Intrinsic value of Continental Building Products - CBPX

Previous Close

$26.50

  Intrinsic Value

$10.14

stock screener

  Rating & Target

str. sell

-62%

  Value-price divergence*

+17%

Previous close

$26.50

 
Intrinsic value

$10.14

 
Up/down potential

-62%

 
Rating

str. sell

 
Value-price divergence*

+17%

*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
  3.40
  3.56
  3.70
  3.83
  3.95
  4.06
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.92
Revenue, $m
  461
  477
  494
  512
  532
  553
  575
  599
  624
  651
  680
  710
  742
  775
  811
  849
  888
  930
  974
  1,020
  1,069
  1,121
  1,175
  1,232
  1,291
  1,354
  1,421
  1,490
  1,563
  1,640
  1,721
Variable operating expenses, $m
 
  427
  441
  457
  474
  493
  512
  533
  555
  578
  603
  617
  645
  675
  706
  738
  773
  809
  847
  888
  930
  975
  1,022
  1,071
  1,124
  1,178
  1,236
  1,296
  1,360
  1,427
  1,497
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
  427
  441
  457
  474
  493
  512
  533
  555
  578
  603
  617
  645
  675
  706
  738
  773
  809
  847
  888
  930
  975
  1,022
  1,071
  1,124
  1,178
  1,236
  1,296
  1,360
  1,427
  1,497
Operating income, $m
  87
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  92
  96
  101
  105
  110
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  185
  194
  203
  213
  224
EBITDA, $m
  134
  99
  103
  107
  111
  115
  120
  125
  130
  136
  142
  148
  155
  162
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  269
  283
  296
  311
  326
  342
  359
Interest expense (income), $m
  0
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
Earnings before tax, $m
  67
  41
  43
  45
  47
  49
  51
  54
  57
  59
  62
  78
  81
  85
  88
  92
  97
  101
  106
  111
  116
  122
  127
  133
  140
  146
  153
  161
  169
  177
  186
Tax expense, $m
  23
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  41
  43
  46
  48
  50
Net income, $m
  44
  30
  31
  33
  34
  36
  37
  39
  41
  43
  46
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135

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
  603
  624
  647
  672
  699
  727
  757
  789
  823
  859
  897
  938
  980
  1,025
  1,073
  1,123
  1,176
  1,231
  1,290
  1,352
  1,417
  1,485
  1,557
  1,633
  1,712
  1,796
  1,884
  1,976
  2,073
  2,176
Adjusted assets (=assets-cash), $m
  583
  603
  624
  647
  672
  699
  727
  757
  789
  823
  859
  897
  938
  980
  1,025
  1,073
  1,123
  1,176
  1,231
  1,290
  1,352
  1,417
  1,485
  1,557
  1,633
  1,712
  1,796
  1,884
  1,976
  2,073
  2,176
Revenue / Adjusted assets
  0.791
  0.791
  0.792
  0.791
  0.792
  0.791
  0.791
  0.791
  0.791
  0.791
  0.792
  0.792
  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
  0.791
  0.791
  0.791
Average production assets, $m
  406
  419
  434
  450
  468
  486
  506
  527
  549
  573
  598
  625
  653
  682
  714
  747
  782
  818
  857
  898
  941
  986
  1,034
  1,084
  1,136
  1,192
  1,250
  1,311
  1,376
  1,443
  1,514
Working capital, $m
  76
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  42
  43
  45
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  80
  83
  88
  92
  96
Total debt, $m
  266
  275
  287
  300
  314
  328
  344
  361
  379
  398
  418
  439
  461
  485
  510
  537
  564
  594
  625
  657
  692
  728
  766
  806
  848
  892
  939
  987
  1,039
  1,093
  1,150
Total liabilities, $m
  326
  335
  347
  360
  374
  388
  404
  421
  439
  458
  478
  499
  521
  545
  570
  597
  624
  654
  685
  717
  752
  788
  826
  866
  908
  952
  999
  1,047
  1,099
  1,153
  1,210
Total equity, $m
  309
  268
  277
  287
  298
  310
  323
  336
  350
  365
  381
  398
  416
  435
  455
  476
  499
  522
  547
  573
  600
  629
  659
  691
  725
  760
  797
  836
  877
  921
  966
Total liabilities and equity, $m
  635
  603
  624
  647
  672
  698
  727
  757
  789
  823
  859
  897
  937
  980
  1,025
  1,073
  1,123
  1,176
  1,232
  1,290
  1,352
  1,417
  1,485
  1,557
  1,633
  1,712
  1,796
  1,883
  1,976
  2,074
  2,176
Debt-to-equity ratio
  0.861
  1.030
  1.040
  1.040
  1.050
  1.060
  1.070
  1.070
  1.080
  1.090
  1.090
  1.100
  1.110
  1.110
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.170
  1.170
  1.170
  1.180
  1.180
  1.180
  1.190
  1.190
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
  30
  31
  33
  34
  36
  37
  39
  41
  43
  46
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
Depreciation, amort., depletion, $m
  47
  49
  51
  52
  54
  55
  57
  59
  61
  63
  65
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  112
  117
  123
  129
  135
Funds from operations, $m
  124
  79
  82
  85
  88
  91
  95
  98
  102
  107
  111
  112
  117
  123
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  203
  213
  224
  235
  246
  258
  271
Change in working capital, $m
  8
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
Cash from operations, $m
  116
  78
  81
  84
  87
  90
  93
  97
  101
  105
  109
  111
  116
  121
  126
  132
  138
  145
  151
  158
  166
  174
  182
  191
  200
  210
  220
  231
  242
  254
  266
Maintenance CAPEX, $m
  0
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -112
  -117
  -123
  -129
New CAPEX, $m
  -12
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -68
  -71
Cash from investing activities, $m
  -12
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -123
  -129
  -136
  -142
  -150
  -156
  -164
  -173
  -181
  -191
  -200
Free cash flow, $m
  104
  28
  29
  29
  29
  30
  30
  31
  32
  32
  33
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
Issuance/(repayment) of debt, $m
  -23
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  51
  54
  57
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
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  51
  54
  57
Total cash flow (excl. dividends), $m
  37
  39
  40
  42
  43
  44
  46
  48
  49
  51
  53
  52
  54
  57
  59
  62
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
Retained Cash Flow (-), $m
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
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
 
  81
  31
  31
  32
  33
  33
  34
  35
  36
  37
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
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
 
  77
  28
  27
  25
  24
  23
  21
  20
  19
  17
  14
  13
  12
  11
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  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. 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 23.9
Price to Sales 2.3
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow 10.1
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 3.4% 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 37.905 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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COMPANY NEWS

▶ 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]
▶ Five Building Materials Stocks Hedge Funds Like   [Jun-13-16 08:04AM  at Insider Monkey]
▶ Why LGI Homes, Trex Stocks Reversed Despite Strong Earnings   [04:02PM  at Investor's Business Daily]
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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