Intrinsic value of Maple Leaf Foods Inc. - MFI

Previous Close

$32.62

  Intrinsic Value

$3.23

stock screener

  Rating & Target

str. sell

-90%

Previous close

$32.62

 
Intrinsic value

$3.23

 
Up/down potential

-90%

 
Rating

str. sell

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

We calculate the intrinsic value of MFI 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 4.2

 

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, %
  1.18
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
Revenue, $m
  3,332
  3,609
  3,896
  4,195
  4,506
  4,829
  5,164
  5,513
  5,876
  6,253
  6,645
  7,054
  7,480
  7,924
  8,386
  8,869
  9,373
  9,899
  10,448
  11,022
  11,622
  12,250
  12,907
  13,594
  14,314
  15,067
  15,856
  16,683
  17,549
  18,456
  19,408
Variable operating expenses, $m
 
  3,544
  3,823
  4,113
  4,414
  4,727
  5,053
  5,391
  5,743
  6,109
  6,490
  6,844
  7,257
  7,687
  8,136
  8,604
  9,093
  9,603
  10,136
  10,693
  11,275
  11,884
  12,522
  13,188
  13,886
  14,617
  15,383
  16,185
  17,025
  17,906
  18,829
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
  3,076
  3,544
  3,823
  4,113
  4,414
  4,727
  5,053
  5,391
  5,743
  6,109
  6,490
  6,844
  7,257
  7,687
  8,136
  8,604
  9,093
  9,603
  10,136
  10,693
  11,275
  11,884
  12,522
  13,188
  13,886
  14,617
  15,383
  16,185
  17,025
  17,906
  18,829
Operating income, $m
  256
  65
  73
  82
  92
  101
  111
  122
  133
  144
  156
  211
  223
  236
  250
  265
  280
  295
  312
  329
  347
  366
  385
  406
  427
  450
  473
  498
  524
  551
  579
EBITDA, $m
  368
  197
  213
  229
  246
  264
  282
  301
  321
  342
  363
  386
  409
  433
  459
  485
  512
  541
  571
  603
  635
  670
  706
  743
  783
  824
  867
  912
  959
  1,009
  1,061
Interest expense (income), $m
  4
  3
  21
  38
  57
  76
  96
  117
  139
  162
  185
  209
  235
  261
  289
  318
  348
  379
  412
  446
  482
  519
  558
  599
  641
  686
  733
  782
  834
  887
  944
Earnings before tax, $m
  250
  61
  53
  44
  35
  25
  15
  4
  -6
  -18
  -29
  1
  -12
  -25
  -39
  -53
  -68
  -84
  -100
  -117
  -135
  -153
  -173
  -193
  -214
  -237
  -260
  -284
  -310
  -337
  -365
Tax expense, $m
  68
  17
  14
  12
  9
  7
  4
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  182
  45
  39
  32
  25
  18
  11
  3
  -6
  -18
  -29
  1
  -12
  -25
  -39
  -53
  -68
  -84
  -100
  -117
  -135
  -153
  -173
  -193
  -214
  -237
  -260
  -284
  -310
  -337
  -365

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  404
  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
  2,633
  2,414
  2,606
  2,806
  3,014
  3,230
  3,454
  3,688
  3,930
  4,182
  4,445
  4,718
  5,003
  5,300
  5,610
  5,932
  6,269
  6,621
  6,989
  7,373
  7,774
  8,194
  8,633
  9,093
  9,574
  10,078
  10,606
  11,159
  11,738
  12,345
  12,982
Adjusted assets (=assets-cash), $m
  2,229
  2,414
  2,606
  2,806
  3,014
  3,230
  3,454
  3,688
  3,930
  4,182
  4,445
  4,718
  5,003
  5,300
  5,610
  5,932
  6,269
  6,621
  6,989
  7,373
  7,774
  8,194
  8,633
  9,093
  9,574
  10,078
  10,606
  11,159
  11,738
  12,345
  12,982
Revenue / Adjusted assets
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
Average production assets, $m
  1,217
  1,317
  1,422
  1,531
  1,645
  1,762
  1,885
  2,012
  2,145
  2,282
  2,426
  2,575
  2,730
  2,892
  3,061
  3,237
  3,421
  3,613
  3,814
  4,023
  4,242
  4,471
  4,711
  4,962
  5,224
  5,499
  5,787
  6,089
  6,405
  6,737
  7,084
Working capital, $m
  597
  209
  226
  243
  261
  280
  300
  320
  341
  363
  385
  409
  434
  460
  486
  514
  544
  574
  606
  639
  674
  711
  749
  788
  830
  874
  920
  968
  1,018
  1,070
  1,126
Total debt, $m
  10
  54
  101
  150
  200
  253
  308
  365
  424
  486
  550
  616
  686
  758
  834
  912
  995
  1,081
  1,170
  1,264
  1,362
  1,464
  1,572
  1,684
  1,801
  1,924
  2,053
  2,188
  2,329
  2,477
  2,633
Total liabilities, $m
  545
  589
  636
  685
  735
  788
  843
  900
  959
  1,021
  1,085
  1,151
  1,221
  1,293
  1,369
  1,447
  1,530
  1,616
  1,705
  1,799
  1,897
  1,999
  2,107
  2,219
  2,336
  2,459
  2,588
  2,723
  2,864
  3,012
  3,168
Total equity, $m
  2,088
  1,825
  1,970
  2,121
  2,279
  2,442
  2,611
  2,788
  2,971
  3,162
  3,360
  3,567
  3,782
  4,007
  4,241
  4,485
  4,740
  5,006
  5,283
  5,574
  5,877
  6,195
  6,527
  6,874
  7,238
  7,619
  8,018
  8,436
  8,874
  9,333
  9,814
Total liabilities and equity, $m
  2,633
  2,414
  2,606
  2,806
  3,014
  3,230
  3,454
  3,688
  3,930
  4,183
  4,445
  4,718
  5,003
  5,300
  5,610
  5,932
  6,270
  6,622
  6,988
  7,373
  7,774
  8,194
  8,634
  9,093
  9,574
  10,078
  10,606
  11,159
  11,738
  12,345
  12,982
Debt-to-equity ratio
  0.005
  0.030
  0.050
  0.070
  0.090
  0.100
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.260
  0.260
  0.260
  0.270
  0.270
Adjusted equity ratio
  0.755
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  182
  45
  39
  32
  25
  18
  11
  3
  -6
  -18
  -29
  1
  -12
  -25
  -39
  -53
  -68
  -84
  -100
  -117
  -135
  -153
  -173
  -193
  -214
  -237
  -260
  -284
  -310
  -337
  -365
Depreciation, amort., depletion, $m
  112
  132
  140
  147
  155
  163
  171
  180
  189
  198
  208
  175
  186
  197
  208
  220
  233
  246
  259
  274
  289
  304
  320
  338
  355
  374
  394
  414
  436
  458
  482
Funds from operations, $m
  337
  177
  178
  179
  180
  181
  182
  183
  182
  180
  178
  176
  174
  172
  170
  167
  165
  162
  160
  157
  154
  151
  148
  145
  141
  138
  134
  130
  126
  122
  117
Change in working capital, $m
  -20
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
Cash from operations, $m
  357
  161
  161
  162
  162
  162
  162
  163
  161
  158
  156
  152
  149
  146
  143
  139
  136
  132
  128
  123
  119
  114
  110
  105
  99
  94
  88
  82
  76
  69
  62
Maintenance CAPEX, $m
  0
  -83
  -90
  -97
  -104
  -112
  -120
  -128
  -137
  -146
  -155
  -165
  -175
  -186
  -197
  -208
  -220
  -233
  -246
  -259
  -274
  -289
  -304
  -320
  -338
  -355
  -374
  -394
  -414
  -436
  -458
New CAPEX, $m
  -113
  -101
  -105
  -109
  -113
  -118
  -122
  -127
  -132
  -138
  -143
  -149
  -155
  -162
  -169
  -176
  -184
  -192
  -201
  -210
  -219
  -229
  -240
  -251
  -263
  -275
  -288
  -302
  -316
  -331
  -347
Cash from investing activities, $m
  -107
  -184
  -195
  -206
  -217
  -230
  -242
  -255
  -269
  -284
  -298
  -314
  -330
  -348
  -366
  -384
  -404
  -425
  -447
  -469
  -493
  -518
  -544
  -571
  -601
  -630
  -662
  -696
  -730
  -767
  -805
Free cash flow, $m
  250
  -22
  -33
  -44
  -56
  -68
  -80
  -93
  -108
  -125
  -143
  -162
  -181
  -201
  -223
  -245
  -268
  -293
  -319
  -346
  -374
  -403
  -434
  -467
  -501
  -537
  -574
  -613
  -655
  -698
  -743
Issuance/(repayment) of debt, $m
  -1
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
Issuance/(repurchase) of shares, $m
  -88
  95
  107
  119
  132
  145
  159
  173
  190
  208
  228
  206
  227
  249
  273
  297
  323
  350
  378
  407
  438
  471
  505
  541
  578
  618
  659
  702
  748
  796
  846
Cash from financing (excl. dividends), $m  
  -91
  140
  154
  168
  183
  198
  214
  230
  249
  270
  292
  273
  296
  321
  349
  376
  405
  436
  468
  501
  536
  573
  612
  653
  695
  741
  788
  837
  889
  944
  1,001
Total cash flow (excl. dividends), $m
  159
  118
  121
  124
  127
  130
  134
  137
  141
  145
  149
  111
  115
  120
  125
  131
  136
  142
  149
  155
  163
  170
  178
  186
  195
  204
  214
  224
  234
  246
  258
Retained Cash Flow (-), $m
  -47
  -140
  -145
  -151
  -157
  -163
  -170
  -176
  -190
  -208
  -228
  -207
  -227
  -249
  -273
  -297
  -323
  -350
  -378
  -407
  -438
  -471
  -505
  -541
  -578
  -618
  -659
  -702
  -748
  -796
  -846
Prev. year cash balance distribution, $m
 
  403
  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
 
  381
  -25
  -27
  -30
  -33
  -36
  -39
  -49
  -64
  -79
  -96
  -112
  -129
  -147
  -166
  -186
  -207
  -229
  -252
  -276
  -301
  -327
  -355
  -383
  -414
  -445
  -478
  -513
  -550
  -588
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
 
  365
  -23
  -24
  -25
  -26
  -26
  -26
  -31
  -37
  -41
  -46
  -48
  -49
  -49
  -49
  -47
  -45
  -42
  -39
  -35
  -31
  -27
  -23
  -20
  -16
  -13
  -10
  -8
  -6
  -4
Current shareholders' claim on cash, %
  100
  97.3
  94.5
  91.8
  89.0
  86.3
  83.6
  80.9
  78.2
  75.6
  73.0
  70.8
  68.7
  66.5
  64.3
  62.1
  60.0
  57.9
  55.8
  53.7
  51.7
  49.7
  47.8
  45.9
  44.0
  42.2
  40.5
  38.8
  37.2
  35.6
  34.0

Maple Leaf Foods Inc is a Canada-based consumer protein company that processes and produces value-added prepared meats, lunch kits snacks, and value-added fresh pork and poultry products sold under flagship Canadian brands such as Maple Leaf, Maple Leaf Prime, Maple Leaf Natural Selections, Schneiders, Schneiders Country Naturals, Mina and Devour. The Company's products include processed chicken products, such as fully cooked chicken breasts and wings, processed turkey products, such as fully cooked turkey breast roasts, specialty sausage and deli products. The Company also manages and produces live hogs, including providing its own hog feed. It has a hog production operation with approximately 200 production locations in Manitoba and Saskatchewan and owns five feed mills in Manitoba.

FINANCIAL RATIOS  of  Maple Leaf Foods Inc. (MFI)

Valuation Ratios
P/E Ratio 23.7
Price to Sales 1.3
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow 17.7
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.6%
Cap. Spend. - 3 Yr. Gr. Rate -20.7%
Financial Strength
Quick Ratio 404
Current Ratio 0.3
LT Debt to Equity 0.4%
Total Debt to Equity 0.5%
Interest Coverage 64
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 10.5%
Return On Total Capital 8.8%
Ret/ On T. Cap. - 3 Yr. Avg. 13.4%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 16%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 17.7%
Gross Margin - 3 Yr. Avg. 12.1%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 4.1%
Operating Margin 7.7%
Oper. Margin - 3 Yr. Avg. 1.4%
Pre-Tax Margin 7.5%
Pre-Tax Margin - 3 Yr. Avg. -0%
Net Profit Margin 5.5%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 27.2%
Eff/ Tax Rate - 3 Yr. Avg. 24.5%
Payout Ratio 26.4%

MFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MFI stock intrinsic value calculation we used $3332 million for the last fiscal year's total revenue generated by Maple Leaf Foods Inc.. The default revenue input number comes from 2016 income statement of Maple Leaf Foods 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 MFI stock valuation model: a) initial revenue growth rate of 8.3% 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 MFI is calculated based on our internal credit rating of Maple Leaf Foods 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 Maple Leaf Foods 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 MFI stock the variable cost ratio is equal to 98.3%.

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 MFI 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 38.1% for Maple Leaf Foods Inc..

Corporate tax rate of 27% is the nominal tax rate for Maple Leaf Foods 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 MFI 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 MFI are equal to 36.5%.

Life of production assets of 14.7 years is the average useful life of capital assets used in Maple Leaf Foods 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 MFI is equal to 5.8%. 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 - $2088 million for Maple Leaf Foods 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 128.584 million for Maple Leaf Foods 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 Maple Leaf Foods Inc. at the current share price and the inputted number of shares is $4.2 billion.

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Financial statements of MFI
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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