Intrinsic value of Werner Enterprises, Inc. - WERN

Previous Close

$30.90

  Intrinsic Value

$52.62

stock screener

  Rating & Target

str. buy

+70%

Previous close

$30.90

 
Intrinsic value

$52.62

 
Up/down potential

+70%

 
Rating

str. buy

We calculate the intrinsic value of WERN 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 2.2

 

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, %
  13.90
  13.01
  12.21
  11.49
  10.84
  10.26
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
  6.48
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
Revenue, $m
  2,800
  3,164
  3,550
  3,958
  4,387
  4,837
  5,308
  5,799
  6,311
  6,844
  7,399
  7,975
  8,575
  9,197
  9,844
  10,517
  11,216
  11,944
  12,700
  13,488
  14,308
  15,163
  16,054
  16,984
  17,953
  18,966
  20,023
  21,128
  22,283
  23,490
Variable operating expenses, $m
  2,139
  2,417
  2,712
  3,024
  3,352
  3,695
  4,055
  4,430
  4,822
  5,229
  5,653
  6,093
  6,551
  7,027
  7,521
  8,035
  8,569
  9,125
  9,703
  10,305
  10,932
  11,585
  12,265
  12,975
  13,716
  14,490
  15,298
  16,142
  17,024
  17,946
Fixed operating expenses, $m
  371
  379
  387
  396
  405
  414
  423
  432
  442
  451
  461
  471
  482
  492
  503
  514
  525
  537
  549
  561
  573
  586
  599
  612
  625
  639
  653
  668
  682
  697
Total operating expenses, $m
  2,510
  2,796
  3,099
  3,420
  3,757
  4,109
  4,478
  4,862
  5,264
  5,680
  6,114
  6,564
  7,033
  7,519
  8,024
  8,549
  9,094
  9,662
  10,252
  10,866
  11,505
  12,171
  12,864
  13,587
  14,341
  15,129
  15,951
  16,810
  17,706
  18,643
Operating income, $m
  290
  368
  450
  538
  631
  728
  830
  937
  1,048
  1,164
  1,285
  1,411
  1,542
  1,678
  1,820
  1,968
  2,122
  2,282
  2,448
  2,622
  2,803
  2,993
  3,190
  3,396
  3,612
  3,837
  4,072
  4,319
  4,576
  4,846
EBITDA, $m
  550
  662
  781
  906
  1,039
  1,178
  1,324
  1,476
  1,635
  1,801
  1,973
  2,153
  2,340
  2,534
  2,736
  2,947
  3,165
  3,393
  3,630
  3,877
  4,135
  4,404
  4,684
  4,977
  5,282
  5,602
  5,936
  6,285
  6,650
  7,032
Interest expense (income), $m
  2
  7
  13
  19
  26
  34
  41
  50
  58
  67
  76
  86
  96
  106
  117
  128
  140
  152
  164
  177
  191
  205
  220
  235
  251
  268
  285
  304
  323
  343
  363
Earnings before tax, $m
  283
  355
  431
  512
  597
  686
  780
  879
  981
  1,088
  1,199
  1,315
  1,436
  1,562
  1,692
  1,828
  1,970
  2,117
  2,271
  2,431
  2,598
  2,773
  2,955
  3,145
  3,344
  3,551
  3,769
  3,996
  4,234
  4,483
Tax expense, $m
  76
  96
  116
  138
  161
  185
  211
  237
  265
  294
  324
  355
  388
  422
  457
  494
  532
  572
  613
  656
  702
  749
  798
  849
  903
  959
  1,018
  1,079
  1,143
  1,210
Net income, $m
  207
  259
  315
  374
  436
  501
  570
  641
  716
  794
  875
  960
  1,048
  1,140
  1,235
  1,335
  1,438
  1,546
  1,658
  1,775
  1,897
  2,024
  2,157
  2,296
  2,441
  2,592
  2,751
  2,917
  3,091
  3,273

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
  2,373
  2,681
  3,009
  3,354
  3,718
  4,099
  4,498
  4,914
  5,348
  5,800
  6,270
  6,759
  7,267
  7,794
  8,343
  8,913
  9,505
  10,122
  10,763
  11,431
  12,126
  12,850
  13,605
  14,393
  15,215
  16,073
  16,969
  17,905
  18,884
  19,907
Adjusted assets (=assets-cash), $m
  2,373
  2,681
  3,009
  3,354
  3,718
  4,099
  4,498
  4,914
  5,348
  5,800
  6,270
  6,759
  7,267
  7,794
  8,343
  8,913
  9,505
  10,122
  10,763
  11,431
  12,126
  12,850
  13,605
  14,393
  15,215
  16,073
  16,969
  17,905
  18,884
  19,907
Revenue / Adjusted assets
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
  1.180
Average production assets, $m
  1,615
  1,826
  2,048
  2,284
  2,531
  2,791
  3,062
  3,346
  3,641
  3,949
  4,269
  4,602
  4,948
  5,307
  5,680
  6,068
  6,472
  6,891
  7,328
  7,783
  8,256
  8,749
  9,263
  9,800
  10,359
  10,943
  11,553
  12,191
  12,857
  13,554
Working capital, $m
  213
  240
  270
  301
  333
  368
  403
  441
  480
  520
  562
  606
  652
  699
  748
  799
  852
  908
  965
  1,025
  1,087
  1,152
  1,220
  1,291
  1,364
  1,441
  1,522
  1,606
  1,693
  1,785
Total debt, $m
  239
  360
  489
  624
  767
  917
  1,074
  1,238
  1,408
  1,586
  1,770
  1,962
  2,162
  2,369
  2,585
  2,809
  3,042
  3,284
  3,536
  3,798
  4,072
  4,356
  4,653
  4,963
  5,286
  5,623
  5,975
  6,343
  6,727
  7,130
Total liabilities, $m
  932
  1,054
  1,182
  1,318
  1,461
  1,611
  1,768
  1,931
  2,102
  2,279
  2,464
  2,656
  2,856
  3,063
  3,279
  3,503
  3,736
  3,978
  4,230
  4,492
  4,765
  5,050
  5,347
  5,656
  5,979
  6,317
  6,669
  7,037
  7,421
  7,823
Total equity, $m
  1,440
  1,628
  1,826
  2,036
  2,257
  2,488
  2,730
  2,983
  3,246
  3,521
  3,806
  4,103
  4,411
  4,731
  5,064
  5,410
  5,770
  6,144
  6,533
  6,938
  7,360
  7,800
  8,258
  8,736
  9,235
  9,756
  10,300
  10,868
  11,462
  12,083
Total liabilities and equity, $m
  2,372
  2,682
  3,008
  3,354
  3,718
  4,099
  4,498
  4,914
  5,348
  5,800
  6,270
  6,759
  7,267
  7,794
  8,343
  8,913
  9,506
  10,122
  10,763
  11,430
  12,125
  12,850
  13,605
  14,392
  15,214
  16,073
  16,969
  17,905
  18,883
  19,906
Debt-to-equity ratio
  0.170
  0.220
  0.270
  0.310
  0.340
  0.370
  0.390
  0.410
  0.430
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
  0.570
  0.580
  0.580
  0.580
  0.590
  0.590
Adjusted equity ratio
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607
  0.607

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  207
  259
  315
  374
  436
  501
  570
  641
  716
  794
  875
  960
  1,048
  1,140
  1,235
  1,335
  1,438
  1,546
  1,658
  1,775
  1,897
  2,024
  2,157
  2,296
  2,441
  2,592
  2,751
  2,917
  3,091
  3,273
Depreciation, amort., depletion, $m
  261
  294
  330
  368
  408
  450
  494
  540
  587
  637
  689
  742
  798
  856
  916
  979
  1,044
  1,112
  1,182
  1,255
  1,332
  1,411
  1,494
  1,581
  1,671
  1,765
  1,863
  1,966
  2,074
  2,186
Funds from operations, $m
  467
  553
  645
  742
  844
  951
  1,064
  1,181
  1,303
  1,431
  1,564
  1,702
  1,846
  1,996
  2,151
  2,313
  2,482
  2,657
  2,840
  3,030
  3,228
  3,435
  3,651
  3,876
  4,112
  4,357
  4,614
  4,883
  5,164
  5,459
Change in working capital, $m
  26
  28
  29
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
Cash from operations, $m
  441
  526
  616
  711
  811
  917
  1,028
  1,144
  1,265
  1,391
  1,522
  1,659
  1,801
  1,949
  2,102
  2,262
  2,429
  2,602
  2,782
  2,970
  3,166
  3,370
  3,583
  3,806
  4,038
  4,281
  4,534
  4,799
  5,077
  5,367
Maintenance CAPEX, $m
  -229
  -261
  -294
  -330
  -368
  -408
  -450
  -494
  -540
  -587
  -637
  -689
  -742
  -798
  -856
  -916
  -979
  -1,044
  -1,112
  -1,182
  -1,255
  -1,332
  -1,411
  -1,494
  -1,581
  -1,671
  -1,765
  -1,863
  -1,966
  -2,074
New CAPEX, $m
  -198
  -210
  -223
  -235
  -248
  -260
  -272
  -283
  -295
  -308
  -320
  -333
  -346
  -359
  -373
  -388
  -403
  -420
  -437
  -455
  -473
  -493
  -514
  -536
  -560
  -584
  -610
  -637
  -666
  -697
Cash from investing activities, $m
  -427
  -471
  -517
  -565
  -616
  -668
  -722
  -777
  -835
  -895
  -957
  -1,022
  -1,088
  -1,157
  -1,229
  -1,304
  -1,382
  -1,464
  -1,549
  -1,637
  -1,728
  -1,825
  -1,925
  -2,030
  -2,141
  -2,255
  -2,375
  -2,500
  -2,632
  -2,771
Free cash flow, $m
  14
  55
  98
  145
  196
  249
  306
  366
  429
  496
  565
  637
  713
  791
  873
  958
  1,046
  1,138
  1,234
  1,334
  1,437
  1,545
  1,658
  1,775
  1,898
  2,026
  2,159
  2,298
  2,444
  2,596
Issuance/(repayment) of debt, $m
  114
  121
  129
  136
  143
  150
  157
  164
  171
  178
  185
  192
  200
  207
  216
  224
  233
  242
  252
  262
  273
  285
  297
  310
  323
  337
  352
  368
  385
  402
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  
  114
  121
  129
  136
  143
  150
  157
  164
  171
  178
  185
  192
  200
  207
  216
  224
  233
  242
  252
  262
  273
  285
  297
  310
  323
  337
  352
  368
  385
  402
Total cash flow (excl. dividends), $m
  128
  176
  227
  281
  338
  399
  463
  530
  600
  673
  750
  829
  912
  999
  1,088
  1,182
  1,279
  1,381
  1,486
  1,596
  1,711
  1,830
  1,955
  2,085
  2,221
  2,363
  2,511
  2,666
  2,829
  2,999
Retained Cash Flow (-), $m
  -175
  -187
  -199
  -210
  -221
  -231
  -242
  -253
  -263
  -274
  -285
  -297
  -308
  -320
  -333
  -346
  -360
  -374
  -389
  -405
  -422
  -440
  -458
  -478
  -499
  -521
  -544
  -568
  -594
  -621
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
  -47
  -11
  28
  71
  118
  168
  221
  277
  337
  399
  464
  533
  604
  678
  756
  836
  920
  1,007
  1,097
  1,191
  1,289
  1,390
  1,496
  1,607
  1,722
  1,842
  1,967
  2,098
  2,235
  2,378
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
  -45
  -10
  25
  59
  91
  122
  149
  173
  193
  209
  221
  227
  230
  228
  222
  212
  200
  185
  169
  151
  133
  115
  98
  82
  67
  54
  42
  32
  24
  18
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

Werner Enterprises, Inc. is a transportation and logistics company. The Company is engaged in transporting truckload shipments of general commodities in both interstate and intrastate commerce. It operates through two segments: Truckload and Werner Logistics. It provides logistics services through its Werner Logistics division. As of December 31, 2016, it had a fleet of approximately 7,100 trucks, of which 6,305 were company-operated and 795 were owned and operated by independent contractors. Its Werner Logistics division operated 74 intermodal drayage trucks as of December 31, 2016. Its Truckload segment comprises the One-Way Truckload and Specialized Services units. It operates in several provinces of Canada to provide through-trailer service into and out of Mexico. Its Werner Logistic segment is a non-asset-based transportation and logistics provider and comprises four operating units: truck brokerage, freight management, the intermodal and Werner Global Logistics international.

FINANCIAL RATIOS  of  Werner Enterprises, Inc. (WERN)

Valuation Ratios
P/E Ratio 28.2
Price to Sales 1.1
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow -9.9
Growth Rates
Sales Growth Rate -4.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18.5%
Cap. Spend. - 3 Yr. Gr. Rate 20.6%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 16.1%
Total Debt to Equity 18.1%
Interest Coverage 65
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 10.5%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 11.5%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 83.8%
Gross Margin - 3 Yr. Avg. 80%
EBITDA Margin 16.9%
EBITDA Margin - 3 Yr. Avg. 17.2%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. 7.8%
Pre-Tax Margin 6.3%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 3.9%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 37.8%
Eff/ Tax Rate - 3 Yr. Avg. 38.3%
Payout Ratio 21.5%

WERN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WERN stock intrinsic value calculation we used $2458 million for the last fiscal year's total revenue generated by Werner Enterprises, Inc.. The default revenue input number comes from 0001 income statement of Werner Enterprises, 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 WERN stock valuation model: a) initial revenue growth rate of 13.9% 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 WERN is calculated based on our internal credit rating of Werner Enterprises, 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 Werner Enterprises, 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 WERN stock the variable cost ratio is equal to 76.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $363 million in the base year in the intrinsic value calculation for WERN 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 Werner Enterprises, Inc..

Corporate tax rate of 27% is the nominal tax rate for Werner Enterprises, 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 WERN 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 WERN are equal to 57.7%.

Life of production assets of 6.2 years is the average useful life of capital assets used in Werner Enterprises, 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 WERN 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 - $1264.753 million for Werner Enterprises, 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 70.598 million for Werner Enterprises, 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 Werner Enterprises, Inc. at the current share price and the inputted number of shares is $2.2 billion.

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