Intrinsic value of GMS Inc. - GMS

Previous Close

$18.93

  Intrinsic Value

$46.46

stock screener

  Rating & Target

str. buy

+145%

Previous close

$18.93

 
Intrinsic value

$46.46

 
Up/down potential

+145%

 
Rating

str. buy

We calculate the intrinsic value of GMS 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 0.8

 

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, %
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.88
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
  6.48
  6.34
  6.20
  6.08
  5.97
  5.88
Revenue, $m
  3,104
  3,778
  4,536
  5,378
  6,304
  7,311
  8,399
  9,567
  10,811
  12,131
  13,524
  14,989
  16,526
  18,134
  19,812
  21,562
  23,383
  25,277
  27,247
  29,294
  31,421
  33,631
  35,929
  38,318
  40,802
  43,387
  46,078
  48,880
  51,800
  54,844
Variable operating expenses, $m
  2,855
  3,462
  4,144
  4,901
  5,733
  6,639
  7,617
  8,667
  9,785
  10,972
  12,159
  13,477
  14,859
  16,305
  17,813
  19,386
  21,024
  22,727
  24,498
  26,338
  28,251
  30,239
  32,304
  34,452
  36,686
  39,010
  41,429
  43,949
  46,574
  49,311
Fixed operating expenses, $m
  74
  75
  77
  79
  80
  82
  84
  86
  88
  90
  91
  93
  96
  98
  100
  102
  104
  107
  109
  111
  114
  116
  119
  121
  124
  127
  130
  132
  135
  138
Total operating expenses, $m
  2,929
  3,537
  4,221
  4,980
  5,813
  6,721
  7,701
  8,753
  9,873
  11,062
  12,250
  13,570
  14,955
  16,403
  17,913
  19,488
  21,128
  22,834
  24,607
  26,449
  28,365
  30,355
  32,423
  34,573
  36,810
  39,137
  41,559
  44,081
  46,709
  49,449
Operating income, $m
  175
  241
  316
  399
  491
  591
  699
  814
  938
  1,069
  1,273
  1,419
  1,572
  1,732
  1,899
  2,073
  2,255
  2,444
  2,640
  2,844
  3,056
  3,277
  3,506
  3,744
  3,992
  4,250
  4,519
  4,799
  5,091
  5,395
EBITDA, $m
  288
  365
  452
  548
  654
  770
  895
  1,029
  1,172
  1,324
  1,484
  1,653
  1,830
  2,015
  2,208
  2,410
  2,620
  2,838
  3,065
  3,301
  3,546
  3,801
  4,066
  4,342
  4,629
  4,927
  5,238
  5,561
  5,899
  6,250
Interest expense (income), $m
  26
  32
  43
  56
  70
  86
  104
  123
  143
  165
  189
  213
  240
  267
  296
  326
  358
  391
  425
  461
  498
  537
  577
  618
  662
  707
  753
  802
  853
  906
  961
Earnings before tax, $m
  142
  198
  260
  329
  404
  487
  576
  671
  773
  881
  1,059
  1,179
  1,304
  1,436
  1,573
  1,715
  1,864
  2,018
  2,179
  2,346
  2,520
  2,700
  2,888
  3,083
  3,286
  3,497
  3,717
  3,946
  4,185
  4,434
Tax expense, $m
  38
  53
  70
  89
  109
  131
  155
  181
  209
  238
  286
  318
  352
  388
  425
  463
  503
  545
  588
  633
  680
  729
  780
  832
  887
  944
  1,004
  1,065
  1,130
  1,197
Net income, $m
  104
  144
  190
  240
  295
  355
  420
  490
  564
  643
  773
  861
  952
  1,048
  1,148
  1,252
  1,361
  1,473
  1,591
  1,713
  1,839
  1,971
  2,108
  2,250
  2,399
  2,553
  2,713
  2,881
  3,055
  3,237

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
  1,798
  2,189
  2,628
  3,116
  3,652
  4,236
  4,866
  5,543
  6,264
  7,028
  7,835
  8,684
  9,575
  10,506
  11,479
  12,492
  13,547
  14,645
  15,786
  16,972
  18,204
  19,485
  20,816
  22,200
  23,640
  25,137
  26,696
  28,320
  30,012
  31,775
Adjusted assets (=assets-cash), $m
  1,798
  2,189
  2,628
  3,116
  3,652
  4,236
  4,866
  5,543
  6,264
  7,028
  7,835
  8,684
  9,575
  10,506
  11,479
  12,492
  13,547
  14,645
  15,786
  16,972
  18,204
  19,485
  20,816
  22,200
  23,640
  25,137
  26,696
  28,320
  30,012
  31,775
Revenue / Adjusted assets
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
Average production assets, $m
  605
  737
  885
  1,049
  1,229
  1,426
  1,638
  1,866
  2,108
  2,365
  2,637
  2,923
  3,223
  3,536
  3,863
  4,205
  4,560
  4,929
  5,313
  5,712
  6,127
  6,558
  7,006
  7,472
  7,956
  8,460
  8,985
  9,532
  10,101
  10,695
Working capital, $m
  469
  571
  685
  812
  952
  1,104
  1,268
  1,445
  1,632
  1,832
  2,042
  2,263
  2,495
  2,738
  2,992
  3,256
  3,531
  3,817
  4,114
  4,423
  4,745
  5,078
  5,425
  5,786
  6,161
  6,551
  6,958
  7,381
  7,822
  8,281
Total debt, $m
  803
  1,039
  1,303
  1,597
  1,919
  2,271
  2,650
  3,058
  3,492
  3,952
  4,438
  4,949
  5,485
  6,046
  6,631
  7,241
  7,876
  8,537
  9,224
  9,938
  10,680
  11,451
  12,252
  13,085
  13,952
  14,854
  15,792
  16,769
  17,788
  18,849
Total liabilities, $m
  1,082
  1,318
  1,582
  1,876
  2,199
  2,550
  2,930
  3,337
  3,771
  4,231
  4,717
  5,228
  5,764
  6,325
  6,910
  7,520
  8,156
  8,816
  9,503
  10,217
  10,959
  11,730
  12,531
  13,365
  14,231
  15,133
  16,071
  17,049
  18,067
  19,129
Total equity, $m
  716
  871
  1,046
  1,240
  1,454
  1,686
  1,937
  2,206
  2,493
  2,797
  3,118
  3,456
  3,811
  4,182
  4,569
  4,972
  5,392
  5,829
  6,283
  6,755
  7,245
  7,755
  8,285
  8,836
  9,409
  10,005
  10,625
  11,271
  11,945
  12,646
Total liabilities and equity, $m
  1,798
  2,189
  2,628
  3,116
  3,653
  4,236
  4,867
  5,543
  6,264
  7,028
  7,835
  8,684
  9,575
  10,507
  11,479
  12,492
  13,548
  14,645
  15,786
  16,972
  18,204
  19,485
  20,816
  22,201
  23,640
  25,138
  26,696
  28,320
  30,012
  31,775
Debt-to-equity ratio
  1.120
  1.190
  1.250
  1.290
  1.320
  1.350
  1.370
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.450
  1.450
  1.460
  1.460
  1.460
  1.470
  1.470
  1.470
  1.480
  1.480
  1.480
  1.480
  1.480
  1.490
  1.490
  1.490
  1.490
Adjusted equity ratio
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  104
  144
  190
  240
  295
  355
  420
  490
  564
  643
  773
  861
  952
  1,048
  1,148
  1,252
  1,361
  1,473
  1,591
  1,713
  1,839
  1,971
  2,108
  2,250
  2,399
  2,553
  2,713
  2,881
  3,055
  3,237
Depreciation, amort., depletion, $m
  113
  124
  136
  149
  163
  179
  196
  214
  234
  254
  211
  234
  258
  283
  309
  336
  365
  394
  425
  457
  490
  525
  560
  598
  637
  677
  719
  763
  808
  856
Funds from operations, $m
  217
  268
  325
  389
  459
  534
  616
  704
  798
  897
  984
  1,095
  1,210
  1,331
  1,457
  1,588
  1,725
  1,868
  2,016
  2,170
  2,329
  2,496
  2,668
  2,848
  3,035
  3,230
  3,432
  3,643
  3,863
  4,092
Change in working capital, $m
  89
  102
  114
  127
  140
  152
  164
  176
  188
  199
  210
  221
  232
  243
  253
  264
  275
  286
  297
  309
  321
  334
  347
  361
  375
  390
  406
  423
  441
  460
Cash from operations, $m
  128
  166
  211
  262
  319
  382
  452
  528
  610
  698
  774
  873
  978
  1,088
  1,204
  1,324
  1,450
  1,582
  1,718
  1,860
  2,008
  2,162
  2,322
  2,487
  2,660
  2,839
  3,026
  3,220
  3,422
  3,633
Maintenance CAPEX, $m
  -39
  -48
  -59
  -71
  -84
  -98
  -114
  -131
  -149
  -169
  -189
  -211
  -234
  -258
  -283
  -309
  -336
  -365
  -394
  -425
  -457
  -490
  -525
  -560
  -598
  -637
  -677
  -719
  -763
  -808
New CAPEX, $m
  -115
  -132
  -148
  -164
  -180
  -196
  -212
  -228
  -243
  -257
  -272
  -286
  -300
  -313
  -327
  -341
  -355
  -369
  -384
  -399
  -415
  -431
  -448
  -466
  -484
  -504
  -525
  -546
  -569
  -594
Cash from investing activities, $m
  -154
  -180
  -207
  -235
  -264
  -294
  -326
  -359
  -392
  -426
  -461
  -497
  -534
  -571
  -610
  -650
  -691
  -734
  -778
  -824
  -872
  -921
  -973
  -1,026
  -1,082
  -1,141
  -1,202
  -1,265
  -1,332
  -1,402
Free cash flow, $m
  -26
  -14
  4
  27
  55
  88
  126
  169
  218
  272
  313
  377
  444
  517
  593
  674
  759
  847
  940
  1,036
  1,136
  1,241
  1,349
  1,461
  1,578
  1,699
  1,824
  1,955
  2,090
  2,231
Issuance/(repayment) of debt, $m
  207
  235
  264
  294
  323
  351
  380
  407
  434
  460
  486
  511
  536
  561
  585
  610
  635
  661
  687
  714
  742
  771
  801
  833
  867
  902
  938
  977
  1,018
  1,062
Issuance/(repurchase) of shares, $m
  32
  11
  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  
  239
  246
  264
  294
  323
  351
  380
  407
  434
  460
  486
  511
  536
  561
  585
  610
  635
  661
  687
  714
  742
  771
  801
  833
  867
  902
  938
  977
  1,018
  1,062
Total cash flow (excl. dividends), $m
  214
  233
  269
  320
  377
  439
  505
  577
  652
  732
  799
  888
  981
  1,078
  1,179
  1,284
  1,394
  1,508
  1,627
  1,750
  1,878
  2,012
  2,150
  2,294
  2,444
  2,600
  2,763
  2,932
  3,109
  3,293
Retained Cash Flow (-), $m
  -136
  -156
  -175
  -194
  -213
  -232
  -251
  -269
  -287
  -304
  -321
  -338
  -354
  -371
  -387
  -403
  -420
  -437
  -454
  -472
  -490
  -510
  -530
  -551
  -573
  -596
  -620
  -646
  -673
  -702
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
  77
  77
  94
  126
  164
  207
  254
  307
  365
  428
  478
  550
  626
  707
  792
  881
  974
  1,071
  1,173
  1,278
  1,388
  1,502
  1,620
  1,743
  1,871
  2,004
  2,142
  2,286
  2,435
  2,591
Discount rate, %
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
  72
  66
  73
  89
  104
  117
  127
  134
  137
  137
  128
  122
  114
  104
  92
  80
  67
  55
  45
  35
  27
  20
  14
  10
  7
  5
  3
  2
  1
  1
Current shareholders' claim on cash, %
  96.0
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8
  94.8

GMS Inc. is a distributor of wallboard and suspended ceilings systems, or ceilings. The Company provides a product offering of over 20,000 stock keeping units (SKUs) of wallboard, ceilings and complementary interior construction products for interior contractors. It offers steel framing and ancillary products for its customers. Its Wallboard is a building product for interior and exterior walls and ceilings in residential and commercial structures. Its ceilings product line consists of suspended mineral fiber, soft fiber and metal ceiling systems primarily used in offices, hotels, hospitals, retail facilities, schools and a range of other commercial and institutional buildings. Its steel framing product line consists of steel track, studs and various other steel products used to frame the interior walls of a commercial or institutional building. It supplies complementary products, including insulation, ready-mix-joint compound and various other interior construction products.

FINANCIAL RATIOS  of  GMS Inc. (GMS)

Valuation Ratios
P/E Ratio 15.8
Price to Sales 0.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 13.8
Growth Rates
Sales Growth Rate 24.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 37.5%
Cap. Spend. - 3 Yr. Gr. Rate 6.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 113.2%
Total Debt to Equity 115.5%
Interest Coverage 4
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 1.6%
Return On Equity 11.9%
Return On Equity - 3 Yr. Avg. 4%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 32.7%
Gross Margin - 3 Yr. Avg. 31.7%
EBITDA Margin 7.2%
EBITDA Margin - 3 Yr. Avg. 6.3%
Operating Margin 4.5%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 3.1%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 31.9%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

GMS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GMS stock intrinsic value calculation we used $2511 million for the last fiscal year's total revenue generated by GMS Inc.. The default revenue input number comes from 0001 income statement of GMS 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 GMS stock valuation model: a) initial revenue growth rate of 23.6% 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 7.8%, whose default value for GMS is calculated based on our internal credit rating of GMS 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 GMS 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 GMS stock the variable cost ratio is equal to 92.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $72 million in the base year in the intrinsic value calculation for GMS 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 GMS Inc..

Corporate tax rate of 27% is the nominal tax rate for GMS 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 GMS 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 GMS are equal to 19.5%.

Life of production assets of 12.5 years is the average useful life of capital assets used in GMS 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 GMS is equal to 15.1%. 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 - $579.451 million for GMS 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 40.572 million for GMS 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 GMS Inc. at the current share price and the inputted number of shares is $0.8 billion.

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