Intrinsic value of Monmouth Real Estate Investment Cl A - MNR

Previous Close

$16.71

  Intrinsic Value

$254.94

stock screener

  Rating & Target

str. buy

+999%

Previous close

$16.71

 
Intrinsic value

$254.94

 
Up/down potential

+999%

 
Rating

str. buy

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

We calculate the intrinsic value of MNR 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
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, %
  20.00
  19.60
  18.14
  16.83
  15.64
  14.58
  13.62
  12.76
  11.98
  11.28
  10.66
  10.09
  9.58
  9.12
  8.71
  8.34
  8.01
  7.71
  7.43
  7.19
  6.97
  6.78
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
Revenue, $m
  114
  136
  161
  188
  218
  249
  283
  319
  358
  398
  441
  485
  531
  580
  630
  683
  738
  795
  854
  915
  979
  1,045
  1,114
  1,186
  1,260
  1,338
  1,419
  1,503
  1,591
  1,683
  1,779
Variable operating expenses, $m
 
  53
  62
  73
  84
  96
  109
  123
  138
  153
  170
  186
  204
  223
  242
  263
  284
  306
  328
  352
  376
  402
  428
  456
  485
  515
  546
  578
  612
  647
  684
Fixed operating expenses, $m
 
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
Total operating expenses, $m
  57
  65
  75
  86
  97
  109
  123
  137
  152
  168
  185
  201
  220
  239
  258
  280
  301
  323
  346
  370
  395
  421
  447
  476
  505
  536
  567
  600
  634
  670
  707
Operating income, $m
  57
  71
  86
  103
  120
  140
  160
  182
  206
  230
  256
  283
  312
  341
  372
  404
  437
  472
  508
  545
  584
  624
  666
  710
  756
  803
  852
  904
  957
  1,013
  1,072
EBITDA, $m
  90
  232
  276
  325
  377
  434
  494
  559
  627
  699
  775
  855
  938
  1,024
  1,114
  1,208
  1,306
  1,408
  1,513
  1,623
  1,737
  1,855
  1,979
  2,107
  2,240
  2,379
  2,524
  2,675
  2,832
  2,996
  3,167
Interest expense (income), $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
Earnings before tax, $m
  40
  71
  86
  103
  120
  140
  160
  182
  206
  230
  256
  283
  312
  341
  372
  404
  437
  472
  508
  545
  584
  624
  666
  710
  756
  803
  852
  904
  957
  1,013
  1,072
Tax expense, $m
  0
  19
  23
  28
  33
  38
  43
  49
  55
  62
  69
  76
  84
  92
  100
  109
  118
  127
  137
  147
  158
  169
  180
  192
  204
  217
  230
  244
  259
  274
  289
Net income, $m
  40
  52
  63
  75
  88
  102
  117
  133
  150
  168
  187
  207
  227
  249
  271
  295
  319
  344
  371
  398
  426
  456
  486
  518
  552
  586
  622
  660
  699
  740
  782

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  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
  1,443
  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
Adjusted assets (=assets-cash), $m
  1,433
  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
Revenue / Adjusted assets
  0.080
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Average production assets, $m
  1,152
  1,606
  1,897
  2,217
  2,563
  2,937
  3,337
  3,763
  4,214
  4,689
  5,189
  5,713
  6,260
  6,831
  7,426
  8,045
  8,690
  9,359
  10,055
  10,778
  11,530
  12,311
  13,123
  13,968
  14,847
  15,762
  16,715
  17,709
  18,745
  19,825
  20,953
Working capital, $m
  0
  -865
  -1,022
  -1,193
  -1,380
  -1,581
  -1,797
  -2,026
  -2,269
  -2,525
  -2,794
  -3,076
  -3,370
  -3,678
  -3,998
  -4,332
  -4,679
  -5,039
  -5,414
  -5,803
  -6,208
  -6,628
  -7,066
  -7,520
  -7,994
  -8,487
  -9,000
  -9,535
  -10,092
  -10,674
  -11,281
Total debt, $m
  711
  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 liabilities, $m
  730
  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 equity, $m
  713
  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 liabilities and equity, $m
  1,443
  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
Debt-to-equity ratio
  0.997
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  0.491
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  40
  52
  63
  75
  88
  102
  117
  133
  150
  168
  187
  207
  227
  249
  271
  295
  319
  344
  371
  398
  426
  456
  486
  518
  552
  586
  622
  660
  699
  740
  782
Depreciation, amort., depletion, $m
  33
  161
  190
  222
  257
  294
  334
  377
  422
  469
  519
  571
  626
  683
  743
  805
  869
  936
  1,006
  1,078
  1,153
  1,231
  1,312
  1,397
  1,485
  1,576
  1,672
  1,771
  1,874
  1,983
  2,095
Funds from operations, $m
  77
  213
  253
  297
  345
  396
  451
  510
  572
  637
  706
  778
  853
  932
  1,014
  1,099
  1,188
  1,280
  1,376
  1,476
  1,579
  1,687
  1,799
  1,915
  2,036
  2,162
  2,294
  2,431
  2,573
  2,722
  2,878
Change in working capital, $m
  3
  -142
  -157
  -172
  -187
  -201
  -215
  -229
  -243
  -256
  -269
  -282
  -295
  -308
  -320
  -333
  -347
  -361
  -375
  -389
  -405
  -421
  -437
  -455
  -473
  -493
  -513
  -535
  -558
  -582
  -607
Cash from operations, $m
  74
  355
  410
  469
  531
  597
  667
  739
  815
  893
  975
  1,060
  1,148
  1,240
  1,334
  1,433
  1,535
  1,641
  1,751
  1,865
  1,984
  2,107
  2,236
  2,370
  2,510
  2,655
  2,807
  2,966
  3,131
  3,304
  3,485
Maintenance CAPEX, $m
  0
  -134
  -161
  -190
  -222
  -256
  -294
  -334
  -376
  -421
  -469
  -519
  -571
  -626
  -683
  -743
  -805
  -869
  -936
  -1,006
  -1,078
  -1,153
  -1,231
  -1,312
  -1,397
  -1,485
  -1,576
  -1,672
  -1,771
  -1,874
  -1,983
New CAPEX, $m
  -5
  -269
  -291
  -319
  -347
  -374
  -400
  -426
  -451
  -476
  -500
  -524
  -547
  -571
  -595
  -619
  -644
  -670
  -696
  -723
  -751
  -781
  -812
  -845
  -879
  -915
  -953
  -993
  -1,036
  -1,080
  -1,128
Cash from investing activities, $m
  -339
  -403
  -452
  -509
  -569
  -630
  -694
  -760
  -827
  -897
  -969
  -1,043
  -1,118
  -1,197
  -1,278
  -1,362
  -1,449
  -1,539
  -1,632
  -1,729
  -1,829
  -1,934
  -2,043
  -2,157
  -2,276
  -2,400
  -2,529
  -2,665
  -2,807
  -2,954
  -3,111
Free cash flow, $m
  -265
  -48
  -42
  -40
  -37
  -33
  -27
  -21
  -13
  -4
  6
  17
  30
  42
  56
  71
  86
  102
  119
  136
  155
  173
  193
  213
  234
  255
  277
  301
  324
  349
  375
Issuance/(repayment) of debt, $m
  155
  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
Issuance/(repurchase) of shares, $m
  42
  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  
  231
  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 cash flow (excl. dividends), $m
  -35
  -48
  -42
  -40
  -37
  -33
  -27
  -21
  -13
  -4
  6
  17
  30
  42
  56
  71
  86
  102
  119
  136
  155
  173
  193
  213
  234
  255
  277
  301
  324
  349
  375
Retained Cash Flow (-), $m
  -115
  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
Prev. year cash balance distribution, $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 flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Cash available for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  6
  17
  30
  42
  56
  71
  86
  102
  119
  136
  155
  173
  193
  213
  234
  255
  277
  301
  324
  349
  375
Discount rate, %
 
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
  0.00
PV of cash for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  6
  17
  30
  42
  56
  71
  86
  102
  119
  136
  155
  173
  193
  213
  234
  255
  277
  301
  324
  349
  375
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

Monmouth Real Estate Investment Corporation is a real estate investment trust (REIT). The Company's primary business is the ownership of real estate. Its investment focus is to own single tenant, industrial buildings and leased to investment-grade tenants or their subsidiaries on long-term net leases. In addition, the Company owns a portfolio of REIT investment securities. Its assets are situated near airports, transportation hubs and manufacturing plants. The Company's property portfolio consists of approximately 109 properties located across 30 states, containing a total of approximately 18.9 million rentable square feet.

FINANCIAL RATIOS  of  Monmouth Real Estate Investment Cl A (MNR)

Valuation Ratios
P/E Ratio 31.6
Price to Sales 11.1
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 17.1
Price to Free Cash Flow 18.3
Growth Rates
Sales Growth Rate 20%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -77.3%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 99.7%
Total Debt to Equity 99.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 6.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 84.2%
Gross Margin - 3 Yr. Avg. 84.3%
EBITDA Margin 64%
EBITDA Margin - 3 Yr. Avg. 60.9%
Operating Margin 50%
Oper. Margin - 3 Yr. Avg. 48.2%
Pre-Tax Margin 35.1%
Pre-Tax Margin - 3 Yr. Avg. 31.9%
Net Profit Margin 35.1%
Net Profit Margin - 3 Yr. Avg. 34%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 127.5%

MNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MNR stock intrinsic value calculation we used $114 million for the last fiscal year's total revenue generated by Monmouth Real Estate Investment Cl A. The default revenue input number comes from 2017 income statement of Monmouth Real Estate Investment 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 MNR stock valuation model: a) initial revenue growth rate of 19.6% 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 0%, whose default value for MNR is calculated based on our internal credit rating of Monmouth Real Estate Investment 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 Monmouth Real Estate Investment 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 MNR stock the variable cost ratio is equal to 38.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12 million in the base year in the intrinsic value calculation for MNR 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 Monmouth Real Estate Investment Cl A.

Corporate tax rate of 27% is the nominal tax rate for Monmouth Real Estate Investment 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 MNR stock is equal to 0.6%.

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 MNR are equal to 1177.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Monmouth Real Estate Investment 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 MNR is equal to -634.2%. 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 Monmouth Real Estate Investment 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 72 million for Monmouth Real Estate Investment 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 Monmouth Real Estate Investment Cl A at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Best AMEX Real Estate Dividend Paying Companies   [Jun-25-18 11:02AM  Simply Wall St.]
▶ Best NYSE Real Estate Dividend Picks For The Day   [May-14-18 11:02AM  Simply Wall St.]
▶ Monmouth: Fiscal 2Q Earnings Snapshot   [May-08-18 07:04PM  Associated Press]
▶ Monmouth reports 1Q results   [Feb-07-18 07:15PM  Associated Press]
▶ Monmouth reports 4Q results   [Nov-29-17 04:48PM  Associated Press]
▶ Preferred REIT Shares Provide Stable Income   [Oct-31-17 09:05PM  Forbes]
▶ Monmouth Real Estate Declares Preferred Dividend   [Oct-02-17 05:00PM  PR Newswire]
▶ It Only Takes One Torpedo To Sink The Ship   [Aug-26-17 07:00AM  Forbes]
▶ Monmouth reports 3Q results   [Aug-09-17 11:00PM  Associated Press]
▶ Monmouth reports 2Q results   [May-04-17 05:03AM  Associated Press]
▶ Top Ranked Income Stocks to Buy for April 18th   [Apr-18-17 10:39AM  Zacks]
Financial statements of MNR
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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