Intrinsic value of Roadrunner Transportation Systems - RRTS

Previous Close

$1.80

  Intrinsic Value

$12.62

stock screener

  Rating & Target

str. buy

+601%

Previous close

$1.80

 
Intrinsic value

$12.62

 
Up/down potential

+601%

 
Rating

str. buy

We calculate the intrinsic value of RRTS 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 2016), $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
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  2,076
  2,125
  2,182
  2,245
  2,314
  2,390
  2,473
  2,562
  2,658
  2,761
  2,872
  2,989
  3,114
  3,247
  3,387
  3,537
  3,694
  3,861
  4,038
  4,224
  4,420
  4,627
  4,845
  5,075
  5,317
  5,572
  5,840
  6,122
  6,419
  6,731
Variable operating expenses, $m
  2,011
  2,058
  2,111
  2,171
  2,237
  2,309
  2,388
  2,473
  2,564
  2,662
  2,729
  2,841
  2,960
  3,086
  3,220
  3,361
  3,511
  3,670
  3,837
  4,014
  4,201
  4,397
  4,605
  4,823
  5,053
  5,295
  5,550
  5,818
  6,100
  6,397
Fixed operating expenses, $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 operating expenses, $m
  2,011
  2,058
  2,111
  2,171
  2,237
  2,309
  2,388
  2,473
  2,564
  2,662
  2,729
  2,841
  2,960
  3,086
  3,220
  3,361
  3,511
  3,670
  3,837
  4,014
  4,201
  4,397
  4,605
  4,823
  5,053
  5,295
  5,550
  5,818
  6,100
  6,397
Operating income, $m
  65
  68
  70
  74
  77
  81
  85
  89
  94
  99
  142
  148
  154
  161
  168
  175
  183
  191
  200
  209
  219
  229
  240
  252
  264
  276
  290
  304
  318
  334
EBITDA, $m
  180
  184
  189
  194
  200
  207
  214
  222
  230
  239
  249
  259
  270
  281
  293
  306
  320
  334
  350
  366
  383
  401
  420
  439
  460
  482
  506
  530
  556
  583
Interest expense (income), $m
  17
  24
  25
  26
  27
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  60
  63
  67
  71
  75
  79
  83
  88
  93
  98
  104
  110
Earnings before tax, $m
  41
  43
  45
  47
  49
  51
  54
  57
  60
  63
  104
  108
  112
  116
  120
  125
  130
  135
  141
  146
  152
  159
  166
  173
  180
  188
  196
  205
  214
  224
Tax expense, $m
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  55
  58
  61
Net income, $m
  30
  31
  33
  34
  36
  37
  39
  41
  44
  46
  76
  79
  82
  85
  88
  91
  95
  99
  103
  107
  111
  116
  121
  126
  132
  137
  143
  150
  157
  164

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
  953
  976
  1,002
  1,031
  1,063
  1,097
  1,135
  1,176
  1,221
  1,268
  1,318
  1,372
  1,430
  1,491
  1,555
  1,624
  1,696
  1,773
  1,854
  1,939
  2,029
  2,124
  2,225
  2,330
  2,441
  2,558
  2,681
  2,811
  2,947
  3,090
Adjusted assets (=assets-cash), $m
  953
  976
  1,002
  1,031
  1,063
  1,097
  1,135
  1,176
  1,221
  1,268
  1,318
  1,372
  1,430
  1,491
  1,555
  1,624
  1,696
  1,773
  1,854
  1,939
  2,029
  2,124
  2,225
  2,330
  2,441
  2,558
  2,681
  2,811
  2,947
  3,090
Revenue / Adjusted assets
  2.178
  2.177
  2.178
  2.177
  2.177
  2.179
  2.179
  2.179
  2.177
  2.177
  2.179
  2.179
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
  2.178
Average production assets, $m
  768
  786
  807
  831
  856
  884
  915
  948
  984
  1,022
  1,062
  1,106
  1,152
  1,201
  1,253
  1,309
  1,367
  1,429
  1,494
  1,563
  1,635
  1,712
  1,793
  1,878
  1,967
  2,061
  2,161
  2,265
  2,375
  2,490
Working capital, $m
  -152
  -155
  -159
  -164
  -169
  -174
  -181
  -187
  -194
  -202
  -210
  -218
  -227
  -237
  -247
  -258
  -270
  -282
  -295
  -308
  -323
  -338
  -354
  -370
  -388
  -407
  -426
  -447
  -469
  -491
Total debt, $m
  460
  478
  498
  521
  546
  574
  604
  636
  671
  708
  748
  790
  836
  884
  935
  989
  1,046
  1,106
  1,170
  1,237
  1,308
  1,383
  1,462
  1,545
  1,633
  1,725
  1,822
  1,924
  2,031
  2,144
Total liabilities, $m
  751
  769
  789
  812
  837
  865
  895
  927
  962
  999
  1,039
  1,081
  1,127
  1,175
  1,226
  1,280
  1,337
  1,397
  1,461
  1,528
  1,599
  1,674
  1,753
  1,836
  1,924
  2,016
  2,113
  2,215
  2,322
  2,435
Total equity, $m
  202
  207
  212
  218
  225
  233
  241
  249
  259
  269
  280
  291
  303
  316
  330
  344
  360
  376
  393
  411
  430
  450
  472
  494
  518
  542
  568
  596
  625
  655
Total liabilities and equity, $m
  953
  976
  1,001
  1,030
  1,062
  1,098
  1,136
  1,176
  1,221
  1,268
  1,319
  1,372
  1,430
  1,491
  1,556
  1,624
  1,697
  1,773
  1,854
  1,939
  2,029
  2,124
  2,225
  2,330
  2,442
  2,558
  2,681
  2,811
  2,947
  3,090
Debt-to-equity ratio
  2.280
  2.310
  2.350
  2.390
  2.430
  2.470
  2.510
  2.550
  2.590
  2.630
  2.680
  2.720
  2.760
  2.800
  2.830
  2.870
  2.910
  2.940
  2.980
  3.010
  3.040
  3.070
  3.100
  3.130
  3.150
  3.180
  3.210
  3.230
  3.250
  3.270
Adjusted equity ratio
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  31
  33
  34
  36
  37
  39
  41
  44
  46
  76
  79
  82
  85
  88
  91
  95
  99
  103
  107
  111
  116
  121
  126
  132
  137
  143
  150
  157
  164
Depreciation, amort., depletion, $m
  115
  116
  119
  121
  123
  126
  129
  133
  136
  140
  106
  111
  115
  120
  125
  131
  137
  143
  149
  156
  164
  171
  179
  188
  197
  206
  216
  227
  237
  249
Funds from operations, $m
  145
  148
  151
  155
  159
  164
  169
  174
  180
  186
  182
  189
  197
  205
  213
  222
  231
  241
  252
  263
  275
  287
  300
  314
  328
  343
  359
  376
  394
  413
Change in working capital, $m
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Cash from operations, $m
  148
  151
  155
  159
  164
  169
  175
  180
  187
  193
  190
  198
  206
  214
  223
  233
  243
  254
  265
  277
  289
  302
  316
  331
  346
  362
  379
  397
  416
  435
Maintenance CAPEX, $m
  -75
  -77
  -79
  -81
  -83
  -86
  -88
  -91
  -95
  -98
  -102
  -106
  -111
  -115
  -120
  -125
  -131
  -137
  -143
  -149
  -156
  -164
  -171
  -179
  -188
  -197
  -206
  -216
  -227
  -237
New CAPEX, $m
  -16
  -18
  -21
  -23
  -26
  -28
  -31
  -33
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -104
  -110
  -116
Cash from investing activities, $m
  -91
  -95
  -100
  -104
  -109
  -114
  -119
  -124
  -131
  -136
  -143
  -149
  -157
  -164
  -172
  -180
  -189
  -199
  -208
  -218
  -229
  -241
  -252
  -264
  -278
  -291
  -305
  -320
  -337
  -353
Free cash flow, $m
  56
  56
  56
  55
  55
  55
  56
  56
  56
  57
  47
  48
  49
  50
  51
  52
  54
  55
  57
  58
  60
  62
  64
  66
  69
  71
  74
  76
  79
  82
Issuance/(repayment) of debt, $m
  14
  18
  20
  23
  25
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
  107
  113
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  
  14
  18
  20
  23
  25
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
  107
  113
Total cash flow (excl. dividends), $m
  71
  74
  76
  78
  81
  83
  86
  88
  91
  94
  87
  91
  94
  98
  102
  106
  111
  116
  121
  126
  131
  137
  143
  149
  156
  163
  171
  179
  187
  195
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
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
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
Cash available for distribution, $m
  66
  69
  71
  72
  74
  76
  77
  80
  82
  84
  77
  79
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  127
  133
  138
  145
  151
  158
  165
Discount rate, %
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
  60
  57
  52
  48
  43
  38
  33
  29
  25
  21
  16
  13
  11
  8
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
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

Roadrunner Transportation Systems, Inc. (RRTS) is an asset-light transportation and logistics service provider. The Company offers a suite of global supply chain solutions, including truckload logistics (TL), customized and expedited less-than-truckload (LTL), intermodal solutions (transporting a shipment by over one mode, primarily through rail and truck), freight consolidation, inventory management, expedited services, air freight, international freight forwarding, customs brokerage and transportation management solutions. The Company operates through three segments: Truckload Logistics, Less-than-Truckload and Global Solutions. The Company utilizes a third-party network of transportation providers, consisting of independent contractors (ICs) and purchased power providers, to serve a diverse customer base. It primarily focuses on small to mid-size shippers.

FINANCIAL RATIOS  of  Roadrunner Transportation Systems (RRTS)

Valuation Ratios
P/E Ratio 1.4
Price to Sales 0
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 0.9
Price to Free Cash Flow 3.8
Growth Rates
Sales Growth Rate 6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.2%
Cap. Spend. - 3 Yr. Gr. Rate 29.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 68.2%
Total Debt to Equity 70.6%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 34.1%
Gross Margin - 3 Yr. Avg. 31.9%
EBITDA Margin 6.5%
EBITDA Margin - 3 Yr. Avg. 6.8%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 3.9%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 37.7%
Eff/ Tax Rate - 3 Yr. Avg. 36.9%
Payout Ratio 0%

RRTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RRTS stock intrinsic value calculation we used $2033 million for the last fiscal year's total revenue generated by Roadrunner Transportation Systems. The default revenue input number comes from 2016 income statement of Roadrunner Transportation Systems. 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 RRTS stock valuation model: a) initial revenue growth rate of 2.1% 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 9.5%, whose default value for RRTS is calculated based on our internal credit rating of Roadrunner Transportation Systems, 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 Roadrunner Transportation Systems.
    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 RRTS stock the variable cost ratio is equal to 96.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for RRTS 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 Roadrunner Transportation Systems.

Corporate tax rate of 27% is the nominal tax rate for Roadrunner Transportation Systems. 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 RRTS stock is equal to 0.1%.

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 RRTS are equal to 37%.

Life of production assets of 10 years is the average useful life of capital assets used in Roadrunner Transportation Systems 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 RRTS is equal to -7.3%. 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 - $197 million for Roadrunner Transportation Systems - 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 38 million for Roadrunner Transportation Systems 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 Roadrunner Transportation Systems at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Roadrunner: 2Q Earnings Snapshot   [06:26AM  Associated Press]
▶ Roadrunner: 1Q Earnings Snapshot   [Jun-29-18 10:46AM  Associated Press]
▶ Roadrunner: 4Q Earnings Snapshot   [Jun-20-18 07:35AM  Associated Press]
▶ Two Former Roadrunner Executives Charged Over Accounting   [08:17PM  The Wall Street Journal]
▶ Trucking Acquisitions Put New Spotlight on Fleet Values   [Mar-20-18 04:20PM  The Wall Street Journal]
▶ The Milwaukee-area stocks pummeled in the market rout   [Feb-06-18 03:55PM  American City Business Journals]
▶ Roadrunner sells subsidiary to N.Y.C.-based Quick International Courier for $95M   [Aug-17-17 01:00PM  American City Business Journals]
▶ LD Micro Index Reconstitution as of August 1, 2017   [Aug-01-17 09:40AM  ACCESSWIRE]
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