Intrinsic value of ManpowerGroup - MAN

Previous Close

$85.44

  Intrinsic Value

$166.70

stock screener

  Rating & Target

str. buy

+95%

Previous close

$85.44

 
Intrinsic value

$166.70

 
Up/down potential

+95%

 
Rating

str. buy

We calculate the intrinsic value of MAN 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 5.1

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  22,431
  22,947
  23,536
  24,199
  24,932
  25,737
  26,614
  27,562
  28,585
  29,682
  30,855
  32,108
  33,441
  34,858
  36,362
  37,955
  39,642
  41,426
  43,310
  45,300
  47,400
  49,614
  51,949
  54,408
  56,998
  59,725
  62,596
  65,616
  68,794
  72,137
Variable operating expenses, $m
  21,575
  22,068
  22,631
  23,264
  23,964
  24,733
  25,570
  26,476
  27,452
  28,500
  29,466
  30,662
  31,935
  33,289
  34,725
  36,246
  37,857
  39,561
  41,361
  43,261
  45,266
  47,381
  49,610
  51,959
  54,432
  57,037
  59,778
  62,663
  65,697
  68,889
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
  21,575
  22,068
  22,631
  23,264
  23,964
  24,733
  25,570
  26,476
  27,452
  28,500
  29,466
  30,662
  31,935
  33,289
  34,725
  36,246
  37,857
  39,561
  41,361
  43,261
  45,266
  47,381
  49,610
  51,959
  54,432
  57,037
  59,778
  62,663
  65,697
  68,889
Operating income, $m
  855
  879
  905
  935
  968
  1,004
  1,044
  1,086
  1,132
  1,182
  1,389
  1,445
  1,505
  1,569
  1,637
  1,709
  1,785
  1,865
  1,950
  2,039
  2,134
  2,233
  2,339
  2,449
  2,566
  2,689
  2,818
  2,954
  3,097
  3,247
EBITDA, $m
  1,057
  1,082
  1,109
  1,141
  1,175
  1,213
  1,254
  1,299
  1,347
  1,399
  1,454
  1,513
  1,576
  1,643
  1,714
  1,789
  1,869
  1,953
  2,041
  2,135
  2,234
  2,339
  2,449
  2,565
  2,687
  2,815
  2,950
  3,093
  3,243
  3,400
Interest expense (income), $m
  37
  58
  65
  72
  81
  90
  101
  112
  125
  139
  154
  169
  186
  205
  224
  244
  266
  289
  314
  340
  367
  396
  426
  458
  492
  527
  565
  604
  646
  690
  736
Earnings before tax, $m
  797
  814
  833
  855
  878
  904
  931
  961
  994
  1,028
  1,220
  1,259
  1,301
  1,345
  1,392
  1,442
  1,495
  1,551
  1,610
  1,672
  1,738
  1,807
  1,880
  1,957
  2,038
  2,124
  2,213
  2,308
  2,407
  2,512
Tax expense, $m
  215
  220
  225
  231
  237
  244
  251
  260
  268
  278
  329
  340
  351
  363
  376
  389
  404
  419
  435
  452
  469
  488
  508
  528
  550
  573
  598
  623
  650
  678
Net income, $m
  582
  594
  608
  624
  641
  660
  680
  702
  725
  751
  890
  919
  950
  982
  1,016
  1,053
  1,092
  1,132
  1,175
  1,221
  1,269
  1,319
  1,373
  1,429
  1,488
  1,550
  1,616
  1,685
  1,757
  1,833

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
  8,691
  8,891
  9,119
  9,376
  9,660
  9,972
  10,311
  10,679
  11,075
  11,500
  11,955
  12,440
  12,957
  13,506
  14,088
  14,706
  15,359
  16,050
  16,780
  17,551
  18,365
  19,223
  20,127
  21,080
  22,084
  23,140
  24,253
  25,423
  26,654
  27,949
Adjusted assets (=assets-cash), $m
  8,691
  8,891
  9,119
  9,376
  9,660
  9,972
  10,311
  10,679
  11,075
  11,500
  11,955
  12,440
  12,957
  13,506
  14,088
  14,706
  15,359
  16,050
  16,780
  17,551
  18,365
  19,223
  20,127
  21,080
  22,084
  23,140
  24,253
  25,423
  26,654
  27,949
Revenue / Adjusted assets
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
  2.581
Average production assets, $m
  965
  987
  1,012
  1,041
  1,072
  1,107
  1,144
  1,185
  1,229
  1,276
  1,327
  1,381
  1,438
  1,499
  1,564
  1,632
  1,705
  1,781
  1,862
  1,948
  2,038
  2,133
  2,234
  2,340
  2,451
  2,568
  2,692
  2,822
  2,958
  3,102
Working capital, $m
  1,301
  1,331
  1,365
  1,404
  1,446
  1,493
  1,544
  1,599
  1,658
  1,722
  1,790
  1,862
  1,940
  2,022
  2,109
  2,201
  2,299
  2,403
  2,512
  2,627
  2,749
  2,878
  3,013
  3,156
  3,306
  3,464
  3,631
  3,806
  3,990
  4,184
Total debt, $m
  1,194
  1,333
  1,491
  1,668
  1,865
  2,081
  2,316
  2,570
  2,844
  3,139
  3,453
  3,789
  4,146
  4,526
  4,930
  5,357
  5,809
  6,287
  6,793
  7,326
  7,889
  8,483
  9,109
  9,768
  10,462
  11,194
  11,963
  12,773
  13,625
  14,521
Total liabilities, $m
  6,014
  6,152
  6,310
  6,488
  6,685
  6,900
  7,135
  7,390
  7,664
  7,958
  8,273
  8,608
  8,966
  9,346
  9,749
  10,176
  10,628
  11,107
  11,612
  12,146
  12,709
  13,302
  13,928
  14,587
  15,282
  16,013
  16,783
  17,593
  18,445
  19,341
Total equity, $m
  2,677
  2,738
  2,809
  2,888
  2,975
  3,071
  3,176
  3,289
  3,411
  3,542
  3,682
  3,832
  3,991
  4,160
  4,339
  4,529
  4,731
  4,943
  5,168
  5,406
  5,656
  5,921
  6,199
  6,493
  6,802
  7,127
  7,470
  7,830
  8,209
  8,608
Total liabilities and equity, $m
  8,691
  8,890
  9,119
  9,376
  9,660
  9,971
  10,311
  10,679
  11,075
  11,500
  11,955
  12,440
  12,957
  13,506
  14,088
  14,705
  15,359
  16,050
  16,780
  17,552
  18,365
  19,223
  20,127
  21,080
  22,084
  23,140
  24,253
  25,423
  26,654
  27,949
Debt-to-equity ratio
  0.450
  0.490
  0.530
  0.580
  0.630
  0.680
  0.730
  0.780
  0.830
  0.890
  0.940
  0.990
  1.040
  1.090
  1.140
  1.180
  1.230
  1.270
  1.310
  1.360
  1.390
  1.430
  1.470
  1.500
  1.540
  1.570
  1.600
  1.630
  1.660
  1.690
Adjusted equity ratio
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308
  0.308

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  582
  594
  608
  624
  641
  660
  680
  702
  725
  751
  890
  919
  950
  982
  1,016
  1,053
  1,092
  1,132
  1,175
  1,221
  1,269
  1,319
  1,373
  1,429
  1,488
  1,550
  1,616
  1,685
  1,757
  1,833
Depreciation, amort., depletion, $m
  202
  203
  204
  206
  207
  209
  211
  213
  215
  217
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
Funds from operations, $m
  784
  797
  812
  829
  848
  868
  891
  915
  940
  968
  956
  987
  1,020
  1,056
  1,094
  1,133
  1,176
  1,220
  1,267
  1,317
  1,369
  1,425
  1,483
  1,544
  1,609
  1,677
  1,748
  1,824
  1,903
  1,986
Change in working capital, $m
  26
  30
  34
  38
  43
  47
  51
  55
  59
  64
  68
  73
  77
  82
  87
  92
  98
  103
  109
  115
  122
  128
  135
  143
  150
  158
  166
  175
  184
  194
Cash from operations, $m
  758
  767
  778
  791
  805
  822
  840
  859
  881
  904
  888
  914
  943
  974
  1,006
  1,041
  1,078
  1,117
  1,158
  1,201
  1,247
  1,296
  1,347
  1,402
  1,459
  1,519
  1,582
  1,648
  1,719
  1,792
Maintenance CAPEX, $m
  -47
  -48
  -49
  -50
  -51
  -53
  -55
  -56
  -58
  -61
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -139
  -146
New CAPEX, $m
  -17
  -22
  -25
  -28
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -54
  -57
  -61
  -65
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -106
  -111
  -117
  -123
  -130
  -137
  -144
Cash from investing activities, $m
  -64
  -70
  -74
  -78
  -83
  -88
  -93
  -97
  -102
  -108
  -113
  -119
  -125
  -132
  -139
  -146
  -153
  -161
  -169
  -178
  -186
  -195
  -205
  -216
  -226
  -238
  -250
  -263
  -276
  -290
Free cash flow, $m
  695
  698
  704
  713
  723
  734
  748
  762
  779
  796
  774
  795
  818
  842
  868
  895
  925
  956
  989
  1,024
  1,061
  1,100
  1,142
  1,186
  1,232
  1,281
  1,332
  1,386
  1,443
  1,503
Issuance/(repayment) of debt, $m
  119
  138
  158
  178
  197
  216
  235
  254
  274
  294
  315
  336
  357
  380
  403
  427
  452
  478
  505
  534
  563
  594
  626
  659
  694
  731
  770
  810
  852
  896
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  
  119
  138
  158
  178
  197
  216
  235
  254
  274
  294
  315
  336
  357
  380
  403
  427
  452
  478
  505
  534
  563
  594
  626
  659
  694
  731
  770
  810
  852
  896
Total cash flow (excl. dividends), $m
  814
  836
  862
  890
  919
  950
  983
  1,017
  1,053
  1,091
  1,089
  1,131
  1,175
  1,222
  1,271
  1,323
  1,377
  1,434
  1,494
  1,558
  1,624
  1,694
  1,768
  1,845
  1,926
  2,012
  2,102
  2,196
  2,295
  2,399
Retained Cash Flow (-), $m
  -52
  -62
  -70
  -79
  -88
  -96
  -105
  -113
  -122
  -131
  -140
  -149
  -159
  -169
  -179
  -190
  -201
  -213
  -225
  -237
  -251
  -264
  -279
  -293
  -309
  -325
  -343
  -360
  -379
  -399
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
  762
  774
  792
  811
  832
  854
  878
  903
  931
  960
  949
  981
  1,016
  1,053
  1,092
  1,132
  1,176
  1,221
  1,269
  1,320
  1,374
  1,430
  1,489
  1,552
  1,617
  1,686
  1,759
  1,835
  1,916
  2,000
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
  731
  709
  689
  668
  645
  620
  593
  565
  535
  503
  451
  419
  386
  353
  320
  288
  256
  225
  195
  168
  142
  119
  98
  79
  63
  49
  38
  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

ManpowerGroup Inc. is a provider of workforce solutions and services. The Company's segments include Americas, Southern Europe, Northern Europe, Asia Pacific Middle East (APME), Right Management and Corporate. The Company's Americas segment includes operations in the United States and Other Americas. Its Southern Europe segment includes operations in France, Italy and Other Southern Europe. Its Northern Europe segment includes operations in the United Kingdom, the Nordics, Germany and the Netherlands. The Company's APME operations provide a range of workforce solutions and services offered through Manpower, Experis and ManpowerGroup Solutions, including permanent, temporary and contract recruitment, assessment and selection, training and outsourcing. The Company's Right Management segment provides talent and career management workforce solutions. The Company provides services under its Experis brand, particularly in the areas of information technology (IT), engineering and finance.

FINANCIAL RATIOS  of  ManpowerGroup (MAN)

Valuation Ratios
P/E Ratio 12.9
Price to Sales 0.3
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 10.5
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.6%
Cap. Spend. - 3 Yr. Gr. Rate 4.8%
Financial Strength
Quick Ratio 15
Current Ratio 0
LT Debt to Equity 33.2%
Total Debt to Equity 34.9%
Interest Coverage 20
Management Effectiveness
Return On Assets 6.2%
Ret/ On Assets - 3 Yr. Avg. 6.1%
Return On Total Capital 13.3%
Ret/ On T. Cap. - 3 Yr. Avg. 12.7%
Return On Equity 17.8%
Return On Equity - 3 Yr. Avg. 15.8%
Asset Turnover 2.6
Profitability Ratios
Gross Margin 17%
Gross Margin - 3 Yr. Avg. 16.9%
EBITDA Margin 4.2%
EBITDA Margin - 3 Yr. Avg. 4%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 3.6%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 3.4%
Net Profit Margin 2.3%
Net Profit Margin - 3 Yr. Avg. 2.2%
Effective Tax Rate 36.7%
Eff/ Tax Rate - 3 Yr. Avg. 36.8%
Payout Ratio 26.6%

MAN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MAN stock intrinsic value calculation we used $21991 million for the last fiscal year's total revenue generated by ManpowerGroup. The default revenue input number comes from 0001 income statement of ManpowerGroup. 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 MAN stock valuation model: a) initial revenue growth rate of 2% 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 MAN is calculated based on our internal credit rating of ManpowerGroup, 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 ManpowerGroup.
    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 MAN stock the variable cost ratio is equal to 96.2%.

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 MAN 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 ManpowerGroup.

Corporate tax rate of 27% is the nominal tax rate for ManpowerGroup. 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 MAN 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 MAN are equal to 4.3%.

Life of production assets of 20.3 years is the average useful life of capital assets used in ManpowerGroup 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 MAN is equal to 5.8%. 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 - $2624.9 million for ManpowerGroup - 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 59.993 million for ManpowerGroup 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 ManpowerGroup at the current share price and the inputted number of shares is $5.1 billion.

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