Intrinsic value of MRC Global Inc. - MRC

Previous Close

$15.41

  Intrinsic Value

$31.76

stock screener

  Rating & Target

str. buy

+106%

Previous close

$15.41

 
Intrinsic value

$31.76

 
Up/down potential

+106%

 
Rating

str. buy

We calculate the intrinsic value of MRC 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, %
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  4,660
  5,174
  5,714
  6,278
  6,868
  7,483
  8,124
  8,791
  9,484
  10,204
  10,953
  11,731
  12,539
  13,380
  14,254
  15,163
  16,109
  17,095
  18,121
  19,192
  20,307
  21,472
  22,687
  23,956
  25,282
  26,667
  28,116
  29,632
  31,217
  32,877
Variable operating expenses, $m
  3,933
  4,358
  4,804
  5,271
  5,758
  6,267
  6,797
  7,348
  7,921
  8,516
  9,054
  9,697
  10,366
  11,061
  11,783
  12,535
  13,317
  14,132
  14,981
  15,865
  16,788
  17,750
  18,755
  19,804
  20,900
  22,045
  23,243
  24,496
  25,807
  27,178
Fixed operating expenses, $m
  538
  549
  561
  574
  586
  599
  613
  626
  640
  654
  668
  683
  698
  713
  729
  745
  761
  778
  795
  813
  831
  849
  868
  887
  906
  926
  947
  967
  989
  1,010
Total operating expenses, $m
  4,471
  4,907
  5,365
  5,845
  6,344
  6,866
  7,410
  7,974
  8,561
  9,170
  9,722
  10,380
  11,064
  11,774
  12,512
  13,280
  14,078
  14,910
  15,776
  16,678
  17,619
  18,599
  19,623
  20,691
  21,806
  22,971
  24,190
  25,463
  26,796
  28,188
Operating income, $m
  190
  267
  348
  434
  523
  617
  715
  817
  923
  1,034
  1,230
  1,350
  1,475
  1,606
  1,741
  1,883
  2,031
  2,185
  2,345
  2,513
  2,689
  2,872
  3,064
  3,265
  3,476
  3,696
  3,927
  4,168
  4,422
  4,688
EBITDA, $m
  314
  396
  482
  573
  668
  768
  872
  980
  1,093
  1,210
  1,333
  1,460
  1,593
  1,731
  1,875
  2,025
  2,182
  2,345
  2,515
  2,693
  2,879
  3,074
  3,277
  3,490
  3,712
  3,946
  4,190
  4,446
  4,714
  4,996
Interest expense (income), $m
  30
  43
  56
  70
  84
  99
  114
  130
  147
  165
  183
  202
  222
  242
  263
  285
  308
  332
  357
  383
  410
  438
  468
  498
  530
  564
  599
  635
  673
  713
  755
Earnings before tax, $m
  146
  211
  279
  350
  425
  503
  585
  670
  759
  851
  1,028
  1,129
  1,233
  1,342
  1,456
  1,574
  1,698
  1,827
  1,962
  2,103
  2,251
  2,405
  2,566
  2,735
  2,912
  3,097
  3,291
  3,495
  3,709
  3,933
Tax expense, $m
  40
  57
  75
  95
  115
  136
  158
  181
  205
  230
  278
  305
  333
  362
  393
  425
  459
  493
  530
  568
  608
  649
  693
  738
  786
  836
  889
  944
  1,001
  1,062
Net income, $m
  107
  154
  203
  256
  310
  367
  427
  489
  554
  621
  751
  824
  900
  980
  1,063
  1,149
  1,240
  1,334
  1,432
  1,535
  1,643
  1,755
  1,873
  1,996
  2,126
  2,261
  2,403
  2,551
  2,707
  2,871

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
  2,719
  3,019
  3,334
  3,663
  4,007
  4,366
  4,740
  5,129
  5,533
  5,953
  6,390
  6,844
  7,316
  7,806
  8,316
  8,847
  9,399
  9,974
  10,573
  11,197
  11,848
  12,527
  13,236
  13,977
  14,750
  15,559
  16,404
  17,288
  18,213
  19,181
Adjusted assets (=assets-cash), $m
  2,719
  3,019
  3,334
  3,663
  4,007
  4,366
  4,740
  5,129
  5,533
  5,953
  6,390
  6,844
  7,316
  7,806
  8,316
  8,847
  9,399
  9,974
  10,573
  11,197
  11,848
  12,527
  13,236
  13,977
  14,750
  15,559
  16,404
  17,288
  18,213
  19,181
Revenue / Adjusted assets
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
  1.714
Average production assets, $m
  624
  693
  766
  841
  920
  1,003
  1,089
  1,178
  1,271
  1,367
  1,468
  1,572
  1,680
  1,793
  1,910
  2,032
  2,159
  2,291
  2,428
  2,572
  2,721
  2,877
  3,040
  3,210
  3,388
  3,573
  3,768
  3,971
  4,183
  4,405
Working capital, $m
  955
  1,061
  1,171
  1,287
  1,408
  1,534
  1,665
  1,802
  1,944
  2,092
  2,245
  2,405
  2,571
  2,743
  2,922
  3,108
  3,302
  3,504
  3,715
  3,934
  4,163
  4,402
  4,651
  4,911
  5,183
  5,467
  5,764
  6,074
  6,400
  6,740
Total debt, $m
  889
  1,103
  1,329
  1,565
  1,811
  2,068
  2,336
  2,614
  2,904
  3,205
  3,517
  3,842
  4,180
  4,531
  4,896
  5,276
  5,671
  6,083
  6,512
  6,959
  7,425
  7,911
  8,419
  8,949
  9,503
  10,082
  10,687
  11,320
  11,983
  12,676
Total liabilities, $m
  1,947
  2,161
  2,387
  2,623
  2,869
  3,126
  3,394
  3,672
  3,962
  4,263
  4,575
  4,900
  5,238
  5,589
  5,954
  6,334
  6,729
  7,141
  7,570
  8,017
  8,483
  8,969
  9,477
  10,007
  10,561
  11,140
  11,745
  12,378
  13,041
  13,734
Total equity, $m
  772
  857
  947
  1,040
  1,138
  1,240
  1,346
  1,457
  1,571
  1,691
  1,815
  1,944
  2,078
  2,217
  2,362
  2,512
  2,669
  2,833
  3,003
  3,180
  3,365
  3,558
  3,759
  3,969
  4,189
  4,419
  4,659
  4,910
  5,173
  5,447
Total liabilities and equity, $m
  2,719
  3,018
  3,334
  3,663
  4,007
  4,366
  4,740
  5,129
  5,533
  5,954
  6,390
  6,844
  7,316
  7,806
  8,316
  8,846
  9,398
  9,974
  10,573
  11,197
  11,848
  12,527
  13,236
  13,976
  14,750
  15,559
  16,404
  17,288
  18,214
  19,181
Debt-to-equity ratio
  1.150
  1.290
  1.400
  1.500
  1.590
  1.670
  1.740
  1.790
  1.850
  1.900
  1.940
  1.980
  2.010
  2.040
  2.070
  2.100
  2.120
  2.150
  2.170
  2.190
  2.210
  2.220
  2.240
  2.250
  2.270
  2.280
  2.290
  2.310
  2.320
  2.330
Adjusted equity ratio
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  107
  154
  203
  256
  310
  367
  427
  489
  554
  621
  751
  824
  900
  980
  1,063
  1,149
  1,240
  1,334
  1,432
  1,535
  1,643
  1,755
  1,873
  1,996
  2,126
  2,261
  2,403
  2,551
  2,707
  2,871
Depreciation, amort., depletion, $m
  124
  129
  134
  139
  145
  151
  157
  163
  169
  176
  103
  110
  117
  125
  134
  142
  151
  160
  170
  180
  190
  201
  213
  224
  237
  250
  263
  278
  293
  308
Funds from operations, $m
  231
  283
  338
  395
  455
  518
  583
  652
  723
  798
  853
  934
  1,018
  1,105
  1,196
  1,291
  1,391
  1,494
  1,602
  1,715
  1,833
  1,957
  2,086
  2,221
  2,362
  2,511
  2,666
  2,829
  3,000
  3,179
Change in working capital, $m
  100
  105
  111
  116
  121
  126
  131
  137
  142
  148
  153
  159
  166
  172
  179
  186
  194
  202
  210
  219
  229
  239
  249
  260
  272
  284
  297
  311
  325
  340
Cash from operations, $m
  131
  178
  227
  279
  334
  392
  452
  515
  581
  650
  700
  774
  852
  933
  1,017
  1,105
  1,197
  1,292
  1,392
  1,496
  1,604
  1,718
  1,837
  1,961
  2,091
  2,227
  2,369
  2,518
  2,675
  2,839
Maintenance CAPEX, $m
  -39
  -44
  -48
  -54
  -59
  -64
  -70
  -76
  -82
  -89
  -96
  -103
  -110
  -117
  -125
  -134
  -142
  -151
  -160
  -170
  -180
  -190
  -201
  -213
  -224
  -237
  -250
  -263
  -278
  -293
New CAPEX, $m
  -66
  -69
  -72
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -100
  -104
  -108
  -113
  -117
  -122
  -127
  -132
  -138
  -143
  -150
  -156
  -163
  -170
  -178
  -186
  -194
  -203
  -212
  -222
Cash from investing activities, $m
  -105
  -113
  -120
  -130
  -138
  -146
  -156
  -165
  -175
  -186
  -196
  -207
  -218
  -230
  -242
  -256
  -269
  -283
  -298
  -313
  -330
  -346
  -364
  -383
  -402
  -423
  -444
  -466
  -490
  -515
Free cash flow, $m
  26
  65
  106
  150
  196
  245
  296
  350
  406
  464
  504
  567
  634
  703
  775
  850
  928
  1,009
  1,094
  1,183
  1,275
  1,372
  1,473
  1,578
  1,689
  1,804
  1,925
  2,052
  2,185
  2,324
Issuance/(repayment) of debt, $m
  205
  215
  225
  236
  246
  257
  268
  278
  290
  301
  313
  325
  338
  351
  365
  380
  395
  412
  429
  447
  466
  486
  508
  530
  554
  579
  605
  633
  662
  693
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  
  205
  215
  225
  236
  246
  257
  268
  278
  290
  301
  313
  325
  338
  351
  365
  380
  395
  412
  429
  447
  466
  486
  508
  530
  554
  579
  605
  633
  662
  693
Total cash flow (excl. dividends), $m
  231
  280
  332
  386
  443
  502
  564
  628
  695
  765
  817
  892
  971
  1,054
  1,140
  1,229
  1,323
  1,421
  1,523
  1,630
  1,741
  1,858
  1,980
  2,108
  2,242
  2,383
  2,530
  2,685
  2,847
  3,017
Retained Cash Flow (-), $m
  -80
  -85
  -89
  -94
  -98
  -102
  -106
  -110
  -115
  -119
  -124
  -129
  -134
  -139
  -145
  -151
  -157
  -163
  -170
  -177
  -185
  -193
  -201
  -210
  -220
  -230
  -240
  -251
  -263
  -275
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
  151
  195
  242
  292
  345
  400
  458
  518
  581
  646
  692
  764
  838
  915
  995
  1,079
  1,166
  1,257
  1,353
  1,452
  1,556
  1,665
  1,779
  1,898
  2,023
  2,153
  2,290
  2,434
  2,584
  2,742
Discount rate, %
  9.20
  9.66
  10.14
  10.65
  11.18
  11.74
  12.33
  12.95
  13.59
  14.27
  14.99
  15.74
  16.52
  17.35
  18.22
  19.13
  20.08
  21.09
  22.14
  23.25
  24.41
  25.63
  26.91
  28.26
  29.67
  31.15
  32.71
  34.35
  36.07
  37.87
PV of cash for distribution, $m
  138
  162
  181
  195
  203
  205
  203
  196
  184
  170
  149
  132
  115
  97
  81
  66
  52
  40
  30
  22
  16
  11
  7
  5
  3
  2
  1
  1
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

MRC Global Inc. is an industrial distributor of pipe, valves and fittings and related products and services to the energy industry. The Company's segments include the U.S., Canada and International. Its U.S. segment includes the United States Eastern Region and Gulf Coast, and the United States Western Region. It provides services, such as product testing, manufacturer assessments, daily deliveries, volume purchasing, inventory and zone store management and warehousing, technical support, training, just-in-time delivery, truck stocking, order consolidation, product tagging and system interfaces customized to customer and supplier specifications for tracking and replenishing inventory, engineering of control packages, and valve inspection and repair. The Company's principal product types include valves, automation, measurement and instrumentation; carbon steel fittings and flanges; stainless steel and alloy fittings, flanges and pipe; gas products; line pipe, and other.

FINANCIAL RATIOS  of  MRC Global Inc. (MRC)

Valuation Ratios
P/E Ratio -17.6
Price to Sales 0.5
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 5.8
Price to Free Cash Flow 6.6
Growth Rates
Sales Growth Rate -32.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.4%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 14
Current Ratio 0.1
LT Debt to Equity 36.3%
Total Debt to Equity 37%
Interest Coverage -2
Management Effectiveness
Return On Assets -2.4%
Ret/ On Assets - 3 Yr. Avg. -2.2%
Return On Total Capital -4.9%
Ret/ On T. Cap. - 3 Yr. Avg. -4.5%
Return On Equity -6.8%
Return On Equity - 3 Yr. Avg. -6.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 15.4%
Gross Margin - 3 Yr. Avg. 16.6%
EBITDA Margin 0.3%
EBITDA Margin - 3 Yr. Avg. 0.6%
Operating Margin -1.9%
Oper. Margin - 3 Yr. Avg. -1%
Pre-Tax Margin -3%
Pre-Tax Margin - 3 Yr. Avg. -2.2%
Net Profit Margin -2.7%
Net Profit Margin - 3 Yr. Avg. -2.5%
Effective Tax Rate 8.8%
Eff/ Tax Rate - 3 Yr. Avg. 16%
Payout Ratio -28.9%

MRC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MRC stock intrinsic value calculation we used $4172 million for the last fiscal year's total revenue generated by MRC Global Inc.. The default revenue input number comes from 0001 income statement of MRC Global 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 MRC stock valuation model: a) initial revenue growth rate of 11.7% 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 9.2%, whose default value for MRC is calculated based on our internal credit rating of MRC Global 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 MRC Global 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 MRC stock the variable cost ratio is equal to 84.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $526 million in the base year in the intrinsic value calculation for MRC 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 6.3% for MRC Global Inc..

Corporate tax rate of 27% is the nominal tax rate for MRC Global 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 MRC 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 MRC are equal to 13.4%.

Life of production assets of 14.3 years is the average useful life of capital assets used in MRC Global 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 MRC is equal to 20.5%. 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 - $692 million for MRC Global 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 84.019 million for MRC Global 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 MRC Global Inc. at the current share price and the inputted number of shares is $1.3 billion.

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