Intrinsic value of Simpson Manufacturing - SSD

Previous Close

$76.58

  Intrinsic Value

$3.88

stock screener

  Rating & Target

str. sell

-95%

Previous close

$76.58

 
Intrinsic value

$3.88

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of SSD 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 3.5

 

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, %
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  1,144
  1,326
  1,522
  1,733
  1,957
  2,194
  2,445
  2,709
  2,985
  3,275
  3,577
  3,891
  4,219
  4,559
  4,914
  5,282
  5,664
  6,062
  6,475
  6,904
  7,351
  7,816
  8,300
  8,804
  9,329
  9,877
  10,448
  11,044
  11,666
  12,316
Variable operating expenses, $m
  956
  1,105
  1,266
  1,439
  1,623
  1,818
  2,024
  2,241
  2,468
  2,705
  2,936
  3,195
  3,463
  3,743
  4,034
  4,336
  4,650
  4,976
  5,316
  5,668
  6,035
  6,417
  6,814
  7,228
  7,659
  8,108
  8,577
  9,066
  9,577
  10,111
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
  956
  1,105
  1,266
  1,439
  1,623
  1,818
  2,024
  2,241
  2,468
  2,705
  2,936
  3,195
  3,463
  3,743
  4,034
  4,336
  4,650
  4,976
  5,316
  5,668
  6,035
  6,417
  6,814
  7,228
  7,659
  8,108
  8,577
  9,066
  9,577
  10,111
Operating income, $m
  188
  221
  256
  294
  334
  376
  421
  468
  518
  570
  640
  697
  755
  816
  880
  946
  1,014
  1,085
  1,159
  1,236
  1,316
  1,399
  1,486
  1,576
  1,670
  1,768
  1,871
  1,977
  2,089
  2,205
EBITDA, $m
  237
  274
  315
  358
  405
  454
  506
  560
  617
  677
  740
  805
  873
  943
  1,016
  1,092
  1,171
  1,254
  1,339
  1,428
  1,520
  1,617
  1,717
  1,821
  1,930
  2,043
  2,161
  2,284
  2,413
  2,547
Interest expense (income), $m
  0
  2
  19
  37
  57
  78
  100
  124
  149
  175
  203
  232
  262
  293
  326
  360
  395
  432
  470
  510
  551
  594
  638
  685
  733
  783
  836
  890
  947
  1,007
  1,069
Earnings before tax, $m
  186
  202
  219
  237
  256
  276
  297
  320
  343
  367
  409
  435
  462
  491
  520
  550
  582
  615
  650
  685
  722
  761
  801
  843
  887
  933
  980
  1,030
  1,082
  1,136
Tax expense, $m
  50
  54
  59
  64
  69
  75
  80
  86
  93
  99
  110
  117
  125
  132
  140
  149
  157
  166
  175
  185
  195
  205
  216
  228
  239
  252
  265
  278
  292
  307
Net income, $m
  136
  147
  160
  173
  187
  202
  217
  233
  250
  268
  298
  318
  337
  358
  380
  402
  425
  449
  474
  500
  527
  556
  585
  616
  647
  681
  716
  752
  790
  829

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
  1,176
  1,363
  1,564
  1,781
  2,011
  2,255
  2,513
  2,784
  3,068
  3,366
  3,676
  3,999
  4,336
  4,686
  5,050
  5,428
  5,821
  6,230
  6,655
  7,096
  7,555
  8,033
  8,530
  9,048
  9,588
  10,151
  10,738
  11,350
  11,990
  12,657
Adjusted assets (=assets-cash), $m
  1,176
  1,363
  1,564
  1,781
  2,011
  2,255
  2,513
  2,784
  3,068
  3,366
  3,676
  3,999
  4,336
  4,686
  5,050
  5,428
  5,821
  6,230
  6,655
  7,096
  7,555
  8,033
  8,530
  9,048
  9,588
  10,151
  10,738
  11,350
  11,990
  12,657
Revenue / Adjusted assets
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
Average production assets, $m
  388
  449
  516
  587
  663
  744
  829
  918
  1,012
  1,110
  1,212
  1,319
  1,430
  1,546
  1,666
  1,790
  1,920
  2,055
  2,195
  2,341
  2,492
  2,650
  2,814
  2,985
  3,163
  3,348
  3,542
  3,744
  3,955
  4,175
Working capital, $m
  328
  381
  437
  497
  562
  630
  702
  777
  857
  940
  1,026
  1,117
  1,211
  1,309
  1,410
  1,516
  1,626
  1,740
  1,858
  1,982
  2,110
  2,243
  2,382
  2,527
  2,678
  2,835
  2,999
  3,170
  3,348
  3,535
Total debt, $m
  30
  58
  88
  121
  156
  193
  231
  272
  315
  360
  407
  456
  507
  560
  615
  672
  731
  793
  857
  923
  993
  1,065
  1,140
  1,218
  1,300
  1,385
  1,473
  1,566
  1,662
  1,763
Total liabilities, $m
  178
  206
  236
  269
  304
  341
  379
  420
  463
  508
  555
  604
  655
  708
  763
  820
  879
  941
  1,005
  1,072
  1,141
  1,213
  1,288
  1,366
  1,448
  1,533
  1,621
  1,714
  1,810
  1,911
Total equity, $m
  998
  1,157
  1,328
  1,512
  1,707
  1,915
  2,134
  2,364
  2,605
  2,857
  3,121
  3,395
  3,681
  3,978
  4,287
  4,609
  4,942
  5,289
  5,650
  6,025
  6,414
  6,820
  7,242
  7,682
  8,140
  8,618
  9,116
  9,636
  10,179
  10,746
Total liabilities and equity, $m
  1,176
  1,363
  1,564
  1,781
  2,011
  2,256
  2,513
  2,784
  3,068
  3,365
  3,676
  3,999
  4,336
  4,686
  5,050
  5,429
  5,821
  6,230
  6,655
  7,097
  7,555
  8,033
  8,530
  9,048
  9,588
  10,151
  10,737
  11,350
  11,989
  12,657
Debt-to-equity ratio
  0.030
  0.050
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.120
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
Adjusted equity ratio
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  136
  147
  160
  173
  187
  202
  217
  233
  250
  268
  298
  318
  337
  358
  380
  402
  425
  449
  474
  500
  527
  556
  585
  616
  647
  681
  716
  752
  790
  829
Depreciation, amort., depletion, $m
  48
  53
  59
  65
  71
  78
  85
  92
  100
  108
  99
  108
  117
  127
  137
  147
  157
  168
  180
  192
  204
  217
  231
  245
  259
  274
  290
  307
  324
  342
Funds from operations, $m
  184
  201
  219
  238
  258
  279
  302
  325
  350
  375
  398
  426
  455
  485
  516
  549
  582
  618
  654
  692
  732
  773
  816
  860
  907
  955
  1,006
  1,059
  1,114
  1,172
Change in working capital, $m
  48
  52
  56
  60
  64
  68
  72
  76
  79
  83
  87
  90
  94
  98
  102
  106
  110
  114
  119
  123
  128
  133
  139
  145
  151
  157
  164
  171
  179
  186
Cash from operations, $m
  136
  149
  162
  177
  194
  211
  230
  249
  270
  292
  311
  335
  361
  387
  414
  443
  473
  503
  536
  569
  603
  639
  677
  716
  756
  798
  842
  888
  935
  985
Maintenance CAPEX, $m
  -27
  -32
  -37
  -42
  -48
  -54
  -61
  -68
  -75
  -83
  -91
  -99
  -108
  -117
  -127
  -137
  -147
  -157
  -168
  -180
  -192
  -204
  -217
  -231
  -245
  -259
  -274
  -290
  -307
  -324
New CAPEX, $m
  -56
  -62
  -67
  -71
  -76
  -81
  -85
  -89
  -94
  -98
  -102
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -140
  -146
  -151
  -158
  -164
  -171
  -178
  -186
  -194
  -202
  -211
  -220
Cash from investing activities, $m
  -83
  -94
  -104
  -113
  -124
  -135
  -146
  -157
  -169
  -181
  -193
  -206
  -219
  -232
  -247
  -262
  -277
  -292
  -308
  -326
  -343
  -362
  -381
  -402
  -423
  -445
  -468
  -492
  -518
  -544
Free cash flow, $m
  53
  55
  59
  64
  69
  76
  84
  92
  101
  111
  118
  129
  141
  154
  168
  182
  196
  211
  227
  243
  260
  277
  295
  314
  333
  353
  374
  395
  418
  441
Issuance/(repayment) of debt, $m
  26
  28
  30
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  92
  97
  101
Issuance/(repurchase) of shares, $m
  10
  11
  12
  11
  9
  6
  2
  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  
  36
  39
  42
  44
  44
  43
  41
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  92
  97
  101
Total cash flow (excl. dividends), $m
  88
  95
  101
  107
  113
  119
  124
  133
  144
  156
  165
  178
  192
  207
  223
  239
  256
  273
  291
  310
  329
  350
  371
  392
  415
  438
  463
  488
  514
  541
Retained Cash Flow (-), $m
  -146
  -159
  -171
  -184
  -196
  -207
  -219
  -230
  -241
  -252
  -263
  -275
  -286
  -297
  -309
  -321
  -334
  -347
  -361
  -375
  -390
  -406
  -422
  -440
  -458
  -478
  -498
  -520
  -543
  -567
Prev. year cash balance distribution, $m
  32
  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
  -25
  -64
  -70
  -77
  -83
  -89
  -94
  -97
  -97
  -96
  -99
  -96
  -93
  -90
  -86
  -82
  -78
  -74
  -69
  -65
  -60
  -56
  -52
  -48
  -43
  -40
  -36
  -32
  -29
  -26
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
  -24
  -58
  -61
  -63
  -64
  -64
  -64
  -61
  -56
  -50
  -47
  -41
  -36
  -30
  -25
  -21
  -17
  -14
  -11
  -8
  -6
  -5
  -3
  -2
  -2
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  99.7
  99.4
  99.2
  99.0
  98.8
  98.8
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7
  98.7

Simpson Manufacturing Co., Inc., through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction. The Company's segments are North America, Europe, Asia/Pacific, and Administrative & All Other. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands and Belgium. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, South Africa, China, Taiwan and Vietnam. The Company manufactures concrete construction products used for concrete, masonry, steel construction and for concrete repair, protection and strengthening, including adhesives, chemicals and mechanical anchors.

FINANCIAL RATIOS  of  Simpson Manufacturing (SSD)

Valuation Ratios
P/E Ratio 40.4
Price to Sales 4.2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 38.2
Price to Free Cash Flow 68.5
Growth Rates
Sales Growth Rate 8.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 23.5%
Cap. Spend. - 3 Yr. Gr. Rate 19.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 10.5%
Ret/ On T. Cap. - 3 Yr. Avg. 8.6%
Return On Equity 10.5%
Return On Equity - 3 Yr. Avg. 8.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 47.9%
Gross Margin - 3 Yr. Avg. 46.2%
EBITDA Margin 19.4%
EBITDA Margin - 3 Yr. Avg. 17.8%
Operating Margin 16.3%
Oper. Margin - 3 Yr. Avg. 14.4%
Pre-Tax Margin 16.1%
Pre-Tax Margin - 3 Yr. Avg. 14.3%
Net Profit Margin 10.5%
Net Profit Margin - 3 Yr. Avg. 9.2%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.1%
Payout Ratio 36.7%

SSD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SSD stock intrinsic value calculation we used $977.025 million for the last fiscal year's total revenue generated by Simpson Manufacturing. The default revenue input number comes from 0001 income statement of Simpson Manufacturing. 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 SSD stock valuation model: a) initial revenue growth rate of 17.1% 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 SSD is calculated based on our internal credit rating of Simpson Manufacturing, 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 Simpson Manufacturing.
    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 SSD stock the variable cost ratio is equal to 83.8%.

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 SSD 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 64.3% for Simpson Manufacturing.

Corporate tax rate of 27% is the nominal tax rate for Simpson Manufacturing. 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 SSD 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 SSD are equal to 33.9%.

Life of production assets of 12.2 years is the average useful life of capital assets used in Simpson Manufacturing 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 SSD is equal to 28.7%. 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 - $884.778 million for Simpson Manufacturing - 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 46.325 million for Simpson Manufacturing 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 Simpson Manufacturing at the current share price and the inputted number of shares is $3.5 billion.

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COMPANY NEWS

▶ Simpson Manufacturing: 1Q Earnings Snapshot   [Apr-30-18 05:38PM  Associated Press]
▶ Simpson Manufacturing posts 4Q profit   [Feb-05-18 04:52PM  Associated Press]
▶ Simpson Manufacturing posts 3Q profit   [Oct-30-17 04:57PM  Associated Press]
▶ Worst-Performing Gurus' Stocks   [May-23-17 05:00PM  GuruFocus.com]
▶ Simpson Manufacturing posts 1Q profit   [Apr-27-17 07:24PM  Associated Press]

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