Intrinsic value of Green Brick Partners, Inc. - GRBK

Previous Close

$8.96

  Intrinsic Value

$19.92

stock screener

  Rating & Target

str. buy

+122%

Previous close

$8.96

 
Intrinsic value

$19.92

 
Up/down potential

+122%

 
Rating

str. buy

We calculate the intrinsic value of GRBK 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 0.5

 

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, %
  35.70
  32.63
  29.87
  27.38
  25.14
  23.13
  21.32
  19.68
  18.22
  16.89
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.79
  6.61
  6.45
Revenue, $m
  847
  1,123
  1,458
  1,858
  2,325
  2,863
  3,473
  4,156
  4,914
  5,744
  6,646
  7,618
  8,660
  9,768
  10,943
  12,182
  13,484
  14,848
  16,275
  17,763
  19,315
  20,929
  22,608
  24,354
  26,168
  28,053
  30,012
  32,049
  34,166
  36,368
Variable operating expenses, $m
  736
  976
  1,267
  1,613
  2,019
  2,486
  3,016
  3,609
  4,266
  4,987
  5,770
  6,614
  7,518
  8,481
  9,500
  10,576
  11,706
  12,891
  14,130
  15,422
  16,769
  18,171
  19,629
  21,144
  22,719
  24,356
  26,057
  27,825
  29,663
  31,575
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
  736
  976
  1,267
  1,613
  2,019
  2,486
  3,016
  3,609
  4,266
  4,987
  5,770
  6,614
  7,518
  8,481
  9,500
  10,576
  11,706
  12,891
  14,130
  15,422
  16,769
  18,171
  19,629
  21,144
  22,719
  24,356
  26,057
  27,825
  29,663
  31,575
Operating income, $m
  111
  148
  192
  244
  306
  377
  457
  547
  647
  757
  876
  1,004
  1,141
  1,287
  1,442
  1,606
  1,777
  1,957
  2,145
  2,341
  2,546
  2,758
  2,980
  3,210
  3,449
  3,697
  3,956
  4,224
  4,503
  4,793
EBITDA, $m
  112
  149
  194
  247
  309
  380
  461
  552
  653
  763
  883
  1,012
  1,150
  1,297
  1,453
  1,618
  1,791
  1,972
  2,161
  2,359
  2,565
  2,779
  3,002
  3,234
  3,475
  3,725
  3,986
  4,256
  4,537
  4,830
Interest expense (income), $m
  0
  11
  17
  24
  34
  45
  57
  72
  89
  107
  128
  151
  175
  202
  230
  261
  293
  327
  362
  400
  439
  479
  522
  566
  612
  659
  709
  761
  814
  870
  928
Earnings before tax, $m
  100
  131
  167
  211
  261
  319
  385
  459
  540
  628
  725
  829
  939
  1,057
  1,181
  1,313
  1,450
  1,595
  1,745
  1,903
  2,066
  2,237
  2,414
  2,598
  2,790
  2,988
  3,195
  3,410
  3,633
  3,866
Tax expense, $m
  27
  35
  45
  57
  71
  86
  104
  124
  146
  170
  196
  224
  254
  285
  319
  354
  392
  431
  471
  514
  558
  604
  652
  701
  753
  807
  863
  921
  981
  1,044
Net income, $m
  73
  95
  122
  154
  191
  233
  281
  335
  394
  459
  529
  605
  686
  772
  862
  958
  1,059
  1,164
  1,274
  1,389
  1,508
  1,633
  1,762
  1,897
  2,036
  2,182
  2,332
  2,489
  2,652
  2,822

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
  1,045
  1,387
  1,801
  2,294
  2,870
  3,534
  4,287
  5,131
  6,066
  7,091
  8,204
  9,405
  10,691
  12,060
  13,510
  15,039
  16,646
  18,331
  20,092
  21,930
  23,845
  25,838
  27,911
  30,067
  32,306
  34,633
  37,052
  39,566
  42,180
  44,899
Adjusted assets (=assets-cash), $m
  1,045
  1,387
  1,801
  2,294
  2,870
  3,534
  4,287
  5,131
  6,066
  7,091
  8,204
  9,405
  10,691
  12,060
  13,510
  15,039
  16,646
  18,331
  20,092
  21,930
  23,845
  25,838
  27,911
  30,067
  32,306
  34,633
  37,052
  39,566
  42,180
  44,899
Revenue / Adjusted assets
  0.811
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
Average production assets, $m
  4
  6
  7
  9
  12
  14
  17
  21
  25
  29
  33
  38
  43
  49
  55
  61
  67
  74
  81
  89
  97
  105
  113
  122
  131
  140
  150
  160
  171
  182
Working capital, $m
  -9
  -12
  -16
  -20
  -26
  -31
  -38
  -46
  -54
  -63
  -73
  -84
  -95
  -107
  -120
  -134
  -148
  -163
  -179
  -195
  -212
  -230
  -249
  -268
  -288
  -309
  -330
  -353
  -376
  -400
Total debt, $m
  313
  453
  623
  825
  1,062
  1,334
  1,643
  1,989
  2,372
  2,792
  3,249
  3,741
  4,268
  4,829
  5,424
  6,051
  6,710
  7,400
  8,123
  8,876
  9,661
  10,478
  11,328
  12,212
  13,130
  14,084
  15,076
  16,107
  17,179
  18,293
Total liabilities, $m
  429
  568
  738
  940
  1,177
  1,449
  1,758
  2,104
  2,487
  2,907
  3,364
  3,856
  4,383
  4,944
  5,539
  6,166
  6,825
  7,516
  8,238
  8,991
  9,777
  10,594
  11,444
  12,327
  13,246
  14,200
  15,191
  16,222
  17,294
  18,409
Total equity, $m
  617
  818
  1,062
  1,353
  1,693
  2,085
  2,530
  3,028
  3,579
  4,184
  4,841
  5,549
  6,308
  7,115
  7,971
  8,873
  9,821
  10,815
  11,854
  12,939
  14,069
  15,245
  16,468
  17,739
  19,061
  20,434
  21,861
  23,344
  24,886
  26,490
Total liabilities and equity, $m
  1,046
  1,386
  1,800
  2,293
  2,870
  3,534
  4,288
  5,132
  6,066
  7,091
  8,205
  9,405
  10,691
  12,059
  13,510
  15,039
  16,646
  18,331
  20,092
  21,930
  23,846
  25,839
  27,912
  30,066
  32,307
  34,634
  37,052
  39,566
  42,180
  44,899
Debt-to-equity ratio
  0.510
  0.550
  0.590
  0.610
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  73
  95
  122
  154
  191
  233
  281
  335
  394
  459
  529
  605
  686
  772
  862
  958
  1,059
  1,164
  1,274
  1,389
  1,508
  1,633
  1,762
  1,897
  2,036
  2,182
  2,332
  2,489
  2,652
  2,822
Depreciation, amort., depletion, $m
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
Funds from operations, $m
  75
  97
  124
  156
  194
  237
  285
  339
  399
  465
  536
  613
  694
  781
  873
  970
  1,072
  1,179
  1,290
  1,407
  1,528
  1,654
  1,785
  1,921
  2,063
  2,210
  2,362
  2,521
  2,687
  2,858
Change in working capital, $m
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
Cash from operations, $m
  77
  100
  128
  161
  199
  242
  292
  347
  408
  474
  546
  623
  706
  794
  886
  984
  1,087
  1,194
  1,306
  1,423
  1,545
  1,672
  1,803
  1,940
  2,082
  2,230
  2,384
  2,544
  2,710
  2,883
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -2
  -2
  -3
  -3
  -4
  -5
  -6
  -6
  -8
  -9
  -11
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -26
  -27
  -29
  -32
  -33
  -35
  -38
  -40
  -43
  -45
Free cash flow, $m
  75
  98
  125
  157
  195
  237
  286
  340
  400
  465
  536
  612
  693
  779
  871
  967
  1,068
  1,174
  1,284
  1,399
  1,519
  1,644
  1,774
  1,909
  2,049
  2,195
  2,346
  2,504
  2,667
  2,837
Issuance/(repayment) of debt, $m
  113
  140
  170
  202
  236
  272
  309
  346
  383
  420
  457
  492
  527
  561
  594
  627
  659
  691
  722
  754
  785
  817
  850
  884
  918
  954
  992
  1,031
  1,072
  1,115
Issuance/(repurchase) of shares, $m
  89
  106
  122
  137
  149
  158
  163
  163
  157
  146
  128
  103
  73
  36
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  202
  246
  292
  339
  385
  430
  472
  509
  540
  566
  585
  595
  600
  597
  594
  627
  659
  691
  722
  754
  785
  817
  850
  884
  918
  954
  992
  1,031
  1,072
  1,115
Total cash flow (excl. dividends), $m
  277
  344
  417
  496
  580
  668
  758
  849
  940
  1,031
  1,120
  1,207
  1,293
  1,377
  1,465
  1,594
  1,727
  1,864
  2,006
  2,153
  2,304
  2,461
  2,624
  2,792
  2,967
  3,149
  3,338
  3,534
  3,739
  3,952
Retained Cash Flow (-), $m
  -162
  -201
  -244
  -291
  -340
  -392
  -444
  -498
  -551
  -605
  -657
  -708
  -759
  -808
  -855
  -902
  -948
  -994
  -1,039
  -1,084
  -1,130
  -1,176
  -1,223
  -1,271
  -1,321
  -1,373
  -1,427
  -1,483
  -1,542
  -1,604
Prev. year cash balance distribution, $m
  13
  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
  128
  142
  173
  205
  240
  276
  314
  351
  389
  426
  463
  499
  534
  569
  610
  692
  779
  870
  967
  1,069
  1,175
  1,285
  1,401
  1,521
  1,646
  1,776
  1,911
  2,051
  2,197
  2,348
Discount rate, %
  7.50
  7.88
  8.27
  8.68
  9.12
  9.57
  10.05
  10.55
  11.08
  11.63
  12.22
  12.83
  13.47
  14.14
  14.85
  15.59
  16.37
  17.19
  18.05
  18.95
  19.90
  20.89
  21.94
  23.04
  24.19
  25.40
  26.67
  28.00
  29.40
  30.87
PV of cash for distribution, $m
  120
  122
  136
  147
  155
  160
  160
  157
  151
  142
  130
  117
  103
  89
  76
  68
  59
  50
  41
  33
  26
  20
  15
  11
  7
  5
  3
  2
  1
  1
Current shareholders' claim on cash, %
  83.2
  70.7
  61.2
  54.0
  48.5
  44.2
  40.9
  38.3
  36.4
  34.9
  33.9
  33.1
  32.7
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5
  32.5

Green Brick Partners, Inc. operates in the real estate industry. The Company operates through two segments. The builder operations segment includes its controlled builders results, which include building and selling single-family detached homes and townhomes that are designed and built to meet local customer preferences, and the sale of lots. Builder operations consist of three operating segments: Texas, Georgia, and corporate and other. Corporate operations segment develops and implements strategic initiatives and supports its builder operations and land development by centralizing certain administrative functions, such as finance, treasury, information technology and human resources. The land development segment includes operations related to the acquisition and development of land, which is sold to its controlled builders and third-party homebuilders. As of December 31, 2016, it had owned or controlled over 5,200 home sites in various locations in the Dallas and Atlanta markets.

FINANCIAL RATIOS  of  Green Brick Partners, Inc. (GRBK)

Valuation Ratios
P/E Ratio 18.3
Price to Sales 1.2
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow -62.7
Price to Free Cash Flow -62.7
Growth Rates
Sales Growth Rate 30.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 2.9%
Total Debt to Equity 22.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. 13.3%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 22.6%
Gross Margin - 3 Yr. Avg. 22.5%
EBITDA Margin 13.4%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 12.4%
Oper. Margin - 3 Yr. Avg. 12.7%
Pre-Tax Margin 13.4%
Pre-Tax Margin - 3 Yr. Avg. 13.4%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 10.6%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. -4.1%
Payout Ratio 0%

GRBK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GRBK stock intrinsic value calculation we used $624 million for the last fiscal year's total revenue generated by Green Brick Partners, Inc.. The default revenue input number comes from 0001 income statement of Green Brick Partners, 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 GRBK stock valuation model: a) initial revenue growth rate of 35.7% 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 7.5%, whose default value for GRBK is calculated based on our internal credit rating of Green Brick Partners, 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 Green Brick Partners, 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 GRBK stock the variable cost ratio is equal to 86.9%.

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 GRBK 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 Green Brick Partners, Inc..

Corporate tax rate of 27% is the nominal tax rate for Green Brick Partners, 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 GRBK 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 GRBK are equal to 0.5%.

Life of production assets of 1.2 years is the average useful life of capital assets used in Green Brick Partners, 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 GRBK is equal to -1.1%. 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 - $468.351 million for Green Brick Partners, 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 50.575 million for Green Brick Partners, 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 Green Brick Partners, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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