Intrinsic value of Lindsay - LNN

Previous Close

$96.95

  Intrinsic Value

$32.24

stock screener

  Rating & Target

str. sell

-67%

Previous close

$96.95

 
Intrinsic value

$32.24

 
Up/down potential

-67%

 
Rating

str. sell

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

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 1.0

 

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, %
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
Revenue, $m
  580
  645
  713
  784
  859
  937
  1,018
  1,103
  1,191
  1,282
  1,377
  1,476
  1,578
  1,685
  1,796
  1,911
  2,031
  2,156
  2,286
  2,421
  2,563
  2,710
  2,864
  3,025
  3,193
  3,368
  3,552
  3,744
  3,944
  4,154
Variable operating expenses, $m
  540
  599
  661
  726
  794
  865
  939
  1,016
  1,097
  1,180
  1,254
  1,344
  1,437
  1,535
  1,636
  1,741
  1,850
  1,964
  2,082
  2,206
  2,334
  2,469
  2,609
  2,755
  2,908
  3,068
  3,235
  3,410
  3,593
  3,784
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
  540
  599
  661
  726
  794
  865
  939
  1,016
  1,097
  1,180
  1,254
  1,344
  1,437
  1,535
  1,636
  1,741
  1,850
  1,964
  2,082
  2,206
  2,334
  2,469
  2,609
  2,755
  2,908
  3,068
  3,235
  3,410
  3,593
  3,784
Operating income, $m
  40
  45
  52
  58
  65
  72
  79
  86
  94
  102
  123
  132
  141
  150
  160
  170
  181
  192
  204
  216
  228
  242
  255
  270
  285
  300
  317
  334
  352
  370
EBITDA, $m
  65
  72
  79
  87
  96
  104
  113
  123
  133
  143
  153
  164
  176
  188
  200
  213
  226
  240
  255
  270
  286
  302
  319
  337
  356
  375
  396
  417
  439
  463
Interest expense (income), $m
  5
  6
  8
  9
  11
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  38
  41
  43
  47
  50
  53
  57
  60
  64
  68
  72
  76
  81
  86
  90
Earnings before tax, $m
  33
  38
  42
  47
  52
  57
  62
  68
  73
  79
  98
  104
  111
  118
  125
  133
  141
  149
  157
  166
  175
  185
  195
  206
  217
  228
  240
  253
  266
  280
Tax expense, $m
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  68
  72
  76
Net income, $m
  24
  27
  31
  34
  38
  42
  45
  49
  54
  58
  71
  76
  81
  86
  91
  97
  103
  109
  115
  121
  128
  135
  142
  150
  158
  167
  175
  185
  194
  204

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
  533
  592
  655
  721
  790
  861
  936
  1,014
  1,094
  1,178
  1,266
  1,356
  1,451
  1,548
  1,650
  1,756
  1,867
  1,981
  2,101
  2,226
  2,356
  2,491
  2,633
  2,780
  2,935
  3,096
  3,265
  3,441
  3,625
  3,818
Adjusted assets (=assets-cash), $m
  533
  592
  655
  721
  790
  861
  936
  1,014
  1,094
  1,178
  1,266
  1,356
  1,451
  1,548
  1,650
  1,756
  1,867
  1,981
  2,101
  2,226
  2,356
  2,491
  2,633
  2,780
  2,935
  3,096
  3,265
  3,441
  3,625
  3,818
Revenue / Adjusted assets
  1.088
  1.090
  1.089
  1.087
  1.087
  1.088
  1.088
  1.088
  1.089
  1.088
  1.088
  1.088
  1.088
  1.089
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
  1.088
Average production assets, $m
  154
  171
  189
  208
  228
  248
  270
  292
  316
  340
  365
  391
  418
  446
  476
  506
  538
  571
  606
  642
  679
  718
  759
  802
  846
  893
  941
  992
  1,045
  1,101
Working capital, $m
  89
  99
  109
  120
  131
  143
  156
  169
  182
  196
  211
  226
  241
  258
  275
  292
  311
  330
  350
  370
  392
  415
  438
  463
  489
  515
  543
  573
  603
  636
Total debt, $m
  145
  174
  206
  238
  272
  308
  344
  383
  423
  464
  508
  553
  599
  648
  698
  751
  805
  862
  921
  983
  1,047
  1,114
  1,184
  1,257
  1,334
  1,414
  1,497
  1,584
  1,676
  1,771
Total liabilities, $m
  264
  293
  324
  357
  391
  426
  463
  502
  542
  583
  626
  671
  718
  767
  817
  869
  924
  981
  1,040
  1,102
  1,166
  1,233
  1,303
  1,376
  1,453
  1,532
  1,616
  1,703
  1,795
  1,890
Total equity, $m
  269
  299
  331
  364
  399
  435
  473
  512
  553
  595
  639
  685
  733
  782
  833
  887
  943
  1,001
  1,061
  1,124
  1,190
  1,258
  1,329
  1,404
  1,482
  1,563
  1,649
  1,738
  1,831
  1,928
Total liabilities and equity, $m
  533
  592
  655
  721
  790
  861
  936
  1,014
  1,095
  1,178
  1,265
  1,356
  1,451
  1,549
  1,650
  1,756
  1,867
  1,982
  2,101
  2,226
  2,356
  2,491
  2,632
  2,780
  2,935
  3,095
  3,265
  3,441
  3,626
  3,818
Debt-to-equity ratio
  0.540
  0.580
  0.620
  0.650
  0.680
  0.710
  0.730
  0.750
  0.770
  0.780
  0.790
  0.810
  0.820
  0.830
  0.840
  0.850
  0.850
  0.860
  0.870
  0.870
  0.880
  0.890
  0.890
  0.900
  0.900
  0.900
  0.910
  0.910
  0.920
  0.920
Adjusted equity ratio
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  27
  31
  34
  38
  42
  45
  49
  54
  58
  71
  76
  81
  86
  91
  97
  103
  109
  115
  121
  128
  135
  142
  150
  158
  167
  175
  185
  194
  204
Depreciation, amort., depletion, $m
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  93
Funds from operations, $m
  49
  54
  59
  64
  69
  74
  80
  86
  92
  99
  102
  109
  116
  124
  131
  139
  148
  157
  166
  175
  185
  195
  206
  218
  229
  242
  255
  268
  282
  297
Change in working capital, $m
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
Cash from operations, $m
  40
  44
  48
  53
  57
  62
  68
  73
  79
  85
  87
  94
  100
  107
  114
  122
  129
  137
  146
  154
  163
  173
  183
  193
  204
  215
  226
  239
  251
  265
Maintenance CAPEX, $m
  -12
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
New CAPEX, $m
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -46
  -49
  -51
  -53
  -56
Cash from investing activities, $m
  -29
  -30
  -32
  -35
  -37
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -75
  -78
  -82
  -87
  -91
  -96
  -101
  -107
  -111
  -117
  -124
  -130
  -136
  -144
Free cash flow, $m
  12
  14
  16
  18
  20
  23
  25
  28
  31
  34
  34
  37
  40
  44
  47
  51
  55
  59
  63
  68
  72
  77
  82
  87
  92
  97
  103
  109
  115
  121
Issuance/(repayment) of debt, $m
  28
  30
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
Issuance/(repurchase) of shares, $m
  4
  3
  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
Cash from financing (excl. dividends), $m  
  32
  33
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
Total cash flow (excl. dividends), $m
  43
  46
  48
  50
  54
  58
  62
  66
  71
  75
  77
  82
  87
  92
  98
  104
  110
  116
  122
  129
  136
  144
  152
  160
  168
  177
  186
  196
  206
  217
Retained Cash Flow (-), $m
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -49
  -51
  -54
  -56
  -58
  -60
  -63
  -66
  -68
  -71
  -75
  -78
  -81
  -85
  -89
  -93
  -97
Prev. year cash balance distribution, $m
  30
  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
  45
  16
  16
  17
  20
  22
  25
  27
  30
  33
  33
  36
  39
  43
  46
  50
  54
  58
  62
  66
  71
  75
  80
  85
  90
  96
  101
  107
  113
  119
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
  43
  15
  14
  14
  15
  16
  17
  17
  17
  17
  16
  15
  15
  14
  14
  13
  12
  11
  10
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  99.5
  99.3
  99.2
  99.2
  99.2
  99.2
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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 45.1
Price to Sales 2
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 26.6
Price to Free Cash Flow 34.6
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 $517.985 million for the last fiscal year's total revenue generated by Lindsay. The default revenue input number comes from 0001 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 11.9% 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 5.4% 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 26.5%.

Life of production assets of 11.9 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 - $270.055 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 10.757 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

▶ A Quantitative Buy Signal on Lindsay Could Propel It Higher   [Jun-29-18 03:28PM  TheStreet.com]
▶ Lindsay: Fiscal 3Q Earnings Snapshot   [06:52AM  Associated Press]
▶ Lindsay Q3 Earnings Preview   [Jun-27-18 02:08PM  Benzinga]
▶ Lindsay Corporation Increases Cash Dividend   [06:45AM  Business Wire]
▶ Is Lindsay Corporation (NYSE:LNN) A Financially Sound Company?   [Jun-22-18 11:49AM  Simply Wall St.]
▶ New FieldNET® Modem Will Support 4G LTE Technology   [May-30-18 10:00AM  PR Newswire]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [May-04-18 04:15PM  Business Wire]
▶ Lindsay meets 2Q profit forecasts   [06:53AM  Associated Press]
▶ Lindsay Corporation Announces Changes to Board of Directors   [Feb-12-18 06:45AM  Business Wire]
▶ 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]

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