Intrinsic value of Marcus Corporation (The) - MCS

Previous Close

$35.01

  Intrinsic Value

$8.82

stock screener

  Rating & Target

str. sell

-75%

Previous close

$35.01

 
Intrinsic value

$8.82

 
Up/down potential

-75%

 
Rating

str. sell

We calculate the intrinsic value of MCS 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, %
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.11
  5.09
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
Revenue, $m
  747
  789
  833
  879
  927
  977
  1,030
  1,085
  1,142
  1,203
  1,266
  1,332
  1,401
  1,474
  1,550
  1,629
  1,713
  1,800
  1,892
  1,989
  2,090
  2,196
  2,307
  2,424
  2,547
  2,675
  2,810
  2,952
  3,101
  3,257
Variable operating expenses, $m
  658
  695
  733
  774
  816
  859
  905
  953
  1,004
  1,056
  1,107
  1,165
  1,226
  1,289
  1,356
  1,425
  1,499
  1,575
  1,656
  1,740
  1,829
  1,921
  2,019
  2,121
  2,228
  2,341
  2,459
  2,583
  2,713
  2,849
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
  658
  695
  733
  774
  816
  859
  905
  953
  1,004
  1,056
  1,107
  1,165
  1,226
  1,289
  1,356
  1,425
  1,499
  1,575
  1,656
  1,740
  1,829
  1,921
  2,019
  2,121
  2,228
  2,341
  2,459
  2,583
  2,713
  2,849
Operating income, $m
  89
  94
  100
  106
  112
  118
  125
  131
  139
  146
  158
  167
  175
  184
  194
  204
  214
  225
  237
  249
  261
  275
  289
  303
  319
  335
  352
  369
  388
  407
EBITDA, $m
  157
  165
  175
  184
  194
  205
  216
  227
  239
  252
  265
  279
  294
  309
  325
  341
  359
  377
  397
  417
  438
  460
  483
  508
  534
  561
  589
  619
  650
  682
Interest expense (income), $m
  9
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  80
  85
  89
  95
  100
  106
Earnings before tax, $m
  75
  78
  82
  86
  91
  95
  100
  105
  110
  115
  125
  131
  137
  143
  150
  157
  165
  172
  181
  189
  198
  208
  217
  228
  239
  250
  262
  275
  288
  302
Tax expense, $m
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  34
  35
  37
  39
  41
  42
  44
  47
  49
  51
  53
  56
  59
  61
  64
  68
  71
  74
  78
  81
Net income, $m
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  91
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  151
  159
  166
  174
  183
  191
  200
  210
  220

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
  1,045
  1,104
  1,165
  1,230
  1,297
  1,367
  1,440
  1,517
  1,598
  1,682
  1,770
  1,863
  1,959
  2,061
  2,167
  2,279
  2,396
  2,518
  2,647
  2,782
  2,923
  3,071
  3,227
  3,390
  3,562
  3,742
  3,930
  4,129
  4,337
  4,555
Adjusted assets (=assets-cash), $m
  1,045
  1,104
  1,165
  1,230
  1,297
  1,367
  1,440
  1,517
  1,598
  1,682
  1,770
  1,863
  1,959
  2,061
  2,167
  2,279
  2,396
  2,518
  2,647
  2,782
  2,923
  3,071
  3,227
  3,390
  3,562
  3,742
  3,930
  4,129
  4,337
  4,555
Revenue / Adjusted assets
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
  0.715
Average production assets, $m
  921
  973
  1,027
  1,084
  1,143
  1,205
  1,270
  1,338
  1,409
  1,483
  1,561
  1,642
  1,727
  1,817
  1,911
  2,009
  2,112
  2,220
  2,333
  2,452
  2,577
  2,708
  2,845
  2,989
  3,140
  3,299
  3,465
  3,640
  3,823
  4,015
Working capital, $m
  -91
  -96
  -102
  -107
  -113
  -119
  -126
  -132
  -139
  -147
  -154
  -162
  -171
  -180
  -189
  -199
  -209
  -220
  -231
  -243
  -255
  -268
  -281
  -296
  -311
  -326
  -343
  -360
  -378
  -397
Total debt, $m
  295
  325
  356
  389
  423
  458
  495
  534
  574
  617
  662
  708
  757
  808
  862
  918
  977
  1,039
  1,104
  1,172
  1,244
  1,319
  1,397
  1,480
  1,566
  1,657
  1,753
  1,853
  1,958
  2,068
Total liabilities, $m
  528
  558
  589
  621
  655
  690
  727
  766
  807
  849
  894
  941
  989
  1,041
  1,094
  1,151
  1,210
  1,272
  1,337
  1,405
  1,476
  1,551
  1,630
  1,712
  1,799
  1,890
  1,985
  2,085
  2,190
  2,300
Total equity, $m
  517
  546
  577
  609
  642
  677
  713
  751
  791
  833
  876
  922
  970
  1,020
  1,073
  1,128
  1,186
  1,246
  1,310
  1,377
  1,447
  1,520
  1,597
  1,678
  1,763
  1,852
  1,946
  2,044
  2,147
  2,255
Total liabilities and equity, $m
  1,045
  1,104
  1,166
  1,230
  1,297
  1,367
  1,440
  1,517
  1,598
  1,682
  1,770
  1,863
  1,959
  2,061
  2,167
  2,279
  2,396
  2,518
  2,647
  2,782
  2,923
  3,071
  3,227
  3,390
  3,562
  3,742
  3,931
  4,129
  4,337
  4,555
Debt-to-equity ratio
  0.570
  0.590
  0.620
  0.640
  0.660
  0.680
  0.690
  0.710
  0.730
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.870
  0.880
  0.890
  0.890
  0.900
  0.910
  0.910
  0.920
Adjusted equity ratio
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  91
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  151
  159
  166
  174
  183
  191
  200
  210
  220
Depreciation, amort., depletion, $m
  67
  71
  75
  79
  83
  87
  91
  96
  101
  106
  107
  112
  118
  124
  131
  138
  145
  152
  160
  168
  176
  185
  195
  205
  215
  226
  237
  249
  262
  275
Funds from operations, $m
  122
  128
  135
  142
  149
  156
  164
  172
  181
  190
  198
  208
  218
  229
  240
  252
  265
  278
  292
  306
  321
  337
  354
  371
  389
  408
  429
  450
  472
  495
Change in working capital, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
Cash from operations, $m
  127
  133
  140
  147
  155
  162
  171
  179
  188
  197
  206
  216
  227
  238
  250
  262
  275
  289
  303
  318
  333
  350
  367
  385
  404
  424
  445
  467
  490
  514
Maintenance CAPEX, $m
  -60
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -92
  -96
  -102
  -107
  -112
  -118
  -124
  -131
  -138
  -145
  -152
  -160
  -168
  -176
  -185
  -195
  -205
  -215
  -226
  -237
  -249
  -262
New CAPEX, $m
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -159
  -166
  -175
  -183
  -192
Cash from investing activities, $m
  -110
  -115
  -121
  -127
  -133
  -140
  -148
  -155
  -163
  -170
  -180
  -188
  -197
  -207
  -218
  -229
  -241
  -253
  -265
  -279
  -293
  -307
  -322
  -339
  -356
  -374
  -392
  -412
  -432
  -454
Free cash flow, $m
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  44
  46
  48
  51
  53
  55
  57
  60
Issuance/(repayment) of debt, $m
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  79
  82
  87
  91
  95
  100
  105
  110
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  
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  79
  82
  87
  91
  95
  100
  105
  110
Total cash flow (excl. dividends), $m
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  135
  141
  148
  155
  162
  170
Retained Cash Flow (-), $m
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
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
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  27
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
Discount rate, %
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  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
  16.43
  17.25
  18.11
PV of cash for distribution, $m
  18
  17
  17
  17
  17
  17
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  15
  14
  13
  12
  11
  10
  9
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  7
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  3
  3
  2
  2
  1
  1
  1
  1
  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

The Marcus Corporation operates principally in two business segments: Theatres, and Hotels and Resorts. The Theatres segment operates multiscreen motion picture theatres in Wisconsin, Illinois, Ohio, Minnesota, Iowa, North Dakota and Nebraska, and a family entertainment center in Wisconsin. The Hotels and Resorts segment owns and operates hotels and resorts in Wisconsin, Illinois, Oklahoma and Nebraska, and manages hotels, resorts and other properties in Wisconsin, Minnesota, Texas, Nevada, Georgia, Florida and California. As of December 31, 2015, the Company owned or operated 53 movie theatre locations with a total of 668 screens in Wisconsin, Illinois, Iowa, Minnesota, Nebraska, North Dakota and Ohio. Its owned and operated hotels and resorts include The Pfister Hotel, The Hilton Milwaukee City Center, Hilton Madison at Monona Terrace, The Grand Geneva Resort & Spa, InterContinental Milwaukee, Skirvin Hilton, AC Hotel Chicago Downtown and The Lincoln Marriott Cornhusker Hotel.

FINANCIAL RATIOS  of  Marcus Corporation (The) (MCS)

Valuation Ratios
P/E Ratio 25.5
Price to Sales 1.8
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow -968.7
Growth Rates
Sales Growth Rate 67.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 90.9%
Cap. Spend. - 3 Yr. Gr. Rate 8.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 76.2%
Total Debt to Equity 81%
Interest Coverage 8
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 10.1%
Return On Equity - 3 Yr. Avg. 8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 46.9%
Gross Margin - 3 Yr. Avg. 46.9%
EBITDA Margin 20.6%
EBITDA Margin - 3 Yr. Avg. 19.6%
Operating Margin 12.9%
Oper. Margin - 3 Yr. Avg. 12.3%
Pre-Tax Margin 11.2%
Pre-Tax Margin - 3 Yr. Avg. 10.3%
Net Profit Margin 7%
Net Profit Margin - 3 Yr. Avg. 6.4%
Effective Tax Rate 37.7%
Eff/ Tax Rate - 3 Yr. Avg. 38.5%
Payout Ratio 31.6%

MCS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCS stock intrinsic value calculation we used $707 million for the last fiscal year's total revenue generated by Marcus Corporation (The). The default revenue input number comes from 0001 income statement of Marcus Corporation (The). 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 MCS stock valuation model: a) initial revenue growth rate of 5.7% 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 4.4%, whose default value for MCS is calculated based on our internal credit rating of Marcus Corporation (The), 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 Marcus Corporation (The).
    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 MCS stock the variable cost ratio is equal to 88.1%.

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 MCS 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 Marcus Corporation (The).

Corporate tax rate of 27% is the nominal tax rate for Marcus Corporation (The). 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 MCS 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 MCS are equal to 123.3%.

Life of production assets of 14.6 years is the average useful life of capital assets used in Marcus Corporation (The) 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 MCS is equal to -12.2%. 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 - $490.009 million for Marcus Corporation (The) - 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 30.826 million for Marcus Corporation (The) 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 Marcus Corporation (The) at the current share price and the inputted number of shares is $1.1 billion.

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