Intrinsic value of Koppers Holdings - KOP

Previous Close

$39.05

  Intrinsic Value

$44.73

stock screener

  Rating & Target

hold

+15%

Previous close

$39.05

 
Intrinsic value

$44.73

 
Up/down potential

+15%

 
Rating

hold

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 2017), $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 0.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  1,538
  1,604
  1,674
  1,748
  1,826
  1,908
  1,996
  2,088
  2,185
  2,288
  2,396
  2,509
  2,629
  2,755
  2,888
  3,028
  3,174
  3,329
  3,491
  3,662
  3,842
  4,030
  4,229
  4,437
  4,656
  4,886
  5,128
  5,382
  5,649
  5,929
Variable operating expenses, $m
  815
  849
  884
  922
  962
  1,004
  1,049
  1,095
  1,145
  1,197
  1,220
  1,278
  1,339
  1,404
  1,471
  1,542
  1,617
  1,696
  1,779
  1,866
  1,957
  2,053
  2,154
  2,261
  2,372
  2,489
  2,613
  2,742
  2,878
  3,021
Fixed operating expenses, $m
  606
  619
  633
  647
  661
  676
  691
  706
  721
  737
  753
  770
  787
  804
  822
  840
  858
  877
  897
  916
  937
  957
  978
  1,000
  1,022
  1,044
  1,067
  1,091
  1,115
  1,139
Total operating expenses, $m
  1,421
  1,468
  1,517
  1,569
  1,623
  1,680
  1,740
  1,801
  1,866
  1,934
  1,973
  2,048
  2,126
  2,208
  2,293
  2,382
  2,475
  2,573
  2,676
  2,782
  2,894
  3,010
  3,132
  3,261
  3,394
  3,533
  3,680
  3,833
  3,993
  4,160
Operating income, $m
  117
  136
  156
  179
  203
  229
  257
  287
  319
  353
  422
  461
  503
  547
  595
  645
  699
  756
  816
  880
  948
  1,020
  1,096
  1,177
  1,262
  1,353
  1,448
  1,550
  1,657
  1,769
EBITDA, $m
  214
  236
  259
  285
  312
  342
  373
  407
  443
  482
  524
  568
  615
  664
  717
  774
  834
  897
  964
  1,036
  1,111
  1,191
  1,276
  1,366
  1,460
  1,560
  1,666
  1,778
  1,897
  2,021
Interest expense (income), $m
  43
  43
  44
  47
  51
  54
  58
  61
  65
  70
  74
  79
  84
  89
  95
  100
  107
  113
  120
  127
  134
  142
  151
  159
  168
  178
  188
  199
  210
  222
  234
Earnings before tax, $m
  74
  91
  109
  128
  149
  171
  195
  221
  249
  279
  343
  377
  414
  453
  494
  539
  586
  636
  689
  746
  806
  869
  937
  1,009
  1,084
  1,165
  1,250
  1,340
  1,435
  1,536
Tax expense, $m
  20
  25
  29
  35
  40
  46
  53
  60
  67
  75
  93
  102
  112
  122
  133
  145
  158
  172
  186
  201
  218
  235
  253
  272
  293
  314
  337
  362
  387
  415
Net income, $m
  54
  67
  79
  93
  109
  125
  143
  161
  182
  204
  250
  275
  302
  330
  361
  393
  428
  464
  503
  544
  588
  635
  684
  736
  792
  850
  912
  978
  1,047
  1,121

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
  1,251
  1,305
  1,362
  1,422
  1,486
  1,553
  1,624
  1,699
  1,778
  1,861
  1,949
  2,042
  2,139
  2,242
  2,350
  2,463
  2,583
  2,709
  2,841
  2,980
  3,126
  3,279
  3,441
  3,610
  3,789
  3,976
  4,173
  4,379
  4,596
  4,825
Adjusted assets (=assets-cash), $m
  1,251
  1,305
  1,362
  1,422
  1,486
  1,553
  1,624
  1,699
  1,778
  1,861
  1,949
  2,042
  2,139
  2,242
  2,350
  2,463
  2,583
  2,709
  2,841
  2,980
  3,126
  3,279
  3,441
  3,610
  3,789
  3,976
  4,173
  4,379
  4,596
  4,825
Revenue / Adjusted assets
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
Average production assets, $m
  654
  682
  711
  743
  776
  811
  848
  887
  929
  972
  1,018
  1,066
  1,117
  1,171
  1,227
  1,287
  1,349
  1,415
  1,484
  1,556
  1,633
  1,713
  1,797
  1,886
  1,979
  2,077
  2,179
  2,287
  2,401
  2,520
Working capital, $m
  98
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  161
  168
  176
  185
  194
  203
  213
  223
  234
  246
  258
  271
  284
  298
  313
  328
  344
  362
  379
Total debt, $m
  703
  751
  802
  857
  914
  974
  1,038
  1,106
  1,177
  1,252
  1,331
  1,414
  1,502
  1,594
  1,692
  1,794
  1,901
  2,015
  2,134
  2,259
  2,390
  2,528
  2,674
  2,826
  2,987
  3,155
  3,332
  3,518
  3,714
  3,919
Total liabilities, $m
  1,126
  1,174
  1,226
  1,280
  1,337
  1,398
  1,461
  1,529
  1,600
  1,675
  1,754
  1,838
  1,925
  2,018
  2,115
  2,217
  2,325
  2,438
  2,557
  2,682
  2,813
  2,952
  3,097
  3,249
  3,410
  3,578
  3,755
  3,941
  4,137
  4,342
Total equity, $m
  125
  130
  136
  142
  149
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  271
  284
  298
  313
  328
  344
  361
  379
  398
  417
  438
  460
  482
Total liabilities and equity, $m
  1,251
  1,304
  1,362
  1,422
  1,486
  1,553
  1,623
  1,699
  1,778
  1,861
  1,949
  2,042
  2,139
  2,242
  2,350
  2,463
  2,583
  2,709
  2,841
  2,980
  3,126
  3,280
  3,441
  3,610
  3,789
  3,976
  4,172
  4,379
  4,597
  4,824
Debt-to-equity ratio
  5.620
  5.760
  5.890
  6.020
  6.150
  6.270
  6.390
  6.510
  6.620
  6.730
  6.830
  6.930
  7.020
  7.110
  7.200
  7.280
  7.360
  7.440
  7.510
  7.580
  7.650
  7.710
  7.770
  7.830
  7.880
  7.940
  7.990
  8.030
  8.080
  8.120
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
  54
  67
  79
  93
  109
  125
  143
  161
  182
  204
  250
  275
  302
  330
  361
  393
  428
  464
  503
  544
  588
  635
  684
  736
  792
  850
  912
  978
  1,047
  1,121
Depreciation, amort., depletion, $m
  97
  100
  103
  106
  109
  113
  117
  121
  125
  129
  102
  107
  112
  117
  123
  129
  135
  141
  148
  156
  163
  171
  180
  189
  198
  208
  218
  229
  240
  252
Funds from operations, $m
  151
  167
  182
  199
  218
  238
  259
  282
  307
  333
  352
  382
  414
  448
  484
  522
  563
  606
  651
  700
  751
  806
  864
  925
  989
  1,058
  1,130
  1,207
  1,288
  1,373
Change in working capital, $m
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
Cash from operations, $m
  147
  162
  178
  195
  213
  233
  254
  276
  300
  326
  345
  375
  406
  440
  475
  513
  553
  596
  641
  689
  740
  794
  851
  911
  975
  1,043
  1,115
  1,190
  1,270
  1,355
Maintenance CAPEX, $m
  -63
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
  -156
  -163
  -171
  -180
  -189
  -198
  -208
  -218
  -229
  -240
New CAPEX, $m
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -59
  -62
  -66
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -113
  -119
Cash from investing activities, $m
  -89
  -93
  -98
  -102
  -107
  -113
  -118
  -124
  -130
  -137
  -143
  -150
  -158
  -166
  -173
  -182
  -191
  -201
  -210
  -221
  -232
  -243
  -255
  -269
  -282
  -296
  -311
  -326
  -342
  -359
Free cash flow, $m
  58
  69
  80
  92
  105
  120
  135
  152
  170
  190
  202
  224
  249
  274
  302
  331
  362
  395
  431
  468
  508
  550
  595
  643
  694
  747
  804
  865
  928
  996
Issuance/(repayment) of debt, $m
  26
  48
  51
  54
  57
  61
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
  108
  113
  119
  125
  131
  138
  145
  153
  160
  169
  177
  186
  195
  205
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  
  26
  48
  51
  54
  57
  61
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
  108
  113
  119
  125
  131
  138
  145
  153
  160
  169
  177
  186
  195
  205
Total cash flow (excl. dividends), $m
  84
  117
  131
  146
  163
  180
  199
  220
  241
  265
  281
  308
  336
  367
  399
  433
  470
  508
  549
  593
  639
  689
  741
  796
  854
  916
  981
  1,051
  1,124
  1,201
Retained Cash Flow (-), $m
  -25
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
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
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
Cash available for distribution, $m
  59
  112
  126
  140
  156
  174
  192
  212
  234
  256
  272
  299
  326
  356
  388
  422
  458
  496
  536
  579
  625
  673
  725
  779
  836
  897
  962
  1,030
  1,102
  1,178
Discount rate, %
  11.10
  11.66
  12.24
  12.85
  13.49
  14.17
  14.88
  15.62
  16.40
  17.22
  18.08
  18.98
  19.93
  20.93
  21.98
  23.08
  24.23
  25.44
  26.71
  28.05
  29.45
  30.92
  32.47
  34.09
  35.80
  37.59
  39.47
  41.44
  43.51
  45.69
PV of cash for distribution, $m
  53
  90
  89
  87
  83
  78
  73
  66
  60
  52
  44
  37
  31
  25
  20
  15
  11
  8
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
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

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 (KOP)

Valuation Ratios
P/E Ratio 27.8
Price to Sales 0.6
Price to Book 26.9
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 11.5
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 $1476 million for the last fiscal year's total revenue generated by Koppers Holdings. The default revenue input number comes from 2017 income statement of Koppers Holdings. 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 4.2% 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 11.1%, whose default value for KOP is calculated based on our internal credit rating of Koppers Holdings, 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.
    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 53.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $593 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 6.3% for Koppers Holdings.

Corporate tax rate of 27% is the nominal tax rate for Koppers Holdings. 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 0.7%.

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 42.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Koppers Holdings 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 6.4%. 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 - $100 million for Koppers Holdings - 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 21 million for Koppers Holdings 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 at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Business, civic leaders sign pledge against sexual violence   [Jun-14-18 05:01PM  American City Business Journals]
▶ Koppers: 1Q Earnings Snapshot   [May-03-18 09:37AM  Associated Press]
▶ 5 Top Stocks to Buy Ahead of a Grueling May   [Apr-30-18 09:27AM  Zacks]
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▶ New Strong Buy Stocks for April 19th   [Apr-19-18 12:40PM  InvestorPlace]
▶ In $200M deal, Koppers acquires South Carolina wood treatment company   [Apr-10-18 01:49PM  American City Business Journals]
▶ Kópavogsbær, birting ársreiknings   [Apr-03-18 08:00AM  GlobeNewswire]
▶ Koppers Holdings Inc. to Host Earnings Call   [Feb-27-18 09:45AM  ACCESSWIRE]
▶ Koppers reports 4Q loss   [09:37AM  Associated Press]
▶ 5 Best GARP Stocks Based on PEG Ratio   [Dec-06-17 09:01AM  Zacks]
▶ Koppers beats 3Q profit forecasts   [08:19AM  Associated Press]
▶ New Strong Buy Stocks for October 31st   [Oct-31-17 11:39AM  Zacks]
▶ New Strong Buy Stocks for October 27th   [Oct-27-17 10:58AM  Zacks]
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