Intrinsic value of Roadrunner Transportation Systems - RRTS

Previous Close

$7.57

  Intrinsic Value

$31.67

stock screener

  Rating & Target

str. buy

+318%

  Value-price divergence*

+10%

Previous close

$7.57

 
Intrinsic value

$31.67

 
Up/down potential

+318%

 
Rating

str. buy

 
Value-price divergence*

+10%

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

We calculate the intrinsic value of RRTS 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 2015), $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 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2015(a)
   2016
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.51
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
Revenue, $m
  1,995
  2,135
  2,280
  2,431
  2,588
  2,751
  2,921
  3,098
  3,283
  3,475
  3,676
  3,885
  4,104
  4,332
  4,571
  4,820
  5,081
  5,354
  5,640
  5,939
  6,252
  6,579
  6,923
  7,282
  7,660
  8,055
  8,469
  8,903
  9,359
  9,837
  10,338
Variable operating expenses, $m
 
  2,021
  2,154
  2,292
  2,435
  2,585
  2,740
  2,902
  3,071
  3,247
  3,430
  3,553
  3,752
  3,961
  4,179
  4,408
  4,646
  4,896
  5,157
  5,430
  5,716
  6,016
  6,330
  6,659
  7,004
  7,365
  7,744
  8,141
  8,557
  8,994
  9,452
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
  1,898
  2,021
  2,154
  2,292
  2,435
  2,585
  2,740
  2,902
  3,071
  3,247
  3,430
  3,553
  3,752
  3,961
  4,179
  4,408
  4,646
  4,896
  5,157
  5,430
  5,716
  6,016
  6,330
  6,659
  7,004
  7,365
  7,744
  8,141
  8,557
  8,994
  9,452
Operating income, $m
  97
  114
  126
  139
  153
  166
  181
  196
  212
  228
  246
  333
  351
  371
  391
  413
  435
  459
  483
  509
  535
  563
  593
  624
  656
  690
  725
  762
  801
  842
  885
EBITDA, $m
  132
  193
  206
  220
  234
  249
  264
  280
  297
  314
  332
  351
  371
  391
  413
  435
  459
  484
  509
  536
  565
  594
  625
  658
  692
  728
  765
  804
  845
  889
  934
Interest expense (income), $m
  17
  17
  18
  20
  22
  25
  27
  29
  32
  34
  37
  39
  42
  45
  48
  52
  55
  59
  62
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  123
Earnings before tax, $m
  77
  97
  108
  119
  130
  142
  154
  167
  180
  194
  209
  293
  309
  326
  343
  361
  380
  400
  421
  442
  465
  489
  514
  540
  567
  596
  626
  658
  691
  725
  762
Tax expense, $m
  29
  26
  29
  32
  35
  38
  42
  45
  49
  52
  56
  79
  83
  88
  93
  98
  103
  108
  114
  119
  126
  132
  139
  146
  153
  161
  169
  178
  187
  196
  206
Net income, $m
  48
  71
  79
  87
  95
  104
  113
  122
  132
  142
  153
  214
  226
  238
  250
  264
  277
  292
  307
  323
  340
  357
  375
  394
  414
  435
  457
  480
  504
  530
  556

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  1,320
  1,403
  1,498
  1,597
  1,700
  1,808
  1,919
  2,036
  2,157
  2,283
  2,415
  2,553
  2,696
  2,846
  3,003
  3,167
  3,339
  3,518
  3,705
  3,902
  4,107
  4,323
  4,548
  4,785
  5,033
  5,292
  5,564
  5,850
  6,149
  6,463
  6,792
Adjusted assets (=assets-cash), $m
  1,311
  1,403
  1,498
  1,597
  1,700
  1,808
  1,919
  2,036
  2,157
  2,283
  2,415
  2,553
  2,696
  2,846
  3,003
  3,167
  3,339
  3,518
  3,705
  3,902
  4,107
  4,323
  4,548
  4,785
  5,033
  5,292
  5,564
  5,850
  6,149
  6,463
  6,792
Revenue / Adjusted assets
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
Average production assets, $m
  250
  267
  285
  304
  323
  344
  365
  387
  410
  434
  459
  486
  513
  542
  571
  603
  635
  669
  705
  742
  781
  822
  865
  910
  957
  1,007
  1,059
  1,113
  1,170
  1,230
  1,292
Working capital, $m
  180
  199
  212
  226
  241
  256
  272
  288
  305
  323
  342
  361
  382
  403
  425
  448
  473
  498
  524
  552
  581
  612
  644
  677
  712
  749
  788
  828
  870
  915
  961
Total debt, $m
  433
  472
  523
  576
  631
  688
  747
  809
  873
  941
  1,011
  1,084
  1,160
  1,240
  1,324
  1,411
  1,502
  1,597
  1,697
  1,802
  1,911
  2,026
  2,146
  2,272
  2,403
  2,541
  2,686
  2,838
  2,997
  3,164
  3,339
Total liabilities, $m
  706
  746
  797
  850
  905
  962
  1,021
  1,083
  1,147
  1,215
  1,285
  1,358
  1,434
  1,514
  1,598
  1,685
  1,776
  1,871
  1,971
  2,076
  2,185
  2,300
  2,420
  2,546
  2,677
  2,815
  2,960
  3,112
  3,271
  3,438
  3,613
Total equity, $m
  613
  656
  701
  747
  796
  846
  898
  953
  1,009
  1,069
  1,130
  1,195
  1,262
  1,332
  1,406
  1,482
  1,562
  1,646
  1,734
  1,826
  1,922
  2,023
  2,129
  2,239
  2,355
  2,477
  2,604
  2,738
  2,878
  3,025
  3,179
Total liabilities and equity, $m
  1,319
  1,402
  1,498
  1,597
  1,701
  1,808
  1,919
  2,036
  2,156
  2,284
  2,415
  2,553
  2,696
  2,846
  3,004
  3,167
  3,338
  3,517
  3,705
  3,902
  4,107
  4,323
  4,549
  4,785
  5,032
  5,292
  5,564
  5,850
  6,149
  6,463
  6,792
Debt-to-equity ratio
  0.706
  0.720
  0.750
  0.770
  0.790
  0.810
  0.830
  0.850
  0.870
  0.880
  0.890
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  0.990
  1.000
  1.010
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
Adjusted equity ratio
  0.461
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468
  0.468

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48
  71
  79
  87
  95
  104
  113
  122
  132
  142
  153
  214
  226
  238
  250
  264
  277
  292
  307
  323
  340
  357
  375
  394
  414
  435
  457
  480
  504
  530
  556
Depreciation, amort., depletion, $m
  35
  79
  80
  81
  81
  82
  83
  84
  85
  85
  86
  18
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
Funds from operations, $m
  49
  150
  158
  167
  176
  186
  195
  206
  216
  227
  239
  232
  245
  258
  272
  286
  301
  317
  334
  351
  369
  388
  408
  428
  450
  473
  497
  522
  548
  576
  605
Change in working capital, $m
  -24
  13
  13
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  39
  40
  42
  44
  47
Cash from operations, $m
  73
  137
  145
  153
  162
  170
  180
  189
  199
  209
  220
  213
  225
  237
  250
  263
  277
  292
  307
  323
  340
  357
  376
  395
  415
  436
  458
  482
  506
  531
  558
Maintenance CAPEX, $m
  0
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
New CAPEX, $m
  -55
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
Cash from investing activities, $m
  -82
  -26
  -28
  -30
  -31
  -32
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -81
  -85
  -90
  -94
  -99
  -104
  -109
Free cash flow, $m
  -9
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  169
  179
  189
  200
  210
  222
  234
  246
  259
  273
  287
  302
  317
  334
  351
  369
  387
  407
  428
  449
Issuance/(repayment) of debt, $m
  8
  48
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
Issuance/(repurchase) of shares, $m
  3
  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  
  6
  48
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
Total cash flow (excl. dividends), $m
  -3
  159
  168
  176
  185
  195
  205
  215
  226
  237
  249
  243
  255
  269
  283
  298
  313
  329
  346
  364
  382
  402
  422
  443
  466
  489
  514
  539
  566
  595
  624
Retained Cash Flow (-), $m
  -54
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -127
  -134
  -140
  -147
  -154
Prev. year cash balance distribution, $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 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
 
  116
  123
  130
  137
  145
  153
  161
  169
  178
  187
  178
  188
  199
  210
  221
  233
  245
  258
  272
  286
  301
  316
  333
  350
  367
  386
  406
  426
  448
  470
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  108
  107
  104
  100
  96
  91
  86
  80
  73
  67
  54
  48
  43
  37
  32
  26
  22
  18
  14
  11
  8
  6
  5
  3
  2
  2
  1
  1
  0
  0
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

Roadrunner Transportation Systems, Inc. (RRTS) is an asset-light transportation and logistics service provider. The Company offers a suite of global supply chain solutions, including truckload logistics (TL), customized and expedited less-than-truckload (LTL), intermodal solutions (transporting a shipment by over one mode, primarily through rail and truck), freight consolidation, inventory management, expedited services, air freight, international freight forwarding, customs brokerage and transportation management solutions. The Company operates through three segments: Truckload Logistics, Less-than-Truckload and Global Solutions. The Company utilizes a third-party network of transportation providers, consisting of independent contractors (ICs) and purchased power providers, to serve a diverse customer base. It primarily focuses on small to mid-size shippers.

FINANCIAL RATIOS  of  Roadrunner Transportation Systems (RRTS)

Valuation Ratios
P/E Ratio 6
Price to Sales 0.1
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 4
Price to Free Cash Flow 16.1
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.2%
Cap. Spend. - 3 Yr. Gr. Rate 29.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 68.2%
Total Debt to Equity 70.6%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 34.1%
Gross Margin - 3 Yr. Avg. 31.9%
EBITDA Margin 6.5%
EBITDA Margin - 3 Yr. Avg. 6.8%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 37.7%
Eff/ Tax Rate - 3 Yr. Avg. 36.9%
Payout Ratio 0%

RRTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RRTS stock intrinsic value calculation we used $1995 million for the last fiscal year's total revenue generated by Roadrunner Transportation Systems. The default revenue input number comes from 2015 income statement of Roadrunner Transportation Systems. 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 RRTS stock valuation model: a) initial revenue growth rate of 7% 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 7%, whose default value for RRTS is calculated based on our internal credit rating of Roadrunner Transportation Systems, 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 Roadrunner Transportation Systems.
    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 RRTS stock the variable cost ratio is equal to 94.9%.

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 RRTS 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 3.9% for Roadrunner Transportation Systems.

Corporate tax rate of 27% is the nominal tax rate for Roadrunner Transportation Systems. 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 RRTS 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 RRTS are equal to 12.5%.

Life of production assets of 26.6 years is the average useful life of capital assets used in Roadrunner Transportation Systems 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 RRTS is equal to 9.3%. 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 - $613 million for Roadrunner Transportation Systems - 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 39.357 million for Roadrunner Transportation Systems 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 Roadrunner Transportation Systems at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Roadrunner sells subsidiary to N.Y.C.-based Quick International Courier for $95M   [Aug-17-17 01:00PM  American City Business Journals]
▶ LD Micro Index Reconstitution as of August 1, 2017   [Aug-01-17 09:40AM  ACCESSWIRE]
Financial statements of RRTS
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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