Intrinsic value of YRC Worldwide, Inc. - YRCW

Previous Close

$2.51

  Intrinsic Value

$3.55

stock screener

  Rating & Target

buy

+42%

Previous close

$2.51

 
Intrinsic value

$3.55

 
Up/down potential

+42%

 
Rating

buy

We calculate the intrinsic value of YRCW 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, %
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  5,255
  5,433
  5,625
  5,832
  6,055
  6,294
  6,548
  6,819
  7,107
  7,413
  7,737
  8,080
  8,443
  8,827
  9,232
  9,659
  10,110
  10,585
  11,086
  11,613
  12,168
  12,753
  13,368
  14,015
  14,695
  15,411
  16,164
  16,955
  17,787
  18,661
Variable operating expenses, $m
  4,630
  4,786
  4,956
  5,138
  5,335
  5,545
  5,769
  6,008
  6,261
  6,531
  6,816
  7,119
  7,438
  7,776
  8,133
  8,510
  8,907
  9,325
  9,766
  10,231
  10,720
  11,235
  11,777
  12,347
  12,947
  13,577
  14,240
  14,937
  15,670
  16,440
Fixed operating expenses, $m
  483
  494
  505
  516
  527
  539
  551
  563
  575
  588
  601
  614
  628
  641
  656
  670
  685
  700
  715
  731
  747
  763
  780
  797
  815
  833
  851
  870
  889
  909
Total operating expenses, $m
  5,113
  5,280
  5,461
  5,654
  5,862
  6,084
  6,320
  6,571
  6,836
  7,119
  7,417
  7,733
  8,066
  8,417
  8,789
  9,180
  9,592
  10,025
  10,481
  10,962
  11,467
  11,998
  12,557
  13,144
  13,762
  14,410
  15,091
  15,807
  16,559
  17,349
Operating income, $m
  142
  152
  164
  178
  193
  210
  228
  249
  270
  294
  320
  347
  377
  409
  443
  479
  518
  560
  604
  651
  701
  754
  811
  870
  934
  1,001
  1,072
  1,148
  1,228
  1,312
EBITDA, $m
  296
  311
  329
  349
  370
  394
  420
  448
  478
  511
  546
  584
  624
  667
  713
  762
  814
  870
  928
  991
  1,057
  1,127
  1,202
  1,280
  1,364
  1,452
  1,545
  1,644
  1,748
  1,858
Interest expense (income), $m
  90
  104
  54
  60
  67
  74
  81
  89
  98
  107
  117
  127
  138
  150
  162
  176
  189
  204
  219
  235
  252
  270
  289
  309
  330
  352
  375
  399
  425
  452
  480
Earnings before tax, $m
  38
  98
  104
  111
  120
  129
  139
  150
  163
  177
  192
  209
  227
  246
  267
  290
  314
  341
  369
  399
  431
  465
  501
  540
  582
  626
  673
  723
  776
  832
Tax expense, $m
  10
  27
  28
  30
  32
  35
  38
  41
  44
  48
  52
  56
  61
  67
  72
  78
  85
  92
  100
  108
  116
  126
  135
  146
  157
  169
  182
  195
  209
  225
Net income, $m
  28
  72
  76
  81
  87
  94
  101
  110
  119
  129
  140
  153
  166
  180
  195
  212
  230
  249
  269
  291
  314
  339
  366
  394
  425
  457
  491
  528
  566
  607

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
  1,669
  1,725
  1,786
  1,852
  1,923
  1,999
  2,079
  2,165
  2,257
  2,354
  2,457
  2,566
  2,681
  2,803
  2,932
  3,067
  3,210
  3,361
  3,520
  3,688
  3,864
  4,050
  4,245
  4,451
  4,667
  4,894
  5,133
  5,384
  5,648
  5,926
Adjusted assets (=assets-cash), $m
  1,669
  1,725
  1,786
  1,852
  1,923
  1,999
  2,079
  2,165
  2,257
  2,354
  2,457
  2,566
  2,681
  2,803
  2,932
  3,067
  3,210
  3,361
  3,520
  3,688
  3,864
  4,050
  4,245
  4,451
  4,667
  4,894
  5,133
  5,384
  5,648
  5,926
Revenue / Adjusted assets
  3.149
  3.150
  3.149
  3.149
  3.149
  3.149
  3.150
  3.150
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.150
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
  3.149
Average production assets, $m
  830
  858
  889
  922
  957
  994
  1,035
  1,077
  1,123
  1,171
  1,222
  1,277
  1,334
  1,395
  1,459
  1,526
  1,597
  1,672
  1,752
  1,835
  1,923
  2,015
  2,112
  2,214
  2,322
  2,435
  2,554
  2,679
  2,810
  2,948
Working capital, $m
  -42
  -43
  -45
  -47
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -118
  -123
  -129
  -136
  -142
  -149
Total debt, $m
  454
  505
  560
  619
  683
  751
  824
  901
  984
  1,071
  1,164
  1,262
  1,365
  1,475
  1,591
  1,713
  1,842
  1,978
  2,121
  2,271
  2,430
  2,597
  2,773
  2,958
  3,152
  3,357
  3,572
  3,798
  4,036
  4,286
Total liabilities, $m
  1,502
  1,553
  1,608
  1,667
  1,731
  1,799
  1,871
  1,949
  2,031
  2,119
  2,211
  2,309
  2,413
  2,523
  2,638
  2,761
  2,889
  3,025
  3,168
  3,319
  3,478
  3,645
  3,821
  4,005
  4,200
  4,405
  4,620
  4,846
  5,084
  5,333
Total equity, $m
  167
  173
  179
  185
  192
  200
  208
  217
  226
  235
  246
  257
  268
  280
  293
  307
  321
  336
  352
  369
  386
  405
  425
  445
  467
  489
  513
  538
  565
  593
Total liabilities and equity, $m
  1,669
  1,726
  1,787
  1,852
  1,923
  1,999
  2,079
  2,166
  2,257
  2,354
  2,457
  2,566
  2,681
  2,803
  2,931
  3,068
  3,210
  3,361
  3,520
  3,688
  3,864
  4,050
  4,246
  4,450
  4,667
  4,894
  5,133
  5,384
  5,649
  5,926
Debt-to-equity ratio
  2.720
  2.930
  3.130
  3.340
  3.550
  3.760
  3.960
  4.160
  4.360
  4.550
  4.740
  4.920
  5.090
  5.260
  5.430
  5.580
  5.740
  5.880
  6.020
  6.160
  6.290
  6.410
  6.530
  6.650
  6.750
  6.860
  6.960
  7.050
  7.150
  7.230
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  72
  76
  81
  87
  94
  101
  110
  119
  129
  140
  153
  166
  180
  195
  212
  230
  249
  269
  291
  314
  339
  366
  394
  425
  457
  491
  528
  566
  607
Depreciation, amort., depletion, $m
  154
  159
  165
  171
  177
  184
  192
  200
  208
  217
  226
  236
  247
  258
  270
  283
  296
  310
  324
  340
  356
  373
  391
  410
  430
  451
  473
  496
  520
  546
Funds from operations, $m
  181
  231
  241
  252
  264
  278
  293
  309
  327
  346
  367
  389
  413
  438
  465
  494
  525
  558
  593
  631
  670
  713
  757
  805
  855
  908
  964
  1,024
  1,087
  1,153
Change in working capital, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from operations, $m
  183
  232
  242
  254
  266
  280
  295
  312
  329
  349
  369
  392
  416
  441
  469
  498
  529
  562
  597
  635
  675
  717
  762
  810
  860
  914
  970
  1,030
  1,093
  1,160
Maintenance CAPEX, $m
  -149
  -154
  -159
  -165
  -171
  -177
  -184
  -192
  -200
  -208
  -217
  -226
  -236
  -247
  -258
  -270
  -283
  -296
  -310
  -324
  -340
  -356
  -373
  -391
  -410
  -430
  -451
  -473
  -496
  -520
New CAPEX, $m
  -26
  -28
  -30
  -33
  -35
  -38
  -40
  -43
  -46
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -108
  -113
  -119
  -125
  -131
  -138
Cash from investing activities, $m
  -175
  -182
  -189
  -198
  -206
  -215
  -224
  -235
  -246
  -256
  -268
  -280
  -293
  -308
  -322
  -338
  -354
  -371
  -389
  -407
  -428
  -448
  -470
  -493
  -518
  -543
  -570
  -598
  -627
  -658
Free cash flow, $m
  8
  50
  53
  56
  60
  65
  71
  77
  84
  92
  101
  111
  122
  134
  146
  160
  175
  191
  209
  227
  247
  269
  292
  316
  343
  370
  400
  432
  466
  502
Issuance/(repayment) of debt, $m
  -421
  51
  55
  59
  64
  68
  73
  77
  82
  87
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
  205
  215
  226
  238
  250
Issuance/(repurchase) of shares, $m
  445
  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  
  24
  51
  55
  59
  64
  68
  73
  77
  82
  87
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
  205
  215
  226
  238
  250
Total cash flow (excl. dividends), $m
  32
  101
  108
  116
  124
  133
  143
  155
  167
  180
  194
  209
  226
  243
  262
  282
  304
  327
  352
  378
  406
  436
  468
  501
  537
  575
  615
  658
  703
  751
Retained Cash Flow (-), $m
  -472
  -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
  -24
  -25
  -26
  -28
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
  -440
  95
  102
  109
  117
  126
  135
  146
  158
  170
  184
  198
  214
  231
  249
  269
  290
  312
  336
  361
  388
  417
  448
  481
  515
  552
  591
  633
  677
  724
Discount rate, %
  11.20
  11.76
  12.35
  12.97
  13.61
  14.29
  15.01
  15.76
  16.55
  17.37
  18.24
  19.16
  20.11
  21.12
  22.18
  23.28
  24.45
  25.67
  26.95
  28.30
  29.72
  31.20
  32.76
  34.40
  36.12
  37.93
  39.82
  41.81
  43.91
  46.10
PV of cash for distribution, $m
  -396
  76
  72
  67
  62
  56
  51
  45
  40
  34
  29
  24
  20
  16
  12
  9
  7
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

YRC Worldwide Inc. is a holding company. The Company, through its subsidiaries, offers its customers a range of transportation services. The Company operates through two segments: YRC Freight and Regional Transportation. The Company has less-than-truckload (LTL) networks in North America with local, regional, national and international capabilities. YRC Freight segment offers a range of services for the transportation of industrial, commercial and retail goods in national, regional and international markets, primarily through the operation of owned or leased equipment in its North American ground distribution network. It provides transportation services for various categories of goods, which include apparel, appliances, automotive parts, chemicals, food, furniture, glass, machinery, metal and metal products. The Company's Regional Transportation segment consists of USF Holland LLC (Holland), New Penn Motor Express, LLC (New Penn) and USF Reddaway Inc. (Reddaway).

FINANCIAL RATIOS  of  YRC Worldwide, Inc. (YRCW)

Valuation Ratios
P/E Ratio 3.7
Price to Sales 0
Price to Book -0.2
Price to Tangible Book
Price to Cash Flow 0.8
Price to Free Cash Flow 40.7
Growth Rates
Sales Growth Rate -2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.5%
Cap. Spend. - 3 Yr. Gr. Rate 8.6%
Financial Strength
Quick Ratio 8
Current Ratio 0.2
LT Debt to Equity -235.6%
Total Debt to Equity -239.7%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. -2%
Return On Equity -5.5%
Return On Equity - 3 Yr. Avg. 2.3%
Asset Turnover 2.6
Profitability Ratios
Gross Margin 11.1%
Gross Margin - 3 Yr. Avg. 10.4%
EBITDA Margin 5.9%
EBITDA Margin - 3 Yr. Avg. 5.2%
Operating Margin 2.7%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 0.5%
Pre-Tax Margin - 3 Yr. Avg. -0.4%
Net Profit Margin 0.5%
Net Profit Margin - 3 Yr. Avg. -0.3%
Effective Tax Rate 12%
Eff/ Tax Rate - 3 Yr. Avg. 52%
Payout Ratio 0%

YRCW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the YRCW stock intrinsic value calculation we used $5092 million for the last fiscal year's total revenue generated by YRC Worldwide, Inc.. The default revenue input number comes from 0001 income statement of YRC Worldwide, 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 YRCW stock valuation model: a) initial revenue growth rate of 3.2% 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 11.2%, whose default value for YRCW is calculated based on our internal credit rating of YRC Worldwide, 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 YRC Worldwide, 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 YRCW stock the variable cost ratio is equal to 88.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $473 million in the base year in the intrinsic value calculation for YRCW 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 11.9% for YRC Worldwide, Inc..

Corporate tax rate of 27% is the nominal tax rate for YRC Worldwide, 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 YRCW 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 YRCW are equal to 15.8%.

Life of production assets of 5.4 years is the average useful life of capital assets used in YRC Worldwide, 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 YRCW is equal to -0.8%. 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 - $-305.5 million for YRC Worldwide, 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 33.843 million for YRC Worldwide, 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 YRC Worldwide, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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