Intrinsic value of Builders FirstSource, Inc. - BLDR

Previous Close

$18.93

  Intrinsic Value

$17.30

stock screener

  Rating & Target

hold

-9%

Previous close

$18.93

 
Intrinsic value

$17.30

 
Up/down potential

-9%

 
Rating

hold

We calculate the intrinsic value of BLDR 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 2.2

 

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, %
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  7,887
  8,076
  8,290
  8,529
  8,793
  9,082
  9,396
  9,736
  10,101
  10,493
  10,911
  11,358
  11,832
  12,337
  12,872
  13,439
  14,038
  14,672
  15,342
  16,049
  16,795
  17,581
  18,410
  19,283
  20,203
  21,171
  22,190
  23,262
  24,390
  25,576
Variable operating expenses, $m
  6,924
  7,087
  7,274
  7,482
  7,711
  7,962
  8,236
  8,531
  8,848
  9,189
  9,485
  9,873
  10,286
  10,725
  11,190
  11,682
  12,204
  12,755
  13,337
  13,952
  14,600
  15,284
  16,004
  16,764
  17,563
  18,405
  19,290
  20,222
  21,203
  22,234
Fixed operating expenses, $m
  597
  610
  623
  637
  651
  665
  680
  695
  710
  726
  742
  758
  775
  792
  809
  827
  845
  864
  883
  902
  922
  943
  963
  985
  1,006
  1,028
  1,051
  1,074
  1,098
  1,122
Total operating expenses, $m
  7,521
  7,697
  7,897
  8,119
  8,362
  8,627
  8,916
  9,226
  9,558
  9,915
  10,227
  10,631
  11,061
  11,517
  11,999
  12,509
  13,049
  13,619
  14,220
  14,854
  15,522
  16,227
  16,967
  17,749
  18,569
  19,433
  20,341
  21,296
  22,301
  23,356
Operating income, $m
  367
  378
  393
  410
  431
  454
  481
  510
  543
  578
  684
  726
  771
  820
  873
  929
  989
  1,053
  1,122
  1,195
  1,272
  1,355
  1,442
  1,535
  1,634
  1,738
  1,849
  1,966
  2,089
  2,220
EBITDA, $m
  505
  518
  535
  554
  577
  603
  633
  665
  701
  740
  782
  828
  878
  932
  989
  1,050
  1,116
  1,186
  1,260
  1,340
  1,424
  1,514
  1,609
  1,709
  1,816
  1,929
  2,049
  2,176
  2,310
  2,451
Interest expense (income), $m
  197
  101
  105
  108
  113
  117
  123
  128
  134
  141
  148
  156
  164
  173
  182
  192
  203
  214
  226
  238
  251
  265
  280
  295
  312
  329
  347
  366
  386
  407
  429
Earnings before tax, $m
  265
  274
  284
  298
  314
  332
  352
  376
  401
  430
  528
  562
  598
  638
  680
  726
  775
  827
  884
  943
  1,007
  1,075
  1,147
  1,224
  1,305
  1,391
  1,483
  1,580
  1,682
  1,791
Tax expense, $m
  72
  74
  77
  80
  85
  90
  95
  101
  108
  116
  143
  152
  162
  172
  184
  196
  209
  223
  239
  255
  272
  290
  310
  330
  352
  376
  400
  426
  454
  484
Net income, $m
  194
  200
  208
  217
  229
  242
  257
  274
  293
  314
  385
  410
  437
  466
  497
  530
  566
  604
  645
  689
  735
  785
  837
  893
  953
  1,016
  1,082
  1,153
  1,228
  1,307

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
  2,994
  3,066
  3,147
  3,238
  3,338
  3,448
  3,567
  3,696
  3,835
  3,984
  4,142
  4,312
  4,492
  4,684
  4,887
  5,102
  5,330
  5,570
  5,825
  6,093
  6,376
  6,675
  6,989
  7,321
  7,670
  8,038
  8,424
  8,831
  9,260
  9,710
Adjusted assets (=assets-cash), $m
  2,994
  3,066
  3,147
  3,238
  3,338
  3,448
  3,567
  3,696
  3,835
  3,984
  4,142
  4,312
  4,492
  4,684
  4,887
  5,102
  5,330
  5,570
  5,825
  6,093
  6,376
  6,675
  6,989
  7,321
  7,670
  8,038
  8,424
  8,831
  9,260
  9,710
Revenue / Adjusted assets
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
  2.634
Average production assets, $m
  1,104
  1,131
  1,161
  1,194
  1,231
  1,272
  1,316
  1,363
  1,414
  1,469
  1,528
  1,590
  1,657
  1,727
  1,802
  1,881
  1,965
  2,054
  2,148
  2,247
  2,351
  2,461
  2,577
  2,700
  2,828
  2,964
  3,107
  3,257
  3,415
  3,581
Working capital, $m
  663
  678
  696
  716
  739
  763
  789
  818
  849
  881
  917
  954
  994
  1,036
  1,081
  1,129
  1,179
  1,232
  1,289
  1,348
  1,411
  1,477
  1,546
  1,620
  1,697
  1,778
  1,864
  1,954
  2,049
  2,148
Total debt, $m
  1,612
  1,669
  1,734
  1,806
  1,886
  1,973
  2,069
  2,171
  2,282
  2,400
  2,527
  2,662
  2,806
  2,958
  3,120
  3,292
  3,473
  3,665
  3,868
  4,081
  4,307
  4,545
  4,796
  5,060
  5,338
  5,631
  5,940
  6,264
  6,605
  6,964
Total liabilities, $m
  2,387
  2,444
  2,508
  2,581
  2,661
  2,748
  2,843
  2,946
  3,056
  3,175
  3,302
  3,437
  3,580
  3,733
  3,895
  4,066
  4,248
  4,440
  4,642
  4,856
  5,082
  5,320
  5,571
  5,835
  6,113
  6,406
  6,714
  7,039
  7,380
  7,739
Total equity, $m
  608
  622
  639
  657
  678
  700
  724
  750
  778
  809
  841
  875
  912
  951
  992
  1,036
  1,082
  1,131
  1,182
  1,237
  1,294
  1,355
  1,419
  1,486
  1,557
  1,632
  1,710
  1,793
  1,880
  1,971
Total liabilities and equity, $m
  2,995
  3,066
  3,147
  3,238
  3,339
  3,448
  3,567
  3,696
  3,834
  3,984
  4,143
  4,312
  4,492
  4,684
  4,887
  5,102
  5,330
  5,571
  5,824
  6,093
  6,376
  6,675
  6,990
  7,321
  7,670
  8,038
  8,424
  8,832
  9,260
  9,710
Debt-to-equity ratio
  2.650
  2.680
  2.710
  2.750
  2.780
  2.820
  2.860
  2.890
  2.930
  2.970
  3.000
  3.040
  3.080
  3.110
  3.150
  3.180
  3.210
  3.240
  3.270
  3.300
  3.330
  3.350
  3.380
  3.400
  3.430
  3.450
  3.470
  3.490
  3.510
  3.530
Adjusted equity ratio
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203
  0.203

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  194
  200
  208
  217
  229
  242
  257
  274
  293
  314
  385
  410
  437
  466
  497
  530
  566
  604
  645
  689
  735
  785
  837
  893
  953
  1,016
  1,082
  1,153
  1,228
  1,307
Depreciation, amort., depletion, $m
  138
  140
  142
  144
  146
  149
  152
  155
  158
  162
  99
  103
  107
  111
  116
  121
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  231
Funds from operations, $m
  332
  340
  349
  361
  375
  391
  409
  429
  451
  476
  484
  513
  544
  577
  613
  651
  693
  737
  784
  834
  887
  943
  1,004
  1,067
  1,135
  1,207
  1,283
  1,363
  1,448
  1,538
Change in working capital, $m
  14
  16
  18
  20
  22
  24
  26
  29
  31
  33
  35
  37
  40
  42
  45
  48
  50
  53
  56
  59
  63
  66
  70
  73
  77
  81
  86
  90
  95
  100
Cash from operations, $m
  318
  324
  331
  341
  353
  367
  383
  401
  421
  443
  449
  475
  504
  535
  568
  604
  642
  683
  727
  774
  824
  877
  934
  994
  1,058
  1,125
  1,197
  1,273
  1,354
  1,439
Maintenance CAPEX, $m
  -70
  -71
  -73
  -75
  -77
  -79
  -82
  -85
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -127
  -133
  -139
  -145
  -152
  -159
  -166
  -174
  -182
  -191
  -200
  -210
  -220
New CAPEX, $m
  -20
  -26
  -30
  -33
  -37
  -40
  -44
  -48
  -51
  -55
  -59
  -62
  -66
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -129
  -136
  -143
  -150
  -158
  -166
Cash from investing activities, $m
  -90
  -97
  -103
  -108
  -114
  -119
  -126
  -133
  -139
  -146
  -154
  -161
  -169
  -178
  -186
  -195
  -205
  -216
  -227
  -238
  -249
  -262
  -275
  -288
  -303
  -318
  -334
  -350
  -368
  -386
Free cash flow, $m
  228
  226
  229
  233
  239
  247
  257
  268
  282
  297
  295
  314
  335
  357
  382
  408
  437
  468
  501
  537
  575
  616
  659
  705
  755
  807
  863
  923
  986
  1,052
Issuance/(repayment) of debt, $m
  51
  57
  65
  72
  80
  87
  95
  103
  111
  118
  127
  135
  144
  153
  162
  171
  181
  192
  203
  214
  226
  238
  251
  264
  278
  293
  308
  324
  341
  359
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  
  51
  57
  65
  72
  80
  87
  95
  103
  111
  118
  127
  135
  144
  153
  162
  171
  181
  192
  203
  214
  226
  238
  251
  264
  278
  293
  308
  324
  341
  359
Total cash flow (excl. dividends), $m
  279
  283
  293
  305
  319
  335
  352
  371
  392
  415
  422
  449
  478
  510
  543
  580
  618
  660
  704
  751
  800
  854
  910
  970
  1,033
  1,100
  1,172
  1,247
  1,327
  1,411
Retained Cash Flow (-), $m
  -12
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -54
  -57
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -91
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
  267
  269
  277
  287
  299
  312
  328
  345
  364
  385
  390
  415
  442
  471
  502
  536
  572
  611
  652
  696
  743
  793
  846
  902
  962
  1,026
  1,093
  1,164
  1,240
  1,320
Discount rate, %
  9.90
  10.40
  10.91
  11.46
  12.03
  12.64
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.83
  25.02
  26.27
  27.58
  28.96
  30.41
  31.93
  33.52
  35.20
  36.96
  38.81
  40.75
PV of cash for distribution, $m
  243
  220
  203
  186
  169
  153
  137
  121
  107
  92
  75
  63
  53
  43
  34
  27
  21
  15
  11
  8
  6
  4
  2
  2
  1
  1
  0
  0
  0
  0
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

Builders FirstSource, Inc. is a supplier and manufacturer of building materials, manufactured components and construction services to professional contractors, sub-contractors, remodelers and consumers. The Company's operating segments include Northeast, Southeast, South and West. As of December 31, 2016, it operated at 400 locations in 40 states across the United States. It offers an integrated solution to its customers providing manufacturing, supply and installation of a range of structural and related building products. Its manufactured products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows, custom millwork and trim, as well as engineered wood that it designs, cuts and assembles for each home. It assembles interior and exterior doors into pre-hung units. Additionally, it supplies customers with offering of professional grade building products, such as dimensional lumber and lumber sheet goods, and various window, door and millwork lines.

FINANCIAL RATIOS  of  Builders FirstSource, Inc. (BLDR)

Valuation Ratios
P/E Ratio 14.7
Price to Sales 0.3
Price to Book 6.8
Price to Tangible Book
Price to Cash Flow 13.4
Price to Free Cash Flow 18.4
Growth Rates
Sales Growth Rate 78.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.3%
Cap. Spend. - 3 Yr. Gr. Rate 23.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 576.1%
Total Debt to Equity 592.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 49.5%
Ret/ On Assets - 3 Yr. Avg. 20.1%
Return On Total Capital 6.7%
Ret/ On T. Cap. - 3 Yr. Avg. 3.2%
Return On Equity 62.7%
Return On Equity - 3 Yr. Avg. 34.6%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 25.1%
Gross Margin - 3 Yr. Avg. 24.2%
EBITDA Margin 5.2%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 3.7%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. 0.3%
Net Profit Margin 2.3%
Net Profit Margin - 3 Yr. Avg. 0.9%
Effective Tax Rate -554.5%
Eff/ Tax Rate - 3 Yr. Avg. -192.4%
Payout Ratio 0%

BLDR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BLDR stock intrinsic value calculation we used $7725 million for the last fiscal year's total revenue generated by Builders FirstSource, Inc.. The default revenue input number comes from 0001 income statement of Builders FirstSource, Inc.. 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 BLDR stock valuation model: a) initial revenue growth rate of 2.1% 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 9.9%, whose default value for BLDR is calculated based on our internal credit rating of Builders FirstSource, Inc., 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 Builders FirstSource, Inc..
    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 BLDR stock the variable cost ratio is equal to 87.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $584 million in the base year in the intrinsic value calculation for BLDR 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 6.5% for Builders FirstSource, Inc..

Corporate tax rate of 27% is the nominal tax rate for Builders FirstSource, Inc.. 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 BLDR 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 BLDR are equal to 14%.

Life of production assets of 15.5 years is the average useful life of capital assets used in Builders FirstSource, Inc. 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 BLDR is equal to 8.4%. 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 - $596.338 million for Builders FirstSource, Inc. - 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 115.470 million for Builders FirstSource, Inc. 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 Builders FirstSource, Inc. at the current share price and the inputted number of shares is $2.2 billion.

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