Intrinsic value of Kaiser Aluminum Corporation - KALU

Previous Close

$92.21

  Intrinsic Value

$131.41

stock screener

  Rating & Target

buy

+43%

Previous close

$92.21

 
Intrinsic value

$131.41

 
Up/down potential

+43%

 
Rating

buy

We calculate the intrinsic value of KALU stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
  5.72
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
Revenue, $m
  1,749
  1,920
  2,099
  2,285
  2,478
  2,680
  2,889
  3,107
  3,333
  3,568
  3,813
  4,067
  4,331
  4,606
  4,892
  5,190
  5,501
  5,824
  6,162
  6,514
  6,882
  7,266
  7,667
  8,086
  8,525
  8,983
  9,463
  9,966
  10,492
  11,042
Variable operating expenses, $m
  1,549
  1,694
  1,846
  2,004
  2,169
  2,340
  2,518
  2,704
  2,896
  3,096
  3,242
  3,459
  3,683
  3,917
  4,160
  4,414
  4,678
  4,953
  5,240
  5,540
  5,852
  6,179
  6,520
  6,877
  7,250
  7,640
  8,048
  8,475
  8,922
  9,391
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,549
  1,694
  1,846
  2,004
  2,169
  2,340
  2,518
  2,704
  2,896
  3,096
  3,242
  3,459
  3,683
  3,917
  4,160
  4,414
  4,678
  4,953
  5,240
  5,540
  5,852
  6,179
  6,520
  6,877
  7,250
  7,640
  8,048
  8,475
  8,922
  9,391
Operating income, $m
  200
  226
  253
  281
  310
  340
  371
  404
  437
  473
  570
  608
  648
  689
  732
  776
  823
  871
  922
  974
  1,029
  1,087
  1,147
  1,210
  1,275
  1,344
  1,416
  1,491
  1,569
  1,652
EBITDA, $m
  306
  336
  367
  400
  433
  469
  505
  543
  583
  624
  667
  711
  757
  805
  856
  908
  962
  1,019
  1,078
  1,139
  1,203
  1,271
  1,341
  1,414
  1,491
  1,571
  1,655
  1,743
  1,835
  1,931
Interest expense (income), $m
  18
  23
  27
  31
  36
  41
  46
  51
  57
  62
  68
  74
  81
  87
  94
  101
  109
  117
  125
  133
  142
  151
  161
  171
  181
  192
  204
  216
  228
  241
  255
Earnings before tax, $m
  178
  199
  221
  245
  269
  294
  320
  347
  375
  404
  496
  528
  561
  595
  630
  667
  706
  746
  789
  832
  878
  926
  976
  1,028
  1,083
  1,140
  1,200
  1,263
  1,328
  1,397
Tax expense, $m
  48
  54
  60
  66
  73
  79
  86
  94
  101
  109
  134
  142
  151
  161
  170
  180
  191
  202
  213
  225
  237
  250
  264
  278
  292
  308
  324
  341
  359
  377
Net income, $m
  130
  145
  162
  179
  196
  214
  234
  253
  274
  295
  362
  385
  409
  434
  460
  487
  515
  545
  576
  608
  641
  676
  713
  751
  791
  832
  876
  922
  970
  1,020

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,566
  1,719
  1,879
  2,045
  2,219
  2,399
  2,587
  2,782
  2,984
  3,195
  3,413
  3,641
  3,877
  4,124
  4,380
  4,647
  4,924
  5,214
  5,516
  5,832
  6,161
  6,505
  6,864
  7,239
  7,632
  8,042
  8,472
  8,922
  9,393
  9,886
Adjusted assets (=assets-cash), $m
  1,566
  1,719
  1,879
  2,045
  2,219
  2,399
  2,587
  2,782
  2,984
  3,195
  3,413
  3,641
  3,877
  4,124
  4,380
  4,647
  4,924
  5,214
  5,516
  5,832
  6,161
  6,505
  6,864
  7,239
  7,632
  8,042
  8,472
  8,922
  9,393
  9,886
Revenue / Adjusted assets
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
  1.117
Average production assets, $m
  686
  753
  823
  896
  972
  1,051
  1,133
  1,218
  1,307
  1,399
  1,495
  1,594
  1,698
  1,806
  1,918
  2,035
  2,156
  2,283
  2,415
  2,554
  2,698
  2,848
  3,005
  3,170
  3,342
  3,522
  3,710
  3,907
  4,113
  4,329
Working capital, $m
  318
  349
  382
  416
  451
  488
  526
  565
  607
  649
  694
  740
  788
  838
  890
  945
  1,001
  1,060
  1,121
  1,186
  1,252
  1,322
  1,395
  1,472
  1,552
  1,635
  1,722
  1,814
  1,909
  2,010
Total debt, $m
  440
  513
  590
  669
  752
  838
  928
  1,021
  1,118
  1,219
  1,323
  1,432
  1,545
  1,663
  1,785
  1,913
  2,045
  2,184
  2,328
  2,479
  2,636
  2,801
  2,972
  3,152
  3,340
  3,536
  3,741
  3,956
  4,181
  4,417
Total liabilities, $m
  749
  822
  898
  978
  1,061
  1,147
  1,236
  1,330
  1,426
  1,527
  1,632
  1,740
  1,853
  1,971
  2,094
  2,221
  2,354
  2,492
  2,637
  2,788
  2,945
  3,109
  3,281
  3,460
  3,648
  3,844
  4,050
  4,265
  4,490
  4,725
Total equity, $m
  818
  897
  981
  1,068
  1,158
  1,252
  1,350
  1,452
  1,558
  1,668
  1,782
  1,901
  2,024
  2,152
  2,286
  2,425
  2,571
  2,722
  2,880
  3,044
  3,216
  3,395
  3,583
  3,779
  3,984
  4,198
  4,422
  4,657
  4,903
  5,160
Total liabilities and equity, $m
  1,567
  1,719
  1,879
  2,046
  2,219
  2,399
  2,586
  2,782
  2,984
  3,195
  3,414
  3,641
  3,877
  4,123
  4,380
  4,646
  4,925
  5,214
  5,517
  5,832
  6,161
  6,504
  6,864
  7,239
  7,632
  8,042
  8,472
  8,922
  9,393
  9,885
Debt-to-equity ratio
  0.540
  0.570
  0.600
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
  0.840
  0.840
  0.850
  0.850
  0.850
  0.860
Adjusted equity ratio
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  130
  145
  162
  179
  196
  214
  234
  253
  274
  295
  362
  385
  409
  434
  460
  487
  515
  545
  576
  608
  641
  676
  713
  751
  791
  832
  876
  922
  970
  1,020
Depreciation, amort., depletion, $m
  105
  110
  114
  119
  124
  129
  134
  140
  146
  151
  96
  103
  110
  116
  124
  131
  139
  147
  156
  165
  174
  184
  194
  205
  216
  227
  239
  252
  265
  279
Funds from operations, $m
  235
  255
  276
  298
  320
  343
  368
  393
  419
  447
  459
  488
  519
  551
  584
  619
  655
  692
  731
  772
  815
  860
  906
  955
  1,006
  1,059
  1,115
  1,174
  1,235
  1,299
Change in working capital, $m
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
Cash from operations, $m
  206
  224
  243
  264
  285
  307
  330
  353
  378
  404
  414
  442
  471
  501
  532
  564
  598
  633
  670
  708
  748
  790
  833
  879
  926
  976
  1,028
  1,082
  1,139
  1,199
Maintenance CAPEX, $m
  -40
  -44
  -49
  -53
  -58
  -63
  -68
  -73
  -79
  -84
  -90
  -96
  -103
  -110
  -116
  -124
  -131
  -139
  -147
  -156
  -165
  -174
  -184
  -194
  -205
  -216
  -227
  -239
  -252
  -265
New CAPEX, $m
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -132
  -138
  -144
  -151
  -157
  -164
  -172
  -180
  -188
  -197
  -206
  -216
Cash from investing activities, $m
  -104
  -111
  -119
  -126
  -134
  -142
  -150
  -158
  -168
  -176
  -186
  -196
  -207
  -218
  -228
  -241
  -253
  -266
  -279
  -294
  -309
  -325
  -341
  -358
  -377
  -396
  -415
  -436
  -458
  -481
Free cash flow, $m
  101
  113
  125
  138
  151
  165
  180
  195
  211
  227
  228
  246
  264
  283
  303
  324
  345
  367
  390
  414
  439
  465
  492
  521
  550
  581
  613
  646
  681
  717
Issuance/(repayment) of debt, $m
  70
  73
  76
  80
  83
  86
  90
  93
  97
  101
  105
  109
  113
  118
  122
  128
  133
  139
  144
  151
  157
  164
  172
  179
  188
  196
  205
  215
  225
  236
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  70
  73
  76
  80
  83
  86
  90
  93
  97
  101
  105
  109
  113
  118
  122
  128
  133
  139
  144
  151
  157
  164
  172
  179
  188
  196
  205
  215
  225
  236
Total cash flow (excl. dividends), $m
  171
  186
  201
  217
  234
  251
  269
  288
  308
  328
  333
  354
  377
  401
  426
  451
  478
  506
  535
  565
  597
  630
  664
  700
  738
  777
  818
  861
  906
  953
Retained Cash Flow (-), $m
  -77
  -80
  -83
  -87
  -91
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -123
  -128
  -134
  -139
  -145
  -151
  -158
  -165
  -172
  -179
  -187
  -196
  -205
  -214
  -224
  -235
  -246
  -257
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  94
  106
  118
  130
  143
  157
  172
  186
  202
  218
  218
  236
  254
  273
  292
  312
  333
  355
  377
  401
  425
  450
  477
  504
  533
  563
  594
  626
  660
  696
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  90
  97
  103
  107
  111
  114
  116
  117
  116
  114
  104
  101
  97
  91
  86
  79
  72
  65
  58
  51
  44
  37
  31
  26
  21
  16
  13
  10
  7
  5
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Kaiser Aluminum Corporation manufactures and sells semi-fabricated specialty aluminum mill products. The Company operates in the Fabricated Products segment. The Company's Fabricated Products segment focuses on producing rolled, extruded and drawn aluminum products used principally for aerospace and defense, automotive and general engineering products that include consumer durables, electronics, electrical and machinery and equipment applications. The Company offers its products for various end market applications, such as aerospace and high strength (Aero/HS products); automotive (Automotive Extrusions); general engineering (GE products), and other industrial (Other products). The Company's fabricated aluminum mill products include flat-rolled (plate and sheet), extruded (rod, bar, hollows and shapes), drawn (rod, bar, pipe and tube) and cast aluminum products.

FINANCIAL RATIOS  of  Kaiser Aluminum Corporation (KALU)

Valuation Ratios
P/E Ratio 17.7
Price to Sales 1.2
Price to Book 2
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 18.5
Growth Rates
Sales Growth Rate -4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20.6%
Cap. Spend. - 3 Yr. Gr. Rate 1.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 45.8%
Total Debt to Equity 45.8%
Interest Coverage 9
Management Effectiveness
Return On Assets 7.7%
Ret/ On Assets - 3 Yr. Avg. -0.7%
Return On Total Capital 8.6%
Ret/ On T. Cap. - 3 Yr. Avg. -2.1%
Return On Equity 11.6%
Return On Equity - 3 Yr. Avg. -2.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 23%
Gross Margin - 3 Yr. Avg. 20.1%
EBITDA Margin 15.2%
EBITDA Margin - 3 Yr. Avg. 1.5%
Operating Margin 12.5%
Oper. Margin - 3 Yr. Avg. -0.7%
Pre-Tax Margin 11%
Pre-Tax Margin - 3 Yr. Avg. -2.6%
Net Profit Margin 6.9%
Net Profit Margin - 3 Yr. Avg. -1.6%
Effective Tax Rate 37.4%
Eff/ Tax Rate - 3 Yr. Avg. 35.5%
Payout Ratio 34.8%

KALU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KALU stock intrinsic value calculation we used $1586 million for the last fiscal year's total revenue generated by Kaiser Aluminum Corporation. The default revenue input number comes from 0001 income statement of Kaiser Aluminum Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KALU stock valuation model: a) initial revenue growth rate of 10.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for KALU is calculated based on our internal credit rating of Kaiser Aluminum Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Kaiser Aluminum Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KALU stock the variable cost ratio is equal to 88.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for KALU stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.1% for Kaiser Aluminum Corporation.

Corporate tax rate of 27% is the nominal tax rate for Kaiser Aluminum Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KALU stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KALU are equal to 39.2%.

Life of production assets of 15.5 years is the average useful life of capital assets used in Kaiser Aluminum Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KALU is equal to 18.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $740.4 million for Kaiser Aluminum Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 16.059 million for Kaiser Aluminum Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Kaiser Aluminum Corporation at the current share price and the inputted number of shares is $1.5 billion.

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