Intrinsic value of Heartland Express - HTLD

Previous Close

$20.88

  Intrinsic Value

$10.71

stock screener

  Rating & Target

sell

-49%

  Value-price divergence*

-47%

Previous close

$20.88

 
Intrinsic value

$10.71

 
Up/down potential

-49%

 
Rating

sell

 
Value-price divergence*

-47%

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

We calculate the intrinsic value of HTLD 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 1.7

 

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, %
  -16.71
  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
  613
  625
  640
  656
  675
  695
  717
  742
  768
  797
  827
  860
  895
  932
  972
  1,014
  1,058
  1,105
  1,155
  1,207
  1,263
  1,321
  1,383
  1,448
  1,517
  1,589
  1,665
  1,745
  1,829
  1,918
  2,011
Variable operating expenses, $m
 
  472
  482
  495
  508
  523
  540
  558
  578
  599
  621
  635
  661
  689
  718
  749
  782
  816
  853
  892
  933
  976
  1,022
  1,070
  1,120
  1,174
  1,230
  1,289
  1,351
  1,417
  1,485
Fixed operating expenses, $m
 
  68
  69
  71
  73
  75
  77
  78
  80
  82
  84
  87
  89
  91
  93
  96
  98
  100
  103
  106
  108
  111
  114
  116
  119
  122
  125
  129
  132
  135
  138
Total operating expenses, $m
  527
  540
  551
  566
  581
  598
  617
  636
  658
  681
  705
  722
  750
  780
  811
  845
  880
  916
  956
  998
  1,041
  1,087
  1,136
  1,186
  1,239
  1,296
  1,355
  1,418
  1,483
  1,552
  1,623
Operating income, $m
  86
  86
  88
  90
  93
  97
  101
  105
  110
  116
  122
  138
  145
  153
  161
  169
  178
  188
  199
  210
  222
  234
  248
  262
  277
  293
  310
  327
  346
  366
  387
EBITDA, $m
  192
  142
  145
  149
  153
  158
  164
  170
  177
  185
  193
  202
  211
  221
  232
  244
  256
  270
  284
  299
  315
  332
  350
  369
  389
  410
  432
  456
  481
  507
  535
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
Earnings before tax, $m
  86
  86
  88
  90
  93
  96
  100
  104
  109
  114
  119
  135
  142
  149
  156
  165
  173
  182
  192
  203
  214
  226
  238
  252
  266
  281
  297
  313
  331
  350
  370
Tax expense, $m
  30
  23
  24
  24
  25
  26
  27
  28
  29
  31
  32
  37
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  72
  76
  80
  85
  89
  94
  100
Net income, $m
  56
  63
  64
  66
  68
  70
  73
  76
  79
  83
  87
  99
  104
  109
  114
  120
  126
  133
  140
  148
  156
  165
  174
  184
  194
  205
  217
  229
  242
  255
  270

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  129
  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
  738
  621
  635
  652
  670
  690
  712
  737
  763
  791
  822
  854
  889
  926
  965
  1,007
  1,051
  1,097
  1,147
  1,199
  1,254
  1,312
  1,373
  1,438
  1,506
  1,578
  1,653
  1,733
  1,816
  1,904
  1,997
Adjusted assets (=assets-cash), $m
  609
  621
  635
  652
  670
  690
  712
  737
  763
  791
  822
  854
  889
  926
  965
  1,007
  1,051
  1,097
  1,147
  1,199
  1,254
  1,312
  1,373
  1,438
  1,506
  1,578
  1,653
  1,733
  1,816
  1,904
  1,997
Revenue / Adjusted assets
  1.007
  1.006
  1.008
  1.006
  1.007
  1.007
  1.007
  1.007
  1.007
  1.008
  1.006
  1.007
  1.007
  1.006
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
  1.007
Average production assets, $m
  452
  461
  471
  484
  497
  512
  529
  547
  566
  587
  610
  634
  660
  687
  716
  747
  780
  814
  851
  890
  931
  974
  1,019
  1,067
  1,118
  1,171
  1,227
  1,286
  1,348
  1,413
  1,482
Working capital, $m
  136
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
Total debt, $m
  0
  5
  10
  16
  23
  31
  39
  49
  59
  69
  81
  93
  107
  121
  136
  151
  168
  186
  205
  225
  246
  268
  291
  316
  342
  369
  398
  428
  460
  494
  529
Total liabilities, $m
  232
  237
  242
  248
  255
  263
  271
  281
  291
  301
  313
  325
  339
  353
  368
  383
  400
  418
  437
  457
  478
  500
  523
  548
  574
  601
  630
  660
  692
  726
  761
Total equity, $m
  506
  384
  393
  403
  415
  427
  441
  456
  472
  490
  509
  529
  550
  573
  597
  623
  650
  679
  710
  742
  776
  812
  850
  890
  932
  977
  1,023
  1,073
  1,124
  1,179
  1,236
Total liabilities and equity, $m
  738
  621
  635
  651
  670
  690
  712
  737
  763
  791
  822
  854
  889
  926
  965
  1,006
  1,050
  1,097
  1,147
  1,199
  1,254
  1,312
  1,373
  1,438
  1,506
  1,578
  1,653
  1,733
  1,816
  1,905
  1,997
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.040
  0.060
  0.070
  0.090
  0.110
  0.120
  0.140
  0.160
  0.180
  0.190
  0.210
  0.230
  0.240
  0.260
  0.270
  0.290
  0.300
  0.320
  0.330
  0.340
  0.350
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
Adjusted equity ratio
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  63
  64
  66
  68
  70
  73
  76
  79
  83
  87
  99
  104
  109
  114
  120
  126
  133
  140
  148
  156
  165
  174
  184
  194
  205
  217
  229
  242
  255
  270
Depreciation, amort., depletion, $m
  106
  56
  57
  58
  60
  61
  63
  65
  67
  69
  71
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
  148
Funds from operations, $m
  163
  119
  121
  124
  127
  131
  136
  141
  146
  152
  158
  162
  170
  177
  186
  195
  204
  215
  225
  237
  249
  262
  276
  290
  306
  322
  339
  357
  377
  397
  418
Change in working capital, $m
  7
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  156
  119
  121
  124
  127
  131
  136
  140
  146
  151
  158
  162
  169
  177
  185
  194
  204
  214
  225
  236
  249
  262
  275
  290
  305
  321
  338
  357
  376
  396
  417
Maintenance CAPEX, $m
  0
  -45
  -46
  -47
  -48
  -50
  -51
  -53
  -55
  -57
  -59
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -141
New CAPEX, $m
  -86
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -19
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
Cash from investing activities, $m
  -39
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -142
  -150
  -158
  -165
  -173
  -182
  -191
  -200
  -210
Free cash flow, $m
  117
  65
  64
  65
  65
  66
  68
  69
  71
  74
  76
  77
  80
  84
  88
  92
  96
  101
  107
  113
  119
  125
  132
  140
  148
  156
  165
  175
  185
  196
  207
Issuance/(repayment) of debt, $m
  0
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
Issuance/(repurchase) of shares, $m
  -15
  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  
  -14
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
Total cash flow (excl. dividends), $m
  102
  69
  70
  71
  72
  74
  76
  79
  81
  85
  88
  89
  93
  98
  103
  108
  113
  119
  126
  132
  140
  148
  156
  165
  174
  184
  194
  205
  217
  229
  242
Retained Cash Flow (-), $m
  -36
  -7
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
  -57
Prev. year cash balance distribution, $m
 
  129
  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
 
  191
  61
  61
  61
  62
  62
  64
  65
  67
  69
  69
  72
  75
  78
  82
  86
  90
  95
  100
  106
  112
  118
  125
  132
  139
  147
  156
  165
  175
  185
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
 
  183
  56
  53
  50
  48
  45
  43
  41
  39
  36
  33
  31
  28
  26
  24
  22
  20
  18
  15
  13
  12
  10
  8
  7
  5
  4
  3
  3
  2
  1
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

Heartland Express, Inc., through its subsidiaries, operates as a short-to-medium haul truckload carrier of general commodities. The company primarily provides nationwide asset-based dry van truckload service for shippers from Washington to Florida and New England to California; and temperature-controlled transportation services and non-asset-based freight brokerage services using company-owned and leased revenue equipment, as well as through independent contractor tractors. It transports appliances, automotive parts, consumer products, paper products, packaged foodstuffs, and retail goods. The company principally serves retailers and manufacturers. Heartland Express, Inc. was founded in 1978 and is headquartered in North Liberty, Iowa.

FINANCIAL RATIOS  of  Heartland Express (HTLD)

Valuation Ratios
P/E Ratio 31.1
Price to Sales 2.8
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow 24.8
Growth Rates
Sales Growth Rate -16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60.4%
Cap. Spend. - 3 Yr. Gr. Rate -8.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 11.5%
Ret/ On T. Cap. - 3 Yr. Avg. 14.6%
Return On Equity 11.5%
Return On Equity - 3 Yr. Avg. 15.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 85%
Gross Margin - 3 Yr. Avg. 81%
EBITDA Margin 31.3%
EBITDA Margin - 3 Yr. Avg. 30.1%
Operating Margin 14%
Oper. Margin - 3 Yr. Avg. 15%
Pre-Tax Margin 14%
Pre-Tax Margin - 3 Yr. Avg. 15%
Net Profit Margin 9.1%
Net Profit Margin - 3 Yr. Avg. 9.6%
Effective Tax Rate 34.9%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 12.5%

HTLD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HTLD stock intrinsic value calculation we used $613 million for the last fiscal year's total revenue generated by Heartland Express. The default revenue input number comes from 2016 income statement of Heartland Express. 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 HTLD 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 4.3%, whose default value for HTLD is calculated based on our internal credit rating of Heartland Express, 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 Heartland Express.
    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 HTLD stock the variable cost ratio is equal to 75.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $66 million in the base year in the intrinsic value calculation for HTLD 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 Heartland Express.

Corporate tax rate of 27% is the nominal tax rate for Heartland Express. 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 HTLD 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 HTLD are equal to 73.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Heartland Express 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 HTLD is equal to 1.1%. 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 - $506 million for Heartland Express - 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 82.276 million for Heartland Express 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 Heartland Express at the current share price and the inputted number of shares is $1.7 billion.

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COMPANY NEWS

▶ Heartland Express misses 2Q profit forecasts   [Aug-02-17 09:41PM  Associated Press]
▶ Heartland Express Acquires Interstate Distributor Co.   [Jul-06-17 08:45AM  GlobeNewswire]
▶ Heartland Express, Inc. Declares Regular Quarterly Dividend   [Jun-12-17 06:08PM  GlobeNewswire]
▶ Heartland Express tops 1Q profit forecasts   [Apr-21-17 09:26AM  Associated Press]
▶ Heartland Express, Inc. Declares Regular Quarterly Dividend   [Mar-14-17 10:03AM  GlobeNewswire]
▶ Heartland Express beats 4Q profit forecasts   [Jan-26-17 04:46PM  Associated Press]
▶ Sell the Trump bump in these truck stocks now, analyst says   [Dec-16-16 03:47PM  at MarketWatch]
▶ Heartland Express, Inc. Declares Regular Quarterly Dividend   [Nov-21-16 05:44PM  GlobeNewswire]
▶ Heartland Express Inc. Earns Quest for Quality Award   [Aug-22-16 05:58PM  GlobeNewswire]
▶ Heartland Express, Inc. Declares Regular Quarterly Dividend   [Jun-10-16 11:00AM  GlobeNewswire]
▶ U.S. Stocks Stutter-Step to Fresh Highs   [Apr-19-16 05:40PM  at The Wall Street Journal]
▶ Trucking Stocks Tumble on Downgrade, Pricing Outlook   [03:08PM  at The Wall Street Journal]
Stock chart of HTLD Financial statements of HTLD
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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