Intrinsic value of Intact Financial Corporation - IFC

Previous Close

$101.41

  Intrinsic Value

$102.45

stock screener

  Rating & Target

hold

+1%

Previous close

$101.41

 
Intrinsic value

$102.45

 
Up/down potential

+1%

 
Rating

hold

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

We calculate the intrinsic value of IFC 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  5.08
  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
  0
  8,609
  8,807
  9,033
  9,287
  9,569
  9,878
  10,214
  10,578
  10,971
  11,392
  11,842
  12,323
  12,834
  13,378
  13,955
  14,567
  15,214
  15,899
  16,622
  17,386
  18,192
  19,042
  19,938
  20,881
  21,875
  22,922
  24,024
  25,183
  26,403
  27,686
Variable operating expenses, $m
 
  7,668
  7,841
  8,039
  8,261
  8,507
  8,777
  9,071
  9,390
  9,733
  10,101
  10,354
  10,775
  11,222
  11,698
  12,202
  12,737
  13,303
  13,902
  14,534
  15,202
  15,907
  16,650
  17,433
  18,258
  19,127
  20,043
  21,006
  22,020
  23,086
  24,208
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
  7,754
  7,668
  7,841
  8,039
  8,261
  8,507
  8,777
  9,071
  9,390
  9,733
  10,101
  10,354
  10,775
  11,222
  11,698
  12,202
  12,737
  13,303
  13,902
  14,534
  15,202
  15,907
  16,650
  17,433
  18,258
  19,127
  20,043
  21,006
  22,020
  23,086
  24,208
Operating income, $m
  686
  941
  966
  994
  1,026
  1,062
  1,101
  1,143
  1,189
  1,238
  1,291
  1,488
  1,548
  1,612
  1,681
  1,753
  1,830
  1,911
  1,997
  2,088
  2,184
  2,285
  2,392
  2,505
  2,623
  2,748
  2,880
  3,018
  3,164
  3,317
  3,478
EBITDA, $m
  773
  1,125
  1,151
  1,181
  1,214
  1,251
  1,291
  1,335
  1,383
  1,434
  1,489
  1,548
  1,611
  1,678
  1,749
  1,824
  1,904
  1,989
  2,078
  2,173
  2,273
  2,378
  2,489
  2,606
  2,730
  2,860
  2,996
  3,140
  3,292
  3,451
  3,619
Interest expense (income), $m
  0
  49
  61
  75
  90
  108
  128
  149
  173
  198
  225
  255
  286
  319
  355
  393
  433
  476
  521
  568
  619
  672
  728
  787
  850
  915
  985
  1,057
  1,134
  1,215
  1,300
Earnings before tax, $m
  686
  892
  905
  920
  936
  954
  973
  994
  1,016
  1,040
  1,065
  1,233
  1,262
  1,293
  1,326
  1,360
  1,397
  1,436
  1,477
  1,520
  1,565
  1,613
  1,664
  1,717
  1,774
  1,833
  1,895
  1,961
  2,030
  2,102
  2,178
Tax expense, $m
  145
  241
  244
  248
  253
  257
  263
  268
  274
  281
  288
  333
  341
  349
  358
  367
  377
  388
  399
  410
  423
  436
  449
  464
  479
  495
  512
  529
  548
  568
  588
Net income, $m
  541
  651
  661
  671
  683
  696
  710
  725
  742
  759
  778
  900
  921
  944
  968
  993
  1,020
  1,048
  1,078
  1,109
  1,143
  1,178
  1,215
  1,254
  1,295
  1,338
  1,383
  1,431
  1,482
  1,534
  1,590

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
  0
Total assets, $m
  22,866
  23,330
  23,867
  24,480
  25,169
  25,932
  26,769
  27,681
  28,667
  29,731
  30,872
  32,092
  33,395
  34,781
  36,255
  37,819
  39,477
  41,231
  43,086
  45,047
  47,116
  49,300
  51,604
  54,031
  56,589
  59,283
  62,120
  65,105
  68,247
  71,552
  75,029
Adjusted assets (=assets-cash), $m
  22,866
  23,330
  23,867
  24,480
  25,169
  25,932
  26,769
  27,681
  28,667
  29,731
  30,872
  32,092
  33,395
  34,781
  36,255
  37,819
  39,477
  41,231
  43,086
  45,047
  47,116
  49,300
  51,604
  54,031
  56,589
  59,283
  62,120
  65,105
  68,247
  71,552
  75,029
Revenue / Adjusted assets
  0.000
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
Average production assets, $m
  1,294
  1,317
  1,347
  1,382
  1,421
  1,464
  1,511
  1,563
  1,618
  1,678
  1,743
  1,812
  1,885
  1,964
  2,047
  2,135
  2,229
  2,328
  2,433
  2,543
  2,660
  2,783
  2,913
  3,050
  3,195
  3,347
  3,507
  3,676
  3,853
  4,040
  4,236
Working capital, $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
  0
Total debt, $m
  1,393
  1,739
  2,133
  2,583
  3,089
  3,649
  4,263
  4,933
  5,657
  6,437
  7,275
  8,171
  9,127
  10,145
  11,226
  12,374
  13,591
  14,879
  16,240
  17,679
  19,198
  20,801
  22,492
  24,274
  26,151
  28,129
  30,211
  32,402
  34,708
  37,134
  39,686
Total liabilities, $m
  16,778
  17,124
  17,518
  17,968
  18,474
  19,034
  19,648
  20,318
  21,042
  21,822
  22,660
  23,556
  24,512
  25,530
  26,611
  27,759
  28,976
  30,264
  31,625
  33,064
  34,583
  36,186
  37,877
  39,659
  41,536
  43,514
  45,596
  47,787
  50,093
  52,519
  55,071
Total equity, $m
  6,088
  6,206
  6,349
  6,512
  6,695
  6,898
  7,121
  7,363
  7,626
  7,908
  8,212
  8,537
  8,883
  9,252
  9,644
  10,060
  10,501
  10,967
  11,461
  11,982
  12,533
  13,114
  13,727
  14,372
  15,053
  15,769
  16,524
  17,318
  18,154
  19,033
  19,958
Total liabilities and equity, $m
  22,866
  23,330
  23,867
  24,480
  25,169
  25,932
  26,769
  27,681
  28,668
  29,730
  30,872
  32,093
  33,395
  34,782
  36,255
  37,819
  39,477
  41,231
  43,086
  45,046
  47,116
  49,300
  51,604
  54,031
  56,589
  59,283
  62,120
  65,105
  68,247
  71,552
  75,029
Debt-to-equity ratio
  0.229
  0.280
  0.340
  0.400
  0.460
  0.530
  0.600
  0.670
  0.740
  0.810
  0.890
  0.960
  1.030
  1.100
  1.160
  1.230
  1.290
  1.360
  1.420
  1.480
  1.530
  1.590
  1.640
  1.690
  1.740
  1.780
  1.830
  1.870
  1.910
  1.950
  1.990
Adjusted equity ratio
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266
  0.266

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  541
  651
  661
  671
  683
  696
  710
  725
  742
  759
  778
  900
  921
  944
  968
  993
  1,020
  1,048
  1,078
  1,109
  1,143
  1,178
  1,215
  1,254
  1,295
  1,338
  1,383
  1,431
  1,482
  1,534
  1,590
Depreciation, amort., depletion, $m
  87
  184
  185
  186
  188
  189
  191
  192
  194
  196
  198
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  112
  117
  123
  128
  135
  141
Funds from operations, $m
  1,043
  836
  846
  858
  871
  885
  901
  918
  936
  955
  976
  960
  984
  1,009
  1,036
  1,064
  1,094
  1,126
  1,159
  1,194
  1,231
  1,271
  1,312
  1,355
  1,401
  1,449
  1,500
  1,554
  1,610
  1,669
  1,731
Change in working capital, $m
  118
  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 operations, $m
  925
  836
  846
  858
  871
  885
  901
  918
  936
  955
  976
  960
  984
  1,009
  1,036
  1,064
  1,094
  1,126
  1,159
  1,194
  1,231
  1,271
  1,312
  1,355
  1,401
  1,449
  1,500
  1,554
  1,610
  1,669
  1,731
Maintenance CAPEX, $m
  0
  -43
  -44
  -45
  -46
  -47
  -49
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -106
  -112
  -117
  -123
  -128
  -135
New CAPEX, $m
  -120
  -24
  -30
  -35
  -39
  -43
  -47
  -51
  -56
  -60
  -64
  -69
  -74
  -78
  -83
  -88
  -94
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -144
  -152
  -160
  -169
  -177
  -187
  -196
Cash from investing activities, $m
  -759
  -67
  -74
  -80
  -85
  -90
  -96
  -101
  -108
  -114
  -120
  -127
  -134
  -141
  -148
  -156
  -165
  -173
  -183
  -192
  -202
  -212
  -223
  -234
  -246
  -258
  -272
  -286
  -300
  -315
  -331
Free cash flow, $m
  166
  769
  772
  778
  786
  795
  805
  816
  828
  841
  856
  833
  850
  868
  887
  908
  929
  952
  977
  1,002
  1,030
  1,059
  1,089
  1,121
  1,155
  1,191
  1,229
  1,268
  1,310
  1,354
  1,400
Issuance/(repayment) of debt, $m
  248
  346
  394
  450
  505
  560
  615
  669
  724
  780
  837
  896
  956
  1,018
  1,082
  1,148
  1,217
  1,288
  1,362
  1,439
  1,519
  1,603
  1,691
  1,782
  1,877
  1,977
  2,082
  2,191
  2,306
  2,426
  2,552
Issuance/(repurchase) of shares, $m
  -63
  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  
  185
  346
  394
  450
  505
  560
  615
  669
  724
  780
  837
  896
  956
  1,018
  1,082
  1,148
  1,217
  1,288
  1,362
  1,439
  1,519
  1,603
  1,691
  1,782
  1,877
  1,977
  2,082
  2,191
  2,306
  2,426
  2,552
Total cash flow (excl. dividends), $m
  351
  1,115
  1,166
  1,229
  1,291
  1,355
  1,419
  1,485
  1,552
  1,622
  1,693
  1,729
  1,806
  1,886
  1,969
  2,056
  2,146
  2,240
  2,338
  2,441
  2,549
  2,662
  2,780
  2,903
  3,033
  3,168
  3,311
  3,460
  3,616
  3,780
  3,952
Retained Cash Flow (-), $m
  -364
  -118
  -143
  -163
  -183
  -203
  -223
  -243
  -263
  -283
  -304
  -325
  -346
  -369
  -392
  -416
  -441
  -467
  -494
  -521
  -551
  -581
  -613
  -646
  -680
  -717
  -755
  -794
  -836
  -879
  -925
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
 
  997
  1,023
  1,065
  1,108
  1,152
  1,197
  1,243
  1,290
  1,339
  1,390
  1,405
  1,460
  1,517
  1,577
  1,640
  1,705
  1,773
  1,845
  1,920
  1,998
  2,081
  2,167
  2,257
  2,352
  2,452
  2,556
  2,666
  2,780
  2,901
  3,027
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  956
  936
  927
  913
  893
  868
  839
  806
  769
  729
  667
  623
  577
  529
  481
  433
  386
  340
  296
  254
  215
  180
  148
  120
  95
  75
  57
  43
  32
  23
Current shareholders' claim on cash, %
  100
  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

Intact Financial Corporation is a holding company, which provides property and casualty (P&C) insurance. The Company operates through P&C insurance operations segment. It offers a range of car, home and business insurance products, including personal auto, personal property, commercial P&C and commercial auto. It offers various levels of coverage to customers for their liability, personal injury and damage to their vehicles through personal auto. Its coverage is also available for motor homes, recreational vehicles and others. Under personal property, it covers individuals for fire, theft and other damages to both their residences and its contents, as well as personal liability coverage. Under commercial P&C, it offers coverage to a group of small and medium-sized businesses, including commercial landlords, manufacturers, transportation businesses, agriculture businesses and service providers. Under commercial auto, it provides the same type of coverage as personal auto category.

FINANCIAL RATIOS  of  Intact Financial Corporation (IFC)

Valuation Ratios
P/E Ratio 24.6
Price to Sales 1.6
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 14.4
Price to Free Cash Flow 16.5
Growth Rates
Sales Growth Rate 5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 34.8%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 22.9%
Total Debt to Equity 22.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 7.5%
Ret/ On T. Cap. - 3 Yr. Avg. 10.1%
Return On Equity 9.2%
Return On Equity - 3 Yr. Avg. 12.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 9.2%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 10.4%
Pre-Tax Margin 8.1%
Pre-Tax Margin - 3 Yr. Avg. 10.4%
Net Profit Margin 6.4%
Net Profit Margin - 3 Yr. Avg. 8.4%
Effective Tax Rate 21.1%
Eff/ Tax Rate - 3 Yr. Avg. 19.6%
Payout Ratio 59.9%

IFC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IFC stock intrinsic value calculation we used $8440 million for the last fiscal year's total revenue generated by Intact Financial Corporation. The default revenue input number comes from 2016 income statement of Intact Financial 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 IFC 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 4.3%, whose default value for IFC is calculated based on our internal credit rating of Intact Financial 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 Intact Financial 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 IFC stock the variable cost ratio is equal to 89.1%.

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 IFC 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 Intact Financial Corporation.

Corporate tax rate of 27% is the nominal tax rate for Intact Financial 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 IFC 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 IFC are equal to 15.3%.

Life of production assets of 30.2 years is the average useful life of capital assets used in Intact Financial 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 IFC is equal to 0%. 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 - $6088 million for Intact Financial 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 139.156 million for Intact Financial 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 Intact Financial Corporation at the current share price and the inputted number of shares is $14.1 billion.

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Financial statements of IFC
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