RPM International (RPM:NYS) Fundamental Valuation Report

Fundamental Valuation Report

RPM International(RPM:NYS)

Basic Materials:Specialty Chemicals

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$52.81 (USD) 07/01/2019

Weighted Valuation
$66.49 (USD)

Overall Rating
Undervalued by 25.9%

Valuation Models Analyst Consensus: $73.00 (USD)
(in order of importance) Discounted Cash Flow: $58.95 (USD)
Comparables: $62.05 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (RPM:NYS USD)

Price 52.81
Range 51.95 – 53.19
52 week 46.92 – 68.05
Open 51.97
Vol / Avg. 2.13M/1.17M
Mkt cap 7.03B
P/E 27.43
Div/yield 1.26/0.02
EPS 2.50
Shares 133.14M
Beta 1.34

Company Description

RPM International Inc manufactures and sells a variety of paints, coatings, and adhesives. The firm organizes itself into three segments based on product type. The industrial segment, which generates around half of total revenue, sells construction chemicals, roofing systems, and weatherproofing sealants. The specialty segment sells industrial equipment, colorants, exterior finishes, and edible coatings for the food and pharmaceutical industry. Products in both the industrial and specialty segments are sold directly to contractors, distributors, and industrial manufacturers within the construction industry. The consumer segment sells paints, nail care enamels, caulks, adhesives, sealants, and wood stains to home improvement retail stores. The majority of revenue comes from North America.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for RPM:NYS

Using a discounted cash flow model we generated an intrinsic value of $58.95 (USD) for RPM:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

RPM:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $58.95 1% 5% 1% 5%
WACC (or Ke) 9.33 $72.47 $49.12
Terminal Growth Rate 3.00 $50.14 $71.07
Tax Rate 0.19 $64.07 $53.82
Cash Flow 950,338,668 $54.78 $63.12
Capital Expenditures 0 $58.95 $58.95
Long Term Debt 1,656,730,000 $59.57 $58.33

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $62.05 (USD) for RPM:NYS. We also generated a valuation of $55.68 (USD) using other metrics and comparables.
The comparable companies were H.B. Fuller (FUL:NYS), GCP Applied Technologies (GCP:NYS), W R Grace (GRA:NYS), Quaker Chemical (KWR:NYS) and Platform Specialty (PAH:NYS).

Company RPM:NYS End Date Value
Earnings/Share $2.16 (USD)
Book Value/Share $12.10 (USD)
Sales/Share $39.58 (USD)
Cash Flow/Share $2.98 (USD)
EBITDA/Share $4.73 (USD)
Price Based on Comps Adjustment Factor (%)
$80.73 (USD) 4.2
$69.12 (USD) -21.7
$64.44 (USD) -23.2
$72.40 (USD) -40.1
$78.31 (USD) 11.6
RPM:NYS Ratios Used Average Values FUL:NYS GCP:NYS GRA:NYS KWR:NYS PAH:NYS
27.21 PE Ratio 37.38 18.16 0.00 0.00 56.60 0.00
4.86 PB Ratio 5.71 1.92 3.83 15.88 5.49 1.46
1.49 PS Ratio 1.63 0.75 1.56 2.34 2.72 0.77
19.72 PCF Ratio 29.60 12.53 0.00 15.34 31.55 58.99
16.81 EV to EBITDA 16.55 13.69 13.89 17.13 21.69 16.33

Multiples

Using a multiples approach we generated a valuation of  $56.48 (USD) for RPM:NYS

Company RPM:NYS End Date Value
Earnings/Share $2.16 (USD)
Book Value/Share $12.10 (USD)
Sales/Share $39.58 (USD)
Cash Flow/Share $2.98 (USD)
EBITDA/Share $4.73 (USD)
Price Based on Comps Adjustment Factor
$52.29 (USD) 0
$58.05 (USD) 0
$56.45 (USD) 0
$54.55 (USD) 0
$61.04 (USD) 0
Ratios Ratio Average
PE Ratio 24.21
PB Ratio 4.80
PS Ratio 1.43
PCF Ratio 18.30
EV to EBITDA 12.90

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  RPM:NYS for the last 10 years was  4.75

We ran the Adjusted Book Value for  RPM:NYS and generated a book value of  $12.05 (USD)
By multiplying these we get an adjusted valuation of  $57.28 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for RPM:NYS. The 3 analysts have a concensus valuation for RPM:NYS for 2019 of $73.00 (USD).

RPM:NYS RPM International

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 3 0 3.6000 Outperform 2019-1-4

Current Price: 52.81 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 2.98 3.65 3.95
# EPS Analysts 5 5 1
Mean Revenue 5,619.00 5,854.60 6,004.00
# Revenue Analysts 4 4 1
Mean Target Price 73.00
Mean Cash Flow 3.90 4.88
Mean EBITDA 764.00 899.70
Mean Net Income 387.30 493.90
Mean Debt Outstanding 1,766.00 1,494.00 1,007.00
Mean Tax Rate 23.67 23.83
Mean Growth Rate 14.35
Mean Capital Expenditure 131.70 127.50 115.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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