Intrinsic value of Metro Inc. - MRU

Previous Close

$39.51

  Intrinsic Value

$42.84

stock screener

  Rating & Target

hold

+8%

Previous close

$39.51

 
Intrinsic value

$42.84

 
Up/down potential

+8%

 
Rating

hold

We calculate the intrinsic value of MRU 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  3.03
  3.00
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
Revenue, $m
  13,175
  13,570
  14,004
  14,478
  14,991
  15,543
  16,137
  16,772
  17,451
  18,173
  18,941
  19,756
  20,619
  21,534
  22,501
  23,523
  24,603
  25,742
  26,943
  28,209
  29,543
  30,949
  32,428
  33,986
  35,625
  37,349
  39,163
  41,071
  43,076
  45,185
  47,402
Variable operating expenses, $m
 
  12,764
  13,166
  13,604
  14,079
  14,591
  15,141
  15,729
  16,357
  17,026
  17,737
  18,294
  19,094
  19,941
  20,836
  21,783
  22,782
  23,837
  24,949
  26,122
  27,358
  28,659
  30,029
  31,471
  32,989
  34,586
  36,266
  38,032
  39,890
  41,842
  43,895
Fixed operating expenses, $m
 
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  16
  17
  17
  18
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
Total operating expenses, $m
  12,403
  12,775
  13,178
  13,616
  14,091
  14,603
  15,154
  15,742
  16,370
  17,040
  17,751
  18,308
  19,109
  19,956
  20,852
  21,799
  22,798
  23,854
  24,966
  26,140
  27,376
  28,677
  30,048
  31,490
  33,009
  34,606
  36,287
  38,053
  39,912
  41,865
  43,918
Operating income, $m
  772
  795
  827
  862
  900
  940
  984
  1,030
  1,080
  1,133
  1,190
  1,447
  1,511
  1,578
  1,649
  1,724
  1,804
  1,888
  1,976
  2,069
  2,168
  2,271
  2,380
  2,495
  2,616
  2,743
  2,877
  3,017
  3,165
  3,320
  3,484
EBITDA, $m
  966
  1,075
  1,109
  1,147
  1,188
  1,231
  1,279
  1,329
  1,383
  1,441
  1,502
  1,567
  1,635
  1,708
  1,785
  1,867
  1,953
  2,043
  2,139
  2,240
  2,346
  2,458
  2,576
  2,700
  2,831
  2,969
  3,113
  3,265
  3,425
  3,594
  3,770
Interest expense (income), $m
  59
  63
  68
  72
  77
  83
  88
  95
  101
  108
  116
  124
  132
  141
  151
  161
  172
  183
  195
  207
  221
  235
  249
  265
  281
  298
  316
  335
  355
  376
  398
Earnings before tax, $m
  802
  732
  759
  790
  822
  858
  895
  936
  979
  1,025
  1,074
  1,323
  1,378
  1,437
  1,498
  1,563
  1,632
  1,705
  1,781
  1,862
  1,947
  2,037
  2,131
  2,230
  2,335
  2,445
  2,560
  2,682
  2,810
  2,944
  3,086
Tax expense, $m
  194
  198
  205
  213
  222
  232
  242
  253
  264
  277
  290
  357
  372
  388
  405
  422
  441
  460
  481
  503
  526
  550
  575
  602
  630
  660
  691
  724
  759
  795
  833
Net income, $m
  592
  534
  554
  576
  600
  626
  654
  683
  715
  748
  784
  966
  1,006
  1,049
  1,094
  1,141
  1,191
  1,244
  1,300
  1,359
  1,421
  1,487
  1,556
  1,628
  1,704
  1,785
  1,869
  1,958
  2,051
  2,149
  2,253

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  149
  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
  6,051
  6,080
  6,274
  6,486
  6,716
  6,964
  7,230
  7,515
  7,818
  8,142
  8,486
  8,851
  9,238
  9,648
  10,081
  10,539
  11,023
  11,533
  12,071
  12,638
  13,236
  13,866
  14,529
  15,227
  15,961
  16,734
  17,546
  18,401
  19,300
  20,244
  21,237
Adjusted assets (=assets-cash), $m
  5,902
  6,080
  6,274
  6,486
  6,716
  6,964
  7,230
  7,515
  7,818
  8,142
  8,486
  8,851
  9,238
  9,648
  10,081
  10,539
  11,023
  11,533
  12,071
  12,638
  13,236
  13,866
  14,529
  15,227
  15,961
  16,734
  17,546
  18,401
  19,300
  20,244
  21,237
Revenue / Adjusted assets
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
  2.232
Average production assets, $m
  1,365
  1,411
  1,456
  1,506
  1,559
  1,617
  1,678
  1,744
  1,815
  1,890
  1,970
  2,055
  2,144
  2,240
  2,340
  2,446
  2,559
  2,677
  2,802
  2,934
  3,073
  3,219
  3,373
  3,535
  3,705
  3,884
  4,073
  4,271
  4,480
  4,699
  4,930
Working capital, $m
  70
  -68
  -70
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -187
  -196
  -205
  -215
  -226
  -237
Total debt, $m
  1,456
  1,538
  1,641
  1,754
  1,876
  2,007
  2,148
  2,299
  2,460
  2,631
  2,814
  3,007
  3,212
  3,429
  3,659
  3,902
  4,158
  4,428
  4,714
  5,014
  5,331
  5,665
  6,016
  6,386
  6,775
  7,185
  7,615
  8,068
  8,545
  9,045
  9,572
Total liabilities, $m
  3,140
  3,222
  3,325
  3,438
  3,560
  3,691
  3,832
  3,983
  4,144
  4,315
  4,498
  4,691
  4,896
  5,113
  5,343
  5,586
  5,842
  6,112
  6,398
  6,698
  7,015
  7,349
  7,700
  8,070
  8,459
  8,869
  9,299
  9,752
  10,229
  10,729
  11,256
Total equity, $m
  2,911
  2,858
  2,949
  3,049
  3,157
  3,273
  3,398
  3,532
  3,675
  3,827
  3,988
  4,160
  4,342
  4,534
  4,738
  4,953
  5,181
  5,420
  5,673
  5,940
  6,221
  6,517
  6,829
  7,157
  7,502
  7,865
  8,247
  8,648
  9,071
  9,515
  9,982
Total liabilities and equity, $m
  6,051
  6,080
  6,274
  6,487
  6,717
  6,964
  7,230
  7,515
  7,819
  8,142
  8,486
  8,851
  9,238
  9,647
  10,081
  10,539
  11,023
  11,532
  12,071
  12,638
  13,236
  13,866
  14,529
  15,227
  15,961
  16,734
  17,546
  18,400
  19,300
  20,244
  21,238
Debt-to-equity ratio
  0.500
  0.540
  0.560
  0.580
  0.590
  0.610
  0.630
  0.650
  0.670
  0.690
  0.710
  0.720
  0.740
  0.760
  0.770
  0.790
  0.800
  0.820
  0.830
  0.840
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
Adjusted equity ratio
  0.468
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470
  0.470

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  592
  534
  554
  576
  600
  626
  654
  683
  715
  748
  784
  966
  1,006
  1,049
  1,094
  1,141
  1,191
  1,244
  1,300
  1,359
  1,421
  1,487
  1,556
  1,628
  1,704
  1,785
  1,869
  1,958
  2,051
  2,149
  2,253
Depreciation, amort., depletion, $m
  194
  279
  282
  285
  288
  291
  295
  299
  303
  307
  312
  119
  125
  130
  136
  142
  149
  156
  163
  171
  179
  187
  196
  205
  215
  226
  237
  248
  260
  273
  287
Funds from operations, $m
  431
  814
  836
  861
  888
  917
  949
  982
  1,018
  1,056
  1,096
  1,086
  1,131
  1,179
  1,230
  1,284
  1,340
  1,400
  1,463
  1,530
  1,600
  1,674
  1,752
  1,834
  1,920
  2,010
  2,106
  2,206
  2,312
  2,423
  2,539
Change in working capital, $m
  -265
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Cash from operations, $m
  696
  816
  839
  864
  891
  920
  952
  985
  1,021
  1,059
  1,100
  1,090
  1,135
  1,184
  1,235
  1,289
  1,346
  1,406
  1,469
  1,536
  1,607
  1,681
  1,759
  1,841
  1,928
  2,019
  2,115
  2,216
  2,322
  2,433
  2,550
Maintenance CAPEX, $m
  0
  -79
  -82
  -85
  -88
  -91
  -94
  -98
  -101
  -106
  -110
  -115
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -163
  -171
  -179
  -187
  -196
  -205
  -215
  -226
  -237
  -248
  -260
  -273
New CAPEX, $m
  -369
  -46
  -45
  -49
  -53
  -57
  -62
  -66
  -71
  -75
  -80
  -85
  -90
  -95
  -101
  -106
  -112
  -118
  -125
  -132
  -139
  -146
  -154
  -162
  -170
  -179
  -189
  -198
  -209
  -219
  -231
Cash from investing activities, $m
  -333
  -125
  -127
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -209
  -220
  -231
  -242
  -254
  -267
  -281
  -295
  -310
  -325
  -341
  -358
  -375
  -394
  -415
  -435
  -457
  -479
  -504
Free cash flow, $m
  363
  690
  711
  730
  750
  772
  796
  822
  849
  879
  910
  890
  926
  964
  1,004
  1,046
  1,091
  1,139
  1,189
  1,242
  1,297
  1,356
  1,418
  1,483
  1,552
  1,624
  1,700
  1,781
  1,865
  1,953
  2,047
Issuance/(repayment) of debt, $m
  200
  96
  103
  112
  122
  131
  141
  151
  161
  172
  182
  194
  205
  217
  230
  243
  256
  270
  285
  301
  317
  334
  351
  370
  389
  409
  431
  453
  476
  501
  526
Issuance/(repurchase) of shares, $m
  -299
  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  
  -98
  96
  103
  112
  122
  131
  141
  151
  161
  172
  182
  194
  205
  217
  230
  243
  256
  270
  285
  301
  317
  334
  351
  370
  389
  409
  431
  453
  476
  501
  526
Total cash flow (excl. dividends), $m
  265
  786
  815
  842
  872
  903
  937
  972
  1,010
  1,050
  1,092
  1,084
  1,131
  1,181
  1,234
  1,289
  1,347
  1,409
  1,474
  1,542
  1,614
  1,690
  1,769
  1,853
  1,941
  2,034
  2,131
  2,234
  2,341
  2,454
  2,573
Retained Cash Flow (-), $m
  -230
  -82
  -91
  -100
  -108
  -116
  -125
  -134
  -143
  -152
  -162
  -172
  -182
  -193
  -204
  -215
  -227
  -240
  -253
  -267
  -281
  -296
  -312
  -328
  -345
  -363
  -382
  -402
  -422
  -444
  -467
Prev. year cash balance distribution, $m
 
  135
  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
 
  840
  723
  743
  764
  787
  812
  839
  867
  898
  931
  912
  949
  988
  1,030
  1,074
  1,120
  1,169
  1,221
  1,276
  1,333
  1,394
  1,458
  1,525
  1,596
  1,671
  1,749
  1,832
  1,919
  2,010
  2,106
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
 
  805
  662
  646
  629
  610
  589
  567
  542
  516
  488
  433
  405
  376
  346
  315
  285
  254
  225
  196
  169
  144
  121
  100
  81
  65
  51
  39
  30
  22
  16
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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

METRO INC. is engaged in food and pharmaceutical distribution. The Company operates under various grocery banners in the supermarket and discount segments. The Company operates or supplies a network of over 940 food stores under various banners, including Metro, Metro Plus, Super C, Food Basics, Adonis and Premiere Moisson, as well as approximately 260 drugstores under the Brunet, Metro Pharmacy and Drug Basics banners. The Adonis banner, which has over 10 stores, is specialized in perishables, and Mediterranean and Middle-Eastern products. It also operates Premiere Moisson, a company specialized in bakery, pastry, charcutery and other food offerings prepared on an artisanal basis. Premiere Moisson sells its products to its stores, to restaurant and distribution chains, as well as directly to consumers. It also acts as franchisor and distributor for over 180 franchised Brunet Plus, Brunet, Brunet Clinique and Clini Plus drugstores, owned by independent pharmacists.

FINANCIAL RATIOS  of  Metro Inc. (MRU)

Valuation Ratios
P/E Ratio 15.2
Price to Sales 0.7
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 27.4
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.5%
Cap. Spend. - 3 Yr. Gr. Rate 12.3%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 49.5%
Total Debt to Equity 50%
Interest Coverage 15
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 14.3%
Ret/ On T. Cap. - 3 Yr. Avg. 14.2%
Return On Equity 21.2%
Return On Equity - 3 Yr. Avg. 20.6%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 19.7%
Gross Margin - 3 Yr. Avg. 19.7%
EBITDA Margin 8%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 5.9%
Oper. Margin - 3 Yr. Avg. 5.8%
Pre-Tax Margin 6.1%
Pre-Tax Margin - 3 Yr. Avg. 5.9%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 24.2%
Eff/ Tax Rate - 3 Yr. Avg. 24.2%
Payout Ratio 24.3%

MRU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MRU stock intrinsic value calculation we used $13175 million for the last fiscal year's total revenue generated by Metro Inc.. The default revenue input number comes from 2017 income statement of Metro Inc.. 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 MRU stock valuation model: a) initial revenue growth rate of 3% 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 MRU is calculated based on our internal credit rating of Metro Inc., 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 Metro Inc..
    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 MRU stock the variable cost ratio is equal to 94.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 million in the base year in the intrinsic value calculation for MRU 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 4.4% for Metro Inc..

Corporate tax rate of 27% is the nominal tax rate for Metro Inc.. 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 MRU 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 MRU are equal to 10.4%.

Life of production assets of 17.2 years is the average useful life of capital assets used in Metro Inc. 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 MRU is equal to -0.5%. 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 - $2911 million for Metro Inc. - 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 227.826 million for Metro Inc. 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 Metro Inc. at the current share price and the inputted number of shares is $9.0 billion.

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Financial statements of MRU
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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