【cabins on the rogue river oregon】Is Primoris Services Corporation (NASDAQ:PRIM) Expensive For A Reason? A Look At The Intrinsic Value
In this cabins on the rogue river oregonarticle I am going to calculate the intrinsic value of Primoris Services Corporation (
NASDAQ:PRIM
) by taking the expected future cash flows and discounting them to their present value. This is done using the Discounted Cash Flows (DCF) model. It may sound complicated, but actually it is quite simple! Anyone interested in learning a bit more about intrinsic value should have a read of the
Simply Wall St analysis model
. If you are reading this and its not January 2019 then I highly recommend you check out the latest calculation for Primoris Services by following the link below.
Check out our latest analysis for Primoris Services
Is PRIM fairly valued?
I use what is known as a 2-stage model, which simply means we have two different periods of varying growth rates for the company’s cash flows. Generally the first stage is higher growth, and the second stage is a more stable growth phase. To start off with we need to estimate the next five years of cash flows. For this I used the consensus of the analysts covering the stock, as you can see below. The sum of these cash flows is then discounted to today’s value.
5-year cash flow forecast
2019
2020
2021
2022
2023
Levered FCF ($, Millions)
$70.00
$70.00
$73.27
$76.69
$80.27
Source
Analyst x1
Analyst x1
Est @ 4.67%
Est @ 4.67%
Est @ 4.67%
Present Value Discounted @ 11.98%
$62.51
$55.82
$52.17
$48.76
$45.58
Present Value of 5-year Cash Flow (PVCF)
= US$265m
After calculating the present value of future cash flows in the intial 5-year period we need to calculate the Terminal Value, which accounts for all the future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of the GDP. In this case I have used the 10-year government bond rate (2.9%). In the same way as with the 5-year ‘growth’ period, we discount this to today’s value at a cost of equity of 12%.
Terminal Value (TV)
= FCF
2023
× (1 + g) ÷ (r – g) = US$80m × (1 + 2.9%) ÷ (12% – 2.9%) = US$915m
Present Value of Terminal Value (PVTV)
= TV / (1 + r)
5
= US$915m ÷ ( 1 + 12%)
5
= US$519m
The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is US$784m. The last step is to then divide the equity value by the number of shares outstanding. If the stock is an depositary receipt (represents a specified number of shares in a foreign corporation) then we use the equivalent number.
This results in an intrinsic value of $15.31
. Compared to the current share price of $18.79, the stock is fair value, maybe slightly overvalued and not available at a discount at this time.
Story continues
NasdaqGS:PRIM Intrinsic Value Export January 2nd 19
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 my inputs, I recommend redoing the calculations yourself and playing with them. Because we are looking at Primoris Services as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighed average cost of capital, WACC) which accounts for debt. In this calculation I’ve used 12%, which is based on a levered beta of 1.282. This is derived from the Bottom-Up Beta method based on comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
Next Steps:
Although the valuation of a company is important, it shouldn’t be the only metric you look at when researching a company. What is the reason for the share price to differ from the intrinsic value? For PRIM, I’ve put together three essential aspects you should further research:
Financial Health
: Does PRIM have a healthy balance sheet? Take a look at our
free balance sheet analysis with six simple checks
on key factors like leverage and risk.
Future Earnings
: How does PRIM’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 High Quality Alternatives
: Are there other high quality stocks you could be holding instead of PRIM? Explore
our interactive list of high quality stocks
to get an idea of what else is out there you may be missing!
PS. The Simply Wall St app conducts a discounted cash flow for every stock on the NASDAQ every 6 hours. If you want to find the calculation for other stocks just
search here
.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at
.
View comments
(责任编辑:Focus)
- How Does Duluth Holdings's (NASDAQ:DLTH) P/E Compare To Its Industry, After The Share Price Drop?
- Pinduoduo’s AI strawberry competition offers glimpse of “one-click planting”
- Voya: 3Q Earnings Snapshot
- A Sliding Share Price Has Us Looking At Malibu Boats, Inc.'s (NASDAQ:MBUU) P/E Ratio
- Are You Looking for a Top Momentum Pick? Why Vapotherm (VAPO) is a Great Choice
- Ukraine prime minister ousted, president seeks 'new brains'
- Drone Delivery Canada Begins Flights For First Paying Customer
- U.S. SEC eases crowdfunding rules for firms due to coronavirus disruption
- Broadcom Inc. (AVGO) Stock Moves -1.58%: What You Should Know
- LATAM Airlines Group: Q1 Earnings Insights
- X-ray Tube Market - Growth, Trends, Forecasts (2020 - 2025)
- CohBar To Target COVID-19 Associated Acute Respiratory Distress Syndrome (ARDS) with its Apelin Receptor Agonist Peptides
- Trump threatens to deploy U.S. military to quell riots across the country
-
Unusual Options Activity Insight: Plug Power
On Friday, shares ofPlug Power(NASDAQ:PLUG) saw unusual options activity. After the option alert, th ...[详细] -
SCOR successfully sponsors a new catastrophe bond, Atlas Capital Reinsurance 2020 DAC
Press ReleaseMay 4, 2020 - N° 11SCOR successfully sponsors a new catastrophe bond, Atlas Capital Rei ...[详细] -
What Does BNP Paribas Know That the Markets Don't?
(Bloomberg Opinion) -- Investors are particularly wary of European banks. Since February, shares in ...[详细] -
NEW YORK, NY / ACCESSWIRE / December 3, 2020 /Bernstein Liebhard, a nationally acclaimed investor ri ...[详细]
-
Dublin, May 05, 2020 (GLOBE NEWSWIRE) -- The"Plasma Protein Therapeutics Market - Growth, Trends, an ...[详细]
-
Microsoft Is in Talks to Buy TikTok in U.S.
(Bloomberg) -- Microsoft Corp. is exploring an acquisition of TikTok’s operations in the U.S., accor ...[详细] -
Hermès Opens Significantly Larger Shop in Las Vegas
Hermèsis showing its confidence in theLas Vegasmarket with the opening of a significantly larger ret ...[详细] -
Akoustis Reports Third Quarter FY20 Results
– Company to Host Investor Update Call Today at 8:00 am ET –Charlotte, N.C., May 04, 2020 (GLOBE NEW ...[详细] -
Ex-Tesla employee agrees to pay $400K over claims he stole trade secrets
Tesla Inc CEO Elon Musk speaks at an opening ceremony for Tesla China-made Model Y program in Shangh ...[详细] -
Will AudioEye Continue to Surge Higher?
As of late, it has definitely been a great time to be an investor ofAudioEye, Inc.AEYE.The stock has ...[详细]
As Biotech Thrives On Vaccine Hopes, Traders Look Into The Sector's Diversity
IRS offers new relief options to help with tax bills during coronavirus pandemic
- S.Korea's Moon tells Trump he would accept invitation to G7 summit
- Exxon CEO sticks to spending targets as oil prices tumble
- Cytokinetics (CYTK) Reports Q4 Loss, Misses Revenue Estimates
- Ducks Unlimited Canada commends Government’s Fall Economic Statement that recognizes nature in Canada’s economic recovery
- Monthly Outlook – January 2020
- Spotify Rolls Out Standalone Streaming On Apple Watch App: TechCrunch
- How Does TCF Financial's (NASDAQ:TCF) P/E Compare To Its Industry, After The Share Price Drop?