Intrinsic value of Mosaic Capital Corporation - M

Previous Close

$6.93

  Intrinsic Value

$7.37

stock screener

  Rating & Target

hold

+6%

  Value-price divergence*

0%

Previous close

$6.93

 
Intrinsic value

$7.37

 
Up/down potential

+6%

 
Rating

hold

 
Value-price divergence*

0%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of M 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 2016), $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
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.24
  45.80
  41.72
  38.05
  34.74
  31.77
  29.09
  26.68
  24.51
  22.56
  20.81
  19.23
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.62
  8.25
  7.93
  7.64
  7.37
  7.14
  6.92
Revenue, $m
  197
  287
  407
  562
  757
  998
  1,288
  1,632
  2,032
  2,490
  3,008
  3,586
  4,225
  4,923
  5,680
  6,494
  7,364
  8,289
  9,267
  10,298
  11,381
  12,514
  13,699
  14,934
  16,221
  17,560
  18,952
  20,400
  21,903
  23,466
  25,091
Variable operating expenses, $m
 
  268
  377
  518
  696
  915
  1,179
  1,491
  1,855
  2,273
  2,744
  3,264
  3,845
  4,480
  5,169
  5,909
  6,701
  7,543
  8,433
  9,371
  10,357
  11,388
  12,466
  13,590
  14,761
  15,979
  17,246
  18,563
  19,932
  21,354
  22,832
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
  194
  268
  377
  518
  696
  915
  1,179
  1,491
  1,855
  2,273
  2,744
  3,264
  3,845
  4,480
  5,169
  5,909
  6,701
  7,543
  8,433
  9,371
  10,357
  11,388
  12,466
  13,590
  14,761
  15,979
  17,246
  18,563
  19,932
  21,354
  22,832
Operating income, $m
  4
  19
  30
  44
  61
  83
  109
  140
  176
  217
  264
  323
  380
  443
  511
  585
  663
  746
  834
  927
  1,024
  1,126
  1,233
  1,344
  1,460
  1,581
  1,706
  1,836
  1,972
  2,112
  2,258
EBITDA, $m
  12
  33
  46
  64
  86
  113
  146
  185
  230
  282
  341
  406
  479
  558
  643
  736
  834
  939
  1,050
  1,167
  1,289
  1,418
  1,552
  1,692
  1,838
  1,989
  2,147
  2,311
  2,481
  2,658
  2,842
Interest expense (income), $m
  1
  1
  3
  6
  9
  14
  19
  26
  33
  42
  52
  64
  77
  91
  107
  124
  142
  162
  182
  204
  227
  251
  277
  303
  331
  360
  390
  421
  453
  487
  522
Earnings before tax, $m
  3
  18
  27
  38
  52
  69
  90
  115
  143
  175
  212
  259
  303
  352
  404
  461
  521
  585
  652
  723
  797
  875
  956
  1,041
  1,129
  1,221
  1,316
  1,415
  1,518
  1,625
  1,736
Tax expense, $m
  -5
  5
  7
  10
  14
  19
  24
  31
  39
  47
  57
  70
  82
  95
  109
  124
  141
  158
  176
  195
  215
  236
  258
  281
  305
  330
  355
  382
  410
  439
  469
Net income, $m
  6
  13
  20
  28
  38
  51
  66
  84
  104
  128
  154
  189
  221
  257
  295
  336
  380
  427
  476
  528
  582
  639
  698
  760
  824
  891
  961
  1,033
  1,108
  1,186
  1,268

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  25
  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
  276
  366
  519
  716
  965
  1,271
  1,641
  2,079
  2,588
  3,172
  3,832
  4,569
  5,382
  6,271
  7,235
  8,272
  9,381
  10,559
  11,806
  13,119
  14,498
  15,942
  17,451
  19,025
  20,664
  22,369
  24,143
  25,987
  27,902
  29,893
  31,963
Adjusted assets (=assets-cash), $m
  251
  366
  519
  716
  965
  1,271
  1,641
  2,079
  2,588
  3,172
  3,832
  4,569
  5,382
  6,271
  7,235
  8,272
  9,381
  10,559
  11,806
  13,119
  14,498
  15,942
  17,451
  19,025
  20,664
  22,369
  24,143
  25,987
  27,902
  29,893
  31,963
Revenue / Adjusted assets
  0.785
  0.784
  0.784
  0.785
  0.784
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
Average production assets, $m
  72
  104
  148
  204
  275
  362
  468
  592
  737
  904
  1,092
  1,302
  1,534
  1,787
  2,062
  2,357
  2,673
  3,009
  3,364
  3,738
  4,131
  4,543
  4,973
  5,421
  5,888
  6,374
  6,880
  7,405
  7,951
  8,518
  9,108
Working capital, $m
  23
  48
  68
  94
  127
  168
  216
  274
  341
  418
  505
  603
  710
  827
  954
  1,091
  1,237
  1,393
  1,557
  1,730
  1,912
  2,102
  2,301
  2,509
  2,725
  2,950
  3,184
  3,427
  3,680
  3,942
  4,215
Total debt, $m
  58
  91
  167
  266
  391
  545
  731
  950
  1,206
  1,499
  1,831
  2,200
  2,609
  3,055
  3,539
  4,060
  4,616
  5,208
  5,833
  6,493
  7,185
  7,910
  8,667
  9,457
  10,280
  11,136
  12,027
  12,952
  13,914
  14,913
  15,952
Total liabilities, $m
  150
  184
  260
  359
  484
  638
  824
  1,043
  1,299
  1,592
  1,924
  2,293
  2,702
  3,148
  3,632
  4,153
  4,709
  5,301
  5,926
  6,586
  7,278
  8,003
  8,760
  9,550
  10,373
  11,229
  12,120
  13,045
  14,007
  15,006
  16,045
Total equity, $m
  125
  182
  258
  356
  480
  633
  817
  1,035
  1,289
  1,580
  1,908
  2,275
  2,680
  3,123
  3,603
  4,120
  4,672
  5,259
  5,879
  6,533
  7,220
  7,939
  8,691
  9,474
  10,291
  11,140
  12,023
  12,941
  13,895
  14,887
  15,917
Total liabilities and equity, $m
  275
  366
  518
  715
  964
  1,271
  1,641
  2,078
  2,588
  3,172
  3,832
  4,568
  5,382
  6,271
  7,235
  8,273
  9,381
  10,560
  11,805
  13,119
  14,498
  15,942
  17,451
  19,024
  20,664
  22,369
  24,143
  25,986
  27,902
  29,893
  31,962
Debt-to-equity ratio
  0.464
  0.500
  0.650
  0.750
  0.810
  0.860
  0.890
  0.920
  0.940
  0.950
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
  0.990
  0.990
  0.990
  0.990
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
Adjusted equity ratio
  0.406
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  13
  20
  28
  38
  51
  66
  84
  104
  128
  154
  189
  221
  257
  295
  336
  380
  427
  476
  528
  582
  639
  698
  760
  824
  891
  961
  1,033
  1,108
  1,186
  1,268
Depreciation, amort., depletion, $m
  8
  13
  16
  20
  24
  30
  37
  45
  54
  65
  77
  83
  98
  115
  132
  151
  171
  193
  216
  240
  265
  291
  319
  348
  377
  409
  441
  475
  510
  546
  584
Funds from operations, $m
  24
  27
  36
  48
  62
  81
  102
  128
  158
  193
  231
  272
  320
  371
  427
  487
  552
  620
  692
  767
  847
  930
  1,017
  1,107
  1,202
  1,300
  1,402
  1,508
  1,618
  1,732
  1,851
Change in working capital, $m
  3
  15
  20
  26
  33
  40
  49
  58
  67
  77
  87
  97
  107
  117
  127
  137
  146
  155
  164
  173
  182
  190
  199
  208
  216
  225
  234
  243
  253
  263
  273
Cash from operations, $m
  21
  11
  16
  22
  30
  40
  54
  71
  91
  116
  144
  175
  212
  254
  300
  351
  405
  464
  527
  594
  665
  739
  818
  900
  985
  1,075
  1,168
  1,265
  1,365
  1,470
  1,579
Maintenance CAPEX, $m
  0
  -5
  -7
  -9
  -13
  -18
  -23
  -30
  -38
  -47
  -58
  -70
  -83
  -98
  -115
  -132
  -151
  -171
  -193
  -216
  -240
  -265
  -291
  -319
  -348
  -377
  -409
  -441
  -475
  -510
  -546
New CAPEX, $m
  -4
  -33
  -43
  -56
  -71
  -87
  -105
  -125
  -145
  -166
  -188
  -210
  -232
  -253
  -275
  -296
  -316
  -336
  -355
  -374
  -393
  -411
  -430
  -448
  -467
  -486
  -505
  -525
  -546
  -567
  -590
Cash from investing activities, $m
  -46
  -38
  -50
  -65
  -84
  -105
  -128
  -155
  -183
  -213
  -246
  -280
  -315
  -351
  -390
  -428
  -467
  -507
  -548
  -590
  -633
  -676
  -721
  -767
  -815
  -863
  -914
  -966
  -1,021
  -1,077
  -1,136
Free cash flow, $m
  -25
  -26
  -35
  -44
  -54
  -65
  -75
  -84
  -92
  -98
  -102
  -105
  -103
  -98
  -89
  -77
  -62
  -43
  -21
  4
  32
  63
  97
  133
  171
  211
  254
  298
  345
  393
  443
Issuance/(repayment) of debt, $m
  34
  58
  77
  99
  125
  154
  186
  220
  256
  293
  331
  370
  408
  446
  484
  521
  556
  591
  626
  659
  692
  725
  757
  790
  823
  856
  890
  925
  962
  999
  1,039
Issuance/(repurchase) of shares, $m
  0
  44
  56
  70
  86
  102
  118
  134
  149
  163
  174
  178
  184
  186
  185
  180
  172
  160
  145
  126
  105
  80
  53
  24
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  27
  102
  133
  169
  211
  256
  304
  354
  405
  456
  505
  548
  592
  632
  669
  701
  728
  751
  771
  785
  797
  805
  810
  814
  823
  856
  890
  925
  962
  999
  1,039
Total cash flow (excl. dividends), $m
  2
  76
  99
  125
  156
  191
  229
  270
  313
  358
  404
  443
  489
  535
  580
  624
  667
  709
  750
  790
  829
  868
  907
  946
  994
  1,068
  1,144
  1,224
  1,306
  1,392
  1,482
Retained Cash Flow (-), $m
  10
  -57
  -76
  -98
  -124
  -153
  -184
  -218
  -254
  -291
  -329
  -367
  -405
  -443
  -480
  -516
  -552
  -587
  -621
  -654
  -687
  -719
  -751
  -784
  -816
  -849
  -883
  -918
  -954
  -991
  -1,030
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
 
  19
  22
  27
  32
  38
  45
  52
  59
  67
  75
  76
  84
  92
  100
  107
  115
  122
  129
  136
  143
  149
  156
  163
  177
  218
  261
  306
  352
  401
  451
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
 
  18
  21
  24
  27
  30
  33
  35
  37
  39
  39
  36
  36
  35
  33
  31
  29
  27
  24
  21
  18
  15
  13
  11
  9
  8
  8
  7
  5
  4
  3
Current shareholders' claim on cash, %
  100
  66.5
  46.1
  33.2
  24.7
  18.9
  14.9
  12.1
  10.0
  8.5
  7.3
  6.5
  5.8
  5.3
  4.9
  4.5
  4.3
  4.1
  3.9
  3.8
  3.7
  3.7
  3.6
  3.6
  3.6
  3.6
  3.6
  3.6
  3.6
  3.6
  3.6

Mosaic Capital Corp is a Canada-based investment company that owns a portfolio of businesses. The Company operates through four segments: Infrastructure, Energy, Diversified and Real Estate. Within the Infrastructure, Energy and Diversified segments, its portfolio of businesses operate in printing, oil and gas services, potash, construction and industrial supply industries. Within the Real Estate segment, the Company owns approximately three commercial properties, land held for development and has joint control of a joint venture with Harbour Equity Capital Corp. (Harbour Equity) for the development of the Parker Industrial Park near Regina, Saskatchewan. The Company's subsidiaries include Printing Unlimited L.P., Allied Cathodic Services L.P., Remote Waste L.P., Ambassador Mechanical Corp., Industrial Scaffold Services L.P., Place-Crete Systems L.P., South East Construction L.P. and Cedar Infrastructure Products Inc.

FINANCIAL RATIOS  of  Mosaic Capital Corporation (M)

Valuation Ratios
P/E Ratio 9.6
Price to Sales 0.3
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 3.4
Growth Rates
Sales Growth Rate 8.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -42.9%
Cap. Spend. - 3 Yr. Gr. Rate -10.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 18.4%
Total Debt to Equity 46.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 4.6%
Return On Equity - 3 Yr. Avg. 6.8%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 10.2%
Gross Margin - 3 Yr. Avg. 12.3%
EBITDA Margin 6.1%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 1.5%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 6.9%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 5.2%
Effective Tax Rate -166.7%
Eff/ Tax Rate - 3 Yr. Avg. -50.8%
Payout Ratio 283.3%

M stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the M stock intrinsic value calculation we used $197 million for the last fiscal year's total revenue generated by Mosaic Capital Corporation. The default revenue input number comes from 2016 income statement of Mosaic Capital 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 M stock valuation model: a) initial revenue growth rate of 45.8% 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 M is calculated based on our internal credit rating of Mosaic Capital 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 Mosaic Capital 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 M stock the variable cost ratio is equal to 94.4%.

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 M 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 Mosaic Capital Corporation.

Corporate tax rate of 27% is the nominal tax rate for Mosaic Capital 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 M 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 M are equal to 36.3%.

Life of production assets of 15.6 years is the average useful life of capital assets used in Mosaic Capital 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 M is equal to 16.8%. 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 - $125 million for Mosaic Capital 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 10.561 million for Mosaic Capital 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 Mosaic Capital Corporation at the current share price and the inputted number of shares is $0.1 billion.

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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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