Intrinsic value of Mistras Group - MG

Previous Close

$21.27

  Intrinsic Value

$15.87

stock screener

  Rating & Target

sell

-25%

Previous close

$21.27

 
Intrinsic value

$15.87

 
Up/down potential

-25%

 
Rating

sell

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 2017), $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
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  715
  731
  750
  771
  795
  820
  848
  879
  911
  946
  984
  1,023
  1,066
  1,111
  1,159
  1,210
  1,264
  1,321
  1,381
  1,444
  1,511
  1,582
  1,656
  1,734
  1,817
  1,904
  1,995
  2,092
  2,193
  2,299
Variable operating expenses, $m
  672
  686
  703
  722
  743
  767
  792
  819
  849
  880
  887
  923
  961
  1,002
  1,045
  1,091
  1,140
  1,191
  1,245
  1,302
  1,363
  1,426
  1,494
  1,564
  1,639
  1,717
  1,800
  1,886
  1,978
  2,074
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
  672
  686
  703
  722
  743
  767
  792
  819
  849
  880
  887
  923
  961
  1,002
  1,045
  1,091
  1,140
  1,191
  1,245
  1,302
  1,363
  1,426
  1,494
  1,564
  1,639
  1,717
  1,800
  1,886
  1,978
  2,074
Operating income, $m
  43
  45
  47
  49
  51
  54
  57
  59
  63
  66
  96
  100
  105
  109
  114
  119
  124
  130
  135
  142
  148
  155
  162
  170
  178
  187
  196
  205
  215
  226
EBITDA, $m
  103
  105
  108
  111
  115
  118
  122
  127
  131
  136
  142
  148
  154
  160
  167
  174
  182
  190
  199
  208
  218
  228
  239
  250
  262
  275
  288
  302
  316
  332
Interest expense (income), $m
  2
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
Earnings before tax, $m
  34
  35
  36
  38
  40
  42
  44
  46
  49
  52
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  128
  133
  139
  146
  153
  160
  167
  175
  183
Tax expense, $m
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  49
Net income, $m
  25
  25
  27
  28
  29
  31
  32
  34
  36
  38
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  106
  111
  116
  122
  128
  134

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
  566
  579
  594
  610
  629
  649
  671
  695
  721
  749
  778
  810
  843
  879
  917
  957
  1,000
  1,045
  1,092
  1,142
  1,195
  1,251
  1,310
  1,372
  1,437
  1,506
  1,579
  1,655
  1,735
  1,819
Adjusted assets (=assets-cash), $m
  566
  579
  594
  610
  629
  649
  671
  695
  721
  749
  778
  810
  843
  879
  917
  957
  1,000
  1,045
  1,092
  1,142
  1,195
  1,251
  1,310
  1,372
  1,437
  1,506
  1,579
  1,655
  1,735
  1,819
Revenue / Adjusted assets
  1.263
  1.263
  1.263
  1.264
  1.264
  1.263
  1.264
  1.265
  1.264
  1.263
  1.265
  1.263
  1.265
  1.264
  1.264
  1.264
  1.264
  1.264
  1.265
  1.264
  1.264
  1.265
  1.264
  1.264
  1.264
  1.264
  1.263
  1.264
  1.264
  1.264
Average production assets, $m
  330
  337
  346
  356
  366
  378
  391
  405
  420
  436
  453
  472
  491
  512
  534
  558
  583
  609
  636
  666
  697
  729
  763
  800
  838
  878
  920
  964
  1,011
  1,060
Working capital, $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 debt, $m
  188
  194
  202
  211
  220
  230
  242
  254
  267
  281
  296
  313
  330
  348
  368
  388
  410
  433
  457
  483
  510
  539
  569
  601
  634
  669
  706
  745
  786
  829
Total liabilities, $m
  290
  296
  304
  312
  322
  332
  344
  356
  369
  383
  398
  415
  432
  450
  470
  490
  512
  535
  559
  585
  612
  641
  671
  703
  736
  771
  808
  847
  888
  931
Total equity, $m
  276
  282
  290
  298
  307
  317
  328
  339
  352
  365
  380
  395
  412
  429
  447
  467
  488
  510
  533
  558
  583
  611
  639
  670
  701
  735
  770
  808
  847
  888
Total liabilities and equity, $m
  566
  578
  594
  610
  629
  649
  672
  695
  721
  748
  778
  810
  844
  879
  917
  957
  1,000
  1,045
  1,092
  1,143
  1,195
  1,252
  1,310
  1,373
  1,437
  1,506
  1,578
  1,655
  1,735
  1,819
Debt-to-equity ratio
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  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
  0.900
  0.900
  0.910
  0.920
  0.920
  0.930
  0.930
Adjusted equity ratio
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488
  0.488

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  25
  27
  28
  29
  31
  32
  34
  36
  38
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  106
  111
  116
  122
  128
  134
Depreciation, amort., depletion, $m
  60
  60
  61
  62
  63
  65
  66
  67
  69
  70
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
Funds from operations, $m
  84
  86
  88
  90
  92
  95
  98
  101
  104
  108
  105
  109
  113
  118
  123
  128
  133
  139
  145
  152
  159
  166
  174
  182
  190
  199
  208
  218
  229
  240
Change in working capital, $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 operations, $m
  84
  86
  88
  90
  92
  95
  98
  101
  104
  108
  105
  109
  113
  118
  123
  128
  133
  139
  145
  152
  159
  166
  174
  182
  190
  199
  208
  218
  229
  240
Maintenance CAPEX, $m
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -39
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
New CAPEX, $m
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
Cash from investing activities, $m
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -67
  -70
  -73
  -76
  -81
  -84
  -89
  -93
  -98
  -103
  -107
  -112
  -118
  -124
  -130
  -136
  -143
  -150
Free cash flow, $m
  45
  45
  45
  46
  46
  47
  47
  48
  49
  50
  44
  45
  46
  48
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  89
Issuance/(repayment) of debt, $m
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
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  
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
Total cash flow (excl. dividends), $m
  51
  52
  53
  54
  56
  57
  59
  60
  62
  64
  59
  61
  64
  66
  69
  72
  75
  78
  81
  85
  88
  92
  97
  101
  106
  110
  116
  121
  127
  133
Retained Cash Flow (-), $m
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
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
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Cash available for distribution, $m
  46
  46
  46
  46
  47
  47
  48
  49
  50
  51
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  91
Discount rate, %
  5.50
  5.78
  6.06
  6.37
  6.69
  7.02
  7.37
  7.74
  8.13
  8.53
  8.96
  9.41
  9.88
  10.37
  10.89
  11.43
  12.01
  12.61
  13.24
  13.90
  14.59
  15.32
  16.09
  16.89
  17.74
  18.62
  19.56
  20.53
  21.56
  22.64
PV of cash for distribution, $m
  44
  41
  38
  36
  34
  31
  29
  27
  25
  22
  17
  16
  14
  12
  11
  9
  8
  7
  5
  4
  4
  3
  2
  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
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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 61.3
Price to Sales 1.5
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 20.4
Price to Free Cash Flow 30.6
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 $701 million for the last fiscal year's total revenue generated by Mistras Group. The default revenue input number comes from 2017 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 5.5%, 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 94%.

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 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 5.4% 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 0.9%.

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 46.1%.

Life of production assets of 10 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 0%. 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 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.

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COMPANY NEWS

▶ New Strong Sell Stocks for July 2nd   [Jul-02-18 10:22AM  Zacks]
▶ Magna CEO Says Nafta Region Needs to Be Competitive With Asia   [May-11-18 02:21PM  Bloomberg Video]
▶ Here's How Mistras Group Can Turn Itself Around   [May-08-18 09:21AM  Motley Fool]
▶ Mistras: 1Q Earnings Snapshot   [May-07-18 04:49PM  Associated Press]
▶ Mistras Group Gives Mixed Results   [Mar-12-18 06:26PM  Motley Fool]
▶ Mistras posts 4Q profit   [04:21PM  Associated Press]
▶ Are Mistras Group Incs (NYSE:MG) Interest Costs Too High?   [Dec-25-17 10:25AM  Simply Wall St.]
▶ 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]
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