Intrinsic value of Eagle Materials Inc - EXP

Previous Close

$72.79

  Intrinsic Value

$44.85

stock screener

  Rating & Target

sell

-38%

Previous close

$72.79

 
Intrinsic value

$44.85

 
Up/down potential

-38%

 
Rating

sell

We calculate the intrinsic value of EXP 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 3.3

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,415
  1,447
  1,484
  1,526
  1,573
  1,623
  1,679
  1,738
  1,803
  1,872
  1,946
  2,025
  2,109
  2,199
  2,293
  2,394
  2,500
  2,613
  2,732
  2,857
  2,990
  3,129
  3,276
  3,432
  3,595
  3,767
  3,948
  4,139
  4,339
  4,550
Variable operating expenses, $m
  1,096
  1,121
  1,149
  1,180
  1,215
  1,254
  1,296
  1,341
  1,390
  1,442
  1,475
  1,535
  1,598
  1,666
  1,738
  1,814
  1,895
  1,980
  2,070
  2,165
  2,265
  2,371
  2,483
  2,600
  2,724
  2,854
  2,992
  3,136
  3,288
  3,448
Fixed operating expenses, $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 operating expenses, $m
  1,096
  1,121
  1,149
  1,180
  1,215
  1,254
  1,296
  1,341
  1,390
  1,442
  1,475
  1,535
  1,598
  1,666
  1,738
  1,814
  1,895
  1,980
  2,070
  2,165
  2,265
  2,371
  2,483
  2,600
  2,724
  2,854
  2,992
  3,136
  3,288
  3,448
Operating income, $m
  319
  327
  336
  346
  357
  369
  383
  397
  413
  430
  471
  491
  511
  533
  556
  580
  606
  633
  662
  692
  724
  758
  794
  831
  871
  912
  956
  1,002
  1,051
  1,102
EBITDA, $m
  451
  461
  473
  487
  501
  518
  535
  554
  575
  597
  620
  646
  672
  701
  731
  763
  797
  833
  871
  911
  953
  998
  1,045
  1,094
  1,146
  1,201
  1,259
  1,320
  1,383
  1,451
Interest expense (income), $m
  19
  34
  34
  36
  37
  39
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  67
  71
  75
  79
  83
  88
  93
  98
  103
  109
  115
  121
  128
  135
  143
Earnings before tax, $m
  285
  292
  300
  309
  318
  329
  341
  353
  366
  381
  420
  436
  454
  472
  492
  513
  535
  558
  583
  609
  636
  665
  696
  728
  762
  797
  835
  874
  916
  960
Tax expense, $m
  77
  79
  81
  83
  86
  89
  92
  95
  99
  103
  113
  118
  123
  128
  133
  138
  144
  151
  157
  164
  172
  180
  188
  197
  206
  215
  225
  236
  247
  259
Net income, $m
  208
  213
  219
  225
  232
  240
  249
  258
  267
  278
  307
  319
  331
  345
  359
  374
  391
  408
  426
  445
  465
  486
  508
  531
  556
  582
  609
  638
  669
  700

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
  2,414
  2,470
  2,533
  2,604
  2,683
  2,770
  2,864
  2,967
  3,077
  3,195
  3,321
  3,456
  3,599
  3,752
  3,914
  4,085
  4,267
  4,459
  4,661
  4,876
  5,102
  5,340
  5,591
  5,856
  6,135
  6,428
  6,737
  7,062
  7,404
  7,764
Adjusted assets (=assets-cash), $m
  2,414
  2,470
  2,533
  2,604
  2,683
  2,770
  2,864
  2,967
  3,077
  3,195
  3,321
  3,456
  3,599
  3,752
  3,914
  4,085
  4,267
  4,459
  4,661
  4,876
  5,102
  5,340
  5,591
  5,856
  6,135
  6,428
  6,737
  7,062
  7,404
  7,764
Revenue / Adjusted assets
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
Average production assets, $m
  1,723
  1,763
  1,808
  1,859
  1,915
  1,977
  2,044
  2,117
  2,196
  2,280
  2,370
  2,467
  2,569
  2,678
  2,793
  2,916
  3,045
  3,182
  3,327
  3,480
  3,641
  3,811
  3,991
  4,180
  4,379
  4,588
  4,809
  5,041
  5,285
  5,542
Working capital, $m
  236
  242
  248
  255
  263
  271
  280
  290
  301
  313
  325
  338
  352
  367
  383
  400
  418
  436
  456
  477
  499
  523
  547
  573
  600
  629
  659
  691
  725
  760
Total debt, $m
  639
  661
  686
  715
  747
  781
  819
  860
  904
  952
  1,002
  1,056
  1,114
  1,175
  1,240
  1,309
  1,382
  1,459
  1,540
  1,626
  1,716
  1,812
  1,913
  2,019
  2,131
  2,248
  2,372
  2,503
  2,640
  2,784
Total liabilities, $m
  968
  990
  1,016
  1,044
  1,076
  1,111
  1,149
  1,190
  1,234
  1,281
  1,332
  1,386
  1,443
  1,504
  1,569
  1,638
  1,711
  1,788
  1,869
  1,955
  2,046
  2,141
  2,242
  2,348
  2,460
  2,578
  2,702
  2,832
  2,969
  3,113
Total equity, $m
  1,446
  1,479
  1,517
  1,560
  1,607
  1,659
  1,716
  1,777
  1,843
  1,914
  1,989
  2,070
  2,156
  2,247
  2,344
  2,447
  2,556
  2,671
  2,792
  2,921
  3,056
  3,199
  3,349
  3,508
  3,675
  3,851
  4,036
  4,230
  4,435
  4,651
Total liabilities and equity, $m
  2,414
  2,469
  2,533
  2,604
  2,683
  2,770
  2,865
  2,967
  3,077
  3,195
  3,321
  3,456
  3,599
  3,751
  3,913
  4,085
  4,267
  4,459
  4,661
  4,876
  5,102
  5,340
  5,591
  5,856
  6,135
  6,429
  6,738
  7,062
  7,404
  7,764
Debt-to-equity ratio
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.490
  0.500
  0.500
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
  0.570
  0.580
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
Adjusted equity ratio
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  208
  213
  219
  225
  232
  240
  249
  258
  267
  278
  307
  319
  331
  345
  359
  374
  391
  408
  426
  445
  465
  486
  508
  531
  556
  582
  609
  638
  669
  700
Depreciation, amort., depletion, $m
  132
  135
  138
  141
  144
  148
  152
  157
  162
  167
  149
  155
  162
  168
  176
  183
  192
  200
  209
  219
  229
  240
  251
  263
  275
  289
  302
  317
  332
  349
Funds from operations, $m
  341
  348
  357
  366
  377
  388
  401
  415
  429
  445
  456
  474
  493
  513
  535
  558
  582
  608
  635
  663
  694
  725
  759
  794
  831
  871
  912
  955
  1,001
  1,049
Change in working capital, $m
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
Cash from operations, $m
  336
  343
  350
  359
  369
  380
  392
  405
  419
  434
  443
  461
  479
  498
  519
  541
  564
  589
  615
  642
  671
  702
  734
  768
  804
  842
  882
  924
  968
  1,014
Maintenance CAPEX, $m
  -106
  -108
  -111
  -114
  -117
  -120
  -124
  -129
  -133
  -138
  -143
  -149
  -155
  -162
  -168
  -176
  -183
  -192
  -200
  -209
  -219
  -229
  -240
  -251
  -263
  -275
  -289
  -302
  -317
  -332
New CAPEX, $m
  -33
  -40
  -45
  -51
  -56
  -62
  -67
  -73
  -79
  -84
  -90
  -96
  -102
  -109
  -116
  -122
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -189
  -199
  -210
  -221
  -232
  -244
  -257
Cash from investing activities, $m
  -139
  -148
  -156
  -165
  -173
  -182
  -191
  -202
  -212
  -222
  -233
  -245
  -257
  -271
  -284
  -298
  -313
  -329
  -345
  -362
  -380
  -399
  -419
  -440
  -462
  -485
  -510
  -534
  -561
  -589
Free cash flow, $m
  196
  195
  194
  195
  196
  198
  200
  203
  207
  211
  210
  215
  221
  228
  235
  243
  251
  260
  270
  280
  291
  303
  315
  328
  342
  357
  373
  389
  406
  425
Issuance/(repayment) of debt, $m
  18
  22
  25
  29
  32
  35
  38
  41
  44
  47
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
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  
  18
  22
  25
  29
  32
  35
  38
  41
  44
  47
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
Total cash flow (excl. dividends), $m
  214
  217
  220
  223
  227
  232
  238
  244
  251
  259
  260
  269
  279
  289
  300
  312
  324
  337
  351
  366
  382
  399
  416
  435
  454
  475
  497
  519
  544
  569
Retained Cash Flow (-), $m
  -28
  -33
  -38
  -43
  -47
  -52
  -57
  -61
  -66
  -71
  -76
  -81
  -86
  -91
  -97
  -103
  -109
  -115
  -122
  -128
  -135
  -143
  -150
  -159
  -167
  -176
  -185
  -195
  -205
  -215
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
  186
  184
  182
  181
  180
  180
  181
  183
  185
  188
  185
  189
  193
  198
  203
  209
  215
  222
  230
  238
  247
  256
  266
  276
  287
  299
  311
  325
  339
  353
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
  178
  168
  158
  149
  140
  131
  123
  114
  106
  99
  88
  80
  73
  66
  60
  53
  47
  41
  35
  30
  25
  21
  17
  14
  11
  9
  7
  5
  4
  3
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

Eagle Materials Inc. is a supplier of construction products, building materials and materials used for oil and natural gas extraction. The Company operates through five segments: Cement, Concrete and Aggregates, Gypsum Wallboard, Recycled Paperboard, and Oil and Gas Proppants. The Company's construction products are used in residential, industrial, commercial and infrastructure construction, and include cement, slag, concrete and aggregates. Its building materials include gypsum wallboard. Its basic material used for oil and natural gas extraction include frac sand and oil well cement. It sells cement in over six regional markets, including northern Nevada and California, the greater Chicago area, the Rocky Mountain region, the Central Plains region and Texas. It sells slag in the greater Chicago, Illinois area and the greater Midwest area. It has approximately three concrete and aggregates businesses. It also operates a recycled paperboard business.

FINANCIAL RATIOS  of  Eagle Materials Inc (EXP)

Valuation Ratios
P/E Ratio 17.8
Price to Sales 2.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 12.8
Growth Rates
Sales Growth Rate 5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.7%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 50.3%
Total Debt to Equity 57%
Interest Coverage 17
Management Effectiveness
Return On Assets 10.2%
Ret/ On Assets - 3 Yr. Avg. 10.2%
Return On Total Capital 11.5%
Ret/ On T. Cap. - 3 Yr. Avg. 11.7%
Return On Equity 17.6%
Return On Equity - 3 Yr. Avg. 17.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 25.8%
Gross Margin - 3 Yr. Avg. 23.3%
EBITDA Margin 33.5%
EBITDA Margin - 3 Yr. Avg. 31.6%
Operating Margin 24.3%
Oper. Margin - 3 Yr. Avg. 22.4%
Pre-Tax Margin 24.4%
Pre-Tax Margin - 3 Yr. Avg. 22.4%
Net Profit Margin 16.4%
Net Profit Margin - 3 Yr. Avg. 15.8%
Effective Tax Rate 32.9%
Eff/ Tax Rate - 3 Yr. Avg. 29.7%
Payout Ratio 9.6%

EXP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EXP stock intrinsic value calculation we used $1387 million for the last fiscal year's total revenue generated by Eagle Materials Inc. The default revenue input number comes from 0001 income statement of Eagle Materials 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 EXP stock valuation model: a) initial revenue growth rate of 2% 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 EXP is calculated based on our internal credit rating of Eagle Materials 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 Eagle Materials 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 EXP stock the variable cost ratio is equal to 77.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for EXP 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 Eagle Materials Inc.

Corporate tax rate of 27% is the nominal tax rate for Eagle Materials 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 EXP 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 EXP are equal to 121.8%.

Life of production assets of 15.9 years is the average useful life of capital assets used in Eagle Materials 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 EXP is equal to 16.7%. 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 - $1417.69 million for Eagle Materials 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 45.952 million for Eagle Materials 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 Eagle Materials Inc at the current share price and the inputted number of shares is $3.3 billion.

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