Intrinsic value of Rex American Resources - REX

Previous Close

$91.07

  Intrinsic Value

$102.00

stock screener

  Rating & Target

hold

+12%

Previous close

$91.07

 
Intrinsic value

$102.00

 
Up/down potential

+12%

 
Rating

hold

We calculate the intrinsic value of REX 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 2017), $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 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.13
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  454
  463
  474
  486
  500
  515
  531
  549
  569
  590
  613
  637
  663
  690
  720
  751
  784
  818
  855
  894
  935
  979
  1,024
  1,072
  1,123
  1,177
  1,233
  1,292
  1,355
  1,420
  1,489
Variable operating expenses, $m
 
  232
  237
  243
  250
  257
  266
  275
  285
  295
  306
  319
  331
  345
  360
  375
  392
  409
  428
  447
  468
  489
  512
  536
  562
  588
  617
  646
  677
  710
  745
Fixed operating expenses, $m
 
  186
  190
  195
  200
  205
  210
  215
  221
  226
  232
  237
  243
  250
  256
  262
  269
  275
  282
  289
  297
  304
  312
  319
  327
  336
  344
  353
  361
  370
  380
Total operating expenses, $m
  404
  418
  427
  438
  450
  462
  476
  490
  506
  521
  538
  556
  574
  595
  616
  637
  661
  684
  710
  736
  765
  793
  824
  855
  889
  924
  961
  999
  1,038
  1,080
  1,125
Operating income, $m
  50
  46
  47
  48
  50
  53
  56
  60
  64
  69
  75
  81
  88
  96
  104
  113
  123
  134
  145
  158
  171
  185
  201
  217
  234
  253
  273
  294
  316
  340
  365
EBITDA, $m
  70
  66
  68
  70
  72
  75
  79
  84
  89
  95
  102
  109
  117
  126
  136
  146
  158
  170
  183
  197
  212
  229
  246
  264
  284
  305
  327
  351
  376
  402
  431
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
Earnings before tax, $m
  57
  46
  47
  48
  50
  52
  55
  59
  63
  68
  73
  80
  86
  94
  102
  111
  120
  131
  142
  154
  167
  181
  196
  212
  229
  247
  266
  287
  309
  332
  356
Tax expense, $m
  17
  12
  13
  13
  13
  14
  15
  16
  17
  18
  20
  21
  23
  25
  28
  30
  33
  35
  38
  42
  45
  49
  53
  57
  62
  67
  72
  77
  83
  90
  96
Net income, $m
  32
  34
  34
  35
  36
  38
  40
  43
  46
  50
  54
  58
  63
  69
  74
  81
  88
  96
  104
  113
  122
  132
  143
  155
  167
  180
  194
  209
  225
  242
  260

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  189
  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
  454
  270
  277
  284
  292
  300
  310
  321
  332
  344
  358
  372
  387
  403
  420
  438
  457
  478
  499
  522
  546
  571
  598
  626
  656
  687
  720
  754
  791
  829
  869
Adjusted assets (=assets-cash), $m
  265
  270
  277
  284
  292
  300
  310
  321
  332
  344
  358
  372
  387
  403
  420
  438
  457
  478
  499
  522
  546
  571
  598
  626
  656
  687
  720
  754
  791
  829
  869
Revenue / Adjusted assets
  1.713
  1.715
  1.711
  1.711
  1.712
  1.717
  1.713
  1.710
  1.714
  1.715
  1.712
  1.712
  1.713
  1.712
  1.714
  1.715
  1.716
  1.711
  1.713
  1.713
  1.712
  1.715
  1.712
  1.712
  1.712
  1.713
  1.713
  1.714
  1.713
  1.713
  1.713
Average production assets, $m
  187
  190
  195
  200
  205
  212
  218
  226
  234
  243
  252
  262
  272
  284
  296
  309
  322
  336
  351
  367
  384
  402
  421
  441
  462
  484
  507
  531
  557
  584
  612
Working capital, $m
  204
  15
  16
  16
  16
  17
  18
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
Total debt, $m
  0
  2
  5
  8
  11
  15
  19
  24
  29
  34
  40
  46
  52
  59
  67
  74
  83
  91
  101
  110
  121
  132
  143
  155
  168
  181
  196
  210
  226
  243
  260
Total liabilities, $m
  114
  116
  119
  122
  125
  129
  133
  138
  143
  148
  154
  160
  166
  173
  181
  188
  197
  205
  215
  224
  235
  246
  257
  269
  282
  295
  310
  324
  340
  357
  374
Total equity, $m
  340
  154
  158
  162
  166
  171
  177
  183
  189
  196
  204
  212
  221
  230
  239
  250
  261
  272
  285
  298
  311
  326
  341
  357
  374
  392
  410
  430
  451
  473
  496
Total liabilities and equity, $m
  454
  270
  277
  284
  291
  300
  310
  321
  332
  344
  358
  372
  387
  403
  420
  438
  458
  477
  500
  522
  546
  572
  598
  626
  656
  687
  720
  754
  791
  830
  870
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.050
  0.070
  0.090
  0.110
  0.130
  0.150
  0.170
  0.200
  0.220
  0.240
  0.260
  0.280
  0.300
  0.320
  0.340
  0.350
  0.370
  0.390
  0.400
  0.420
  0.430
  0.450
  0.460
  0.480
  0.490
  0.500
  0.510
  0.520
Adjusted equity ratio
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  32
  34
  34
  35
  36
  38
  40
  43
  46
  50
  54
  58
  63
  69
  74
  81
  88
  96
  104
  113
  122
  132
  143
  155
  167
  180
  194
  209
  225
  242
  260
Depreciation, amort., depletion, $m
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
Funds from operations, $m
  74
  54
  55
  56
  58
  61
  64
  67
  71
  76
  81
  86
  92
  99
  106
  114
  123
  132
  142
  152
  163
  175
  188
  202
  217
  232
  249
  266
  285
  305
  326
Change in working capital, $m
  5
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  69
  54
  55
  56
  58
  60
  63
  67
  71
  75
  80
  85
  92
  98
  105
  113
  121
  131
  140
  151
  162
  174
  187
  200
  215
  230
  247
  264
  283
  303
  324
Maintenance CAPEX, $m
  0
  -20
  -20
  -21
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -63
New CAPEX, $m
  -14
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Cash from investing activities, $m
  -8
  -24
  -24
  -26
  -27
  -28
  -30
  -30
  -32
  -34
  -35
  -37
  -39
  -40
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -78
  -83
  -87
  -91
Free cash flow, $m
  61
  30
  30
  30
  31
  32
  34
  36
  38
  41
  45
  48
  53
  58
  63
  69
  75
  82
  89
  97
  106
  115
  125
  135
  147
  159
  172
  186
  200
  216
  233
Issuance/(repayment) of debt, $m
  0
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -5
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
Total cash flow (excl. dividends), $m
  57
  32
  32
  33
  34
  36
  38
  40
  43
  47
  50
  55
  59
  64
  70
  76
  83
  90
  98
  107
  116
  126
  136
  147
  159
  172
  186
  201
  216
  232
  250
Retained Cash Flow (-), $m
  -29
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Prev. year cash balance distribution, $m
 
  189
  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
 
  218
  29
  29
  30
  31
  32
  34
  37
  39
  43
  46
  51
  55
  60
  66
  72
  79
  86
  94
  102
  111
  121
  131
  143
  154
  167
  181
  195
  211
  227
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
 
  209
  26
  25
  24
  24
  23
  23
  23
  23
  22
  22
  22
  21
  20
  19
  18
  17
  16
  14
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  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
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Rex American Resources Corporation is a holding company. As of January 31, 2017, the Company had invested in three ethanol production entities. It operates through alternative energy segment. As of January 31, 2017, the Company's ethanol investments include One Earth Energy, LLC (One Earth), NuGen Energy, LLC (NuGen) and Big River Resources, LLC (Big River). One Earth has its ethanol production facility in Gibson City, Illinois. NuGen operates an ethanol producing facility in Marion, South Dakota. Big River is a holding company for various entities, including Big River Resources West Burlington, LLC, which operates an ethanol plant in West Burlington, Iowa. Big River has interest in Big River United Energy, LLC, which operates an ethanol production facility located in Dyersville, Iowa. Big River has interest in an ethanol production facility, which is located in Boyceville, Wisconsin.

FINANCIAL RATIOS  of  Rex American Resources (REX)

Valuation Ratios
P/E Ratio 18.7
Price to Sales 1.3
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 10.9
Growth Rates
Sales Growth Rate 4.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.7%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.4%
Ret/ On Assets - 3 Yr. Avg. 11.5%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 14.6%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 15.6%
Gross Margin - 3 Yr. Avg. 17.4%
EBITDA Margin 17%
EBITDA Margin - 3 Yr. Avg. 21.1%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 13.9%
Pre-Tax Margin 12.6%
Pre-Tax Margin - 3 Yr. Avg. 17.1%
Net Profit Margin 7%
Net Profit Margin - 3 Yr. Avg. 9.8%
Effective Tax Rate 29.8%
Eff/ Tax Rate - 3 Yr. Avg. 30.5%
Payout Ratio 12.5%

REX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REX stock intrinsic value calculation we used $454 million for the last fiscal year's total revenue generated by Rex American Resources. The default revenue input number comes from 2017 income statement of Rex American Resources. 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 REX stock valuation model: a) initial revenue growth rate of 2% 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 REX is calculated based on our internal credit rating of Rex American Resources, 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 Rex American Resources.
    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 REX stock the variable cost ratio is equal to 50%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $181 million in the base year in the intrinsic value calculation for REX 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 3.5% for Rex American Resources.

Corporate tax rate of 27% is the nominal tax rate for Rex American Resources. 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 REX 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 REX are equal to 41.1%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Rex American Resources 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 REX is equal to 3.3%. 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 - $340 million for Rex American Resources - 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 6.567 million for Rex American Resources 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 Rex American Resources at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ REX posts 2Q profit   [Aug-31-17 08:04PM  Associated Press]
▶ REX American sees 2Q profit tumble, stock price falls   [Aug-30-17 04:36PM  American City Business Journals]
▶ Anglo American appoints Chambers as next chairman   [Jun-07-17 03:31AM  Reuters]
▶ REX posts 1Q profit   [May-24-17 07:04AM  Associated Press]
▶ Here are REX American Resources 3 highest-paid executives   [May-12-17 07:20AM  American City Business Journals]
▶ Dayton ethanol company plans up to $30M in plant expansions   [Apr-03-17 06:25AM  at bizjournals.com]
▶ Dayton ethanol company plans up to $30M in plant expansions   [06:25AM  American City Business Journals]
▶ REX posts 4Q profit   [07:24AM  Associated Press]
▶ Why The Ethanol Industry Should Fear President Trump   [Jan-22-17 06:27PM  at Forbes]
▶ Is Schnitzer Steel Industries, Inc. (SCHN) A Good Stock To Buy?   [Dec-08-16 01:29PM  at Insider Monkey]
▶ [$$] Overheard: For This Company, Trumps a Gas   [12:54AM  at The Wall Street Journal]
▶ For This Company, Trump's a Gas   [Nov-30-16 02:24PM  at The Wall Street Journal]
▶ REX profit drops in 1Q   [Jun-02-16 03:28PM  at bizjournals.com]
▶ Has Your Equity Fund Loaded Up on Debt?   [May-17-16 03:00PM  Morningstar]
▶ Dayton energy company plans new plant in Wyoming   [Apr-29-16 03:25PM  at bizjournals.com]
Financial statements of REX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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