Intrinsic value of Genworth MI Canada Inc. - MIC

Previous Close

$43.40

  Intrinsic Value

$124.66

stock screener

  Rating & Target

str. buy

+187%

Previous close

$43.40

 
Intrinsic value

$124.66

 
Up/down potential

+187%

 
Rating

str. buy

We calculate the intrinsic value of MIC 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 4.0

 

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, %
  22.50
  20.75
  19.18
  17.76
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
Revenue, $m
  832
  1,004
  1,197
  1,410
  1,642
  1,894
  2,164
  2,454
  2,761
  3,087
  3,429
  3,789
  4,166
  4,559
  4,970
  5,397
  5,842
  6,305
  6,786
  7,285
  7,805
  8,344
  8,905
  9,489
  10,096
  10,727
  11,385
  12,070
  12,784
  13,529
Variable operating expenses, $m
  87
  105
  125
  147
  171
  197
  225
  255
  287
  320
  355
  392
  431
  471
  514
  558
  604
  652
  702
  753
  807
  863
  921
  981
  1,044
  1,109
  1,177
  1,248
  1,322
  1,399
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
  87
  105
  125
  147
  171
  197
  225
  255
  287
  320
  355
  392
  431
  471
  514
  558
  604
  652
  702
  753
  807
  863
  921
  981
  1,044
  1,109
  1,177
  1,248
  1,322
  1,399
Operating income, $m
  745
  899
  1,072
  1,263
  1,471
  1,697
  1,939
  2,199
  2,475
  2,766
  3,075
  3,397
  3,735
  4,088
  4,456
  4,839
  5,238
  5,653
  6,084
  6,532
  6,998
  7,482
  7,985
  8,508
  9,052
  9,618
  10,208
  10,822
  11,462
  12,130
EBITDA, $m
  748
  903
  1,077
  1,268
  1,477
  1,703
  1,947
  2,207
  2,484
  2,776
  3,084
  3,408
  3,747
  4,101
  4,470
  4,854
  5,255
  5,671
  6,103
  6,553
  7,020
  7,505
  8,010
  8,534
  9,080
  9,648
  10,240
  10,856
  11,498
  12,168
Interest expense (income), $m
  22
  22
  55
  94
  136
  184
  235
  291
  351
  415
  483
  556
  632
  711
  795
  882
  973
  1,068
  1,167
  1,270
  1,376
  1,487
  1,602
  1,722
  1,846
  1,976
  2,110
  2,251
  2,396
  2,548
  2,707
Earnings before tax, $m
  723
  844
  978
  1,126
  1,287
  1,462
  1,648
  1,848
  2,059
  2,283
  2,519
  2,766
  3,024
  3,293
  3,574
  3,866
  4,170
  4,486
  4,815
  5,156
  5,511
  5,879
  6,263
  6,661
  7,076
  7,508
  7,957
  8,426
  8,914
  9,423
Tax expense, $m
  195
  228
  264
  304
  348
  395
  445
  499
  556
  616
  680
  747
  816
  889
  965
  1,044
  1,126
  1,211
  1,300
  1,392
  1,488
  1,587
  1,691
  1,799
  1,911
  2,027
  2,148
  2,275
  2,407
  2,544
Net income, $m
  528
  616
  714
  822
  940
  1,067
  1,203
  1,349
  1,503
  1,666
  1,839
  2,019
  2,207
  2,404
  2,609
  2,822
  3,044
  3,275
  3,515
  3,764
  4,023
  4,292
  4,572
  4,863
  5,166
  5,481
  5,809
  6,151
  6,507
  6,879

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
  8,075
  9,751
  11,621
  13,685
  15,940
  18,384
  21,013
  23,823
  26,808
  29,966
  33,293
  36,786
  40,444
  44,265
  48,250
  52,401
  56,721
  61,212
  65,880
  70,732
  75,773
  81,013
  86,460
  92,124
  98,016
  104,148
  110,533
  117,184
  124,117
  131,346
Adjusted assets (=assets-cash), $m
  8,075
  9,751
  11,621
  13,685
  15,940
  18,384
  21,013
  23,823
  26,808
  29,966
  33,293
  36,786
  40,444
  44,265
  48,250
  52,401
  56,721
  61,212
  65,880
  70,732
  75,773
  81,013
  86,460
  92,124
  98,016
  104,148
  110,533
  117,184
  124,117
  131,346
Revenue / Adjusted assets
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
  0.103
Average production assets, $m
  12
  14
  17
  20
  23
  27
  30
  34
  39
  43
  48
  53
  58
  64
  70
  76
  82
  88
  95
  102
  109
  117
  125
  133
  141
  150
  159
  169
  179
  189
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
Total debt, $m
  1,088
  1,839
  2,676
  3,601
  4,611
  5,706
  6,884
  8,143
  9,480
  10,895
  12,385
  13,950
  15,589
  17,301
  19,086
  20,946
  22,881
  24,893
  26,984
  29,158
  31,416
  33,764
  36,204
  38,741
  41,381
  44,128
  46,989
  49,969
  53,074
  56,313
Total liabilities, $m
  3,618
  4,369
  5,206
  6,131
  7,141
  8,236
  9,414
  10,673
  12,010
  13,425
  14,915
  16,480
  18,119
  19,831
  21,616
  23,476
  25,411
  27,423
  29,514
  31,688
  33,946
  36,294
  38,734
  41,271
  43,911
  46,658
  49,519
  52,499
  55,604
  58,843
Total equity, $m
  4,458
  5,383
  6,415
  7,554
  8,799
  10,148
  11,599
  13,150
  14,798
  16,541
  18,378
  20,306
  22,325
  24,434
  26,634
  28,925
  31,310
  33,789
  36,366
  39,044
  41,827
  44,719
  47,726
  50,852
  54,105
  57,490
  61,014
  64,686
  68,512
  72,503
Total liabilities and equity, $m
  8,076
  9,752
  11,621
  13,685
  15,940
  18,384
  21,013
  23,823
  26,808
  29,966
  33,293
  36,786
  40,444
  44,265
  48,250
  52,401
  56,721
  61,212
  65,880
  70,732
  75,773
  81,013
  86,460
  92,123
  98,016
  104,148
  110,533
  117,185
  124,116
  131,346
Debt-to-equity ratio
  0.240
  0.340
  0.420
  0.480
  0.520
  0.560
  0.590
  0.620
  0.640
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.720
  0.730
  0.740
  0.740
  0.750
  0.750
  0.760
  0.760
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.780
Adjusted equity ratio
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  528
  616
  714
  822
  940
  1,067
  1,203
  1,349
  1,503
  1,666
  1,839
  2,019
  2,207
  2,404
  2,609
  2,822
  3,044
  3,275
  3,515
  3,764
  4,023
  4,292
  4,572
  4,863
  5,166
  5,481
  5,809
  6,151
  6,507
  6,879
Depreciation, amort., depletion, $m
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
Funds from operations, $m
  531
  620
  719
  827
  945
  1,073
  1,211
  1,357
  1,512
  1,676
  1,849
  2,030
  2,219
  2,417
  2,623
  2,837
  3,060
  3,293
  3,534
  3,784
  4,045
  4,315
  4,597
  4,889
  5,194
  5,511
  5,841
  6,185
  6,543
  6,917
Change in 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
Cash from operations, $m
  531
  620
  719
  827
  945
  1,073
  1,211
  1,357
  1,512
  1,676
  1,849
  2,030
  2,219
  2,417
  2,623
  2,837
  3,060
  3,293
  3,534
  3,784
  4,045
  4,315
  4,597
  4,889
  5,194
  5,511
  5,841
  6,185
  6,543
  6,917
Maintenance CAPEX, $m
  -2
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
New CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
Cash from investing activities, $m
  -4
  -4
  -6
  -6
  -7
  -9
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -25
  -26
  -27
  -30
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
Free cash flow, $m
  527
  615
  713
  821
  938
  1,065
  1,201
  1,347
  1,501
  1,664
  1,835
  2,015
  2,203
  2,399
  2,604
  2,817
  3,039
  3,270
  3,509
  3,758
  4,017
  4,286
  4,566
  4,856
  5,159
  5,474
  5,802
  6,143
  6,499
  6,871
Issuance/(repayment) of debt, $m
  655
  751
  838
  924
  1,010
  1,095
  1,178
  1,259
  1,338
  1,415
  1,490
  1,565
  1,639
  1,712
  1,785
  1,860
  1,935
  2,012
  2,091
  2,173
  2,259
  2,347
  2,440
  2,537
  2,640
  2,747
  2,860
  2,980
  3,106
  3,239
Issuance/(repurchase) of shares, $m
  281
  309
  318
  317
  305
  282
  248
  202
  145
  77
  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  
  936
  1,060
  1,156
  1,241
  1,315
  1,377
  1,426
  1,461
  1,483
  1,492
  1,490
  1,565
  1,639
  1,712
  1,785
  1,860
  1,935
  2,012
  2,091
  2,173
  2,259
  2,347
  2,440
  2,537
  2,640
  2,747
  2,860
  2,980
  3,106
  3,239
Total cash flow (excl. dividends), $m
  1,463
  1,675
  1,869
  2,062
  2,254
  2,442
  2,627
  2,807
  2,983
  3,155
  3,325
  3,580
  3,842
  4,111
  4,390
  4,677
  4,974
  5,282
  5,601
  5,932
  6,276
  6,633
  7,006
  7,394
  7,798
  8,221
  8,662
  9,123
  9,605
  10,109
Retained Cash Flow (-), $m
  -809
  -925
  -1,032
  -1,139
  -1,245
  -1,349
  -1,451
  -1,551
  -1,648
  -1,743
  -1,836
  -1,928
  -2,019
  -2,109
  -2,200
  -2,291
  -2,384
  -2,479
  -2,577
  -2,678
  -2,783
  -2,892
  -3,007
  -3,127
  -3,252
  -3,385
  -3,525
  -3,672
  -3,827
  -3,990
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
  654
  750
  837
  923
  1,009
  1,093
  1,176
  1,257
  1,335
  1,412
  1,489
  1,652
  1,823
  2,002
  2,190
  2,386
  2,590
  2,803
  3,024
  3,254
  3,493
  3,741
  3,999
  4,267
  4,546
  4,836
  5,137
  5,451
  5,778
  6,119
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
  627
  686
  728
  760
  782
  793
  794
  785
  767
  740
  707
  705
  693
  672
  643
  606
  564
  516
  466
  413
  361
  310
  262
  217
  177
  141
  110
  84
  63
  46
Current shareholders' claim on cash, %
  93.4
  87.7
  83.2
  79.6
  76.7
  74.5
  72.9
  71.7
  71.0
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6
  70.6

Genworth MI Canada Inc., through its subsidiary, Genworth Financial Mortgage Insurance Company Canada, operates as a private-sector residential mortgage insurer. The Company provides mortgage default insurance to Canadian residential mortgage lenders. It underwrites mortgage insurance for residential properties in various provinces and territories of Canada. The Company offers both transactional and portfolio mortgage insurance. Its transactional mortgage insurance covers default risk on mortgage loans secured by residential properties to protect lenders from any resulting losses on claims. It also provides portfolio mortgage insurance to lenders for loans with loan-to-value ratios of 80% or less. Under mortgage insurance, it serves originators of residential mortgage loans, such as banks, mortgage loan and trust companies, and credit unions. It works with lenders, mortgage brokers and real estate agents across Canada to make homeownership accessible for first-time homebuyers.

FINANCIAL RATIOS  of  Genworth MI Canada Inc. (MIC)

Valuation Ratios
P/E Ratio 9.6
Price to Sales 5.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 7.3
Price to Free Cash Flow 7.4
Growth Rates
Sales Growth Rate 9.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 11.9%
Total Debt to Equity 11.9%
Interest Coverage 27
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 10.5%
Ret/ On T. Cap. - 3 Yr. Avg. 10.5%
Return On Equity 11.8%
Return On Equity - 3 Yr. Avg. 11.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 96.3%
EBITDA Margin - 3 Yr. Avg. 98.8%
Operating Margin 84.8%
Oper. Margin - 3 Yr. Avg. 88.4%
Pre-Tax Margin 83.4%
Pre-Tax Margin - 3 Yr. Avg. 85.6%
Net Profit Margin 61.4%
Net Profit Margin - 3 Yr. Avg. 63.3%
Effective Tax Rate 26.3%
Eff/ Tax Rate - 3 Yr. Avg. 26%
Payout Ratio 37.4%

MIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MIC stock intrinsic value calculation we used $679 million for the last fiscal year's total revenue generated by Genworth MI Canada Inc.. The default revenue input number comes from 2016 income statement of Genworth MI Canada 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 MIC stock valuation model: a) initial revenue growth rate of 22.5% 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 MIC is calculated based on our internal credit rating of Genworth MI Canada 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 Genworth MI Canada 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 MIC stock the variable cost ratio is equal to 10.5%.

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 MIC 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 5.1% for Genworth MI Canada Inc..

Corporate tax rate of 27% is the nominal tax rate for Genworth MI Canada 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 MIC 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 MIC are equal to 1.4%.

Life of production assets of 0.3 years is the average useful life of capital assets used in Genworth MI Canada 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 MIC 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 - $3649 million for Genworth MI Canada 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 91.034 million for Genworth MI Canada 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 Genworth MI Canada Inc. at the current share price and the inputted number of shares is $4.0 billion.

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