Intrinsic value of FreightCar America - RAIL

Previous Close

$10.15

  Intrinsic Value

$4.22

stock screener

  Rating & Target

str. sell

-58%

Previous close

$10.15

 
Intrinsic value

$4.22

 
Up/down potential

-58%

 
Rating

str. sell

We calculate the intrinsic value of RAIL 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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  418
  427
  438
  451
  464
  479
  496
  513
  532
  553
  575
  598
  623
  649
  677
  707
  738
  771
  806
  843
  883
  924
  967
  1,013
  1,061
  1,112
  1,166
  1,222
  1,281
  1,343
Variable operating expenses, $m
  242
  247
  254
  261
  269
  277
  286
  297
  308
  319
  330
  343
  357
  372
  388
  405
  423
  443
  463
  484
  506
  530
  555
  581
  609
  638
  669
  701
  735
  771
Fixed operating expenses, $m
  213
  217
  222
  227
  232
  237
  242
  248
  253
  259
  264
  270
  276
  282
  288
  295
  301
  308
  315
  321
  328
  336
  343
  351
  358
  366
  374
  383
  391
  400
Total operating expenses, $m
  455
  464
  476
  488
  501
  514
  528
  545
  561
  578
  594
  613
  633
  654
  676
  700
  724
  751
  778
  805
  834
  866
  898
  932
  967
  1,004
  1,043
  1,084
  1,126
  1,171
Operating income, $m
  -37
  -37
  -37
  -37
  -36
  -35
  -33
  -31
  -28
  -25
  -19
  -15
  -11
  -5
  0
  7
  14
  21
  29
  38
  48
  58
  69
  81
  94
  108
  123
  138
  155
  173
EBITDA, $m
  -26
  -26
  -26
  -26
  -25
  -23
  -21
  -18
  -15
  -12
  -8
  -3
  2
  8
  14
  21
  28
  37
  46
  55
  66
  77
  89
  102
  115
  130
  146
  163
  181
  200
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
Earnings before tax, $m
  -37
  -37
  -38
  -37
  -37
  -35
  -34
  -32
  -29
  -26
  -21
  -17
  -12
  -7
  -2
  4
  11
  18
  26
  35
  44
  54
  65
  76
  89
  102
  117
  132
  148
  166
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  5
  7
  9
  12
  15
  18
  21
  24
  28
  31
  36
  40
  45
Net income, $m
  -37
  -37
  -38
  -37
  -37
  -35
  -34
  -32
  -29
  -26
  -21
  -17
  -12
  -7
  -2
  3
  8
  13
  19
  25
  32
  39
  47
  56
  65
  75
  85
  96
  108
  121

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
  300
  307
  314
  323
  333
  344
  355
  368
  382
  396
  412
  429
  447
  466
  486
  507
  530
  553
  579
  605
  633
  663
  694
  727
  761
  798
  836
  876
  919
  964
Adjusted assets (=assets-cash), $m
  300
  307
  314
  323
  333
  344
  355
  368
  382
  396
  412
  429
  447
  466
  486
  507
  530
  553
  579
  605
  633
  663
  694
  727
  761
  798
  836
  876
  919
  964
Revenue / Adjusted assets
  1.393
  1.391
  1.395
  1.396
  1.393
  1.392
  1.397
  1.394
  1.393
  1.396
  1.396
  1.394
  1.394
  1.393
  1.393
  1.394
  1.392
  1.394
  1.392
  1.393
  1.395
  1.394
  1.393
  1.393
  1.394
  1.393
  1.395
  1.395
  1.394
  1.393
Average production assets, $m
  79
  80
  82
  85
  87
  90
  93
  96
  100
  104
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  190
  200
  209
  219
  230
  241
  253
Working capital, $m
  119
  122
  125
  128
  132
  137
  141
  146
  152
  158
  164
  170
  177
  185
  193
  201
  210
  220
  230
  240
  252
  263
  276
  289
  302
  317
  332
  348
  365
  383
Total debt, $m
  1
  3
  5
  7
  9
  11
  14
  16
  19
  23
  26
  30
  34
  38
  42
  47
  52
  57
  63
  68
  74
  81
  88
  95
  103
  111
  119
  128
  137
  147
Total liabilities, $m
  66
  67
  69
  71
  73
  75
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
  159
  167
  175
  183
  192
  201
  211
Total equity, $m
  234
  239
  246
  252
  260
  268
  278
  288
  298
  310
  322
  335
  349
  364
  379
  396
  414
  432
  452
  473
  494
  518
  542
  568
  595
  623
  653
  685
  718
  753
Total liabilities and equity, $m
  300
  306
  315
  323
  333
  343
  356
  369
  382
  397
  412
  429
  447
  466
  485
  507
  530
  553
  579
  606
  633
  663
  694
  727
  762
  798
  836
  877
  919
  964
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.030
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.100
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.140
  0.150
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
Adjusted equity ratio
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -37
  -37
  -38
  -37
  -37
  -35
  -34
  -32
  -29
  -26
  -21
  -17
  -12
  -7
  -2
  3
  8
  13
  19
  25
  32
  39
  47
  56
  65
  75
  85
  96
  108
  121
Depreciation, amort., depletion, $m
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  24
  25
  26
  27
Funds from operations, $m
  -26
  -27
  -27
  -26
  -25
  -24
  -22
  -19
  -16
  -13
  -9
  -5
  0
  6
  12
  17
  23
  29
  35
  42
  50
  58
  67
  76
  86
  97
  109
  121
  134
  148
Change in working capital, $m
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
Cash from operations, $m
  -28
  -29
  -30
  -30
  -29
  -28
  -26
  -24
  -22
  -19
  -15
  -11
  -7
  -2
  4
  9
  14
  19
  25
  32
  39
  46
  54
  63
  73
  83
  93
  105
  117
  130
Maintenance CAPEX, $m
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Cash from investing activities, $m
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -21
  -23
  -23
  -24
  -26
  -27
  -29
  -29
  -31
  -32
  -35
  -36
  -38
Free cash flow, $m
  -38
  -40
  -40
  -41
  -41
  -40
  -39
  -38
  -36
  -33
  -30
  -27
  -23
  -19
  -14
  -10
  -6
  -2
  3
  9
  14
  21
  28
  35
  43
  52
  61
  71
  81
  93
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
Issuance/(repurchase) of shares, $m
  42
  43
  44
  44
  44
  44
  43
  42
  40
  38
  33
  30
  26
  22
  17
  13
  10
  5
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  43
  45
  46
  46
  46
  46
  46
  45
  43
  41
  36
  34
  30
  26
  21
  18
  15
  10
  7
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
Total cash flow (excl. dividends), $m
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  6
  6
  7
  7
  7
  8
  8
  9
  9
  14
  21
  27
  34
  42
  51
  60
  69
  80
  91
  102
Retained Cash Flow (-), $m
  -42
  -43
  -44
  -44
  -44
  -44
  -43
  -42
  -40
  -38
  -33
  -30
  -26
  -22
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
Prev. year cash balance distribution, $m
  3
  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
  -34
  -38
  -39
  -39
  -38
  -38
  -36
  -35
  -33
  -30
  -27
  -24
  -20
  -15
  -10
  -9
  -9
  -10
  -10
  -6
  -1
  4
  10
  17
  24
  31
  39
  48
  58
  68
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
  -33
  -35
  -34
  -32
  -30
  -27
  -25
  -22
  -19
  -16
  -13
  -10
  -7
  -5
  -3
  -2
  -2
  -2
  -2
  -1
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
Current shareholders' claim on cash, %
  79.4
  63.0
  50.0
  39.7
  31.8
  25.6
  20.9
  17.2
  14.4
  12.2
  10.6
  9.3
  8.4
  7.7
  7.2
  6.9
  6.6
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5
  6.5

FreightCar America, Inc. is a manufacturer of railcars and railcar components. The Company operates in the Manufacturing segment. The Company designs and manufactures a range of railcar types for transportation of bulk commodities and containerized freight products primarily in North America, including open top hoppers, covered hoppers, and gondolas along with intermodal and non-intermodal flat cars. The Company manufactures aluminum-bodied railcars, including coal cars. The Manufacturing segment includes new railcar manufacturing, used railcar sales, railcar leasing and major railcar rebuilds. The Company refurbishes and rebuilds railcars, and sells forged, cast and fabricated parts for all of the railcars. The Company also leases freight cars through its JAIX Leasing Company subsidiary. The Company's railcar manufacturing facilities are located in Cherokee, Alabama (Shoals), Danville, Illinois and Roanoke, Virginia.

FINANCIAL RATIOS  of  FreightCar America (RAIL)

Valuation Ratios
P/E Ratio 10.5
Price to Sales 0.2
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -9
Growth Rates
Sales Growth Rate -32.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.6%
Cap. Spend. - 3 Yr. Gr. Rate -3.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 4.9%
Return On Equity - 3 Yr. Avg. 7.5%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 7.6%
Gross Margin - 3 Yr. Avg. 8.5%
EBITDA Margin 5%
EBITDA Margin - 3 Yr. Avg. 5.1%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 3.6%
Pre-Tax Margin 3.1%
Pre-Tax Margin - 3 Yr. Avg. 3.5%
Net Profit Margin 2.3%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 33.3%

RAIL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RAIL stock intrinsic value calculation we used $409.474 million for the last fiscal year's total revenue generated by FreightCar America. The default revenue input number comes from 0001 income statement of FreightCar America. 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 RAIL stock valuation model: a) initial revenue growth rate of 2% 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 RAIL is calculated based on our internal credit rating of FreightCar America, 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 FreightCar America.
    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 RAIL stock the variable cost ratio is equal to 57.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $208 million in the base year in the intrinsic value calculation for RAIL 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 FreightCar America.

Corporate tax rate of 27% is the nominal tax rate for FreightCar America. 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 RAIL 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 RAIL are equal to 18.8%.

Life of production assets of 9.3 years is the average useful life of capital assets used in FreightCar America 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 RAIL is equal to 28.5%. 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 - $231.732 million for FreightCar America - 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 12.464 million for FreightCar America 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 FreightCar America at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Freightcar America: 3Q Earnings Snapshot   [07:26PM  Associated Press]
▶ Unloved Fitbit Watches Shares Slide Despite Beat   [Aug-03-18 11:00AM  TheStreet.com]
▶ Freightcar America: 2Q Earnings Snapshot   [05:04AM  Associated Press]
▶ Earnings Progress Reports: RAIL, FIT, RELL   [May-04-18 12:00PM  TheStreet.com]
▶ Freightcar America: 1Q Earnings Snapshot   [May-02-18 07:27PM  Associated Press]
▶ FreightCar America Inc (NASDAQ:RAIL): When Will It Breakeven?   [Mar-05-18 12:27PM  Simply Wall St.]
▶ Freightcar America reports 4Q loss   [05:01AM  Associated Press]
▶ Is It Too Late To Buy FreightCar America Inc (NASDAQ:RAIL)?   [Jan-31-18 04:09PM  Simply Wall St.]
▶ Freightcar America reports 3Q loss   [Nov-01-17 06:32PM  Associated Press]
▶ My 5 Favorite Dividend Stocks   [Oct-06-17 01:00PM  TheStreet.com]
▶ FreightCar America, Inc. Declares Regular Dividend   [Aug-07-17 05:00PM  GlobeNewswire]
▶ 3 Value Names Chalk Up Post-Earnings Wins   [Aug-04-17 11:00AM  TheStreet.com]
▶ Freightcar America reports 2Q loss   [Aug-03-17 06:26PM  Associated Press]
▶ Dow rallies, Nasdaq falls as mega-mergers in focus   [Jul-31-17 11:30AM  Yahoo Finance]
▶ Yahoo Finance Live: Midday Movers   [09:40AM  Yahoo Finance Video]
▶ New Strong Buys at New Highs Breaking Out Today   [May-11-17 05:57PM  Zacks]
▶ FreightCar America, Inc. Declares Regular Dividend   [May-08-17 05:00PM  GlobeNewswire]
▶ 3 Small Value Stocks That Came Up Big on Thursday   [May-05-17 11:00AM  TheStreet.com]
▶ Freightcar America posts 1Q profit   [05:03AM  Associated Press]
▶ FreightCar America, Inc. Reports First Quarter 2017 Results   [May-03-17 05:00PM  GlobeNewswire]
▶ FreightCar America Among Slim Deep-Value Pickings   [Apr-21-17 03:08PM  TheStreet.com]
▶ New Strong Sell Stocks for March 28th   [Mar-28-17 08:40AM  Zacks]
▶ FreightCar America Jumps the Value Tracks   [Mar-06-17 11:00AM  TheStreet.com]
▶ Freightcar America posts 4Q profit   [Feb-27-17 07:16PM  Associated Press]

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