Intrinsic value of Park-Ohio Holdings Corp. - PKOH

Previous Close

$28.05

  Intrinsic Value

$50.49

stock screener

  Rating & Target

str. buy

+80%

Previous close

$28.05

 
Intrinsic value

$50.49

 
Up/down potential

+80%

 
Rating

str. buy

We calculate the intrinsic value of PKOH 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, %
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
Revenue, $m
  1,839
  2,028
  2,227
  2,434
  2,650
  2,874
  3,108
  3,351
  3,604
  3,867
  4,140
  4,423
  4,718
  5,025
  5,344
  5,676
  6,022
  6,382
  6,758
  7,149
  7,558
  7,985
  8,431
  8,896
  9,383
  9,892
  10,424
  10,981
  11,564
  12,174
Variable operating expenses, $m
  1,728
  1,904
  2,088
  2,281
  2,481
  2,690
  2,907
  3,133
  3,368
  3,612
  3,846
  4,109
  4,383
  4,668
  4,964
  5,273
  5,594
  5,929
  6,278
  6,642
  7,022
  7,418
  7,832
  8,264
  8,717
  9,189
  9,684
  10,201
  10,743
  11,310
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
  1,728
  1,904
  2,088
  2,281
  2,481
  2,690
  2,907
  3,133
  3,368
  3,612
  3,846
  4,109
  4,383
  4,668
  4,964
  5,273
  5,594
  5,929
  6,278
  6,642
  7,022
  7,418
  7,832
  8,264
  8,717
  9,189
  9,684
  10,201
  10,743
  11,310
Operating income, $m
  111
  124
  138
  153
  168
  184
  201
  218
  236
  255
  294
  314
  335
  357
  379
  403
  428
  453
  480
  508
  537
  567
  599
  632
  666
  702
  740
  780
  821
  864
EBITDA, $m
  161
  178
  195
  213
  232
  252
  272
  293
  315
  338
  362
  387
  413
  440
  468
  497
  527
  559
  591
  626
  661
  699
  738
  779
  821
  866
  912
  961
  1,012
  1,065
Interest expense (income), $m
  26
  35
  41
  48
  54
  61
  69
  76
  84
  93
  101
  110
  120
  129
  139
  150
  161
  172
  184
  196
  209
  222
  236
  250
  266
  281
  298
  315
  333
  352
  372
Earnings before tax, $m
  76
  83
  91
  98
  107
  115
  124
  134
  143
  153
  184
  195
  206
  218
  230
  242
  256
  270
  284
  299
  315
  331
  348
  366
  385
  404
  425
  446
  469
  492
Tax expense, $m
  20
  22
  24
  27
  29
  31
  34
  36
  39
  41
  50
  53
  56
  59
  62
  65
  69
  73
  77
  81
  85
  89
  94
  99
  104
  109
  115
  121
  127
  133
Net income, $m
  55
  61
  66
  72
  78
  84
  91
  98
  105
  112
  134
  142
  150
  159
  168
  177
  187
  197
  207
  218
  230
  242
  254
  267
  281
  295
  310
  326
  342
  359

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
  1,340
  1,478
  1,623
  1,774
  1,931
  2,095
  2,266
  2,443
  2,627
  2,818
  3,017
  3,224
  3,439
  3,662
  3,895
  4,137
  4,389
  4,652
  4,925
  5,211
  5,509
  5,820
  6,145
  6,484
  6,839
  7,210
  7,598
  8,004
  8,428
  8,873
Adjusted assets (=assets-cash), $m
  1,340
  1,478
  1,623
  1,774
  1,931
  2,095
  2,266
  2,443
  2,627
  2,818
  3,017
  3,224
  3,439
  3,662
  3,895
  4,137
  4,389
  4,652
  4,925
  5,211
  5,509
  5,820
  6,145
  6,484
  6,839
  7,210
  7,598
  8,004
  8,428
  8,873
Revenue / Adjusted assets
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
  1.372
Average production assets, $m
  331
  365
  401
  438
  477
  517
  559
  603
  649
  696
  745
  796
  849
  904
  962
  1,022
  1,084
  1,149
  1,216
  1,287
  1,360
  1,437
  1,517
  1,601
  1,689
  1,781
  1,876
  1,977
  2,081
  2,191
Working capital, $m
  427
  471
  517
  565
  615
  667
  721
  778
  836
  897
  960
  1,026
  1,095
  1,166
  1,240
  1,317
  1,397
  1,481
  1,568
  1,659
  1,753
  1,852
  1,956
  2,064
  2,177
  2,295
  2,418
  2,548
  2,683
  2,824
Total debt, $m
  665
  769
  878
  992
  1,110
  1,233
  1,362
  1,495
  1,634
  1,778
  1,928
  2,083
  2,245
  2,414
  2,589
  2,771
  2,961
  3,159
  3,365
  3,580
  3,804
  4,038
  4,283
  4,538
  4,805
  5,085
  5,377
  5,683
  6,003
  6,338
Total liabilities, $m
  1,009
  1,113
  1,222
  1,336
  1,454
  1,578
  1,706
  1,839
  1,978
  2,122
  2,272
  2,428
  2,589
  2,758
  2,933
  3,115
  3,305
  3,503
  3,709
  3,924
  4,148
  4,382
  4,627
  4,882
  5,150
  5,429
  5,721
  6,027
  6,347
  6,682
Total equity, $m
  331
  365
  401
  438
  477
  517
  560
  603
  649
  696
  745
  796
  849
  905
  962
  1,022
  1,084
  1,149
  1,217
  1,287
  1,361
  1,438
  1,518
  1,602
  1,689
  1,781
  1,877
  1,977
  2,082
  2,192
Total liabilities and equity, $m
  1,340
  1,478
  1,623
  1,774
  1,931
  2,095
  2,266
  2,442
  2,627
  2,818
  3,017
  3,224
  3,438
  3,663
  3,895
  4,137
  4,389
  4,652
  4,926
  5,211
  5,509
  5,820
  6,145
  6,484
  6,839
  7,210
  7,598
  8,004
  8,429
  8,874
Debt-to-equity ratio
  2.010
  2.110
  2.190
  2.260
  2.330
  2.380
  2.430
  2.480
  2.520
  2.550
  2.590
  2.620
  2.640
  2.670
  2.690
  2.710
  2.730
  2.750
  2.770
  2.780
  2.800
  2.810
  2.820
  2.830
  2.840
  2.860
  2.870
  2.870
  2.880
  2.890
Adjusted equity ratio
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247
  0.247

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  61
  66
  72
  78
  84
  91
  98
  105
  112
  134
  142
  150
  159
  168
  177
  187
  197
  207
  218
  230
  242
  254
  267
  281
  295
  310
  326
  342
  359
Depreciation, amort., depletion, $m
  50
  53
  57
  60
  64
  67
  71
  75
  79
  84
  68
  73
  78
  83
  88
  94
  99
  105
  112
  118
  125
  132
  139
  147
  155
  163
  172
  181
  191
  201
Funds from operations, $m
  105
  114
  123
  132
  142
  152
  162
  173
  184
  196
  202
  215
  228
  242
  256
  271
  286
  302
  319
  336
  355
  374
  393
  414
  436
  459
  482
  507
  533
  560
Change in working capital, $m
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  68
  71
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  142
Cash from operations, $m
  64
  70
  77
  84
  91
  99
  108
  116
  125
  135
  139
  149
  160
  171
  182
  194
  206
  219
  232
  245
  260
  275
  290
  306
  323
  340
  359
  378
  398
  419
Maintenance CAPEX, $m
  -27
  -30
  -33
  -37
  -40
  -44
  -47
  -51
  -55
  -60
  -64
  -68
  -73
  -78
  -83
  -88
  -94
  -99
  -105
  -112
  -118
  -125
  -132
  -139
  -147
  -155
  -163
  -172
  -181
  -191
New CAPEX, $m
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -100
  -105
  -110
Cash from investing activities, $m
  -60
  -64
  -69
  -74
  -79
  -84
  -89
  -95
  -100
  -107
  -113
  -119
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -183
  -192
  -202
  -212
  -223
  -235
  -247
  -259
  -272
  -286
  -301
Free cash flow, $m
  3
  5
  8
  10
  12
  15
  18
  21
  25
  28
  26
  30
  34
  38
  42
  46
  50
  54
  59
  63
  68
  73
  78
  83
  88
  94
  100
  106
  112
  118
Issuance/(repayment) of debt, $m
  100
  104
  109
  114
  118
  123
  128
  133
  139
  144
  150
  156
  162
  168
  175
  182
  190
  198
  206
  215
  224
  234
  245
  256
  267
  279
  292
  306
  320
  335
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  
  100
  104
  109
  114
  118
  123
  128
  133
  139
  144
  150
  156
  162
  168
  175
  182
  190
  198
  206
  215
  224
  234
  245
  256
  267
  279
  292
  306
  320
  335
Total cash flow (excl. dividends), $m
  103
  109
  116
  124
  131
  139
  147
  155
  163
  172
  176
  186
  195
  206
  217
  228
  240
  252
  265
  278
  292
  307
  323
  339
  356
  373
  392
  411
  432
  453
Retained Cash Flow (-), $m
  -32
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -100
  -105
  -110
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
  71
  75
  81
  86
  92
  98
  104
  111
  118
  125
  127
  134
  142
  151
  159
  168
  177
  187
  197
  208
  219
  230
  242
  255
  268
  282
  296
  311
  327
  343
Discount rate, %
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
  65
  63
  60
  57
  54
  50
  46
  41
  37
  32
  27
  23
  19
  16
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  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
  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

Park-Ohio Holdings Corp. is a diversified international company providing supply chain management outsourcing services, capital equipment used on their production lines and manufactured components used to assemble its products. The Company operates in three segments: Supply Technologies, Assembly Components and Engineered Products. Supply Technologies provides its customers with Total Supply Management, which manages every aspect of supplying production parts and materials to its customers' manufacturing floor, from strategic planning to program implementation. Assembly Components manufactures products oriented towards fuel efficiency and reduced emission standards. Engineered Products segment operates a group of manufacturing businesses that design and manufacture a range of products, including induction heating and melting systems, pipe threading systems, and forged and machined products. It operates through the subsidiaries of its direct subsidiary, Park-Ohio Industries, Inc.

FINANCIAL RATIOS  of  Park-Ohio Holdings Corp. (PKOH)

Valuation Ratios
P/E Ratio 10.9
Price to Sales 0.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 4.8
Price to Free Cash Flow 7.9
Growth Rates
Sales Growth Rate -12.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.6%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 194.2%
Total Debt to Equity 208%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 6.4%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 6.7%
Return On Equity 14.8%
Return On Equity - 3 Yr. Avg. 22%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 15.9%
Gross Margin - 3 Yr. Avg. 16.3%
EBITDA Margin 7.6%
EBITDA Margin - 3 Yr. Avg. 8.3%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 3.2%
Pre-Tax Margin - 3 Yr. Avg. 4.4%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate 22%
Eff/ Tax Rate - 3 Yr. Avg. 28.9%
Payout Ratio 18.8%

PKOH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PKOH stock intrinsic value calculation we used $1658 million for the last fiscal year's total revenue generated by Park-Ohio Holdings Corp.. The default revenue input number comes from 0001 income statement of Park-Ohio Holdings Corp.. 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 PKOH stock valuation model: a) initial revenue growth rate of 10.9% 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 9.3%, whose default value for PKOH is calculated based on our internal credit rating of Park-Ohio Holdings Corp., 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 Park-Ohio Holdings Corp..
    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 PKOH stock the variable cost ratio is equal to 94.1%.

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 PKOH 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 6.2% for Park-Ohio Holdings Corp..

Corporate tax rate of 27% is the nominal tax rate for Park-Ohio Holdings Corp.. 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 PKOH 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 PKOH are equal to 18%.

Life of production assets of 10.9 years is the average useful life of capital assets used in Park-Ohio Holdings Corp. 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 PKOH is equal to 23.2%. 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 - $299 million for Park-Ohio Holdings Corp. - 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 12.661 million for Park-Ohio Holdings Corp. 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 Park-Ohio Holdings Corp. at the current share price and the inputted number of shares is $0.4 billion.

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