Intrinsic value of ArcBest Corporation - ARCB

Previous Close

$26.84

  Intrinsic Value

$164.73

stock screener

  Rating & Target

str. buy

+514%

Previous close

$26.84

 
Intrinsic value

$164.73

 
Up/down potential

+514%

 
Rating

str. buy

We calculate the intrinsic value of ARCB 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 0001), $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 0.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
Revenue, $m
  3,369
  3,656
  3,954
  4,265
  4,587
  4,922
  5,270
  5,632
  6,008
  6,399
  6,806
  7,230
  7,671
  8,130
  8,609
  9,109
  9,630
  10,174
  10,743
  11,336
  11,957
  12,606
  13,285
  13,995
  14,738
  15,516
  16,331
  17,185
  18,079
  19,016
Variable operating expenses, $m
  2,761
  2,990
  3,229
  3,477
  3,735
  4,004
  4,282
  4,572
  4,873
  5,186
  5,449
  5,788
  6,141
  6,509
  6,893
  7,293
  7,710
  8,146
  8,601
  9,076
  9,573
  10,092
  10,636
  11,204
  11,799
  12,422
  13,075
  13,758
  14,474
  15,224
Fixed operating expenses, $m
  465
  475
  486
  496
  507
  518
  530
  542
  553
  566
  578
  591
  604
  617
  631
  645
  659
  673
  688
  703
  719
  734
  751
  767
  784
  801
  819
  837
  855
  874
Total operating expenses, $m
  3,226
  3,465
  3,715
  3,973
  4,242
  4,522
  4,812
  5,114
  5,426
  5,752
  6,027
  6,379
  6,745
  7,126
  7,524
  7,938
  8,369
  8,819
  9,289
  9,779
  10,292
  10,826
  11,387
  11,971
  12,583
  13,223
  13,894
  14,595
  15,329
  16,098
Operating income, $m
  144
  191
  240
  291
  344
  400
  458
  518
  581
  647
  779
  851
  926
  1,004
  1,086
  1,172
  1,262
  1,356
  1,454
  1,557
  1,666
  1,779
  1,898
  2,023
  2,155
  2,293
  2,438
  2,590
  2,750
  2,918
EBITDA, $m
  312
  367
  426
  487
  550
  616
  685
  757
  831
  909
  991
  1,076
  1,164
  1,257
  1,354
  1,455
  1,561
  1,672
  1,788
  1,910
  2,037
  2,171
  2,311
  2,459
  2,613
  2,775
  2,945
  3,124
  3,312
  3,509
Interest expense (income), $m
  0
  16
  20
  24
  28
  33
  37
  42
  47
  52
  58
  63
  69
  75
  81
  88
  95
  102
  110
  117
  126
  134
  143
  152
  162
  172
  183
  194
  206
  218
  231
Earnings before tax, $m
  128
  171
  216
  263
  312
  363
  416
  471
  529
  590
  716
  782
  851
  923
  998
  1,077
  1,159
  1,246
  1,337
  1,432
  1,532
  1,636
  1,746
  1,861
  1,983
  2,110
  2,244
  2,384
  2,532
  2,687
Tax expense, $m
  35
  46
  58
  71
  84
  98
  112
  127
  143
  159
  193
  211
  230
  249
  269
  291
  313
  336
  361
  387
  414
  442
  471
  503
  535
  570
  606
  644
  684
  725
Net income, $m
  93
  125
  158
  192
  227
  265
  304
  344
  386
  430
  523
  571
  621
  674
  729
  786
  846
  910
  976
  1,045
  1,118
  1,194
  1,275
  1,359
  1,447
  1,540
  1,638
  1,740
  1,848
  1,961

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  1,676
  1,819
  1,967
  2,122
  2,282
  2,449
  2,622
  2,802
  2,989
  3,184
  3,386
  3,597
  3,816
  4,045
  4,283
  4,532
  4,791
  5,062
  5,345
  5,640
  5,949
  6,272
  6,609
  6,963
  7,332
  7,720
  8,125
  8,550
  8,995
  9,461
Adjusted assets (=assets-cash), $m
  1,676
  1,819
  1,967
  2,122
  2,282
  2,449
  2,622
  2,802
  2,989
  3,184
  3,386
  3,597
  3,816
  4,045
  4,283
  4,532
  4,791
  5,062
  5,345
  5,640
  5,949
  6,272
  6,609
  6,963
  7,332
  7,720
  8,125
  8,550
  8,995
  9,461
Revenue / Adjusted assets
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
  2.010
Average production assets, $m
  765
  830
  898
  968
  1,041
  1,117
  1,196
  1,278
  1,364
  1,453
  1,545
  1,641
  1,741
  1,846
  1,954
  2,068
  2,186
  2,310
  2,439
  2,573
  2,714
  2,862
  3,016
  3,177
  3,346
  3,522
  3,707
  3,901
  4,104
  4,317
Working capital, $m
  -51
  -55
  -59
  -64
  -69
  -74
  -79
  -84
  -90
  -96
  -102
  -108
  -115
  -122
  -129
  -137
  -144
  -153
  -161
  -170
  -179
  -189
  -199
  -210
  -221
  -233
  -245
  -258
  -271
  -285
Total debt, $m
  365
  441
  521
  603
  689
  778
  870
  966
  1,066
  1,170
  1,278
  1,391
  1,508
  1,630
  1,757
  1,890
  2,029
  2,173
  2,324
  2,482
  2,647
  2,819
  2,999
  3,188
  3,386
  3,592
  3,809
  4,036
  4,273
  4,522
Total liabilities, $m
  895
  971
  1,051
  1,133
  1,219
  1,308
  1,400
  1,496
  1,596
  1,700
  1,808
  1,921
  2,038
  2,160
  2,287
  2,420
  2,558
  2,703
  2,854
  3,012
  3,177
  3,349
  3,529
  3,718
  3,915
  4,122
  4,339
  4,565
  4,803
  5,052
Total equity, $m
  781
  848
  917
  989
  1,063
  1,141
  1,222
  1,306
  1,393
  1,484
  1,578
  1,676
  1,778
  1,885
  1,996
  2,112
  2,233
  2,359
  2,491
  2,628
  2,772
  2,923
  3,080
  3,245
  3,417
  3,597
  3,786
  3,984
  4,191
  4,409
Total liabilities and equity, $m
  1,676
  1,819
  1,968
  2,122
  2,282
  2,449
  2,622
  2,802
  2,989
  3,184
  3,386
  3,597
  3,816
  4,045
  4,283
  4,532
  4,791
  5,062
  5,345
  5,640
  5,949
  6,272
  6,609
  6,963
  7,332
  7,719
  8,125
  8,549
  8,994
  9,461
Debt-to-equity ratio
  0.470
  0.520
  0.570
  0.610
  0.650
  0.680
  0.710
  0.740
  0.770
  0.790
  0.810
  0.830
  0.850
  0.860
  0.880
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.010
  1.020
  1.030
Adjusted equity ratio
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  93
  125
  158
  192
  227
  265
  304
  344
  386
  430
  523
  571
  621
  674
  729
  786
  846
  910
  976
  1,045
  1,118
  1,194
  1,275
  1,359
  1,447
  1,540
  1,638
  1,740
  1,848
  1,961
Depreciation, amort., depletion, $m
  168
  177
  186
  196
  206
  216
  227
  238
  250
  262
  212
  225
  239
  253
  268
  283
  299
  316
  334
  353
  372
  392
  413
  435
  458
  482
  508
  534
  562
  591
Funds from operations, $m
  261
  302
  344
  388
  433
  481
  531
  582
  636
  693
  734
  795
  859
  926
  996
  1,069
  1,146
  1,226
  1,310
  1,398
  1,490
  1,586
  1,688
  1,794
  1,906
  2,023
  2,146
  2,275
  2,410
  2,553
Change in working capital, $m
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
Cash from operations, $m
  265
  306
  348
  392
  438
  486
  536
  588
  642
  698
  740
  802
  866
  933
  1,003
  1,077
  1,154
  1,234
  1,318
  1,407
  1,499
  1,596
  1,698
  1,805
  1,917
  2,034
  2,158
  2,288
  2,424
  2,567
Maintenance CAPEX, $m
  -96
  -105
  -114
  -123
  -133
  -143
  -153
  -164
  -175
  -187
  -199
  -212
  -225
  -239
  -253
  -268
  -283
  -299
  -316
  -334
  -353
  -372
  -392
  -413
  -435
  -458
  -482
  -508
  -534
  -562
New CAPEX, $m
  -64
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -104
  -109
  -113
  -118
  -124
  -129
  -135
  -141
  -147
  -154
  -161
  -169
  -177
  -185
  -194
  -203
  -213
Cash from investing activities, $m
  -160
  -170
  -182
  -193
  -206
  -219
  -232
  -246
  -260
  -276
  -291
  -308
  -325
  -343
  -362
  -381
  -401
  -423
  -445
  -469
  -494
  -519
  -546
  -574
  -604
  -635
  -667
  -702
  -737
  -775
Free cash flow, $m
  105
  136
  167
  199
  232
  267
  304
  342
  381
  423
  449
  494
  541
  590
  642
  696
  752
  811
  873
  938
  1,006
  1,077
  1,152
  1,230
  1,313
  1,399
  1,490
  1,586
  1,686
  1,792
Issuance/(repayment) of debt, $m
  74
  76
  79
  82
  86
  89
  92
  96
  100
  104
  108
  113
  117
  122
  127
  133
  138
  145
  151
  158
  165
  172
  180
  189
  197
  207
  216
  227
  238
  249
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  74
  76
  79
  82
  86
  89
  92
  96
  100
  104
  108
  113
  117
  122
  127
  133
  138
  145
  151
  158
  165
  172
  180
  189
  197
  207
  216
  227
  238
  249
Total cash flow (excl. dividends), $m
  179
  212
  246
  281
  318
  356
  396
  438
  481
  527
  557
  607
  658
  712
  769
  828
  891
  956
  1,024
  1,096
  1,171
  1,249
  1,332
  1,419
  1,510
  1,606
  1,707
  1,813
  1,924
  2,041
Retained Cash Flow (-), $m
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -107
  -111
  -116
  -121
  -126
  -132
  -138
  -144
  -150
  -157
  -165
  -172
  -180
  -189
  -198
  -207
  -217
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
  146
  177
  209
  243
  279
  315
  354
  394
  436
  463
  508
  556
  606
  658
  713
  770
  830
  892
  958
  1,027
  1,099
  1,175
  1,254
  1,338
  1,426
  1,518
  1,615
  1,717
  1,824
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
  111
  133
  154
  172
  188
  202
  213
  221
  226
  229
  220
  217
  211
  203
  193
  181
  167
  153
  137
  122
  106
  91
  77
  64
  52
  42
  33
  25
  19
  14
Current shareholders' claim on cash, %
  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

ArcBest Corporation is a holding company of businesses providing integrated logistics solutions. The Company operates through three segments: Asset-Based, which consists of ABF Freight System, Inc. and other subsidiaries; ArcBest, which represents the consolidation of the operations of the Premium Logistics, Transportation Management and Household Goods Moving Services segments, and FleetNet, which includes the results of operations of FleetNet America, Inc. (FleetNet). Its Asset-Based operations offer transportation of general commodities through standard, time-critical, expedited and guaranteed LTL services-nationally and regionally. Its ArcBest segment includes truckload, expedite, international, warehousing, freight transportation, management services and moving services. Its FleetNet segment provides roadside assistance and maintenance management services for commercial vehicles to customers in the United States and Canada through a network of third-party service providers.

FINANCIAL RATIOS  of  ArcBest Corporation (ARCB)

Valuation Ratios
P/E Ratio 36.2
Price to Sales 0.3
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow 22.2
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.2%
Cap. Spend. - 3 Yr. Gr. Rate 18.4%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 30.1%
Total Debt to Equity 40.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 3.2%
Return On Equity - 3 Yr. Avg. 6.5%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 72.3%
Gross Margin - 3 Yr. Avg. 67.9%
EBITDA Margin 4.9%
EBITDA Margin - 3 Yr. Avg. 5.7%
Operating Margin 1.1%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 32.1%
Eff/ Tax Rate - 3 Yr. Avg. 35.2%
Payout Ratio 42.1%

ARCB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARCB stock intrinsic value calculation we used $3094 million for the last fiscal year's total revenue generated by ArcBest Corporation. The default revenue input number comes from 0001 income statement of ArcBest Corporation. 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 ARCB stock valuation model: a) initial revenue growth rate of 8.9% 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 ARCB is calculated based on our internal credit rating of ArcBest Corporation, 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 ArcBest Corporation.
    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 ARCB stock the variable cost ratio is equal to 82.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $455 million in the base year in the intrinsic value calculation for ARCB 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 5.4% for ArcBest Corporation.

Corporate tax rate of 27% is the nominal tax rate for ArcBest Corporation. 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 ARCB 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 ARCB are equal to 22.7%.

Life of production assets of 7.3 years is the average useful life of capital assets used in ArcBest Corporation 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 ARCB is equal to -1.5%. 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 - $717.682 million for ArcBest Corporation - 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 25.538 million for ArcBest Corporation 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 ArcBest Corporation at the current share price and the inputted number of shares is $0.7 billion.

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