Intrinsic value of Ingevity Corporation - NGVT

Previous Close

$103.71

  Intrinsic Value

$145.06

stock screener

  Rating & Target

buy

+40%

Previous close

$103.71

 
Intrinsic value

$145.06

 
Up/down potential

+40%

 
Rating

buy

We calculate the intrinsic value of NGVT 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 4.3

 

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, %
  21.40
  19.76
  18.28
  16.96
  15.76
  14.68
  13.72
  12.84
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
Revenue, $m
  1,377
  1,649
  1,950
  2,281
  2,640
  3,028
  3,443
  3,886
  4,354
  4,848
  5,368
  5,913
  6,482
  7,077
  7,696
  8,341
  9,011
  9,708
  10,433
  11,185
  11,968
  12,781
  13,626
  14,506
  15,421
  16,373
  17,365
  18,399
  19,477
  20,601
Variable operating expenses, $m
  844
  1,006
  1,185
  1,381
  1,595
  1,826
  2,072
  2,335
  2,614
  2,908
  3,191
  3,515
  3,853
  4,207
  4,575
  4,958
  5,356
  5,771
  6,201
  6,649
  7,114
  7,597
  8,100
  8,622
  9,166
  9,733
  10,322
  10,937
  11,578
  12,246
Fixed operating expenses, $m
  189
  193
  197
  202
  206
  211
  215
  220
  225
  230
  235
  240
  245
  251
  256
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  355
Total operating expenses, $m
  1,033
  1,199
  1,382
  1,583
  1,801
  2,037
  2,287
  2,555
  2,839
  3,138
  3,426
  3,755
  4,098
  4,458
  4,831
  5,220
  5,624
  6,045
  6,481
  6,935
  7,406
  7,896
  8,405
  8,934
  9,485
  10,059
  10,655
  11,277
  11,926
  12,601
Operating income, $m
  344
  450
  568
  698
  839
  992
  1,155
  1,330
  1,515
  1,711
  1,942
  2,158
  2,384
  2,619
  2,865
  3,121
  3,387
  3,664
  3,951
  4,251
  4,562
  4,885
  5,221
  5,571
  5,935
  6,315
  6,710
  7,122
  7,552
  8,000
EBITDA, $m
  431
  549
  681
  826
  983
  1,153
  1,336
  1,530
  1,736
  1,954
  2,183
  2,423
  2,675
  2,937
  3,211
  3,495
  3,792
  4,100
  4,420
  4,753
  5,099
  5,459
  5,833
  6,223
  6,628
  7,050
  7,490
  7,948
  8,426
  8,925
Interest expense (income), $m
  15
  41
  53
  66
  80
  96
  113
  131
  151
  172
  194
  217
  242
  268
  295
  323
  352
  383
  414
  447
  482
  517
  554
  593
  633
  674
  718
  763
  810
  859
  910
Earnings before tax, $m
  302
  397
  502
  618
  743
  879
  1,024
  1,179
  1,344
  1,517
  1,725
  1,916
  2,116
  2,325
  2,542
  2,769
  3,004
  3,249
  3,504
  3,769
  4,044
  4,331
  4,629
  4,938
  5,261
  5,597
  5,947
  6,312
  6,693
  7,090
Tax expense, $m
  82
  107
  136
  167
  201
  237
  277
  318
  363
  410
  466
  517
  571
  628
  686
  748
  811
  877
  946
  1,018
  1,092
  1,169
  1,250
  1,333
  1,420
  1,511
  1,606
  1,704
  1,807
  1,914
Net income, $m
  221
  290
  367
  451
  543
  642
  748
  861
  981
  1,107
  1,259
  1,399
  1,545
  1,697
  1,856
  2,021
  2,193
  2,372
  2,558
  2,751
  2,952
  3,161
  3,379
  3,605
  3,841
  4,086
  4,341
  4,608
  4,886
  5,176

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
  1,597
  1,913
  2,262
  2,646
  3,063
  3,513
  3,995
  4,508
  5,051
  5,625
  6,228
  6,859
  7,520
  8,210
  8,928
  9,676
  10,454
  11,262
  12,103
  12,976
  13,884
  14,827
  15,808
  16,828
  17,889
  18,994
  20,145
  21,345
  22,595
  23,900
Adjusted assets (=assets-cash), $m
  1,597
  1,913
  2,262
  2,646
  3,063
  3,513
  3,995
  4,508
  5,051
  5,625
  6,228
  6,859
  7,520
  8,210
  8,928
  9,676
  10,454
  11,262
  12,103
  12,976
  13,884
  14,827
  15,808
  16,828
  17,889
  18,994
  20,145
  21,345
  22,595
  23,900
Revenue / Adjusted assets
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
  0.862
Average production assets, $m
  668
  800
  946
  1,106
  1,281
  1,469
  1,670
  1,884
  2,112
  2,352
  2,604
  2,868
  3,144
  3,432
  3,733
  4,045
  4,370
  4,708
  5,060
  5,425
  5,804
  6,199
  6,609
  7,035
  7,479
  7,941
  8,422
  8,924
  9,446
  9,992
Working capital, $m
  211
  252
  298
  349
  404
  463
  527
  594
  666
  742
  821
  905
  992
  1,083
  1,177
  1,276
  1,379
  1,485
  1,596
  1,711
  1,831
  1,955
  2,085
  2,219
  2,359
  2,505
  2,657
  2,815
  2,980
  3,152
Total debt, $m
  961
  1,195
  1,455
  1,739
  2,049
  2,382
  2,740
  3,121
  3,524
  3,949
  4,397
  4,866
  5,356
  5,867
  6,401
  6,955
  7,533
  8,133
  8,756
  9,404
  10,078
  10,777
  11,505
  12,262
  13,050
  13,870
  14,724
  15,614
  16,542
  17,509
Total liabilities, $m
  1,185
  1,419
  1,679
  1,963
  2,273
  2,606
  2,964
  3,345
  3,748
  4,174
  4,621
  5,090
  5,580
  6,092
  6,625
  7,180
  7,757
  8,357
  8,980
  9,628
  10,302
  11,002
  11,729
  12,486
  13,274
  14,094
  14,948
  15,838
  16,766
  17,733
Total equity, $m
  412
  493
  584
  683
  790
  906
  1,031
  1,163
  1,303
  1,451
  1,607
  1,770
  1,940
  2,118
  2,303
  2,496
  2,697
  2,906
  3,123
  3,348
  3,582
  3,825
  4,078
  4,342
  4,615
  4,901
  5,198
  5,507
  5,830
  6,166
Total liabilities and equity, $m
  1,597
  1,912
  2,263
  2,646
  3,063
  3,512
  3,995
  4,508
  5,051
  5,625
  6,228
  6,860
  7,520
  8,210
  8,928
  9,676
  10,454
  11,263
  12,103
  12,976
  13,884
  14,827
  15,807
  16,828
  17,889
  18,995
  20,146
  21,345
  22,596
  23,899
Debt-to-equity ratio
  2.330
  2.420
  2.490
  2.550
  2.590
  2.630
  2.660
  2.680
  2.700
  2.720
  2.740
  2.750
  2.760
  2.770
  2.780
  2.790
  2.790
  2.800
  2.800
  2.810
  2.810
  2.820
  2.820
  2.820
  2.830
  2.830
  2.830
  2.840
  2.840
  2.840
Adjusted equity ratio
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  221
  290
  367
  451
  543
  642
  748
  861
  981
  1,107
  1,259
  1,399
  1,545
  1,697
  1,856
  2,021
  2,193
  2,372
  2,558
  2,751
  2,952
  3,161
  3,379
  3,605
  3,841
  4,086
  4,341
  4,608
  4,886
  5,176
Depreciation, amort., depletion, $m
  87
  100
  113
  128
  144
  162
  180
  200
  221
  243
  241
  266
  291
  318
  346
  375
  405
  436
  469
  502
  537
  574
  612
  651
  693
  735
  780
  826
  875
  925
Funds from operations, $m
  308
  389
  480
  579
  687
  803
  928
  1,061
  1,202
  1,351
  1,500
  1,664
  1,836
  2,015
  2,201
  2,396
  2,598
  2,808
  3,027
  3,254
  3,490
  3,735
  3,991
  4,256
  4,533
  4,821
  5,121
  5,434
  5,761
  6,101
Change in working capital, $m
  37
  42
  46
  51
  55
  59
  64
  68
  72
  76
  80
  83
  87
  91
  95
  99
  103
  107
  111
  115
  120
  124
  129
  135
  140
  146
  152
  158
  165
  172
Cash from operations, $m
  271
  348
  434
  528
  632
  744
  865
  993
  1,130
  1,275
  1,421
  1,581
  1,749
  1,924
  2,107
  2,297
  2,495
  2,701
  2,916
  3,139
  3,370
  3,611
  3,861
  4,122
  4,393
  4,675
  4,969
  5,276
  5,596
  5,929
Maintenance CAPEX, $m
  -51
  -62
  -74
  -88
  -102
  -119
  -136
  -155
  -174
  -196
  -218
  -241
  -266
  -291
  -318
  -346
  -375
  -405
  -436
  -469
  -502
  -537
  -574
  -612
  -651
  -693
  -735
  -780
  -826
  -875
New CAPEX, $m
  -118
  -132
  -146
  -160
  -174
  -188
  -201
  -214
  -227
  -240
  -252
  -264
  -276
  -288
  -300
  -313
  -325
  -338
  -351
  -365
  -379
  -394
  -410
  -426
  -444
  -462
  -481
  -501
  -523
  -545
Cash from investing activities, $m
  -169
  -194
  -220
  -248
  -276
  -307
  -337
  -369
  -401
  -436
  -470
  -505
  -542
  -579
  -618
  -659
  -700
  -743
  -787
  -834
  -881
  -931
  -984
  -1,038
  -1,095
  -1,155
  -1,216
  -1,281
  -1,349
  -1,420
Free cash flow, $m
  102
  154
  213
  280
  355
  437
  527
  624
  729
  840
  951
  1,076
  1,207
  1,345
  1,488
  1,639
  1,796
  1,959
  2,128
  2,305
  2,488
  2,679
  2,877
  3,084
  3,298
  3,521
  3,753
  3,995
  4,247
  4,509
Issuance/(repayment) of debt, $m
  209
  234
  259
  285
  309
  334
  357
  381
  403
  426
  447
  469
  490
  512
  533
  555
  577
  600
  624
  648
  673
  700
  728
  757
  788
  820
  854
  890
  928
  968
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  
  209
  234
  259
  285
  309
  334
  357
  381
  403
  426
  447
  469
  490
  512
  533
  555
  577
  600
  624
  648
  673
  700
  728
  757
  788
  820
  854
  890
  928
  968
Total cash flow (excl. dividends), $m
  310
  388
  473
  565
  664
  771
  885
  1,005
  1,132
  1,265
  1,398
  1,545
  1,697
  1,856
  2,022
  2,194
  2,373
  2,559
  2,752
  2,953
  3,162
  3,379
  3,605
  3,840
  4,086
  4,341
  4,607
  4,885
  5,174
  5,477
Retained Cash Flow (-), $m
  -73
  -81
  -90
  -99
  -108
  -116
  -124
  -132
  -140
  -148
  -156
  -163
  -170
  -178
  -185
  -193
  -201
  -209
  -217
  -225
  -234
  -243
  -253
  -263
  -274
  -285
  -297
  -309
  -323
  -337
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
  237
  307
  383
  466
  557
  655
  760
  873
  992
  1,117
  1,243
  1,382
  1,527
  1,678
  1,836
  2,001
  2,172
  2,350
  2,535
  2,728
  2,928
  3,136
  3,352
  3,577
  3,812
  4,056
  4,310
  4,575
  4,852
  5,140
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
  221
  265
  304
  338
  366
  387
  399
  403
  399
  388
  367
  343
  314
  282
  249
  215
  182
  150
  122
  96
  74
  56
  41
  30
  21
  14
  9
  6
  4
  2
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

Ingevity Corporation is a manufacturer of specialty chemicals and high performance carbon materials. The Company is also a manufacturer of activated carbon used in gasoline vapor emission control systems in cars, trucks, motorcycles and boats. The Company operates through two segments: Performance Materials and Performance Chemicals. The Performance Materials segment primarily produces automotive carbon products used in gasoline vapor emission control systems in cars, trucks, motorcycles and boats. The Performance Chemicals segment develops, manufactures and sells a range of specialty chemicals primarily derived from co-products of the Kraft pulping process. Its products are used in a range of applications, including asphalt paving, oil exploration and production, agrochemicals, adhesives, lubricants, publication inks and automotive components that reduce gasoline vapor emissions.

FINANCIAL RATIOS  of  Ingevity Corporation (NGVT)

Valuation Ratios
P/E Ratio 124.8
Price to Sales 4.8
Price to Book 34.4
Price to Tangible Book
Price to Cash Flow 34.1
Price to Free Cash Flow 61.5
Growth Rates
Sales Growth Rate -6.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -44.1%
Cap. Spend. - 3 Yr. Gr. Rate -2%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 378.7%
Total Debt to Equity 385%
Interest Coverage 7
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 12.3%
Return On Total Capital 5.7%
Ret/ On T. Cap. - 3 Yr. Avg. 16.1%
Return On Equity 10.9%
Return On Equity - 3 Yr. Avg. 20.9%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 30.2%
Gross Margin - 3 Yr. Avg. 30.1%
EBITDA Margin 15.5%
EBITDA Margin - 3 Yr. Avg. 19.2%
Operating Margin 10.2%
Oper. Margin - 3 Yr. Avg. 14.5%
Pre-Tax Margin 9.6%
Pre-Tax Margin - 3 Yr. Avg. 14.4%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 8.2%
Effective Tax Rate 49.4%
Eff/ Tax Rate - 3 Yr. Avg. 40.8%
Payout Ratio 0%

NGVT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NGVT stock intrinsic value calculation we used $1134 million for the last fiscal year's total revenue generated by Ingevity Corporation. The default revenue input number comes from 0001 income statement of Ingevity Corporation. 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 NGVT stock valuation model: a) initial revenue growth rate of 21.4% 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 NGVT is calculated based on our internal credit rating of Ingevity Corporation, 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 Ingevity Corporation.
    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 NGVT stock the variable cost ratio is equal to 61.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $185 million in the base year in the intrinsic value calculation for NGVT 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 Ingevity Corporation.

Corporate tax rate of 27% is the nominal tax rate for Ingevity Corporation. 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 NGVT 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 NGVT are equal to 48.5%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Ingevity Corporation 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 NGVT is equal to 15.3%. 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 - $338.7 million for Ingevity Corporation - 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 41.708 million for Ingevity Corporation 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 Ingevity Corporation at the current share price and the inputted number of shares is $4.3 billion.

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