Intrinsic value of Xerium Technologies - XRM

Previous Close

$13.49

  Intrinsic Value

$2.00

stock screener

  Rating & Target

str. sell

-85%

Previous close

$13.49

 
Intrinsic value

$2.00

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of XRM 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, %
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
Revenue, $m
  501
  522
  544
  568
  593
  619
  647
  677
  708
  741
  776
  812
  851
  891
  934
  979
  1,026
  1,076
  1,129
  1,184
  1,241
  1,302
  1,366
  1,433
  1,504
  1,578
  1,656
  1,738
  1,824
  1,915
Variable operating expenses, $m
  90
  94
  98
  101
  106
  110
  115
  120
  125
  130
  129
  135
  141
  148
  155
  163
  171
  179
  188
  197
  206
  217
  227
  238
  250
  262
  275
  289
  303
  318
Fixed operating expenses, $m
  355
  362
  370
  379
  387
  395
  404
  413
  422
  431
  441
  451
  460
  471
  481
  492
  502
  513
  525
  536
  548
  560
  572
  585
  598
  611
  624
  638
  652
  667
Total operating expenses, $m
  445
  456
  468
  480
  493
  505
  519
  533
  547
  561
  570
  586
  601
  619
  636
  655
  673
  692
  713
  733
  754
  777
  799
  823
  848
  873
  899
  927
  955
  985
Operating income, $m
  56
  65
  76
  88
  100
  114
  128
  144
  161
  179
  206
  227
  249
  273
  298
  325
  353
  384
  416
  451
  487
  526
  567
  610
  656
  705
  756
  811
  869
  930
EBITDA, $m
  94
  105
  117
  130
  144
  159
  176
  193
  212
  232
  254
  277
  302
  328
  356
  386
  417
  451
  486
  524
  564
  607
  652
  699
  750
  803
  859
  919
  982
  1,049
Interest expense (income), $m
  29
  53
  35
  37
  40
  42
  45
  48
  51
  54
  58
  62
  65
  69
  74
  78
  83
  88
  93
  99
  104
  110
  117
  124
  131
  138
  146
  154
  163
  172
  181
Earnings before tax, $m
  3
  30
  39
  48
  58
  69
  80
  93
  107
  121
  144
  161
  179
  199
  220
  242
  265
  291
  318
  346
  377
  409
  443
  479
  518
  559
  602
  648
  697
  749
Tax expense, $m
  1
  8
  10
  13
  16
  19
  22
  25
  29
  33
  39
  44
  48
  54
  59
  65
  72
  78
  86
  93
  102
  110
  120
  129
  140
  151
  163
  175
  188
  202
Net income, $m
  2
  22
  28
  35
  42
  50
  59
  68
  78
  89
  105
  118
  131
  145
  160
  177
  194
  212
  232
  253
  275
  298
  323
  350
  378
  408
  440
  473
  509
  546

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
  591
  616
  642
  670
  700
  731
  764
  799
  836
  875
  916
  959
  1,004
  1,052
  1,103
  1,156
  1,212
  1,271
  1,332
  1,397
  1,466
  1,538
  1,613
  1,692
  1,776
  1,863
  1,956
  2,052
  2,154
  2,261
Adjusted assets (=assets-cash), $m
  591
  616
  642
  670
  700
  731
  764
  799
  836
  875
  916
  959
  1,004
  1,052
  1,103
  1,156
  1,212
  1,271
  1,332
  1,397
  1,466
  1,538
  1,613
  1,692
  1,776
  1,863
  1,956
  2,052
  2,154
  2,261
Revenue / Adjusted assets
  0.848
  0.847
  0.847
  0.848
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.848
  0.847
  0.847
  0.847
  0.847
  0.847
  0.848
  0.848
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
Average production assets, $m
  330
  344
  359
  374
  391
  408
  426
  446
  467
  488
  511
  535
  561
  587
  616
  645
  676
  709
  744
  780
  818
  858
  900
  945
  991
  1,040
  1,092
  1,146
  1,202
  1,262
Working capital, $m
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
  201
  210
  221
  232
  243
  255
  268
  281
  295
Total debt, $m
  337
  359
  383
  408
  434
  462
  492
  524
  557
  592
  629
  668
  709
  752
  797
  845
  895
  948
  1,004
  1,062
  1,124
  1,188
  1,256
  1,328
  1,403
  1,482
  1,565
  1,652
  1,743
  1,839
Total liabilities, $m
  532
  554
  578
  603
  630
  658
  688
  719
  752
  787
  824
  863
  904
  947
  993
  1,040
  1,091
  1,143
  1,199
  1,258
  1,319
  1,384
  1,452
  1,523
  1,598
  1,677
  1,760
  1,847
  1,939
  2,035
Total equity, $m
  59
  62
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  100
  105
  110
  116
  121
  127
  133
  140
  147
  154
  161
  169
  178
  186
  196
  205
  215
  226
Total liabilities and equity, $m
  591
  616
  642
  670
  700
  731
  764
  799
  836
  874
  916
  959
  1,004
  1,052
  1,103
  1,156
  1,212
  1,270
  1,332
  1,398
  1,466
  1,538
  1,613
  1,692
  1,776
  1,863
  1,956
  2,052
  2,154
  2,261
Debt-to-equity ratio
  5.690
  5.830
  5.960
  6.080
  6.210
  6.330
  6.440
  6.550
  6.660
  6.770
  6.870
  6.960
  7.050
  7.140
  7.230
  7.310
  7.390
  7.460
  7.530
  7.600
  7.670
  7.730
  7.790
  7.850
  7.900
  7.950
  8.000
  8.050
  8.090
  8.140
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  22
  28
  35
  42
  50
  59
  68
  78
  89
  105
  118
  131
  145
  160
  177
  194
  212
  232
  253
  275
  298
  323
  350
  378
  408
  440
  473
  509
  546
Depreciation, amort., depletion, $m
  38
  40
  41
  42
  44
  46
  47
  49
  51
  53
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
  103
  108
  113
  119
Funds from operations, $m
  40
  62
  69
  77
  86
  96
  106
  117
  129
  142
  154
  168
  184
  201
  218
  237
  258
  279
  302
  326
  352
  379
  408
  439
  472
  506
  543
  581
  622
  665
Change in working capital, $m
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
Cash from operations, $m
  37
  59
  66
  74
  82
  92
  102
  112
  124
  137
  148
  163
  178
  194
  212
  230
  250
  271
  294
  318
  343
  370
  399
  429
  461
  495
  531
  569
  609
  652
Maintenance CAPEX, $m
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -113
New CAPEX, $m
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -57
  -60
Cash from investing activities, $m
  -43
  -45
  -47
  -50
  -51
  -54
  -56
  -59
  -63
  -66
  -69
  -72
  -75
  -80
  -83
  -88
  -92
  -97
  -102
  -106
  -112
  -117
  -123
  -129
  -136
  -143
  -149
  -157
  -165
  -173
Free cash flow, $m
  -6
  14
  19
  24
  30
  37
  45
  53
  61
  71
  79
  90
  102
  115
  128
  143
  158
  175
  193
  211
  231
  253
  275
  300
  325
  352
  381
  412
  444
  479
Issuance/(repayment) of debt, $m
  -172
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  58
  62
  65
  68
  71
  75
  79
  83
  87
  91
  96
Issuance/(repurchase) of shares, $m
  193
  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  
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  58
  62
  65
  68
  71
  75
  79
  83
  87
  91
  96
Total cash flow (excl. dividends), $m
  16
  36
  42
  49
  57
  65
  74
  84
  95
  106
  116
  129
  143
  158
  174
  191
  209
  228
  248
  270
  293
  317
  343
  371
  400
  431
  464
  499
  536
  575
Retained Cash Flow (-), $m
  -196
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
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
  -180
  33
  40
  47
  54
  62
  71
  81
  91
  102
  112
  125
  138
  153
  169
  185
  203
  222
  242
  263
  286
  310
  336
  363
  392
  422
  455
  489
  525
  564
Discount rate, %
  15.10
  15.86
  16.65
  17.48
  18.35
  19.27
  20.24
  21.25
  22.31
  23.43
  24.60
  25.83
  27.12
  28.47
  29.90
  31.39
  32.96
  34.61
  36.34
  38.16
  40.06
  42.07
  44.17
  46.38
  48.70
  51.13
  53.69
  56.38
  59.19
  62.15
PV of cash for distribution, $m
  -156
  25
  25
  24
  23
  22
  20
  17
  15
  12
  10
  8
  6
  5
  3
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
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Xerium Technologies, Inc. (Xerium) is a manufacturer and supplier of over two types of consumable products used in the production of paper: machine clothing and roll covers. The Company markets its products through brands, such as Huyck Wangner, Weavexx, Stowe Woodward, Mount Hope, Robec and Xibe. The Company operates in two segments: machine clothing and roll covers. Its machine clothing segment products include various types of industrial textiles used on paper-making machines and manufactures spreader rolls. Through its roll covers segment, it manufactures various types of roll covers, refurbishes previously installed roll covers, provides mechanical services for the internal mechanisms of rolls used on paper-making machines, and manufactures spreader rolls. In addition, its products are also installed in other industrial applications, such as non-woven and fiber cement machines.

FINANCIAL RATIOS  of  Xerium Technologies (XRM)

Valuation Ratios
P/E Ratio -9.9
Price to Sales 0.5
Price to Book -1.5
Price to Tangible Book
Price to Cash Flow 5.9
Price to Free Cash Flow 9.5
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -72.5%
Cap. Spend. - 3 Yr. Gr. Rate -20.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity -334.7%
Total Debt to Equity -345.6%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. -0.2%
Return On Total Capital -6%
Ret/ On T. Cap. - 3 Yr. Avg. -2.9%
Return On Equity 16.9%
Return On Equity - 3 Yr. Avg. 12.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 37.6%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 14.2%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin -2.5%
Pre-Tax Margin - 3 Yr. Avg. 1.2%
Net Profit Margin -4.7%
Net Profit Margin - 3 Yr. Avg. -2.3%
Effective Tax Rate -83.3%
Eff/ Tax Rate - 3 Yr. Avg. 63.8%
Payout Ratio 0%

XRM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XRM stock intrinsic value calculation we used $481.048 million for the last fiscal year's total revenue generated by Xerium Technologies. The default revenue input number comes from 0001 income statement of Xerium Technologies. 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 XRM stock valuation model: a) initial revenue growth rate of 4.1% 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 15.1%, whose default value for XRM is calculated based on our internal credit rating of Xerium Technologies, 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 Xerium Technologies.
    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 XRM stock the variable cost ratio is equal to 18.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $347 million in the base year in the intrinsic value calculation for XRM 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 10.4% for Xerium Technologies.

Corporate tax rate of 27% is the nominal tax rate for Xerium Technologies. 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 XRM 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 XRM are equal to 65.9%.

Life of production assets of 10.6 years is the average useful life of capital assets used in Xerium Technologies 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 XRM is equal to 15.4%. 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 - $-136.466 million for Xerium Technologies - 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 16.428 million for Xerium Technologies 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 Xerium Technologies at the current share price and the inputted number of shares is $0.2 billion.

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