Intrinsic value of Lsb Industries Inc. - LXU

Previous Close

$4.40

  Intrinsic Value

$2.90

stock screener

  Rating & Target

sell

-34%

Previous close

$4.40

 
Intrinsic value

$2.90

 
Up/down potential

-34%

 
Rating

sell

We calculate the intrinsic value of LXU 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 0.1

 

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, %
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  403
  428
  455
  482
  511
  541
  573
  606
  640
  675
  713
  752
  793
  835
  880
  926
  975
  1,027
  1,080
  1,136
  1,195
  1,257
  1,322
  1,390
  1,461
  1,535
  1,614
  1,696
  1,782
  1,872
Variable operating expenses, $m
  430
  458
  486
  516
  546
  578
  612
  647
  683
  721
  760
  802
  846
  891
  939
  988
  1,041
  1,095
  1,152
  1,212
  1,275
  1,341
  1,410
  1,483
  1,558
  1,638
  1,722
  1,809
  1,901
  1,997
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
  430
  458
  486
  516
  546
  578
  612
  647
  683
  721
  760
  802
  846
  891
  939
  988
  1,041
  1,095
  1,152
  1,212
  1,275
  1,341
  1,410
  1,483
  1,558
  1,638
  1,722
  1,809
  1,901
  1,997
Operating income, $m
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -113
  -119
  -125
EBITDA, $m
  50
  53
  57
  60
  64
  67
  71
  75
  80
  84
  89
  94
  99
  104
  110
  115
  122
  128
  135
  142
  149
  157
  165
  173
  182
  191
  201
  211
  222
  233
Interest expense (income), $m
  28
  44
  49
  55
  60
  66
  73
  79
  86
  93
  100
  108
  116
  124
  133
  142
  152
  162
  173
  184
  195
  207
  220
  233
  247
  262
  277
  293
  310
  328
  346
Earnings before tax, $m
  -72
  -79
  -86
  -93
  -101
  -110
  -118
  -127
  -136
  -146
  -156
  -166
  -177
  -189
  -201
  -214
  -227
  -241
  -256
  -271
  -287
  -304
  -322
  -340
  -360
  -380
  -401
  -424
  -447
  -472
Tax expense, $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
Net income, $m
  -72
  -79
  -86
  -93
  -101
  -110
  -118
  -127
  -136
  -146
  -156
  -166
  -177
  -189
  -201
  -214
  -227
  -241
  -256
  -271
  -287
  -304
  -322
  -340
  -360
  -380
  -401
  -424
  -447
  -472

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
  1,224
  1,301
  1,382
  1,466
  1,554
  1,646
  1,741
  1,841
  1,945
  2,053
  2,166
  2,285
  2,409
  2,538
  2,674
  2,816
  2,965
  3,120
  3,283
  3,454
  3,633
  3,821
  4,018
  4,224
  4,440
  4,667
  4,905
  5,154
  5,416
  5,691
Adjusted assets (=assets-cash), $m
  1,224
  1,301
  1,382
  1,466
  1,554
  1,646
  1,741
  1,841
  1,945
  2,053
  2,166
  2,285
  2,409
  2,538
  2,674
  2,816
  2,965
  3,120
  3,283
  3,454
  3,633
  3,821
  4,018
  4,224
  4,440
  4,667
  4,905
  5,154
  5,416
  5,691
Revenue / Adjusted assets
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
  0.329
Average production assets, $m
  1,064
  1,132
  1,202
  1,275
  1,351
  1,431
  1,514
  1,600
  1,691
  1,785
  1,884
  1,987
  2,095
  2,207
  2,325
  2,449
  2,578
  2,713
  2,855
  3,004
  3,159
  3,322
  3,493
  3,673
  3,861
  4,058
  4,265
  4,482
  4,709
  4,948
Working capital, $m
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  67
  71
  74
  79
  83
  87
  92
  97
  102
  107
  112
  118
  124
  131
  137
  144
  152
  159
  167
  176
Total debt, $m
  487
  541
  598
  657
  719
  783
  850
  920
  993
  1,069
  1,148
  1,232
  1,319
  1,410
  1,505
  1,605
  1,709
  1,818
  1,933
  2,053
  2,178
  2,310
  2,448
  2,593
  2,745
  2,904
  3,071
  3,246
  3,430
  3,622
Total liabilities, $m
  859
  914
  970
  1,029
  1,091
  1,155
  1,222
  1,292
  1,365
  1,441
  1,521
  1,604
  1,691
  1,782
  1,877
  1,977
  2,081
  2,191
  2,305
  2,425
  2,551
  2,682
  2,820
  2,965
  3,117
  3,276
  3,443
  3,618
  3,802
  3,995
Total equity, $m
  365
  388
  412
  437
  463
  490
  519
  548
  579
  612
  646
  681
  718
  756
  797
  839
  883
  930
  978
  1,029
  1,083
  1,139
  1,197
  1,259
  1,323
  1,391
  1,462
  1,536
  1,614
  1,696
Total liabilities and equity, $m
  1,224
  1,302
  1,382
  1,466
  1,554
  1,645
  1,741
  1,840
  1,944
  2,053
  2,167
  2,285
  2,409
  2,538
  2,674
  2,816
  2,964
  3,121
  3,283
  3,454
  3,634
  3,821
  4,017
  4,224
  4,440
  4,667
  4,905
  5,154
  5,416
  5,691
Debt-to-equity ratio
  1.330
  1.400
  1.450
  1.500
  1.550
  1.600
  1.640
  1.680
  1.710
  1.750
  1.780
  1.810
  1.840
  1.860
  1.890
  1.910
  1.930
  1.960
  1.980
  1.990
  2.010
  2.030
  2.040
  2.060
  2.070
  2.090
  2.100
  2.110
  2.120
  2.140
Adjusted equity ratio
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298
  0.298

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -72
  -79
  -86
  -93
  -101
  -110
  -118
  -127
  -136
  -146
  -156
  -166
  -177
  -189
  -201
  -214
  -227
  -241
  -256
  -271
  -287
  -304
  -322
  -340
  -360
  -380
  -401
  -424
  -447
  -472
Depreciation, amort., depletion, $m
  78
  83
  88
  93
  99
  104
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  187
  197
  207
  218
  229
  241
  253
  266
  280
  294
  309
  325
  341
  359
Funds from operations, $m
  6
  4
  2
  0
  -3
  -5
  -8
  -10
  -13
  -16
  -19
  -22
  -26
  -29
  -33
  -37
  -40
  -45
  -49
  -54
  -58
  -63
  -69
  -74
  -80
  -86
  -92
  -99
  -106
  -113
Change in working capital, $m
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
Cash from operations, $m
  4
  2
  0
  -3
  -5
  -8
  -11
  -13
  -16
  -19
  -23
  -26
  -29
  -33
  -37
  -41
  -45
  -49
  -54
  -59
  -64
  -69
  -75
  -80
  -86
  -93
  -100
  -107
  -114
  -122
Maintenance CAPEX, $m
  -72
  -77
  -82
  -87
  -92
  -98
  -104
  -110
  -116
  -123
  -129
  -137
  -144
  -152
  -160
  -168
  -177
  -187
  -197
  -207
  -218
  -229
  -241
  -253
  -266
  -280
  -294
  -309
  -325
  -341
New CAPEX, $m
  -65
  -68
  -70
  -73
  -76
  -80
  -83
  -87
  -90
  -94
  -99
  -103
  -108
  -113
  -118
  -123
  -129
  -135
  -142
  -149
  -156
  -163
  -171
  -179
  -188
  -197
  -207
  -217
  -228
  -239
Cash from investing activities, $m
  -137
  -145
  -152
  -160
  -168
  -178
  -187
  -197
  -206
  -217
  -228
  -240
  -252
  -265
  -278
  -291
  -306
  -322
  -339
  -356
  -374
  -392
  -412
  -432
  -454
  -477
  -501
  -526
  -553
  -580
Free cash flow, $m
  -133
  -143
  -153
  -163
  -174
  -185
  -197
  -210
  -223
  -236
  -251
  -266
  -281
  -298
  -315
  -333
  -352
  -372
  -392
  -414
  -437
  -461
  -486
  -513
  -541
  -570
  -600
  -633
  -666
  -702
Issuance/(repayment) of debt, $m
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  126
  132
  138
  145
  152
  159
  167
  175
  184
  193
Issuance/(repurchase) of shares, $m
  94
  102
  110
  119
  128
  137
  147
  157
  167
  179
  189
  202
  214
  228
  242
  256
  272
  288
  304
  322
  341
  360
  380
  402
  424
  447
  472
  498
  525
  553
Cash from financing (excl. dividends), $m  
  147
  157
  167
  178
  190
  201
  214
  227
  240
  255
  269
  285
  301
  319
  337
  356
  376
  397
  418
  442
  467
  492
  518
  547
  576
  606
  639
  673
  709
  746
Total cash flow (excl. dividends), $m
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
Retained Cash Flow (-), $m
  -94
  -102
  -110
  -119
  -128
  -137
  -147
  -157
  -167
  -179
  -189
  -202
  -214
  -228
  -242
  -256
  -272
  -288
  -304
  -322
  -341
  -360
  -380
  -402
  -424
  -447
  -472
  -498
  -525
  -553
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
  -81
  -88
  -96
  -104
  -112
  -121
  -130
  -140
  -150
  -160
  -171
  -182
  -194
  -207
  -220
  -233
  -247
  -262
  -278
  -294
  -312
  -329
  -348
  -368
  -389
  -411
  -433
  -457
  -482
  -509
Discount rate, %
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
  -74
  -73
  -72
  -69
  -66
  -62
  -57
  -52
  -47
  -42
  -36
  -31
  -26
  -22
  -17
  -14
  -11
  -8
  -6
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  71.8
  51.4
  36.5
  25.9
  18.3
  12.9
  9.0
  6.3
  4.4
  3.0
  2.1
  1.5
  1.0
  0.7
  0.5
  0.3
  0.2
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

LSB Industries, Inc. is a holding company. The Company, through its subsidiaries, is engaged in the manufacture and sale of chemical products. The Company operates through chemical business segment. It is a manufacturer and distributor of nitrogen fertilizer and other nitrogen products in North America. Its principal nitrogen products are ammonia (AN), fertilizer grade ammonium nitrate (high density ammonium nitrate prills used in the agricultural industry (HDAN)), urea ammonia nitrate (UAN), and AN solution for agricultural applications, high purity and commercial grade ammonia, high purity AN, sulfuric acids, concentrated, blended and regular nitric acid, mixed nitrating acids, carbon dioxide, and diesel exhaust fluid for industrial applications, and industrial grade AN (low density ammonium nitrate prills used in the mining industry (LDAN)) and 83% AN solution (AN solution) for the mining industry. Its customers include cooperatives and independent fertilizer distributors.

FINANCIAL RATIOS  of  Lsb Industries Inc. (LXU)

Valuation Ratios
P/E Ratio 1.1
Price to Sales 0.3
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow -5.2
Price to Free Cash Flow -0.5
Growth Rates
Sales Growth Rate -14.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -51.5%
Cap. Spend. - 3 Yr. Gr. Rate 6.3%
Financial Strength
Quick Ratio 3
Current Ratio 0.3
LT Debt to Equity 63.6%
Total Debt to Equity 67.1%
Interest Coverage -4
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 18.1%
Return On Equity - 3 Yr. Avg. 5.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin -13.1%
Gross Margin - 3 Yr. Avg. 1.5%
EBITDA Margin -10.1%
EBITDA Margin - 3 Yr. Avg. -1.8%
Operating Margin -26.4%
Oper. Margin - 3 Yr. Avg. -12.1%
Pre-Tax Margin -34.7%
Pre-Tax Margin - 3 Yr. Avg. -17%
Net Profit Margin 29.9%
Net Profit Margin - 3 Yr. Avg. 8.6%
Effective Tax Rate 32.3%
Eff/ Tax Rate - 3 Yr. Avg. 39.5%
Payout Ratio 7.1%

LXU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LXU stock intrinsic value calculation we used $378 million for the last fiscal year's total revenue generated by Lsb Industries Inc.. The default revenue input number comes from 0001 income statement of Lsb Industries Inc.. 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 LXU stock valuation model: a) initial revenue growth rate of 6.5% 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 9.3%, whose default value for LXU is calculated based on our internal credit rating of Lsb Industries Inc., 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 Lsb Industries Inc..
    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 LXU stock the variable cost ratio is equal to 106.9%.

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 LXU 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 10.1% for Lsb Industries Inc..

Corporate tax rate of 27% is the nominal tax rate for Lsb Industries Inc.. 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 LXU 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 LXU are equal to 264.3%.

Life of production assets of 13.8 years is the average useful life of capital assets used in Lsb Industries Inc. 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 LXU is equal to 9.4%. 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 - $342.197 million for Lsb Industries Inc. - 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 28.809 million for Lsb Industries Inc. 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 Lsb Industries Inc. at the current share price and the inputted number of shares is $0.1 billion.

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