Intrinsic value of Powell Industries, Inc. - POWL

Previous Close

$36.47

  Intrinsic Value

$7.76

stock screener

  Rating & Target

str. sell

-79%

Previous close

$36.47

 
Intrinsic value

$7.76

 
Up/down potential

-79%

 
Rating

str. sell

We calculate the intrinsic value of POWL 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, %
  21.30
  19.67
  18.20
  16.88
  15.69
  14.62
  13.66
  12.80
  12.02
  11.31
  10.68
  10.12
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
Revenue, $m
  545
  652
  770
  900
  1,042
  1,194
  1,357
  1,531
  1,715
  1,909
  2,113
  2,327
  2,550
  2,783
  3,026
  3,279
  3,542
  3,816
  4,100
  4,395
  4,702
  5,021
  5,352
  5,697
  6,056
  6,430
  6,819
  7,225
  7,648
  8,089
Variable operating expenses, $m
  437
  523
  618
  722
  835
  957
  1,088
  1,227
  1,375
  1,530
  1,694
  1,865
  2,044
  2,231
  2,426
  2,628
  2,839
  3,058
  3,286
  3,523
  3,769
  4,024
  4,290
  4,567
  4,854
  5,154
  5,466
  5,791
  6,130
  6,483
Fixed operating expenses, $m
  101
  103
  106
  108
  110
  113
  115
  118
  120
  123
  126
  129
  131
  134
  137
  140
  143
  146
  150
  153
  156
  160
  163
  167
  171
  174
  178
  182
  186
  190
Total operating expenses, $m
  538
  626
  724
  830
  945
  1,070
  1,203
  1,345
  1,495
  1,653
  1,820
  1,994
  2,175
  2,365
  2,563
  2,768
  2,982
  3,204
  3,436
  3,676
  3,925
  4,184
  4,453
  4,734
  5,025
  5,328
  5,644
  5,973
  6,316
  6,673
Operating income, $m
  7
  26
  47
  70
  96
  124
  154
  186
  220
  256
  294
  333
  375
  418
  463
  510
  560
  611
  664
  719
  777
  837
  899
  964
  1,031
  1,102
  1,175
  1,252
  1,332
  1,415
EBITDA, $m
  22
  45
  69
  96
  126
  158
  193
  230
  269
  310
  354
  400
  448
  498
  550
  604
  661
  720
  781
  845
  911
  980
  1,052
  1,126
  1,204
  1,285
  1,370
  1,458
  1,550
  1,646
Interest expense (income), $m
  0
  0
  3
  7
  11
  15
  20
  25
  30
  36
  42
  48
  55
  62
  69
  77
  85
  93
  102
  111
  120
  130
  140
  150
  161
  172
  184
  196
  209
  223
  236
Earnings before tax, $m
  7
  22
  40
  60
  81
  104
  129
  156
  184
  214
  245
  278
  313
  349
  387
  426
  467
  509
  553
  599
  647
  697
  749
  803
  859
  917
  979
  1,042
  1,109
  1,179
Tax expense, $m
  2
  6
  11
  16
  22
  28
  35
  42
  50
  58
  66
  75
  84
  94
  104
  115
  126
  137
  149
  162
  175
  188
  202
  217
  232
  248
  264
  281
  299
  318
Net income, $m
  5
  16
  29
  44
  59
  76
  94
  114
  134
  156
  179
  203
  228
  255
  282
  311
  341
  372
  404
  437
  472
  509
  546
  586
  627
  670
  714
  761
  810
  860

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
  522
  624
  738
  863
  998
  1,144
  1,300
  1,466
  1,643
  1,829
  2,024
  2,229
  2,443
  2,666
  2,899
  3,141
  3,393
  3,655
  3,927
  4,210
  4,504
  4,809
  5,127
  5,457
  5,801
  6,159
  6,532
  6,920
  7,325
  7,748
Adjusted assets (=assets-cash), $m
  522
  624
  738
  863
  998
  1,144
  1,300
  1,466
  1,643
  1,829
  2,024
  2,229
  2,443
  2,666
  2,899
  3,141
  3,393
  3,655
  3,927
  4,210
  4,504
  4,809
  5,127
  5,457
  5,801
  6,159
  6,532
  6,920
  7,325
  7,748
Revenue / Adjusted assets
  1.044
  1.045
  1.043
  1.043
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
  1.044
Average production assets, $m
  163
  196
  231
  270
  313
  358
  407
  459
  514
  573
  634
  698
  765
  835
  908
  984
  1,063
  1,145
  1,230
  1,318
  1,411
  1,506
  1,606
  1,709
  1,817
  1,929
  2,046
  2,167
  2,294
  2,427
Working capital, $m
  102
  123
  145
  169
  196
  225
  255
  288
  322
  359
  397
  437
  479
  523
  569
  616
  666
  717
  771
  826
  884
  944
  1,006
  1,071
  1,139
  1,209
  1,282
  1,358
  1,438
  1,521
Total debt, $m
  29
  59
  93
  130
  171
  214
  261
  310
  363
  418
  476
  537
  601
  668
  737
  809
  884
  962
  1,044
  1,128
  1,215
  1,306
  1,401
  1,500
  1,602
  1,709
  1,820
  1,936
  2,056
  2,182
Total liabilities, $m
  155
  186
  220
  257
  297
  341
  387
  437
  490
  545
  603
  664
  728
  794
  864
  936
  1,011
  1,089
  1,170
  1,254
  1,342
  1,433
  1,528
  1,626
  1,729
  1,835
  1,946
  2,062
  2,183
  2,309
Total equity, $m
  366
  438
  518
  605
  701
  803
  913
  1,029
  1,153
  1,284
  1,421
  1,565
  1,715
  1,872
  2,035
  2,205
  2,382
  2,566
  2,757
  2,955
  3,162
  3,376
  3,599
  3,831
  4,072
  4,324
  4,585
  4,858
  5,142
  5,439
Total liabilities and equity, $m
  521
  624
  738
  862
  998
  1,144
  1,300
  1,466
  1,643
  1,829
  2,024
  2,229
  2,443
  2,666
  2,899
  3,141
  3,393
  3,655
  3,927
  4,209
  4,504
  4,809
  5,127
  5,457
  5,801
  6,159
  6,531
  6,920
  7,325
  7,748
Debt-to-equity ratio
  0.080
  0.140
  0.180
  0.220
  0.240
  0.270
  0.290
  0.300
  0.310
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.380
  0.390
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
  0.400
  0.400
Adjusted equity ratio
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  16
  29
  44
  59
  76
  94
  114
  134
  156
  179
  203
  228
  255
  282
  311
  341
  372
  404
  437
  472
  509
  546
  586
  627
  670
  714
  761
  810
  860
Depreciation, amort., depletion, $m
  16
  19
  22
  26
  30
  34
  39
  44
  49
  55
  60
  66
  73
  80
  86
  94
  101
  109
  117
  126
  134
  143
  153
  163
  173
  184
  195
  206
  219
  231
Funds from operations, $m
  21
  35
  52
  70
  89
  110
  133
  158
  184
  211
  240
  270
  301
  334
  369
  404
  442
  481
  521
  563
  607
  652
  699
  749
  800
  853
  909
  967
  1,028
  1,091
Change in working capital, $m
  18
  20
  22
  24
  27
  29
  31
  33
  35
  36
  38
  40
  42
  44
  46
  48
  49
  51
  53
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  83
Cash from operations, $m
  3
  15
  29
  45
  63
  82
  103
  125
  149
  174
  201
  230
  259
  290
  323
  357
  392
  429
  468
  507
  549
  592
  637
  684
  732
  783
  836
  891
  949
  1,008
Maintenance CAPEX, $m
  -13
  -16
  -19
  -22
  -26
  -30
  -34
  -39
  -44
  -49
  -55
  -60
  -66
  -73
  -80
  -86
  -94
  -101
  -109
  -117
  -126
  -134
  -143
  -153
  -163
  -173
  -184
  -195
  -206
  -219
New CAPEX, $m
  -28
  -32
  -36
  -39
  -42
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -99
  -103
  -108
  -112
  -117
  -122
  -127
  -132
Cash from investing activities, $m
  -41
  -48
  -55
  -61
  -68
  -76
  -83
  -91
  -99
  -107
  -116
  -124
  -133
  -143
  -153
  -162
  -173
  -183
  -194
  -206
  -218
  -230
  -242
  -256
  -271
  -285
  -301
  -317
  -333
  -351
Free cash flow, $m
  -39
  -33
  -25
  -16
  -5
  6
  20
  34
  50
  67
  85
  105
  126
  148
  171
  195
  220
  246
  273
  302
  331
  362
  394
  427
  462
  498
  536
  575
  615
  658
Issuance/(repayment) of debt, $m
  27
  31
  34
  37
  40
  43
  47
  50
  53
  55
  58
  61
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  98
  102
  107
  111
  116
  121
  126
Issuance/(repurchase) of shares, $m
  60
  56
  50
  44
  36
  26
  15
  3
  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  
  87
  87
  84
  81
  76
  69
  62
  53
  53
  55
  58
  61
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  98
  102
  107
  111
  116
  121
  126
Total cash flow (excl. dividends), $m
  48
  54
  59
  65
  71
  76
  82
  87
  103
  123
  144
  166
  190
  214
  240
  267
  295
  324
  354
  386
  419
  453
  489
  526
  564
  605
  647
  690
  736
  784
Retained Cash Flow (-), $m
  -65
  -72
  -80
  -87
  -95
  -102
  -110
  -117
  -124
  -130
  -137
  -144
  -150
  -157
  -163
  -170
  -177
  -184
  -191
  -199
  -206
  -214
  -223
  -232
  -241
  -251
  -262
  -273
  -284
  -297
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
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -21
  -8
  7
  22
  39
  57
  77
  97
  118
  140
  163
  187
  213
  239
  266
  294
  323
  353
  385
  418
  452
  487
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
  -16
  -17
  -18
  -18
  -19
  -19
  -19
  -19
  -12
  -4
  3
  10
  15
  19
  22
  25
  26
  26
  25
  24
  22
  20
  17
  15
  13
  10
  8
  6
  5
  4
Current shareholders' claim on cash, %
  88.3
  80.1
  74.4
  70.4
  67.7
  66.0
  65.2
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1
  65.1

Powell Industries, Inc. develops design, manufactures and services custom-engineered equipment and systems for the distribution, control and monitoring of electrical energy designed to distribute, control and monitor the flow of electrical energy, and provide protection to motors, transformers and other electrically powered equipment. The Company's principal products include integrated power control room substations (PCRs), custom-engineered modules, electrical houses (E-Houses), traditional and arc-resistant distribution switchgear and control gear, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers and bus duct systems. These products are designed for application voltages ranging from 480 volts to 38,000 volts, and are used in oil and gas refining, offshore oil and gas production, petrochemical, pipeline, terminal, mining and metals, light rail traction power, electric utility, pulp and paper, and other heavy industrial markets.

FINANCIAL RATIOS  of  Powell Industries, Inc. (POWL)

Valuation Ratios
P/E Ratio -46.3
Price to Sales 1.1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 11.3
Price to Free Cash Flow 12.6
Growth Rates
Sales Growth Rate -29.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate -25.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0.6%
Total Debt to Equity 0.6%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.1%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital -2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 1.5%
Return On Equity -2.7%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 12.9%
Gross Margin - 3 Yr. Avg. 16%
EBITDA Margin -1.3%
EBITDA Margin - 3 Yr. Avg. 3.2%
Operating Margin -4.8%
Oper. Margin - 3 Yr. Avg. 0.4%
Pre-Tax Margin -4.3%
Pre-Tax Margin - 3 Yr. Avg. 0.8%
Net Profit Margin -2.3%
Net Profit Margin - 3 Yr. Avg. 0.6%
Effective Tax Rate 47.1%
Eff/ Tax Rate - 3 Yr. Avg. 39.7%
Payout Ratio -133.3%

POWL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the POWL stock intrinsic value calculation we used $449 million for the last fiscal year's total revenue generated by Powell Industries, Inc.. The default revenue input number comes from 0001 income statement of Powell Industries, 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 POWL stock valuation model: a) initial revenue growth rate of 21.3% 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 POWL is calculated based on our internal credit rating of Powell Industries, 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 Powell Industries, 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 POWL stock the variable cost ratio is equal to 80.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $99 million in the base year in the intrinsic value calculation for POWL 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 11.5% for Powell Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for Powell Industries, 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 POWL 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 POWL are equal to 30%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Powell Industries, 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 POWL is equal to 18.8%. 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 - $301.644 million for Powell Industries, 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 12.338 million for Powell Industries, 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 Powell Industries, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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