Intrinsic value of Murphy USA Inc. - MUSA

Previous Close

$84.05

  Intrinsic Value

$74.82

stock screener

  Rating & Target

hold

-11%

Previous close

$84.05

 
Intrinsic value

$74.82

 
Up/down potential

-11%

 
Rating

hold

We calculate the intrinsic value of MUSA 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 2.7

 

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, %
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  14,880
  15,437
  16,033
  16,671
  17,352
  18,076
  18,845
  19,661
  20,526
  21,441
  22,408
  23,430
  24,509
  25,647
  26,848
  28,113
  29,445
  30,849
  32,326
  33,882
  35,518
  37,239
  39,050
  40,954
  42,956
  45,061
  47,273
  49,598
  52,042
  54,610
Variable operating expenses, $m
  14,478
  15,020
  15,600
  16,221
  16,883
  17,588
  18,336
  19,131
  19,972
  20,862
  21,803
  22,798
  23,847
  24,955
  26,123
  27,354
  28,650
  30,016
  31,454
  32,967
  34,559
  36,234
  37,996
  39,848
  41,796
  43,844
  45,997
  48,259
  50,637
  53,135
Fixed operating expenses, $m
  68
  70
  72
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  104
  106
  108
  111
  113
  115
  118
  121
  123
  126
  129
Total operating expenses, $m
  14,546
  15,090
  15,672
  16,294
  16,958
  17,664
  18,414
  19,211
  20,053
  20,945
  21,888
  22,885
  23,936
  25,046
  26,216
  27,449
  28,747
  30,115
  31,555
  33,071
  34,665
  36,342
  38,107
  39,961
  41,911
  43,962
  46,118
  48,382
  50,763
  53,264
Operating income, $m
  333
  347
  361
  377
  394
  412
  431
  451
  473
  496
  520
  546
  573
  602
  632
  664
  698
  734
  772
  811
  853
  897
  944
  993
  1,044
  1,099
  1,156
  1,216
  1,279
  1,346
EBITDA, $m
  472
  490
  510
  532
  555
  580
  606
  634
  664
  695
  728
  763
  801
  840
  882
  925
  972
  1,021
  1,072
  1,126
  1,183
  1,244
  1,307
  1,374
  1,444
  1,518
  1,595
  1,677
  1,763
  1,853
Interest expense (income), $m
  71
  53
  56
  60
  64
  68
  72
  77
  82
  88
  93
  99
  106
  112
  120
  127
  135
  143
  152
  161
  171
  181
  192
  204
  216
  228
  241
  255
  270
  285
  301
Earnings before tax, $m
  281
  291
  302
  313
  326
  339
  354
  369
  385
  402
  421
  440
  460
  482
  505
  529
  555
  582
  610
  640
  672
  705
  740
  777
  816
  857
  901
  946
  994
  1,045
Tax expense, $m
  76
  79
  81
  85
  88
  92
  95
  100
  104
  109
  114
  119
  124
  130
  136
  143
  150
  157
  165
  173
  181
  190
  200
  210
  220
  231
  243
  255
  268
  282
Net income, $m
  205
  212
  220
  229
  238
  248
  258
  269
  281
  294
  307
  321
  336
  352
  369
  386
  405
  425
  445
  467
  490
  515
  540
  567
  596
  626
  657
  691
  726
  762

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
  2,446
  2,537
  2,635
  2,740
  2,852
  2,971
  3,098
  3,232
  3,374
  3,524
  3,683
  3,851
  4,028
  4,216
  4,413
  4,621
  4,840
  5,070
  5,313
  5,569
  5,838
  6,121
  6,418
  6,731
  7,061
  7,406
  7,770
  8,152
  8,554
  8,976
Adjusted assets (=assets-cash), $m
  2,446
  2,537
  2,635
  2,740
  2,852
  2,971
  3,098
  3,232
  3,374
  3,524
  3,683
  3,851
  4,028
  4,216
  4,413
  4,621
  4,840
  5,070
  5,313
  5,569
  5,838
  6,121
  6,418
  6,731
  7,061
  7,406
  7,770
  8,152
  8,554
  8,976
Revenue / Adjusted assets
  6.083
  6.085
  6.085
  6.084
  6.084
  6.084
  6.083
  6.083
  6.084
  6.084
  6.084
  6.084
  6.085
  6.083
  6.084
  6.084
  6.084
  6.085
  6.084
  6.084
  6.084
  6.084
  6.084
  6.084
  6.084
  6.084
  6.084
  6.084
  6.084
  6.084
Average production assets, $m
  1,771
  1,837
  1,908
  1,984
  2,065
  2,151
  2,243
  2,340
  2,443
  2,551
  2,667
  2,788
  2,917
  3,052
  3,195
  3,345
  3,504
  3,671
  3,847
  4,032
  4,227
  4,431
  4,647
  4,874
  5,112
  5,362
  5,625
  5,902
  6,193
  6,499
Working capital, $m
  -74
  -77
  -80
  -83
  -87
  -90
  -94
  -98
  -103
  -107
  -112
  -117
  -123
  -128
  -134
  -141
  -147
  -154
  -162
  -169
  -178
  -186
  -195
  -205
  -215
  -225
  -236
  -248
  -260
  -273
Total debt, $m
  919
  979
  1,044
  1,113
  1,186
  1,265
  1,348
  1,436
  1,530
  1,629
  1,733
  1,844
  1,961
  2,084
  2,213
  2,350
  2,494
  2,646
  2,806
  2,974
  3,151
  3,337
  3,533
  3,739
  3,956
  4,183
  4,423
  4,674
  4,938
  5,216
Total liabilities, $m
  1,609
  1,670
  1,734
  1,803
  1,877
  1,955
  2,038
  2,126
  2,220
  2,319
  2,424
  2,534
  2,651
  2,774
  2,904
  3,040
  3,185
  3,336
  3,496
  3,664
  3,841
  4,028
  4,223
  4,429
  4,646
  4,873
  5,113
  5,364
  5,628
  5,906
Total equity, $m
  836
  868
  901
  937
  975
  1,016
  1,059
  1,105
  1,154
  1,205
  1,260
  1,317
  1,378
  1,442
  1,509
  1,580
  1,655
  1,734
  1,817
  1,905
  1,997
  2,093
  2,195
  2,302
  2,415
  2,533
  2,657
  2,788
  2,925
  3,070
Total liabilities and equity, $m
  2,445
  2,538
  2,635
  2,740
  2,852
  2,971
  3,097
  3,231
  3,374
  3,524
  3,684
  3,851
  4,029
  4,216
  4,413
  4,620
  4,840
  5,070
  5,313
  5,569
  5,838
  6,121
  6,418
  6,731
  7,061
  7,406
  7,770
  8,152
  8,553
  8,976
Debt-to-equity ratio
  1.100
  1.130
  1.160
  1.190
  1.220
  1.240
  1.270
  1.300
  1.330
  1.350
  1.380
  1.400
  1.420
  1.450
  1.470
  1.490
  1.510
  1.530
  1.540
  1.560
  1.580
  1.590
  1.610
  1.620
  1.640
  1.650
  1.660
  1.680
  1.690
  1.700
Adjusted equity ratio
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342
  0.342

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  205
  212
  220
  229
  238
  248
  258
  269
  281
  294
  307
  321
  336
  352
  369
  386
  405
  425
  445
  467
  490
  515
  540
  567
  596
  626
  657
  691
  726
  762
Depreciation, amort., depletion, $m
  138
  144
  149
  155
  161
  168
  175
  183
  191
  199
  208
  218
  228
  238
  250
  261
  274
  287
  301
  315
  330
  346
  363
  381
  399
  419
  439
  461
  484
  508
Funds from operations, $m
  343
  356
  369
  384
  399
  416
  433
  452
  472
  493
  515
  539
  564
  590
  618
  648
  679
  711
  746
  782
  821
  861
  903
  948
  995
  1,045
  1,097
  1,152
  1,210
  1,270
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from operations, $m
  346
  359
  372
  387
  403
  419
  437
  456
  476
  498
  520
  544
  569
  596
  624
  654
  685
  718
  753
  790
  829
  870
  912
  958
  1,005
  1,055
  1,108
  1,163
  1,222
  1,283
Maintenance CAPEX, $m
  -134
  -138
  -144
  -149
  -155
  -161
  -168
  -175
  -183
  -191
  -199
  -208
  -218
  -228
  -238
  -250
  -261
  -274
  -287
  -301
  -315
  -330
  -346
  -363
  -381
  -399
  -419
  -439
  -461
  -484
New CAPEX, $m
  -57
  -66
  -71
  -76
  -81
  -86
  -92
  -97
  -103
  -109
  -115
  -122
  -128
  -135
  -143
  -151
  -159
  -167
  -176
  -185
  -195
  -205
  -215
  -227
  -238
  -250
  -263
  -277
  -291
  -306
Cash from investing activities, $m
  -191
  -204
  -215
  -225
  -236
  -247
  -260
  -272
  -286
  -300
  -314
  -330
  -346
  -363
  -381
  -401
  -420
  -441
  -463
  -486
  -510
  -535
  -561
  -590
  -619
  -649
  -682
  -716
  -752
  -790
Free cash flow, $m
  155
  154
  158
  162
  167
  172
  178
  184
  191
  198
  206
  214
  223
  233
  243
  254
  265
  278
  291
  304
  319
  334
  351
  368
  386
  406
  426
  447
  470
  494
Issuance/(repayment) of debt, $m
  56
  60
  65
  69
  74
  78
  83
  88
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  217
  228
  239
  251
  264
  278
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  
  56
  60
  65
  69
  74
  78
  83
  88
  94
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
  186
  196
  206
  217
  228
  239
  251
  264
  278
Total cash flow (excl. dividends), $m
  211
  214
  222
  231
  240
  250
  261
  272
  284
  297
  310
  325
  340
  356
  373
  391
  410
  429
  450
  473
  496
  521
  547
  574
  603
  633
  665
  699
  734
  771
Retained Cash Flow (-), $m
  -29
  -31
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -51
  -54
  -57
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
  -107
  -113
  -118
  -124
  -131
  -137
  -144
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
  182
  183
  189
  195
  202
  210
  218
  226
  236
  245
  256
  267
  279
  292
  305
  320
  335
  351
  367
  385
  404
  424
  445
  467
  490
  515
  541
  568
  597
  627
Discount rate, %
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
  174
  166
  162
  158
  153
  148
  142
  136
  129
  121
  114
  106
  97
  89
  80
  72
  64
  56
  48
  41
  34
  28
  23
  18
  14
  11
  8
  6
  4
  3
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

Murphy USA Inc. is engaged in the marketing of retail motor fuel products and merchandise through a chain of retail stores. The Company operates through the Marketing segment. The Marketing segment includes its retail marketing sites and product supply, and wholesale assets. As of December 31, 2016, its retail stores were located in 26 states, primarily in the Southwest, Southeast and Midwest the United States. Out of the total 1,401 stores, 1,152 were branded Murphy USA and 249 were Murphy Express locations, as of December 31, 2016. Its retail stores under the brand name Murphy USA participate in the Walmart discount program. The Walmart discount program offers a cents-off per gallon purchased for fuel when using specific payment methods as decided by Walmart and the Company. Its business also includes product supply and wholesale assets, including product distribution terminals and pipeline positions.

FINANCIAL RATIOS  of  Murphy USA Inc. (MUSA)

Valuation Ratios
P/E Ratio 14
Price to Sales 0.3
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 41.4
Growth Rates
Sales Growth Rate -8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 27.8%
Cap. Spend. - 3 Yr. Gr. Rate 10%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 90.2%
Total Debt to Equity 96.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 13.4%
Ret/ On Assets - 3 Yr. Avg. 12.5%
Return On Total Capital 16.7%
Ret/ On T. Cap. - 3 Yr. Avg. 16.4%
Return On Equity 29.7%
Return On Equity - 3 Yr. Avg. 27.7%
Asset Turnover 5.8
Profitability Ratios
Gross Margin 8.8%
Gross Margin - 3 Yr. Avg. 7.5%
EBITDA Margin 4.5%
EBITDA Margin - 3 Yr. Avg. 3.3%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin 3%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 37.2%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 0%

MUSA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MUSA stock intrinsic value calculation we used $14363 million for the last fiscal year's total revenue generated by Murphy USA Inc.. The default revenue input number comes from 0001 income statement of Murphy USA 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 MUSA stock valuation model: a) initial revenue growth rate of 3.6% 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 4.7%, whose default value for MUSA is calculated based on our internal credit rating of Murphy USA 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 Murphy USA 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 MUSA stock the variable cost ratio is equal to 97.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $67 million in the base year in the intrinsic value calculation for MUSA 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 6.1% for Murphy USA Inc..

Corporate tax rate of 27% is the nominal tax rate for Murphy USA 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 MUSA 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 MUSA are equal to 11.9%.

Life of production assets of 12.8 years is the average useful life of capital assets used in Murphy USA 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 MUSA is equal to -0.5%. 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 - $807.3 million for Murphy USA 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 32.222 million for Murphy USA 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 Murphy USA Inc. at the current share price and the inputted number of shares is $2.7 billion.

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