Intrinsic value of Cott Corporation - BCB

Previous Close

$22.50

  Intrinsic Value

$7.45

stock screener

  Rating & Target

str. sell

-67%

Previous close

$22.50

 
Intrinsic value

$7.45

 
Up/down potential

-67%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BCB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.90
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  4,372
  4,459
  4,562
  4,679
  4,811
  4,957
  5,117
  5,291
  5,480
  5,683
  5,901
  6,134
  6,383
  6,648
  6,930
  7,229
  7,546
  7,881
  8,236
  8,610
  9,006
  9,424
  9,864
  10,328
  10,817
  11,332
  11,874
  12,445
  13,045
  13,677
  14,341
Variable operating expenses, $m
 
  4,305
  4,400
  4,509
  4,631
  4,767
  4,916
  5,078
  5,253
  5,442
  5,645
  5,703
  5,934
  6,181
  6,443
  6,721
  7,015
  7,327
  7,657
  8,005
  8,373
  8,761
  9,170
  9,602
  10,056
  10,535
  11,039
  11,569
  12,128
  12,715
  13,333
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  4,261
  4,305
  4,400
  4,509
  4,631
  4,767
  4,916
  5,078
  5,253
  5,442
  5,645
  5,703
  5,934
  6,181
  6,443
  6,721
  7,015
  7,327
  7,657
  8,005
  8,373
  8,761
  9,170
  9,602
  10,056
  10,535
  11,039
  11,569
  12,128
  12,715
  13,333
Operating income, $m
  111
  155
  162
  170
  180
  190
  201
  213
  227
  241
  256
  431
  449
  468
  487
  508
  531
  554
  579
  606
  633
  663
  694
  726
  761
  797
  835
  875
  917
  962
  1,009
EBITDA, $m
  434
  522
  534
  548
  563
  580
  599
  619
  641
  665
  691
  718
  747
  778
  811
  846
  883
  922
  964
  1,008
  1,054
  1,103
  1,155
  1,209
  1,266
  1,326
  1,390
  1,457
  1,527
  1,601
  1,679
Interest expense (income), $m
  169
  183
  188
  194
  201
  209
  218
  227
  237
  249
  261
  274
  287
  302
  318
  335
  352
  371
  391
  412
  434
  458
  483
  509
  536
  565
  596
  628
  662
  697
  735
Earnings before tax, $m
  -62
  -28
  -26
  -24
  -22
  -19
  -17
  -14
  -11
  -8
  -4
  158
  161
  165
  169
  174
  178
  183
  188
  193
  199
  205
  211
  218
  225
  232
  239
  247
  256
  264
  274
Tax expense, $m
  35
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  43
  44
  45
  46
  47
  48
  49
  51
  52
  54
  55
  57
  59
  61
  63
  65
  67
  69
  71
  74
Net income, $m
  -105
  -28
  -26
  -24
  -22
  -19
  -17
  -14
  -11
  -8
  -4
  115
  118
  121
  124
  127
  130
  134
  137
  141
  145
  150
  154
  159
  164
  169
  175
  180
  187
  193
  200

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  160
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,323
  5,265
  5,386
  5,524
  5,680
  5,852
  6,041
  6,247
  6,469
  6,709
  6,967
  7,242
  7,536
  7,849
  8,182
  8,535
  8,909
  9,305
  9,723
  10,166
  10,633
  11,126
  11,646
  12,193
  12,771
  13,379
  14,019
  14,693
  15,402
  16,147
  16,932
Adjusted assets (=assets-cash), $m
  5,163
  5,265
  5,386
  5,524
  5,680
  5,852
  6,041
  6,247
  6,469
  6,709
  6,967
  7,242
  7,536
  7,849
  8,182
  8,535
  8,909
  9,305
  9,723
  10,166
  10,633
  11,126
  11,646
  12,193
  12,771
  13,379
  14,019
  14,693
  15,402
  16,147
  16,932
Revenue / Adjusted assets
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
  0.847
Average production assets, $m
  2,246
  2,292
  2,345
  2,405
  2,473
  2,548
  2,630
  2,720
  2,817
  2,921
  3,033
  3,153
  3,281
  3,417
  3,562
  3,716
  3,879
  4,051
  4,233
  4,426
  4,629
  4,844
  5,070
  5,309
  5,560
  5,825
  6,103
  6,397
  6,705
  7,030
  7,371
Working capital, $m
  58
  192
  196
  201
  207
  213
  220
  228
  236
  244
  254
  264
  274
  286
  298
  311
  324
  339
  354
  370
  387
  405
  424
  444
  465
  487
  511
  535
  561
  588
  617
Total debt, $m
  2,973
  2,893
  2,986
  3,093
  3,214
  3,347
  3,493
  3,652
  3,824
  4,009
  4,208
  4,421
  4,649
  4,890
  5,148
  5,420
  5,710
  6,016
  6,339
  6,681
  7,042
  7,423
  7,825
  8,249
  8,695
  9,165
  9,660
  10,180
  10,728
  11,305
  11,911
Total liabilities, $m
  4,149
  4,070
  4,163
  4,270
  4,391
  4,524
  4,670
  4,829
  5,001
  5,186
  5,385
  5,598
  5,826
  6,067
  6,325
  6,597
  6,887
  7,193
  7,516
  7,858
  8,219
  8,600
  9,002
  9,426
  9,872
  10,342
  10,837
  11,357
  11,905
  12,482
  13,088
Total equity, $m
  1,173
  1,195
  1,223
  1,254
  1,289
  1,328
  1,371
  1,418
  1,469
  1,523
  1,581
  1,644
  1,711
  1,782
  1,857
  1,937
  2,022
  2,112
  2,207
  2,308
  2,414
  2,526
  2,644
  2,768
  2,899
  3,037
  3,182
  3,335
  3,496
  3,665
  3,844
Total liabilities and equity, $m
  5,322
  5,265
  5,386
  5,524
  5,680
  5,852
  6,041
  6,247
  6,470
  6,709
  6,966
  7,242
  7,537
  7,849
  8,182
  8,534
  8,909
  9,305
  9,723
  10,166
  10,633
  11,126
  11,646
  12,194
  12,771
  13,379
  14,019
  14,692
  15,401
  16,147
  16,932
Debt-to-equity ratio
  2.535
  2.420
  2.440
  2.470
  2.490
  2.520
  2.550
  2.580
  2.600
  2.630
  2.660
  2.690
  2.720
  2.740
  2.770
  2.800
  2.820
  2.850
  2.870
  2.900
  2.920
  2.940
  2.960
  2.980
  3.000
  3.020
  3.040
  3.050
  3.070
  3.080
  3.100
Adjusted equity ratio
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -105
  -28
  -26
  -24
  -22
  -19
  -17
  -14
  -11
  -8
  -4
  115
  118
  121
  124
  127
  130
  134
  137
  141
  145
  150
  154
  159
  164
  169
  175
  180
  187
  193
  200
Depreciation, amort., depletion, $m
  323
  367
  372
  377
  384
  390
  398
  406
  415
  424
  435
  287
  298
  311
  324
  338
  353
  368
  385
  402
  421
  440
  461
  483
  505
  530
  555
  582
  610
  639
  670
Funds from operations, $m
  429
  339
  346
  354
  362
  371
  381
  392
  404
  417
  430
  402
  416
  431
  448
  465
  483
  502
  522
  544
  566
  590
  615
  641
  669
  699
  730
  762
  796
  832
  870
Change in working capital, $m
  64
  4
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
Cash from operations, $m
  365
  335
  342
  349
  356
  365
  374
  385
  396
  408
  421
  392
  405
  420
  435
  452
  469
  488
  507
  527
  549
  572
  596
  622
  648
  677
  706
  737
  770
  805
  841
Maintenance CAPEX, $m
  0
  -204
  -208
  -213
  -219
  -225
  -232
  -239
  -247
  -256
  -266
  -276
  -287
  -298
  -311
  -324
  -338
  -353
  -368
  -385
  -402
  -421
  -440
  -461
  -483
  -505
  -530
  -555
  -582
  -610
  -639
New CAPEX, $m
  -200
  -47
  -53
  -60
  -68
  -75
  -82
  -90
  -97
  -104
  -112
  -120
  -128
  -136
  -145
  -154
  -163
  -172
  -182
  -193
  -203
  -215
  -226
  -239
  -251
  -265
  -279
  -293
  -309
  -325
  -342
Cash from investing activities, $m
  -1,482
  -251
  -261
  -273
  -287
  -300
  -314
  -329
  -344
  -360
  -378
  -396
  -415
  -434
  -456
  -478
  -501
  -525
  -550
  -578
  -605
  -636
  -666
  -700
  -734
  -770
  -809
  -848
  -891
  -935
  -981
Free cash flow, $m
  -1,117
  85
  80
  75
  70
  65
  61
  56
  52
  47
  43
  -4
  -9
  -15
  -20
  -26
  -31
  -37
  -44
  -50
  -57
  -63
  -71
  -78
  -86
  -94
  -102
  -111
  -120
  -129
  -139
Issuance/(repayment) of debt, $m
  781
  80
  94
  107
  120
  133
  146
  159
  172
  185
  199
  213
  227
  242
  257
  273
  289
  306
  324
  342
  361
  381
  402
  424
  446
  470
  495
  521
  548
  577
  606
Issuance/(repurchase) of shares, $m
  488
  50
  54
  55
  57
  58
  59
  60
  61
  62
  63
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,225
  130
  148
  162
  177
  191
  205
  219
  233
  247
  262
  213
  227
  242
  257
  273
  289
  306
  324
  342
  361
  381
  402
  424
  446
  470
  495
  521
  548
  577
  606
Total cash flow (excl. dividends), $m
  97
  215
  228
  237
  247
  257
  266
  276
  285
  295
  305
  209
  218
  227
  237
  247
  258
  269
  280
  292
  304
  318
  331
  346
  361
  376
  393
  410
  428
  447
  467
Retained Cash Flow (-), $m
  -309
  -50
  -54
  -55
  -57
  -58
  -59
  -60
  -61
  -62
  -63
  -63
  -67
  -71
  -76
  -80
  -85
  -90
  -95
  -100
  -106
  -112
  -118
  -124
  -131
  -138
  -145
  -153
  -161
  -169
  -178
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  164
  174
  182
  190
  198
  207
  215
  224
  233
  242
  147
  151
  156
  162
  167
  173
  179
  185
  192
  198
  206
  213
  221
  230
  238
  248
  257
  267
  278
  289
Discount rate, %
 
  10.60
  11.13
  11.69
  12.27
  12.88
  13.53
  14.21
  14.92
  15.66
  16.44
  17.27
  18.13
  19.04
  19.99
  20.99
  22.04
  23.14
  24.30
  25.51
  26.79
  28.12
  29.53
  31.01
  32.56
  34.19
  35.90
  37.69
  39.57
  41.55
  43.63
PV of cash for distribution, $m
 
  149
  141
  131
  120
  108
  97
  85
  74
  63
  53
  25
  20
  16
  13
  10
  7
  5
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.4
  96.8
  95.2
  93.6
  92.0
  90.5
  89.1
  87.6
  86.3
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0
  85.0

Cott Corp is a Canada-based company, which along with its subsidiaries, is engaged in production of beverages on behalf of retailers, brand owners and distributors. The Company operates through five operating segments: Water & Coffee Solutions; Cott North America; Cott United Kingdom (Cott U.K.), Royal Crown International (RCI) and Mexico. Water & Coffee Solutions segment provides direct-to-consumer products, such as bottled water, coffee, brewed tea, water dispensers, coffee and tea brewers, and filtration equipment. Its traditional business consists of its Cott North America, Cott U.K. and All Other segments. Its traditional business produces products, including carbonated soft drinks, shelf stable juice and juice-based products, clear, still and sparkling flavored waters, energy drinks and shots, sports drinks, new age beverages, ready-to liquid enhancers, freezables, hot chocolate, creamers/whiteners, cereals and beverage concentrates directly or through third-party manufacturers.

FINANCIAL RATIOS  of  Cott Corporation (BCB)

Valuation Ratios
P/E Ratio -29.7
Price to Sales 0.7
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 18.9
Growth Rates
Sales Growth Rate 9.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 28.2%
Cap. Spend. - 3 Yr. Gr. Rate 19.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 228.9%
Total Debt to Equity 253.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. -10.6%
Return On Total Capital -2.9%
Ret/ On T. Cap. - 3 Yr. Avg. -0.5%
Return On Equity -10.3%
Return On Equity - 3 Yr. Avg. -2.1%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 33.2%
Gross Margin - 3 Yr. Avg. 25.6%
EBITDA Margin 9.8%
EBITDA Margin - 3 Yr. Avg. 8.8%
Operating Margin 2.5%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin -1.4%
Pre-Tax Margin - 3 Yr. Avg. -1.2%
Net Profit Margin -2.4%
Net Profit Margin - 3 Yr. Avg. -0.5%
Effective Tax Rate -56.5%
Eff/ Tax Rate - 3 Yr. Avg. 371%
Payout Ratio -40%

BCB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BCB stock intrinsic value calculation we used $4372 million for the last fiscal year's total revenue generated by Cott Corporation. The default revenue input number comes from 2016 income statement of Cott Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BCB stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10.6%, whose default value for BCB is calculated based on our internal credit rating of Cott Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Cott Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BCB stock the variable cost ratio is equal to 96.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BCB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.5% for Cott Corporation.

Corporate tax rate of 27% is the nominal tax rate for Cott Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BCB stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BCB are equal to 51.4%.

Life of production assets of 11 years is the average useful life of capital assets used in Cott Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BCB is equal to 4.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1173 million for Cott Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 139.214 million for Cott Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Cott Corporation at the current share price and the inputted number of shares is $3.1 billion.

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Financial statements of BCB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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