Intrinsic value of Mistras Group - MG

Previous Close

$22.25

  Intrinsic Value

$7.65

stock screener

  Rating & Target

str. sell

-66%

Previous close

$22.25

 
Intrinsic value

$7.65

 
Up/down potential

-66%

 
Rating

str. sell

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

We calculate the intrinsic value of MG 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 0.6

 

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, %
  -43.81
  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
  404
  412
  422
  432
  445
  458
  473
  489
  506
  525
  545
  567
  590
  614
  640
  668
  697
  728
  761
  796
  832
  871
  911
  954
  1,000
  1,047
  1,097
  1,150
  1,205
  1,264
  1,325
Variable operating expenses, $m
 
  378
  386
  396
  406
  418
  431
  445
  461
  477
  495
  497
  517
  538
  561
  585
  611
  638
  667
  697
  729
  763
  798
  836
  876
  917
  961
  1,007
  1,056
  1,107
  1,161
Fixed operating expenses, $m
 
  16
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  28
  28
  29
  30
  30
  31
  32
  33
  34
Total operating expenses, $m
  387
  394
  403
  413
  424
  436
  450
  464
  480
  497
  515
  518
  539
  560
  584
  608
  635
  662
  692
  723
  755
  790
  826
  864
  905
  947
  991
  1,038
  1,088
  1,140
  1,195
Operating income, $m
  18
  18
  18
  19
  20
  22
  23
  25
  26
  28
  30
  49
  52
  54
  57
  60
  63
  66
  69
  73
  77
  81
  86
  90
  95
  100
  106
  112
  118
  124
  131
EBITDA, $m
  37
  43
  44
  45
  46
  48
  49
  51
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
  93
  98
  103
  109
  114
  120
  127
  134
  141
  148
  156
Interest expense (income), $m
  2
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  17
Earnings before tax, $m
  15
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  71
  75
  79
  83
  87
  92
  97
  102
  108
  113
Tax expense, $m
  5
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
Net income, $m
  10
  11
  11
  12
  12
  13
  14
  15
  16
  17
  18
  32
  33
  35
  37
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
  71
  74
  79
  83

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  19
  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
  469
  459
  469
  482
  495
  510
  527
  544
  564
  585
  607
  631
  657
  684
  713
  744
  776
  811
  847
  886
  927
  970
  1,015
  1,063
  1,113
  1,166
  1,222
  1,281
  1,342
  1,407
  1,476
Adjusted assets (=assets-cash), $m
  450
  459
  469
  482
  495
  510
  527
  544
  564
  585
  607
  631
  657
  684
  713
  744
  776
  811
  847
  886
  927
  970
  1,015
  1,063
  1,113
  1,166
  1,222
  1,281
  1,342
  1,407
  1,476
Revenue / Adjusted assets
  0.898
  0.898
  0.900
  0.896
  0.899
  0.898
  0.898
  0.899
  0.897
  0.897
  0.898
  0.899
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
  0.897
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
  0.898
Average production assets, $m
  118
  120
  123
  126
  129
  133
  138
  142
  147
  153
  159
  165
  172
  179
  186
  194
  203
  212
  221
  232
  242
  253
  265
  278
  291
  305
  319
  335
  351
  368
  386
Working capital, $m
  105
  96
  98
  101
  104
  107
  110
  114
  118
  122
  127
  132
  137
  143
  149
  156
  162
  170
  177
  185
  194
  203
  212
  222
  233
  244
  256
  268
  281
  294
  309
Total debt, $m
  103
  99
  103
  108
  114
  120
  127
  135
  143
  152
  161
  171
  182
  194
  206
  219
  233
  247
  263
  279
  296
  314
  333
  353
  375
  397
  421
  445
  471
  499
  528
Total liabilities, $m
  199
  194
  198
  203
  209
  215
  222
  230
  238
  247
  256
  266
  277
  289
  301
  314
  328
  342
  358
  374
  391
  409
  428
  448
  470
  492
  516
  540
  566
  594
  623
Total equity, $m
  271
  265
  271
  278
  286
  295
  304
  315
  326
  338
  351
  365
  380
  395
  412
  430
  449
  469
  490
  512
  536
  560
  587
  614
  643
  674
  706
  740
  776
  813
  853
Total liabilities and equity, $m
  470
  459
  469
  481
  495
  510
  526
  545
  564
  585
  607
  631
  657
  684
  713
  744
  777
  811
  848
  886
  927
  969
  1,015
  1,062
  1,113
  1,166
  1,222
  1,280
  1,342
  1,407
  1,476
Debt-to-equity ratio
  0.380
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.540
  0.550
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.600
  0.610
  0.610
  0.620
Adjusted equity ratio
  0.560
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  11
  11
  12
  12
  13
  14
  15
  16
  17
  18
  32
  33
  35
  37
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
  71
  74
  79
  83
Depreciation, amort., depletion, $m
  19
  25
  25
  25
  26
  26
  26
  26
  27
  27
  28
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
Funds from operations, $m
  26
  35
  36
  37
  38
  39
  40
  41
  43
  44
  46
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
Change in working capital, $m
  -4
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
Cash from operations, $m
  30
  34
  34
  34
  35
  36
  36
  37
  38
  40
  41
  38
  39
  41
  43
  45
  47
  49
  51
  54
  57
  59
  63
  66
  69
  73
  77
  81
  85
  89
  94
Maintenance CAPEX, $m
  0
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
New CAPEX, $m
  -10
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
Cash from investing activities, $m
  -17
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
Free cash flow, $m
  13
  23
  23
  23
  23
  23
  23
  24
  24
  24
  25
  21
  22
  23
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  52
Issuance/(repayment) of debt, $m
  -2
  4
  4
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
Issuance/(repurchase) of shares, $m
  -8
  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  
  -13
  4
  4
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
Total cash flow (excl. dividends), $m
  -2
  27
  28
  28
  29
  29
  30
  31
  32
  33
  34
  31
  33
  34
  36
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  73
  76
  81
Retained Cash Flow (-), $m
  5
  -5
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
Prev. year cash balance distribution, $m
 
  11
  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
 
  33
  22
  21
  21
  21
  21
  21
  21
  21
  21
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  39
  41
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  31
  19
  18
  17
  15
  14
  13
  12
  11
  10
  7
  7
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  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

Mistras Group, Inc. offers asset protection solutions and is a provider of technology-enabled asset protection solutions used to evaluate the structural integrity and reliability of critical energy, industrial and public infrastructure. The Company's segments are Services segment, which provides asset protection solutions in North America with concentration on the United States along with a Canadian services business, consisting of non-destructive testing, and inspection and engineering services that are used to evaluate structural integrity and reliability of critical energy, industrial and public infrastructure; International segment, which offers services, products and systems similar to those of its Services and Products and Systems segments to markets in Europe, the Middle East, Africa, Asia and South America, and Products and Systems segment, which designs, manufactures, sells, installs and services asset protection products and systems, including equipment and instrumentation.

FINANCIAL RATIOS  of  Mistras Group (MG)

Valuation Ratios
P/E Ratio 64.1
Price to Sales 1.6
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 21.4
Price to Free Cash Flow 32
Growth Rates
Sales Growth Rate -43.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -37.5%
Cap. Spend. - 3 Yr. Gr. Rate -11.1%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 35.1%
Total Debt to Equity 38%
Interest Coverage 9
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 2.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 3.7%
Return On Equity - 3 Yr. Avg. 6.6%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 29%
Gross Margin - 3 Yr. Avg. 27.7%
EBITDA Margin 8.9%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 4.2%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. 2.7%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.3%
Payout Ratio 0%

MG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MG stock intrinsic value calculation we used $404 million for the last fiscal year's total revenue generated by Mistras Group. The default revenue input number comes from 2016 income statement of Mistras Group. 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 MG 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 5%, whose default value for MG is calculated based on our internal credit rating of Mistras Group, 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 Mistras Group.
    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 MG stock the variable cost ratio is equal to 91.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $16 million in the base year in the intrinsic value calculation for MG 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 3.5% for Mistras Group.

Corporate tax rate of 27% is the nominal tax rate for Mistras Group. 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 MG 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 MG are equal to 29.1%.

Life of production assets of 15.1 years is the average useful life of capital assets used in Mistras Group 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 MG is equal to 23.3%. 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 - $271 million for Mistras Group - 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 28.251 million for Mistras Group 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 Mistras Group at the current share price and the inputted number of shares is $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
TISI Team 13.80 12.94  hold
GE General Electr 17.91 23.56  hold
IBM International 156.74 173.22  hold
SO Southern 51.19 132.67  str.buy
EXPO Exponent 71.90 54.86  sell
TRMB Trimble 40.80 17.76  str.sell

COMPANY NEWS

▶ Auto-Parts Suppliers Fear End of Nafta   [Nov-09-17 05:33PM  Bloomberg Video]
▶ Mistras Group Waits Patiently for Energy to Recover   [Nov-06-17 05:58PM  Motley Fool]
▶ Mistras reports 3Q loss   [04:11PM  Associated Press]
▶ Mistras posts 2Q profit   [Aug-09-17 10:59PM  Associated Press]
▶ Mistras Group Announces Second Quarter Results   [Aug-08-17 04:01PM  GlobeNewswire]
▶ MISTRAS Group Announces Changes in Leadership   [Aug-07-17 04:01PM  GlobeNewswire]
▶ Mistras Group Is Still Fighting Low Oil Prices   [Jun-07-17 06:08PM  Motley Fool]
▶ Mistras posts 1Q profit   [May-08-17 05:19PM  Associated Press]
▶ Pressure on Mistras Group Refuses to Let Up   [Mar-29-17 08:23AM  Motley Fool]
▶ Pressure on Mistras Group Refuses to Let Up   [08:23AM  at Motley Fool]
▶ New Strong Sell Stocks for March 27th   [Mar-27-17 11:46AM  Zacks]
▶ New Strong Sell Stocks for March 21st   [Mar-21-17 09:42AM  Zacks]
▶ Mistras Group Again Faces Challenges   [Jan-05-17 11:31AM  at Motley Fool]
▶ Should You Buy Mistras Group Inc (MG)?   [Dec-14-16 08:51AM  at Insider Monkey]
▶ Mistras Group Predicts Tougher Times Ahead   [01:43PM  at Motley Fool]
Financial statements of MG
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.