Intrinsic value of Celadon Group - CGI

Previous Close

$4.00

  Intrinsic Value

$11.63

stock screener

  Rating & Target

str. buy

+191%

  Value-price divergence*

-13%

Previous close

$4.00

 
Intrinsic value

$11.63

 
Up/down potential

+191%

 
Rating

str. buy

 
Value-price divergence*

-13%

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

We calculate the intrinsic value of CGI 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 0.1

 

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, %
  18.20
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,065
  1,086
  1,111
  1,140
  1,172
  1,207
  1,246
  1,289
  1,335
  1,384
  1,437
  1,494
  1,555
  1,620
  1,688
  1,761
  1,838
  1,920
  2,006
  2,097
  2,194
  2,296
  2,403
  2,516
  2,635
  2,760
  2,892
  3,031
  3,178
  3,332
  3,493
Variable operating expenses, $m
 
  1,007
  1,030
  1,056
  1,086
  1,119
  1,154
  1,194
  1,236
  1,282
  1,331
  1,377
  1,433
  1,493
  1,556
  1,623
  1,694
  1,770
  1,849
  1,933
  2,022
  2,116
  2,215
  2,319
  2,429
  2,544
  2,666
  2,794
  2,929
  3,071
  3,220
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
  1,013
  1,007
  1,030
  1,056
  1,086
  1,119
  1,154
  1,194
  1,236
  1,282
  1,331
  1,377
  1,433
  1,493
  1,556
  1,623
  1,694
  1,770
  1,849
  1,933
  2,022
  2,116
  2,215
  2,319
  2,429
  2,544
  2,666
  2,794
  2,929
  3,071
  3,220
Operating income, $m
  52
  79
  81
  84
  86
  89
  92
  95
  99
  103
  107
  117
  122
  127
  132
  138
  144
  150
  157
  164
  172
  180
  188
  197
  206
  216
  226
  237
  249
  261
  273
EBITDA, $m
  132
  161
  165
  169
  174
  179
  185
  191
  198
  205
  213
  221
  230
  240
  250
  261
  272
  284
  297
  311
  325
  340
  356
  373
  390
  409
  428
  449
  471
  493
  517
Interest expense (income), $m
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  50
  52
  55
  58
  62
  65
  69
Earnings before tax, $m
  38
  64
  65
  67
  69
  71
  73
  76
  78
  81
  84
  93
  96
  100
  104
  108
  112
  117
  121
  127
  132
  138
  144
  150
  157
  164
  171
  179
  187
  196
  205
Tax expense, $m
  13
  17
  18
  18
  19
  19
  20
  20
  21
  22
  23
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
Net income, $m
  25
  47
  48
  49
  50
  52
  53
  55
  57
  59
  61
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  101
  105
  110
  114
  120
  125
  131
  137
  143
  149

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  1,103
  1,116
  1,142
  1,171
  1,204
  1,241
  1,281
  1,325
  1,372
  1,423
  1,477
  1,536
  1,598
  1,664
  1,735
  1,810
  1,889
  1,973
  2,062
  2,156
  2,255
  2,359
  2,469
  2,586
  2,708
  2,837
  2,973
  3,116
  3,266
  3,424
  3,590
Adjusted assets (=assets-cash), $m
  1,094
  1,116
  1,142
  1,171
  1,204
  1,241
  1,281
  1,325
  1,372
  1,423
  1,477
  1,536
  1,598
  1,664
  1,735
  1,810
  1,889
  1,973
  2,062
  2,156
  2,255
  2,359
  2,469
  2,586
  2,708
  2,837
  2,973
  3,116
  3,266
  3,424
  3,590
Revenue / Adjusted assets
  0.973
  0.973
  0.973
  0.974
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.974
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
Average production assets, $m
  766
  781
  799
  820
  843
  868
  896
  927
  960
  995
  1,034
  1,074
  1,118
  1,164
  1,214
  1,266
  1,322
  1,380
  1,442
  1,508
  1,577
  1,650
  1,728
  1,809
  1,895
  1,985
  2,080
  2,180
  2,285
  2,395
  2,512
Working capital, $m
  64
  109
  111
  114
  117
  121
  125
  129
  133
  138
  144
  149
  155
  162
  169
  176
  184
  192
  201
  210
  219
  230
  240
  252
  263
  276
  289
  303
  318
  333
  349
Total debt, $m
  451
  457
  474
  493
  514
  538
  564
  593
  623
  657
  692
  730
  771
  814
  860
  909
  961
  1,015
  1,073
  1,134
  1,199
  1,267
  1,339
  1,415
  1,495
  1,579
  1,667
  1,760
  1,858
  1,961
  2,070
Total liabilities, $m
  722
  728
  745
  764
  785
  809
  835
  864
  894
  928
  963
  1,001
  1,042
  1,085
  1,131
  1,180
  1,232
  1,286
  1,344
  1,405
  1,470
  1,538
  1,610
  1,686
  1,766
  1,850
  1,938
  2,031
  2,129
  2,232
  2,341
Total equity, $m
  381
  389
  397
  408
  419
  432
  446
  461
  477
  495
  514
  534
  556
  579
  604
  630
  657
  687
  718
  750
  785
  821
  859
  900
  942
  987
  1,034
  1,084
  1,137
  1,192
  1,249
Total liabilities and equity, $m
  1,103
  1,117
  1,142
  1,172
  1,204
  1,241
  1,281
  1,325
  1,371
  1,423
  1,477
  1,535
  1,598
  1,664
  1,735
  1,810
  1,889
  1,973
  2,062
  2,155
  2,255
  2,359
  2,469
  2,586
  2,708
  2,837
  2,972
  3,115
  3,266
  3,424
  3,590
Debt-to-equity ratio
  1.184
  1.180
  1.190
  1.210
  1.230
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.370
  1.390
  1.410
  1.420
  1.440
  1.460
  1.480
  1.500
  1.510
  1.530
  1.540
  1.560
  1.570
  1.590
  1.600
  1.610
  1.620
  1.640
  1.650
  1.660
Adjusted equity ratio
  0.340
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  47
  48
  49
  50
  52
  53
  55
  57
  59
  61
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  101
  105
  110
  114
  120
  125
  131
  137
  143
  149
Depreciation, amort., depletion, $m
  80
  81
  83
  85
  87
  90
  93
  96
  99
  102
  106
  104
  109
  113
  118
  123
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  222
  233
  244
Funds from operations, $m
  -104
  128
  131
  134
  138
  142
  146
  151
  156
  161
  167
  172
  179
  186
  193
  202
  210
  219
  229
  239
  249
  261
  273
  285
  298
  312
  327
  342
  358
  375
  393
Change in working capital, $m
  -99
  2
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
Cash from operations, $m
  -5
  126
  128
  131
  134
  138
  142
  146
  151
  156
  162
  166
  173
  179
  187
  194
  202
  211
  220
  230
  240
  251
  262
  274
  286
  300
  314
  328
  344
  360
  377
Maintenance CAPEX, $m
  0
  -74
  -76
  -78
  -80
  -82
  -84
  -87
  -90
  -93
  -97
  -100
  -104
  -109
  -113
  -118
  -123
  -128
  -134
  -140
  -146
  -153
  -160
  -168
  -176
  -184
  -193
  -202
  -212
  -222
  -233
New CAPEX, $m
  -88
  -15
  -18
  -21
  -23
  -26
  -28
  -31
  -33
  -36
  -38
  -41
  -44
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -105
  -111
  -116
Cash from investing activities, $m
  36
  -89
  -94
  -99
  -103
  -108
  -112
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -187
  -196
  -206
  -215
  -226
  -237
  -249
  -262
  -274
  -288
  -302
  -317
  -333
  -349
Free cash flow, $m
  31
  37
  35
  33
  32
  31
  30
  29
  28
  28
  27
  25
  25
  24
  24
  24
  24
  24
  24
  24
  24
  24
  25
  25
  25
  26
  26
  26
  27
  28
  28
Issuance/(repayment) of debt, $m
  -44
  15
  17
  19
  21
  24
  26
  28
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  93
  98
  103
  108
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -44
  15
  17
  19
  21
  24
  26
  28
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
  89
  93
  98
  103
  108
Total cash flow (excl. dividends), $m
  -14
  51
  51
  52
  53
  55
  56
  57
  59
  61
  63
  63
  65
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  101
  105
  110
  114
  120
  125
  131
  137
Retained Cash Flow (-), $m
  -15
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -52
  -55
  -58
Prev. year cash balance distribution, $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 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
 
  44
  42
  42
  42
  42
  42
  42
  43
  43
  44
  43
  44
  45
  46
  47
  48
  49
  51
  53
  54
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  41
  36
  33
  29
  26
  23
  21
  18
  16
  13
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  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

Celadon Group, Inc., through its subsidiaries, provides transportation services between the United States, Canada, and Mexico. It operates through three segments: Asset-Based, Asset-Light, and Equipment Leasing and Services. The Asset-Based segment offers dry van, refrigerated, and flatbed services; cross-border services between the United States and each of Mexico and Canada; intra-Mexico and intra-Canada services; contract services; regional and specialized short haul services; and rail intermodal services. The Asset-Light segment provides freight brokerage, warehousing, less-than truckload consolidation, and supply chain logistics services. The Equipment Leasing and Services segment offers tractor and trailer sales and leasing services, as well as insurance, maintenance, and other ancillary services primarily to the independent contractors and other trucking fleets. The company transports various types of freight, including tobacco, consumer goods, automotive parts, various home products and fixtures, lawn tractors and assorted equipment, light bulbs, and various parts for engines. Celadon Group, Inc. was founded in 1985 and is headquartered in Indianapolis, Indiana.

FINANCIAL RATIOS  of  Celadon Group (CGI)

Valuation Ratios
P/E Ratio 4.5
Price to Sales 0.1
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow -22.6
Price to Free Cash Flow -1.2
Growth Rates
Sales Growth Rate 18.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.4%
Cap. Spend. - 3 Yr. Gr. Rate -12.3%
Financial Strength
Quick Ratio 0
Current Ratio 0.4
LT Debt to Equity 105%
Total Debt to Equity 118.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 6.7%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 90.3%
Gross Margin - 3 Yr. Avg. 83.9%
EBITDA Margin 12.4%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 5.8%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 5.5%
Net Profit Margin 2.3%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 34.2%
Eff/ Tax Rate - 3 Yr. Avg. 36.1%
Payout Ratio 8%

CGI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CGI stock intrinsic value calculation we used $1065 million for the last fiscal year's total revenue generated by Celadon Group. The default revenue input number comes from 2016 income statement of Celadon Group. 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 CGI stock valuation model: a) initial revenue growth rate of 2% 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 8.1%, whose default value for CGI is calculated based on our internal credit rating of Celadon Group, 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 Celadon Group.
    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 CGI stock the variable cost ratio is equal to 92.7%.

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 CGI 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 Celadon Group.

Corporate tax rate of 27% is the nominal tax rate for Celadon Group. 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 CGI 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 CGI are equal to 71.9%.

Life of production assets of 10.3 years is the average useful life of capital assets used in Celadon Group 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 CGI is equal to 10%. 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 - $381 million for Celadon Group - 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 26.645 million for Celadon Group 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 Celadon Group at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ [$$] Celadon Hires Turnaround Expert   [Jul-13-17 07:39PM  The Wall Street Journal]
▶ Trucking Industrys Tale of Woe: Too Many Big Rigs   [10:48PM  The Wall Street Journal]
▶ Trucking Industry's Tale of Woe: Too Many Big Rigs:   [05:30AM  The Wall Street Journal]
▶ Celadon Group Announces Corporate Updates   [May-01-17 08:04PM  PR Newswire]
Stock chart of CGI Financial statements of CGI Annual reports of CGI
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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