Intrinsic value of Universal Stainless & Alloy Products, In - USAP

Previous Close

$16.11

  Intrinsic Value

$6.76

stock screener

  Rating & Target

str. sell

-58%

Previous close

$16.11

 
Intrinsic value

$6.76

 
Up/down potential

-58%

 
Rating

str. sell

We calculate the intrinsic value of USAP 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 0.1

 

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, %
  13.50
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.96
  7.67
  7.40
  7.16
  6.94
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
Revenue, $m
  291
  327
  366
  407
  450
  495
  543
  592
  643
  696
  752
  809
  869
  932
  996
  1,063
  1,133
  1,206
  1,282
  1,361
  1,443
  1,528
  1,618
  1,711
  1,808
  1,909
  2,015
  2,126
  2,242
  2,363
Variable operating expenses, $m
  226
  254
  285
  316
  350
  385
  422
  460
  500
  541
  584
  629
  675
  724
  774
  826
  881
  937
  996
  1,057
  1,121
  1,187
  1,257
  1,329
  1,405
  1,483
  1,566
  1,652
  1,742
  1,836
Fixed operating expenses, $m
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  59
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
Total operating expenses, $m
  269
  298
  330
  362
  397
  433
  471
  510
  551
  593
  637
  684
  731
  781
  832
  885
  942
  999
  1,060
  1,122
  1,187
  1,255
  1,326
  1,400
  1,477
  1,557
  1,642
  1,729
  1,821
  1,917
Operating income, $m
  22
  29
  37
  45
  54
  63
  72
  82
  92
  103
  114
  126
  138
  151
  164
  178
  192
  207
  222
  239
  255
  273
  291
  311
  331
  352
  374
  397
  421
  446
EBITDA, $m
  43
  53
  64
  75
  87
  99
  112
  126
  140
  155
  170
  186
  202
  220
  238
  256
  276
  296
  317
  339
  362
  386
  411
  437
  464
  493
  523
  554
  587
  621
Interest expense (income), $m
  3
  3
  4
  5
  7
  8
  9
  11
  12
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
Earnings before tax, $m
  19
  25
  31
  38
  46
  53
  62
  70
  79
  88
  98
  107
  118
  129
  140
  152
  164
  177
  190
  204
  218
  233
  249
  265
  283
  301
  320
  339
  360
  382
Tax expense, $m
  5
  7
  8
  10
  12
  14
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  67
  72
  76
  81
  86
  92
  97
  103
Net income, $m
  14
  18
  23
  28
  33
  39
  45
  51
  58
  64
  71
  78
  86
  94
  102
  111
  120
  129
  139
  149
  159
  170
  182
  194
  206
  220
  233
  248
  263
  279

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
  401
  451
  505
  562
  621
  683
  748
  816
  887
  960
  1,037
  1,116
  1,199
  1,285
  1,374
  1,467
  1,563
  1,664
  1,768
  1,877
  1,990
  2,108
  2,231
  2,359
  2,493
  2,633
  2,779
  2,932
  3,092
  3,259
Adjusted assets (=assets-cash), $m
  401
  451
  505
  562
  621
  683
  748
  816
  887
  960
  1,037
  1,116
  1,199
  1,285
  1,374
  1,467
  1,563
  1,664
  1,768
  1,877
  1,990
  2,108
  2,231
  2,359
  2,493
  2,633
  2,779
  2,932
  3,092
  3,259
Revenue / Adjusted assets
  0.726
  0.725
  0.725
  0.724
  0.725
  0.725
  0.726
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
Average production assets, $m
  200
  225
  252
  280
  310
  341
  373
  407
  442
  479
  517
  557
  598
  641
  685
  732
  780
  830
  882
  936
  993
  1,051
  1,113
  1,177
  1,244
  1,313
  1,386
  1,463
  1,542
  1,625
Working capital, $m
  132
  148
  166
  184
  204
  224
  246
  268
  291
  315
  341
  367
  394
  422
  451
  482
  513
  546
  581
  616
  654
  692
  733
  775
  819
  865
  913
  963
  1,015
  1,070
Total debt, $m
  62
  79
  97
  115
  135
  155
  177
  199
  222
  246
  272
  298
  325
  353
  383
  413
  445
  478
  512
  548
  585
  624
  664
  707
  751
  797
  845
  895
  948
  1,003
Total liabilities, $m
  132
  149
  166
  185
  204
  225
  246
  269
  292
  316
  341
  367
  394
  423
  452
  483
  514
  547
  582
  617
  655
  694
  734
  776
  820
  866
  914
  965
  1,017
  1,072
Total equity, $m
  269
  303
  339
  377
  417
  459
  502
  548
  595
  644
  696
  749
  805
  862
  922
  984
  1,049
  1,116
  1,186
  1,259
  1,335
  1,414
  1,497
  1,583
  1,673
  1,767
  1,865
  1,967
  2,075
  2,187
Total liabilities and equity, $m
  401
  452
  505
  562
  621
  684
  748
  817
  887
  960
  1,037
  1,116
  1,199
  1,285
  1,374
  1,467
  1,563
  1,663
  1,768
  1,876
  1,990
  2,108
  2,231
  2,359
  2,493
  2,633
  2,779
  2,932
  3,092
  3,259
Debt-to-equity ratio
  0.230
  0.260
  0.290
  0.310
  0.320
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  0.460
  0.460
Adjusted equity ratio
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  18
  23
  28
  33
  39
  45
  51
  58
  64
  71
  78
  86
  94
  102
  111
  120
  129
  139
  149
  159
  170
  182
  194
  206
  220
  233
  248
  263
  279
Depreciation, amort., depletion, $m
  21
  24
  27
  30
  33
  37
  40
  44
  48
  52
  56
  60
  64
  69
  74
  79
  84
  89
  95
  101
  107
  113
  120
  127
  134
  141
  149
  157
  166
  175
Funds from operations, $m
  35
  42
  50
  58
  67
  76
  85
  95
  105
  116
  127
  138
  150
  163
  176
  189
  203
  218
  233
  249
  266
  283
  301
  320
  340
  361
  382
  405
  429
  453
Change in working capital, $m
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
Cash from operations, $m
  19
  26
  32
  40
  47
  55
  64
  73
  82
  92
  102
  112
  123
  135
  147
  159
  172
  185
  199
  214
  229
  245
  261
  278
  296
  315
  334
  355
  376
  399
Maintenance CAPEX, $m
  -19
  -21
  -24
  -27
  -30
  -33
  -37
  -40
  -44
  -48
  -52
  -56
  -60
  -64
  -69
  -74
  -79
  -84
  -89
  -95
  -101
  -107
  -113
  -120
  -127
  -134
  -141
  -149
  -157
  -166
New CAPEX, $m
  -24
  -25
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -83
Cash from investing activities, $m
  -43
  -46
  -51
  -55
  -60
  -64
  -69
  -74
  -79
  -85
  -90
  -96
  -101
  -107
  -114
  -120
  -127
  -134
  -141
  -149
  -157
  -166
  -174
  -184
  -194
  -204
  -214
  -225
  -237
  -249
Free cash flow, $m
  -23
  -21
  -19
  -16
  -13
  -9
  -5
  -1
  3
  7
  12
  17
  22
  28
  33
  39
  45
  51
  58
  65
  72
  79
  87
  94
  103
  111
  120
  130
  139
  150
Issuance/(repayment) of debt, $m
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
Issuance/(repurchase) of shares, $m
  18
  16
  13
  10
  6
  3
  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  
  34
  33
  31
  29
  26
  23
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
Total cash flow (excl. dividends), $m
  11
  11
  12
  13
  13
  14
  16
  21
  26
  32
  37
  43
  49
  56
  62
  69
  77
  84
  92
  100
  109
  118
  127
  137
  147
  157
  168
  180
  192
  204
Retained Cash Flow (-), $m
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -83
  -86
  -90
  -94
  -98
  -102
  -107
  -112
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
  -21
  -23
  -24
  -25
  -26
  -28
  -28
  -25
  -21
  -18
  -14
  -10
  -6
  -2
  3
  7
  12
  17
  22
  27
  33
  39
  44
  51
  57
  63
  70
  77
  85
  92
Discount rate, %
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
  -20
  -21
  -21
  -21
  -20
  -20
  -18
  -15
  -12
  -9
  -6
  -4
  -2
  -1
  1
  2
  2
  3
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
Current shareholders' claim on cash, %
  90.1
  83.1
  78.3
  75.1
  73.3
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7
  72.7

Universal Stainless & Alloy Products, Inc. manufactures and markets semi-finished and finished specialty steel products, including stainless steel, nickel alloys, tool steel and certain other alloyed steels. The Company's manufacturing process involves melting, remelting, heat treating, hot and cold rolling, forging, machining and cold drawing of semi-finished and finished specialty steels. The Company also performs conversion services on materials supplied by customers. The Company's manufacturing locations include Bridgeville and Titusville, Pennsylvania; Dunkirk, New York, and North Jackson, Ohio. The Company produce a range of specialty steel grades using several manufacturing processes, including argon oxygen decarburization (AOD), electro-slag remelted (ESR), vacuum induction melting (VIM) and vacuum-arc remelted (VAR). It manufactures its products within the product lines, including Stainless Steel, High-Strength Low Alloy Steel, Tool Steel and High-Temperature Alloy Steel.

FINANCIAL RATIOS  of  Universal Stainless & Alloy Products, In (USAP)

Valuation Ratios
P/E Ratio -23.3
Price to Sales 0.8
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 14.5
Price to Free Cash Flow 29.1
Growth Rates
Sales Growth Rate -14.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 37.6%
Total Debt to Equity 40.3%
Interest Coverage -2
Management Effectiveness
Return On Assets -1.1%
Ret/ On Assets - 3 Yr. Avg. -1.8%
Return On Total Capital -1.9%
Ret/ On T. Cap. - 3 Yr. Avg. -2.7%
Return On Equity -2.7%
Return On Equity - 3 Yr. Avg. -3.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 9.1%
Gross Margin - 3 Yr. Avg. 10%
EBITDA Margin 8.4%
EBITDA Margin - 3 Yr. Avg. 5%
Operating Margin -2.6%
Oper. Margin - 3 Yr. Avg. -4.6%
Pre-Tax Margin -5.8%
Pre-Tax Margin - 3 Yr. Avg. -6.9%
Net Profit Margin -3.2%
Net Profit Margin - 3 Yr. Avg. -4.3%
Effective Tax Rate 44.4%
Eff/ Tax Rate - 3 Yr. Avg. 41.2%
Payout Ratio 0%

USAP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USAP stock intrinsic value calculation we used $256 million for the last fiscal year's total revenue generated by Universal Stainless & Alloy Products, In. The default revenue input number comes from 0001 income statement of Universal Stainless & Alloy Products, In. 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 USAP stock valuation model: a) initial revenue growth rate of 13.5% 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 4.5%, whose default value for USAP is calculated based on our internal credit rating of Universal Stainless & Alloy Products, In, 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 Universal Stainless & Alloy Products, In.
    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 USAP stock the variable cost ratio is equal to 77.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $42 million in the base year in the intrinsic value calculation for USAP 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 6.8% for Universal Stainless & Alloy Products, In.

Corporate tax rate of 27% is the nominal tax rate for Universal Stainless & Alloy Products, In. 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 USAP 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 USAP are equal to 68.8%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Universal Stainless & Alloy Products, In 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 USAP is equal to 45.3%. 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 - $237.011 million for Universal Stainless & Alloy Products, In - 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 8.767 million for Universal Stainless & Alloy Products, In 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 Universal Stainless & Alloy Products, In at the current share price and the inputted number of shares is $0.1 billion.

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