Intrinsic value of Matrix Service - MTRX

Previous Close

$21.40

  Intrinsic Value

$7.17

stock screener

  Rating & Target

str. sell

-67%

Previous close

$21.40

 
Intrinsic value

$7.17

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of MTRX 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 0.6

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,221
  1,250
  1,282
  1,318
  1,358
  1,402
  1,449
  1,501
  1,557
  1,616
  1,680
  1,748
  1,821
  1,898
  1,980
  2,067
  2,159
  2,256
  2,358
  2,467
  2,581
  2,702
  2,829
  2,963
  3,104
  3,252
  3,409
  3,573
  3,746
  3,928
Variable operating expenses, $m
  840
  859
  881
  905
  932
  962
  994
  1,029
  1,067
  1,107
  1,136
  1,182
  1,232
  1,284
  1,339
  1,398
  1,460
  1,526
  1,595
  1,668
  1,746
  1,827
  1,913
  2,004
  2,099
  2,200
  2,305
  2,417
  2,534
  2,657
Fixed operating expenses, $m
  384
  393
  401
  410
  419
  428
  438
  448
  457
  467
  478
  488
  499
  510
  521
  533
  544
  556
  569
  581
  594
  607
  620
  634
  648
  662
  677
  692
  707
  722
Total operating expenses, $m
  1,224
  1,252
  1,282
  1,315
  1,351
  1,390
  1,432
  1,477
  1,524
  1,574
  1,614
  1,670
  1,731
  1,794
  1,860
  1,931
  2,004
  2,082
  2,164
  2,249
  2,340
  2,434
  2,533
  2,638
  2,747
  2,862
  2,982
  3,109
  3,241
  3,379
Operating income, $m
  -3
  -2
  -1
  2
  6
  11
  17
  24
  32
  42
  66
  78
  90
  104
  120
  136
  154
  174
  195
  217
  242
  268
  295
  325
  357
  391
  427
  465
  506
  549
EBITDA, $m
  27
  28
  30
  33
  37
  43
  50
  57
  66
  76
  87
  100
  114
  128
  145
  163
  182
  202
  225
  249
  274
  302
  331
  363
  396
  432
  470
  510
  553
  599
Interest expense (income), $m
  2
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  20
  22
  23
  25
  28
  30
  32
  35
  37
  40
  43
  46
  49
  53
  56
  60
Earnings before tax, $m
  -7
  -7
  -6
  -4
  -1
  3
  8
  14
  21
  29
  53
  63
  74
  86
  100
  115
  131
  148
  167
  188
  209
  233
  258
  285
  314
  345
  377
  412
  449
  489
Tax expense, $m
  0
  0
  0
  0
  0
  1
  2
  4
  6
  8
  14
  17
  20
  23
  27
  31
  35
  40
  45
  51
  57
  63
  70
  77
  85
  93
  102
  111
  121
  132
Net income, $m
  -7
  -7
  -6
  -4
  -1
  2
  6
  11
  16
  22
  38
  46
  54
  63
  73
  84
  96
  108
  122
  137
  153
  170
  188
  208
  229
  252
  275
  301
  328
  357

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
  598
  611
  627
  645
  664
  686
  709
  734
  762
  791
  822
  855
  891
  929
  969
  1,011
  1,056
  1,104
  1,154
  1,207
  1,263
  1,322
  1,384
  1,449
  1,518
  1,591
  1,668
  1,748
  1,833
  1,922
Adjusted assets (=assets-cash), $m
  598
  611
  627
  645
  664
  686
  709
  734
  762
  791
  822
  855
  891
  929
  969
  1,011
  1,056
  1,104
  1,154
  1,207
  1,263
  1,322
  1,384
  1,449
  1,518
  1,591
  1,668
  1,748
  1,833
  1,922
Revenue / Adjusted assets
  2.042
  2.046
  2.045
  2.043
  2.045
  2.044
  2.044
  2.045
  2.043
  2.043
  2.044
  2.044
  2.044
  2.043
  2.043
  2.045
  2.045
  2.043
  2.043
  2.044
  2.044
  2.044
  2.044
  2.045
  2.045
  2.044
  2.044
  2.044
  2.044
  2.044
Average production assets, $m
  145
  149
  153
  157
  162
  167
  172
  179
  185
  192
  200
  208
  217
  226
  236
  246
  257
  268
  281
  294
  307
  322
  337
  353
  369
  387
  406
  425
  446
  467
Working capital, $m
  98
  100
  103
  105
  109
  112
  116
  120
  125
  129
  134
  140
  146
  152
  158
  165
  173
  180
  189
  197
  206
  216
  226
  237
  248
  260
  273
  286
  300
  314
Total debt, $m
  50
  56
  63
  71
  80
  90
  100
  112
  124
  137
  151
  166
  182
  199
  217
  236
  257
  278
  301
  325
  350
  377
  405
  434
  465
  498
  533
  569
  607
  647
Total liabilities, $m
  270
  276
  283
  291
  300
  309
  320
  331
  343
  357
  371
  386
  402
  419
  437
  456
  476
  498
  520
  544
  570
  596
  624
  654
  685
  718
  752
  788
  827
  867
Total equity, $m
  328
  336
  344
  354
  365
  376
  389
  403
  418
  434
  451
  470
  489
  510
  532
  555
  580
  606
  633
  663
  693
  726
  760
  796
  834
  874
  916
  960
  1,006
  1,055
Total liabilities and equity, $m
  598
  612
  627
  645
  665
  685
  709
  734
  761
  791
  822
  856
  891
  929
  969
  1,011
  1,056
  1,104
  1,153
  1,207
  1,263
  1,322
  1,384
  1,450
  1,519
  1,592
  1,668
  1,748
  1,833
  1,922
Debt-to-equity ratio
  0.150
  0.170
  0.180
  0.200
  0.220
  0.240
  0.260
  0.280
  0.300
  0.320
  0.340
  0.350
  0.370
  0.390
  0.410
  0.430
  0.440
  0.460
  0.470
  0.490
  0.500
  0.520
  0.530
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
Adjusted equity ratio
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  -7
  -6
  -4
  -1
  2
  6
  11
  16
  22
  38
  46
  54
  63
  73
  84
  96
  108
  122
  137
  153
  170
  188
  208
  229
  252
  275
  301
  328
  357
Depreciation, amort., depletion, $m
  29
  30
  30
  31
  31
  32
  32
  33
  34
  34
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
Funds from operations, $m
  22
  23
  24
  27
  30
  34
  38
  43
  49
  56
  60
  68
  77
  87
  98
  110
  123
  137
  152
  168
  186
  204
  224
  246
  268
  293
  319
  346
  376
  407
Change in working capital, $m
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  20
  20
  22
  24
  27
  31
  35
  39
  45
  51
  55
  62
  71
  81
  92
  103
  116
  129
  144
  160
  176
  195
  214
  235
  257
  281
  306
  333
  362
  392
Maintenance CAPEX, $m
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -18
  -18
  -20
  -20
  -22
  -22
  -24
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -66
  -69
Free cash flow, $m
  2
  2
  2
  3
  6
  8
  11
  15
  19
  24
  26
  33
  40
  49
  58
  68
  78
  90
  103
  117
  132
  148
  165
  183
  203
  224
  246
  270
  296
  323
Issuance/(repayment) of debt, $m
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
Issuance/(repurchase) of shares, $m
  14
  15
  15
  14
  12
  9
  7
  3
  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  
  19
  21
  22
  22
  21
  19
  18
  14
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
Total cash flow (excl. dividends), $m
  21
  22
  24
  25
  26
  27
  28
  30
  32
  38
  41
  48
  57
  66
  76
  87
  99
  112
  126
  141
  157
  174
  193
  213
  234
  257
  281
  307
  334
  363
Retained Cash Flow (-), $m
  -14
  -15
  -15
  -14
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
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
  7
  8
  9
  11
  15
  15
  16
  16
  17
  22
  23
  30
  37
  45
  54
  64
  74
  86
  98
  112
  126
  142
  159
  177
  196
  217
  239
  262
  288
  314
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
  7
  7
  8
  9
  10
  10
  9
  9
  8
  9
  9
  10
  11
  11
  11
  11
  10
  10
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  97.7
  95.3
  93.0
  91.0
  89.4
  88.1
  87.2
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8

Matrix Service Company provides engineering, fabrication, infrastructure, construction and maintenance services primarily to the oil, gas, power, petrochemical, industrial, mining and minerals markets. The Company's segments include Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial. The Electrical Infrastructure segment primarily includes construction and maintenance services to a range of power generation facilities, such as combined cycle plants, natural gas fired power stations and renewable energy installations. The Oil Gas & Chemical segment includes turnaround activities, plant maintenance services and construction in the downstream petroleum industry. The Storage Solutions segment includes new construction of crude and refined products aboveground storage tanks (ASTs), as well as planned and emergency maintenance services. The Industrial segment includes construction and maintenance work in the iron and steel and mining and minerals industries.

FINANCIAL RATIOS  of  Matrix Service (MTRX)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow -30
Price to Free Cash Flow -18.4
Growth Rates
Sales Growth Rate -8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 14%
Total Debt to Equity 14%
Interest Coverage 2
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 6.8%
Gross Margin - 3 Yr. Avg. 7.6%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 3.1%
Operating Margin 0.4%
Oper. Margin - 3 Yr. Avg. 1.4%
Pre-Tax Margin 0.2%
Pre-Tax Margin - 3 Yr. Avg. 1.3%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate 100%
Eff/ Tax Rate - 3 Yr. Avg. 86.7%
Payout Ratio 0%

MTRX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTRX stock intrinsic value calculation we used $1197.509 million for the last fiscal year's total revenue generated by Matrix Service. The default revenue input number comes from 0001 income statement of Matrix Service. 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 MTRX stock valuation model: a) initial revenue growth rate of 2% 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 MTRX is calculated based on our internal credit rating of Matrix Service, 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 Matrix Service.
    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 MTRX stock the variable cost ratio is equal to 68.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $376 million in the base year in the intrinsic value calculation for MTRX 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 9.9% for Matrix Service.

Corporate tax rate of 27% is the nominal tax rate for Matrix Service. 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 MTRX 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 MTRX are equal to 11.9%.

Life of production assets of 9.4 years is the average useful life of capital assets used in Matrix Service 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 MTRX is equal to 8%. 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 - $321.809 million for Matrix Service - 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 26.823 million for Matrix Service 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 Matrix Service at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Matrix Service: Fiscal 4Q Earnings Snapshot   [Sep-10-18 04:41PM  Associated Press]
▶ While S&P 500 Hits Record, This Other Index Already Notched A New High   [Aug-21-18 01:37PM  Investor's Business Daily]
▶ Matrix Service: Fiscal 3Q Earnings Snapshot   [May-09-18 07:42PM  Associated Press]
▶ Matrix Service posts 2Q profit   [05:02AM  Associated Press]
▶ 5 Great Breakout Stocks Offering Superlative Returns   [Jan-29-18 01:40PM  InvestorPlace]
▶ Matrix Service Company to Host Earnings Call   [Nov-07-17 09:00AM  ACCESSWIRE]
▶ Matrix Service posts 1Q profit   [06:17AM  Associated Press]
▶ These 3 Oil Stocks Soared 30% in 1 Month   [Sep-19-17 08:17AM  Motley Fool]
▶ Matrix Service reports 4Q loss   [Sep-06-17 11:57PM  Associated Press]
▶ ETFs with exposure to Matrix Service Co. : August 1, 2017   [Aug-01-17 04:56PM  Capital Cube]
▶ ETFs with exposure to Matrix Service Co. : July 11, 2017   [Jul-11-17 02:49PM  Capital Cube]
▶ ETFs with exposure to Matrix Service Co. : June 30, 2017   [Jun-30-17 03:11PM  Capital Cube]
▶ ETFs with exposure to Matrix Service Co. : June 19, 2017   [Jun-19-17 03:45PM  Capital Cube]
▶ Matrix Service reports 3Q loss   [May-09-17 07:32PM  Associated Press]
▶ Matrix Service posts 2Q profit   [Feb-08-17 06:58PM  Associated Press]

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