Intrinsic value of Mueller Water Products Inc - MWA

Previous Close

$9.69

  Intrinsic Value

$15.19

stock screener

  Rating & Target

str. buy

+57%

Previous close

$9.69

 
Intrinsic value

$15.19

 
Up/down potential

+57%

 
Rating

str. buy

We calculate the intrinsic value of MWA 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 1.5

 

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, %
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
Revenue, $m
  990
  1,067
  1,147
  1,231
  1,317
  1,407
  1,501
  1,598
  1,699
  1,805
  1,915
  2,029
  2,148
  2,272
  2,402
  2,538
  2,679
  2,827
  2,981
  3,143
  3,312
  3,489
  3,674
  3,868
  4,071
  4,283
  4,506
  4,739
  4,984
  5,241
Variable operating expenses, $m
  772
  829
  888
  949
  1,013
  1,079
  1,148
  1,220
  1,295
  1,372
  1,411
  1,496
  1,584
  1,675
  1,771
  1,871
  1,975
  2,084
  2,198
  2,317
  2,441
  2,572
  2,708
  2,851
  3,001
  3,157
  3,322
  3,494
  3,674
  3,863
Fixed operating expenses, $m
  82
  84
  85
  87
  89
  91
  93
  95
  97
  99
  102
  104
  106
  108
  111
  113
  116
  118
  121
  124
  126
  129
  132
  135
  138
  141
  144
  147
  150
  154
Total operating expenses, $m
  854
  913
  973
  1,036
  1,102
  1,170
  1,241
  1,315
  1,392
  1,471
  1,513
  1,600
  1,690
  1,783
  1,882
  1,984
  2,091
  2,202
  2,319
  2,441
  2,567
  2,701
  2,840
  2,986
  3,139
  3,298
  3,466
  3,641
  3,824
  4,017
Operating income, $m
  137
  155
  174
  194
  215
  237
  259
  283
  307
  333
  402
  429
  458
  489
  521
  554
  588
  625
  663
  703
  744
  788
  834
  882
  932
  985
  1,040
  1,099
  1,160
  1,224
EBITDA, $m
  208
  229
  250
  273
  296
  320
  346
  372
  400
  428
  458
  489
  522
  556
  592
  629
  668
  708
  751
  795
  842
  891
  942
  996
  1,052
  1,112
  1,174
  1,239
  1,307
  1,379
Interest expense (income), $m
  20
  24
  27
  31
  34
  38
  41
  45
  49
  53
  58
  62
  67
  72
  77
  82
  88
  94
  100
  106
  113
  120
  127
  134
  142
  151
  159
  169
  178
  188
  199
Earnings before tax, $m
  112
  128
  144
  160
  178
  195
  214
  234
  254
  275
  339
  363
  387
  412
  438
  466
  495
  525
  557
  590
  625
  661
  699
  739
  781
  826
  872
  920
  972
  1,025
Tax expense, $m
  30
  34
  39
  43
  48
  53
  58
  63
  69
  74
  92
  98
  104
  111
  118
  126
  134
  142
  150
  159
  169
  178
  189
  200
  211
  223
  235
  249
  262
  277
Net income, $m
  82
  93
  105
  117
  130
  143
  156
  171
  185
  201
  248
  265
  282
  301
  320
  340
  361
  383
  406
  431
  456
  483
  510
  540
  570
  603
  636
  672
  709
  748

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
  1,202
  1,295
  1,393
  1,494
  1,599
  1,708
  1,822
  1,940
  2,062
  2,190
  2,324
  2,462
  2,607
  2,758
  2,915
  3,080
  3,251
  3,431
  3,618
  3,814
  4,019
  4,234
  4,459
  4,694
  4,940
  5,198
  5,468
  5,752
  6,049
  6,360
Adjusted assets (=assets-cash), $m
  1,202
  1,295
  1,393
  1,494
  1,599
  1,708
  1,822
  1,940
  2,062
  2,190
  2,324
  2,462
  2,607
  2,758
  2,915
  3,080
  3,251
  3,431
  3,618
  3,814
  4,019
  4,234
  4,459
  4,694
  4,940
  5,198
  5,468
  5,752
  6,049
  6,360
Revenue / Adjusted assets
  0.824
  0.824
  0.823
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
  0.824
Average production assets, $m
  380
  410
  441
  473
  506
  540
  576
  614
  653
  693
  735
  779
  825
  873
  922
  974
  1,029
  1,086
  1,145
  1,207
  1,272
  1,340
  1,411
  1,485
  1,563
  1,645
  1,730
  1,820
  1,914
  2,012
Working capital, $m
  186
  201
  216
  231
  248
  265
  282
  300
  319
  339
  360
  381
  404
  427
  452
  477
  504
  531
  561
  591
  623
  656
  691
  727
  765
  805
  847
  891
  937
  985
Total debt, $m
  504
  566
  629
  695
  764
  836
  910
  988
  1,068
  1,152
  1,239
  1,330
  1,425
  1,524
  1,627
  1,734
  1,847
  1,964
  2,087
  2,215
  2,350
  2,490
  2,638
  2,792
  2,953
  3,122
  3,299
  3,484
  3,679
  3,883
Total liabilities, $m
  787
  848
  912
  978
  1,047
  1,119
  1,193
  1,270
  1,351
  1,435
  1,522
  1,613
  1,708
  1,806
  1,910
  2,017
  2,130
  2,247
  2,370
  2,498
  2,633
  2,773
  2,920
  3,074
  3,236
  3,405
  3,582
  3,767
  3,962
  4,166
Total equity, $m
  415
  447
  480
  515
  552
  589
  628
  669
  712
  756
  802
  849
  899
  951
  1,006
  1,062
  1,122
  1,184
  1,248
  1,316
  1,387
  1,461
  1,538
  1,619
  1,704
  1,793
  1,887
  1,984
  2,087
  2,194
Total liabilities and equity, $m
  1,202
  1,295
  1,392
  1,493
  1,599
  1,708
  1,821
  1,939
  2,063
  2,191
  2,324
  2,462
  2,607
  2,757
  2,916
  3,079
  3,252
  3,431
  3,618
  3,814
  4,020
  4,234
  4,458
  4,693
  4,940
  5,198
  5,469
  5,751
  6,049
  6,360
Debt-to-equity ratio
  1.220
  1.270
  1.310
  1.350
  1.390
  1.420
  1.450
  1.480
  1.500
  1.520
  1.550
  1.570
  1.580
  1.600
  1.620
  1.630
  1.650
  1.660
  1.670
  1.680
  1.690
  1.700
  1.710
  1.720
  1.730
  1.740
  1.750
  1.760
  1.760
  1.770
Adjusted equity ratio
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  82
  93
  105
  117
  130
  143
  156
  171
  185
  201
  248
  265
  282
  301
  320
  340
  361
  383
  406
  431
  456
  483
  510
  540
  570
  603
  636
  672
  709
  748
Depreciation, amort., depletion, $m
  71
  74
  76
  78
  81
  84
  86
  89
  92
  95
  57
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  103
  109
  114
  120
  127
  133
  140
  147
  155
Funds from operations, $m
  153
  167
  181
  195
  211
  226
  243
  260
  278
  296
  304
  325
  346
  368
  391
  415
  440
  467
  494
  523
  554
  586
  619
  654
  691
  729
  770
  812
  856
  903
Change in working capital, $m
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
Cash from operations, $m
  139
  152
  166
  180
  194
  209
  225
  242
  259
  276
  284
  303
  323
  344
  367
  390
  414
  439
  465
  493
  522
  552
  584
  618
  653
  689
  728
  768
  810
  855
Maintenance CAPEX, $m
  -27
  -29
  -32
  -34
  -36
  -39
  -42
  -44
  -47
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -109
  -114
  -120
  -127
  -133
  -140
  -147
New CAPEX, $m
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -98
Cash from investing activities, $m
  -56
  -59
  -63
  -66
  -69
  -74
  -78
  -81
  -86
  -90
  -95
  -101
  -106
  -111
  -117
  -123
  -129
  -136
  -143
  -150
  -158
  -166
  -174
  -183
  -192
  -202
  -213
  -223
  -234
  -245
Free cash flow, $m
  84
  93
  103
  114
  125
  136
  148
  160
  173
  186
  188
  203
  218
  233
  250
  267
  284
  303
  323
  343
  364
  387
  410
  435
  460
  487
  516
  545
  577
  609
Issuance/(repayment) of debt, $m
  59
  61
  64
  66
  69
  72
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
  112
  117
  123
  128
  134
  141
  147
  154
  161
  169
  177
  186
  194
  204
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  
  59
  61
  64
  66
  69
  72
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
  112
  117
  123
  128
  134
  141
  147
  154
  161
  169
  177
  186
  194
  204
Total cash flow (excl. dividends), $m
  143
  155
  167
  180
  193
  207
  222
  237
  253
  270
  275
  294
  312
  332
  353
  374
  397
  421
  445
  471
  499
  527
  557
  589
  622
  656
  693
  731
  771
  813
Retained Cash Flow (-), $m
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -102
  -107
Prev. year cash balance distribution, $m
  180
  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
  292
  122
  134
  145
  157
  170
  183
  196
  211
  225
  230
  246
  262
  280
  298
  318
  338
  359
  381
  404
  428
  453
  480
  508
  537
  567
  599
  633
  669
  706
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
  280
  112
  116
  120
  122
  123
  124
  123
  121
  118
  109
  105
  100
  94
  88
  81
  73
  66
  59
  51
  44
  38
  31
  26
  21
  17
  13
  10
  7
  5
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

Mueller Water Products, Inc. is a manufacturer and marketer of products and services used in the transmission, distribution and measurement of water in North America. The Company operates through three segments: Mueller Co., Anvil and Mueller Technologies. The Mueller Co. segment manufactures valves for water and gas systems, and dry-barrel and wet-barrel fire hydrants. The Anvil segment manufactures and sources a range of products, including a range of fittings, couplings, hangers and related products. The Mueller Technologies segment offers metering systems, leak detection, pipe condition assessment and other products and services for the water infrastructure industry. The Mueller Technologies segment includes Mueller Systems and Echologics businesses. The Company offers a range of water infrastructure, flow control and piping component system products and services in the United States and Canada.

FINANCIAL RATIOS  of  Mueller Water Products Inc (MWA)

Valuation Ratios
P/E Ratio 12.5
Price to Sales 1.9
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 96
Price to Free Cash Flow -61.5
Growth Rates
Sales Growth Rate 3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.1%
Cap. Spend. - 3 Yr. Gr. Rate 2.1%
Financial Strength
Quick Ratio 60
Current Ratio 0.1
LT Debt to Equity 97.3%
Total Debt to Equity 98.6%
Interest Coverage 5
Management Effectiveness
Return On Assets 10.8%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 13.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 27.2%
Return On Equity - 3 Yr. Avg. 17.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 32.4%
Gross Margin - 3 Yr. Avg. 32.3%
EBITDA Margin 17.1%
EBITDA Margin - 3 Yr. Avg. 15.3%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 10%
Pre-Tax Margin 9.6%
Pre-Tax Margin - 3 Yr. Avg. 6.9%
Net Profit Margin 14.9%
Net Profit Margin - 3 Yr. Avg. 8.9%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 34.8%
Payout Ratio 19.5%

MWA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MWA stock intrinsic value calculation we used $916 million for the last fiscal year's total revenue generated by Mueller Water Products Inc. The default revenue input number comes from 0001 income statement of Mueller Water Products 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 MWA stock valuation model: a) initial revenue growth rate of 8.1% 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 MWA is calculated based on our internal credit rating of Mueller Water Products 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 Mueller Water Products 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 MWA stock the variable cost ratio is equal to 78.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $80 million in the base year in the intrinsic value calculation for MWA 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 5.4% for Mueller Water Products Inc.

Corporate tax rate of 27% is the nominal tax rate for Mueller Water Products 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 MWA 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 MWA are equal to 38.4%.

Life of production assets of 13 years is the average useful life of capital assets used in Mueller Water Products 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 MWA is equal to 18.8%. 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 - $563.3 million for Mueller Water Products 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 158.406 million for Mueller Water Products 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 Mueller Water Products Inc at the current share price and the inputted number of shares is $1.5 billion.

RELATED COMPANIES Price Int.Val. Rating
CIR CIRCOR Interna 38.74 61.54  str.buy
BMI Badger Meter, 52.96 17.85  str.sell
ITRI Itron, Inc. 59.82 64.78  buy
DOV Dover Corporat 98.12 82.02  hold

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.