Intrinsic value of Masco Corporation - MAS

Previous Close

$41.75

  Intrinsic Value

$39.67

stock screener

  Rating & Target

hold

-5%

Previous close

$41.75

 
Intrinsic value

$39.67

 
Up/down potential

-5%

 
Rating

hold

We calculate the intrinsic value of MAS 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 12.3

 

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, %
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
Revenue, $m
  9,203
  10,086
  11,007
  11,966
  12,965
  14,004
  15,084
  16,206
  17,372
  18,584
  19,843
  21,153
  22,515
  23,933
  25,409
  26,946
  28,548
  30,218
  31,960
  33,779
  35,677
  37,660
  39,732
  41,898
  44,163
  46,533
  49,013
  51,609
  54,328
  57,174
Variable operating expenses, $m
  7,754
  8,486
  9,248
  10,043
  10,871
  11,731
  12,626
  13,555
  14,521
  15,525
  16,438
  17,523
  18,652
  19,826
  21,049
  22,322
  23,649
  25,033
  26,476
  27,982
  29,555
  31,197
  32,914
  34,708
  36,585
  38,548
  40,603
  42,753
  45,005
  47,363
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
  7,754
  8,486
  9,248
  10,043
  10,871
  11,731
  12,626
  13,555
  14,521
  15,525
  16,438
  17,523
  18,652
  19,826
  21,049
  22,322
  23,649
  25,033
  26,476
  27,982
  29,555
  31,197
  32,914
  34,708
  36,585
  38,548
  40,603
  42,753
  45,005
  47,363
Operating income, $m
  1,449
  1,600
  1,758
  1,923
  2,094
  2,273
  2,458
  2,650
  2,851
  3,059
  3,405
  3,630
  3,864
  4,107
  4,360
  4,624
  4,899
  5,185
  5,484
  5,796
  6,122
  6,462
  6,818
  7,190
  7,578
  7,985
  8,411
  8,856
  9,323
  9,811
EBITDA, $m
  1,708
  1,872
  2,043
  2,221
  2,406
  2,599
  2,799
  3,008
  3,224
  3,449
  3,683
  3,926
  4,179
  4,442
  4,716
  5,001
  5,298
  5,608
  5,932
  6,269
  6,622
  6,990
  7,374
  7,776
  8,197
  8,637
  9,097
  9,579
  10,083
  10,612
Interest expense (income), $m
  198
  161
  152
  180
  209
  239
  270
  303
  337
  372
  408
  446
  486
  527
  570
  614
  660
  709
  759
  811
  866
  923
  982
  1,044
  1,109
  1,177
  1,248
  1,323
  1,400
  1,482
  1,567
Earnings before tax, $m
  1,288
  1,448
  1,578
  1,714
  1,856
  2,002
  2,155
  2,314
  2,479
  2,650
  2,959
  3,144
  3,337
  3,537
  3,746
  3,964
  4,190
  4,427
  4,673
  4,931
  5,199
  5,480
  5,774
  6,080
  6,401
  6,737
  7,088
  7,456
  7,841
  8,244
Tax expense, $m
  348
  391
  426
  463
  501
  541
  582
  625
  669
  716
  799
  849
  901
  955
  1,011
  1,070
  1,131
  1,195
  1,262
  1,331
  1,404
  1,480
  1,559
  1,642
  1,728
  1,819
  1,914
  2,013
  2,117
  2,226
Net income, $m
  940
  1,057
  1,152
  1,251
  1,355
  1,462
  1,573
  1,689
  1,810
  1,935
  2,160
  2,295
  2,436
  2,582
  2,735
  2,893
  3,059
  3,231
  3,411
  3,599
  3,796
  4,000
  4,215
  4,439
  4,673
  4,918
  5,174
  5,443
  5,724
  6,018

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
  5,938
  6,507
  7,101
  7,720
  8,365
  9,035
  9,731
  10,455
  11,208
  11,989
  12,802
  13,647
  14,526
  15,441
  16,393
  17,384
  18,418
  19,496
  20,620
  21,793
  23,017
  24,297
  25,634
  27,031
  28,493
  30,022
  31,622
  33,296
  35,050
  36,887
Adjusted assets (=assets-cash), $m
  5,938
  6,507
  7,101
  7,720
  8,365
  9,035
  9,731
  10,455
  11,208
  11,989
  12,802
  13,647
  14,526
  15,441
  16,393
  17,384
  18,418
  19,496
  20,620
  21,793
  23,017
  24,297
  25,634
  27,031
  28,493
  30,022
  31,622
  33,296
  35,050
  36,887
Revenue / Adjusted assets
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
  1.550
Average production assets, $m
  1,933
  2,118
  2,311
  2,513
  2,723
  2,941
  3,168
  3,403
  3,648
  3,903
  4,167
  4,442
  4,728
  5,026
  5,336
  5,659
  5,995
  6,346
  6,712
  7,093
  7,492
  7,909
  8,344
  8,799
  9,274
  9,772
  10,293
  10,838
  11,409
  12,007
Working capital, $m
  589
  645
  704
  766
  830
  896
  965
  1,037
  1,112
  1,189
  1,270
  1,354
  1,441
  1,532
  1,626
  1,725
  1,827
  1,934
  2,045
  2,162
  2,283
  2,410
  2,543
  2,681
  2,826
  2,978
  3,137
  3,303
  3,477
  3,659
Total debt, $m
  2,819
  3,331
  3,866
  4,423
  5,003
  5,606
  6,233
  6,885
  7,562
  8,265
  8,997
  9,757
  10,548
  11,371
  12,228
  13,121
  14,051
  15,021
  16,033
  17,088
  18,191
  19,342
  20,545
  21,803
  23,118
  24,494
  25,934
  27,442
  29,020
  30,673
Total liabilities, $m
  5,344
  5,856
  6,391
  6,948
  7,528
  8,131
  8,758
  9,410
  10,087
  10,790
  11,522
  12,282
  13,073
  13,896
  14,753
  15,646
  16,576
  17,546
  18,558
  19,613
  20,716
  21,867
  23,070
  24,328
  25,643
  27,019
  28,459
  29,967
  31,545
  33,198
Total equity, $m
  594
  651
  710
  772
  836
  903
  973
  1,046
  1,121
  1,199
  1,280
  1,365
  1,453
  1,544
  1,639
  1,738
  1,842
  1,950
  2,062
  2,179
  2,302
  2,430
  2,563
  2,703
  2,849
  3,002
  3,162
  3,330
  3,505
  3,689
Total liabilities and equity, $m
  5,938
  6,507
  7,101
  7,720
  8,364
  9,034
  9,731
  10,456
  11,208
  11,989
  12,802
  13,647
  14,526
  15,440
  16,392
  17,384
  18,418
  19,496
  20,620
  21,792
  23,018
  24,297
  25,633
  27,031
  28,492
  30,021
  31,621
  33,297
  35,050
  36,887
Debt-to-equity ratio
  4.750
  5.120
  5.440
  5.730
  5.980
  6.210
  6.410
  6.580
  6.750
  6.890
  7.030
  7.150
  7.260
  7.360
  7.460
  7.550
  7.630
  7.700
  7.780
  7.840
  7.900
  7.960
  8.010
  8.070
  8.110
  8.160
  8.200
  8.240
  8.280
  8.320
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  940
  1,057
  1,152
  1,251
  1,355
  1,462
  1,573
  1,689
  1,810
  1,935
  2,160
  2,295
  2,436
  2,582
  2,735
  2,893
  3,059
  3,231
  3,411
  3,599
  3,796
  4,000
  4,215
  4,439
  4,673
  4,918
  5,174
  5,443
  5,724
  6,018
Depreciation, amort., depletion, $m
  259
  272
  284
  298
  312
  326
  342
  357
  374
  391
  278
  296
  315
  335
  356
  377
  400
  423
  447
  473
  499
  527
  556
  587
  618
  651
  686
  723
  761
  800
Funds from operations, $m
  1,199
  1,329
  1,437
  1,549
  1,666
  1,788
  1,915
  2,046
  2,183
  2,325
  2,438
  2,591
  2,751
  2,917
  3,090
  3,271
  3,459
  3,655
  3,859
  4,072
  4,295
  4,528
  4,771
  5,025
  5,291
  5,569
  5,860
  6,165
  6,484
  6,819
Change in working capital, $m
  54
  56
  59
  61
  64
  66
  69
  72
  75
  78
  81
  84
  87
  91
  94
  98
  103
  107
  112
  116
  121
  127
  133
  139
  145
  152
  159
  166
  174
  182
Cash from operations, $m
  1,145
  1,272
  1,378
  1,488
  1,603
  1,722
  1,846
  1,975
  2,109
  2,248
  2,357
  2,507
  2,664
  2,827
  2,996
  3,172
  3,356
  3,548
  3,747
  3,956
  4,174
  4,401
  4,638
  4,887
  5,146
  5,418
  5,702
  5,999
  6,310
  6,636
Maintenance CAPEX, $m
  -117
  -129
  -141
  -154
  -168
  -182
  -196
  -211
  -227
  -243
  -260
  -278
  -296
  -315
  -335
  -356
  -377
  -400
  -423
  -447
  -473
  -499
  -527
  -556
  -587
  -618
  -651
  -686
  -723
  -761
New CAPEX, $m
  -174
  -185
  -193
  -202
  -210
  -218
  -227
  -236
  -245
  -254
  -265
  -275
  -286
  -298
  -310
  -323
  -336
  -351
  -366
  -382
  -399
  -416
  -435
  -455
  -476
  -498
  -521
  -545
  -571
  -598
Cash from investing activities, $m
  -291
  -314
  -334
  -356
  -378
  -400
  -423
  -447
  -472
  -497
  -525
  -553
  -582
  -613
  -645
  -679
  -713
  -751
  -789
  -829
  -872
  -915
  -962
  -1,011
  -1,063
  -1,116
  -1,172
  -1,231
  -1,294
  -1,359
Free cash flow, $m
  855
  958
  1,043
  1,132
  1,225
  1,322
  1,423
  1,528
  1,637
  1,750
  1,832
  1,955
  2,082
  2,214
  2,351
  2,494
  2,642
  2,797
  2,958
  3,127
  3,302
  3,485
  3,676
  3,875
  4,084
  4,302
  4,529
  4,768
  5,017
  5,278
Issuance/(repayment) of debt, $m
  -160
  512
  535
  557
  580
  603
  627
  652
  677
  704
  731
  760
  791
  823
  857
  893
  930
  970
  1,012
  1,056
  1,102
  1,151
  1,203
  1,258
  1,315
  1,376
  1,440
  1,507
  1,578
  1,653
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  
  -160
  512
  535
  557
  580
  603
  627
  652
  677
  704
  731
  760
  791
  823
  857
  893
  930
  970
  1,012
  1,056
  1,102
  1,151
  1,203
  1,258
  1,315
  1,376
  1,440
  1,507
  1,578
  1,653
Total cash flow (excl. dividends), $m
  694
  1,471
  1,578
  1,689
  1,805
  1,925
  2,050
  2,179
  2,314
  2,454
  2,564
  2,715
  2,873
  3,037
  3,208
  3,386
  3,573
  3,767
  3,970
  4,182
  4,404
  4,636
  4,879
  5,133
  5,399
  5,678
  5,969
  6,275
  6,595
  6,931
Retained Cash Flow (-), $m
  -705
  -57
  -59
  -62
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -108
  -112
  -117
  -122
  -128
  -134
  -140
  -146
  -153
  -160
  -167
  -175
  -184
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
  -10
  1,414
  1,519
  1,628
  1,741
  1,858
  1,980
  2,107
  2,239
  2,375
  2,483
  2,631
  2,785
  2,945
  3,113
  3,287
  3,469
  3,659
  3,858
  4,065
  4,282
  4,508
  4,745
  4,993
  5,253
  5,525
  5,809
  6,108
  6,420
  6,747
Discount rate, %
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
  -10
  1,187
  1,154
  1,109
  1,053
  988
  915
  836
  754
  670
  578
  498
  422
  351
  287
  230
  181
  139
  104
  76
  55
  38
  26
  17
  11
  7
  4
  2
  1
  1
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

Masco Corporation designs, manufactures, markets and distributes branded home improvement and building products. The Company operates through four business segments: Plumbing Products, Decorative Architectural Products, Cabinetry Products, and Windows and Other Specialty Products. The Company's portfolio of brands includes BEHR paint; DELTA and HANSGROHE faucets, bath and shower fixtures; KRAFTMAID and MERILLAT cabinets; MILGARD windows and doors, and HOT SPRING spas. The Company's plumbing products include faucets, showerheads, handheld showers, valves, bathing units, shower enclosures and toilets and are sold to home center retailers and to wholesalers and distributors. It also produces architectural coatings, including paints, primers, specialty paints, stains and waterproofing products. In North America, it manufactures and sells value-priced, stock and semi-custom assembled cabinetry for kitchen, bath, storage, home office and home entertainment applications.

FINANCIAL RATIOS  of  Masco Corporation (MAS)

Valuation Ratios
P/E Ratio 27
Price to Sales 1.8
Price to Book -44.6
Price to Tangible Book
Price to Cash Flow 18.3
Price to Free Cash Flow 24.3
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 13.9%
Cap. Spend. - 3 Yr. Gr. Rate 7.4%
Financial Strength
Quick Ratio 596
Current Ratio 0
LT Debt to Equity -1005%
Total Debt to Equity -1005.7%
Interest Coverage 5
Management Effectiveness
Return On Assets 11.5%
Ret/ On Assets - 3 Yr. Avg. 12.1%
Return On Total Capital 16.4%
Ret/ On T. Cap. - 3 Yr. Avg. 15.4%
Return On Equity -226.8%
Return On Equity - 3 Yr. Avg. -7.1%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 33.4%
Gross Margin - 3 Yr. Avg. 31.4%
EBITDA Margin 16.1%
EBITDA Margin - 3 Yr. Avg. 14.6%
Operating Margin 14.3%
Oper. Margin - 3 Yr. Avg. 12.5%
Pre-Tax Margin 11.3%
Pre-Tax Margin - 3 Yr. Avg. 9.4%
Net Profit Margin 6.7%
Net Profit Margin - 3 Yr. Avg. 8%
Effective Tax Rate 35.7%
Eff/ Tax Rate - 3 Yr. Avg. 2.3%
Payout Ratio 26.1%

MAS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MAS stock intrinsic value calculation we used $8359 million for the last fiscal year's total revenue generated by Masco Corporation. The default revenue input number comes from 0001 income statement of Masco 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 MAS stock valuation model: a) initial revenue growth rate of 10.1% 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 8.7%, whose default value for MAS is calculated based on our internal credit rating of Masco 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 Masco 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 MAS stock the variable cost ratio is equal to 84.4%.

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 MAS 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 Masco Corporation.

Corporate tax rate of 27% is the nominal tax rate for Masco 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 MAS 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 MAS are equal to 21%.

Life of production assets of 15 years is the average useful life of capital assets used in Masco 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 MAS 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 - $-111 million for Masco 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 294.510 million for Masco 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 Masco Corporation at the current share price and the inputted number of shares is $12.3 billion.

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