Intrinsic value of National Presto Industries - NPK

Previous Close

$104.20

  Intrinsic Value

$79.86

stock screener

  Rating & Target

sell

-23%

Previous close

$104.20

 
Intrinsic value

$79.86

 
Up/down potential

-23%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -3.93
  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
  342
  349
  357
  366
  376
  388
  400
  414
  429
  445
  462
  480
  499
  520
  542
  565
  590
  617
  644
  674
  705
  737
  772
  808
  846
  886
  929
  973
  1,020
  1,070
  1,122
Variable operating expenses, $m
 
  287
  293
  301
  309
  319
  329
  340
  352
  365
  379
  393
  409
  426
  444
  463
  483
  505
  527
  551
  577
  604
  632
  661
  693
  726
  761
  797
  836
  876
  919
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
  279
  287
  293
  301
  309
  319
  329
  340
  352
  365
  379
  393
  409
  426
  444
  463
  483
  505
  527
  551
  577
  604
  632
  661
  693
  726
  761
  797
  836
  876
  919
Operating income, $m
  63
  62
  64
  65
  67
  69
  71
  74
  77
  79
  83
  87
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  146
  153
  161
  168
  176
  185
  194
  203
EBITDA, $m
  78
  75
  76
  78
  81
  83
  86
  89
  92
  95
  99
  103
  107
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  208
  218
  229
  240
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
Earnings before tax, $m
  63
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  90
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  150
  157
  165
  172
  181
  189
  198
Tax expense, $m
  21
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  42
  44
  47
  49
  51
  54
Net income, $m
  45
  45
  46
  48
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  111
  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
  418
  313
  320
  329
  338
  348
  359
  372
  385
  399
  414
  431
  448
  467
  487
  508
  530
  553
  578
  605
  632
  662
  693
  725
  760
  796
  834
  874
  916
  960
  1,007
Adjusted assets (=assets-cash), $m
  307
  313
  320
  329
  338
  348
  359
  372
  385
  399
  414
  431
  448
  467
  487
  508
  530
  553
  578
  605
  632
  662
  693
  725
  760
  796
  834
  874
  916
  960
  1,007
Revenue / Adjusted assets
  1.114
  1.115
  1.116
  1.112
  1.112
  1.115
  1.114
  1.113
  1.114
  1.115
  1.116
  1.114
  1.114
  1.113
  1.113
  1.112
  1.113
  1.116
  1.114
  1.114
  1.116
  1.113
  1.114
  1.114
  1.113
  1.113
  1.114
  1.113
  1.114
  1.115
  1.114
Average production assets, $m
  56
  57
  59
  60
  62
  64
  66
  68
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  106
  110
  116
  121
  127
  132
  139
  145
  152
  160
  167
  175
  184
Working capital, $m
  277
  169
  173
  178
  183
  188
  194
  201
  208
  216
  224
  233
  242
  252
  263
  274
  286
  299
  312
  327
  342
  358
  374
  392
  410
  430
  450
  472
  495
  519
  544
Total debt, $m
  0
  1
  3
  5
  7
  9
  11
  14
  17
  20
  24
  27
  31
  35
  40
  44
  49
  54
  60
  66
  72
  78
  85
  92
  100
  108
  116
  125
  134
  144
  155
Total liabilities, $m
  67
  69
  71
  73
  75
  77
  79
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  223
Total equity, $m
  350
  244
  250
  256
  263
  271
  280
  289
  300
  311
  323
  336
  349
  364
  379
  395
  413
  431
  451
  471
  493
  515
  540
  565
  592
  620
  650
  681
  714
  748
  784
Total liabilities and equity, $m
  417
  313
  321
  329
  338
  348
  359
  371
  385
  399
  415
  431
  448
  467
  487
  507
  530
  553
  579
  605
  633
  661
  693
  725
  760
  796
  834
  874
  916
  960
  1,007
Debt-to-equity ratio
  0.000
  0.000
  0.010
  0.020
  0.030
  0.030
  0.040
  0.050
  0.060
  0.060
  0.070
  0.080
  0.090
  0.100
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
Adjusted equity ratio
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779
  0.779

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  45
  45
  46
  48
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
Depreciation, amort., depletion, $m
  15
  13
  13
  13
  13
  14
  14
  15
  15
  16
  16
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
Funds from operations, $m
  66
  58
  59
  61
  62
  64
  66
  68
  71
  73
  76
  79
  82
  85
  89
  92
  96
  101
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  165
  173
  182
Change in working capital, $m
  0
  3
  4
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  66
  55
  55
  56
  57
  59
  60
  62
  64
  66
  68
  70
  72
  75
  78
  81
  84
  88
  92
  95
  100
  104
  109
  114
  119
  124
  130
  136
  142
  149
  156
Maintenance CAPEX, $m
  0
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
New CAPEX, $m
  -7
  -1
  -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
Cash from investing activities, $m
  -61
  -12
  -12
  -14
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -19
  -21
  -22
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -35
  -36
  -37
  -40
  -41
  -44
Free cash flow, $m
  5
  42
  43
  43
  44
  44
  45
  46
  48
  49
  50
  52
  53
  55
  57
  59
  62
  64
  67
  70
  72
  76
  79
  82
  86
  90
  94
  98
  103
  108
  113
Issuance/(repayment) of debt, $m
  0
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
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
  0
Cash from financing (excl. dividends), $m  
  0
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
Total cash flow (excl. dividends), $m
  6
  43
  44
  45
  46
  47
  48
  49
  50
  52
  54
  55
  57
  59
  62
  64
  67
  69
  72
  75
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
Retained Cash Flow (-), $m
  -11
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
Prev. year cash balance distribution, $m
 
  111
  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
 
  149
  39
  38
  38
  39
  39
  40
  40
  41
  42
  42
  44
  45
  46
  48
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
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
 
  143
  35
  33
  32
  30
  28
  27
  25
  24
  22
  20
  19
  17
  16
  14
  13
  11
  10
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  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

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 (NPK)

Valuation Ratios
P/E Ratio 16.1
Price to Sales 2.1
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 11
Price to Free Cash Flow 12.3
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 $342 million for the last fiscal year's total revenue generated by National Presto Industries. The default revenue input number comes from 2016 income statement of National Presto Industries. 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 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 NPK is calculated based on our internal credit rating of National Presto Industries, 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.
    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 82.2%.

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 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 3.5% for National Presto Industries.

Corporate tax rate of 27% is the nominal tax rate for National Presto Industries. 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 16.4%.

Life of production assets of 4.5 years is the average useful life of capital assets used in National Presto Industries 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 48.5%. 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 - $350 million for National Presto Industries - 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 7.049 million for National Presto Industries 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 at the current share price and the inputted number of shares is $0.7 billion.

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Financial statements of NPK
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