Intrinsic value of TPI Composites, Inc. - TPIC

Previous Close

$29.13

  Intrinsic Value

$21.33

stock screener

  Rating & Target

sell

-27%

Previous close

$29.13

 
Intrinsic value

$21.33

 
Up/down potential

-27%

 
Rating

sell

We calculate the intrinsic value of TPIC 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 1.0

 

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, %
  14.40
  13.46
  12.61
  11.85
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.65
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
Revenue, $m
  1,178
  1,337
  1,506
  1,684
  1,872
  2,070
  2,276
  2,493
  2,718
  2,953
  3,197
  3,452
  3,716
  3,990
  4,276
  4,572
  4,881
  5,201
  5,535
  5,882
  6,243
  6,619
  7,011
  7,420
  7,847
  8,292
  8,757
  9,243
  9,751
  10,281
Variable operating expenses, $m
  1,091
  1,238
  1,394
  1,559
  1,733
  1,916
  2,107
  2,307
  2,516
  2,733
  2,959
  3,194
  3,438
  3,692
  3,956
  4,231
  4,516
  4,813
  5,121
  5,442
  5,777
  6,125
  6,488
  6,866
  7,261
  7,673
  8,103
  8,553
  9,023
  9,514
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
  1,091
  1,238
  1,394
  1,559
  1,733
  1,916
  2,107
  2,307
  2,516
  2,733
  2,959
  3,194
  3,438
  3,692
  3,956
  4,231
  4,516
  4,813
  5,121
  5,442
  5,777
  6,125
  6,488
  6,866
  7,261
  7,673
  8,103
  8,553
  9,023
  9,514
Operating income, $m
  87
  99
  112
  125
  139
  154
  169
  185
  202
  220
  239
  258
  277
  298
  319
  341
  364
  388
  413
  439
  466
  494
  524
  554
  586
  619
  654
  690
  728
  768
EBITDA, $m
  117
  133
  150
  168
  187
  206
  227
  248
  271
  294
  319
  344
  370
  398
  426
  456
  486
  518
  552
  586
  622
  660
  699
  740
  782
  827
  873
  921
  972
  1,025
Interest expense (income), $m
  11
  11
  15
  20
  25
  31
  36
  42
  48
  55
  61
  68
  76
  83
  91
  99
  108
  117
  126
  135
  145
  156
  167
  178
  189
  202
  214
  228
  242
  256
  271
Earnings before tax, $m
  76
  84
  92
  100
  109
  118
  127
  137
  148
  158
  170
  182
  194
  207
  220
  234
  248
  263
  278
  294
  310
  328
  346
  365
  384
  405
  426
  449
  472
  497
Tax expense, $m
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  75
  79
  84
  89
  93
  98
  104
  109
  115
  121
  127
  134
Net income, $m
  56
  61
  67
  73
  79
  86
  93
  100
  108
  116
  124
  133
  142
  151
  161
  171
  181
  192
  203
  215
  227
  239
  252
  266
  281
  296
  311
  328
  345
  363

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
  692
  785
  884
  989
  1,099
  1,215
  1,337
  1,464
  1,596
  1,734
  1,878
  2,027
  2,182
  2,343
  2,511
  2,685
  2,866
  3,054
  3,250
  3,454
  3,666
  3,887
  4,117
  4,357
  4,608
  4,869
  5,142
  5,428
  5,726
  6,037
Adjusted assets (=assets-cash), $m
  692
  785
  884
  989
  1,099
  1,215
  1,337
  1,464
  1,596
  1,734
  1,878
  2,027
  2,182
  2,343
  2,511
  2,685
  2,866
  3,054
  3,250
  3,454
  3,666
  3,887
  4,117
  4,357
  4,608
  4,869
  5,142
  5,428
  5,726
  6,037
Revenue / Adjusted assets
  1.702
  1.703
  1.704
  1.703
  1.703
  1.704
  1.702
  1.703
  1.703
  1.703
  1.702
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
  1.703
Average production assets, $m
  165
  187
  211
  236
  262
  290
  319
  349
  381
  413
  448
  483
  520
  559
  599
  640
  683
  728
  775
  823
  874
  927
  982
  1,039
  1,099
  1,161
  1,226
  1,294
  1,365
  1,439
Working capital, $m
  94
  107
  120
  135
  150
  166
  182
  199
  217
  236
  256
  276
  297
  319
  342
  366
  390
  416
  443
  471
  499
  530
  561
  594
  628
  663
  701
  739
  780
  823
Total debt, $m
  193
  252
  315
  382
  452
  525
  603
  683
  767
  855
  946
  1,041
  1,139
  1,242
  1,348
  1,459
  1,574
  1,693
  1,817
  1,947
  2,081
  2,222
  2,368
  2,521
  2,680
  2,846
  3,019
  3,200
  3,389
  3,587
Total liabilities, $m
  439
  498
  561
  628
  698
  772
  849
  929
  1,014
  1,101
  1,192
  1,287
  1,386
  1,488
  1,594
  1,705
  1,820
  1,939
  2,064
  2,193
  2,328
  2,468
  2,614
  2,767
  2,926
  3,092
  3,265
  3,446
  3,636
  3,834
Total equity, $m
  253
  287
  323
  361
  401
  444
  488
  534
  583
  633
  685
  740
  796
  855
  916
  980
  1,046
  1,115
  1,186
  1,261
  1,338
  1,419
  1,503
  1,590
  1,682
  1,777
  1,877
  1,981
  2,090
  2,204
Total liabilities and equity, $m
  692
  785
  884
  989
  1,099
  1,216
  1,337
  1,463
  1,597
  1,734
  1,877
  2,027
  2,182
  2,343
  2,510
  2,685
  2,866
  3,054
  3,250
  3,454
  3,666
  3,887
  4,117
  4,357
  4,608
  4,869
  5,142
  5,427
  5,726
  6,038
Debt-to-equity ratio
  0.760
  0.880
  0.980
  1.060
  1.130
  1.180
  1.230
  1.280
  1.320
  1.350
  1.380
  1.410
  1.430
  1.450
  1.470
  1.490
  1.500
  1.520
  1.530
  1.540
  1.560
  1.570
  1.580
  1.580
  1.590
  1.600
  1.610
  1.620
  1.620
  1.630
Adjusted equity ratio
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365
  0.365

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  61
  67
  73
  79
  86
  93
  100
  108
  116
  124
  133
  142
  151
  161
  171
  181
  192
  203
  215
  227
  239
  252
  266
  281
  296
  311
  328
  345
  363
Depreciation, amort., depletion, $m
  30
  34
  38
  43
  48
  52
  58
  63
  69
  75
  80
  86
  93
  100
  107
  114
  122
  130
  138
  147
  156
  165
  175
  186
  196
  207
  219
  231
  244
  257
Funds from operations, $m
  86
  95
  105
  116
  127
  138
  151
  163
  176
  190
  204
  219
  235
  251
  267
  285
  303
  322
  341
  362
  383
  405
  428
  452
  477
  503
  530
  559
  588
  620
Change in working capital, $m
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
Cash from operations, $m
  74
  83
  92
  101
  112
  123
  134
  146
  158
  171
  185
  199
  214
  229
  245
  261
  278
  296
  315
  334
  354
  375
  396
  419
  443
  467
  493
  520
  548
  577
Maintenance CAPEX, $m
  -26
  -29
  -33
  -38
  -42
  -47
  -52
  -57
  -62
  -68
  -74
  -80
  -86
  -93
  -100
  -107
  -114
  -122
  -130
  -138
  -147
  -156
  -165
  -175
  -186
  -196
  -207
  -219
  -231
  -244
New CAPEX, $m
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
Cash from investing activities, $m
  -47
  -51
  -57
  -63
  -68
  -75
  -81
  -87
  -94
  -101
  -108
  -116
  -123
  -131
  -140
  -149
  -157
  -167
  -177
  -187
  -198
  -209
  -220
  -232
  -246
  -258
  -272
  -287
  -302
  -318
Free cash flow, $m
  28
  31
  35
  39
  43
  48
  53
  59
  65
  71
  77
  83
  90
  97
  105
  113
  121
  129
  138
  147
  156
  166
  176
  186
  197
  209
  221
  233
  246
  259
Issuance/(repayment) of debt, $m
  55
  59
  63
  67
  70
  74
  77
  81
  84
  88
  91
  95
  99
  102
  106
  111
  115
  120
  124
  129
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
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  
  55
  59
  63
  67
  70
  74
  77
  81
  84
  88
  91
  95
  99
  102
  106
  111
  115
  120
  124
  129
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
Total cash flow (excl. dividends), $m
  83
  90
  98
  105
  113
  122
  130
  139
  149
  158
  168
  178
  189
  200
  211
  223
  236
  249
  262
  276
  291
  306
  322
  339
  356
  375
  394
  414
  435
  457
Retained Cash Flow (-), $m
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -66
  -69
  -71
  -74
  -77
  -81
  -84
  -88
  -91
  -95
  -100
  -104
  -109
  -114
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
  51
  56
  61
  67
  73
  79
  86
  93
  100
  108
  115
  124
  132
  141
  150
  160
  170
  180
  191
  202
  213
  226
  238
  251
  265
  279
  294
  310
  326
  343
Discount rate, %
  6.40
  6.72
  7.06
  7.41
  7.78
  8.17
  8.58
  9.01
  9.46
  9.93
  10.42
  10.95
  11.49
  12.07
  12.67
  13.31
  13.97
  14.67
  15.40
  16.17
  16.98
  17.83
  18.72
  19.66
  20.64
  21.67
  22.76
  23.89
  25.09
  26.34
PV of cash for distribution, $m
  48
  49
  50
  50
  50
  50
  48
  47
  44
  42
  39
  36
  32
  29
  25
  22
  18
  15
  13
  10
  8
  6
  5
  3
  2
  2
  1
  1
  0
  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

TPI Composites, Inc. manufactures composite wind blades. The Company operates through four segments. The United States segment includes the manufacturing of wind blades at its Newton, Iowa plant; the manufacturing of precision molding and assembly systems used for the manufacture of wind blades in its Warren, Rhode Island facility, and the manufacturing of composite solutions for the transportation industry, which it also conducts in its Rhode Island and Massachusetts facilities. The Asia segment includes the manufacturing of wind blades in facilities in Taicang Port, China and two in Dafeng, China; the manufacturing of precision molding and assembly systems in its Taicang City, China facility; the manufacturing of components in its second Taicang Port, China facility, and wind blade inspection and repair services. The Mexico segment manufactures wind blades from a facility in Juarez, Mexico. The Middle East and Africa segment manufactures wind blades from a facility in Izmir, Turkey.

FINANCIAL RATIOS  of  TPI Composites, Inc. (TPIC)

Valuation Ratios
P/E Ratio 70.2
Price to Sales 1.3
Price to Book 9.2
Price to Tangible Book
Price to Cash Flow 18.2
Price to Free Cash Flow 42.7
Growth Rates
Sales Growth Rate 28.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.2%
Cap. Spend. - 3 Yr. Gr. Rate 34.7%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 84.1%
Total Debt to Equity 116.8%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 7.4%
Ret/ On T. Cap. - 3 Yr. Avg. 1.9%
Return On Equity 24.3%
Return On Equity - 3 Yr. Avg. 217%
Asset Turnover 2
Profitability Ratios
Gross Margin 10.2%
Gross Margin - 3 Yr. Avg. 7.3%
EBITDA Margin 6%
EBITDA Margin - 3 Yr. Avg. 4.5%
Operating Margin 5.2%
Oper. Margin - 3 Yr. Avg. 3.6%
Pre-Tax Margin 2.8%
Pre-Tax Margin - 3 Yr. Avg. 1%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 0.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

TPIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TPIC stock intrinsic value calculation we used $1030 million for the last fiscal year's total revenue generated by TPI Composites, Inc.. The default revenue input number comes from 0001 income statement of TPI Composites, 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 TPIC stock valuation model: a) initial revenue growth rate of 14.4% 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 6.4%, whose default value for TPIC is calculated based on our internal credit rating of TPI Composites, 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 TPI Composites, 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 TPIC stock the variable cost ratio is equal to 92.6%.

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 TPIC 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 8% for TPI Composites, Inc..

Corporate tax rate of 27% is the nominal tax rate for TPI Composites, 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 TPIC 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 TPIC are equal to 14%.

Life of production assets of 5.6 years is the average useful life of capital assets used in TPI Composites, 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 TPIC is equal to 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 - $220.957 million for TPI Composites, 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 35.003 million for TPI Composites, 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 TPI Composites, Inc. at the current share price and the inputted number of shares is $1.0 billion.

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