Intrinsic value of Lindsay - LNN

Previous Close

$93.61

  Intrinsic Value

$32.18

stock screener

  Rating & Target

str. sell

-66%

Previous close

$93.61

 
Intrinsic value

$32.18

 
Up/down potential

-66%

 
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 2017), $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
   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, %
  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
  528
  541
  554
  570
  587
  606
  627
  649
  673
  699
  727
  756
  788
  821
  856
  894
  934
  976
  1,020
  1,067
  1,117
  1,169
  1,224
  1,282
  1,343
  1,407
  1,474
  1,546
  1,620
  1,699
Variable operating expenses, $m
  492
  503
  516
  530
  546
  563
  582
  602
  624
  647
  661
  687
  716
  746
  778
  813
  849
  887
  927
  970
  1,015
  1,062
  1,112
  1,165
  1,220
  1,279
  1,340
  1,405
  1,473
  1,544
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
  492
  503
  516
  530
  546
  563
  582
  602
  624
  647
  661
  687
  716
  746
  778
  813
  849
  887
  927
  970
  1,015
  1,062
  1,112
  1,165
  1,220
  1,279
  1,340
  1,405
  1,473
  1,544
Operating income, $m
  36
  37
  39
  40
  42
  43
  45
  47
  49
  52
  66
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
  141
  148
  155
EBITDA, $m
  68
  70
  72
  74
  76
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  200
  210
  220
Interest expense (income), $m
  5
  6
  7
  7
  7
  8
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
Earnings before tax, $m
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  55
  58
  60
  62
  64
  67
  70
  72
  75
  79
  82
  86
  89
  93
  97
  102
  106
  111
  116
  121
Tax expense, $m
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
Net income, $m
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89

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
  486
  497
  510
  524
  540
  558
  577
  597
  619
  643
  669
  696
  725
  755
  788
  822
  859
  898
  939
  982
  1,027
  1,075
  1,126
  1,179
  1,235
  1,294
  1,356
  1,422
  1,491
  1,563
Adjusted assets (=assets-cash), $m
  486
  497
  510
  524
  540
  558
  577
  597
  619
  643
  669
  696
  725
  755
  788
  822
  859
  898
  939
  982
  1,027
  1,075
  1,126
  1,179
  1,235
  1,294
  1,356
  1,422
  1,491
  1,563
Revenue / Adjusted assets
  1.086
  1.089
  1.086
  1.088
  1.087
  1.086
  1.087
  1.087
  1.087
  1.087
  1.087
  1.086
  1.087
  1.087
  1.086
  1.088
  1.087
  1.087
  1.086
  1.087
  1.088
  1.087
  1.087
  1.087
  1.087
  1.087
  1.087
  1.087
  1.087
  1.087
Average production assets, $m
  202
  206
  212
  218
  224
  232
  239
  248
  257
  267
  278
  289
  301
  314
  327
  342
  357
  373
  390
  408
  427
  446
  467
  490
  513
  537
  563
  590
  619
  649
Working capital, $m
  50
  51
  53
  54
  56
  58
  60
  62
  64
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  161
Total debt, $m
  122
  127
  133
  141
  148
  157
  166
  177
  188
  199
  212
  225
  240
  255
  271
  288
  306
  325
  346
  367
  389
  413
  438
  465
  492
  522
  552
  585
  619
  655
Total liabilities, $m
  241
  246
  252
  260
  267
  276
  285
  296
  307
  318
  331
  344
  359
  374
  390
  407
  425
  444
  465
  486
  508
  532
  557
  584
  611
  641
  671
  704
  738
  774
Total equity, $m
  245
  251
  258
  265
  273
  282
  291
  302
  313
  325
  338
  351
  366
  381
  398
  415
  434
  453
  474
  496
  519
  543
  568
  595
  624
  654
  685
  718
  753
  789
Total liabilities and equity, $m
  486
  497
  510
  525
  540
  558
  576
  598
  620
  643
  669
  695
  725
  755
  788
  822
  859
  897
  939
  982
  1,027
  1,075
  1,125
  1,179
  1,235
  1,295
  1,356
  1,422
  1,491
  1,563
Debt-to-equity ratio
  0.500
  0.510
  0.520
  0.530
  0.540
  0.560
  0.570
  0.590
  0.600
  0.610
  0.630
  0.640
  0.650
  0.670
  0.680
  0.690
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.830
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
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
Depreciation, amort., depletion, $m
  32
  33
  33
  34
  34
  35
  36
  37
  38
  39
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
Funds from operations, $m
  54
  55
  56
  58
  59
  61
  63
  65
  67
  69
  68
  71
  74
  77
  80
  83
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
Change in working capital, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
Cash from operations, $m
  53
  54
  55
  56
  58
  59
  61
  63
  65
  67
  66
  68
  71
  73
  76
  79
  83
  86
  90
  94
  98
  102
  107
  111
  117
  122
  127
  133
  140
  146
Maintenance CAPEX, $m
  -20
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
Cash from investing activities, $m
  -24
  -25
  -26
  -27
  -29
  -29
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -80
  -83
  -88
  -92
Free cash flow, $m
  29
  29
  29
  29
  29
  29
  30
  30
  31
  31
  28
  29
  30
  31
  31
  32
  33
  34
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
Issuance/(repayment) of debt, $m
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
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  
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
Total cash flow (excl. dividends), $m
  35
  35
  35
  36
  37
  38
  39
  40
  41
  43
  41
  42
  44
  46
  48
  49
  51
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
Retained Cash Flow (-), $m
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
Prev. year cash balance distribution, $m
  29
  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
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
Cash available for distribution, $m
  59
  29
  29
  29
  29
  29
  30
  30
  30
  31
  28
  29
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
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
  56
  27
  25
  24
  23
  21
  20
  19
  17
  16
  13
  12
  11
  10
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
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

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 43.5
Price to Sales 1.9
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 25.7
Price to Free Cash Flow 33.4
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 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 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 93.2%.

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 0.7%.

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 38.2%.

Life of production assets of 10 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 9.5%. 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 11 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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