Intrinsic value of LSI Industries Inc. - LYTS

Previous Close

$2.81

  Intrinsic Value

$0.93

stock screener

  Rating & Target

str. sell

-67%

Previous close

$2.81

 
Intrinsic value

$0.93

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of LYTS 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, %
  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
  349
  357
  366
  376
  388
  400
  414
  429
  445
  462
  480
  499
  520
  542
  565
  590
  617
  644
  674
  705
  737
  772
  808
  846
  886
  929
  973
  1,020
  1,070
  1,122
Variable operating expenses, $m
  345
  352
  361
  371
  382
  394
  408
  422
  437
  454
  465
  484
  504
  525
  548
  572
  597
  624
  652
  682
  714
  747
  783
  820
  859
  900
  943
  989
  1,036
  1,087
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
  345
  352
  361
  371
  382
  394
  408
  422
  437
  454
  465
  484
  504
  525
  548
  572
  597
  624
  652
  682
  714
  747
  783
  820
  859
  900
  943
  989
  1,036
  1,087
Operating income, $m
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
EBITDA, $m
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
Interest expense (income), $m
  1
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
Earnings before tax, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
Tax expense, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
Net income, $m
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16

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
  234
  240
  246
  253
  260
  269
  278
  288
  298
  310
  322
  335
  349
  364
  380
  396
  414
  432
  452
  473
  495
  518
  542
  568
  595
  623
  653
  685
  718
  753
Adjusted assets (=assets-cash), $m
  234
  240
  246
  253
  260
  269
  278
  288
  298
  310
  322
  335
  349
  364
  380
  396
  414
  432
  452
  473
  495
  518
  542
  568
  595
  623
  653
  685
  718
  753
Revenue / Adjusted assets
  1.491
  1.488
  1.488
  1.486
  1.492
  1.487
  1.489
  1.490
  1.493
  1.490
  1.491
  1.490
  1.490
  1.489
  1.487
  1.490
  1.490
  1.491
  1.491
  1.490
  1.489
  1.490
  1.491
  1.489
  1.489
  1.491
  1.490
  1.489
  1.490
  1.490
Average production assets, $m
  88
  90
  92
  95
  98
  101
  104
  108
  112
  116
  121
  126
  131
  137
  143
  149
  155
  162
  170
  178
  186
  194
  204
  213
  223
  234
  245
  257
  270
  283
Working capital, $m
  66
  67
  69
  71
  73
  76
  78
  81
  84
  87
  91
  94
  98
  102
  107
  112
  117
  122
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
  202
  212
Total debt, $m
  47
  49
  52
  54
  57
  61
  64
  68
  72
  77
  82
  87
  92
  98
  104
  111
  118
  125
  133
  141
  150
  159
  168
  178
  189
  200
  212
  224
  237
  251
Total liabilities, $m
  92
  94
  97
  99
  102
  106
  109
  113
  117
  122
  127
  132
  137
  143
  149
  156
  163
  170
  178
  186
  194
  204
  213
  223
  234
  245
  257
  269
  282
  296
Total equity, $m
  142
  145
  149
  153
  158
  163
  169
  175
  181
  188
  195
  203
  212
  221
  230
  240
  251
  262
  274
  287
  300
  314
  329
  345
  361
  378
  397
  416
  436
  457
Total liabilities and equity, $m
  234
  239
  246
  252
  260
  269
  278
  288
  298
  310
  322
  335
  349
  364
  379
  396
  414
  432
  452
  473
  494
  518
  542
  568
  595
  623
  654
  685
  718
  753
Debt-to-equity ratio
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.460
  0.470
  0.480
  0.480
  0.490
  0.500
  0.500
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
Adjusted equity ratio
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
Depreciation, amort., depletion, $m
  14
  14
  14
  14
  14
  15
  15
  15
  16
  16
  10
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
Funds from operations, $m
  15
  15
  16
  16
  16
  17
  17
  18
  18
  19
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
Change in working capital, $m
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Cash from operations, $m
  14
  14
  14
  14
  14
  14
  15
  15
  15
  16
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Maintenance CAPEX, $m
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -17
  -19
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
Free cash flow, $m
  5
  5
  4
  4
  4
  3
  3
  3
  3
  2
  0
  0
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
Issuance/(repayment) of debt, $m
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Issuance/(repurchase) of shares, $m
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
Cash from financing (excl. dividends), $m  
  3
  4
  4
  5
  6
  6
  7
  8
  8
  8
  5
  5
  5
  6
  6
  8
  8
  8
  9
  10
  11
  11
  13
  13
  14
  15
  16
  16
  18
  19
Total cash flow (excl. dividends), $m
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Retained Cash Flow (-), $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
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
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Discount rate, %
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
  5
  5
  4
  4
  4
  3
  3
  2
  2
  2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.5
  96.7
  94.8
  92.6
  90.3
  87.9
  85.4
  82.9
  80.4
  77.9
  77.9
  77.9
  77.9
  77.7
  77.5
  77.2
  76.7
  76.2
  75.6
  74.9
  74.2
  73.4
  72.5
  71.6
  70.7
  69.7
  68.7
  67.7
  66.7
  65.6

LSI Industries Inc. is a provider of corporate visual image solutions to the petroleum/convenience store industry. The Company designs and develops aspects of the solid-state light emitting diode (LED) lighting, from the electronic circuit board, to the software to drive and control the LEDs, to the structure of the LED product. It operates through three segments: Lighting, Graphics and Technology. The Lighting Segment manufactures and markets outdoor and indoor lighting and lighting controls for the commercial, industrial and multi-site retail markets, including the quick-service and automotive markets. The Graphics Segment manufactures and sells exterior and interior visual image elements related to signage and graphics, including integrated digital solutions. The Technology Segment designs, engineers, and manufactures electronic circuit boards, assemblies, lighting controls and large format solid state LED video displays. The Company provides a range of lighting control solutions.

FINANCIAL RATIOS  of  LSI Industries Inc. (LYTS)

Valuation Ratios
P/E Ratio 23.8
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 3.4
Price to Free Cash Flow 5.1
Growth Rates
Sales Growth Rate 2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30%
Cap. Spend. - 3 Yr. Gr. Rate 7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 31.3%
Total Debt to Equity 31.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 1.8%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 3.7%
Return On Equity 1.9%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 25.1%
Gross Margin - 3 Yr. Avg. 25.1%
EBITDA Margin 3.6%
EBITDA Margin - 3 Yr. Avg. 4.9%
Operating Margin 0.9%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin 0.9%
Pre-Tax Margin - 3 Yr. Avg. 2.6%
Net Profit Margin 0.9%
Net Profit Margin - 3 Yr. Avg. 1.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 24.4%
Payout Ratio 166.7%

LYTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LYTS stock intrinsic value calculation we used $342 million for the last fiscal year's total revenue generated by LSI Industries Inc.. The default revenue input number comes from 0001 income statement of LSI 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 LYTS 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 5.3%, whose default value for LYTS is calculated based on our internal credit rating of LSI 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 LSI 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 LYTS stock the variable cost ratio is equal to 98.8%.

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 LYTS 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 LSI Industries Inc..

Corporate tax rate of 27% is the nominal tax rate for LSI 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 LYTS 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 LYTS are equal to 25.2%.

Life of production assets of 12.4 years is the average useful life of capital assets used in LSI 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 LYTS is equal to 18.9%. 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 - $139.251 million for LSI 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 25.889 million for LSI 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 LSI Industries Inc. at the current share price and the inputted number of shares is $0.1 billion.

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