Intrinsic value of Luxfer Holdings PLC - LXFR

Previous Close

$22.44

  Intrinsic Value

$11.42

stock screener

  Rating & Target

sell

-49%

Previous close

$22.44

 
Intrinsic value

$11.42

 
Up/down potential

-49%

 
Rating

sell

We calculate the intrinsic value of LXFR 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 0.6

 

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, %
  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
  498
  509
  522
  537
  553
  571
  591
  612
  634
  659
  685
  712
  742
  774
  807
  842
  880
  919
  961
  1,005
  1,052
  1,101
  1,153
  1,207
  1,265
  1,325
  1,389
  1,456
  1,527
  1,601
Variable operating expenses, $m
  410
  419
  430
  442
  455
  469
  485
  502
  520
  540
  553
  575
  599
  624
  651
  680
  710
  742
  776
  811
  849
  889
  931
  975
  1,021
  1,070
  1,121
  1,175
  1,232
  1,292
Fixed operating expenses, $m
  57
  58
  60
  61
  62
  64
  65
  67
  68
  70
  71
  73
  74
  76
  78
  79
  81
  83
  85
  87
  88
  90
  92
  94
  96
  99
  101
  103
  105
  108
Total operating expenses, $m
  467
  477
  490
  503
  517
  533
  550
  569
  588
  610
  624
  648
  673
  700
  729
  759
  791
  825
  861
  898
  937
  979
  1,023
  1,069
  1,117
  1,169
  1,222
  1,278
  1,337
  1,400
Operating income, $m
  31
  31
  33
  34
  36
  38
  40
  43
  46
  49
  61
  65
  69
  73
  78
  83
  89
  94
  101
  107
  114
  122
  130
  138
  147
  157
  167
  178
  189
  201
EBITDA, $m
  54
  55
  57
  59
  61
  64
  67
  70
  74
  78
  82
  87
  92
  97
  103
  109
  116
  123
  130
  138
  147
  156
  165
  175
  186
  198
  210
  223
  236
  250
Interest expense (income), $m
  6
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
Earnings before tax, $m
  26
  27
  28
  29
  31
  32
  34
  37
  39
  42
  53
  56
  59
  63
  67
  72
  76
  81
  87
  92
  98
  105
  112
  119
  127
  135
  144
  153
  163
  173
Tax expense, $m
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  34
  36
  39
  41
  44
  47
Net income, $m
  19
  20
  20
  21
  22
  24
  25
  27
  28
  30
  39
  41
  43
  46
  49
  52
  56
  59
  63
  67
  72
  77
  82
  87
  93
  99
  105
  112
  119
  126

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
  398
  407
  418
  430
  443
  457
  472
  489
  507
  527
  548
  570
  594
  619
  646
  674
  704
  735
  769
  804
  841
  881
  922
  966
  1,012
  1,060
  1,111
  1,165
  1,221
  1,281
Adjusted assets (=assets-cash), $m
  398
  407
  418
  430
  443
  457
  472
  489
  507
  527
  548
  570
  594
  619
  646
  674
  704
  735
  769
  804
  841
  881
  922
  966
  1,012
  1,060
  1,111
  1,165
  1,221
  1,281
Revenue / Adjusted assets
  1.251
  1.251
  1.249
  1.249
  1.248
  1.249
  1.252
  1.252
  1.250
  1.250
  1.250
  1.249
  1.249
  1.250
  1.249
  1.249
  1.250
  1.250
  1.250
  1.250
  1.251
  1.250
  1.251
  1.249
  1.250
  1.250
  1.250
  1.250
  1.251
  1.250
Average production assets, $m
  164
  168
  172
  177
  182
  188
  194
  201
  209
  217
  225
  234
  244
  254
  265
  277
  289
  302
  316
  331
  346
  362
  379
  397
  416
  436
  457
  479
  502
  527
Working capital, $m
  85
  87
  89
  91
  94
  97
  100
  104
  108
  112
  116
  121
  126
  131
  137
  143
  150
  156
  163
  171
  179
  187
  196
  205
  215
  225
  236
  248
  260
  272
Total debt, $m
  81
  86
  92
  98
  105
  112
  120
  129
  139
  149
  160
  172
  184
  198
  212
  227
  243
  259
  277
  296
  315
  336
  358
  381
  405
  431
  458
  486
  516
  547
Total liabilities, $m
  210
  215
  221
  227
  234
  241
  249
  258
  268
  278
  289
  301
  313
  327
  341
  356
  372
  388
  406
  425
  444
  465
  487
  510
  534
  560
  587
  615
  645
  676
Total equity, $m
  188
  192
  197
  203
  209
  216
  223
  231
  240
  249
  259
  269
  280
  292
  305
  318
  332
  347
  363
  380
  397
  416
  435
  456
  478
  500
  525
  550
  576
  604
Total liabilities and equity, $m
  398
  407
  418
  430
  443
  457
  472
  489
  508
  527
  548
  570
  593
  619
  646
  674
  704
  735
  769
  805
  841
  881
  922
  966
  1,012
  1,060
  1,112
  1,165
  1,221
  1,280
Debt-to-equity ratio
  0.430
  0.450
  0.460
  0.480
  0.500
  0.520
  0.540
  0.560
  0.580
  0.600
  0.620
  0.640
  0.660
  0.680
  0.700
  0.710
  0.730
  0.750
  0.760
  0.780
  0.790
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.910
Adjusted equity ratio
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  20
  20
  21
  22
  24
  25
  27
  28
  30
  39
  41
  43
  46
  49
  52
  56
  59
  63
  67
  72
  77
  82
  87
  93
  99
  105
  112
  119
  126
Depreciation, amort., depletion, $m
  24
  24
  24
  25
  25
  26
  26
  27
  28
  28
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
Funds from operations, $m
  43
  44
  45
  46
  48
  49
  51
  54
  56
  59
  60
  63
  66
  70
  74
  78
  83
  88
  93
  98
  104
  110
  117
  124
  131
  139
  148
  156
  166
  176
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
Cash from operations, $m
  41
  42
  43
  44
  45
  46
  48
  50
  52
  55
  55
  58
  61
  65
  68
  72
  76
  81
  86
  91
  96
  102
  108
  115
  122
  129
  137
  145
  154
  163
Maintenance CAPEX, $m
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -45
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
Free cash flow, $m
  23
  23
  23
  23
  23
  24
  24
  25
  26
  27
  26
  28
  30
  31
  33
  36
  38
  41
  44
  47
  50
  54
  57
  61
  66
  70
  75
  80
  86
  92
Issuance/(repayment) of debt, $m
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
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  
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
Total cash flow (excl. dividends), $m
  27
  27
  28
  29
  30
  31
  32
  34
  36
  38
  37
  40
  42
  45
  48
  51
  54
  58
  61
  65
  70
  74
  79
  84
  90
  96
  102
  109
  116
  123
Retained Cash Flow (-), $m
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
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
  23
  23
  23
  23
  24
  24
  25
  26
  27
  28
  28
  29
  31
  33
  35
  37
  40
  43
  46
  49
  52
  56
  60
  64
  68
  73
  78
  83
  89
  95
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
  22
  21
  20
  19
  18
  18
  17
  16
  16
  15
  13
  12
  12
  11
  10
  9
  9
  8
  7
  6
  5
  5
  4
  3
  3
  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

Luxfer Holdings PLC is a holding company. The Company is a materials technology company specializing in the design, manufacture and supply of materials, components and gas-containment devices for healthcare, environmental, protection and specialty end-markets. It operates through two divisions: Elektron and Gas Cylinders. Its Elektron Division focuses on specialty materials based primarily on magnesium, zirconium and rare earths. It sells its products through two brands, Magnesium Elektron and MEL Chemicals. Its Gas Cylinders Division manufactures and markets specialized products using aluminum, magnesium, carbon composites and steel. It sells its products through two brands, Luxfer Gas Cylinders and Superform. Its customers include both end users of its products and manufacturers that incorporate its products into finished goods. As of December 31, 2016, it had operated 20 manufacturing plants in the United States, the United Kingdom, Canada, France, the Czech Republic and China.

FINANCIAL RATIOS  of  Luxfer Holdings PLC (LXFR)

Valuation Ratios
P/E Ratio 26.7
Price to Sales 1.4
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 20.2
Price to Free Cash Flow 58.7
Growth Rates
Sales Growth Rate -9.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.8%
Cap. Spend. - 3 Yr. Gr. Rate -6.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 85.2%
Total Debt to Equity 85.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 7.8%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 14.1%
Return On Equity - 3 Yr. Avg. 13.1%
Asset Turnover 1
Profitability Ratios
Gross Margin 22.4%
Gross Margin - 3 Yr. Avg. 22.7%
EBITDA Margin 12.5%
EBITDA Margin - 3 Yr. Avg. 12%
Operating Margin 8.7%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 5.3%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 21.4%
Eff/ Tax Rate - 3 Yr. Avg. 26.4%
Payout Ratio 59.1%

LXFR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LXFR stock intrinsic value calculation we used $488 million for the last fiscal year's total revenue generated by Luxfer Holdings PLC. The default revenue input number comes from 0001 income statement of Luxfer Holdings PLC. 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 LXFR 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 LXFR is calculated based on our internal credit rating of Luxfer Holdings PLC, 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 Luxfer Holdings PLC.
    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 LXFR stock the variable cost ratio is equal to 82.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $56 million in the base year in the intrinsic value calculation for LXFR 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 Luxfer Holdings PLC.

Corporate tax rate of 27% is the nominal tax rate for Luxfer Holdings PLC. 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 LXFR 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 LXFR are equal to 32.9%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Luxfer Holdings PLC 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 LXFR is equal to 17%. 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 - $184.3 million for Luxfer Holdings PLC - 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 27.000 million for Luxfer Holdings PLC 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 Luxfer Holdings PLC at the current share price and the inputted number of shares is $0.6 billion.

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