Intrinsic value of Natural Alternatives International - NAII

Previous Close

$9.30

  Intrinsic Value

$21.63

stock screener

  Rating & Target

str. buy

+133%

Previous close

$9.30

 
Intrinsic value

$21.63

 
Up/down potential

+133%

 
Rating

str. buy

We calculate the intrinsic value of NAII 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, %
  26.60
  24.44
  22.50
  20.75
  19.17
  17.75
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
Revenue, $m
  154
  192
  235
  284
  339
  399
  464
  536
  612
  694
  781
  873
  970
  1,072
  1,178
  1,290
  1,406
  1,527
  1,653
  1,783
  1,919
  2,061
  2,208
  2,360
  2,519
  2,684
  2,856
  3,034
  3,220
  3,414
Variable operating expenses, $m
  138
  172
  210
  254
  302
  356
  415
  478
  547
  620
  698
  780
  866
  957
  1,052
  1,152
  1,255
  1,363
  1,476
  1,593
  1,714
  1,840
  1,971
  2,108
  2,249
  2,397
  2,550
  2,709
  2,876
  3,049
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
  138
  172
  210
  254
  302
  356
  415
  478
  547
  620
  698
  780
  866
  957
  1,052
  1,152
  1,255
  1,363
  1,476
  1,593
  1,714
  1,840
  1,971
  2,108
  2,249
  2,397
  2,550
  2,709
  2,876
  3,049
Operating income, $m
  17
  21
  25
  30
  36
  43
  50
  57
  66
  74
  84
  93
  104
  115
  126
  138
  150
  163
  177
  191
  205
  220
  236
  253
  270
  287
  306
  325
  345
  365
EBITDA, $m
  20
  24
  30
  36
  43
  50
  59
  68
  77
  88
  99
  110
  123
  136
  149
  163
  178
  193
  209
  225
  243
  261
  279
  298
  318
  339
  361
  384
  407
  432
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
Earnings before tax, $m
  17
  20
  25
  30
  35
  42
  48
  56
  63
  72
  81
  90
  100
  110
  121
  133
  145
  157
  170
  183
  197
  211
  226
  242
  258
  275
  293
  311
  330
  350
Tax expense, $m
  4
  6
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
Net income, $m
  12
  15
  18
  22
  26
  30
  35
  41
  46
  52
  59
  66
  73
  81
  89
  97
  105
  115
  124
  134
  144
  154
  165
  177
  188
  201
  214
  227
  241
  255

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
  70
  87
  106
  128
  153
  180
  210
  242
  276
  313
  352
  394
  438
  483
  531
  582
  634
  689
  745
  804
  866
  929
  996
  1,065
  1,136
  1,211
  1,288
  1,369
  1,452
  1,540
Adjusted assets (=assets-cash), $m
  70
  87
  106
  128
  153
  180
  210
  242
  276
  313
  352
  394
  438
  483
  531
  582
  634
  689
  745
  804
  866
  929
  996
  1,065
  1,136
  1,211
  1,288
  1,369
  1,452
  1,540
Revenue / Adjusted assets
  2.200
  2.207
  2.217
  2.219
  2.216
  2.217
  2.210
  2.215
  2.217
  2.217
  2.219
  2.216
  2.215
  2.219
  2.218
  2.216
  2.218
  2.216
  2.219
  2.218
  2.216
  2.219
  2.217
  2.216
  2.217
  2.216
  2.217
  2.216
  2.218
  2.217
Average production assets, $m
  21
  26
  32
  39
  46
  54
  63
  73
  83
  94
  106
  119
  132
  146
  160
  175
  191
  208
  225
  243
  261
  280
  300
  321
  343
  365
  388
  413
  438
  464
Working capital, $m
  17
  21
  26
  32
  38
  44
  52
  59
  68
  77
  87
  97
  108
  119
  131
  143
  156
  169
  183
  198
  213
  229
  245
  262
  280
  298
  317
  337
  357
  379
Total debt, $m
  3
  7
  11
  15
  20
  26
  32
  39
  46
  54
  62
  70
  80
  89
  99
  110
  120
  132
  144
  156
  169
  182
  196
  210
  225
  240
  256
  273
  291
  309
Total liabilities, $m
  14
  18
  22
  27
  32
  37
  44
  50
  57
  65
  73
  82
  91
  101
  111
  121
  132
  143
  155
  167
  180
  193
  207
  221
  236
  252
  268
  285
  302
  320
Total equity, $m
  55
  69
  84
  102
  121
  142
  166
  191
  219
  248
  279
  312
  347
  383
  421
  461
  502
  545
  590
  637
  686
  736
  789
  843
  900
  959
  1,020
  1,084
  1,150
  1,220
Total liabilities and equity, $m
  69
  87
  106
  129
  153
  179
  210
  241
  276
  313
  352
  394
  438
  484
  532
  582
  634
  688
  745
  804
  866
  929
  996
  1,064
  1,136
  1,211
  1,288
  1,369
  1,452
  1,540
Debt-to-equity ratio
  0.050
  0.100
  0.130
  0.150
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
Adjusted equity ratio
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792
  0.792

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  15
  18
  22
  26
  30
  35
  41
  46
  52
  59
  66
  73
  81
  89
  97
  105
  115
  124
  134
  144
  154
  165
  177
  188
  201
  214
  227
  241
  255
Depreciation, amort., depletion, $m
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  59
  63
  66
Funds from operations, $m
  15
  19
  23
  27
  32
  38
  44
  51
  58
  66
  74
  83
  92
  101
  111
  122
  133
  144
  156
  168
  181
  194
  208
  222
  237
  253
  269
  286
  303
  322
Change in working capital, $m
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
Cash from operations, $m
  11
  14
  18
  22
  26
  31
  37
  43
  50
  57
  64
  73
  81
  90
  100
  110
  120
  131
  142
  154
  166
  179
  192
  206
  220
  235
  250
  266
  283
  300
Maintenance CAPEX, $m
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -63
New CAPEX, $m
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
Cash from investing activities, $m
  -6
  -8
  -10
  -12
  -13
  -15
  -17
  -19
  -20
  -23
  -25
  -28
  -30
  -33
  -35
  -38
  -41
  -43
  -47
  -50
  -53
  -56
  -60
  -64
  -68
  -71
  -75
  -79
  -84
  -89
Free cash flow, $m
  5
  6
  8
  11
  13
  17
  20
  24
  29
  34
  39
  45
  51
  57
  64
  71
  79
  87
  95
  104
  113
  122
  132
  142
  152
  163
  175
  186
  198
  211
Issuance/(repayment) of debt, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
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  
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
Total cash flow (excl. dividends), $m
  7
  10
  12
  15
  19
  22
  26
  31
  36
  41
  47
  53
  60
  67
  74
  82
  90
  98
  107
  116
  126
  135
  146
  156
  167
  179
  191
  203
  216
  229
Retained Cash Flow (-), $m
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -50
  -52
  -55
  -57
  -59
  -61
  -64
  -66
  -69
Prev. year cash balance distribution, $m
  18
  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
  14
  -4
  -3
  -2
  -1
  1
  3
  6
  9
  12
  16
  21
  25
  31
  36
  42
  48
  55
  62
  69
  77
  85
  93
  102
  111
  120
  129
  139
  149
  160
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
  13
  -3
  -3
  -2
  -1
  1
  2
  4
  5
  6
  8
  9
  10
  10
  11
  11
  11
  10
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  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

Natural Alternatives International, Inc. is a formulator, manufacturer and marketer of nutritional supplements. The Company operates through three segments: private-label contract manufacturing, patent and trademark licensing, and branded products. The private-label contract manufacturing segment primarily relates to the provision of private-label contract manufacturing services to companies that market and distribute nutritional supplements and other healthcare products. The patent and trademark licensing segment primarily includes direct raw material sales and royalty income from its license and supply agreements associated with the sale and use of beta-alanine under its CarnosSyn trade name. The branded products segment relates to the marketing and distribution of branded nutritional supplements and consists primarily of the products sold under its Pathway to Healing product line.

FINANCIAL RATIOS  of  Natural Alternatives International (NAII)

Valuation Ratios
P/E Ratio 9.2
Price to Sales 0.5
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 4.6
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate 7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 9.5%
Ret/ On Assets - 3 Yr. Avg. 10.3%
Return On Total Capital 12.2%
Ret/ On T. Cap. - 3 Yr. Avg. 13.2%
Return On Equity 12.2%
Return On Equity - 3 Yr. Avg. 13.2%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 21.3%
Gross Margin - 3 Yr. Avg. 20.2%
EBITDA Margin 9.8%
EBITDA Margin - 3 Yr. Avg. 10.5%
Operating Margin 8.2%
Oper. Margin - 3 Yr. Avg. 8.3%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 8.5%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 6.1%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 27.9%
Payout Ratio 0%

NAII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NAII stock intrinsic value calculation we used $121.946 million for the last fiscal year's total revenue generated by Natural Alternatives International. The default revenue input number comes from 0001 income statement of Natural Alternatives International. 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 NAII stock valuation model: a) initial revenue growth rate of 26.6% 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 NAII is calculated based on our internal credit rating of Natural Alternatives International, 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 Natural Alternatives International.
    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 NAII stock the variable cost ratio is equal to 89.3%.

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 NAII 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 Natural Alternatives International.

Corporate tax rate of 27% is the nominal tax rate for Natural Alternatives International. 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 NAII 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 NAII are equal to 13.6%.

Life of production assets of 7 years is the average useful life of capital assets used in Natural Alternatives International 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 NAII is equal to 11.1%. 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 - $61.148 million for Natural Alternatives International - 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 7.558 million for Natural Alternatives International 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 Natural Alternatives International at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Natural Alternatives: Fiscal 1Q Earnings Snapshot   [Nov-13-18 05:08PM  Associated Press]
▶ Natural Alternatives: Fiscal 4Q Earnings Snapshot   [Sep-19-18 04:53PM  Associated Press]
▶ Cheap Stocks To Watch Out For In May   [May-16-18 10:02AM  Simply Wall St.]
▶ Natural Alternatives: Fiscal 3Q Earnings Snapshot   [May-14-18 05:21PM  Associated Press]
▶ Natural Alternatives reports 2Q loss   [Feb-13-18 04:59PM  Associated Press]
▶ Financially Sounds Stocks Selling At A Discount   [Feb-08-18 09:02AM  Simply Wall St.]
▶ Cheap Stocks To Watch Out For In January   [Jan-08-18 08:02AM  Simply Wall St.]
▶ Best Cheap Stock in November   [Nov-25-17 08:02AM  Simply Wall St.]
▶ Natural Alternatives posts 1Q profit   [Nov-13-17 06:24PM  Associated Press]
▶ Natural Alternatives posts 4Q profit   [Sep-18-17 10:06PM  Associated Press]
▶ Natural Alternatives posts 3Q profit   [May-15-17 09:04AM  Associated Press]
▶ Natural Alternatives International, Inc. Announces   [Mar-30-17 05:47PM  PR Newswire]
▶ Natural Alternatives posts 2Q profit   [Feb-14-17 05:35PM  Associated Press]

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