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Mobile Mini, Inc. (NASDAQ:MINI): How Much Money Comes Back To Investors?

Mobile Mini, Inc. (NASDAQ:MINI) shareholders, and potential investors, need to understand how much cash the business makes from its core operational activities, as well as how much is invested back into the business. After investment, what’s left over is what belongs to you, the investor. This also determines how much the stock is worth. I’ve analysed below, the health and outlook of MINI’s cash flow, which will help you understand the stock from a cash standpoint. Cash is an important concept to grasp as an investor, as it directly impacts the value of your shares and the future growth potential of your portfolio.

Check out our latest analysis for Mobile Mini

What is free cash flow?

Free cash flow (FCF) is the amount of cash Mobile Mini has left after it pays off its expenses, including its net capital expenditures, which is what the company needs to spend each year to maintain or grow its business operations.

There are two methods I will use to evaluate the quality of Mobile Mini’s FCF: firstly, I will measure its FCF yield relative to the market index yield; secondly, I will examine whether its operating cash flow will continue to grow into the future, which will give us a sense of sustainability.

Free Cash Flow = Operating Cash Flows – Net Capital Expenditure

Free Cash Flow Yield = Free Cash Flow / Enterprise Value

where Enterprise Value = Market Capitalisation + Net Debt

Mobile Mini’s yield of 1.79% indicates its sub-standard capacity to generate cash, compared to the stock market index as a whole, accounting for the size differential. This means investors are taking on more concentrated risk on Mobile Mini but are not being adequately rewarded for doing so.

NasdaqGS:MINI Net Worth December 13th 18
NasdaqGS:MINI Net Worth December 13th 18

Does Mobile Mini have a favourable cash flow trend?

Another important consideration is whether this return is likely to be maintained over the next couple of years. We can gauge this by looking at MINI’s expected operating cash flows. In the next few years, the company is expected to grow its cash from operations at a single-digit rate of 8.6%, increasing from its current levels of US$156m to US$170m in two years’ time. Furthermore, breaking down growth into a year on year basis, MINI is able to increase its growth rate each year, from 2.9% next year, to 5.6% in the following year. The overall future outlook seems buoyant if MINI can maintain its levels of capital expenditure as well.

Next Steps:

Given a low free cash flow yield, on the basis of cash, Mobile Mini becomes a less appealing investment. This is because you would be better compensated in terms of cash yield, by investing in the market index, as well as take on lower diversification risk. However, cash is only one aspect of investing. Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. You should continue to research Mobile Mini to get a better picture of the company by looking at:

  1. Valuation: What is MINI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MINI is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Mobile Mini’s board and the CEO’s back ground.

  3. Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks 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 editorial-team@simplywallst.com.

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