Intrinsic value of Multi-Color - LABL

Previous Close

$72.75

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$72.75

 
Intrinsic value

$53.13

 
Up/down potential

-27%

 
Rating

sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of LABL 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 1.2

 

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, %
  7.40
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  871
  892
  916
  942
  971
  1,003
  1,038
  1,076
  1,116
  1,159
  1,206
  1,255
  1,308
  1,363
  1,423
  1,485
  1,551
  1,622
  1,696
  1,774
  1,856
  1,943
  2,035
  2,131
  2,233
  2,340
  2,453
  2,571
  2,696
  2,827
  2,965
Variable operating expenses, $m
 
  785
  805
  827
  851
  878
  907
  938
  971
  1,007
  1,046
  1,045
  1,089
  1,135
  1,184
  1,236
  1,292
  1,350
  1,412
  1,477
  1,545
  1,618
  1,694
  1,774
  1,859
  1,948
  2,042
  2,141
  2,244
  2,354
  2,468
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
  776
  785
  805
  827
  851
  878
  907
  938
  971
  1,007
  1,046
  1,045
  1,089
  1,135
  1,184
  1,236
  1,292
  1,350
  1,412
  1,477
  1,545
  1,618
  1,694
  1,774
  1,859
  1,948
  2,042
  2,141
  2,244
  2,354
  2,468
Operating income, $m
  94
  107
  111
  116
  120
  126
  132
  138
  145
  152
  160
  210
  219
  228
  238
  249
  260
  272
  284
  297
  311
  325
  341
  357
  374
  392
  411
  431
  451
  473
  496
EBITDA, $m
  138
  171
  175
  181
  186
  192
  199
  206
  214
  222
  231
  241
  251
  261
  273
  285
  297
  311
  325
  340
  356
  372
  390
  408
  428
  448
  470
  493
  517
  542
  568
Interest expense (income), $m
  0
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
  75
Earnings before tax, $m
  67
  90
  93
  97
  101
  105
  110
  115
  121
  127
  134
  183
  190
  198
  206
  215
  224
  234
  244
  255
  267
  279
  292
  305
  319
  334
  350
  367
  384
  402
  421
Tax expense, $m
  19
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  109
  114
Net income, $m
  48
  65
  68
  71
  74
  77
  80
  84
  88
  93
  98
  133
  139
  144
  150
  157
  164
  171
  178
  186
  195
  204
  213
  223
  233
  244
  255
  268
  280
  294
  308

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  28
  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
  1,070
  1,067
  1,095
  1,127
  1,162
  1,200
  1,242
  1,287
  1,335
  1,387
  1,442
  1,501
  1,564
  1,631
  1,702
  1,777
  1,856
  1,940
  2,028
  2,122
  2,220
  2,324
  2,434
  2,549
  2,671
  2,799
  2,934
  3,076
  3,225
  3,382
  3,547
Adjusted assets (=assets-cash), $m
  1,042
  1,067
  1,095
  1,127
  1,162
  1,200
  1,242
  1,287
  1,335
  1,387
  1,442
  1,501
  1,564
  1,631
  1,702
  1,777
  1,856
  1,940
  2,028
  2,122
  2,220
  2,324
  2,434
  2,549
  2,671
  2,799
  2,934
  3,076
  3,225
  3,382
  3,547
Revenue / Adjusted assets
  0.836
  0.836
  0.837
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
Average production assets, $m
  363
  371
  381
  392
  404
  417
  432
  447
  464
  482
  502
  522
  544
  567
  592
  618
  645
  675
  705
  738
  772
  808
  846
  887
  929
  973
  1,020
  1,070
  1,121
  1,176
  1,233
Working capital, $m
  112
  88
  91
  93
  96
  99
  103
  106
  110
  115
  119
  124
  129
  135
  141
  147
  154
  161
  168
  176
  184
  192
  201
  211
  221
  232
  243
  255
  267
  280
  294
Total debt, $m
  506
  522
  542
  564
  588
  615
  644
  676
  710
  746
  785
  826
  870
  917
  966
  1,019
  1,074
  1,133
  1,195
  1,260
  1,329
  1,402
  1,479
  1,560
  1,645
  1,734
  1,829
  1,928
  2,032
  2,142
  2,258
Total liabilities, $m
  731
  747
  767
  789
  813
  840
  869
  901
  935
  971
  1,010
  1,051
  1,095
  1,142
  1,191
  1,244
  1,299
  1,358
  1,420
  1,485
  1,554
  1,627
  1,704
  1,785
  1,870
  1,959
  2,054
  2,153
  2,257
  2,367
  2,483
Total equity, $m
  339
  320
  329
  338
  349
  360
  373
  386
  401
  416
  433
  450
  469
  489
  510
  533
  557
  582
  608
  637
  666
  697
  730
  765
  801
  840
  880
  923
  967
  1,014
  1,064
Total liabilities and equity, $m
  1,070
  1,067
  1,096
  1,127
  1,162
  1,200
  1,242
  1,287
  1,336
  1,387
  1,443
  1,501
  1,564
  1,631
  1,701
  1,777
  1,856
  1,940
  2,028
  2,122
  2,220
  2,324
  2,434
  2,550
  2,671
  2,799
  2,934
  3,076
  3,224
  3,381
  3,547
Debt-to-equity ratio
  1.493
  1.630
  1.650
  1.670
  1.690
  1.710
  1.730
  1.750
  1.770
  1.790
  1.810
  1.830
  1.850
  1.870
  1.890
  1.910
  1.930
  1.950
  1.960
  1.980
  2.000
  2.010
  2.030
  2.040
  2.050
  2.070
  2.080
  2.090
  2.100
  2.110
  2.120
Adjusted equity ratio
  0.298
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300
  0.300

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48
  65
  68
  71
  74
  77
  80
  84
  88
  93
  98
  133
  139
  144
  150
  157
  164
  171
  178
  186
  195
  204
  213
  223
  233
  244
  255
  268
  280
  294
  308
Depreciation, amort., depletion, $m
  44
  64
  64
  65
  66
  66
  67
  68
  69
  70
  71
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
Funds from operations, $m
  99
  129
  132
  136
  139
  143
  148
  152
  158
  163
  169
  164
  170
  177
  185
  193
  201
  210
  219
  229
  240
  251
  262
  274
  287
  301
  315
  330
  345
  362
  379
Change in working capital, $m
  0
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Cash from operations, $m
  99
  155
  130
  133
  136
  140
  144
  149
  154
  159
  164
  159
  165
  172
  179
  187
  195
  203
  212
  221
  231
  242
  253
  265
  277
  290
  304
  318
  333
  349
  366
Maintenance CAPEX, $m
  0
  -21
  -22
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
New CAPEX, $m
  -35
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -57
Cash from investing activities, $m
  -135
  -30
  -32
  -33
  -35
  -36
  -38
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -60
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -108
  -114
  -120
  -125
Free cash flow, $m
  -36
  125
  98
  100
  101
  103
  106
  108
  111
  114
  117
  109
  113
  117
  121
  126
  131
  136
  142
  148
  154
  161
  168
  175
  183
  191
  200
  209
  219
  229
  240
Issuance/(repayment) of debt, $m
  45
  18
  20
  22
  24
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  52
  56
  59
  62
  65
  69
  73
  77
  81
  85
  90
  94
  99
  104
  110
  115
Issuance/(repurchase) of shares, $m
  3
  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  
  48
  18
  20
  22
  24
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  52
  56
  59
  62
  65
  69
  73
  77
  81
  85
  90
  94
  99
  104
  110
  115
Total cash flow (excl. dividends), $m
  13
  143
  118
  122
  126
  130
  135
  139
  145
  150
  156
  150
  157
  164
  171
  179
  187
  195
  204
  213
  223
  234
  245
  256
  268
  281
  295
  309
  323
  339
  355
Retained Cash Flow (-), $m
  -50
  -7
  -9
  -10
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -49
Prev. year cash balance distribution, $m
 
  26
  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
 
  162
  110
  112
  115
  119
  122
  126
  130
  134
  139
  133
  138
  144
  150
  156
  163
  170
  177
  185
  194
  202
  212
  222
  232
  243
  254
  266
  279
  292
  306
Discount rate, %
 
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
 
  149
  92
  86
  79
  73
  66
  59
  53
  46
  40
  32
  27
  23
  19
  15
  12
  9
  7
  5
  4
  3
  2
  1
  1
  1
  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

Multi-Color Corporation provides various label solutions. The company offers pressure sensitive labels; in-mold labels; heat transfer labels; shrink sleeve labels; cut and stack glue-applied labels comprising peel-away promotional labels, thermochromics, holographics, and metalized films; and promotional products, such as scratch-off coupons, static-clings, and tags. It also provides graphic and pre-press services; and various print methods consisting of flexographic, lithographic, rotogravure, letterpress, and digital services. The company serves producers of home and personal care, wine and spirit, food and beverage, healthcare, and specialty consumer products, as well as container manufacturers primarily in North, Central, and South America, as well as Europe, Australia, New Zealand, South Africa, Southeast Asia, and China. Multi-Color Corporation was founded in 1916 and is headquartered in Batavia, Ohio.

FINANCIAL RATIOS  of  Multi-Color (LABL)

Valuation Ratios
P/E Ratio 25.5
Price to Sales 1.4
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 12.4
Price to Free Cash Flow 19.1
Growth Rates
Sales Growth Rate 7.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20.7%
Cap. Spend. - 3 Yr. Gr. Rate 3.8%
Financial Strength
Quick Ratio 14
Current Ratio 0
LT Debt to Equity 148.7%
Total Debt to Equity 149.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.3%
Return On Equity 15.3%
Return On Equity - 3 Yr. Avg. 13.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 20.9%
Gross Margin - 3 Yr. Avg. 20.3%
EBITDA Margin 12.7%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin 10.9%
Oper. Margin - 3 Yr. Avg. 10.6%
Pre-Tax Margin 7.7%
Pre-Tax Margin - 3 Yr. Avg. 7.6%
Net Profit Margin 5.5%
Net Profit Margin - 3 Yr. Avg. 5%
Effective Tax Rate 28.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.3%
Payout Ratio 6.3%

LABL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LABL stock intrinsic value calculation we used $871 million for the last fiscal year's total revenue generated by Multi-Color. The default revenue input number comes from 2016 income statement of Multi-Color. 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 LABL stock valuation model: a) initial revenue growth rate of 2.4% 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 8.5%, whose default value for LABL is calculated based on our internal credit rating of Multi-Color, 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 Multi-Color.
    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 LABL stock the variable cost ratio is equal to 88.1%.

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 LABL 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 Multi-Color.

Corporate tax rate of 27% is the nominal tax rate for Multi-Color. 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 LABL 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 LABL are equal to 41.6%.

Life of production assets of 17.2 years is the average useful life of capital assets used in Multi-Color 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 LABL is equal to 9.9%. 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 - $339 million for Multi-Color - 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 17.042 million for Multi-Color 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 Multi-Color at the current share price and the inputted number of shares is $1.2 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
RRD R.R. Donnelley 12.02 7.42  sell
BRC Brady Cl A 38.20 14.15  str.sell
MPSX Multi Packagin 17.95 5.95  str.sell
GEF Greif Cl A 56.43 35.58  sell
EBF Ennis 16.30 2.19  str.sell
INWK InnerWorkings 10.01 14.66  buy

COMPANY NEWS

▶ Multi-Color posts 3Q profit   [08:39AM  Associated Press]
▶ Multi-Color Corporation Declares Quarterly Dividend   [Feb-01-17 01:02PM  GlobeNewswire]
▶ Has The Smart Money Found A Winner in Infoblox Inc (BLOX)?   [Dec-01-16 01:23PM  at Insider Monkey]
▶ Multi-Color Corporation Declares Quarterly Dividend   [Nov-01-16 02:31PM  GlobeNewswire]
▶ Multi-Color Corporation Declares Quarterly Dividend   [Aug-01-16 03:57PM  GlobeNewswire]
▶ Multi-Color Declares Quarterly Dividend   [May-02-16 11:52AM  GlobeNewswire]
▶ Multi-Color Corporation Declares Quarterly Dividend   [Feb-01-16 01:42PM  at noodls]
Stock chart of LABL Financial statements of LABL
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.