Intrinsic value of Kaman Corporation - KAMN

Previous Close

$61.49

  Intrinsic Value

$42.93

stock screener

  Rating & Target

sell

-30%

Previous close

$61.49

 
Intrinsic value

$42.93

 
Up/down potential

-30%

 
Rating

sell

We calculate the intrinsic value of KAMN 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 1.7

 

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, %
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.11
  5.09
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
Revenue, $m
  1,982
  2,093
  2,210
  2,332
  2,459
  2,592
  2,731
  2,877
  3,030
  3,189
  3,357
  3,532
  3,715
  3,908
  4,109
  4,321
  4,542
  4,775
  5,019
  5,274
  5,543
  5,824
  6,119
  6,429
  6,754
  7,095
  7,453
  7,829
  8,223
  8,637
Variable operating expenses, $m
  1,858
  1,961
  2,067
  2,179
  2,295
  2,417
  2,545
  2,678
  2,818
  2,964
  3,074
  3,234
  3,402
  3,579
  3,763
  3,957
  4,160
  4,373
  4,596
  4,830
  5,076
  5,333
  5,604
  5,887
  6,185
  6,497
  6,825
  7,169
  7,530
  7,909
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
  1,858
  1,961
  2,067
  2,179
  2,295
  2,417
  2,545
  2,678
  2,818
  2,964
  3,074
  3,234
  3,402
  3,579
  3,763
  3,957
  4,160
  4,373
  4,596
  4,830
  5,076
  5,333
  5,604
  5,887
  6,185
  6,497
  6,825
  7,169
  7,530
  7,909
Operating income, $m
  123
  133
  143
  153
  164
  175
  187
  199
  212
  225
  283
  298
  313
  329
  346
  364
  383
  402
  423
  444
  467
  491
  516
  542
  569
  598
  628
  660
  693
  728
EBITDA, $m
  196
  207
  218
  230
  243
  256
  269
  284
  299
  315
  331
  348
  367
  386
  405
  426
  448
  471
  495
  520
  547
  575
  604
  634
  666
  700
  735
  772
  811
  852
Interest expense (income), $m
  0
  17
  20
  23
  26
  29
  32
  35
  39
  43
  47
  51
  55
  59
  64
  69
  74
  80
  85
  91
  97
  104
  111
  118
  126
  133
  142
  150
  160
  169
  179
Earnings before tax, $m
  106
  113
  120
  127
  135
  143
  151
  160
  169
  179
  232
  243
  254
  265
  277
  290
  303
  317
  332
  347
  363
  380
  398
  416
  436
  456
  477
  500
  524
  548
Tax expense, $m
  29
  31
  32
  34
  36
  39
  41
  43
  46
  48
  63
  66
  68
  72
  75
  78
  82
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  141
  148
Net income, $m
  78
  83
  88
  93
  98
  104
  110
  117
  123
  130
  170
  177
  185
  194
  202
  212
  221
  231
  242
  253
  265
  277
  290
  304
  318
  333
  349
  365
  382
  400

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
  1,544
  1,630
  1,721
  1,816
  1,915
  2,019
  2,127
  2,241
  2,360
  2,484
  2,614
  2,751
  2,894
  3,043
  3,201
  3,365
  3,538
  3,719
  3,909
  4,108
  4,317
  4,536
  4,766
  5,007
  5,260
  5,526
  5,805
  6,097
  6,404
  6,727
Adjusted assets (=assets-cash), $m
  1,544
  1,630
  1,721
  1,816
  1,915
  2,019
  2,127
  2,241
  2,360
  2,484
  2,614
  2,751
  2,894
  3,043
  3,201
  3,365
  3,538
  3,719
  3,909
  4,108
  4,317
  4,536
  4,766
  5,007
  5,260
  5,526
  5,805
  6,097
  6,404
  6,727
Revenue / Adjusted assets
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
Average production assets, $m
  434
  458
  484
  511
  539
  568
  598
  630
  664
  698
  735
  773
  814
  856
  900
  946
  995
  1,046
  1,099
  1,155
  1,214
  1,275
  1,340
  1,408
  1,479
  1,554
  1,632
  1,714
  1,801
  1,891
Working capital, $m
  482
  509
  537
  567
  598
  630
  664
  699
  736
  775
  816
  858
  903
  950
  999
  1,050
  1,104
  1,160
  1,220
  1,282
  1,347
  1,415
  1,487
  1,562
  1,641
  1,724
  1,811
  1,902
  1,998
  2,099
Total debt, $m
  340
  389
  441
  494
  550
  609
  671
  735
  802
  872
  946
  1,023
  1,104
  1,189
  1,278
  1,371
  1,469
  1,571
  1,679
  1,791
  1,910
  2,034
  2,164
  2,300
  2,444
  2,594
  2,752
  2,917
  3,091
  3,274
Total liabilities, $m
  874
  923
  974
  1,028
  1,084
  1,143
  1,204
  1,268
  1,336
  1,406
  1,480
  1,557
  1,638
  1,723
  1,811
  1,905
  2,002
  2,105
  2,212
  2,325
  2,443
  2,567
  2,697
  2,834
  2,977
  3,128
  3,285
  3,451
  3,625
  3,807
Total equity, $m
  670
  708
  747
  788
  831
  876
  923
  972
  1,024
  1,078
  1,135
  1,194
  1,256
  1,321
  1,389
  1,460
  1,535
  1,614
  1,696
  1,783
  1,873
  1,969
  2,068
  2,173
  2,283
  2,398
  2,519
  2,646
  2,779
  2,919
Total liabilities and equity, $m
  1,544
  1,631
  1,721
  1,816
  1,915
  2,019
  2,127
  2,240
  2,360
  2,484
  2,615
  2,751
  2,894
  3,044
  3,200
  3,365
  3,537
  3,719
  3,908
  4,108
  4,316
  4,536
  4,765
  5,007
  5,260
  5,526
  5,804
  6,097
  6,404
  6,726
Debt-to-equity ratio
  0.510
  0.550
  0.590
  0.630
  0.660
  0.700
  0.730
  0.760
  0.780
  0.810
  0.830
  0.860
  0.880
  0.900
  0.920
  0.940
  0.960
  0.970
  0.990
  1.000
  1.020
  1.030
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
Adjusted equity ratio
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  78
  83
  88
  93
  98
  104
  110
  117
  123
  130
  170
  177
  185
  194
  202
  212
  221
  231
  242
  253
  265
  277
  290
  304
  318
  333
  349
  365
  382
  400
Depreciation, amort., depletion, $m
  72
  74
  75
  77
  79
  81
  83
  85
  87
  90
  48
  51
  54
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  93
  97
  102
  107
  113
  118
  124
Funds from operations, $m
  150
  156
  163
  170
  178
  185
  193
  202
  211
  220
  218
  228
  239
  250
  262
  274
  287
  300
  314
  329
  345
  361
  378
  396
  415
  435
  456
  478
  501
  525
Change in working capital, $m
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91
  96
  101
Cash from operations, $m
  124
  129
  135
  141
  147
  153
  159
  166
  174
  181
  177
  185
  194
  203
  213
  223
  233
  244
  255
  267
  280
  293
  307
  321
  336
  352
  369
  386
  405
  424
Maintenance CAPEX, $m
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -88
  -93
  -97
  -102
  -107
  -113
  -118
New CAPEX, $m
  -23
  -24
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -91
Cash from investing activities, $m
  -50
  -53
  -56
  -59
  -62
  -64
  -67
  -71
  -74
  -79
  -83
  -86
  -91
  -96
  -100
  -105
  -111
  -116
  -122
  -128
  -135
  -142
  -149
  -156
  -164
  -172
  -180
  -189
  -199
  -209
Free cash flow, $m
  74
  76
  79
  82
  85
  88
  92
  95
  99
  102
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  151
  158
  165
  173
  180
  188
  197
  206
  215
Issuance/(repayment) of debt, $m
  46
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  137
  143
  150
  158
  166
  174
  182
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  
  46
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  137
  143
  150
  158
  166
  174
  182
Total cash flow (excl. dividends), $m
  120
  125
  130
  136
  141
  147
  153
  159
  166
  173
  168
  176
  184
  192
  201
  210
  220
  230
  240
  252
  263
  275
  288
  302
  316
  331
  346
  362
  380
  398
Retained Cash Flow (-), $m
  -37
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -79
  -82
  -86
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -140
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
  84
  88
  91
  95
  98
  102
  106
  110
  114
  119
  112
  117
  122
  127
  133
  139
  145
  151
  158
  165
  173
  180
  188
  197
  206
  215
  225
  235
  246
  258
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
  80
  80
  79
  78
  76
  74
  72
  69
  66
  62
  53
  50
  46
  43
  39
  35
  32
  28
  24
  21
  18
  15
  12
  10
  8
  6
  5
  4
  3
  2
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

Kaman Corporation conducts business in the aerospace and distribution markets. The Company operates through two segments: Distribution and Aerospace. The Company's brands include KAflex, KAron and K-MAX. Distribution segment is a power transmission, motion control, and fluid power industrial distributor with operations throughout the United States. Distribution segment conducts business in the mechanical power transmission and bearings, electrical, automation and control, and fluid power product platforms and provides total solutions from system design and integration to machine parts and services to the national manufacturing industry. Aerospace segment produces and markets aircraft bearings and components; super precision, miniature ball bearings; metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft, and safe and arming solutions for missile and bomb systems for the United States and allied militaries.

FINANCIAL RATIOS  of  Kaman Corporation (KAMN)

Valuation Ratios
P/E Ratio 28.3
Price to Sales 0.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 15.4
Price to Free Cash Flow 21.4
Growth Rates
Sales Growth Rate 1.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -6.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 52.1%
Total Debt to Equity 73.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.7%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 11.1%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 30.4%
Gross Margin - 3 Yr. Avg. 29.3%
EBITDA Margin 7.5%
EBITDA Margin - 3 Yr. Avg. 7.3%
Operating Margin 5.9%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 5%
Pre-Tax Margin - 3 Yr. Avg. 5.1%
Net Profit Margin 3.3%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 34.4%
Eff/ Tax Rate - 3 Yr. Avg. 32.7%
Payout Ratio 33.9%

KAMN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KAMN stock intrinsic value calculation we used $1875 million for the last fiscal year's total revenue generated by Kaman Corporation. The default revenue input number comes from 0001 income statement of Kaman 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 KAMN stock valuation model: a) initial revenue growth rate of 5.7% 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 KAMN is calculated based on our internal credit rating of Kaman 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 Kaman 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 KAMN stock the variable cost ratio is equal to 93.9%.

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 KAMN 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 5.8% for Kaman Corporation.

Corporate tax rate of 27% is the nominal tax rate for Kaman 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 KAMN 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 KAMN are equal to 21.9%.

Life of production assets of 15.2 years is the average useful life of capital assets used in Kaman 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 KAMN is equal to 24.3%. 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 - $633.157 million for Kaman 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 27.807 million for Kaman 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 Kaman Corporation at the current share price and the inputted number of shares is $1.7 billion.

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