Intrinsic value of National Presto Industries, Inc. - NPK

Previous Close

$87.86

  Intrinsic Value

$60.92

stock screener

  Rating & Target

sell

-31%

Previous close

$87.86

 
Intrinsic value

$60.92

 
Up/down potential

-31%

 
Rating

sell

We calculate the intrinsic value of NPK 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 0.6

 

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, %
  15.60
  14.54
  13.59
  12.73
  11.95
  11.26
  10.63
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.69
  7.42
  7.18
  6.96
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.68
  5.62
  5.55
  5.50
Revenue, $m
  386
  442
  502
  566
  634
  705
  780
  859
  941
  1,027
  1,116
  1,209
  1,306
  1,406
  1,510
  1,619
  1,732
  1,849
  1,971
  2,098
  2,229
  2,367
  2,510
  2,659
  2,814
  2,976
  3,146
  3,322
  3,507
  3,700
Variable operating expenses, $m
  315
  361
  410
  462
  517
  575
  636
  700
  767
  836
  908
  983
  1,062
  1,144
  1,229
  1,317
  1,409
  1,504
  1,603
  1,706
  1,813
  1,925
  2,041
  2,163
  2,289
  2,421
  2,559
  2,702
  2,852
  3,009
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
  315
  361
  410
  462
  517
  575
  636
  700
  767
  836
  908
  983
  1,062
  1,144
  1,229
  1,317
  1,409
  1,504
  1,603
  1,706
  1,813
  1,925
  2,041
  2,163
  2,289
  2,421
  2,559
  2,702
  2,852
  3,009
Operating income, $m
  71
  81
  93
  104
  117
  130
  144
  159
  174
  190
  208
  226
  244
  262
  282
  302
  323
  345
  368
  391
  416
  442
  468
  496
  525
  555
  587
  620
  654
  690
EBITDA, $m
  82
  94
  107
  121
  135
  150
  166
  183
  200
  219
  238
  257
  278
  299
  321
  345
  369
  394
  419
  446
  475
  504
  534
  566
  599
  634
  670
  707
  746
  787
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  13
  15
  16
  17
  18
  19
  20
  22
  23
  24
Earnings before tax, $m
  71
  81
  92
  103
  115
  128
  142
  156
  170
  186
  203
  220
  237
  255
  274
  293
  313
  334
  356
  379
  402
  427
  453
  479
  507
  536
  567
  598
  631
  666
Tax expense, $m
  19
  22
  25
  28
  31
  35
  38
  42
  46
  50
  55
  59
  64
  69
  74
  79
  85
  90
  96
  102
  109
  115
  122
  129
  137
  145
  153
  162
  170
  180
Net income, $m
  52
  59
  67
  75
  84
  94
  103
  114
  124
  136
  148
  160
  173
  186
  200
  214
  229
  244
  260
  277
  294
  312
  331
  350
  370
  392
  414
  437
  461
  486

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
  353
  405
  460
  518
  580
  645
  714
  786
  861
  939
  1,021
  1,106
  1,195
  1,286
  1,382
  1,481
  1,584
  1,692
  1,803
  1,919
  2,040
  2,165
  2,296
  2,433
  2,575
  2,723
  2,878
  3,040
  3,208
  3,385
Adjusted assets (=assets-cash), $m
  353
  405
  460
  518
  580
  645
  714
  786
  861
  939
  1,021
  1,106
  1,195
  1,286
  1,382
  1,481
  1,584
  1,692
  1,803
  1,919
  2,040
  2,165
  2,296
  2,433
  2,575
  2,723
  2,878
  3,040
  3,208
  3,385
Revenue / Adjusted assets
  1.093
  1.091
  1.091
  1.093
  1.093
  1.093
  1.092
  1.093
  1.093
  1.094
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
  1.093
Average production assets, $m
  57
  65
  74
  83
  93
  104
  115
  126
  138
  151
  164
  178
  192
  207
  222
  238
  255
  272
  290
  308
  328
  348
  369
  391
  414
  438
  462
  488
  516
  544
Working capital, $m
  173
  198
  225
  253
  283
  315
  349
  384
  421
  459
  499
  540
  584
  629
  675
  724
  774
  826
  881
  938
  997
  1,058
  1,122
  1,189
  1,258
  1,330
  1,406
  1,485
  1,568
  1,654
Total debt, $m
  7
  15
  24
  33
  42
  53
  63
  74
  86
  98
  111
  124
  138
  152
  167
  182
  198
  215
  232
  250
  269
  288
  308
  330
  352
  375
  399
  424
  450
  477
Total liabilities, $m
  55
  63
  71
  80
  90
  100
  111
  122
  133
  146
  158
  171
  185
  199
  214
  230
  246
  262
  279
  297
  316
  336
  356
  377
  399
  422
  446
  471
  497
  525
Total equity, $m
  298
  342
  388
  438
  490
  545
  603
  664
  728
  794
  863
  935
  1,009
  1,087
  1,168
  1,252
  1,339
  1,429
  1,524
  1,622
  1,724
  1,830
  1,940
  2,056
  2,176
  2,301
  2,432
  2,568
  2,711
  2,860
Total liabilities and equity, $m
  353
  405
  459
  518
  580
  645
  714
  786
  861
  940
  1,021
  1,106
  1,194
  1,286
  1,382
  1,482
  1,585
  1,691
  1,803
  1,919
  2,040
  2,166
  2,296
  2,433
  2,575
  2,723
  2,878
  3,039
  3,208
  3,385
Debt-to-equity ratio
  0.020
  0.040
  0.060
  0.070
  0.090
  0.100
  0.100
  0.110
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
Adjusted equity ratio
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845
  0.845

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  52
  59
  67
  75
  84
  94
  103
  114
  124
  136
  148
  160
  173
  186
  200
  214
  229
  244
  260
  277
  294
  312
  331
  350
  370
  392
  414
  437
  461
  486
Depreciation, amort., depletion, $m
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  29
  32
  34
  37
  40
  42
  45
  49
  52
  55
  59
  62
  66
  70
  74
  78
  83
  87
  92
  97
Funds from operations, $m
  63
  72
  81
  91
  102
  113
  125
  137
  150
  164
  177
  192
  207
  223
  239
  256
  274
  293
  312
  332
  352
  374
  396
  420
  444
  470
  496
  524
  553
  583
Change in working capital, $m
  23
  25
  27
  29
  30
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  48
  50
  52
  54
  57
  59
  61
  64
  67
  69
  72
  76
  79
  82
  86
Cash from operations, $m
  40
  47
  54
  63
  72
  81
  92
  102
  114
  125
  138
  151
  164
  178
  193
  208
  224
  240
  257
  275
  293
  313
  332
  353
  375
  397
  421
  445
  471
  497
Maintenance CAPEX, $m
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -20
  -23
  -25
  -27
  -29
  -32
  -34
  -37
  -40
  -42
  -45
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -83
  -87
  -92
New CAPEX, $m
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
Cash from investing activities, $m
  -17
  -18
  -21
  -22
  -25
  -27
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -56
  -59
  -62
  -67
  -71
  -74
  -79
  -83
  -88
  -93
  -98
  -103
  -109
  -114
  -120
Free cash flow, $m
  23
  28
  34
  40
  47
  54
  62
  70
  79
  88
  97
  108
  118
  129
  140
  152
  165
  177
  191
  205
  219
  234
  249
  265
  282
  300
  318
  337
  356
  377
Issuance/(repayment) of debt, $m
  7
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
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  
  7
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
Total cash flow (excl. dividends), $m
  30
  36
  43
  49
  57
  64
  73
  81
  91
  100
  110
  121
  132
  143
  155
  168
  181
  194
  208
  223
  238
  253
  270
  287
  304
  323
  342
  362
  382
  404
Retained Cash Flow (-), $m
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -111
  -115
  -120
  -125
  -131
  -137
  -143
  -149
Prev. year cash balance distribution, $m
  108
  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
  98
  -7
  -4
  0
  4
  9
  15
  21
  27
  34
  41
  49
  57
  66
  75
  84
  94
  104
  114
  125
  136
  147
  159
  171
  184
  197
  211
  225
  240
  255
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
  94
  -6
  -3
  0
  3
  7
  10
  13
  16
  18
  20
  21
  22
  22
  22
  21
  20
  19
  18
  16
  14
  12
  10
  9
  7
  6
  5
  3
  3
  2
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
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National Presto Industries, Inc. operates through two business segments: the Housewares/Small Appliance segment and the Defense segment. The Housewares/Small Appliance segment designs, markets and distributes housewares and small electrical appliances, including pressure cookers and canners, kitchen electrics and comfort appliances. The Defense segment manufactures 40 millimeter (mm) ammunition, precision mechanical and electro-mechanical assemblies, and medium caliber cartridge cases; performs Load, Assemble and Pack (LAP) operations on ordnance-related products primarily for the United States Government and prime contractors; produces and sells a range of less lethal products and support accessories, and provides training for the use of less lethal products, and manufactures detonators, booster pellets, release cartridges, lead azide, and other military energetic devices and materials. The Company's Defense segment includes the operations of AMTEC Corporation.

FINANCIAL RATIOS  of  National Presto Industries, Inc. (NPK)

Valuation Ratios
P/E Ratio 13.6
Price to Sales 1.8
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 9.3
Price to Free Cash Flow 10.3
Growth Rates
Sales Growth Rate -3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate -34.5%
Financial Strength
Quick Ratio NaN
Current Ratio 1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.2%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 13.1%
Ret/ On T. Cap. - 3 Yr. Avg. 11.1%
Return On Equity 13.1%
Return On Equity - 3 Yr. Avg. 11.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 25.1%
Gross Margin - 3 Yr. Avg. 24.5%
EBITDA Margin 22.8%
EBITDA Margin - 3 Yr. Avg. 21.4%
Operating Margin 18.4%
Oper. Margin - 3 Yr. Avg. 16.5%
Pre-Tax Margin 18.4%
Pre-Tax Margin - 3 Yr. Avg. 16.5%
Net Profit Margin 13.2%
Net Profit Margin - 3 Yr. Avg. 10.7%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 33.1%
Payout Ratio 77.8%

NPK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NPK stock intrinsic value calculation we used $334 million for the last fiscal year's total revenue generated by National Presto Industries, Inc.. The default revenue input number comes from 0001 income statement of National Presto 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 NPK stock valuation model: a) initial revenue growth rate of 15.6% 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 NPK is calculated based on our internal credit rating of National Presto 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 National Presto 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 NPK stock the variable cost ratio is equal to 81.7%.

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 NPK 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 National Presto Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for National Presto 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 NPK 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 NPK are equal to 14.7%.

Life of production assets of 5.6 years is the average useful life of capital assets used in National Presto 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 NPK is equal to 44.7%. 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 - $366.123 million for National Presto 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 6.980 million for National Presto 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 National Presto Industries, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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