Intrinsic value of GCP Applied Technologies Inc. - GCP

Previous Close

$30.43

  Intrinsic Value

$9.20

stock screener

  Rating & Target

str. sell

-70%

Previous close

$30.43

 
Intrinsic value

$9.20

 
Up/down potential

-70%

 
Rating

str. sell

We calculate the intrinsic value of GCP 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 2.2

 

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
  1,148
  1,174
  1,204
  1,238
  1,275
  1,317
  1,361
  1,410
  1,462
  1,518
  1,578
  1,643
  1,711
  1,783
  1,860
  1,942
  2,028
  2,119
  2,216
  2,317
  2,425
  2,538
  2,658
  2,783
  2,916
  3,055
  3,202
  3,357
  3,519
  3,690
Variable operating expenses, $m
  517
  528
  541
  555
  571
  589
  608
  628
  651
  674
  670
  697
  726
  757
  790
  824
  861
  900
  941
  984
  1,030
  1,078
  1,128
  1,182
  1,238
  1,297
  1,360
  1,425
  1,494
  1,567
Fixed operating expenses, $m
  538
  549
  561
  574
  586
  599
  613
  626
  640
  654
  668
  683
  698
  713
  729
  745
  761
  778
  795
  813
  831
  849
  868
  887
  906
  926
  947
  967
  989
  1,010
Total operating expenses, $m
  1,055
  1,077
  1,102
  1,129
  1,157
  1,188
  1,221
  1,254
  1,291
  1,328
  1,338
  1,380
  1,424
  1,470
  1,519
  1,569
  1,622
  1,678
  1,736
  1,797
  1,861
  1,927
  1,996
  2,069
  2,144
  2,223
  2,307
  2,392
  2,483
  2,577
Operating income, $m
  93
  96
  102
  109
  118
  129
  141
  156
  172
  190
  240
  262
  286
  313
  341
  372
  405
  441
  480
  521
  565
  611
  661
  715
  772
  832
  896
  964
  1,036
  1,113
EBITDA, $m
  153
  158
  164
  172
  182
  194
  207
  223
  241
  261
  282
  306
  332
  361
  391
  424
  460
  498
  539
  583
  630
  679
  733
  789
  850
  914
  982
  1,054
  1,131
  1,212
Interest expense (income), $m
  39
  73
  76
  80
  85
  90
  95
  101
  107
  114
  122
  130
  139
  148
  158
  168
  179
  191
  204
  217
  231
  245
  261
  277
  295
  313
  332
  352
  373
  395
  419
Earnings before tax, $m
  20
  20
  21
  24
  28
  34
  40
  48
  58
  68
  110
  123
  138
  155
  173
  193
  214
  238
  263
  290
  319
  351
  384
  420
  459
  500
  544
  591
  641
  694
Tax expense, $m
  5
  5
  6
  7
  8
  9
  11
  13
  16
  18
  30
  33
  37
  42
  47
  52
  58
  64
  71
  78
  86
  95
  104
  113
  124
  135
  147
  160
  173
  187
Net income, $m
  15
  15
  16
  18
  21
  25
  29
  35
  42
  50
  80
  90
  101
  113
  126
  141
  156
  173
  192
  212
  233
  256
  280
  307
  335
  365
  397
  431
  468
  507

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
  1,247
  1,276
  1,309
  1,346
  1,386
  1,431
  1,480
  1,533
  1,589
  1,650
  1,716
  1,785
  1,860
  1,938
  2,022
  2,111
  2,204
  2,303
  2,408
  2,519
  2,636
  2,759
  2,889
  3,025
  3,169
  3,321
  3,481
  3,649
  3,825
  4,011
Adjusted assets (=assets-cash), $m
  1,247
  1,276
  1,309
  1,346
  1,386
  1,431
  1,480
  1,533
  1,589
  1,650
  1,716
  1,785
  1,860
  1,938
  2,022
  2,111
  2,204
  2,303
  2,408
  2,519
  2,636
  2,759
  2,889
  3,025
  3,169
  3,321
  3,481
  3,649
  3,825
  4,011
Revenue / Adjusted assets
  0.921
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
Average production assets, $m
  375
  384
  394
  405
  417
  431
  445
  461
  478
  497
  516
  537
  559
  583
  608
  635
  663
  693
  725
  758
  793
  830
  869
  910
  953
  999
  1,047
  1,098
  1,151
  1,207
Working capital, $m
  92
  94
  96
  99
  102
  105
  109
  113
  117
  121
  126
  131
  137
  143
  149
  155
  162
  170
  177
  185
  194
  203
  213
  223
  233
  244
  256
  269
  282
  295
Total debt, $m
  373
  392
  413
  437
  463
  492
  524
  558
  595
  634
  677
  722
  770
  821
  875
  932
  993
  1,057
  1,125
  1,197
  1,273
  1,353
  1,437
  1,525
  1,619
  1,717
  1,820
  1,929
  2,044
  2,164
Total liabilities, $m
  808
  827
  848
  872
  898
  927
  959
  993
  1,030
  1,070
  1,112
  1,157
  1,205
  1,256
  1,310
  1,368
  1,428
  1,493
  1,561
  1,632
  1,708
  1,788
  1,872
  1,960
  2,054
  2,152
  2,255
  2,364
  2,479
  2,599
Total equity, $m
  439
  449
  461
  474
  488
  504
  521
  539
  559
  581
  604
  628
  655
  682
  712
  743
  776
  811
  848
  887
  928
  971
  1,017
  1,065
  1,116
  1,169
  1,225
  1,284
  1,347
  1,412
Total liabilities and equity, $m
  1,247
  1,276
  1,309
  1,346
  1,386
  1,431
  1,480
  1,532
  1,589
  1,651
  1,716
  1,785
  1,860
  1,938
  2,022
  2,111
  2,204
  2,304
  2,409
  2,519
  2,636
  2,759
  2,889
  3,025
  3,170
  3,321
  3,480
  3,648
  3,826
  4,011
Debt-to-equity ratio
  0.850
  0.870
  0.900
  0.920
  0.950
  0.980
  1.010
  1.030
  1.060
  1.090
  1.120
  1.150
  1.180
  1.200
  1.230
  1.260
  1.280
  1.300
  1.330
  1.350
  1.370
  1.390
  1.410
  1.430
  1.450
  1.470
  1.490
  1.500
  1.520
  1.530
Adjusted equity ratio
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  15
  16
  18
  21
  25
  29
  35
  42
  50
  80
  90
  101
  113
  126
  141
  156
  173
  192
  212
  233
  256
  280
  307
  335
  365
  397
  431
  468
  507
Depreciation, amort., depletion, $m
  60
  61
  62
  63
  64
  65
  66
  67
  69
  70
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
Funds from operations, $m
  75
  76
  78
  80
  84
  90
  96
  103
  111
  120
  123
  134
  147
  161
  176
  193
  211
  230
  251
  274
  298
  324
  352
  381
  413
  447
  483
  521
  562
  606
Change in working capital, $m
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Cash from operations, $m
  73
  74
  75
  78
  81
  86
  92
  99
  107
  116
  118
  129
  141
  155
  170
  186
  204
  223
  243
  266
  289
  315
  342
  371
  403
  436
  471
  509
  549
  592
Maintenance CAPEX, $m
  -30
  -31
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
New CAPEX, $m
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
Cash from investing activities, $m
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -61
  -63
  -66
  -70
  -73
  -77
  -80
  -84
  -89
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -137
  -143
  -150
Free cash flow, $m
  35
  34
  34
  34
  36
  39
  42
  46
  52
  58
  57
  66
  75
  86
  97
  110
  124
  139
  155
  173
  192
  213
  235
  259
  285
  312
  341
  373
  406
  442
Issuance/(repayment) of debt, $m
  16
  19
  21
  24
  26
  29
  32
  34
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  89
  93
  98
  103
  109
  115
  120
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  
  16
  19
  21
  24
  26
  29
  32
  34
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  89
  93
  98
  103
  109
  115
  120
Total cash flow (excl. dividends), $m
  51
  53
  55
  58
  62
  68
  74
  81
  89
  98
  100
  111
  123
  137
  151
  167
  184
  203
  223
  245
  268
  293
  319
  348
  378
  410
  445
  481
  521
  562
Retained Cash Flow (-), $m
  -8
  -10
  -12
  -13
  -14
  -16
  -17
  -19
  -20
  -21
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
Prev. year cash balance distribution, $m
  49
  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
  92
  43
  44
  45
  48
  52
  56
  62
  69
  76
  77
  86
  97
  109
  122
  136
  151
  168
  186
  206
  227
  249
  273
  299
  327
  357
  389
  422
  458
  497
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  87
  38
  36
  35
  34
  34
  33
  33
  33
  32
  28
  28
  27
  25
  24
  22
  20
  18
  16
  13
  11
  9
  7
  6
  4
  3
  2
  2
  1
  1
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

GCP Applied Technologies Inc. produces and sells specialty construction chemicals, specialty building materials, and packaging sealants and coatings. The Company operates through two segments: Specialty Construction Chemicals and Specialty Building Materials. The Specialty Construction Chemicals segment manufactures and markets products to manage performance of Portland cement, and materials based on Portland cement, such as concrete admixtures and cement additives, as well as concrete production management systems. The Specialty Building Materials segment manufactures and markets building envelope products, residential building products and specialty construction products. Its brands include ADVA, CBA, MIRA, ADPRUFE, DARABLEND and APPERTA.

FINANCIAL RATIOS  of  GCP Applied Technologies Inc. (GCP)

Valuation Ratios
P/E Ratio 29.8
Price to Sales 1.6
Price to Book -15.2
Price to Tangible Book
Price to Cash Flow 17
Price to Free Cash Flow 26.2
Growth Rates
Sales Growth Rate -4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 1.4%
Financial Strength
Quick Ratio 3
Current Ratio 0.3
LT Debt to Equity -547.6%
Total Debt to Equity -581.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 10.4%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 11.9%
Ret/ On T. Cap. - 3 Yr. Avg. 12.7%
Return On Equity 44.5%
Return On Equity - 3 Yr. Avg. 24.7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 39%
Gross Margin - 3 Yr. Avg. 37.1%
EBITDA Margin 13.3%
EBITDA Margin - 3 Yr. Avg. 13.3%
Operating Margin 13%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin 7.8%
Pre-Tax Margin - 3 Yr. Avg. 9.8%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 30.2%
Eff/ Tax Rate - 3 Yr. Avg. 42.1%
Payout Ratio 0%

GCP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GCP stock intrinsic value calculation we used $1125 million for the last fiscal year's total revenue generated by GCP Applied Technologies Inc.. The default revenue input number comes from 0001 income statement of GCP Applied Technologies 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 GCP 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 5.8%, whose default value for GCP is calculated based on our internal credit rating of GCP Applied Technologies 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 GCP Applied Technologies 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 GCP stock the variable cost ratio is equal to 45.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $526 million in the base year in the intrinsic value calculation for GCP 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 20.5% for GCP Applied Technologies Inc..

Corporate tax rate of 27% is the nominal tax rate for GCP Applied Technologies 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 GCP 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 GCP are equal to 32.7%.

Life of production assets of 12.2 years is the average useful life of capital assets used in GCP Applied Technologies 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 GCP is equal to 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 - $479.4 million for GCP Applied Technologies 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 72.377 million for GCP Applied Technologies 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 GCP Applied Technologies Inc. at the current share price and the inputted number of shares is $2.2 billion.

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