Intrinsic value of Ennis, Inc. - EBF

Previous Close

$20.38

  Intrinsic Value

$91.07

stock screener

  Rating & Target

str. buy

+347%

Previous close

$20.38

 
Intrinsic value

$91.07

 
Up/down potential

+347%

 
Rating

str. buy

We calculate the intrinsic value of EBF 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 0.5

 

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, %
  15.50
  14.45
  13.51
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
Revenue, $m
  427
  489
  555
  625
  700
  778
  860
  947
  1,037
  1,131
  1,229
  1,331
  1,437
  1,547
  1,661
  1,780
  1,904
  2,033
  2,166
  2,305
  2,450
  2,601
  2,758
  2,921
  3,092
  3,269
  3,455
  3,649
  3,852
  4,063
Variable operating expenses, $m
  211
  239
  270
  303
  337
  373
  412
  452
  494
  537
  571
  618
  667
  719
  772
  827
  885
  944
  1,006
  1,071
  1,138
  1,208
  1,281
  1,357
  1,436
  1,519
  1,605
  1,695
  1,789
  1,888
Fixed operating expenses, $m
  145
  148
  152
  155
  158
  162
  165
  169
  173
  177
  180
  184
  188
  193
  197
  201
  206
  210
  215
  219
  224
  229
  234
  239
  245
  250
  256
  261
  267
  273
Total operating expenses, $m
  356
  387
  422
  458
  495
  535
  577
  621
  667
  714
  751
  802
  855
  912
  969
  1,028
  1,091
  1,154
  1,221
  1,290
  1,362
  1,437
  1,515
  1,596
  1,681
  1,769
  1,861
  1,956
  2,056
  2,161
Operating income, $m
  72
  102
  134
  168
  204
  243
  283
  326
  370
  417
  478
  528
  581
  636
  693
  752
  814
  878
  945
  1,015
  1,088
  1,163
  1,242
  1,325
  1,411
  1,501
  1,594
  1,693
  1,795
  1,903
EBITDA, $m
  94
  125
  159
  195
  233
  274
  316
  361
  408
  457
  507
  561
  616
  673
  733
  796
  860
  928
  998
  1,071
  1,147
  1,227
  1,309
  1,396
  1,486
  1,580
  1,679
  1,782
  1,889
  2,002
Interest expense (income), $m
  1
  2
  2
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
Earnings before tax, $m
  70
  99
  131
  164
  200
  238
  278
  319
  363
  409
  468
  518
  570
  624
  679
  738
  798
  861
  927
  995
  1,067
  1,141
  1,219
  1,299
  1,384
  1,472
  1,564
  1,660
  1,761
  1,867
Tax expense, $m
  19
  27
  35
  44
  54
  64
  75
  86
  98
  110
  126
  140
  154
  168
  183
  199
  216
  233
  250
  269
  288
  308
  329
  351
  374
  397
  422
  448
  476
  504
Net income, $m
  51
  73
  96
  120
  146
  174
  203
  233
  265
  298
  342
  378
  416
  455
  496
  539
  583
  629
  677
  727
  779
  833
  890
  949
  1,010
  1,075
  1,142
  1,212
  1,286
  1,363

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
  304
  347
  394
  444
  497
  553
  611
  672
  736
  803
  873
  945
  1,020
  1,099
  1,180
  1,264
  1,352
  1,444
  1,539
  1,637
  1,740
  1,847
  1,958
  2,075
  2,196
  2,322
  2,454
  2,592
  2,735
  2,886
Adjusted assets (=assets-cash), $m
  304
  347
  394
  444
  497
  553
  611
  672
  736
  803
  873
  945
  1,020
  1,099
  1,180
  1,264
  1,352
  1,444
  1,539
  1,637
  1,740
  1,847
  1,958
  2,075
  2,196
  2,322
  2,454
  2,592
  2,735
  2,886
Revenue / Adjusted assets
  1.405
  1.409
  1.409
  1.408
  1.408
  1.407
  1.408
  1.409
  1.409
  1.408
  1.408
  1.408
  1.409
  1.408
  1.408
  1.408
  1.408
  1.408
  1.407
  1.408
  1.408
  1.408
  1.409
  1.408
  1.408
  1.408
  1.408
  1.408
  1.408
  1.408
Average production assets, $m
  126
  144
  164
  184
  206
  230
  254
  279
  306
  334
  362
  393
  424
  456
  490
  525
  562
  600
  639
  680
  723
  767
  813
  862
  912
  965
  1,019
  1,076
  1,136
  1,199
Working capital, $m
  43
  49
  56
  63
  71
  79
  87
  96
  105
  114
  124
  134
  145
  156
  168
  180
  192
  205
  219
  233
  247
  263
  279
  295
  312
  330
  349
  369
  389
  410
Total debt, $m
  41
  52
  64
  77
  90
  105
  120
  136
  152
  169
  187
  206
  226
  246
  267
  289
  311
  335
  359
  385
  411
  439
  468
  498
  529
  561
  595
  631
  668
  707
Total liabilities, $m
  78
  90
  102
  115
  128
  143
  158
  173
  190
  207
  225
  244
  263
  283
  304
  326
  349
  372
  397
  422
  449
  477
  505
  535
  567
  599
  633
  669
  706
  745
Total equity, $m
  225
  258
  293
  330
  369
  410
  453
  499
  546
  596
  648
  701
  757
  815
  876
  938
  1,003
  1,071
  1,142
  1,215
  1,291
  1,371
  1,453
  1,539
  1,629
  1,723
  1,821
  1,923
  2,030
  2,141
Total liabilities and equity, $m
  303
  348
  395
  445
  497
  553
  611
  672
  736
  803
  873
  945
  1,020
  1,098
  1,180
  1,264
  1,352
  1,443
  1,539
  1,637
  1,740
  1,848
  1,958
  2,074
  2,196
  2,322
  2,454
  2,592
  2,736
  2,886
Debt-to-equity ratio
  0.180
  0.200
  0.220
  0.230
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742
  0.742

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  51
  73
  96
  120
  146
  174
  203
  233
  265
  298
  342
  378
  416
  455
  496
  539
  583
  629
  677
  727
  779
  833
  890
  949
  1,010
  1,075
  1,142
  1,212
  1,286
  1,363
Depreciation, amort., depletion, $m
  22
  24
  26
  27
  29
  31
  33
  35
  37
  40
  30
  32
  35
  38
  41
  43
  46
  50
  53
  56
  60
  63
  67
  71
  75
  80
  84
  89
  94
  99
Funds from operations, $m
  74
  96
  121
  147
  175
  205
  236
  268
  302
  338
  372
  411
  451
  493
  537
  582
  629
  678
  730
  783
  838
  896
  957
  1,020
  1,086
  1,154
  1,226
  1,301
  1,380
  1,462
Change in working capital, $m
  6
  6
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
Cash from operations, $m
  68
  90
  114
  140
  168
  197
  227
  260
  293
  328
  362
  400
  440
  482
  525
  570
  617
  665
  716
  769
  824
  881
  941
  1,003
  1,068
  1,136
  1,207
  1,282
  1,359
  1,440
Maintenance CAPEX, $m
  -9
  -10
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -35
  -38
  -41
  -43
  -46
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -80
  -84
  -89
  -94
New CAPEX, $m
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
Cash from investing activities, $m
  -26
  -28
  -31
  -35
  -37
  -40
  -43
  -46
  -50
  -53
  -57
  -60
  -63
  -68
  -72
  -76
  -79
  -84
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
  -135
  -141
  -149
  -156
Free cash flow, $m
  42
  62
  83
  106
  131
  157
  184
  213
  244
  275
  306
  340
  376
  414
  453
  494
  537
  581
  627
  675
  725
  777
  831
  888
  947
  1,008
  1,073
  1,140
  1,210
  1,284
Issuance/(repayment) of debt, $m
  11
  11
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
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  
  11
  11
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
Total cash flow (excl. dividends), $m
  52
  73
  95
  119
  144
  171
  199
  229
  260
  293
  323
  359
  396
  434
  474
  516
  559
  605
  652
  701
  751
  805
  860
  918
  978
  1,041
  1,107
  1,176
  1,248
  1,323
Retained Cash Flow (-), $m
  -30
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -83
  -86
  -90
  -94
  -98
  -102
  -107
  -112
Prev. year cash balance distribution, $m
  67
  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
  89
  40
  60
  82
  105
  130
  156
  183
  213
  243
  272
  305
  340
  376
  414
  453
  494
  537
  581
  627
  675
  725
  777
  832
  888
  947
  1,009
  1,073
  1,141
  1,211
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
  85
  37
  52
  67
  81
  94
  105
  115
  122
  127
  129
  130
  129
  126
  122
  115
  108
  99
  89
  80
  70
  60
  51
  42
  35
  28
  22
  17
  12
  9
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

Ennis, Inc. and its subsidiaries are engaged in the production and sale of printed business products, business forms and other business products. The Company operates through Print segment, which is engaged in printing, manufacturing and selling a range of business forms and other business products to distributors located throughout the United States primarily through independent dealers. The Print Segment sells products, including snap sets, continuous forms, laser cut sheets, checks, commercial printing, multimedia packaging, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs. The Company has network of 56 facilities across 21 states.

FINANCIAL RATIOS  of  Ennis, Inc. (EBF)

Valuation Ratios
P/E Ratio 258.9
Price to Sales 1.5
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 9.2
Growth Rates
Sales Growth Rate -7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -9.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 12%
Total Debt to Equity 12%
Interest Coverage 41
Management Effectiveness
Return On Assets 0.7%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0.7%
Return On Equity - 3 Yr. Avg. -0.3%
Asset Turnover 1
Profitability Ratios
Gross Margin 29.1%
Gross Margin - 3 Yr. Avg. 29.8%
EBITDA Margin 15.1%
EBITDA Margin - 3 Yr. Avg. 16.6%
Operating Margin 11.5%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 11.2%
Pre-Tax Margin - 3 Yr. Avg. 12.9%
Net Profit Margin 0.6%
Net Profit Margin - 3 Yr. Avg. -0.7%
Effective Tax Rate 35%
Eff/ Tax Rate - 3 Yr. Avg. 36.4%
Payout Ratio 2850%

EBF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EBF stock intrinsic value calculation we used $370 million for the last fiscal year's total revenue generated by Ennis, Inc.. The default revenue input number comes from 0001 income statement of Ennis, 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 EBF stock valuation model: a) initial revenue growth rate of 15.5% 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 EBF is calculated based on our internal credit rating of Ennis, 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 Ennis, 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 EBF stock the variable cost ratio is equal to 49.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $142 million in the base year in the intrinsic value calculation for EBF 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 Ennis, Inc..

Corporate tax rate of 27% is the nominal tax rate for Ennis, 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 EBF 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 EBF are equal to 29.5%.

Life of production assets of 12.1 years is the average useful life of capital assets used in Ennis, 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 EBF is equal to 10.1%. 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 - $261.704 million for Ennis, 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 26.124 million for Ennis, 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 Ennis, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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