Intrinsic value of Construction Partners, Inc. - ROAD

Previous Close

$14.39

  Intrinsic Value

$13.59

stock screener

  Rating & Target

hold

-6%

Previous close

$14.39

 
Intrinsic value

$13.59

 
Up/down potential

-6%

 
Rating

hold

We calculate the intrinsic value of ROAD 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 0.7

 

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, %
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  698
  717
  739
  763
  790
  818
  848
  881
  916
  953
  993
  1,035
  1,080
  1,127
  1,177
  1,231
  1,287
  1,346
  1,408
  1,474
  1,543
  1,617
  1,694
  1,775
  1,860
  1,950
  2,044
  2,144
  2,248
  2,358
Variable operating expenses, $m
  605
  622
  640
  660
  682
  706
  732
  759
  789
  820
  836
  871
  909
  949
  991
  1,036
  1,083
  1,133
  1,185
  1,241
  1,299
  1,361
  1,425
  1,494
  1,565
  1,641
  1,721
  1,804
  1,892
  1,985
Fixed operating expenses, $m
  31
  31
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  41
  42
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  54
  55
  56
  58
Total operating expenses, $m
  636
  653
  672
  693
  715
  740
  767
  795
  825
  857
  874
  910
  949
  990
  1,033
  1,078
  1,126
  1,177
  1,230
  1,287
  1,346
  1,409
  1,474
  1,545
  1,617
  1,694
  1,775
  1,859
  1,948
  2,043
Operating income, $m
  62
  64
  67
  70
  74
  77
  81
  86
  91
  96
  119
  125
  131
  138
  145
  152
  160
  169
  178
  187
  197
  208
  219
  230
  243
  256
  270
  284
  300
  316
EBITDA, $m
  103
  106
  110
  114
  118
  123
  128
  133
  139
  146
  152
  160
  167
  176
  184
  194
  204
  214
  225
  237
  249
  262
  276
  290
  305
  321
  338
  356
  375
  395
Interest expense (income), $m
  0
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
Earnings before tax, $m
  59
  61
  63
  66
  69
  72
  76
  80
  84
  89
  111
  117
  122
  128
  134
  141
  148
  156
  164
  172
  181
  191
  201
  211
  222
  234
  246
  259
  273
  288
Tax expense, $m
  16
  16
  17
  18
  19
  20
  20
  22
  23
  24
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
Net income, $m
  43
  44
  46
  48
  50
  53
  55
  58
  61
  65
  81
  85
  89
  94
  98
  103
  108
  114
  120
  126
  132
  139
  146
  154
  162
  171
  180
  189
  199
  210

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
  509
  524
  540
  557
  576
  597
  619
  643
  669
  696
  725
  756
  788
  823
  859
  898
  939
  982
  1,028
  1,076
  1,127
  1,180
  1,236
  1,295
  1,358
  1,423
  1,492
  1,565
  1,641
  1,721
Adjusted assets (=assets-cash), $m
  509
  524
  540
  557
  576
  597
  619
  643
  669
  696
  725
  756
  788
  823
  859
  898
  939
  982
  1,028
  1,076
  1,127
  1,180
  1,236
  1,295
  1,358
  1,423
  1,492
  1,565
  1,641
  1,721
Revenue / Adjusted assets
  1.371
  1.368
  1.369
  1.370
  1.372
  1.370
  1.370
  1.370
  1.369
  1.369
  1.370
  1.369
  1.371
  1.369
  1.370
  1.371
  1.371
  1.371
  1.370
  1.370
  1.369
  1.370
  1.371
  1.371
  1.370
  1.370
  1.370
  1.370
  1.370
  1.370
Average production assets, $m
  169
  174
  179
  185
  191
  198
  205
  213
  222
  231
  240
  251
  261
  273
  285
  298
  311
  326
  341
  357
  374
  391
  410
  429
  450
  472
  495
  519
  544
  571
Working capital, $m
  50
  51
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  160
  167
Total debt, $m
  68
  74
  80
  87
  95
  103
  112
  121
  131
  142
  154
  166
  179
  193
  207
  223
  239
  256
  274
  293
  313
  334
  357
  380
  405
  431
  458
  487
  517
  549
Total liabilities, $m
  202
  208
  214
  221
  229
  237
  246
  255
  265
  276
  288
  300
  313
  327
  341
  357
  373
  390
  408
  427
  447
  468
  491
  514
  539
  565
  592
  621
  651
  683
Total equity, $m
  307
  316
  325
  336
  348
  360
  373
  388
  403
  420
  437
  456
  475
  496
  518
  542
  566
  592
  620
  649
  679
  712
  745
  781
  819
  858
  900
  943
  989
  1,038
Total liabilities and equity, $m
  509
  524
  539
  557
  577
  597
  619
  643
  668
  696
  725
  756
  788
  823
  859
  899
  939
  982
  1,028
  1,076
  1,126
  1,180
  1,236
  1,295
  1,358
  1,423
  1,492
  1,564
  1,640
  1,721
Debt-to-equity ratio
  0.220
  0.230
  0.250
  0.260
  0.270
  0.290
  0.300
  0.310
  0.330
  0.340
  0.350
  0.360
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.490
  0.500
  0.510
  0.520
  0.520
  0.530
Adjusted equity ratio
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603
  0.603

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  43
  44
  46
  48
  50
  53
  55
  58
  61
  65
  81
  85
  89
  94
  98
  103
  108
  114
  120
  126
  132
  139
  146
  154
  162
  171
  180
  189
  199
  210
Depreciation, amort., depletion, $m
  41
  42
  43
  44
  44
  45
  46
  48
  49
  50
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
  72
  76
  79
Funds from operations, $m
  84
  86
  89
  92
  95
  98
  102
  106
  110
  115
  115
  120
  125
  131
  138
  144
  151
  159
  167
  175
  184
  193
  203
  214
  225
  236
  249
  261
  275
  289
Change in working capital, $m
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  83
  85
  87
  90
  93
  96
  100
  103
  108
  112
  112
  117
  122
  128
  134
  141
  147
  155
  162
  171
  179
  188
  198
  208
  219
  230
  242
  254
  268
  281
Maintenance CAPEX, $m
  -23
  -23
  -24
  -25
  -26
  -27
  -27
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -76
New CAPEX, $m
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Cash from investing activities, $m
  -27
  -28
  -29
  -31
  -32
  -34
  -34
  -37
  -38
  -40
  -42
  -43
  -46
  -47
  -50
  -53
  -55
  -57
  -60
  -63
  -67
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -97
  -103
Free cash flow, $m
  56
  57
  58
  59
  61
  63
  65
  67
  70
  72
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  113
  119
  125
  131
  138
  146
  153
  162
  170
  179
Issuance/(repayment) of debt, $m
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
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  
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
Total cash flow (excl. dividends), $m
  61
  62
  64
  66
  69
  71
  74
  77
  80
  83
  82
  86
  90
  94
  99
  104
  109
  114
  120
  126
  133
  140
  147
  155
  163
  172
  181
  190
  201
  211
Retained Cash Flow (-), $m
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
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
  54
  54
  55
  56
  57
  59
  60
  62
  64
  67
  64
  67
  70
  73
  77
  80
  84
  88
  93
  97
  102
  108
  113
  119
  126
  132
  139
  147
  155
  163
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
  51
  49
  47
  46
  44
  42
  41
  39
  37
  35
  31
  29
  27
  25
  22
  20
  18
  16
  14
  12
  11
  9
  7
  6
  5
  4
  3
  2
  2
  1
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

FINANCIAL RATIOS  of  Construction Partners, Inc. (ROAD)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

ROAD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ROAD stock intrinsic value calculation we used $680 million for the last fiscal year's total revenue generated by Construction Partners, Inc.. The default revenue input number comes from 0001 income statement of Construction Partners, 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 ROAD stock valuation model: a) initial revenue growth rate of 2.6% 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 4.3%, whose default value for ROAD is calculated based on our internal credit rating of Construction Partners, 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 Construction Partners, 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 ROAD stock the variable cost ratio is equal to 86.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $30 million in the base year in the intrinsic value calculation for ROAD 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 Construction Partners, Inc..

Corporate tax rate of 27% is the nominal tax rate for Construction Partners, 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 ROAD 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 ROAD are equal to 24.2%.

Life of production assets of 7.2 years is the average useful life of capital assets used in Construction Partners, 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 ROAD is equal to 7.1%. 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 - $299.469 million for Construction Partners, 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 51.415 million for Construction Partners, 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 Construction Partners, Inc. at the current share price and the inputted number of shares is $0.7 billion.

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