Intrinsic value of Brunswick Corporation - BC

Previous Close

$52.94

  Intrinsic Value

$68.23

stock screener

  Rating & Target

buy

+29%

Previous close

$52.94

 
Intrinsic value

$68.23

 
Up/down potential

+29%

 
Rating

buy

We calculate the intrinsic value of BC 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 4.6

 

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, %
  5.70
  5.63
  5.57
  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
  5.11
  5.09
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
Revenue, $m
  5,453
  5,760
  6,081
  6,416
  6,766
  7,132
  7,515
  7,916
  8,336
  8,775
  9,236
  9,718
  10,223
  10,752
  11,307
  11,889
  12,499
  13,138
  13,809
  14,512
  15,250
  16,024
  16,837
  17,689
  18,583
  19,522
  20,507
  21,540
  22,625
  23,764
Variable operating expenses, $m
  4,349
  4,586
  4,833
  5,092
  5,362
  5,645
  5,940
  6,250
  6,573
  6,912
  7,126
  7,498
  7,888
  8,296
  8,724
  9,173
  9,644
  10,137
  10,655
  11,198
  11,767
  12,364
  12,991
  13,649
  14,339
  15,063
  15,823
  16,620
  17,457
  18,336
Fixed operating expenses, $m
  702
  718
  733
  749
  766
  783
  800
  818
  836
  854
  873
  892
  912
  932
  952
  973
  995
  1,016
  1,039
  1,062
  1,085
  1,109
  1,133
  1,158
  1,184
  1,210
  1,236
  1,264
  1,291
  1,320
Total operating expenses, $m
  5,051
  5,304
  5,566
  5,841
  6,128
  6,428
  6,740
  7,068
  7,409
  7,766
  7,999
  8,390
  8,800
  9,228
  9,676
  10,146
  10,639
  11,153
  11,694
  12,260
  12,852
  13,473
  14,124
  14,807
  15,523
  16,273
  17,059
  17,884
  18,748
  19,656
Operating income, $m
  402
  457
  514
  575
  638
  705
  775
  849
  927
  1,009
  1,237
  1,328
  1,423
  1,524
  1,630
  1,742
  1,860
  1,984
  2,115
  2,253
  2,398
  2,551
  2,712
  2,882
  3,061
  3,249
  3,448
  3,656
  3,876
  4,108
EBITDA, $m
  657
  718
  782
  849
  920
  994
  1,073
  1,155
  1,242
  1,333
  1,429
  1,529
  1,636
  1,748
  1,865
  1,989
  2,120
  2,257
  2,402
  2,554
  2,715
  2,884
  3,062
  3,250
  3,447
  3,655
  3,873
  4,104
  4,346
  4,602
Interest expense (income), $m
  30
  67
  76
  85
  94
  103
  114
  124
  135
  147
  159
  171
  185
  199
  213
  228
  244
  261
  279
  297
  317
  337
  358
  380
  404
  428
  454
  481
  510
  539
  571
Earnings before tax, $m
  335
  381
  430
  481
  535
  591
  651
  714
  780
  850
  1,065
  1,143
  1,225
  1,311
  1,402
  1,498
  1,599
  1,706
  1,818
  1,937
  2,062
  2,193
  2,332
  2,478
  2,633
  2,795
  2,966
  3,147
  3,337
  3,538
Tax expense, $m
  90
  103
  116
  130
  144
  160
  176
  193
  211
  230
  288
  309
  331
  354
  379
  404
  432
  461
  491
  523
  557
  592
  630
  669
  711
  755
  801
  850
  901
  955
Net income, $m
  244
  278
  314
  351
  390
  432
  475
  521
  570
  621
  778
  834
  894
  957
  1,023
  1,094
  1,167
  1,245
  1,327
  1,414
  1,505
  1,601
  1,702
  1,809
  1,922
  2,040
  2,165
  2,297
  2,436
  2,582

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
  4,529
  4,784
  5,050
  5,329
  5,620
  5,924
  6,242
  6,575
  6,924
  7,289
  7,671
  8,071
  8,491
  8,930
  9,391
  9,874
  10,381
  10,912
  11,469
  12,053
  12,666
  13,309
  13,984
  14,692
  15,435
  16,214
  17,032
  17,891
  18,792
  19,738
Adjusted assets (=assets-cash), $m
  4,529
  4,784
  5,050
  5,329
  5,620
  5,924
  6,242
  6,575
  6,924
  7,289
  7,671
  8,071
  8,491
  8,930
  9,391
  9,874
  10,381
  10,912
  11,469
  12,053
  12,666
  13,309
  13,984
  14,692
  15,435
  16,214
  17,032
  17,891
  18,792
  19,738
Revenue / Adjusted assets
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
  1.204
Average production assets, $m
  1,325
  1,400
  1,478
  1,559
  1,644
  1,733
  1,826
  1,924
  2,026
  2,132
  2,244
  2,361
  2,484
  2,613
  2,748
  2,889
  3,037
  3,193
  3,356
  3,526
  3,706
  3,894
  4,091
  4,298
  4,516
  4,744
  4,983
  5,234
  5,498
  5,775
Working capital, $m
  382
  403
  426
  449
  474
  499
  526
  554
  584
  614
  646
  680
  716
  753
  791
  832
  875
  920
  967
  1,016
  1,068
  1,122
  1,179
  1,238
  1,301
  1,367
  1,435
  1,508
  1,584
  1,663
Total debt, $m
  1,376
  1,536
  1,705
  1,880
  2,064
  2,256
  2,456
  2,667
  2,887
  3,117
  3,358
  3,611
  3,875
  4,153
  4,444
  4,748
  5,068
  5,403
  5,755
  6,123
  6,510
  6,916
  7,342
  7,788
  8,257
  8,749
  9,265
  9,807
  10,375
  10,972
Total liabilities, $m
  2,858
  3,019
  3,187
  3,362
  3,546
  3,738
  3,939
  4,149
  4,369
  4,599
  4,840
  5,093
  5,358
  5,635
  5,926
  6,231
  6,550
  6,885
  7,237
  7,606
  7,992
  8,398
  8,824
  9,271
  9,739
  10,231
  10,747
  11,289
  11,858
  12,454
Total equity, $m
  1,671
  1,765
  1,864
  1,966
  2,074
  2,186
  2,303
  2,426
  2,555
  2,690
  2,831
  2,978
  3,133
  3,295
  3,465
  3,644
  3,831
  4,027
  4,232
  4,448
  4,674
  4,911
  5,160
  5,421
  5,695
  5,983
  6,285
  6,602
  6,934
  7,283
Total liabilities and equity, $m
  4,529
  4,784
  5,051
  5,328
  5,620
  5,924
  6,242
  6,575
  6,924
  7,289
  7,671
  8,071
  8,491
  8,930
  9,391
  9,875
  10,381
  10,912
  11,469
  12,054
  12,666
  13,309
  13,984
  14,692
  15,434
  16,214
  17,032
  17,891
  18,792
  19,737
Debt-to-equity ratio
  0.820
  0.870
  0.910
  0.960
  1.000
  1.030
  1.070
  1.100
  1.130
  1.160
  1.190
  1.210
  1.240
  1.260
  1.280
  1.300
  1.320
  1.340
  1.360
  1.380
  1.390
  1.410
  1.420
  1.440
  1.450
  1.460
  1.470
  1.490
  1.500
  1.510
Adjusted equity ratio
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  244
  278
  314
  351
  390
  432
  475
  521
  570
  621
  778
  834
  894
  957
  1,023
  1,094
  1,167
  1,245
  1,327
  1,414
  1,505
  1,601
  1,702
  1,809
  1,922
  2,040
  2,165
  2,297
  2,436
  2,582
Depreciation, amort., depletion, $m
  255
  261
  268
  275
  282
  290
  297
  306
  315
  324
  192
  202
  212
  223
  235
  247
  260
  273
  287
  301
  317
  333
  350
  367
  386
  405
  426
  447
  470
  494
Funds from operations, $m
  499
  539
  581
  626
  672
  721
  773
  827
  884
  944
  969
  1,036
  1,106
  1,180
  1,258
  1,340
  1,427
  1,518
  1,614
  1,715
  1,822
  1,934
  2,052
  2,177
  2,308
  2,446
  2,591
  2,745
  2,906
  3,076
Change in working capital, $m
  21
  21
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  72
  76
  80
Cash from operations, $m
  479
  518
  559
  602
  648
  696
  746
  799
  855
  914
  937
  1,002
  1,071
  1,143
  1,219
  1,300
  1,384
  1,473
  1,567
  1,666
  1,770
  1,880
  1,995
  2,117
  2,245
  2,380
  2,522
  2,672
  2,830
  2,996
Maintenance CAPEX, $m
  -107
  -113
  -120
  -126
  -133
  -141
  -148
  -156
  -164
  -173
  -182
  -192
  -202
  -212
  -223
  -235
  -247
  -260
  -273
  -287
  -301
  -317
  -333
  -350
  -367
  -386
  -405
  -426
  -447
  -470
New CAPEX, $m
  -72
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
  -155
  -163
  -171
  -179
  -188
  -197
  -207
  -217
  -228
  -239
  -251
  -264
  -277
Cash from investing activities, $m
  -179
  -188
  -198
  -207
  -218
  -230
  -241
  -253
  -266
  -280
  -294
  -309
  -325
  -341
  -358
  -376
  -395
  -415
  -436
  -458
  -480
  -505
  -530
  -557
  -584
  -614
  -644
  -677
  -711
  -747
Free cash flow, $m
  299
  330
  361
  394
  429
  466
  505
  545
  588
  634
  643
  693
  746
  802
  861
  924
  989
  1,058
  1,131
  1,208
  1,289
  1,375
  1,465
  1,560
  1,660
  1,766
  1,878
  1,995
  2,119
  2,250
Issuance/(repayment) of debt, $m
  155
  161
  168
  176
  184
  192
  201
  210
  220
  230
  241
  253
  265
  277
  291
  305
  320
  335
  352
  369
  387
  406
  426
  447
  469
  492
  516
  542
  569
  597
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  
  155
  161
  168
  176
  184
  192
  201
  210
  220
  230
  241
  253
  265
  277
  291
  305
  320
  335
  352
  369
  387
  406
  426
  447
  469
  492
  516
  542
  569
  597
Total cash flow (excl. dividends), $m
  454
  491
  529
  570
  613
  658
  706
  756
  808
  864
  884
  946
  1,011
  1,080
  1,152
  1,228
  1,309
  1,393
  1,483
  1,577
  1,676
  1,781
  1,891
  2,007
  2,129
  2,258
  2,394
  2,537
  2,688
  2,846
Retained Cash Flow (-), $m
  -89
  -94
  -98
  -103
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -187
  -196
  -206
  -216
  -226
  -237
  -249
  -261
  -274
  -288
  -302
  -317
  -333
  -349
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
  365
  397
  431
  467
  506
  546
  588
  633
  680
  729
  743
  798
  856
  918
  982
  1,050
  1,122
  1,197
  1,277
  1,361
  1,450
  1,543
  1,642
  1,746
  1,855
  1,970
  2,092
  2,220
  2,355
  2,497
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  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
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  346
  355
  362
  367
  368
  366
  361
  352
  341
  326
  294
  277
  257
  236
  214
  191
  169
  147
  125
  105
  87
  71
  56
  44
  34
  25
  18
  13
  9
  6
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

Brunswick Corporation is a designer, manufacturer and marketer of recreation products. The Company operates through three segments: Marine Engine, Boat and Fitness. The Company's product includes marine engines, boats, fitness equipment and active recreation products. The Company's engine-related products include outboard, sterndrive and inboard engines; trolling motors; propellers; engine control systems; and marine parts and accessories. Its boat offerings include: fiberglass pleasure boats; yachts and sport yachts; sport cruisers and sport boats; offshore fishing boats; aluminum and fiberglass fishing boats; pontoon boats; utility boats; deck boats; inflatable boats; and heavy-gauge aluminum boats. Its fitness products include cardiovascular and strength training equipment for both the commercial and consumer markets. It also sells products for active aging, rehabilitation, productive well-being, a complete line of billiards tables and other game room tables and accessories.

FINANCIAL RATIOS  of  Brunswick Corporation (BC)

Valuation Ratios
P/E Ratio 17.1
Price to Sales 1.1
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 20.7
Growth Rates
Sales Growth Rate 9.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 45.9%
Cap. Spend. - 3 Yr. Gr. Rate 8.8%
Financial Strength
Quick Ratio 76
Current Ratio 0
LT Debt to Equity 30.3%
Total Debt to Equity 30.7%
Interest Coverage 14
Management Effectiveness
Return On Assets 9.2%
Ret/ On Assets - 3 Yr. Avg. 8.8%
Return On Total Capital 15.3%
Ret/ On T. Cap. - 3 Yr. Avg. 15.1%
Return On Equity 20.3%
Return On Equity - 3 Yr. Avg. 20.7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 27.4%
Gross Margin - 3 Yr. Avg. 27.2%
EBITDA Margin 11.7%
EBITDA Margin - 3 Yr. Avg. 10.9%
Operating Margin 9.1%
Oper. Margin - 3 Yr. Avg. 8.4%
Pre-Tax Margin 8.7%
Pre-Tax Margin - 3 Yr. Avg. 8%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 6.1%
Effective Tax Rate 29.7%
Eff/ Tax Rate - 3 Yr. Avg. 30%
Payout Ratio 19.9%

BC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BC stock intrinsic value calculation we used $5159 million for the last fiscal year's total revenue generated by Brunswick Corporation. The default revenue input number comes from 0001 income statement of Brunswick 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 BC stock valuation model: a) initial revenue growth rate of 5.7% 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 5.4%, whose default value for BC is calculated based on our internal credit rating of Brunswick 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 Brunswick 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 BC stock the variable cost ratio is equal to 79.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $687 million in the base year in the intrinsic value calculation for BC 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 5.5% for Brunswick Corporation.

Corporate tax rate of 27% is the nominal tax rate for Brunswick 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 BC 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 BC are equal to 24.3%.

Life of production assets of 11.7 years is the average useful life of capital assets used in Brunswick 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 BC is equal to 7%. 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 - $1582.6 million for Brunswick 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 86.948 million for Brunswick 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 Brunswick Corporation at the current share price and the inputted number of shares is $4.6 billion.

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