Intrinsic value of Matthews International Cl A - MATW

Previous Close

$53.80

  Intrinsic Value

$36.88

stock screener

  Rating & Target

sell

-31%

Previous close

$53.80

 
Intrinsic value

$36.88

 
Up/down potential

-31%

 
Rating

sell

We calculate the intrinsic value of MATW 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, %
  3.79
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  1,480
  1,511
  1,547
  1,588
  1,634
  1,685
  1,740
  1,800
  1,865
  1,935
  2,010
  2,090
  2,176
  2,267
  2,364
  2,466
  2,575
  2,690
  2,811
  2,939
  3,075
  3,218
  3,368
  3,527
  3,694
  3,871
  4,056
  4,251
  4,457
  4,673
  4,900
Variable operating expenses, $m
 
  1,145
  1,170
  1,199
  1,231
  1,267
  1,306
  1,348
  1,394
  1,443
  1,495
  1,466
  1,526
  1,590
  1,658
  1,730
  1,806
  1,887
  1,972
  2,062
  2,157
  2,257
  2,363
  2,474
  2,592
  2,715
  2,845
  2,982
  3,126
  3,278
  3,437
Fixed operating expenses, $m
 
  250
  256
  263
  269
  276
  283
  290
  297
  305
  312
  320
  328
  336
  345
  353
  362
  371
  381
  390
  400
  410
  420
  431
  441
  452
  464
  475
  487
  499
  512
Total operating expenses, $m
  1,362
  1,395
  1,426
  1,462
  1,500
  1,543
  1,589
  1,638
  1,691
  1,748
  1,807
  1,786
  1,854
  1,926
  2,003
  2,083
  2,168
  2,258
  2,353
  2,452
  2,557
  2,667
  2,783
  2,905
  3,033
  3,167
  3,309
  3,457
  3,613
  3,777
  3,949
Operating income, $m
  119
  116
  120
  126
  133
  142
  151
  162
  174
  188
  203
  304
  321
  340
  361
  383
  406
  432
  459
  487
  518
  551
  585
  622
  661
  703
  747
  794
  843
  895
  951
EBITDA, $m
  184
  229
  234
  241
  249
  258
  269
  281
  294
  309
  325
  343
  362
  382
  405
  429
  454
  482
  511
  542
  575
  610
  648
  688
  730
  775
  822
  873
  926
  982
  1,042
Interest expense (income), $m
  24
  30
  31
  32
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  65
  68
  72
  76
  81
  85
  90
  95
  100
  106
  112
  118
  125
  132
Earnings before tax, $m
  95
  86
  90
  95
  100
  107
  115
  124
  135
  146
  158
  257
  272
  288
  306
  325
  345
  367
  390
  415
  442
  470
  500
  532
  566
  603
  641
  682
  725
  771
  819
Tax expense, $m
  29
  23
  24
  26
  27
  29
  31
  34
  36
  39
  43
  69
  74
  78
  83
  88
  93
  99
  105
  112
  119
  127
  135
  144
  153
  163
  173
  184
  196
  208
  221
Net income, $m
  67
  63
  66
  69
  73
  78
  84
  91
  98
  107
  116
  188
  199
  211
  223
  237
  252
  268
  285
  303
  322
  343
  365
  389
  413
  440
  468
  498
  529
  563
  598

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  56
  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
  2,091
  2,079
  2,128
  2,185
  2,248
  2,317
  2,393
  2,476
  2,566
  2,662
  2,765
  2,875
  2,993
  3,118
  3,251
  3,392
  3,541
  3,699
  3,867
  4,043
  4,229
  4,426
  4,633
  4,852
  5,082
  5,324
  5,579
  5,848
  6,130
  6,427
  6,740
Adjusted assets (=assets-cash), $m
  2,035
  2,079
  2,128
  2,185
  2,248
  2,317
  2,393
  2,476
  2,566
  2,662
  2,765
  2,875
  2,993
  3,118
  3,251
  3,392
  3,541
  3,699
  3,867
  4,043
  4,229
  4,426
  4,633
  4,852
  5,082
  5,324
  5,579
  5,848
  6,130
  6,427
  6,740
Revenue / Adjusted assets
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
  0.727
Average production assets, $m
  628
  641
  656
  673
  693
  714
  738
  763
  791
  821
  852
  886
  923
  961
  1,002
  1,046
  1,092
  1,140
  1,192
  1,246
  1,304
  1,364
  1,428
  1,496
  1,566
  1,641
  1,720
  1,803
  1,890
  1,981
  2,078
Working capital, $m
  315
  293
  300
  308
  317
  327
  338
  349
  362
  375
  390
  406
  422
  440
  459
  478
  499
  522
  545
  570
  597
  624
  653
  684
  717
  751
  787
  825
  865
  907
  951
Total debt, $m
  873
  873
  906
  944
  986
  1,032
  1,083
  1,138
  1,197
  1,261
  1,330
  1,403
  1,481
  1,565
  1,653
  1,747
  1,846
  1,951
  2,062
  2,180
  2,304
  2,434
  2,572
  2,717
  2,870
  3,032
  3,201
  3,380
  3,568
  3,765
  3,973
Total liabilities, $m
  1,382
  1,382
  1,415
  1,453
  1,495
  1,541
  1,592
  1,647
  1,706
  1,770
  1,839
  1,912
  1,990
  2,074
  2,162
  2,256
  2,355
  2,460
  2,571
  2,689
  2,813
  2,943
  3,081
  3,226
  3,379
  3,541
  3,710
  3,889
  4,077
  4,274
  4,482
Total equity, $m
  709
  696
  713
  732
  753
  776
  802
  830
  860
  892
  926
  963
  1,003
  1,045
  1,089
  1,136
  1,186
  1,239
  1,295
  1,354
  1,417
  1,483
  1,552
  1,625
  1,702
  1,784
  1,869
  1,959
  2,054
  2,153
  2,258
Total liabilities and equity, $m
  2,091
  2,078
  2,128
  2,185
  2,248
  2,317
  2,394
  2,477
  2,566
  2,662
  2,765
  2,875
  2,993
  3,119
  3,251
  3,392
  3,541
  3,699
  3,866
  4,043
  4,230
  4,426
  4,633
  4,851
  5,081
  5,325
  5,579
  5,848
  6,131
  6,427
  6,740
Debt-to-equity ratio
  1.231
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.370
  1.390
  1.410
  1.440
  1.460
  1.480
  1.500
  1.520
  1.540
  1.560
  1.570
  1.590
  1.610
  1.630
  1.640
  1.660
  1.670
  1.690
  1.700
  1.710
  1.730
  1.740
  1.750
  1.760
Adjusted equity ratio
  0.321
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335
  0.335

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  67
  63
  66
  69
  73
  78
  84
  91
  98
  107
  116
  188
  199
  211
  223
  237
  252
  268
  285
  303
  322
  343
  365
  389
  413
  440
  468
  498
  529
  563
  598
Depreciation, amort., depletion, $m
  65
  113
  114
  115
  115
  116
  117
  119
  120
  121
  122
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
Funds from operations, $m
  143
  176
  179
  184
  189
  195
  202
  209
  218
  228
  238
  227
  239
  253
  267
  283
  300
  318
  337
  358
  380
  403
  428
  454
  482
  512
  543
  577
  612
  649
  689
Change in working capital, $m
  3
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
Cash from operations, $m
  140
  170
  172
  176
  180
  185
  191
  198
  205
  214
  224
  211
  223
  235
  249
  263
  279
  296
  314
  333
  353
  375
  399
  423
  450
  478
  507
  539
  572
  608
  645
Maintenance CAPEX, $m
  0
  -28
  -28
  -29
  -30
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
New CAPEX, $m
  -42
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -49
  -52
  -54
  -57
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -96
Cash from investing activities, $m
  -47
  -41
  -43
  -46
  -49
  -51
  -54
  -58
  -61
  -65
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -158
  -166
  -175
  -183
Free cash flow, $m
  93
  130
  129
  130
  131
  133
  136
  140
  144
  150
  156
  140
  147
  156
  165
  176
  187
  199
  212
  226
  241
  257
  275
  293
  313
  334
  357
  381
  406
  433
  462
Issuance/(repayment) of debt, $m
  -30
  28
  33
  38
  42
  46
  51
  55
  59
  64
  69
  73
  78
  83
  88
  94
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  208
Issuance/(repurchase) of shares, $m
  -52
  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  
  -90
  28
  33
  38
  42
  46
  51
  55
  59
  64
  69
  73
  78
  83
  88
  94
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  208
Total cash flow (excl. dividends), $m
  3
  158
  162
  167
  173
  179
  187
  195
  204
  214
  224
  213
  226
  239
  254
  269
  286
  304
  323
  344
  365
  388
  413
  439
  466
  495
  526
  559
  594
  631
  670
Retained Cash Flow (-), $m
  22
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -32
  -35
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
Prev. year cash balance distribution, $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
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
 
  171
  145
  148
  152
  156
  161
  167
  174
  181
  190
  176
  186
  197
  209
  222
  236
  251
  267
  284
  303
  322
  343
  365
  389
  414
  441
  469
  499
  531
  565
Discount rate, %
 
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
 
  158
  123
  114
  105
  96
  87
  79
  71
  63
  56
  43
  37
  32
  27
  22
  18
  14
  11
  9
  6
  5
  3
  2
  2
  1
  1
  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

Matthews International Corporation is a provider of brand solutions, memorialization products and industrial technologies. The Company operates through three segments: SGK Brand Solutions, Memorialization and Industrial Technologies. The SGK Brand Solutions segment provides brand development, deployment and delivery (consisting of brand management, printing plates and cylinders, pre-media services and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services). The Memorialization segment manufactures and markets a line of memorialization products used primarily in cemeteries, funeral homes and crematories. The Industrial Technologies segment designs, manufactures and distributes a range of marking, coding and industrial automation solutions, order fulfillment systems and related consumables.

FINANCIAL RATIOS  of  Matthews International Cl A (MATW)

Valuation Ratios
P/E Ratio 25.8
Price to Sales 1.2
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 12.4
Price to Free Cash Flow 17.6
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.5%
Cap. Spend. - 3 Yr. Gr. Rate 10.9%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 119.2%
Total Debt to Equity 123.1%
Interest Coverage 5
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 3.6%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity 9.3%
Return On Equity - 3 Yr. Avg. 8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 37.6%
Gross Margin - 3 Yr. Avg. 36.7%
EBITDA Margin 12.4%
EBITDA Margin - 3 Yr. Avg. 11.9%
Operating Margin 8%
Oper. Margin - 3 Yr. Avg. 7.6%
Pre-Tax Margin 6.4%
Pre-Tax Margin - 3 Yr. Avg. 6.2%
Net Profit Margin 4.5%
Net Profit Margin - 3 Yr. Avg. 4.3%
Effective Tax Rate 30.5%
Eff/ Tax Rate - 3 Yr. Avg. 31.8%
Payout Ratio 28.4%

MATW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MATW stock intrinsic value calculation we used $1480 million for the last fiscal year's total revenue generated by Matthews International Cl A. The default revenue input number comes from 2016 income statement of Matthews International Cl A. 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 MATW stock valuation model: a) initial revenue growth rate of 2.1% 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 8.4%, whose default value for MATW is calculated based on our internal credit rating of Matthews International Cl A, 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 Matthews International Cl A.
    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 MATW stock the variable cost ratio is equal to 75.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $244 million in the base year in the intrinsic value calculation for MATW 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 Matthews International Cl A.

Corporate tax rate of 27% is the nominal tax rate for Matthews International Cl A. 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 MATW 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 MATW are equal to 42.4%.

Life of production assets of 22.8 years is the average useful life of capital assets used in Matthews International Cl A 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 MATW is equal to 19.4%. 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 - $709 million for Matthews International Cl A - 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 32.146 million for Matthews International Cl A 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 Matthews International Cl A at the current share price and the inputted number of shares is $1.7 billion.

RELATED COMPANIES Price Int.Val. Rating
HI Hillenbrand 44.60 34.64  hold
SCI Service Intern 36.83 26.03  sell
CSV Carriage Servi 26.21 26.58  hold
STON StoneMor Partn 6.75 5.63  hold
SNFCA Security Natio 5.20 22.57  str.buy
JOE St. Joe 18.50 2.37  str.sell

COMPANY NEWS

▶ Matthews International posts 4Q profit   [Nov-16-17 04:59PM  Associated Press]
▶ Matthews International posts 3Q profit   [Jul-28-17 08:04PM  Associated Press]
▶ Matthews International Declares Quarterly Dividend   [Jul-20-17 02:00PM  GlobeNewswire]
▶ Husband of woman who stole nearly $13M faces fed tax charges   [May-03-17 12:52PM  Associated Press]
▶ Matthews International posts 2Q profit   [Apr-27-17 06:40PM  Associated Press]
▶ Matthews International Declares Quarterly Dividend   [Apr-20-17 02:00PM  GlobeNewswire]
▶ Cashier admits stealing $13M at Pittsburgh monuments firm   [Mar-16-17 11:11AM  Associated Press]
▶ Hedge Funds Are Betting On Matthews International Corp (MATW)   [Dec-12-16 01:33PM  at Insider Monkey]
Financial statements of MATW
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.