Intrinsic value of Matthews International Cl A - MATW

Previous Close

$51.55

  Intrinsic Value

$46.60

stock screener

  Rating & Target

hold

-10%

Previous close

$51.55

 
Intrinsic value

$46.60

 
Up/down potential

-10%

 
Rating

hold

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 1.7

 

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, %
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
Revenue, $m
  1,600
  1,689
  1,782
  1,879
  1,980
  2,086
  2,197
  2,313
  2,435
  2,562
  2,696
  2,836
  2,982
  3,136
  3,297
  3,466
  3,643
  3,829
  4,024
  4,228
  4,442
  4,668
  4,904
  5,151
  5,411
  5,684
  5,971
  6,271
  6,587
  6,918
Variable operating expenses, $m
  1,465
  1,539
  1,616
  1,697
  1,781
  1,869
  1,962
  2,059
  2,160
  2,266
  2,245
  2,361
  2,483
  2,611
  2,745
  2,886
  3,034
  3,188
  3,351
  3,521
  3,700
  3,887
  4,084
  4,290
  4,506
  4,734
  4,972
  5,223
  5,485
  5,761
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
  1,465
  1,539
  1,616
  1,697
  1,781
  1,869
  1,962
  2,059
  2,160
  2,266
  2,245
  2,361
  2,483
  2,611
  2,745
  2,886
  3,034
  3,188
  3,351
  3,521
  3,700
  3,887
  4,084
  4,290
  4,506
  4,734
  4,972
  5,223
  5,485
  5,761
Operating income, $m
  135
  150
  166
  182
  199
  217
  235
  255
  275
  296
  451
  474
  499
  524
  551
  580
  609
  640
  673
  707
  743
  781
  820
  862
  905
  951
  999
  1,049
  1,102
  1,157
EBITDA, $m
  309
  326
  344
  363
  382
  403
  424
  447
  470
  495
  520
  547
  576
  605
  636
  669
  703
  739
  777
  816
  858
  901
  947
  994
  1,045
  1,097
  1,153
  1,211
  1,272
  1,336
Interest expense (income), $m
  26
  49
  54
  58
  63
  68
  73
  79
  85
  91
  97
  103
  110
  118
  125
  133
  142
  150
  159
  169
  179
  190
  201
  213
  225
  238
  251
  265
  280
  296
  312
Earnings before tax, $m
  86
  97
  108
  119
  131
  143
  156
  170
  184
  199
  347
  364
  381
  399
  418
  438
  459
  481
  504
  528
  553
  580
  607
  637
  667
  699
  733
  769
  806
  845
Tax expense, $m
  23
  26
  29
  32
  35
  39
  42
  46
  50
  54
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  149
  157
  164
  172
  180
  189
  198
  208
  218
  228
Net income, $m
  63
  71
  79
  87
  96
  105
  114
  124
  135
  146
  254
  266
  278
  291
  305
  320
  335
  351
  368
  385
  404
  423
  443
  465
  487
  511
  535
  561
  588
  617

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
  2,371
  2,502
  2,640
  2,783
  2,933
  3,090
  3,255
  3,427
  3,607
  3,796
  3,994
  4,201
  4,418
  4,646
  4,884
  5,134
  5,397
  5,672
  5,961
  6,264
  6,581
  6,915
  7,265
  7,632
  8,017
  8,421
  8,846
  9,291
  9,759
  10,249
Adjusted assets (=assets-cash), $m
  2,371
  2,502
  2,640
  2,783
  2,933
  3,090
  3,255
  3,427
  3,607
  3,796
  3,994
  4,201
  4,418
  4,646
  4,884
  5,134
  5,397
  5,672
  5,961
  6,264
  6,581
  6,915
  7,265
  7,632
  8,017
  8,421
  8,846
  9,291
  9,759
  10,249
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
  917
  968
  1,021
  1,076
  1,135
  1,195
  1,259
  1,325
  1,395
  1,468
  1,545
  1,625
  1,709
  1,797
  1,889
  1,986
  2,087
  2,194
  2,306
  2,423
  2,546
  2,674
  2,810
  2,952
  3,101
  3,257
  3,421
  3,594
  3,774
  3,964
Working capital, $m
  298
  314
  331
  349
  368
  388
  409
  430
  453
  477
  501
  527
  555
  583
  613
  645
  678
  712
  748
  786
  826
  868
  912
  958
  1,007
  1,057
  1,111
  1,166
  1,225
  1,287
Total debt, $m
  993
  1,078
  1,167
  1,260
  1,357
  1,459
  1,565
  1,677
  1,794
  1,916
  2,044
  2,178
  2,319
  2,467
  2,621
  2,783
  2,953
  3,132
  3,319
  3,515
  3,721
  3,937
  4,164
  4,402
  4,651
  4,913
  5,188
  5,477
  5,780
  6,098
Total liabilities, $m
  1,536
  1,622
  1,711
  1,804
  1,901
  2,003
  2,109
  2,221
  2,337
  2,460
  2,588
  2,722
  2,863
  3,010
  3,165
  3,327
  3,497
  3,676
  3,863
  4,059
  4,265
  4,481
  4,708
  4,945
  5,195
  5,457
  5,732
  6,021
  6,324
  6,641
Total equity, $m
  835
  881
  929
  980
  1,033
  1,088
  1,146
  1,206
  1,270
  1,336
  1,406
  1,479
  1,555
  1,635
  1,719
  1,807
  1,900
  1,997
  2,098
  2,205
  2,317
  2,434
  2,557
  2,686
  2,822
  2,964
  3,114
  3,270
  3,435
  3,608
Total liabilities and equity, $m
  2,371
  2,503
  2,640
  2,784
  2,934
  3,091
  3,255
  3,427
  3,607
  3,796
  3,994
  4,201
  4,418
  4,645
  4,884
  5,134
  5,397
  5,673
  5,961
  6,264
  6,582
  6,915
  7,265
  7,631
  8,017
  8,421
  8,846
  9,291
  9,759
  10,249
Debt-to-equity ratio
  1.190
  1.220
  1.260
  1.290
  1.310
  1.340
  1.370
  1.390
  1.410
  1.430
  1.450
  1.470
  1.490
  1.510
  1.520
  1.540
  1.550
  1.570
  1.580
  1.590
  1.610
  1.620
  1.630
  1.640
  1.650
  1.660
  1.670
  1.670
  1.680
  1.690
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
  63
  71
  79
  87
  96
  105
  114
  124
  135
  146
  254
  266
  278
  291
  305
  320
  335
  351
  368
  385
  404
  423
  443
  465
  487
  511
  535
  561
  588
  617
Depreciation, amort., depletion, $m
  174
  176
  178
  181
  183
  186
  189
  192
  195
  198
  70
  73
  77
  81
  85
  89
  94
  99
  104
  109
  115
  120
  127
  133
  140
  147
  154
  162
  170
  179
Funds from operations, $m
  236
  246
  257
  268
  279
  291
  303
  316
  330
  344
  323
  339
  355
  372
  390
  409
  429
  450
  472
  494
  518
  544
  570
  598
  627
  657
  689
  723
  758
  795
Change in working capital, $m
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
Cash from operations, $m
  221
  230
  239
  250
  260
  271
  282
  294
  307
  320
  298
  313
  328
  344
  360
  378
  396
  415
  435
  456
  479
  502
  526
  552
  578
  607
  636
  667
  700
  734
Maintenance CAPEX, $m
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
  -120
  -127
  -133
  -140
  -147
  -154
  -162
  -170
New CAPEX, $m
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -106
  -112
  -117
  -123
  -129
  -135
  -142
  -149
  -156
  -164
  -172
  -181
  -190
Cash from investing activities, $m
  -87
  -92
  -97
  -102
  -106
  -112
  -118
  -124
  -130
  -136
  -142
  -150
  -157
  -165
  -173
  -182
  -191
  -200
  -211
  -221
  -232
  -244
  -255
  -269
  -282
  -296
  -311
  -326
  -343
  -360
Free cash flow, $m
  134
  138
  143
  148
  153
  159
  165
  171
  178
  184
  156
  163
  171
  179
  187
  196
  205
  215
  225
  235
  247
  258
  270
  283
  296
  311
  325
  341
  357
  374
Issuance/(repayment) of debt, $m
  82
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
  141
  148
  155
  162
  170
  178
  187
  196
  206
  216
  227
  238
  250
  262
  275
  289
  303
  318
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  
  82
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
  141
  148
  155
  162
  170
  178
  187
  196
  206
  216
  227
  238
  250
  262
  275
  289
  303
  318
Total cash flow (excl. dividends), $m
  215
  223
  232
  241
  251
  261
  272
  283
  294
  307
  284
  297
  311
  326
  342
  358
  375
  393
  412
  432
  452
  474
  497
  521
  546
  573
  600
  629
  660
  692
Retained Cash Flow (-), $m
  -45
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -136
  -142
  -149
  -157
  -165
  -173
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
  170
  177
  183
  191
  198
  206
  214
  222
  231
  240
  214
  224
  235
  246
  258
  270
  283
  296
  310
  325
  341
  357
  374
  392
  411
  430
  451
  473
  495
  519
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
  151
  143
  134
  125
  116
  106
  96
  86
  76
  57
  49
  42
  35
  29
  24
  19
  15
  11
  9
  6
  4
  3
  2
  1
  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 Cl A (MATW)

Valuation Ratios
P/E Ratio 22.4
Price to Sales 1.1
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 11.1
Price to Free Cash Flow 15.9
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 $1515.608 million for the last fiscal year's total revenue generated by Matthews International Cl A. The default revenue input number comes from 0001 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 5.6% 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 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 57.3%.

Life of production assets of 22.2 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 18.6%. 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 - $789.707 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 32.134 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]

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