Intrinsic value of Natural Health Trends Corp. - NHTC

Previous Close

$12.98

  Intrinsic Value

$119.74

stock screener

  Rating & Target

str. buy

+822%

Previous close

$12.98

 
Intrinsic value

$119.74

 
Up/down potential

+822%

 
Rating

str. buy

We calculate the intrinsic value of NHTC 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, %
  17.20
  15.98
  14.88
  13.89
  13.00
  12.20
  11.48
  10.84
  10.25
  9.73
  9.25
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
Revenue, $m
  232
  269
  309
  352
  398
  447
  498
  552
  608
  667
  729
  794
  861
  930
  1,003
  1,078
  1,156
  1,238
  1,322
  1,410
  1,502
  1,597
  1,696
  1,799
  1,906
  2,018
  2,135
  2,257
  2,384
  2,517
Variable operating expenses, $m
  178
  207
  237
  270
  305
  343
  382
  423
  467
  512
  559
  609
  660
  714
  769
  827
  887
  949
  1,014
  1,082
  1,152
  1,225
  1,301
  1,380
  1,462
  1,548
  1,638
  1,731
  1,829
  1,931
Fixed operating expenses, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Total operating expenses, $m
  180
  209
  239
  272
  307
  345
  384
  425
  469
  514
  562
  612
  663
  717
  772
  830
  890
  952
  1,017
  1,085
  1,155
  1,228
  1,304
  1,383
  1,465
  1,552
  1,642
  1,735
  1,833
  1,935
Operating income, $m
  52
  60
  70
  80
  90
  102
  113
  126
  139
  153
  167
  182
  198
  214
  231
  248
  267
  285
  305
  326
  347
  369
  392
  416
  441
  467
  494
  522
  552
  583
EBITDA, $m
  52
  61
  71
  81
  91
  103
  115
  127
  140
  154
  169
  184
  200
  216
  233
  250
  269
  288
  308
  328
  350
  372
  395
  419
  444
  471
  498
  527
  556
  588
Interest expense (income), $m
  0
  0
  0
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  23
  24
  26
  27
  29
  31
  33
Earnings before tax, $m
  52
  61
  69
  79
  89
  99
  110
  122
  134
  147
  161
  175
  189
  204
  220
  237
  254
  271
  290
  309
  329
  349
  371
  393
  417
  441
  466
  493
  521
  550
Tax expense, $m
  14
  16
  19
  21
  24
  27
  30
  33
  36
  40
  43
  47
  51
  55
  59
  64
  68
  73
  78
  83
  89
  94
  100
  106
  113
  119
  126
  133
  141
  148
Net income, $m
  38
  44
  51
  57
  65
  72
  81
  89
  98
  107
  117
  128
  138
  149
  161
  173
  185
  198
  211
  225
  240
  255
  271
  287
  304
  322
  341
  360
  380
  401

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
  74
  86
  98
  112
  127
  142
  158
  176
  194
  212
  232
  252
  274
  296
  319
  343
  368
  394
  421
  449
  478
  508
  540
  572
  607
  642
  679
  718
  759
  801
Adjusted assets (=assets-cash), $m
  74
  86
  98
  112
  127
  142
  158
  176
  194
  212
  232
  252
  274
  296
  319
  343
  368
  394
  421
  449
  478
  508
  540
  572
  607
  642
  679
  718
  759
  801
Revenue / Adjusted assets
  3.135
  3.128
  3.153
  3.143
  3.134
  3.148
  3.152
  3.136
  3.134
  3.146
  3.142
  3.151
  3.142
  3.142
  3.144
  3.143
  3.141
  3.142
  3.140
  3.140
  3.142
  3.144
  3.141
  3.145
  3.140
  3.143
  3.144
  3.143
  3.141
  3.142
Average production assets, $m
  3
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
Working capital, $m
  -34
  -40
  -45
  -52
  -58
  -66
  -73
  -81
  -89
  -98
  -107
  -117
  -127
  -137
  -147
  -158
  -170
  -182
  -194
  -207
  -221
  -235
  -249
  -264
  -280
  -297
  -314
  -332
  -351
  -370
Total debt, $m
  -2
  8
  20
  32
  45
  59
  74
  89
  105
  122
  140
  158
  178
  197
  218
  240
  262
  286
  310
  335
  361
  388
  417
  446
  477
  509
  542
  577
  614
  652
Total liabilities, $m
  66
  77
  89
  101
  114
  128
  143
  158
  174
  191
  209
  227
  246
  266
  287
  309
  331
  354
  379
  404
  430
  457
  486
  515
  546
  578
  611
  646
  683
  721
Total equity, $m
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
Total liabilities and equity, $m
  73
  86
  99
  112
  127
  142
  159
  176
  193
  212
  232
  252
  273
  296
  319
  343
  368
  393
  421
  449
  478
  508
  540
  572
  607
  642
  679
  718
  759
  801
Debt-to-equity ratio
  -0.340
  0.950
  1.990
  2.850
  3.560
  4.150
  4.650
  5.070
  5.440
  5.750
  6.030
  6.270
  6.480
  6.670
  6.840
  6.990
  7.130
  7.250
  7.360
  7.460
  7.560
  7.640
  7.720
  7.800
  7.860
  7.930
  7.990
  8.040
  8.090
  8.140
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  44
  51
  57
  65
  72
  81
  89
  98
  107
  117
  128
  138
  149
  161
  173
  185
  198
  211
  225
  240
  255
  271
  287
  304
  322
  341
  360
  380
  401
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Funds from operations, $m
  38
  45
  51
  58
  66
  73
  82
  90
  99
  109
  119
  129
  140
  151
  163
  175
  187
  200
  214
  228
  243
  258
  274
  291
  308
  326
  345
  364
  385
  406
Change in working capital, $m
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
Cash from operations, $m
  43
  50
  57
  65
  72
  81
  89
  98
  108
  118
  128
  139
  150
  161
  173
  186
  199
  212
  226
  241
  256
  272
  289
  306
  324
  342
  362
  382
  403
  426
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
New CAPEX, $m
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  0
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Free cash flow, $m
  43
  50
  56
  64
  71
  79
  88
  97
  106
  116
  126
  136
  147
  159
  171
  183
  196
  209
  223
  238
  253
  268
  284
  301
  319
  337
  357
  377
  398
  420
Issuance/(repayment) of debt, $m
  -2
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
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  
  -2
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
Total cash flow (excl. dividends), $m
  40
  60
  68
  76
  84
  93
  102
  112
  122
  133
  144
  155
  167
  179
  192
  205
  218
  233
  247
  263
  279
  295
  313
  331
  350
  369
  390
  412
  434
  458
Retained Cash Flow (-), $m
  -13
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Prev. year cash balance distribution, $m
  97
  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
  123
  59
  66
  74
  83
  92
  101
  110
  120
  131
  142
  153
  165
  177
  189
  202
  216
  230
  245
  260
  276
  292
  310
  328
  346
  366
  386
  408
  430
  453
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
  118
  54
  58
  61
  64
  66
  68
  69
  69
  69
  67
  65
  63
  59
  56
  51
  47
  42
  38
  33
  29
  24
  20
  17
  13
  11
  8
  6
  5
  3
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 Health Trends Corp. is a direct-selling and e-commerce company. The Company, through its subsidiaries, sells personal care, wellness, and quality of life products under the NHT Global brand. The Company's subsidiaries have presence in various markets, such as North America; Greater China, which consists of Hong Kong, Taiwan and China; South Korea; Singapore; Malaysia; Japan; and Europe. It also operates in Russia and Kazakhstan through its engagement with a local service provider. As of December 31, 2016, the Company offered a line of NHT Global branded products in five categories: wellness, herbal, beauty, lifestyle, and home, its newest category. Its wellness products include Premium Noni Juice, Triotein, Cluster X2, Children's Chewable MultiVitamin, ReStor Silver, ReStor Vital, HerBalance, Trifusion Max, Glucosamine 2200, FibeRich, Energin, Enhanced Essential Probiotics, Omega 3 Essential Fatty Acids, Memory Burst, StemRenu, OcuFocus, and FE Enzyme Toothpaste.

FINANCIAL RATIOS  of  Natural Health Trends Corp. (NHTC)

Valuation Ratios
P/E Ratio 2.7
Price to Sales 0.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 2.8
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 40.4%
Ret/ On Assets - 3 Yr. Avg. 49.4%
Return On Total Capital 79.1%
Ret/ On T. Cap. - 3 Yr. Avg. 105.8%
Return On Equity 79.1%
Return On Equity - 3 Yr. Avg. 105.8%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 80.9%
Gross Margin - 3 Yr. Avg. 79.6%
EBITDA Margin 22.2%
EBITDA Margin - 3 Yr. Avg. 19%
Operating Margin 22.2%
Oper. Margin - 3 Yr. Avg. 19%
Pre-Tax Margin 22.2%
Pre-Tax Margin - 3 Yr. Avg. 19%
Net Profit Margin 19.1%
Net Profit Margin - 3 Yr. Avg. 17.6%
Effective Tax Rate 14.1%
Eff/ Tax Rate - 3 Yr. Avg. 7%
Payout Ratio 12.7%

NHTC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NHTC stock intrinsic value calculation we used $198 million for the last fiscal year's total revenue generated by Natural Health Trends Corp.. The default revenue input number comes from 0001 income statement of Natural Health Trends Corp.. 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 NHTC stock valuation model: a) initial revenue growth rate of 17.2% 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 4.3%, whose default value for NHTC is calculated based on our internal credit rating of Natural Health Trends Corp., 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 Health Trends Corp..
    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 NHTC stock the variable cost ratio is equal to 76.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2 million in the base year in the intrinsic value calculation for NHTC 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 Health Trends Corp..

Corporate tax rate of 27% is the nominal tax rate for Natural Health Trends Corp.. 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 NHTC 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 NHTC are equal to 1.1%.

Life of production assets of 5.7 years is the average useful life of capital assets used in Natural Health Trends Corp. 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 NHTC is equal to -14.7%. 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 - $90.621 million for Natural Health Trends Corp. - 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 11.376 million for Natural Health Trends Corp. 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 Health Trends Corp. at the current share price and the inputted number of shares is $0.1 billion.

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