Intrinsic value of Gibraltar Industries - ROCK

Previous Close

$32.55

  Intrinsic Value

$24.84

stock screener

  Rating & Target

sell

-24%

Previous close

$32.55

 
Intrinsic value

$24.84

 
Up/down potential

-24%

 
Rating

sell

We calculate the intrinsic value of ROCK 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 1.0

 

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, %
  -3.17
  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
  1,008
  1,028
  1,052
  1,079
  1,109
  1,143
  1,180
  1,220
  1,263
  1,310
  1,361
  1,414
  1,472
  1,533
  1,598
  1,667
  1,740
  1,817
  1,899
  1,985
  2,076
  2,173
  2,274
  2,381
  2,494
  2,613
  2,738
  2,869
  3,008
  3,153
  3,307
Variable operating expenses, $m
 
  980
  1,002
  1,027
  1,055
  1,086
  1,120
  1,157
  1,198
  1,241
  1,287
  1,307
  1,360
  1,416
  1,476
  1,540
  1,607
  1,679
  1,754
  1,834
  1,918
  2,007
  2,101
  2,200
  2,304
  2,414
  2,529
  2,651
  2,779
  2,913
  3,055
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
  935
  980
  1,002
  1,027
  1,055
  1,086
  1,120
  1,157
  1,198
  1,241
  1,287
  1,307
  1,360
  1,416
  1,476
  1,540
  1,607
  1,679
  1,754
  1,834
  1,918
  2,007
  2,101
  2,200
  2,304
  2,414
  2,529
  2,651
  2,779
  2,913
  3,055
Operating income, $m
  73
  48
  50
  52
  54
  57
  59
  63
  66
  69
  73
  108
  112
  117
  122
  127
  132
  138
  145
  151
  158
  165
  173
  181
  190
  199
  208
  219
  229
  240
  252
EBITDA, $m
  97
  89
  91
  93
  96
  99
  102
  106
  109
  113
  118
  122
  127
  133
  138
  144
  151
  157
  164
  172
  180
  188
  197
  206
  216
  226
  237
  248
  260
  273
  286
Interest expense (income), $m
  14
  14
  15
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  49
  53
  56
  59
  63
  67
  71
  75
  79
Earnings before tax, $m
  50
  34
  35
  36
  38
  39
  41
  43
  45
  48
  50
  83
  86
  89
  92
  95
  98
  102
  106
  110
  114
  119
  124
  129
  134
  140
  146
  152
  158
  165
  173
Tax expense, $m
  16
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
Net income, $m
  34
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  61
  63
  65
  67
  69
  72
  75
  77
  80
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  170
  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
  918
  763
  780
  800
  823
  848
  875
  905
  937
  972
  1,009
  1,049
  1,092
  1,137
  1,185
  1,236
  1,291
  1,348
  1,409
  1,473
  1,540
  1,612
  1,687
  1,766
  1,850
  1,938
  2,031
  2,128
  2,231
  2,339
  2,453
Adjusted assets (=assets-cash), $m
  748
  763
  780
  800
  823
  848
  875
  905
  937
  972
  1,009
  1,049
  1,092
  1,137
  1,185
  1,236
  1,291
  1,348
  1,409
  1,473
  1,540
  1,612
  1,687
  1,766
  1,850
  1,938
  2,031
  2,128
  2,231
  2,339
  2,453
Revenue / Adjusted assets
  1.348
  1.347
  1.349
  1.349
  1.348
  1.348
  1.349
  1.348
  1.348
  1.348
  1.349
  1.348
  1.348
  1.348
  1.349
  1.349
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
  1.348
Average production assets, $m
  231
  235
  241
  247
  254
  262
  270
  279
  289
  300
  312
  324
  337
  351
  366
  382
  398
  416
  435
  455
  476
  498
  521
  545
  571
  598
  627
  657
  689
  722
  757
Working capital, $m
  239
  70
  72
  73
  75
  78
  80
  83
  86
  89
  93
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  205
  214
  225
Total debt, $m
  210
  219
  230
  242
  256
  271
  288
  306
  326
  347
  370
  394
  420
  448
  477
  508
  542
  577
  614
  653
  694
  738
  784
  832
  883
  937
  994
  1,054
  1,116
  1,182
  1,252
Total liabilities, $m
  457
  466
  477
  489
  503
  518
  535
  553
  573
  594
  617
  641
  667
  695
  724
  755
  789
  824
  861
  900
  941
  985
  1,031
  1,079
  1,130
  1,184
  1,241
  1,301
  1,363
  1,429
  1,499
Total equity, $m
  461
  297
  304
  311
  320
  330
  340
  352
  365
  378
  393
  408
  425
  442
  461
  481
  502
  524
  548
  573
  599
  627
  656
  687
  720
  754
  790
  828
  868
  910
  954
Total liabilities and equity, $m
  918
  763
  781
  800
  823
  848
  875
  905
  938
  972
  1,010
  1,049
  1,092
  1,137
  1,185
  1,236
  1,291
  1,348
  1,409
  1,473
  1,540
  1,612
  1,687
  1,766
  1,850
  1,938
  2,031
  2,129
  2,231
  2,339
  2,453
Debt-to-equity ratio
  0.456
  0.740
  0.760
  0.780
  0.800
  0.820
  0.850
  0.870
  0.890
  0.920
  0.940
  0.970
  0.990
  1.010
  1.030
  1.060
  1.080
  1.100
  1.120
  1.140
  1.160
  1.180
  1.190
  1.210
  1.230
  1.240
  1.260
  1.270
  1.290
  1.300
  1.310
Adjusted equity ratio
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  34
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  61
  63
  65
  67
  69
  72
  75
  77
  80
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
Depreciation, amort., depletion, $m
  24
  41
  41
  42
  42
  42
  43
  43
  44
  44
  45
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
Funds from operations, $m
  159
  66
  67
  68
  70
  71
  73
  75
  77
  79
  81
  75
  78
  81
  84
  87
  90
  93
  97
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  154
  160
Change in working capital, $m
  36
  1
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
Cash from operations, $m
  123
  64
  65
  66
  68
  69
  70
  72
  74
  76
  78
  72
  74
  76
  79
  82
  85
  88
  92
  95
  99
  103
  107
  112
  116
  121
  126
  132
  138
  144
  150
Maintenance CAPEX, $m
  0
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
New CAPEX, $m
  -11
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
Cash from investing activities, $m
  -24
  -15
  -16
  -17
  -18
  -20
  -20
  -21
  -23
  -24
  -26
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -58
  -62
  -64
  -68
Free cash flow, $m
  99
  49
  49
  49
  49
  50
  50
  50
  51
  52
  52
  45
  46
  47
  48
  50
  51
  52
  54
  56
  57
  59
  61
  63
  66
  68
  71
  73
  76
  79
  82
Issuance/(repayment) of debt, $m
  0
  9
  11
  12
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  69
Issuance/(repurchase) of shares, $m
  2
  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  
  3
  9
  11
  12
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  69
Total cash flow (excl. dividends), $m
  101
  58
  60
  61
  63
  65
  67
  69
  71
  73
  75
  70
  72
  75
  78
  81
  84
  87
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
Retained Cash Flow (-), $m
  -51
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
Prev. year cash balance distribution, $m
 
  170
  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
 
  222
  53
  54
  54
  55
  56
  57
  58
  59
  61
  54
  56
  57
  59
  61
  63
  65
  67
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  107
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
 
  213
  49
  47
  45
  43
  41
  39
  36
  34
  32
  26
  24
  22
  20
  18
  16
  14
  12
  11
  9
  8
  6
  5
  4
  3
  3
  2
  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

Gibraltar Industries, Inc. is a manufacturer and distributor of building products for industrial, transportation infrastructure, residential housing, renewable energy and resource conservation markets. The Company's segments include Residential Products; Industrial and Infrastructure Products, and Renewable Energy and Conservation. The Residential Products segment services residential housing construction and residential repair and remodeling activity with products including roof and foundation ventilation products, rain dispersion products and roof ventilation accessories. The Industrial and Infrastructure Products segment focuses on a range of markets, including industrial and commercial construction, automotive, airports and energy and power generation markets with products. The Renewable Energy and Conservation segment focuses on the design, engineering, manufacturing and installation of solar racking systems and commercial, institutional and retail greenhouse structures.

FINANCIAL RATIOS  of  Gibraltar Industries (ROCK)

Valuation Ratios
P/E Ratio 30.7
Price to Sales 1
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 9.3
Growth Rates
Sales Growth Rate -3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.3%
Cap. Spend. - 3 Yr. Gr. Rate -6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 45.6%
Total Debt to Equity 45.6%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. -1.2%
Return On Equity 7.8%
Return On Equity - 3 Yr. Avg. -1.8%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 25.3%
Gross Margin - 3 Yr. Avg. 20.2%
EBITDA Margin 8.7%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 1.2%
Pre-Tax Margin 5%
Pre-Tax Margin - 3 Yr. Avg. -0.4%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. -1.3%
Effective Tax Rate 32%
Eff/ Tax Rate - 3 Yr. Avg. 24.5%
Payout Ratio 0%

ROCK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ROCK stock intrinsic value calculation we used $1008 million for the last fiscal year's total revenue generated by Gibraltar Industries. The default revenue input number comes from 2016 income statement of Gibraltar Industries. 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 ROCK 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 ROCK is calculated based on our internal credit rating of Gibraltar Industries, 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 Gibraltar Industries.
    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 ROCK stock the variable cost ratio is equal to 95.4%.

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 ROCK 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 6.7% for Gibraltar Industries.

Corporate tax rate of 27% is the nominal tax rate for Gibraltar Industries. 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 ROCK 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 ROCK are equal to 22.9%.

Life of production assets of 22 years is the average useful life of capital assets used in Gibraltar Industries 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 ROCK is equal to 6.8%. 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 - $461 million for Gibraltar Industries - 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 31.644 million for Gibraltar Industries 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 Gibraltar Industries at the current share price and the inputted number of shares is $1.0 billion.

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COMPANY NEWS

▶ New Strong Sell Stocks for August 25th   [Aug-25-17 06:20AM  Zacks]
▶ New Strong Sell Stocks for July 31st   [Jul-31-17 10:04AM  Zacks]
▶ Gibraltar Industries posts 2Q profit   [Jul-27-17 03:45PM  Associated Press]
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▶ Why Gibraltar Industries Stock Plunged 12%   [May-05-17 03:34PM  Motley Fool]
▶ Gibraltar Industries meets 1Q profit forecasts   [07:38AM  Associated Press]
▶ Housing Starts Decline in March   [Apr-21-17 05:42PM  GuruFocus.com]
▶ Is Atkore International Group Inc (ATKR) a Good Stock to Buy?   [Dec-12-16 06:04PM  at Insider Monkey]
▶ How Gibraltar Industries Inc (ROCK) Stacks Up Against Its Peers   [Dec-10-16 07:06PM  at Insider Monkey]
Financial statements of ROCK
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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