Intrinsic value of NN, Inc. - NNBR

Previous Close

$6.06

  Intrinsic Value

$13.71

stock screener

  Rating & Target

str. buy

+126%

Previous close

$6.06

 
Intrinsic value

$13.71

 
Up/down potential

+126%

 
Rating

str. buy

We calculate the intrinsic value of NNBR 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, %
  38.80
  35.42
  32.38
  29.64
  27.18
  24.96
  22.96
  21.17
  19.55
  18.09
  16.79
  15.61
  14.55
  13.59
  12.73
  11.96
  11.26
  10.64
  10.07
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
Revenue, $m
  861
  1,165
  1,543
  2,000
  2,543
  3,178
  3,908
  4,735
  5,661
  6,685
  7,808
  9,026
  10,339
  11,744
  13,240
  14,823
  16,492
  18,247
  20,085
  22,006
  24,011
  26,099
  28,273
  30,533
  32,883
  35,325
  37,863
  40,500
  43,242
  46,092
Variable operating expenses, $m
  782
  1,035
  1,347
  1,726
  2,176
  2,702
  3,307
  3,992
  4,759
  5,607
  6,468
  7,477
  8,565
  9,729
  10,967
  12,279
  13,662
  15,115
  16,638
  18,229
  19,890
  21,620
  23,421
  25,293
  27,240
  29,263
  31,365
  33,550
  35,821
  38,182
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
  782
  1,035
  1,347
  1,726
  2,176
  2,702
  3,307
  3,992
  4,759
  5,607
  6,468
  7,477
  8,565
  9,729
  10,967
  12,279
  13,662
  15,115
  16,638
  18,229
  19,890
  21,620
  23,421
  25,293
  27,240
  29,263
  31,365
  33,550
  35,821
  38,182
Operating income, $m
  78
  131
  196
  274
  367
  476
  601
  743
  902
  1,078
  1,340
  1,549
  1,774
  2,015
  2,272
  2,544
  2,830
  3,131
  3,447
  3,777
  4,121
  4,479
  4,852
  5,240
  5,643
  6,062
  6,498
  6,950
  7,421
  7,910
EBITDA, $m
  200
  271
  359
  466
  592
  740
  910
  1,103
  1,318
  1,557
  1,818
  2,102
  2,407
  2,734
  3,083
  3,451
  3,840
  4,248
  4,676
  5,124
  5,590
  6,077
  6,583
  7,109
  7,656
  8,225
  8,816
  9,430
  10,068
  10,732
Interest expense (income), $m
  59
  53
  77
  108
  147
  193
  248
  313
  387
  472
  566
  670
  785
  909
  1,043
  1,186
  1,338
  1,499
  1,669
  1,848
  2,035
  2,231
  2,435
  2,648
  2,869
  3,100
  3,339
  3,588
  3,846
  4,115
  4,394
Earnings before tax, $m
  26
  54
  87
  128
  174
  228
  288
  356
  431
  512
  670
  764
  866
  973
  1,086
  1,206
  1,331
  1,462
  1,599
  1,741
  1,890
  2,044
  2,204
  2,371
  2,544
  2,723
  2,910
  3,104
  3,306
  3,516
Tax expense, $m
  7
  15
  24
  34
  47
  62
  78
  96
  116
  138
  181
  206
  234
  263
  293
  326
  359
  395
  432
  470
  510
  552
  595
  640
  687
  735
  786
  838
  893
  949
Net income, $m
  19
  39
  64
  93
  127
  166
  211
  260
  314
  374
  489
  558
  632
  710
  793
  880
  972
  1,067
  1,167
  1,271
  1,379
  1,492
  1,609
  1,731
  1,857
  1,988
  2,124
  2,266
  2,413
  2,567

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
  1,863
  2,522
  3,339
  4,329
  5,505
  6,879
  8,459
  10,250
  12,253
  14,471
  16,899
  19,537
  22,379
  25,420
  28,657
  32,084
  35,698
  39,495
  43,473
  47,632
  51,971
  56,492
  61,197
  66,090
  71,176
  76,462
  81,955
  87,663
  93,597
  99,767
Adjusted assets (=assets-cash), $m
  1,863
  2,522
  3,339
  4,329
  5,505
  6,879
  8,459
  10,250
  12,253
  14,471
  16,899
  19,537
  22,379
  25,420
  28,657
  32,084
  35,698
  39,495
  43,473
  47,632
  51,971
  56,492
  61,197
  66,090
  71,176
  76,462
  81,955
  87,663
  93,597
  99,767
Revenue / Adjusted assets
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
Average production assets, $m
  822
  1,113
  1,473
  1,910
  2,429
  3,035
  3,732
  4,522
  5,406
  6,385
  7,456
  8,620
  9,874
  11,216
  12,644
  14,156
  15,750
  17,426
  19,181
  21,016
  22,930
  24,925
  27,001
  29,159
  31,404
  33,736
  36,159
  38,678
  41,296
  44,018
Working capital, $m
  225
  304
  403
  522
  664
  830
  1,020
  1,236
  1,478
  1,745
  2,038
  2,356
  2,698
  3,065
  3,456
  3,869
  4,305
  4,762
  5,242
  5,744
  6,267
  6,812
  7,379
  7,969
  8,583
  9,220
  9,882
  10,571
  11,286
  12,030
Total debt, $m
  1,185
  1,663
  2,254
  2,971
  3,822
  4,817
  5,961
  7,257
  8,708
  10,313
  12,072
  13,981
  16,039
  18,241
  20,584
  23,065
  25,682
  28,431
  31,311
  34,322
  37,463
  40,736
  44,143
  47,685
  51,368
  55,195
  59,172
  63,305
  67,601
  72,068
Total liabilities, $m
  1,349
  1,826
  2,418
  3,134
  3,986
  4,981
  6,124
  7,421
  8,871
  10,477
  12,235
  14,145
  16,202
  18,404
  20,748
  23,229
  25,845
  28,594
  31,475
  34,486
  37,627
  40,900
  44,306
  47,849
  51,531
  55,358
  59,335
  63,468
  67,764
  72,231
Total equity, $m
  514
  696
  922
  1,195
  1,519
  1,899
  2,335
  2,829
  3,382
  3,994
  4,664
  5,392
  6,177
  7,016
  7,909
  8,855
  9,853
  10,901
  11,999
  13,146
  14,344
  15,592
  16,890
  18,241
  19,645
  21,103
  22,619
  24,195
  25,833
  27,536
Total liabilities and equity, $m
  1,863
  2,522
  3,340
  4,329
  5,505
  6,880
  8,459
  10,250
  12,253
  14,471
  16,899
  19,537
  22,379
  25,420
  28,657
  32,084
  35,698
  39,495
  43,474
  47,632
  51,971
  56,492
  61,196
  66,090
  71,176
  76,461
  81,954
  87,663
  93,597
  99,767
Debt-to-equity ratio
  2.310
  2.390
  2.450
  2.490
  2.520
  2.540
  2.550
  2.570
  2.570
  2.580
  2.590
  2.590
  2.600
  2.600
  2.600
  2.600
  2.610
  2.610
  2.610
  2.610
  2.610
  2.610
  2.610
  2.610
  2.610
  2.620
  2.620
  2.620
  2.620
  2.620
Adjusted equity ratio
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  39
  64
  93
  127
  166
  211
  260
  314
  374
  489
  558
  632
  710
  793
  880
  972
  1,067
  1,167
  1,271
  1,379
  1,492
  1,609
  1,731
  1,857
  1,988
  2,124
  2,266
  2,413
  2,567
Depreciation, amort., depletion, $m
  122
  141
  164
  192
  225
  264
  308
  359
  416
  478
  478
  553
  633
  719
  810
  907
  1,010
  1,117
  1,230
  1,347
  1,470
  1,598
  1,731
  1,869
  2,013
  2,163
  2,318
  2,479
  2,647
  2,822
Funds from operations, $m
  141
  180
  227
  285
  352
  430
  519
  619
  730
  852
  967
  1,111
  1,265
  1,429
  1,604
  1,788
  1,981
  2,184
  2,397
  2,618
  2,849
  3,090
  3,340
  3,600
  3,870
  4,151
  4,442
  4,745
  5,061
  5,388
Change in working capital, $m
  63
  80
  98
  119
  142
  166
  190
  216
  242
  267
  293
  318
  343
  367
  390
  413
  436
  458
  480
  501
  523
  545
  567
  590
  613
  637
  662
  688
  716
  744
Cash from operations, $m
  78
  100
  129
  165
  210
  264
  328
  403
  488
  585
  674
  792
  922
  1,062
  1,213
  1,374
  1,546
  1,726
  1,917
  2,117
  2,326
  2,545
  2,772
  3,010
  3,257
  3,513
  3,780
  4,057
  4,345
  4,644
Maintenance CAPEX, $m
  -38
  -53
  -71
  -94
  -122
  -156
  -195
  -239
  -290
  -347
  -409
  -478
  -553
  -633
  -719
  -810
  -907
  -1,010
  -1,117
  -1,230
  -1,347
  -1,470
  -1,598
  -1,731
  -1,869
  -2,013
  -2,163
  -2,318
  -2,479
  -2,647
New CAPEX, $m
  -230
  -291
  -360
  -437
  -519
  -606
  -697
  -790
  -884
  -978
  -1,072
  -1,164
  -1,254
  -1,342
  -1,428
  -1,512
  -1,594
  -1,675
  -1,755
  -1,835
  -1,914
  -1,995
  -2,076
  -2,159
  -2,244
  -2,332
  -2,424
  -2,519
  -2,618
  -2,722
Cash from investing activities, $m
  -268
  -344
  -431
  -531
  -641
  -762
  -892
  -1,029
  -1,174
  -1,325
  -1,481
  -1,642
  -1,807
  -1,975
  -2,147
  -2,322
  -2,501
  -2,685
  -2,872
  -3,065
  -3,261
  -3,465
  -3,674
  -3,890
  -4,113
  -4,345
  -4,587
  -4,837
  -5,097
  -5,369
Free cash flow, $m
  -190
  -244
  -303
  -366
  -431
  -498
  -563
  -626
  -685
  -740
  -807
  -849
  -884
  -912
  -934
  -948
  -956
  -959
  -955
  -948
  -935
  -920
  -901
  -880
  -857
  -832
  -806
  -779
  -752
  -725
Issuance/(repayment) of debt, $m
  377
  478
  591
  717
  852
  995
  1,144
  1,296
  1,451
  1,605
  1,759
  1,910
  2,058
  2,202
  2,343
  2,481
  2,616
  2,749
  2,880
  3,011
  3,141
  3,273
  3,406
  3,543
  3,682
  3,827
  3,977
  4,133
  4,296
  4,467
Issuance/(repurchase) of shares, $m
  125
  143
  162
  180
  198
  213
  225
  234
  239
  238
  182
  170
  153
  129
  100
  66
  26
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  502
  621
  753
  897
  1,050
  1,208
  1,369
  1,530
  1,690
  1,843
  1,941
  2,080
  2,211
  2,331
  2,443
  2,547
  2,642
  2,749
  2,880
  3,011
  3,141
  3,273
  3,406
  3,543
  3,682
  3,827
  3,977
  4,133
  4,296
  4,467
Total cash flow (excl. dividends), $m
  313
  377
  450
  531
  618
  710
  806
  904
  1,004
  1,104
  1,133
  1,230
  1,326
  1,419
  1,510
  1,599
  1,686
  1,791
  1,925
  2,063
  2,206
  2,353
  2,505
  2,663
  2,826
  2,995
  3,171
  3,354
  3,544
  3,742
Retained Cash Flow (-), $m
  -144
  -182
  -225
  -273
  -325
  -379
  -436
  -494
  -553
  -612
  -670
  -728
  -784
  -839
  -893
  -946
  -997
  -1,048
  -1,098
  -1,148
  -1,198
  -1,248
  -1,299
  -1,350
  -1,404
  -1,459
  -1,516
  -1,576
  -1,638
  -1,703
Prev. year cash balance distribution, $m
  116
  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
  285
  195
  225
  258
  293
  331
  370
  410
  451
  492
  463
  502
  541
  579
  617
  653
  688
  743
  827
  916
  1,008
  1,105
  1,207
  1,312
  1,422
  1,536
  1,655
  1,778
  1,906
  2,039
Discount rate, %
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
  261
  163
  169
  173
  175
  172
  167
  158
  147
  133
  103
  90
  77
  65
  53
  42
  33
  25
  20
  15
  11
  8
  6
  4
  2
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  67.4
  48.3
  36.3
  28.3
  22.9
  19.1
  16.3
  14.3
  12.7
  11.6
  10.9
  10.3
  9.9
  9.6
  9.5
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3
  9.3

NN, Inc. is a diversified industrial company and a global manufacturer of high precision components and assemblies to a range of markets on a global basis. The Company's operating segments include: the Precision Engineered Products Group and the Autocam Precision Components Group. Precision Engineered Products Group combines materials science capability with engineering and production solutions to design and manufacture a range of high-precision metal and plastic components, assemblies and finished devices for the medical, electrical, automotive and aerospace end markets. Autocam Precision Components Group manufactures highly engineered, difficult-to-manufacture precision metal components and subassemblies for the automotive, heating, ventilating and air conditioning (HVAC), fluid power and diesel engine end markets.

FINANCIAL RATIOS  of  NN, Inc. (NNBR)

Valuation Ratios
P/E Ratio 20.6
Price to Sales 0.2
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow 6.6
Growth Rates
Sales Growth Rate 24.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12.8%
Cap. Spend. - 3 Yr. Gr. Rate 24%
Financial Strength
Quick Ratio 0
Current Ratio 0.8
LT Debt to Equity 253.2%
Total Debt to Equity 257.4%
Interest Coverage 1
Management Effectiveness
Return On Assets -0.6%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital 0.7%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity 2.6%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 25.5%
Gross Margin - 3 Yr. Avg. 22.8%
EBITDA Margin 13.7%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 6.7%
Oper. Margin - 3 Yr. Avg. 4.5%
Pre-Tax Margin -0.8%
Pre-Tax Margin - 3 Yr. Avg. -0.5%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 128.6%
Eff/ Tax Rate - 3 Yr. Avg. 74.2%
Payout Ratio 100%

NNBR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NNBR stock intrinsic value calculation we used $620 million for the last fiscal year's total revenue generated by NN, Inc.. The default revenue input number comes from 0001 income statement of NN, 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 NNBR stock valuation model: a) initial revenue growth rate of 38.8% 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 9%, whose default value for NNBR is calculated based on our internal credit rating of NN, 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 NN, 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 NNBR stock the variable cost ratio is equal to 94%.

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 NNBR 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 6.5% for NN, Inc..

Corporate tax rate of 27% is the nominal tax rate for NN, 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 NNBR 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 NNBR are equal to 95.5%.

Life of production assets of 15.6 years is the average useful life of capital assets used in NN, 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 NNBR is equal to 26.1%. 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 - $486.104 million for NN, 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 42.104 million for NN, 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 NN, Inc. at the current share price and the inputted number of shares is $0.3 billion.

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