Intrinsic value of NL Industries, Inc. - NL

Previous Close

$4.21

  Intrinsic Value

$3.73

stock screener

  Rating & Target

hold

-11%

Previous close

$4.21

 
Intrinsic value

$3.73

 
Up/down potential

-11%

 
Rating

hold

We calculate the intrinsic value of NL 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 0.2

 

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, %
  9.20
  8.78
  8.40
  8.06
  7.76
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.34
  5.30
  5.27
  5.24
  5.22
  5.20
Revenue, $m
  129
  140
  152
  164
  177
  190
  204
  218
  233
  249
  265
  281
  299
  317
  336
  355
  376
  397
  420
  443
  468
  493
  520
  548
  577
  607
  639
  673
  708
  745
Variable operating expenses, $m
  126
  137
  149
  160
  173
  185
  198
  212
  226
  241
  254
  270
  287
  304
  322
  341
  361
  382
  403
  425
  449
  473
  499
  526
  554
  583
  614
  646
  680
  715
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
  126
  137
  149
  160
  173
  185
  198
  212
  226
  241
  254
  270
  287
  304
  322
  341
  361
  382
  403
  425
  449
  473
  499
  526
  554
  583
  614
  646
  680
  715
Operating income, $m
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
EBITDA, $m
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
Interest expense (income), $m
  0
  0
  1
  3
  4
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  52
  55
  59
  63
  67
  71
Earnings before tax, $m
  2
  2
  1
  0
  -1
  -2
  -3
  -4
  -5
  -7
  -5
  -6
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -20
  -22
  -24
  -27
  -29
  -31
  -33
  -36
  -39
  -41
Tax expense, $m
  1
  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
Net income, $m
  2
  1
  0
  0
  -1
  -2
  -3
  -4
  -5
  -7
  -5
  -6
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -20
  -22
  -24
  -27
  -29
  -31
  -33
  -36
  -39
  -41

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
  555
  604
  655
  708
  763
  820
  879
  941
  1,005
  1,071
  1,140
  1,212
  1,287
  1,366
  1,447
  1,532
  1,620
  1,713
  1,809
  1,910
  2,015
  2,125
  2,240
  2,361
  2,486
  2,618
  2,756
  2,901
  3,052
  3,211
Adjusted assets (=assets-cash), $m
  555
  604
  655
  708
  763
  820
  879
  941
  1,005
  1,071
  1,140
  1,212
  1,287
  1,366
  1,447
  1,532
  1,620
  1,713
  1,809
  1,910
  2,015
  2,125
  2,240
  2,361
  2,486
  2,618
  2,756
  2,901
  3,052
  3,211
Revenue / Adjusted assets
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
Average production assets, $m
  50
  55
  59
  64
  69
  74
  79
  85
  91
  97
  103
  109
  116
  123
  131
  138
  146
  155
  163
  172
  182
  192
  202
  213
  224
  236
  249
  262
  275
  290
Working capital, $m
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -69
  -73
  -78
  -83
  -88
  -93
  -99
  -104
  -111
  -117
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188
  -198
  -208
  -219
Total debt, $m
  25
  50
  76
  103
  132
  161
  192
  224
  257
  291
  327
  364
  403
  443
  485
  529
  575
  623
  673
  725
  779
  836
  896
  958
  1,023
  1,091
  1,162
  1,237
  1,315
  1,397
Total liabilities, $m
  287
  312
  339
  366
  394
  424
  454
  486
  519
  554
  590
  627
  666
  706
  748
  792
  838
  885
  935
  987
  1,042
  1,099
  1,158
  1,220
  1,286
  1,354
  1,425
  1,500
  1,578
  1,660
Total equity, $m
  268
  292
  316
  342
  368
  396
  425
  454
  485
  517
  551
  586
  622
  660
  699
  740
  783
  827
  874
  922
  973
  1,026
  1,082
  1,140
  1,201
  1,265
  1,331
  1,401
  1,474
  1,551
Total liabilities and equity, $m
  555
  604
  655
  708
  762
  820
  879
  940
  1,004
  1,071
  1,141
  1,213
  1,288
  1,366
  1,447
  1,532
  1,621
  1,712
  1,809
  1,909
  2,015
  2,125
  2,240
  2,360
  2,487
  2,619
  2,756
  2,901
  3,052
  3,211
Debt-to-equity ratio
  0.090
  0.170
  0.240
  0.300
  0.360
  0.410
  0.450
  0.490
  0.530
  0.560
  0.590
  0.620
  0.650
  0.670
  0.690
  0.720
  0.730
  0.750
  0.770
  0.790
  0.800
  0.810
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
Adjusted equity ratio
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  1
  0
  0
  -1
  -2
  -3
  -4
  -5
  -7
  -5
  -6
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -20
  -22
  -24
  -27
  -29
  -31
  -33
  -36
  -39
  -41
Depreciation, amort., depletion, $m
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
Funds from operations, $m
  7
  7
  7
  6
  6
  5
  4
  3
  3
  2
  1
  0
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -22
  -24
Change in working capital, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  11
  10
  10
  10
  9
  9
  8
  8
  7
  6
  6
  5
  4
  3
  3
  2
  1
  0
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -14
Maintenance CAPEX, $m
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
New CAPEX, $m
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from investing activities, $m
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -21
  -23
  -23
  -25
  -26
  -28
  -29
  -30
Free cash flow, $m
  4
  3
  2
  2
  1
  0
  -2
  -3
  -4
  -5
  -6
  -8
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -20
  -22
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -41
  -44
Issuance/(repayment) of debt, $m
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
Issuance/(repurchase) of shares, $m
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  76
  80
  85
  90
  95
  100
  106
  112
  118
Cash from financing (excl. dividends), $m  
  45
  47
  50
  53
  56
  59
  63
  66
  69
  73
  75
  78
  83
  87
  92
  97
  102
  108
  113
  119
  125
  133
  139
  147
  155
  163
  171
  181
  190
  200
Total cash flow (excl. dividends), $m
  48
  51
  53
  55
  57
  59
  61
  63
  66
  68
  68
  71
  74
  77
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
Retained Cash Flow (-), $m
  -23
  -24
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -76
  -80
  -85
  -90
  -95
  -100
  -106
  -112
  -118
Prev. year cash balance distribution, $m
  39
  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
  65
  27
  28
  29
  29
  29
  29
  29
  29
  29
  29
  30
  30
  30
  30
  30
  31
  31
  31
  32
  32
  33
  33
  34
  34
  35
  36
  36
  37
  38
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
  62
  25
  24
  24
  22
  21
  20
  18
  17
  15
  14
  13
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  89.4
  80.1
  71.9
  64.6
  58.1
  52.2
  47.0
  42.3
  38.1
  34.3
  31.1
  28.1
  25.5
  23.1
  20.9
  18.9
  17.1
  15.5
  14.0
  12.6
  11.4
  10.3
  9.3
  8.4
  7.6
  6.8
  6.1
  5.5
  5.0
  4.5

NL Industries, Inc. is a holding company. The Company operates in the component products industry through its subsidiary, CompX International Inc. (CompX). The Company operates in the chemicals industry through its non-controlling interest in Kronos Worldwide, Inc. (Kronos). The Company, through Compx, manufactures engineered components that are sold to a range of industries, including recreational transportation (including boats), postal, office and institutional furniture, cabinetry, tool storage, healthcare, gas stations and vending equipment. Kronos is a global producer and marketer of value-added titanium dioxide pigments (TiO2), a base industrial product used in imparting whiteness, brightness and opacity to a range of customer applications and end use markets, including coatings, plastics, paper, inks, food, cosmetics, and other industrial and consumer products. Kronos has production facilities in Europe and North America.

FINANCIAL RATIOS  of  NL Industries, Inc. (NL)

Valuation Ratios
P/E Ratio 13.7
Price to Sales 1.9
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 7.3
Price to Free Cash Flow 8.2
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
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 4.1%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 2.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 32.1%
Gross Margin - 3 Yr. Avg. 31.1%
EBITDA Margin 16.5%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin -0.9%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin 12.8%
Pre-Tax Margin - 3 Yr. Avg. -0.1%
Net Profit Margin 13.8%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate -21.4%
Eff/ Tax Rate - 3 Yr. Avg. 15.9%
Payout Ratio 0%

NL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NL stock intrinsic value calculation we used $118 million for the last fiscal year's total revenue generated by NL Industries, Inc.. The default revenue input number comes from 0001 income statement of NL Industries, 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 NL stock valuation model: a) initial revenue growth rate of 9.2% 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 NL is calculated based on our internal credit rating of NL Industries, 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 NL Industries, 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 NL stock the variable cost ratio is equal to 98.3%.

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 NL 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 NL Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for NL Industries, 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 NL 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 NL are equal to 38.9%.

Life of production assets of 17.1 years is the average useful life of capital assets used in NL Industries, 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 NL is equal to -29.4%. 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 - $284.115 million for NL Industries, 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 48.727 million for NL Industries, 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 NL Industries, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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