Intrinsic value of Mullen Group Ltd. - MTL

Previous Close

$17.20

  Intrinsic Value

$1.47

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

0%

Previous close

$17.20

 
Intrinsic value

$1.47

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of MTL 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 1.8

 

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, %
  -14.74
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
Revenue, $m
  1,035
  1,148
  1,266
  1,390
  1,519
  1,654
  1,794
  1,940
  2,092
  2,250
  2,414
  2,584
  2,761
  2,945
  3,137
  3,336
  3,543
  3,759
  3,984
  4,218
  4,463
  4,718
  4,985
  5,263
  5,553
  5,857
  6,175
  6,507
  6,855
  7,219
  7,600
Variable operating expenses, $m
 
  1,103
  1,213
  1,328
  1,448
  1,573
  1,704
  1,840
  1,981
  2,128
  2,280
  2,403
  2,568
  2,739
  2,917
  3,102
  3,295
  3,496
  3,705
  3,923
  4,151
  4,388
  4,636
  4,894
  5,165
  5,447
  5,743
  6,052
  6,375
  6,713
  7,068
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
  963
  1,103
  1,213
  1,328
  1,448
  1,573
  1,704
  1,840
  1,981
  2,128
  2,280
  2,403
  2,568
  2,739
  2,917
  3,102
  3,295
  3,496
  3,705
  3,923
  4,151
  4,388
  4,636
  4,894
  5,165
  5,447
  5,743
  6,052
  6,375
  6,713
  7,068
Operating income, $m
  72
  45
  53
  62
  71
  81
  90
  101
  111
  122
  134
  181
  193
  206
  220
  234
  248
  263
  279
  295
  312
  330
  349
  368
  389
  410
  432
  456
  480
  505
  532
EBITDA, $m
  157
  150
  166
  182
  199
  217
  235
  254
  274
  295
  316
  339
  362
  386
  411
  437
  464
  493
  522
  553
  585
  618
  653
  690
  728
  767
  809
  853
  898
  946
  996
Interest expense (income), $m
  34
  26
  30
  34
  38
  42
  47
  52
  57
  62
  68
  73
  79
  85
  92
  98
  105
  112
  120
  128
  136
  144
  153
  162
  172
  182
  192
  203
  215
  227
  239
Earnings before tax, $m
  72
  19
  24
  28
  33
  38
  43
  49
  54
  60
  66
  108
  114
  121
  128
  135
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
  279
  293
Tax expense, $m
  20
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  29
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  75
  79
Net income, $m
  52
  14
  17
  21
  24
  28
  32
  36
  40
  44
  48
  78
  83
  88
  93
  99
  104
  110
  116
  122
  129
  136
  143
  151
  158
  167
  175
  184
  194
  203
  214

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  270
  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
  1,873
  1,777
  1,960
  2,152
  2,352
  2,560
  2,778
  3,004
  3,239
  3,483
  3,736
  4,000
  4,274
  4,559
  4,856
  5,164
  5,485
  5,819
  6,167
  6,530
  6,909
  7,304
  7,716
  8,147
  8,597
  9,067
  9,559
  10,073
  10,611
  11,174
  11,764
Adjusted assets (=assets-cash), $m
  1,603
  1,777
  1,960
  2,152
  2,352
  2,560
  2,778
  3,004
  3,239
  3,483
  3,736
  4,000
  4,274
  4,559
  4,856
  5,164
  5,485
  5,819
  6,167
  6,530
  6,909
  7,304
  7,716
  8,147
  8,597
  9,067
  9,559
  10,073
  10,611
  11,174
  11,764
Revenue / Adjusted assets
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
Average production assets, $m
  998
  1,106
  1,221
  1,340
  1,465
  1,594
  1,730
  1,870
  2,017
  2,169
  2,327
  2,491
  2,662
  2,839
  3,024
  3,216
  3,416
  3,624
  3,841
  4,067
  4,302
  4,548
  4,805
  5,073
  5,353
  5,646
  5,953
  6,273
  6,608
  6,959
  7,326
Working capital, $m
  243
  121
  133
  146
  160
  174
  188
  204
  220
  236
  253
  271
  290
  309
  329
  350
  372
  395
  418
  443
  469
  495
  523
  553
  583
  615
  648
  683
  720
  758
  798
Total debt, $m
  696
  645
  734
  827
  924
  1,025
  1,130
  1,240
  1,354
  1,472
  1,595
  1,723
  1,856
  1,994
  2,138
  2,287
  2,443
  2,605
  2,774
  2,950
  3,134
  3,325
  3,525
  3,734
  3,952
  4,180
  4,419
  4,668
  4,929
  5,203
  5,489
Total liabilities, $m
  913
  862
  951
  1,044
  1,141
  1,242
  1,347
  1,457
  1,571
  1,689
  1,812
  1,940
  2,073
  2,211
  2,355
  2,504
  2,660
  2,822
  2,991
  3,167
  3,351
  3,542
  3,742
  3,951
  4,169
  4,397
  4,636
  4,885
  5,146
  5,420
  5,706
Total equity, $m
  960
  915
  1,009
  1,108
  1,211
  1,319
  1,430
  1,547
  1,668
  1,794
  1,924
  2,060
  2,201
  2,348
  2,501
  2,659
  2,825
  2,997
  3,176
  3,363
  3,558
  3,761
  3,974
  4,196
  4,427
  4,669
  4,923
  5,188
  5,465
  5,755
  6,059
Total liabilities and equity, $m
  1,873
  1,777
  1,960
  2,152
  2,352
  2,561
  2,777
  3,004
  3,239
  3,483
  3,736
  4,000
  4,274
  4,559
  4,856
  5,163
  5,485
  5,819
  6,167
  6,530
  6,909
  7,303
  7,716
  8,147
  8,596
  9,066
  9,559
  10,073
  10,611
  11,175
  11,765
Debt-to-equity ratio
  0.725
  0.700
  0.730
  0.750
  0.760
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.840
  0.850
  0.850
  0.860
  0.860
  0.870
  0.870
  0.880
  0.880
  0.880
  0.890
  0.890
  0.890
  0.900
  0.900
  0.900
  0.900
  0.900
  0.910
Adjusted equity ratio
  0.430
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515
  0.515

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  52
  14
  17
  21
  24
  28
  32
  36
  40
  44
  48
  78
  83
  88
  93
  99
  104
  110
  116
  122
  129
  136
  143
  151
  158
  167
  175
  184
  194
  203
  214
Depreciation, amort., depletion, $m
  85
  105
  112
  120
  128
  136
  145
  154
  163
  172
  182
  158
  168
  180
  191
  204
  216
  229
  243
  257
  272
  288
  304
  321
  339
  357
  377
  397
  418
  440
  464
Funds from operations, $m
  163
  119
  130
  141
  152
  164
  176
  189
  202
  216
  231
  236
  252
  268
  285
  302
  320
  339
  359
  380
  401
  424
  447
  472
  497
  524
  552
  581
  612
  644
  677
Change in working capital, $m
  -11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
Cash from operations, $m
  174
  108
  117
  128
  139
  150
  162
  174
  187
  200
  213
  218
  233
  249
  265
  281
  299
  317
  336
  355
  376
  397
  419
  442
  467
  492
  519
  546
  575
  606
  637
Maintenance CAPEX, $m
  0
  -63
  -70
  -77
  -85
  -93
  -101
  -109
  -118
  -128
  -137
  -147
  -158
  -168
  -180
  -191
  -204
  -216
  -229
  -243
  -257
  -272
  -288
  -304
  -321
  -339
  -357
  -377
  -397
  -418
  -440
New CAPEX, $m
  -21
  -109
  -114
  -119
  -125
  -130
  -135
  -141
  -146
  -152
  -158
  -164
  -171
  -177
  -185
  -192
  -200
  -208
  -217
  -226
  -236
  -246
  -257
  -268
  -280
  -293
  -306
  -320
  -335
  -351
  -367
Cash from investing activities, $m
  -30
  -172
  -184
  -196
  -210
  -223
  -236
  -250
  -264
  -280
  -295
  -311
  -329
  -345
  -365
  -383
  -404
  -424
  -446
  -469
  -493
  -518
  -545
  -572
  -601
  -632
  -663
  -697
  -732
  -769
  -807
Free cash flow, $m
  144
  -65
  -67
  -69
  -71
  -73
  -75
  -76
  -78
  -80
  -82
  -93
  -95
  -97
  -100
  -102
  -105
  -108
  -111
  -114
  -117
  -121
  -125
  -130
  -135
  -140
  -145
  -151
  -157
  -163
  -170
Issuance/(repayment) of debt, $m
  -77
  85
  89
  93
  97
  101
  105
  110
  114
  118
  123
  128
  133
  138
  144
  150
  156
  162
  169
  176
  184
  192
  200
  209
  218
  228
  238
  249
  261
  273
  286
Issuance/(repurchase) of shares, $m
  153
  75
  77
  78
  79
  80
  80
  81
  81
  82
  82
  57
  58
  59
  59
  60
  61
  62
  63
  64
  66
  68
  69
  71
  73
  76
  78
  81
  84
  87
  90
Cash from financing (excl. dividends), $m  
  42
  160
  166
  171
  176
  181
  185
  191
  195
  200
  205
  185
  191
  197
  203
  210
  217
  224
  232
  240
  250
  260
  269
  280
  291
  304
  316
  330
  345
  360
  376
Total cash flow (excl. dividends), $m
  183
  95
  99
  102
  105
  108
  111
  114
  117
  120
  124
  92
  96
  99
  103
  108
  112
  117
  121
  127
  132
  138
  144
  150
  157
  164
  172
  179
  188
  197
  206
Retained Cash Flow (-), $m
  -153
  -89
  -94
  -99
  -103
  -107
  -112
  -116
  -121
  -126
  -131
  -136
  -141
  -147
  -153
  -159
  -165
  -172
  -179
  -187
  -195
  -203
  -212
  -222
  -232
  -242
  -253
  -265
  -277
  -290
  -304
Prev. year cash balance distribution, $m
 
  134
  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
 
  140
  5
  3
  2
  1
  -1
  -2
  -4
  -5
  -7
  -44
  -46
  -47
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -94
  -98
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  133
  4
  3
  2
  0
  -1
  -1
  -2
  -3
  -3
  -19
  -17
  -15
  -14
  -12
  -11
  -10
  -8
  -7
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  100
  95.3
  91.2
  87.6
  84.4
  81.5
  78.9
  76.6
  74.5
  72.5
  70.8
  69.7
  68.6
  67.7
  66.8
  65.9
  65.1
  64.3
  63.6
  62.9
  62.3
  61.6
  61.0
  60.5
  59.9
  59.4
  58.8
  58.3
  57.8
  57.3
  56.8

Mullen Group Ltd. is a supplier of trucking and logistics services in Canada. The Company operates through its Business Units, which are divided into two operating segments: Trucking/Logistics and Oilfield Services. The Trucking/Logistics segment consists of over 10 Business Units, offering a range of truckload and less-than-truckload (LTL) general freight services to customers in Canada and the United States. These services include transporting goods, including general freight; commodities, such as cable, pipe and steel; over-dimensional loads, such as heavy equipment and compressors, and dry bulk commodities, such as cement and frac sand. The Oilfield Services segment consists of over 10 Business Units that provide transportation services, drilling, well-servicing and dewatering services to the oil and natural gas industry. These services include transporting of oversize and overweight shipments, conductor pipe setting, core drilling, and transportation and disposal of fluids.

FINANCIAL RATIOS  of  Mullen Group Ltd. (MTL)

Valuation Ratios
P/E Ratio 34.3
Price to Sales 1.7
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 10.2
Price to Free Cash Flow 11.7
Growth Rates
Sales Growth Rate -14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -71.2%
Cap. Spend. - 3 Yr. Gr. Rate -31%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 58.3%
Total Debt to Equity 72.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 5.9%
Return On Equity - 3 Yr. Avg. 6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 31.2%
Gross Margin - 3 Yr. Avg. 30.9%
EBITDA Margin 18.5%
EBITDA Margin - 3 Yr. Avg. 16.5%
Operating Margin 7%
Oper. Margin - 3 Yr. Avg. 6.6%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 5%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 27.8%
Eff/ Tax Rate - 3 Yr. Avg. 41.9%
Payout Ratio 115.4%

MTL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTL stock intrinsic value calculation we used $1035 million for the last fiscal year's total revenue generated by Mullen Group Ltd.. The default revenue input number comes from 2016 income statement of Mullen Group Ltd.. 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 MTL stock valuation model: a) initial revenue growth rate of 10.9% 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 5%, whose default value for MTL is calculated based on our internal credit rating of Mullen Group Ltd., 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 Mullen Group Ltd..
    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 MTL stock the variable cost ratio is equal to 96.4%.

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 MTL 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 4.6% for Mullen Group Ltd..

Corporate tax rate of 27% is the nominal tax rate for Mullen Group Ltd.. 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 MTL 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 MTL are equal to 96.4%.

Life of production assets of 15.8 years is the average useful life of capital assets used in Mullen Group Ltd. 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 MTL is equal to 10.5%. 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 - $960 million for Mullen Group Ltd. - 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 103.767 million for Mullen Group Ltd. 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 Mullen Group Ltd. at the current share price and the inputted number of shares is $1.8 billion.

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Financial statements of MTL
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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