Intrinsic value of Douglas Dynamics, Inc. - PLOW

Previous Close

$38.56

  Intrinsic Value

$38.92

stock screener

  Rating & Target

hold

+1%

Previous close

$38.56

 
Intrinsic value

$38.92

 
Up/down potential

+1%

 
Rating

hold

We calculate the intrinsic value of PLOW 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 0.9

 

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, %
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
Revenue, $m
  576
  631
  688
  748
  810
  874
  941
  1,011
  1,083
  1,158
  1,236
  1,317
  1,402
  1,490
  1,581
  1,676
  1,776
  1,879
  1,988
  2,100
  2,218
  2,341
  2,470
  2,604
  2,745
  2,892
  3,046
  3,207
  3,376
  3,552
Variable operating expenses, $m
  484
  526
  570
  616
  663
  713
  764
  817
  873
  930
  949
  1,011
  1,076
  1,143
  1,214
  1,287
  1,363
  1,443
  1,526
  1,612
  1,703
  1,797
  1,896
  1,999
  2,107
  2,220
  2,338
  2,462
  2,591
  2,727
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
  484
  526
  570
  616
  663
  713
  764
  817
  873
  930
  949
  1,011
  1,076
  1,143
  1,214
  1,287
  1,363
  1,443
  1,526
  1,612
  1,703
  1,797
  1,896
  1,999
  2,107
  2,220
  2,338
  2,462
  2,591
  2,727
Operating income, $m
  92
  105
  118
  132
  147
  162
  177
  193
  210
  228
  287
  306
  326
  346
  367
  390
  413
  437
  462
  488
  515
  544
  574
  605
  638
  672
  708
  745
  784
  826
EBITDA, $m
  146
  160
  174
  189
  205
  221
  238
  255
  274
  293
  312
  333
  354
  376
  400
  424
  449
  475
  502
  531
  561
  592
  624
  658
  694
  731
  770
  810
  853
  898
Interest expense (income), $m
  14
  16
  18
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  54
  57
  61
  65
  70
  74
  79
  83
  88
  94
  99
  105
  111
  117
  124
  131
  138
Earnings before tax, $m
  76
  87
  98
  109
  121
  133
  146
  159
  173
  188
  244
  260
  276
  293
  310
  328
  347
  367
  388
  409
  432
  456
  480
  506
  533
  561
  590
  621
  654
  688
Tax expense, $m
  21
  23
  26
  29
  33
  36
  39
  43
  47
  51
  66
  70
  74
  79
  84
  89
  94
  99
  105
  111
  117
  123
  130
  137
  144
  151
  159
  168
  176
  186
Net income, $m
  56
  63
  71
  80
  88
  97
  107
  116
  126
  137
  178
  190
  201
  214
  226
  240
  254
  268
  283
  299
  315
  333
  351
  369
  389
  410
  431
  454
  477
  502

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
  744
  814
  888
  965
  1,045
  1,128
  1,214
  1,304
  1,397
  1,494
  1,595
  1,700
  1,809
  1,922
  2,040
  2,163
  2,291
  2,425
  2,565
  2,710
  2,862
  3,021
  3,187
  3,360
  3,542
  3,731
  3,930
  4,138
  4,356
  4,584
Adjusted assets (=assets-cash), $m
  744
  814
  888
  965
  1,045
  1,128
  1,214
  1,304
  1,397
  1,494
  1,595
  1,700
  1,809
  1,922
  2,040
  2,163
  2,291
  2,425
  2,565
  2,710
  2,862
  3,021
  3,187
  3,360
  3,542
  3,731
  3,930
  4,138
  4,356
  4,584
Revenue / Adjusted assets
  0.774
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
  0.775
Average production assets, $m
  292
  319
  348
  378
  410
  442
  476
  511
  548
  586
  625
  667
  709
  754
  800
  848
  899
  951
  1,006
  1,063
  1,122
  1,185
  1,250
  1,318
  1,389
  1,463
  1,541
  1,623
  1,708
  1,798
Working capital, $m
  142
  155
  169
  184
  199
  215
  231
  249
  266
  285
  304
  324
  345
  366
  389
  412
  437
  462
  489
  517
  546
  576
  608
  641
  675
  711
  749
  789
  830
  874
Total debt, $m
  319
  360
  403
  448
  495
  543
  593
  645
  700
  756
  815
  876
  939
  1,005
  1,074
  1,145
  1,220
  1,298
  1,379
  1,464
  1,552
  1,645
  1,741
  1,842
  1,948
  2,058
  2,174
  2,295
  2,421
  2,554
Total liabilities, $m
  433
  474
  517
  562
  608
  656
  707
  759
  813
  870
  928
  989
  1,053
  1,119
  1,187
  1,259
  1,334
  1,411
  1,493
  1,577
  1,666
  1,758
  1,855
  1,956
  2,061
  2,172
  2,287
  2,408
  2,535
  2,668
Total equity, $m
  311
  340
  371
  403
  437
  471
  508
  545
  584
  625
  667
  710
  756
  803
  853
  904
  958
  1,014
  1,072
  1,133
  1,196
  1,263
  1,332
  1,405
  1,480
  1,560
  1,643
  1,730
  1,821
  1,916
Total liabilities and equity, $m
  744
  814
  888
  965
  1,045
  1,127
  1,215
  1,304
  1,397
  1,495
  1,595
  1,699
  1,809
  1,922
  2,040
  2,163
  2,292
  2,425
  2,565
  2,710
  2,862
  3,021
  3,187
  3,361
  3,541
  3,732
  3,930
  4,138
  4,356
  4,584
Debt-to-equity ratio
  1.030
  1.060
  1.090
  1.110
  1.130
  1.150
  1.170
  1.180
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.270
  1.280
  1.290
  1.290
  1.300
  1.300
  1.310
  1.310
  1.320
  1.320
  1.320
  1.330
  1.330
  1.330
Adjusted equity ratio
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  63
  71
  80
  88
  97
  107
  116
  126
  137
  178
  190
  201
  214
  226
  240
  254
  268
  283
  299
  315
  333
  351
  369
  389
  410
  431
  454
  477
  502
Depreciation, amort., depletion, $m
  53
  54
  56
  57
  58
  59
  61
  62
  64
  65
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
Funds from operations, $m
  109
  118
  127
  137
  146
  157
  167
  179
  190
  202
  203
  216
  230
  244
  259
  274
  290
  306
  324
  342
  360
  380
  401
  422
  445
  468
  493
  519
  546
  574
Change in working capital, $m
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  43
Cash from operations, $m
  96
  104
  113
  122
  131
  141
  151
  161
  172
  184
  184
  196
  209
  222
  236
  250
  265
  281
  297
  314
  331
  350
  369
  389
  410
  432
  455
  479
  504
  531
Maintenance CAPEX, $m
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -69
New CAPEX, $m
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -85
  -89
Cash from investing activities, $m
  -37
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -58
  -60
  -64
  -66
  -70
  -72
  -76
  -80
  -84
  -88
  -93
  -97
  -103
  -107
  -113
  -118
  -124
  -130
  -137
  -144
  -150
  -158
Free cash flow, $m
  59
  65
  71
  78
  85
  92
  99
  107
  115
  124
  121
  130
  140
  149
  159
  170
  181
  192
  204
  216
  229
  243
  256
  271
  286
  302
  318
  336
  354
  373
Issuance/(repayment) of debt, $m
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  88
  92
  97
  101
  106
  110
  116
  121
  127
  133
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  
  39
  41
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  88
  92
  97
  101
  106
  110
  116
  121
  127
  133
Total cash flow (excl. dividends), $m
  99
  106
  114
  122
  131
  140
  150
  159
  169
  180
  180
  191
  203
  215
  228
  242
  256
  270
  285
  301
  318
  335
  353
  372
  392
  412
  434
  457
  480
  505
Retained Cash Flow (-), $m
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -66
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -95
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
  70
  77
  83
  90
  98
  105
  113
  122
  130
  139
  138
  147
  157
  168
  179
  190
  202
  214
  227
  240
  254
  269
  284
  299
  316
  333
  351
  370
  389
  410
Discount rate, %
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
  66
  66
  67
  66
  65
  63
  61
  57
  54
  50
  42
  38
  34
  30
  26
  22
  18
  15
  12
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
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Douglas Dynamics, Inc. is a manufacturer and up-fitter of commercial vehicle attachments and equipment. The Company's portfolio includes snow and ice management attachments sold under the BLIZZARD, FISHER, HENDERSON, SNOWEX and WESTERN brands, turf care equipment under the TURFEX brand and industrial maintenance equipment under the SWEEPEX brand. The Company operates through two segments: Work Truck Attachments and Work Truck Solutions. The Work Truck Attachments segment includes snow and ice management attachments sold under the FISHER, WESTERN, HENDERSON and SNOWEX brands. The Work Truck Solutions segment includes the up-fit of attachments and storage solutions for commercial work vehicles under the DEJANA brand and its related sub-brands. In its Work Truck Attachments segment, the Company offers a product line of snowplows, and sand and salt spreaders for light and heavy duty trucks. Its Work Truck Solutions products consist of truck and vehicle up-fits.

FINANCIAL RATIOS  of  Douglas Dynamics, Inc. (PLOW)

Valuation Ratios
P/E Ratio 22.2
Price to Sales 2.1
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 12.4
Price to Free Cash Flow 14.5
Growth Rates
Sales Growth Rate 4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 27.2%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 139.5%
Total Debt to Equity 140.9%
Interest Coverage 6
Management Effectiveness
Return On Assets 8.1%
Ret/ On Assets - 3 Yr. Avg. 9.8%
Return On Total Capital 8.5%
Ret/ On T. Cap. - 3 Yr. Avg. 10.9%
Return On Equity 18.5%
Return On Equity - 3 Yr. Avg. 22.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 32.2%
Gross Margin - 3 Yr. Avg. 34.5%
EBITDA Margin 22.8%
EBITDA Margin - 3 Yr. Avg. 23.7%
Operating Margin 19%
Oper. Margin - 3 Yr. Avg. 20.5%
Pre-Tax Margin 15.4%
Pre-Tax Margin - 3 Yr. Avg. 17.4%
Net Profit Margin 9.4%
Net Profit Margin - 3 Yr. Avg. 11.2%
Effective Tax Rate 39.1%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 53.8%

PLOW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PLOW stock intrinsic value calculation we used $524 million for the last fiscal year's total revenue generated by Douglas Dynamics, Inc.. The default revenue input number comes from 0001 income statement of Douglas Dynamics, Inc.. 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 PLOW stock valuation model: a) initial revenue growth rate of 10% 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 7%, whose default value for PLOW is calculated based on our internal credit rating of Douglas Dynamics, Inc., 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 Douglas Dynamics, Inc..
    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 PLOW stock the variable cost ratio is equal to 84.7%.

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 PLOW 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 5.7% for Douglas Dynamics, Inc..

Corporate tax rate of 27% is the nominal tax rate for Douglas Dynamics, Inc.. 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 PLOW 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 PLOW are equal to 50.6%.

Life of production assets of 24.9 years is the average useful life of capital assets used in Douglas Dynamics, Inc. 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 PLOW is equal to 24.6%. 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 - $282.756 million for Douglas Dynamics, Inc. - 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 22.701 million for Douglas Dynamics, Inc. 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 Douglas Dynamics, Inc. at the current share price and the inputted number of shares is $0.9 billion.

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