Intrinsic value of Foundation Building Materials - FBM

Previous Close

$13.20

  Intrinsic Value

$18.71

stock screener

  Rating & Target

buy

+42%

Previous close

$13.20

 
Intrinsic value

$18.71

 
Up/down potential

+42%

 
Rating

buy

We calculate the intrinsic value of FBM 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, %
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
Revenue, $m
  2,356
  2,671
  3,005
  3,359
  3,732
  4,124
  4,534
  4,962
  5,409
  5,874
  6,358
  6,862
  7,385
  7,929
  8,494
  9,082
  9,692
  10,327
  10,988
  11,675
  12,391
  13,136
  13,914
  14,724
  15,569
  16,452
  17,373
  18,336
  19,342
  20,394
Variable operating expenses, $m
  2,196
  2,480
  2,783
  3,103
  3,441
  3,795
  4,166
  4,553
  4,957
  5,378
  5,751
  6,207
  6,680
  7,172
  7,683
  8,215
  8,767
  9,341
  9,939
  10,560
  11,208
  11,882
  12,585
  13,318
  14,083
  14,881
  15,715
  16,585
  17,495
  18,447
Fixed operating expenses, $m
  77
  78
  80
  82
  84
  85
  87
  89
  91
  93
  95
  97
  100
  102
  104
  106
  109
  111
  113
  116
  118
  121
  124
  126
  129
  132
  135
  138
  141
  144
Total operating expenses, $m
  2,273
  2,558
  2,863
  3,185
  3,525
  3,880
  4,253
  4,642
  5,048
  5,471
  5,846
  6,304
  6,780
  7,274
  7,787
  8,321
  8,876
  9,452
  10,052
  10,676
  11,326
  12,003
  12,709
  13,444
  14,212
  15,013
  15,850
  16,723
  17,636
  18,591
Operating income, $m
  83
  112
  142
  174
  208
  243
  281
  320
  360
  403
  512
  558
  606
  655
  707
  761
  817
  875
  936
  999
  1,064
  1,133
  1,205
  1,279
  1,357
  1,439
  1,524
  1,613
  1,706
  1,803
EBITDA, $m
  200
  236
  273
  313
  355
  399
  446
  494
  545
  597
  652
  709
  769
  831
  895
  962
  1,031
  1,103
  1,179
  1,257
  1,338
  1,424
  1,512
  1,605
  1,701
  1,802
  1,908
  2,018
  2,133
  2,254
Interest expense (income), $m
  20
  54
  67
  81
  96
  111
  128
  145
  163
  182
  201
  222
  243
  265
  288
  312
  337
  363
  390
  418
  447
  477
  509
  541
  576
  611
  648
  687
  728
  770
  814
Earnings before tax, $m
  29
  45
  61
  78
  97
  116
  136
  157
  179
  201
  290
  315
  340
  367
  395
  424
  454
  485
  518
  552
  587
  625
  663
  704
  746
  790
  836
  885
  935
  989
Tax expense, $m
  8
  12
  17
  21
  26
  31
  37
  42
  48
  54
  78
  85
  92
  99
  107
  114
  123
  131
  140
  149
  159
  169
  179
  190
  201
  213
  226
  239
  253
  267
Net income, $m
  21
  33
  45
  57
  71
  85
  99
  114
  130
  147
  212
  230
  248
  268
  288
  309
  331
  354
  378
  403
  429
  456
  484
  514
  545
  577
  611
  646
  683
  722

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
  1,548
  1,755
  1,975
  2,207
  2,452
  2,709
  2,979
  3,260
  3,554
  3,860
  4,178
  4,508
  4,852
  5,210
  5,581
  5,967
  6,368
  6,785
  7,219
  7,671
  8,141
  8,631
  9,142
  9,674
  10,229
  10,809
  11,415
  12,047
  12,708
  13,399
Adjusted assets (=assets-cash), $m
  1,548
  1,755
  1,975
  2,207
  2,452
  2,709
  2,979
  3,260
  3,554
  3,860
  4,178
  4,508
  4,852
  5,210
  5,581
  5,967
  6,368
  6,785
  7,219
  7,671
  8,141
  8,631
  9,142
  9,674
  10,229
  10,809
  11,415
  12,047
  12,708
  13,399
Revenue / Adjusted assets
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
  1.522
Average production assets, $m
  542
  614
  691
  773
  858
  948
  1,043
  1,141
  1,244
  1,351
  1,462
  1,578
  1,699
  1,824
  1,954
  2,089
  2,229
  2,375
  2,527
  2,685
  2,850
  3,021
  3,200
  3,386
  3,581
  3,784
  3,996
  4,217
  4,449
  4,691
Working capital, $m
  337
  382
  430
  480
  534
  590
  648
  710
  773
  840
  909
  981
  1,056
  1,134
  1,215
  1,299
  1,386
  1,477
  1,571
  1,670
  1,772
  1,879
  1,990
  2,106
  2,226
  2,353
  2,484
  2,622
  2,766
  2,916
Total debt, $m
  721
  870
  1,028
  1,195
  1,372
  1,557
  1,751
  1,954
  2,165
  2,385
  2,614
  2,852
  3,100
  3,357
  3,625
  3,902
  4,191
  4,492
  4,804
  5,129
  5,468
  5,821
  6,188
  6,572
  6,972
  7,389
  7,825
  8,280
  8,756
  9,254
Total liabilities, $m
  1,114
  1,263
  1,422
  1,589
  1,766
  1,951
  2,145
  2,347
  2,559
  2,779
  3,008
  3,246
  3,494
  3,751
  4,018
  4,296
  4,585
  4,885
  5,198
  5,523
  5,862
  6,214
  6,582
  6,965
  7,365
  7,783
  8,219
  8,674
  9,150
  9,647
Total equity, $m
  433
  491
  553
  618
  687
  759
  834
  913
  995
  1,081
  1,170
  1,262
  1,359
  1,459
  1,563
  1,671
  1,783
  1,900
  2,021
  2,148
  2,280
  2,417
  2,560
  2,709
  2,864
  3,027
  3,196
  3,373
  3,558
  3,752
Total liabilities and equity, $m
  1,547
  1,754
  1,975
  2,207
  2,453
  2,710
  2,979
  3,260
  3,554
  3,860
  4,178
  4,508
  4,853
  5,210
  5,581
  5,967
  6,368
  6,785
  7,219
  7,671
  8,142
  8,631
  9,142
  9,674
  10,229
  10,810
  11,415
  12,047
  12,708
  13,399
Debt-to-equity ratio
  1.660
  1.770
  1.860
  1.930
  2.000
  2.050
  2.100
  2.140
  2.180
  2.210
  2.230
  2.260
  2.280
  2.300
  2.320
  2.340
  2.350
  2.360
  2.380
  2.390
  2.400
  2.410
  2.420
  2.430
  2.430
  2.440
  2.450
  2.450
  2.460
  2.470
Adjusted equity ratio
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  33
  45
  57
  71
  85
  99
  114
  130
  147
  212
  230
  248
  268
  288
  309
  331
  354
  378
  403
  429
  456
  484
  514
  545
  577
  611
  646
  683
  722
Depreciation, amort., depletion, $m
  117
  124
  131
  139
  147
  156
  165
  175
  184
  195
  141
  152
  163
  175
  188
  201
  214
  228
  243
  258
  274
  291
  308
  326
  344
  364
  384
  406
  428
  451
Funds from operations, $m
  138
  157
  176
  196
  218
  241
  264
  289
  315
  342
  352
  381
  412
  443
  476
  510
  546
  583
  621
  661
  703
  746
  792
  839
  889
  941
  995
  1,051
  1,111
  1,173
Change in working capital, $m
  42
  45
  48
  51
  53
  56
  59
  61
  64
  67
  69
  72
  75
  78
  81
  84
  87
  91
  94
  98
  102
  107
  111
  116
  121
  126
  132
  138
  144
  150
Cash from operations, $m
  96
  112
  128
  146
  165
  185
  206
  228
  251
  275
  283
  309
  337
  365
  395
  426
  458
  492
  527
  563
  600
  640
  681
  723
  768
  814
  863
  914
  967
  1,022
Maintenance CAPEX, $m
  -46
  -52
  -59
  -66
  -74
  -83
  -91
  -100
  -110
  -120
  -130
  -141
  -152
  -163
  -175
  -188
  -201
  -214
  -228
  -243
  -258
  -274
  -291
  -308
  -326
  -344
  -364
  -384
  -406
  -428
New CAPEX, $m
  -68
  -72
  -77
  -81
  -86
  -90
  -94
  -99
  -103
  -107
  -111
  -116
  -120
  -125
  -130
  -135
  -140
  -146
  -152
  -158
  -165
  -171
  -179
  -186
  -194
  -203
  -212
  -221
  -231
  -242
Cash from investing activities, $m
  -114
  -124
  -136
  -147
  -160
  -173
  -185
  -199
  -213
  -227
  -241
  -257
  -272
  -288
  -305
  -323
  -341
  -360
  -380
  -401
  -423
  -445
  -470
  -494
  -520
  -547
  -576
  -605
  -637
  -670
Free cash flow, $m
  -18
  -13
  -8
  -2
  5
  12
  20
  29
  38
  49
  42
  53
  65
  77
  90
  103
  117
  131
  146
  162
  178
  194
  211
  229
  248
  267
  287
  308
  330
  353
Issuance/(repayment) of debt, $m
  139
  149
  158
  167
  176
  185
  194
  203
  211
  220
  229
  238
  248
  257
  267
  278
  289
  300
  312
  325
  339
  353
  368
  383
  400
  417
  436
  455
  476
  498
Issuance/(repurchase) of shares, $m
  33
  25
  17
  8
  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  
  172
  174
  175
  175
  176
  185
  194
  203
  211
  220
  229
  238
  248
  257
  267
  278
  289
  300
  312
  325
  339
  353
  368
  383
  400
  417
  436
  455
  476
  498
Total cash flow (excl. dividends), $m
  154
  161
  167
  173
  181
  197
  214
  232
  250
  269
  271
  291
  312
  334
  357
  381
  406
  432
  459
  487
  516
  547
  579
  613
  648
  685
  723
  764
  806
  850
Retained Cash Flow (-), $m
  -55
  -58
  -62
  -65
  -69
  -72
  -75
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -126
  -132
  -137
  -143
  -149
  -156
  -162
  -170
  -177
  -185
  -194
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
  100
  103
  106
  108
  112
  125
  139
  153
  168
  183
  182
  199
  216
  234
  253
  273
  294
  315
  337
  360
  385
  410
  436
  464
  492
  522
  554
  586
  621
  657
Discount rate, %
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
  91
  86
  79
  72
  66
  65
  62
  58
  54
  49
  40
  35
  30
  26
  21
  17
  13
  10
  8
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  94.4
  90.9
  88.8
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0
  88.0

Foundation Building Materials, Inc. is a specialty distributor of wallboard and suspended ceiling systems in the United States and Canada. The Company’s segments include Specialty Building Products and Mechanical Insulation. The Company fabricates and distributes its products for specialty contractors seeking to improve or maintain energy efficiency in a range of commercial and industrial buildings. It serves markets across the United States and in Canada. Specialty building products segment distributes wallboard and accessories, metal framing, suspended ceiling systems and other products. Other products include stucco and Exterior insulation and finish system (EIFS), as well as offerings, such as tools, safety accessories and fasteners. Its Mechanical insulation segment includes insulation solutions for pipes and mechanical systems and the primary end markets served are new non-residential construction, non- residential repair and remodel construction and industrial markets.

FINANCIAL RATIOS  of  Foundation Building Materials (FBM)

Valuation Ratios
P/E Ratio -20.2
Price to Sales 0.4
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 17.1
Price to Free Cash Flow 188.6
Growth Rates
Sales Growth Rate 69.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 130.8%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 223.1%
Total Debt to Equity 223.1%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.4%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital -3.2%
Ret/ On T. Cap. - 3 Yr. Avg. -4.5%
Return On Equity -9%
Return On Equity - 3 Yr. Avg. -13.2%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 28.5%
Gross Margin - 3 Yr. Avg. 27.8%
EBITDA Margin 2%
EBITDA Margin - 3 Yr. Avg. 2.1%
Operating Margin 1.2%
Oper. Margin - 3 Yr. Avg. 0.3%
Pre-Tax Margin -3.1%
Pre-Tax Margin - 3 Yr. Avg. -2.8%
Net Profit Margin -2%
Net Profit Margin - 3 Yr. Avg. -2.3%
Effective Tax Rate 34.9%
Eff/ Tax Rate - 3 Yr. Avg. -17.1%
Payout Ratio 0%

FBM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FBM stock intrinsic value calculation we used $2060.902 million for the last fiscal year's total revenue generated by Foundation Building Materials. The default revenue input number comes from 0001 income statement of Foundation Building Materials. 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 FBM stock valuation model: a) initial revenue growth rate of 14.3% 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 9.1%, whose default value for FBM is calculated based on our internal credit rating of Foundation Building Materials, 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 Foundation Building Materials.
    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 FBM stock the variable cost ratio is equal to 93.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $75 million in the base year in the intrinsic value calculation for FBM 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 9.3% for Foundation Building Materials.

Corporate tax rate of 27% is the nominal tax rate for Foundation Building Materials. 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 FBM 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 FBM are equal to 23%.

Life of production assets of 10.4 years is the average useful life of capital assets used in Foundation Building Materials 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 FBM is equal to 14.3%. 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 - $378.664 million for Foundation Building Materials - 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 42.894 million for Foundation Building Materials 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 Foundation Building Materials at the current share price and the inputted number of shares is $0.6 billion.

COMPANY NEWS

▶ Foundation Building Materials Prices $450 Million Term Loan   [May-14-18 04:40PM  Business Wire]

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