Intrinsic value of Brink's Company (The) - BCO

Previous Close

$78.04

  Intrinsic Value

$45.38

stock screener

  Rating & Target

sell

-42%

Previous close

$78.04

 
Intrinsic value

$45.38

 
Up/down potential

-42%

 
Rating

sell

We calculate the intrinsic value of BCO 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 3.9

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,559
  3,641
  3,734
  3,839
  3,956
  4,083
  4,222
  4,373
  4,535
  4,709
  4,895
  5,094
  5,306
  5,530
  5,769
  6,022
  6,289
  6,572
  6,871
  7,187
  7,520
  7,872
  8,242
  8,632
  9,043
  9,476
  9,931
  10,410
  10,915
  11,445
Variable operating expenses, $m
  3,265
  3,338
  3,422
  3,515
  3,619
  3,733
  3,857
  3,991
  4,136
  4,291
  4,367
  4,544
  4,732
  4,933
  5,146
  5,371
  5,610
  5,862
  6,129
  6,411
  6,708
  7,021
  7,352
  7,700
  8,066
  8,452
  8,858
  9,286
  9,736
  10,209
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
  3,265
  3,338
  3,422
  3,515
  3,619
  3,733
  3,857
  3,991
  4,136
  4,291
  4,367
  4,544
  4,732
  4,933
  5,146
  5,371
  5,610
  5,862
  6,129
  6,411
  6,708
  7,021
  7,352
  7,700
  8,066
  8,452
  8,858
  9,286
  9,736
  10,209
Operating income, $m
  294
  302
  313
  324
  337
  350
  365
  382
  399
  418
  529
  550
  573
  597
  623
  651
  679
  710
  742
  776
  812
  850
  890
  932
  977
  1,024
  1,073
  1,125
  1,179
  1,236
EBITDA, $m
  507
  519
  532
  547
  564
  582
  602
  623
  647
  671
  698
  726
  756
  788
  822
  858
  897
  937
  980
  1,025
  1,072
  1,122
  1,175
  1,231
  1,289
  1,351
  1,416
  1,484
  1,556
  1,632
Interest expense (income), $m
  20
  84
  78
  82
  86
  91
  96
  102
  108
  115
  122
  130
  138
  147
  157
  167
  178
  189
  201
  214
  227
  241
  257
  272
  289
  307
  325
  345
  365
  387
  410
Earnings before tax, $m
  210
  225
  231
  238
  246
  254
  264
  274
  284
  296
  399
  412
  426
  441
  456
  473
  490
  509
  529
  549
  571
  594
  618
  643
  670
  698
  728
  759
  792
  827
Tax expense, $m
  57
  61
  62
  64
  66
  69
  71
  74
  77
  80
  108
  111
  115
  119
  123
  128
  132
  137
  143
  148
  154
  160
  167
  174
  181
  189
  197
  205
  214
  223
Net income, $m
  153
  164
  169
  174
  180
  186
  193
  200
  208
  216
  291
  301
  311
  322
  333
  345
  358
  372
  386
  401
  417
  433
  451
  470
  489
  510
  532
  554
  578
  604

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
  3,301
  3,377
  3,464
  3,561
  3,669
  3,788
  3,917
  4,057
  4,207
  4,368
  4,541
  4,725
  4,922
  5,130
  5,352
  5,586
  5,834
  6,097
  6,374
  6,667
  6,976
  7,302
  7,646
  8,008
  8,389
  8,790
  9,213
  9,657
  10,125
  10,617
Adjusted assets (=assets-cash), $m
  3,301
  3,377
  3,464
  3,561
  3,669
  3,788
  3,917
  4,057
  4,207
  4,368
  4,541
  4,725
  4,922
  5,130
  5,352
  5,586
  5,834
  6,097
  6,374
  6,667
  6,976
  7,302
  7,646
  8,008
  8,389
  8,790
  9,213
  9,657
  10,125
  10,617
Revenue / Adjusted assets
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
  1.078
Average production assets, $m
  1,057
  1,081
  1,109
  1,140
  1,175
  1,213
  1,254
  1,299
  1,347
  1,399
  1,454
  1,513
  1,576
  1,643
  1,713
  1,788
  1,868
  1,952
  2,041
  2,135
  2,234
  2,338
  2,448
  2,564
  2,686
  2,814
  2,950
  3,092
  3,242
  3,399
Working capital, $m
  -39
  -40
  -41
  -42
  -44
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -95
  -99
  -104
  -109
  -115
  -120
  -126
Total debt, $m
  1,443
  1,511
  1,589
  1,677
  1,774
  1,881
  1,997
  2,123
  2,258
  2,403
  2,559
  2,725
  2,901
  3,089
  3,288
  3,499
  3,723
  3,959
  4,209
  4,472
  4,750
  5,044
  5,353
  5,678
  6,022
  6,383
  6,763
  7,163
  7,584
  8,027
Total liabilities, $m
  2,971
  3,039
  3,118
  3,205
  3,302
  3,409
  3,525
  3,651
  3,786
  3,932
  4,087
  4,253
  4,430
  4,617
  4,816
  5,027
  5,251
  5,487
  5,737
  6,000
  6,279
  6,572
  6,881
  7,207
  7,550
  7,911
  8,291
  8,691
  9,112
  9,555
Total equity, $m
  330
  338
  346
  356
  367
  379
  392
  406
  421
  437
  454
  473
  492
  513
  535
  559
  583
  610
  637
  667
  698
  730
  765
  801
  839
  879
  921
  966
  1,012
  1,062
Total liabilities and equity, $m
  3,301
  3,377
  3,464
  3,561
  3,669
  3,788
  3,917
  4,057
  4,207
  4,369
  4,541
  4,726
  4,922
  5,130
  5,351
  5,586
  5,834
  6,097
  6,374
  6,667
  6,977
  7,302
  7,646
  8,008
  8,389
  8,790
  9,212
  9,657
  10,124
  10,617
Debt-to-equity ratio
  4.370
  4.470
  4.590
  4.710
  4.840
  4.970
  5.100
  5.230
  5.370
  5.500
  5.630
  5.770
  5.890
  6.020
  6.140
  6.260
  6.380
  6.490
  6.600
  6.710
  6.810
  6.910
  7.000
  7.090
  7.180
  7.260
  7.340
  7.420
  7.490
  7.560
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  153
  164
  169
  174
  180
  186
  193
  200
  208
  216
  291
  301
  311
  322
  333
  345
  358
  372
  386
  401
  417
  433
  451
  470
  489
  510
  532
  554
  578
  604
Depreciation, amort., depletion, $m
  214
  217
  220
  223
  227
  232
  237
  242
  247
  253
  169
  176
  183
  191
  199
  208
  217
  227
  237
  248
  260
  272
  285
  298
  312
  327
  343
  360
  377
  395
Funds from operations, $m
  367
  380
  388
  397
  407
  418
  429
  442
  455
  469
  460
  477
  494
  513
  532
  553
  575
  599
  623
  649
  676
  705
  736
  768
  802
  837
  875
  914
  955
  999
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Cash from operations, $m
  368
  381
  389
  398
  408
  419
  431
  443
  457
  471
  462
  479
  497
  515
  535
  556
  578
  602
  626
  653
  680
  709
  740
  772
  806
  842
  880
  919
  961
  1,005
Maintenance CAPEX, $m
  -121
  -123
  -126
  -129
  -133
  -137
  -141
  -146
  -151
  -157
  -163
  -169
  -176
  -183
  -191
  -199
  -208
  -217
  -227
  -237
  -248
  -260
  -272
  -285
  -298
  -312
  -327
  -343
  -360
  -377
New CAPEX, $m
  -20
  -24
  -28
  -31
  -35
  -38
  -41
  -45
  -48
  -52
  -55
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -129
  -135
  -142
  -150
  -158
Cash from investing activities, $m
  -141
  -147
  -154
  -160
  -168
  -175
  -182
  -191
  -199
  -209
  -218
  -228
  -239
  -250
  -262
  -274
  -287
  -301
  -316
  -331
  -347
  -364
  -382
  -401
  -420
  -441
  -462
  -485
  -510
  -535
Free cash flow, $m
  227
  234
  236
  238
  241
  244
  248
  253
  258
  263
  244
  251
  258
  265
  273
  282
  291
  300
  311
  321
  333
  345
  358
  372
  386
  401
  417
  434
  452
  470
Issuance/(repayment) of debt, $m
  -111
  68
  78
  88
  97
  107
  116
  126
  135
  145
  155
  166
  177
  188
  199
  211
  223
  236
  250
  264
  278
  293
  309
  326
  343
  361
  380
  400
  421
  443
Issuance/(repurchase) of shares, $m
  23
  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  
  -88
  68
  78
  88
  97
  107
  116
  126
  135
  145
  155
  166
  177
  188
  199
  211
  223
  236
  250
  264
  278
  293
  309
  326
  343
  361
  380
  400
  421
  443
Total cash flow (excl. dividends), $m
  139
  302
  314
  326
  338
  351
  364
  378
  393
  408
  400
  417
  434
  453
  472
  493
  514
  537
  560
  585
  611
  638
  667
  697
  729
  762
  797
  834
  872
  913
Retained Cash Flow (-), $m
  -176
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
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
  -37
  295
  305
  316
  327
  339
  352
  364
  378
  392
  383
  398
  415
  432
  450
  469
  489
  510
  533
  556
  580
  606
  633
  661
  691
  722
  755
  789
  826
  864
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
  -35
  253
  240
  226
  211
  195
  178
  162
  145
  129
  106
  92
  79
  66
  55
  45
  36
  28
  22
  17
  12
  9
  6
  4
  3
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5

The Brink's Company (Brink's) is a provider of logistics and security solutions. The Company operates through nine segments: U.S., France, Mexico, Brazil, Canada, Latin America, EMEA, Asia and Payment Services. The Company's solutions include cash-in-transit (CIT), automated teller machine (ATM) replenishment and maintenance, cash management services, including vault outsourcing, money processing, and intelligent safe services, international transportation of valuables, and payment services. Its customers include financial institutions, retailers, government agencies (including central banks), mints, jewelers and other commercial operations around the world. As of December 31, 2016, the Company's global network served customers in over 100 countries. Its services offerings include Core Services, High-Value Services and Other Security Services.

FINANCIAL RATIOS  of  Brink's Company (The) (BCO)

Valuation Ratios
P/E Ratio 111.5
Price to Sales 1.3
Price to Book 11.6
Price to Tangible Book
Price to Cash Flow 23.2
Price to Free Cash Flow 69.7
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.9%
Cap. Spend. - 3 Yr. Gr. Rate -8.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 73.3%
Total Debt to Equity 131.5%
Interest Coverage 7
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. -0.3%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. -1.4%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. -2.5%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 19.7%
Gross Margin - 3 Yr. Avg. 18.7%
EBITDA Margin 9.2%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 4.1%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 1.2%
Net Profit Margin - 3 Yr. Avg. -0.5%
Effective Tax Rate 62.4%
Eff/ Tax Rate - 3 Yr. Avg. 49.3%
Payout Ratio 57.1%

BCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BCO stock intrinsic value calculation we used $3489 million for the last fiscal year's total revenue generated by Brink's Company (The). The default revenue input number comes from 0001 income statement of Brink's Company (The). 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 BCO stock valuation model: a) initial revenue growth rate of 2% 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 BCO is calculated based on our internal credit rating of Brink's Company (The), 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 Brink's Company (The).
    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 BCO stock the variable cost ratio is equal to 91.8%.

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 BCO 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 Brink's Company (The).

Corporate tax rate of 27% is the nominal tax rate for Brink's Company (The). 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 BCO 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 BCO are equal to 29.7%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Brink's Company (The) 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 BCO is equal to -1.1%. 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 - $153.7 million for Brink's Company (The) - 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 49.654 million for Brink's Company (The) 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 Brink's Company (The) at the current share price and the inputted number of shares is $3.9 billion.

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