Intrinsic value of Installed Building Products - IBP

Previous Close

$34.81

  Intrinsic Value

$46.86

stock screener

  Rating & Target

buy

+35%

Previous close

$34.81

 
Intrinsic value

$46.86

 
Up/down potential

+35%

 
Rating

buy

We calculate the intrinsic value of IBP 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 1.1

 

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, %
  17.90
  16.61
  15.45
  14.40
  13.46
  12.62
  11.86
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
Revenue, $m
  1,336
  1,558
  1,798
  2,057
  2,334
  2,629
  2,940
  3,269
  3,614
  3,975
  4,353
  4,746
  5,157
  5,584
  6,028
  6,489
  6,969
  7,467
  7,985
  8,523
  9,083
  9,666
  10,272
  10,903
  11,560
  12,245
  12,959
  13,704
  14,482
  15,294
Variable operating expenses, $m
  1,228
  1,427
  1,643
  1,875
  2,123
  2,388
  2,667
  2,962
  3,271
  3,595
  3,905
  4,258
  4,626
  5,009
  5,407
  5,821
  6,252
  6,699
  7,163
  7,646
  8,148
  8,671
  9,215
  9,781
  10,370
  10,985
  11,626
  12,294
  12,992
  13,720
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
  1,228
  1,427
  1,643
  1,875
  2,123
  2,388
  2,667
  2,962
  3,271
  3,595
  3,905
  4,258
  4,626
  5,009
  5,407
  5,821
  6,252
  6,699
  7,163
  7,646
  8,148
  8,671
  9,215
  9,781
  10,370
  10,985
  11,626
  12,294
  12,992
  13,720
Operating income, $m
  108
  131
  156
  182
  211
  241
  273
  307
  343
  380
  448
  488
  531
  575
  620
  668
  717
  768
  822
  877
  935
  995
  1,057
  1,122
  1,190
  1,260
  1,334
  1,410
  1,490
  1,574
EBITDA, $m
  177
  207
  239
  273
  310
  349
  390
  434
  480
  528
  578
  630
  684
  741
  800
  861
  925
  991
  1,060
  1,131
  1,206
  1,283
  1,363
  1,447
  1,534
  1,625
  1,720
  1,819
  1,922
  2,030
Interest expense (income), $m
  5
  24
  30
  37
  44
  52
  61
  70
  79
  89
  100
  111
  123
  135
  148
  161
  174
  189
  203
  219
  235
  251
  268
  286
  305
  324
  344
  366
  388
  410
  434
Earnings before tax, $m
  84
  101
  119
  138
  159
  180
  203
  228
  253
  280
  337
  366
  396
  427
  460
  493
  529
  565
  603
  643
  684
  726
  771
  817
  865
  916
  968
  1,023
  1,080
  1,139
Tax expense, $m
  23
  27
  32
  37
  43
  49
  55
  61
  68
  76
  91
  99
  107
  115
  124
  133
  143
  153
  163
  173
  185
  196
  208
  221
  234
  247
  261
  276
  292
  308
Net income, $m
  62
  74
  87
  101
  116
  132
  149
  166
  185
  204
  246
  267
  289
  312
  336
  360
  386
  413
  440
  469
  499
  530
  563
  596
  632
  668
  707
  747
  788
  832

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
  871
  1,015
  1,172
  1,341
  1,522
  1,714
  1,917
  2,131
  2,356
  2,591
  2,837
  3,094
  3,362
  3,640
  3,929
  4,230
  4,543
  4,868
  5,205
  5,556
  5,921
  6,301
  6,696
  7,107
  7,536
  7,982
  8,448
  8,934
  9,441
  9,970
Adjusted assets (=assets-cash), $m
  871
  1,015
  1,172
  1,341
  1,522
  1,714
  1,917
  2,131
  2,356
  2,591
  2,837
  3,094
  3,362
  3,640
  3,929
  4,230
  4,543
  4,868
  5,205
  5,556
  5,921
  6,301
  6,696
  7,107
  7,536
  7,982
  8,448
  8,934
  9,441
  9,970
Revenue / Adjusted assets
  1.534
  1.535
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
  1.534
Average production assets, $m
  231
  269
  311
  356
  404
  455
  509
  566
  625
  688
  753
  821
  892
  966
  1,043
  1,123
  1,206
  1,292
  1,381
  1,475
  1,571
  1,672
  1,777
  1,886
  2,000
  2,118
  2,242
  2,371
  2,505
  2,646
Working capital, $m
  147
  171
  198
  226
  257
  289
  323
  360
  398
  437
  479
  522
  567
  614
  663
  714
  767
  821
  878
  938
  999
  1,063
  1,130
  1,199
  1,272
  1,347
  1,426
  1,507
  1,593
  1,682
Total debt, $m
  454
  557
  670
  790
  919
  1,057
  1,202
  1,355
  1,516
  1,684
  1,860
  2,044
  2,235
  2,434
  2,641
  2,856
  3,080
  3,312
  3,553
  3,804
  4,065
  4,337
  4,619
  4,913
  5,220
  5,539
  5,872
  6,219
  6,582
  6,960
Total liabilities, $m
  623
  726
  838
  959
  1,088
  1,225
  1,371
  1,524
  1,684
  1,853
  2,029
  2,212
  2,404
  2,603
  2,809
  3,025
  3,248
  3,480
  3,722
  3,973
  4,234
  4,505
  4,788
  5,082
  5,388
  5,707
  6,040
  6,388
  6,750
  7,129
Total equity, $m
  248
  289
  334
  382
  434
  488
  546
  607
  671
  739
  809
  882
  958
  1,037
  1,120
  1,206
  1,295
  1,387
  1,484
  1,584
  1,688
  1,796
  1,908
  2,026
  2,148
  2,275
  2,408
  2,546
  2,691
  2,842
Total liabilities and equity, $m
  871
  1,015
  1,172
  1,341
  1,522
  1,713
  1,917
  2,131
  2,355
  2,592
  2,838
  3,094
  3,362
  3,640
  3,929
  4,231
  4,543
  4,867
  5,206
  5,557
  5,922
  6,301
  6,696
  7,108
  7,536
  7,982
  8,448
  8,934
  9,441
  9,971
Debt-to-equity ratio
  1.830
  1.930
  2.000
  2.070
  2.120
  2.160
  2.200
  2.230
  2.260
  2.280
  2.300
  2.320
  2.330
  2.350
  2.360
  2.370
  2.380
  2.390
  2.400
  2.400
  2.410
  2.410
  2.420
  2.430
  2.430
  2.430
  2.440
  2.440
  2.450
  2.450
Adjusted equity ratio
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  62
  74
  87
  101
  116
  132
  149
  166
  185
  204
  246
  267
  289
  312
  336
  360
  386
  413
  440
  469
  499
  530
  563
  596
  632
  668
  707
  747
  788
  832
Depreciation, amort., depletion, $m
  69
  76
  83
  91
  99
  108
  117
  127
  137
  148
  130
  142
  154
  167
  180
  194
  208
  223
  238
  254
  271
  288
  306
  325
  345
  365
  387
  409
  432
  456
Funds from operations, $m
  131
  150
  170
  192
  215
  239
  266
  293
  322
  352
  376
  408
  443
  478
  515
  554
  594
  635
  678
  723
  770
  819
  869
  922
  976
  1,034
  1,093
  1,155
  1,220
  1,288
Change in working capital, $m
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  79
  82
  86
  89
Cash from operations, $m
  108
  125
  143
  163
  184
  207
  231
  257
  284
  312
  334
  365
  398
  431
  466
  503
  541
  580
  621
  664
  708
  754
  802
  852
  904
  958
  1,015
  1,073
  1,135
  1,199
Maintenance CAPEX, $m
  -34
  -40
  -46
  -54
  -61
  -70
  -78
  -88
  -98
  -108
  -119
  -130
  -142
  -154
  -167
  -180
  -194
  -208
  -223
  -238
  -254
  -271
  -288
  -306
  -325
  -345
  -365
  -387
  -409
  -432
New CAPEX, $m
  -35
  -38
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -129
  -135
  -140
Cash from investing activities, $m
  -69
  -78
  -88
  -99
  -109
  -121
  -132
  -145
  -158
  -171
  -184
  -198
  -213
  -228
  -244
  -260
  -277
  -294
  -313
  -331
  -351
  -372
  -393
  -415
  -439
  -464
  -489
  -516
  -544
  -572
Free cash flow, $m
  40
  47
  55
  65
  75
  87
  99
  112
  127
  142
  150
  167
  185
  204
  223
  243
  264
  286
  309
  333
  357
  383
  409
  437
  465
  495
  526
  558
  591
  626
Issuance/(repayment) of debt, $m
  94
  103
  112
  121
  129
  137
  145
  153
  161
  168
  176
  184
  191
  199
  207
  215
  224
  232
  241
  251
  261
  271
  282
  294
  306
  319
  333
  347
  363
  379
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  
  94
  103
  112
  121
  129
  137
  145
  153
  161
  168
  176
  184
  191
  199
  207
  215
  224
  232
  241
  251
  261
  271
  282
  294
  306
  319
  333
  347
  363
  379
Total cash flow (excl. dividends), $m
  134
  150
  167
  185
  204
  224
  244
  265
  288
  310
  326
  351
  376
  403
  430
  458
  488
  519
  551
  584
  618
  654
  692
  731
  772
  814
  859
  905
  954
  1,005
Retained Cash Flow (-), $m
  -38
  -41
  -45
  -48
  -51
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -133
  -138
  -144
  -151
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
  96
  109
  123
  137
  153
  169
  186
  204
  223
  243
  256
  278
  300
  323
  348
  373
  399
  426
  454
  484
  514
  546
  579
  614
  649
  687
  726
  767
  809
  854
Discount rate, %
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
  90
  95
  98
  100
  102
  101
  99
  96
  92
  87
  78
  71
  64
  57
  50
  42
  36
  29
  24
  19
  14
  11
  8
  6
  4
  3
  2
  1
  1
  0
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

Installed Building Products, Inc. is a holding company. The Company is a residential insulation installer in the United States. As of December 31, 2016, the Company's national platform included over 100 locations accessing customers in 48 continental states and the District of Columbia. The Company also installs complementary building products, including garage doors, rain gutters, shower doors, closet shelving and mirrors, which provides cross-selling opportunities to supplement the insulation installation business. The Company manages various aspects of the installation process for the customers, from the direct purchase and receipt of materials from national manufacturers, to supply of materials to job sites and quality installation. The Company's customers include production and custom homebuilders, multi-family and commercial contractors, and homeowners.

FINANCIAL RATIOS  of  Installed Building Products (IBP)

Valuation Ratios
P/E Ratio 28.8
Price to Sales 1.3
Price to Book 7.1
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow 23.8
Growth Rates
Sales Growth Rate 30.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 55.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 92.9%
Total Debt to Equity 108.4%
Interest Coverage 13
Management Effectiveness
Return On Assets 9.8%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 13.1%
Ret/ On T. Cap. - 3 Yr. Avg. 12.4%
Return On Equity 28.4%
Return On Equity - 3 Yr. Avg. 24.1%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 29.2%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 9.9%
Operating Margin 7.6%
Oper. Margin - 3 Yr. Avg. 6.5%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 5.9%
Net Profit Margin 4.4%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 36.7%
Eff/ Tax Rate - 3 Yr. Avg. 37.2%
Payout Ratio 0%

IBP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IBP stock intrinsic value calculation we used $1132.927 million for the last fiscal year's total revenue generated by Installed Building Products. The default revenue input number comes from 0001 income statement of Installed Building Products. 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 IBP stock valuation model: a) initial revenue growth rate of 17.9% 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%, whose default value for IBP is calculated based on our internal credit rating of Installed Building Products, 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 Installed Building Products.
    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 IBP stock the variable cost ratio is equal to 92.3%.

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 IBP 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 6.6% for Installed Building Products.

Corporate tax rate of 27% is the nominal tax rate for Installed Building Products. 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 IBP 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 IBP are equal to 17.3%.

Life of production assets of 5.8 years is the average useful life of capital assets used in Installed Building Products 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 IBP is equal to 11%. 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 - $210.528 million for Installed Building Products - 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 31.606 million for Installed Building Products 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 Installed Building Products at the current share price and the inputted number of shares is $1.1 billion.

RELATED COMPANIES Price Int.Val. Rating
BLD TopBuild 47.76 122.39  str.buy
APOG Apogee Enterpr 33.12 115.81  str.buy

COMPANY NEWS

▶ Growing company wants to expand downtown headquarters, add 52 jobs   [Nov-19-18 01:27PM  American City Business Journals]
▶ Installed Building Products acquires Denver glass group   [12:06PM  American City Business Journals]
▶ This Roll-Up Can't Roll On Forever   [May-29-18 10:41AM  Forbes]
▶ Installed Building Products buys fourth company in as many months   [Apr-10-18 12:04PM  American City Business Journals]
▶ Fast-growing Columbus building supplier acquires $15M North Carolina chain   [Mar-20-18 12:03PM  American City Business Journals]
▶ Columbus-based Installed Building Products became a billion-dollar business in 2017   [Mar-02-18 02:55PM  American City Business Journals]
▶ Installed Building Products finishes strong year with two acquisitions   [Jan-02-18 01:55PM  American City Business Journals]
▶ Installed Building Products Sees Its Composite Rating Rise To 96   [Dec-15-17 03:00AM  Investor's Business Daily]
▶ Installed Building Products CEO sells $14.9M in stock   [Dec-14-17 07:05AM  American City Business Journals]
▶ NYSE Top Growth Stocks Installed Building Products And More   [Dec-07-17 11:02AM  Simply Wall St.]
▶ Installed Building Products Announces Successful Repricing   [Dec-01-17 04:05PM  Business Wire]
▶ 5 Small Growth Stocks With Big Upside: Wasatch   [Nov-08-17 08:00AM  Investopedia]

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