Intrinsic value of Hostess Brands, Inc. - TWNK

Previous Close

$13.58

  Intrinsic Value

$14.43

stock screener

  Rating & Target

hold

+6%

Previous close

$13.58

 
Intrinsic value

$14.43

 
Up/down potential

+6%

 
Rating

hold

We calculate the intrinsic value of TWNK 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 1.8

 

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, %
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
Revenue, $m
  931
  1,015
  1,103
  1,194
  1,289
  1,388
  1,490
  1,597
  1,708
  1,823
  1,943
  2,067
  2,197
  2,332
  2,472
  2,619
  2,772
  2,931
  3,097
  3,271
  3,452
  3,642
  3,840
  4,048
  4,265
  4,492
  4,729
  4,978
  5,239
  5,512
Variable operating expenses, $m
  649
  705
  764
  826
  890
  956
  1,025
  1,097
  1,171
  1,249
  1,308
  1,391
  1,479
  1,569
  1,664
  1,763
  1,866
  1,973
  2,085
  2,202
  2,324
  2,452
  2,585
  2,725
  2,871
  3,023
  3,183
  3,351
  3,526
  3,710
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
  649
  705
  764
  826
  890
  956
  1,025
  1,097
  1,171
  1,249
  1,308
  1,391
  1,479
  1,569
  1,664
  1,763
  1,866
  1,973
  2,085
  2,202
  2,324
  2,452
  2,585
  2,725
  2,871
  3,023
  3,183
  3,351
  3,526
  3,710
Operating income, $m
  282
  310
  338
  368
  399
  432
  465
  500
  536
  574
  635
  676
  718
  762
  808
  856
  906
  958
  1,012
  1,069
  1,129
  1,191
  1,255
  1,323
  1,394
  1,468
  1,546
  1,627
  1,712
  1,802
EBITDA, $m
  357
  389
  423
  458
  494
  532
  571
  612
  655
  699
  745
  793
  842
  894
  948
  1,004
  1,063
  1,124
  1,188
  1,254
  1,324
  1,397
  1,473
  1,552
  1,635
  1,722
  1,813
  1,909
  2,009
  2,113
Interest expense (income), $m
  0
  53
  64
  76
  88
  100
  113
  127
  141
  155
  170
  186
  202
  219
  237
  256
  275
  295
  316
  337
  360
  384
  409
  434
  462
  490
  519
  550
  583
  617
  652
Earnings before tax, $m
  229
  245
  263
  281
  299
  318
  338
  359
  381
  403
  449
  473
  499
  525
  553
  581
  611
  642
  675
  709
  745
  782
  821
  862
  904
  949
  995
  1,044
  1,096
  1,149
Tax expense, $m
  62
  66
  71
  76
  81
  86
  91
  97
  103
  109
  121
  128
  135
  142
  149
  157
  165
  173
  182
  191
  201
  211
  222
  233
  244
  256
  269
  282
  296
  310
Net income, $m
  167
  179
  192
  205
  218
  232
  247
  262
  278
  295
  328
  345
  364
  383
  403
  424
  446
  469
  493
  518
  544
  571
  599
  629
  660
  693
  727
  762
  800
  839

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
  3,277
  3,574
  3,883
  4,204
  4,539
  4,886
  5,247
  5,623
  6,013
  6,418
  6,840
  7,278
  7,735
  8,210
  8,705
  9,221
  9,759
  10,320
  10,906
  11,517
  12,156
  12,824
  13,522
  14,252
  15,016
  15,815
  16,652
  17,528
  18,446
  19,407
Adjusted assets (=assets-cash), $m
  3,277
  3,574
  3,883
  4,204
  4,539
  4,886
  5,247
  5,623
  6,013
  6,418
  6,840
  7,278
  7,735
  8,210
  8,705
  9,221
  9,759
  10,320
  10,906
  11,517
  12,156
  12,824
  13,522
  14,252
  15,016
  15,815
  16,652
  17,528
  18,446
  19,407
Revenue / Adjusted assets
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
Average production assets, $m
  1,579
  1,722
  1,871
  2,026
  2,187
  2,355
  2,529
  2,710
  2,898
  3,093
  3,296
  3,508
  3,728
  3,957
  4,195
  4,444
  4,703
  4,974
  5,256
  5,551
  5,859
  6,181
  6,517
  6,869
  7,237
  7,622
  8,025
  8,448
  8,890
  9,353
Working capital, $m
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
Total debt, $m
  1,191
  1,404
  1,626
  1,857
  2,097
  2,346
  2,606
  2,875
  3,155
  3,446
  3,749
  4,064
  4,392
  4,733
  5,088
  5,459
  5,845
  6,248
  6,668
  7,107
  7,566
  8,046
  8,547
  9,071
  9,619
  10,193
  10,794
  11,423
  12,082
  12,772
Total liabilities, $m
  2,353
  2,566
  2,788
  3,019
  3,259
  3,508
  3,768
  4,037
  4,317
  4,608
  4,911
  5,226
  5,554
  5,895
  6,250
  6,621
  7,007
  7,410
  7,830
  8,270
  8,728
  9,208
  9,709
  10,233
  10,781
  11,355
  11,956
  12,585
  13,244
  13,934
Total equity, $m
  924
  1,008
  1,095
  1,186
  1,280
  1,378
  1,480
  1,586
  1,696
  1,810
  1,929
  2,053
  2,181
  2,315
  2,455
  2,600
  2,752
  2,910
  3,075
  3,248
  3,428
  3,616
  3,813
  4,019
  4,234
  4,460
  4,696
  4,943
  5,202
  5,473
Total liabilities and equity, $m
  3,277
  3,574
  3,883
  4,205
  4,539
  4,886
  5,248
  5,623
  6,013
  6,418
  6,840
  7,279
  7,735
  8,210
  8,705
  9,221
  9,759
  10,320
  10,905
  11,518
  12,156
  12,824
  13,522
  14,252
  15,015
  15,815
  16,652
  17,528
  18,446
  19,407
Debt-to-equity ratio
  1.290
  1.390
  1.480
  1.570
  1.640
  1.700
  1.760
  1.810
  1.860
  1.900
  1.940
  1.980
  2.010
  2.040
  2.070
  2.100
  2.120
  2.150
  2.170
  2.190
  2.210
  2.220
  2.240
  2.260
  2.270
  2.290
  2.300
  2.310
  2.320
  2.330
Adjusted equity ratio
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282
  0.282

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  167
  179
  192
  205
  218
  232
  247
  262
  278
  295
  328
  345
  364
  383
  403
  424
  446
  469
  493
  518
  544
  571
  599
  629
  660
  693
  727
  762
  800
  839
Depreciation, amort., depletion, $m
  75
  79
  84
  90
  95
  100
  106
  112
  119
  125
  110
  117
  124
  132
  140
  148
  157
  166
  175
  185
  195
  206
  217
  229
  241
  254
  268
  282
  296
  312
Funds from operations, $m
  242
  259
  276
  294
  313
  333
  353
  375
  397
  420
  438
  462
  488
  515
  543
  572
  603
  635
  668
  703
  739
  777
  816
  858
  901
  947
  994
  1,044
  1,096
  1,151
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
Cash from operations, $m
  240
  256
  274
  292
  311
  330
  351
  372
  394
  417
  434
  459
  485
  512
  539
  569
  599
  630
  664
  698
  734
  772
  811
  852
  895
  941
  988
  1,037
  1,089
  1,143
Maintenance CAPEX, $m
  -48
  -53
  -57
  -62
  -68
  -73
  -78
  -84
  -90
  -97
  -103
  -110
  -117
  -124
  -132
  -140
  -148
  -157
  -166
  -175
  -185
  -195
  -206
  -217
  -229
  -241
  -254
  -268
  -282
  -296
New CAPEX, $m
  -137
  -143
  -149
  -155
  -161
  -167
  -174
  -181
  -188
  -195
  -203
  -211
  -220
  -229
  -239
  -249
  -259
  -270
  -282
  -295
  -308
  -322
  -336
  -352
  -368
  -385
  -403
  -422
  -442
  -463
Cash from investing activities, $m
  -185
  -196
  -206
  -217
  -229
  -240
  -252
  -265
  -278
  -292
  -306
  -321
  -337
  -353
  -371
  -389
  -407
  -427
  -448
  -470
  -493
  -517
  -542
  -569
  -597
  -626
  -657
  -690
  -724
  -759
Free cash flow, $m
  54
  61
  67
  75
  82
  90
  98
  107
  115
  125
  128
  138
  148
  158
  169
  180
  191
  203
  215
  228
  241
  255
  269
  283
  298
  314
  330
  347
  365
  384
Issuance/(repayment) of debt, $m
  203
  213
  222
  231
  240
  250
  259
  269
  280
  291
  303
  315
  328
  341
  355
  370
  386
  403
  421
  439
  459
  479
  501
  524
  548
  574
  601
  629
  659
  690
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  
  203
  213
  222
  231
  240
  250
  259
  269
  280
  291
  303
  315
  328
  341
  355
  370
  386
  403
  421
  439
  459
  479
  501
  524
  548
  574
  601
  629
  659
  690
Total cash flow (excl. dividends), $m
  257
  274
  289
  305
  322
  339
  357
  376
  395
  416
  431
  453
  476
  499
  524
  550
  578
  606
  636
  667
  700
  734
  770
  807
  847
  888
  931
  977
  1,024
  1,074
Retained Cash Flow (-), $m
  -80
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -124
  -129
  -134
  -140
  -145
  -152
  -158
  -165
  -172
  -180
  -188
  -197
  -206
  -215
  -225
  -236
  -247
  -259
  -271
Prev. year cash balance distribution, $m
  5
  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
  182
  190
  202
  215
  228
  241
  256
  270
  285
  301
  312
  329
  347
  365
  385
  405
  426
  448
  471
  495
  520
  546
  573
  602
  631
  663
  695
  729
  765
  803
Discount rate, %
  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
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
  169
  163
  159
  153
  146
  139
  130
  120
  110
  99
  86
  76
  66
  56
  47
  39
  31
  25
  19
  15
  11
  8
  6
  4
  3
  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

Hostess Brands, Inc. engages in developing, manufacturing, marketing, selling, and distributing fresh baked sweet goods in the United States. It produces various new and classic treats, including Ding Dongs, Ho Hos, Donettes, Fruit Pies, Twinkies, CupCakes, Mini Muffins, Sno Balls, Zingers, Honey Buns, Coffee Cakes, Brownies, and Cinnamon Rolls. The company was formerly known as Gores Holdings, Inc. and changed its name to Hostess Brands, Inc. in November 2016. Hostess Brands, Inc. was founded in 1919 and is based in Kansas City, Missouri.

FINANCIAL RATIOS  of  Hostess Brands, Inc. (TWNK)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

TWNK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TWNK stock intrinsic value calculation we used $850 million for the last fiscal year's total revenue generated by Hostess Brands, Inc.. The default revenue input number comes from 0001 income statement of Hostess Brands, 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 TWNK stock valuation model: a) initial revenue growth rate of 9.5% 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 7.6%, whose default value for TWNK is calculated based on our internal credit rating of Hostess Brands, 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 Hostess Brands, 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 TWNK stock the variable cost ratio is equal to 69.9%.

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 TWNK 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 Hostess Brands, Inc..

Corporate tax rate of 27% is the nominal tax rate for Hostess Brands, 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 TWNK 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 TWNK are equal to 169.7%.

Life of production assets of 64.9 years is the average useful life of capital assets used in Hostess Brands, 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 TWNK is equal to 2.7%. 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 - $849.349 million for Hostess Brands, 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 130.508 million for Hostess Brands, 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 Hostess Brands, Inc. at the current share price and the inputted number of shares is $1.8 billion.

RELATED COMPANIES Price Int.Val. Rating
TWNK Hostess Brands 13.58 35.83  str.buy

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