Intrinsic value of Hub Group, Inc. - HUBG

Previous Close

$43.68

  Intrinsic Value

$90.69

stock screener

  Rating & Target

str. buy

+108%

Previous close

$43.68

 
Intrinsic value

$90.69

 
Up/down potential

+108%

 
Rating

str. buy

We calculate the intrinsic value of HUBG 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 1.5

 

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, %
  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
  4,126
  4,592
  5,082
  5,596
  6,133
  6,693
  7,276
  7,884
  8,515
  9,172
  9,855
  10,564
  11,301
  12,067
  12,864
  13,692
  14,554
  15,452
  16,387
  17,361
  18,377
  19,437
  20,543
  21,697
  22,903
  24,163
  25,481
  26,859
  28,300
  29,808
Variable operating expenses, $m
  3,730
  4,144
  4,579
  5,034
  5,511
  6,008
  6,526
  7,065
  7,626
  8,208
  8,746
  9,375
  10,029
  10,709
  11,416
  12,152
  12,917
  13,714
  14,543
  15,408
  16,309
  17,250
  18,231
  19,256
  20,326
  21,445
  22,614
  23,837
  25,116
  26,454
Fixed operating expenses, $m
  230
  235
  240
  245
  251
  256
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  355
  363
  371
  379
  388
  396
  405
  414
  423
  432
Total operating expenses, $m
  3,960
  4,379
  4,819
  5,279
  5,762
  6,264
  6,788
  7,333
  7,900
  8,488
  9,032
  9,667
  10,328
  11,014
  11,728
  12,471
  13,243
  14,047
  14,883
  15,756
  16,664
  17,613
  18,602
  19,635
  20,714
  21,841
  23,019
  24,251
  25,539
  26,886
Operating income, $m
  166
  213
  263
  316
  371
  428
  488
  551
  616
  684
  823
  896
  973
  1,053
  1,135
  1,222
  1,312
  1,406
  1,504
  1,606
  1,712
  1,824
  1,940
  2,062
  2,189
  2,322
  2,462
  2,608
  2,761
  2,922
EBITDA, $m
  307
  363
  422
  483
  548
  615
  685
  759
  835
  915
  997
  1,083
  1,173
  1,266
  1,363
  1,464
  1,569
  1,679
  1,793
  1,913
  2,037
  2,167
  2,303
  2,446
  2,594
  2,750
  2,913
  3,083
  3,262
  3,449
Interest expense (income), $m
  4
  18
  24
  31
  38
  45
  52
  60
  68
  76
  85
  94
  104
  113
  124
  134
  145
  157
  168
  181
  194
  207
  221
  236
  251
  267
  284
  301
  320
  339
  359
Earnings before tax, $m
  148
  189
  233
  278
  326
  376
  429
  483
  540
  599
  729
  793
  860
  929
  1,001
  1,077
  1,155
  1,237
  1,323
  1,412
  1,505
  1,602
  1,704
  1,811
  1,922
  2,039
  2,161
  2,289
  2,423
  2,563
Tax expense, $m
  40
  51
  63
  75
  88
  102
  116
  130
  146
  162
  197
  214
  232
  251
  270
  291
  312
  334
  357
  381
  406
  433
  460
  489
  519
  550
  583
  618
  654
  692
Net income, $m
  108
  138
  170
  203
  238
  275
  313
  353
  394
  437
  532
  579
  628
  678
  731
  786
  843
  903
  966
  1,031
  1,099
  1,170
  1,244
  1,322
  1,403
  1,488
  1,577
  1,671
  1,768
  1,871

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
  2,156
  2,399
  2,655
  2,924
  3,204
  3,497
  3,802
  4,119
  4,449
  4,792
  5,149
  5,519
  5,904
  6,305
  6,721
  7,154
  7,604
  8,073
  8,562
  9,071
  9,601
  10,155
  10,733
  11,336
  11,966
  12,625
  13,313
  14,033
  14,786
  15,574
Adjusted assets (=assets-cash), $m
  2,156
  2,399
  2,655
  2,924
  3,204
  3,497
  3,802
  4,119
  4,449
  4,792
  5,149
  5,519
  5,904
  6,305
  6,721
  7,154
  7,604
  8,073
  8,562
  9,071
  9,601
  10,155
  10,733
  11,336
  11,966
  12,625
  13,313
  14,033
  14,786
  15,574
Revenue / Adjusted assets
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
  1.914
Average production assets, $m
  978
  1,088
  1,205
  1,326
  1,453
  1,586
  1,724
  1,868
  2,018
  2,174
  2,336
  2,504
  2,678
  2,860
  3,049
  3,245
  3,449
  3,662
  3,884
  4,115
  4,355
  4,607
  4,869
  5,142
  5,428
  5,727
  6,039
  6,365
  6,707
  7,065
Working capital, $m
  120
  133
  147
  162
  178
  194
  211
  229
  247
  266
  286
  306
  328
  350
  373
  397
  422
  448
  475
  503
  533
  564
  596
  629
  664
  701
  739
  779
  821
  864
Total debt, $m
  451
  570
  695
  827
  964
  1,108
  1,257
  1,413
  1,574
  1,742
  1,917
  2,099
  2,287
  2,484
  2,688
  2,900
  3,120
  3,350
  3,590
  3,839
  4,099
  4,370
  4,653
  4,949
  5,258
  5,580
  5,918
  6,270
  6,639
  7,025
Total liabilities, $m
  1,056
  1,176
  1,301
  1,433
  1,570
  1,713
  1,863
  2,018
  2,180
  2,348
  2,523
  2,704
  2,893
  3,089
  3,293
  3,505
  3,726
  3,956
  4,195
  4,445
  4,705
  4,976
  5,259
  5,555
  5,863
  6,186
  6,523
  6,876
  7,245
  7,631
Total equity, $m
  1,099
  1,224
  1,354
  1,491
  1,634
  1,783
  1,939
  2,101
  2,269
  2,444
  2,626
  2,815
  3,011
  3,215
  3,428
  3,648
  3,878
  4,117
  4,366
  4,626
  4,897
  5,179
  5,474
  5,781
  6,103
  6,439
  6,790
  7,157
  7,541
  7,943
Total liabilities and equity, $m
  2,155
  2,400
  2,655
  2,924
  3,204
  3,496
  3,802
  4,119
  4,449
  4,792
  5,149
  5,519
  5,904
  6,304
  6,721
  7,153
  7,604
  8,073
  8,561
  9,071
  9,602
  10,155
  10,733
  11,336
  11,966
  12,625
  13,313
  14,033
  14,786
  15,574
Debt-to-equity ratio
  0.410
  0.470
  0.510
  0.550
  0.590
  0.620
  0.650
  0.670
  0.690
  0.710
  0.730
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.840
  0.850
  0.860
  0.860
  0.870
  0.870
  0.880
  0.880
  0.880
Adjusted equity ratio
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  108
  138
  170
  203
  238
  275
  313
  353
  394
  437
  532
  579
  628
  678
  731
  786
  843
  903
  966
  1,031
  1,099
  1,170
  1,244
  1,322
  1,403
  1,488
  1,577
  1,671
  1,768
  1,871
Depreciation, amort., depletion, $m
  141
  149
  158
  167
  177
  187
  197
  208
  219
  230
  174
  187
  200
  213
  228
  242
  257
  273
  290
  307
  325
  344
  363
  384
  405
  427
  451
  475
  501
  527
Funds from operations, $m
  249
  288
  328
  370
  415
  461
  510
  560
  613
  668
  706
  766
  827
  892
  959
  1,028
  1,101
  1,176
  1,255
  1,338
  1,424
  1,513
  1,607
  1,705
  1,808
  1,916
  2,028
  2,146
  2,269
  2,398
Change in working capital, $m
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
Cash from operations, $m
  236
  274
  314
  355
  399
  445
  493
  543
  595
  649
  687
  745
  806
  869
  935
  1,004
  1,076
  1,150
  1,228
  1,309
  1,394
  1,483
  1,575
  1,672
  1,773
  1,879
  1,990
  2,106
  2,227
  2,354
Maintenance CAPEX, $m
  -65
  -73
  -81
  -90
  -99
  -108
  -118
  -129
  -139
  -151
  -162
  -174
  -187
  -200
  -213
  -228
  -242
  -257
  -273
  -290
  -307
  -325
  -344
  -363
  -384
  -405
  -427
  -451
  -475
  -501
New CAPEX, $m
  -106
  -111
  -116
  -122
  -127
  -133
  -138
  -144
  -150
  -156
  -162
  -168
  -175
  -182
  -189
  -196
  -204
  -213
  -222
  -231
  -241
  -251
  -262
  -274
  -286
  -299
  -312
  -327
  -342
  -357
Cash from investing activities, $m
  -171
  -184
  -197
  -212
  -226
  -241
  -256
  -273
  -289
  -307
  -324
  -342
  -362
  -382
  -402
  -424
  -446
  -470
  -495
  -521
  -548
  -576
  -606
  -637
  -670
  -704
  -739
  -778
  -817
  -858
Free cash flow, $m
  65
  91
  116
  144
  173
  204
  236
  270
  305
  342
  363
  403
  444
  488
  533
  580
  629
  680
  733
  789
  846
  907
  969
  1,035
  1,104
  1,175
  1,250
  1,329
  1,411
  1,496
Issuance/(repayment) of debt, $m
  112
  119
  125
  131
  137
  143
  149
  156
  162
  168
  175
  182
  189
  196
  204
  212
  221
  230
  239
  249
  260
  271
  283
  296
  309
  323
  337
  353
  369
  386
Issuance/(repurchase) of shares, $m
  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
  0
Cash from financing (excl. dividends), $m  
  123
  119
  125
  131
  137
  143
  149
  156
  162
  168
  175
  182
  189
  196
  204
  212
  221
  230
  239
  249
  260
  271
  283
  296
  309
  323
  337
  353
  369
  386
Total cash flow (excl. dividends), $m
  188
  210
  242
  275
  311
  347
  386
  426
  467
  511
  537
  584
  633
  684
  737
  792
  850
  910
  973
  1,038
  1,106
  1,178
  1,253
  1,331
  1,412
  1,498
  1,587
  1,681
  1,780
  1,883
Retained Cash Flow (-), $m
  -119
  -124
  -131
  -137
  -143
  -149
  -156
  -162
  -168
  -175
  -182
  -189
  -196
  -204
  -212
  -221
  -230
  -239
  -249
  -260
  -271
  -282
  -295
  -308
  -321
  -336
  -351
  -367
  -384
  -402
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
  70
  86
  111
  139
  167
  198
  230
  264
  299
  336
  355
  395
  437
  480
  525
  572
  620
  671
  724
  779
  836
  896
  958
  1,023
  1,091
  1,162
  1,236
  1,314
  1,396
  1,481
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
  67
  78
  97
  114
  130
  144
  155
  165
  172
  176
  169
  169
  166
  161
  154
  145
  135
  124
  111
  99
  86
  74
  63
  52
  42
  34
  27
  20
  15
  11
Current shareholders' claim on cash, %
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3
  99.3

Hub Group, Inc. is an asset-light freight transportation management company. The Company offers intermodal, truck brokerage and logistics services. It operates through two business segments: Mode and Hub. The Mode segment markets and operates its freight transportation services, consisting of intermodal, truck brokerage and logistics, primarily through agents entering into contractual arrangements with Mode Transportation, LLC (Mode LLC). The Mode segment also operates a temperature protected services division. The Hub segment provides intermodal, truck brokerage and logistics services through a network of operating centers throughout the United States, Canada and Mexico. The Hub segment services customers in a range of industries, including consumer products, retail and durable goods. It operates through a network of operating centers and independent business owners. The Company also provides drayage services with its own drayage operations.

FINANCIAL RATIOS  of  Hub Group, Inc. (HUBG)

Valuation Ratios
P/E Ratio 19.7
Price to Sales 0.4
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 14.5
Price to Free Cash Flow -295.8
Growth Rates
Sales Growth Rate 1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.9%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 20.1%
Total Debt to Equity 27.7%
Interest Coverage 31
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 9.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.9%
Return On Equity 11.8%
Return On Equity - 3 Yr. Avg. 10.7%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 12.7%
Gross Margin - 3 Yr. Avg. 11.6%
EBITDA Margin 4.8%
EBITDA Margin - 3 Yr. Avg. 4.1%
Operating Margin 3.5%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 3.4%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 38%
Eff/ Tax Rate - 3 Yr. Avg. 37.1%
Payout Ratio 0%

HUBG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HUBG stock intrinsic value calculation we used $3684 million for the last fiscal year's total revenue generated by Hub Group, Inc.. The default revenue input number comes from 0001 income statement of Hub Group, 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 HUBG 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 HUBG is calculated based on our internal credit rating of Hub Group, 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 Hub Group, 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 HUBG stock the variable cost ratio is equal to 90.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $225 million in the base year in the intrinsic value calculation for HUBG 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 Hub Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Hub Group, 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 HUBG 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 HUBG are equal to 23.7%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Hub Group, 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 HUBG is equal to 2.9%. 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 - $980.834 million for Hub Group, 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 34.813 million for Hub Group, 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 Hub Group, Inc. at the current share price and the inputted number of shares is $1.5 billion.

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