Intrinsic value of RBC Bearings Incorporated - ROLL

Previous Close

$159.96

  Intrinsic Value

$56.92

stock screener

  Rating & Target

str. sell

-64%

Previous close

$159.96

 
Intrinsic value

$56.92

 
Up/down potential

-64%

 
Rating

str. sell

We calculate the intrinsic value of ROLL 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 4.0

 

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, %
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  694
  715
  738
  763
  790
  819
  851
  884
  920
  958
  999
  1,042
  1,087
  1,136
  1,187
  1,241
  1,298
  1,358
  1,421
  1,488
  1,559
  1,633
  1,711
  1,793
  1,880
  1,971
  2,066
  2,167
  2,273
  2,384
Variable operating expenses, $m
  479
  492
  506
  522
  539
  557
  577
  598
  620
  644
  624
  651
  680
  710
  742
  776
  811
  849
  888
  930
  974
  1,021
  1,069
  1,121
  1,175
  1,232
  1,292
  1,354
  1,421
  1,490
Fixed operating expenses, $m
  65
  67
  68
  70
  71
  73
  75
  76
  78
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  103
  106
  108
  110
  113
  115
  118
  120
  123
Total operating expenses, $m
  544
  559
  574
  592
  610
  630
  652
  674
  698
  724
  705
  734
  765
  797
  831
  867
  904
  944
  985
  1,029
  1,075
  1,124
  1,175
  1,229
  1,285
  1,345
  1,407
  1,472
  1,541
  1,613
Operating income, $m
  150
  156
  163
  171
  180
  189
  199
  210
  222
  235
  293
  308
  323
  339
  356
  375
  394
  414
  436
  459
  483
  509
  536
  564
  595
  626
  660
  695
  732
  771
EBITDA, $m
  214
  221
  228
  237
  246
  256
  267
  279
  292
  306
  320
  336
  352
  370
  388
  408
  429
  451
  475
  499
  526
  553
  582
  613
  645
  680
  716
  754
  794
  836
Interest expense (income), $m
  0
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
Earnings before tax, $m
  140
  146
  153
  160
  168
  177
  186
  196
  207
  219
  277
  290
  304
  320
  336
  353
  371
  390
  410
  431
  454
  478
  503
  530
  558
  587
  618
  651
  686
  722
Tax expense, $m
  38
  39
  41
  43
  45
  48
  50
  53
  56
  59
  75
  78
  82
  86
  91
  95
  100
  105
  111
  116
  123
  129
  136
  143
  151
  159
  167
  176
  185
  195
Net income, $m
  102
  107
  112
  117
  123
  129
  136
  143
  151
  160
  202
  212
  222
  233
  245
  257
  271
  285
  299
  315
  331
  349
  367
  387
  407
  429
  451
  475
  501
  527

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
  1,174
  1,210
  1,248
  1,291
  1,337
  1,386
  1,439
  1,496
  1,557
  1,621
  1,690
  1,763
  1,840
  1,922
  2,008
  2,100
  2,196
  2,298
  2,405
  2,518
  2,637
  2,763
  2,895
  3,034
  3,180
  3,334
  3,496
  3,667
  3,846
  4,034
Adjusted assets (=assets-cash), $m
  1,174
  1,210
  1,248
  1,291
  1,337
  1,386
  1,439
  1,496
  1,557
  1,621
  1,690
  1,763
  1,840
  1,922
  2,008
  2,100
  2,196
  2,298
  2,405
  2,518
  2,637
  2,763
  2,895
  3,034
  3,180
  3,334
  3,496
  3,667
  3,846
  4,034
Revenue / Adjusted assets
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
  0.591
Average production assets, $m
  429
  442
  456
  471
  488
  506
  526
  546
  569
  592
  617
  644
  672
  702
  733
  767
  802
  839
  878
  920
  963
  1,009
  1,057
  1,108
  1,162
  1,218
  1,277
  1,339
  1,405
  1,473
Working capital, $m
  347
  357
  369
  381
  395
  410
  425
  442
  460
  479
  499
  521
  544
  568
  593
  620
  649
  679
  711
  744
  779
  816
  855
  897
  940
  985
  1,033
  1,084
  1,136
  1,192
Total debt, $m
  182
  192
  202
  214
  226
  239
  254
  269
  286
  303
  321
  341
  362
  384
  407
  432
  458
  486
  515
  545
  577
  611
  647
  684
  724
  765
  809
  855
  904
  954
Total liabilities, $m
  317
  327
  337
  349
  361
  374
  389
  404
  420
  438
  456
  476
  497
  519
  542
  567
  593
  620
  649
  680
  712
  746
  782
  819
  859
  900
  944
  990
  1,038
  1,089
Total equity, $m
  857
  883
  911
  942
  976
  1,012
  1,051
  1,092
  1,137
  1,184
  1,234
  1,287
  1,343
  1,403
  1,466
  1,533
  1,603
  1,677
  1,756
  1,838
  1,925
  2,017
  2,113
  2,215
  2,322
  2,434
  2,552
  2,677
  2,807
  2,945
Total liabilities and equity, $m
  1,174
  1,210
  1,248
  1,291
  1,337
  1,386
  1,440
  1,496
  1,557
  1,622
  1,690
  1,763
  1,840
  1,922
  2,008
  2,100
  2,196
  2,297
  2,405
  2,518
  2,637
  2,763
  2,895
  3,034
  3,181
  3,334
  3,496
  3,667
  3,845
  4,034
Debt-to-equity ratio
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
Adjusted equity ratio
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  102
  107
  112
  117
  123
  129
  136
  143
  151
  160
  202
  212
  222
  233
  245
  257
  271
  285
  299
  315
  331
  349
  367
  387
  407
  429
  451
  475
  501
  527
Depreciation, amort., depletion, $m
  64
  65
  65
  66
  67
  67
  68
  69
  70
  71
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  49
  51
  53
  56
  59
  62
  65
Funds from operations, $m
  166
  171
  177
  183
  189
  197
  204
  213
  222
  231
  229
  240
  252
  264
  277
  291
  306
  321
  338
  355
  374
  393
  414
  435
  458
  482
  507
  534
  562
  592
Change in working capital, $m
  9
  10
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
Cash from operations, $m
  157
  161
  165
  170
  176
  182
  189
  196
  204
  212
  209
  219
  229
  240
  252
  264
  277
  291
  306
  322
  338
  356
  374
  394
  415
  437
  460
  484
  509
  536
Maintenance CAPEX, $m
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -62
New CAPEX, $m
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -69
Cash from investing activities, $m
  -30
  -32
  -33
  -35
  -38
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -63
  -65
  -69
  -72
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -131
Free cash flow, $m
  127
  129
  132
  135
  138
  142
  147
  152
  158
  164
  158
  165
  172
  181
  189
  199
  208
  219
  230
  242
  255
  268
  282
  297
  313
  329
  347
  366
  385
  406
Issuance/(repayment) of debt, $m
  9
  10
  11
  11
  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
  51
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
  10
  11
  11
  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
  51
Total cash flow (excl. dividends), $m
  136
  139
  142
  146
  151
  156
  161
  167
  174
  181
  176
  185
  193
  203
  213
  223
  234
  246
  259
  272
  287
  302
  318
  334
  352
  371
  391
  412
  433
  457
Retained Cash Flow (-), $m
  -23
  -26
  -28
  -31
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -92
  -96
  -102
  -107
  -112
  -118
  -124
  -131
  -137
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
  113
  113
  114
  115
  117
  120
  123
  126
  130
  134
  126
  131
  137
  143
  150
  157
  164
  172
  181
  190
  200
  210
  221
  233
  245
  258
  272
  287
  303
  319
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
  109
  103
  99
  95
  91
  87
  83
  79
  74
  70
  60
  56
  52
  48
  44
  40
  36
  32
  28
  24
  21
  17
  14
  12
  10
  8
  6
  4
  3
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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RBC Bearings Incorporated is an international manufacturer and marketer of engineered precision bearings and products, which are integral to the manufacture and operation of machines, aircraft and mechanical systems. The Company operates through four segments: Plain Bearings; Roller Bearings; Ball Bearings, and Engineered Products. The Company has over 40 facilities of which over 30 are manufacturing facilities in approximately five countries. The Company classifies its customers into two categories: industrial and aerospace. The Company manufactures bearings and engineered products for a range of diversified industrial markets, including construction and mining, oil and natural resource extraction, heavy truck, marine, rail and train, packaging, semiconductor machinery and the general industrial markets. The Company supplies bearings and engineered products for use in commercial, private and military aircraft and aircraft engines, guided weaponry, and vision and optical systems.

FINANCIAL RATIOS  of  RBC Bearings Incorporated (ROLL)

Valuation Ratios
P/E Ratio 55.8
Price to Sales 6.4
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 39.2
Price to Free Cash Flow 49.5
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -6.3%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 35.7%
Total Debt to Equity 37.7%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 7.7%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8.7%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 10.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 37.4%
Gross Margin - 3 Yr. Avg. 37.4%
EBITDA Margin 21.5%
EBITDA Margin - 3 Yr. Avg. 21.4%
Operating Margin 18.4%
Oper. Margin - 3 Yr. Avg. 18.5%
Pre-Tax Margin 17.1%
Pre-Tax Margin - 3 Yr. Avg. 17.4%
Net Profit Margin 11.5%
Net Profit Margin - 3 Yr. Avg. 11.8%
Effective Tax Rate 32.4%
Eff/ Tax Rate - 3 Yr. Avg. 32.3%
Payout Ratio 0%

ROLL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ROLL stock intrinsic value calculation we used $675 million for the last fiscal year's total revenue generated by RBC Bearings Incorporated. The default revenue input number comes from 0001 income statement of RBC Bearings Incorporated. 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 ROLL stock valuation model: a) initial revenue growth rate of 2.8% 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 ROLL is calculated based on our internal credit rating of RBC Bearings Incorporated, 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 RBC Bearings Incorporated.
    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 ROLL stock the variable cost ratio is equal to 69.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $64 million in the base year in the intrinsic value calculation for ROLL 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 RBC Bearings Incorporated.

Corporate tax rate of 27% is the nominal tax rate for RBC Bearings Incorporated. 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 ROLL 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 ROLL are equal to 61.8%.

Life of production assets of 22.8 years is the average useful life of capital assets used in RBC Bearings Incorporated 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 ROLL is equal to 50%. 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 - $834.552 million for RBC Bearings Incorporated - 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 24.793 million for RBC Bearings Incorporated 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 RBC Bearings Incorporated at the current share price and the inputted number of shares is $4.0 billion.

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