Intrinsic value of Lindsay - LNN

Previous Close

$91.66

  Intrinsic Value

$55.81

stock screener

  Rating & Target

sell

-39%

Previous close

$91.66

 
Intrinsic value

$55.81

 
Up/down potential

-39%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LNN 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  0.39
  13.60
  12.74
  11.97
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
Revenue, $m
  518
  588
  663
  743
  827
  914
  1,007
  1,103
  1,203
  1,308
  1,417
  1,531
  1,648
  1,771
  1,898
  2,030
  2,168
  2,311
  2,459
  2,614
  2,775
  2,943
  3,118
  3,300
  3,490
  3,689
  3,896
  4,112
  4,339
  4,575
  4,822
Variable operating expenses, $m
 
  549
  617
  690
  767
  848
  933
  1,021
  1,114
  1,210
  1,310
  1,407
  1,515
  1,628
  1,745
  1,866
  1,993
  2,124
  2,261
  2,403
  2,551
  2,705
  2,866
  3,033
  3,208
  3,391
  3,581
  3,780
  3,988
  4,205
  4,432
Fixed operating expenses, $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 operating expenses, $m
  478
  549
  617
  690
  767
  848
  933
  1,021
  1,114
  1,210
  1,310
  1,407
  1,515
  1,628
  1,745
  1,866
  1,993
  2,124
  2,261
  2,403
  2,551
  2,705
  2,866
  3,033
  3,208
  3,391
  3,581
  3,780
  3,988
  4,205
  4,432
Operating income, $m
  40
  40
  46
  52
  59
  66
  74
  81
  90
  98
  107
  124
  133
  143
  153
  164
  175
  187
  199
  211
  224
  238
  252
  267
  282
  298
  315
  333
  351
  370
  390
EBITDA, $m
  57
  59
  67
  75
  84
  92
  102
  111
  122
  132
  143
  155
  167
  179
  192
  205
  219
  233
  248
  264
  280
  297
  315
  333
  353
  373
  394
  416
  438
  462
  487
Interest expense (income), $m
  5
  5
  6
  8
  9
  11
  13
  15
  17
  18
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  53
  56
  60
  63
  67
  71
  76
  80
  85
Earnings before tax, $m
  36
  35
  40
  44
  50
  55
  61
  67
  73
  80
  86
  101
  108
  116
  124
  132
  141
  149
  159
  168
  178
  189
  200
  211
  223
  235
  248
  261
  275
  290
  305
Tax expense, $m
  13
  9
  11
  12
  13
  15
  16
  18
  20
  21
  23
  27
  29
  31
  33
  36
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  67
  71
  74
  78
  82
Net income, $m
  23
  25
  29
  32
  36
  40
  44
  49
  53
  58
  63
  74
  79
  85
  90
  96
  103
  109
  116
  123
  130
  138
  146
  154
  163
  172
  181
  191
  201
  212
  223

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  122
  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
  506
  436
  492
  551
  613
  678
  746
  818
  892
  970
  1,051
  1,135
  1,222
  1,313
  1,407
  1,505
  1,607
  1,713
  1,823
  1,938
  2,057
  2,182
  2,311
  2,446
  2,587
  2,734
  2,888
  3,049
  3,216
  3,391
  3,575
Adjusted assets (=assets-cash), $m
  384
  436
  492
  551
  613
  678
  746
  818
  892
  970
  1,051
  1,135
  1,222
  1,313
  1,407
  1,505
  1,607
  1,713
  1,823
  1,938
  2,057
  2,182
  2,311
  2,446
  2,587
  2,734
  2,888
  3,049
  3,216
  3,391
  3,575
Revenue / Adjusted assets
  1.349
  1.349
  1.348
  1.348
  1.349
  1.348
  1.350
  1.348
  1.349
  1.348
  1.348
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
  1.349
Average production assets, $m
  121
  138
  155
  174
  193
  214
  236
  258
  282
  306
  332
  358
  386
  414
  444
  475
  507
  541
  576
  612
  649
  689
  730
  772
  817
  863
  912
  962
  1,015
  1,071
  1,128
Working capital, $m
  201
  90
  102
  114
  126
  140
  154
  169
  184
  200
  217
  234
  252
  271
  290
  311
  332
  354
  376
  400
  425
  450
  477
  505
  534
  564
  596
  629
  664
  700
  738
Total debt, $m
  117
  149
  183
  220
  258
  298
  340
  384
  430
  477
  527
  579
  632
  688
  746
  807
  869
  934
  1,002
  1,073
  1,146
  1,223
  1,302
  1,386
  1,472
  1,563
  1,657
  1,756
  1,859
  1,967
  2,080
Total liabilities, $m
  236
  268
  302
  339
  377
  417
  459
  503
  549
  596
  646
  698
  751
  807
  865
  926
  988
  1,053
  1,121
  1,192
  1,265
  1,342
  1,421
  1,505
  1,591
  1,682
  1,776
  1,875
  1,978
  2,086
  2,199
Total equity, $m
  270
  168
  189
  212
  236
  261
  287
  315
  343
  373
  404
  437
  470
  505
  542
  579
  619
  659
  702
  746
  792
  840
  890
  942
  996
  1,053
  1,112
  1,174
  1,238
  1,306
  1,376
Total liabilities and equity, $m
  506
  436
  491
  551
  613
  678
  746
  818
  892
  969
  1,050
  1,135
  1,221
  1,312
  1,407
  1,505
  1,607
  1,712
  1,823
  1,938
  2,057
  2,182
  2,311
  2,447
  2,587
  2,735
  2,888
  3,049
  3,216
  3,392
  3,575
Debt-to-equity ratio
  0.433
  0.890
  0.970
  1.040
  1.090
  1.140
  1.180
  1.220
  1.250
  1.280
  1.300
  1.320
  1.340
  1.360
  1.380
  1.390
  1.410
  1.420
  1.430
  1.440
  1.450
  1.460
  1.460
  1.470
  1.480
  1.480
  1.490
  1.500
  1.500
  1.510
  1.510
Adjusted equity ratio
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  23
  25
  29
  32
  36
  40
  44
  49
  53
  58
  63
  74
  79
  85
  90
  96
  103
  109
  116
  123
  130
  138
  146
  154
  163
  172
  181
  191
  201
  212
  223
Depreciation, amort., depletion, $m
  17
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  59
  63
  67
  70
  74
  79
  83
  88
  92
  97
Funds from operations, $m
  36
  45
  50
  55
  61
  66
  72
  79
  85
  92
  99
  105
  112
  120
  129
  137
  146
  156
  165
  176
  186
  197
  209
  221
  233
  246
  260
  274
  289
  304
  320
Change in working capital, $m
  -3
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
Cash from operations, $m
  39
  34
  38
  43
  48
  53
  58
  64
  70
  76
  83
  87
  94
  102
  109
  117
  125
  134
  143
  152
  161
  171
  182
  193
  204
  216
  228
  241
  254
  268
  282
Maintenance CAPEX, $m
  0
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -67
  -70
  -74
  -79
  -83
  -88
  -92
New CAPEX, $m
  -9
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -51
  -53
  -55
  -58
Cash from investing activities, $m
  -10
  -27
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -82
  -86
  -91
  -95
  -100
  -106
  -111
  -116
  -122
  -130
  -136
  -143
  -150
Free cash flow, $m
  29
  7
  9
  11
  13
  16
  18
  21
  24
  27
  31
  32
  36
  40
  44
  48
  52
  57
  61
  66
  71
  76
  82
  87
  93
  99
  105
  111
  118
  125
  132
Issuance/(repayment) of debt, $m
  0
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  73
  76
  80
  83
  87
  90
  94
  99
  103
  108
  113
Issuance/(repurchase) of shares, $m
  3
  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  
  2
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  73
  76
  80
  83
  87
  90
  94
  99
  103
  108
  113
Total cash flow (excl. dividends), $m
  32
  39
  43
  47
  51
  56
  60
  65
  70
  75
  80
  84
  90
  96
  102
  108
  115
  122
  129
  137
  144
  153
  161
  170
  179
  189
  199
  210
  221
  233
  245
Retained Cash Flow (-), $m
  -18
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -67
  -71
Prev. year cash balance distribution, $m
 
  122
  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
 
  141
  22
  25
  28
  31
  34
  38
  41
  45
  49
  52
  56
  61
  65
  70
  76
  81
  87
  92
  99
  105
  111
  118
  125
  133
  140
  148
  157
  165
  174
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
 
  136
  20
  21
  23
  24
  25
  25
  26
  26
  26
  24
  24
  23
  22
  21
  19
  18
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  11
  9
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  1
Current shareholders' claim on cash, %
  100
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  100.0
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  100.0
  100.0
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  100.0

Lindsay Corporation, along with its subsidiaries, provides a range of water management and road infrastructure products and services. The Company operates through two segments: Irrigation Segment and Infrastructure Segment. The Irrigation Segment includes the manufacture and marketing of center pivot, lateral move, and hose reel irrigation systems, which are used primarily in the agricultural industry. The Infrastructure Segment includes the manufacture and marketing of moveable barriers, specialty barriers, crash cushions and end terminals, road marking and road safety equipment, large diameter steel tubing, and railroad signals and structures. It also manufactures and markets hose reel travelers under the Perrot and Greenfield brands in Europe and South Africa. It produces or markets chemical injection systems, variable rate irrigation systems, flow meters, weather stations, soil moisture sensors, and remote monitoring and control systems, which it sells under its GrowSmart brand.

FINANCIAL RATIOS  of  Lindsay (LNN)

Valuation Ratios
P/E Ratio 42.6
Price to Sales 1.9
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 25.1
Price to Free Cash Flow 32.7
Growth Rates
Sales Growth Rate 0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 43.3%
Total Debt to Equity 43.3%
Interest Coverage 8
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 6.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5.9%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 8%
Asset Turnover 1
Profitability Ratios
Gross Margin 28%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 11.2%
EBITDA Margin - 3 Yr. Avg. 10.9%
Operating Margin 7.7%
Oper. Margin - 3 Yr. Avg. 7.8%
Pre-Tax Margin 6.9%
Pre-Tax Margin - 3 Yr. Avg. 7%
Net Profit Margin 4.4%
Net Profit Margin - 3 Yr. Avg. 4.3%
Effective Tax Rate 36.1%
Eff/ Tax Rate - 3 Yr. Avg. 37.3%
Payout Ratio 52.2%

LNN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LNN stock intrinsic value calculation we used $518 million for the last fiscal year's total revenue generated by Lindsay. The default revenue input number comes from 2017 income statement of Lindsay. 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 LNN stock valuation model: a) initial revenue growth rate of 13.6% 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 LNN is calculated based on our internal credit rating of Lindsay, 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 Lindsay.
    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 LNN stock the variable cost ratio is equal to 93.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for LNN 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 4.3% for Lindsay.

Corporate tax rate of 27% is the nominal tax rate for Lindsay. 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 LNN 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 LNN are equal to 23.4%.

Life of production assets of 11.6 years is the average useful life of capital assets used in Lindsay 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 LNN is equal to 15.3%. 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 - $270 million for Lindsay - 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 10.748 million for Lindsay 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 Lindsay at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ 5 Stocks That Look Good Short   [Jan-13-18 12:00PM  TheStreet.com]
▶ Lindsay misses 1Q profit forecasts   [Dec-21-17 06:51AM  Associated Press]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [Dec-08-17 04:15PM  Business Wire]
▶ ETFs with exposure to Lindsay Corp. : October 18, 2017   [Oct-18-17 09:50AM  Capital Cube]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [Oct-12-17 04:15PM  Business Wire]
▶ Lindsay misses Street 4Q forecasts   [06:52AM  Associated Press]
▶ Lindsay Corp. Value Analysis (NYSE:LNN) : August 23, 2017   [Aug-23-17 05:42PM  Capital Cube]
▶ Lindsay Corporation Increases Cash Dividend   [Jul-19-17 06:45AM  Business Wire]
▶ ETFs with exposure to Lindsay Corp. : July 4, 2017   [Jul-04-17 03:05PM  Capital Cube]
▶ Lindsay tops Street 3Q forecasts   [Jun-29-17 09:57PM  Associated Press]
▶ ETFs with exposure to Lindsay Corp. : June 15, 2017   [Jun-15-17 02:27PM  Capital Cube]
▶ Lindsay Corp. Value Analysis (NYSE:LNN) : May 19, 2017   [May-19-17 02:32PM  Capital Cube]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [Apr-28-17 05:00PM  Business Wire]
▶ ETFs with exposure to Lindsay Corp. : April 7, 2017   [Apr-07-17 05:01PM  Capital Cube]
▶ Lindsay tops Street 2Q forecasts   [06:54AM  Associated Press]
Financial statements of LNN
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