Intrinsic value of Continental Building Products - CBPX

Previous Close

$32.35

  Intrinsic Value

$23.18

stock screener

  Rating & Target

sell

-28%

Previous close

$32.35

 
Intrinsic value

$23.18

 
Up/down potential

-28%

 
Rating

sell

We calculate the intrinsic value of CBPX 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
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, %
  9.24
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
Revenue, $m
  461
  518
  549
  581
  614
  649
  685
  723
  763
  804
  847
  893
  940
  990
  1,042
  1,096
  1,153
  1,213
  1,276
  1,341
  1,410
  1,483
  1,558
  1,638
  1,721
  1,809
  1,900
  1,997
  2,098
  2,203
  2,315
Variable operating expenses, $m
 
  420
  443
  468
  494
  521
  549
  578
  609
  641
  674
  690
  727
  765
  805
  847
  891
  938
  986
  1,037
  1,090
  1,146
  1,204
  1,266
  1,330
  1,398
  1,469
  1,543
  1,621
  1,703
  1,789
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
  374
  420
  443
  468
  494
  521
  549
  578
  609
  641
  674
  690
  727
  765
  805
  847
  891
  938
  986
  1,037
  1,090
  1,146
  1,204
  1,266
  1,330
  1,398
  1,469
  1,543
  1,621
  1,703
  1,789
Operating income, $m
  87
  99
  106
  113
  120
  128
  136
  145
  154
  163
  173
  203
  213
  225
  237
  249
  262
  275
  290
  305
  320
  337
  354
  372
  391
  411
  431
  453
  476
  500
  526
EBITDA, $m
  134
  170
  180
  191
  202
  213
  225
  238
  251
  264
  278
  293
  309
  325
  342
  360
  379
  399
  419
  441
  464
  487
  512
  538
  566
  594
  625
  656
  689
  724
  761
Interest expense (income), $m
  0
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
  71
  75
Earnings before tax, $m
  67
  84
  90
  96
  103
  110
  117
  124
  132
  139
  148
  176
  185
  194
  204
  215
  226
  238
  250
  262
  276
  290
  304
  320
  336
  353
  370
  389
  408
  429
  450
Tax expense, $m
  23
  23
  24
  26
  28
  30
  31
  33
  36
  38
  40
  47
  50
  53
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  91
  95
  100
  105
  110
  116
  122
Net income, $m
  44
  62
  66
  70
  75
  80
  85
  90
  96
  102
  108
  128
  135
  142
  149
  157
  165
  173
  182
  192
  201
  211
  222
  233
  245
  257
  270
  284
  298
  313
  329

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  52
  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
  635
  650
  689
  729
  771
  814
  860
  907
  957
  1,009
  1,063
  1,120
  1,180
  1,242
  1,307
  1,375
  1,447
  1,522
  1,601
  1,683
  1,770
  1,860
  1,955
  2,055
  2,160
  2,269
  2,384
  2,505
  2,632
  2,765
  2,904
Adjusted assets (=assets-cash), $m
  583
  650
  689
  729
  771
  814
  860
  907
  957
  1,009
  1,063
  1,120
  1,180
  1,242
  1,307
  1,375
  1,447
  1,522
  1,601
  1,683
  1,770
  1,860
  1,955
  2,055
  2,160
  2,269
  2,384
  2,505
  2,632
  2,765
  2,904
Revenue / Adjusted assets
  0.791
  0.797
  0.797
  0.797
  0.796
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
  0.797
Average production assets, $m
  406
  527
  558
  590
  624
  659
  696
  735
  775
  817
  861
  907
  955
  1,006
  1,058
  1,114
  1,172
  1,232
  1,296
  1,363
  1,433
  1,506
  1,583
  1,664
  1,749
  1,837
  1,931
  2,028
  2,131
  2,239
  2,352
Working capital, $m
  76
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
Total debt, $m
  266
  283
  303
  324
  346
  369
  393
  418
  444
  471
  500
  529
  561
  593
  628
  663
  701
  740
  782
  825
  870
  918
  968
  1,020
  1,075
  1,133
  1,193
  1,257
  1,323
  1,393
  1,466
Total liabilities, $m
  326
  341
  362
  383
  405
  427
  451
  476
  502
  530
  558
  588
  619
  652
  686
  722
  760
  799
  840
  884
  929
  977
  1,027
  1,079
  1,134
  1,191
  1,252
  1,315
  1,382
  1,451
  1,525
Total equity, $m
  309
  309
  327
  346
  366
  387
  408
  431
  454
  479
  505
  532
  560
  590
  621
  653
  687
  723
  760
  799
  841
  884
  929
  976
  1,026
  1,078
  1,133
  1,190
  1,250
  1,313
  1,380
Total liabilities and equity, $m
  635
  650
  689
  729
  771
  814
  859
  907
  956
  1,009
  1,063
  1,120
  1,179
  1,242
  1,307
  1,375
  1,447
  1,522
  1,600
  1,683
  1,770
  1,861
  1,956
  2,055
  2,160
  2,269
  2,385
  2,505
  2,632
  2,764
  2,905
Debt-to-equity ratio
  0.861
  0.920
  0.930
  0.940
  0.950
  0.950
  0.960
  0.970
  0.980
  0.980
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
  1.030
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.060
Adjusted equity ratio
  0.441
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475
  0.475

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  62
  66
  70
  75
  80
  85
  90
  96
  102
  108
  128
  135
  142
  149
  157
  165
  173
  182
  192
  201
  211
  222
  233
  245
  257
  270
  284
  298
  313
  329
Depreciation, amort., depletion, $m
  47
  72
  75
  78
  81
  85
  89
  93
  97
  101
  105
  91
  96
  101
  106
  111
  117
  123
  130
  136
  143
  151
  158
  166
  175
  184
  193
  203
  213
  224
  235
Funds from operations, $m
  124
  133
  141
  148
  157
  165
  174
  183
  193
  203
  213
  219
  230
  243
  255
  268
  282
  297
  312
  328
  345
  362
  380
  400
  420
  441
  463
  487
  511
  537
  564
Change in working capital, $m
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  116
  134
  141
  149
  157
  165
  174
  183
  193
  203
  214
  220
  231
  243
  256
  269
  283
  297
  313
  329
  345
  363
  381
  401
  421
  442
  464
  488
  512
  538
  565
Maintenance CAPEX, $m
  0
  -50
  -53
  -56
  -59
  -62
  -66
  -70
  -73
  -77
  -82
  -86
  -91
  -96
  -101
  -106
  -111
  -117
  -123
  -130
  -136
  -143
  -151
  -158
  -166
  -175
  -184
  -193
  -203
  -213
  -224
New CAPEX, $m
  -12
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
Cash from investing activities, $m
  -12
  -80
  -84
  -88
  -93
  -97
  -103
  -109
  -113
  -119
  -126
  -132
  -139
  -146
  -154
  -161
  -169
  -178
  -187
  -197
  -206
  -216
  -228
  -239
  -251
  -264
  -277
  -291
  -306
  -321
  -337
Free cash flow, $m
  104
  54
  57
  61
  64
  68
  71
  75
  79
  84
  88
  87
  92
  97
  102
  108
  114
  119
  126
  132
  139
  146
  154
  162
  170
  178
  188
  197
  207
  217
  228
Issuance/(repayment) of debt, $m
  -23
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  48
  50
  52
  55
  58
  60
  63
  67
  70
  73
Issuance/(repurchase) of shares, $m
  -40
  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  
  -68
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  48
  50
  52
  55
  58
  60
  63
  67
  70
  73
Total cash flow (excl. dividends), $m
  37
  74
  78
  82
  86
  91
  95
  100
  105
  111
  116
  117
  123
  130
  137
  144
  151
  159
  167
  176
  184
  194
  204
  214
  225
  236
  248
  260
  274
  287
  302
Retained Cash Flow (-), $m
  -8
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
Prev. year cash balance distribution, $m
 
  26
  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
 
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Cash available for distribution, $m
 
  83
  59
  63
  66
  70
  74
  78
  82
  86
  91
  90
  95
  100
  106
  111
  117
  123
  130
  136
  143
  151
  159
  167
  175
  184
  193
  203
  213
  224
  235
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  79
  54
  54
  54
  54
  53
  52
  50
  48
  46
  41
  39
  37
  34
  31
  28
  25
  22
  19
  17
  14
  12
  10
  8
  6
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  4
  3
  2
  1
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

Continental Building Products, Inc. is a manufacturer of gypsum wallboard and complementary finishing products. The Company operates through wallboard segment. Gypsum wallboard is a primary building material used in residential and commercial construction and in repair and remodel (R&R). It offers customers a range of gypsum wallboard products, including LiftLite, its lightweight product designed to lift and install; its Mold Defense line of products designed for protection against mold and mildew, and its Weather Defense line of moisture and mold-resistant exterior sheathing. The Company also operates a finishing products business that manufactures a line of joint compounds at its plant in Silver Grove (Kentucky) and its joint compound plant in Chambly (Quebec). The Company manufactures gypsum wallboard related products for commercial and residential buildings and houses. The Company's manufacturing facilities are concentrated in the eastern United States and eastern Canada.

FINANCIAL RATIOS  of  Continental Building Products (CBPX)

Valuation Ratios
P/E Ratio 29.2
Price to Sales 2.8
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow 12.3
Growth Rates
Sales Growth Rate 9.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate 19.1%
Financial Strength
Quick Ratio 26
Current Ratio 0
LT Debt to Equity 85.4%
Total Debt to Equity 86.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 7.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 14.4%
Return On Equity - 3 Yr. Avg. 9.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 27.1%
Gross Margin - 3 Yr. Avg. 25%
EBITDA Margin 24.7%
EBITDA Margin - 3 Yr. Avg. 22.2%
Operating Margin 18.9%
Oper. Margin - 3 Yr. Avg. 14.6%
Pre-Tax Margin 14.5%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 9.5%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 34.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.8%
Payout Ratio 0%

CBPX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CBPX stock intrinsic value calculation we used $489 million for the last fiscal year's total revenue generated by Continental Building Products. The default revenue input number comes from 2016 income statement of Continental Building Products. 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 CBPX stock valuation model: a) initial revenue growth rate of 6% 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 4.5%, whose default value for CBPX is calculated based on our internal credit rating of Continental Building Products, 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 Continental Building Products.
    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 CBPX stock the variable cost ratio is equal to 81.2%.

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 CBPX 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 5.4% for Continental Building Products.

Corporate tax rate of 27% is the nominal tax rate for Continental Building Products. 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 CBPX stock is equal to 0.6%.

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 CBPX are equal to 101.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Continental Building Products 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 CBPX is equal to -1.2%. 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 - $318 million for Continental Building Products - 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 39 million for Continental Building Products 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 Continental Building Products at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

▶ Continental: 1Q Earnings Snapshot   [May-03-18 05:51PM  Associated Press]
▶ New Strong Buy Stocks for March 20th   [Mar-20-18 11:25AM  Zacks]
▶ Continental tops Street 4Q forecasts   [Feb-22-18 05:33PM  Associated Press]
▶ Here are the D.C.-area stocks getting pummeled in the market rout   [Feb-06-18 03:21PM  American City Business Journals]
▶ See the D.C.-area stocks hit hardest in the last week   [10:22AM  American City Business Journals]
▶ Continental meets 3Q profit forecasts   [Nov-09-17 04:47PM  Associated Press]
▶ Continental Building Prd Shows Market Leadership With Jump To 82 RS Rating   [Nov-01-17 03:00AM  Investor's Business Daily]
▶ Continental Supports Hurricane Irma Relief Efforts   [Sep-12-17 04:15PM  Business Wire]
▶ Continental posts 2Q profit   [Aug-04-17 02:36AM  Associated Press]
▶ 3 Stocks With Activision Blizzard-Like Return Potential   [Jun-13-17 09:31AM  Motley Fool]
▶ Continental beats 1Q profit forecasts   [May-04-17 06:28PM  Associated Press]
▶ Continental tops Street 4Q forecasts   [05:31PM  Associated Press]
▶ Is Hi-Crush Partners LP (HCLP) A Good Stock To Buy?   [Dec-12-16 04:36PM  at Insider Monkey]
▶ Is CenterState Banks Inc (CSFL) A Good Stock To Buy?   [Dec-07-16 07:57AM  at Insider Monkey]
▶ 3 Best Gypsum Stocks to Buy   [Aug-30-16 02:04PM  at Motley Fool]
Financial statements of CBPX
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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