Intrinsic value of NCI Building Systems, Inc. - NCS

Previous Close

$6.27

  Intrinsic Value

$17.56

stock screener

  Rating & Target

str. buy

+180%

Previous close

$6.27

 
Intrinsic value

$17.56

 
Up/down potential

+180%

 
Rating

str. buy

We calculate the intrinsic value of NCS 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 0.8

 

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, %
  17.40
  16.16
  15.04
  14.04
  13.14
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
Revenue, $m
  2,349
  2,729
  3,139
  3,580
  4,050
  4,549
  5,077
  5,632
  6,214
  6,823
  7,459
  8,122
  8,813
  9,531
  10,278
  11,055
  11,861
  12,700
  13,571
  14,477
  15,419
  16,399
  17,419
  18,482
  19,589
  20,743
  21,946
  23,201
  24,512
  25,881
Variable operating expenses, $m
  2,119
  2,457
  2,822
  3,215
  3,633
  4,078
  4,547
  5,041
  5,559
  6,101
  6,640
  7,231
  7,845
  8,485
  9,150
  9,841
  10,559
  11,305
  12,081
  12,887
  13,726
  14,599
  15,507
  16,453
  17,438
  18,465
  19,536
  20,654
  21,821
  23,039
Fixed operating expenses, $m
  62
  64
  65
  67
  68
  70
  71
  73
  74
  76
  77
  79
  81
  83
  85
  86
  88
  90
  92
  94
  96
  98
  101
  103
  105
  107
  110
  112
  115
  117
Total operating expenses, $m
  2,181
  2,521
  2,887
  3,282
  3,701
  4,148
  4,618
  5,114
  5,633
  6,177
  6,717
  7,310
  7,926
  8,568
  9,235
  9,927
  10,647
  11,395
  12,173
  12,981
  13,822
  14,697
  15,608
  16,556
  17,543
  18,572
  19,646
  20,766
  21,936
  23,156
Operating income, $m
  168
  208
  252
  299
  349
  402
  459
  518
  580
  646
  741
  813
  887
  964
  1,044
  1,127
  1,214
  1,304
  1,398
  1,495
  1,597
  1,702
  1,812
  1,926
  2,046
  2,170
  2,300
  2,435
  2,577
  2,724
EBITDA, $m
  232
  278
  328
  382
  439
  500
  564
  632
  704
  778
  856
  937
  1,022
  1,110
  1,202
  1,297
  1,396
  1,499
  1,606
  1,718
  1,834
  1,954
  2,080
  2,210
  2,347
  2,489
  2,637
  2,792
  2,953
  3,122
Interest expense (income), $m
  28
  22
  30
  38
  47
  56
  66
  77
  88
  100
  113
  126
  140
  154
  169
  184
  200
  217
  234
  252
  271
  290
  310
  331
  353
  376
  400
  425
  450
  477
  505
Earnings before tax, $m
  146
  178
  214
  252
  293
  336
  382
  430
  480
  533
  616
  673
  733
  795
  860
  927
  997
  1,070
  1,146
  1,224
  1,306
  1,392
  1,481
  1,573
  1,670
  1,770
  1,875
  1,985
  2,099
  2,219
Tax expense, $m
  39
  48
  58
  68
  79
  91
  103
  116
  130
  144
  166
  182
  198
  215
  232
  250
  269
  289
  309
  331
  353
  376
  400
  425
  451
  478
  506
  536
  567
  599
Net income, $m
  106
  130
  156
  184
  214
  245
  279
  314
  350
  389
  449
  491
  535
  580
  628
  677
  728
  781
  836
  894
  954
  1,016
  1,081
  1,148
  1,219
  1,292
  1,369
  1,449
  1,532
  1,620

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
  1,304
  1,514
  1,742
  1,987
  2,248
  2,525
  2,817
  3,125
  3,448
  3,786
  4,139
  4,507
  4,891
  5,289
  5,704
  6,135
  6,582
  7,048
  7,531
  8,034
  8,557
  9,101
  9,667
  10,256
  10,871
  11,511
  12,179
  12,875
  13,603
  14,362
Adjusted assets (=assets-cash), $m
  1,304
  1,514
  1,742
  1,987
  2,248
  2,525
  2,817
  3,125
  3,448
  3,786
  4,139
  4,507
  4,891
  5,289
  5,704
  6,135
  6,582
  7,048
  7,531
  8,034
  8,557
  9,101
  9,667
  10,256
  10,871
  11,511
  12,179
  12,875
  13,603
  14,362
Revenue / Adjusted assets
  1.801
  1.803
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
  1.802
Average production assets, $m
  437
  508
  584
  666
  753
  846
  944
  1,047
  1,156
  1,269
  1,387
  1,511
  1,639
  1,773
  1,912
  2,056
  2,206
  2,362
  2,524
  2,693
  2,868
  3,050
  3,240
  3,438
  3,644
  3,858
  4,082
  4,315
  4,559
  4,814
Working capital, $m
  235
  273
  314
  358
  405
  455
  508
  563
  621
  682
  746
  812
  881
  953
  1,028
  1,105
  1,186
  1,270
  1,357
  1,448
  1,542
  1,640
  1,742
  1,848
  1,959
  2,074
  2,195
  2,320
  2,451
  2,588
Total debt, $m
  544
  692
  852
  1,024
  1,208
  1,402
  1,608
  1,825
  2,052
  2,289
  2,538
  2,796
  3,066
  3,346
  3,637
  3,940
  4,255
  4,582
  4,922
  5,275
  5,643
  6,025
  6,423
  6,838
  7,270
  7,720
  8,189
  8,679
  9,190
  9,724
Total liabilities, $m
  916
  1,065
  1,225
  1,397
  1,580
  1,775
  1,981
  2,197
  2,424
  2,662
  2,910
  3,169
  3,438
  3,718
  4,010
  4,313
  4,627
  4,954
  5,294
  5,648
  6,015
  6,398
  6,796
  7,210
  7,642
  8,092
  8,562
  9,051
  9,563
  10,097
Total equity, $m
  387
  450
  517
  590
  668
  750
  837
  928
  1,024
  1,125
  1,229
  1,339
  1,453
  1,571
  1,694
  1,822
  1,955
  2,093
  2,237
  2,386
  2,541
  2,703
  2,871
  3,046
  3,229
  3,419
  3,617
  3,824
  4,040
  4,266
Total liabilities and equity, $m
  1,303
  1,515
  1,742
  1,987
  2,248
  2,525
  2,818
  3,125
  3,448
  3,787
  4,139
  4,508
  4,891
  5,289
  5,704
  6,135
  6,582
  7,047
  7,531
  8,034
  8,556
  9,101
  9,667
  10,256
  10,871
  11,511
  12,179
  12,875
  13,603
  14,363
Debt-to-equity ratio
  1.410
  1.540
  1.650
  1.740
  1.810
  1.870
  1.920
  1.970
  2.000
  2.040
  2.060
  2.090
  2.110
  2.130
  2.150
  2.160
  2.180
  2.190
  2.200
  2.210
  2.220
  2.230
  2.240
  2.240
  2.250
  2.260
  2.260
  2.270
  2.270
  2.280
Adjusted equity ratio
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  106
  130
  156
  184
  214
  245
  279
  314
  350
  389
  449
  491
  535
  580
  628
  677
  728
  781
  836
  894
  954
  1,016
  1,081
  1,148
  1,219
  1,292
  1,369
  1,449
  1,532
  1,620
Depreciation, amort., depletion, $m
  64
  70
  76
  83
  90
  98
  106
  114
  123
  132
  115
  125
  135
  147
  158
  170
  182
  195
  209
  223
  237
  252
  268
  284
  301
  319
  337
  357
  377
  398
Funds from operations, $m
  170
  200
  232
  267
  304
  343
  384
  428
  474
  521
  564
  616
  670
  727
  786
  847
  910
  976
  1,045
  1,116
  1,191
  1,268
  1,349
  1,432
  1,520
  1,611
  1,706
  1,806
  1,909
  2,018
Change in working capital, $m
  35
  38
  41
  44
  47
  50
  53
  55
  58
  61
  64
  66
  69
  72
  75
  78
  81
  84
  87
  91
  94
  98
  102
  106
  111
  115
  120
  126
  131
  137
Cash from operations, $m
  135
  162
  191
  223
  257
  293
  331
  372
  415
  461
  500
  550
  601
  655
  711
  769
  830
  893
  958
  1,026
  1,096
  1,170
  1,247
  1,326
  1,409
  1,496
  1,586
  1,680
  1,778
  1,881
Maintenance CAPEX, $m
  -31
  -36
  -42
  -48
  -55
  -62
  -70
  -78
  -87
  -96
  -105
  -115
  -125
  -135
  -147
  -158
  -170
  -182
  -195
  -209
  -223
  -237
  -252
  -268
  -284
  -301
  -319
  -337
  -357
  -377
New CAPEX, $m
  -65
  -71
  -76
  -82
  -87
  -93
  -98
  -103
  -108
  -113
  -118
  -123
  -128
  -134
  -139
  -144
  -150
  -156
  -162
  -168
  -175
  -182
  -190
  -198
  -206
  -215
  -224
  -234
  -244
  -255
Cash from investing activities, $m
  -96
  -107
  -118
  -130
  -142
  -155
  -168
  -181
  -195
  -209
  -223
  -238
  -253
  -269
  -286
  -302
  -320
  -338
  -357
  -377
  -398
  -419
  -442
  -466
  -490
  -516
  -543
  -571
  -601
  -632
Free cash flow, $m
  39
  55
  73
  92
  114
  138
  163
  191
  221
  252
  277
  312
  348
  386
  426
  467
  510
  554
  601
  649
  699
  751
  805
  861
  919
  980
  1,043
  1,109
  1,178
  1,249
Issuance/(repayment) of debt, $m
  136
  148
  160
  172
  183
  195
  206
  216
  227
  238
  248
  259
  269
  280
  291
  303
  315
  327
  340
  353
  368
  382
  398
  414
  432
  450
  469
  490
  511
  534
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  
  136
  148
  160
  172
  183
  195
  206
  216
  227
  238
  248
  259
  269
  280
  291
  303
  315
  327
  340
  353
  368
  382
  398
  414
  432
  450
  469
  490
  511
  534
Total cash flow (excl. dividends), $m
  176
  203
  233
  264
  298
  332
  369
  408
  448
  489
  525
  571
  618
  666
  717
  770
  824
  881
  941
  1,002
  1,066
  1,133
  1,203
  1,275
  1,351
  1,430
  1,513
  1,599
  1,689
  1,783
Retained Cash Flow (-), $m
  -57
  -63
  -68
  -73
  -78
  -82
  -87
  -91
  -96
  -100
  -105
  -109
  -114
  -118
  -123
  -128
  -133
  -138
  -144
  -149
  -155
  -162
  -168
  -175
  -182
  -190
  -198
  -207
  -216
  -226
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
  119
  141
  165
  192
  220
  250
  282
  316
  352
  389
  421
  461
  504
  548
  594
  642
  691
  743
  797
  853
  911
  972
  1,035
  1,100
  1,169
  1,240
  1,314
  1,392
  1,473
  1,558
Discount rate, %
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
  111
  122
  131
  139
  145
  148
  148
  146
  142
  135
  124
  114
  104
  92
  80
  69
  58
  48
  38
  30
  23
  17
  13
  9
  6
  4
  3
  2
  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

NCI Building Systems, Inc. is a manufacturer and marketer of metal products in North America. The Company's operating segments include Engineered building systems, Metal components and Metal coil coating. The Engineered building systems segment is engaged in the manufacturing of main frames and long bay systems, and engineering and drafting. The Metal components segment's products include metal roof and wall panels, doors, metal partitions, metal trim, insulated metal panel (IMP) products and other related accessories. The Company manufactures and distributes a range of metal products for the non-residential construction market. It operates in the United States, Mexico, Canada and China. The Company provides metal coil coating services, and designs, engineers, manufactures and markets metal components and engineered building systems. It also provides metal coil coating services for commercial and construction applications, servicing both internal and external customers.

FINANCIAL RATIOS  of  NCI Building Systems, Inc. (NCS)

Valuation Ratios
P/E Ratio 7.8
Price to Sales 0.2
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 10.7
Growth Rates
Sales Growth Rate 5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.8%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 127.2%
Total Debt to Equity 127.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 8%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 18.8%
Return On Equity - 3 Yr. Avg. 14.7%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 23.5%
Gross Margin - 3 Yr. Avg. 24.3%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 7.9%
Operating Margin 6.2%
Oper. Margin - 3 Yr. Avg. 5.5%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 3.7%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 2.4%
Effective Tax Rate 33.7%
Eff/ Tax Rate - 3 Yr. Avg. 34.2%
Payout Ratio 0%

NCS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCS stock intrinsic value calculation we used $2001 million for the last fiscal year's total revenue generated by NCI Building Systems, Inc.. The default revenue input number comes from 0001 income statement of NCI Building Systems, 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 NCS stock valuation model: a) initial revenue growth rate of 17.4% 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 7.2%, whose default value for NCS is calculated based on our internal credit rating of NCI Building Systems, 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 NCI Building Systems, 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 NCS stock the variable cost ratio is equal to 90.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $61 million in the base year in the intrinsic value calculation for NCS 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 5.5% for NCI Building Systems, Inc..

Corporate tax rate of 27% is the nominal tax rate for NCI Building Systems, 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 NCS 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 NCS are equal to 18.6%.

Life of production assets of 12.1 years is the average useful life of capital assets used in NCI Building Systems, 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 NCS is equal to 10%. 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 - $330.265 million for NCI Building Systems, 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 125.476 million for NCI Building Systems, 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 NCI Building Systems, Inc. at the current share price and the inputted number of shares is $0.8 billion.

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