Intrinsic value of Quanex Building Products - NX

Previous Close

$18.60

  Intrinsic Value

$10.26

stock screener

  Rating & Target

sell

-45%

Previous close

$18.60

 
Intrinsic value

$10.26

 
Up/down potential

-45%

 
Rating

sell

We calculate the intrinsic value of NX 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 0.7

 

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, %
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  887
  911
  937
  966
  998
  1,033
  1,070
  1,110
  1,154
  1,200
  1,249
  1,301
  1,356
  1,415
  1,478
  1,544
  1,613
  1,687
  1,765
  1,847
  1,933
  2,024
  2,120
  2,222
  2,328
  2,440
  2,558
  2,682
  2,813
  2,950
Variable operating expenses, $m
  852
  874
  898
  925
  954
  986
  1,020
  1,057
  1,097
  1,139
  1,148
  1,196
  1,247
  1,301
  1,358
  1,419
  1,483
  1,551
  1,622
  1,698
  1,777
  1,861
  1,949
  2,042
  2,140
  2,243
  2,351
  2,465
  2,585
  2,712
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
  852
  874
  898
  925
  954
  986
  1,020
  1,057
  1,097
  1,139
  1,148
  1,196
  1,247
  1,301
  1,358
  1,419
  1,483
  1,551
  1,622
  1,698
  1,777
  1,861
  1,949
  2,042
  2,140
  2,243
  2,351
  2,465
  2,585
  2,712
Operating income, $m
  35
  37
  40
  42
  44
  47
  50
  53
  57
  61
  101
  105
  110
  114
  119
  125
  130
  136
  143
  149
  156
  164
  171
  179
  188
  197
  207
  217
  227
  238
EBITDA, $m
  112
  115
  118
  122
  126
  130
  135
  140
  145
  151
  157
  164
  171
  178
  186
  195
  203
  213
  222
  233
  244
  255
  267
  280
  293
  308
  322
  338
  354
  372
Interest expense (income), $m
  9
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  21
  22
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  42
  44
  46
  49
  52
  54
  57
Earnings before tax, $m
  23
  24
  26
  27
  29
  31
  34
  36
  38
  41
  80
  83
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
Tax expense, $m
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  22
  23
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
Net income, $m
  16
  18
  19
  20
  21
  23
  24
  26
  28
  30
  59
  61
  63
  66
  69
  71
  74
  78
  81
  84
  88
  92
  96
  101
  105
  110
  115
  120
  126
  132

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
  792
  813
  837
  863
  891
  922
  956
  991
  1,030
  1,071
  1,115
  1,162
  1,211
  1,264
  1,319
  1,378
  1,440
  1,506
  1,576
  1,649
  1,726
  1,808
  1,893
  1,984
  2,079
  2,179
  2,284
  2,395
  2,511
  2,634
Adjusted assets (=assets-cash), $m
  792
  813
  837
  863
  891
  922
  956
  991
  1,030
  1,071
  1,115
  1,162
  1,211
  1,264
  1,319
  1,378
  1,440
  1,506
  1,576
  1,649
  1,726
  1,808
  1,893
  1,984
  2,079
  2,179
  2,284
  2,395
  2,511
  2,634
Revenue / Adjusted assets
  1.120
  1.121
  1.119
  1.119
  1.120
  1.120
  1.119
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.119
  1.121
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.119
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
  1.120
Average production assets, $m
  398
  408
  420
  433
  447
  463
  479
  497
  517
  537
  559
  583
  608
  634
  662
  692
  723
  756
  791
  827
  866
  907
  950
  995
  1,043
  1,093
  1,146
  1,202
  1,260
  1,321
Working capital, $m
  91
  94
  97
  100
  103
  106
  110
  114
  119
  124
  129
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  209
  218
  229
  240
  251
  263
  276
  290
  304
Total debt, $m
  248
  258
  269
  281
  295
  310
  325
  342
  361
  380
  401
  423
  446
  471
  498
  526
  555
  586
  619
  654
  691
  729
  770
  813
  858
  905
  955
  1,008
  1,063
  1,121
Total liabilities, $m
  376
  386
  397
  409
  422
  437
  453
  470
  488
  508
  528
  551
  574
  599
  625
  653
  683
  714
  747
  782
  818
  857
  897
  940
  985
  1,033
  1,083
  1,135
  1,190
  1,248
Total equity, $m
  417
  428
  440
  454
  469
  485
  503
  521
  542
  563
  586
  611
  637
  665
  694
  725
  758
  792
  829
  867
  908
  951
  996
  1,043
  1,093
  1,146
  1,201
  1,260
  1,321
  1,385
Total liabilities and equity, $m
  793
  814
  837
  863
  891
  922
  956
  991
  1,030
  1,071
  1,114
  1,162
  1,211
  1,264
  1,319
  1,378
  1,441
  1,506
  1,576
  1,649
  1,726
  1,808
  1,893
  1,983
  2,078
  2,179
  2,284
  2,395
  2,511
  2,633
Debt-to-equity ratio
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.730
  0.740
  0.750
  0.750
  0.760
  0.770
  0.770
  0.780
  0.780
  0.790
  0.790
  0.800
  0.800
  0.810
Adjusted equity ratio
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  18
  19
  20
  21
  23
  24
  26
  28
  30
  59
  61
  63
  66
  69
  71
  74
  78
  81
  84
  88
  92
  96
  101
  105
  110
  115
  120
  126
  132
Depreciation, amort., depletion, $m
  76
  77
  79
  80
  81
  83
  85
  86
  88
  90
  57
  59
  61
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  101
  105
  110
  116
  121
  127
  133
Funds from operations, $m
  93
  95
  97
  100
  103
  106
  109
  113
  116
  121
  115
  120
  125
  130
  135
  141
  147
  154
  161
  168
  176
  184
  192
  201
  211
  220
  231
  242
  253
  266
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  91
  93
  95
  97
  99
  102
  105
  109
  112
  116
  110
  114
  119
  124
  129
  134
  140
  146
  153
  160
  167
  174
  182
  191
  200
  209
  219
  229
  240
  251
Maintenance CAPEX, $m
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -87
  -92
  -96
  -101
  -105
  -110
  -116
  -121
  -127
New CAPEX, $m
  -9
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -58
  -61
Cash from investing activities, $m
  -48
  -51
  -53
  -55
  -58
  -60
  -64
  -66
  -69
  -73
  -76
  -80
  -84
  -87
  -92
  -97
  -101
  -106
  -111
  -117
  -123
  -128
  -135
  -141
  -149
  -155
  -163
  -172
  -179
  -188
Free cash flow, $m
  42
  42
  42
  41
  41
  42
  42
  42
  42
  43
  34
  34
  35
  36
  37
  38
  39
  40
  42
  43
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
Issuance/(repayment) of debt, $m
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  58
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
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  58
Total cash flow (excl. dividends), $m
  51
  52
  53
  54
  55
  56
  58
  59
  61
  62
  55
  57
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  88
  92
  96
  101
  105
  110
  115
  121
Retained Cash Flow (-), $m
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -64
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
  41
  41
  40
  40
  40
  40
  40
  40
  40
  41
  32
  32
  33
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  56
Discount rate, %
  5.50
  5.78
  6.06
  6.37
  6.69
  7.02
  7.37
  7.74
  8.13
  8.53
  8.96
  9.41
  9.88
  10.37
  10.89
  11.43
  12.01
  12.61
  13.24
  13.90
  14.59
  15.32
  16.09
  16.89
  17.74
  18.62
  19.56
  20.53
  21.56
  22.64
PV of cash for distribution, $m
  39
  36
  34
  31
  29
  27
  24
  22
  20
  18
  12
  11
  10
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
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
  100.0
  100.0
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Quanex Building Products Corporation manufactures components for original equipment manufacturers (OEM) in the building products industry. The Company's components can be categorized as window and door (fenestration) components, and kitchen and bath cabinet components. The Company operates through three segments: North American Engineered Components (NA Engineered Components), which consists of four operating segments primarily focused on the fenestration market in North America manufacturing vinyl profiles, insulating glass (IG) spacers, screens and other fenestration components; European Engineered Components (EU Engineered Components), which consists of the United Kingdom-based vinyl extrusion business, manufacturing vinyl profiles and conservatories, and the European insulating glass business manufacturing IG spacers, and North American Cabinet Components (NA Cabinet Components), which consists of the North American cabinet door and components business.

FINANCIAL RATIOS  of  Quanex Building Products (NX)

Valuation Ratios
P/E Ratio 34.1
Price to Sales 0.7
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow 14.7
Growth Rates
Sales Growth Rate -6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.4%
Cap. Spend. - 3 Yr. Gr. Rate 0.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 53.6%
Total Debt to Equity 58.7%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.1%
Return On Equity 4.9%
Return On Equity - 3 Yr. Avg. 2.8%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 22.4%
Gross Margin - 3 Yr. Avg. 22.8%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 8.8%
Operating Margin 4%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 3%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 1.5%
Effective Tax Rate 26.9%
Eff/ Tax Rate - 3 Yr. Avg. 41.3%
Payout Ratio 31.6%

NX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NX stock intrinsic value calculation we used $866.555 million for the last fiscal year's total revenue generated by Quanex Building Products. The default revenue input number comes from 0001 income statement of Quanex Building Products. 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 NX stock valuation model: a) initial revenue growth rate of 2.4% 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 5.5%, whose default value for NX is calculated based on our internal credit rating of Quanex Building Products, 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 Quanex Building Products.
    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 NX stock the variable cost ratio is equal to 96.1%.

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 NX 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 Quanex Building Products.

Corporate tax rate of 27% is the nominal tax rate for Quanex Building Products. 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 NX 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 NX are equal to 44.8%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Quanex Building Products 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 NX is equal to 10.3%. 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 - $406.847 million for Quanex Building Products - 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 35.061 million for Quanex Building Products 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 Quanex Building Products at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Quanex: Fiscal 3Q Earnings Snapshot   [04:33PM  Associated Press]
▶ The 5 Best Stocks to Buy for August   [Jul-31-18 02:40PM  InvestorPlace]
▶ Quanex: Fiscal 2Q Earnings Snapshot   [Jun-04-18 04:23PM  Associated Press]
▶ Top NYSE Cheap Stocks To Buy   [10:02AM  Simply Wall St.]
▶ Quanex posts 1Q profit   [Mar-05-18 04:21PM  Associated Press]
▶ Quanex posts 4Q profit   [Dec-11-17 04:33PM  Associated Press]
▶ Quanex Building Products Declares Quarterly Dividend   [Dec-04-17 04:15PM  GlobeNewswire]
▶ Quanex posts 3Q profit   [Sep-06-17 10:41PM  Associated Press]
▶ Quanex posts 2Q profit   [May-30-17 04:23PM  Associated Press]
▶ Quanex reports 1Q loss   [Mar-06-17 05:20PM  Associated Press]

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