Intrinsic value of Ennis - EBF

Previous Close

$19.50

  Intrinsic Value

$24.92

stock screener

  Rating & Target

buy

+28%

Previous close

$19.50

 
Intrinsic value

$24.92

 
Up/down potential

+28%

 
Rating

buy

We calculate the intrinsic value of EBF 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 2017), $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 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.51
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  357
  373
  389
  407
  425
  445
  466
  488
  511
  535
  560
  587
  615
  645
  676
  709
  744
  780
  818
  859
  901
  945
  992
  1,041
  1,092
  1,146
  1,203
  1,263
  1,326
  1,391
  1,461
Variable operating expenses, $m
 
  244
  254
  266
  277
  290
  303
  317
  331
  347
  363
  373
  391
  410
  430
  450
  472
  495
  520
  545
  572
  600
  630
  661
  694
  728
  764
  802
  842
  884
  928
Fixed operating expenses, $m
 
  86
  88
  90
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
Total operating expenses, $m
  316
  330
  342
  356
  370
  385
  400
  417
  433
  452
  471
  483
  504
  526
  549
  572
  597
  623
  651
  679
  710
  741
  775
  809
  846
  884
  924
  966
  1,010
  1,056
  1,104
Operating income, $m
  41
  43
  47
  51
  55
  60
  65
  71
  77
  83
  90
  104
  112
  120
  128
  137
  147
  157
  168
  179
  191
  204
  217
  232
  247
  263
  279
  297
  316
  336
  357
EBITDA, $m
  54
  58
  62
  67
  72
  77
  83
  89
  95
  102
  109
  117
  125
  134
  143
  153
  163
  174
  186
  198
  211
  225
  239
  254
  271
  288
  306
  325
  345
  366
  389
Interest expense (income), $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
Earnings before tax, $m
  40
  42
  46
  50
  54
  59
  64
  69
  75
  81
  87
  101
  109
  117
  125
  134
  143
  153
  164
  175
  186
  199
  212
  226
  241
  256
  273
  290
  308
  328
  348
Tax expense, $m
  14
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  27
  29
  32
  34
  36
  39
  41
  44
  47
  50
  54
  57
  61
  65
  69
  74
  78
  83
  89
  94
Net income, $m
  2
  30
  33
  36
  39
  43
  47
  50
  55
  59
  64
  74
  79
  85
  91
  98
  104
  112
  119
  127
  136
  145
  155
  165
  176
  187
  199
  212
  225
  239
  254

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  80
  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
  324
  255
  266
  278
  291
  304
  318
  333
  349
  366
  383
  401
  421
  441
  462
  485
  508
  533
  559
  587
  616
  646
  678
  711
  747
  784
  822
  863
  906
  951
  998
Adjusted assets (=assets-cash), $m
  244
  255
  266
  278
  291
  304
  318
  333
  349
  366
  383
  401
  421
  441
  462
  485
  508
  533
  559
  587
  616
  646
  678
  711
  747
  784
  822
  863
  906
  951
  998
Revenue / Adjusted assets
  1.463
  1.463
  1.462
  1.464
  1.460
  1.464
  1.465
  1.465
  1.464
  1.462
  1.462
  1.464
  1.461
  1.463
  1.463
  1.462
  1.465
  1.463
  1.463
  1.463
  1.463
  1.463
  1.463
  1.464
  1.462
  1.462
  1.464
  1.463
  1.464
  1.463
  1.464
Average production assets, $m
  104
  108
  113
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
  206
  216
  226
  237
  249
  261
  274
  288
  302
  317
  332
  349
  366
  384
  404
  424
Working capital, $m
  119
  41
  42
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
  103
  108
  113
  119
  125
  131
  138
  144
  152
  159
Total debt, $m
  30
  33
  37
  40
  44
  48
  52
  57
  61
  66
  71
  77
  83
  89
  95
  102
  109
  116
  124
  132
  141
  150
  160
  170
  180
  191
  203
  215
  228
  241
  256
Total liabilities, $m
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  126
  132
  138
  145
  152
  159
  167
  175
  184
  193
  203
  213
  223
  234
  246
  258
  271
  284
  299
Total equity, $m
  251
  179
  187
  195
  204
  213
  223
  234
  245
  256
  268
  281
  295
  309
  324
  340
  356
  374
  392
  411
  432
  453
  475
  499
  523
  549
  577
  605
  635
  667
  700
Total liabilities and equity, $m
  324
  255
  267
  278
  291
  304
  318
  334
  349
  365
  382
  401
  421
  441
  462
  485
  508
  533
  559
  586
  616
  646
  678
  712
  746
  783
  823
  863
  906
  951
  999
Debt-to-equity ratio
  0.120
  0.190
  0.200
  0.210
  0.220
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.270
  0.280
  0.290
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.360
  0.370
Adjusted equity ratio
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  30
  33
  36
  39
  43
  47
  50
  55
  59
  64
  74
  79
  85
  91
  98
  104
  112
  119
  127
  136
  145
  155
  165
  176
  187
  199
  212
  225
  239
  254
Depreciation, amort., depletion, $m
  13
  15
  16
  16
  16
  17
  17
  18
  18
  19
  19
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
Funds from operations, $m
  60
  46
  49
  52
  56
  60
  64
  68
  73
  78
  83
  87
  93
  99
  106
  113
  121
  129
  137
  146
  156
  166
  177
  188
  200
  212
  226
  240
  254
  270
  286
Change in working capital, $m
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  59
  44
  47
  50
  54
  58
  62
  66
  70
  75
  80
  84
  90
  96
  103
  110
  117
  125
  133
  142
  151
  161
  171
  182
  194
  206
  219
  233
  247
  263
  279
Maintenance CAPEX, $m
  0
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
New CAPEX, $m
  -3
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  86
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -46
  -48
  -51
Free cash flow, $m
  145
  32
  34
  37
  40
  43
  46
  49
  53
  57
  61
  64
  69
  74
  79
  85
  91
  98
  105
  112
  120
  128
  137
  146
  156
  167
  178
  189
  202
  215
  228
Issuance/(repayment) of debt, $m
  -10
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Issuance/(repurchase) of shares, $m
  -6
  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  
  -15
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Total cash flow (excl. dividends), $m
  130
  35
  37
  40
  43
  47
  50
  54
  58
  62
  67
  69
  75
  80
  86
  92
  99
  105
  113
  121
  129
  138
  147
  156
  167
  178
  189
  201
  214
  228
  242
Retained Cash Flow (-), $m
  48
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
Prev. year cash balance distribution, $m
 
  80
  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
 
  107
  30
  32
  34
  37
  40
  43
  47
  50
  54
  57
  61
  66
  71
  76
  82
  88
  94
  101
  109
  116
  124
  133
  142
  152
  162
  173
  184
  196
  209
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  103
  27
  28
  28
  29
  29
  29
  29
  29
  28
  27
  26
  25
  24
  22
  21
  19
  17
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
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

Ennis, Inc. and its subsidiaries are engaged in the production and sale of printed business products, business forms and other business products. The Company operates through Print segment, which is engaged in printing, manufacturing and selling a range of business forms and other business products to distributors located throughout the United States primarily through independent dealers. The Print Segment sells products, including snap sets, continuous forms, laser cut sheets, checks, commercial printing, multimedia packaging, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs. The Company has network of 56 facilities across 21 states.

FINANCIAL RATIOS  of  Ennis (EBF)

Valuation Ratios
P/E Ratio 247.7
Price to Sales 1.4
Price to Book 2
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 8.8
Growth Rates
Sales Growth Rate -7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -9.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 12%
Total Debt to Equity 12%
Interest Coverage 41
Management Effectiveness
Return On Assets 0.7%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0.7%
Return On Equity - 3 Yr. Avg. -0.3%
Asset Turnover 1
Profitability Ratios
Gross Margin 29.1%
Gross Margin - 3 Yr. Avg. 29.8%
EBITDA Margin 15.1%
EBITDA Margin - 3 Yr. Avg. 16.6%
Operating Margin 11.5%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 11.2%
Pre-Tax Margin - 3 Yr. Avg. 12.9%
Net Profit Margin 0.6%
Net Profit Margin - 3 Yr. Avg. -0.7%
Effective Tax Rate 35%
Eff/ Tax Rate - 3 Yr. Avg. 36.4%
Payout Ratio 2850%

EBF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EBF stock intrinsic value calculation we used $357 million for the last fiscal year's total revenue generated by Ennis. The default revenue input number comes from 2017 income statement of Ennis. 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 EBF stock valuation model: a) initial revenue growth rate of 4.4% 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 4.3%, whose default value for EBF is calculated based on our internal credit rating of Ennis, 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 Ennis.
    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 EBF stock the variable cost ratio is equal to 65.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $84 million in the base year in the intrinsic value calculation for EBF 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 Ennis.

Corporate tax rate of 27% is the nominal tax rate for Ennis. 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 EBF 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 EBF are equal to 29%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Ennis 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 EBF is equal to 10.9%. 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 - $251 million for Ennis - 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 25.417 million for Ennis 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 Ennis at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Top Dividend Yielding Stocks To Profit From   [Dec-08-17 08:02AM  Simply Wall St.]
▶ Ennis, Inc. Value Analysis (NYSE:EBF) : November 9, 2017   [Nov-09-17 01:29PM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : November 8, 2017   [Nov-08-17 05:59PM  Capital Cube]
▶ Is There Now An Opportunity In Ennis Inc (EBF)?   [Oct-25-17 07:08PM  Simply Wall St.]
▶ ETFs with exposure to Ennis, Inc. : October 17, 2017   [Oct-17-17 09:41AM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : October 6, 2017   [Oct-06-17 10:47AM  Capital Cube]
▶ Ennis posts 2Q profit   [Sep-25-17 09:41PM  Associated Press]
▶ Ennis, Inc. Value Analysis (NYSE:EBF) : August 29, 2017   [Aug-28-17 08:26PM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : August 11, 2017   [Aug-11-17 05:20PM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : July 31, 2017   [Jul-31-17 04:37PM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : July 12, 2017   [Jul-12-17 02:27PM  Capital Cube]
▶ Ennis posts 1Q profit   [Jun-26-17 09:56PM  Associated Press]
▶ Ennis, Inc. Value Analysis (NYSE:EBF) : June 20, 2017   [Jun-20-17 03:47PM  Capital Cube]
▶ Ennis, Inc. Declares Quarterly Dividend   [06:30AM  Business Wire]
▶ ETFs with exposure to Ennis, Inc. : May 25, 2017   [May-25-17 12:38PM  Capital Cube]
▶ Ennis posts 4Q profit   [Apr-25-17 06:24AM  Associated Press]
▶ Ennis, Inc. Value Analysis (NYSE:EBF) : April 17, 2017   [Apr-17-17 01:26PM  Capital Cube]
▶ Ennis, Inc. Declares Quarterly Dividend   [Mar-27-17 12:02PM  Business Wire]
▶ ETFs with exposure to Ennis, Inc. : January 12, 2017   [Jan-12-17 01:59PM  Capital Cube]
▶ Ennis posts 3Q profit   [Dec-20-16 05:47PM  Associated Press]
▶ Ennis, Inc. (EBF): Are Hedge Funds Right About This Stock?   [Dec-09-16 03:50AM  at Insider Monkey]
Financial statements of EBF
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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