Intrinsic value of U.S. Lime&Minerals - USLM

Previous Close

$94.76

  Intrinsic Value

$95.20

stock screener

  Rating & Target

hold

0%

  Value-price divergence*

+115%

Previous close

$94.76

 
Intrinsic value

$95.20

 
Up/down potential

0%

 
Rating

hold

 
Value-price divergence*

+115%

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

We calculate the intrinsic value of USLM 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 0.5

 

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, %
  6.11
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.80
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
Revenue, $m
  139
  156
  174
  192
  212
  232
  254
  276
  299
  323
  348
  374
  401
  429
  459
  489
  520
  553
  588
  623
  660
  699
  739
  782
  826
  872
  920
  970
  1,022
  1,077
  1,135
Variable operating expenses, $m
 
  79
  87
  97
  107
  117
  128
  139
  151
  163
  175
  189
  202
  216
  231
  246
  262
  279
  296
  314
  333
  352
  373
  394
  416
  439
  463
  489
  515
  543
  572
Fixed operating expenses, $m
 
  48
  49
  51
  52
  53
  55
  56
  57
  59
  60
  62
  63
  65
  66
  68
  70
  72
  73
  75
  77
  79
  81
  83
  85
  87
  89
  92
  94
  96
  99
Total operating expenses, $m
  116
  127
  136
  148
  159
  170
  183
  195
  208
  222
  235
  251
  265
  281
  297
  314
  332
  351
  369
  389
  410
  431
  454
  477
  501
  526
  552
  581
  609
  639
  671
Operating income, $m
  23
  29
  37
  45
  53
  62
  71
  81
  91
  102
  113
  124
  136
  148
  161
  174
  188
  203
  218
  234
  251
  268
  286
  305
  324
  345
  367
  389
  413
  438
  464
EBITDA, $m
  39
  47
  57
  67
  77
  89
  100
  113
  125
  139
  152
  167
  182
  197
  213
  230
  248
  266
  285
  305
  326
  348
  370
  394
  419
  445
  472
  500
  530
  561
  594
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
Earnings before tax, $m
  24
  29
  37
  44
  53
  61
  71
  80
  90
  100
  111
  122
  134
  146
  159
  172
  186
  200
  215
  231
  247
  264
  282
  300
  320
  340
  361
  384
  407
  431
  457
Tax expense, $m
  6
  8
  10
  12
  14
  17
  19
  22
  24
  27
  30
  33
  36
  39
  43
  46
  50
  54
  58
  62
  67
  71
  76
  81
  86
  92
  98
  104
  110
  116
  123
Net income, $m
  18
  21
  27
  32
  39
  45
  52
  58
  66
  73
  81
  89
  98
  107
  116
  126
  136
  146
  157
  168
  180
  193
  206
  219
  233
  248
  264
  280
  297
  315
  334

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  75
  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
  210
  151
  169
  187
  206
  225
  246
  268
  290
  314
  338
  363
  390
  417
  445
  475
  505
  537
  570
  605
  641
  679
  718
  759
  802
  846
  893
  942
  992
  1,046
  1,102
Adjusted assets (=assets-cash), $m
  135
  151
  169
  187
  206
  225
  246
  268
  290
  314
  338
  363
  390
  417
  445
  475
  505
  537
  570
  605
  641
  679
  718
  759
  802
  846
  893
  942
  992
  1,046
  1,102
Revenue / Adjusted assets
  1.030
  1.033
  1.030
  1.027
  1.029
  1.031
  1.033
  1.030
  1.031
  1.029
  1.030
  1.030
  1.028
  1.029
  1.031
  1.029
  1.030
  1.030
  1.032
  1.030
  1.030
  1.029
  1.029
  1.030
  1.030
  1.031
  1.030
  1.030
  1.030
  1.030
  1.030
Average production assets, $m
  105
  118
  131
  145
  160
  175
  191
  208
  226
  244
  263
  282
  303
  324
  346
  369
  393
  418
  444
  471
  499
  528
  558
  590
  623
  658
  694
  732
  772
  813
  857
Working capital, $m
  96
  24
  26
  29
  32
  35
  38
  42
  45
  49
  53
  56
  61
  65
  69
  74
  79
  84
  89
  94
  100
  106
  112
  118
  125
  132
  139
  146
  154
  163
  171
Total debt, $m
  0
  4
  7
  11
  16
  20
  25
  29
  34
  40
  45
  51
  56
  63
  69
  75
  82
  89
  97
  104
  112
  121
  129
  138
  148
  158
  168
  179
  190
  202
  215
Total liabilities, $m
  31
  34
  37
  41
  46
  50
  55
  59
  64
  70
  75
  81
  86
  93
  99
  105
  112
  119
  127
  134
  142
  151
  159
  168
  178
  188
  198
  209
  220
  232
  245
Total equity, $m
  180
  118
  131
  145
  160
  175
  192
  208
  226
  244
  263
  283
  303
  324
  346
  369
  393
  418
  444
  471
  499
  528
  559
  590
  624
  658
  695
  733
  772
  814
  857
Total liabilities and equity, $m
  211
  152
  168
  186
  206
  225
  247
  267
  290
  314
  338
  364
  389
  417
  445
  474
  505
  537
  571
  605
  641
  679
  718
  758
  802
  846
  893
  942
  992
  1,046
  1,102
Debt-to-equity ratio
  0.000
  0.030
  0.060
  0.080
  0.100
  0.110
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
Adjusted equity ratio
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778
  0.778

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  21
  27
  32
  39
  45
  52
  58
  66
  73
  81
  89
  98
  107
  116
  126
  136
  146
  157
  168
  180
  193
  206
  219
  233
  248
  264
  280
  297
  315
  334
Depreciation, amort., depletion, $m
  16
  18
  20
  22
  24
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  56
  60
  63
  67
  71
  76
  80
  85
  89
  94
  100
  105
  111
  117
  123
  130
Funds from operations, $m
  40
  39
  47
  54
  63
  71
  81
  90
  100
  110
  121
  132
  144
  156
  168
  181
  195
  209
  224
  240
  256
  273
  290
  309
  328
  348
  369
  391
  414
  438
  463
Change in working capital, $m
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  38
  37
  44
  52
  60
  68
  77
  87
  96
  107
  117
  128
  140
  152
  164
  177
  190
  204
  219
  234
  250
  267
  284
  302
  321
  341
  362
  383
  406
  430
  455
Maintenance CAPEX, $m
  0
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -56
  -60
  -63
  -67
  -71
  -76
  -80
  -85
  -89
  -94
  -100
  -105
  -111
  -117
  -123
New CAPEX, $m
  -18
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
Cash from investing activities, $m
  -18
  -29
  -31
  -34
  -37
  -39
  -43
  -46
  -49
  -52
  -56
  -60
  -63
  -67
  -71
  -75
  -80
  -85
  -89
  -94
  -99
  -105
  -110
  -117
  -122
  -129
  -136
  -143
  -151
  -158
  -166
Free cash flow, $m
  20
  8
  13
  18
  23
  29
  35
  41
  47
  54
  61
  69
  76
  84
  93
  102
  111
  120
  130
  140
  151
  162
  174
  186
  199
  212
  226
  240
  256
  271
  288
Issuance/(repayment) of debt, $m
  0
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
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  
  -3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
Total cash flow (excl. dividends), $m
  18
  12
  16
  22
  27
  33
  39
  46
  52
  59
  67
  74
  82
  91
  99
  108
  117
  127
  137
  148
  159
  170
  182
  195
  208
  222
  236
  251
  267
  283
  301
Retained Cash Flow (-), $m
  -13
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
Prev. year cash balance distribution, $m
 
  75
  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
 
  74
  3
  8
  12
  18
  23
  29
  35
  41
  48
  55
  62
  69
  77
  85
  94
  102
  111
  121
  131
  141
  152
  163
  175
  187
  200
  213
  227
  242
  257
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
 
  71
  3
  7
  10
  14
  17
  19
  22
  24
  25
  26
  26
  26
  26
  25
  24
  22
  21
  19
  17
  15
  13
  11
  9
  7
  6
  5
  4
  3
  2
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
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United States Lime & Minerals, Inc. is a manufacturer of lime and limestone products. The Company's segments include Lime and Limestone operations, and Natural gas interests. The Company, through its Lime and Limestone Operations, is a manufacturer of lime and limestone products, supplying primarily the construction, environmental (including municipal sanitation and water treatment facilities, and flue gas treatment processes), industrial, metals (including steel producers), roof shingle, oil and gas services, and agriculture (including poultry and cattle feed producers) industries. The Company operates lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Oklahoma and Texas. The Company, through its subsidiary, U.S. Lime Company-O & G, LLC (U.S. Lime O & G), had royalty interests with respect to oil and gas rights on the Company's approximately 3,800 acres of land located in Johnson County, Texas, in the Barnett Shale Formation, at December 31, 2016.

FINANCIAL RATIOS  of  U.S. Lime&Minerals (USLM)

Valuation Ratios
P/E Ratio 29.3
Price to Sales 3.8
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 13.9
Price to Free Cash Flow 26.4
Growth Rates
Sales Growth Rate 6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 63.6%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 8.8%
Return On Total Capital 10.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.8%
Return On Equity 10.4%
Return On Equity - 3 Yr. Avg. 10.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 23.7%
Gross Margin - 3 Yr. Avg. 23.5%
EBITDA Margin 28.8%
EBITDA Margin - 3 Yr. Avg. 27.8%
Operating Margin 16.5%
Oper. Margin - 3 Yr. Avg. 16.4%
Pre-Tax Margin 17.3%
Pre-Tax Margin - 3 Yr. Avg. 15.9%
Net Profit Margin 12.9%
Net Profit Margin - 3 Yr. Avg. 11.8%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 25.2%
Payout Ratio 16.7%

USLM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USLM stock intrinsic value calculation we used $139 million for the last fiscal year's total revenue generated by U.S. Lime&Minerals. The default revenue input number comes from 2016 income statement of U.S. Lime&Minerals. 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 USLM stock valuation model: a) initial revenue growth rate of 12.1% 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 USLM is calculated based on our internal credit rating of U.S. Lime&Minerals, 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. Lime&Minerals.
    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 USLM stock the variable cost ratio is equal to 50.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $47 million in the base year in the intrinsic value calculation for USLM 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 U.S. Lime&Minerals.

Corporate tax rate of 27% is the nominal tax rate for U.S. Lime&Minerals. 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 USLM 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 USLM are equal to 75.5%.

Life of production assets of 6.6 years is the average useful life of capital assets used in U.S. Lime&Minerals 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 USLM is equal to 15.1%. 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 - $180 million for U.S. Lime&Minerals - 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 5.451 million for U.S. Lime&Minerals 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. Lime&Minerals at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ United States Lime posts 1Q profit   [Apr-25-17 06:29PM  Associated Press]
▶ United States Lime posts 4Q profit   [Jan-30-17 04:59PM  Associated Press]
▶ Here is What Hedge Funds Think About PFSweb, Inc. (PFSW)   [Nov-27  04:40AM  at Insider Monkey]
▶ 10-Q for United States Lime & Minerals, Inc.   [Aug-06  08:09PM  at Company Spotlight]
▶ 10-Q for United States Lime & Minerals, Inc.   [May-11  08:12PM  at Company Spotlight]
▶ 10-K for United States Lime & Minerals, Inc.   [Mar-08  08:08PM  at Company Spotlight]
▶ 10-Q for United States Lime & Minerals, Inc.   [Nov-03  07:08PM  Company Spotlight]
Financial statements of USLM
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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