Intrinsic value of Maple Leaf Foods Inc. - MFI

Previous Close

$35.58

  Intrinsic Value

$3.24

stock screener

  Rating & Target

str. sell

-91%

Previous close

$35.58

 
Intrinsic value

$3.24

 
Up/down potential

-91%

 
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 4.6

 

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
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  3,332
  3,552
  3,781
  4,019
  4,266
  4,525
  4,794
  5,074
  5,367
  5,672
  5,991
  6,324
  6,671
  7,035
  7,416
  7,813
  8,230
  8,666
  9,122
  9,600
  10,101
  10,626
  11,176
  11,752
  12,356
  12,990
  13,654
  14,351
  15,082
  15,849
  16,653
Variable operating expenses, $m
 
  3,489
  3,711
  3,942
  4,182
  4,432
  4,693
  4,965
  5,249
  5,545
  5,855
  6,135
  6,472
  6,825
  7,194
  7,580
  7,984
  8,407
  8,850
  9,314
  9,800
  10,309
  10,842
  11,401
  11,987
  12,602
  13,247
  13,923
  14,632
  15,376
  16,156
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
  3,489
  3,711
  3,942
  4,182
  4,432
  4,693
  4,965
  5,249
  5,545
  5,855
  6,135
  6,472
  6,825
  7,194
  7,580
  7,984
  8,407
  8,850
  9,314
  9,800
  10,309
  10,842
  11,401
  11,987
  12,602
  13,247
  13,923
  14,632
  15,376
  16,156
Operating income, $m
  256
  63
  70
  77
  85
  92
  100
  109
  117
  126
  136
  189
  199
  210
  221
  233
  246
  259
  272
  287
  301
  317
  334
  351
  369
  388
  408
  428
  450
  473
  497
EBITDA, $m
  368
  194
  207
  220
  233
  247
  262
  277
  293
  310
  328
  346
  365
  385
  405
  427
  450
  474
  499
  525
  552
  581
  611
  643
  676
  710
  747
  785
  825
  867
  911
Interest expense (income), $m
  4
  3
  17
  31
  46
  61
  78
  94
  112
  130
  149
  169
  189
  211
  234
  257
  282
  308
  335
  363
  393
  424
  457
  491
  527
  565
  604
  645
  689
  734
  782
Earnings before tax, $m
  250
  60
  53
  46
  38
  31
  23
  14
  6
  -3
  -13
  20
  10
  -1
  -12
  -24
  -36
  -49
  -63
  -77
  -92
  -107
  -123
  -140
  -158
  -177
  -196
  -217
  -238
  -261
  -285
Tax expense, $m
  68
  16
  14
  12
  10
  8
  6
  4
  2
  0
  0
  5
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  182
  44
  39
  33
  28
  22
  17
  11
  4
  -3
  -13
  15
  7
  -1
  -12
  -24
  -36
  -49
  -63
  -77
  -92
  -107
  -123
  -140
  -158
  -177
  -196
  -217
  -238
  -261
  -285

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
  2,376
  2,529
  2,688
  2,854
  3,026
  3,206
  3,394
  3,590
  3,794
  4,007
  4,230
  4,463
  4,706
  4,960
  5,226
  5,505
  5,797
  6,102
  6,422
  6,757
  7,107
  7,475
  7,861
  8,265
  8,689
  9,133
  9,599
  10,088
  10,601
  11,139
Adjusted assets (=assets-cash), $m
  2,229
  2,376
  2,529
  2,688
  2,854
  3,026
  3,206
  3,394
  3,590
  3,794
  4,007
  4,230
  4,463
  4,706
  4,960
  5,226
  5,505
  5,797
  6,102
  6,422
  6,757
  7,107
  7,475
  7,861
  8,265
  8,689
  9,133
  9,599
  10,088
  10,601
  11,139
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
  1,296
  1,380
  1,467
  1,557
  1,651
  1,750
  1,852
  1,959
  2,070
  2,187
  2,308
  2,435
  2,568
  2,707
  2,852
  3,004
  3,163
  3,330
  3,504
  3,687
  3,878
  4,079
  4,289
  4,510
  4,741
  4,984
  5,238
  5,505
  5,785
  6,078
Working capital, $m
  597
  206
  219
  233
  247
  262
  278
  294
  311
  329
  347
  367
  387
  408
  430
  453
  477
  503
  529
  557
  586
  616
  648
  682
  717
  753
  792
  832
  875
  919
  966
Total debt, $m
  10
  45
  82
  121
  161
  203
  247
  293
  341
  391
  443
  497
  554
  613
  675
  740
  808
  879
  954
  1,032
  1,114
  1,199
  1,289
  1,383
  1,482
  1,585
  1,694
  1,807
  1,927
  2,052
  2,183
Total liabilities, $m
  545
  580
  617
  656
  696
  738
  782
  828
  876
  926
  978
  1,032
  1,089
  1,148
  1,210
  1,275
  1,343
  1,414
  1,489
  1,567
  1,649
  1,734
  1,824
  1,918
  2,017
  2,120
  2,229
  2,342
  2,462
  2,587
  2,718
Total equity, $m
  2,088
  1,796
  1,912
  2,032
  2,158
  2,288
  2,424
  2,566
  2,714
  2,868
  3,029
  3,198
  3,374
  3,558
  3,750
  3,951
  4,162
  4,382
  4,613
  4,855
  5,108
  5,373
  5,651
  5,943
  6,248
  6,569
  6,905
  7,257
  7,627
  8,014
  8,421
Total liabilities and equity, $m
  2,633
  2,376
  2,529
  2,688
  2,854
  3,026
  3,206
  3,394
  3,590
  3,794
  4,007
  4,230
  4,463
  4,706
  4,960
  5,226
  5,505
  5,796
  6,102
  6,422
  6,757
  7,107
  7,475
  7,861
  8,265
  8,689
  9,134
  9,599
  10,089
  10,601
  11,139
Debt-to-equity ratio
  0.005
  0.020
  0.040
  0.060
  0.070
  0.090
  0.100
  0.110
  0.130
  0.140
  0.150
  0.160
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
  0.250
  0.250
  0.260
  0.260
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
  44
  39
  33
  28
  22
  17
  11
  4
  -3
  -13
  15
  7
  -1
  -12
  -24
  -36
  -49
  -63
  -77
  -92
  -107
  -123
  -140
  -158
  -177
  -196
  -217
  -238
  -261
  -285
Depreciation, amort., depletion, $m
  112
  131
  137
  143
  149
  155
  162
  169
  176
  184
  192
  157
  166
  175
  184
  194
  204
  215
  227
  238
  251
  264
  277
  292
  307
  323
  339
  356
  374
  394
  413
Funds from operations, $m
  337
  175
  175
  176
  177
  178
  178
  179
  180
  180
  179
  172
  173
  174
  172
  170
  168
  166
  164
  161
  159
  157
  154
  151
  149
  146
  143
  139
  136
  133
  129
Change in working capital, $m
  -20
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  40
  42
  44
  47
Cash from operations, $m
  357
  162
  162
  162
  162
  163
  163
  163
  163
  163
  160
  152
  153
  153
  150
  147
  144
  141
  137
  134
  130
  126
  122
  118
  114
  109
  104
  99
  94
  88
  82
Maintenance CAPEX, $m
  0
  -83
  -88
  -94
  -100
  -106
  -112
  -119
  -126
  -133
  -141
  -149
  -157
  -166
  -175
  -184
  -194
  -204
  -215
  -227
  -238
  -251
  -264
  -277
  -292
  -307
  -323
  -339
  -356
  -374
  -394
New CAPEX, $m
  -113
  -80
  -83
  -87
  -90
  -94
  -98
  -102
  -107
  -111
  -116
  -122
  -127
  -133
  -139
  -145
  -152
  -159
  -167
  -174
  -183
  -192
  -201
  -210
  -221
  -231
  -243
  -254
  -267
  -280
  -294
Cash from investing activities, $m
  -107
  -163
  -171
  -181
  -190
  -200
  -210
  -221
  -233
  -244
  -257
  -271
  -284
  -299
  -314
  -329
  -346
  -363
  -382
  -401
  -421
  -443
  -465
  -487
  -513
  -538
  -566
  -593
  -623
  -654
  -688
Free cash flow, $m
  250
  -1
  -10
  -18
  -28
  -38
  -48
  -58
  -70
  -82
  -97
  -118
  -131
  -146
  -164
  -183
  -202
  -223
  -245
  -267
  -291
  -316
  -342
  -370
  -399
  -429
  -461
  -494
  -529
  -566
  -605
Issuance/(repayment) of debt, $m
  -1
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
  103
  108
  114
  119
  125
  131
Issuance/(repurchase) of shares, $m
  -88
  68
  77
  87
  97
  108
  119
  131
  144
  158
  174
  154
  169
  185
  205
  225
  247
  270
  294
  319
  345
  372
  401
  432
  464
  497
  532
  569
  608
  649
  691
Cash from financing (excl. dividends), $m  
  -91
  104
  114
  126
  137
  150
  163
  177
  192
  208
  226
  208
  226
  244
  267
  290
  315
  341
  368
  397
  427
  458
  491
  526
  563
  600
  640
  683
  727
  774
  822
Total cash flow (excl. dividends), $m
  159
  102
  105
  107
  110
  113
  116
  119
  122
  125
  129
  90
  94
  98
  103
  108
  113
  118
  124
  129
  136
  142
  149
  156
  164
  172
  180
  189
  198
  208
  218
Retained Cash Flow (-), $m
  -47
  -111
  -116
  -120
  -125
  -131
  -136
  -142
  -148
  -158
  -174
  -168
  -176
  -185
  -205
  -225
  -247
  -270
  -294
  -319
  -345
  -372
  -401
  -432
  -464
  -497
  -532
  -569
  -608
  -649
  -691
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
 
  394
  -11
  -13
  -15
  -18
  -20
  -23
  -26
  -32
  -45
  -78
  -82
  -87
  -102
  -118
  -134
  -152
  -170
  -189
  -209
  -230
  -253
  -276
  -300
  -326
  -353
  -381
  -410
  -441
  -474
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
 
  378
  -10
  -11
  -13
  -14
  -15
  -16
  -16
  -19
  -24
  -37
  -35
  -33
  -34
  -35
  -34
  -33
  -31
  -29
  -27
  -24
  -21
  -18
  -15
  -13
  -10
  -8
  -6
  -5
  -4
Current shareholders' claim on cash, %
  100
  98.2
  96.3
  94.3
  92.3
  90.2
  88.1
  86.0
  83.8
  81.7
  79.5
  77.6
  75.8
  73.9
  72.0
  70.1
  68.2
  66.2
  64.2
  62.3
  60.3
  58.3
  56.4
  54.5
  52.6
  50.8
  48.9
  47.2
  45.4
  43.7
  42.0

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 25.8
Price to Sales 1.4
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 13.2
Price to Free Cash Flow 19.3
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 6.6% 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 127.976 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 $4.6 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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