Intrinsic value of Matrix Service - MTRX

Previous Close

$19.20

  Intrinsic Value

$8.33

stock screener

  Rating & Target

str. sell

-57%

Previous close

$19.20

 
Intrinsic value

$8.33

 
Up/down potential

-57%

 
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 2017), $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 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

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
  1,222
  1,250
  1,282
  1,318
  1,358
  1,402
  1,450
  1,502
  1,557
  1,617
  1,681
  1,749
  1,822
  1,899
  1,981
  2,068
  2,160
  2,257
  2,359
  2,468
  2,582
  2,703
  2,830
  2,964
  3,105
  3,254
  3,410
  3,575
  3,748
  3,930
Variable operating expenses, $m
  838
  857
  879
  903
  930
  959
  992
  1,026
  1,064
  1,104
  1,133
  1,179
  1,228
  1,280
  1,336
  1,394
  1,456
  1,522
  1,591
  1,664
  1,741
  1,823
  1,908
  1,999
  2,094
  2,194
  2,299
  2,410
  2,527
  2,650
Fixed operating expenses, $m
  388
  397
  406
  415
  424
  433
  443
  452
  462
  472
  483
  493
  504
  515
  527
  538
  550
  562
  575
  587
  600
  613
  627
  641
  655
  669
  684
  699
  714
  730
Total operating expenses, $m
  1,226
  1,254
  1,285
  1,318
  1,354
  1,392
  1,435
  1,478
  1,526
  1,576
  1,616
  1,672
  1,732
  1,795
  1,863
  1,932
  2,006
  2,084
  2,166
  2,251
  2,341
  2,436
  2,535
  2,640
  2,749
  2,863
  2,983
  3,109
  3,241
  3,380
Operating income, $m
  -4
  -4
  -2
  1
  5
  10
  16
  23
  31
  40
  65
  76
  89
  103
  118
  135
  153
  173
  194
  217
  241
  267
  295
  325
  357
  391
  427
  465
  506
  550
EBITDA, $m
  30
  31
  34
  37
  42
  47
  54
  62
  71
  82
  93
  106
  120
  135
  152
  170
  190
  211
  234
  258
  284
  313
  343
  375
  409
  446
  484
  526
  570
  616
Interest expense (income), $m
  2
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  28
  30
  32
  35
  37
  40
  43
  46
  49
  53
  56
  60
Earnings before tax, $m
  -9
  -9
  -8
  -6
  -2
  2
  7
  13
  20
  28
  51
  61
  73
  85
  99
  114
  130
  147
  166
  187
  209
  232
  257
  285
  313
  344
  377
  412
  450
  490
Tax expense, $m
  0
  0
  0
  0
  0
  0
  2
  3
  5
  8
  14
  17
  20
  23
  27
  31
  35
  40
  45
  50
  56
  63
  70
  77
  85
  93
  102
  111
  121
  132
Net income, $m
  -9
  -9
  -8
  -6
  -2
  1
  5
  9
  14
  20
  37
  45
  53
  62
  72
  83
  95
  108
  121
  136
  152
  170
  188
  208
  229
  251
  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
  612
  628
  645
  665
  686
  710
  735
  762
  791
  823
  856
  892
  929
  970
  1,012
  1,057
  1,105
  1,155
  1,208
  1,264
  1,323
  1,385
  1,451
  1,520
  1,593
  1,669
  1,750
  1,834
  1,924
Adjusted assets (=assets-cash), $m
  598
  612
  628
  645
  665
  686
  710
  735
  762
  791
  823
  856
  892
  929
  970
  1,012
  1,057
  1,105
  1,155
  1,208
  1,264
  1,323
  1,385
  1,451
  1,520
  1,593
  1,669
  1,750
  1,834
  1,924
Revenue / Adjusted assets
  2.043
  2.042
  2.041
  2.043
  2.042
  2.044
  2.042
  2.044
  2.043
  2.044
  2.043
  2.043
  2.043
  2.044
  2.042
  2.043
  2.044
  2.043
  2.042
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.044
  2.043
Average production assets, $m
  207
  211
  217
  223
  230
  237
  245
  254
  263
  273
  284
  296
  308
  321
  335
  349
  365
  381
  399
  417
  436
  457
  478
  501
  525
  550
  576
  604
  633
  664
Working capital, $m
  -104
  -106
  -109
  -112
  -115
  -119
  -123
  -128
  -132
  -137
  -143
  -149
  -155
  -161
  -168
  -176
  -184
  -192
  -201
  -210
  -219
  -230
  -241
  -252
  -264
  -277
  -290
  -304
  -319
  -334
Total debt, $m
  50
  57
  64
  72
  80
  90
  101
  112
  124
  138
  152
  167
  183
  200
  218
  237
  257
  279
  301
  325
  351
  377
  405
  435
  466
  499
  533
  570
  608
  648
Total liabilities, $m
  270
  276
  283
  291
  300
  310
  320
  331
  344
  357
  371
  386
  402
  419
  437
  456
  477
  498
  521
  545
  570
  597
  625
  654
  685
  718
  753
  789
  827
  868
Total equity, $m
  328
  336
  345
  354
  365
  377
  390
  403
  418
  435
  452
  470
  490
  510
  532
  556
  580
  606
  634
  663
  694
  726
  760
  796
  834
  874
  916
  961
  1,007
  1,056
Total liabilities and equity, $m
  598
  612
  628
  645
  665
  687
  710
  734
  762
  792
  823
  856
  892
  929
  969
  1,012
  1,057
  1,104
  1,155
  1,208
  1,264
  1,323
  1,385
  1,450
  1,519
  1,592
  1,669
  1,750
  1,834
  1,924
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
  0.480
  0.490
  0.510
  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
  -9
  -9
  -8
  -6
  -2
  1
  5
  9
  14
  20
  37
  45
  53
  62
  72
  83
  95
  108
  121
  136
  152
  170
  188
  208
  229
  251
  275
  301
  328
  357
Depreciation, amort., depletion, $m
  35
  35
  36
  36
  37
  38
  39
  39
  40
  41
  28
  30
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  58
  60
  63
  66
Funds from operations, $m
  26
  26
  28
  31
  35
  39
  43
  49
  55
  62
  66
  74
  84
  94
  106
  118
  131
  146
  161
  178
  196
  215
  236
  258
  281
  306
  333
  362
  392
  424
Change in working capital, $m
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
Cash from operations, $m
  28
  29
  31
  34
  38
  43
  47
  53
  60
  67
  71
  80
  90
  101
  112
  125
  139
  154
  170
  187
  206
  225
  247
  269
  293
  319
  346
  376
  406
  439
Maintenance CAPEX, $m
  -20
  -21
  -21
  -22
  -22
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -58
  -60
  -63
New CAPEX, $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
Cash from investing activities, $m
  -24
  -26
  -26
  -28
  -29
  -30
  -32
  -34
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -86
  -89
  -94
Free cash flow, $m
  3
  3
  4
  6
  9
  12
  16
  20
  25
  30
  33
  40
  48
  57
  67
  77
  89
  101
  114
  129
  145
  161
  179
  199
  219
  241
  265
  290
  317
  345
Issuance/(repayment) of debt, $m
  6
  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
  35
  36
  38
  40
Issuance/(repurchase) of shares, $m
  15
  16
  16
  15
  13
  11
  8
  5
  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  
  21
  22
  23
  23
  22
  21
  19
  16
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
Total cash flow (excl. dividends), $m
  24
  26
  28
  29
  31
  33
  34
  36
  38
  44
  47
  55
  64
  74
  85
  96
  109
  122
  137
  153
  170
  188
  208
  228
  251
  274
  299
  326
  355
  385
Retained Cash Flow (-), $m
  -15
  -16
  -16
  -15
  -13
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -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
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  20
  20
  21
  22
Cash available for distribution, $m
  9
  10
  11
  14
  18
  21
  21
  22
  23
  28
  30
  37
  45
  53
  63
  73
  84
  96
  110
  124
  139
  156
  173
  192
  213
  234
  257
  282
  309
  337
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
  8
  9
  9
  11
  13
  14
  13
  12
  11
  12
  11
  12
  13
  13
  13
  13
  12
  11
  10
  9
  8
  6
  5
  4
  3
  3
  2
  1
  1
  1
Current shareholders' claim on cash, %
  97.2
  94.2
  91.5
  89.0
  87.0
  85.5
  84.4
  83.8
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7
  83.7

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 0.4
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow -26.9
Price to Free Cash Flow -16.5
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 $1198 million for the last fiscal year's total revenue generated by Matrix Service. The default revenue input number comes from 2017 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 68.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $380 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 0.6%.

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 16.9%.

Life of production assets of 10 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 -8.5%. 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 - $322 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 27 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 $0.5 billion.

RELATED COMPANIES Price Int.Val. Rating
AEGN Aegion 25.36 16.98  sell
EME EMCOR Group 77.75 90.85  hold
CVX Chevron 122.27 224.57  str.buy
ES Eversource Ene 58.75 26.89  str.sell
EIX Edison Interna 65.06 21.49  str.sell

COMPANY NEWS

▶ 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]
▶ Here is What Hedge Funds Think About Matrix Service Co (MTRX)   [Dec-10-16 01:28PM  at Insider Monkey]
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.