Intrinsic value of Milacron Holdings - MCRN

Previous Close

$18.00

  Intrinsic Value

$6.72

stock screener

  Rating & Target

str. sell

-63%

Previous close

$18.00

 
Intrinsic value

$6.72

 
Up/down potential

-63%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MCRN 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 2016), $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 1.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -1.10
  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
  1,167
  1,190
  1,218
  1,249
  1,284
  1,323
  1,366
  1,412
  1,463
  1,517
  1,575
  1,637
  1,704
  1,775
  1,850
  1,930
  2,014
  2,104
  2,198
  2,298
  2,404
  2,515
  2,633
  2,757
  2,887
  3,025
  3,169
  3,322
  3,482
  3,651
  3,828
Variable operating expenses, $m
 
  1,139
  1,164
  1,193
  1,225
  1,261
  1,300
  1,342
  1,388
  1,438
  1,491
  1,497
  1,558
  1,623
  1,692
  1,765
  1,842
  1,924
  2,010
  2,102
  2,198
  2,300
  2,408
  2,521
  2,640
  2,766
  2,898
  3,038
  3,184
  3,338
  3,501
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
  1,061
  1,139
  1,164
  1,193
  1,225
  1,261
  1,300
  1,342
  1,388
  1,438
  1,491
  1,497
  1,558
  1,623
  1,692
  1,765
  1,842
  1,924
  2,010
  2,102
  2,198
  2,300
  2,408
  2,521
  2,640
  2,766
  2,898
  3,038
  3,184
  3,338
  3,501
Operating income, $m
  106
  51
  53
  56
  59
  62
  66
  70
  74
  79
  84
  140
  146
  152
  158
  165
  172
  180
  188
  197
  206
  215
  225
  236
  247
  259
  271
  284
  298
  312
  327
EBITDA, $m
  166
  134
  137
  141
  145
  149
  154
  159
  165
  171
  178
  185
  192
  200
  209
  218
  227
  237
  248
  259
  271
  284
  297
  311
  326
  341
  358
  375
  393
  412
  432
Interest expense (income), $m
  59
  59
  60
  62
  65
  67
  70
  73
  76
  79
  83
  87
  91
  96
  101
  106
  112
  117
  124
  130
  137
  144
  152
  160
  169
  178
  187
  197
  208
  219
  230
Earnings before tax, $m
  45
  -8
  -7
  -6
  -5
  -5
  -4
  -3
  -1
  0
  1
  53
  54
  56
  57
  59
  61
  63
  64
  66
  69
  71
  73
  76
  78
  81
  84
  87
  90
  93
  97
Tax expense, $m
  14
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  14
  15
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  20
  21
  22
  23
  23
  24
  25
  26
Net income, $m
  31
  -8
  -7
  -6
  -5
  -5
  -4
  -3
  -1
  0
  1
  39
  40
  41
  42
  43
  44
  46
  47
  49
  50
  52
  53
  55
  57
  59
  61
  63
  66
  68
  71

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  130
  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
  1,722
  1,624
  1,661
  1,704
  1,752
  1,805
  1,863
  1,927
  1,995
  2,069
  2,149
  2,234
  2,324
  2,421
  2,524
  2,632
  2,748
  2,870
  2,999
  3,136
  3,280
  3,432
  3,592
  3,761
  3,939
  4,127
  4,324
  4,532
  4,750
  4,981
  5,222
Adjusted assets (=assets-cash), $m
  1,592
  1,624
  1,661
  1,704
  1,752
  1,805
  1,863
  1,927
  1,995
  2,069
  2,149
  2,234
  2,324
  2,421
  2,524
  2,632
  2,748
  2,870
  2,999
  3,136
  3,280
  3,432
  3,592
  3,761
  3,939
  4,127
  4,324
  4,532
  4,750
  4,981
  5,222
Revenue / Adjusted assets
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
Average production assets, $m
  594
  606
  620
  636
  654
  673
  695
  719
  744
  772
  802
  833
  867
  903
  942
  982
  1,025
  1,071
  1,119
  1,170
  1,224
  1,280
  1,340
  1,403
  1,470
  1,540
  1,613
  1,691
  1,772
  1,858
  1,948
Working capital, $m
  355
  237
  242
  249
  256
  263
  272
  281
  291
  302
  313
  326
  339
  353
  368
  384
  401
  419
  437
  457
  478
  501
  524
  549
  575
  602
  631
  661
  693
  726
  762
Total debt, $m
  941
  960
  990
  1,024
  1,063
  1,105
  1,152
  1,203
  1,258
  1,318
  1,382
  1,450
  1,523
  1,601
  1,683
  1,771
  1,863
  1,961
  2,065
  2,175
  2,291
  2,413
  2,542
  2,678
  2,821
  2,972
  3,130
  3,298
  3,473
  3,658
  3,853
Total liabilities, $m
  1,287
  1,306
  1,336
  1,370
  1,409
  1,451
  1,498
  1,549
  1,604
  1,664
  1,728
  1,796
  1,869
  1,947
  2,029
  2,117
  2,209
  2,307
  2,411
  2,521
  2,637
  2,759
  2,888
  3,024
  3,167
  3,318
  3,476
  3,644
  3,819
  4,004
  4,199
Total equity, $m
  435
  318
  326
  334
  343
  354
  365
  378
  391
  406
  421
  438
  456
  475
  495
  516
  539
  563
  588
  615
  643
  673
  704
  737
  772
  809
  847
  888
  931
  976
  1,024
Total liabilities and equity, $m
  1,722
  1,624
  1,662
  1,704
  1,752
  1,805
  1,863
  1,927
  1,995
  2,070
  2,149
  2,234
  2,325
  2,422
  2,524
  2,633
  2,748
  2,870
  2,999
  3,136
  3,280
  3,432
  3,592
  3,761
  3,939
  4,127
  4,323
  4,532
  4,750
  4,980
  5,223
Debt-to-equity ratio
  2.163
  3.010
  3.040
  3.070
  3.090
  3.120
  3.150
  3.190
  3.220
  3.250
  3.280
  3.310
  3.340
  3.370
  3.400
  3.430
  3.460
  3.490
  3.510
  3.540
  3.560
  3.590
  3.610
  3.630
  3.650
  3.670
  3.690
  3.710
  3.730
  3.750
  3.760
Adjusted equity ratio
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  -8
  -7
  -6
  -5
  -5
  -4
  -3
  -1
  0
  1
  39
  40
  41
  42
  43
  44
  46
  47
  49
  50
  52
  53
  55
  57
  59
  61
  63
  66
  68
  71
Depreciation, amort., depletion, $m
  60
  83
  84
  85
  86
  87
  88
  89
  91
  92
  94
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
Funds from operations, $m
  141
  76
  77
  79
  80
  82
  85
  87
  89
  92
  95
  83
  86
  89
  93
  96
  99
  103
  107
  111
  116
  121
  125
  131
  136
  142
  148
  154
  161
  168
  176
Change in working capital, $m
  25
  5
  5
  6
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
Cash from operations, $m
  116
  71
  72
  72
  73
  75
  76
  78
  79
  81
  83
  71
  73
  75
  78
  80
  83
  85
  88
  92
  95
  98
  102
  106
  110
  115
  119
  124
  129
  135
  140
Maintenance CAPEX, $m
  0
  -32
  -33
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
New CAPEX, $m
  -57
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -74
  -78
  -82
  -86
  -90
Cash from investing activities, $m
  -56
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -111
  -117
  -123
  -129
  -135
  -141
  -149
  -157
  -165
  -173
  -181
  -190
Free cash flow, $m
  60
  27
  25
  23
  21
  20
  18
  17
  15
  14
  12
  -4
  -6
  -7
  -9
  -11
  -13
  -15
  -17
  -20
  -22
  -24
  -27
  -29
  -32
  -34
  -37
  -40
  -43
  -47
  -50
Issuance/(repayment) of debt, $m
  -1
  26
  30
  34
  39
  43
  47
  51
  55
  59
  64
  68
  73
  78
  82
  88
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
Issuance/(repurchase) of shares, $m
  7
  14
  14
  15
  15
  15
  15
  15
  15
  15
  15
  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  
  6
  40
  44
  49
  54
  58
  62
  66
  70
  74
  79
  68
  73
  78
  82
  88
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
Total cash flow (excl. dividends), $m
  63
  67
  70
  72
  75
  77
  80
  83
  85
  88
  91
  65
  67
  70
  73
  76
  80
  83
  86
  90
  94
  98
  102
  107
  111
  116
  121
  127
  132
  138
  145
Retained Cash Flow (-), $m
  6
  -14
  -14
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
Prev. year cash balance distribution, $m
 
  123
  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
 
  176
  55
  58
  60
  62
  65
  68
  70
  73
  75
  48
  50
  51
  53
  55
  57
  59
  61
  63
  66
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
Discount rate, %
 
  9.60
  10.08
  10.58
  11.11
  11.67
  12.25
  12.86
  13.51
  14.18
  14.89
  15.64
  16.42
  17.24
  18.10
  19.01
  19.96
  20.96
  22.00
  23.10
  24.26
  25.47
  26.75
  28.08
  29.49
  30.96
  32.51
  34.13
  35.84
  37.63
  39.51
PV of cash for distribution, $m
 
  160
  45
  43
  39
  36
  32
  29
  25
  22
  19
  10
  8
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.4
  96.9
  95.4
  93.9
  92.5
  91.2
  89.9
  88.7
  87.5
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4
  86.4

Milacron Holdings Corp. is engaged in the manufacture, distribution, and service of engineered and customized systems used in the plastic technology and processing industry. The Company operates through three segments: Advanced Plastic Processing Technologies (APPT), Melt Delivery and Control Systems (MDCS), and Fluid Technologies. The Company has a product portfolio that includes hot runner systems, injection molding, blow molding and extrusion equipment. It produces process control systems, mold bases and components, and maintenance, repair and operating (MRO) supplies and fluid technology. As of December 31, 2016, the Company's products were sold in over 100 countries across six continents. Its customers include original equipment manufacturers (OEMs), molders and mold-makers. Its customer base covers a range of end-market applications, including packaging, automotive, medical, construction, consumer goods and electronics.

FINANCIAL RATIOS  of  Milacron Holdings (MCRN)

Valuation Ratios
P/E Ratio 39.8
Price to Sales 1.1
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 20.9
Growth Rates
Sales Growth Rate -1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.5%
Cap. Spend. - 3 Yr. Gr. Rate 13.7%
Financial Strength
Quick Ratio 19
Current Ratio 0
LT Debt to Equity 214.7%
Total Debt to Equity 216.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity 7.1%
Return On Equity - 3 Yr. Avg. -2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 33.9%
Gross Margin - 3 Yr. Avg. 34.3%
EBITDA Margin 14.1%
EBITDA Margin - 3 Yr. Avg. 12%
Operating Margin 9.1%
Oper. Margin - 3 Yr. Avg. 6.7%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 1%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. -0.6%
Effective Tax Rate 31.1%
Eff/ Tax Rate - 3 Yr. Avg. 76.2%
Payout Ratio 0%

MCRN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCRN stock intrinsic value calculation we used $1167 million for the last fiscal year's total revenue generated by Milacron Holdings. The default revenue input number comes from 2016 income statement of Milacron Holdings. 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 MCRN 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 9.6%, whose default value for MCRN is calculated based on our internal credit rating of Milacron Holdings, 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 Milacron Holdings.
    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 MCRN stock the variable cost ratio is equal to 95.8%.

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 MCRN 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 6.3% for Milacron Holdings.

Corporate tax rate of 27% is the nominal tax rate for Milacron Holdings. 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 MCRN 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 MCRN are equal to 50.9%.

Life of production assets of 18.6 years is the average useful life of capital assets used in Milacron Holdings 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 MCRN is equal to 19.9%. 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 - $435 million for Milacron Holdings - 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 69.189 million for Milacron Holdings 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 Milacron Holdings at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Milacron Holdings beats Street 3Q forecasts   [07:48AM  Associated Press]
▶ Is There Now An Opportunity In Milacron Holdings Corp (MCRN)?   [Sep-06-17 05:44PM  Simply Wall St.]
▶ Weekly CEO Buys Highlights   [Aug-28-17 12:26PM  GuruFocus.com]
▶ Milacron Holdings tops Street 2Q forecasts   [Jul-27-17 11:38PM  Associated Press]
▶ Milacron Files for Secondary Offering   [May-01-17 10:25AM  24/7 Wall St.]
▶ Milacron Holdings reports 1Q loss   [Apr-27-17 08:36AM  Associated Press]
▶ Milacron Holdings Corp. To Host Investor Meeting   [Apr-21-17 04:20PM  Business Wire]
▶ Milacron Files for IPO   [Apr-18-17 10:20AM  24/7 Wall St.]
▶ Who Will Win the March Madness of Trump Stocks?   [Mar-23-17 05:12PM  Zacks]
Financial statements of MCRN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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