Intrinsic value of Multi-Color Corporation - LABL

Previous Close

$49.97

  Intrinsic Value

$114.67

stock screener

  Rating & Target

str. buy

+129%

Previous close

$49.97

 
Intrinsic value

$114.67

 
Up/down potential

+129%

 
Rating

str. buy

We calculate the intrinsic value of LABL 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 1.0

 

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, %
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
Revenue, $m
  1,465
  1,638
  1,821
  2,013
  2,214
  2,424
  2,643
  2,872
  3,109
  3,356
  3,613
  3,880
  4,157
  4,445
  4,745
  5,056
  5,380
  5,717
  6,068
  6,434
  6,815
  7,213
  7,627
  8,060
  8,512
  8,984
  9,477
  9,993
  10,532
  11,097
Variable operating expenses, $m
  1,267
  1,396
  1,532
  1,674
  1,824
  1,980
  2,143
  2,312
  2,489
  2,673
  2,686
  2,884
  3,090
  3,305
  3,527
  3,759
  4,000
  4,250
  4,511
  4,783
  5,067
  5,362
  5,670
  5,992
  6,328
  6,679
  7,046
  7,429
  7,830
  8,249
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
  1,267
  1,396
  1,532
  1,674
  1,824
  1,980
  2,143
  2,312
  2,489
  2,673
  2,686
  2,884
  3,090
  3,305
  3,527
  3,759
  4,000
  4,250
  4,511
  4,783
  5,067
  5,362
  5,670
  5,992
  6,328
  6,679
  7,046
  7,429
  7,830
  8,249
Operating income, $m
  198
  243
  290
  339
  390
  444
  501
  559
  620
  683
  927
  995
  1,067
  1,141
  1,217
  1,297
  1,380
  1,467
  1,557
  1,651
  1,749
  1,851
  1,957
  2,068
  2,184
  2,305
  2,432
  2,564
  2,702
  2,847
EBITDA, $m
  427
  477
  531
  587
  645
  706
  770
  837
  906
  978
  1,053
  1,130
  1,211
  1,295
  1,382
  1,473
  1,568
  1,666
  1,768
  1,875
  1,986
  2,101
  2,222
  2,348
  2,480
  2,618
  2,761
  2,911
  3,069
  3,233
Interest expense (income), $m
  24
  86
  101
  116
  133
  150
  168
  186
  206
  226
  247
  269
  292
  316
  341
  366
  393
  421
  450
  480
  511
  544
  578
  613
  650
  688
  729
  771
  815
  861
  909
Earnings before tax, $m
  112
  142
  173
  206
  241
  277
  314
  353
  394
  436
  658
  703
  751
  800
  851
  904
  960
  1,017
  1,077
  1,140
  1,205
  1,273
  1,344
  1,418
  1,496
  1,576
  1,661
  1,749
  1,842
  1,939
Tax expense, $m
  30
  38
  47
  56
  65
  75
  85
  95
  106
  118
  178
  190
  203
  216
  230
  244
  259
  275
  291
  308
  325
  344
  363
  383
  404
  426
  448
  472
  497
  523
Net income, $m
  82
  103
  126
  150
  176
  202
  229
  258
  287
  318
  480
  513
  548
  584
  621
  660
  701
  743
  786
  832
  880
  929
  981
  1,035
  1,092
  1,151
  1,213
  1,277
  1,345
  1,415

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
  3,270
  3,657
  4,065
  4,494
  4,942
  5,411
  5,900
  6,410
  6,940
  7,491
  8,064
  8,660
  9,279
  9,922
  10,591
  11,286
  12,009
  12,762
  13,545
  14,362
  15,213
  16,100
  17,025
  17,991
  19,000
  20,053
  21,155
  22,306
  23,510
  24,769
Adjusted assets (=assets-cash), $m
  3,270
  3,657
  4,065
  4,494
  4,942
  5,411
  5,900
  6,410
  6,940
  7,491
  8,064
  8,660
  9,279
  9,922
  10,591
  11,286
  12,009
  12,762
  13,545
  14,362
  15,213
  16,100
  17,025
  17,991
  19,000
  20,053
  21,155
  22,306
  23,510
  24,769
Revenue / Adjusted assets
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
  0.448
Average production assets, $m
  1,090
  1,219
  1,355
  1,498
  1,647
  1,804
  1,967
  2,136
  2,313
  2,497
  2,688
  2,886
  3,093
  3,307
  3,530
  3,762
  4,003
  4,254
  4,515
  4,787
  5,071
  5,366
  5,675
  5,997
  6,333
  6,684
  7,051
  7,435
  7,836
  8,256
Working capital, $m
  256
  287
  319
  352
  387
  424
  463
  503
  544
  587
  632
  679
  727
  778
  830
  885
  942
  1,001
  1,062
  1,126
  1,193
  1,262
  1,335
  1,411
  1,490
  1,572
  1,659
  1,749
  1,843
  1,942
Total debt, $m
  1,870
  2,156
  2,457
  2,774
  3,106
  3,452
  3,814
  4,190
  4,582
  4,989
  5,413
  5,853
  6,310
  6,786
  7,280
  7,794
  8,328
  8,884
  9,463
  10,067
  10,695
  11,351
  12,035
  12,749
  13,494
  14,273
  15,087
  15,937
  16,827
  17,758
Total liabilities, $m
  2,416
  2,703
  3,004
  3,321
  3,652
  3,999
  4,360
  4,737
  5,129
  5,536
  5,960
  6,400
  6,857
  7,332
  7,826
  8,340
  8,875
  9,431
  10,010
  10,613
  11,242
  11,898
  12,582
  13,295
  14,041
  14,819
  15,633
  16,484
  17,374
  18,305
Total equity, $m
  853
  954
  1,061
  1,173
  1,290
  1,412
  1,540
  1,673
  1,811
  1,955
  2,105
  2,260
  2,422
  2,590
  2,764
  2,946
  3,134
  3,331
  3,535
  3,748
  3,970
  4,202
  4,444
  4,696
  4,959
  5,234
  5,521
  5,822
  6,136
  6,465
Total liabilities and equity, $m
  3,269
  3,657
  4,065
  4,494
  4,942
  5,411
  5,900
  6,410
  6,940
  7,491
  8,065
  8,660
  9,279
  9,922
  10,590
  11,286
  12,009
  12,762
  13,545
  14,361
  15,212
  16,100
  17,026
  17,991
  19,000
  20,053
  21,154
  22,306
  23,510
  24,770
Debt-to-equity ratio
  2.190
  2.260
  2.320
  2.370
  2.410
  2.440
  2.480
  2.500
  2.530
  2.550
  2.570
  2.590
  2.610
  2.620
  2.630
  2.650
  2.660
  2.670
  2.680
  2.690
  2.690
  2.700
  2.710
  2.710
  2.720
  2.730
  2.730
  2.740
  2.740
  2.750
Adjusted equity ratio
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261
  0.261

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  82
  103
  126
  150
  176
  202
  229
  258
  287
  318
  480
  513
  548
  584
  621
  660
  701
  743
  786
  832
  880
  929
  981
  1,035
  1,092
  1,151
  1,213
  1,277
  1,345
  1,415
Depreciation, amort., depletion, $m
  229
  235
  241
  248
  255
  262
  270
  278
  286
  294
  126
  135
  145
  155
  165
  176
  187
  199
  211
  224
  237
  251
  265
  280
  296
  312
  329
  347
  366
  386
Funds from operations, $m
  310
  338
  367
  398
  430
  464
  499
  535
  573
  613
  606
  648
  692
  738
  786
  836
  888
  941
  997
  1,056
  1,117
  1,180
  1,246
  1,316
  1,388
  1,463
  1,542
  1,624
  1,711
  1,801
Change in working capital, $m
  29
  30
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  50
  52
  55
  57
  59
  61
  64
  67
  70
  73
  76
  79
  83
  86
  90
  94
  99
Cash from operations, $m
  282
  308
  335
  365
  395
  427
  461
  495
  532
  569
  561
  602
  644
  688
  734
  781
  831
  882
  936
  992
  1,050
  1,111
  1,174
  1,240
  1,309
  1,381
  1,456
  1,534
  1,616
  1,702
Maintenance CAPEX, $m
  -45
  -51
  -57
  -63
  -70
  -77
  -84
  -92
  -100
  -108
  -117
  -126
  -135
  -145
  -155
  -165
  -176
  -187
  -199
  -211
  -224
  -237
  -251
  -265
  -280
  -296
  -312
  -329
  -347
  -366
New CAPEX, $m
  -122
  -129
  -136
  -143
  -150
  -156
  -163
  -170
  -177
  -184
  -191
  -199
  -206
  -214
  -223
  -232
  -241
  -251
  -261
  -272
  -284
  -296
  -308
  -322
  -336
  -351
  -367
  -384
  -401
  -420
Cash from investing activities, $m
  -167
  -180
  -193
  -206
  -220
  -233
  -247
  -262
  -277
  -292
  -308
  -325
  -341
  -359
  -378
  -397
  -417
  -438
  -460
  -483
  -508
  -533
  -559
  -587
  -616
  -647
  -679
  -713
  -748
  -786
Free cash flow, $m
  115
  128
  142
  158
  176
  194
  213
  234
  255
  278
  253
  277
  303
  329
  356
  385
  414
  444
  476
  509
  543
  578
  615
  653
  692
  733
  776
  821
  868
  916
Issuance/(repayment) of debt, $m
  271
  286
  302
  317
  332
  347
  361
  377
  392
  407
  424
  440
  457
  475
  494
  514
  534
  556
  579
  603
  629
  656
  684
  714
  745
  779
  814
  851
  890
  931
Issuance/(repurchase) of shares, $m
  14
  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  
  285
  286
  302
  317
  332
  347
  361
  377
  392
  407
  424
  440
  457
  475
  494
  514
  534
  556
  579
  603
  629
  656
  684
  714
  745
  779
  814
  851
  890
  931
Total cash flow (excl. dividends), $m
  400
  414
  444
  475
  507
  540
  575
  610
  647
  685
  677
  718
  760
  804
  850
  898
  948
  1,001
  1,055
  1,112
  1,171
  1,234
  1,299
  1,366
  1,438
  1,512
  1,590
  1,672
  1,757
  1,847
Retained Cash Flow (-), $m
  -96
  -101
  -106
  -112
  -117
  -122
  -128
  -133
  -138
  -144
  -150
  -155
  -162
  -168
  -175
  -181
  -189
  -196
  -205
  -213
  -222
  -232
  -242
  -252
  -263
  -275
  -287
  -300
  -314
  -329
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
  304
  313
  338
  363
  390
  418
  447
  477
  509
  541
  527
  562
  599
  637
  676
  717
  760
  804
  851
  899
  949
  1,002
  1,057
  1,114
  1,174
  1,237
  1,303
  1,371
  1,443
  1,518
Discount rate, %
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.30
  19.22
  20.18
  21.19
  22.24
  23.36
  24.52
  25.75
  27.04
  28.39
  29.81
  31.30
  32.87
  34.51
  36.23
  38.05
  39.95
  41.95
  44.04
PV of cash for distribution, $m
  275
  253
  242
  228
  212
  194
  175
  155
  136
  117
  90
  75
  61
  49
  38
  29
  21
  16
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6
  98.6

Multi-Color Corporation (Multi-Color) is engaged in label solutions business, supporting brands, including producers of home and personal care, wine and spirit, food and beverage, healthcare and specialty consumer products. The Company serves international brand owners in North, Central and South America, Europe, Australia, New Zealand, South Africa and China and Southeast Asia with a range of label technologies in Pressure Sensitive, Glue-Applied (Cut and Stack), In-Mold, Shrink Sleeve and Heat Transfer. The Company also provides a range of print methods, including flexographic, lithographic, rotogravure, letterpress and digital, and in-house prepress services. The Company provides graphics and pre-press services for its customers at all of its manufacturing locations. These services include the conversion of customer digital files and artwork into proofs, production of print layouts and printing plates, and product mock ups and samples for market research.

FINANCIAL RATIOS  of  Multi-Color Corporation (LABL)

Valuation Ratios
P/E Ratio 13.9
Price to Sales 0.9
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 13.9
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 31.4%
Cap. Spend. - 3 Yr. Gr. Rate 8.9%
Financial Strength
Quick Ratio 13
Current Ratio 0
LT Debt to Equity 126.6%
Total Debt to Equity 127.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 7.2%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 17%
Return On Equity - 3 Yr. Avg. 16%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 21.3%
Gross Margin - 3 Yr. Avg. 21.2%
EBITDA Margin 17.2%
EBITDA Margin - 3 Yr. Avg. 14.6%
Operating Margin 12%
Oper. Margin - 3 Yr. Avg. 11.6%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 6.6%
Net Profit Margin - 3 Yr. Avg. 5.9%
Effective Tax Rate 30.7%
Eff/ Tax Rate - 3 Yr. Avg. 31.4%
Payout Ratio 6.6%

LABL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LABL stock intrinsic value calculation we used $1301 million for the last fiscal year's total revenue generated by Multi-Color Corporation. The default revenue input number comes from 0001 income statement of Multi-Color Corporation. 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 LABL stock valuation model: a) initial revenue growth rate of 12.6% 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 10.7%, whose default value for LABL is calculated based on our internal credit rating of Multi-Color Corporation, 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 Multi-Color Corporation.
    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 LABL stock the variable cost ratio is equal to 88%.

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 LABL 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 Multi-Color Corporation.

Corporate tax rate of 27% is the nominal tax rate for Multi-Color Corporation. 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 LABL 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 LABL are equal to 74.4%.

Life of production assets of 21.4 years is the average useful life of capital assets used in Multi-Color Corporation 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 LABL is equal to 17.5%. 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 - $757.557 million for Multi-Color Corporation - 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 20.596 million for Multi-Color Corporation 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 Multi-Color Corporation at the current share price and the inputted number of shares is $1.0 billion.

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