Intrinsic value of Parkland Fuel Corporation - PKI

Previous Close

$24.41

  Intrinsic Value

$10.09

stock screener

  Rating & Target

str. sell

-59%

Previous close

$24.41

 
Intrinsic value

$10.09

 
Up/down potential

-59%

 
Rating

str. sell

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

We calculate the intrinsic value of PKI 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 3.2

 

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, %
  -0.54
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
Revenue, $m
  6,266
  7,206
  8,215
  9,291
  10,433
  11,639
  12,908
  14,239
  15,632
  17,087
  18,603
  20,182
  21,825
  23,532
  25,307
  27,151
  29,068
  31,060
  33,131
  35,285
  37,526
  39,858
  42,287
  44,818
  47,456
  50,207
  53,078
  56,075
  59,205
  62,475
  65,893
Variable operating expenses, $m
 
  7,089
  8,074
  9,124
  10,239
  11,416
  12,655
  13,955
  15,314
  16,734
  18,214
  19,699
  21,302
  22,969
  24,701
  26,501
  28,372
  30,316
  32,338
  34,440
  36,627
  38,904
  41,275
  43,745
  46,320
  49,006
  51,808
  54,733
  57,788
  60,979
  64,316
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
  6,140
  7,089
  8,074
  9,124
  10,239
  11,416
  12,655
  13,955
  15,314
  16,734
  18,214
  19,699
  21,302
  22,969
  24,701
  26,501
  28,372
  30,316
  32,338
  34,440
  36,627
  38,904
  41,275
  43,745
  46,320
  49,006
  51,808
  54,733
  57,788
  60,979
  64,316
Operating income, $m
  126
  116
  141
  166
  194
  223
  253
  285
  318
  353
  389
  483
  522
  563
  606
  650
  696
  743
  793
  845
  898
  954
  1,012
  1,073
  1,136
  1,202
  1,271
  1,342
  1,417
  1,495
  1,577
EBITDA, $m
  229
  240
  273
  309
  347
  387
  430
  474
  520
  569
  619
  672
  727
  783
  843
  904
  968
  1,034
  1,103
  1,175
  1,249
  1,327
  1,408
  1,492
  1,580
  1,672
  1,767
  1,867
  1,971
  2,080
  2,194
Interest expense (income), $m
  27
  34
  45
  57
  69
  82
  96
  111
  127
  143
  160
  177
  196
  215
  235
  255
  277
  299
  322
  346
  371
  397
  424
  452
  482
  512
  544
  578
  612
  649
  687
Earnings before tax, $m
  67
  82
  96
  110
  125
  140
  157
  174
  192
  210
  230
  306
  327
  349
  371
  395
  419
  445
  471
  499
  527
  557
  588
  621
  654
  690
  726
  765
  805
  847
  891
Tax expense, $m
  20
  22
  26
  30
  34
  38
  42
  47
  52
  57
  62
  83
  88
  94
  100
  107
  113
  120
  127
  135
  142
  150
  159
  168
  177
  186
  196
  206
  217
  229
  240
Net income, $m
  47
  60
  70
  80
  91
  102
  114
  127
  140
  153
  168
  223
  239
  254
  271
  288
  306
  325
  344
  364
  385
  407
  429
  453
  478
  503
  530
  558
  588
  618
  650

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  26
  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
  2,562
  2,916
  3,324
  3,760
  4,222
  4,710
  5,224
  5,763
  6,326
  6,915
  7,529
  8,168
  8,832
  9,523
  10,242
  10,988
  11,764
  12,570
  13,408
  14,280
  15,186
  16,130
  17,113
  18,138
  19,205
  20,319
  21,480
  22,693
  23,960
  25,283
  26,667
Adjusted assets (=assets-cash), $m
  2,536
  2,916
  3,324
  3,760
  4,222
  4,710
  5,224
  5,763
  6,326
  6,915
  7,529
  8,168
  8,832
  9,523
  10,242
  10,988
  11,764
  12,570
  13,408
  14,280
  15,186
  16,130
  17,113
  18,138
  19,205
  20,319
  21,480
  22,693
  23,960
  25,283
  26,667
Revenue / Adjusted assets
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
  2.471
Average production assets, $m
  726
  836
  953
  1,078
  1,210
  1,350
  1,497
  1,652
  1,813
  1,982
  2,158
  2,341
  2,532
  2,730
  2,936
  3,150
  3,372
  3,603
  3,843
  4,093
  4,353
  4,624
  4,905
  5,199
  5,505
  5,824
  6,157
  6,505
  6,868
  7,247
  7,644
Working capital, $m
  91
  418
  476
  539
  605
  675
  749
  826
  907
  991
  1,079
  1,171
  1,266
  1,365
  1,468
  1,575
  1,686
  1,801
  1,922
  2,047
  2,176
  2,312
  2,453
  2,599
  2,752
  2,912
  3,079
  3,252
  3,434
  3,624
  3,822
Total debt, $m
  837
  1,071
  1,350
  1,647
  1,963
  2,296
  2,647
  3,015
  3,400
  3,802
  4,221
  4,657
  5,111
  5,583
  6,074
  6,584
  7,114
  7,664
  8,237
  8,832
  9,451
  10,096
  10,767
  11,467
  12,196
  12,957
  13,750
  14,578
  15,444
  16,347
  17,292
Total liabilities, $m
  1,758
  1,992
  2,271
  2,568
  2,884
  3,217
  3,568
  3,936
  4,321
  4,723
  5,142
  5,578
  6,032
  6,504
  6,995
  7,505
  8,035
  8,585
  9,158
  9,753
  10,372
  11,017
  11,688
  12,388
  13,117
  13,878
  14,671
  15,499
  16,365
  17,268
  18,213
Total equity, $m
  804
  924
  1,054
  1,192
  1,338
  1,493
  1,656
  1,827
  2,005
  2,192
  2,387
  2,589
  2,800
  3,019
  3,247
  3,483
  3,729
  3,985
  4,250
  4,527
  4,814
  5,113
  5,425
  5,750
  6,088
  6,441
  6,809
  7,194
  7,595
  8,015
  8,453
Total liabilities and equity, $m
  2,562
  2,916
  3,325
  3,760
  4,222
  4,710
  5,224
  5,763
  6,326
  6,915
  7,529
  8,167
  8,832
  9,523
  10,242
  10,988
  11,764
  12,570
  13,408
  14,280
  15,186
  16,130
  17,113
  18,138
  19,205
  20,319
  21,480
  22,693
  23,960
  25,283
  26,666
Debt-to-equity ratio
  1.041
  1.160
  1.280
  1.380
  1.470
  1.540
  1.600
  1.650
  1.700
  1.730
  1.770
  1.800
  1.830
  1.850
  1.870
  1.890
  1.910
  1.920
  1.940
  1.950
  1.960
  1.970
  1.980
  1.990
  2.000
  2.010
  2.020
  2.030
  2.030
  2.040
  2.050
Adjusted equity ratio
  0.307
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317
  0.317

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  47
  60
  70
  80
  91
  102
  114
  127
  140
  153
  168
  223
  239
  254
  271
  288
  306
  325
  344
  364
  385
  407
  429
  453
  478
  503
  530
  558
  588
  618
  650
Depreciation, amort., depletion, $m
  103
  123
  133
  143
  154
  165
  177
  189
  202
  216
  230
  189
  204
  220
  237
  254
  272
  291
  310
  330
  351
  373
  396
  419
  444
  470
  497
  525
  554
  584
  616
Funds from operations, $m
  183
  184
  203
  223
  245
  267
  291
  316
  342
  369
  398
  412
  443
  475
  508
  542
  578
  615
  654
  694
  736
  780
  825
  872
  922
  973
  1,027
  1,083
  1,141
  1,203
  1,267
Change in working capital, $m
  18
  55
  59
  62
  66
  70
  74
  77
  81
  84
  88
  92
  95
  99
  103
  107
  111
  116
  120
  125
  130
  135
  141
  147
  153
  160
  167
  174
  182
  190
  198
Cash from operations, $m
  165
  129
  144
  161
  178
  197
  217
  239
  261
  285
  310
  320
  347
  376
  405
  435
  467
  500
  534
  569
  606
  644
  684
  726
  769
  813
  860
  909
  960
  1,013
  1,068
Maintenance CAPEX, $m
  0
  -59
  -67
  -77
  -87
  -98
  -109
  -121
  -133
  -146
  -160
  -174
  -189
  -204
  -220
  -237
  -254
  -272
  -291
  -310
  -330
  -351
  -373
  -396
  -419
  -444
  -470
  -497
  -525
  -554
  -584
New CAPEX, $m
  -95
  -110
  -117
  -125
  -132
  -140
  -147
  -154
  -162
  -169
  -176
  -183
  -191
  -198
  -206
  -214
  -222
  -231
  -240
  -250
  -260
  -271
  -282
  -294
  -306
  -319
  -333
  -348
  -363
  -379
  -396
Cash from investing activities, $m
  -191
  -169
  -184
  -202
  -219
  -238
  -256
  -275
  -295
  -315
  -336
  -357
  -380
  -402
  -426
  -451
  -476
  -503
  -531
  -560
  -590
  -622
  -655
  -690
  -725
  -763
  -803
  -845
  -888
  -933
  -980
Free cash flow, $m
  -26
  -40
  -40
  -41
  -41
  -40
  -39
  -36
  -34
  -30
  -26
  -37
  -32
  -27
  -21
  -15
  -9
  -3
  3
  9
  16
  23
  29
  36
  43
  50
  58
  65
  72
  80
  87
Issuance/(repayment) of debt, $m
  88
  260
  279
  297
  316
  333
  351
  368
  385
  402
  419
  436
  454
  472
  491
  510
  530
  551
  572
  595
  619
  645
  671
  700
  729
  760
  794
  828
  865
  904
  945
Issuance/(repurchase) of shares, $m
  5
  60
  60
  58
  56
  52
  49
  44
  39
  33
  27
  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  
  93
  320
  339
  355
  372
  385
  400
  412
  424
  435
  446
  436
  454
  472
  491
  510
  530
  551
  572
  595
  619
  645
  671
  700
  729
  760
  794
  828
  865
  904
  945
Total cash flow (excl. dividends), $m
  68
  280
  298
  314
  330
  346
  361
  376
  390
  405
  420
  400
  422
  445
  469
  494
  520
  547
  575
  605
  635
  667
  701
  736
  773
  811
  851
  893
  937
  984
  1,032
Retained Cash Flow (-), $m
  9
  -120
  -129
  -138
  -146
  -155
  -163
  -171
  -179
  -187
  -195
  -203
  -211
  -219
  -228
  -237
  -246
  -256
  -266
  -276
  -287
  -299
  -312
  -325
  -338
  -353
  -368
  -384
  -402
  -420
  -438
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
 
  160
  169
  176
  184
  191
  198
  205
  212
  219
  225
  197
  211
  226
  242
  258
  274
  292
  310
  328
  348
  368
  389
  411
  434
  458
  483
  509
  536
  564
  594
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  148
  143
  136
  128
  119
  110
  100
  89
  79
  69
  50
  45
  39
  33
  28
  23
  18
  14
  11
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.1
  96.6
  95.2
  94.1
  93.2
  92.5
  91.8
  91.3
  91.0
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7
  90.7

Parkland Fuel Corporation distributes and markets fuels and lubricants. The Company delivers refined fuels and other petroleum products to motorists, businesses, consumers and wholesale customers. Its segments include Retail Fuels, Commercial Fuels, Parkland USA, Supply and Wholesale, and Corporate. Its Retail Fuels segment supplies and supports a network of over 1,070 retail gas stations in Canada. Its Commercial Fuels segment delivers bulk fuel, propane, heating oil, lubricants, agricultural inputs and other related products and services. Its Parkland USA segment supplies and distributes refined petroleum products in North Dakota, Montana, Minnesota, South Dakota and Wyoming. Its Supply and Wholesale segment manages fuel supply by contracting and purchasing fuel from refiners and other suppliers, distributing through third-party rail and highway carriers, storing fuel in owned and leased facilities and serving wholesale and reseller customers in Canada and in the United States.

FINANCIAL RATIOS  of  Parkland Fuel Corporation (PKI)

Valuation Ratios
P/E Ratio 50
Price to Sales 0.4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 14.2
Price to Free Cash Flow 33.6
Growth Rates
Sales Growth Rate -0.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.1%
Cap. Spend. - 3 Yr. Gr. Rate 11.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.5
LT Debt to Equity 66.9%
Total Debt to Equity 104.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4%
Return On Equity 5.8%
Return On Equity - 3 Yr. Avg. 7.2%
Asset Turnover 2.9
Profitability Ratios
Gross Margin 11.4%
Gross Margin - 3 Yr. Avg. 9.5%
EBITDA Margin 3.1%
EBITDA Margin - 3 Yr. Avg. 2.7%
Operating Margin 2%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 1.1%
Pre-Tax Margin - 3 Yr. Avg. 1%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 29.9%
Eff/ Tax Rate - 3 Yr. Avg. 30.6%
Payout Ratio 136.2%

PKI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PKI stock intrinsic value calculation we used $6266 million for the last fiscal year's total revenue generated by Parkland Fuel Corporation. The default revenue input number comes from 2016 income statement of Parkland Fuel 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 PKI stock valuation model: a) initial revenue growth rate of 15% 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 8.1%, whose default value for PKI is calculated based on our internal credit rating of Parkland Fuel 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 Parkland Fuel 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 PKI stock the variable cost ratio is equal to 98.5%.

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 PKI 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 Parkland Fuel Corporation.

Corporate tax rate of 27% is the nominal tax rate for Parkland Fuel 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 PKI 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 PKI are equal to 11.6%.

Life of production assets of 12.4 years is the average useful life of capital assets used in Parkland Fuel 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 PKI 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 - $804 million for Parkland Fuel 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 130.401 million for Parkland Fuel 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 Parkland Fuel Corporation at the current share price and the inputted number of shares is $3.2 billion.

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Financial statements of PKI
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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