Intrinsic value of Construction Partners Cl A - ROAD

Previous Close

$9.00

  Intrinsic Value

$68.09

stock screener

  Rating & Target

str. buy

+657%

Previous close

$9.00

 
Intrinsic value

$68.09

 
Up/down potential

+657%

 
Rating

str. buy

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 0.1

 

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, %
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  595
  624
  654
  686
  720
  755
  792
  830
  871
  914
  959
  1,007
  1,056
  1,109
  1,164
  1,221
  1,282
  1,345
  1,412
  1,483
  1,556
  1,634
  1,715
  1,801
  1,890
  1,985
  2,084
  2,188
  2,297
  2,411
Variable operating expenses, $m
  388
  406
  426
  446
  468
  490
  514
  539
  565
  593
  619
  649
  682
  715
  751
  788
  827
  868
  911
  957
  1,004
  1,054
  1,107
  1,162
  1,220
  1,280
  1,344
  1,411
  1,482
  1,556
Fixed operating expenses, $m
  158
  162
  165
  169
  173
  177
  181
  184
  189
  193
  197
  201
  206
  210
  215
  220
  224
  229
  234
  240
  245
  250
  256
  261
  267
  273
  279
  285
  291
  298
Total operating expenses, $m
  546
  568
  591
  615
  641
  667
  695
  723
  754
  786
  816
  850
  888
  925
  966
  1,008
  1,051
  1,097
  1,145
  1,197
  1,249
  1,304
  1,363
  1,423
  1,487
  1,553
  1,623
  1,696
  1,773
  1,854
Operating income, $m
  50
  56
  63
  71
  79
  88
  97
  107
  117
  128
  143
  156
  169
  183
  198
  214
  230
  248
  267
  287
  307
  330
  353
  378
  404
  431
  460
  491
  524
  558
EBITDA, $m
  72
  80
  88
  97
  106
  116
  126
  137
  149
  162
  175
  189
  204
  220
  236
  254
  272
  292
  313
  335
  359
  383
  409
  437
  466
  496
  529
  563
  599
  637
Interest expense (income), $m
  0
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  38
  40
Earnings before tax, $m
  46
  52
  58
  65
  73
  81
  89
  98
  108
  118
  132
  144
  156
  169
  183
  198
  213
  229
  247
  265
  285
  305
  327
  350
  374
  400
  427
  456
  486
  518
Tax expense, $m
  12
  14
  16
  18
  20
  22
  24
  27
  29
  32
  36
  39
  42
  46
  49
  53
  58
  62
  67
  72
  77
  82
  88
  94
  101
  108
  115
  123
  131
  140
Net income, $m
  33
  38
  43
  48
  53
  59
  65
  72
  79
  86
  97
  105
  114
  123
  134
  144
  156
  167
  180
  194
  208
  223
  239
  255
  273
  292
  312
  333
  355
  378

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
  344
  361
  378
  397
  416
  436
  458
  480
  504
  529
  555
  582
  611
  641
  673
  706
  741
  778
  817
  857
  900
  945
  992
  1,041
  1,093
  1,148
  1,205
  1,265
  1,328
  1,395
Adjusted assets (=assets-cash), $m
  344
  361
  378
  397
  416
  436
  458
  480
  504
  529
  555
  582
  611
  641
  673
  706
  741
  778
  817
  857
  900
  945
  992
  1,041
  1,093
  1,148
  1,205
  1,265
  1,328
  1,395
Revenue / Adjusted assets
  1.730
  1.729
  1.730
  1.728
  1.731
  1.732
  1.729
  1.729
  1.728
  1.728
  1.728
  1.730
  1.728
  1.730
  1.730
  1.729
  1.730
  1.729
  1.728
  1.730
  1.729
  1.729
  1.729
  1.730
  1.729
  1.729
  1.729
  1.730
  1.730
  1.728
Average production assets, $m
  133
  139
  146
  153
  160
  168
  177
  185
  194
  204
  214
  224
  236
  247
  259
  272
  286
  300
  315
  331
  347
  364
  382
  402
  422
  443
  465
  488
  512
  538
Working capital, $m
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  93
  97
  102
  107
  113
  118
  124
  130
  137
  144
  151
  158
  166
  175
  183
Total debt, $m
  66
  75
  84
  94
  104
  115
  127
  139
  151
  165
  179
  193
  209
  225
  242
  260
  279
  299
  319
  341
  364
  388
  413
  440
  468
  497
  528
  560
  594
  630
Total liabilities, $m
  185
  194
  203
  213
  223
  234
  246
  258
  271
  284
  298
  313
  328
  344
  361
  379
  398
  418
  439
  460
  483
  507
  533
  559
  587
  616
  647
  679
  713
  749
Total equity, $m
  159
  167
  175
  184
  193
  202
  212
  222
  233
  245
  257
  270
  283
  297
  312
  327
  343
  360
  378
  397
  417
  438
  459
  482
  506
  531
  558
  586
  615
  646
Total liabilities and equity, $m
  344
  361
  378
  397
  416
  436
  458
  480
  504
  529
  555
  583
  611
  641
  673
  706
  741
  778
  817
  857
  900
  945
  992
  1,041
  1,093
  1,147
  1,205
  1,265
  1,328
  1,395
Debt-to-equity ratio
  0.410
  0.450
  0.480
  0.510
  0.540
  0.570
  0.600
  0.620
  0.650
  0.670
  0.700
  0.720
  0.740
  0.760
  0.780
  0.800
  0.810
  0.830
  0.840
  0.860
  0.870
  0.890
  0.900
  0.910
  0.920
  0.940
  0.950
  0.960
  0.970
  0.980
Adjusted equity ratio
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  38
  43
  48
  53
  59
  65
  72
  79
  86
  97
  105
  114
  123
  134
  144
  156
  167
  180
  194
  208
  223
  239
  255
  273
  292
  312
  333
  355
  378
Depreciation, amort., depletion, $m
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  31
  33
  35
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
  68
  72
  75
  79
Funds from operations, $m
  56
  62
  67
  74
  80
  87
  95
  102
  111
  120
  128
  138
  149
  160
  172
  184
  198
  212
  226
  242
  259
  276
  295
  315
  335
  357
  380
  404
  430
  457
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  54
  59
  65
  71
  78
  84
  92
  99
  108
  116
  125
  134
  145
  156
  168
  180
  193
  207
  221
  237
  253
  270
  289
  308
  328
  350
  373
  397
  422
  449
Maintenance CAPEX, $m
  -19
  -20
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
New CAPEX, $m
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
Cash from investing activities, $m
  -25
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -36
  -39
  -40
  -42
  -44
  -47
  -48
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
  -96
  -101
Free cash flow, $m
  29
  34
  38
  43
  48
  53
  59
  65
  71
  78
  85
  92
  101
  110
  119
  129
  139
  151
  162
  175
  188
  202
  217
  233
  249
  267
  285
  305
  326
  348
Issuance/(repayment) of debt, $m
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
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  
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
Total cash flow (excl. dividends), $m
  38
  42
  47
  52
  58
  64
  70
  77
  84
  92
  99
  107
  116
  126
  136
  147
  158
  170
  183
  197
  211
  226
  242
  259
  277
  296
  316
  337
  360
  383
Retained Cash Flow (-), $m
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
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
  31
  35
  39
  44
  49
  55
  60
  66
  73
  80
  87
  94
  103
  112
  121
  131
  142
  153
  165
  178
  191
  205
  220
  236
  253
  271
  290
  310
  330
  353
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
  29
  32
  34
  36
  38
  40
  41
  42
  42
  42
  41
  40
  39
  38
  36
  33
  31
  28
  25
  23
  20
  17
  14
  12
  10
  8
  6
  5
  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

FINANCIAL RATIOS  of  Construction Partners Cl A (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 $568.212 million for the last fiscal year's total revenue generated by Construction Partners Cl A. The default revenue input number comes from 0001 income statement of Construction Partners Cl A. 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 4.8% 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 Cl A, 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 Cl A.
    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 65.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $155 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 6.7% for Construction Partners Cl A.

Corporate tax rate of 27% is the nominal tax rate for Construction Partners Cl A. 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 22.3%.

Life of production assets of 6.8 years is the average useful life of capital assets used in Construction Partners Cl A 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 7.6%. 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 - $152.181 million for Construction Partners Cl A - 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 11.95 million for Construction Partners Cl A 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 Cl A at the current share price and the inputted number of shares is $0.1 billion.

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