Intrinsic value of Twin Disc, Incorporated - TWIN

Previous Close

$13.91

  Intrinsic Value

$196.43

stock screener

  Rating & Target

str. buy

+999%

Previous close

$13.91

 
Intrinsic value

$196.43

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of TWIN 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 0.2

 

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, %
  38.10
  34.79
  31.81
  29.13
  26.72
  24.55
  22.59
  20.83
  19.25
  17.82
  16.54
  15.39
  14.35
  13.41
  12.57
  11.81
  11.13
  10.52
  9.97
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.38
  7.14
  6.92
  6.73
  6.56
Revenue, $m
  333
  449
  591
  764
  968
  1,205
  1,477
  1,785
  2,129
  2,508
  2,923
  3,373
  3,857
  4,374
  4,924
  5,505
  6,118
  6,762
  7,436
  8,140
  8,875
  9,640
  10,437
  11,264
  12,125
  13,020
  13,949
  14,915
  15,919
  16,963
Variable operating expenses, $m
  222
  299
  394
  509
  645
  803
  984
  1,189
  1,418
  1,671
  1,946
  2,246
  2,568
  2,913
  3,279
  3,666
  4,074
  4,503
  4,952
  5,421
  5,910
  6,420
  6,950
  7,501
  8,074
  8,670
  9,289
  9,932
  10,601
  11,296
Fixed operating expenses, $m
  67
  69
  70
  72
  74
  75
  77
  79
  80
  82
  84
  86
  88
  90
  91
  93
  96
  98
  100
  102
  104
  107
  109
  111
  114
  116
  119
  121
  124
  127
Total operating expenses, $m
  289
  368
  464
  581
  719
  878
  1,061
  1,268
  1,498
  1,753
  2,030
  2,332
  2,656
  3,003
  3,370
  3,759
  4,170
  4,601
  5,052
  5,523
  6,014
  6,527
  7,059
  7,612
  8,188
  8,786
  9,408
  10,053
  10,725
  11,423
Operating income, $m
  43
  80
  127
  183
  249
  327
  416
  517
  630
  755
  893
  1,041
  1,201
  1,372
  1,553
  1,746
  1,948
  2,161
  2,384
  2,618
  2,861
  3,114
  3,378
  3,652
  3,937
  4,233
  4,541
  4,861
  5,194
  5,540
EBITDA, $m
  52
  93
  142
  203
  275
  359
  455
  564
  686
  821
  968
  1,128
  1,301
  1,485
  1,681
  1,888
  2,107
  2,336
  2,577
  2,828
  3,090
  3,363
  3,648
  3,943
  4,251
  4,570
  4,902
  5,247
  5,606
  5,979
Interest expense (income), $m
  0
  1
  3
  5
  8
  12
  17
  22
  28
  35
  42
  50
  60
  70
  80
  92
  104
  116
  130
  144
  159
  174
  191
  207
  225
  243
  262
  282
  302
  323
  346
Earnings before tax, $m
  43
  78
  121
  174
  237
  310
  394
  489
  596
  713
  842
  981
  1,131
  1,292
  1,462
  1,642
  1,832
  2,031
  2,240
  2,459
  2,686
  2,923
  3,170
  3,427
  3,694
  3,971
  4,259
  4,559
  4,871
  5,195
Tax expense, $m
  12
  21
  33
  47
  64
  84
  106
  132
  161
  193
  227
  265
  305
  349
  395
  443
  495
  549
  605
  664
  725
  789
  856
  925
  997
  1,072
  1,150
  1,231
  1,315
  1,403
Net income, $m
  31
  57
  89
  127
  173
  227
  288
  357
  435
  521
  615
  716
  826
  943
  1,067
  1,199
  1,337
  1,483
  1,635
  1,795
  1,961
  2,134
  2,314
  2,502
  2,697
  2,899
  3,109
  3,328
  3,556
  3,792

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
  333
  449
  592
  764
  969
  1,206
  1,479
  1,787
  2,131
  2,511
  2,926
  3,376
  3,860
  4,378
  4,929
  5,511
  6,125
  6,769
  7,444
  8,149
  8,884
  9,650
  10,447
  11,276
  12,137
  13,033
  13,963
  14,930
  15,935
  16,980
Adjusted assets (=assets-cash), $m
  333
  449
  592
  764
  969
  1,206
  1,479
  1,787
  2,131
  2,511
  2,926
  3,376
  3,860
  4,378
  4,929
  5,511
  6,125
  6,769
  7,444
  8,149
  8,884
  9,650
  10,447
  11,276
  12,137
  13,033
  13,963
  14,930
  15,935
  16,980
Revenue / Adjusted assets
  1.000
  1.000
  0.998
  1.000
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
  0.999
Average production assets, $m
  75
  101
  133
  172
  218
  271
  332
  402
  479
  564
  658
  759
  868
  984
  1,108
  1,239
  1,377
  1,521
  1,673
  1,832
  1,997
  2,169
  2,348
  2,535
  2,728
  2,929
  3,139
  3,356
  3,582
  3,817
Working capital, $m
  113
  152
  200
  259
  328
  409
  501
  605
  722
  850
  991
  1,143
  1,307
  1,483
  1,669
  1,866
  2,074
  2,292
  2,521
  2,760
  3,009
  3,268
  3,538
  3,819
  4,110
  4,414
  4,729
  5,056
  5,397
  5,750
Total debt, $m
  49
  96
  154
  224
  307
  404
  515
  640
  780
  935
  1,104
  1,287
  1,484
  1,695
  1,919
  2,156
  2,406
  2,668
  2,943
  3,230
  3,529
  3,841
  4,165
  4,502
  4,853
  5,217
  5,596
  5,990
  6,399
  6,824
Total liabilities, $m
  136
  183
  241
  311
  394
  491
  602
  727
  867
  1,022
  1,191
  1,374
  1,571
  1,782
  2,006
  2,243
  2,493
  2,755
  3,030
  3,316
  3,616
  3,928
  4,252
  4,589
  4,940
  5,304
  5,683
  6,076
  6,486
  6,911
Total equity, $m
  198
  266
  351
  453
  574
  715
  877
  1,060
  1,264
  1,489
  1,735
  2,002
  2,289
  2,596
  2,923
  3,268
  3,632
  4,014
  4,414
  4,832
  5,268
  5,722
  6,195
  6,687
  7,197
  7,728
  8,280
  8,853
  9,449
  10,069
Total liabilities and equity, $m
  334
  449
  592
  764
  968
  1,206
  1,479
  1,787
  2,131
  2,511
  2,926
  3,376
  3,860
  4,378
  4,929
  5,511
  6,125
  6,769
  7,444
  8,148
  8,884
  9,650
  10,447
  11,276
  12,137
  13,032
  13,963
  14,929
  15,935
  16,980
Debt-to-equity ratio
  0.250
  0.360
  0.440
  0.490
  0.540
  0.560
  0.590
  0.600
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.680
Adjusted equity ratio
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593
  0.593

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  57
  89
  127
  173
  227
  288
  357
  435
  521
  615
  716
  826
  943
  1,067
  1,199
  1,337
  1,483
  1,635
  1,795
  1,961
  2,134
  2,314
  2,502
  2,697
  2,899
  3,109
  3,328
  3,556
  3,792
Depreciation, amort., depletion, $m
  9
  12
  16
  20
  26
  32
  39
  47
  56
  65
  76
  87
  100
  113
  127
  142
  158
  175
  192
  211
  230
  249
  270
  291
  314
  337
  361
  386
  412
  439
Funds from operations, $m
  40
  69
  104
  147
  199
  258
  327
  404
  490
  586
  690
  804
  926
  1,056
  1,195
  1,341
  1,496
  1,658
  1,828
  2,005
  2,191
  2,383
  2,584
  2,793
  3,010
  3,236
  3,470
  3,714
  3,967
  4,231
Change in working capital, $m
  31
  39
  48
  58
  69
  81
  92
  104
  116
  129
  141
  152
  164
  175
  186
  197
  208
  218
  229
  239
  249
  259
  270
  281
  292
  303
  315
  327
  340
  354
Cash from operations, $m
  9
  30
  56
  89
  129
  178
  234
  300
  374
  457
  550
  651
  762
  881
  1,008
  1,144
  1,288
  1,440
  1,599
  1,767
  1,941
  2,124
  2,314
  2,512
  2,718
  2,933
  3,155
  3,386
  3,627
  3,877
Maintenance CAPEX, $m
  -6
  -9
  -12
  -15
  -20
  -25
  -31
  -38
  -46
  -55
  -65
  -76
  -87
  -100
  -113
  -127
  -142
  -158
  -175
  -192
  -211
  -230
  -249
  -270
  -291
  -314
  -337
  -361
  -386
  -412
New CAPEX, $m
  -21
  -26
  -32
  -39
  -46
  -53
  -61
  -69
  -77
  -85
  -93
  -101
  -109
  -116
  -124
  -131
  -138
  -145
  -152
  -158
  -165
  -172
  -179
  -186
  -194
  -201
  -209
  -217
  -226
  -235
Cash from investing activities, $m
  -27
  -35
  -44
  -54
  -66
  -78
  -92
  -107
  -123
  -140
  -158
  -177
  -196
  -216
  -237
  -258
  -280
  -303
  -327
  -350
  -376
  -402
  -428
  -456
  -485
  -515
  -546
  -578
  -612
  -647
Free cash flow, $m
  -18
  -5
  12
  35
  64
  99
  142
  192
  251
  317
  392
  474
  565
  664
  771
  886
  1,008
  1,137
  1,273
  1,416
  1,566
  1,722
  1,886
  2,056
  2,233
  2,418
  2,609
  2,808
  3,015
  3,230
Issuance/(repayment) of debt, $m
  37
  47
  58
  70
  83
  97
  111
  125
  140
  155
  169
  183
  197
  211
  224
  237
  250
  262
  275
  287
  299
  312
  324
  337
  351
  364
  379
  394
  409
  425
Issuance/(repurchase) of shares, $m
  23
  12
  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  
  60
  59
  58
  70
  83
  97
  111
  125
  140
  155
  169
  183
  197
  211
  224
  237
  250
  262
  275
  287
  299
  312
  324
  337
  351
  364
  379
  394
  409
  425
Total cash flow (excl. dividends), $m
  43
  54
  70
  105
  147
  196
  253
  318
  390
  472
  561
  658
  763
  875
  995
  1,123
  1,257
  1,399
  1,547
  1,703
  1,865
  2,034
  2,210
  2,393
  2,584
  2,782
  2,988
  3,202
  3,424
  3,656
Retained Cash Flow (-), $m
  -55
  -69
  -85
  -102
  -121
  -141
  -162
  -183
  -204
  -225
  -246
  -267
  -287
  -307
  -326
  -345
  -364
  -382
  -400
  -418
  -436
  -454
  -473
  -491
  -511
  -531
  -552
  -573
  -596
  -620
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
  -12
  -15
  -14
  3
  26
  55
  91
  135
  187
  246
  314
  391
  475
  568
  669
  777
  893
  1,017
  1,147
  1,285
  1,429
  1,580
  1,738
  1,902
  2,073
  2,251
  2,436
  2,629
  2,828
  3,036
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
  -11
  -13
  -12
  2
  20
  40
  62
  84
  107
  129
  149
  167
  181
  191
  196
  198
  194
  187
  177
  163
  148
  131
  114
  97
  81
  66
  52
  41
  31
  23
Current shareholders' claim on cash, %
  88.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6
  84.6

Twin Disc, Incorporated designs, manufactures and sells marine and heavy duty off-highway power transmission equipment. The Company operates through two segments: manufacturing and distribution. Its products include marine transmissions, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems. Its industrial products include clutches and pump drives sold to the agriculture, recycling, construction, and oil and gas markets. Its land-based transmission products include applications for oilfield and natural gas, military, and airport rescue and firefighting. Its marine and propulsion systems include marine transmission, controls, surface drives, propellers and boat management systems for the commercial, pleasure craft and patrol boat markets. Its other products include non-Company manufactured product sold through Company-owned distribution entities.

FINANCIAL RATIOS  of  Twin Disc, Incorporated (TWIN)

Valuation Ratios
P/E Ratio -26.7
Price to Sales 1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 53.4
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -15.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 4.9%
Total Debt to Equity 4.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. -1.3%
Return On Total Capital -4.7%
Ret/ On T. Cap. - 3 Yr. Avg. -2.4%
Return On Equity -5%
Return On Equity - 3 Yr. Avg. -2.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 28.6%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin -1.8%
EBITDA Margin - 3 Yr. Avg. -0.4%
Operating Margin -5.4%
Oper. Margin - 3 Yr. Avg. -4.8%
Pre-Tax Margin -6%
Pre-Tax Margin - 3 Yr. Avg. -5%
Net Profit Margin -3.6%
Net Profit Margin - 3 Yr. Avg. -2.4%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 39.8%
Payout Ratio 0%

TWIN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TWIN stock intrinsic value calculation we used $241 million for the last fiscal year's total revenue generated by Twin Disc, Incorporated. The default revenue input number comes from 0001 income statement of Twin Disc, Incorporated. 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 TWIN stock valuation model: a) initial revenue growth rate of 38.1% 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 TWIN is calculated based on our internal credit rating of Twin Disc, Incorporated, 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 Twin Disc, Incorporated.
    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 TWIN stock the variable cost ratio is equal to 66.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $66 million in the base year in the intrinsic value calculation for TWIN 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 Twin Disc, Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Twin Disc, Incorporated. 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 TWIN 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 TWIN are equal to 22.5%.

Life of production assets of 8.7 years is the average useful life of capital assets used in Twin Disc, Incorporated 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 TWIN is equal to 33.9%. 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 - $142.997 million for Twin Disc, Incorporated - 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 13.100 million for Twin Disc, Incorporated 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 Twin Disc, Incorporated at the current share price and the inputted number of shares is $0.2 billion.

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