Intrinsic value of Cubic Corporation - CUB

Previous Close

$68.42

  Intrinsic Value

$130.17

stock screener

  Rating & Target

str. buy

+90%

Previous close

$68.42

 
Intrinsic value

$130.17

 
Up/down potential

+90%

 
Rating

str. buy

We calculate the intrinsic value of CUB 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 2.1

 

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, %
  22.90
  21.11
  19.50
  18.05
  16.74
  15.57
  14.51
  13.56
  12.71
  11.93
  11.24
  10.62
  10.06
  9.55
  9.09
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
Revenue, $m
  1,478
  1,791
  2,140
  2,526
  2,949
  3,408
  3,903
  4,432
  4,995
  5,591
  6,220
  6,880
  7,572
  8,295
  9,049
  9,835
  10,653
  11,504
  12,388
  13,307
  14,262
  15,255
  16,286
  17,359
  18,475
  19,636
  20,845
  22,104
  23,416
  24,785
Variable operating expenses, $m
  1,131
  1,361
  1,618
  1,903
  2,215
  2,553
  2,918
  3,308
  3,723
  4,162
  4,585
  5,072
  5,582
  6,115
  6,671
  7,250
  7,853
  8,480
  9,132
  9,810
  10,514
  11,245
  12,006
  12,796
  13,619
  14,475
  15,366
  16,294
  17,262
  18,270
Fixed operating expenses, $m
  263
  268
  274
  280
  287
  293
  299
  306
  313
  319
  327
  334
  341
  349
  356
  364
  372
  380
  389
  397
  406
  415
  424
  433
  443
  453
  462
  473
  483
  494
Total operating expenses, $m
  1,394
  1,629
  1,892
  2,183
  2,502
  2,846
  3,217
  3,614
  4,036
  4,481
  4,912
  5,406
  5,923
  6,464
  7,027
  7,614
  8,225
  8,860
  9,521
  10,207
  10,920
  11,660
  12,430
  13,229
  14,062
  14,928
  15,828
  16,767
  17,745
  18,764
Operating income, $m
  85
  161
  247
  343
  448
  562
  686
  818
  960
  1,109
  1,308
  1,475
  1,649
  1,832
  2,022
  2,221
  2,428
  2,643
  2,867
  3,100
  3,343
  3,595
  3,857
  4,129
  4,413
  4,708
  5,016
  5,337
  5,671
  6,020
EBITDA, $m
  161
  244
  338
  443
  558
  683
  818
  963
  1,118
  1,282
  1,455
  1,637
  1,827
  2,027
  2,235
  2,453
  2,679
  2,914
  3,159
  3,414
  3,678
  3,954
  4,240
  4,538
  4,848
  5,171
  5,507
  5,857
  6,223
  6,604
Interest expense (income), $m
  0
  11
  19
  27
  37
  47
  59
  71
  84
  99
  114
  130
  147
  165
  184
  204
  224
  245
  268
  291
  315
  339
  365
  392
  420
  449
  480
  511
  544
  578
  614
Earnings before tax, $m
  74
  143
  220
  306
  401
  504
  615
  734
  861
  995
  1,178
  1,327
  1,484
  1,648
  1,819
  1,997
  2,183
  2,376
  2,577
  2,786
  3,003
  3,229
  3,464
  3,709
  3,964
  4,229
  4,505
  4,793
  5,093
  5,407
Tax expense, $m
  20
  39
  59
  83
  108
  136
  166
  198
  232
  269
  318
  358
  401
  445
  491
  539
  589
  641
  696
  752
  811
  872
  935
  1,001
  1,070
  1,142
  1,216
  1,294
  1,375
  1,460
Net income, $m
  54
  104
  161
  224
  293
  368
  449
  536
  628
  727
  860
  969
  1,083
  1,203
  1,328
  1,458
  1,593
  1,734
  1,881
  2,034
  2,192
  2,357
  2,529
  2,708
  2,893
  3,087
  3,289
  3,499
  3,718
  3,947

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
  1,604
  1,942
  2,321
  2,740
  3,198
  3,696
  4,233
  4,807
  5,418
  6,064
  6,746
  7,462
  8,212
  8,997
  9,815
  10,667
  11,555
  12,477
  13,436
  14,433
  15,469
  16,545
  17,664
  18,827
  20,038
  21,297
  22,608
  23,974
  25,397
  26,881
Adjusted assets (=assets-cash), $m
  1,604
  1,942
  2,321
  2,740
  3,198
  3,696
  4,233
  4,807
  5,418
  6,064
  6,746
  7,462
  8,212
  8,997
  9,815
  10,667
  11,555
  12,477
  13,436
  14,433
  15,469
  16,545
  17,664
  18,827
  20,038
  21,297
  22,608
  23,974
  25,397
  26,881
Revenue / Adjusted assets
  0.921
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
  0.922
Average production assets, $m
  393
  476
  569
  672
  784
  907
  1,038
  1,179
  1,329
  1,487
  1,654
  1,830
  2,014
  2,206
  2,407
  2,616
  2,834
  3,060
  3,295
  3,540
  3,794
  4,058
  4,332
  4,617
  4,914
  5,223
  5,545
  5,880
  6,229
  6,593
Working capital, $m
  245
  297
  355
  419
  490
  566
  648
  736
  829
  928
  1,032
  1,142
  1,257
  1,377
  1,502
  1,633
  1,768
  1,910
  2,056
  2,209
  2,368
  2,532
  2,704
  2,882
  3,067
  3,260
  3,460
  3,669
  3,887
  4,114
Total debt, $m
  347
  503
  679
  873
  1,085
  1,315
  1,564
  1,830
  2,112
  2,412
  2,727
  3,059
  3,406
  3,770
  4,148
  4,543
  4,954
  5,381
  5,825
  6,287
  6,766
  7,264
  7,783
  8,321
  8,882
  9,465
  10,072
  10,704
  11,363
  12,050
Total liabilities, $m
  742
  899
  1,075
  1,268
  1,481
  1,711
  1,960
  2,226
  2,508
  2,808
  3,123
  3,455
  3,802
  4,165
  4,544
  4,939
  5,350
  5,777
  6,221
  6,682
  7,162
  7,660
  8,178
  8,717
  9,277
  9,861
  10,468
  11,100
  11,759
  12,446
Total equity, $m
  861
  1,043
  1,246
  1,471
  1,718
  1,985
  2,273
  2,581
  2,909
  3,256
  3,623
  4,007
  4,410
  4,831
  5,271
  5,728
  6,205
  6,700
  7,215
  7,751
  8,307
  8,885
  9,486
  10,110
  10,760
  11,437
  12,141
  12,874
  13,638
  14,435
Total liabilities and equity, $m
  1,603
  1,942
  2,321
  2,739
  3,199
  3,696
  4,233
  4,807
  5,417
  6,064
  6,746
  7,462
  8,212
  8,996
  9,815
  10,667
  11,555
  12,477
  13,436
  14,433
  15,469
  16,545
  17,664
  18,827
  20,037
  21,298
  22,609
  23,974
  25,397
  26,881
Debt-to-equity ratio
  0.400
  0.480
  0.540
  0.590
  0.630
  0.660
  0.690
  0.710
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.790
  0.800
  0.800
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
Adjusted equity ratio
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537
  0.537

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  54
  104
  161
  224
  293
  368
  449
  536
  628
  727
  860
  969
  1,083
  1,203
  1,328
  1,458
  1,593
  1,734
  1,881
  2,034
  2,192
  2,357
  2,529
  2,708
  2,893
  3,087
  3,289
  3,499
  3,718
  3,947
Depreciation, amort., depletion, $m
  76
  83
  91
  100
  110
  121
  133
  145
  158
  172
  146
  162
  178
  195
  213
  232
  251
  271
  292
  313
  336
  359
  383
  409
  435
  462
  491
  520
  551
  583
Funds from operations, $m
  129
  187
  252
  324
  403
  489
  581
  681
  787
  899
  1,006
  1,131
  1,261
  1,398
  1,541
  1,689
  1,844
  2,005
  2,173
  2,347
  2,528
  2,716
  2,912
  3,116
  3,328
  3,549
  3,779
  4,019
  4,269
  4,530
Change in working capital, $m
  46
  52
  58
  64
  70
  76
  82
  88
  93
  99
  104
  110
  115
  120
  125
  130
  136
  141
  147
  153
  159
  165
  171
  178
  185
  193
  201
  209
  218
  227
Cash from operations, $m
  84
  135
  194
  260
  332
  412
  499
  593
  693
  800
  902
  1,021
  1,147
  1,278
  1,415
  1,559
  1,708
  1,864
  2,026
  2,194
  2,370
  2,552
  2,741
  2,938
  3,143
  3,357
  3,579
  3,810
  4,052
  4,303
Maintenance CAPEX, $m
  -28
  -35
  -42
  -50
  -59
  -69
  -80
  -92
  -104
  -118
  -132
  -146
  -162
  -178
  -195
  -213
  -232
  -251
  -271
  -292
  -313
  -336
  -359
  -383
  -409
  -435
  -462
  -491
  -520
  -551
New CAPEX, $m
  -73
  -83
  -93
  -103
  -113
  -122
  -132
  -141
  -150
  -159
  -167
  -176
  -184
  -192
  -201
  -209
  -218
  -226
  -235
  -244
  -254
  -264
  -274
  -285
  -297
  -309
  -322
  -335
  -349
  -364
Cash from investing activities, $m
  -101
  -118
  -135
  -153
  -172
  -191
  -212
  -233
  -254
  -277
  -299
  -322
  -346
  -370
  -396
  -422
  -450
  -477
  -506
  -536
  -567
  -600
  -633
  -668
  -706
  -744
  -784
  -826
  -869
  -915
Free cash flow, $m
  -18
  17
  59
  106
  160
  221
  287
  360
  439
  524
  603
  699
  801
  907
  1,019
  1,137
  1,259
  1,387
  1,520
  1,658
  1,802
  1,952
  2,108
  2,269
  2,438
  2,613
  2,795
  2,985
  3,182
  3,388
Issuance/(repayment) of debt, $m
  138
  157
  175
  194
  212
  231
  248
  266
  283
  299
  316
  332
  347
  363
  379
  395
  411
  427
  444
  461
  480
  498
  518
  539
  560
  583
  607
  632
  659
  687
Issuance/(repurchase) of shares, $m
  107
  78
  43
  1
  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  
  245
  235
  218
  195
  212
  231
  248
  266
  283
  299
  316
  332
  347
  363
  379
  395
  411
  427
  444
  461
  480
  498
  518
  539
  560
  583
  607
  632
  659
  687
Total cash flow (excl. dividends), $m
  227
  252
  277
  302
  373
  451
  536
  626
  722
  823
  919
  1,031
  1,148
  1,271
  1,398
  1,531
  1,670
  1,814
  1,964
  2,120
  2,282
  2,450
  2,626
  2,808
  2,998
  3,196
  3,402
  3,617
  3,841
  4,075
Retained Cash Flow (-), $m
  -161
  -182
  -203
  -225
  -246
  -267
  -288
  -308
  -328
  -347
  -366
  -385
  -403
  -421
  -439
  -458
  -476
  -495
  -515
  -535
  -556
  -578
  -601
  -625
  -650
  -676
  -704
  -733
  -764
  -797
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
  66
  70
  73
  77
  127
  184
  248
  318
  394
  476
  553
  646
  745
  849
  959
  1,074
  1,194
  1,319
  1,449
  1,585
  1,726
  1,872
  2,025
  2,183
  2,348
  2,520
  2,698
  2,884
  3,077
  3,278
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  63
  64
  63
  62
  96
  131
  163
  192
  218
  239
  250
  260
  266
  265
  259
  249
  235
  217
  197
  176
  154
  132
  111
  92
  74
  58
  45
  34
  25
  18
Current shareholders' claim on cash, %
  95.2
  92.5
  91.3
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2

Cubic Corporation (Cubic) designs, integrates and operates systems, products and services that provide situational awareness for its customers in the transportation and defense industries. The Company operates in three business segments across the global transportation and defense markets, which include Cubic Transportation Systems (CTS), Cubic Global Defense (CGD) and Cubic Global Defense Services (CGD Services). The Company's CTS segment is a systems integrator of payment and information technology and services for travel solutions. The Company's CGD Systems is focused on two primary lines of business: training systems and secure communications (SC) products. The Company's CGD Services segment is a provider of training, operations, intelligence, maintenance, technical and other support services to the United States government and its agencies and allied nations. It also provides cross-domain hardware solutions to address multi-level security challenges across common networks.

FINANCIAL RATIOS  of  Cubic Corporation (CUB)

Valuation Ratios
P/E Ratio -168.7
Price to Sales 1.2
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 74.2
Price to Free Cash Flow -154.7
Growth Rates
Sales Growth Rate 1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.6%
Cap. Spend. - 3 Yr. Gr. Rate 16.8%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 29%
Total Debt to Equity 37%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.8%
Ret/ On Assets - 3 Yr. Avg. 0.4%
Return On Total Capital -1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 0.6%
Return On Equity -1.6%
Return On Equity - 3 Yr. Avg. 0.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 24.5%
Gross Margin - 3 Yr. Avg. 24%
EBITDA Margin 3.7%
EBITDA Margin - 3 Yr. Avg. 4.7%
Operating Margin 1.2%
Oper. Margin - 3 Yr. Avg. 2.3%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. 1.6%
Net Profit Margin -0.7%
Net Profit Margin - 3 Yr. Avg. 0.3%
Effective Tax Rate 375%
Eff/ Tax Rate - 3 Yr. Avg. 190.5%
Payout Ratio -63.6%

CUB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CUB stock intrinsic value calculation we used $1203 million for the last fiscal year's total revenue generated by Cubic Corporation. The default revenue input number comes from 0001 income statement of Cubic 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 CUB stock valuation model: a) initial revenue growth rate of 22.9% 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 4.6%, whose default value for CUB is calculated based on our internal credit rating of Cubic 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 Cubic 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 CUB stock the variable cost ratio is equal to 77.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $257 million in the base year in the intrinsic value calculation for CUB 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 Cubic Corporation.

Corporate tax rate of 27% is the nominal tax rate for Cubic 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 CUB 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 CUB are equal to 26.6%.

Life of production assets of 11.3 years is the average useful life of capital assets used in Cubic 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 CUB is equal to 16.6%. 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 - $700.121 million for Cubic 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 31.171 million for Cubic 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 Cubic Corporation at the current share price and the inputted number of shares is $2.1 billion.

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