Intrinsic value of Natural Health Trends - NHTC

Previous Close

$22.90

  Intrinsic Value

$49.70

stock screener

  Rating & Target

str. buy

+117%

Previous close

$22.90

 
Intrinsic value

$49.70

 
Up/down potential

+117%

 
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 0.3

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  202
  206
  211
  217
  224
  231
  239
  248
  257
  267
  277
  288
  300
  313
  327
  341
  356
  372
  389
  407
  426
  446
  467
  489
  512
  537
  562
  589
  618
  648
Variable operating expenses, $m
  155
  158
  162
  167
  172
  178
  184
  190
  197
  205
  213
  221
  230
  240
  251
  262
  273
  285
  298
  312
  327
  342
  358
  375
  393
  412
  431
  452
  474
  497
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
  157
  160
  164
  169
  174
  180
  186
  192
  199
  207
  216
  224
  233
  243
  254
  265
  276
  288
  301
  315
  330
  345
  361
  378
  396
  416
  435
  456
  478
  501
Operating income, $m
  45
  46
  47
  48
  50
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  134
  140
  147
EBITDA, $m
  45
  46
  48
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  117
  122
  128
  135
  141
  148
Interest expense (income), $m
  0
  0
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
Earnings before tax, $m
  45
  46
  47
  49
  50
  52
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  86
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
  141
Tax expense, $m
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
Net income, $m
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  98
  103

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
  64
  66
  67
  69
  71
  74
  76
  79
  82
  85
  88
  92
  96
  100
  104
  108
  113
  118
  124
  129
  135
  142
  148
  156
  163
  171
  179
  188
  197
  206
Adjusted assets (=assets-cash), $m
  64
  66
  67
  69
  71
  74
  76
  79
  82
  85
  88
  92
  96
  100
  104
  108
  113
  118
  124
  129
  135
  142
  148
  156
  163
  171
  179
  188
  197
  206
Revenue / Adjusted assets
  3.156
  3.121
  3.149
  3.145
  3.155
  3.122
  3.145
  3.139
  3.134
  3.141
  3.148
  3.130
  3.125
  3.130
  3.144
  3.157
  3.150
  3.153
  3.137
  3.155
  3.156
  3.141
  3.155
  3.135
  3.141
  3.140
  3.140
  3.133
  3.137
  3.146
Average production assets, $m
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
Working capital, $m
  -30
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
Total debt, $m
  -11
  -10
  -8
  -7
  -5
  -3
  0
  2
  5
  7
  10
  14
  17
  21
  25
  29
  33
  38
  42
  48
  53
  59
  65
  71
  78
  85
  92
  100
  108
  117
Total liabilities, $m
  58
  59
  61
  62
  64
  66
  68
  71
  74
  76
  79
  83
  86
  90
  94
  98
  102
  107
  111
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  186
Total equity, $m
  6
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
Total liabilities and equity, $m
  64
  66
  68
  69
  71
  73
  76
  79
  82
  84
  88
  92
  96
  100
  104
  109
  113
  119
  123
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  207
Debt-to-equity ratio
  -1.750
  -1.510
  -1.250
  -0.970
  -0.670
  -0.370
  -0.060
  0.250
  0.560
  0.880
  1.180
  1.490
  1.790
  2.080
  2.370
  2.650
  2.920
  3.180
  3.430
  3.680
  3.910
  4.140
  4.360
  4.570
  4.770
  4.960
  5.150
  5.320
  5.490
  5.660
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
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  98
  103
Depreciation, amort., depletion, $m
  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
  1
  1
  1
  1
Funds from operations, $m
  33
  34
  35
  36
  37
  38
  40
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  87
  91
  95
  100
  104
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Cash from operations, $m
  34
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
New CAPEX, $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 investing activities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Free cash flow, $m
  33
  35
  36
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
Issuance/(repayment) of debt, $m
  -11
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
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  
  -11
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
Total cash flow (excl. dividends), $m
  22
  36
  37
  38
  40
  41
  42
  44
  46
  48
  49
  52
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  101
  105
  111
  116
Retained Cash Flow (-), $m
  -12
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
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
  106
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
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
  102
  33
  32
  31
  31
  30
  29
  27
  26
  25
  23
  22
  20
  19
  17
  15
  14
  12
  11
  9
  8
  7
  5
  4
  4
  3
  2
  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

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 (NHTC)

Valuation Ratios
P/E Ratio 4.7
Price to Sales 0.9
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 4.9
Price to Free Cash Flow 5
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 $197.563 million for the last fiscal year's total revenue generated by Natural Health Trends. The default revenue input number comes from 0001 income statement of Natural Health Trends. 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 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, 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.
    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.

Corporate tax rate of 27% is the nominal tax rate for Natural Health Trends. 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 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 - 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 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 at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Natural Health Trends: 3Q Earnings Snapshot   [Oct-30-18 09:08AM  Associated Press]
▶ Los Angeles stocks that are driving Wall Street's latest bull run   [Aug-23-18 02:31PM  American City Business Journals]
▶ Natural Health Trends: 2Q Earnings Snapshot   [09:13AM  Associated Press]
▶ Natural Health Trends Issues Response to Allegation   [Jul-20-18 09:00AM  GlobeNewswire]
▶ Natural Health Trends: 1Q Earnings Snapshot   [May-02-18 09:51AM  Associated Press]
▶ Top Undervalued Stocks To Buy   [Apr-12-18 10:02AM  Simply Wall St.]
▶ Natural Health Trends reports 4Q loss   [09:44AM  Associated Press]
▶ February Best Undervalued Stocks   [Feb-10-18 09:02AM  Simply Wall St.]
▶ OTCPK Top Cheap Stocks China SNX Organic Fertilizers And More   [Jan-03-18 08:02AM  Simply Wall St.]
▶ Best-In-Class NasdaqCM Undervalued Stocks   [Nov-18-17 08:02AM  Simply Wall St.]
▶ Natural Health Trends posts 3Q profit   [09:11AM  Associated Press]
▶ Natural Health Trends posts 2Q profit   [Aug-02-17 10:37PM  Associated Press]
▶ Natural Health Trends posts 1Q profit   [05:01AM  Associated Press]
▶ Natural Health Trends posts 4Q profit   [Feb-08-17 09:13AM  Associated Press]

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