Intrinsic value of Continental Building Products - CBPX

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$23.80

  Intrinsic Value

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  Value-price divergence*

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

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

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 1.0

 

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
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.17
  5.15
  5.13
  5.12
  5.11
Revenue, $m
  461
  495
  530
  566
  604
  643
  684
  727
  771
  817
  865
  915
  968
  1,022
  1,079
  1,139
  1,201
  1,267
  1,335
  1,406
  1,481
  1,559
  1,641
  1,727
  1,817
  1,911
  2,009
  2,113
  2,221
  2,335
  2,454
Variable operating expenses, $m
 
  442
  473
  504
  537
  571
  607
  644
  683
  723
  765
  796
  842
  889
  939
  991
  1,045
  1,102
  1,161
  1,223
  1,288
  1,356
  1,428
  1,502
  1,580
  1,662
  1,748
  1,838
  1,932
  2,031
  2,135
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
  442
  473
  504
  537
  571
  607
  644
  683
  723
  765
  796
  842
  889
  939
  991
  1,045
  1,102
  1,161
  1,223
  1,288
  1,356
  1,428
  1,502
  1,580
  1,662
  1,748
  1,838
  1,932
  2,031
  2,135
Operating income, $m
  87
  52
  57
  62
  67
  72
  77
  82
  88
  94
  100
  119
  126
  133
  140
  148
  156
  165
  174
  183
  193
  203
  213
  225
  236
  248
  261
  275
  289
  304
  319
EBITDA, $m
  134
  103
  110
  118
  126
  134
  143
  152
  161
  170
  180
  191
  202
  213
  225
  238
  251
  264
  278
  293
  309
  325
  342
  360
  379
  399
  419
  441
  463
  487
  512
Interest expense (income), $m
  0
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  55
Earnings before tax, $m
  67
  43
  47
  51
  55
  59
  63
  68
  72
  77
  82
  100
  105
  111
  117
  124
  130
  137
  145
  152
  160
  168
  177
  186
  196
  206
  216
  227
  239
  251
  264
Tax expense, $m
  23
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  58
  61
  65
  68
  71
Net income, $m
  44
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  73
  77
  81
  86
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
  183
  193

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
  625
  670
  716
  763
  813
  865
  918
  974
  1,033
  1,094
  1,157
  1,223
  1,292
  1,365
  1,440
  1,519
  1,601
  1,688
  1,778
  1,872
  1,971
  2,075
  2,183
  2,297
  2,416
  2,540
  2,671
  2,808
  2,952
  3,103
Adjusted assets (=assets-cash), $m
  583
  625
  670
  716
  763
  813
  865
  918
  974
  1,033
  1,094
  1,157
  1,223
  1,292
  1,365
  1,440
  1,519
  1,601
  1,688
  1,778
  1,872
  1,971
  2,075
  2,183
  2,297
  2,416
  2,540
  2,671
  2,808
  2,952
  3,103
Revenue / Adjusted assets
  0.791
  0.792
  0.791
  0.791
  0.792
  0.791
  0.791
  0.792
  0.792
  0.791
  0.791
  0.791
  0.791
  0.791
  0.790
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
Average production assets, $m
  406
  435
  466
  498
  531
  566
  602
  639
  678
  719
  761
  805
  852
  900
  950
  1,002
  1,057
  1,115
  1,175
  1,237
  1,303
  1,372
  1,444
  1,519
  1,599
  1,681
  1,768
  1,859
  1,955
  2,055
  2,160
Working capital, $m
  76
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  107
  113
  118
  124
  131
  137
Total debt, $m
  266
  288
  312
  338
  364
  392
  421
  451
  482
  514
  548
  583
  620
  659
  699
  741
  785
  830
  878
  928
  981
  1,036
  1,093
  1,154
  1,217
  1,283
  1,352
  1,425
  1,501
  1,581
  1,665
Total liabilities, $m
  326
  348
  372
  398
  424
  452
  481
  511
  542
  574
  608
  643
  680
  719
  759
  801
  845
  890
  938
  988
  1,041
  1,096
  1,153
  1,214
  1,277
  1,343
  1,412
  1,485
  1,561
  1,641
  1,725
Total equity, $m
  309
  278
  297
  318
  339
  361
  384
  408
  433
  459
  486
  514
  543
  574
  606
  639
  674
  711
  749
  789
  831
  875
  921
  969
  1,020
  1,073
  1,128
  1,186
  1,247
  1,311
  1,378
Total liabilities and equity, $m
  635
  626
  669
  716
  763
  813
  865
  919
  975
  1,033
  1,094
  1,157
  1,223
  1,293
  1,365
  1,440
  1,519
  1,601
  1,687
  1,777
  1,872
  1,971
  2,074
  2,183
  2,297
  2,416
  2,540
  2,671
  2,808
  2,952
  3,103
Debt-to-equity ratio
  0.861
  1.040
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
  1.110
  1.120
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.170
  1.170
  1.180
  1.180
  1.180
  1.190
  1.190
  1.190
  1.200
  1.200
  1.200
  1.200
  1.210
  1.210
Adjusted equity ratio
  0.441
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  73
  77
  81
  86
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
  183
  193
Depreciation, amort., depletion, $m
  47
  51
  54
  56
  59
  63
  66
  69
  73
  76
  80
  72
  76
  80
  85
  90
  94
  100
  105
  110
  116
  122
  129
  136
  143
  150
  158
  166
  175
  183
  193
Funds from operations, $m
  124
  82
  88
  93
  99
  105
  112
  119
  125
  133
  140
  145
  153
  162
  170
  180
  190
  200
  210
  222
  233
  245
  258
  272
  286
  300
  316
  332
  349
  367
  385
Change in working capital, $m
  8
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
Cash from operations, $m
  116
  65
  86
  91
  97
  103
  110
  116
  123
  130
  137
  142
  150
  158
  167
  176
  186
  196
  207
  218
  229
  241
  254
  267
  281
  295
  310
  326
  343
  360
  379
Maintenance CAPEX, $m
  0
  -36
  -39
  -42
  -44
  -47
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -76
  -80
  -85
  -90
  -94
  -100
  -105
  -110
  -116
  -122
  -129
  -136
  -143
  -150
  -158
  -166
  -175
  -183
New CAPEX, $m
  -12
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -105
Cash from investing activities, $m
  -12
  -66
  -70
  -74
  -77
  -82
  -87
  -91
  -96
  -102
  -106
  -112
  -118
  -124
  -130
  -137
  -145
  -151
  -160
  -168
  -176
  -185
  -194
  -204
  -215
  -226
  -237
  -249
  -261
  -275
  -288
Free cash flow, $m
  104
  -1
  16
  18
  20
  21
  23
  25
  27
  29
  31
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  70
  73
  77
  81
  86
  90
Issuance/(repayment) of debt, $m
  -23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
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
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
Total cash flow (excl. dividends), $m
  37
  23
  41
  43
  46
  49
  52
  55
  58
  61
  65
  65
  69
  73
  77
  81
  85
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
Retained Cash Flow (-), $m
  -8
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
Prev. year cash balance distribution, $m
 
  50
  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
 
  54
  21
  23
  25
  27
  29
  31
  33
  35
  38
  37
  39
  42
  45
  48
  50
  54
  57
  60
  63
  67
  71
  75
  79
  83
  87
  92
  97
  102
  107
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  51
  19
  19
  20
  20
  20
  19
  19
  18
  17
  15
  14
  13
  12
  11
  10
  9
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  0
  0
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. manufactures and sells gypsum wallboard and complementary finishing products in the eastern United States and eastern Canada. It sells its products to gypsum wallboard distributors, buying groups, wholesalers, and mass merchants in the new residential, repair and remodel, and commercial construction markets under the LiftLite, Mold Defense, and Weather Defense names. The company is headquartered in Herndon, Virginia.

FINANCIAL RATIOS  of  Continental Building Products (CBPX)

Valuation Ratios
P/E Ratio 21.5
Price to Sales 2
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 8.1
Price to Free Cash Flow 9.1
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 $461 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 7.3% 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 5.2%, 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 89.6%.

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 3.5% 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%.

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 88%.

Life of production assets of 11.2 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 5.6%. 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 - $309 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 39.922 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 $1.0 billion.


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Stock chart of CBPX Financial statements of CBPX Annual reports 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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