Intrinsic value of OMNOVA Solutions - OMN

Previous Close

$8.33

  Intrinsic Value

$4.04

stock screener

  Rating & Target

str. sell

-52%

Previous close

$8.33

 
Intrinsic value

$4.04

 
Up/down potential

-52%

 
Rating

str. sell

We calculate the intrinsic value of OMN 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 0.4

 

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
  799
  817
  838
  862
  888
  916
  948
  981
  1,018
  1,057
  1,099
  1,143
  1,191
  1,241
  1,295
  1,352
  1,412
  1,475
  1,542
  1,613
  1,688
  1,767
  1,850
  1,937
  2,030
  2,127
  2,229
  2,337
  2,450
  2,569
Variable operating expenses, $m
  759
  777
  796
  818
  843
  870
  899
  930
  964
  1,001
  1,028
  1,069
  1,114
  1,161
  1,211
  1,264
  1,320
  1,380
  1,443
  1,509
  1,579
  1,653
  1,730
  1,812
  1,899
  1,989
  2,085
  2,186
  2,291
  2,403
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
  759
  777
  796
  818
  843
  870
  899
  930
  964
  1,001
  1,028
  1,069
  1,114
  1,161
  1,211
  1,264
  1,320
  1,380
  1,443
  1,509
  1,579
  1,653
  1,730
  1,812
  1,899
  1,989
  2,085
  2,186
  2,291
  2,403
Operating income, $m
  39
  41
  42
  43
  45
  47
  49
  51
  54
  56
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  120
  125
  131
  137
  144
  151
  158
  166
EBITDA, $m
  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
  23
  22
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  70
  74
  78
  82
  87
  92
Earnings before tax, $m
  18
  20
  20
  21
  22
  22
  23
  24
  25
  26
  39
  40
  41
  43
  44
  45
  47
  48
  50
  51
  53
  55
  57
  59
  61
  64
  66
  69
  71
  74
Tax expense, $m
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  11
  11
  11
  11
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
Net income, $m
  13
  14
  15
  15
  16
  16
  17
  17
  18
  19
  29
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54

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
  625
  639
  656
  674
  695
  717
  742
  768
  796
  827
  860
  895
  932
  971
  1,013
  1,058
  1,105
  1,154
  1,207
  1,262
  1,321
  1,382
  1,447
  1,516
  1,588
  1,664
  1,744
  1,828
  1,917
  2,010
Adjusted assets (=assets-cash), $m
  625
  639
  656
  674
  695
  717
  742
  768
  796
  827
  860
  895
  932
  971
  1,013
  1,058
  1,105
  1,154
  1,207
  1,262
  1,321
  1,382
  1,447
  1,516
  1,588
  1,664
  1,744
  1,828
  1,917
  2,010
Revenue / Adjusted assets
  1.278
  1.279
  1.277
  1.279
  1.278
  1.278
  1.278
  1.277
  1.279
  1.278
  1.278
  1.277
  1.278
  1.278
  1.278
  1.278
  1.278
  1.278
  1.278
  1.278
  1.278
  1.279
  1.279
  1.278
  1.278
  1.278
  1.278
  1.278
  1.278
  1.278
Average production assets, $m
  276
  283
  290
  298
  307
  317
  328
  340
  352
  366
  380
  396
  412
  429
  448
  468
  488
  510
  534
  558
  584
  611
  640
  670
  702
  736
  771
  808
  848
  889
Working capital, $m
  77
  79
  81
  84
  86
  89
  92
  95
  99
  103
  107
  111
  116
  120
  126
  131
  137
  143
  150
  156
  164
  171
  179
  188
  197
  206
  216
  227
  238
  249
Total debt, $m
  342
  355
  370
  386
  405
  425
  447
  471
  496
  524
  553
  585
  618
  654
  691
  731
  774
  818
  866
  915
  968
  1,024
  1,082
  1,144
  1,209
  1,277
  1,349
  1,425
  1,505
  1,588
Total liabilities, $m
  563
  575
  590
  607
  625
  645
  667
  691
  717
  744
  774
  805
  839
  874
  912
  952
  994
  1,039
  1,086
  1,136
  1,189
  1,244
  1,303
  1,364
  1,429
  1,498
  1,570
  1,645
  1,725
  1,809
Total equity, $m
  63
  64
  66
  67
  69
  72
  74
  77
  80
  83
  86
  89
  93
  97
  101
  106
  110
  115
  121
  126
  132
  138
  145
  152
  159
  166
  174
  183
  192
  201
Total liabilities and equity, $m
  626
  639
  656
  674
  694
  717
  741
  768
  797
  827
  860
  894
  932
  971
  1,013
  1,058
  1,104
  1,154
  1,207
  1,262
  1,321
  1,382
  1,448
  1,516
  1,588
  1,664
  1,744
  1,828
  1,917
  2,010
Debt-to-equity ratio
  5.470
  5.550
  5.640
  5.730
  5.820
  5.920
  6.030
  6.130
  6.230
  6.330
  6.430
  6.530
  6.630
  6.730
  6.820
  6.910
  7.000
  7.090
  7.170
  7.250
  7.330
  7.400
  7.480
  7.540
  7.610
  7.670
  7.740
  7.790
  7.850
  7.900
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  14
  15
  15
  16
  16
  17
  17
  18
  19
  29
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
Depreciation, amort., depletion, $m
  35
  36
  36
  37
  38
  39
  40
  41
  42
  43
  32
  33
  34
  36
  37
  39
  41
  43
  44
  47
  49
  51
  53
  56
  59
  61
  64
  67
  71
  74
Funds from operations, $m
  48
  50
  51
  52
  54
  55
  56
  58
  60
  62
  60
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  113
  118
  123
  128
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
Cash from operations, $m
  47
  48
  49
  50
  51
  52
  53
  55
  56
  58
  56
  58
  60
  62
  64
  66
  69
  72
  74
  77
  80
  84
  87
  91
  94
  98
  103
  107
  112
  117
Maintenance CAPEX, $m
  -23
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -51
  -53
  -56
  -59
  -61
  -64
  -67
  -71
New CAPEX, $m
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
Cash from investing activities, $m
  -29
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -51
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -88
  -93
  -96
  -101
  -106
  -112
Free cash flow, $m
  18
  19
  18
  18
  17
  17
  16
  16
  15
  15
  11
  11
  10
  10
  10
  9
  9
  9
  9
  8
  8
  8
  7
  7
  7
  6
  6
  6
  5
  5
Issuance/(repayment) of debt, $m
  -12
  13
  15
  17
  18
  20
  22
  24
  26
  28
  29
  31
  33
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  68
  72
  76
  80
  84
Issuance/(repurchase) of shares, $m
  11
  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  
  -1
  13
  15
  17
  18
  20
  22
  24
  26
  28
  29
  31
  33
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  68
  72
  76
  80
  84
Total cash flow (excl. dividends), $m
  18
  32
  33
  34
  36
  37
  38
  40
  41
  42
  41
  42
  44
  46
  48
  49
  51
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
Retained Cash Flow (-), $m
  -24
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
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
  -7
  31
  31
  32
  34
  35
  36
  37
  38
  39
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
Discount rate, %
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
  -6
  25
  23
  21
  19
  17
  15
  14
  12
  10
  8
  6
  5
  4
  3
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
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OMNOVA Solutions Inc. is a provider of emulsion polymers, specialty chemicals and engineered surfaces for commercial, industrial and residential end uses. The Company's segments include Performance Chemicals and Engineered Surfaces. The Performance Chemicals segment produces a range of emulsion polymers and specialty chemicals based on styrene butadiene, styrene butadiene acrylonitrile, styrene butadiene vinyl pyridine, nitrile butadiene, polyvinyl acetate, acrylic, styrene acrylic, vinyl acrylic, glyoxal, fluorochemical and bio-based chemistries. The Engineered Surfaces segment develops, designs, produces and markets a line of functional and decorative surfacing products, including coated fabrics, vinyl, paper, and specialty laminates and industrial films. The Performance Chemicals segment includes two product lines: Performance Materials and Specialty Chemicals, and the Engineered Surfaces segment includes two product lines: Coated Fabrics, and Laminates and Performance Films.

FINANCIAL RATIOS  of  OMNOVA Solutions (OMN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.5
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 15
Growth Rates
Sales Growth Rate -9.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 8.3%
Cap. Spend. - 3 Yr. Gr. Rate -2.2%
Financial Strength
Quick Ratio 20
Current Ratio 0
LT Debt to Equity 320.9%
Total Debt to Equity 324.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. -2.2%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 26.8%
Gross Margin - 3 Yr. Avg. 23.4%
EBITDA Margin 8.4%
EBITDA Margin - 3 Yr. Avg. 7%
Operating Margin 1.3%
Oper. Margin - 3 Yr. Avg. -0%
Pre-Tax Margin 1.3%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 0%

OMN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OMN stock intrinsic value calculation we used $783.1 million for the last fiscal year's total revenue generated by OMNOVA Solutions. The default revenue input number comes from 0001 income statement of OMNOVA Solutions. 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 OMN 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 9.5%, whose default value for OMN is calculated based on our internal credit rating of OMNOVA Solutions, 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 OMNOVA Solutions.
    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 OMN stock the variable cost ratio is equal to 95.1%.

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 OMN 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 6.1% for OMNOVA Solutions.

Corporate tax rate of 27% is the nominal tax rate for OMNOVA Solutions. 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 OMN 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 OMN are equal to 34.6%.

Life of production assets of 12 years is the average useful life of capital assets used in OMNOVA Solutions 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 OMN is equal to 9.7%. 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 - $38.2 million for OMNOVA Solutions - 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 44.9 million for OMNOVA Solutions 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 OMNOVA Solutions at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Omnova: Fiscal 3Q Earnings Snapshot   [08:17AM  Associated Press]
▶ Omnova Solutions Q3 Earnings Preview   [Sep-25-18 02:14PM  Benzinga]
▶ OMNOVA Solutions Inc. to Host Earnings Call   [Jun-28-18 09:00AM  ACCESSWIRE]
▶ Omnova: Fiscal 2Q Earnings Snapshot   [08:34AM  Associated Press]
▶ Omnova Solutions Q2 Earnings Outlook   [Jun-27-18 02:12PM  Benzinga]
▶ Should You Buy OMNOVA Solutions Inc (NYSE:OMN)?   [Jun-26-18 11:26AM  Simply Wall St.]
▶ Omnova beats 1Q profit forecasts   [08:14AM  Associated Press]
▶ When Will OMNOVA Solutions Inc (NYSE:OMN) Become Profitable?   [Mar-26-18 07:48PM  Simply Wall St.]
▶ Gabelli & Companys 9th Specialty Chemicals Conference   [Feb-15-18 07:30AM  Business Wire]
▶ Omnova reports 4Q loss   [08:41AM  Associated Press]
▶ Omnova beats 3Q profit forecasts   [Sep-28-17 09:41PM  Associated Press]
▶ Should You Buy OMNOVA Solutions Inc (OMN) Now?   [Sep-12-17 03:19PM  Simply Wall St.]
▶ Omnova reports 2Q loss   [Jun-28-17 09:55PM  Associated Press]
▶ Omnova meets 1Q profit forecasts   [07:42AM  Associated Press]

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