Intrinsic value of Monmouth Real Estate Investment Cl A - MNR

Previous Close

$15.13

  Intrinsic Value

$2.14

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

+9%

Previous close

$15.13

 
Intrinsic value

$2.14

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

+9%

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

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

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

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 1.1

 

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, %
  21.79
  17.40
  16.16
  15.04
  14.04
  13.14
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
Revenue, $m
  95
  112
  130
  149
  170
  192
  216
  241
  267
  295
  324
  354
  386
  418
  453
  488
  525
  563
  603
  644
  687
  732
  779
  827
  877
  930
  985
  1,042
  1,102
  1,164
  1,229
Variable operating expenses, $m
 
  46
  53
  61
  70
  79
  89
  99
  110
  121
  133
  146
  158
  172
  186
  201
  216
  231
  248
  265
  282
  301
  320
  340
  361
  382
  405
  428
  453
  478
  505
Fixed operating expenses, $m
 
  10
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  16
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
Total operating expenses, $m
  49
  56
  64
  72
  81
  90
  101
  111
  122
  133
  146
  159
  171
  186
  200
  215
  231
  246
  264
  281
  298
  318
  337
  358
  379
  401
  424
  447
  473
  498
  526
Operating income, $m
  45
  55
  66
  77
  89
  102
  116
  130
  145
  161
  178
  195
  214
  233
  252
  273
  294
  316
  340
  364
  388
  414
  441
  469
  499
  529
  561
  594
  629
  665
  703
EBITDA, $m
  72
  92
  108
  126
  145
  165
  186
  209
  232
  257
  284
  311
  339
  369
  400
  432
  465
  500
  536
  574
  613
  653
  695
  739
  785
  833
  882
  934
  988
  1,045
  1,103
Interest expense (income), $m
  0
  21
  25
  30
  34
  39
  44
  49
  55
  61
  68
  74
  81
  89
  96
  104
  112
  121
  130
  139
  149
  158
  169
  180
  191
  202
  215
  227
  240
  254
  269
Earnings before tax, $m
  32
  34
  40
  48
  55
  63
  72
  81
  90
  100
  110
  121
  132
  144
  156
  169
  182
  196
  210
  225
  240
  256
  273
  290
  308
  327
  346
  367
  388
  411
  434
Tax expense, $m
  0
  9
  11
  13
  15
  17
  19
  22
  24
  27
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  74
  78
  83
  88
  94
  99
  105
  111
  117
Net income, $m
  32
  25
  30
  35
  40
  46
  52
  59
  66
  73
  80
  88
  97
  105
  114
  123
  133
  143
  153
  164
  175
  187
  199
  212
  225
  239
  253
  268
  283
  300
  317

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  96
  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
  1,223
  1,328
  1,542
  1,774
  2,023
  2,289
  2,571
  2,869
  3,183
  3,512
  3,856
  4,216
  4,591
  4,981
  5,387
  5,809
  6,248
  6,704
  7,178
  7,670
  8,182
  8,715
  9,269
  9,845
  10,446
  11,071
  11,724
  12,404
  13,113
  13,854
  14,628
Adjusted assets (=assets-cash), $m
  1,127
  1,328
  1,542
  1,774
  2,023
  2,289
  2,571
  2,869
  3,183
  3,512
  3,856
  4,216
  4,591
  4,981
  5,387
  5,809
  6,248
  6,704
  7,178
  7,670
  8,182
  8,715
  9,269
  9,845
  10,446
  11,071
  11,724
  12,404
  13,113
  13,854
  14,628
Revenue / Adjusted assets
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
  0.084
Average production assets, $m
  930
  1,091
  1,268
  1,458
  1,663
  1,881
  2,113
  2,358
  2,616
  2,886
  3,169
  3,465
  3,773
  4,094
  4,427
  4,774
  5,135
  5,510
  5,899
  6,304
  6,725
  7,162
  7,618
  8,091
  8,585
  9,099
  9,635
  10,194
  10,777
  11,386
  12,022
Working capital, $m
  0
  -11
  -13
  -15
  -17
  -19
  -22
  -24
  -27
  -30
  -32
  -35
  -39
  -42
  -45
  -49
  -52
  -56
  -60
  -64
  -69
  -73
  -78
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -123
Total debt, $m
  612
  724
  843
  972
  1,110
  1,258
  1,414
  1,579
  1,754
  1,936
  2,127
  2,327
  2,535
  2,751
  2,977
  3,211
  3,455
  3,708
  3,971
  4,244
  4,528
  4,824
  5,131
  5,451
  5,784
  6,132
  6,494
  6,871
  7,265
  7,676
  8,105
Total liabilities, $m
  626
  737
  856
  985
  1,123
  1,271
  1,427
  1,592
  1,767
  1,949
  2,140
  2,340
  2,548
  2,764
  2,990
  3,224
  3,468
  3,721
  3,984
  4,257
  4,541
  4,837
  5,144
  5,464
  5,797
  6,145
  6,507
  6,884
  7,278
  7,689
  8,118
Total equity, $m
  598
  591
  686
  790
  900
  1,019
  1,144
  1,277
  1,416
  1,563
  1,716
  1,876
  2,043
  2,217
  2,397
  2,585
  2,780
  2,983
  3,194
  3,413
  3,641
  3,878
  4,125
  4,381
  4,648
  4,927
  5,217
  5,520
  5,835
  6,165
  6,509
Total liabilities and equity, $m
  1,224
  1,328
  1,542
  1,775
  2,023
  2,290
  2,571
  2,869
  3,183
  3,512
  3,856
  4,216
  4,591
  4,981
  5,387
  5,809
  6,248
  6,704
  7,178
  7,670
  8,182
  8,715
  9,269
  9,845
  10,445
  11,072
  11,724
  12,404
  13,113
  13,854
  14,627
Debt-to-equity ratio
  1.023
  1.230
  1.230
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.250
  1.250
Adjusted equity ratio
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  32
  25
  30
  35
  40
  46
  52
  59
  66
  73
  80
  88
  97
  105
  114
  123
  133
  143
  153
  164
  175
  187
  199
  212
  225
  239
  253
  268
  283
  300
  317
Depreciation, amort., depletion, $m
  27
  36
  42
  49
  55
  63
  70
  79
  87
  96
  106
  115
  126
  136
  148
  159
  171
  184
  197
  210
  224
  239
  254
  270
  286
  303
  321
  340
  359
  380
  401
Funds from operations, $m
  53
  61
  72
  83
  96
  109
  123
  137
  153
  169
  186
  204
  222
  242
  262
  282
  304
  326
  350
  374
  399
  426
  453
  481
  511
  542
  574
  608
  643
  679
  718
Change in working capital, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Cash from operations, $m
  55
  63
  74
  85
  98
  111
  125
  140
  156
  172
  189
  207
  225
  245
  265
  286
  308
  330
  354
  378
  404
  430
  458
  486
  516
  547
  580
  613
  649
  686
  724
Maintenance CAPEX, $m
  0
  -31
  -36
  -42
  -49
  -55
  -63
  -70
  -79
  -87
  -96
  -106
  -115
  -126
  -136
  -148
  -159
  -171
  -184
  -197
  -210
  -224
  -239
  -254
  -270
  -286
  -303
  -321
  -340
  -359
  -380
New CAPEX, $m
  -22
  -162
  -176
  -191
  -205
  -218
  -232
  -245
  -258
  -270
  -283
  -295
  -308
  -321
  -334
  -347
  -361
  -375
  -389
  -405
  -421
  -438
  -455
  -474
  -493
  -514
  -536
  -559
  -583
  -609
  -636
Cash from investing activities, $m
  -228
  -193
  -212
  -233
  -254
  -273
  -295
  -315
  -337
  -357
  -379
  -401
  -423
  -447
  -470
  -495
  -520
  -546
  -573
  -602
  -631
  -662
  -694
  -728
  -763
  -800
  -839
  -880
  -923
  -968
  -1,016
Free cash flow, $m
  -173
  -130
  -139
  -148
  -156
  -163
  -169
  -175
  -181
  -186
  -190
  -194
  -198
  -202
  -205
  -209
  -212
  -216
  -219
  -223
  -227
  -232
  -237
  -242
  -247
  -253
  -260
  -267
  -274
  -282
  -291
Issuance/(repayment) of debt, $m
  106
  112
  119
  129
  138
  148
  157
  165
  174
  183
  191
  200
  208
  217
  225
  234
  244
  253
  263
  273
  284
  296
  307
  320
  333
  347
  362
  377
  394
  411
  429
Issuance/(repurchase) of shares, $m
  196
  64
  66
  69
  71
  72
  73
  74
  74
  74
  73
  72
  70
  69
  67
  65
  62
  60
  58
  55
  53
  50
  48
  45
  42
  40
  37
  35
  32
  30
  27
Cash from financing (excl. dividends), $m  
  299
  176
  185
  198
  209
  220
  230
  239
  248
  257
  264
  272
  278
  286
  292
  299
  306
  313
  321
  328
  337
  346
  355
  365
  375
  387
  399
  412
  426
  441
  456
Total cash flow (excl. dividends), $m
  126
  46
  46
  50
  53
  57
  60
  64
  67
  70
  74
  77
  80
  84
  87
  90
  94
  98
  101
  105
  110
  114
  119
  123
  128
  134
  140
  146
  152
  158
  166
Retained Cash Flow (-), $m
  -152
  -89
  -95
  -103
  -111
  -118
  -126
  -133
  -140
  -146
  -153
  -160
  -167
  -174
  -181
  -188
  -195
  -203
  -211
  -219
  -228
  -237
  -247
  -257
  -267
  -278
  -290
  -303
  -316
  -330
  -344
Prev. year cash balance distribution, $m
 
  96
  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
 
  53
  -50
  -54
  -58
  -61
  -65
  -69
  -72
  -76
  -80
  -83
  -87
  -90
  -94
  -98
  -101
  -105
  -109
  -114
  -118
  -123
  -128
  -133
  -139
  -145
  -151
  -157
  -164
  -171
  -179
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  49
  -42
  -41
  -40
  -38
  -36
  -33
  -31
  -27
  -24
  -21
  -18
  -15
  -13
  -10
  -8
  -7
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  93.3
  87.7
  83.1
  79.1
  75.6
  72.7
  70.1
  67.9
  66.0
  64.3
  62.8
  61.5
  60.3
  59.3
  58.4
  57.7
  57.0
  56.3
  55.8
  55.3
  54.9
  54.5
  54.2
  53.9
  53.6
  53.4
  53.2
  53.0
  52.9
  52.7

Monmouth Real Estate Investment Corporation (MREIC) is a real estate investment trust. It owns, manages, and leases properties to investment-grade tenants on long-term leases. The firm invests in the public equity and real estate markets of the United States. It primarily invests in industrial properties and holds a portfolio of REIT securities. Monmouth Real Estate Investment Corporation was founded in 1968 and is based in Freehold, New Jersey.

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

Valuation Ratios
P/E Ratio 32.6
Price to Sales 11
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 19
Price to Free Cash Flow 31.6
Growth Rates
Sales Growth Rate 21.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 9.5%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 102.3%
Total Debt to Equity 102.3%
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. 5.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 84.2%
Gross Margin - 3 Yr. Avg. 84.1%
EBITDA Margin 62.1%
EBITDA Margin - 3 Yr. Avg. 58.7%
Operating Margin 48.4%
Oper. Margin - 3 Yr. Avg. 47.2%
Pre-Tax Margin 33.7%
Pre-Tax Margin - 3 Yr. Avg. 30.3%
Net Profit Margin 33.7%
Net Profit Margin - 3 Yr. Avg. 32.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 131.3%

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 $95 million for the last fiscal year's total revenue generated by Monmouth Real Estate Investment Cl A. The default revenue input number comes from 2016 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 17.4% 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 8.1%, 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 41.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $10 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 3.5% 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%.

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 978.4%.

Life of production assets of 34.4 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 -10%. 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 - $598 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 69.925 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 $1.1 billion.

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COMPANY NEWS

▶ 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]
▶ How Monmouth R.E. Inv. Corp. (MNR) Stacks Up Against Its Peers   [Dec-12-16 08:46PM  at Insider Monkey]
▶ The Cyber Monday REITs   [07:00AM  at Forbes]
▶ Where's Value in REITs?   [02:33PM  at Barrons.com]
Stock chart of MNR 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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