Intrinsic value of Modine Manufacturing Company - MOD

Previous Close

$13.32

  Intrinsic Value

$17.11

stock screener

  Rating & Target

buy

+28%

Previous close

$13.32

 
Intrinsic value

$17.11

 
Up/down potential

+28%

 
Rating

buy

We calculate the intrinsic value of MOD 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 0.7

 

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, %
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
Revenue, $m
  2,219
  2,340
  2,466
  2,598
  2,737
  2,882
  3,033
  3,192
  3,359
  3,533
  3,716
  3,908
  4,109
  4,319
  4,540
  4,772
  5,015
  5,270
  5,537
  5,818
  6,112
  6,421
  6,746
  7,086
  7,443
  7,818
  8,211
  8,624
  9,058
  9,513
Variable operating expenses, $m
  2,033
  2,142
  2,256
  2,376
  2,500
  2,631
  2,768
  2,912
  3,062
  3,219
  3,354
  3,527
  3,708
  3,898
  4,098
  4,307
  4,526
  4,756
  4,998
  5,251
  5,517
  5,796
  6,088
  6,395
  6,718
  7,056
  7,411
  7,784
  8,175
  8,585
Fixed operating expenses, $m
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
  108
  110
  113
  115
  118
  120
  123
  126
  129
  131
  134
  137
  140
  143
  146
  150
  153
  156
  160
  163
Total operating expenses, $m
  2,120
  2,231
  2,347
  2,469
  2,595
  2,728
  2,867
  3,013
  3,165
  3,325
  3,462
  3,637
  3,821
  4,013
  4,216
  4,427
  4,649
  4,882
  5,127
  5,382
  5,651
  5,933
  6,228
  6,538
  6,864
  7,206
  7,564
  7,940
  8,335
  8,748
Operating income, $m
  99
  109
  119
  130
  142
  154
  166
  180
  194
  208
  254
  270
  288
  306
  325
  345
  366
  388
  411
  436
  461
  489
  517
  547
  579
  612
  647
  684
  723
  764
EBITDA, $m
  195
  208
  222
  237
  253
  269
  286
  304
  323
  343
  364
  386
  409
  433
  459
  485
  514
  543
  575
  607
  642
  678
  716
  756
  799
  843
  890
  939
  990
  1,044
Interest expense (income), $m
  15
  26
  29
  32
  36
  40
  44
  48
  52
  56
  61
  66
  71
  76
  82
  88
  94
  100
  107
  114
  121
  129
  137
  146
  155
  165
  175
  185
  196
  207
  219
Earnings before tax, $m
  73
  80
  87
  94
  102
  110
  119
  128
  137
  147
  188
  200
  211
  224
  237
  251
  265
  281
  297
  314
  332
  351
  371
  392
  414
  438
  462
  488
  516
  544
Tax expense, $m
  20
  22
  23
  25
  27
  30
  32
  34
  37
  40
  51
  54
  57
  60
  64
  68
  72
  76
  80
  85
  90
  95
  100
  106
  112
  118
  125
  132
  139
  147
Net income, $m
  53
  58
  63
  69
  74
  80
  87
  93
  100
  108
  138
  146
  154
  163
  173
  183
  194
  205
  217
  229
  242
  256
  271
  286
  302
  320
  337
  356
  376
  397

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
  1,659
  1,750
  1,844
  1,943
  2,047
  2,155
  2,269
  2,388
  2,512
  2,643
  2,779
  2,923
  3,073
  3,231
  3,396
  3,569
  3,751
  3,942
  4,142
  4,351
  4,572
  4,803
  5,045
  5,300
  5,567
  5,847
  6,141
  6,450
  6,775
  7,115
Adjusted assets (=assets-cash), $m
  1,659
  1,750
  1,844
  1,943
  2,047
  2,155
  2,269
  2,388
  2,512
  2,643
  2,779
  2,923
  3,073
  3,231
  3,396
  3,569
  3,751
  3,942
  4,142
  4,351
  4,572
  4,803
  5,045
  5,300
  5,567
  5,847
  6,141
  6,450
  6,775
  7,115
Revenue / Adjusted assets
  1.338
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
  1.337
Average production assets, $m
  668
  704
  742
  782
  824
  867
  913
  961
  1,011
  1,064
  1,119
  1,176
  1,237
  1,300
  1,367
  1,436
  1,509
  1,586
  1,667
  1,751
  1,840
  1,933
  2,030
  2,133
  2,240
  2,353
  2,472
  2,596
  2,726
  2,863
Working capital, $m
  191
  201
  212
  223
  235
  248
  261
  275
  289
  304
  320
  336
  353
  371
  390
  410
  431
  453
  476
  500
  526
  552
  580
  609
  640
  672
  706
  742
  779
  818
Total debt, $m
  539
  602
  667
  735
  806
  881
  959
  1,041
  1,127
  1,217
  1,311
  1,410
  1,513
  1,622
  1,736
  1,855
  1,980
  2,112
  2,250
  2,394
  2,546
  2,705
  2,872
  3,048
  3,232
  3,425
  3,628
  3,840
  4,064
  4,298
Total liabilities, $m
  1,143
  1,206
  1,271
  1,339
  1,410
  1,485
  1,563
  1,645
  1,731
  1,821
  1,915
  2,014
  2,117
  2,226
  2,340
  2,459
  2,584
  2,716
  2,854
  2,998
  3,150
  3,309
  3,476
  3,652
  3,836
  4,029
  4,231
  4,444
  4,668
  4,902
Total equity, $m
  516
  544
  574
  604
  637
  670
  706
  743
  781
  822
  864
  909
  956
  1,005
  1,056
  1,110
  1,167
  1,226
  1,288
  1,353
  1,422
  1,494
  1,569
  1,648
  1,731
  1,818
  1,910
  2,006
  2,107
  2,213
Total liabilities and equity, $m
  1,659
  1,750
  1,845
  1,943
  2,047
  2,155
  2,269
  2,388
  2,512
  2,643
  2,779
  2,923
  3,073
  3,231
  3,396
  3,569
  3,751
  3,942
  4,142
  4,351
  4,572
  4,803
  5,045
  5,300
  5,567
  5,847
  6,141
  6,450
  6,775
  7,115
Debt-to-equity ratio
  1.050
  1.110
  1.160
  1.220
  1.270
  1.310
  1.360
  1.400
  1.440
  1.480
  1.520
  1.550
  1.580
  1.610
  1.640
  1.670
  1.700
  1.720
  1.750
  1.770
  1.790
  1.810
  1.830
  1.850
  1.870
  1.880
  1.900
  1.910
  1.930
  1.940
Adjusted equity ratio
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311
  0.311

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  53
  58
  63
  69
  74
  80
  87
  93
  100
  108
  138
  146
  154
  163
  173
  183
  194
  205
  217
  229
  242
  256
  271
  286
  302
  320
  337
  356
  376
  397
Depreciation, amort., depletion, $m
  96
  99
  103
  107
  111
  115
  120
  125
  130
  135
  110
  115
  121
  127
  134
  141
  148
  156
  163
  172
  180
  189
  199
  209
  220
  231
  242
  254
  267
  281
Funds from operations, $m
  149
  158
  166
  176
  186
  196
  207
  218
  230
  242
  247
  261
  276
  291
  307
  324
  342
  361
  380
  401
  423
  446
  470
  495
  522
  550
  580
  611
  644
  678
Change in working capital, $m
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
Cash from operations, $m
  139
  147
  156
  164
  174
  183
  193
  204
  215
  227
  232
  245
  258
  273
  288
  304
  321
  339
  357
  377
  398
  419
  442
  466
  491
  518
  546
  575
  606
  639
Maintenance CAPEX, $m
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -110
  -115
  -121
  -127
  -134
  -141
  -148
  -156
  -163
  -172
  -180
  -189
  -199
  -209
  -220
  -231
  -242
  -254
  -267
New CAPEX, $m
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -84
  -89
  -93
  -98
  -102
  -107
  -113
  -118
  -124
  -130
  -137
Cash from investing activities, $m
  -97
  -101
  -107
  -113
  -119
  -125
  -131
  -138
  -144
  -152
  -159
  -168
  -175
  -184
  -193
  -204
  -214
  -225
  -237
  -247
  -261
  -273
  -287
  -301
  -316
  -333
  -349
  -366
  -384
  -404
Free cash flow, $m
  42
  45
  48
  52
  55
  59
  63
  67
  71
  76
  72
  77
  83
  88
  94
  100
  107
  114
  121
  129
  137
  146
  155
  165
  175
  186
  197
  209
  221
  235
Issuance/(repayment) of debt, $m
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
  131
  138
  145
  152
  159
  167
  175
  184
  193
  203
  213
  223
  234
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  
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  119
  125
  131
  138
  145
  152
  159
  167
  175
  184
  193
  203
  213
  223
  234
Total cash flow (excl. dividends), $m
  102
  108
  114
  120
  127
  134
  141
  149
  157
  166
  166
  176
  186
  197
  208
  220
  232
  245
  259
  274
  289
  305
  322
  340
  359
  379
  400
  422
  445
  469
Retained Cash Flow (-), $m
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
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
  76
  80
  84
  89
  94
  100
  106
  112
  118
  125
  124
  131
  139
  148
  157
  166
  176
  186
  197
  208
  220
  233
  247
  261
  276
  291
  308
  326
  344
  363
Discount rate, %
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
  71
  69
  68
  66
  64
  61
  58
  54
  51
  46
  40
  36
  32
  28
  24
  21
  17
  14
  11
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
  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

Modine Manufacturing Company provides engineered heat transfer systems and heat transfer components for use in on-highway and off-highway original equipment manufacturer (OEM) vehicular applications, and for sale into an array of building, industrial and refrigeration markets. The Company's products include radiators and radiator cores, exhaust gas recirculation coolers, building heating, ventilating and air conditioning (HVAC) equipment, and coils. Its segments include Americas, Europe, Asia and Building HVAC. Its Americas segment consists of vehicular and industrial original equipment products in North America and South America, as well as aftermarket products in South America. Its Europe segment consists of vehicular and industrial original equipment products in Europe. Its Asia segment consists of vehicular and industrial original equipment products in Asia. Its Building HVAC segment consists of building heating, ventilating and air conditioning products throughout the world.

FINANCIAL RATIOS  of  Modine Manufacturing Company (MOD)

Valuation Ratios
P/E Ratio 47.7
Price to Sales 0.4
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 15.9
Price to Free Cash Flow -30.3
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1.6%
Cap. Spend. - 3 Yr. Gr. Rate 3.8%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 98.1%
Total Debt to Equity 123.4%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. 1.6%
Return On Total Capital 1.9%
Ret/ On T. Cap. - 3 Yr. Avg. 1.9%
Return On Equity 3.5%
Return On Equity - 3 Yr. Avg. 2.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 16.8%
Gross Margin - 3 Yr. Avg. 16.6%
EBITDA Margin 6.3%
EBITDA Margin - 3 Yr. Avg. 5.6%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 1.4%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin 0.9%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 55%
Payout Ratio 0%

MOD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MOD stock intrinsic value calculation we used $2103 million for the last fiscal year's total revenue generated by Modine Manufacturing Company. The default revenue input number comes from 0001 income statement of Modine Manufacturing Company. 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 MOD stock valuation model: a) initial revenue growth rate of 5.5% 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 6.7%, whose default value for MOD is calculated based on our internal credit rating of Modine Manufacturing Company, 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 Modine Manufacturing Company.
    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 MOD stock the variable cost ratio is equal to 91.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $85 million in the base year in the intrinsic value calculation for MOD 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 Modine Manufacturing Company.

Corporate tax rate of 27% is the nominal tax rate for Modine Manufacturing Company. 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 MOD 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 MOD are equal to 30.1%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Modine Manufacturing Company 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 MOD is equal to 8.6%. 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 - $490.1 million for Modine Manufacturing Company - 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 50.629 million for Modine Manufacturing Company 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 Modine Manufacturing Company at the current share price and the inputted number of shares is $0.7 billion.

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