Intrinsic value of RBC Bearings - ROLL

Previous Close

$137.02

  Intrinsic Value

$60.18

stock screener

  Rating & Target

str. sell

-56%

Previous close

$137.02

 
Intrinsic value

$60.18

 
Up/down potential

-56%

 
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 3.4

 

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, %
  7.40
  7.16
  6.94
  6.75
  6.57
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
Revenue, $m
  725
  777
  831
  887
  945
  1,006
  1,069
  1,135
  1,203
  1,274
  1,349
  1,426
  1,507
  1,592
  1,680
  1,773
  1,869
  1,970
  2,076
  2,186
  2,302
  2,423
  2,550
  2,683
  2,822
  2,968
  3,121
  3,281
  3,450
  3,626
Variable operating expenses, $m
  498
  531
  564
  599
  636
  674
  713
  754
  797
  842
  843
  892
  942
  995
  1,050
  1,108
  1,168
  1,231
  1,297
  1,366
  1,439
  1,514
  1,594
  1,677
  1,764
  1,855
  1,951
  2,051
  2,156
  2,266
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
  563
  598
  632
  669
  707
  747
  788
  830
  875
  922
  924
  975
  1,027
  1,082
  1,139
  1,199
  1,261
  1,326
  1,394
  1,465
  1,540
  1,617
  1,700
  1,785
  1,874
  1,968
  2,066
  2,169
  2,276
  2,389
Operating income, $m
  161
  179
  198
  218
  238
  259
  281
  304
  328
  353
  424
  452
  480
  510
  541
  574
  608
  644
  681
  721
  762
  805
  850
  898
  948
  1,000
  1,055
  1,113
  1,173
  1,237
EBITDA, $m
  226
  245
  266
  287
  309
  331
  355
  380
  406
  433
  461
  490
  521
  553
  587
  622
  659
  697
  738
  780
  824
  871
  920
  971
  1,024
  1,081
  1,140
  1,202
  1,267
  1,335
Interest expense (income), $m
  0
  9
  11
  12
  13
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  52
  56
  59
  62
  66
  70
  74
  78
Earnings before tax, $m
  152
  169
  186
  204
  223
  243
  264
  285
  307
  331
  400
  426
  452
  480
  509
  540
  572
  605
  640
  677
  715
  756
  798
  842
  889
  938
  989
  1,043
  1,099
  1,159
Tax expense, $m
  41
  46
  50
  55
  60
  66
  71
  77
  83
  89
  108
  115
  122
  130
  138
  146
  154
  163
  173
  183
  193
  204
  215
  227
  240
  253
  267
  282
  297
  313
Net income, $m
  111
  123
  136
  149
  163
  177
  192
  208
  224
  241
  292
  311
  330
  351
  372
  394
  417
  442
  467
  494
  522
  552
  583
  615
  649
  685
  722
  761
  803
  846

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
  1,227
  1,314
  1,406
  1,501
  1,599
  1,702
  1,809
  1,920
  2,036
  2,156
  2,282
  2,413
  2,551
  2,694
  2,843
  2,999
  3,163
  3,333
  3,512
  3,699
  3,895
  4,100
  4,314
  4,539
  4,775
  5,022
  5,281
  5,552
  5,837
  6,135
Adjusted assets (=assets-cash), $m
  1,227
  1,314
  1,406
  1,501
  1,599
  1,702
  1,809
  1,920
  2,036
  2,156
  2,282
  2,413
  2,551
  2,694
  2,843
  2,999
  3,163
  3,333
  3,512
  3,699
  3,895
  4,100
  4,314
  4,539
  4,775
  5,022
  5,281
  5,552
  5,837
  6,135
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
  448
  480
  513
  548
  584
  622
  661
  701
  743
  788
  834
  881
  932
  984
  1,038
  1,095
  1,155
  1,217
  1,283
  1,351
  1,423
  1,497
  1,576
  1,658
  1,744
  1,834
  1,929
  2,028
  2,132
  2,241
Working capital, $m
  362
  388
  415
  443
  473
  503
  534
  567
  602
  637
  674
  713
  754
  796
  840
  886
  935
  985
  1,038
  1,093
  1,151
  1,211
  1,275
  1,341
  1,411
  1,484
  1,560
  1,641
  1,725
  1,813
Total debt, $m
  196
  220
  245
  270
  297
  325
  353
  383
  415
  447
  481
  517
  554
  592
  633
  675
  719
  765
  813
  864
  917
  972
  1,030
  1,091
  1,154
  1,221
  1,291
  1,364
  1,441
  1,522
Total liabilities, $m
  331
  355
  380
  405
  432
  459
  488
  518
  550
  582
  616
  652
  689
  727
  768
  810
  854
  900
  948
  999
  1,052
  1,107
  1,165
  1,226
  1,289
  1,356
  1,426
  1,499
  1,576
  1,657
Total equity, $m
  895
  959
  1,026
  1,095
  1,167
  1,242
  1,320
  1,401
  1,486
  1,574
  1,666
  1,762
  1,862
  1,966
  2,075
  2,189
  2,309
  2,433
  2,564
  2,700
  2,843
  2,993
  3,150
  3,314
  3,486
  3,666
  3,855
  4,053
  4,261
  4,479
Total liabilities and equity, $m
  1,226
  1,314
  1,406
  1,500
  1,599
  1,701
  1,808
  1,919
  2,036
  2,156
  2,282
  2,414
  2,551
  2,693
  2,843
  2,999
  3,163
  3,333
  3,512
  3,699
  3,895
  4,100
  4,315
  4,540
  4,775
  5,022
  5,281
  5,552
  5,837
  6,136
Debt-to-equity ratio
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
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
  111
  123
  136
  149
  163
  177
  192
  208
  224
  241
  292
  311
  330
  351
  372
  394
  417
  442
  467
  494
  522
  552
  583
  615
  649
  685
  722
  761
  803
  846
Depreciation, amort., depletion, $m
  65
  66
  68
  69
  71
  72
  74
  76
  78
  80
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  66
  69
  73
  76
  80
  85
  89
  94
  98
Funds from operations, $m
  176
  189
  204
  218
  234
  250
  267
  284
  302
  321
  329
  349
  371
  394
  417
  442
  468
  495
  524
  553
  585
  617
  652
  688
  725
  765
  807
  850
  896
  944
Change in working capital, $m
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  63
  66
  70
  73
  77
  80
  84
  88
Cash from operations, $m
  151
  163
  177
  190
  205
  219
  235
  251
  268
  285
  292
  311
  331
  351
  373
  396
  420
  445
  471
  498
  527
  557
  588
  621
  656
  692
  730
  770
  812
  856
Maintenance CAPEX, $m
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -76
  -80
  -85
  -89
  -94
New CAPEX, $m
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -95
  -99
  -104
  -109
Cash from investing activities, $m
  -49
  -52
  -54
  -58
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -166
  -175
  -184
  -193
  -203
Free cash flow, $m
  102
  112
  122
  133
  145
  156
  169
  182
  195
  209
  211
  226
  242
  258
  275
  293
  312
  332
  352
  374
  396
  420
  444
  470
  497
  525
  555
  586
  619
  654
Issuance/(repayment) of debt, $m
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  77
  81
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  
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  77
  81
Total cash flow (excl. dividends), $m
  125
  135
  147
  159
  171
  184
  198
  212
  226
  241
  245
  262
  279
  297
  316
  336
  356
  378
  400
  424
  449
  475
  502
  531
  561
  592
  625
  660
  696
  734
Retained Cash Flow (-), $m
  -61
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -104
  -109
  -114
  -119
  -125
  -130
  -137
  -143
  -150
  -157
  -164
  -172
  -180
  -189
  -198
  -208
  -218
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
  64
  71
  80
  90
  99
  109
  120
  130
  142
  153
  153
  166
  179
  192
  207
  221
  237
  253
  270
  288
  306
  325
  345
  366
  389
  412
  436
  462
  488
  516
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
  61
  65
  70
  74
  77
  79
  81
  81
  81
  80
  73
  71
  68
  65
  61
  56
  52
  47
  42
  37
  32
  27
  23
  19
  15
  12
  9
  7
  5
  4
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

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 (ROLL)

Valuation Ratios
P/E Ratio 47.8
Price to Sales 5.5
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 33.6
Price to Free Cash Flow 42.4
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 $674.949 million for the last fiscal year's total revenue generated by RBC Bearings. The default revenue input number comes from 0001 income statement of RBC Bearings. 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 7.4% 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, 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.
    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.

Corporate tax rate of 27% is the nominal tax rate for RBC Bearings. 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 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 - 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 24.596 million for RBC Bearings 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 at the current share price and the inputted number of shares is $3.4 billion.

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COMPANY NEWS

▶ 3 Small Cap Growth Stocks With Boeing Exposure   [Nov-10-18 08:36AM  Motley Fool]
▶ RBC Bearings (ROLL) Tops Q2 Earnings Estimates   [Nov-02-18 09:20AM  Zacks]
▶ RBC Bearings: Fiscal 2Q Earnings Snapshot   [08:12AM  Associated Press]
▶ RBC Bearings Incorporated (NASDAQ:ROLL) Has A ROE Of 11%   [Oct-18-18 01:54PM  Simply Wall St.]
▶ RBC Bearings: Fiscal 1Q Earnings Snapshot   [10:06AM  Associated Press]
▶ Here's What Made RBC Bearings' Year   [12:08PM  Motley Fool]
▶ RBC Bearings: Fiscal 4Q Earnings Snapshot   [08:20AM  Associated Press]
▶ RBC Bearings Q4 Earnings Outlook   [May-29-18 02:39PM  Benzinga]
▶ RBC Bearings Launches Higher on Aerospace Strength   [Feb-06-18 10:36AM  Motley Fool]
▶ RBC Bearings beats 3Q profit forecasts   [08:11AM  Associated Press]
▶ RBC Bearings Hits 80-Plus Relative Strength Rating Benchmark   [Jan-12-18 03:00AM  Investor's Business Daily]
▶ Dr. Steven H. Kaplan Joins RBC Bearings Board of Directors   [Jan-08-18 08:00AM  Business Wire]
▶ RBC Bearings Shows Rising Price Performance With Jump To 82 RS Rating   [Dec-21-17 03:00AM  Investor's Business Daily]
▶ Restructuring Charges Hold RBC Bearings Back for Now   [Nov-04-17 11:20AM  Motley Fool]
▶ RBC Bearings Incorporated to Host Earnings Call   [Nov-03-17 08:30AM  ACCESSWIRE]
▶ RBC Bearings misses 2Q profit forecasts   [08:09AM  Associated Press]
▶ What's Working: Industrial plays   [Oct-05-17 08:18AM  CNBC Videos]

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