Intrinsic value of Matrix Service - MTRX

Previous Close

$15.50

  Intrinsic Value

$7.91

stock screener

  Rating & Target

sell

-49%

Previous close

$15.50

 
Intrinsic value

$7.91

 
Up/down potential

-49%

 
Rating

sell

We calculate the intrinsic value of MTRX 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 2017), $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 0.4

 

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, %
  -8.69
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,198
  1,222
  1,250
  1,282
  1,318
  1,358
  1,402
  1,450
  1,502
  1,557
  1,617
  1,681
  1,749
  1,822
  1,899
  1,981
  2,068
  2,160
  2,257
  2,359
  2,468
  2,582
  2,703
  2,830
  2,964
  3,105
  3,254
  3,410
  3,575
  3,748
  3,930
Variable operating expenses, $m
 
  836
  855
  876
  901
  928
  957
  989
  1,024
  1,062
  1,102
  1,134
  1,180
  1,229
  1,281
  1,336
  1,395
  1,457
  1,522
  1,591
  1,665
  1,742
  1,823
  1,909
  1,999
  2,094
  2,195
  2,300
  2,411
  2,528
  2,651
Fixed operating expenses, $m
 
  392
  401
  411
  422
  432
  443
  454
  465
  477
  489
  501
  514
  527
  540
  553
  567
  581
  596
  611
  626
  642
  658
  674
  691
  708
  726
  744
  763
  782
  801
Total operating expenses, $m
  1,193
  1,228
  1,256
  1,287
  1,323
  1,360
  1,400
  1,443
  1,489
  1,539
  1,591
  1,635
  1,694
  1,756
  1,821
  1,889
  1,962
  2,038
  2,118
  2,202
  2,291
  2,384
  2,481
  2,583
  2,690
  2,802
  2,921
  3,044
  3,174
  3,310
  3,452
Operating income, $m
  5
  -5
  -6
  -5
  -4
  -1
  2
  6
  12
  18
  26
  46
  56
  66
  78
  92
  106
  122
  139
  157
  177
  199
  222
  247
  274
  303
  333
  366
  401
  438
  478
EBITDA, $m
  27
  18
  18
  18
  20
  23
  27
  32
  38
  45
  53
  62
  72
  84
  97
  110
  126
  142
  160
  180
  201
  224
  248
  274
  302
  332
  364
  399
  435
  474
  516
Interest expense (income), $m
  2
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  51
  54
Earnings before tax, $m
  2
  -9
  -10
  -10
  -10
  -8
  -5
  -2
  3
  8
  15
  34
  42
  52
  62
  74
  87
  101
  116
  133
  151
  170
  191
  214
  238
  264
  292
  322
  354
  388
  424
Tax expense, $m
  2
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  9
  11
  14
  17
  20
  23
  27
  31
  36
  41
  46
  52
  58
  64
  71
  79
  87
  95
  105
  114
Net income, $m
  0
  -9
  -10
  -10
  -10
  -8
  -5
  -2
  2
  6
  11
  25
  31
  38
  45
  54
  63
  73
  85
  97
  110
  124
  139
  156
  174
  193
  213
  235
  258
  283
  309

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  44
  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
  586
  553
  566
  580
  596
  615
  634
  656
  679
  705
  732
  761
  791
  824
  859
  896
  936
  977
  1,021
  1,068
  1,117
  1,168
  1,223
  1,281
  1,341
  1,405
  1,472
  1,543
  1,617
  1,696
  1,778
Adjusted assets (=assets-cash), $m
  542
  553
  566
  580
  596
  615
  634
  656
  679
  705
  732
  761
  791
  824
  859
  896
  936
  977
  1,021
  1,068
  1,117
  1,168
  1,223
  1,281
  1,341
  1,405
  1,472
  1,543
  1,617
  1,696
  1,778
Revenue / Adjusted assets
  2.210
  2.210
  2.208
  2.210
  2.211
  2.208
  2.211
  2.210
  2.212
  2.209
  2.209
  2.209
  2.211
  2.211
  2.211
  2.211
  2.209
  2.211
  2.211
  2.209
  2.209
  2.211
  2.210
  2.209
  2.210
  2.210
  2.211
  2.210
  2.211
  2.210
  2.210
Average production assets, $m
  106
  108
  110
  113
  116
  120
  123
  128
  132
  137
  142
  148
  154
  160
  167
  174
  182
  190
  199
  208
  217
  227
  238
  249
  261
  273
  286
  300
  315
  330
  346
Working capital, $m
  140
  98
  100
  103
  105
  109
  112
  116
  120
  125
  129
  134
  140
  146
  152
  158
  165
  173
  181
  189
  197
  207
  216
  226
  237
  248
  260
  273
  286
  300
  314
Total debt, $m
  45
  50
  56
  64
  71
  80
  90
  100
  112
  124
  137
  151
  166
  182
  199
  218
  237
  257
  278
  301
  325
  350
  377
  405
  434
  465
  498
  532
  569
  607
  647
Total liabilities, $m
  264
  269
  275
  283
  290
  299
  309
  319
  331
  343
  356
  370
  385
  401
  418
  437
  456
  476
  497
  520
  544
  569
  596
  624
  653
  684
  717
  751
  788
  826
  866
Total equity, $m
  322
  284
  290
  298
  306
  315
  325
  337
  349
  361
  375
  390
  406
  423
  441
  460
  480
  501
  524
  548
  573
  599
  627
  657
  688
  721
  755
  792
  830
  870
  912
Total liabilities and equity, $m
  586
  553
  565
  581
  596
  614
  634
  656
  680
  704
  731
  760
  791
  824
  859
  897
  936
  977
  1,021
  1,068
  1,117
  1,168
  1,223
  1,281
  1,341
  1,405
  1,472
  1,543
  1,618
  1,696
  1,778
Debt-to-equity ratio
  0.140
  0.180
  0.190
  0.210
  0.230
  0.250
  0.280
  0.300
  0.320
  0.340
  0.370
  0.390
  0.410
  0.430
  0.450
  0.470
  0.490
  0.510
  0.530
  0.550
  0.570
  0.580
  0.600
  0.620
  0.630
  0.650
  0.660
  0.670
  0.690
  0.700
  0.710
Adjusted equity ratio
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  -9
  -10
  -10
  -10
  -8
  -5
  -2
  2
  6
  11
  25
  31
  38
  45
  54
  63
  73
  85
  97
  110
  124
  139
  156
  174
  193
  213
  235
  258
  283
  309
Depreciation, amort., depletion, $m
  22
  23
  23
  24
  24
  24
  25
  25
  26
  26
  27
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
Funds from operations, $m
  -66
  14
  13
  13
  14
  17
  20
  24
  28
  32
  38
  41
  47
  55
  64
  73
  83
  94
  106
  119
  134
  149
  165
  183
  202
  222
  244
  267
  292
  319
  347
Change in working capital, $m
  -47
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  -19
  12
  11
  11
  12
  13
  16
  20
  24
  28
  33
  36
  42
  49
  57
  66
  76
  87
  98
  111
  125
  140
  156
  173
  191
  211
  232
  255
  279
  305
  332
Maintenance CAPEX, $m
  0
  -12
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
New CAPEX, $m
  -12
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
Cash from investing activities, $m
  -51
  -14
  -14
  -15
  -15
  -17
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -43
  -45
  -47
  -49
  -52
Free cash flow, $m
  -70
  -1
  -3
  -4
  -4
  -3
  -1
  2
  5
  9
  13
  14
  20
  26
  33
  41
  49
  59
  69
  81
  93
  106
  120
  136
  152
  170
  189
  210
  232
  256
  281
Issuance/(repayment) of debt, $m
  45
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
Issuance/(repurchase) of shares, $m
  -2
  15
  17
  18
  18
  17
  15
  13
  10
  7
  3
  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  
  43
  20
  23
  25
  26
  26
  25
  24
  21
  19
  16
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
Total cash flow (excl. dividends), $m
  -28
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  29
  35
  42
  50
  59
  69
  79
  91
  103
  117
  131
  147
  164
  182
  201
  222
  244
  268
  294
  321
Retained Cash Flow (-), $m
  -5
  -15
  -17
  -18
  -18
  -17
  -15
  -13
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
Prev. year cash balance distribution, $m
 
  44
  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
 
  48
  3
  3
  4
  6
  9
  13
  15
  15
  15
  14
  19
  25
  32
  40
  48
  58
  68
  79
  91
  105
  119
  134
  151
  169
  188
  208
  230
  253
  278
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  46
  3
  3
  3
  5
  7
  9
  9
  9
  8
  7
  8
  10
  11
  12
  12
  13
  13
  12
  12
  11
  10
  9
  8
  7
  5
  4
  4
  3
  2
Current shareholders' claim on cash, %
  100
  96.0
  91.8
  87.6
  83.7
  80.2
  77.3
  75.0
  73.3
  72.2
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8
  71.8

Matrix Service Company provides engineering, fabrication, infrastructure, construction and maintenance services primarily to the oil, gas, power, petrochemical, industrial, mining and minerals markets. The Company's segments include Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial. The Electrical Infrastructure segment primarily includes construction and maintenance services to a range of power generation facilities, such as combined cycle plants, natural gas fired power stations and renewable energy installations. The Oil Gas & Chemical segment includes turnaround activities, plant maintenance services and construction in the downstream petroleum industry. The Storage Solutions segment includes new construction of crude and refined products aboveground storage tanks (ASTs), as well as planned and emergency maintenance services. The Industrial segment includes construction and maintenance work in the iron and steel and mining and minerals industries.

FINANCIAL RATIOS  of  Matrix Service (MTRX)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -21.7
Price to Free Cash Flow -13.3
Growth Rates
Sales Growth Rate -8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 14%
Total Debt to Equity 14%
Interest Coverage 2
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 6.8%
Gross Margin - 3 Yr. Avg. 7.6%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 3.1%
Operating Margin 0.4%
Oper. Margin - 3 Yr. Avg. 1.4%
Pre-Tax Margin 0.2%
Pre-Tax Margin - 3 Yr. Avg. 1.3%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 86.7%
Payout Ratio 0%

MTRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTRX stock intrinsic value calculation we used $1198 million for the last fiscal year's total revenue generated by Matrix Service. The default revenue input number comes from 2017 income statement of Matrix Service. 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 MTRX stock valuation model: a) initial revenue growth rate of 2% 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 4.3%, whose default value for MTRX is calculated based on our internal credit rating of Matrix Service, 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 Matrix Service.
    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 MTRX stock the variable cost ratio is equal to 68.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $382 million in the base year in the intrinsic value calculation for MTRX 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 8.9% for Matrix Service.

Corporate tax rate of 27% is the nominal tax rate for Matrix Service. 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 MTRX 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 MTRX are equal to 8.8%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Matrix Service 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 MTRX is equal to 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 - $322 million for Matrix Service - 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 26.723 million for Matrix Service 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 Matrix Service at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Matrix Service Company to Host Earnings Call   [Nov-07-17 09:00AM  ACCESSWIRE]
▶ Matrix Service posts 1Q profit   [06:17AM  Associated Press]
▶ These 3 Oil Stocks Soared 30% in 1 Month   [Sep-19-17 08:17AM  Motley Fool]
▶ Matrix Service reports 4Q loss   [Sep-06-17 11:57PM  Associated Press]
▶ ETFs with exposure to Matrix Service Co. : August 1, 2017   [Aug-01-17 04:56PM  Capital Cube]
▶ ETFs with exposure to Matrix Service Co. : July 11, 2017   [Jul-11-17 02:49PM  Capital Cube]
▶ ETFs with exposure to Matrix Service Co. : June 30, 2017   [Jun-30-17 03:11PM  Capital Cube]
▶ ETFs with exposure to Matrix Service Co. : June 19, 2017   [Jun-19-17 03:45PM  Capital Cube]
▶ Matrix Service reports 3Q loss   [May-09-17 07:32PM  Associated Press]
▶ Matrix Service posts 2Q profit   [Feb-08-17 06:58PM  Associated Press]
▶ Here is What Hedge Funds Think About Matrix Service Co (MTRX)   [Dec-10-16 01:28PM  at Insider Monkey]
▶ Matrix Service Company Certified by Great Place to Work®   [Oct-13-16 04:05PM  GlobeNewswire]
Financial statements of MTRX
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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