Intrinsic value of Northwest Pipe - NWPX

Previous Close

$24.11

  Intrinsic Value

$5.14

stock screener

  Rating & Target

str. sell

-79%

Previous close

$24.11

 
Intrinsic value

$5.14

 
Up/down potential

-79%

 
Rating

str. sell

We calculate the intrinsic value of NWPX 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, %
  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
  135
  139
  142
  146
  151
  155
  161
  166
  173
  179
  186
  194
  202
  210
  220
  229
  239
  250
  262
  274
  286
  300
  314
  329
  344
  361
  378
  396
  415
  436
Variable operating expenses, $m
  145
  148
  152
  156
  161
  166
  172
  178
  184
  191
  199
  207
  216
  225
  234
  245
  256
  267
  279
  292
  306
  320
  335
  351
  368
  385
  404
  423
  444
  465
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
  145
  148
  152
  156
  161
  166
  172
  178
  184
  191
  199
  207
  216
  225
  234
  245
  256
  267
  279
  292
  306
  320
  335
  351
  368
  385
  404
  423
  444
  465
Operating income, $m
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
EBITDA, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Interest expense (income), $m
  0
  1
  1
  1
  2
  2
  2
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
Earnings before tax, $m
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -58
  -61
Tax expense, $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
Net income, $m
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -58
  -61

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
  207
  212
  217
  223
  230
  238
  246
  254
  264
  274
  285
  296
  309
  322
  336
  350
  366
  382
  400
  418
  438
  458
  480
  502
  526
  551
  578
  606
  635
  666
Adjusted assets (=assets-cash), $m
  207
  212
  217
  223
  230
  238
  246
  254
  264
  274
  285
  296
  309
  322
  336
  350
  366
  382
  400
  418
  438
  458
  480
  502
  526
  551
  578
  606
  635
  666
Revenue / Adjusted assets
  0.652
  0.656
  0.654
  0.655
  0.657
  0.651
  0.654
  0.654
  0.655
  0.653
  0.653
  0.655
  0.654
  0.652
  0.655
  0.654
  0.653
  0.654
  0.655
  0.656
  0.653
  0.655
  0.654
  0.655
  0.654
  0.655
  0.654
  0.653
  0.654
  0.655
Average production assets, $m
  82
  84
  86
  88
  91
  94
  97
  100
  104
  108
  112
  117
  122
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  217
  228
  239
  250
  263
Working capital, $m
  68
  69
  71
  73
  75
  78
  80
  83
  86
  90
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
  208
  218
Total debt, $m
  2
  2
  3
  4
  5
  6
  7
  8
  10
  11
  13
  15
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  69
Total liabilities, $m
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  84
  88
  93
  97
Total equity, $m
  177
  181
  186
  191
  197
  203
  210
  217
  225
  234
  243
  253
  264
  275
  287
  299
  313
  327
  341
  357
  374
  391
  410
  429
  449
  471
  494
  517
  542
  569
Total liabilities and equity, $m
  207
  212
  218
  224
  231
  238
  246
  254
  264
  274
  285
  296
  309
  322
  336
  350
  366
  383
  399
  418
  438
  458
  480
  502
  526
  552
  578
  605
  635
  666
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.030
  0.040
  0.040
  0.050
  0.050
  0.060
  0.060
  0.070
  0.070
  0.080
  0.080
  0.080
  0.090
  0.090
  0.090
  0.100
  0.100
  0.100
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
Adjusted equity ratio
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -58
  -61
Depreciation, amort., depletion, $m
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -25
  -27
  -28
  -30
  -33
  -35
  -37
  -40
Change in working capital, $m
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
Cash from operations, $m
  -4
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -44
  -47
  -50
Maintenance CAPEX, $m
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
Cash from investing activities, $m
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -22
  -22
  -23
  -25
  -25
  -27
  -28
  -30
  -32
  -33
Free cash flow, $m
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -29
  -31
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -83
Issuance/(repayment) of debt, $m
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
Issuance/(repurchase) of shares, $m
  13
  14
  15
  17
  18
  19
  21
  22
  24
  26
  28
  29
  31
  34
  36
  38
  41
  43
  46
  49
  52
  55
  59
  62
  66
  70
  74
  78
  83
  88
Cash from financing (excl. dividends), $m  
  13
  15
  16
  18
  19
  20
  22
  23
  25
  27
  30
  31
  33
  36
  38
  40
  43
  45
  49
  52
  55
  58
  62
  65
  69
  74
  78
  82
  87
  93
Total cash flow (excl. dividends), $m
  1
  1
  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
  9
  10
Retained Cash Flow (-), $m
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -29
  -31
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -83
  -88
Prev. year cash balance distribution, $m
  27
  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
  15
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -66
  -70
  -74
  -78
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
  14
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -11
  -11
  -11
  -10
  -9
  -9
  -8
  -7
  -6
  -5
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
Current shareholders' claim on cash, %
  94.0
  88.0
  82.0
  76.2
  70.5
  65.0
  59.8
  54.8
  50.1
  45.7
  41.5
  37.6
  34.0
  30.7
  27.6
  24.8
  22.2
  19.9
  17.7
  15.8
  14.1
  12.5
  11.1
  9.8
  8.7
  7.6
  6.7
  5.9
  5.2
  4.6

Northwest Pipe Company is a manufacturer of engineered steel pipe water systems. The Company produces steel pipeline systems for use in drinking water infrastructure, and has approximately eight manufacturing facilities, located in Portland, Oregon; Denver, Colorado; Adelanto, California; Parkersburg, West Virginia; Saginaw, Texas; St. Louis, Missouri; Salt Lake City, Utah, and Monterrey, Mexico. The Company, through Water Transmission Group, produces engineered welded steel pipe products for use in water transmission applications. The Company's solutions-based products are used in water transmission, plant piping, tunnels and river crossings applications.

FINANCIAL RATIOS  of  Northwest Pipe (NWPX)

Valuation Ratios
P/E Ratio -25.7
Price to Sales 1.5
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 115.7
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -34.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -77.8%
Cap. Spend. - 3 Yr. Gr. Rate -41%
Financial Strength
Quick Ratio NaN
Current Ratio 1.9
LT Debt to Equity 0.5%
Total Debt to Equity 0.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -3.6%
Ret/ On Assets - 3 Yr. Avg. -5.3%
Return On Total Capital -4.2%
Ret/ On T. Cap. - 3 Yr. Avg. -7%
Return On Equity -4.2%
Return On Equity - 3 Yr. Avg. -7.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin -1.9%
Gross Margin - 3 Yr. Avg. 0.9%
EBITDA Margin -2.6%
EBITDA Margin - 3 Yr. Avg. -3.8%
Operating Margin -9%
Oper. Margin - 3 Yr. Avg. -8.6%
Pre-Tax Margin -9%
Pre-Tax Margin - 3 Yr. Avg. -8.9%
Net Profit Margin -5.8%
Net Profit Margin - 3 Yr. Avg. -7.5%
Effective Tax Rate 35.7%
Eff/ Tax Rate - 3 Yr. Avg. -45%
Payout Ratio 0%

NWPX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NWPX stock intrinsic value calculation we used $132.78 million for the last fiscal year's total revenue generated by Northwest Pipe. The default revenue input number comes from 0001 income statement of Northwest Pipe. 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 NWPX 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 NWPX is calculated based on our internal credit rating of Northwest Pipe, 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 Northwest Pipe.
    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 NWPX stock the variable cost ratio is equal to 106.8%.

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 NWPX 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 49.4% for Northwest Pipe.

Corporate tax rate of 27% is the nominal tax rate for Northwest Pipe. 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 NWPX 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 NWPX are equal to 60.3%.

Life of production assets of 12.2 years is the average useful life of capital assets used in Northwest Pipe 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 NWPX is equal to 50%. 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 - $200.264 million for Northwest Pipe - 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 9.735 million for Northwest Pipe 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 Northwest Pipe at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Northwest Pipe Co.: 3Q Earnings Snapshot   [05:14AM  Associated Press]
▶ Northwest Pipe Co.: 2Q Earnings Snapshot   [05:09AM  Associated Press]
▶ Northwest Pipe Co.: 1Q Earnings Snapshot   [May-03-18 05:03AM  Associated Press]
▶ Northwest Pipe Co. reports 4Q loss   [Feb-28-18 04:41PM  Associated Press]
▶ Northwest Pipe Co. reports 3Q loss   [Oct-31-17 05:23PM  Associated Press]
▶ Northwest Pipe Co. reports 2Q loss   [Aug-03-17 03:40PM  Associated Press]
▶ ETFs with exposure to Northwest Pipe Co. : May 19, 2017   [May-19-17 02:03PM  Capital Cube]
▶ ETFs with exposure to Northwest Pipe Co. : May 8, 2017   [May-08-17 05:01PM  Capital Cube]
▶ Northwest Pipe Co. reports 1Q loss   [May-02-17 07:07PM  Associated Press]
▶ ETFs with exposure to Northwest Pipe Co. : April 5, 2017   [Apr-05-17 05:12PM  Capital Cube]
▶ Northwest Pipe Co. posts 4Q profit   [Mar-08-17 07:16PM  Associated Press]
▶ 3 Stocks That Could Double Because of President Trump   [Dec-02-16 08:02AM  at Motley Fool]

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