Intrinsic value of Matthews International Corporation - MATW

Previous Close

$34.31

  Intrinsic Value

$47.74

stock screener

  Rating & Target

buy

+39%

Previous close

$34.31

 
Intrinsic value

$47.74

 
Up/down potential

+39%

 
Rating

buy

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 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 1.1

 

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
  1,635
  1,673
  1,716
  1,764
  1,817
  1,876
  1,940
  2,009
  2,084
  2,164
  2,249
  2,340
  2,438
  2,541
  2,651
  2,767
  2,890
  3,020
  3,157
  3,302
  3,455
  3,617
  3,787
  3,966
  4,155
  4,354
  4,563
  4,783
  5,015
  5,258
Variable operating expenses, $m
  1,246
  1,272
  1,301
  1,334
  1,370
  1,410
  1,453
  1,500
  1,550
  1,604
  1,523
  1,585
  1,651
  1,720
  1,795
  1,873
  1,957
  2,045
  2,138
  2,236
  2,339
  2,449
  2,564
  2,685
  2,813
  2,948
  3,089
  3,239
  3,395
  3,560
Fixed operating expenses, $m
  257
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  356
  363
  371
  380
  388
  396
  405
  414
  423
  432
  442
  452
  462
  472
  482
Total operating expenses, $m
  1,503
  1,534
  1,569
  1,608
  1,650
  1,696
  1,745
  1,799
  1,855
  1,916
  1,842
  1,911
  1,984
  2,060
  2,143
  2,229
  2,320
  2,416
  2,518
  2,624
  2,735
  2,854
  2,978
  3,108
  3,245
  3,390
  3,541
  3,701
  3,867
  4,042
Operating income, $m
  132
  139
  147
  156
  168
  180
  195
  211
  228
  247
  407
  430
  454
  480
  508
  538
  570
  604
  640
  678
  719
  763
  809
  857
  909
  964
  1,022
  1,083
  1,147
  1,216
EBITDA, $m
  317
  324
  334
  345
  357
  372
  388
  406
  425
  447
  470
  495
  522
  550
  581
  614
  650
  687
  727
  770
  815
  863
  914
  967
  1,024
  1,084
  1,148
  1,215
  1,286
  1,361
Interest expense (income), $m
  26
  52
  53
  55
  58
  60
  63
  66
  69
  72
  76
  80
  85
  89
  94
  99
  105
  111
  117
  124
  131
  138
  146
  154
  163
  172
  181
  191
  202
  213
  225
Earnings before tax, $m
  80
  85
  91
  99
  108
  118
  129
  142
  156
  171
  327
  345
  365
  386
  409
  433
  459
  487
  516
  548
  581
  617
  655
  695
  737
  783
  830
  881
  934
  991
Tax expense, $m
  22
  23
  25
  27
  29
  32
  35
  38
  42
  46
  88
  93
  99
  104
  110
  117
  124
  131
  139
  148
  157
  167
  177
  188
  199
  211
  224
  238
  252
  268
Net income, $m
  59
  62
  67
  72
  79
  86
  94
  104
  114
  125
  239
  252
  266
  282
  298
  316
  335
  355
  377
  400
  424
  450
  478
  507
  538
  571
  606
  643
  682
  723

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
  2,422
  2,478
  2,542
  2,613
  2,692
  2,779
  2,874
  2,976
  3,087
  3,205
  3,332
  3,467
  3,611
  3,764
  3,927
  4,099
  4,281
  4,474
  4,677
  4,892
  5,119
  5,358
  5,610
  5,876
  6,155
  6,450
  6,760
  7,086
  7,429
  7,790
Adjusted assets (=assets-cash), $m
  2,422
  2,478
  2,542
  2,613
  2,692
  2,779
  2,874
  2,976
  3,087
  3,205
  3,332
  3,467
  3,611
  3,764
  3,927
  4,099
  4,281
  4,474
  4,677
  4,892
  5,119
  5,358
  5,610
  5,876
  6,155
  6,450
  6,760
  7,086
  7,429
  7,790
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
  942
  963
  988
  1,016
  1,047
  1,081
  1,117
  1,157
  1,200
  1,246
  1,296
  1,348
  1,404
  1,464
  1,527
  1,594
  1,664
  1,739
  1,818
  1,902
  1,990
  2,083
  2,181
  2,284
  2,393
  2,508
  2,628
  2,755
  2,888
  3,029
Working capital, $m
  307
  314
  323
  332
  342
  353
  365
  378
  392
  407
  423
  440
  458
  478
  498
  520
  543
  568
  594
  621
  650
  680
  712
  746
  781
  818
  858
  899
  943
  989
Total debt, $m
  989
  1,025
  1,065
  1,110
  1,160
  1,216
  1,276
  1,341
  1,411
  1,486
  1,566
  1,652
  1,743
  1,840
  1,943
  2,052
  2,168
  2,290
  2,419
  2,555
  2,699
  2,850
  3,010
  3,179
  3,356
  3,543
  3,739
  3,946
  4,164
  4,392
Total liabilities, $m
  1,536
  1,571
  1,611
  1,657
  1,707
  1,762
  1,822
  1,887
  1,957
  2,032
  2,113
  2,198
  2,290
  2,387
  2,490
  2,599
  2,714
  2,836
  2,965
  3,102
  3,245
  3,397
  3,557
  3,725
  3,902
  4,089
  4,286
  4,492
  4,710
  4,939
Total equity, $m
  887
  907
  930
  956
  985
  1,017
  1,052
  1,089
  1,130
  1,173
  1,220
  1,269
  1,322
  1,378
  1,437
  1,500
  1,567
  1,637
  1,712
  1,790
  1,873
  1,961
  2,053
  2,150
  2,253
  2,361
  2,474
  2,593
  2,719
  2,851
Total liabilities and equity, $m
  2,423
  2,478
  2,541
  2,613
  2,692
  2,779
  2,874
  2,976
  3,087
  3,205
  3,333
  3,467
  3,612
  3,765
  3,927
  4,099
  4,281
  4,473
  4,677
  4,892
  5,118
  5,358
  5,610
  5,875
  6,155
  6,450
  6,760
  7,085
  7,429
  7,790
Debt-to-equity ratio
  1.120
  1.130
  1.140
  1.160
  1.180
  1.190
  1.210
  1.230
  1.250
  1.270
  1.280
  1.300
  1.320
  1.340
  1.350
  1.370
  1.380
  1.400
  1.410
  1.430
  1.440
  1.450
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
Adjusted equity ratio
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366
  0.366

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  59
  62
  67
  72
  79
  86
  94
  104
  114
  125
  239
  252
  266
  282
  298
  316
  335
  355
  377
  400
  424
  450
  478
  507
  538
  571
  606
  643
  682
  723
Depreciation, amort., depletion, $m
  185
  186
  187
  188
  190
  191
  193
  195
  197
  199
  62
  65
  68
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
  110
  115
  121
  126
  132
  139
  146
Funds from operations, $m
  243
  248
  254
  260
  268
  277
  287
  298
  311
  324
  301
  317
  334
  352
  372
  393
  415
  439
  464
  491
  520
  551
  583
  617
  653
  692
  732
  775
  821
  869
Change in working capital, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
Cash from operations, $m
  237
  241
  245
  251
  258
  266
  275
  285
  297
  309
  285
  300
  316
  333
  351
  371
  392
  414
  438
  464
  491
  520
  551
  583
  618
  654
  693
  734
  777
  823
Maintenance CAPEX, $m
  -44
  -45
  -46
  -48
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -62
  -65
  -68
  -70
  -73
  -77
  -80
  -84
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -121
  -126
  -132
  -139
New CAPEX, $m
  -19
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -56
  -59
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -109
  -115
  -121
  -127
  -133
  -140
Cash from investing activities, $m
  -63
  -67
  -71
  -76
  -80
  -84
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
  -133
  -140
  -148
  -155
  -163
  -171
  -179
  -189
  -198
  -208
  -219
  -230
  -242
  -253
  -265
  -279
Free cash flow, $m
  174
  174
  174
  176
  179
  182
  187
  192
  198
  205
  176
  185
  195
  206
  218
  230
  244
  260
  276
  293
  312
  332
  353
  375
  399
  425
  452
  481
  512
  544
Issuance/(repayment) of debt, $m
  29
  35
  40
  45
  50
  55
  60
  65
  70
  75
  80
  86
  91
  97
  103
  109
  115
  122
  129
  136
  144
  152
  160
  168
  177
  187
  197
  207
  218
  229
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  
  29
  35
  40
  45
  50
  55
  60
  65
  70
  75
  80
  86
  91
  97
  103
  109
  115
  122
  129
  136
  144
  152
  160
  168
  177
  187
  197
  207
  218
  229
Total cash flow (excl. dividends), $m
  202
  209
  215
  221
  229
  237
  247
  257
  268
  280
  256
  271
  286
  303
  321
  340
  360
  382
  405
  429
  455
  483
  513
  544
  577
  612
  649
  688
  729
  773
Retained Cash Flow (-), $m
  -18
  -20
  -23
  -26
  -29
  -32
  -35
  -38
  -40
  -43
  -46
  -49
  -53
  -56
  -59
  -63
  -67
  -71
  -74
  -79
  -83
  -88
  -92
  -97
  -102
  -108
  -113
  -119
  -126
  -132
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
  184
  189
  191
  195
  200
  205
  212
  219
  228
  237
  210
  221
  233
  247
  261
  277
  293
  311
  330
  351
  372
  396
  420
  446
  474
  504
  535
  568
  603
  641
Discount rate, %
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
  171
  161
  149
  137
  126
  115
  104
  93
  83
  74
  55
  47
  41
  35
  29
  24
  19
  15
  12
  9
  7
  5
  3
  2
  2
  1
  1
  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 Corporation (MATW)

Valuation Ratios
P/E Ratio 14.9
Price to Sales 0.7
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 10.6
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 $1603 million for the last fiscal year's total revenue generated by Matthews International Corporation. The default revenue input number comes from 0001 income statement of Matthews International 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 MATW 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 8%, whose default value for MATW is calculated based on our internal credit rating of Matthews International 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 Matthews International 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 MATW stock the variable cost ratio is equal to 76.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $251 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 Corporation.

Corporate tax rate of 27% is the nominal tax rate for Matthews International 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 MATW 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 MATW are equal to 57.6%.

Life of production assets of 20.8 years is the average useful life of capital assets used in Matthews International 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 MATW is equal to 18.8%. 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 - $868.351 million for Matthews International 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 31.759 million for Matthews International 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 Matthews International Corporation at the current share price and the inputted number of shares is $1.1 billion.

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