Intrinsic value of Monmouth Real Estate Investment Cl A - MNR

Previous Close

$14.00

  Intrinsic Value

$2.35

stock screener

  Rating & Target

str. sell

-83%

Previous close

$14.00

 
Intrinsic value

$2.35

 
Up/down potential

-83%

 
Rating

str. sell

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
  15.40
  14.36
  13.42
  12.58
  11.82
  11.14
  10.53
  9.97
  9.48
  9.03
  8.63
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
  5.92
  5.83
  5.75
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  114
  132
  150
  171
  192
  215
  239
  264
  290
  318
  346
  376
  407
  440
  473
  508
  545
  582
  621
  662
  705
  749
  795
  843
  893
  945
  999
  1,056
  1,115
  1,177
  1,241
Variable operating expenses, $m
 
  55
  63
  72
  81
  90
  101
  111
  122
  134
  146
  158
  172
  185
  199
  214
  229
  245
  262
  279
  297
  315
  335
  355
  376
  398
  421
  444
  469
  495
  523
Fixed operating expenses, $m
 
  9
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  18
  19
Total operating expenses, $m
  57
  64
  72
  82
  91
  100
  111
  122
  133
  145
  158
  170
  184
  197
  212
  227
  242
  259
  276
  293
  312
  330
  350
  371
  392
  415
  438
  462
  487
  513
  542
Operating income, $m
  57
  67
  78
  89
  101
  114
  128
  142
  157
  173
  189
  206
  224
  242
  261
  281
  302
  323
  346
  369
  393
  418
  445
  472
  501
  530
  561
  594
  627
  663
  700
EBITDA, $m
  90
  111
  128
  147
  166
  187
  208
  231
  255
  280
  306
  333
  361
  390
  421
  452
  485
  519
  555
  592
  631
  671
  712
  756
  801
  848
  898
  949
  1,003
  1,059
  1,118
Interest expense (income), $m
  0
  25
  29
  33
  37
  42
  47
  53
  58
  64
  70
  76
  83
  90
  97
  105
  113
  121
  129
  138
  147
  156
  166
  176
  187
  198
  210
  222
  234
  248
  261
Earnings before tax, $m
  40
  42
  49
  56
  64
  72
  81
  90
  99
  109
  119
  130
  141
  152
  164
  177
  189
  203
  217
  231
  246
  262
  279
  296
  314
  332
  352
  372
  393
  415
  438
Tax expense, $m
  0
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  62
  67
  71
  75
  80
  85
  90
  95
  100
  106
  112
  118
Net income, $m
  40
  31
  36
  41
  47
  53
  59
  65
  72
  79
  87
  95
  103
  111
  120
  129
  138
  148
  158
  169
  180
  191
  203
  216
  229
  242
  257
  271
  287
  303
  320

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
  1,644
  1,881
  2,133
  2,401
  2,685
  2,985
  3,299
  3,628
  3,972
  4,330
  4,704
  5,092
  5,497
  5,917
  6,353
  6,807
  7,278
  7,769
  8,278
  8,809
  9,360
  9,935
  10,533
  11,157
  11,808
  12,486
  13,194
  13,934
  14,706
  15,514
Adjusted assets (=assets-cash), $m
  1,433
  1,644
  1,881
  2,133
  2,401
  2,685
  2,985
  3,299
  3,628
  3,972
  4,330
  4,704
  5,092
  5,497
  5,917
  6,353
  6,807
  7,278
  7,769
  8,278
  8,809
  9,360
  9,935
  10,533
  11,157
  11,808
  12,486
  13,194
  13,934
  14,706
  15,514
Revenue / Adjusted assets
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
Average production assets, $m
  1,152
  1,329
  1,520
  1,724
  1,941
  2,170
  2,412
  2,666
  2,931
  3,209
  3,499
  3,801
  4,115
  4,442
  4,781
  5,134
  5,501
  5,882
  6,278
  6,690
  7,118
  7,564
  8,028
  8,512
  9,016
  9,541
  10,090
  10,662
  11,260
  11,884
  12,536
Working capital, $m
  0
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -79
  -83
  -88
  -93
  -98
  -104
  -109
Total debt, $m
  711
  818
  938
  1,067
  1,203
  1,348
  1,500
  1,660
  1,828
  2,003
  2,185
  2,375
  2,573
  2,779
  2,993
  3,215
  3,446
  3,686
  3,935
  4,195
  4,465
  4,745
  5,038
  5,343
  5,660
  5,991
  6,336
  6,697
  7,073
  7,467
  7,877
Total liabilities, $m
  730
  837
  957
  1,086
  1,222
  1,367
  1,519
  1,679
  1,847
  2,022
  2,204
  2,394
  2,592
  2,798
  3,012
  3,234
  3,465
  3,705
  3,954
  4,214
  4,484
  4,764
  5,057
  5,362
  5,679
  6,010
  6,355
  6,716
  7,092
  7,486
  7,896
Total equity, $m
  713
  807
  923
  1,047
  1,179
  1,319
  1,465
  1,620
  1,781
  1,950
  2,126
  2,309
  2,500
  2,699
  2,905
  3,119
  3,342
  3,574
  3,814
  4,065
  4,325
  4,596
  4,878
  5,172
  5,478
  5,798
  6,131
  6,478
  6,842
  7,221
  7,617
Total liabilities and equity, $m
  1,443
  1,644
  1,880
  2,133
  2,401
  2,686
  2,984
  3,299
  3,628
  3,972
  4,330
  4,703
  5,092
  5,497
  5,917
  6,353
  6,807
  7,279
  7,768
  8,279
  8,809
  9,360
  9,935
  10,534
  11,157
  11,808
  12,486
  13,194
  13,934
  14,707
  15,513
Debt-to-equity ratio
  0.997
  1.010
  1.020
  1.020
  1.020
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
  1.030
Adjusted equity ratio
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491
  0.491

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  40
  31
  36
  41
  47
  53
  59
  65
  72
  79
  87
  95
  103
  111
  120
  129
  138
  148
  158
  169
  180
  191
  203
  216
  229
  242
  257
  271
  287
  303
  320
Depreciation, amort., depletion, $m
  33
  44
  51
  57
  65
  72
  80
  89
  98
  107
  117
  127
  137
  148
  159
  171
  183
  196
  209
  223
  237
  252
  268
  284
  301
  318
  336
  355
  375
  396
  418
Funds from operations, $m
  77
  75
  86
  99
  111
  125
  139
  154
  170
  186
  203
  221
  240
  259
  279
  300
  322
  344
  368
  392
  417
  444
  471
  500
  529
  561
  593
  627
  662
  699
  738
Change in working capital, $m
  3
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
Cash from operations, $m
  74
  77
  88
  100
  113
  127
  141
  156
  172
  189
  206
  224
  243
  262
  282
  303
  325
  347
  371
  395
  421
  447
  475
  504
  534
  565
  598
  632
  667
  705
  744
Maintenance CAPEX, $m
  0
  -38
  -44
  -51
  -57
  -65
  -72
  -80
  -89
  -98
  -107
  -117
  -127
  -137
  -148
  -159
  -171
  -183
  -196
  -209
  -223
  -237
  -252
  -268
  -284
  -301
  -318
  -336
  -355
  -375
  -396
New CAPEX, $m
  -5
  -177
  -191
  -204
  -217
  -229
  -242
  -254
  -266
  -278
  -290
  -302
  -314
  -327
  -339
  -353
  -367
  -381
  -396
  -412
  -428
  -446
  -464
  -484
  -504
  -526
  -548
  -572
  -598
  -624
  -652
Cash from investing activities, $m
  -339
  -215
  -235
  -255
  -274
  -294
  -314
  -334
  -355
  -376
  -397
  -419
  -441
  -464
  -487
  -512
  -538
  -564
  -592
  -621
  -651
  -683
  -716
  -752
  -788
  -827
  -866
  -908
  -953
  -999
  -1,048
Free cash flow, $m
  -265
  -139
  -147
  -154
  -161
  -167
  -173
  -178
  -182
  -187
  -191
  -195
  -198
  -202
  -205
  -209
  -213
  -217
  -221
  -226
  -231
  -236
  -241
  -247
  -254
  -261
  -269
  -277
  -286
  -295
  -305
Issuance/(repayment) of debt, $m
  155
  107
  120
  128
  137
  145
  152
  160
  167
  175
  183
  190
  198
  206
  214
  222
  231
  240
  249
  259
  270
  281
  292
  305
  317
  331
  345
  360
  376
  393
  411
Issuance/(repurchase) of shares, $m
  42
  74
  80
  83
  85
  87
  88
  89
  89
  89
  89
  89
  88
  87
  86
  86
  84
  83
  82
  81
  80
  80
  79
  78
  77
  77
  77
  76
  76
  76
  76
Cash from financing (excl. dividends), $m  
  231
  181
  200
  211
  222
  232
  240
  249
  256
  264
  272
  279
  286
  293
  300
  308
  315
  323
  331
  340
  350
  361
  371
  383
  394
  408
  422
  436
  452
  469
  487
Total cash flow (excl. dividends), $m
  -35
  42
  53
  57
  61
  64
  68
  71
  74
  78
  81
  84
  88
  91
  95
  99
  102
  107
  111
  115
  120
  125
  130
  135
  141
  147
  153
  160
  167
  175
  182
Retained Cash Flow (-), $m
  -115
  -104
  -116
  -124
  -132
  -139
  -147
  -154
  -162
  -169
  -176
  -183
  -191
  -198
  -206
  -214
  -223
  -232
  -241
  -250
  -260
  -271
  -282
  -294
  -306
  -319
  -333
  -348
  -363
  -379
  -396
Prev. year cash balance distribution, $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
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
  -63
  -67
  -71
  -75
  -79
  -83
  -87
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -120
  -125
  -130
  -135
  -141
  -146
  -152
  -159
  -165
  -172
  -180
  -188
  -196
  -205
  -214
Discount rate, %
 
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.24
  23.35
  24.52
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.50
  36.22
PV of cash for distribution, $m
 
  -49
  -52
  -51
  -48
  -45
  -42
  -38
  -34
  -30
  -26
  -23
  -19
  -16
  -13
  -10
  -8
  -6
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  93.4
  87.6
  82.6
  78.3
  74.6
  71.4
  68.6
  66.2
  64.0
  62.1
  60.4
  58.9
  57.6
  56.4
  55.3
  54.3
  53.4
  52.6
  51.8
  51.1
  50.5
  49.9
  49.4
  48.9
  48.5
  48.0
  47.6
  47.3
  46.9
  46.6

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 26.5
Price to Sales 9.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 14.3
Price to Free Cash Flow 15.3
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 15.4% 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 8.8%, 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 42.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9 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 1010.1%.

Life of production assets of 34.9 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 -8.8%. 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 - $713 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 75.843 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 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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