Intrinsic value of First Midwest Bancorp - FMBI

Previous Close

$27.11

  Intrinsic Value

$20.98

stock screener

  Rating & Target

sell

-23%

Previous close

$27.11

 
Intrinsic value

$20.98

 
Up/down potential

-23%

 
Rating

sell

Our model is not good at valuating stocks of financial companies, such as FMBI.

We calculate the intrinsic value of FMBI 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -100.00
  26.30
  24.17
  22.25
  20.53
  18.97
  17.58
  16.32
  15.19
  14.17
  13.25
  12.43
  11.68
  11.02
  10.41
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.11
  6.00
Revenue, $m
  0
  763
  947
  1,158
  1,396
  1,661
  1,952
  2,271
  2,616
  2,987
  3,382
  3,803
  4,247
  4,715
  5,206
  5,720
  6,257
  6,817
  7,400
  8,006
  8,637
  9,292
  9,974
  10,681
  11,417
  12,182
  12,977
  13,805
  14,666
  15,563
  16,497
Variable operating expenses, $m
 
  464
  576
  704
  849
  1,010
  1,187
  1,381
  1,591
  1,816
  2,057
  2,312
  2,582
  2,867
  3,165
  3,478
  3,804
  4,145
  4,499
  4,868
  5,251
  5,650
  6,064
  6,494
  6,942
  7,407
  7,890
  8,393
  8,917
  9,462
  10,030
Fixed operating expenses, $m
 
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
  71
  72
  74
  75
  77
  79
  81
  82
  84
  86
  88
  90
  92
  94
  96
  98
Total operating expenses, $m
  0
  516
  629
  758
  905
  1,067
  1,245
  1,440
  1,652
  1,878
  2,120
  2,377
  2,648
  2,935
  3,234
  3,549
  3,876
  4,219
  4,574
  4,945
  5,330
  5,731
  6,146
  6,578
  7,028
  7,495
  7,980
  8,485
  9,011
  9,558
  10,128
Operating income, $m
  0
  247
  318
  400
  491
  594
  707
  831
  965
  1,109
  1,263
  1,426
  1,599
  1,781
  1,972
  2,172
  2,380
  2,598
  2,825
  3,061
  3,307
  3,562
  3,827
  4,103
  4,390
  4,687
  4,997
  5,320
  5,655
  6,005
  6,369
EBITDA, $m
  18
  1,858
  2,318
  2,845
  3,438
  4,100
  4,830
  5,626
  6,488
  7,415
  8,404
  9,455
  10,566
  11,736
  12,964
  14,249
  15,591
  16,991
  18,449
  19,966
  21,543
  23,182
  24,885
  26,656
  28,496
  30,409
  32,398
  34,467
  36,621
  38,864
  41,201
Interest expense (income), $m
  27
  683
  758
  921
  1,107
  1,317
  1,551
  1,809
  2,091
  2,396
  2,723
  3,073
  3,444
  3,837
  4,250
  4,684
  5,138
  5,613
  6,108
  6,623
  7,159
  7,716
  8,295
  8,897
  9,523
  10,173
  10,849
  11,551
  12,283
  13,044
  13,836
Earnings before tax, $m
  139
  -436
  -440
  -522
  -616
  -723
  -844
  -978
  -1,126
  -1,287
  -1,461
  -1,647
  -1,846
  -2,056
  -2,279
  -2,513
  -2,758
  -3,015
  -3,282
  -3,561
  -3,852
  -4,154
  -4,468
  -4,794
  -5,133
  -5,485
  -5,851
  -6,232
  -6,627
  -7,039
  -7,467
Tax expense, $m
  47
  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
Net income, $m
  92
  -436
  -440
  -522
  -616
  -723
  -844
  -978
  -1,126
  -1,287
  -1,461
  -1,647
  -1,846
  -2,056
  -2,279
  -2,513
  -2,758
  -3,015
  -3,282
  -3,561
  -3,852
  -4,154
  -4,468
  -4,794
  -5,133
  -5,485
  -5,851
  -6,232
  -6,627
  -7,039
  -7,467

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  11,423
  13,870
  17,222
  21,055
  25,377
  30,192
  35,499
  41,293
  47,564
  54,303
  61,500
  69,142
  77,221
  85,727
  94,655
  104,000
  113,761
  123,939
  134,539
  145,567
  157,034
  168,952
  181,337
  194,208
  207,585
  221,491
  235,952
  250,997
  266,656
  282,961
  299,948
Adjusted assets (=assets-cash), $m
  11,423
  13,870
  17,222
  21,055
  25,377
  30,192
  35,499
  41,293
  47,564
  54,303
  61,500
  69,142
  77,221
  85,727
  94,655
  104,000
  113,761
  123,939
  134,539
  145,567
  157,034
  168,952
  181,337
  194,208
  207,585
  221,491
  235,952
  250,997
  266,656
  282,961
  299,948
Revenue / Adjusted assets
  0.000
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
Average production assets, $m
  120
  16,107
  20,000
  24,450
  29,470
  35,061
  41,224
  47,952
  55,235
  63,061
  71,418
  80,293
  89,674
  99,553
  109,920
  120,772
  132,108
  143,927
  156,236
  169,043
  182,359
  196,199
  210,582
  225,528
  241,062
  257,211
  274,004
  291,475
  309,659
  328,594
  348,320
Working capital, $m
  0
  -14,474
  -17,973
  -21,972
  -26,483
  -31,508
  -37,046
  -43,092
  -49,637
  -56,669
  -64,179
  -72,155
  -80,586
  -89,463
  -98,779
  -108,532
  -118,718
  -129,339
  -140,401
  -151,910
  -163,876
  -176,313
  -189,238
  -202,670
  -216,629
  -231,141
  -246,233
  -261,933
  -278,274
  -295,290
  -313,017
Total debt, $m
  195
  14,040
  17,057
  20,506
  24,396
  28,730
  33,506
  38,720
  44,364
  50,430
  56,907
  63,785
  71,056
  78,711
  86,747
  95,157
  103,942
  113,102
  122,642
  132,567
  142,887
  153,614
  164,760
  176,344
  188,383
  200,899
  213,914
  227,454
  241,547
  256,222
  271,510
Total liabilities, $m
  10,165
  12,483
  15,500
  18,949
  22,839
  27,173
  31,949
  37,163
  42,808
  48,873
  55,350
  62,228
  69,499
  77,155
  85,190
  93,600
  102,385
  111,545
  121,085
  131,010
  141,331
  152,057
  163,204
  174,787
  186,826
  199,342
  212,357
  225,897
  239,990
  254,665
  269,953
Total equity, $m
  1,257
  1,387
  1,722
  2,105
  2,538
  3,019
  3,550
  4,129
  4,756
  5,430
  6,150
  6,914
  7,722
  8,573
  9,466
  10,400
  11,376
  12,394
  13,454
  14,557
  15,703
  16,895
  18,134
  19,421
  20,758
  22,149
  23,595
  25,100
  26,666
  28,296
  29,995
Total liabilities and equity, $m
  11,422
  13,870
  17,222
  21,054
  25,377
  30,192
  35,499
  41,292
  47,564
  54,303
  61,500
  69,142
  77,221
  85,728
  94,656
  104,000
  113,761
  123,939
  134,539
  145,567
  157,034
  168,952
  181,338
  194,208
  207,584
  221,491
  235,952
  250,997
  266,656
  282,961
  299,948
Debt-to-equity ratio
  0.155
  10.120
  9.900
  9.740
  9.610
  9.520
  9.440
  9.380
  9.330
  9.290
  9.250
  9.230
  9.200
  9.180
  9.160
  9.150
  9.140
  9.130
  9.120
  9.110
  9.100
  9.090
  9.090
  9.080
  9.070
  9.070
  9.070
  9.060
  9.060
  9.060
  9.050
Adjusted equity ratio
  0.110
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  92
  -436
  -440
  -522
  -616
  -723
  -844
  -978
  -1,126
  -1,287
  -1,461
  -1,647
  -1,846
  -2,056
  -2,279
  -2,513
  -2,758
  -3,015
  -3,282
  -3,561
  -3,852
  -4,154
  -4,468
  -4,794
  -5,133
  -5,485
  -5,851
  -6,232
  -6,627
  -7,039
  -7,467
Depreciation, amort., depletion, $m
  18
  1,611
  2,000
  2,445
  2,947
  3,506
  4,122
  4,795
  5,523
  6,306
  7,142
  8,029
  8,967
  9,955
  10,992
  12,077
  13,211
  14,393
  15,624
  16,904
  18,236
  19,620
  21,058
  22,553
  24,106
  25,721
  27,400
  29,148
  30,966
  32,859
  34,832
Funds from operations, $m
  117
  1,175
  1,560
  1,923
  2,331
  2,783
  3,278
  3,817
  4,397
  5,019
  5,681
  6,382
  7,122
  7,899
  8,713
  9,564
  10,453
  11,378
  12,341
  13,343
  14,384
  15,466
  16,590
  17,759
  18,973
  20,236
  21,549
  22,916
  24,339
  25,821
  27,365
Change in working capital, $m
  -4
  -3,014
  -3,498
  -3,999
  -4,510
  -5,025
  -5,538
  -6,046
  -6,545
  -7,033
  -7,510
  -7,975
  -8,431
  -8,877
  -9,317
  -9,752
  -10,186
  -10,622
  -11,061
  -11,509
  -11,966
  -12,438
  -12,925
  -13,431
  -13,959
  -14,512
  -15,091
  -15,700
  -16,341
  -17,016
  -17,727
Cash from operations, $m
  121
  4,189
  5,058
  5,923
  6,842
  7,808
  8,817
  9,863
  10,942
  12,052
  13,191
  14,358
  15,552
  16,776
  18,030
  19,317
  20,639
  22,000
  23,403
  24,852
  26,350
  27,904
  29,515
  31,190
  32,933
  34,748
  36,641
  38,616
  40,680
  42,836
  45,092
Maintenance CAPEX, $m
  0
  -1,275
  -1,611
  -2,000
  -2,445
  -2,947
  -3,506
  -4,122
  -4,795
  -5,523
  -6,306
  -7,142
  -8,029
  -8,967
  -9,955
  -10,992
  -12,077
  -13,211
  -14,393
  -15,624
  -16,904
  -18,236
  -19,620
  -21,058
  -22,553
  -24,106
  -25,721
  -27,400
  -29,148
  -30,966
  -32,859
New CAPEX, $m
  -19
  -3,357
  -3,893
  -4,451
  -5,019
  -5,592
  -6,163
  -6,728
  -7,283
  -7,826
  -8,357
  -8,875
  -9,382
  -9,878
  -10,368
  -10,852
  -11,335
  -11,820
  -12,309
  -12,807
  -13,316
  -13,840
  -14,383
  -14,946
  -15,534
  -16,149
  -16,794
  -17,471
  -18,184
  -18,935
  -19,726
Cash from investing activities, $m
  -1,049
  -4,632
  -5,504
  -6,451
  -7,464
  -8,539
  -9,669
  -10,850
  -12,078
  -13,349
  -14,663
  -16,017
  -17,411
  -18,845
  -20,323
  -21,844
  -23,412
  -25,031
  -26,702
  -28,431
  -30,220
  -32,076
  -34,003
  -36,004
  -38,087
  -40,255
  -42,515
  -44,871
  -47,332
  -49,901
  -52,585
Free cash flow, $m
  -928
  -443
  -445
  -528
  -623
  -731
  -853
  -988
  -1,136
  -1,298
  -1,472
  -1,659
  -1,858
  -2,070
  -2,293
  -2,527
  -2,773
  -3,031
  -3,299
  -3,579
  -3,870
  -4,173
  -4,487
  -4,814
  -5,154
  -5,507
  -5,874
  -6,255
  -6,652
  -7,064
  -7,494
Issuance/(repayment) of debt, $m
  704
  1,397
  3,017
  3,449
  3,890
  4,334
  4,776
  5,214
  5,644
  6,065
  6,477
  6,878
  7,271
  7,656
  8,035
  8,411
  8,785
  9,160
  9,540
  9,925
  10,320
  10,726
  11,147
  11,583
  12,039
  12,516
  13,015
  13,540
  14,093
  14,675
  15,288
Issuance/(repurchase) of shares, $m
  0
  1,856
  775
  905
  1,048
  1,205
  1,375
  1,558
  1,753
  1,961
  2,180
  2,411
  2,654
  2,907
  3,172
  3,447
  3,734
  4,032
  4,342
  4,664
  4,998
  5,346
  5,706
  6,081
  6,471
  6,876
  7,297
  7,736
  8,193
  8,669
  9,166
Cash from financing (excl. dividends), $m  
  838
  3,253
  3,792
  4,354
  4,938
  5,539
  6,151
  6,772
  7,397
  8,026
  8,657
  9,289
  9,925
  10,563
  11,207
  11,858
  12,519
  13,192
  13,882
  14,589
  15,318
  16,072
  16,853
  17,664
  18,510
  19,392
  20,312
  21,276
  22,286
  23,344
  24,454
Total cash flow (excl. dividends), $m
  -90
  2,809
  3,347
  3,826
  4,315
  4,808
  5,299
  5,784
  6,262
  6,729
  7,185
  7,630
  8,066
  8,493
  8,914
  9,330
  9,746
  10,162
  10,583
  11,011
  11,449
  11,899
  12,366
  12,850
  13,356
  13,884
  14,439
  15,021
  15,634
  16,280
  16,960
Retained Cash Flow (-), $m
  -111
  -1,856
  -775
  -905
  -1,048
  -1,205
  -1,375
  -1,558
  -1,753
  -1,961
  -2,180
  -2,411
  -2,654
  -2,907
  -3,172
  -3,447
  -3,734
  -4,032
  -4,342
  -4,664
  -4,998
  -5,346
  -5,706
  -6,081
  -6,471
  -6,876
  -7,297
  -7,736
  -8,193
  -8,669
  -9,166
Prev. year cash balance distribution, $m
 
  33
  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
 
  11
  14
  18
  22
  27
  32
  37
  43
  50
  57
  64
  72
  81
  90
  99
  109
  119
  130
  141
  152
  164
  177
  189
  203
  217
  231
  247
  262
  279
  296
Cash available for distribution, $m
 
  987
  2,572
  2,922
  3,267
  3,603
  3,924
  4,226
  4,508
  4,768
  5,005
  5,219
  5,412
  5,586
  5,742
  5,883
  6,011
  6,130
  6,241
  6,347
  6,450
  6,554
  6,659
  6,769
  6,885
  7,008
  7,141
  7,285
  7,441
  7,610
  7,794
Discount rate, %
 
  13.70
  14.39
  15.10
  15.86
  16.65
  17.49
  18.36
  19.28
  20.24
  21.25
  22.32
  23.43
  24.60
  25.83
  27.13
  28.48
  29.91
  31.40
  32.97
  34.62
  36.35
  38.17
  40.08
  42.08
  44.18
  46.39
  48.71
  51.15
  53.71
  56.39
PV of cash for distribution, $m
 
  868
  1,966
  1,916
  1,813
  1,668
  1,492
  1,299
  1,100
  908
  729
  569
  433
  320
  230
  161
  109
  72
  46
  28
  17
  10
  5
  3
  2
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  32.1
  21.0
  14.0
  9.5
  6.5
  4.5
  3.2
  2.3
  1.6
  1.2
  0.8
  0.6
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

First Midwest Bancorp, Inc. is a bank holding company. The Company's principal subsidiary, First Midwest Bank (the Bank), is an Illinois state-chartered bank and provides a range of banking, treasury and wealth management products and services, to commercial and industrial, commercial real estate, municipal and consumer customers. As of December 31, 2016, the Bank operated primarily throughout the Chicago metropolitan area, as well as northwest Indiana, central and western Illinois, and eastern Iowa through 117 banking locations. The Bank offers capital market products to commercial customers as risk management solutions, which include derivatives and interest rate risk products. The Bank provides an array of financing products to developers, investors and other real estate professionals, which include funding for the construction, purchase, refinance or improvement of commercial real estate properties. The Company's loan portfolio consists of both corporate and consumer loans.

FINANCIAL RATIOS  of  First Midwest Bancorp (FMBI)

Valuation Ratios
P/E Ratio 24
Price to Sales 0
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 18.2
Price to Free Cash Flow 21.6
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 72.7%
Cap. Spend. - 3 Yr. Gr. Rate 11.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 15.5%
Total Debt to Equity 15.5%
Interest Coverage 6
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 1%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 7.7%
Return On Equity - 3 Yr. Avg. 7.2%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 33.8%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 31.5%

FMBI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FMBI stock intrinsic value calculation we used $604 million for the last fiscal year's total revenue generated by First Midwest Bancorp. The default revenue input number comes from 2016 income statement of First Midwest Bancorp. 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 FMBI stock valuation model: a) initial revenue growth rate of 26.3% 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 13.7%, whose default value for FMBI is calculated based on our internal credit rating of First Midwest Bancorp, 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 First Midwest Bancorp.
    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 FMBI stock the variable cost ratio is equal to 60.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $51 million in the base year in the intrinsic value calculation for FMBI 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 5.4% for First Midwest Bancorp.

Corporate tax rate of 27% is the nominal tax rate for First Midwest Bancorp. 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 FMBI stock is equal to 1.9%.

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 FMBI are equal to 2111.4%.

Life of production assets of 10 years is the average useful life of capital assets used in First Midwest Bancorp 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 FMBI is equal to -1897.4%. 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 - $0 million for First Midwest Bancorp - 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 101 million for First Midwest Bancorp 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 First Midwest Bancorp at the current share price and the inputted number of shares is $2.7 billion.

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COMPANY NEWS

▶ First Midwest Bancorp, Inc. to Host Earnings Call   [Jul-25-18 09:00AM  ACCESSWIRE]
▶ First Midwest Bancorp: 2Q Earnings Snapshot   [Jul-24-18 06:07PM  Associated Press]
▶ First Midwest Bancorp: 1Q Earnings Snapshot   [Apr-24-18 05:37PM  Associated Press]
▶ First Midwest Bancorp misses Street 4Q forecasts   [Jan-30-18 05:03AM  Associated Press]
▶ First Midwest Bancorp, Inc. to Host Earnings Call   [Oct-25-17 07:15AM  ACCESSWIRE]
▶ First Midwest Bancorp tops 3Q profit forecasts   [Oct-24-17 06:45PM  Associated Press]
▶ When Should You Sell First Midwest Bancorp Inc (FMBI)?   [Sep-29-17 08:07PM  Simply Wall St.]
▶ First Midwest Bancorp misses Street 2Q forecasts   [12:01AM  Associated Press]
▶ First Midwest Bancorp meets 1Q profit forecasts   [Apr-25-17 06:12PM  Associated Press]
Financial statements of FMBI
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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