Intrinsic value of Lawson Products - LAWS

Previous Close

$31.15

  Intrinsic Value

$107.10

stock screener

  Rating & Target

str. buy

+244%

Previous close

$31.15

 
Intrinsic value

$107.10

 
Up/down potential

+244%

 
Rating

str. buy

We calculate the intrinsic value of LAWS 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 0.3

 

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, %
  20.50
  18.95
  17.56
  16.30
  15.17
  14.15
  13.24
  12.41
  11.67
  11.01
  10.40
  9.86
  9.38
  8.94
  8.55
  8.19
  7.87
  7.58
  7.33
  7.09
  6.88
  6.70
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
Revenue, $m
  369
  438
  515
  599
  690
  788
  892
  1,003
  1,120
  1,244
  1,373
  1,508
  1,650
  1,797
  1,951
  2,111
  2,277
  2,450
  2,629
  2,816
  3,009
  3,211
  3,421
  3,639
  3,865
  4,102
  4,348
  4,605
  4,872
  5,151
Variable operating expenses, $m
  292
  347
  407
  473
  544
  621
  703
  789
  881
  978
  1,076
  1,182
  1,293
  1,409
  1,529
  1,654
  1,785
  1,920
  2,061
  2,207
  2,359
  2,517
  2,681
  2,852
  3,029
  3,215
  3,408
  3,609
  3,818
  4,037
Fixed operating expenses, $m
  60
  62
  63
  64
  66
  67
  69
  70
  72
  73
  75
  77
  78
  80
  82
  84
  85
  87
  89
  91
  93
  95
  97
  99
  102
  104
  106
  109
  111
  113
Total operating expenses, $m
  352
  409
  470
  537
  610
  688
  772
  859
  953
  1,051
  1,151
  1,259
  1,371
  1,489
  1,611
  1,738
  1,870
  2,007
  2,150
  2,298
  2,452
  2,612
  2,778
  2,951
  3,131
  3,319
  3,514
  3,718
  3,929
  4,150
Operating income, $m
  16
  30
  45
  62
  80
  100
  121
  144
  167
  192
  222
  250
  279
  309
  340
  373
  407
  443
  479
  518
  558
  599
  642
  687
  734
  783
  834
  887
  943
  1,001
EBITDA, $m
  26
  41
  58
  76
  96
  117
  140
  165
  190
  218
  246
  276
  308
  341
  375
  410
  447
  486
  526
  568
  611
  656
  703
  752
  803
  856
  911
  969
  1,029
  1,092
Interest expense (income), $m
  0
  1
  2
  3
  5
  6
  8
  9
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  44
  48
  51
  55
  58
  62
  66
  70
  75
  79
Earnings before tax, $m
  15
  28
  42
  57
  74
  92
  112
  132
  154
  177
  205
  230
  257
  285
  313
  344
  375
  408
  441
  477
  513
  552
  591
  633
  676
  721
  768
  817
  868
  921
Tax expense, $m
  4
  8
  11
  16
  20
  25
  30
  36
  42
  48
  55
  62
  69
  77
  85
  93
  101
  110
  119
  129
  139
  149
  160
  171
  183
  195
  207
  221
  234
  249
Net income, $m
  11
  20
  31
  42
  54
  67
  82
  97
  113
  129
  149
  168
  187
  208
  229
  251
  274
  298
  322
  348
  375
  403
  432
  462
  494
  526
  561
  596
  634
  673

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
  230
  273
  321
  373
  430
  491
  556
  625
  698
  775
  855
  940
  1,028
  1,120
  1,216
  1,315
  1,419
  1,526
  1,638
  1,754
  1,875
  2,001
  2,131
  2,267
  2,408
  2,556
  2,709
  2,869
  3,036
  3,210
Adjusted assets (=assets-cash), $m
  230
  273
  321
  373
  430
  491
  556
  625
  698
  775
  855
  940
  1,028
  1,120
  1,216
  1,315
  1,419
  1,526
  1,638
  1,754
  1,875
  2,001
  2,131
  2,267
  2,408
  2,556
  2,709
  2,869
  3,036
  3,210
Revenue / Adjusted assets
  1.604
  1.604
  1.604
  1.606
  1.605
  1.605
  1.604
  1.605
  1.605
  1.605
  1.606
  1.604
  1.605
  1.604
  1.604
  1.605
  1.605
  1.606
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
  1.605
Average production assets, $m
  46
  55
  65
  76
  87
  99
  112
  126
  141
  157
  173
  190
  208
  226
  246
  266
  287
  309
  331
  355
  379
  405
  431
  458
  487
  517
  548
  580
  614
  649
Working capital, $m
  58
  68
  80
  94
  108
  123
  139
  157
  175
  194
  214
  235
  257
  280
  304
  329
  355
  382
  410
  439
  469
  501
  534
  568
  603
  640
  678
  718
  760
  804
Total debt, $m
  41
  63
  88
  114
  143
  174
  207
  243
  280
  319
  360
  403
  448
  495
  544
  595
  647
  702
  759
  818
  880
  944
  1,011
  1,080
  1,152
  1,227
  1,305
  1,387
  1,472
  1,561
Total liabilities, $m
  117
  139
  164
  190
  219
  250
  284
  319
  356
  395
  436
  479
  524
  571
  620
  671
  724
  778
  835
  895
  956
  1,020
  1,087
  1,156
  1,228
  1,303
  1,382
  1,463
  1,548
  1,637
Total equity, $m
  113
  134
  157
  183
  211
  241
  272
  306
  342
  380
  419
  461
  504
  549
  596
  644
  695
  748
  803
  860
  919
  980
  1,044
  1,111
  1,180
  1,252
  1,327
  1,406
  1,487
  1,573
Total liabilities and equity, $m
  230
  273
  321
  373
  430
  491
  556
  625
  698
  775
  855
  940
  1,028
  1,120
  1,216
  1,315
  1,419
  1,526
  1,638
  1,755
  1,875
  2,000
  2,131
  2,267
  2,408
  2,555
  2,709
  2,869
  3,035
  3,210
Debt-to-equity ratio
  0.360
  0.470
  0.560
  0.620
  0.680
  0.720
  0.760
  0.790
  0.820
  0.840
  0.860
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
  0.980
  0.980
  0.990
  0.990
  0.990
Adjusted equity ratio
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  20
  31
  42
  54
  67
  82
  97
  113
  129
  149
  168
  187
  208
  229
  251
  274
  298
  322
  348
  375
  403
  432
  462
  494
  526
  561
  596
  634
  673
Depreciation, amort., depletion, $m
  10
  11
  12
  14
  15
  17
  19
  21
  23
  25
  24
  27
  29
  32
  35
  37
  40
  43
  47
  50
  53
  57
  61
  65
  69
  73
  77
  82
  86
  91
Funds from operations, $m
  21
  31
  43
  56
  70
  85
  101
  118
  136
  155
  174
  195
  217
  240
  263
  288
  314
  341
  369
  398
  428
  460
  492
  527
  562
  599
  638
  678
  720
  764
Change in working capital, $m
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
Cash from operations, $m
  11
  20
  31
  43
  55
  69
  84
  100
  117
  135
  154
  174
  195
  217
  239
  263
  288
  314
  341
  369
  398
  428
  460
  493
  527
  562
  599
  638
  678
  720
Maintenance CAPEX, $m
  -5
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -32
  -35
  -37
  -40
  -43
  -47
  -50
  -53
  -57
  -61
  -65
  -69
  -73
  -77
  -82
  -86
New CAPEX, $m
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
Cash from investing activities, $m
  -13
  -16
  -18
  -20
  -22
  -24
  -27
  -30
  -33
  -36
  -38
  -41
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -88
  -94
  -99
  -104
  -109
  -116
  -121
Free cash flow, $m
  -2
  5
  13
  23
  33
  45
  57
  71
  85
  100
  115
  132
  150
  169
  188
  209
  230
  252
  275
  299
  324
  349
  376
  404
  434
  464
  496
  528
  563
  599
Issuance/(repayment) of debt, $m
  20
  22
  24
  27
  29
  31
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
Issuance/(repurchase) of shares, $m
  8
  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
  0
  0
  0
Cash from financing (excl. dividends), $m  
  28
  23
  24
  27
  29
  31
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
Total cash flow (excl. dividends), $m
  26
  28
  38
  50
  62
  76
  90
  106
  122
  139
  156
  175
  195
  216
  237
  259
  283
  307
  332
  358
  385
  414
  443
  474
  506
  539
  574
  610
  648
  687
Retained Cash Flow (-), $m
  -19
  -21
  -23
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -82
  -85
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
  7
  7
  14
  24
  34
  46
  58
  72
  86
  102
  117
  134
  152
  171
  190
  211
  232
  254
  277
  301
  326
  352
  379
  407
  436
  467
  499
  532
  566
  602
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
  6
  6
  13
  20
  27
  33
  39
  45
  50
  53
  56
  57
  58
  57
  56
  54
  50
  47
  43
  38
  34
  29
  25
  21
  17
  14
  11
  8
  6
  5
Current shareholders' claim on cash, %
  97.2
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9
  96.9

Lawson Products, Inc. is a distributor of products and services the industrial, commercial, institutional and government maintenance, repair and operations (MRO) market. The Company's product categories include fastening systems, fluid power, specialty chemicals, cutting tools and abrasives, electrical, aftermarket automotive supplies, safety, welding and metal repair, and other. The Company supplies a range of automotive products, including body hardware, body shop, brake/wheel, fleet/truck, repair harness assembly and other parts. The Company offers approximately 200,000 different core products for sale of which approximately 50,000 products are maintained in its distribution centers. The Company's customers operate in a range of industries, including automotive repair, commercial vehicle maintenance, government, manufacturing, food processing, distribution, construction, oil and gas, mining, wholesale and service.

FINANCIAL RATIOS  of  Lawson Products (LAWS)

Valuation Ratios
P/E Ratio -137.5
Price to Sales 1
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 34.4
Price to Free Cash Flow 55
Growth Rates
Sales Growth Rate 0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 11.5%
Total Debt to Equity 14.8%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.5%
Ret/ On Assets - 3 Yr. Avg. -1.4%
Return On Total Capital -2.8%
Ret/ On T. Cap. - 3 Yr. Avg. -2.6%
Return On Equity -3.3%
Return On Equity - 3 Yr. Avg. -3.2%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 60.6%
Gross Margin - 3 Yr. Avg. 60.8%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 2.3%
Operating Margin -0.4%
Oper. Margin - 3 Yr. Avg. -0.5%
Pre-Tax Margin -0.7%
Pre-Tax Margin - 3 Yr. Avg. -0.8%
Net Profit Margin -0.7%
Net Profit Margin - 3 Yr. Avg. -0.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 33.3%
Payout Ratio 0%

LAWS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LAWS stock intrinsic value calculation we used $305.907 million for the last fiscal year's total revenue generated by Lawson Products. The default revenue input number comes from 0001 income statement of Lawson Products. 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 LAWS stock valuation model: a) initial revenue growth rate of 20.5% 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 LAWS is calculated based on our internal credit rating of Lawson Products, 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 Lawson Products.
    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 LAWS stock the variable cost ratio is equal to 79.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $59 million in the base year in the intrinsic value calculation for LAWS 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 Lawson Products.

Corporate tax rate of 27% is the nominal tax rate for Lawson Products. 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 LAWS 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 LAWS are equal to 12.6%.

Life of production assets of 7.1 years is the average useful life of capital assets used in Lawson Products 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 LAWS is equal to 15.6%. 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 - $93.49 million for Lawson Products - 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 8.919 million for Lawson Products 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 Lawson Products at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Lawson Products: 2Q Earnings Snapshot   [07:57AM  Associated Press]
▶ Lawson Products: 1Q Earnings Snapshot   [07:39AM  Associated Press]
▶ Lawson Products posts 4Q profit   [Feb-22-18 10:57AM  Associated Press]
▶ Lawson Products posts 3Q profit   [Oct-26-17 08:33AM  Associated Press]
▶ Lawson Products posts 2Q profit   [Jul-27-17 10:36PM  Associated Press]
▶ Lawson Products posts 1Q profit   [07:38AM  Associated Press]
▶ Lawson Products reports 4Q loss   [Feb-23-17 08:11AM  Associated Press]
▶ How ProQR Therapeutics NV (PRQR) Stacks Up Against Its Peers   [Dec-16-16 08:51PM  at Insider Monkey]
▶ Lawson Products Acquires Mattic Industries   [Nov-15-16 04:35PM  Business Wire]

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