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Calculating The Intrinsic Value Of Monro Inc (NASDAQ:MNRO)

How far off is Monro Inc (NASDAQ:MNRO) from its intrinsic value? Using the most recent financial data, I am going to take a look at whether the stock is fairly priced using the discounted cash flows (DCF) model. If you want to learn more about this method, the basis for my calculations can be found in detail in the Simply Wall St analysis model. If you are reading this after May 2018 then I highly recommend you check out the latest calculation for Monro here.

What’s the value?

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. Firstly, I pulled together the analyst consensus forecast of MNRO’s levered free cash flow (FCF) over the next five years and discounted these values at the cost of equity of 9.59%. When estimates weren’t available, I’ve extrapolated the average annual growth rate over the previous five years, capped at a reasonable level. This resulted in a present value of 5-year cash flow of US$408.90M. Want to know how I calculated this value? Take a look at our detailed analysis here.

NasdaqGS:MNRO Future Profit May 28th 18
NasdaqGS:MNRO Future Profit May 28th 18

In the visual above, we see how how MNRO’s top and bottom lines are expected to move in the future, which should give you some color on MNRO’s outlook. Secondly, I determine the terminal value, which is the business’s cash flow after the first stage. I’ve decided to use the 10-year government bond rate of 2.8% as the stable growth rate, which is rightly below GDP growth, but more towards the conservative side. The present value of the terminal value after discounting it back five years is US$1.24B.

The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is US$1.64B. To get the intrinsic value per share, we divide this by the total number of shares outstanding. This results in an intrinsic value of $50.13, which, compared to the current share price of $55.85, we see that Monro is fair value, maybe slightly overvalued at the time of writing.

Next Steps:

Whilst important, DCF calculation shouldn’t be the only metric you look at when researching a company.

For MNRO, I’ve put together three important factors you should further examine:

  1. Financial Health: Does MNRO 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.

  2. Future Earnings: How does MNRO’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.

  3. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of MNRO? 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 pass 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.

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