Intrinsic value of Forward Air Corporation - FWRD

Previous Close

$59.35

  Intrinsic Value

$38.69

stock screener

  Rating & Target

sell

-35%

Previous close

$59.35

 
Intrinsic value

$38.69

 
Up/down potential

-35%

 
Rating

sell

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

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 1.7

 

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, %
  9.70
  9.23
  8.81
  8.43
  8.08
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.08
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
Revenue, $m
  1,449
  1,583
  1,722
  1,867
  2,018
  2,175
  2,338
  2,508
  2,684
  2,867
  3,057
  3,255
  3,461
  3,676
  3,899
  4,132
  4,374
  4,627
  4,891
  5,167
  5,455
  5,756
  6,070
  6,399
  6,743
  7,103
  7,480
  7,874
  8,287
  8,720
Variable operating expenses, $m
  1,312
  1,432
  1,556
  1,685
  1,820
  1,959
  2,105
  2,256
  2,413
  2,576
  2,725
  2,901
  3,084
  3,276
  3,475
  3,682
  3,898
  4,124
  4,359
  4,604
  4,861
  5,129
  5,409
  5,702
  6,009
  6,329
  6,665
  7,016
  7,385
  7,770
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
  1,312
  1,432
  1,556
  1,685
  1,820
  1,959
  2,105
  2,256
  2,413
  2,576
  2,725
  2,901
  3,084
  3,276
  3,475
  3,682
  3,898
  4,124
  4,359
  4,604
  4,861
  5,129
  5,409
  5,702
  6,009
  6,329
  6,665
  7,016
  7,385
  7,770
Operating income, $m
  137
  151
  167
  182
  199
  216
  234
  252
  271
  291
  333
  355
  377
  400
  425
  450
  476
  504
  533
  563
  594
  627
  661
  697
  734
  773
  814
  857
  902
  950
EBITDA, $m
  190
  208
  226
  245
  265
  286
  307
  329
  353
  377
  402
  428
  455
  483
  512
  543
  575
  608
  643
  679
  717
  756
  797
  841
  886
  933
  982
  1,034
  1,089
  1,145
Interest expense (income), $m
  2
  3
  4
  5
  6
  7
  8
  10
  11
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  31
  33
  35
  37
  40
  43
  45
  48
  51
  55
  58
  61
Earnings before tax, $m
  134
  148
  162
  176
  192
  207
  224
  241
  259
  277
  317
  337
  358
  380
  402
  426
  450
  476
  502
  530
  559
  589
  621
  654
  689
  725
  763
  803
  844
  888
Tax expense, $m
  36
  40
  44
  48
  52
  56
  60
  65
  70
  75
  86
  91
  97
  103
  109
  115
  122
  128
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
Net income, $m
  98
  108
  118
  129
  140
  151
  163
  176
  189
  202
  232
  246
  261
  277
  294
  311
  329
  347
  367
  387
  408
  430
  453
  478
  503
  529
  557
  586
  616
  648

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
  834
  911
  991
  1,074
  1,161
  1,252
  1,345
  1,443
  1,544
  1,650
  1,759
  1,873
  1,992
  2,115
  2,243
  2,377
  2,517
  2,662
  2,814
  2,973
  3,139
  3,312
  3,493
  3,682
  3,880
  4,087
  4,304
  4,530
  4,768
  5,017
Adjusted assets (=assets-cash), $m
  834
  911
  991
  1,074
  1,161
  1,252
  1,345
  1,443
  1,544
  1,650
  1,759
  1,873
  1,992
  2,115
  2,243
  2,377
  2,517
  2,662
  2,814
  2,973
  3,139
  3,312
  3,493
  3,682
  3,880
  4,087
  4,304
  4,530
  4,768
  5,017
Revenue / Adjusted assets
  1.737
  1.738
  1.738
  1.738
  1.738
  1.737
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.737
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
  1.738
Average production assets, $m
  397
  434
  472
  512
  553
  596
  641
  687
  735
  786
  838
  892
  948
  1,007
  1,068
  1,132
  1,199
  1,268
  1,340
  1,416
  1,495
  1,577
  1,663
  1,753
  1,848
  1,946
  2,049
  2,157
  2,271
  2,389
Working capital, $m
  110
  120
  131
  142
  153
  165
  178
  191
  204
  218
  232
  247
  263
  279
  296
  314
  332
  352
  372
  393
  415
  437
  461
  486
  512
  540
  568
  598
  630
  663
Total debt, $m
  67
  88
  110
  133
  157
  181
  207
  233
  261
  289
  319
  350
  382
  416
  451
  487
  525
  565
  606
  649
  694
  741
  791
  842
  896
  952
  1,011
  1,073
  1,138
  1,205
Total liabilities, $m
  227
  248
  270
  292
  316
  340
  366
  392
  420
  449
  478
  509
  542
  575
  610
  647
  685
  724
  766
  809
  854
  901
  950
  1,001
  1,055
  1,112
  1,171
  1,232
  1,297
  1,365
Total equity, $m
  607
  663
  721
  782
  845
  911
  979
  1,050
  1,124
  1,201
  1,281
  1,364
  1,450
  1,540
  1,633
  1,731
  1,832
  1,938
  2,049
  2,164
  2,285
  2,411
  2,543
  2,680
  2,824
  2,975
  3,133
  3,298
  3,471
  3,652
Total liabilities and equity, $m
  834
  911
  991
  1,074
  1,161
  1,251
  1,345
  1,442
  1,544
  1,650
  1,759
  1,873
  1,992
  2,115
  2,243
  2,378
  2,517
  2,662
  2,815
  2,973
  3,139
  3,312
  3,493
  3,681
  3,879
  4,087
  4,304
  4,530
  4,768
  5,017
Debt-to-equity ratio
  0.110
  0.130
  0.150
  0.170
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
Adjusted equity ratio
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728
  0.728

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  98
  108
  118
  129
  140
  151
  163
  176
  189
  202
  232
  246
  261
  277
  294
  311
  329
  347
  367
  387
  408
  430
  453
  478
  503
  529
  557
  586
  616
  648
Depreciation, amort., depletion, $m
  54
  57
  60
  63
  66
  70
  74
  77
  81
  85
  69
  73
  78
  83
  88
  93
  98
  104
  110
  116
  123
  129
  136
  144
  151
  160
  168
  177
  186
  196
Funds from operations, $m
  152
  164
  178
  192
  206
  221
  237
  253
  270
  288
  300
  319
  339
  360
  381
  403
  427
  451
  476
  503
  531
  559
  590
  621
  654
  689
  725
  763
  803
  844
Change in working capital, $m
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
Cash from operations, $m
  142
  154
  167
  181
  195
  209
  225
  240
  257
  274
  286
  304
  323
  343
  364
  386
  408
  432
  456
  482
  509
  537
  566
  596
  628
  661
  696
  733
  771
  811
Maintenance CAPEX, $m
  -30
  -33
  -36
  -39
  -42
  -45
  -49
  -53
  -56
  -60
  -64
  -69
  -73
  -78
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -123
  -129
  -136
  -144
  -151
  -160
  -168
  -177
  -186
New CAPEX, $m
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -72
  -76
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
Cash from investing activities, $m
  -65
  -70
  -74
  -79
  -83
  -88
  -94
  -99
  -104
  -110
  -116
  -123
  -129
  -137
  -144
  -152
  -159
  -167
  -176
  -186
  -195
  -205
  -215
  -226
  -238
  -250
  -263
  -276
  -290
  -305
Free cash flow, $m
  77
  85
  93
  102
  111
  121
  131
  141
  152
  163
  169
  181
  194
  207
  220
  234
  249
  264
  280
  297
  314
  332
  350
  370
  390
  411
  434
  457
  481
  507
Issuance/(repayment) of debt, $m
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
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  
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
Total cash flow (excl. dividends), $m
  97
  106
  115
  125
  135
  146
  157
  168
  180
  192
  199
  212
  226
  240
  255
  271
  287
  304
  321
  340
  359
  379
  400
  421
  444
  468
  493
  519
  546
  574
Retained Cash Flow (-), $m
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -97
  -102
  -106
  -111
  -115
  -121
  -126
  -132
  -138
  -144
  -151
  -158
  -165
  -173
  -181
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
  43
  50
  57
  64
  72
  80
  88
  97
  106
  115
  119
  129
  140
  151
  162
  173
  185
  198
  211
  224
  238
  253
  268
  284
  300
  317
  335
  353
  373
  393
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
  41
  46
  49
  53
  56
  58
  60
  61
  61
  60
  57
  55
  53
  51
  48
  44
  40
  36
  32
  28
  25
  21
  18
  14
  12
  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

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 Corporation (FWRD)

Valuation Ratios
P/E Ratio 63.8
Price to Sales 1.8
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 13.7
Price to Free Cash Flow 20.3
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 $1321 million for the last fiscal year's total revenue generated by Forward Air Corporation. The default revenue input number comes from 0001 income statement of Forward Air Corporation. 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 9.7% 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 Corporation, 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 Corporation.
    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 90.7%.

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 5.4% for Forward Air Corporation.

Corporate tax rate of 27% is the nominal tax rate for Forward Air Corporation. 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 27.4%.

Life of production assets of 12.2 years is the average useful life of capital assets used in Forward Air Corporation 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 7.6%. 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 - $553.244 million for Forward Air Corporation - 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 28.787 million for Forward Air Corporation 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 Corporation at the current share price and the inputted number of shares is $1.7 billion.

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