Intrinsic value of Perma-Pipe International Holdings - PPIH

Previous Close

$8.82

  Intrinsic Value

$15.91

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  Rating & Target

str. buy

+80%

Previous close

$8.82

 
Intrinsic value

$15.91

 
Up/down potential

+80%

 
Rating

str. buy

We calculate the intrinsic value of PPIH 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 0.1

 

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, %
  22.90
  21.11
  19.50
  18.05
  16.74
  15.57
  14.51
  13.56
  12.71
  11.93
  11.24
  10.62
  10.06
  9.55
  9.09
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
Revenue, $m
  129
  157
  187
  221
  258
  298
  341
  388
  437
  489
  544
  602
  662
  726
  792
  860
  932
  1,006
  1,084
  1,164
  1,248
  1,335
  1,425
  1,519
  1,616
  1,718
  1,824
  1,934
  2,049
  2,168
Variable operating expenses, $m
  91
  110
  132
  156
  182
  210
  240
  273
  307
  344
  382
  423
  465
  510
  556
  605
  655
  707
  762
  818
  877
  938
  1,001
  1,067
  1,136
  1,207
  1,281
  1,359
  1,440
  1,524
Fixed operating expenses, $m
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
  71
  72
  74
  75
  77
  79
Total operating expenses, $m
  133
  153
  176
  201
  228
  257
  288
  322
  357
  395
  434
  476
  519
  566
  613
  663
  714
  768
  824
  881
  942
  1,004
  1,069
  1,136
  1,207
  1,279
  1,355
  1,434
  1,517
  1,603
Operating income, $m
  -4
  4
  12
  21
  31
  42
  54
  66
  80
  94
  110
  126
  143
  160
  179
  198
  218
  239
  260
  283
  306
  331
  356
  382
  410
  439
  468
  500
  532
  566
EBITDA, $m
  3
  11
  21
  31
  43
  56
  70
  84
  100
  117
  135
  154
  173
  194
  215
  238
  261
  285
  311
  337
  364
  393
  422
  453
  485
  518
  553
  589
  627
  667
Interest expense (income), $m
  0
  1
  2
  2
  3
  4
  5
  6
  7
  9
  10
  11
  13
  14
  16
  18
  20
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
Earnings before tax, $m
  -5
  2
  9
  18
  27
  37
  47
  59
  71
  84
  98
  113
  128
  144
  161
  178
  196
  215
  235
  255
  277
  299
  322
  346
  371
  397
  424
  452
  481
  512
Tax expense, $m
  0
  1
  3
  5
  7
  10
  13
  16
  19
  23
  27
  30
  35
  39
  43
  48
  53
  58
  63
  69
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
Net income, $m
  -5
  1
  7
  13
  20
  27
  35
  43
  52
  62
  72
  82
  94
  105
  117
  130
  143
  157
  171
  186
  202
  218
  235
  252
  271
  290
  309
  330
  351
  374

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
  129
  156
  186
  220
  257
  297
  340
  386
  435
  487
  542
  600
  660
  723
  789
  857
  928
  1,002
  1,080
  1,160
  1,243
  1,329
  1,419
  1,513
  1,610
  1,711
  1,816
  1,926
  2,040
  2,160
Adjusted assets (=assets-cash), $m
  129
  156
  186
  220
  257
  297
  340
  386
  435
  487
  542
  600
  660
  723
  789
  857
  928
  1,002
  1,080
  1,160
  1,243
  1,329
  1,419
  1,513
  1,610
  1,711
  1,816
  1,926
  2,040
  2,160
Revenue / Adjusted assets
  1.000
  1.006
  1.005
  1.005
  1.004
  1.003
  1.003
  1.005
  1.005
  1.004
  1.004
  1.003
  1.003
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
  1.003
  1.004
  1.005
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
Average production assets, $m
  45
  55
  65
  77
  90
  104
  119
  135
  152
  170
  189
  209
  231
  253
  276
  299
  324
  350
  377
  405
  434
  464
  496
  529
  562
  598
  635
  673
  713
  755
Working capital, $m
  28
  34
  41
  48
  56
  65
  74
  85
  95
  107
  119
  131
  144
  158
  173
  188
  203
  219
  236
  254
  272
  291
  311
  331
  352
  375
  398
  422
  447
  473
Total debt, $m
  28
  42
  57
  74
  93
  113
  135
  158
  183
  209
  237
  266
  296
  328
  361
  396
  432
  469
  508
  549
  591
  634
  680
  727
  776
  827
  880
  936
  993
  1,054
Total liabilities, $m
  65
  79
  94
  111
  130
  150
  172
  195
  220
  246
  274
  303
  333
  365
  398
  433
  469
  506
  545
  586
  628
  671
  717
  764
  813
  864
  917
  973
  1,030
  1,091
Total equity, $m
  64
  77
  92
  109
  127
  147
  168
  191
  215
  241
  268
  297
  327
  358
  390
  424
  460
  496
  534
  574
  615
  658
  702
  749
  797
  847
  899
  953
  1,010
  1,069
Total liabilities and equity, $m
  129
  156
  186
  220
  257
  297
  340
  386
  435
  487
  542
  600
  660
  723
  788
  857
  929
  1,002
  1,079
  1,160
  1,243
  1,329
  1,419
  1,513
  1,610
  1,711
  1,816
  1,926
  2,040
  2,160
Debt-to-equity ratio
  0.440
  0.540
  0.620
  0.680
  0.730
  0.770
  0.800
  0.830
  0.850
  0.870
  0.880
  0.900
  0.910
  0.920
  0.930
  0.930
  0.940
  0.950
  0.950
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.990
Adjusted equity ratio
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  1
  7
  13
  20
  27
  35
  43
  52
  62
  72
  82
  94
  105
  117
  130
  143
  157
  171
  186
  202
  218
  235
  252
  271
  290
  309
  330
  351
  374
Depreciation, amort., depletion, $m
  6
  8
  9
  10
  12
  14
  16
  18
  21
  23
  25
  28
  31
  34
  37
  40
  43
  47
  50
  54
  58
  62
  66
  70
  75
  80
  85
  90
  95
  101
Funds from operations, $m
  2
  9
  16
  23
  32
  41
  51
  61
  73
  85
  97
  110
  124
  139
  154
  170
  187
  204
  222
  240
  260
  280
  301
  323
  346
  369
  394
  420
  447
  475
Change in working capital, $m
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
Cash from operations, $m
  -4
  3
  9
  16
  24
  32
  41
  51
  62
  73
  85
  98
  111
  125
  140
  155
  171
  188
  205
  223
  242
  261
  281
  302
  324
  347
  371
  396
  422
  448
Maintenance CAPEX, $m
  -5
  -6
  -7
  -9
  -10
  -12
  -14
  -16
  -18
  -20
  -23
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -70
  -75
  -80
  -85
  -90
  -95
New CAPEX, $m
  -8
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
Cash from investing activities, $m
  -13
  -16
  -18
  -21
  -23
  -26
  -29
  -32
  -35
  -38
  -42
  -45
  -49
  -53
  -57
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -99
  -104
  -110
  -117
  -123
  -130
  -137
Free cash flow, $m
  -17
  -12
  -9
  -4
  1
  6
  12
  19
  27
  35
  43
  52
  62
  72
  83
  94
  106
  118
  131
  145
  158
  173
  188
  204
  220
  237
  254
  273
  292
  312
Issuance/(repayment) of debt, $m
  12
  14
  15
  17
  19
  20
  22
  23
  25
  26
  28
  29
  30
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
Issuance/(repurchase) of shares, $m
  17
  12
  8
  4
  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  
  29
  26
  23
  21
  19
  20
  22
  23
  25
  26
  28
  29
  30
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
Total cash flow (excl. dividends), $m
  12
  13
  15
  16
  19
  26
  34
  43
  51
  61
  71
  81
  93
  104
  116
  129
  142
  156
  170
  185
  201
  217
  233
  251
  269
  288
  308
  328
  350
  372
Retained Cash Flow (-), $m
  -17
  -13
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
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
  -5
  0
  0
  0
  1
  7
  13
  20
  27
  35
  44
  53
  63
  73
  84
  95
  107
  119
  132
  145
  159
  174
  189
  205
  221
  238
  255
  274
  293
  313
Discount rate, %
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
  -4
  0
  0
  0
  1
  4
  7
  10
  12
  14
  15
  16
  16
  15
  14
  13
  12
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  80.5
  70.4
  65.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2
  63.2

FINANCIAL RATIOS  of  Perma-Pipe International Holdings (PPIH)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PPIH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PPIH stock intrinsic value calculation we used $105.248 million for the last fiscal year's total revenue generated by Perma-Pipe International Holdings. The default revenue input number comes from 0001 income statement of Perma-Pipe International Holdings. 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 PPIH stock valuation model: a) initial revenue growth rate of 22.9% 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 6.3%, whose default value for PPIH is calculated based on our internal credit rating of Perma-Pipe International Holdings, 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 Perma-Pipe International Holdings.
    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 PPIH stock the variable cost ratio is equal to 70.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $41 million in the base year in the intrinsic value calculation for PPIH 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 Perma-Pipe International Holdings.

Corporate tax rate of 27% is the nominal tax rate for Perma-Pipe International Holdings. 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 PPIH 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 PPIH are equal to 34.8%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Perma-Pipe International Holdings 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 PPIH is equal to 21.8%. 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 - $51.812 million for Perma-Pipe International Holdings - 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 7.726 million for Perma-Pipe International Holdings 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 Perma-Pipe International Holdings at the current share price and the inputted number of shares is $0.1 billion.

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