Intrinsic value of Chorus Aviation Inc. Voting and Variable - CHR

Previous Close

$7.24

  Intrinsic Value

$4.57

stock screener

  Rating & Target

sell

-37%

Previous close

$7.24

 
Intrinsic value

$4.57

 
Up/down potential

-37%

 
Rating

sell

We calculate the intrinsic value of CHR 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 0.9

 

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, %
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  1,331
  1,388
  1,448
  1,512
  1,580
  1,651
  1,727
  1,806
  1,890
  1,979
  2,073
  2,171
  2,275
  2,384
  2,499
  2,619
  2,746
  2,880
  3,021
  3,168
  3,324
  3,487
  3,659
  3,839
  4,029
  4,228
  4,437
  4,657
  4,887
  5,130
Variable operating expenses, $m
  1,202
  1,253
  1,307
  1,365
  1,426
  1,491
  1,559
  1,631
  1,707
  1,787
  1,870
  1,959
  2,053
  2,151
  2,255
  2,364
  2,479
  2,599
  2,726
  2,859
  3,000
  3,147
  3,302
  3,465
  3,636
  3,815
  4,004
  4,202
  4,411
  4,630
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
  1,202
  1,253
  1,307
  1,365
  1,426
  1,491
  1,559
  1,631
  1,707
  1,787
  1,870
  1,959
  2,053
  2,151
  2,255
  2,364
  2,479
  2,599
  2,726
  2,859
  3,000
  3,147
  3,302
  3,465
  3,636
  3,815
  4,004
  4,202
  4,411
  4,630
Operating income, $m
  129
  135
  141
  147
  153
  160
  168
  176
  184
  192
  202
  212
  222
  233
  244
  256
  268
  281
  295
  309
  324
  340
  357
  374
  393
  412
  433
  454
  477
  500
EBITDA, $m
  214
  223
  232
  243
  254
  265
  277
  290
  304
  318
  333
  349
  365
  383
  401
  421
  441
  462
  485
  509
  534
  560
  587
  616
  647
  679
  712
  748
  785
  824
Interest expense (income), $m
  21
  31
  33
  35
  37
  39
  41
  44
  47
  49
  52
  56
  59
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
  122
  128
  135
  143
  151
  159
Earnings before tax, $m
  98
  102
  106
  110
  114
  119
  124
  129
  134
  140
  147
  153
  160
  166
  174
  182
  190
  198
  207
  217
  226
  237
  248
  259
  271
  284
  297
  311
  326
  342
Tax expense, $m
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
Net income, $m
  72
  75
  77
  80
  84
  87
  90
  94
  98
  102
  107
  112
  116
  122
  127
  133
  138
  145
  151
  158
  165
  173
  181
  189
  198
  207
  217
  227
  238
  249

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
  1,500
  1,564
  1,632
  1,705
  1,781
  1,861
  1,947
  2,036
  2,131
  2,231
  2,337
  2,448
  2,564
  2,687
  2,817
  2,953
  3,096
  3,247
  3,405
  3,572
  3,747
  3,931
  4,125
  4,328
  4,542
  4,766
  5,002
  5,250
  5,510
  5,784
Adjusted assets (=assets-cash), $m
  1,500
  1,564
  1,632
  1,705
  1,781
  1,861
  1,947
  2,036
  2,131
  2,231
  2,337
  2,448
  2,564
  2,687
  2,817
  2,953
  3,096
  3,247
  3,405
  3,572
  3,747
  3,931
  4,125
  4,328
  4,542
  4,766
  5,002
  5,250
  5,510
  5,784
Revenue / Adjusted assets
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
Average production assets, $m
  1,090
  1,136
  1,186
  1,238
  1,294
  1,352
  1,414
  1,479
  1,548
  1,621
  1,697
  1,778
  1,863
  1,952
  2,046
  2,145
  2,249
  2,359
  2,474
  2,595
  2,722
  2,856
  2,996
  3,144
  3,299
  3,462
  3,634
  3,814
  4,003
  4,201
Working capital, $m
  -56
  -58
  -61
  -64
  -66
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -140
  -146
  -154
  -161
  -169
  -178
  -186
  -196
  -205
  -215
Total debt, $m
  929
  987
  1,048
  1,113
  1,182
  1,254
  1,331
  1,412
  1,497
  1,587
  1,682
  1,782
  1,887
  1,998
  2,114
  2,237
  2,366
  2,501
  2,644
  2,794
  2,951
  3,117
  3,291
  3,474
  3,667
  3,869
  4,081
  4,304
  4,538
  4,784
Total liabilities, $m
  1,350
  1,408
  1,469
  1,534
  1,603
  1,675
  1,752
  1,833
  1,918
  2,008
  2,103
  2,203
  2,308
  2,419
  2,535
  2,658
  2,787
  2,922
  3,065
  3,215
  3,372
  3,538
  3,712
  3,895
  4,088
  4,290
  4,502
  4,725
  4,959
  5,205
Total equity, $m
  150
  156
  163
  170
  178
  186
  195
  204
  213
  223
  234
  245
  256
  269
  282
  295
  310
  325
  341
  357
  375
  393
  412
  433
  454
  477
  500
  525
  551
  578
Total liabilities and equity, $m
  1,500
  1,564
  1,632
  1,704
  1,781
  1,861
  1,947
  2,037
  2,131
  2,231
  2,337
  2,448
  2,564
  2,688
  2,817
  2,953
  3,097
  3,247
  3,406
  3,572
  3,747
  3,931
  4,124
  4,328
  4,542
  4,767
  5,002
  5,250
  5,510
  5,783
Debt-to-equity ratio
  6.190
  6.310
  6.420
  6.530
  6.640
  6.740
  6.840
  6.930
  7.020
  7.110
  7.200
  7.280
  7.360
  7.430
  7.510
  7.570
  7.640
  7.700
  7.760
  7.820
  7.880
  7.930
  7.980
  8.030
  8.070
  8.120
  8.160
  8.200
  8.240
  8.270
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  72
  75
  77
  80
  84
  87
  90
  94
  98
  102
  107
  112
  116
  122
  127
  133
  138
  145
  151
  158
  165
  173
  181
  189
  198
  207
  217
  227
  238
  249
Depreciation, amort., depletion, $m
  85
  88
  92
  96
  100
  105
  109
  115
  120
  125
  131
  137
  143
  150
  157
  165
  173
  181
  190
  200
  209
  220
  230
  242
  254
  266
  280
  293
  308
  323
Funds from operations, $m
  156
  163
  169
  176
  184
  192
  200
  209
  218
  228
  238
  248
  260
  272
  284
  298
  311
  326
  341
  358
  375
  393
  411
  431
  452
  474
  497
  521
  546
  573
Change in working capital, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
Cash from operations, $m
  159
  165
  172
  179
  187
  195
  203
  212
  221
  231
  242
  253
  264
  276
  289
  303
  317
  332
  347
  364
  381
  399
  419
  439
  460
  482
  505
  530
  556
  583
Maintenance CAPEX, $m
  -80
  -84
  -87
  -91
  -95
  -100
  -104
  -109
  -114
  -119
  -125
  -131
  -137
  -143
  -150
  -157
  -165
  -173
  -181
  -190
  -200
  -209
  -220
  -230
  -242
  -254
  -266
  -280
  -293
  -308
New CAPEX, $m
  -44
  -47
  -49
  -52
  -55
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
  -134
  -141
  -148
  -155
  -163
  -171
  -180
  -189
  -199
Cash from investing activities, $m
  -124
  -131
  -136
  -143
  -150
  -159
  -166
  -174
  -183
  -192
  -202
  -212
  -222
  -232
  -244
  -256
  -269
  -282
  -296
  -311
  -327
  -343
  -361
  -378
  -397
  -417
  -437
  -460
  -482
  -507
Free cash flow, $m
  34
  35
  35
  35
  36
  37
  37
  38
  39
  40
  40
  41
  42
  44
  45
  46
  48
  49
  51
  53
  54
  56
  58
  61
  63
  65
  68
  70
  73
  76
Issuance/(repayment) of debt, $m
  50
  58
  61
  65
  69
  73
  77
  81
  85
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
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  
  50
  58
  61
  65
  69
  73
  77
  81
  85
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
Total cash flow (excl. dividends), $m
  84
  92
  96
  100
  105
  109
  114
  119
  124
  130
  135
  141
  148
  154
  161
  169
  177
  185
  193
  202
  212
  222
  232
  244
  255
  267
  280
  293
  307
  322
Retained Cash Flow (-), $m
  -11
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
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
  73
  86
  89
  93
  97
  101
  105
  110
  115
  120
  125
  130
  136
  142
  148
  155
  162
  170
  178
  186
  194
  204
  213
  223
  234
  245
  256
  269
  281
  295
Discount rate, %
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
  66
  69
  64
  58
  52
  46
  41
  35
  30
  25
  21
  17
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
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

Chorus Aviation Inc is a Canada-based holding company, which holds various aviation interests. It operates through businesses, such as Jazz Aviation LP (Jazz), Voyageur Aviation Corp. (Voyageur) and Chorus Aviation Capital Corp. (CACC). Jazz operates through three divisions: Air Canada Express, through which Jazz provides service using the Air Canada Express brand throughout North America; Jazz Technical Services (JTS) provides maintenance, repair and overhaul (MRO) services to third parties, and Jazz division, which offers charters throughout North America with a fleet of three Bombardier aircraft and also offers airline operators services, such as ground handling, dispatching, flight load planning, training and consulting. Its Voyageur provides services to customers throughout the international and Canadian regional aviation markets. Voyageur Aviation provides support services to other companies, including administrative support services, commercial services and materials management.

FINANCIAL RATIOS  of  Chorus Aviation Inc. Voting and Variable (CHR)

Valuation Ratios
P/E Ratio 7.9
Price to Sales 0.7
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow 4.6
Price to Free Cash Flow -3.6
Growth Rates
Sales Growth Rate -17.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 89.2%
Cap. Spend. - 3 Yr. Gr. Rate 22.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 584.2%
Total Debt to Equity 648.9%
Interest Coverage 8
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 12.7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.2%
Return On Equity 89.6%
Return On Equity - 3 Yr. Avg. 50.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 67.7%
Gross Margin - 3 Yr. Avg. 59.5%
EBITDA Margin 19.3%
EBITDA Margin - 3 Yr. Avg. 12.9%
Operating Margin 11.9%
Oper. Margin - 3 Yr. Avg. 10%
Pre-Tax Margin 11.3%
Pre-Tax Margin - 3 Yr. Avg. 7%
Net Profit Margin 8.8%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 22.2%
Eff/ Tax Rate - 3 Yr. Avg. 37.6%
Payout Ratio 52.7%

CHR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHR stock intrinsic value calculation we used $1277 million for the last fiscal year's total revenue generated by Chorus Aviation Inc. Voting and Variable. The default revenue input number comes from 2016 income statement of Chorus Aviation Inc. Voting and Variable. 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 CHR stock valuation model: a) initial revenue growth rate of 4.2% 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 10.9%, whose default value for CHR is calculated based on our internal credit rating of Chorus Aviation Inc. Voting and Variable, 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 Chorus Aviation Inc. Voting and Variable.
    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 CHR stock the variable cost ratio is equal to 90.3%.

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 CHR 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 3.5% for Chorus Aviation Inc. Voting and Variable.

Corporate tax rate of 27% is the nominal tax rate for Chorus Aviation Inc. Voting and Variable. 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 CHR 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 CHR are equal to 81.9%.

Life of production assets of 13 years is the average useful life of capital assets used in Chorus Aviation Inc. Voting and Variable 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 CHR is equal to -4.2%. 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 - $139 million for Chorus Aviation Inc. Voting and Variable - 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 125.389 million for Chorus Aviation Inc. Voting and Variable 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 Chorus Aviation Inc. Voting and Variable at the current share price and the inputted number of shares is $0.9 billion.

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