A Quantitative View on USG Corp

In support of my bull call in Wikinvest, i did my analysis based on data compiled from 2008-2001.
My wikinvest article on USG: http://www.wikinvest.com/stock/USG_(USG)

Ed's Call: Buy
Intrinsic Value: US$19.07
Price at time of call: US$14.60

Did a DCF valuation on USG. The parameters I used were:



As the company currently has negative earnings, i did a normalisation on the earnings for the DCF model. The normalised earnings using a historical average approach was ~$400mil

Relative Valuations:
- Relative valuations were lowest in the most recent year. This is easily attributed to the economic and business cycle.



CF Analysis:
- Notice the high CapEx leading up to 2007. This is seen similarly across the industry as the homebuilding sector was booming and material manufacturers were adding capacity to their production lines.



Balance Sheet Analysis:
- Cash conversion cycle increased dramatically to 46 days as inventory turnover slowed and receivables increased.
- Debt levels increase with LT debt totalling $1.4Bil
- Common share holding diluted over the last 2 years.
- Book value holds at ~$15/share




Income Analysis
- COGS as % of Rev = 95.833%. This signifies that the company is barely breaking even. Pricing pressure remains as competitors depress price to clear inventory and try to gain market share. USG on the other hand has a consistent and firm pricing policy. It charges above market price for its wallboards, marketing them as premium high quality boards.