Intrinsic value of Installed Building Products, Inc. - IBP

Previous Close

$53.07

  Intrinsic Value

$61.45

stock screener

  Rating & Target

hold

+16%

Previous close

$53.07

 
Intrinsic value

$61.45

 
Up/down potential

+16%

 
Rating

hold

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 1.6

 

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, %
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.62
  8.25
  7.93
  7.64
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
Revenue, $m
  1,574
  1,834
  2,116
  2,419
  2,743
  3,087
  3,452
  3,836
  4,239
  4,661
  5,102
  5,562
  6,041
  6,540
  7,058
  7,597
  8,157
  8,739
  9,344
  9,973
  10,627
  11,307
  12,015
  12,752
  13,520
  14,320
  15,154
  16,025
  16,933
  17,882
Variable operating expenses, $m
  1,420
  1,649
  1,898
  2,165
  2,451
  2,755
  3,076
  3,415
  3,770
  4,142
  4,499
  4,905
  5,327
  5,767
  6,224
  6,699
  7,193
  7,706
  8,240
  8,794
  9,371
  9,971
  10,595
  11,245
  11,922
  12,628
  13,363
  14,131
  14,932
  15,769
Fixed operating expenses, $m
  35
  36
  36
  37
  38
  39
  40
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  53
  54
  55
  56
  57
  59
  60
  61
  63
  64
  65
Total operating expenses, $m
  1,455
  1,685
  1,934
  2,202
  2,489
  2,794
  3,116
  3,455
  3,811
  4,184
  4,542
  4,949
  5,372
  5,813
  6,271
  6,747
  7,242
  7,756
  8,291
  8,847
  9,425
  10,026
  10,651
  11,302
  11,981
  12,688
  13,424
  14,194
  14,996
  15,834
Operating income, $m
  119
  149
  181
  216
  254
  294
  336
  381
  427
  476
  560
  613
  669
  727
  787
  850
  915
  982
  1,053
  1,126
  1,202
  1,281
  1,364
  1,450
  1,539
  1,632
  1,730
  1,831
  1,937
  2,048
EBITDA, $m
  193
  230
  270
  313
  360
  409
  461
  515
  573
  633
  696
  762
  830
  901
  976
  1,053
  1,133
  1,216
  1,302
  1,392
  1,486
  1,583
  1,685
  1,790
  1,900
  2,015
  2,135
  2,259
  2,390
  2,526
Interest expense (income), $m
  5
  25
  31
  38
  46
  54
  62
  71
  81
  91
  101
  113
  124
  136
  149
  162
  176
  190
  205
  220
  236
  253
  270
  288
  306
  326
  346
  367
  389
  412
  436
Earnings before tax, $m
  94
  118
  143
  171
  200
  232
  265
  300
  336
  375
  447
  489
  532
  578
  625
  674
  725
  778
  833
  890
  950
  1,012
  1,076
  1,143
  1,213
  1,286
  1,363
  1,442
  1,525
  1,612
Tax expense, $m
  25
  32
  39
  46
  54
  63
  72
  81
  91
  101
  121
  132
  144
  156
  169
  182
  196
  210
  225
  240
  256
  273
  291
  309
  328
  347
  368
  389
  412
  435
Net income, $m
  69
  86
  105
  125
  146
  169
  193
  219
  246
  274
  326
  357
  389
  422
  456
  492
  529
  568
  608
  650
  693
  738
  786
  835
  886
  939
  995
  1,053
  1,113
  1,177

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
  983
  1,145
  1,321
  1,511
  1,713
  1,928
  2,156
  2,396
  2,648
  2,911
  3,187
  3,474
  3,773
  4,085
  4,409
  4,745
  5,095
  5,459
  5,836
  6,229
  6,638
  7,062
  7,505
  7,965
  8,444
  8,944
  9,465
  10,009
  10,577
  11,169
Adjusted assets (=assets-cash), $m
  983
  1,145
  1,321
  1,511
  1,713
  1,928
  2,156
  2,396
  2,648
  2,911
  3,187
  3,474
  3,773
  4,085
  4,409
  4,745
  5,095
  5,459
  5,836
  6,229
  6,638
  7,062
  7,505
  7,965
  8,444
  8,944
  9,465
  10,009
  10,577
  11,169
Revenue / Adjusted assets
  1.601
  1.602
  1.602
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
  1.601
Average production assets, $m
  282
  328
  379
  433
  491
  553
  618
  687
  759
  834
  913
  996
  1,081
  1,171
  1,263
  1,360
  1,460
  1,564
  1,673
  1,785
  1,902
  2,024
  2,151
  2,283
  2,420
  2,563
  2,713
  2,868
  3,031
  3,201
Working capital, $m
  184
  215
  248
  283
  321
  361
  404
  449
  496
  545
  597
  651
  707
  765
  826
  889
  954
  1,022
  1,093
  1,167
  1,243
  1,323
  1,406
  1,492
  1,582
  1,675
  1,773
  1,875
  1,981
  2,092
Total debt, $m
  579
  706
  843
  991
  1,149
  1,317
  1,495
  1,682
  1,879
  2,085
  2,300
  2,525
  2,758
  3,002
  3,254
  3,517
  3,791
  4,074
  4,370
  4,676
  4,995
  5,327
  5,672
  6,032
  6,406
  6,797
  7,204
  7,628
  8,072
  8,535
Total liabilities, $m
  768
  895
  1,032
  1,180
  1,338
  1,506
  1,684
  1,871
  2,068
  2,274
  2,489
  2,713
  2,947
  3,190
  3,443
  3,706
  3,979
  4,263
  4,558
  4,865
  5,184
  5,516
  5,861
  6,221
  6,595
  6,985
  7,393
  7,817
  8,260
  8,723
Total equity, $m
  215
  251
  289
  331
  375
  422
  472
  525
  580
  638
  698
  761
  826
  895
  965
  1,039
  1,116
  1,195
  1,278
  1,364
  1,454
  1,547
  1,643
  1,744
  1,849
  1,959
  2,073
  2,192
  2,316
  2,446
Total liabilities and equity, $m
  983
  1,146
  1,321
  1,511
  1,713
  1,928
  2,156
  2,396
  2,648
  2,912
  3,187
  3,474
  3,773
  4,085
  4,408
  4,745
  5,095
  5,458
  5,836
  6,229
  6,638
  7,063
  7,504
  7,965
  8,444
  8,944
  9,466
  10,009
  10,576
  11,169
Debt-to-equity ratio
  2.690
  2.810
  2.910
  3.000
  3.060
  3.120
  3.170
  3.210
  3.240
  3.270
  3.300
  3.320
  3.340
  3.360
  3.370
  3.380
  3.400
  3.410
  3.420
  3.430
  3.440
  3.440
  3.450
  3.460
  3.460
  3.470
  3.480
  3.480
  3.480
  3.490
Adjusted equity ratio
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  69
  86
  105
  125
  146
  169
  193
  219
  246
  274
  326
  357
  389
  422
  456
  492
  529
  568
  608
  650
  693
  738
  786
  835
  886
  939
  995
  1,053
  1,113
  1,177
Depreciation, amort., depletion, $m
  74
  81
  89
  97
  106
  115
  125
  135
  146
  157
  136
  149
  161
  175
  189
  203
  218
  233
  250
  266
  284
  302
  321
  341
  361
  383
  405
  428
  452
  478
Funds from operations, $m
  143
  167
  193
  222
  252
  284
  318
  354
  391
  430
  463
  506
  550
  597
  645
  695
  747
  801
  858
  916
  977
  1,041
  1,107
  1,175
  1,247
  1,322
  1,400
  1,481
  1,566
  1,655
Change in working capital, $m
  28
  30
  33
  35
  38
  40
  43
  45
  47
  49
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  76
  80
  83
  86
  90
  94
  98
  102
  106
  111
Cash from operations, $m
  115
  137
  160
  186
  214
  244
  275
  309
  344
  381
  411
  452
  494
  538
  584
  632
  682
  733
  787
  843
  901
  961
  1,024
  1,089
  1,157
  1,228
  1,302
  1,379
  1,460
  1,544
Maintenance CAPEX, $m
  -36
  -42
  -49
  -57
  -65
  -73
  -82
  -92
  -102
  -113
  -125
  -136
  -149
  -161
  -175
  -189
  -203
  -218
  -233
  -250
  -266
  -284
  -302
  -321
  -341
  -361
  -383
  -405
  -428
  -452
New CAPEX, $m
  -42
  -47
  -50
  -54
  -58
  -62
  -65
  -69
  -72
  -76
  -79
  -82
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -132
  -137
  -143
  -149
  -156
  -163
  -170
Cash from investing activities, $m
  -78
  -89
  -99
  -111
  -123
  -135
  -147
  -161
  -174
  -189
  -204
  -218
  -235
  -250
  -268
  -285
  -303
  -322
  -341
  -363
  -383
  -406
  -429
  -453
  -478
  -504
  -532
  -561
  -591
  -622
Free cash flow, $m
  37
  48
  61
  75
  91
  109
  128
  148
  169
  192
  208
  233
  260
  288
  317
  347
  378
  411
  445
  480
  517
  555
  595
  636
  679
  724
  770
  818
  869
  921
Issuance/(repayment) of debt, $m
  116
  127
  137
  148
  158
  168
  178
  187
  197
  206
  215
  224
  234
  243
  253
  263
  273
  284
  295
  307
  319
  332
  345
  360
  375
  390
  407
  425
  443
  463
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  
  116
  127
  137
  148
  158
  168
  178
  187
  197
  206
  215
  224
  234
  243
  253
  263
  273
  284
  295
  307
  319
  332
  345
  360
  375
  390
  407
  425
  443
  463
Total cash flow (excl. dividends), $m
  153
  175
  199
  223
  249
  277
  305
  335
  366
  398
  423
  457
  493
  531
  569
  610
  652
  695
  740
  787
  836
  887
  940
  996
  1,054
  1,114
  1,177
  1,243
  1,312
  1,384
Retained Cash Flow (-), $m
  -33
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -89
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -130
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
  120
  139
  160
  182
  205
  230
  255
  283
  311
  340
  362
  395
  428
  463
  499
  536
  575
  615
  657
  701
  747
  794
  843
  895
  949
  1,005
  1,063
  1,124
  1,188
  1,254
Discount rate, %
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
  111
  119
  125
  129
  131
  131
  128
  124
  118
  110
  99
  89
  79
  69
  59
  50
  41
  33
  26
  20
  15
  11
  8
  5
  4
  2
  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, Inc. (IBP)

Valuation Ratios
P/E Ratio 44
Price to Sales 1.9
Price to Book 10.8
Price to Tangible Book
Price to Cash Flow 22.9
Price to Free Cash Flow 36.3
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 $1336 million for the last fiscal year's total revenue generated by Installed Building Products, Inc.. The default revenue input number comes from 0001 income statement of Installed Building Products, 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 IBP stock valuation model: a) initial revenue growth rate of 17.8% 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 7.7%, whose default value for IBP is calculated based on our internal credit rating of Installed Building Products, 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 Installed Building Products, 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 IBP 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 $34 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 5.4% for Installed Building Products, Inc..

Corporate tax rate of 27% is the nominal tax rate for Installed Building Products, 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 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 17.9%.

Life of production assets of 6.7 years is the average useful life of capital assets used in Installed Building Products, 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 IBP is equal to 11.7%. 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 - $182.498 million for Installed Building Products, 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 29.995 million for Installed Building Products, 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 Installed Building Products, Inc. at the current share price and the inputted number of shares is $1.6 billion.

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