Intrinsic value of Matthews International Cl A - MATW

Previous Close

$51.95

  Intrinsic Value

$40.65

stock screener

  Rating & Target

sell

-22%

Previous close

$51.95

 
Intrinsic value

$40.65

 
Up/down potential

-22%

 
Rating

sell

We calculate the intrinsic value of MATW 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 2017), $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 1.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  1,552
  1,594
  1,640
  1,691
  1,746
  1,807
  1,872
  1,943
  2,018
  2,099
  2,184
  2,276
  2,373
  2,476
  2,585
  2,700
  2,822
  2,951
  3,087
  3,231
  3,382
  3,542
  3,710
  3,887
  4,073
  4,269
  4,475
  4,692
  4,920
  5,160
Variable operating expenses, $m
  1,425
  1,459
  1,498
  1,540
  1,587
  1,637
  1,691
  1,750
  1,813
  1,880
  1,819
  1,895
  1,976
  2,062
  2,153
  2,249
  2,351
  2,458
  2,571
  2,691
  2,817
  2,950
  3,089
  3,237
  3,392
  3,555
  3,727
  3,908
  4,098
  4,298
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
  1,425
  1,459
  1,498
  1,540
  1,587
  1,637
  1,691
  1,750
  1,813
  1,880
  1,819
  1,895
  1,976
  2,062
  2,153
  2,249
  2,351
  2,458
  2,571
  2,691
  2,817
  2,950
  3,089
  3,237
  3,392
  3,555
  3,727
  3,908
  4,098
  4,298
Operating income, $m
  127
  134
  142
  150
  160
  170
  181
  193
  205
  219
  365
  381
  397
  414
  432
  452
  472
  493
  516
  540
  566
  592
  620
  650
  681
  714
  748
  785
  823
  863
EBITDA, $m
  414
  425
  438
  451
  466
  482
  500
  518
  539
  560
  583
  607
  633
  661
  690
  721
  753
  788
  824
  862
  903
  945
  990
  1,037
  1,087
  1,139
  1,194
  1,252
  1,313
  1,377
Interest expense (income), $m
  26
  49
  51
  53
  56
  58
  61
  64
  68
  71
  75
  79
  84
  89
  94
  99
  105
  111
  117
  124
  131
  138
  146
  154
  163
  172
  182
  192
  203
  214
  226
Earnings before tax, $m
  78
  83
  89
  95
  102
  109
  117
  125
  134
  143
  286
  297
  308
  320
  333
  347
  361
  377
  393
  410
  427
  446
  466
  487
  509
  532
  556
  582
  609
  637
Tax expense, $m
  21
  22
  24
  26
  27
  29
  31
  34
  36
  39
  77
  80
  83
  86
  90
  94
  98
  102
  106
  111
  115
  120
  126
  131
  137
  144
  150
  157
  164
  172
Net income, $m
  57
  61
  65
  69
  74
  79
  85
  91
  98
  105
  209
  217
  225
  234
  243
  253
  264
  275
  287
  299
  312
  326
  340
  355
  371
  388
  406
  425
  444
  465

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
  2,300
  2,361
  2,429
  2,505
  2,587
  2,677
  2,774
  2,878
  2,990
  3,109
  3,236
  3,372
  3,516
  3,668
  3,830
  4,001
  4,181
  4,372
  4,574
  4,786
  5,011
  5,247
  5,496
  5,758
  6,034
  6,324
  6,630
  6,951
  7,290
  7,645
Adjusted assets (=assets-cash), $m
  2,300
  2,361
  2,429
  2,505
  2,587
  2,677
  2,774
  2,878
  2,990
  3,109
  3,236
  3,372
  3,516
  3,668
  3,830
  4,001
  4,181
  4,372
  4,574
  4,786
  5,011
  5,247
  5,496
  5,758
  6,034
  6,324
  6,630
  6,951
  7,290
  7,645
Revenue / Adjusted assets
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
Average production assets, $m
  1,548
  1,589
  1,635
  1,686
  1,741
  1,801
  1,867
  1,937
  2,012
  2,092
  2,178
  2,269
  2,366
  2,469
  2,577
  2,692
  2,814
  2,942
  3,078
  3,221
  3,372
  3,531
  3,699
  3,875
  4,061
  4,256
  4,462
  4,678
  4,906
  5,145
Working capital, $m
  107
  110
  113
  117
  121
  125
  129
  134
  139
  145
  151
  157
  164
  171
  178
  186
  195
  204
  213
  223
  233
  244
  256
  268
  281
  295
  309
  324
  340
  356
Total debt, $m
  947
  986
  1,031
  1,080
  1,133
  1,191
  1,254
  1,321
  1,394
  1,471
  1,554
  1,641
  1,735
  1,833
  1,938
  2,049
  2,166
  2,290
  2,420
  2,558
  2,703
  2,857
  3,018
  3,188
  3,366
  3,555
  3,753
  3,961
  4,180
  4,411
Total liabilities, $m
  1,490
  1,530
  1,574
  1,623
  1,677
  1,735
  1,797
  1,865
  1,937
  2,015
  2,097
  2,185
  2,278
  2,377
  2,482
  2,592
  2,710
  2,833
  2,964
  3,102
  3,247
  3,400
  3,561
  3,731
  3,910
  4,098
  4,296
  4,505
  4,724
  4,954
Total equity, $m
  810
  831
  855
  882
  911
  942
  976
  1,013
  1,052
  1,094
  1,139
  1,187
  1,237
  1,291
  1,348
  1,408
  1,472
  1,539
  1,610
  1,685
  1,764
  1,847
  1,935
  2,027
  2,124
  2,226
  2,334
  2,447
  2,566
  2,691
Total liabilities and equity, $m
  2,300
  2,361
  2,429
  2,505
  2,588
  2,677
  2,773
  2,878
  2,989
  3,109
  3,236
  3,372
  3,515
  3,668
  3,830
  4,000
  4,182
  4,372
  4,574
  4,787
  5,011
  5,247
  5,496
  5,758
  6,034
  6,324
  6,630
  6,952
  7,290
  7,645
Debt-to-equity ratio
  1.170
  1.190
  1.210
  1.220
  1.240
  1.260
  1.280
  1.300
  1.320
  1.340
  1.360
  1.380
  1.400
  1.420
  1.440
  1.450
  1.470
  1.490
  1.500
  1.520
  1.530
  1.550
  1.560
  1.570
  1.590
  1.600
  1.610
  1.620
  1.630
  1.640
Adjusted equity ratio
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  57
  61
  65
  69
  74
  79
  85
  91
  98
  105
  209
  217
  225
  234
  243
  253
  264
  275
  287
  299
  312
  326
  340
  355
  371
  388
  406
  425
  444
  465
Depreciation, amort., depletion, $m
  287
  291
  296
  301
  306
  312
  319
  326
  333
  341
  218
  227
  237
  247
  258
  269
  281
  294
  308
  322
  337
  353
  370
  387
  406
  426
  446
  468
  491
  514
Funds from operations, $m
  344
  352
  360
  370
  380
  392
  404
  417
  431
  446
  426
  443
  462
  481
  501
  522
  545
  569
  594
  621
  649
  679
  710
  743
  778
  814
  852
  893
  935
  980
Change in working capital, $m
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
Cash from operations, $m
  342
  349
  357
  366
  377
  388
  399
  412
  426
  441
  421
  437
  455
  474
  493
  514
  537
  560
  585
  611
  639
  668
  698
  731
  765
  800
  838
  878
  919
  963
Maintenance CAPEX, $m
  -151
  -155
  -159
  -163
  -169
  -174
  -180
  -187
  -194
  -201
  -209
  -218
  -227
  -237
  -247
  -258
  -269
  -281
  -294
  -308
  -322
  -337
  -353
  -370
  -387
  -406
  -426
  -446
  -468
  -491
New CAPEX, $m
  -36
  -41
  -46
  -51
  -56
  -60
  -65
  -70
  -75
  -80
  -86
  -91
  -97
  -103
  -109
  -115
  -122
  -128
  -136
  -143
  -151
  -159
  -168
  -176
  -186
  -195
  -206
  -216
  -228
  -239
Cash from investing activities, $m
  -187
  -196
  -205
  -214
  -225
  -234
  -245
  -257
  -269
  -281
  -295
  -309
  -324
  -340
  -356
  -373
  -391
  -409
  -430
  -451
  -473
  -496
  -521
  -546
  -573
  -601
  -632
  -662
  -696
  -730
Free cash flow, $m
  154
  153
  152
  152
  152
  153
  154
  155
  157
  159
  126
  128
  131
  134
  138
  142
  146
  150
  155
  160
  166
  172
  178
  184
  191
  199
  207
  215
  224
  233
Issuance/(repayment) of debt, $m
  36
  40
  44
  49
  53
  58
  63
  68
  72
  77
  82
  88
  93
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  208
  219
  230
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  
  36
  40
  44
  49
  53
  58
  63
  68
  72
  77
  82
  88
  93
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  208
  219
  230
Total cash flow (excl. dividends), $m
  190
  193
  197
  201
  206
  211
  217
  223
  229
  236
  208
  216
  224
  233
  243
  252
  263
  274
  286
  298
  311
  325
  339
  354
  370
  387
  405
  423
  443
  464
Retained Cash Flow (-), $m
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -108
  -113
  -119
  -125
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
  15
  16
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
Cash available for distribution, $m
  170
  171
  173
  175
  177
  180
  183
  186
  190
  194
  163
  168
  174
  179
  186
  192
  199
  207
  215
  223
  232
  242
  252
  262
  273
  285
  297
  310
  324
  338
Discount rate, %
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
  158
  146
  134
  123
  112
  101
  90
  80
  70
  61
  43
  37
  31
  26
  21
  17
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  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

Matthews International Corporation is a provider of brand solutions, memorialization products and industrial technologies. The Company operates through three segments: SGK Brand Solutions, Memorialization and Industrial Technologies. The SGK Brand Solutions segment provides brand development, deployment and delivery (consisting of brand management, printing plates and cylinders, pre-media services and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services). The Memorialization segment manufactures and markets a line of memorialization products used primarily in cemeteries, funeral homes and crematories. The Industrial Technologies segment designs, manufactures and distributes a range of marking, coding and industrial automation solutions, order fulfillment systems and related consumables.

FINANCIAL RATIOS  of  Matthews International Cl A (MATW)

Valuation Ratios
P/E Ratio 22.6
Price to Sales 1.1
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 16.1
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.1%
Cap. Spend. - 3 Yr. Gr. Rate 9.2%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 111.5%
Total Debt to Equity 115.3%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.3%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 4.5%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 9.9%
Return On Equity - 3 Yr. Avg. 9.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 37.1%
Gross Margin - 3 Yr. Avg. 37.3%
EBITDA Margin 12.5%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin 7.5%
Oper. Margin - 3 Yr. Avg. 7.6%
Pre-Tax Margin 6.3%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 22.9%
Eff/ Tax Rate - 3 Yr. Avg. 27.8%
Payout Ratio 29.7%

MATW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MATW stock intrinsic value calculation we used $1516 million for the last fiscal year's total revenue generated by Matthews International Cl A. The default revenue input number comes from 2017 income statement of Matthews International Cl A. 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 MATW stock valuation model: a) initial revenue growth rate of 2.4% 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 7.9%, whose default value for MATW is calculated based on our internal credit rating of Matthews International Cl A, 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 Matthews International Cl A.
    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 MATW stock the variable cost ratio is equal to 92%.

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 MATW 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 Matthews International Cl A.

Corporate tax rate of 27% is the nominal tax rate for Matthews International Cl A. 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 MATW stock is equal to 1%.

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 MATW are equal to 99.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Matthews International Cl A 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 MATW is equal to 6.9%. 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 - $790 million for Matthews International Cl A - 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 32 million for Matthews International Cl A 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 Matthews International Cl A at the current share price and the inputted number of shares is $1.7 billion.

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COMPANY NEWS

▶ Matthews International Declares Quarterly Dividend   [Jul-19-18 04:15PM  Business Wire]
▶ Play 5 Top-Ranked Stocks With Rising P/E   [Jun-13-18 07:59AM  Zacks]
▶ Add 5 Stocks With Rising P/E to Your Portfolio   [May-29-18 07:28AM  Zacks]
▶ Matthews International: Fiscal 2Q Earnings Snapshot   [Apr-26-18 06:20PM  Associated Press]
▶ Matthews International Declares Quarterly Dividend   [Apr-19-18 02:05PM  GlobeNewswire]
▶ Anthem Worldwide Honored For Packaging Design Excellence   [Mar-21-18 08:03AM  PR Newswire]
▶ Matthews International posts 1Q profit   [Jan-25-18 05:22PM  Associated Press]
▶ Matthews International posts 4Q profit   [Nov-16-17 04:59PM  Associated Press]
▶ Matthews International posts 3Q profit   [Jul-28-17 08:04PM  Associated Press]
▶ Matthews International Declares Quarterly Dividend   [Jul-20-17 02:00PM  GlobeNewswire]
▶ Husband of woman who stole nearly $13M faces fed tax charges   [May-03-17 12:52PM  Associated Press]
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