Intrinsic value of Kronos Worldwide Inc - KRO

Previous Close

$13.39

  Intrinsic Value

$25.99

stock screener

  Rating & Target

str. buy

+94%

Previous close

$13.39

 
Intrinsic value

$25.99

 
Up/down potential

+94%

 
Rating

str. buy

We calculate the intrinsic value of KRO 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 1.6

 

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, %
  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
  1,695
  1,734
  1,779
  1,829
  1,884
  1,945
  2,011
  2,083
  2,160
  2,243
  2,332
  2,427
  2,527
  2,634
  2,748
  2,869
  2,996
  3,131
  3,273
  3,424
  3,582
  3,750
  3,926
  4,112
  4,308
  4,514
  4,731
  4,959
  5,199
  5,452
Variable operating expenses, $m
  1,249
  1,278
  1,311
  1,348
  1,389
  1,434
  1,482
  1,535
  1,592
  1,653
  1,719
  1,788
  1,863
  1,942
  2,025
  2,114
  2,208
  2,307
  2,412
  2,523
  2,640
  2,764
  2,894
  3,031
  3,175
  3,327
  3,487
  3,655
  3,832
  4,018
Fixed operating expenses, $m
  110
  113
  115
  118
  120
  123
  126
  129
  131
  134
  137
  140
  143
  146
  150
  153
  156
  160
  163
  167
  171
  174
  178
  182
  186
  190
  194
  199
  203
  207
Total operating expenses, $m
  1,359
  1,391
  1,426
  1,466
  1,509
  1,557
  1,608
  1,664
  1,723
  1,787
  1,856
  1,928
  2,006
  2,088
  2,175
  2,267
  2,364
  2,467
  2,575
  2,690
  2,811
  2,938
  3,072
  3,213
  3,361
  3,517
  3,681
  3,854
  4,035
  4,225
Operating income, $m
  335
  343
  353
  363
  375
  389
  403
  419
  437
  456
  476
  498
  521
  546
  573
  601
  632
  664
  698
  734
  772
  812
  854
  899
  947
  997
  1,050
  1,106
  1,164
  1,226
EBITDA, $m
  386
  395
  406
  418
  431
  447
  463
  482
  501
  523
  546
  571
  597
  625
  655
  687
  721
  757
  795
  836
  879
  924
  972
  1,022
  1,076
  1,132
  1,191
  1,254
  1,320
  1,389
Interest expense (income), $m
  18
  25
  26
  27
  29
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  62
  66
  70
  75
  80
  85
  91
  96
  102
  109
  115
  123
  130
  138
  146
Earnings before tax, $m
  311
  318
  325
  335
  345
  356
  369
  383
  398
  414
  431
  450
  470
  492
  515
  540
  566
  593
  622
  654
  686
  721
  758
  797
  838
  882
  927
  976
  1,027
  1,080
Tax expense, $m
  84
  86
  88
  90
  93
  96
  100
  103
  107
  112
  117
  122
  127
  133
  139
  146
  153
  160
  168
  176
  185
  195
  205
  215
  226
  238
  250
  263
  277
  292
Net income, $m
  227
  232
  238
  244
  252
  260
  269
  279
  290
  302
  315
  329
  343
  359
  376
  394
  413
  433
  454
  477
  501
  527
  553
  582
  612
  643
  677
  712
  749
  789

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
  1,790
  1,831
  1,878
  1,931
  1,990
  2,054
  2,124
  2,200
  2,281
  2,369
  2,462
  2,562
  2,669
  2,782
  2,902
  3,029
  3,164
  3,306
  3,456
  3,615
  3,783
  3,960
  4,146
  4,342
  4,549
  4,766
  4,996
  5,237
  5,490
  5,757
Adjusted assets (=assets-cash), $m
  1,790
  1,831
  1,878
  1,931
  1,990
  2,054
  2,124
  2,200
  2,281
  2,369
  2,462
  2,562
  2,669
  2,782
  2,902
  3,029
  3,164
  3,306
  3,456
  3,615
  3,783
  3,960
  4,146
  4,342
  4,549
  4,766
  4,996
  5,237
  5,490
  5,757
Revenue / Adjusted assets
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
  0.947
Average production assets, $m
  507
  519
  532
  547
  563
  582
  601
  623
  646
  671
  697
  726
  756
  788
  822
  858
  896
  936
  979
  1,024
  1,071
  1,121
  1,174
  1,229
  1,288
  1,350
  1,414
  1,483
  1,555
  1,630
Working capital, $m
  607
  621
  637
  655
  675
  696
  720
  746
  773
  803
  835
  869
  905
  943
  984
  1,027
  1,073
  1,121
  1,172
  1,226
  1,282
  1,342
  1,406
  1,472
  1,542
  1,616
  1,694
  1,775
  1,861
  1,952
Total debt, $m
  477
  502
  531
  562
  598
  636
  678
  724
  773
  826
  882
  942
  1,006
  1,074
  1,147
  1,223
  1,304
  1,390
  1,481
  1,576
  1,677
  1,783
  1,896
  2,014
  2,138
  2,269
  2,407
  2,552
  2,705
  2,865
Total liabilities, $m
  1,078
  1,102
  1,131
  1,163
  1,198
  1,236
  1,279
  1,324
  1,373
  1,426
  1,482
  1,543
  1,607
  1,675
  1,747
  1,823
  1,905
  1,990
  2,081
  2,176
  2,277
  2,384
  2,496
  2,614
  2,738
  2,869
  3,007
  3,152
  3,305
  3,466
Total equity, $m
  712
  729
  748
  769
  792
  817
  845
  875
  908
  943
  980
  1,020
  1,062
  1,107
  1,155
  1,206
  1,259
  1,316
  1,376
  1,439
  1,506
  1,576
  1,650
  1,728
  1,810
  1,897
  1,988
  2,084
  2,185
  2,291
Total liabilities and equity, $m
  1,790
  1,831
  1,879
  1,932
  1,990
  2,053
  2,124
  2,199
  2,281
  2,369
  2,462
  2,563
  2,669
  2,782
  2,902
  3,029
  3,164
  3,306
  3,457
  3,615
  3,783
  3,960
  4,146
  4,342
  4,548
  4,766
  4,995
  5,236
  5,490
  5,757
Debt-to-equity ratio
  0.670
  0.690
  0.710
  0.730
  0.750
  0.780
  0.800
  0.830
  0.850
  0.880
  0.900
  0.920
  0.950
  0.970
  0.990
  1.010
  1.040
  1.060
  1.080
  1.100
  1.110
  1.130
  1.150
  1.170
  1.180
  1.200
  1.210
  1.220
  1.240
  1.250
Adjusted equity ratio
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  227
  232
  238
  244
  252
  260
  269
  279
  290
  302
  315
  329
  343
  359
  376
  394
  413
  433
  454
  477
  501
  527
  553
  582
  612
  643
  677
  712
  749
  789
Depreciation, amort., depletion, $m
  51
  52
  53
  55
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
  163
Funds from operations, $m
  278
  284
  291
  299
  308
  318
  329
  342
  355
  369
  385
  401
  419
  438
  458
  480
  502
  527
  552
  579
  608
  639
  671
  705
  741
  778
  818
  860
  905
  952
Change in working capital, $m
  12
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  90
Cash from operations, $m
  266
  270
  275
  281
  288
  296
  306
  316
  327
  340
  353
  367
  383
  400
  417
  436
  457
  478
  501
  526
  551
  579
  608
  638
  671
  705
  741
  779
  819
  861
Maintenance CAPEX, $m
  -50
  -51
  -52
  -53
  -55
  -56
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -90
  -94
  -98
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
  -155
New CAPEX, $m
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
Cash from investing activities, $m
  -60
  -63
  -65
  -68
  -72
  -74
  -78
  -81
  -85
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -137
  -143
  -149
  -157
  -165
  -173
  -182
  -191
  -200
  -209
  -220
  -231
Free cash flow, $m
  206
  207
  210
  213
  217
  222
  228
  234
  242
  250
  259
  269
  280
  292
  305
  318
  333
  348
  365
  383
  402
  422
  443
  465
  489
  514
  541
  569
  599
  630
Issuance/(repayment) of debt, $m
  21
  25
  28
  32
  35
  39
  42
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
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  
  21
  25
  28
  32
  35
  39
  42
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
Total cash flow (excl. dividends), $m
  227
  232
  238
  245
  252
  261
  270
  280
  291
  303
  316
  330
  344
  360
  377
  395
  414
  434
  456
  478
  502
  528
  555
  583
  614
  645
  679
  714
  751
  791
Retained Cash Flow (-), $m
  -14
  -16
  -19
  -21
  -23
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
Prev. year cash balance distribution, $m
  141
  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
  354
  216
  219
  224
  229
  235
  242
  250
  259
  268
  278
  290
  302
  315
  329
  344
  360
  378
  396
  415
  436
  458
  481
  505
  531
  559
  588
  618
  651
  685
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
  339
  197
  191
  184
  177
  171
  163
  156
  149
  141
  132
  124
  115
  106
  97
  87
  78
  70
  61
  53
  45
  38
  32
  26
  21
  16
  13
  10
  7
  5
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

Kronos Worldwide, Inc. (Kronos) is a producer and marketer of titanium dioxide (TiO2) pigments, a base industrial product that is used in a range of applications. The Company, along with its distributors and agents, sells and provides technical services for its products with sales in Europe and North America. It offers its customers a portfolio of products that include TiO2 pigment grades under the Kronos brand, which provides a range of performance properties. It offers its products to domestic and international paint, plastics, decorative laminate and paper manufacturers. It ships TiO2 to its customers in either a powder or slurry form through rail, truck or ocean carrier. It sells and provides technical services for its products in three end use markets, which include coatings, plastics and paper. It produces TiO2 in two crystalline forms, which include rutile and anatase. Rutile TiO2 is manufactured using both a chloride production process and a sulfate production process.

FINANCIAL RATIOS  of  Kronos Worldwide Inc (KRO)

Valuation Ratios
P/E Ratio 36.1
Price to Sales 1.1
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 17.2
Price to Free Cash Flow 41.9
Growth Rates
Sales Growth Rate 1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12.8%
Cap. Spend. - 3 Yr. Gr. Rate -4.9%
Financial Strength
Quick Ratio 13
Current Ratio 0
LT Debt to Equity 84.8%
Total Debt to Equity 85.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 5.6%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity 10%
Return On Equity - 3 Yr. Avg. -2.1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 18.8%
Gross Margin - 3 Yr. Avg. 18.1%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. 7.6%
Operating Margin 5.9%
Oper. Margin - 3 Yr. Avg. 5%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 3.4%
Net Profit Margin 3.2%
Net Profit Margin - 3 Yr. Avg. -1.3%
Effective Tax Rate 29.5%
Eff/ Tax Rate - 3 Yr. Avg. -135.2%
Payout Ratio 162.8%

KRO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KRO stock intrinsic value calculation we used $1662 million for the last fiscal year's total revenue generated by Kronos Worldwide Inc. The default revenue input number comes from 0001 income statement of Kronos Worldwide 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 KRO 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 4.3%, whose default value for KRO is calculated based on our internal credit rating of Kronos Worldwide 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 Kronos Worldwide 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 KRO stock the variable cost ratio is equal to 73.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $108 million in the base year in the intrinsic value calculation for KRO 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 5.4% for Kronos Worldwide Inc.

Corporate tax rate of 27% is the nominal tax rate for Kronos Worldwide 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 KRO 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 KRO are equal to 29.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Kronos Worldwide 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 KRO is equal to 35.8%. 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 - $839.8 million for Kronos Worldwide 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 115.942 million for Kronos Worldwide 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 Kronos Worldwide Inc at the current share price and the inputted number of shares is $1.6 billion.

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