Intrinsic value of Lawson Products, Inc. - LAWS

Previous Close

$31.76

  Intrinsic Value

$21.24

stock screener

  Rating & Target

sell

-33%

Previous close

$31.76

 
Intrinsic value

$21.24

 
Up/down potential

-33%

 
Rating

sell

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, %
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
Revenue, $m
  375
  400
  426
  454
  483
  512
  544
  576
  610
  645
  682
  720
  760
  802
  846
  891
  939
  989
  1,042
  1,097
  1,154
  1,215
  1,278
  1,344
  1,413
  1,486
  1,562
  1,642
  1,726
  1,814
Variable operating expenses, $m
  332
  354
  377
  401
  426
  453
  480
  508
  538
  569
  597
  631
  666
  703
  741
  781
  823
  867
  913
  961
  1,012
  1,065
  1,120
  1,178
  1,239
  1,302
  1,369
  1,439
  1,513
  1,590
Fixed operating expenses, $m
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  60
Total operating expenses, $m
  364
  386
  410
  435
  461
  488
  516
  545
  576
  608
  636
  671
  707
  745
  784
  825
  868
  913
  960
  1,009
  1,061
  1,115
  1,171
  1,230
  1,292
  1,357
  1,425
  1,496
  1,571
  1,650
Operating income, $m
  11
  14
  16
  19
  22
  25
  28
  31
  34
  38
  45
  49
  53
  57
  61
  66
  71
  76
  82
  87
  94
  100
  107
  114
  121
  129
  137
  146
  155
  164
EBITDA, $m
  20
  23
  26
  29
  32
  35
  39
  42
  46
  50
  54
  59
  63
  68
  73
  79
  84
  90
  96
  103
  110
  117
  125
  133
  141
  150
  159
  169
  179
  190
Interest expense (income), $m
  0
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
Earnings before tax, $m
  10
  12
  15
  17
  19
  22
  24
  27
  30
  33
  39
  43
  46
  50
  54
  58
  62
  66
  71
  76
  81
  87
  92
  98
  105
  112
  119
  126
  134
  142
Tax expense, $m
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  11
  12
  12
  13
  14
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
Net income, $m
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  29
  31
  34
  36
  39
  42
  45
  48
  52
  55
  59
  63
  67
  72
  77
  81
  87
  92
  98
  104

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
  211
  225
  240
  256
  272
  289
  306
  324
  343
  363
  384
  406
  428
  452
  476
  502
  529
  557
  587
  618
  650
  684
  720
  757
  796
  837
  880
  925
  972
  1,022
Adjusted assets (=assets-cash), $m
  211
  225
  240
  256
  272
  289
  306
  324
  343
  363
  384
  406
  428
  452
  476
  502
  529
  557
  587
  618
  650
  684
  720
  757
  796
  837
  880
  925
  972
  1,022
Revenue / Adjusted assets
  1.777
  1.778
  1.775
  1.773
  1.776
  1.772
  1.778
  1.778
  1.778
  1.777
  1.776
  1.773
  1.776
  1.774
  1.777
  1.775
  1.775
  1.776
  1.775
  1.775
  1.775
  1.776
  1.775
  1.775
  1.775
  1.775
  1.775
  1.775
  1.776
  1.775
Average production assets, $m
  45
  48
  51
  54
  57
  61
  65
  69
  73
  77
  81
  86
  90
  95
  101
  106
  112
  118
  124
  131
  137
  145
  152
  160
  168
  177
  186
  195
  205
  216
Working capital, $m
  42
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
  128
  135
  142
  149
  157
  165
  173
  182
  192
  201
Total debt, $m
  23
  30
  37
  45
  53
  62
  70
  79
  89
  99
  109
  120
  131
  143
  155
  168
  181
  195
  210
  225
  241
  258
  276
  294
  314
  334
  355
  378
  401
  426
Total liabilities, $m
  105
  112
  119
  127
  135
  143
  152
  161
  171
  181
  191
  202
  213
  225
  237
  250
  263
  277
  292
  307
  323
  340
  358
  376
  396
  416
  437
  460
  483
  508
Total equity, $m
  106
  113
  121
  129
  137
  145
  154
  163
  173
  183
  193
  204
  215
  227
  240
  253
  266
  280
  295
  311
  327
  344
  362
  381
  400
  421
  443
  465
  489
  514
Total liabilities and equity, $m
  211
  225
  240
  256
  272
  288
  306
  324
  344
  364
  384
  406
  428
  452
  477
  503
  529
  557
  587
  618
  650
  684
  720
  757
  796
  837
  880
  925
  972
  1,022
Debt-to-equity ratio
  0.220
  0.270
  0.310
  0.350
  0.390
  0.420
  0.460
  0.490
  0.510
  0.540
  0.560
  0.590
  0.610
  0.630
  0.650
  0.660
  0.680
  0.700
  0.710
  0.720
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
Adjusted equity ratio
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  29
  31
  34
  36
  39
  42
  45
  48
  52
  55
  59
  63
  67
  72
  77
  81
  87
  92
  98
  104
Depreciation, amort., depletion, $m
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
Funds from operations, $m
  16
  18
  20
  22
  24
  26
  29
  31
  34
  36
  38
  41
  44
  48
  51
  55
  58
  62
  67
  71
  76
  80
  86
  91
  97
  102
  109
  115
  122
  130
Change in working capital, $m
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Cash from operations, $m
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  74
  79
  84
  89
  94
  100
  106
  113
  120
Maintenance CAPEX, $m
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
New CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
Cash from investing activities, $m
  -8
  -8
  -9
  -9
  -9
  -11
  -11
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
  -17
  -19
  -19
  -20
  -22
  -23
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -34
Free cash flow, $m
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  30
  32
  35
  38
  41
  44
  47
  50
  54
  58
  62
  66
  70
  75
  80
  85
Issuance/(repayment) of debt, $m
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
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  
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
Total cash flow (excl. dividends), $m
  12
  14
  16
  17
  19
  21
  23
  25
  27
  30
  31
  34
  36
  39
  42
  45
  48
  52
  55
  59
  63
  67
  71
  76
  81
  86
  91
  97
  103
  109
Retained Cash Flow (-), $m
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
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
  5
  7
  8
  10
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  47
  50
  54
  57
  61
  65
  70
  75
  79
  85
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
  5
  6
  7
  8
  9
  9
  10
  10
  10
  10
  10
  10
  9
  9
  9
  8
  8
  7
  6
  6
  5
  4
  4
  3
  2
  2
  2
  1
  1
  1
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

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, Inc. (LAWS)

Valuation Ratios
P/E Ratio -140.2
Price to Sales 1
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 35.1
Price to Free Cash Flow 56.1
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 $350 million for the last fiscal year's total revenue generated by Lawson Products, Inc.. The default revenue input number comes from 0001 income statement of Lawson Products, 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 LAWS stock valuation model: a) initial revenue growth rate of 7% 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, 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 Lawson Products, 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 LAWS stock the variable cost ratio is equal to 88.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $31 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 5.5% for Lawson Products, Inc..

Corporate tax rate of 27% is the nominal tax rate for Lawson Products, 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 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 11.9%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Lawson Products, 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 LAWS is equal to 11.1%. 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 - $99.173 million for Lawson Products, 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 8.963 million for Lawson Products, 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 Lawson Products, Inc. at the current share price and the inputted number of shares is $0.3 billion.

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