Intrinsic value of Echo Global Logistics, Inc. - ECHO

Previous Close

$20.53

  Intrinsic Value

$25.01

stock screener

  Rating & Target

buy

+22%

Previous close

$20.53

 
Intrinsic value

$25.01

 
Up/down potential

+22%

 
Rating

buy

We calculate the intrinsic value of ECHO 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 0.6

 

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, %
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  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
Revenue, $m
  2,596
  2,759
  2,928
  3,104
  3,288
  3,479
  3,679
  3,888
  4,106
  4,333
  4,571
  4,820
  5,080
  5,352
  5,637
  5,935
  6,247
  6,574
  6,916
  7,275
  7,651
  8,046
  8,459
  8,892
  9,347
  9,824
  10,324
  10,848
  11,399
  11,976
Variable operating expenses, $m
  2,414
  2,565
  2,722
  2,885
  3,056
  3,233
  3,419
  3,612
  3,814
  4,025
  4,240
  4,470
  4,711
  4,964
  5,228
  5,504
  5,794
  6,097
  6,415
  6,747
  7,096
  7,462
  7,845
  8,247
  8,669
  9,111
  9,575
  10,061
  10,572
  11,107
Fixed operating expenses, $m
  123
  125
  128
  131
  134
  137
  140
  143
  146
  149
  152
  156
  159
  163
  166
  170
  174
  178
  181
  185
  190
  194
  198
  202
  207
  211
  216
  221
  226
  231
Total operating expenses, $m
  2,537
  2,690
  2,850
  3,016
  3,190
  3,370
  3,559
  3,755
  3,960
  4,174
  4,392
  4,626
  4,870
  5,127
  5,394
  5,674
  5,968
  6,275
  6,596
  6,932
  7,286
  7,656
  8,043
  8,449
  8,876
  9,322
  9,791
  10,282
  10,798
  11,338
Operating income, $m
  59
  69
  78
  88
  99
  109
  121
  133
  146
  159
  179
  194
  209
  225
  243
  261
  279
  299
  320
  342
  366
  390
  416
  443
  471
  501
  533
  566
  601
  638
EBITDA, $m
  88
  98
  109
  121
  133
  145
  158
  172
  187
  202
  218
  235
  252
  271
  290
  311
  332
  355
  379
  404
  430
  458
  487
  518
  551
  585
  621
  658
  698
  740
Interest expense (income), $m
  7
  14
  17
  20
  22
  25
  28
  31
  34
  37
  41
  44
  48
  52
  56
  61
  65
  70
  75
  80
  85
  91
  97
  103
  110
  116
  124
  131
  139
  147
  156
Earnings before tax, $m
  45
  52
  59
  66
  74
  82
  90
  99
  108
  118
  135
  146
  157
  169
  182
  196
  210
  225
  240
  257
  275
  293
  313
  333
  355
  378
  402
  427
  454
  482
Tax expense, $m
  12
  14
  16
  18
  20
  22
  24
  27
  29
  32
  36
  39
  42
  46
  49
  53
  57
  61
  65
  69
  74
  79
  84
  90
  96
  102
  108
  115
  123
  130
Net income, $m
  33
  38
  43
  48
  54
  60
  66
  72
  79
  86
  98
  106
  115
  124
  133
  143
  153
  164
  176
  188
  200
  214
  228
  243
  259
  276
  293
  312
  331
  352

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
  935
  993
  1,054
  1,117
  1,184
  1,253
  1,324
  1,400
  1,478
  1,560
  1,645
  1,735
  1,829
  1,927
  2,029
  2,136
  2,249
  2,366
  2,490
  2,619
  2,754
  2,896
  3,045
  3,201
  3,365
  3,536
  3,716
  3,905
  4,103
  4,311
Adjusted assets (=assets-cash), $m
  935
  993
  1,054
  1,117
  1,184
  1,253
  1,324
  1,400
  1,478
  1,560
  1,645
  1,735
  1,829
  1,927
  2,029
  2,136
  2,249
  2,366
  2,490
  2,619
  2,754
  2,896
  3,045
  3,201
  3,365
  3,536
  3,716
  3,905
  4,103
  4,311
Revenue / Adjusted assets
  2.776
  2.778
  2.778
  2.779
  2.777
  2.777
  2.779
  2.777
  2.778
  2.778
  2.779
  2.778
  2.777
  2.777
  2.778
  2.779
  2.778
  2.779
  2.778
  2.778
  2.778
  2.778
  2.778
  2.778
  2.778
  2.778
  2.778
  2.778
  2.778
  2.778
Average production assets, $m
  291
  309
  328
  348
  368
  390
  412
  435
  460
  485
  512
  540
  569
  599
  631
  665
  700
  736
  775
  815
  857
  901
  947
  996
  1,047
  1,100
  1,156
  1,215
  1,277
  1,341
Working capital, $m
  91
  97
  102
  109
  115
  122
  129
  136
  144
  152
  160
  169
  178
  187
  197
  208
  219
  230
  242
  255
  268
  282
  296
  311
  327
  344
  361
  380
  399
  419
Total debt, $m
  214
  247
  281
  316
  353
  391
  431
  473
  517
  562
  610
  659
  711
  766
  823
  883
  945
  1,010
  1,079
  1,151
  1,226
  1,305
  1,388
  1,475
  1,566
  1,661
  1,761
  1,866
  1,976
  2,092
Total liabilities, $m
  520
  552
  586
  621
  658
  696
  736
  778
  822
  867
  915
  965
  1,017
  1,071
  1,128
  1,188
  1,250
  1,316
  1,384
  1,456
  1,531
  1,610
  1,693
  1,780
  1,871
  1,966
  2,066
  2,171
  2,281
  2,397
Total equity, $m
  415
  441
  468
  496
  525
  556
  588
  621
  656
  693
  731
  770
  812
  855
  901
  949
  998
  1,051
  1,105
  1,163
  1,223
  1,286
  1,352
  1,421
  1,494
  1,570
  1,650
  1,734
  1,822
  1,914
Total liabilities and equity, $m
  935
  993
  1,054
  1,117
  1,183
  1,252
  1,324
  1,399
  1,478
  1,560
  1,646
  1,735
  1,829
  1,926
  2,029
  2,137
  2,248
  2,367
  2,489
  2,619
  2,754
  2,896
  3,045
  3,201
  3,365
  3,536
  3,716
  3,905
  4,103
  4,311
Debt-to-equity ratio
  0.520
  0.560
  0.600
  0.640
  0.670
  0.700
  0.730
  0.760
  0.790
  0.810
  0.830
  0.860
  0.880
  0.900
  0.910
  0.930
  0.950
  0.960
  0.980
  0.990
  1.000
  1.010
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.080
  1.090
Adjusted equity ratio
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  38
  43
  48
  54
  60
  66
  72
  79
  86
  98
  106
  115
  124
  133
  143
  153
  164
  176
  188
  200
  214
  228
  243
  259
  276
  293
  312
  331
  352
Depreciation, amort., depletion, $m
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
  88
  92
  97
  102
Funds from operations, $m
  61
  67
  74
  81
  88
  95
  103
  111
  120
  129
  137
  147
  158
  169
  181
  193
  206
  220
  234
  249
  265
  282
  300
  319
  338
  359
  381
  404
  428
  454
Change in working capital, $m
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
Cash from operations, $m
  56
  62
  68
  74
  81
  89
  96
  104
  112
  121
  129
  139
  149
  159
  171
  183
  195
  208
  222
  237
  252
  268
  285
  303
  322
  342
  363
  385
  409
  433
Maintenance CAPEX, $m
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -97
New CAPEX, $m
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -62
  -65
Cash from investing activities, $m
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -64
  -67
  -70
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -109
  -114
  -121
  -126
  -132
  -139
  -147
  -154
  -162
Free cash flow, $m
  18
  21
  26
  30
  34
  39
  44
  50
  55
  61
  65
  72
  79
  86
  93
  101
  110
  119
  128
  138
  148
  159
  171
  183
  196
  210
  224
  239
  255
  272
Issuance/(repayment) of debt, $m
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  116
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  
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  116
Total cash flow (excl. dividends), $m
  49
  54
  59
  65
  71
  78
  84
  91
  99
  106
  113
  122
  131
  140
  150
  161
  172
  184
  197
  210
  224
  238
  254
  270
  287
  305
  324
  344
  365
  388
Retained Cash Flow (-), $m
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -43
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
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
  24
  28
  32
  37
  42
  47
  52
  58
  64
  70
  75
  82
  89
  97
  105
  113
  122
  132
  142
  152
  164
  175
  188
  201
  214
  229
  244
  260
  277
  295
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
  23
  26
  28
  30
  32
  34
  35
  36
  37
  37
  36
  35
  34
  33
  31
  29
  27
  24
  22
  19
  17
  15
  12
  10
  8
  7
  5
  4
  3
  2
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

Echo Global Logistics, Inc. is a provider of technology-enabled transportation and supply chain management solutions. The Company utilizes a technology platform to compile and analyze data from its multi-modal network of transportation providers to facilitate its transportation and logistics services. The Company focuses primarily on arranging transportation by truckload (TL) and less than truckload (LTL) carriers. It also offers intermodal (which involves moving a shipment by rail and truck), small parcel, domestic air, expedited and international transportation services. The Company's core logistics services include rate negotiation, shipment execution and tracking, carrier selection and management, routing compliance freight bill payment and audit, payment and performance management and reporting functions.

FINANCIAL RATIOS  of  Echo Global Logistics, Inc. (ECHO)

Valuation Ratios
P/E Ratio 288.8
Price to Sales 0.3
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow 44.4
Growth Rates
Sales Growth Rate 13.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 213.3%
Cap. Spend. - 3 Yr. Gr. Rate 39.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 57%
Total Debt to Equity 57%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.1%
Return On Equity 0.5%
Return On Equity - 3 Yr. Avg. 4.4%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 18.6%
Gross Margin - 3 Yr. Avg. 18.5%
EBITDA Margin 2.3%
EBITDA Margin - 3 Yr. Avg. 2.8%
Operating Margin 0.9%
Oper. Margin - 3 Yr. Avg. 1.6%
Pre-Tax Margin 0.1%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin 0.1%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate -100%
Eff/ Tax Rate - 3 Yr. Avg. -9.9%
Payout Ratio 0%

ECHO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ECHO stock intrinsic value calculation we used $2440 million for the last fiscal year's total revenue generated by Echo Global Logistics, Inc.. The default revenue input number comes from 0001 income statement of Echo Global Logistics, 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 ECHO stock valuation model: a) initial revenue growth rate of 6.4% 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 ECHO is calculated based on our internal credit rating of Echo Global Logistics, 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 Echo Global Logistics, 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 ECHO stock the variable cost ratio is equal to 93%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $120 million in the base year in the intrinsic value calculation for ECHO 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 7.9% for Echo Global Logistics, Inc..

Corporate tax rate of 27% is the nominal tax rate for Echo Global Logistics, 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 ECHO 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 ECHO are equal to 11.2%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Echo Global Logistics, 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 ECHO is equal to 3.5%. 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 - $389.932 million for Echo Global Logistics, 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 27.818 million for Echo Global Logistics, 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 Echo Global Logistics, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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