Intrinsic value of Milacron Holdings - MCRN

Previous Close

$14.02

  Intrinsic Value

$16.74

stock screener

  Rating & Target

hold

+19%

Previous close

$14.02

 
Intrinsic value

$16.74

 
Up/down potential

+19%

 
Rating

hold

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 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 1.0

 

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, %
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.17
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
Revenue, $m
  1,309
  1,388
  1,470
  1,555
  1,644
  1,737
  1,834
  1,935
  2,041
  2,152
  2,268
  2,389
  2,516
  2,649
  2,788
  2,933
  3,086
  3,246
  3,414
  3,589
  3,774
  3,967
  4,169
  4,382
  4,605
  4,839
  5,084
  5,342
  5,612
  5,895
Variable operating expenses, $m
  1,189
  1,255
  1,324
  1,396
  1,470
  1,549
  1,630
  1,716
  1,805
  1,898
  1,909
  2,011
  2,118
  2,229
  2,346
  2,469
  2,597
  2,732
  2,873
  3,021
  3,176
  3,339
  3,509
  3,688
  3,876
  4,073
  4,279
  4,496
  4,724
  4,962
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
  1,189
  1,255
  1,324
  1,396
  1,470
  1,549
  1,630
  1,716
  1,805
  1,898
  1,909
  2,011
  2,118
  2,229
  2,346
  2,469
  2,597
  2,732
  2,873
  3,021
  3,176
  3,339
  3,509
  3,688
  3,876
  4,073
  4,279
  4,496
  4,724
  4,962
Operating income, $m
  121
  133
  146
  159
  173
  188
  204
  220
  236
  254
  359
  378
  398
  419
  441
  464
  488
  514
  540
  568
  597
  628
  660
  694
  729
  766
  805
  846
  888
  933
EBITDA, $m
  245
  260
  275
  291
  308
  325
  344
  363
  382
  403
  425
  448
  471
  496
  522
  550
  578
  608
  640
  672
  707
  743
  781
  821
  863
  907
  952
  1,001
  1,051
  1,104
Interest expense (income), $m
  59
  50
  55
  59
  64
  69
  74
  80
  86
  91
  98
  104
  111
  118
  125
  133
  141
  150
  159
  168
  178
  188
  199
  210
  222
  235
  248
  261
  276
  291
  307
Earnings before tax, $m
  70
  78
  86
  95
  104
  114
  124
  134
  145
  156
  255
  267
  280
  294
  308
  323
  339
  355
  372
  390
  409
  429
  450
  471
  494
  518
  543
  570
  597
  626
Tax expense, $m
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
  116
  121
  127
  133
  140
  147
  154
  161
  169
Net income, $m
  51
  57
  63
  69
  76
  83
  90
  98
  106
  114
  186
  195
  205
  214
  225
  236
  247
  259
  272
  285
  299
  313
  328
  344
  361
  378
  397
  416
  436
  457

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
  1,972
  2,090
  2,213
  2,342
  2,476
  2,616
  2,762
  2,914
  3,074
  3,241
  3,415
  3,598
  3,789
  3,989
  4,198
  4,418
  4,648
  4,888
  5,141
  5,406
  5,683
  5,974
  6,279
  6,599
  6,935
  7,287
  7,657
  8,045
  8,452
  8,879
Adjusted assets (=assets-cash), $m
  1,972
  2,090
  2,213
  2,342
  2,476
  2,616
  2,762
  2,914
  3,074
  3,241
  3,415
  3,598
  3,789
  3,989
  4,198
  4,418
  4,648
  4,888
  5,141
  5,406
  5,683
  5,974
  6,279
  6,599
  6,935
  7,287
  7,657
  8,045
  8,452
  8,879
Revenue / Adjusted assets
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
  0.664
Average production assets, $m
  723
  766
  811
  858
  907
  959
  1,012
  1,068
  1,127
  1,188
  1,252
  1,319
  1,389
  1,462
  1,539
  1,619
  1,703
  1,792
  1,884
  1,981
  2,083
  2,190
  2,302
  2,419
  2,542
  2,671
  2,806
  2,949
  3,098
  3,254
Working capital, $m
  241
  255
  270
  286
  302
  320
  337
  356
  376
  396
  417
  440
  463
  487
  513
  540
  568
  597
  628
  660
  694
  730
  767
  806
  847
  890
  935
  983
  1,033
  1,085
Total debt, $m
  1,015
  1,100
  1,189
  1,281
  1,378
  1,478
  1,584
  1,693
  1,808
  1,928
  2,054
  2,185
  2,323
  2,467
  2,618
  2,776
  2,941
  3,115
  3,297
  3,487
  3,687
  3,896
  4,116
  4,347
  4,588
  4,842
  5,108
  5,387
  5,680
  5,988
Total liabilities, $m
  1,420
  1,505
  1,594
  1,686
  1,783
  1,883
  1,988
  2,098
  2,213
  2,333
  2,459
  2,590
  2,728
  2,872
  3,023
  3,181
  3,346
  3,520
  3,701
  3,892
  4,092
  4,301
  4,521
  4,752
  4,993
  5,247
  5,513
  5,792
  6,085
  6,393
Total equity, $m
  552
  585
  620
  656
  693
  732
  773
  816
  861
  907
  956
  1,007
  1,061
  1,117
  1,176
  1,237
  1,301
  1,369
  1,439
  1,514
  1,591
  1,673
  1,758
  1,848
  1,942
  2,040
  2,144
  2,253
  2,366
  2,486
Total liabilities and equity, $m
  1,972
  2,090
  2,214
  2,342
  2,476
  2,615
  2,761
  2,914
  3,074
  3,240
  3,415
  3,597
  3,789
  3,989
  4,199
  4,418
  4,647
  4,889
  5,140
  5,406
  5,683
  5,974
  6,279
  6,600
  6,935
  7,287
  7,657
  8,045
  8,451
  8,879
Debt-to-equity ratio
  1.840
  1.880
  1.920
  1.950
  1.990
  2.020
  2.050
  2.080
  2.100
  2.130
  2.150
  2.170
  2.190
  2.210
  2.230
  2.240
  2.260
  2.280
  2.290
  2.300
  2.320
  2.330
  2.340
  2.350
  2.360
  2.370
  2.380
  2.390
  2.400
  2.410
Adjusted equity ratio
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  51
  57
  63
  69
  76
  83
  90
  98
  106
  114
  186
  195
  205
  214
  225
  236
  247
  259
  272
  285
  299
  313
  328
  344
  361
  378
  397
  416
  436
  457
Depreciation, amort., depletion, $m
  125
  127
  129
  132
  135
  137
  140
  143
  146
  149
  66
  69
  73
  77
  81
  85
  90
  94
  99
  104
  110
  115
  121
  127
  134
  141
  148
  155
  163
  171
Funds from operations, $m
  176
  184
  193
  201
  211
  220
  230
  241
  252
  263
  252
  264
  278
  291
  306
  321
  337
  353
  371
  389
  408
  428
  449
  471
  495
  519
  544
  571
  599
  629
Change in working capital, $m
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
Cash from operations, $m
  162
  170
  178
  186
  194
  203
  212
  222
  232
  243
  231
  242
  254
  267
  280
  294
  309
  324
  340
  357
  374
  393
  412
  432
  454
  476
  499
  524
  549
  576
Maintenance CAPEX, $m
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -63
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -110
  -115
  -121
  -127
  -134
  -141
  -148
  -155
  -163
New CAPEX, $m
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -142
  -149
  -156
Cash from investing activities, $m
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -109
  -114
  -120
  -127
  -133
  -139
  -146
  -154
  -161
  -169
  -178
  -187
  -196
  -206
  -217
  -227
  -238
  -250
  -263
  -276
  -290
  -304
  -319
Free cash flow, $m
  85
  88
  92
  96
  100
  104
  108
  113
  118
  122
  104
  109
  115
  121
  127
  133
  139
  146
  153
  161
  168
  176
  185
  194
  203
  213
  223
  234
  245
  257
Issuance/(repayment) of debt, $m
  82
  85
  89
  92
  96
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  173
  182
  191
  200
  210
  220
  230
  242
  254
  266
  279
  293
  307
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
  92
  96
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  173
  182
  191
  200
  210
  220
  230
  242
  254
  266
  279
  293
  307
Total cash flow (excl. dividends), $m
  167
  173
  181
  188
  196
  205
  214
  223
  232
  243
  230
  241
  252
  265
  277
  291
  305
  319
  335
  351
  368
  386
  405
  424
  445
  467
  489
  513
  538
  564
Retained Cash Flow (-), $m
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -59
  -61
  -64
  -67
  -71
  -74
  -78
  -81
  -85
  -90
  -94
  -99
  -103
  -109
  -114
  -120
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
  135
  140
  146
  152
  159
  166
  173
  180
  188
  196
  181
  190
  199
  209
  219
  229
  240
  252
  264
  277
  290
  304
  319
  335
  351
  368
  386
  404
  424
  445
Discount rate, %
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
  125
  119
  113
  106
  99
  91
  83
  75
  67
  59
  46
  39
  33
  28
  23
  18
  15
  11
  9
  6
  5
  3
  2
  2
  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

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 31
Price to Sales 0.8
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 16.3
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 $1234.2 million for the last fiscal year's total revenue generated by Milacron Holdings. The default revenue input number comes from 0001 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 6.1% 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 8.2%, 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 91.2%.

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 5.4% 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 55.2%.

Life of production assets of 19 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 18.4%. 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 - $520.7 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 70.495 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 $1.0 billion.

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COMPANY NEWS

▶ Milacron Holdings: 3Q Earnings Snapshot   [06:59AM  Associated Press]
▶ P&G division inks major deal with Milacron   [Oct-22-18 12:11PM  American City Business Journals]
▶ Milacron Celebrates Landmark 50th Anniversary in Plastics   [Sep-25-18 09:00AM  Business Wire]
▶ Milacron Holdings: 2Q Earnings Snapshot   [Jul-26-18 07:19AM  Associated Press]
▶ Milacron Holdings: 1Q Earnings Snapshot   [Apr-26-18 09:34AM  Associated Press]
▶ New Strong Buy Stocks for March 15th   [Mar-15-18 10:29AM  Zacks]
▶ MORE from Milacron at NPE   [Mar-12-18 02:06PM  Business Wire]
▶ Stock picks for rising rates   [Feb-28-18 02:05PM  CNBC Videos]
▶ Milacron Holdings beats Street 4Q forecasts   [07:44AM  Associated Press]
▶ Milacron Holdings beats Street 3Q forecasts   [07:48AM  Associated Press]

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