Multi-Color Corp. – Value Analysis (NASDAQ:LABL) : April 14, 2016

Capitalcube gives Multi-Color Corp. a score of 63.

Our analysis is based on comparing Multi-Color Corp. with the following peers – InnerWorkings, Inc., R.R. Donnelley & Sons Company, Cimpress N.V., Cenveo, Inc. and Brady Corporation Class A (INWK-US, RRD-US, CMPR-US, CVO-US and BRC-US).

Investment Outlook

Multi-Color Corp. has a fundamental score of 63 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • Multi-Color Corporation’s current Price/Book of 2.83 is about median in its peer group.
  • The market expects LABL-US to grow more slowly than its peers and for its median ROE to decline.
  • LABL-US‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • LABL-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While LABL-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • LABL-US might have enough interest coverage to take-on additional debt prudently.

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Leverage & Liquidity

LABL-US might have enough interest coverage to take-on additional debt.

  • While LABL-US‘s debt to enterprise ratio of 34.45% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 28.06%), it also enjoys a relatively high interest coverage level of 4.14x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 5 peers for the company have an outstanding debt balance.

LABL-US has moved to a Some Capacity from a relatively high liquidity profile at the recent year-end.

  • LABL-US‘s interest coverage is upward trending and is now similar to its five-year average interest coverage of 3.84x.
  • Though its interest coverage has remained relatively stable at 4.14x compared to 2015, its peer median has decreased to 3.86x from 4.92x during this period.
  • Interest coverage rose 1.11 points relative to peers (and is now higher than its peer median).
  • LABL-US‘s debt-EV has increased 5.69 percentage points from last year’s low but is still below its five-year average debt-EV of 42.27.
  • The increase in its debt-EV to 34.45% from 28.76% (in 2015) was also accompanied by an increase in its peer median during this period to 28.06% from 25.02%.
  • Relative to peers, debt-EV rose 2.64 percentage points.

Access the detailed analysis for Multi-Color Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
InnerWorkings, Inc. 21.27 1.47 5.75 40.11
R.R. Donnelley & Sons Company 55.92 1.33 2.49 18.4
Cimpress N.V. 21.67 0.58 3.59 23.88
Cenveo, Inc. 95.92 1.38 0.97 5.11
Brady Corporation Class A 20.05 2.58 10.34 40.65
Multi-Color Corporation 34.45 2.03 4.14 19.48
Peer Median 28.06 1.42 3.86 21.68
Best In Class 20.05 2.58 10.34 40.65

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Company Profile

Multi-Color Corp. is engaged in the business of global label solutions supporting various brands such as home and personal care, wine and spirit, food and beverages, healthcare and specialty consumer products. Its products include pressure sensitive labels, in-molds, glue-applied, heat transfer, and shrink sleeve labels. The company also provides services such as conversion of customer digital files and artwork into proofs, production of print layouts and printing plates, and product mock ups and samples for market research. The company was founded in 1916 and is headquartered in Batavia, OH.

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