Intrinsic value of Lindsay - LNN

Previous Close

$91.10

  Intrinsic Value

$42.77

stock screener

  Rating & Target

str. sell

-53%

Previous close

$91.10

 
Intrinsic value

$42.77

 
Up/down potential

-53%

 
Rating

str. 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

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
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
  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
  518
  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
 
  493
  505
  517
  532
  547
  565
  584
  604
  627
  650
  668
  695
  724
  755
  787
  822
  858
  897
  938
  981
  1,026
  1,074
  1,125
  1,178
  1,234
  1,293
  1,355
  1,421
  1,489
  1,562
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
  493
  505
  517
  532
  547
  565
  584
  604
  627
  650
  668
  695
  724
  755
  787
  822
  858
  897
  938
  981
  1,026
  1,074
  1,125
  1,178
  1,234
  1,293
  1,355
  1,421
  1,489
  1,562
Operating income, $m
  40
  35
  36
  37
  38
  40
  41
  43
  45
  47
  49
  59
  61
  64
  66
  69
  72
  76
  79
  82
  86
  90
  95
  99
  104
  109
  114
  119
  125
  131
  137
EBITDA, $m
  57
  53
  55
  56
  58
  59
  61
  63
  66
  68
  71
  73
  76
  80
  83
  87
  90
  94
  99
  103
  108
  113
  118
  124
  129
  136
  142
  149
  156
  164
  172
Interest expense (income), $m
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
Earnings before tax, $m
  36
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  78
  81
  85
  89
  93
  97
  101
  106
  111
Tax expense, $m
  13
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Net income, $m
  23
  22
  22
  23
  24
  25
  25
  26
  27
  29
  30
  37
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  77
  81

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
  392
  401
  411
  423
  435
  449
  465
  481
  499
  518
  539
  561
  584
  609
  635
  663
  692
  723
  756
  791
  828
  866
  907
  950
  995
  1,043
  1,093
  1,146
  1,201
  1,260
Adjusted assets (=assets-cash), $m
  384
  392
  401
  411
  423
  435
  449
  465
  481
  499
  518
  539
  561
  584
  609
  635
  663
  692
  723
  756
  791
  828
  866
  907
  950
  995
  1,043
  1,093
  1,146
  1,201
  1,260
Revenue / Adjusted assets
  1.349
  1.347
  1.349
  1.348
  1.348
  1.349
  1.350
  1.348
  1.349
  1.349
  1.349
  1.349
  1.348
  1.349
  1.348
  1.348
  1.348
  1.350
  1.350
  1.349
  1.349
  1.349
  1.350
  1.350
  1.349
  1.350
  1.349
  1.349
  1.349
  1.349
  1.348
Average production assets, $m
  121
  124
  126
  130
  133
  137
  142
  147
  152
  158
  164
  170
  177
  184
  192
  200
  209
  219
  228
  239
  250
  261
  273
  286
  300
  314
  329
  345
  362
  379
  398
Working capital, $m
  201
  81
  83
  85
  87
  90
  93
  96
  99
  103
  107
  111
  116
  121
  126
  131
  137
  143
  149
  156
  163
  171
  179
  187
  196
  205
  215
  226
  236
  248
  260
Total debt, $m
  117
  122
  127
  134
  141
  149
  157
  167
  177
  188
  200
  212
  226
  240
  255
  271
  289
  307
  326
  346
  367
  390
  414
  439
  465
  493
  522
  553
  586
  620
  656
Total liabilities, $m
  236
  241
  246
  253
  260
  268
  276
  286
  296
  307
  319
  331
  345
  359
  374
  390
  408
  426
  445
  465
  486
  509
  533
  558
  584
  612
  641
  672
  705
  739
  775
Total equity, $m
  270
  151
  154
  158
  163
  168
  173
  179
  185
  192
  200
  207
  216
  225
  234
  244
  255
  266
  278
  291
  305
  319
  334
  349
  366
  383
  402
  421
  441
  462
  485
Total liabilities and equity, $m
  506
  392
  400
  411
  423
  436
  449
  465
  481
  499
  519
  538
  561
  584
  608
  634
  663
  692
  723
  756
  791
  828
  867
  907
  950
  995
  1,043
  1,093
  1,146
  1,201
  1,260
Debt-to-equity ratio
  0.433
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.960
  0.980
  1.000
  1.020
  1.050
  1.070
  1.090
  1.110
  1.130
  1.150
  1.170
  1.190
  1.210
  1.220
  1.240
  1.260
  1.270
  1.290
  1.300
  1.310
  1.330
  1.340
  1.350
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
  22
  22
  23
  24
  25
  25
  26
  27
  29
  30
  37
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  77
  81
Depreciation, amort., depletion, $m
  17
  18
  19
  19
  19
  20
  20
  20
  21
  21
  22
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
Funds from operations, $m
  36
  40
  41
  42
  43
  44
  45
  47
  48
  50
  52
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
Change in working capital, $m
  -3
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Cash from operations, $m
  39
  39
  39
  40
  41
  42
  43
  44
  45
  46
  48
  47
  49
  50
  52
  54
  57
  59
  61
  64
  66
  69
  72
  76
  79
  82
  86
  90
  94
  99
  103
Maintenance CAPEX, $m
  0
  -10
  -11
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
New CAPEX, $m
  -9
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
Cash from investing activities, $m
  -10
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -47
  -49
  -51
Free cash flow, $m
  29
  26
  26
  26
  26
  26
  26
  27
  27
  27
  28
  26
  27
  28
  29
  30
  30
  31
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
Issuance/(repayment) of debt, $m
  0
  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
  2
  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
  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
  32
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
Retained Cash Flow (-), $m
  -18
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
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
 
  150
  28
  28
  28
  29
  29
  30
  31
  32
  32
  31
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  47
  48
  51
  53
  55
  57
  60
  63
  65
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
 
  144
  25
  24
  23
  22
  21
  20
  19
  18
  17
  15
  14
  13
  12
  10
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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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 42.4
Price to Sales 1.9
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 25
Price to Free Cash Flow 32.5
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 93.4%.

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 10.697 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

▶ 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]
▶ Is Lindsay Corporation (LNN) A Good Stock To Buy?   [Dec-14-16 08:49AM  at Insider Monkey]
▶ Lindsay Corporation Announces Quarterly Cash Dividend   [Dec-02-16 06:45AM  Business Wire]
Financial statements of LNN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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