Intrinsic value of Perma-Pipe International Holdings, Inc. - PPIH

Previous Close

$8.79

  Intrinsic Value

$10.22

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  Rating & Target

hold

+16%

Previous close

$8.79

 
Intrinsic value

$10.22

 
Up/down potential

+16%

 
Rating

hold

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, %
  19.30
  17.87
  16.58
  15.42
  14.38
  13.44
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
  5.67
Revenue, $m
  125
  148
  172
  199
  227
  258
  290
  325
  361
  399
  439
  480
  524
  569
  616
  665
  716
  769
  824
  881
  940
  1,002
  1,066
  1,133
  1,203
  1,275
  1,351
  1,429
  1,511
  1,597
Variable operating expenses, $m
  88
  104
  121
  140
  160
  181
  204
  228
  254
  281
  308
  338
  368
  400
  433
  468
  503
  541
  579
  619
  661
  704
  750
  797
  845
  896
  950
  1,005
  1,063
  1,123
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
  130
  147
  165
  185
  206
  228
  252
  277
  304
  332
  360
  391
  422
  456
  490
  526
  562
  602
  641
  682
  726
  770
  818
  866
  916
  968
  1,024
  1,080
  1,140
  1,202
Operating income, $m
  -5
  1
  7
  14
  22
  30
  38
  47
  57
  67
  78
  89
  101
  113
  126
  139
  153
  168
  183
  198
  214
  231
  249
  267
  286
  306
  327
  349
  372
  395
EBITDA, $m
  1
  8
  15
  23
  32
  42
  52
  63
  74
  86
  99
  112
  125
  140
  155
  170
  186
  203
  221
  239
  258
  278
  298
  320
  342
  366
  390
  415
  442
  470
Interest expense (income), $m
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
Earnings before tax, $m
  -6
  -1
  5
  11
  18
  25
  33
  42
  50
  59
  69
  79
  90
  101
  113
  125
  137
  150
  164
  178
  192
  208
  224
  240
  258
  276
  295
  314
  335
  356
Tax expense, $m
  0
  0
  1
  3
  5
  7
  9
  11
  14
  16
  19
  21
  24
  27
  30
  34
  37
  41
  44
  48
  52
  56
  60
  65
  70
  74
  80
  85
  90
  96
Net income, $m
  -6
  -1
  4
  8
  13
  19
  24
  30
  37
  43
  51
  58
  66
  74
  82
  91
  100
  110
  119
  130
  141
  152
  163
  175
  188
  201
  215
  229
  244
  260

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
  125
  147
  171
  198
  226
  257
  289
  323
  359
  397
  437
  478
  522
  567
  614
  662
  713
  766
  820
  877
  936
  998
  1,062
  1,128
  1,198
  1,270
  1,345
  1,424
  1,505
  1,591
Adjusted assets (=assets-cash), $m
  125
  147
  171
  198
  226
  257
  289
  323
  359
  397
  437
  478
  522
  567
  614
  662
  713
  766
  820
  877
  936
  998
  1,062
  1,128
  1,198
  1,270
  1,345
  1,424
  1,505
  1,591
Revenue / Adjusted assets
  1.000
  1.007
  1.006
  1.005
  1.004
  1.004
  1.003
  1.006
  1.006
  1.005
  1.005
  1.004
  1.004
  1.004
  1.003
  1.005
  1.004
  1.004
  1.005
  1.005
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
  1.004
Average production assets, $m
  44
  51
  60
  69
  79
  90
  101
  113
  126
  139
  153
  167
  182
  198
  214
  231
  249
  268
  287
  307
  327
  349
  371
  394
  418
  444
  470
  497
  526
  556
Working capital, $m
  27
  32
  38
  43
  50
  56
  63
  71
  79
  87
  96
  105
  114
  124
  134
  145
  156
  168
  180
  192
  205
  218
  232
  247
  262
  278
  294
  312
  329
  348
Total debt, $m
  26
  37
  50
  63
  77
  93
  109
  126
  145
  164
  184
  205
  226
  249
  273
  297
  323
  350
  377
  406
  436
  467
  499
  533
  568
  604
  642
  682
  723
  766
Total liabilities, $m
  63
  74
  87
  100
  114
  130
  146
  163
  182
  201
  221
  242
  263
  286
  310
  335
  360
  387
  414
  443
  473
  504
  536
  570
  605
  641
  679
  719
  760
  803
Total equity, $m
  62
  73
  85
  98
  112
  127
  143
  160
  178
  197
  216
  237
  258
  281
  304
  328
  353
  379
  406
  434
  464
  494
  526
  559
  593
  629
  666
  705
  745
  787
Total liabilities and equity, $m
  125
  147
  172
  198
  226
  257
  289
  323
  360
  398
  437
  479
  521
  567
  614
  663
  713
  766
  820
  877
  937
  998
  1,062
  1,129
  1,198
  1,270
  1,345
  1,424
  1,505
  1,590
Debt-to-equity ratio
  0.420
  0.510
  0.580
  0.640
  0.690
  0.730
  0.760
  0.790
  0.810
  0.830
  0.850
  0.860
  0.880
  0.890
  0.900
  0.910
  0.920
  0.920
  0.930
  0.930
  0.940
  0.950
  0.950
  0.950
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
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
  -6
  -1
  4
  8
  13
  19
  24
  30
  37
  43
  51
  58
  66
  74
  82
  91
  100
  110
  119
  130
  141
  152
  163
  175
  188
  201
  215
  229
  244
  260
Depreciation, amort., depletion, $m
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  20
  22
  24
  26
  29
  31
  33
  36
  38
  41
  44
  46
  49
  53
  56
  59
  63
  66
  70
  74
Funds from operations, $m
  0
  6
  12
  18
  24
  31
  38
  46
  54
  62
  71
  80
  90
  100
  111
  122
  133
  145
  158
  171
  184
  198
  213
  228
  244
  260
  278
  296
  315
  334
Change in working capital, $m
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
Cash from operations, $m
  -4
  2
  7
  12
  18
  24
  31
  38
  46
  54
  62
  71
  81
  90
  101
  111
  122
  134
  146
  158
  171
  185
  199
  213
  229
  245
  261
  279
  297
  316
Maintenance CAPEX, $m
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -13
  -15
  -17
  -19
  -20
  -22
  -24
  -26
  -29
  -31
  -33
  -36
  -38
  -41
  -44
  -46
  -49
  -53
  -56
  -59
  -63
  -66
  -70
New CAPEX, $m
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
Cash from investing activities, $m
  -12
  -14
  -16
  -17
  -19
  -22
  -23
  -25
  -28
  -30
  -33
  -34
  -37
  -40
  -42
  -46
  -49
  -51
  -55
  -58
  -62
  -65
  -68
  -72
  -77
  -81
  -85
  -90
  -95
  -100
Free cash flow, $m
  -16
  -12
  -9
  -5
  -1
  3
  8
  13
  18
  24
  30
  36
  43
  50
  58
  66
  74
  82
  91
  100
  110
  120
  130
  141
  152
  164
  176
  188
  202
  216
Issuance/(repayment) of debt, $m
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
Issuance/(repurchase) of shares, $m
  16
  12
  8
  5
  1
  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  
  26
  23
  20
  18
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
Total cash flow (excl. dividends), $m
  10
  11
  12
  13
  14
  18
  24
  30
  36
  43
  50
  57
  65
  73
  81
  90
  99
  109
  119
  129
  140
  151
  162
  174
  187
  200
  214
  228
  243
  259
Retained Cash Flow (-), $m
  -16
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
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
  -6
  -1
  0
  0
  0
  3
  8
  13
  18
  24
  30
  37
  44
  51
  58
  66
  74
  83
  91
  101
  110
  120
  131
  141
  153
  164
  177
  189
  203
  216
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
  -5
  -1
  0
  0
  0
  2
  4
  7
  8
  10
  10
  11
  11
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  81.5
  71.5
  65.8
  63.2
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8
  62.8

FINANCIAL RATIOS  of  Perma-Pipe International Holdings, Inc. (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 million for the last fiscal year's total revenue generated by Perma-Pipe International Holdings, Inc.. The default revenue input number comes from 0001 income statement of Perma-Pipe International Holdings, 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 PPIH stock valuation model: a) initial revenue growth rate of 19.3% 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 6.3%, whose default value for PPIH is calculated based on our internal credit rating of Perma-Pipe International Holdings, 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 Perma-Pipe International Holdings, 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 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Perma-Pipe International Holdings, 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 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, 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 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, 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 7.886 million for Perma-Pipe International Holdings, 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 Perma-Pipe International Holdings, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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