Intrinsic value of Continental Building Products - CBPX

Previous Close

$21.70

  Intrinsic Value

$8.66

stock screener

  Rating & Target

str. sell

-60%

  Value-price divergence*

-10%

Previous close

$21.70

 
Intrinsic value

$8.66

 
Up/down potential

-60%

 
Rating

str. sell

 
Value-price divergence*

-10%

*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 0.9

 

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
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  461
  502
  546
  591
  637
  686
  737
  789
  844
  900
  959
  1,021
  1,084
  1,151
  1,220
  1,292
  1,368
  1,446
  1,528
  1,614
  1,703
  1,796
  1,894
  1,996
  2,103
  2,215
  2,332
  2,455
  2,583
  2,718
  2,859
Variable operating expenses, $m
 
  449
  487
  526
  567
  609
  653
  698
  746
  795
  847
  888
  943
  1,001
  1,061
  1,124
  1,190
  1,258
  1,329
  1,404
  1,482
  1,563
  1,648
  1,737
  1,830
  1,927
  2,029
  2,136
  2,247
  2,364
  2,487
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
  449
  487
  526
  567
  609
  653
  698
  746
  795
  847
  888
  943
  1,001
  1,061
  1,124
  1,190
  1,258
  1,329
  1,404
  1,482
  1,563
  1,648
  1,737
  1,830
  1,927
  2,029
  2,136
  2,247
  2,364
  2,487
Operating income, $m
  87
  53
  59
  65
  71
  77
  84
  91
  98
  105
  113
  133
  141
  150
  159
  168
  178
  188
  199
  210
  221
  234
  246
  260
  273
  288
  303
  319
  336
  353
  372
EBITDA, $m
  134
  105
  114
  123
  133
  143
  154
  165
  176
  188
  200
  213
  226
  240
  255
  270
  285
  302
  319
  337
  355
  375
  395
  416
  439
  462
  486
  512
  539
  567
  596
Interest expense (income), $m
  0
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  21
  23
  25
  26
  28
  30
  32
  33
  35
  38
  40
  42
  44
  47
  50
  52
  55
  58
  61
  65
Earnings before tax, $m
  67
  44
  49
  53
  58
  64
  69
  75
  80
  86
  93
  111
  118
  125
  132
  140
  148
  156
  165
  174
  184
  194
  204
  215
  226
  238
  251
  264
  278
  292
  307
Tax expense, $m
  23
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
Net income, $m
  44
  32
  36
  39
  43
  46
  50
  54
  59
  63
  68
  81
  86
  91
  97
  102
  108
  114
  121
  127
  134
  141
  149
  157
  165
  174
  183
  193
  203
  213
  224

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
  635
  690
  747
  806
  867
  931
  997
  1,066
  1,138
  1,213
  1,290
  1,371
  1,455
  1,543
  1,634
  1,729
  1,828
  1,932
  2,040
  2,153
  2,271
  2,395
  2,524
  2,659
  2,800
  2,948
  3,103
  3,266
  3,436
  3,614
Adjusted assets (=assets-cash), $m
  583
  635
  690
  747
  806
  867
  931
  997
  1,066
  1,138
  1,213
  1,290
  1,371
  1,455
  1,543
  1,634
  1,729
  1,828
  1,932
  2,040
  2,153
  2,271
  2,395
  2,524
  2,659
  2,800
  2,948
  3,103
  3,266
  3,436
  3,614
Revenue / Adjusted assets
  0.791
  0.791
  0.791
  0.791
  0.790
  0.791
  0.792
  0.791
  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
  0.791
  0.791
  0.791
Average production assets, $m
  406
  442
  480
  520
  561
  604
  648
  694
  742
  792
  844
  898
  954
  1,013
  1,074
  1,137
  1,203
  1,273
  1,345
  1,420
  1,499
  1,581
  1,667
  1,757
  1,851
  1,949
  2,052
  2,160
  2,273
  2,392
  2,516
Working capital, $m
  76
  28
  31
  33
  36
  38
  41
  44
  47
  50
  54
  57
  61
  64
  68
  72
  77
  81
  86
  90
  95
  101
  106
  112
  118
  124
  131
  137
  145
  152
  160
Total debt, $m
  266
  293
  324
  355
  388
  422
  458
  495
  533
  573
  614
  657
  702
  749
  798
  848
  901
  956
  1,014
  1,074
  1,137
  1,203
  1,271
  1,343
  1,418
  1,497
  1,579
  1,665
  1,756
  1,850
  1,949
Total liabilities, $m
  326
  353
  384
  415
  448
  482
  518
  555
  593
  633
  674
  717
  762
  809
  858
  908
  961
  1,016
  1,074
  1,134
  1,197
  1,263
  1,331
  1,403
  1,478
  1,557
  1,639
  1,725
  1,816
  1,910
  2,009
Total equity, $m
  309
  282
  306
  332
  358
  385
  413
  443
  474
  505
  538
  573
  609
  646
  685
  725
  768
  812
  858
  906
  956
  1,008
  1,063
  1,121
  1,181
  1,243
  1,309
  1,378
  1,450
  1,526
  1,605
Total liabilities and equity, $m
  635
  635
  690
  747
  806
  867
  931
  998
  1,067
  1,138
  1,212
  1,290
  1,371
  1,455
  1,543
  1,633
  1,729
  1,828
  1,932
  2,040
  2,153
  2,271
  2,394
  2,524
  2,659
  2,800
  2,948
  3,103
  3,266
  3,436
  3,614
Debt-to-equity ratio
  0.861
  1.040
  1.060
  1.070
  1.080
  1.100
  1.110
  1.120
  1.130
  1.130
  1.140
  1.150
  1.150
  1.160
  1.160
  1.170
  1.170
  1.180
  1.180
  1.190
  1.190
  1.190
  1.200
  1.200
  1.200
  1.200
  1.210
  1.210
  1.210
  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
  32
  36
  39
  43
  46
  50
  54
  59
  63
  68
  81
  86
  91
  97
  102
  108
  114
  121
  127
  134
  141
  149
  157
  165
  174
  183
  193
  203
  213
  224
Depreciation, amort., depletion, $m
  47
  51
  55
  58
  62
  66
  70
  74
  78
  83
  87
  80
  85
  90
  96
  102
  107
  114
  120
  127
  134
  141
  149
  157
  165
  174
  183
  193
  203
  214
  225
Funds from operations, $m
  124
  84
  90
  97
  105
  112
  120
  128
  137
  146
  155
  161
  171
  182
  193
  204
  216
  228
  241
  254
  268
  283
  298
  314
  331
  348
  366
  386
  406
  427
  449
Change in working capital, $m
  8
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  116
  81
  88
  95
  102
  110
  117
  125
  134
  143
  152
  158
  168
  178
  189
  200
  211
  223
  236
  249
  263
  277
  292
  308
  325
  342
  360
  379
  398
  419
  441
Maintenance CAPEX, $m
  0
  -36
  -39
  -43
  -46
  -50
  -54
  -58
  -62
  -66
  -71
  -75
  -80
  -85
  -90
  -96
  -102
  -107
  -114
  -120
  -127
  -134
  -141
  -149
  -157
  -165
  -174
  -183
  -193
  -203
  -214
New CAPEX, $m
  -12
  -37
  -38
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -64
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
Cash from investing activities, $m
  -12
  -73
  -77
  -83
  -87
  -93
  -98
  -104
  -110
  -116
  -123
  -129
  -136
  -143
  -151
  -160
  -168
  -176
  -186
  -195
  -206
  -216
  -227
  -239
  -251
  -263
  -277
  -291
  -306
  -321
  -338
Free cash flow, $m
  104
  8
  10
  12
  15
  17
  19
  21
  24
  26
  29
  29
  31
  34
  37
  40
  44
  47
  50
  54
  58
  61
  65
  69
  74
  78
  83
  88
  93
  98
  103
Issuance/(repayment) of debt, $m
  -23
  29
  30
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
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
  29
  30
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
Total cash flow (excl. dividends), $m
  37
  38
  41
  44
  47
  51
  55
  58
  62
  66
  71
  72
  76
  81
  86
  91
  97
  102
  108
  114
  120
  127
  134
  141
  149
  157
  165
  174
  183
  192
  202
Retained Cash Flow (-), $m
  -8
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -79
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
 
  65
  17
  19
  21
  24
  26
  29
  32
  34
  37
  37
  40
  44
  47
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  123
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
 
  61
  15
  16
  17
  17
  18
  18
  18
  18
  17
  15
  15
  14
  13
  12
  11
  9
  8
  7
  6
  5
  4
  3
  3
  2
  1
  1
  1
  1
  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 19.6
Price to Sales 1.9
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 8.3
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 $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 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 5.2%, 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 $0.9 billion.

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COMPANY NEWS

▶ 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]
Stock chart of CBPX 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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