Intrinsic value of U S Concrete - USCR

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$63.00

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$63.00

 
Intrinsic value

$109.51

 
Up/down potential

+74%

 
Rating

str. buy

 
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 USCR 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, %
  19.79
  20.80
  19.22
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
Revenue, $m
  1,168
  1,411
  1,682
  1,982
  2,309
  2,664
  3,045
  3,453
  3,887
  4,346
  4,829
  5,336
  5,868
  6,423
  7,002
  7,605
  8,233
  8,886
  9,564
  10,269
  11,002
  11,763
  12,555
  13,378
  14,234
  15,125
  16,053
  17,019
  18,027
  19,077
  20,173
Variable operating expenses, $m
 
  1,298
  1,545
  1,818
  2,116
  2,439
  2,786
  3,158
  3,553
  3,970
  4,411
  4,859
  5,343
  5,849
  6,376
  6,925
  7,497
  8,091
  8,709
  9,351
  10,018
  10,712
  11,432
  12,182
  12,962
  13,773
  14,618
  15,498
  16,415
  17,372
  18,370
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
  1,093
  1,298
  1,545
  1,818
  2,116
  2,439
  2,786
  3,158
  3,553
  3,970
  4,411
  4,859
  5,343
  5,849
  6,376
  6,925
  7,497
  8,091
  8,709
  9,351
  10,018
  10,712
  11,432
  12,182
  12,962
  13,773
  14,618
  15,498
  16,415
  17,372
  18,370
Operating income, $m
  75
  113
  137
  164
  193
  225
  259
  295
  334
  375
  418
  477
  525
  574
  626
  680
  736
  794
  855
  918
  983
  1,051
  1,122
  1,196
  1,272
  1,352
  1,435
  1,521
  1,611
  1,705
  1,803
EBITDA, $m
  130
  178
  212
  250
  291
  336
  384
  435
  490
  548
  609
  672
  739
  809
  882
  958
  1,038
  1,120
  1,205
  1,294
  1,386
  1,482
  1,582
  1,686
  1,794
  1,906
  2,023
  2,145
  2,272
  2,404
  2,542
Interest expense (income), $m
  25
  30
  40
  52
  65
  80
  95
  112
  130
  148
  168
  190
  212
  235
  259
  284
  311
  338
  367
  396
  427
  459
  492
  527
  563
  600
  639
  679
  722
  765
  811
Earnings before tax, $m
  31
  83
  97
  112
  128
  145
  164
  184
  205
  227
  250
  287
  313
  339
  367
  395
  425
  456
  488
  522
  556
  593
  630
  669
  710
  752
  796
  842
  890
  940
  992
Tax expense, $m
  21
  22
  26
  30
  35
  39
  44
  50
  55
  61
  67
  78
  84
  92
  99
  107
  115
  123
  132
  141
  150
  160
  170
  181
  192
  203
  215
  227
  240
  254
  268
Net income, $m
  9
  61
  71
  81
  93
  106
  120
  134
  149
  165
  182
  210
  228
  248
  268
  289
  310
  333
  356
  381
  406
  433
  460
  488
  518
  549
  581
  615
  650
  686
  724

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  76
  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
  945
  1,050
  1,252
  1,474
  1,718
  1,982
  2,266
  2,569
  2,892
  3,233
  3,593
  3,971
  4,366
  4,779
  5,210
  5,659
  6,126
  6,611
  7,116
  7,641
  8,186
  8,752
  9,341
  9,954
  10,591
  11,254
  11,944
  12,663
  13,413
  14,194
  15,010
Adjusted assets (=assets-cash), $m
  869
  1,050
  1,252
  1,474
  1,718
  1,982
  2,266
  2,569
  2,892
  3,233
  3,593
  3,971
  4,366
  4,779
  5,210
  5,659
  6,126
  6,611
  7,116
  7,641
  8,186
  8,752
  9,341
  9,954
  10,591
  11,254
  11,944
  12,663
  13,413
  14,194
  15,010
Revenue / Adjusted assets
  1.344
  1.344
  1.343
  1.345
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
  1.344
Average production assets, $m
  407
  491
  585
  690
  803
  927
  1,060
  1,202
  1,353
  1,512
  1,680
  1,857
  2,042
  2,235
  2,437
  2,647
  2,865
  3,092
  3,328
  3,574
  3,829
  4,094
  4,369
  4,655
  4,953
  5,264
  5,586
  5,923
  6,273
  6,639
  7,020
Working capital, $m
  71
  14
  17
  20
  23
  27
  30
  35
  39
  43
  48
  53
  59
  64
  70
  76
  82
  89
  96
  103
  110
  118
  126
  134
  142
  151
  161
  170
  180
  191
  202
Total debt, $m
  449
  585
  757
  946
  1,153
  1,378
  1,619
  1,877
  2,151
  2,441
  2,747
  3,068
  3,404
  3,755
  4,121
  4,503
  4,900
  5,313
  5,742
  6,188
  6,651
  7,132
  7,633
  8,154
  8,695
  9,259
  9,845
  10,457
  11,094
  11,758
  12,451
Total liabilities, $m
  757
  892
  1,064
  1,253
  1,460
  1,685
  1,926
  2,184
  2,458
  2,748
  3,054
  3,375
  3,711
  4,062
  4,428
  4,810
  5,207
  5,620
  6,049
  6,495
  6,958
  7,439
  7,940
  8,461
  9,002
  9,566
  10,152
  10,764
  11,401
  12,065
  12,758
Total equity, $m
  189
  157
  188
  221
  258
  297
  340
  385
  434
  485
  539
  596
  655
  717
  781
  849
  919
  992
  1,067
  1,146
  1,228
  1,313
  1,401
  1,493
  1,589
  1,688
  1,792
  1,899
  2,012
  2,129
  2,251
Total liabilities and equity, $m
  946
  1,049
  1,252
  1,474
  1,718
  1,982
  2,266
  2,569
  2,892
  3,233
  3,593
  3,971
  4,366
  4,779
  5,209
  5,659
  6,126
  6,612
  7,116
  7,641
  8,186
  8,752
  9,341
  9,954
  10,591
  11,254
  11,944
  12,663
  13,413
  14,194
  15,009
Debt-to-equity ratio
  2.376
  3.720
  4.030
  4.280
  4.480
  4.630
  4.760
  4.870
  4.960
  5.030
  5.100
  5.150
  5.200
  5.240
  5.270
  5.300
  5.330
  5.360
  5.380
  5.400
  5.420
  5.430
  5.450
  5.460
  5.470
  5.480
  5.500
  5.510
  5.510
  5.520
  5.530
Adjusted equity ratio
  0.130
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  61
  71
  81
  93
  106
  120
  134
  149
  165
  182
  210
  228
  248
  268
  289
  310
  333
  356
  381
  406
  433
  460
  488
  518
  549
  581
  615
  650
  686
  724
Depreciation, amort., depletion, $m
  55
  65
  75
  86
  98
  111
  125
  140
  156
  172
  190
  195
  215
  235
  256
  279
  302
  325
  350
  376
  403
  431
  460
  490
  521
  554
  588
  623
  660
  699
  739
Funds from operations, $m
  99
  126
  145
  167
  191
  217
  244
  274
  305
  338
  373
  405
  443
  483
  524
  567
  612
  659
  707
  757
  809
  863
  920
  979
  1,040
  1,103
  1,169
  1,238
  1,310
  1,385
  1,463
Change in working capital, $m
  -13
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
Cash from operations, $m
  112
  185
  143
  164
  188
  213
  241
  270
  301
  333
  368
  400
  438
  477
  518
  561
  606
  652
  700
  750
  802
  856
  912
  970
  1,031
  1,094
  1,160
  1,228
  1,300
  1,374
  1,452
Maintenance CAPEX, $m
  0
  -43
  -52
  -62
  -73
  -85
  -98
  -112
  -126
  -142
  -159
  -177
  -195
  -215
  -235
  -256
  -279
  -302
  -325
  -350
  -376
  -403
  -431
  -460
  -490
  -521
  -554
  -588
  -623
  -660
  -699
New CAPEX, $m
  -40
  -85
  -94
  -104
  -114
  -123
  -133
  -142
  -151
  -160
  -168
  -177
  -185
  -193
  -202
  -210
  -218
  -227
  -236
  -245
  -255
  -265
  -275
  -286
  -298
  -310
  -323
  -336
  -351
  -366
  -381
Cash from investing activities, $m
  -163
  -128
  -146
  -166
  -187
  -208
  -231
  -254
  -277
  -302
  -327
  -354
  -380
  -408
  -437
  -466
  -497
  -529
  -561
  -595
  -631
  -668
  -706
  -746
  -788
  -831
  -877
  -924
  -974
  -1,026
  -1,080
Free cash flow, $m
  -51
  57
  -3
  -1
  1
  5
  10
  16
  23
  31
  40
  47
  58
  69
  82
  95
  109
  123
  138
  154
  171
  188
  206
  224
  243
  263
  283
  304
  326
  348
  372
Issuance/(repayment) of debt, $m
  137
  153
  172
  189
  207
  224
  241
  258
  274
  290
  306
  321
  336
  351
  366
  381
  397
  413
  429
  446
  463
  482
  501
  521
  542
  564
  587
  611
  637
  664
  693
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  
  122
  153
  172
  189
  207
  224
  241
  258
  274
  290
  306
  321
  336
  351
  366
  381
  397
  413
  429
  446
  463
  482
  501
  521
  542
  564
  587
  611
  637
  664
  693
Total cash flow (excl. dividends), $m
  72
  211
  168
  188
  208
  230
  252
  274
  298
  321
  346
  368
  394
  420
  448
  476
  506
  536
  568
  600
  634
  669
  706
  744
  784
  826
  870
  915
  963
  1,013
  1,065
Retained Cash Flow (-), $m
  -55
  -27
  -30
  -33
  -37
  -40
  -43
  -46
  -48
  -51
  -54
  -57
  -59
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -88
  -92
  -96
  -99
  -104
  -108
  -112
  -117
  -122
Prev. year cash balance distribution, $m
 
  59
  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
 
  242
  138
  154
  172
  190
  209
  229
  249
  270
  292
  311
  334
  358
  383
  409
  436
  463
  492
  522
  552
  584
  618
  653
  689
  727
  766
  807
  851
  896
  943
Discount rate, %
 
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  225
  118
  121
  123
  122
  120
  116
  111
  104
  96
  86
  77
  68
  59
  50
  42
  34
  27
  21
  16
  12
  9
  6
  4
  3
  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

U.S. Concrete, Inc., through its subsidiaries, produces and sells ready-mixed concrete, aggregates, and concrete-related products and services for the construction industry in the United States. It operates through two segments, Ready-Mixed Concrete and Aggregate Products. The Ready-Mixed Concrete segment is involved in the formulation, preparation, and delivery of ready-mixed concrete to customers’ job sites; and the provision of various services that include the formulation of mixtures for specific design uses, on-site and lab-based product quality control, and customized delivery programs. The Aggregate Products segment offers crushed stone, sand, and gravel for use in commercial, industrial, and public works projects. The company also engages in the operation of building materials stores; provision of concrete blocks, lime slurry, and Aridus rapid-drying concrete technology; sale of brokered products; hauling and recycled aggregates operation activities; and operation of drum mixer trucks, as well as transfer trucks for transporting cement and aggregates. It primarily serves concrete sub-contractors, general contractors, governmental agencies, property owners and developers, architects, engineers, and home builders in north and west Texas, California, New Jersey, New York, Washington, D.C., and Oklahoma. U.S. Concrete, Inc. was incorporated in 1997 and is headquartered in Euless, Texas.

FINANCIAL RATIOS  of  U S Concrete (USCR)

Valuation Ratios
P/E Ratio 109.9
Price to Sales 0.8
Price to Book 5.2
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 13.7
Growth Rates
Sales Growth Rate 19.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 60%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 228.6%
Total Debt to Equity 237.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital 1.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity 5.6%
Return On Equity - 3 Yr. Avg. 8%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 21.1%
Gross Margin - 3 Yr. Avg. 20.2%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 67.7%
Eff/ Tax Rate - 3 Yr. Avg. 17%
Payout Ratio 0%

USCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USCR stock intrinsic value calculation we used $1168 million for the last fiscal year's total revenue generated by U S Concrete. The default revenue input number comes from 2016 income statement of U S Concrete. 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 USCR stock valuation model: a) initial revenue growth rate of 20.8% 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 7.6%, whose default value for USCR is calculated based on our internal credit rating of U S Concrete, 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 U S Concrete.
    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 USCR stock the variable cost ratio is equal to 92.2%.

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 USCR 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 6.9% for U S Concrete.

Corporate tax rate of 27% is the nominal tax rate for U S Concrete. 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 USCR 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 USCR are equal to 34.8%.

Life of production assets of 9.5 years is the average useful life of capital assets used in U S Concrete 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 USCR is equal to 1%. 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 - $189 million for U S Concrete - 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 16.228 million for U S Concrete 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 U S Concrete at the current share price and the inputted number of shares is $1.0 billion.


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COMPANY NEWS

▶ U.S. Concrete Announces Personnel Changes   [04:57PM  Marketwired]
▶ U.S. Concrete wants in on Trump's wall   [Jan-26-17 08:25PM  at bizjournals.com]
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