Intrinsic value of SIFCO Industries - SIF

Previous Close

$4.78

  Intrinsic Value

$1.37

stock screener

  Rating & Target

str. sell

-71%

Previous close

$4.78

 
Intrinsic value

$1.37

 
Up/down potential

-71%

 
Rating

str. sell

We calculate the intrinsic value of SIF 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 0.0

 

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
  124
  127
  130
  134
  138
  142
  147
  152
  158
  164
  170
  177
  185
  193
  201
  210
  219
  229
  239
  250
  262
  274
  287
  300
  315
  330
  346
  362
  380
  398
Variable operating expenses, $m
  119
  121
  125
  128
  132
  136
  141
  146
  151
  157
  161
  167
  174
  182
  189
  198
  207
  216
  226
  236
  247
  259
  271
  283
  297
  311
  326
  342
  358
  376
Fixed operating expenses, $m
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  27
  28
  29
  29
  30
  31
  31
  32
  33
Total operating expenses, $m
  136
  139
  143
  147
  151
  155
  161
  166
  172
  178
  183
  189
  197
  205
  213
  222
  232
  241
  252
  262
  274
  286
  299
  312
  326
  341
  357
  373
  390
  409
Operating income, $m
  -12
  -12
  -13
  -13
  -13
  -13
  -13
  -14
  -14
  -14
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -11
  -11
  -11
  -11
  -10
  -10
EBITDA, $m
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  18
Interest expense (income), $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Earnings before tax, $m
  -14
  -15
  -15
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -15
  -16
  -16
  -16
  -16
  -17
  -17
  -17
  -18
  -18
  -18
  -18
  -19
  -19
  -19
  -19
  -20
  -20
  -20
  -20
Tax expense, $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
Net income, $m
  -14
  -15
  -15
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -15
  -16
  -16
  -16
  -16
  -17
  -17
  -17
  -18
  -18
  -18
  -18
  -19
  -19
  -19
  -19
  -20
  -20
  -20
  -20

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
  114
  116
  119
  123
  126
  130
  135
  140
  145
  150
  156
  163
  169
  176
  184
  192
  201
  210
  219
  229
  240
  251
  263
  275
  289
  302
  317
  332
  348
  365
Adjusted assets (=assets-cash), $m
  114
  116
  119
  123
  126
  130
  135
  140
  145
  150
  156
  163
  169
  176
  184
  192
  201
  210
  219
  229
  240
  251
  263
  275
  289
  302
  317
  332
  348
  365
Revenue / Adjusted assets
  1.088
  1.095
  1.092
  1.089
  1.095
  1.092
  1.089
  1.086
  1.090
  1.093
  1.090
  1.086
  1.095
  1.097
  1.092
  1.094
  1.090
  1.090
  1.091
  1.092
  1.092
  1.092
  1.091
  1.091
  1.090
  1.093
  1.091
  1.090
  1.092
  1.090
Average production assets, $m
  56
  57
  59
  60
  62
  64
  66
  69
  71
  74
  77
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
  164
  172
  180
Working capital, $m
  32
  33
  33
  34
  35
  37
  38
  39
  41
  42
  44
  46
  47
  49
  52
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  102
Total debt, $m
  33
  34
  36
  38
  40
  42
  44
  47
  50
  53
  56
  60
  63
  67
  71
  76
  80
  85
  91
  96
  102
  108
  115
  121
  129
  136
  144
  153
  161
  171
Total liabilities, $m
  62
  64
  65
  67
  69
  71
  74
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
Total equity, $m
  51
  53
  54
  55
  57
  59
  61
  63
  65
  68
  71
  73
  77
  80
  83
  87
  91
  95
  99
  104
  108
  114
  119
  124
  130
  137
  143
  150
  157
  165
Total liabilities and equity, $m
  113
  117
  119
  122
  126
  130
  135
  139
  144
  150
  157
  162
  170
  177
  184
  192
  201
  210
  219
  230
  239
  252
  263
  275
  288
  303
  317
  332
  348
  365
Debt-to-equity ratio
  0.640
  0.650
  0.660
  0.680
  0.700
  0.710
  0.730
  0.740
  0.760
  0.780
  0.790
  0.810
  0.830
  0.840
  0.860
  0.870
  0.890
  0.900
  0.910
  0.930
  0.940
  0.950
  0.960
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.030
Adjusted equity ratio
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452
  0.452

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -14
  -15
  -15
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -15
  -16
  -16
  -16
  -16
  -17
  -17
  -17
  -18
  -18
  -18
  -18
  -19
  -19
  -19
  -19
  -20
  -20
  -20
  -20
Depreciation, amort., depletion, $m
  11
  11
  11
  11
  11
  12
  12
  12
  13
  13
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
Funds from operations, $m
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  0
  0
  1
  1
  2
  3
  4
  4
  5
  6
  7
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
Cash from operations, $m
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  0
  0
  1
  2
  3
Maintenance CAPEX, $m
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
New CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
Cash from investing activities, $m
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -14
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -19
  -21
  -22
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -34
Free cash flow, $m
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -25
  -26
  -27
  -28
  -28
  -29
  -30
  -30
  -31
  -32
Issuance/(repayment) of debt, $m
  1
  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
Issuance/(repurchase) of shares, $m
  15
  16
  16
  17
  17
  18
  18
  18
  19
  19
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  27
  28
Cash from financing (excl. dividends), $m  
  16
  17
  18
  19
  19
  20
  20
  21
  22
  22
  21
  21
  23
  23
  24
  24
  26
  26
  27
  28
  29
  29
  30
  31
  32
  34
  34
  35
  36
  37
Total cash flow (excl. dividends), $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Retained Cash Flow (-), $m
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -18
  -19
  -19
  -18
  -18
  -19
  -19
  -20
  -20
  -21
  -21
  -22
  -22
  -23
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -27
  -28
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
  -13
  -13
  -13
  -14
  -14
  -14
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -17
  -18
  -18
  -18
  -19
  -19
  -19
  -20
  -20
  -20
  -21
  -21
  -21
  -22
  -22
  -22
  -23
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  -12
  -12
  -11
  -11
  -10
  -10
  -9
  -8
  -8
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  69.5
  48.3
  33.6
  23.3
  16.1
  11.2
  7.8
  5.4
  3.8
  2.7
  1.9
  1.4
  1.0
  0.8
  0.6
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
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SIFCO Industries, Inc. is engaged in the production of forgings and machined components for the aerospace and energy markets. The Company's processes and services include forging, heat-treating and machining. The Company services both original equipment manufacturers (OEM) and aftermarket customers with products that range in size from approximately 2 to 1,200 pounds. The Company's products are made primarily of steel, stainless steel, titanium and aluminum, and include OEM and aftermarket components for aircraft and industrial gas turbine engines; steam turbine blades; structural airframe components; aircraft landing gear components; aircraft wheels and brakes; critical rotating components for helicopters, and commercial/industrial products. It also provides heat-treatment, surface-treatment, non-destructive testing and select machining of forged components. It supplies new and spare components to the United States military for aircraft, helicopters, vehicles and ammunition.

FINANCIAL RATIOS  of  SIFCO Industries (SIF)

Valuation Ratios
P/E Ratio -1.9
Price to Sales 0.2
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 2.7
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -27.5%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 10%
Total Debt to Equity 62%
Interest Coverage -6
Management Effectiveness
Return On Assets -9.8%
Ret/ On Assets - 3 Yr. Avg. -6.2%
Return On Total Capital -15.6%
Ret/ On T. Cap. - 3 Yr. Avg. -9.5%
Return On Equity -25.5%
Return On Equity - 3 Yr. Avg. -15.3%
Asset Turnover 1
Profitability Ratios
Gross Margin 10.7%
Gross Margin - 3 Yr. Avg. 11.8%
EBITDA Margin -0.8%
EBITDA Margin - 3 Yr. Avg. 0.4%
Operating Margin -9.9%
Oper. Margin - 3 Yr. Avg. -8.5%
Pre-Tax Margin -10.7%
Pre-Tax Margin - 3 Yr. Avg. -9.1%
Net Profit Margin -11.6%
Net Profit Margin - 3 Yr. Avg. -7.9%
Effective Tax Rate -7.7%
Eff/ Tax Rate - 3 Yr. Avg. 13.7%
Payout Ratio 0%

SIF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SIF stock intrinsic value calculation we used $121.458 million for the last fiscal year's total revenue generated by SIFCO Industries. The default revenue input number comes from 0001 income statement of SIFCO Industries. 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 SIF 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 5.4%, whose default value for SIF is calculated based on our internal credit rating of SIFCO Industries, 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 SIFCO Industries.
    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 SIF stock the variable cost ratio is equal to 95.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17 million in the base year in the intrinsic value calculation for SIF 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 6.3% for SIFCO Industries.

Corporate tax rate of 27% is the nominal tax rate for SIFCO Industries. 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 SIF 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 SIF are equal to 45.2%.

Life of production assets of 6.5 years is the average useful life of capital assets used in SIFCO Industries 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 SIF is equal to 25.7%. 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 - $50.131 million for SIFCO Industries - 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 5.691 million for SIFCO Industries 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 SIFCO Industries at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ SIFCO Industries, Inc. Closes its Alliance Plant Location   [Jun-01-17 04:05PM  Business Wire]
▶ 10-Q for SIFCO Industries, Inc.   [Aug-14  08:10PM  at Company Spotlight]
▶ 10-Q for SIFCO Industries, Inc.   [May-07  08:09PM  at Company Spotlight]
▶ 10-Q for SIFCO Industries, Inc.   [Feb-05  07:07PM  at Company Spotlight]
▶ 10-K for SIFCO Industries, Inc.   [Dec-04  07:07PM  Company Spotlight]
▶ SIFCO Industries, Inc. Declares Cash Dividend   [Sep-24  07:38PM  Business Wire]
▶ SIFCO Industries, Inc. Added to Russell Global Index   [Aug-08  05:23PM  Business Wire]

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