Intrinsic value of Rex American Resources - REX

Previous Close

$74.21

  Intrinsic Value

$74.87

stock screener

  Rating & Target

hold

+1%

Previous close

$74.21

 
Intrinsic value

$74.87

 
Up/down potential

+1%

 
Rating

hold

We calculate the intrinsic value of REX 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 2018), $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 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047
   2048

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
  462
  473
  485
  498
  514
  530
  548
  568
  589
  611
  636
  661
  689
  718
  749
  782
  817
  853
  892
  933
  976
  1,022
  1,070
  1,121
  1,174
  1,230
  1,289
  1,352
  1,417
  1,486
Variable operating expenses, $m
  411
  421
  432
  444
  457
  472
  488
  505
  524
  544
  566
  589
  613
  639
  667
  696
  727
  759
  794
  831
  869
  910
  952
  997
  1,045
  1,095
  1,148
  1,203
  1,261
  1,323
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
  411
  421
  432
  444
  457
  472
  488
  505
  524
  544
  566
  589
  613
  639
  667
  696
  727
  759
  794
  831
  869
  910
  952
  997
  1,045
  1,095
  1,148
  1,203
  1,261
  1,323
Operating income, $m
  51
  52
  53
  55
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  142
  149
  156
  163
EBITDA, $m
  70
  72
  74
  76
  78
  81
  83
  86
  90
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  148
  155
  163
  170
  178
  187
  196
  205
  215
  226
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
Earnings before tax, $m
  51
  52
  53
  54
  56
  58
  59
  61
  63
  66
  68
  71
  73
  76
  79
  83
  86
  90
  94
  98
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
Tax expense, $m
  14
  14
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
Net income, $m
  37
  38
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  101
  106
  111

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
  316
  323
  331
  341
  351
  362
  375
  388
  402
  418
  434
  452
  471
  491
  512
  534
  558
  583
  610
  638
  667
  699
  731
  766
  803
  841
  881
  924
  969
  1,016
Adjusted assets (=assets-cash), $m
  316
  323
  331
  341
  351
  362
  375
  388
  402
  418
  434
  452
  471
  491
  512
  534
  558
  583
  610
  638
  667
  699
  731
  766
  803
  841
  881
  924
  969
  1,016
Revenue / Adjusted assets
  1.462
  1.464
  1.465
  1.460
  1.464
  1.464
  1.461
  1.464
  1.465
  1.462
  1.465
  1.462
  1.463
  1.462
  1.463
  1.464
  1.464
  1.463
  1.462
  1.462
  1.463
  1.462
  1.464
  1.463
  1.462
  1.463
  1.463
  1.463
  1.462
  1.463
Average production assets, $m
  194
  199
  204
  209
  216
  223
  230
  238
  247
  257
  267
  278
  289
  302
  315
  328
  343
  358
  375
  392
  410
  429
  449
  471
  493
  517
  542
  568
  595
  624
Working capital, $m
  13
  13
  14
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  42
Total debt, $m
  2
  4
  7
  9
  13
  16
  20
  24
  29
  34
  39
  45
  50
  57
  63
  70
  78
  86
  94
  103
  112
  122
  133
  143
  155
  167
  180
  193
  207
  222
Total liabilities, $m
  99
  102
  104
  107
  111
  114
  118
  122
  127
  132
  137
  142
  148
  155
  161
  168
  176
  184
  192
  201
  210
  220
  230
  241
  253
  265
  278
  291
  305
  320
Total equity, $m
  216
  221
  227
  233
  240
  248
  257
  266
  276
  286
  298
  310
  323
  336
  351
  366
  382
  400
  418
  437
  457
  479
  501
  525
  550
  576
  604
  633
  664
  696
Total liabilities and equity, $m
  315
  323
  331
  340
  351
  362
  375
  388
  403
  418
  435
  452
  471
  491
  512
  534
  558
  584
  610
  638
  667
  699
  731
  766
  803
  841
  882
  924
  969
  1,016
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.070
  0.080
  0.090
  0.100
  0.120
  0.130
  0.140
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.230
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
Adjusted equity ratio
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  37
  38
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  101
  106
  111
Depreciation, amort., depletion, $m
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
Funds from operations, $m
  57
  58
  59
  61
  62
  64
  66
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  106
  110
  115
  121
  126
  132
  138
  144
  151
  158
  166
  174
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
Cash from operations, $m
  56
  57
  59
  60
  62
  64
  66
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
  105
  109
  114
  119
  125
  130
  136
  143
  149
  156
  164
  172
Maintenance CAPEX, $m
  -19
  -19
  -20
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
New CAPEX, $m
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
Cash from investing activities, $m
  -23
  -23
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -80
  -84
  -89
Free cash flow, $m
  33
  34
  34
  34
  35
  35
  36
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
Issuance/(repayment) of debt, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
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  
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Total cash flow (excl. dividends), $m
  36
  36
  36
  37
  38
  39
  40
  41
  42
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
Retained Cash Flow (-), $m
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
Prev. year cash balance distribution, $m
  169
  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
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Cash available for distribution, $m
  200
  31
  31
  31
  31
  31
  31
  32
  32
  33
  34
  35
  35
  36
  38
  39
  40
  41
  43
  44
  46
  48
  49
  51
  53
  56
  58
  60
  63
  66
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
  191
  28
  27
  25
  24
  23
  21
  20
  19
  17
  16
  15
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Rex American Resources Corporation is a holding company. As of January 31, 2017, the Company had invested in three ethanol production entities. It operates through alternative energy segment. As of January 31, 2017, the Company's ethanol investments include One Earth Energy, LLC (One Earth), NuGen Energy, LLC (NuGen) and Big River Resources, LLC (Big River). One Earth has its ethanol production facility in Gibson City, Illinois. NuGen operates an ethanol producing facility in Marion, South Dakota. Big River is a holding company for various entities, including Big River Resources West Burlington, LLC, which operates an ethanol plant in West Burlington, Iowa. Big River has interest in Big River United Energy, LLC, which operates an ethanol production facility located in Dyersville, Iowa. Big River has interest in an ethanol production facility, which is located in Boyceville, Wisconsin.

FINANCIAL RATIOS  of  Rex American Resources (REX)

Valuation Ratios
P/E Ratio 15.2
Price to Sales 1.1
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 8.9
Growth Rates
Sales Growth Rate 4.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.7%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.4%
Ret/ On Assets - 3 Yr. Avg. 11.5%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 14.6%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 15.6%
Gross Margin - 3 Yr. Avg. 17.4%
EBITDA Margin 17%
EBITDA Margin - 3 Yr. Avg. 21.1%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 13.9%
Pre-Tax Margin 12.6%
Pre-Tax Margin - 3 Yr. Avg. 17.1%
Net Profit Margin 7%
Net Profit Margin - 3 Yr. Avg. 9.8%
Effective Tax Rate 29.8%
Eff/ Tax Rate - 3 Yr. Avg. 30.5%
Payout Ratio 12.5%

REX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REX stock intrinsic value calculation we used $453 million for the last fiscal year's total revenue generated by Rex American Resources. The default revenue input number comes from 2018 income statement of Rex American Resources. 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 REX 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 REX is calculated based on our internal credit rating of Rex American Resources, 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 Rex American Resources.
    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 REX stock the variable cost ratio is equal to 89%.

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 REX 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 Rex American Resources.

Corporate tax rate of 27% is the nominal tax rate for Rex American Resources. 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 REX stock is equal to 0.4%.

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 REX are equal to 42%.

Life of production assets of 10 years is the average useful life of capital assets used in Rex American Resources 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 REX is equal to 2.8%. 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 - $381 million for Rex American Resources - 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 million for Rex American Resources 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 Rex American Resources at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ The List: Dayton-Area Public Company Executive Compensation   [Jul-02-18 05:16AM  American City Business Journals]
▶ Dayton company posts $120M in first-quarter sales   [May-23-18 09:35AM  American City Business Journals]
▶ REX: Fiscal 1Q Earnings Snapshot   [07:05AM  Associated Press]
▶ Here are REX Americans 3 highest-paid executives   [May-02-18 03:02PM  American City Business Journals]
▶ REX posts 4Q profit   [07:47AM  Associated Press]
▶ REX posts 3Q profit   [Nov-29-17 07:06AM  Associated Press]
▶ REX posts 2Q profit   [Aug-31-17 08:04PM  Associated Press]
▶ REX American sees 2Q profit tumble, stock price falls   [Aug-30-17 04:36PM  American City Business Journals]
▶ Anglo American appoints Chambers as next chairman   [Jun-07-17 03:31AM  Reuters]
▶ REX posts 1Q profit   [May-24-17 07:04AM  Associated Press]
▶ Here are REX American Resources 3 highest-paid executives   [May-12-17 07:20AM  American City Business Journals]
▶ Dayton ethanol company plans up to $30M in plant expansions   [Apr-03-17 06:25AM  at bizjournals.com]
▶ Dayton ethanol company plans up to $30M in plant expansions   [06:25AM  American City Business Journals]
▶ REX posts 4Q profit   [07:24AM  Associated Press]
▶ Why The Ethanol Industry Should Fear President Trump   [Jan-22-17 06:27PM  at Forbes]
▶ Is Schnitzer Steel Industries, Inc. (SCHN) A Good Stock To Buy?   [Dec-08-16 01:29PM  at Insider Monkey]
▶ [$$] Overheard: For This Company, Trumps a Gas   [12:54AM  at The Wall Street Journal]
▶ For This Company, Trump's a Gas   [Nov-30-16 02:24PM  at The Wall Street Journal]
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