Intrinsic value of MGP Ingredients, Inc. - MGPI

Previous Close

$77.24

  Intrinsic Value

$49.48

stock screener

  Rating & Target

sell

-36%

Previous close

$77.24

 
Intrinsic value

$49.48

 
Up/down potential

-36%

 
Rating

sell

We calculate the intrinsic value of MGPI 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 1.3

 

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, %
  18.90
  17.51
  16.26
  15.13
  14.12
  13.21
  12.39
  11.65
  10.98
  10.39
  9.85
  9.36
  8.93
  8.53
  8.18
  7.86
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
Revenue, $m
  447
  525
  611
  703
  802
  908
  1,021
  1,140
  1,265
  1,397
  1,534
  1,678
  1,827
  1,983
  2,146
  2,314
  2,490
  2,672
  2,861
  3,058
  3,262
  3,475
  3,696
  3,927
  4,167
  4,417
  4,677
  4,949
  5,232
  5,528
Variable operating expenses, $m
  335
  394
  458
  527
  602
  681
  766
  855
  949
  1,047
  1,151
  1,258
  1,371
  1,487
  1,609
  1,736
  1,867
  2,004
  2,146
  2,293
  2,447
  2,606
  2,772
  2,945
  3,125
  3,312
  3,508
  3,712
  3,924
  4,146
Fixed operating expenses, $m
  47
  48
  49
  50
  51
  52
  54
  55
  56
  57
  58
  60
  61
  62
  64
  65
  67
  68
  70
  71
  73
  74
  76
  78
  79
  81
  83
  85
  86
  88
Total operating expenses, $m
  382
  442
  507
  577
  653
  733
  820
  910
  1,005
  1,104
  1,209
  1,318
  1,432
  1,549
  1,673
  1,801
  1,934
  2,072
  2,216
  2,364
  2,520
  2,680
  2,848
  3,023
  3,204
  3,393
  3,591
  3,797
  4,010
  4,234
Operating income, $m
  65
  83
  104
  126
  149
  175
  202
  230
  260
  292
  325
  360
  396
  433
  473
  513
  556
  600
  646
  693
  743
  795
  848
  904
  962
  1,023
  1,087
  1,153
  1,222
  1,294
EBITDA, $m
  78
  99
  122
  147
  173
  202
  232
  265
  298
  334
  371
  410
  451
  493
  537
  583
  631
  680
  732
  785
  841
  899
  960
  1,022
  1,088
  1,156
  1,227
  1,302
  1,379
  1,460
Interest expense (income), $m
  1
  2
  3
  3
  4
  5
  6
  8
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
Earnings before tax, $m
  63
  81
  100
  121
  144
  168
  194
  221
  250
  280
  312
  345
  380
  416
  453
  492
  533
  575
  619
  664
  712
  761
  812
  866
  922
  980
  1,040
  1,104
  1,170
  1,239
Tax expense, $m
  17
  22
  27
  33
  39
  45
  52
  60
  68
  76
  84
  93
  103
  112
  122
  133
  144
  155
  167
  179
  192
  206
  219
  234
  249
  265
  281
  298
  316
  334
Net income, $m
  46
  59
  73
  89
  105
  123
  142
  162
  183
  205
  228
  252
  277
  304
  331
  359
  389
  420
  452
  485
  520
  556
  593
  632
  673
  715
  760
  806
  854
  904

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
  330
  388
  451
  520
  593
  671
  755
  843
  935
  1,032
  1,134
  1,240
  1,351
  1,466
  1,586
  1,710
  1,840
  1,975
  2,115
  2,260
  2,411
  2,568
  2,732
  2,902
  3,080
  3,264
  3,457
  3,658
  3,867
  4,086
Adjusted assets (=assets-cash), $m
  330
  388
  451
  520
  593
  671
  755
  843
  935
  1,032
  1,134
  1,240
  1,351
  1,466
  1,586
  1,710
  1,840
  1,975
  2,115
  2,260
  2,411
  2,568
  2,732
  2,902
  3,080
  3,264
  3,457
  3,658
  3,867
  4,086
Revenue / Adjusted assets
  1.355
  1.353
  1.355
  1.352
  1.352
  1.353
  1.352
  1.352
  1.353
  1.354
  1.353
  1.353
  1.352
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
  1.353
Average production assets, $m
  133
  157
  182
  210
  239
  271
  304
  340
  377
  416
  457
  500
  545
  591
  639
  690
  742
  796
  853
  911
  972
  1,036
  1,102
  1,170
  1,242
  1,316
  1,394
  1,475
  1,559
  1,647
Working capital, $m
  134
  157
  183
  210
  240
  272
  305
  341
  378
  418
  459
  502
  546
  593
  642
  692
  744
  799
  855
  914
  975
  1,039
  1,105
  1,174
  1,246
  1,321
  1,398
  1,480
  1,564
  1,653
Total debt, $m
  46
  62
  80
  98
  119
  140
  163
  187
  213
  239
  267
  297
  327
  359
  392
  426
  462
  499
  537
  577
  619
  662
  707
  754
  802
  853
  906
  961
  1,019
  1,079
Total liabilities, $m
  91
  107
  124
  143
  163
  185
  208
  232
  257
  284
  312
  341
  371
  403
  436
  470
  506
  543
  582
  622
  663
  706
  751
  798
  847
  898
  951
  1,006
  1,063
  1,124
Total equity, $m
  240
  282
  327
  377
  430
  487
  547
  611
  678
  748
  822
  899
  979
  1,063
  1,150
  1,240
  1,334
  1,432
  1,533
  1,639
  1,748
  1,862
  1,981
  2,104
  2,233
  2,367
  2,506
  2,652
  2,804
  2,962
Total liabilities and equity, $m
  331
  389
  451
  520
  593
  672
  755
  843
  935
  1,032
  1,134
  1,240
  1,350
  1,466
  1,586
  1,710
  1,840
  1,975
  2,115
  2,261
  2,411
  2,568
  2,732
  2,902
  3,080
  3,265
  3,457
  3,658
  3,867
  4,086
Debt-to-equity ratio
  0.190
  0.220
  0.240
  0.260
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.350
  0.350
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
  0.360
Adjusted equity ratio
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725
  0.725

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  46
  59
  73
  89
  105
  123
  142
  162
  183
  205
  228
  252
  277
  304
  331
  359
  389
  420
  452
  485
  520
  556
  593
  632
  673
  715
  760
  806
  854
  904
Depreciation, amort., depletion, $m
  13
  16
  18
  21
  24
  27
  31
  34
  38
  42
  46
  50
  55
  60
  65
  70
  75
  80
  86
  92
  98
  105
  111
  118
  125
  133
  141
  149
  157
  166
Funds from operations, $m
  59
  75
  92
  110
  129
  150
  172
  196
  221
  247
  274
  303
  332
  363
  395
  429
  464
  500
  538
  577
  618
  660
  704
  750
  798
  848
  900
  955
  1,011
  1,071
Change in working capital, $m
  21
  23
  26
  28
  30
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
  50
  52
  54
  57
  59
  61
  64
  66
  69
  72
  75
  78
  81
  85
  88
Cash from operations, $m
  38
  51
  66
  82
  100
  119
  139
  160
  183
  207
  233
  260
  287
  317
  347
  379
  411
  446
  481
  518
  557
  597
  638
  681
  727
  773
  822
  873
  927
  982
Maintenance CAPEX, $m
  -11
  -13
  -16
  -18
  -21
  -24
  -27
  -31
  -34
  -38
  -42
  -46
  -50
  -55
  -60
  -65
  -70
  -75
  -80
  -86
  -92
  -98
  -105
  -111
  -118
  -125
  -133
  -141
  -149
  -157
New CAPEX, $m
  -21
  -23
  -25
  -28
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -78
  -81
  -84
  -88
Cash from investing activities, $m
  -32
  -36
  -41
  -46
  -51
  -56
  -61
  -66
  -71
  -77
  -83
  -89
  -95
  -101
  -108
  -115
  -122
  -129
  -136
  -145
  -153
  -161
  -171
  -180
  -189
  -199
  -211
  -222
  -233
  -245
Free cash flow, $m
  6
  15
  25
  36
  49
  63
  78
  94
  112
  130
  150
  171
  192
  215
  239
  264
  290
  316
  344
  373
  404
  435
  468
  502
  537
  574
  612
  652
  693
  736
Issuance/(repayment) of debt, $m
  14
  16
  17
  19
  20
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
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  
  14
  16
  17
  19
  20
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
Total cash flow (excl. dividends), $m
  20
  31
  42
  55
  69
  84
  101
  118
  137
  157
  178
  200
  223
  247
  272
  298
  325
  353
  383
  413
  445
  478
  513
  548
  586
  624
  665
  707
  751
  797
Retained Cash Flow (-), $m
  -38
  -42
  -46
  -50
  -53
  -57
  -60
  -64
  -67
  -70
  -74
  -77
  -80
  -84
  -87
  -90
  -94
  -98
  -101
  -105
  -110
  -114
  -119
  -123
  -129
  -134
  -140
  -146
  -152
  -159
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
  -18
  -11
  -4
  5
  16
  28
  40
  55
  70
  87
  104
  123
  143
  163
  185
  208
  231
  256
  281
  308
  336
  364
  394
  425
  457
  490
  525
  561
  599
  638
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -17
  -10
  -3
  4
  12
  20
  27
  34
  40
  45
  49
  52
  54
  55
  54
  53
  50
  47
  43
  39
  35
  30
  26
  22
  18
  14
  11
  9
  7
  5
Current shareholders' claim on cash, %
  100.0
  100.0
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  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

MGP Ingredients, Inc. is a producer and supplier of distilled spirits, and specialty wheat protein and starch food ingredients. The Company's distilled spirits include bourbon and rye whiskeys, and grain neutral spirits, including vodka and gin. The Company's segments include distillery products and ingredient solutions. The distillery products segment consists of food grade alcohol and distillery co-products, such as distillers feed and fuel grade alcohol. The ingredient solutions segment consists of specialty starches and proteins, commodity starches and commodity proteins. The distillery products segment also includes warehouse services, including barrel put away, barrel storage, and barrel retrieval services. It is also a producer of industrial alcohol for use in both food and non-food applications. The Company's distillery products are derived from corn and other grains (including rye, barley, wheat, barley malt and milo), and its ingredient products are derived from wheat flour.

FINANCIAL RATIOS  of  MGP Ingredients, Inc. (MGPI)

Valuation Ratios
P/E Ratio 41.5
Price to Sales 4
Price to Book 8.8
Price to Tangible Book
Price to Cash Flow 64.3
Price to Free Cash Flow 643.4
Growth Rates
Sales Growth Rate -3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -41.9%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 21.9%
Total Debt to Equity 24.7%
Interest Coverage 46
Management Effectiveness
Return On Assets 15.1%
Ret/ On Assets - 3 Yr. Avg. 15.4%
Return On Total Capital 18.7%
Ret/ On T. Cap. - 3 Yr. Avg. 20.1%
Return On Equity 23.7%
Return On Equity - 3 Yr. Avg. 24.4%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 20.4%
Gross Margin - 3 Yr. Avg. 15.8%
EBITDA Margin 17.9%
EBITDA Margin - 3 Yr. Avg. 15.3%
Operating Margin 13.2%
Oper. Margin - 3 Yr. Avg. 9.5%
Pre-Tax Margin 14.2%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 9.7%
Net Profit Margin - 3 Yr. Avg. 8.4%
Effective Tax Rate 31.1%
Eff/ Tax Rate - 3 Yr. Avg. 23.5%
Payout Ratio 6.5%

MGPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MGPI stock intrinsic value calculation we used $376 million for the last fiscal year's total revenue generated by MGP Ingredients, Inc.. The default revenue input number comes from 0001 income statement of MGP Ingredients, Inc.. 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 MGPI stock valuation model: a) initial revenue growth rate of 18.9% 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 4.3%, whose default value for MGPI is calculated based on our internal credit rating of MGP Ingredients, Inc., 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 MGP Ingredients, Inc..
    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 MGPI stock the variable cost ratio is equal to 75%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $46 million in the base year in the intrinsic value calculation for MGPI 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 MGP Ingredients, Inc..

Corporate tax rate of 27% is the nominal tax rate for MGP Ingredients, Inc.. 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 MGPI 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 MGPI are equal to 29.8%.

Life of production assets of 9.9 years is the average useful life of capital assets used in MGP Ingredients, Inc. 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 MGPI is equal to 29.9%. 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 - $201.441 million for MGP Ingredients, Inc. - 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 16.909 million for MGP Ingredients, Inc. 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 MGP Ingredients, Inc. at the current share price and the inputted number of shares is $1.3 billion.

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