Intrinsic value of Ennis - EBF

Previous Close

$20.25

  Intrinsic Value

$27.66

stock screener

  Rating & Target

buy

+37%

  Value-price divergence*

+1092%

Previous close

$20.25

 
Intrinsic value

$27.66

 
Up/down potential

+37%

 
Rating

buy

 
Value-price divergence*

+1092%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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 2017), $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
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.51
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
Revenue, $m
  357
  377
  398
  420
  443
  466
  491
  518
  545
  574
  604
  635
  668
  702
  739
  777
  816
  858
  902
  948
  996
  1,046
  1,099
  1,155
  1,213
  1,275
  1,339
  1,406
  1,477
  1,552
  1,630
Variable operating expenses, $m
 
  247
  260
  274
  288
  303
  319
  336
  353
  371
  390
  403
  424
  446
  469
  493
  518
  545
  573
  602
  633
  665
  698
  734
  771
  810
  850
  893
  938
  985
  1,035
Fixed operating expenses, $m
 
  86
  88
  90
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
Total operating expenses, $m
  316
  333
  348
  364
  381
  398
  416
  436
  455
  476
  498
  513
  537
  562
  588
  615
  643
  673
  704
  736
  771
  806
  843
  882
  923
  966
  1,010
  1,057
  1,106
  1,157
  1,211
Operating income, $m
  41
  44
  50
  56
  62
  68
  75
  82
  89
  97
  106
  121
  131
  141
  151
  162
  173
  185
  198
  212
  226
  241
  257
  273
  291
  309
  329
  350
  371
  394
  418
EBITDA, $m
  54
  60
  66
  72
  78
  85
  93
  100
  108
  117
  126
  135
  145
  156
  167
  179
  191
  204
  218
  232
  248
  264
  281
  299
  317
  337
  358
  380
  404
  428
  454
Interest expense (income), $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
Earnings before tax, $m
  40
  43
  49
  54
  60
  66
  73
  80
  87
  95
  103
  119
  128
  137
  147
  158
  169
  181
  193
  207
  220
  235
  251
  267
  284
  302
  321
  341
  363
  385
  409
Tax expense, $m
  14
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  32
  34
  37
  40
  43
  46
  49
  52
  56
  60
  63
  68
  72
  77
  82
  87
  92
  98
  104
  110
Net income, $m
  2
  32
  36
  40
  44
  48
  53
  58
  64
  69
  75
  87
  93
  100
  108
  115
  123
  132
  141
  151
  161
  172
  183
  195
  207
  221
  235
  249
  265
  281
  298

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  80
  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
  324
  258
  272
  287
  302
  319
  336
  354
  372
  392
  413
  434
  457
  480
  505
  531
  558
  587
  616
  648
  681
  715
  751
  790
  829
  871
  915
  961
  1,010
  1,061
  1,114
Adjusted assets (=assets-cash), $m
  244
  258
  272
  287
  302
  319
  336
  354
  372
  392
  413
  434
  457
  480
  505
  531
  558
  587
  616
  648
  681
  715
  751
  790
  829
  871
  915
  961
  1,010
  1,061
  1,114
Revenue / Adjusted assets
  1.463
  1.461
  1.463
  1.463
  1.467
  1.461
  1.461
  1.463
  1.465
  1.464
  1.462
  1.463
  1.462
  1.463
  1.463
  1.463
  1.462
  1.462
  1.464
  1.463
  1.463
  1.463
  1.463
  1.462
  1.463
  1.464
  1.463
  1.463
  1.462
  1.463
  1.463
Average production assets, $m
  104
  109
  115
  122
  128
  135
  142
  150
  158
  166
  175
  184
  194
  204
  214
  225
  237
  249
  262
  275
  289
  303
  319
  335
  352
  370
  388
  408
  428
  450
  473
Working capital, $m
  119
  41
  43
  46
  48
  51
  54
  56
  59
  63
  66
  69
  73
  77
  81
  85
  89
  94
  98
  103
  109
  114
  120
  126
  132
  139
  146
  153
  161
  169
  178
Total debt, $m
  30
  34
  38
  43
  47
  52
  57
  63
  68
  74
  80
  87
  94
  101
  108
  116
  124
  132
  141
  151
  161
  171
  182
  193
  205
  218
  231
  244
  259
  274
  290
Total liabilities, $m
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
  151
  159
  167
  175
  184
  194
  204
  214
  225
  236
  248
  261
  274
  287
  302
  317
  333
Total equity, $m
  251
  181
  191
  201
  212
  223
  235
  248
  261
  275
  289
  304
  320
  337
  354
  372
  391
  411
  432
  454
  477
  501
  527
  553
  581
  611
  642
  674
  708
  743
  781
Total liabilities and equity, $m
  324
  258
  272
  287
  302
  318
  335
  354
  372
  392
  412
  434
  457
  481
  505
  531
  558
  586
  616
  648
  681
  715
  752
  789
  829
  872
  916
  961
  1,010
  1,060
  1,114
Debt-to-equity ratio
  0.120
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.340
  0.350
  0.350
  0.360
  0.360
  0.360
  0.370
  0.370
  0.370
Adjusted equity ratio
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  32
  36
  40
  44
  48
  53
  58
  64
  69
  75
  87
  93
  100
  108
  115
  123
  132
  141
  151
  161
  172
  183
  195
  207
  221
  235
  249
  265
  281
  298
Depreciation, amort., depletion, $m
  13
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
Funds from operations, $m
  60
  47
  51
  56
  61
  66
  71
  77
  83
  89
  96
  101
  108
  116
  124
  132
  141
  151
  161
  172
  183
  195
  207
  220
  234
  249
  264
  280
  297
  315
  334
Change in working capital, $m
  1
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
Cash from operations, $m
  59
  45
  49
  54
  58
  63
  68
  74
  80
  86
  92
  97
  104
  112
  120
  128
  137
  146
  156
  167
  178
  189
  201
  214
  228
  242
  257
  273
  290
  307
  326
Maintenance CAPEX, $m
  0
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
New CAPEX, $m
  -3
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  86
  -14
  -14
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -22
  -22
  -24
  -25
  -25
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -57
Free cash flow, $m
  145
  31
  35
  38
  42
  47
  51
  56
  60
  66
  71
  75
  81
  87
  94
  101
  108
  116
  125
  134
  143
  153
  163
  174
  185
  198
  210
  224
  238
  253
  269
Issuance/(repayment) of debt, $m
  -10
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
Issuance/(repurchase) of shares, $m
  -6
  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  
  -15
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
Total cash flow (excl. dividends), $m
  130
  35
  39
  43
  47
  51
  56
  61
  66
  71
  77
  81
  88
  94
  101
  109
  117
  125
  134
  143
  153
  163
  174
  185
  197
  210
  223
  238
  253
  268
  285
Retained Cash Flow (-), $m
  48
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
Prev. year cash balance distribution, $m
 
  80
  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
 
  106
  29
  32
  36
  40
  44
  48
  53
  58
  63
  66
  72
  78
  84
  91
  98
  105
  113
  121
  130
  139
  148
  159
  169
  181
  193
  205
  219
  233
  248
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
 
  101
  27
  28
  30
  31
  32
  33
  33
  33
  33
  31
  31
  30
  28
  27
  25
  23
  21
  19
  16
  14
  12
  10
  9
  7
  6
  4
  3
  3
  2
Current shareholders' claim on cash, %
  100
  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
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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 (EBF)

Valuation Ratios
P/E Ratio 257.3
Price to Sales 1.4
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 8.7
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 $357 million for the last fiscal year's total revenue generated by Ennis. The default revenue input number comes from 2017 income statement of Ennis. 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 5.6% 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, 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.
    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 65.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $84 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 3.5% for Ennis.

Corporate tax rate of 27% is the nominal tax rate for Ennis. 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%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Ennis 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 10.9%. 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 - $251 million for Ennis - 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 25.485 million for Ennis 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 at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ ETFs with exposure to Ennis, Inc. : October 17, 2017   [Oct-17-17 09:41AM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : October 6, 2017   [Oct-06-17 10:47AM  Capital Cube]
▶ Ennis posts 2Q profit   [Sep-25-17 09:41PM  Associated Press]
▶ Ennis, Inc. Value Analysis (NYSE:EBF) : August 29, 2017   [Aug-28-17 08:26PM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : August 11, 2017   [Aug-11-17 05:20PM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : July 31, 2017   [Jul-31-17 04:37PM  Capital Cube]
▶ ETFs with exposure to Ennis, Inc. : July 12, 2017   [Jul-12-17 02:27PM  Capital Cube]
▶ Ennis posts 1Q profit   [Jun-26-17 09:56PM  Associated Press]
▶ Ennis, Inc. Value Analysis (NYSE:EBF) : June 20, 2017   [Jun-20-17 03:47PM  Capital Cube]
▶ Ennis, Inc. Declares Quarterly Dividend   [06:30AM  Business Wire]
▶ ETFs with exposure to Ennis, Inc. : May 25, 2017   [May-25-17 12:38PM  Capital Cube]
▶ Ennis posts 4Q profit   [Apr-25-17 06:24AM  Associated Press]
▶ Ennis, Inc. Value Analysis (NYSE:EBF) : April 17, 2017   [Apr-17-17 01:26PM  Capital Cube]
▶ Ennis, Inc. Declares Quarterly Dividend   [Mar-27-17 12:02PM  Business Wire]
▶ ETFs with exposure to Ennis, Inc. : January 12, 2017   [Jan-12-17 01:59PM  Capital Cube]
▶ Ennis posts 3Q profit   [Dec-20-16 05:47PM  Associated Press]
▶ Ennis, Inc. (EBF): Are Hedge Funds Right About This Stock?   [Dec-09-16 03:50AM  at Insider Monkey]
Financial statements of EBF
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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