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Is AZZ Inc (NYSE:AZZ) Expensive For A Reason? A Look At The Intrinsic Value

Mary Ramos

I am going to run you through how I calculated the intrinsic value of AZZ Inc (NYSE:AZZ) using the discounted cash flow (DCF) method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. Also note that this article was written in May 2018 so be sure check the latest calculation for AZZ here.

Is AZZ fairly valued?

We are going to use a two-stage DCF model, which simply means we have two different periods of varying growth rates for the company’s cash flows. Generally the initial phase has higher growth rates that plateau over time. Firstly, I took the analyst consensus estimates of AZZ’s levered free cash flow (FCF) over the next five years and discounted these figures at the rate of 11.49%. When estimates weren’t available, I’ve extrapolated the average annual growth rate over the previous five years, capped at a reasonable level. This resulted in a present value of 5-year cash flow of US$262.74M. Want to understand how I calculated this value? Take a look at our detailed analysis here.

NYSE:AZZ Future Profit May 15th 18

The graph above shows how AZZ’s top and bottom lines are expected to move in the future, which should give you an idea of AZZ’s outlook. Next, I determine the terminal value, which accounts for all the future cash flows after the five years. I think it’s suitable to use the 10-year government bond rate of 2.8% as the stable growth rate, which is rightly below GDP growth, but more towards the conservative side. Discounting the terminal value back five years gives us a present value of US$604.47M.

The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is US$867.21M. In the final step we divide the equity value by the number of shares outstanding. This results in an intrinsic value of $33.40, which, compared to the current share price of $45.05, we see that AZZ is quite expensive at the time of writing.

Next Steps:

Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn’t be the only metric you look at when researching a company. What is the reason for the share price to differ from the intrinsic value? For AZZ, there are three fundamental aspects you should further examine:

  1. Financial Health: Does AZZ have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Future Earnings: How does AZZ’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of AZZ? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. Simply Wall St does a DCF calculation for every US stock every 6 hours, so if you want to find the intrinsic value of any other stock just search here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.