Intrinsic value of Landstar System, Inc. - LSTR

Previous Close

$110.36

  Intrinsic Value

$134.88

stock screener

  Rating & Target

buy

+22%

Previous close

$110.36

 
Intrinsic value

$134.88

 
Up/down potential

+22%

 
Rating

buy

We calculate the intrinsic value of LSTR 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 4.4

 

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, %
  12.40
  11.66
  10.99
  10.39
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
Revenue, $m
  5,187
  5,792
  6,429
  7,097
  7,797
  8,527
  9,289
  10,082
  10,907
  11,765
  12,657
  13,584
  14,547
  15,548
  16,589
  17,671
  18,797
  19,968
  21,189
  22,460
  23,785
  25,167
  26,608
  28,113
  29,685
  31,327
  33,043
  34,837
  36,714
  38,678
Variable operating expenses, $m
  4,725
  5,276
  5,855
  6,463
  7,100
  7,765
  8,458
  9,180
  9,931
  10,712
  11,520
  12,364
  13,240
  14,151
  15,099
  16,084
  17,108
  18,175
  19,285
  20,442
  21,648
  22,906
  24,218
  25,588
  27,019
  28,513
  30,075
  31,708
  33,416
  35,204
Fixed operating expenses, $m
  88
  90
  92
  94
  96
  98
  100
  102
  105
  107
  109
  112
  114
  117
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  162
  165
Total operating expenses, $m
  4,813
  5,366
  5,947
  6,557
  7,196
  7,863
  8,558
  9,282
  10,036
  10,819
  11,629
  12,476
  13,354
  14,268
  15,218
  16,206
  17,232
  18,302
  19,415
  20,575
  21,784
  23,045
  24,360
  25,733
  27,167
  28,664
  30,230
  31,866
  33,578
  35,369
Operating income, $m
  374
  427
  482
  540
  601
  664
  730
  799
  871
  946
  1,028
  1,108
  1,193
  1,280
  1,371
  1,465
  1,564
  1,666
  1,773
  1,885
  2,001
  2,122
  2,248
  2,380
  2,518
  2,662
  2,813
  2,971
  3,136
  3,309
EBITDA, $m
  424
  482
  543
  607
  674
  744
  817
  893
  972
  1,055
  1,140
  1,229
  1,322
  1,418
  1,519
  1,623
  1,731
  1,844
  1,962
  2,085
  2,212
  2,346
  2,485
  2,631
  2,783
  2,941
  3,107
  3,281
  3,463
  3,653
Interest expense (income), $m
  4
  10
  15
  20
  25
  30
  36
  42
  48
  54
  61
  68
  75
  83
  91
  99
  107
  116
  125
  135
  145
  155
  166
  177
  189
  201
  214
  227
  241
  256
  271
Earnings before tax, $m
  364
  412
  462
  515
  571
  628
  689
  752
  817
  885
  960
  1,033
  1,110
  1,189
  1,272
  1,358
  1,448
  1,541
  1,638
  1,740
  1,846
  1,956
  2,071
  2,192
  2,317
  2,449
  2,586
  2,730
  2,881
  3,038
Tax expense, $m
  98
  111
  125
  139
  154
  170
  186
  203
  221
  239
  259
  279
  300
  321
  343
  367
  391
  416
  442
  470
  498
  528
  559
  592
  626
  661
  698
  737
  778
  820
Net income, $m
  266
  301
  338
  376
  416
  459
  503
  549
  596
  646
  701
  754
  810
  868
  929
  991
  1,057
  1,125
  1,196
  1,270
  1,347
  1,428
  1,512
  1,600
  1,692
  1,788
  1,888
  1,993
  2,103
  2,218

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
  1,552
  1,733
  1,923
  2,123
  2,332
  2,551
  2,779
  3,016
  3,263
  3,519
  3,786
  4,063
  4,351
  4,651
  4,962
  5,286
  5,623
  5,973
  6,338
  6,718
  7,115
  7,528
  7,959
  8,410
  8,880
  9,371
  9,884
  10,421
  10,982
  11,570
Adjusted assets (=assets-cash), $m
  1,552
  1,733
  1,923
  2,123
  2,332
  2,551
  2,779
  3,016
  3,263
  3,519
  3,786
  4,063
  4,351
  4,651
  4,962
  5,286
  5,623
  5,973
  6,338
  6,718
  7,115
  7,528
  7,959
  8,410
  8,880
  9,371
  9,884
  10,421
  10,982
  11,570
Revenue / Adjusted assets
  3.342
  3.342
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
  3.343
Average production assets, $m
  337
  376
  418
  461
  507
  554
  604
  655
  709
  765
  823
  883
  946
  1,011
  1,078
  1,149
  1,222
  1,298
  1,377
  1,460
  1,546
  1,636
  1,730
  1,827
  1,930
  2,036
  2,148
  2,264
  2,386
  2,514
Working capital, $m
  332
  371
  411
  454
  499
  546
  594
  645
  698
  753
  810
  869
  931
  995
  1,062
  1,131
  1,203
  1,278
  1,356
  1,437
  1,522
  1,611
  1,703
  1,799
  1,900
  2,005
  2,115
  2,230
  2,350
  2,475
Total debt, $m
  271
  362
  457
  558
  663
  773
  888
  1,007
  1,131
  1,260
  1,394
  1,534
  1,679
  1,829
  1,986
  2,149
  2,318
  2,495
  2,678
  2,869
  3,069
  3,277
  3,494
  3,720
  3,957
  4,204
  4,462
  4,732
  5,014
  5,310
Total liabilities, $m
  780
  871
  967
  1,068
  1,173
  1,283
  1,398
  1,517
  1,641
  1,770
  1,904
  2,044
  2,189
  2,339
  2,496
  2,659
  2,828
  3,005
  3,188
  3,379
  3,579
  3,787
  4,004
  4,230
  4,467
  4,714
  4,972
  5,242
  5,524
  5,820
Total equity, $m
  771
  861
  956
  1,055
  1,159
  1,268
  1,381
  1,499
  1,622
  1,749
  1,882
  2,020
  2,163
  2,312
  2,466
  2,627
  2,794
  2,969
  3,150
  3,339
  3,536
  3,742
  3,956
  4,180
  4,413
  4,657
  4,912
  5,179
  5,458
  5,750
Total liabilities and equity, $m
  1,551
  1,732
  1,923
  2,123
  2,332
  2,551
  2,779
  3,016
  3,263
  3,519
  3,786
  4,064
  4,352
  4,651
  4,962
  5,286
  5,622
  5,974
  6,338
  6,718
  7,115
  7,529
  7,960
  8,410
  8,880
  9,371
  9,884
  10,421
  10,982
  11,570
Debt-to-equity ratio
  0.350
  0.420
  0.480
  0.530
  0.570
  0.610
  0.640
  0.670
  0.700
  0.720
  0.740
  0.760
  0.780
  0.790
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.880
  0.890
  0.900
  0.900
  0.910
  0.910
  0.920
  0.920
Adjusted equity ratio
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497
  0.497

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  266
  301
  338
  376
  416
  459
  503
  549
  596
  646
  701
  754
  810
  868
  929
  991
  1,057
  1,125
  1,196
  1,270
  1,347
  1,428
  1,512
  1,600
  1,692
  1,788
  1,888
  1,993
  2,103
  2,218
Depreciation, amort., depletion, $m
  50
  55
  61
  67
  73
  80
  87
  94
  101
  109
  113
  121
  130
  138
  148
  157
  167
  178
  189
  200
  212
  224
  237
  250
  264
  279
  294
  310
  327
  344
Funds from operations, $m
  316
  356
  399
  443
  490
  538
  589
  642
  697
  755
  813
  875
  940
  1,007
  1,076
  1,149
  1,224
  1,303
  1,385
  1,470
  1,559
  1,652
  1,749
  1,850
  1,956
  2,067
  2,182
  2,303
  2,430
  2,562
Change in working capital, $m
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  81
  85
  88
  92
  96
  101
  105
  110
  115
  120
  126
Cash from operations, $m
  279
  317
  358
  400
  445
  492
  540
  591
  644
  700
  756
  816
  878
  943
  1,010
  1,080
  1,152
  1,228
  1,307
  1,389
  1,474
  1,564
  1,657
  1,754
  1,855
  1,961
  2,072
  2,188
  2,310
  2,437
Maintenance CAPEX, $m
  -41
  -46
  -52
  -57
  -63
  -69
  -76
  -83
  -90
  -97
  -105
  -113
  -121
  -130
  -138
  -148
  -157
  -167
  -178
  -189
  -200
  -212
  -224
  -237
  -250
  -264
  -279
  -294
  -310
  -327
New CAPEX, $m
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -70
  -73
  -76
  -79
  -83
  -86
  -90
  -94
  -98
  -102
  -107
  -112
  -117
  -122
  -128
Cash from investing activities, $m
  -79
  -85
  -93
  -100
  -108
  -116
  -126
  -135
  -144
  -153
  -163
  -173
  -184
  -195
  -206
  -218
  -230
  -243
  -257
  -272
  -286
  -302
  -318
  -335
  -352
  -371
  -391
  -411
  -432
  -455
Free cash flow, $m
  200
  232
  265
  300
  336
  375
  415
  457
  501
  547
  593
  643
  694
  748
  804
  862
  922
  984
  1,050
  1,117
  1,188
  1,262
  1,339
  1,419
  1,503
  1,590
  1,682
  1,777
  1,877
  1,982
Issuance/(repayment) of debt, $m
  87
  91
  96
  101
  105
  110
  115
  119
  124
  129
  134
  139
  145
  151
  157
  163
  169
  176
  184
  191
  199
  208
  217
  226
  236
  247
  258
  270
  282
  295
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  
  87
  91
  96
  101
  105
  110
  115
  119
  124
  129
  134
  139
  145
  151
  157
  163
  169
  176
  184
  191
  199
  208
  217
  226
  236
  247
  258
  270
  282
  295
Total cash flow (excl. dividends), $m
  287
  323
  361
  400
  442
  485
  530
  576
  625
  676
  728
  782
  839
  899
  960
  1,024
  1,091
  1,161
  1,233
  1,309
  1,388
  1,470
  1,556
  1,646
  1,739
  1,837
  1,940
  2,047
  2,160
  2,278
Retained Cash Flow (-), $m
  -84
  -90
  -95
  -99
  -104
  -109
  -113
  -118
  -123
  -128
  -133
  -138
  -143
  -149
  -155
  -161
  -167
  -174
  -181
  -189
  -197
  -205
  -214
  -224
  -234
  -244
  -255
  -267
  -279
  -292
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
  203
  233
  266
  301
  338
  376
  416
  459
  503
  548
  595
  645
  696
  750
  805
  863
  924
  986
  1,052
  1,120
  1,191
  1,264
  1,341
  1,422
  1,506
  1,593
  1,685
  1,781
  1,881
  1,986
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
  195
  213
  231
  248
  262
  273
  281
  287
  289
  287
  283
  275
  265
  252
  236
  219
  201
  182
  162
  142
  123
  105
  88
  72
  59
  46
  36
  28
  21
  15
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

Landstar System, Inc. (Landstar) is an asset-light provider of integrated transportation management solutions. The Company offers services to its customers across multiple transportation modes, with the ability to arrange for individual shipments of freight to enterprise solutions to manage customer's transportation needs. It operates in two segments: the Transportation Logistics segment and the Insurance segment. The Transportation Logistics segment provides a range of integrated transportation management solutions. Transportation services offered by it include truckload and less-than-truckload transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul or specialized, the United States-Canada and the United States-Mexico cross-border, project cargo and customs brokerage. The insurance segment consists of Signature Insurance Company, which is an offshore insurance subsidiary, and Risk Management Claim Services, Inc.

FINANCIAL RATIOS  of  Landstar System, Inc. (LSTR)

Valuation Ratios
P/E Ratio 33.7
Price to Sales 1.5
Price to Book 8.5
Price to Tangible Book
Price to Cash Flow 24.3
Price to Free Cash Flow 27.6
Growth Rates
Sales Growth Rate -4.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 360%
Cap. Spend. - 3 Yr. Gr. Rate 30.8%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 17.3%
Total Debt to Equity 32.2%
Interest Coverage 56
Management Effectiveness
Return On Assets 13.4%
Ret/ On Assets - 3 Yr. Avg. 14%
Return On Total Capital 20.4%
Ret/ On T. Cap. - 3 Yr. Avg. 22.2%
Return On Equity 27.2%
Return On Equity - 3 Yr. Avg. 29.2%
Asset Turnover 3
Profitability Ratios
Gross Margin 15.4%
Gross Margin - 3 Yr. Avg. 15.1%
EBITDA Margin 8.2%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 7%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 6.9%
Pre-Tax Margin - 3 Yr. Avg. 7%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 37.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
Payout Ratio 10.2%

LSTR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LSTR stock intrinsic value calculation we used $4615 million for the last fiscal year's total revenue generated by Landstar System, Inc.. The default revenue input number comes from 0001 income statement of Landstar System, 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 LSTR stock valuation model: a) initial revenue growth rate of 12.4% 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 LSTR is calculated based on our internal credit rating of Landstar System, 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 Landstar System, 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 LSTR stock the variable cost ratio is equal to 91.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $86 million in the base year in the intrinsic value calculation for LSTR 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 Landstar System, Inc..

Corporate tax rate of 27% is the nominal tax rate for Landstar System, 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 LSTR 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 LSTR are equal to 6.5%.

Life of production assets of 7.3 years is the average useful life of capital assets used in Landstar System, 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 LSTR is equal to 6.4%. 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 - $686.824 million for Landstar System, 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 40.084 million for Landstar System, 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 Landstar System, Inc. at the current share price and the inputted number of shares is $4.4 billion.

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