A Look At The Fair Value Of Mercer International Inc. (NASDAQ:MERC)
A Look At The Fair Value Of Mercer International Inc. (NASDAQ:MERC)
Key Insights
- The projected fair value for Mercer International is US$9.89 based on 2 Stage Free Cash Flow to Equity
- Mercer International's US$9.10 share price indicates it is trading at similar levels as its fair value estimate
- Our fair value estimate is 6.9% higher than Mercer International's analyst price target of US$9.25
How far off is Mercer International Inc. (NASDAQ:MERC) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by estimating the company's future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. There's really not all that much to it, even though it might appear quite complex.
Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
The Calculation
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$40.5m | US$72.0m | US$70.0m | US$69.2m | US$69.1m | US$69.5m | US$70.2m | US$71.2m | US$72.5m | US$73.8m |
Growth Rate Estimate Source | Analyst x2 | Analyst x3 | Est @ -2.72% | Est @ -1.22% | Est @ -0.16% | Est @ 0.57% | Est @ 1.09% | Est @ 1.45% | Est @ 1.70% | Est @ 1.88% |
Present Value ($, Millions) Discounted @ 11% | US$36.3 | US$57.9 | US$50.5 | US$44.8 | US$40.1 | US$36.2 | US$32.8 | US$29.8 | US$27.2 | US$24.9 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$381m
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 11%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$74m× (1 + 2.3%) ÷ (11%– 2.3%) = US$821m
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$821m÷ ( 1 + 11%)10= US$277m
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$657m. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$9.1, the company appears about fair value at a 8.0% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
Important Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Mercer International as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 11%, which is based on a levered beta of 2.000. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Mercer International
- Debt is well covered by earnings.
- Balance sheet summary for MERC.
- Dividend is low compared to the top 25% of dividend payers in the Forestry market.
- Has sufficient cash runway for more than 3 years based on current free cash flows.
- Good value based on P/S ratio and estimated fair value.
- Debt is not well covered by operating cash flow.
- Paying a dividend but company is unprofitable.
- Not expected to become profitable over the next 3 years.
- Is MERC well equipped to handle threats?
Next Steps:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Mercer International, we've put together three additional elements you should consider:
- Risks: As an example, we've found 3 warning signs for Mercer International that you need to consider before investing here.
- Future Earnings: How does MERC's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
關鍵見解
- 根據兩階段股權自由現金流,美世國際的預計公允價值爲9.89美元
- 美世國際9.10美元的股價表明其交易價格與其公允價值估計相似
- 我們的公允價值估計比美世國際分析師的9.25美元目標股價高6.9%
美世國際公司(納斯達克股票代碼:MERC)距離其內在價值有多遠?使用最新的財務數據,我們將通過估算公司未來的現金流並將其折扣爲現值來研究股票的定價是否公平。折扣現金流(DCF)模型是我們將應用的工具。儘管它可能看起來很複雜,但實際上並沒有那麼多。
公司可以在很多方面得到估值,因此我們要指出,DCF並不適合所有情況。如果您想了解有關折扣現金流的更多信息,可以在Simply Wall St分析模型中詳細了解此計算背後的理由。
計算結果
我們使用的是兩階段增長模型,這只是意味着我們考慮了公司增長的兩個階段。在初始階段,公司的增長率可能更高,而第二階段通常被認爲具有穩定的增長率。在第一階段,我們需要估算未來十年的業務現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
差價合約完全是關於未來一美元的價值低於今天一美元的想法,因此我們需要對這些未來現金流的總和進行折現才能得出現值估計:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 4,050 萬美元 | 7200 萬美元 | 7,000 萬美元 | 6,920 萬美元 | 6,910 萬美元 | 6,950 萬美元 | 7,020 萬美元 | 71.2 萬美元 | 7250 萬美元 | 7,380 萬美元 |
增長率估算來源 | 分析師 x2 | 分析師 x3 | 美國東部標準時間 @ -2.72% | 美國東部標準時間 @ -1.22% | Est @ -0.16% | Est @ 0.57% | 東部標準時間 @ 1.09% | Est @ 1.45% | Est @ 1.70% | Est @ 1.88% |
現值(美元,百萬)折扣 @ 11% | 36.3 美元 | 57.9 美元 | 50.5 美元 | 44.8 美元 | 40.1 美元 | 36.2 美元 | 32.8 美元 | 29.8 美元 | 27.2 美元 | 24.9 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
10 年期現金流 (PVCF) 的現值 = 3.81 億美元
在計算了最初10年期內未來現金流的現值之後,我們需要計算終值,該終值涵蓋了第一階段以後的所有未來現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長率。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們將未來的現金流折現爲今天的價值,使用11%的股本成本。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 7400 萬美元× (1 + 2.3%) ÷ (11% — 2.3%) = 8.21 億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 8.21億美元÷ (1 + 11%)10= 2.77億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲6.57億美元。最後一步是將股票價值除以已發行股票的數量。相對於目前的9.1美元的股價,該公司的公允價值似乎比目前的股價折扣了8.0%。但請記住,這只是一個近似的估值,就像任何複雜的公式一樣,垃圾進出。
重要假設
上面的計算在很大程度上取決於兩個假設。第一個是貼現率,另一個是現金流。你不必同意這些輸入,我建議你自己重做計算然後試一試。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將美世國際視爲潛在股東,因此使用股本成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了11%,這是基於2.000的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
美世國際的SWOT分析
- 債務可以很好地由收益支付。
- MERC 的資產負債表摘要。
- 與林業市場前25%的股息支付者相比,股息很低。
- 根據當前的自由現金流,有足夠的現金流超過3年。
- 根據市銷率和估計的公允價值,物有所值。
- 運營現金流無法很好地覆蓋債務。
- 支付股息,但公司無利可圖。
- 預計在未來三年內不會盈利。
- MERC 有足夠的能力應對威脅嗎?
後續步驟:
儘管公司的估值很重要,但它不應該是你在研究公司時唯一考慮的指標。DCF模型不是完美的股票估值工具。相反,DCF模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。例如,如果稍微調整終值增長率,則可能會極大地改變整體結果。對於美世國際,我們彙總了您應該考慮的另外三個要素:
- 風險:例如,我們發現了美世國際的3個警告信號,在投資之前,您需要考慮這些信號。
- 未來收益:與同行和整個市場相比,MERC的增長率如何?通過與我們的免費分析師增長預期圖表互動,深入了解未來幾年的分析師共識數字。
- 其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
PS。Simply Wall St每天都會更新每隻美國股票的差價合約計算結果,因此,如果您想找到任何其他股票的內在價值,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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