Intrinsic value of Forward Air - FWRD

Previous Close

$62.90

  Intrinsic Value

$16.66

stock screener

  Rating & Target

str. sell

-74%

Previous close

$62.90

 
Intrinsic value

$16.66

 
Up/down potential

-74%

 
Rating

str. sell

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

We calculate the intrinsic value of FWRD 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.50
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
Revenue, $m
  983
  1,101
  1,225
  1,356
  1,493
  1,636
  1,786
  1,942
  2,104
  2,272
  2,447
  2,630
  2,819
  3,015
  3,220
  3,432
  3,653
  3,884
  4,123
  4,373
  4,633
  4,904
  5,186
  5,481
  5,789
  6,111
  6,448
  6,799
  7,167
  7,551
  7,954
Variable operating expenses, $m
 
  1,005
  1,117
  1,234
  1,357
  1,485
  1,619
  1,758
  1,904
  2,055
  2,212
  2,357
  2,526
  2,702
  2,886
  3,076
  3,274
  3,480
  3,695
  3,919
  4,152
  4,394
  4,648
  4,912
  5,188
  5,477
  5,778
  6,093
  6,423
  6,767
  7,128
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
  923
  1,005
  1,117
  1,234
  1,357
  1,485
  1,619
  1,758
  1,904
  2,055
  2,212
  2,357
  2,526
  2,702
  2,886
  3,076
  3,274
  3,480
  3,695
  3,919
  4,152
  4,394
  4,648
  4,912
  5,188
  5,477
  5,778
  6,093
  6,423
  6,767
  7,128
Operating income, $m
  60
  96
  109
  122
  137
  151
  167
  183
  200
  217
  236
  273
  293
  313
  334
  356
  379
  403
  428
  454
  481
  509
  538
  569
  601
  634
  669
  706
  744
  784
  826
EBITDA, $m
  98
  140
  156
  173
  190
  209
  228
  248
  268
  290
  312
  335
  360
  385
  411
  438
  466
  495
  526
  558
  591
  626
  662
  699
  739
  780
  823
  867
  914
  963
  1,015
Interest expense (income), $m
  2
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
Earnings before tax, $m
  58
  95
  107
  120
  134
  148
  163
  179
  195
  211
  229
  265
  284
  304
  324
  345
  367
  390
  414
  438
  464
  491
  519
  549
  579
  611
  644
  679
  716
  754
  794
Tax expense, $m
  30
  26
  29
  33
  36
  40
  44
  48
  53
  57
  62
  72
  77
  82
  87
  93
  99
  105
  112
  118
  125
  133
  140
  148
  156
  165
  174
  183
  193
  204
  214
Net income, $m
  28
  69
  78
  88
  98
  108
  119
  130
  142
  154
  167
  194
  207
  222
  237
  252
  268
  285
  302
  320
  339
  359
  379
  400
  423
  446
  470
  496
  523
  550
  580

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  641
  708
  788
  872
  960
  1,052
  1,148
  1,249
  1,353
  1,461
  1,574
  1,691
  1,813
  1,939
  2,071
  2,207
  2,350
  2,497
  2,651
  2,812
  2,979
  3,153
  3,335
  3,525
  3,723
  3,930
  4,146
  4,372
  4,609
  4,856
  5,115
Adjusted assets (=assets-cash), $m
  632
  708
  788
  872
  960
  1,052
  1,148
  1,249
  1,353
  1,461
  1,574
  1,691
  1,813
  1,939
  2,071
  2,207
  2,350
  2,497
  2,651
  2,812
  2,979
  3,153
  3,335
  3,525
  3,723
  3,930
  4,146
  4,372
  4,609
  4,856
  5,115
Revenue / Adjusted assets
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.556
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.554
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
  1.555
Average production assets, $m
  311
  348
  387
  429
  472
  517
  564
  614
  665
  718
  773
  831
  891
  953
  1,017
  1,085
  1,155
  1,227
  1,303
  1,382
  1,464
  1,550
  1,639
  1,732
  1,829
  1,931
  2,037
  2,148
  2,265
  2,386
  2,513
Working capital, $m
  58
  86
  96
  106
  116
  128
  139
  151
  164
  177
  191
  205
  220
  235
  251
  268
  285
  303
  322
  341
  361
  382
  405
  428
  452
  477
  503
  530
  559
  589
  620
Total debt, $m
  29
  36
  52
  70
  89
  108
  128
  149
  171
  194
  218
  242
  268
  294
  322
  351
  380
  411
  444
  478
  513
  549
  587
  627
  669
  712
  758
  805
  855
  907
  961
Total liabilities, $m
  142
  149
  165
  183
  202
  221
  241
  262
  284
  307
  331
  355
  381
  407
  435
  464
  493
  524
  557
  591
  626
  662
  700
  740
  782
  825
  871
  918
  968
  1,020
  1,074
Total equity, $m
  499
  559
  623
  689
  759
  831
  907
  986
  1,069
  1,154
  1,243
  1,336
  1,432
  1,532
  1,636
  1,744
  1,856
  1,973
  2,095
  2,221
  2,353
  2,491
  2,635
  2,785
  2,941
  3,105
  3,276
  3,454
  3,641
  3,836
  4,041
Total liabilities and equity, $m
  641
  708
  788
  872
  961
  1,052
  1,148
  1,248
  1,353
  1,461
  1,574
  1,691
  1,813
  1,939
  2,071
  2,208
  2,349
  2,497
  2,652
  2,812
  2,979
  3,153
  3,335
  3,525
  3,723
  3,930
  4,147
  4,372
  4,609
  4,856
  5,115
Debt-to-equity ratio
  0.058
  0.060
  0.080
  0.100
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
Adjusted equity ratio
  0.775
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  69
  78
  88
  98
  108
  119
  130
  142
  154
  167
  194
  207
  222
  237
  252
  268
  285
  302
  320
  339
  359
  379
  400
  423
  446
  470
  496
  523
  550
  580
Depreciation, amort., depletion, $m
  38
  45
  48
  51
  54
  57
  61
  65
  68
  72
  77
  62
  67
  72
  77
  82
  87
  92
  98
  104
  110
  117
  123
  130
  138
  145
  153
  162
  170
  179
  189
Funds from operations, $m
  139
  114
  126
  139
  152
  166
  180
  195
  211
  227
  244
  256
  274
  293
  313
  333
  355
  377
  400
  424
  449
  475
  502
  531
  560
  591
  624
  657
  693
  730
  769
Change in working capital, $m
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
Cash from operations, $m
  130
  105
  116
  128
  141
  154
  168
  183
  198
  214
  230
  242
  260
  278
  297
  317
  337
  359
  381
  404
  429
  454
  480
  508
  536
  566
  597
  630
  664
  700
  737
Maintenance CAPEX, $m
  0
  -23
  -26
  -29
  -32
  -35
  -39
  -42
  -46
  -50
  -54
  -58
  -62
  -67
  -72
  -77
  -82
  -87
  -92
  -98
  -104
  -110
  -117
  -123
  -130
  -138
  -145
  -153
  -162
  -170
  -179
New CAPEX, $m
  -42
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -102
  -106
  -111
  -116
  -122
  -127
Cash from investing activities, $m
  -52
  -60
  -65
  -70
  -75
  -80
  -86
  -91
  -97
  -103
  -109
  -116
  -122
  -129
  -137
  -144
  -152
  -160
  -168
  -177
  -186
  -196
  -206
  -216
  -227
  -240
  -251
  -264
  -278
  -292
  -306
Free cash flow, $m
  78
  45
  51
  58
  66
  74
  82
  91
  101
  110
  121
  126
  137
  149
  161
  173
  186
  199
  213
  228
  243
  258
  274
  291
  309
  327
  346
  366
  386
  408
  431
Issuance/(repayment) of debt, $m
  -56
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
Issuance/(repurchase) of shares, $m
  -30
  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  
  -87
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
Total cash flow (excl. dividends), $m
  -9
  60
  68
  76
  84
  93
  102
  112
  122
  133
  144
  151
  163
  175
  188
  202
  216
  231
  246
  261
  278
  295
  313
  331
  350
  370
  391
  413
  436
  460
  485
Retained Cash Flow (-), $m
  11
  -60
  -63
  -66
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -127
  -132
  -138
  -144
  -150
  -157
  -163
  -171
  -179
  -187
  -195
  -204
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
 
  0
  4
  9
  15
  20
  27
  33
  40
  48
  55
  58
  67
  76
  85
  94
  104
  114
  124
  135
  146
  157
  169
  181
  194
  207
  221
  235
  249
  265
  281
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
 
  0
  4
  8
  12
  16
  19
  22
  25
  27
  29
  28
  29
  29
  28
  28
  26
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  23
  21
  19
  16
  14
  12
  10
  8
  6
  5
  4
  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
  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

Forward Air Corporation is a freight and logistics company. The Company provides less-than-truckload (LTL), truckload, intermodal and pool distribution services across the United States and in Canada. The Company's segments include Expedited LTL, Truckload Premium Services (TLS), Intermodal and Pool Distribution. Expedited LTL segment provides expedited regional, inter-regional and national LTL services. TLS segment is a provider of transportation management services, including, but not limited to, expedited truckload brokerage, fleet services, as well as security and temperature-controlled logistics services in the United States and Canada. Intermodal offers first- and last-mile transportation of freight both to and from seaports and railheads through fleet and third party transportation providers. Pool distribution involves managing high-frequency handling and distribution of time-sensitive product to numerous destinations in specific geographic regions.

FINANCIAL RATIOS  of  Forward Air (FWRD)

Valuation Ratios
P/E Ratio 67.6
Price to Sales 1.9
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 14.6
Price to Free Cash Flow 21.5
Growth Rates
Sales Growth Rate 2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 5%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0.2%
Total Debt to Equity 5.8%
Interest Coverage 30
Management Effectiveness
Return On Assets 4.3%
Ret/ On Assets - 3 Yr. Avg. 8.4%
Return On Total Capital 5%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 5.6%
Return On Equity - 3 Yr. Avg. 10.2%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 46.5%
Gross Margin - 3 Yr. Avg. 45.9%
EBITDA Margin 10%
EBITDA Margin - 3 Yr. Avg. 12.9%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 9%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 8.8%
Net Profit Margin 2.8%
Net Profit Margin - 3 Yr. Avg. 5.5%
Effective Tax Rate 51.7%
Eff/ Tax Rate - 3 Yr. Avg. 39.4%
Payout Ratio 57.1%

FWRD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FWRD stock intrinsic value calculation we used $983 million for the last fiscal year's total revenue generated by Forward Air. The default revenue input number comes from 2016 income statement of Forward Air. 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 FWRD stock valuation model: a) initial revenue growth rate of 12% 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 FWRD is calculated based on our internal credit rating of Forward Air, 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 Forward Air.
    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 FWRD stock the variable cost ratio is equal to 91.5%.

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 FWRD 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 Forward Air.

Corporate tax rate of 27% is the nominal tax rate for Forward Air. 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 FWRD 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 FWRD are equal to 31.6%.

Life of production assets of 13.3 years is the average useful life of capital assets used in Forward Air 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 FWRD is equal to 7.8%. 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 - $499 million for Forward Air - 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 30.118 million for Forward Air 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 Forward Air at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ Nasdaq Leads; Bitcoin ETF Cuts Losses; Why Tesla Is Not A Buy Right Now   [Jan-08-18 03:09PM  Investor's Business Daily]
▶ Forward Air Corporation to Host Earnings Call   [Oct-26-17 07:15AM  ACCESSWIRE]
▶ Forward Air tops Street 3Q forecasts   [Oct-25-17 05:11PM  Associated Press]
▶ Forward Air tops Street 2Q forecasts   [Jul-26-17 11:23PM  Associated Press]
▶ ETFs with exposure to Forward Air Corp. : July 10, 2017   [Jul-10-17 02:32PM  Capital Cube]
▶ ETFs with exposure to Forward Air Corp. : June 22, 2017   [Jun-22-17 03:44PM  Capital Cube]
▶ Top Ranked Momentum Stocks to Buy for June 13th   [Jun-13-17 10:14AM  Zacks]
▶ Forward Air Corporation Closes Acquisition of Atlantic   [May-18-17 05:00PM  Business Wire]
▶ Forward Air tops Street 1Q forecasts   [Apr-26-17 05:24PM  Associated Press]
▶ Forward Air Corporation Announces Acquisition of Atlantic   [Apr-10-17 05:00PM  Business Wire]
▶ Forward Air tops Street 4Q forecasts   [Feb-08-17 04:46PM  Associated Press]
▶ Is Forward Air Corporation (FWRD) a Good Stock to Invest in?   [Dec-05-16 03:37PM  at Insider Monkey]
Financial statements of FWRD
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