Intrinsic value of KLX - KLXI

Previous Close

$62.97

  Intrinsic Value

$71.40

stock screener

  Rating & Target

hold

+13%

Previous close

$62.97

 
Intrinsic value

$71.40

 
Up/down potential

+13%

 
Rating

hold

We calculate the intrinsic value of KLXI 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 3.2

 

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, %
  21.30
  19.67
  18.20
  16.88
  15.69
  14.62
  13.66
  12.80
  12.02
  11.31
  10.68
  10.12
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
Revenue, $m
  2,112
  2,527
  2,987
  3,491
  4,039
  4,630
  5,262
  5,936
  6,649
  7,401
  8,192
  9,021
  9,887
  10,791
  11,733
  12,713
  13,733
  14,793
  15,895
  17,039
  18,229
  19,466
  20,751
  22,089
  23,480
  24,929
  26,438
  28,011
  29,650
  31,360
Variable operating expenses, $m
  1,337
  1,573
  1,835
  2,122
  2,433
  2,769
  3,129
  3,511
  3,917
  4,345
  4,658
  5,129
  5,621
  6,135
  6,671
  7,228
  7,808
  8,411
  9,037
  9,688
  10,364
  11,067
  11,798
  12,559
  13,350
  14,174
  15,032
  15,926
  16,858
  17,830
Fixed operating expenses, $m
  416
  425
  434
  444
  454
  464
  474
  484
  495
  506
  517
  528
  540
  552
  564
  577
  589
  602
  615
  629
  643
  657
  671
  686
  701
  717
  732
  749
  765
  782
Total operating expenses, $m
  1,753
  1,998
  2,269
  2,566
  2,887
  3,233
  3,603
  3,995
  4,412
  4,851
  5,175
  5,657
  6,161
  6,687
  7,235
  7,805
  8,397
  9,013
  9,652
  10,317
  11,007
  11,724
  12,469
  13,245
  14,051
  14,891
  15,764
  16,675
  17,623
  18,612
Operating income, $m
  359
  529
  718
  926
  1,152
  1,397
  1,660
  1,940
  2,237
  2,551
  3,017
  3,363
  3,726
  4,104
  4,498
  4,909
  5,336
  5,780
  6,242
  6,722
  7,222
  7,741
  8,281
  8,844
  9,429
  10,039
  10,674
  11,336
  12,027
  12,748
EBITDA, $m
  542
  721
  920
  1,140
  1,378
  1,636
  1,913
  2,208
  2,521
  2,851
  3,199
  3,563
  3,944
  4,343
  4,758
  5,190
  5,640
  6,108
  6,594
  7,100
  7,625
  8,172
  8,741
  9,333
  9,949
  10,591
  11,259
  11,956
  12,683
  13,442
Interest expense (income), $m
  72
  76
  97
  120
  146
  174
  204
  237
  273
  310
  350
  392
  437
  483
  531
  582
  635
  689
  746
  806
  867
  931
  998
  1,067
  1,139
  1,214
  1,291
  1,372
  1,457
  1,545
  1,636
Earnings before tax, $m
  283
  432
  598
  780
  979
  1,193
  1,422
  1,667
  1,927
  2,200
  2,625
  2,927
  3,243
  3,572
  3,916
  4,274
  4,646
  5,034
  5,436
  5,855
  6,291
  6,743
  7,215
  7,705
  8,215
  8,747
  9,301
  9,879
  10,482
  11,112
Tax expense, $m
  76
  117
  161
  211
  264
  322
  384
  450
  520
  594
  709
  790
  876
  965
  1,057
  1,154
  1,255
  1,359
  1,468
  1,581
  1,698
  1,821
  1,948
  2,080
  2,218
  2,362
  2,511
  2,667
  2,830
  3,000
Net income, $m
  206
  315
  436
  569
  714
  871
  1,038
  1,217
  1,406
  1,606
  1,916
  2,137
  2,367
  2,608
  2,859
  3,120
  3,392
  3,675
  3,969
  4,274
  4,592
  4,923
  5,267
  5,625
  5,997
  6,385
  6,790
  7,212
  7,652
  8,112

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
  4,600
  5,505
  6,507
  7,606
  8,800
  10,087
  11,465
  12,932
  14,486
  16,125
  17,848
  19,653
  21,540
  23,510
  25,562
  27,698
  29,920
  32,229
  34,629
  37,123
  39,715
  42,409
  45,210
  48,123
  51,155
  54,312
  57,599
  61,025
  64,597
  68,323
Adjusted assets (=assets-cash), $m
  4,600
  5,505
  6,507
  7,606
  8,800
  10,087
  11,465
  12,932
  14,486
  16,125
  17,848
  19,653
  21,540
  23,510
  25,562
  27,698
  29,920
  32,229
  34,629
  37,123
  39,715
  42,409
  45,210
  48,123
  51,155
  54,312
  57,599
  61,025
  64,597
  68,323
Revenue / Adjusted assets
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
  0.459
Average production assets, $m
  1,136
  1,359
  1,607
  1,878
  2,173
  2,491
  2,831
  3,193
  3,577
  3,982
  4,407
  4,853
  5,319
  5,806
  6,312
  6,840
  7,388
  7,959
  8,551
  9,167
  9,807
  10,472
  11,164
  11,884
  12,632
  13,412
  14,224
  15,070
  15,952
  16,872
Working capital, $m
  1,056
  1,263
  1,493
  1,746
  2,020
  2,315
  2,631
  2,968
  3,325
  3,701
  4,096
  4,510
  4,944
  5,396
  5,867
  6,357
  6,867
  7,397
  7,947
  8,520
  9,114
  9,733
  10,376
  11,044
  11,740
  12,465
  13,219
  14,005
  14,825
  15,680
Total debt, $m
  1,509
  1,872
  2,274
  2,715
  3,193
  3,709
  4,262
  4,850
  5,473
  6,131
  6,821
  7,545
  8,302
  9,092
  9,915
  10,771
  11,662
  12,588
  13,551
  14,551
  15,590
  16,670
  17,794
  18,962
  20,178
  21,443
  22,762
  24,136
  25,568
  27,062
Total liabilities, $m
  1,845
  2,208
  2,609
  3,050
  3,529
  4,045
  4,597
  5,186
  5,809
  6,466
  7,157
  7,881
  8,638
  9,427
  10,250
  11,107
  11,998
  12,924
  13,886
  14,886
  15,926
  17,006
  18,129
  19,297
  20,513
  21,779
  23,097
  24,471
  25,903
  27,397
Total equity, $m
  2,756
  3,298
  3,898
  4,556
  5,271
  6,042
  6,867
  7,746
  8,677
  9,659
  10,691
  11,772
  12,903
  14,082
  15,312
  16,591
  17,922
  19,305
  20,743
  22,237
  23,789
  25,403
  27,081
  28,826
  30,642
  32,533
  34,502
  36,554
  38,694
  40,925
Total liabilities and equity, $m
  4,601
  5,506
  6,507
  7,606
  8,800
  10,087
  11,464
  12,932
  14,486
  16,125
  17,848
  19,653
  21,541
  23,509
  25,562
  27,698
  29,920
  32,229
  34,629
  37,123
  39,715
  42,409
  45,210
  48,123
  51,155
  54,312
  57,599
  61,025
  64,597
  68,322
Debt-to-equity ratio
  0.550
  0.570
  0.580
  0.600
  0.610
  0.610
  0.620
  0.630
  0.630
  0.630
  0.640
  0.640
  0.640
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
  0.660
Adjusted equity ratio
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  206
  315
  436
  569
  714
  871
  1,038
  1,217
  1,406
  1,606
  1,916
  2,137
  2,367
  2,608
  2,859
  3,120
  3,392
  3,675
  3,969
  4,274
  4,592
  4,923
  5,267
  5,625
  5,997
  6,385
  6,790
  7,212
  7,652
  8,112
Depreciation, amort., depletion, $m
  183
  192
  203
  214
  226
  239
  253
  268
  284
  300
  181
  200
  219
  239
  260
  281
  304
  328
  352
  377
  404
  431
  459
  489
  520
  552
  585
  620
  656
  694
Funds from operations, $m
  390
  508
  639
  783
  940
  1,110
  1,291
  1,485
  1,690
  1,907
  2,098
  2,336
  2,586
  2,847
  3,118
  3,401
  3,696
  4,002
  4,321
  4,652
  4,996
  5,354
  5,726
  6,114
  6,517
  6,937
  7,375
  7,832
  8,309
  8,806
Change in working capital, $m
  185
  208
  230
  252
  274
  295
  316
  337
  357
  376
  395
  414
  433
  452
  471
  490
  510
  530
  551
  572
  595
  618
  643
  669
  696
  724
  754
  786
  820
  855
Cash from operations, $m
  204
  300
  409
  531
  666
  814
  975
  1,148
  1,334
  1,531
  1,702
  1,922
  2,153
  2,395
  2,648
  2,911
  3,186
  3,472
  3,770
  4,079
  4,401
  4,735
  5,083
  5,445
  5,821
  6,213
  6,621
  7,046
  7,489
  7,951
Maintenance CAPEX, $m
  -39
  -47
  -56
  -66
  -77
  -89
  -103
  -117
  -131
  -147
  -164
  -181
  -200
  -219
  -239
  -260
  -281
  -304
  -328
  -352
  -377
  -404
  -431
  -459
  -489
  -520
  -552
  -585
  -620
  -656
New CAPEX, $m
  -200
  -223
  -247
  -271
  -295
  -318
  -340
  -362
  -384
  -405
  -425
  -446
  -466
  -486
  -507
  -527
  -549
  -570
  -593
  -616
  -640
  -665
  -692
  -719
  -749
  -779
  -812
  -846
  -882
  -920
Cash from investing activities, $m
  -239
  -270
  -303
  -337
  -372
  -407
  -443
  -479
  -515
  -552
  -589
  -627
  -666
  -705
  -746
  -787
  -830
  -874
  -921
  -968
  -1,017
  -1,069
  -1,123
  -1,178
  -1,238
  -1,299
  -1,364
  -1,431
  -1,502
  -1,576
Free cash flow, $m
  -34
  30
  106
  194
  294
  407
  532
  670
  818
  979
  1,113
  1,295
  1,487
  1,689
  1,902
  2,124
  2,356
  2,598
  2,850
  3,111
  3,384
  3,667
  3,961
  4,266
  4,584
  4,914
  5,257
  5,615
  5,987
  6,374
Issuance/(repayment) of debt, $m
  325
  363
  402
  441
  479
  516
  553
  588
  623
  657
  691
  724
  757
  790
  823
  857
  891
  926
  962
  1,000
  1,039
  1,080
  1,123
  1,168
  1,216
  1,266
  1,318
  1,374
  1,432
  1,494
Issuance/(repurchase) of shares, $m
  279
  227
  164
  89
  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
Cash from financing (excl. dividends), $m  
  604
  590
  566
  530
  480
  516
  553
  588
  623
  657
  691
  724
  757
  790
  823
  857
  891
  926
  962
  1,000
  1,039
  1,080
  1,123
  1,168
  1,216
  1,266
  1,318
  1,374
  1,432
  1,494
Total cash flow (excl. dividends), $m
  570
  620
  671
  723
  774
  923
  1,085
  1,258
  1,442
  1,636
  1,804
  2,019
  2,244
  2,479
  2,725
  2,981
  3,247
  3,524
  3,812
  4,111
  4,423
  4,747
  5,084
  5,434
  5,799
  6,179
  6,575
  6,988
  7,419
  7,868
Retained Cash Flow (-), $m
  -486
  -542
  -600
  -658
  -715
  -771
  -825
  -879
  -931
  -982
  -1,032
  -1,081
  -1,131
  -1,180
  -1,229
  -1,279
  -1,331
  -1,383
  -1,438
  -1,494
  -1,552
  -1,614
  -1,678
  -1,745
  -1,816
  -1,891
  -1,969
  -2,052
  -2,140
  -2,232
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
  77
  71
  65
  59
  152
  259
  379
  511
  654
  772
  937
  1,113
  1,300
  1,496
  1,701
  1,916
  2,141
  2,374
  2,618
  2,870
  3,133
  3,406
  3,689
  3,983
  4,289
  4,606
  4,936
  5,279
  5,637
Discount rate, %
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
  80
  69
  59
  50
  41
  99
  152
  200
  241
  272
  281
  296
  301
  297
  285
  267
  244
  218
  191
  162
  135
  110
  87
  68
  51
  38
  27
  19
  13
  8
Current shareholders' claim on cash, %
  92.0
  86.9
  83.9
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6
  82.6

KLX Inc. (KLX) is the distributor and service provider of aerospace fasteners and consumables. The Company offers ranges of aerospace hardware and consumables and inventory management services across the world. The Company operates through two segments: Aerospace Solutions Group (ASG) and Energy Services Group (ESG). The Company's ASG segment service offerings include inventory management and replenishment, creative and differential supply chain solutions, such as third-party logistics programs, special packaging and bar-coding, parts kitting, quality assurance testing and a range of purchasing assistance programs, plus the electronic data interchange capability. The Company's ESG segment products and services include onshore completion services, wireline services, fishing services and tools, down-hole completion and production services, pressure control, accommodations and related surface rental equipment, and remanufacturing shops.

FINANCIAL RATIOS  of  KLX (KLXI)

Valuation Ratios
P/E Ratio 68.2
Price to Sales 2.2
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 28.5
Growth Rates
Sales Growth Rate -4.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -72.5%
Cap. Spend. - 3 Yr. Gr. Rate 4.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 53.2%
Total Debt to Equity 53.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. -1%
Return On Total Capital 1.4%
Ret/ On T. Cap. - 3 Yr. Avg. -2.2%
Return On Equity 2.2%
Return On Equity - 3 Yr. Avg. -3.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 24.6%
Gross Margin - 3 Yr. Avg. 25.8%
EBITDA Margin 12.9%
EBITDA Margin - 3 Yr. Avg. 0.5%
Operating Margin 8.6%
Oper. Margin - 3 Yr. Avg. -3.7%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. -7.1%
Net Profit Margin 3.2%
Net Profit Margin - 3 Yr. Avg. -5.4%
Effective Tax Rate 11.1%
Eff/ Tax Rate - 3 Yr. Avg. 37.4%
Payout Ratio 0%

KLXI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KLXI stock intrinsic value calculation we used $1740.8 million for the last fiscal year's total revenue generated by KLX. The default revenue input number comes from 0001 income statement of KLX. 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 KLXI stock valuation model: a) initial revenue growth rate of 21.3% 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 5.9%, whose default value for KLXI is calculated based on our internal credit rating of KLX, 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 KLX.
    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 KLXI stock the variable cost ratio is equal to 64.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $407 million in the base year in the intrinsic value calculation for KLXI 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 6.4% for KLX.

Corporate tax rate of 27% is the nominal tax rate for KLX. 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 KLXI 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 KLXI are equal to 53.8%.

Life of production assets of 24.3 years is the average useful life of capital assets used in KLX 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 KLXI is equal to 50%. 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 - $2269.9 million for KLX - 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 50.747 million for KLX 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 KLX at the current share price and the inputted number of shares is $3.2 billion.

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