Intrinsic value of Koppers Holdings Inc. - KOP

Previous Close

$29.65

  Intrinsic Value

$55.04

stock screener

  Rating & Target

str. buy

+86%

Previous close

$29.65

 
Intrinsic value

$55.04

 
Up/down potential

+86%

 
Rating

str. buy

We calculate the intrinsic value of KOP 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 0.6

 

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, %
  16.20
  15.08
  14.07
  13.16
  12.35
  11.61
  10.95
  10.36
  9.82
  9.34
  8.91
  8.51
  8.16
  7.85
  7.56
  7.31
  7.08
  6.87
  6.68
  6.51
  6.36
  6.23
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
Revenue, $m
  1,987
  2,287
  2,608
  2,952
  3,316
  3,701
  4,107
  4,532
  4,977
  5,442
  5,927
  6,431
  6,956
  7,502
  8,070
  8,659
  9,272
  9,909
  10,571
  11,259
  11,975
  12,721
  13,497
  14,306
  15,149
  16,029
  16,946
  17,904
  18,904
  19,949
Variable operating expenses, $m
  1,826
  2,094
  2,382
  2,689
  3,015
  3,360
  3,723
  4,103
  4,501
  4,917
  5,302
  5,754
  6,224
  6,712
  7,219
  7,747
  8,295
  8,865
  9,457
  10,073
  10,714
  11,381
  12,075
  12,799
  13,553
  14,340
  15,161
  16,017
  16,912
  17,847
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
  1,826
  2,094
  2,382
  2,689
  3,015
  3,360
  3,723
  4,103
  4,501
  4,917
  5,302
  5,754
  6,224
  6,712
  7,219
  7,747
  8,295
  8,865
  9,457
  10,073
  10,714
  11,381
  12,075
  12,799
  13,553
  14,340
  15,161
  16,017
  16,912
  17,847
Operating income, $m
  161
  192
  226
  263
  301
  341
  384
  429
  476
  525
  624
  678
  733
  790
  850
  912
  977
  1,044
  1,114
  1,186
  1,262
  1,340
  1,422
  1,507
  1,596
  1,689
  1,785
  1,886
  1,992
  2,102
EBITDA, $m
  253
  291
  332
  376
  423
  472
  523
  577
  634
  693
  755
  819
  886
  956
  1,028
  1,103
  1,181
  1,262
  1,347
  1,434
  1,526
  1,621
  1,720
  1,823
  1,930
  2,042
  2,159
  2,281
  2,408
  2,542
Interest expense (income), $m
  43
  67
  76
  92
  109
  127
  146
  167
  188
  211
  234
  259
  285
  311
  339
  368
  398
  429
  462
  496
  531
  567
  605
  645
  686
  729
  773
  820
  868
  919
  972
Earnings before tax, $m
  94
  117
  135
  154
  174
  195
  218
  241
  265
  291
  366
  393
  422
  451
  482
  514
  548
  582
  618
  656
  695
  735
  778
  822
  868
  916
  966
  1,018
  1,073
  1,130
Tax expense, $m
  25
  31
  36
  42
  47
  53
  59
  65
  72
  78
  99
  106
  114
  122
  130
  139
  148
  157
  167
  177
  188
  199
  210
  222
  234
  247
  261
  275
  290
  305
Net income, $m
  68
  85
  98
  112
  127
  143
  159
  176
  194
  212
  267
  287
  308
  329
  352
  375
  400
  425
  451
  479
  507
  537
  568
  600
  633
  668
  705
  743
  783
  825

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
  1,720
  1,980
  2,258
  2,556
  2,871
  3,205
  3,556
  3,924
  4,309
  4,712
  5,131
  5,568
  6,023
  6,496
  6,987
  7,497
  8,028
  8,579
  9,152
  9,748
  10,368
  11,014
  11,686
  12,386
  13,116
  13,878
  14,672
  15,501
  16,367
  17,272
Adjusted assets (=assets-cash), $m
  1,720
  1,980
  2,258
  2,556
  2,871
  3,205
  3,556
  3,924
  4,309
  4,712
  5,131
  5,568
  6,023
  6,496
  6,987
  7,497
  8,028
  8,579
  9,152
  9,748
  10,368
  11,014
  11,686
  12,386
  13,116
  13,878
  14,672
  15,501
  16,367
  17,272
Revenue / Adjusted assets
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
  1.155
Average production assets, $m
  666
  766
  874
  989
  1,111
  1,240
  1,376
  1,518
  1,667
  1,823
  1,985
  2,155
  2,330
  2,513
  2,703
  2,901
  3,106
  3,319
  3,541
  3,772
  4,012
  4,262
  4,522
  4,793
  5,075
  5,370
  5,677
  5,998
  6,333
  6,683
Working capital, $m
  246
  284
  323
  366
  411
  459
  509
  562
  617
  675
  735
  798
  863
  930
  1,001
  1,074
  1,150
  1,229
  1,311
  1,396
  1,485
  1,577
  1,674
  1,774
  1,879
  1,988
  2,101
  2,220
  2,344
  2,474
Total debt, $m
  1,115
  1,349
  1,599
  1,867
  2,151
  2,451
  2,767
  3,098
  3,445
  3,807
  4,185
  4,578
  4,987
  5,413
  5,855
  6,314
  6,792
  7,288
  7,804
  8,340
  8,898
  9,479
  10,084
  10,714
  11,371
  12,057
  12,771
  13,518
  14,297
  15,111
Total liabilities, $m
  1,548
  1,782
  2,033
  2,300
  2,584
  2,884
  3,200
  3,532
  3,878
  4,241
  4,618
  5,012
  5,421
  5,846
  6,288
  6,747
  7,225
  7,721
  8,237
  8,773
  9,332
  9,912
  10,517
  11,148
  11,805
  12,490
  13,205
  13,951
  14,730
  15,544
Total equity, $m
  172
  198
  226
  256
  287
  320
  356
  392
  431
  471
  513
  557
  602
  650
  699
  750
  803
  858
  915
  975
  1,037
  1,101
  1,169
  1,239
  1,312
  1,388
  1,467
  1,550
  1,637
  1,727
Total liabilities and equity, $m
  1,720
  1,980
  2,259
  2,556
  2,871
  3,204
  3,556
  3,924
  4,309
  4,712
  5,131
  5,569
  6,023
  6,496
  6,987
  7,497
  8,028
  8,579
  9,152
  9,748
  10,369
  11,013
  11,686
  12,387
  13,117
  13,878
  14,672
  15,501
  16,367
  17,271
Debt-to-equity ratio
  6.480
  6.810
  7.080
  7.300
  7.490
  7.650
  7.780
  7.900
  7.990
  8.080
  8.160
  8.220
  8.280
  8.330
  8.380
  8.420
  8.460
  8.490
  8.530
  8.560
  8.580
  8.610
  8.630
  8.650
  8.670
  8.690
  8.700
  8.720
  8.740
  8.750
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  68
  85
  98
  112
  127
  143
  159
  176
  194
  212
  267
  287
  308
  329
  352
  375
  400
  425
  451
  479
  507
  537
  568
  600
  633
  668
  705
  743
  783
  825
Depreciation, amort., depletion, $m
  92
  99
  106
  114
  122
  130
  139
  148
  158
  168
  131
  142
  153
  165
  178
  191
  204
  218
  233
  248
  264
  280
  297
  315
  334
  353
  373
  395
  417
  440
Funds from operations, $m
  161
  184
  204
  226
  249
  273
  298
  324
  352
  381
  397
  429
  461
  495
  530
  566
  604
  643
  684
  727
  771
  817
  865
  915
  967
  1,022
  1,078
  1,138
  1,200
  1,264
Change in working capital, $m
  34
  37
  40
  43
  45
  48
  50
  53
  55
  58
  60
  63
  65
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
  105
  109
  114
  119
  124
  130
Cash from operations, $m
  126
  147
  164
  183
  203
  225
  248
  271
  297
  323
  337
  366
  396
  427
  459
  493
  528
  564
  602
  641
  682
  725
  769
  815
  863
  913
  965
  1,019
  1,076
  1,135
Maintenance CAPEX, $m
  -38
  -44
  -50
  -57
  -65
  -73
  -82
  -91
  -100
  -110
  -120
  -131
  -142
  -153
  -165
  -178
  -191
  -204
  -218
  -233
  -248
  -264
  -280
  -297
  -315
  -334
  -353
  -373
  -395
  -417
New CAPEX, $m
  -92
  -100
  -108
  -115
  -122
  -129
  -136
  -142
  -149
  -156
  -162
  -169
  -176
  -183
  -190
  -198
  -205
  -213
  -222
  -231
  -240
  -250
  -260
  -271
  -282
  -295
  -307
  -321
  -335
  -350
Cash from investing activities, $m
  -130
  -144
  -158
  -172
  -187
  -202
  -218
  -233
  -249
  -266
  -282
  -300
  -318
  -336
  -355
  -376
  -396
  -417
  -440
  -464
  -488
  -514
  -540
  -568
  -597
  -629
  -660
  -694
  -730
  -767
Free cash flow, $m
  -4
  3
  6
  11
  16
  23
  30
  38
  48
  58
  55
  66
  78
  91
  104
  118
  132
  147
  162
  178
  194
  211
  228
  246
  265
  284
  304
  325
  346
  368
Issuance/(repayment) of debt, $m
  125
  233
  251
  268
  284
  300
  316
  331
  347
  362
  378
  393
  409
  425
  442
  459
  477
  496
  516
  536
  558
  581
  605
  630
  657
  685
  715
  746
  779
  814
Issuance/(repurchase) of shares, $m
  48
  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  
  173
  233
  251
  268
  284
  300
  316
  331
  347
  362
  378
  393
  409
  425
  442
  459
  477
  496
  516
  536
  558
  581
  605
  630
  657
  685
  715
  746
  779
  814
Total cash flow (excl. dividends), $m
  169
  236
  257
  278
  300
  323
  346
  370
  394
  420
  433
  460
  487
  516
  546
  577
  609
  643
  678
  714
  752
  792
  833
  877
  922
  969
  1,019
  1,071
  1,125
  1,182
Retained Cash Flow (-), $m
  -116
  -26
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -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
  53
  210
  229
  249
  269
  289
  311
  333
  356
  380
  391
  416
  442
  469
  497
  526
  556
  588
  621
  655
  690
  727
  766
  807
  849
  893
  939
  988
  1,039
  1,092
Discount rate, %
  13.30
  13.97
  14.66
  15.40
  16.17
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.75
  23.88
  25.08
  26.33
  27.65
  29.03
  30.48
  32.01
  33.61
  35.29
  37.05
  38.91
  40.85
  42.89
  45.04
  47.29
  49.65
  52.14
  54.74
PV of cash for distribution, $m
  47
  162
  152
  140
  127
  113
  99
  84
  71
  58
  45
  36
  27
  20
  15
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2

Koppers Holdings Inc. is a global integrated provider of treated wood products, wood treatment chemicals and carbon compounds. The Company operates through three segments: Railroad and Utility Products and Services (RUPS), Carbon Materials and Chemicals (CMC) and Performance Chemicals (PC). The RUPS business sells treated and untreated wood products, rail joint bars and services primarily to the railroad markets. The primary products supplied by PC business are copper-based wood preservatives, including micronized copper quaternary and micronized copper azole (MicroPro), micronized pigments (MicroShades) and chromated copper arsenate. Through CMC business, the Company processes coal tar into a range of products, including carbon pitch, creosote and carbon black feedstock. Its products and services are used in a range of markets, including the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber and construction industries.

FINANCIAL RATIOS  of  Koppers Holdings Inc. (KOP)

Valuation Ratios
P/E Ratio 21.1
Price to Sales 0.4
Price to Book 20.4
Price to Tangible Book
Price to Cash Flow 5.1
Price to Free Cash Flow 8.8
Growth Rates
Sales Growth Rate -13%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22%
Cap. Spend. - 3 Yr. Gr. Rate -7.3%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 2063.3%
Total Debt to Equity 2206.7%
Interest Coverage 2
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 7%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. -3.1%
Return On Equity 527.3%
Return On Equity - 3 Yr. Avg. 72.8%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 20.3%
Gross Margin - 3 Yr. Avg. 16.6%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 5.2%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 2.1%
Pre-Tax Margin 2.8%
Pre-Tax Margin - 3 Yr. Avg. -0.8%
Net Profit Margin 2%
Net Profit Margin - 3 Yr. Avg. -1.5%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. -177%
Payout Ratio 0%

KOP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KOP stock intrinsic value calculation we used $1710 million for the last fiscal year's total revenue generated by Koppers Holdings Inc.. The default revenue input number comes from 0001 income statement of Koppers Holdings Inc.. 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 KOP stock valuation model: a) initial revenue growth rate of 16.2% 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 13.3%, whose default value for KOP is calculated based on our internal credit rating of Koppers Holdings Inc., 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 Koppers Holdings Inc..
    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 KOP stock the variable cost ratio is equal to 92.3%.

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 KOP 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 6.8% for Koppers Holdings Inc..

Corporate tax rate of 27% is the nominal tax rate for Koppers Holdings Inc.. 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 KOP 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 KOP are equal to 33.5%.

Life of production assets of 15.2 years is the average useful life of capital assets used in Koppers Holdings Inc. 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 KOP is equal to 12.4%. 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 - $56.2 million for Koppers Holdings Inc. - 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 20.549 million for Koppers Holdings Inc. 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 Koppers Holdings Inc. at the current share price and the inputted number of shares is $0.6 billion.

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