Intrinsic value of Mueller Industries, Inc. - MLI

Previous Close

$30.71

  Intrinsic Value

$26.97

stock screener

  Rating & Target

hold

-12%

Previous close

$30.71

 
Intrinsic value

$26.97

 
Up/down potential

-12%

 
Rating

hold

We calculate the intrinsic value of MLI 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 1.7

 

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, %
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  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
  5.10
  5.09
  5.08
Revenue, $m
  2,679
  2,856
  3,040
  3,232
  3,432
  3,640
  3,857
  4,083
  4,319
  4,565
  4,822
  5,090
  5,370
  5,663
  5,970
  6,291
  6,626
  6,977
  7,345
  7,730
  8,134
  8,556
  8,999
  9,463
  9,950
  10,461
  10,996
  11,557
  12,146
  12,763
Variable operating expenses, $m
  2,431
  2,590
  2,756
  2,929
  3,108
  3,296
  3,491
  3,694
  3,906
  4,127
  4,337
  4,579
  4,831
  5,095
  5,370
  5,659
  5,960
  6,276
  6,607
  6,954
  7,316
  7,697
  8,095
  8,513
  8,951
  9,410
  9,891
  10,396
  10,926
  11,481
Fixed operating expenses, $m
  60
  62
  63
  64
  66
  67
  69
  70
  72
  73
  75
  77
  78
  80
  82
  84
  85
  87
  89
  91
  93
  95
  97
  99
  102
  104
  106
  109
  111
  113
Total operating expenses, $m
  2,491
  2,652
  2,819
  2,993
  3,174
  3,363
  3,560
  3,764
  3,978
  4,200
  4,412
  4,656
  4,909
  5,175
  5,452
  5,743
  6,045
  6,363
  6,696
  7,045
  7,409
  7,792
  8,192
  8,612
  9,053
  9,514
  9,997
  10,505
  11,037
  11,594
Operating income, $m
  188
  204
  221
  239
  258
  277
  298
  319
  341
  364
  409
  435
  461
  489
  518
  548
  580
  614
  649
  685
  724
  764
  807
  851
  898
  947
  998
  1,052
  1,109
  1,169
EBITDA, $m
  243
  262
  282
  302
  323
  345
  369
  393
  418
  444
  472
  500
  531
  562
  595
  630
  666
  704
  743
  785
  829
  875
  923
  973
  1,026
  1,082
  1,140
  1,202
  1,266
  1,334
Interest expense (income), $m
  7
  27
  30
  33
  36
  40
  43
  47
  51
  55
  59
  63
  68
  73
  78
  83
  88
  94
  100
  106
  112
  119
  126
  134
  142
  150
  159
  168
  177
  187
  197
Earnings before tax, $m
  161
  174
  188
  203
  218
  234
  251
  268
  286
  305
  346
  367
  389
  411
  435
  460
  486
  514
  543
  573
  605
  638
  673
  709
  748
  788
  831
  875
  922
  971
Tax expense, $m
  43
  47
  51
  55
  59
  63
  68
  72
  77
  82
  93
  99
  105
  111
  118
  124
  131
  139
  147
  155
  163
  172
  182
  192
  202
  213
  224
  236
  249
  262
Net income, $m
  117
  127
  137
  148
  159
  171
  183
  196
  209
  223
  253
  268
  284
  300
  318
  336
  355
  375
  396
  418
  441
  466
  491
  518
  546
  576
  606
  639
  673
  709

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
  1,463
  1,560
  1,660
  1,765
  1,874
  1,988
  2,106
  2,230
  2,359
  2,493
  2,633
  2,780
  2,933
  3,093
  3,260
  3,436
  3,619
  3,811
  4,011
  4,222
  4,442
  4,673
  4,915
  5,168
  5,434
  5,713
  6,005
  6,312
  6,633
  6,971
Adjusted assets (=assets-cash), $m
  1,463
  1,560
  1,660
  1,765
  1,874
  1,988
  2,106
  2,230
  2,359
  2,493
  2,633
  2,780
  2,933
  3,093
  3,260
  3,436
  3,619
  3,811
  4,011
  4,222
  4,442
  4,673
  4,915
  5,168
  5,434
  5,713
  6,005
  6,312
  6,633
  6,971
Revenue / Adjusted assets
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
  1.831
Average production assets, $m
  463
  494
  526
  559
  594
  630
  667
  706
  747
  790
  834
  881
  929
  980
  1,033
  1,088
  1,146
  1,207
  1,271
  1,337
  1,407
  1,480
  1,557
  1,637
  1,721
  1,810
  1,902
  1,999
  2,101
  2,208
Working capital, $m
  431
  460
  489
  520
  553
  586
  621
  657
  695
  735
  776
  819
  865
  912
  961
  1,013
  1,067
  1,123
  1,183
  1,245
  1,309
  1,378
  1,449
  1,524
  1,602
  1,684
  1,770
  1,861
  1,955
  2,055
Total debt, $m
  553
  611
  672
  735
  800
  868
  939
  1,013
  1,091
  1,171
  1,256
  1,343
  1,435
  1,531
  1,632
  1,737
  1,847
  1,962
  2,082
  2,209
  2,341
  2,479
  2,624
  2,777
  2,936
  3,103
  3,279
  3,463
  3,656
  3,858
Total liabilities, $m
  878
  936
  996
  1,059
  1,125
  1,193
  1,264
  1,338
  1,415
  1,496
  1,580
  1,668
  1,760
  1,856
  1,956
  2,061
  2,171
  2,286
  2,407
  2,533
  2,665
  2,804
  2,949
  3,101
  3,261
  3,428
  3,603
  3,787
  3,980
  4,182
Total equity, $m
  585
  624
  664
  706
  750
  795
  843
  892
  943
  997
  1,053
  1,112
  1,173
  1,237
  1,304
  1,374
  1,448
  1,524
  1,605
  1,689
  1,777
  1,869
  1,966
  2,067
  2,174
  2,285
  2,402
  2,525
  2,653
  2,788
Total liabilities and equity, $m
  1,463
  1,560
  1,660
  1,765
  1,875
  1,988
  2,107
  2,230
  2,358
  2,493
  2,633
  2,780
  2,933
  3,093
  3,260
  3,435
  3,619
  3,810
  4,012
  4,222
  4,442
  4,673
  4,915
  5,168
  5,435
  5,713
  6,005
  6,312
  6,633
  6,970
Debt-to-equity ratio
  0.950
  0.980
  1.010
  1.040
  1.070
  1.090
  1.110
  1.140
  1.160
  1.170
  1.190
  1.210
  1.220
  1.240
  1.250
  1.260
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.330
  1.340
  1.350
  1.360
  1.360
  1.370
  1.380
  1.380
Adjusted equity ratio
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  117
  127
  137
  148
  159
  171
  183
  196
  209
  223
  253
  268
  284
  300
  318
  336
  355
  375
  396
  418
  441
  466
  491
  518
  546
  576
  606
  639
  673
  709
Depreciation, amort., depletion, $m
  56
  58
  60
  63
  66
  68
  71
  74
  77
  80
  62
  66
  69
  73
  77
  81
  86
  90
  95
  100
  105
  110
  116
  122
  128
  135
  142
  149
  157
  165
Funds from operations, $m
  173
  185
  198
  211
  225
  239
  254
  270
  286
  303
  315
  334
  353
  373
  395
  417
  441
  465
  491
  518
  546
  576
  607
  640
  674
  711
  748
  788
  830
  874
Change in working capital, $m
  27
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
Cash from operations, $m
  146
  157
  168
  180
  193
  206
  219
  233
  248
  263
  274
  290
  308
  326
  345
  366
  387
  409
  432
  456
  481
  508
  536
  565
  596
  628
  662
  698
  735
  774
Maintenance CAPEX, $m
  -32
  -35
  -37
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -105
  -110
  -116
  -122
  -128
  -135
  -142
  -149
  -157
New CAPEX, $m
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -49
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -93
  -97
  -102
  -107
Cash from investing activities, $m
  -62
  -66
  -69
  -72
  -77
  -80
  -85
  -89
  -94
  -99
  -103
  -108
  -115
  -120
  -126
  -132
  -139
  -147
  -154
  -162
  -170
  -178
  -187
  -196
  -206
  -216
  -228
  -239
  -251
  -264
Free cash flow, $m
  84
  91
  99
  108
  116
  125
  135
  144
  154
  165
  170
  182
  194
  206
  219
  233
  247
  262
  278
  295
  312
  330
  349
  369
  390
  412
  435
  459
  484
  511
Issuance/(repayment) of debt, $m
  57
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  139
  145
  152
  160
  167
  175
  184
  193
  202
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  
  57
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  139
  145
  152
  160
  167
  175
  184
  193
  202
Total cash flow (excl. dividends), $m
  140
  150
  160
  171
  182
  193
  206
  218
  232
  246
  254
  270
  286
  302
  320
  338
  357
  377
  399
  421
  444
  468
  494
  521
  549
  579
  610
  643
  677
  713
Retained Cash Flow (-), $m
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
  -123
  -129
  -135
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
  103
  111
  120
  129
  138
  148
  158
  169
  180
  192
  198
  211
  224
  238
  253
  268
  284
  301
  318
  337
  356
  376
  397
  420
  443
  467
  493
  520
  548
  578
Discount rate, %
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
  98
  99
  100
  100
  99
  98
  95
  92
  88
  83
  76
  70
  65
  58
  52
  46
  40
  34
  29
  24
  19
  15
  12
  9
  7
  5
  4
  3
  2
  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

Mueller Industries, Inc. is a manufacturer of copper, brass, aluminum and plastic products. The Company operates through three segments: Piping Systems, Industrial Metals and Climate. The Company's products include copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; plastic fittings and valves; refrigeration valves and fittings; fabricated tubular products, and steel nipples. The Company also resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products. The Company's operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, and China. The Company markets its products to the heating, ventilation, and air-conditioning (HVAC), plumbing, refrigeration, hardware, and other industries.

FINANCIAL RATIOS  of  Mueller Industries, Inc. (MLI)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 0.9
Price to Book 2
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 14.7
Growth Rates
Sales Growth Rate -2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 31%
Cap. Spend. - 3 Yr. Gr. Rate -1.5%
Financial Strength
Quick Ratio 25
Current Ratio 0.2
LT Debt to Equity 23.7%
Total Debt to Equity 25.3%
Interest Coverage 22
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 9.2%
Ret/ On T. Cap. - 3 Yr. Avg. 9.4%
Return On Equity 11.6%
Return On Equity - 3 Yr. Avg. 12.2%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 16.3%
Gross Margin - 3 Yr. Avg. 14.6%
EBITDA Margin 9.1%
EBITDA Margin - 3 Yr. Avg. 8.5%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 6.8%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 32.9%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 21%

MLI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MLI stock intrinsic value calculation we used $2508 million for the last fiscal year's total revenue generated by Mueller Industries, Inc.. The default revenue input number comes from 0001 income statement of Mueller Industries, 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 MLI stock valuation model: a) initial revenue growth rate of 6.8% 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 5.6%, whose default value for MLI is calculated based on our internal credit rating of Mueller Industries, 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 Mueller Industries, 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 MLI stock the variable cost ratio is equal to 90.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $59 million in the base year in the intrinsic value calculation for MLI 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 Mueller Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for Mueller Industries, 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 MLI 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 MLI are equal to 17.3%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Mueller Industries, 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 MLI is equal to 16.1%. 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 - $548.356 million for Mueller Industries, 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 56.586 million for Mueller Industries, 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 Mueller Industries, Inc. at the current share price and the inputted number of shares is $1.7 billion.

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