Intrinsic value of Kewaunee Scientific - KEQU

Previous Close

$27.98

  Intrinsic Value

$135.18

stock screener

  Rating & Target

str. buy

+383%

Previous close

$27.98

 
Intrinsic value

$135.18

 
Up/down potential

+383%

 
Rating

str. buy

We calculate the intrinsic value of KEQU 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 0.1

 

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, %
  28.70
  26.33
  24.20
  22.28
  20.55
  18.99
  17.60
  16.34
  15.20
  14.18
  13.26
  12.44
  11.69
  11.02
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
Revenue, $m
  203
  257
  319
  390
  470
  560
  658
  766
  882
  1,007
  1,141
  1,283
  1,433
  1,591
  1,757
  1,930
  2,112
  2,301
  2,497
  2,702
  2,915
  3,137
  3,367
  3,606
  3,854
  4,112
  4,381
  4,660
  4,951
  5,254
Variable operating expenses, $m
  178
  224
  279
  341
  411
  489
  575
  669
  770
  879
  996
  1,120
  1,251
  1,389
  1,534
  1,685
  1,843
  2,008
  2,180
  2,359
  2,545
  2,738
  2,939
  3,148
  3,365
  3,590
  3,825
  4,069
  4,322
  4,587
Fixed operating expenses, $m
  11
  11
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
Total operating expenses, $m
  189
  235
  291
  353
  423
  502
  588
  682
  783
  893
  1,010
  1,134
  1,266
  1,404
  1,549
  1,701
  1,859
  2,024
  2,197
  2,376
  2,562
  2,756
  2,957
  3,167
  3,384
  3,609
  3,845
  4,089
  4,343
  4,608
Operating income, $m
  15
  21
  29
  38
  47
  59
  71
  84
  99
  114
  131
  149
  167
  187
  208
  230
  252
  276
  301
  326
  353
  381
  409
  439
  471
  503
  537
  572
  608
  646
EBITDA, $m
  18
  26
  34
  44
  56
  68
  82
  98
  114
  132
  151
  171
  192
  215
  239
  263
  289
  316
  344
  373
  404
  435
  468
  502
  538
  575
  613
  653
  695
  738
Interest expense (income), $m
  0
  0
  1
  2
  2
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  35
  38
  41
  44
  47
  51
  54
  58
  61
Earnings before tax, $m
  14
  20
  27
  35
  44
  54
  65
  77
  91
  105
  120
  136
  153
  171
  189
  209
  229
  251
  273
  296
  320
  345
  371
  398
  426
  455
  486
  517
  550
  585
Tax expense, $m
  4
  5
  7
  9
  12
  15
  18
  21
  24
  28
  32
  37
  41
  46
  51
  56
  62
  68
  74
  80
  86
  93
  100
  107
  115
  123
  131
  140
  149
  158
Net income, $m
  10
  15
  20
  26
  32
  40
  48
  57
  66
  76
  87
  99
  111
  124
  138
  152
  167
  183
  199
  216
  234
  252
  271
  291
  311
  332
  355
  378
  402
  427

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
  109
  137
  170
  208
  251
  299
  351
  409
  471
  538
  609
  685
  765
  849
  938
  1,031
  1,127
  1,228
  1,333
  1,443
  1,556
  1,675
  1,797
  1,925
  2,058
  2,196
  2,339
  2,488
  2,643
  2,805
Adjusted assets (=assets-cash), $m
  109
  137
  170
  208
  251
  299
  351
  409
  471
  538
  609
  685
  765
  849
  938
  1,031
  1,127
  1,228
  1,333
  1,443
  1,556
  1,675
  1,797
  1,925
  2,058
  2,196
  2,339
  2,488
  2,643
  2,805
Revenue / Adjusted assets
  1.862
  1.876
  1.876
  1.875
  1.873
  1.873
  1.875
  1.873
  1.873
  1.872
  1.874
  1.873
  1.873
  1.874
  1.873
  1.872
  1.874
  1.874
  1.873
  1.872
  1.873
  1.873
  1.874
  1.873
  1.873
  1.872
  1.873
  1.873
  1.873
  1.873
Average production assets, $m
  19
  23
  29
  36
  43
  51
  60
  70
  80
  92
  104
  117
  130
  145
  160
  176
  192
  209
  227
  246
  265
  285
  306
  328
  351
  374
  399
  424
  451
  478
Working capital, $m
  39
  49
  61
  74
  89
  106
  125
  146
  168
  191
  217
  244
  272
  302
  334
  367
  401
  437
  475
  513
  554
  596
  640
  685
  732
  781
  832
  885
  941
  998
Total debt, $m
  17
  30
  44
  61
  80
  101
  124
  150
  177
  207
  238
  272
  307
  344
  384
  425
  467
  512
  558
  607
  657
  709
  763
  820
  879
  939
  1,003
  1,069
  1,137
  1,209
Total liabilities, $m
  48
  61
  75
  92
  111
  132
  155
  181
  208
  238
  269
  303
  338
  375
  415
  456
  498
  543
  589
  638
  688
  740
  794
  851
  910
  970
  1,034
  1,100
  1,168
  1,240
Total equity, $m
  61
  77
  95
  116
  140
  167
  196
  228
  263
  300
  340
  382
  427
  474
  523
  575
  629
  685
  744
  805
  868
  934
  1,003
  1,074
  1,148
  1,225
  1,305
  1,388
  1,475
  1,565
Total liabilities and equity, $m
  109
  138
  170
  208
  251
  299
  351
  409
  471
  538
  609
  685
  765
  849
  938
  1,031
  1,127
  1,228
  1,333
  1,443
  1,556
  1,674
  1,797
  1,925
  2,058
  2,195
  2,339
  2,488
  2,643
  2,805
Debt-to-equity ratio
  0.280
  0.390
  0.470
  0.530
  0.570
  0.610
  0.630
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.730
  0.730
  0.740
  0.740
  0.750
  0.750
  0.750
  0.760
  0.760
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
Adjusted equity ratio
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  15
  20
  26
  32
  40
  48
  57
  66
  76
  87
  99
  111
  124
  138
  152
  167
  183
  199
  216
  234
  252
  271
  291
  311
  332
  355
  378
  402
  427
Depreciation, amort., depletion, $m
  4
  4
  6
  7
  8
  10
  12
  13
  15
  18
  20
  22
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  72
  77
  82
  87
  92
Funds from operations, $m
  14
  19
  25
  33
  40
  49
  59
  70
  82
  94
  107
  122
  137
  152
  169
  186
  204
  223
  243
  263
  285
  307
  330
  354
  379
  404
  431
  459
  488
  519
Change in working capital, $m
  9
  10
  12
  14
  15
  17
  19
  20
  22
  24
  25
  27
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  58
Cash from operations, $m
  5
  9
  14
  19
  25
  32
  40
  50
  59
  70
  82
  95
  108
  122
  137
  153
  170
  187
  206
  224
  244
  265
  286
  308
  331
  355
  380
  406
  433
  461
Maintenance CAPEX, $m
  -3
  -4
  -4
  -6
  -7
  -8
  -10
  -12
  -13
  -15
  -18
  -20
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -44
  -47
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -82
  -87
New CAPEX, $m
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -28
Cash from investing activities, $m
  -7
  -9
  -10
  -12
  -14
  -16
  -19
  -22
  -24
  -26
  -30
  -33
  -36
  -39
  -43
  -47
  -50
  -54
  -58
  -63
  -66
  -71
  -76
  -81
  -86
  -91
  -96
  -102
  -108
  -115
Free cash flow, $m
  -2
  1
  3
  7
  11
  16
  22
  28
  35
  43
  52
  62
  72
  83
  94
  107
  120
  133
  147
  162
  178
  194
  210
  228
  246
  264
  284
  304
  325
  347
Issuance/(repayment) of debt, $m
  11
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  33
  35
  37
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  71
Issuance/(repurchase) of shares, $m
  3
  1
  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  
  14
  14
  15
  17
  19
  21
  23
  25
  27
  30
  32
  33
  35
  37
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  71
Total cash flow (excl. dividends), $m
  12
  14
  18
  24
  30
  37
  45
  54
  63
  73
  84
  95
  107
  120
  134
  148
  162
  178
  194
  210
  228
  246
  265
  284
  304
  325
  347
  370
  394
  419
Retained Cash Flow (-), $m
  -14
  -16
  -19
  -21
  -24
  -27
  -29
  -32
  -35
  -37
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -80
  -83
  -87
  -90
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
  -1
  -1
  0
  3
  6
  11
  16
  22
  28
  36
  44
  53
  63
  73
  84
  96
  108
  121
  135
  149
  164
  180
  196
  213
  230
  248
  267
  287
  307
  328
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
  -1
  -1
  0
  2
  5
  8
  11
  13
  16
  19
  21
  23
  24
  25
  25
  24
  24
  22
  21
  19
  17
  15
  13
  11
  9
  7
  6
  4
  3
  2
Current shareholders' claim on cash, %
  96.1
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9
  94.9

Kewaunee Scientific Corporation is engaged in the design, manufacture and installation of laboratory, healthcare and technical furniture products. The Company's products include steel, wood and laminate furniture, fume hoods, biological safety cabinets, laminar flow and ductless hoods, adaptable modular and column systems, moveable workstations and carts, epoxy resin worksurfaces, sinks, and accessories and related design services. It operates through two segments: Domestic and International. The Domestic business segment designs, manufactures, and installs scientific and technical furniture, including steel and wood laboratory cabinetry, fume hoods, laminate casework, flexible systems, worksurfaces, workstations, workbenches, and computer enclosures. The International business segment provides facility design, engineering, construction and project management from the planning stage through testing and commissioning of laboratories.

FINANCIAL RATIOS  of  Kewaunee Scientific (KEQU)

Valuation Ratios
P/E Ratio 15.2
Price to Sales 0.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow 8.4
Growth Rates
Sales Growth Rate 7.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 4.7%
Total Debt to Equity 16.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.1%
Return On Total Capital 10.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.5%
Return On Equity 12.3%
Return On Equity - 3 Yr. Avg. 11.6%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 19.4%
Gross Margin - 3 Yr. Avg. 18.8%
EBITDA Margin 7.2%
EBITDA Margin - 3 Yr. Avg. 7%
Operating Margin 5%
Oper. Margin - 3 Yr. Avg. 4.6%
Pre-Tax Margin 5%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 3.4%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 40%

KEQU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEQU stock intrinsic value calculation we used $158.05 million for the last fiscal year's total revenue generated by Kewaunee Scientific. The default revenue input number comes from 0001 income statement of Kewaunee Scientific. 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 KEQU stock valuation model: a) initial revenue growth rate of 28.7% 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 KEQU is calculated based on our internal credit rating of Kewaunee Scientific, 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 Kewaunee Scientific.
    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 KEQU stock the variable cost ratio is equal to 87.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 million in the base year in the intrinsic value calculation for KEQU 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 5.4% for Kewaunee Scientific.

Corporate tax rate of 27% is the nominal tax rate for Kewaunee Scientific. 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 KEQU 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 KEQU are equal to 9.1%.

Life of production assets of 5.2 years is the average useful life of capital assets used in Kewaunee Scientific 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 KEQU is equal to 19%. 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 - $47.059 million for Kewaunee Scientific - 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 2.741 million for Kewaunee Scientific 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 Kewaunee Scientific at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Kewaunee Scientific Corporation Promotes Lisa L. Ryan   [Aug-30-18 04:16PM  PR Newswire]
▶ Kewaunee Scientific Reports Results for First Quarter   [Aug-28-18 09:34PM  PR Newswire]
▶ May Healthcare Dividend Stocks To Look Out For   [May-11-18 06:02AM  Simply Wall St.]
▶ 7 A-Rated Small-Cap Stocks to Buy   [Mar-16-18 02:30PM  InvestorPlace]
▶ Best Healthcare Dividend Stock Picks   [Mar-09-18 05:02AM  Simply Wall St.]
▶ Kewaunee Scientific Reports Results for Third Quarter   [Feb-27-18 07:26PM  PR Newswire]
▶ Top Healthcare Dividend Picks For The Day   [Feb-02-18 05:02AM  Simply Wall St.]
▶ NasdaqGM Healthcare Dividend Stock Picks   [Dec-22-17 05:02AM  Simply Wall St.]
▶ Kewaunee Scientific Reports Results for Second Quarter   [Dec-05-17 06:25PM  PR Newswire]
▶ Top AMEX Undervalued Stock   [Nov-20-17 08:02AM  Simply Wall St.]
▶ Kewaunee Scientific Reports Board of Directors Join NACD   [Oct-11-17 04:03PM  PR Newswire]
▶ Kewaunee Scientific Reports Results for First Quarter   [Aug-29-17 08:11PM  PR Newswire]
▶ Kewaunee Scientific Reports Results for Third Quarter   [Feb-28-17 05:32PM  PR Newswire]
▶ Kewaunee Scientific Reports Results for Second Quarter   [Dec-06-16 04:03PM  PR Newswire]
▶ Kewaunee Scientific Reports Results for First Quarter   [Aug-30-16 05:56PM  PR Newswire]

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