Intrinsic value of MGP Ingredients - MGPI

Previous Close

$69.77

  Intrinsic Value

$19.41

stock screener

  Rating & Target

str. sell

-72%

Previous close

$69.77

 
Intrinsic value

$19.41

 
Up/down potential

-72%

 
Rating

str. 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 1.2

 

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, %
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  358
  369
  381
  394
  408
  424
  440
  458
  476
  496
  518
  540
  564
  589
  616
  644
  673
  705
  738
  773
  809
  848
  888
  931
  976
  1,024
  1,073
  1,126
  1,181
  1,239
Variable operating expenses, $m
  310
  320
  330
  342
  354
  367
  382
  397
  413
  430
  449
  468
  489
  511
  534
  558
  584
  611
  640
  670
  702
  735
  770
  807
  846
  887
  931
  976
  1,024
  1,074
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
  310
  320
  330
  342
  354
  367
  382
  397
  413
  430
  449
  468
  489
  511
  534
  558
  584
  611
  640
  670
  702
  735
  770
  807
  846
  887
  931
  976
  1,024
  1,074
Operating income, $m
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
  157
  165
EBITDA, $m
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  140
  147
  154
  161
  169
  178
  186
  195
  205
Interest expense (income), $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
Earnings before tax, $m
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  106
  111
  116
  122
  128
  134
  140
  147
  154
Tax expense, $m
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
Net income, $m
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113

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
  248
  255
  264
  273
  283
  293
  305
  317
  330
  344
  358
  374
  390
  408
  426
  446
  466
  488
  511
  535
  560
  587
  615
  645
  676
  709
  743
  780
  818
  858
Adjusted assets (=assets-cash), $m
  248
  255
  264
  273
  283
  293
  305
  317
  330
  344
  358
  374
  390
  408
  426
  446
  466
  488
  511
  535
  560
  587
  615
  645
  676
  709
  743
  780
  818
  858
Revenue / Adjusted assets
  1.444
  1.447
  1.443
  1.443
  1.442
  1.447
  1.443
  1.445
  1.442
  1.442
  1.447
  1.444
  1.446
  1.444
  1.446
  1.444
  1.444
  1.445
  1.444
  1.445
  1.445
  1.445
  1.444
  1.443
  1.444
  1.444
  1.444
  1.444
  1.444
  1.444
Average production assets, $m
  101
  104
  107
  111
  115
  119
  124
  129
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  208
  218
  228
  239
  251
  263
  275
  289
  303
  317
  333
  349
Working capital, $m
  93
  96
  99
  103
  107
  111
  115
  119
  124
  130
  135
  141
  147
  154
  161
  168
  176
  184
  193
  202
  211
  221
  232
  243
  255
  267
  280
  294
  308
  323
Total debt, $m
  27
  29
  32
  34
  37
  40
  44
  47
  51
  55
  60
  64
  69
  75
  80
  86
  92
  98
  105
  112
  120
  128
  136
  145
  154
  164
  174
  185
  197
  209
Total liabilities, $m
  74
  76
  79
  81
  84
  87
  91
  94
  98
  102
  107
  111
  116
  122
  127
  133
  139
  145
  152
  159
  167
  175
  183
  192
  201
  211
  222
  232
  244
  256
Total equity, $m
  174
  179
  185
  192
  198
  206
  214
  222
  232
  241
  252
  263
  274
  286
  299
  313
  327
  343
  359
  376
  393
  412
  432
  453
  475
  498
  522
  547
  574
  602
Total liabilities and equity, $m
  248
  255
  264
  273
  282
  293
  305
  316
  330
  343
  359
  374
  390
  408
  426
  446
  466
  488
  511
  535
  560
  587
  615
  645
  676
  709
  744
  779
  818
  858
Debt-to-equity ratio
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.340
  0.340
  0.350
Adjusted equity ratio
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113
Depreciation, amort., depletion, $m
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
  38
  40
Funds from operations, $m
  45
  47
  48
  50
  52
  53
  55
  58
  60
  62
  65
  68
  70
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  121
  126
  133
  139
  146
  153
Change in working capital, $m
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Cash from operations, $m
  43
  44
  45
  46
  48
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  120
  125
  131
  138
Maintenance CAPEX, $m
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
New CAPEX, $m
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
Cash from investing activities, $m
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -19
  -20
  -21
  -22
  -23
  -25
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -41
  -43
  -45
  -47
  -50
  -52
  -54
Free cash flow, $m
  29
  29
  30
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
Issuance/(repayment) of debt, $m
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
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  
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Total cash flow (excl. dividends), $m
  31
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  86
  91
  95
Retained Cash Flow (-), $m
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
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
  26
  26
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  33
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
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
  25
  24
  23
  22
  21
  20
  19
  18
  17
  16
  15
  14
  13
  12
  11
  9
  8
  7
  6
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
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

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 (MGPI)

Valuation Ratios
P/E Ratio 37.5
Price to Sales 3.7
Price to Book 8
Price to Tangible Book
Price to Cash Flow 58.1
Price to Free Cash Flow 581.2
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 $347.448 million for the last fiscal year's total revenue generated by MGP Ingredients. The default revenue input number comes from 0001 income statement of MGP Ingredients. 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 2.9% 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, 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.
    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 86.7%.

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 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.

Corporate tax rate of 27% is the nominal tax rate for MGP Ingredients. 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 28.2%.

Life of production assets of 8.7 years is the average useful life of capital assets used in MGP Ingredients 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 26.1%. 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 - $168.73 million for MGP Ingredients - 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 16.848 million for MGP Ingredients 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 at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ MGP: 3Q Earnings Snapshot   [Nov-01-18 08:02AM  Associated Press]
▶ Local EY Entrepreneur of the Year winners share insight on driving success   [Oct-03-18 04:09PM  American City Business Journals]
▶ 3 Stocks That Turned $3,000 Into $17,000 in 5 Years   [Aug-27-18 08:31AM  Motley Fool]
▶ Here are the KC stocks driving Wall Street's bull run   [Aug-24-18 09:39AM  American City Business Journals]
▶ 15 Colorado companies reaping the benefits of Wall Street's latest bull run   [Aug-23-18 09:00AM  American City Business Journals]
▶ MGP: 2Q Earnings Snapshot   [Aug-02-18 11:57AM  Associated Press]
▶ A heartfelt gift: KU Health System gets $2M from former MGP chairman   [Jul-03-18 02:50PM  American City Business Journals]
▶ Jenell Loschke Joins MGP Corporate Communications Team   [Jun-26-18 07:00AM  GlobeNewswire]
▶ MGP Ingredients to Webcast Analyst Day on June 7   [May-31-18 04:15PM  GlobeNewswire]
▶ MGP to Webcast Annual Meeting on May 23   [May-16-18 04:34PM  GlobeNewswire]
▶ MGP Ingredients launches its first proprietary rye whiskey   [May-11-18 01:50PM  American City Business Journals]
▶ MGP: 1Q Earnings Snapshot   [May-02-18 09:15AM  Associated Press]
▶ Why Lands' End, Omeros, and MGP Ingredients Jumped Today   [Mar-22-18 04:31PM  Motley Fool]
▶ MGP tops Street 4Q forecasts   [10:10AM  Associated Press]
▶ MGP Ingredients Declares $0.08 Quarterly Dividend   [Feb-22-18 08:30AM  GlobeNewswire]
▶ 3 Stocks That Could Double in the Next Decade   [Jan-05-18 06:02AM  Motley Fool]
▶ 3 Stocks Set to Drop   [Dec-04-17 11:42AM  Motley Fool]
▶ Cramer Remix: Bitcoin has taken away the luster of gold   [Dec-01-17 07:12PM  CNBC Videos]
▶ MGP posts 3Q profit   [Nov-02-17 10:15AM  Associated Press]
▶ 3 Signs You Should Sell This 17-Bagger Stock   [Oct-21-17 09:12AM  Motley Fool]
▶ Should You Sell MGP Ingredients Inc (MGPI) At $60.63?   [Oct-02-17 12:32PM  Simply Wall St.]
▶ 2 Stocks You'll Brag About Owning Someday   [Sep-30-17 03:30PM  Motley Fool]
▶ MGP posts 2Q profit   [03:48PM  Associated Press]
▶ MGP Declares $0.85 Special Dividend   [Aug-02-17 07:30AM  GlobeNewswire]

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