Intrinsic value of Cascades Inc. - CAS

Previous Close

$12.38

  Intrinsic Value

$60.37

stock screener

  Rating & Target

str. buy

+388%

Previous close

$12.38

 
Intrinsic value

$60.37

 
Up/down potential

+388%

 
Rating

str. buy

We calculate the intrinsic value of CAS 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 1.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
Revenue, $m
  4,321
  4,654
  5,000
  5,359
  5,732
  6,120
  6,524
  6,944
  7,381
  7,836
  8,309
  8,803
  9,318
  9,855
  10,415
  11,000
  11,611
  12,250
  12,918
  13,616
  14,346
  15,111
  15,911
  16,749
  17,626
  18,546
  19,509
  20,518
  21,576
  22,686
Variable operating expenses, $m
  1,635
  1,758
  1,886
  2,019
  2,158
  2,301
  2,451
  2,606
  2,768
  2,937
  3,078
  3,261
  3,451
  3,650
  3,858
  4,074
  4,301
  4,537
  4,785
  5,043
  5,314
  5,597
  5,893
  6,204
  6,529
  6,869
  7,226
  7,600
  7,992
  8,403
Fixed operating expenses, $m
  2,373
  2,425
  2,479
  2,533
  2,589
  2,646
  2,704
  2,764
  2,824
  2,886
  2,950
  3,015
  3,081
  3,149
  3,218
  3,289
  3,361
  3,435
  3,511
  3,588
  3,667
  3,748
  3,830
  3,915
  4,001
  4,089
  4,179
  4,271
  4,365
  4,461
Total operating expenses, $m
  4,008
  4,183
  4,365
  4,552
  4,747
  4,947
  5,155
  5,370
  5,592
  5,823
  6,028
  6,276
  6,532
  6,799
  7,076
  7,363
  7,662
  7,972
  8,296
  8,631
  8,981
  9,345
  9,723
  10,119
  10,530
  10,958
  11,405
  11,871
  12,357
  12,864
Operating income, $m
  313
  470
  635
  806
  986
  1,173
  1,369
  1,574
  1,788
  2,012
  2,282
  2,527
  2,785
  3,055
  3,339
  3,637
  3,949
  4,277
  4,622
  4,984
  5,365
  5,766
  6,187
  6,630
  7,097
  7,588
  8,104
  8,648
  9,220
  9,822
EBITDA, $m
  522
  693
  871
  1,057
  1,252
  1,455
  1,667
  1,889
  2,120
  2,363
  2,617
  2,883
  3,161
  3,453
  3,759
  4,081
  4,418
  4,772
  5,143
  5,534
  5,944
  6,376
  6,829
  7,306
  7,808
  8,336
  8,891
  9,476
  10,091
  10,738
Interest expense (income), $m
  89
  80
  91
  103
  115
  128
  141
  155
  169
  184
  199
  215
  232
  249
  267
  286
  306
  326
  348
  370
  394
  418
  444
  471
  499
  529
  560
  592
  626
  661
  699
Earnings before tax, $m
  233
  379
  532
  691
  858
  1,032
  1,214
  1,405
  1,605
  1,813
  2,067
  2,296
  2,536
  2,788
  3,053
  3,331
  3,623
  3,929
  4,252
  4,590
  4,947
  5,322
  5,716
  6,131
  6,568
  7,028
  7,512
  8,022
  8,559
  9,124
Tax expense, $m
  63
  102
  144
  187
  232
  279
  328
  379
  433
  490
  558
  620
  685
  753
  824
  899
  978
  1,061
  1,148
  1,239
  1,336
  1,437
  1,543
  1,655
  1,773
  1,898
  2,028
  2,166
  2,311
  2,463
Net income, $m
  170
  277
  388
  505
  626
  754
  887
  1,026
  1,171
  1,324
  1,509
  1,676
  1,851
  2,036
  2,229
  2,432
  2,645
  2,868
  3,104
  3,351
  3,611
  3,885
  4,173
  4,476
  4,795
  5,130
  5,484
  5,856
  6,248
  6,660

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  4,046
  4,357
  4,681
  5,018
  5,367
  5,731
  6,109
  6,502
  6,911
  7,337
  7,780
  8,243
  8,725
  9,227
  9,752
  10,300
  10,872
  11,470
  12,095
  12,749
  13,433
  14,149
  14,898
  15,682
  16,504
  17,365
  18,267
  19,212
  20,203
  21,241
Adjusted assets (=assets-cash), $m
  4,046
  4,357
  4,681
  5,018
  5,367
  5,731
  6,109
  6,502
  6,911
  7,337
  7,780
  8,243
  8,725
  9,227
  9,752
  10,300
  10,872
  11,470
  12,095
  12,749
  13,433
  14,149
  14,898
  15,682
  16,504
  17,365
  18,267
  19,212
  20,203
  21,241
Revenue / Adjusted assets
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
  1.068
Average production assets, $m
  1,936
  2,085
  2,240
  2,401
  2,568
  2,742
  2,923
  3,111
  3,307
  3,510
  3,723
  3,944
  4,174
  4,415
  4,666
  4,928
  5,202
  5,488
  5,787
  6,100
  6,427
  6,770
  7,128
  7,503
  7,897
  8,308
  8,740
  9,192
  9,666
  10,163
Working capital, $m
  367
  396
  425
  456
  487
  520
  555
  590
  627
  666
  706
  748
  792
  838
  885
  935
  987
  1,041
  1,098
  1,157
  1,219
  1,284
  1,352
  1,424
  1,498
  1,576
  1,658
  1,744
  1,834
  1,928
Total debt, $m
  1,790
  2,019
  2,258
  2,506
  2,764
  3,032
  3,310
  3,600
  3,901
  4,215
  4,542
  4,883
  5,238
  5,608
  5,995
  6,399
  6,821
  7,261
  7,722
  8,204
  8,708
  9,236
  9,788
  10,366
  10,971
  11,606
  12,271
  12,967
  13,697
  14,463
Total liabilities, $m
  2,982
  3,211
  3,450
  3,698
  3,956
  4,224
  4,502
  4,792
  5,093
  5,407
  5,734
  6,075
  6,430
  6,800
  7,187
  7,591
  8,013
  8,453
  8,914
  9,396
  9,900
  10,428
  10,980
  11,558
  12,163
  12,798
  13,463
  14,159
  14,889
  15,655
Total equity, $m
  1,064
  1,146
  1,231
  1,320
  1,412
  1,507
  1,607
  1,710
  1,818
  1,930
  2,046
  2,168
  2,295
  2,427
  2,565
  2,709
  2,859
  3,017
  3,181
  3,353
  3,533
  3,721
  3,918
  4,124
  4,341
  4,567
  4,804
  5,053
  5,313
  5,586
Total liabilities and equity, $m
  4,046
  4,357
  4,681
  5,018
  5,368
  5,731
  6,109
  6,502
  6,911
  7,337
  7,780
  8,243
  8,725
  9,227
  9,752
  10,300
  10,872
  11,470
  12,095
  12,749
  13,433
  14,149
  14,898
  15,682
  16,504
  17,365
  18,267
  19,212
  20,202
  21,241
Debt-to-equity ratio
  1.680
  1.760
  1.830
  1.900
  1.960
  2.010
  2.060
  2.110
  2.150
  2.180
  2.220
  2.250
  2.280
  2.310
  2.340
  2.360
  2.390
  2.410
  2.430
  2.450
  2.460
  2.480
  2.500
  2.510
  2.530
  2.540
  2.550
  2.570
  2.580
  2.590
Adjusted equity ratio
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263
  0.263

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  170
  277
  388
  505
  626
  754
  887
  1,026
  1,171
  1,324
  1,509
  1,676
  1,851
  2,036
  2,229
  2,432
  2,645
  2,868
  3,104
  3,351
  3,611
  3,885
  4,173
  4,476
  4,795
  5,130
  5,484
  5,856
  6,248
  6,660
Depreciation, amort., depletion, $m
  209
  222
  236
  251
  266
  281
  298
  315
  332
  351
  335
  355
  376
  398
  420
  444
  469
  494
  521
  550
  579
  610
  642
  676
  711
  749
  787
  828
  871
  916
Funds from operations, $m
  379
  499
  624
  755
  892
  1,035
  1,184
  1,340
  1,504
  1,674
  1,844
  2,031
  2,227
  2,433
  2,649
  2,875
  3,113
  3,363
  3,625
  3,901
  4,190
  4,495
  4,815
  5,152
  5,506
  5,879
  6,271
  6,684
  7,119
  7,576
Change in working capital, $m
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
Cash from operations, $m
  352
  471
  595
  725
  860
  1,002
  1,150
  1,305
  1,466
  1,636
  1,804
  1,989
  2,184
  2,388
  2,601
  2,826
  3,061
  3,309
  3,568
  3,841
  4,128
  4,430
  4,747
  5,081
  5,432
  5,801
  6,189
  6,598
  7,029
  7,482
Maintenance CAPEX, $m
  -161
  -174
  -188
  -202
  -216
  -231
  -247
  -263
  -280
  -298
  -316
  -335
  -355
  -376
  -398
  -420
  -444
  -469
  -494
  -521
  -550
  -579
  -610
  -642
  -676
  -711
  -749
  -787
  -828
  -871
New CAPEX, $m
  -144
  -149
  -155
  -161
  -167
  -174
  -181
  -188
  -196
  -204
  -212
  -221
  -231
  -241
  -251
  -262
  -274
  -286
  -299
  -313
  -327
  -342
  -358
  -375
  -393
  -412
  -432
  -452
  -474
  -497
Cash from investing activities, $m
  -305
  -323
  -343
  -363
  -383
  -405
  -428
  -451
  -476
  -502
  -528
  -556
  -586
  -617
  -649
  -682
  -718
  -755
  -793
  -834
  -877
  -921
  -968
  -1,017
  -1,069
  -1,123
  -1,181
  -1,239
  -1,302
  -1,368
Free cash flow, $m
  46
  147
  252
  362
  477
  597
  722
  853
  991
  1,134
  1,275
  1,433
  1,598
  1,771
  1,953
  2,143
  2,343
  2,554
  2,775
  3,007
  3,251
  3,508
  3,779
  4,063
  4,362
  4,678
  5,009
  5,359
  5,727
  6,114
Issuance/(repayment) of debt, $m
  218
  230
  239
  248
  258
  268
  279
  290
  301
  314
  327
  341
  355
  371
  387
  404
  422
  441
  461
  482
  504
  528
  552
  578
  606
  634
  665
  697
  730
  766
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  218
  230
  239
  248
  258
  268
  279
  290
  301
  314
  327
  341
  355
  371
  387
  404
  422
  441
  461
  482
  504
  528
  552
  578
  606
  634
  665
  697
  730
  766
Total cash flow (excl. dividends), $m
  264
  377
  491
  610
  734
  865
  1,001
  1,143
  1,292
  1,448
  1,602
  1,773
  1,953
  2,142
  2,339
  2,547
  2,765
  2,994
  3,235
  3,489
  3,755
  4,036
  4,331
  4,641
  4,968
  5,312
  5,674
  6,055
  6,457
  6,879
Retained Cash Flow (-), $m
  -80
  -82
  -85
  -88
  -92
  -96
  -99
  -103
  -108
  -112
  -117
  -122
  -127
  -132
  -138
  -144
  -151
  -157
  -164
  -172
  -180
  -188
  -197
  -206
  -216
  -226
  -237
  -249
  -261
  -273
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
  184
  295
  406
  521
  642
  769
  901
  1,040
  1,184
  1,336
  1,485
  1,652
  1,826
  2,009
  2,201
  2,403
  2,615
  2,837
  3,071
  3,317
  3,576
  3,848
  4,134
  4,435
  4,752
  5,086
  5,437
  5,807
  6,196
  6,606
Discount rate, %
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
  170
  249
  310
  358
  393
  415
  424
  421
  408
  387
  357
  324
  288
  251
  214
  178
  145
  115
  89
  68
  50
  36
  25
  17
  11
  7
  4
  3
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Cascades Inc. (Cascades) is a Canada-based company that produces, converts and markets packaging and tissue products consisting of recycled fibers. The Company operates through four segments: Containerboard, Boxboard Europe, Specialty Products (which constitutes the Company's Packaging Products) and Tissue Papers. The Containerboard segment is a manufacturer of containerboard and converter of corrugated products in North America. The Boxboard Europe segment is engaged in manufacturing coated boxboard in Europe. The Specialty Products Group manufactures industrial packaging, consumer packaging products, and is also involved in recovery and recycling. The Tissue Papers segment operates units that manufacture and convert tissue papers for the Away-from-Home and consumer products markets. In Europe, Cascades operates the La Rochette mill in France that produces coated boxboard made of virgin fiber, with a total annual production capacity of approximately 165,000 metric tons.

FINANCIAL RATIOS  of  Cascades Inc. (CAS)

Valuation Ratios
P/E Ratio 8.7
Price to Sales 0.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 3.1
Price to Free Cash Flow 6.2
Growth Rates
Sales Growth Rate 3.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.7%
Cap. Spend. - 3 Yr. Gr. Rate 5.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 157.1%
Total Debt to Equity 166.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 5%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity 14.6%
Return On Equity - 3 Yr. Avg. -2.6%
Asset Turnover 1
Profitability Ratios
Gross Margin 15.5%
Gross Margin - 3 Yr. Avg. 15%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 8%
Operating Margin 5.5%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 1%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. -0.8%
Effective Tax Rate 24.7%
Eff/ Tax Rate - 3 Yr. Avg. -82.3%
Payout Ratio 11.1%

CAS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CAS stock intrinsic value calculation we used $4001 million for the last fiscal year's total revenue generated by Cascades Inc.. The default revenue input number comes from 2016 income statement of Cascades Inc.. 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 CAS stock valuation model: a) initial revenue growth rate of 8% 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 8.5%, whose default value for CAS is calculated based on our internal credit rating of Cascades Inc., 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 Cascades Inc..
    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 CAS stock the variable cost ratio is equal to 37.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2322 million in the base year in the intrinsic value calculation for CAS 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 5.1% for Cascades Inc..

Corporate tax rate of 27% is the nominal tax rate for Cascades Inc.. 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 CAS 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 CAS are equal to 44.8%.

Life of production assets of 11.1 years is the average useful life of capital assets used in Cascades Inc. 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 CAS is equal to 8.5%. 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 - $984 million for Cascades Inc. - 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 94.714 million for Cascades Inc. 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 Cascades Inc. at the current share price and the inputted number of shares is $1.2 billion.

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