Intrinsic value of Kraton Corporation - KRA

Previous Close

$29.17

  Intrinsic Value

$55.70

stock screener

  Rating & Target

str. buy

+91%

Previous close

$29.17

 
Intrinsic value

$55.70

 
Up/down potential

+91%

 
Rating

str. buy

We calculate the intrinsic value of KRA 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 0.9

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,052
  2,099
  2,153
  2,214
  2,281
  2,355
  2,435
  2,522
  2,615
  2,716
  2,823
  2,938
  3,060
  3,189
  3,327
  3,473
  3,627
  3,790
  3,963
  4,145
  4,337
  4,539
  4,753
  4,978
  5,215
  5,464
  5,727
  6,003
  6,294
  6,600
Variable operating expenses, $m
  365
  371
  377
  385
  393
  402
  412
  423
  434
  446
  346
  360
  375
  391
  408
  426
  445
  465
  486
  508
  532
  556
  583
  610
  639
  670
  702
  736
  772
  809
Fixed operating expenses, $m
  1,469
  1,501
  1,534
  1,568
  1,602
  1,637
  1,673
  1,710
  1,748
  1,786
  1,826
  1,866
  1,907
  1,949
  1,992
  2,035
  2,080
  2,126
  2,173
  2,221
  2,269
  2,319
  2,370
  2,423
  2,476
  2,530
  2,586
  2,643
  2,701
  2,760
Total operating expenses, $m
  1,834
  1,872
  1,911
  1,953
  1,995
  2,039
  2,085
  2,133
  2,182
  2,232
  2,172
  2,226
  2,282
  2,340
  2,400
  2,461
  2,525
  2,591
  2,659
  2,729
  2,801
  2,875
  2,953
  3,033
  3,115
  3,200
  3,288
  3,379
  3,473
  3,569
Operating income, $m
  219
  228
  242
  261
  286
  315
  349
  389
  433
  483
  651
  712
  778
  849
  927
  1,011
  1,102
  1,199
  1,304
  1,416
  1,536
  1,663
  1,800
  1,945
  2,100
  2,264
  2,439
  2,625
  2,821
  3,030
EBITDA, $m
  437
  448
  465
  488
  516
  549
  587
  631
  680
  735
  795
  861
  934
  1,012
  1,097
  1,189
  1,287
  1,393
  1,506
  1,627
  1,757
  1,895
  2,042
  2,199
  2,366
  2,543
  2,731
  2,931
  3,143
  3,367
Interest expense (income), $m
  116
  92
  95
  98
  101
  105
  109
  114
  119
  125
  131
  138
  145
  152
  160
  169
  177
  187
  197
  208
  219
  231
  243
  256
  270
  285
  300
  316
  333
  351
  370
Earnings before tax, $m
  127
  133
  144
  160
  181
  206
  235
  269
  308
  352
  514
  567
  625
  689
  759
  834
  915
  1,002
  1,096
  1,197
  1,305
  1,420
  1,544
  1,675
  1,815
  1,964
  2,123
  2,291
  2,470
  2,660
Tax expense, $m
  34
  36
  39
  43
  49
  56
  64
  73
  83
  95
  139
  153
  169
  186
  205
  225
  247
  271
  296
  323
  352
  383
  417
  452
  490
  530
  573
  619
  667
  718
Net income, $m
  92
  97
  105
  117
  132
  150
  172
  197
  225
  257
  375
  414
  457
  503
  554
  609
  668
  732
  800
  874
  953
  1,037
  1,127
  1,223
  1,325
  1,434
  1,549
  1,672
  1,803
  1,942

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
  2,953
  3,021
  3,098
  3,186
  3,282
  3,388
  3,504
  3,628
  3,763
  3,907
  4,062
  4,227
  4,402
  4,589
  4,787
  4,997
  5,219
  5,453
  5,701
  5,963
  6,240
  6,531
  6,839
  7,162
  7,503
  7,862
  8,240
  8,638
  9,056
  9,496
Adjusted assets (=assets-cash), $m
  2,953
  3,021
  3,098
  3,186
  3,282
  3,388
  3,504
  3,628
  3,763
  3,907
  4,062
  4,227
  4,402
  4,589
  4,787
  4,997
  5,219
  5,453
  5,701
  5,963
  6,240
  6,531
  6,839
  7,162
  7,503
  7,862
  8,240
  8,638
  9,056
  9,496
Revenue / Adjusted assets
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
  0.695
Average production assets, $m
  1,560
  1,596
  1,637
  1,683
  1,734
  1,790
  1,851
  1,917
  1,988
  2,064
  2,145
  2,233
  2,325
  2,424
  2,528
  2,639
  2,756
  2,880
  3,012
  3,150
  3,296
  3,450
  3,612
  3,783
  3,963
  4,153
  4,353
  4,563
  4,784
  5,016
Working capital, $m
  384
  393
  403
  414
  427
  440
  455
  472
  489
  508
  528
  549
  572
  596
  622
  649
  678
  709
  741
  775
  811
  849
  889
  931
  975
  1,022
  1,071
  1,123
  1,177
  1,234
Total debt, $m
  1,577
  1,628
  1,686
  1,752
  1,825
  1,904
  1,991
  2,085
  2,187
  2,295
  2,412
  2,536
  2,668
  2,808
  2,957
  3,115
  3,283
  3,459
  3,646
  3,844
  4,052
  4,271
  4,503
  4,746
  5,003
  5,273
  5,558
  5,857
  6,172
  6,504
Total liabilities, $m
  2,224
  2,275
  2,333
  2,399
  2,471
  2,551
  2,638
  2,732
  2,834
  2,942
  3,059
  3,183
  3,315
  3,455
  3,604
  3,762
  3,930
  4,106
  4,293
  4,490
  4,699
  4,918
  5,150
  5,393
  5,650
  5,920
  6,205
  6,504
  6,819
  7,151
Total equity, $m
  729
  746
  765
  787
  811
  837
  865
  896
  929
  965
  1,003
  1,044
  1,087
  1,133
  1,182
  1,234
  1,289
  1,347
  1,408
  1,473
  1,541
  1,613
  1,689
  1,769
  1,853
  1,942
  2,035
  2,134
  2,237
  2,346
Total liabilities and equity, $m
  2,953
  3,021
  3,098
  3,186
  3,282
  3,388
  3,503
  3,628
  3,763
  3,907
  4,062
  4,227
  4,402
  4,588
  4,786
  4,996
  5,219
  5,453
  5,701
  5,963
  6,240
  6,531
  6,839
  7,162
  7,503
  7,862
  8,240
  8,638
  9,056
  9,497
Debt-to-equity ratio
  2.160
  2.180
  2.200
  2.230
  2.250
  2.280
  2.300
  2.330
  2.350
  2.380
  2.400
  2.430
  2.450
  2.480
  2.500
  2.520
  2.550
  2.570
  2.590
  2.610
  2.630
  2.650
  2.670
  2.680
  2.700
  2.720
  2.730
  2.750
  2.760
  2.770
Adjusted equity ratio
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  92
  97
  105
  117
  132
  150
  172
  197
  225
  257
  375
  414
  457
  503
  554
  609
  668
  732
  800
  874
  953
  1,037
  1,127
  1,223
  1,325
  1,434
  1,549
  1,672
  1,803
  1,942
Depreciation, amort., depletion, $m
  218
  221
  223
  226
  230
  234
  238
  242
  247
  252
  144
  150
  156
  163
  170
  177
  185
  193
  202
  211
  221
  232
  242
  254
  266
  279
  292
  306
  321
  337
Funds from operations, $m
  311
  318
  329
  343
  362
  384
  409
  439
  472
  509
  519
  564
  613
  666
  724
  786
  853
  925
  1,002
  1,085
  1,174
  1,268
  1,369
  1,477
  1,591
  1,712
  1,842
  1,979
  2,124
  2,278
Change in working capital, $m
  8
  9
  10
  11
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
Cash from operations, $m
  303
  309
  319
  332
  349
  370
  394
  423
  454
  490
  499
  542
  590
  642
  698
  759
  824
  895
  970
  1,051
  1,138
  1,231
  1,329
  1,435
  1,547
  1,666
  1,792
  1,927
  2,070
  2,221
Maintenance CAPEX, $m
  -103
  -105
  -107
  -110
  -113
  -116
  -120
  -124
  -129
  -133
  -139
  -144
  -150
  -156
  -163
  -170
  -177
  -185
  -193
  -202
  -211
  -221
  -232
  -242
  -254
  -266
  -279
  -292
  -306
  -321
New CAPEX, $m
  -31
  -36
  -41
  -46
  -51
  -56
  -61
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -138
  -146
  -154
  -162
  -171
  -180
  -190
  -200
  -210
  -221
  -232
Cash from investing activities, $m
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -209
  -221
  -231
  -243
  -255
  -268
  -281
  -294
  -309
  -324
  -340
  -357
  -375
  -394
  -413
  -434
  -456
  -479
  -502
  -527
  -553
Free cash flow, $m
  170
  168
  171
  176
  185
  198
  213
  232
  255
  280
  279
  311
  347
  387
  431
  478
  530
  586
  646
  711
  781
  855
  935
  1,021
  1,113
  1,210
  1,314
  1,425
  1,543
  1,668
Issuance/(repayment) of debt, $m
  44
  51
  58
  66
  73
  80
  87
  94
  101
  109
  116
  124
  132
  140
  149
  158
  167
  177
  187
  197
  208
  220
  231
  244
  257
  270
  285
  299
  315
  331
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  
  44
  51
  58
  66
  73
  80
  87
  94
  101
  109
  116
  124
  132
  140
  149
  158
  167
  177
  187
  197
  208
  220
  231
  244
  257
  270
  285
  299
  315
  331
Total cash flow (excl. dividends), $m
  214
  219
  229
  242
  258
  277
  300
  326
  356
  389
  395
  435
  479
  528
  580
  636
  697
  762
  833
  908
  989
  1,075
  1,167
  1,265
  1,369
  1,480
  1,599
  1,724
  1,858
  1,999
Retained Cash Flow (-), $m
  -14
  -17
  -19
  -22
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -109
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
  200
  203
  210
  220
  234
  251
  272
  296
  323
  353
  357
  395
  436
  481
  531
  584
  642
  704
  771
  843
  920
  1,003
  1,091
  1,185
  1,285
  1,392
  1,505
  1,626
  1,754
  1,890
Discount rate, %
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
  183
  168
  157
  146
  137
  128
  119
  111
  101
  92
  76
  67
  59
  50
  42
  35
  28
  22
  17
  12
  9
  6
  4
  3
  2
  1
  1
  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

Kraton Corporation, formerly Kraton Performance Polymers, Inc., is a specialty chemicals company. The Company manufactures styrenic block copolymers (SBCs) and other engineered polymers. The Company also produces specialty products primarily derived from pine wood pulping co-products. The Company operates through two segments: Polymer Segment, which comprises SBCs and other engineered polymers business, and Chemical Segment, which comprises pine-based specialty products business. Its SBCs are used in a range of applications, including adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing and footwear products. The Company also sells isoprene rubber (IR) and isoprene rubber latex (IRL), which are non-SBC products primarily used in applications, such as medical products, personal care, adhesives, tackifiers, paints and coatings. It offers crude tall oil (CTO) and crude sulfate turpentine (CST).

FINANCIAL RATIOS  of  Kraton Corporation (KRA)

Valuation Ratios
P/E Ratio 8.4
Price to Sales 0.5
Price to Book 2
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 69.5
Growth Rates
Sales Growth Rate 68.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.1%
Cap. Spend. - 3 Yr. Gr. Rate 7.8%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 370.7%
Total Debt to Equity 379.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 52.4%
Ret/ On Assets - 3 Yr. Avg. 18.7%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2%
Return On Equity 26.2%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 27.5%
Gross Margin - 3 Yr. Avg. 23.1%
EBITDA Margin 14.6%
EBITDA Margin - 3 Yr. Avg. 9.9%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 3.8%
Pre-Tax Margin 0.7%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate -707.7%
Eff/ Tax Rate - 3 Yr. Avg. -247%
Payout Ratio 0%

KRA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KRA stock intrinsic value calculation we used $2012 million for the last fiscal year's total revenue generated by Kraton Corporation. The default revenue input number comes from 0001 income statement of Kraton Corporation. 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 KRA stock valuation model: a) initial revenue growth rate of 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 9.3%, whose default value for KRA is calculated based on our internal credit rating of Kraton Corporation, 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 Kraton Corporation.
    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 KRA stock the variable cost ratio is equal to 17.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1437 million in the base year in the intrinsic value calculation for KRA 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% for Kraton Corporation.

Corporate tax rate of 27% is the nominal tax rate for Kraton Corporation. 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 KRA 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 KRA are equal to 76%.

Life of production assets of 14.9 years is the average useful life of capital assets used in Kraton Corporation 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 KRA is equal to 18.7%. 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 - $715.138 million for Kraton Corporation - 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 31.876 million for Kraton Corporation 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 Kraton Corporation at the current share price and the inputted number of shares is $0.9 billion.

RELATED COMPANIES Price Int.Val. Rating
XOM Exxon Mobil Co 70.93 74.13  hold
EMN Eastman Chemic 68.05 106.10  buy
HUN Huntsman Corpo 21.15 43.77  str.buy
NGVT Ingevity Corpo 78.48 150.70  buy
LYB LyondellBasell 78.05 165.38  str.buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.