Intrinsic value of MYR Group - MYRG

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$37.89

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$37.89

 
Intrinsic value

$40.85

 
Up/down potential

+8%

 
Rating

hold

 
Value-price divergence* premium content

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

We calculate the intrinsic value of MYRG 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 0.6

 

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, %
  7.53
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  1,142
  1,113
  1,167
  1,223
  1,282
  1,345
  1,411
  1,480
  1,552
  1,628
  1,709
  1,793
  1,881
  1,974
  2,072
  2,175
  2,282
  2,396
  2,515
  2,640
  2,771
  2,909
  3,054
  3,206
  3,366
  3,533
  3,709
  3,894
  4,089
  4,293
  4,507
Variable operating expenses, $m
 
  1,045
  1,095
  1,148
  1,203
  1,262
  1,323
  1,387
  1,455
  1,527
  1,601
  1,675
  1,758
  1,845
  1,936
  2,032
  2,133
  2,239
  2,350
  2,467
  2,590
  2,719
  2,854
  2,996
  3,145
  3,302
  3,467
  3,640
  3,821
  4,012
  4,212
Fixed operating expenses, $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
Total operating expenses, $m
  1,104
  1,045
  1,095
  1,148
  1,203
  1,262
  1,323
  1,387
  1,455
  1,527
  1,601
  1,675
  1,758
  1,845
  1,936
  2,032
  2,133
  2,239
  2,350
  2,467
  2,590
  2,719
  2,854
  2,996
  3,145
  3,302
  3,467
  3,640
  3,821
  4,012
  4,212
Operating income, $m
  39
  68
  72
  75
  79
  83
  88
  92
  97
  102
  107
  117
  123
  129
  136
  142
  149
  157
  165
  173
  181
  190
  200
  210
  220
  231
  243
  255
  268
  281
  295
EBITDA, $m
  78
  104
  109
  114
  119
  125
  131
  138
  145
  152
  159
  167
  175
  184
  193
  202
  213
  223
  234
  246
  258
  271
  284
  298
  313
  329
  345
  363
  381
  400
  420
Interest expense (income), $m
  1
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
Earnings before tax, $m
  38
  68
  71
  75
  78
  82
  86
  90
  94
  99
  103
  113
  118
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  206
  216
  227
  238
  249
  261
  274
Tax expense, $m
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  71
  74
Net income, $m
  21
  50
  52
  54
  57
  60
  63
  66
  69
  72
  76
  83
  86
  90
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
  200

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  24
  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
  574
  508
  533
  558
  586
  614
  644
  676
  709
  744
  780
  819
  859
  902
  946
  993
  1,042
  1,094
  1,148
  1,205
  1,265
  1,328
  1,394
  1,464
  1,537
  1,613
  1,694
  1,778
  1,867
  1,960
  2,058
Adjusted assets (=assets-cash), $m
  550
  508
  533
  558
  586
  614
  644
  676
  709
  744
  780
  819
  859
  902
  946
  993
  1,042
  1,094
  1,148
  1,205
  1,265
  1,328
  1,394
  1,464
  1,537
  1,613
  1,694
  1,778
  1,867
  1,960
  2,058
Revenue / Adjusted assets
  2.076
  2.191
  2.189
  2.192
  2.188
  2.191
  2.191
  2.189
  2.189
  2.188
  2.191
  2.189
  2.190
  2.188
  2.190
  2.190
  2.190
  2.190
  2.191
  2.191
  2.191
  2.191
  2.191
  2.190
  2.190
  2.190
  2.189
  2.190
  2.190
  2.190
  2.190
Average production assets, $m
  169
  173
  181
  190
  199
  208
  219
  229
  241
  252
  265
  278
  292
  306
  321
  337
  354
  371
  390
  409
  430
  451
  473
  497
  522
  548
  575
  604
  634
  665
  699
Working capital, $m
  130
  87
  91
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  178
  187
  196
  206
  216
  227
  238
  250
  263
  276
  289
  304
  319
  335
  352
Total debt, $m
  64
  9
  19
  30
  40
  52
  64
  77
  90
  104
  119
  134
  150
  167
  185
  204
  224
  245
  267
  290
  314
  339
  366
  393
  423
  454
  486
  520
  556
  593
  632
Total liabilities, $m
  310
  204
  214
  225
  235
  247
  259
  272
  285
  299
  314
  329
  345
  362
  380
  399
  419
  440
  462
  485
  509
  534
  561
  588
  618
  649
  681
  715
  751
  788
  827
Total equity, $m
  263
  304
  319
  334
  350
  367
  385
  404
  424
  445
  467
  490
  514
  539
  566
  594
  623
  654
  687
  721
  757
  794
  834
  875
  919
  965
  1,013
  1,063
  1,116
  1,172
  1,231
Total liabilities and equity, $m
  573
  508
  533
  559
  585
  614
  644
  676
  709
  744
  781
  819
  859
  901
  946
  993
  1,042
  1,094
  1,149
  1,206
  1,266
  1,328
  1,395
  1,463
  1,537
  1,614
  1,694
  1,778
  1,867
  1,960
  2,058
Debt-to-equity ratio
  0.243
  0.030
  0.060
  0.090
  0.120
  0.140
  0.170
  0.190
  0.210
  0.230
  0.250
  0.270
  0.290
  0.310
  0.330
  0.340
  0.360
  0.370
  0.390
  0.400
  0.410
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.510
Adjusted equity ratio
  0.435
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  50
  52
  54
  57
  60
  63
  66
  69
  72
  76
  83
  86
  90
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
  200
Depreciation, amort., depletion, $m
  39
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
  93
  98
  103
  108
  113
  119
  125
Funds from operations, $m
  40
  85
  89
  93
  97
  102
  106
  111
  116
  122
  128
  132
  138
  145
  152
  159
  167
  175
  183
  192
  202
  211
  222
  233
  244
  256
  268
  281
  295
  310
  325
Change in working capital, $m
  -14
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
Cash from operations, $m
  54
  87
  85
  89
  93
  97
  101
  106
  111
  116
  121
  126
  132
  138
  144
  151
  159
  166
  174
  183
  191
  201
  210
  221
  231
  243
  255
  267
  280
  294
  308
Maintenance CAPEX, $m
  0
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -119
New CAPEX, $m
  -25
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
Cash from investing activities, $m
  -34
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -64
  -66
  -70
  -73
  -77
  -81
  -84
  -89
  -93
  -98
  -103
  -109
  -114
  -119
  -125
  -132
  -138
  -145
  -152
Free cash flow, $m
  20
  50
  46
  48
  50
  52
  54
  56
  59
  61
  64
  65
  68
  71
  75
  78
  82
  85
  89
  94
  98
  103
  107
  113
  118
  124
  129
  136
  142
  149
  156
Issuance/(repayment) of debt, $m
  58
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
Issuance/(repurchase) of shares, $m
  -95
  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  
  -36
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  37
  39
Total cash flow (excl. dividends), $m
  -16
  60
  56
  58
  60
  63
  66
  69
  72
  75
  78
  81
  84
  88
  93
  97
  101
  106
  111
  117
  122
  128
  134
  140
  147
  154
  162
  170
  178
  186
  195
Retained Cash Flow (-), $m
  67
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
Prev. year cash balance distribution, $m
 
  40
  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
 
  86
  41
  43
  44
  46
  48
  50
  52
  54
  57
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  108
  114
  119
  125
  131
  137
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
 
  82
  37
  37
  36
  36
  35
  34
  33
  31
  30
  27
  26
  24
  22
  20
  18
  16
  15
  13
  11
  9
  8
  6
  5
  4
  3
  3
  2
  1
  1
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

MYR Group Inc., through its subsidiaries, provides electrical construction services in the United States and Canada. It operates through two segments, Transmission and Distribution, and Commercial and Industrial. The Transmission and Distribution segment offers a range of services on electric transmission and distribution networks, and substation facilities, including design, engineering, procurement, construction, upgrade, maintenance, and repair services with primary focus on construction, maintenance, and repair to customers in the electric utility and the renewable energy industries. Its services comprise construction and maintenance of high voltage transmission lines, substations, and lower voltage underground and overhead distribution systems; and storm restoration services in response to hurricane, ice, or other storm related damages. This segment serves as a prime contractor to customers, such as investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners, and other contractors. The Commercial and Industrial segment provides services, such as design, installation, maintenance, and repair of commercial and industrial wiring; and installation of traffic networks, bridge, roadway, and tunnel lighting. This segment offers its services for airports, hospitals, data centers, hotels, stadiums, convention centers, manufacturing plants, processing facilities, waste-water treatment facilities, mining facilities, and transportation control and management systems. It serves general contractors, commercial and industrial facility owners, local governments, and developers. MYR Group Inc. was founded in 1891 and is headquartered in Rolling Meadows, Illinois.

FINANCIAL RATIOS  of  MYR Group (MYRG)

Valuation Ratios
P/E Ratio 29.5
Price to Sales 0.5
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 11.5
Price to Free Cash Flow 21.3
Growth Rates
Sales Growth Rate 7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -46.8%
Cap. Spend. - 3 Yr. Gr. Rate -10.3%
Financial Strength
Quick Ratio 24
Current Ratio 0
LT Debt to Equity 24%
Total Debt to Equity 24.3%
Interest Coverage 39
Management Effectiveness
Return On Assets 3.9%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 6.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.9%
Return On Equity 7.1%
Return On Equity - 3 Yr. Avg. 9.1%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 11.8%
Gross Margin - 3 Yr. Avg. 12.4%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 3.3%
Oper. Margin - 3 Yr. Avg. 4.6%
Pre-Tax Margin 3.3%
Pre-Tax Margin - 3 Yr. Avg. 4.5%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 44.7%
Eff/ Tax Rate - 3 Yr. Avg. 39.9%
Payout Ratio 0%

MYRG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MYRG stock intrinsic value calculation we used $1062 million for the last fiscal year's total revenue generated by MYR Group. The default revenue input number comes from 2016 income statement of MYR Group. 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 MYRG stock valuation model: a) initial revenue growth rate of 4.8% 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 MYRG is calculated based on our internal credit rating of MYR Group, 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 MYR Group.
    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 MYRG stock the variable cost ratio is equal to 93.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MYRG 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 MYR Group.

Corporate tax rate of 27% is the nominal tax rate for MYR Group. 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 MYRG 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 MYRG are equal to 15.5%.

Life of production assets of 5.6 years is the average useful life of capital assets used in MYR Group 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 MYRG is equal to 7.8%. 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 - $330 million for MYR Group - 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 15.388 million for MYR Group 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 MYR Group at the current share price and the inputted number of shares is $0.6 billion.


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COMPANY NEWS

▶ Why MYR Group Inc.'s Shares Plunged 20% Today   [May-04-17 02:49PM  Motley Fool]
▶ MYR misses Street 1Q forecasts   [May-03-17 05:04PM  Associated Press]
▶ Is MYR Group Inc (MYRG) A Good Investment?   [Dec-08-16 04:29PM  at Insider Monkey]
▶ [$$] Three Picks to Play Oil Pipelines   [Aug-04-16 11:14AM  at Barrons.com]
Stock chart of MYRG Financial statements of MYRG Annual reports of MYRG
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