Intrinsic value of Neenah, Inc. - NP

Previous Close

$66.24

  Intrinsic Value

$47.78

stock screener

  Rating & Target

sell

-28%

Previous close

$66.24

 
Intrinsic value

$47.78

 
Up/down potential

-28%

 
Rating

sell

We calculate the intrinsic value of NP 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 1.1

 

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, %
  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
  1,056
  1,080
  1,108
  1,139
  1,173
  1,211
  1,253
  1,297
  1,345
  1,397
  1,452
  1,511
  1,574
  1,641
  1,711
  1,786
  1,866
  1,950
  2,038
  2,132
  2,231
  2,335
  2,445
  2,561
  2,683
  2,811
  2,946
  3,088
  3,238
  3,395
Variable operating expenses, $m
  941
  963
  987
  1,014
  1,045
  1,078
  1,114
  1,153
  1,195
  1,241
  1,274
  1,325
  1,380
  1,439
  1,501
  1,567
  1,636
  1,710
  1,788
  1,870
  1,957
  2,048
  2,144
  2,246
  2,353
  2,465
  2,584
  2,708
  2,840
  2,978
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
  941
  963
  987
  1,014
  1,045
  1,078
  1,114
  1,153
  1,195
  1,241
  1,274
  1,325
  1,380
  1,439
  1,501
  1,567
  1,636
  1,710
  1,788
  1,870
  1,957
  2,048
  2,144
  2,246
  2,353
  2,465
  2,584
  2,708
  2,840
  2,978
Operating income, $m
  114
  117
  121
  125
  129
  133
  139
  144
  150
  156
  179
  186
  194
  202
  210
  220
  229
  240
  251
  262
  274
  287
  301
  315
  330
  346
  362
  380
  398
  418
EBITDA, $m
  161
  165
  169
  174
  180
  185
  192
  198
  206
  214
  222
  231
  241
  251
  262
  273
  285
  298
  312
  326
  341
  357
  374
  392
  410
  430
  451
  472
  495
  519
Interest expense (income), $m
  10
  13
  13
  14
  15
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  38
  40
  42
  45
  48
  50
  53
  57
  60
  63
  67
Earnings before tax, $m
  101
  104
  107
  110
  113
  117
  121
  126
  131
  136
  157
  163
  169
  176
  183
  190
  198
  206
  215
  225
  234
  245
  256
  267
  279
  292
  306
  320
  335
  350
Tax expense, $m
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  42
  44
  46
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  75
  79
  83
  86
  90
  95
Net income, $m
  74
  76
  78
  80
  83
  86
  89
  92
  95
  99
  114
  119
  123
  128
  133
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  213
  223
  234
  244
  256

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
  878
  898
  922
  948
  976
  1,008
  1,042
  1,079
  1,119
  1,162
  1,208
  1,257
  1,309
  1,365
  1,424
  1,486
  1,552
  1,622
  1,696
  1,774
  1,856
  1,943
  2,034
  2,130
  2,232
  2,339
  2,451
  2,569
  2,694
  2,825
Adjusted assets (=assets-cash), $m
  878
  898
  922
  948
  976
  1,008
  1,042
  1,079
  1,119
  1,162
  1,208
  1,257
  1,309
  1,365
  1,424
  1,486
  1,552
  1,622
  1,696
  1,774
  1,856
  1,943
  2,034
  2,130
  2,232
  2,339
  2,451
  2,569
  2,694
  2,825
Revenue / Adjusted assets
  1.203
  1.203
  1.202
  1.201
  1.202
  1.201
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
  1.202
Average production assets, $m
  500
  512
  525
  540
  556
  574
  594
  615
  638
  662
  688
  716
  746
  778
  811
  847
  884
  924
  966
  1,011
  1,057
  1,107
  1,159
  1,214
  1,272
  1,332
  1,396
  1,464
  1,535
  1,609
Working capital, $m
  152
  156
  160
  164
  169
  174
  180
  187
  194
  201
  209
  218
  227
  236
  246
  257
  269
  281
  294
  307
  321
  336
  352
  369
  386
  405
  424
  445
  466
  489
Total debt, $m
  249
  260
  272
  286
  302
  319
  338
  358
  380
  404
  429
  456
  484
  515
  547
  581
  617
  655
  696
  738
  783
  831
  881
  933
  989
  1,047
  1,109
  1,173
  1,242
  1,313
Total liabilities, $m
  480
  491
  504
  518
  534
  551
  570
  590
  612
  636
  661
  688
  716
  747
  779
  813
  849
  887
  928
  970
  1,015
  1,063
  1,113
  1,165
  1,221
  1,279
  1,341
  1,405
  1,473
  1,545
Total equity, $m
  398
  407
  417
  429
  442
  457
  472
  489
  507
  526
  547
  570
  593
  618
  645
  673
  703
  735
  768
  804
  841
  880
  921
  965
  1,011
  1,059
  1,110
  1,164
  1,220
  1,280
Total liabilities and equity, $m
  878
  898
  921
  947
  976
  1,008
  1,042
  1,079
  1,119
  1,162
  1,208
  1,258
  1,309
  1,365
  1,424
  1,486
  1,552
  1,622
  1,696
  1,774
  1,856
  1,943
  2,034
  2,130
  2,232
  2,338
  2,451
  2,569
  2,693
  2,825
Debt-to-equity ratio
  0.620
  0.640
  0.650
  0.670
  0.680
  0.700
  0.720
  0.730
  0.750
  0.770
  0.780
  0.800
  0.820
  0.830
  0.850
  0.860
  0.880
  0.890
  0.910
  0.920
  0.930
  0.940
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
Adjusted equity ratio
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  74
  76
  78
  80
  83
  86
  89
  92
  95
  99
  114
  119
  123
  128
  133
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  213
  223
  234
  244
  256
Depreciation, amort., depletion, $m
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  44
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  93
  97
  102
Funds from operations, $m
  121
  124
  127
  130
  133
  137
  142
  146
  151
  157
  158
  164
  171
  177
  185
  192
  201
  209
  218
  228
  238
  249
  260
  272
  285
  298
  312
  326
  342
  358
Change in working capital, $m
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
Cash from operations, $m
  118
  120
  123
  125
  128
  132
  136
  140
  144
  149
  150
  156
  162
  168
  174
  182
  189
  197
  206
  214
  224
  234
  244
  255
  267
  279
  292
  306
  320
  335
Maintenance CAPEX, $m
  -31
  -32
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -93
  -97
New CAPEX, $m
  -10
  -12
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
Cash from investing activities, $m
  -41
  -44
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -64
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -100
  -105
  -111
  -116
  -122
  -128
  -135
  -141
  -148
  -155
  -164
  -172
Free cash flow, $m
  77
  77
  77
  77
  78
  79
  80
  81
  83
  84
  82
  84
  86
  89
  92
  95
  98
  101
  105
  109
  113
  117
  122
  127
  132
  138
  144
  150
  156
  163
Issuance/(repayment) of debt, $m
  9
  11
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  55
  58
  61
  65
  68
  72
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  
  9
  11
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  30
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  55
  58
  61
  65
  68
  72
Total cash flow (excl. dividends), $m
  87
  88
  90
  92
  94
  96
  99
  101
  104
  108
  107
  111
  115
  119
  124
  129
  134
  140
  145
  152
  158
  165
  172
  180
  188
  196
  205
  215
  225
  235
Retained Cash Flow (-), $m
  -8
  -9
  -10
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -56
  -59
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
  79
  79
  79
  80
  81
  82
  83
  85
  86
  88
  86
  89
  91
  94
  97
  101
  104
  108
  112
  116
  121
  126
  131
  136
  142
  148
  154
  161
  168
  176
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  75
  71
  67
  63
  59
  55
  51
  47
  43
  39
  34
  31
  27
  24
  21
  18
  16
  13
  11
  9
  7
  6
  4
  3
  3
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100.0
  100.0
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Neenah Paper, Inc. is a materials company focused in niche markets. The Company has two primary businesses: technical products, and fine paper and packaging. The technical products business is an international producer of transportation, water and other filtration media, digital transfer materials, tape and abrasive backings, labels and other performance-oriented substrates. The fine paper and packaging business is a supplier of high-end printing and specialty papers and packaging in North America. Technical products manufacturing facilities are located near Munich, Germany, in Bolton, England, Eerbeekse Beek, Netherlands, Munising, Michigan and Pittsfield, Massachusetts. In addition, certain technical products are manufactured along with fine paper and packaging products in shared facilities located in upstate New York and Quakertown, Pennsylvania.

FINANCIAL RATIOS  of  Neenah, Inc. (NP)

Valuation Ratios
P/E Ratio 15.2
Price to Sales 1.2
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow 23.6
Growth Rates
Sales Growth Rate 6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 43.8%
Cap. Spend. - 3 Yr. Gr. Rate 15.2%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 65.1%
Total Debt to Equity 65.4%
Interest Coverage 11
Management Effectiveness
Return On Assets 10.6%
Ret/ On Assets - 3 Yr. Avg. 9.9%
Return On Total Capital 13.3%
Ret/ On T. Cap. - 3 Yr. Avg. 12.3%
Return On Equity 22.5%
Return On Equity - 3 Yr. Avg. 21.4%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 22.8%
Gross Margin - 3 Yr. Avg. 21.7%
EBITDA Margin 15.4%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 10.9%
Pre-Tax Margin - 3 Yr. Avg. 10%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. 7.2%
Effective Tax Rate 29.1%
Eff/ Tax Rate - 3 Yr. Avg. 24%
Payout Ratio 30.1%

NP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NP stock intrinsic value calculation we used $1035 million for the last fiscal year's total revenue generated by Neenah, Inc.. The default revenue input number comes from 0001 income statement of Neenah, 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 NP 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 5.4%, whose default value for NP is calculated based on our internal credit rating of Neenah, 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 Neenah, 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 NP stock the variable cost ratio is equal to 89.2%.

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 NP 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 Neenah, Inc..

Corporate tax rate of 27% is the nominal tax rate for Neenah, 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 NP 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 NP are equal to 47.4%.

Life of production assets of 15.8 years is the average useful life of capital assets used in Neenah, 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 NP is equal to 14.4%. 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 - $390.2 million for Neenah, 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 16.811 million for Neenah, 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 Neenah, Inc. at the current share price and the inputted number of shares is $1.1 billion.

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