Intrinsic value of BRP Inc. Subordinate Voting Shares - DOO

Previous Close

$61.37

  Intrinsic Value

$34.84

stock screener

  Rating & Target

sell

-43%

Previous close

$61.37

 
Intrinsic value

$34.84

 
Up/down potential

-43%

 
Rating

sell

We calculate the intrinsic value of DOO 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 2017), $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 6.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
Revenue, $m
  4,794
  5,460
  6,171
  6,925
  7,721
  8,559
  9,437
  10,356
  11,315
  12,315
  13,355
  14,438
  15,564
  16,734
  17,949
  19,213
  20,526
  21,891
  23,311
  24,788
  26,326
  27,927
  29,596
  31,335
  33,149
  35,042
  37,019
  39,083
  41,239
  43,494
Variable operating expenses, $m
  4,207
  4,791
  5,413
  6,073
  6,769
  7,502
  8,271
  9,075
  9,915
  10,790
  11,689
  12,636
  13,622
  14,646
  15,709
  16,815
  17,964
  19,159
  20,402
  21,695
  23,041
  24,442
  25,903
  27,425
  29,013
  30,670
  32,399
  34,206
  36,093
  38,066
Fixed operating expenses, $m
  214
  218
  223
  228
  233
  238
  243
  249
  254
  260
  266
  271
  277
  283
  290
  296
  303
  309
  316
  323
  330
  337
  345
  352
  360
  368
  376
  384
  393
  401
Total operating expenses, $m
  4,421
  5,009
  5,636
  6,301
  7,002
  7,740
  8,514
  9,324
  10,169
  11,050
  11,955
  12,907
  13,899
  14,929
  15,999
  17,111
  18,267
  19,468
  20,718
  22,018
  23,371
  24,779
  26,248
  27,777
  29,373
  31,038
  32,775
  34,590
  36,486
  38,467
Operating income, $m
  373
  451
  535
  625
  719
  818
  923
  1,032
  1,146
  1,265
  1,401
  1,530
  1,665
  1,805
  1,950
  2,101
  2,259
  2,422
  2,593
  2,770
  2,955
  3,147
  3,348
  3,558
  3,776
  4,005
  4,243
  4,492
  4,753
  5,026
EBITDA, $m
  520
  617
  721
  832
  948
  1,071
  1,200
  1,336
  1,477
  1,624
  1,778
  1,938
  2,104
  2,277
  2,457
  2,643
  2,838
  3,040
  3,250
  3,470
  3,698
  3,935
  4,183
  4,442
  4,712
  4,993
  5,288
  5,595
  5,917
  6,253
Interest expense (income), $m
  48
  39
  41
  55
  69
  84
  100
  117
  134
  153
  172
  192
  213
  235
  257
  281
  305
  331
  357
  384
  413
  442
  473
  505
  539
  574
  610
  648
  688
  729
  772
Earnings before tax, $m
  334
  410
  481
  556
  635
  718
  806
  897
  993
  1,093
  1,209
  1,317
  1,430
  1,547
  1,669
  1,796
  1,928
  2,065
  2,208
  2,357
  2,512
  2,674
  2,843
  3,019
  3,203
  3,394
  3,595
  3,805
  4,024
  4,253
Tax expense, $m
  90
  111
  130
  150
  171
  194
  218
  242
  268
  295
  326
  356
  386
  418
  451
  485
  521
  558
  596
  636
  678
  722
  768
  815
  865
  916
  971
  1,027
  1,086
  1,148
Net income, $m
  244
  299
  351
  406
  463
  524
  588
  655
  725
  798
  882
  962
  1,044
  1,129
  1,219
  1,311
  1,408
  1,508
  1,612
  1,721
  1,834
  1,952
  2,075
  2,204
  2,338
  2,478
  2,624
  2,777
  2,937
  3,105

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
  2,544
  2,898
  3,276
  3,676
  4,098
  4,543
  5,009
  5,497
  6,006
  6,536
  7,089
  7,664
  8,261
  8,882
  9,527
  10,198
  10,895
  11,619
  12,373
  13,157
  13,973
  14,823
  15,709
  16,632
  17,595
  18,600
  19,649
  20,745
  21,889
  23,086
Adjusted assets (=assets-cash), $m
  2,544
  2,898
  3,276
  3,676
  4,098
  4,543
  5,009
  5,497
  6,006
  6,536
  7,089
  7,664
  8,261
  8,882
  9,527
  10,198
  10,895
  11,619
  12,373
  13,157
  13,973
  14,823
  15,709
  16,632
  17,595
  18,600
  19,649
  20,745
  21,889
  23,086
Revenue / Adjusted assets
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
Average production assets, $m
  987
  1,125
  1,271
  1,427
  1,591
  1,763
  1,944
  2,133
  2,331
  2,537
  2,751
  2,974
  3,206
  3,447
  3,698
  3,958
  4,228
  4,509
  4,802
  5,106
  5,423
  5,753
  6,097
  6,455
  6,829
  7,219
  7,626
  8,051
  8,495
  8,960
Working capital, $m
  110
  126
  142
  159
  178
  197
  217
  238
  260
  283
  307
  332
  358
  385
  413
  442
  472
  503
  536
  570
  605
  642
  681
  721
  762
  806
  851
  899
  949
  1,000
Total debt, $m
  982
  1,300
  1,640
  2,000
  2,381
  2,781
  3,200
  3,639
  4,097
  4,575
  5,072
  5,589
  6,127
  6,686
  7,266
  7,870
  8,497
  9,149
  9,828
  10,533
  11,268
  12,033
  12,830
  13,661
  14,528
  15,432
  16,376
  17,362
  18,392
  19,469
Total liabilities, $m
  2,290
  2,608
  2,948
  3,308
  3,689
  4,089
  4,508
  4,947
  5,405
  5,883
  6,380
  6,897
  7,435
  7,994
  8,574
  9,178
  9,805
  10,457
  11,136
  11,841
  12,576
  13,341
  14,138
  14,969
  15,836
  16,740
  17,684
  18,670
  19,700
  20,777
Total equity, $m
  254
  290
  328
  368
  410
  454
  501
  550
  601
  654
  709
  766
  826
  888
  953
  1,020
  1,089
  1,162
  1,237
  1,316
  1,397
  1,482
  1,571
  1,663
  1,760
  1,860
  1,965
  2,074
  2,189
  2,309
Total liabilities and equity, $m
  2,544
  2,898
  3,276
  3,676
  4,099
  4,543
  5,009
  5,497
  6,006
  6,537
  7,089
  7,663
  8,261
  8,882
  9,527
  10,198
  10,894
  11,619
  12,373
  13,157
  13,973
  14,823
  15,709
  16,632
  17,596
  18,600
  19,649
  20,744
  21,889
  23,086
Debt-to-equity ratio
  3.860
  4.490
  5.010
  5.440
  5.810
  6.120
  6.390
  6.620
  6.820
  7.000
  7.150
  7.290
  7.420
  7.530
  7.630
  7.720
  7.800
  7.870
  7.940
  8.010
  8.060
  8.120
  8.170
  8.210
  8.260
  8.300
  8.330
  8.370
  8.400
  8.430
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
  244
  299
  351
  406
  463
  524
  588
  655
  725
  798
  882
  962
  1,044
  1,129
  1,219
  1,311
  1,408
  1,508
  1,612
  1,721
  1,834
  1,952
  2,075
  2,204
  2,338
  2,478
  2,624
  2,777
  2,937
  3,105
Depreciation, amort., depletion, $m
  147
  166
  186
  207
  229
  253
  278
  304
  331
  359
  377
  407
  439
  472
  507
  542
  579
  618
  658
  699
  743
  788
  835
  884
  935
  989
  1,045
  1,103
  1,164
  1,227
Funds from operations, $m
  391
  465
  537
  613
  693
  777
  866
  959
  1,056
  1,157
  1,259
  1,369
  1,483
  1,602
  1,725
  1,853
  1,987
  2,126
  2,270
  2,420
  2,577
  2,740
  2,910
  3,088
  3,273
  3,467
  3,669
  3,880
  4,101
  4,332
Change in working capital, $m
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
  45
  47
  50
  52
Cash from operations, $m
  376
  450
  520
  595
  675
  758
  846
  938
  1,034
  1,134
  1,235
  1,344
  1,457
  1,575
  1,697
  1,824
  1,957
  2,094
  2,237
  2,386
  2,542
  2,703
  2,872
  3,048
  3,232
  3,423
  3,623
  3,833
  4,052
  4,280
Maintenance CAPEX, $m
  -118
  -135
  -154
  -174
  -195
  -218
  -242
  -266
  -292
  -319
  -348
  -377
  -407
  -439
  -472
  -507
  -542
  -579
  -618
  -658
  -699
  -743
  -788
  -835
  -884
  -935
  -989
  -1,045
  -1,103
  -1,164
New CAPEX, $m
  -128
  -137
  -146
  -155
  -164
  -173
  -181
  -189
  -198
  -206
  -214
  -223
  -232
  -241
  -250
  -260
  -270
  -281
  -292
  -304
  -317
  -330
  -344
  -358
  -374
  -390
  -407
  -425
  -444
  -464
Cash from investing activities, $m
  -246
  -272
  -300
  -329
  -359
  -391
  -423
  -455
  -490
  -525
  -562
  -600
  -639
  -680
  -722
  -767
  -812
  -860
  -910
  -962
  -1,016
  -1,073
  -1,132
  -1,193
  -1,258
  -1,325
  -1,396
  -1,470
  -1,547
  -1,628
Free cash flow, $m
  131
  177
  220
  266
  315
  368
  423
  482
  544
  609
  673
  744
  818
  895
  974
  1,058
  1,144
  1,234
  1,327
  1,424
  1,525
  1,631
  1,740
  1,854
  1,974
  2,098
  2,228
  2,363
  2,504
  2,652
Issuance/(repayment) of debt, $m
  52
  319
  340
  360
  380
  400
  420
  439
  458
  478
  497
  517
  538
  559
  581
  603
  627
  652
  678
  706
  735
  765
  797
  831
  867
  904
  944
  986
  1,030
  1,077
Issuance/(repurchase) of shares, $m
  35
  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  
  87
  319
  340
  360
  380
  400
  420
  439
  458
  478
  497
  517
  538
  559
  581
  603
  627
  652
  678
  706
  735
  765
  797
  831
  867
  904
  944
  986
  1,030
  1,077
Total cash flow (excl. dividends), $m
  217
  496
  559
  626
  695
  768
  843
  921
  1,002
  1,086
  1,171
  1,261
  1,356
  1,453
  1,555
  1,661
  1,771
  1,886
  2,005
  2,130
  2,260
  2,396
  2,537
  2,685
  2,840
  3,002
  3,172
  3,349
  3,535
  3,729
Retained Cash Flow (-), $m
  -278
  -35
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -72
  -75
  -78
  -82
  -85
  -89
  -92
  -96
  -100
  -105
  -110
  -114
  -120
Prev. year cash balance distribution, $m
  185
  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
  124
  460
  522
  586
  653
  723
  796
  872
  951
  1,033
  1,115
  1,204
  1,296
  1,391
  1,491
  1,594
  1,701
  1,813
  1,930
  2,052
  2,178
  2,311
  2,449
  2,593
  2,744
  2,902
  3,067
  3,239
  3,420
  3,609
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  117
  407
  430
  448
  459
  465
  463
  456
  443
  424
  400
  373
  343
  310
  277
  243
  210
  178
  149
  122
  98
  77
  59
  45
  33
  24
  17
  11
  7
  5
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

BRP Inc. is engaged in the design, development, manufacturing, distribution and marketing of power sports vehicles and propulsion systems. The Company manufactures and sells Year-Round Products consisting of all-terrain vehicles (ATVs), side-by-side vehicles (SSVs) and roadsters; Seasonal Products consisting of snowmobiles and personal watercrafts (PWCs), and Propulsion Products consisting of engines for outboard and jet boats, karts, motorcycles and recreational aircraft. The Company's diversified portfolio of brands and products includes Can-Am ATVs, SSVs and roadsters, Ski-Doo and Lynx snowmobiles, Sea-Doo PWCs, and propulsion systems consisting of Evinrude outboard boat engines and Rotax engines for jet boats, karts, motorcycles and recreational aircraft. Additionally, the Company supports its line of products with a parts, accessories and clothing (PAC) business. Its products are sold through a network of dealers, distributors and to original equipment manufacturers.

FINANCIAL RATIOS  of  BRP Inc. Subordinate Voting Shares (DOO)

Valuation Ratios
P/E Ratio 34.5
Price to Sales 2.1
Price to Book 55.1
Price to Tangible Book
Price to Cash Flow 17.5
Price to Free Cash Flow 27.8
Growth Rates
Sales Growth Rate 9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.4%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 577.6%
Total Debt to Equity 650.3%
Interest Coverage 8
Management Effectiveness
Return On Assets 11.9%
Ret/ On Assets - 3 Yr. Avg. 6.4%
Return On Total Capital 21%
Ret/ On T. Cap. - 3 Yr. Avg. 10.7%
Return On Equity 362%
Return On Equity - 3 Yr. Avg. -14%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 24.2%
Gross Margin - 3 Yr. Avg. 24%
EBITDA Margin 12.2%
EBITDA Margin - 3 Yr. Avg. 9%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 7.6%
Pre-Tax Margin 7.8%
Pre-Tax Margin - 3 Yr. Avg. 4.7%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 3.2%
Effective Tax Rate 21.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

DOO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DOO stock intrinsic value calculation we used $4172 million for the last fiscal year's total revenue generated by BRP Inc. Subordinate Voting Shares. The default revenue input number comes from 2017 income statement of BRP Inc. Subordinate Voting Shares. 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 DOO stock valuation model: a) initial revenue growth rate of 14.9% 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 6%, whose default value for DOO is calculated based on our internal credit rating of BRP Inc. Subordinate Voting Shares, 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 BRP Inc. Subordinate Voting Shares.
    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 DOO stock the variable cost ratio is equal to 87.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $209 million in the base year in the intrinsic value calculation for DOO 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 4.2% for BRP Inc. Subordinate Voting Shares.

Corporate tax rate of 27% is the nominal tax rate for BRP Inc. Subordinate Voting Shares. 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 DOO 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 DOO are equal to 20.6%.

Life of production assets of 7.3 years is the average useful life of capital assets used in BRP Inc. Subordinate Voting Shares 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 DOO is equal to 2.3%. 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 - $161 million for BRP Inc. Subordinate Voting Shares - 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 101.914 million for BRP Inc. Subordinate Voting Shares 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 BRP Inc. Subordinate Voting Shares at the current share price and the inputted number of shares is $6.3 billion.

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