Intrinsic value of Virco Manufacturing Corporation - VIRC

Previous Close

$4.41

  Intrinsic Value

$0.94

stock screener

  Rating & Target

str. sell

-79%

Previous close

$4.41

 
Intrinsic value

$0.94

 
Up/down potential

-79%

 
Rating

str. sell

We calculate the intrinsic value of VIRC 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, %
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  211
  234
  259
  284
  311
  339
  368
  398
  430
  462
  496
  531
  568
  606
  646
  687
  730
  774
  821
  869
  920
  973
  1,028
  1,085
  1,145
  1,208
  1,274
  1,342
  1,414
  1,489
Variable operating expenses, $m
  204
  227
  251
  275
  301
  328
  356
  385
  416
  447
  480
  514
  550
  587
  625
  665
  706
  750
  795
  842
  891
  942
  995
  1,051
  1,109
  1,169
  1,233
  1,299
  1,369
  1,442
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
  204
  227
  251
  275
  301
  328
  356
  385
  416
  447
  480
  514
  550
  587
  625
  665
  706
  750
  795
  842
  891
  942
  995
  1,051
  1,109
  1,169
  1,233
  1,299
  1,369
  1,442
Operating income, $m
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
EBITDA, $m
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  35
  37
  39
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  86
  91
Interest expense (income), $m
  1
  2
  3
  4
  5
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
Earnings before tax, $m
  4
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
Tax expense, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8

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
  130
  145
  160
  175
  192
  209
  227
  246
  265
  285
  306
  328
  350
  374
  398
  424
  450
  478
  506
  536
  568
  600
  634
  669
  707
  745
  786
  828
  872
  919
Adjusted assets (=assets-cash), $m
  130
  145
  160
  175
  192
  209
  227
  246
  265
  285
  306
  328
  350
  374
  398
  424
  450
  478
  506
  536
  568
  600
  634
  669
  707
  745
  786
  828
  872
  919
Revenue / Adjusted assets
  1.623
  1.614
  1.619
  1.623
  1.620
  1.622
  1.621
  1.618
  1.623
  1.621
  1.621
  1.619
  1.623
  1.620
  1.623
  1.620
  1.622
  1.619
  1.623
  1.621
  1.620
  1.622
  1.621
  1.622
  1.620
  1.621
  1.621
  1.621
  1.622
  1.620
Average production assets, $m
  43
  48
  53
  58
  63
  69
  75
  81
  87
  94
  101
  108
  115
  123
  131
  139
  148
  157
  167
  176
  187
  197
  209
  220
  232
  245
  259
  273
  287
  302
Working capital, $m
  36
  40
  44
  48
  53
  58
  63
  68
  73
  79
  84
  90
  97
  103
  110
  117
  124
  132
  140
  148
  156
  165
  175
  184
  195
  205
  217
  228
  240
  253
Total debt, $m
  23
  31
  38
  46
  54
  63
  72
  81
  90
  101
  111
  122
  133
  145
  157
  169
  183
  196
  210
  225
  241
  257
  274
  292
  310
  329
  349
  370
  392
  415
Total liabilities, $m
  65
  72
  79
  87
  95
  104
  113
  122
  132
  142
  152
  163
  174
  186
  198
  211
  224
  237
  252
  267
  282
  298
  315
  333
  351
  370
  391
  412
  434
  457
Total equity, $m
  66
  73
  80
  88
  97
  105
  114
  124
  133
  143
  154
  165
  176
  188
  200
  213
  226
  240
  255
  270
  285
  302
  319
  337
  355
  375
  395
  417
  439
  462
Total liabilities and equity, $m
  131
  145
  159
  175
  192
  209
  227
  246
  265
  285
  306
  328
  350
  374
  398
  424
  450
  477
  507
  537
  567
  600
  634
  670
  706
  745
  786
  829
  873
  919
Debt-to-equity ratio
  0.360
  0.420
  0.470
  0.520
  0.560
  0.600
  0.630
  0.650
  0.680
  0.700
  0.720
  0.740
  0.750
  0.770
  0.780
  0.790
  0.810
  0.820
  0.830
  0.840
  0.840
  0.850
  0.860
  0.870
  0.870
  0.880
  0.880
  0.890
  0.890
  0.900
Adjusted equity ratio
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
Depreciation, amort., depletion, $m
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
Funds from operations, $m
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
Change in working capital, $m
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
Cash from operations, $m
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
Maintenance CAPEX, $m
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
New CAPEX, $m
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
Cash from investing activities, $m
  -9
  -11
  -12
  -13
  -13
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -30
  -31
  -34
  -35
  -38
  -39
  -42
  -43
  -46
  -48
  -51
  -54
  -56
Free cash flow, $m
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -29
  -30
  -32
  -34
Issuance/(repayment) of debt, $m
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
Issuance/(repurchase) of shares, $m
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
Cash from financing (excl. dividends), $m  
  11
  11
  12
  13
  14
  15
  16
  16
  18
  19
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  38
  40
  41
  44
  46
  49
  52
  54
Total cash flow (excl. dividends), $m
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
Retained Cash Flow (-), $m
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
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
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
Discount rate, %
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  95.0
  90.1
  85.3
  80.8
  76.5
  72.4
  68.6
  64.9
  61.5
  58.2
  55.2
  52.2
  49.5
  46.9
  44.4
  42.1
  39.8
  37.7
  35.7
  33.7
  31.9
  30.1
  28.4
  26.9
  25.3
  23.9
  22.6
  21.3
  20.0
  18.9

Virco Mfg. Corporation (Virco) is engaged in the designing, producing and distributing of furniture for a range family of customers. The Company is a manufacturer and supplier of moveable educational furniture and equipment for the preschool through 12th grade market in the United States. It manufactures an assortment of products, including mobile tables, mobile storage equipment, desks, computer furniture, chairs, folding chairs and folding tables. Its primary furniture lines are constructed of tubular metal legs and frames, combined with wood and plastic tops, plastic seats and backs, upholstered seats and backs, and upholstered rigid polyethylene and polypropylene shells. Virco also has flat metal forming capabilities to enable the production of desks, returns, bookcases, filing cabinets, mobile pedestals and related items. Its ZUMA line includes cantilever chairs; tablet arm chairs with a fixed or articulating work surface and a compact footprint, and steel-frame rockers.

FINANCIAL RATIOS  of  Virco Manufacturing Corporation (VIRC)

Valuation Ratios
P/E Ratio 2.9
Price to Sales 0.4
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 33.5
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 8.5%
Total Debt to Equity 8.5%
Interest Coverage 6
Management Effectiveness
Return On Assets 28%
Ret/ On Assets - 3 Yr. Avg. 12.5%
Return On Total Capital 44.2%
Ret/ On T. Cap. - 3 Yr. Avg. 20.3%
Return On Equity 50%
Return On Equity - 3 Yr. Avg. 23.9%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 36.4%
Gross Margin - 3 Yr. Avg. 35.2%
EBITDA Margin 6.4%
EBITDA Margin - 3 Yr. Avg. 5.5%
Operating Margin 3.5%
Oper. Margin - 3 Yr. Avg. 2.7%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin 13.3%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate -360%
Eff/ Tax Rate - 3 Yr. Avg. -120%
Payout Ratio 0%

VIRC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VIRC stock intrinsic value calculation we used $189 million for the last fiscal year's total revenue generated by Virco Manufacturing Corporation. The default revenue input number comes from 0001 income statement of Virco Manufacturing Corporation. 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 VIRC stock valuation model: a) initial revenue growth rate of 11.7% 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 6.3%, whose default value for VIRC is calculated based on our internal credit rating of Virco Manufacturing Corporation, 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 Virco Manufacturing Corporation.
    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 VIRC stock the variable cost ratio is equal to 96.8%.

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 VIRC 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 14.2% for Virco Manufacturing Corporation.

Corporate tax rate of 27% is the nominal tax rate for Virco Manufacturing Corporation. 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 VIRC 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 VIRC are equal to 20.3%.

Life of production assets of 7 years is the average useful life of capital assets used in Virco Manufacturing Corporation 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 VIRC is equal to 17%. 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 - $58.712 million for Virco Manufacturing Corporation - 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 15.542 million for Virco Manufacturing Corporation 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 Virco Manufacturing Corporation at the current share price and the inputted number of shares is $0.1 billion.

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