Intrinsic value of Miller Industries, Inc. - MLR

Previous Close

$33.07

  Intrinsic Value

$44.42

stock screener

  Rating & Target

buy

+34%

Previous close

$33.07

 
Intrinsic value

$44.42

 
Up/down potential

+34%

 
Rating

buy

We calculate the intrinsic value of MLR 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 0.4

 

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, %
  12.70
  11.93
  11.24
  10.61
  10.05
  9.55
  9.09
  8.68
  8.31
  7.98
  7.68
  7.42
  7.17
  6.96
  6.76
  6.59
  6.43
  6.28
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
Revenue, $m
  802
  898
  999
  1,105
  1,216
  1,332
  1,453
  1,580
  1,711
  1,848
  1,990
  2,137
  2,290
  2,450
  2,615
  2,788
  2,967
  3,153
  3,347
  3,550
  3,760
  3,980
  4,209
  4,448
  4,698
  4,959
  5,232
  5,517
  5,815
  6,126
Variable operating expenses, $m
  699
  782
  870
  962
  1,058
  1,159
  1,265
  1,374
  1,489
  1,607
  1,730
  1,858
  1,991
  2,130
  2,274
  2,423
  2,579
  2,741
  2,910
  3,086
  3,269
  3,460
  3,659
  3,867
  4,084
  4,311
  4,548
  4,796
  5,055
  5,326
Fixed operating expenses, $m
  51
  52
  53
  55
  56
  57
  58
  60
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  82
  84
  86
  88
  90
  92
  94
  96
Total operating expenses, $m
  750
  834
  923
  1,017
  1,114
  1,216
  1,323
  1,434
  1,550
  1,669
  1,794
  1,923
  2,057
  2,198
  2,343
  2,494
  2,651
  2,815
  2,986
  3,163
  3,348
  3,541
  3,741
  3,951
  4,170
  4,399
  4,638
  4,888
  5,149
  5,422
Operating income, $m
  53
  64
  76
  89
  102
  116
  131
  146
  162
  178
  196
  214
  233
  252
  272
  293
  315
  338
  362
  387
  412
  439
  468
  497
  528
  560
  594
  629
  666
  705
EBITDA, $m
  62
  74
  87
  101
  116
  131
  146
  163
  180
  198
  217
  236
  256
  277
  299
  322
  346
  370
  396
  423
  451
  480
  510
  542
  576
  610
  647
  685
  725
  767
Interest expense (income), $m
  2
  2
  5
  7
  10
  13
  16
  20
  23
  27
  30
  34
  38
  42
  47
  51
  56
  60
  65
  71
  76
  82
  88
  94
  100
  107
  114
  121
  129
  137
  145
Earnings before tax, $m
  50
  59
  69
  78
  89
  100
  111
  123
  135
  148
  162
  176
  191
  206
  222
  238
  255
  273
  291
  310
  331
  352
  374
  397
  421
  446
  472
  500
  529
  559
Tax expense, $m
  14
  16
  19
  21
  24
  27
  30
  33
  36
  40
  44
  48
  52
  56
  60
  64
  69
  74
  79
  84
  89
  95
  101
  107
  114
  120
  128
  135
  143
  151
Net income, $m
  37
  43
  50
  57
  65
  73
  81
  90
  99
  108
  119
  129
  139
  150
  162
  174
  186
  199
  213
  227
  241
  257
  273
  290
  307
  326
  345
  365
  386
  408

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
  415
  464
  517
  571
  629
  689
  752
  817
  885
  955
  1,029
  1,105
  1,184
  1,267
  1,352
  1,441
  1,534
  1,630
  1,731
  1,835
  1,944
  2,058
  2,176
  2,300
  2,429
  2,564
  2,705
  2,852
  3,007
  3,168
Adjusted assets (=assets-cash), $m
  415
  464
  517
  571
  629
  689
  752
  817
  885
  955
  1,029
  1,105
  1,184
  1,267
  1,352
  1,441
  1,534
  1,630
  1,731
  1,835
  1,944
  2,058
  2,176
  2,300
  2,429
  2,564
  2,705
  2,852
  3,007
  3,168
Revenue / Adjusted assets
  1.933
  1.935
  1.932
  1.935
  1.933
  1.933
  1.932
  1.934
  1.933
  1.935
  1.934
  1.934
  1.934
  1.934
  1.934
  1.935
  1.934
  1.934
  1.934
  1.935
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
Average production assets, $m
  97
  109
  121
  134
  147
  161
  176
  191
  207
  224
  241
  259
  277
  296
  316
  337
  359
  382
  405
  429
  455
  482
  509
  538
  568
  600
  633
  668
  704
  741
Working capital, $m
  139
  155
  173
  191
  210
  230
  251
  273
  296
  320
  344
  370
  396
  424
  452
  482
  513
  546
  579
  614
  651
  689
  728
  770
  813
  858
  905
  954
  1,006
  1,060
Total debt, $m
  34
  53
  73
  93
  115
  138
  162
  187
  213
  240
  268
  297
  328
  359
  392
  426
  461
  498
  536
  576
  618
  661
  707
  754
  803
  855
  909
  965
  1,024
  1,085
Total liabilities, $m
  158
  177
  197
  218
  240
  263
  287
  312
  338
  365
  393
  422
  452
  484
  517
  551
  586
  623
  661
  701
  743
  786
  831
  879
  928
  979
  1,033
  1,090
  1,148
  1,210
Total equity, $m
  256
  287
  319
  353
  389
  426
  464
  505
  547
  590
  636
  683
  732
  783
  836
  891
  948
  1,008
  1,070
  1,134
  1,202
  1,272
  1,345
  1,421
  1,501
  1,585
  1,672
  1,763
  1,858
  1,958
Total liabilities and equity, $m
  414
  464
  516
  571
  629
  689
  751
  817
  885
  955
  1,029
  1,105
  1,184
  1,267
  1,353
  1,442
  1,534
  1,631
  1,731
  1,835
  1,945
  2,058
  2,176
  2,300
  2,429
  2,564
  2,705
  2,853
  3,006
  3,168
Debt-to-equity ratio
  0.130
  0.180
  0.230
  0.260
  0.300
  0.330
  0.350
  0.370
  0.390
  0.410
  0.420
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.490
  0.500
  0.510
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.540
  0.550
  0.550
  0.550
Adjusted equity ratio
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  37
  43
  50
  57
  65
  73
  81
  90
  99
  108
  119
  129
  139
  150
  162
  174
  186
  199
  213
  227
  241
  257
  273
  290
  307
  326
  345
  365
  386
  408
Depreciation, amort., depletion, $m
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
Funds from operations, $m
  46
  54
  61
  70
  78
  87
  97
  107
  117
  128
  139
  150
  163
  175
  188
  202
  216
  231
  247
  263
  280
  297
  316
  335
  355
  376
  398
  421
  445
  471
Change in working capital, $m
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
Cash from operations, $m
  30
  37
  44
  51
  59
  67
  76
  85
  94
  104
  114
  125
  136
  148
  160
  172
  185
  199
  213
  228
  243
  259
  276
  293
  312
  331
  351
  372
  394
  417
Maintenance CAPEX, $m
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
New CAPEX, $m
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
Cash from investing activities, $m
  -18
  -20
  -21
  -23
  -24
  -26
  -29
  -30
  -32
  -34
  -36
  -38
  -41
  -42
  -45
  -48
  -50
  -53
  -55
  -58
  -61
  -65
  -68
  -72
  -75
  -80
  -83
  -87
  -92
  -97
Free cash flow, $m
  12
  17
  23
  28
  34
  41
  48
  55
  62
  70
  78
  87
  96
  105
  115
  125
  135
  146
  157
  169
  182
  194
  208
  222
  236
  252
  267
  284
  301
  320
Issuance/(repayment) of debt, $m
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  52
  54
  56
  59
  62
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  
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  52
  54
  56
  59
  62
Total cash flow (excl. dividends), $m
  30
  36
  43
  49
  56
  64
  72
  80
  88
  97
  106
  116
  126
  136
  147
  159
  171
  183
  196
  209
  223
  238
  253
  269
  286
  303
  321
  340
  360
  381
Retained Cash Flow (-), $m
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -100
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
  1
  6
  10
  15
  21
  27
  33
  40
  46
  54
  61
  69
  77
  86
  94
  104
  113
  123
  134
  145
  156
  168
  180
  193
  206
  220
  234
  249
  265
  282
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
  1
  5
  9
  13
  16
  19
  22
  25
  27
  28
  29
  29
  29
  29
  28
  26
  25
  23
  21
  18
  16
  14
  12
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Miller Industries, Inc. is a manufacturer of towing and recovery equipment. The Company manufactures the bodies of wreckers and car carriers, which are installed on truck chassis manufactured by third parties. It has domestic manufacturing operations in Tennessee and Pennsylvania, and foreign manufacturing operations in France and the United Kingdom. The Company purchases truck chassis for resale its customers. The Company also manufactures vehicle transport trailers. As of December 31, 2016, yhe Company's products were sold through independent distributors all 50 states, Canada and Mexico, and other foreign markets including Europe, the Pacific Rim, the Middle East, South America and Africa, and through prime contractors to governmental entities. The Company's products are offered under various brands, including Century, Vulcan, Challenger, Holmes, Champion, Chevron, Eagle, Titan, Jige and Boniface. Its wreckers are used to recover and tow disabled vehicles and other equipment.

FINANCIAL RATIOS  of  Miller Industries, Inc. (MLR)

Valuation Ratios
P/E Ratio 18.8
Price to Sales 0.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 17.9
Price to Free Cash Flow -93.8
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 108.3%
Cap. Spend. - 3 Yr. Gr. Rate 65.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 2.7%
Total Debt to Equity 2.7%
Interest Coverage 17
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 6.7%
Return On Total Capital 11%
Ret/ On T. Cap. - 3 Yr. Avg. 9.8%
Return On Equity 11.1%
Return On Equity - 3 Yr. Avg. 9.9%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 10.6%
Gross Margin - 3 Yr. Avg. 10.7%
EBITDA Margin 6.3%
EBITDA Margin - 3 Yr. Avg. 5.9%
Operating Margin 5.2%
Oper. Margin - 3 Yr. Avg. 4.9%
Pre-Tax Margin 5.2%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 3.3%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 35.5%
Eff/ Tax Rate - 3 Yr. Avg. 36.3%
Payout Ratio 40%

MLR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MLR stock intrinsic value calculation we used $712 million for the last fiscal year's total revenue generated by Miller Industries, Inc.. The default revenue input number comes from 0001 income statement of Miller 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 MLR stock valuation model: a) initial revenue growth rate of 12.7% 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 MLR is calculated based on our internal credit rating of Miller 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 Miller 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 MLR stock the variable cost ratio is equal to 87.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $50 million in the base year in the intrinsic value calculation for MLR 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 14.2% for Miller Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for Miller 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 MLR 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 MLR are equal to 12.1%.

Life of production assets of 11.9 years is the average useful life of capital assets used in Miller 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 MLR is equal to 17.3%. 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 - $227.563 million for Miller 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 11.400 million for Miller 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 Miller Industries, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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