Intrinsic value of Kewaunee Scientific - KEQU

Previous Close

$26.98

  Intrinsic Value

$51.06

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  Rating & Target

str. buy

+89%

Previous close

$26.98

 
Intrinsic value

$51.06

 
Up/down potential

+89%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Kewaunee Scientific (KEQU) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.75
  13.90
  13.01
  12.21
  11.49
  10.84
  10.26
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
  6.48
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
Revenue, $m
  139
  158
  179
  201
  224
  248
  274
  300
  328
  357
  387
  418
  451
  485
  520
  557
  595
  634
  675
  718
  763
  809
  857
  908
  960
  1,015
  1,073
  1,132
  1,195
  1,260
  1,328
Variable operating expenses, $m
 
  142
  161
  180
  201
  223
  246
  270
  295
  321
  348
  376
  405
  436
  468
  500
  535
  570
  607
  646
  686
  727
  771
  816
  863
  913
  964
  1,018
  1,074
  1,133
  1,194
Fixed operating expenses, $m
 
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
Total operating expenses, $m
  132
  149
  168
  188
  209
  231
  254
  278
  304
  330
  357
  385
  414
  446
  478
  510
  545
  581
  618
  657
  697
  739
  783
  828
  876
  926
  977
  1,032
  1,088
  1,147
  1,209
Operating income, $m
  7
  9
  11
  13
  15
  17
  20
  22
  25
  27
  30
  33
  36
  39
  43
  46
  50
  53
  57
  61
  66
  70
  75
  79
  84
  90
  95
  101
  107
  113
  119
EBITDA, $m
  10
  10
  13
  15
  17
  20
  22
  25
  28
  31
  34
  37
  41
  44
  48
  52
  56
  60
  64
  69
  73
  78
  83
  88
  94
  100
  106
  112
  119
  126
  133
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
Earnings before tax, $m
  7
  9
  10
  12
  14
  16
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  83
  88
  93
  98
  104
  110
Tax expense, $m
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  27
  28
  30
Net income, $m
  5
  6
  8
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  80

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  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
  81
  77
  88
  98
  110
  121
  134
  147
  160
  175
  189
  205
  221
  237
  254
  272
  291
  310
  330
  351
  373
  396
  420
  444
  470
  497
  525
  554
  585
  616
  650
Adjusted assets (=assets-cash), $m
  68
  77
  88
  98
  110
  121
  134
  147
  160
  175
  189
  205
  221
  237
  254
  272
  291
  310
  330
  351
  373
  396
  420
  444
  470
  497
  525
  554
  585
  616
  650
Revenue / Adjusted assets
  2.044
  2.052
  2.034
  2.051
  2.036
  2.050
  2.045
  2.041
  2.050
  2.040
  2.048
  2.039
  2.041
  2.046
  2.047
  2.048
  2.045
  2.045
  2.045
  2.046
  2.046
  2.043
  2.040
  2.045
  2.043
  2.042
  2.044
  2.043
  2.043
  2.045
  2.043
Average production assets, $m
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  66
Working capital, $m
  33
  28
  32
  36
  40
  45
  49
  54
  59
  64
  70
  75
  81
  87
  94
  100
  107
  114
  122
  129
  137
  146
  154
  163
  173
  183
  193
  204
  215
  227
  239
Total debt, $m
  7
  7
  11
  17
  22
  28
  34
  40
  47
  54
  61
  68
  76
  84
  92
  101
  110
  120
  129
  139
  150
  161
  172
  184
  197
  210
  223
  238
  252
  268
  284
Total liabilities, $m
  38
  38
  42
  48
  53
  59
  65
  71
  78
  85
  92
  99
  107
  115
  123
  132
  141
  151
  160
  170
  181
  192
  203
  215
  228
  241
  254
  269
  283
  299
  315
Total equity, $m
  43
  40
  45
  51
  56
  63
  69
  76
  83
  90
  98
  105
  114
  122
  131
  140
  150
  160
  170
  181
  192
  204
  216
  229
  242
  256
  270
  285
  301
  317
  335
Total liabilities and equity, $m
  81
  78
  87
  99
  109
  122
  134
  147
  161
  175
  190
  204
  221
  237
  254
  272
  291
  311
  330
  351
  373
  396
  419
  444
  470
  497
  524
  554
  584
  616
  650
Debt-to-equity ratio
  0.163
  0.160
  0.250
  0.330
  0.390
  0.450
  0.490
  0.530
  0.570
  0.600
  0.620
  0.650
  0.670
  0.690
  0.710
  0.720
  0.730
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.830
  0.830
  0.840
  0.840
  0.850
Adjusted equity ratio
  0.500
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  6
  8
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  80
Depreciation, amort., depletion, $m
  3
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Funds from operations, $m
  16
  8
  9
  11
  13
  14
  16
  18
  20
  22
  24
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  55
  59
  63
  66
  71
  75
  79
  84
  89
  94
Change in working capital, $m
  4
  3
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
Cash from operations, $m
  12
  4
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  54
  57
  61
  64
  68
  73
  77
  81
Maintenance CAPEX, $m
  0
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
New CAPEX, $m
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
Free cash flow, $m
  10
  2
  3
  4
  5
  7
  8
  9
  11
  12
  14
  16
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  42
  45
  48
  51
  55
  58
  62
  65
Issuance/(repayment) of debt, $m
  -1
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
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
  0
Cash from financing (excl. dividends), $m  
  0
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
Total cash flow (excl. dividends), $m
  9
  7
  8
  9
  11
  12
  14
  16
  17
  19
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  82
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
Prev. year cash balance distribution, $m
 
  8
  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
 
  10
  3
  4
  5
  6
  8
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
  47
  51
  54
  57
  61
  64
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
 
  9
  3
  3
  4
  5
  5
  6
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  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

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 14.6
Price to Sales 0.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow 8.1
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 $139 million for the last fiscal year's total revenue generated by Kewaunee Scientific. The default revenue input number comes from 2017 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 13.9% 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 89.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7 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 3.5% 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 5%.

Life of production assets of 2.3 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 18%. 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 - $43 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 2.699 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

▶ 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]
▶ Kewaunee Scientific Reports Results for Third Quarter   [Mar-01-16 06:05PM  PR Newswire]
▶ Kewaunee Scientific Reports Results for Second Quarter   [Dec-08  05:25PM  PR Newswire]
▶ Kewaunee Scientific Corporation Raises Dividend 8%   [Aug-26  10:17AM  PR Newswire]
▶ Kewaunee Scientific Reports Results for First Quarter   [Aug-25  06:42PM  PR Newswire]
▶ 10-K for Kewaunee Scientific Corp.   [Jul-22  08:09PM  at Company Spotlight]
Financial statements of KEQU
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