Intrinsic value of Transcontinental Inc. Class A Subordinat - TCL-A

Previous Close

$30.13

  Intrinsic Value

$31.56

stock screener

  Rating & Target

hold

+5%

Previous close

$30.13

 
Intrinsic value

$31.56

 
Up/down potential

+5%

 
Rating

hold

We calculate the intrinsic value of TCL-A 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 2017), $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 2.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  2,047
  2,094
  2,148
  2,208
  2,275
  2,349
  2,429
  2,515
  2,609
  2,709
  2,816
  2,930
  3,052
  3,181
  3,319
  3,464
  3,618
  3,781
  3,953
  4,134
  4,326
  4,528
  4,741
  4,966
  5,202
  5,451
  5,713
  5,988
  6,278
  6,584
Variable operating expenses, $m
  1,829
  1,870
  1,917
  1,969
  2,027
  2,091
  2,161
  2,236
  2,317
  2,404
  2,447
  2,546
  2,652
  2,764
  2,883
  3,010
  3,143
  3,285
  3,434
  3,592
  3,759
  3,934
  4,119
  4,314
  4,520
  4,736
  4,963
  5,203
  5,455
  5,720
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
  1,829
  1,870
  1,917
  1,969
  2,027
  2,091
  2,161
  2,236
  2,317
  2,404
  2,447
  2,546
  2,652
  2,764
  2,883
  3,010
  3,143
  3,285
  3,434
  3,592
  3,759
  3,934
  4,119
  4,314
  4,520
  4,736
  4,963
  5,203
  5,455
  5,720
Operating income, $m
  218
  224
  231
  239
  248
  258
  268
  279
  292
  305
  369
  384
  400
  417
  435
  454
  475
  496
  518
  542
  567
  594
  622
  651
  682
  715
  749
  785
  823
  864
EBITDA, $m
  346
  354
  363
  373
  384
  397
  410
  425
  441
  457
  476
  495
  515
  537
  560
  585
  611
  638
  667
  698
  731
  765
  801
  839
  878
  920
  965
  1,011
  1,060
  1,112
Interest expense (income), $m
  16
  16
  17
  18
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  41
  44
  47
  50
  53
  57
  61
  65
  69
  74
  78
  83
  89
  94
  100
  106
Earnings before tax, $m
  202
  207
  213
  220
  228
  236
  245
  255
  265
  276
  339
  351
  365
  379
  395
  411
  428
  446
  465
  485
  507
  529
  553
  578
  604
  632
  661
  691
  724
  758
Tax expense, $m
  55
  56
  58
  59
  61
  64
  66
  69
  72
  75
  91
  95
  99
  102
  107
  111
  116
  120
  126
  131
  137
  143
  149
  156
  163
  171
  178
  187
  195
  205
Net income, $m
  147
  151
  156
  161
  166
  172
  179
  186
  193
  202
  247
  256
  266
  277
  288
  300
  312
  326
  340
  354
  370
  386
  404
  422
  441
  461
  482
  505
  528
  553

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
  1,928
  1,972
  2,023
  2,080
  2,143
  2,212
  2,287
  2,369
  2,456
  2,551
  2,652
  2,759
  2,874
  2,996
  3,125
  3,262
  3,407
  3,560
  3,722
  3,893
  4,073
  4,264
  4,464
  4,676
  4,898
  5,133
  5,379
  5,639
  5,912
  6,199
Adjusted assets (=assets-cash), $m
  1,928
  1,972
  2,023
  2,080
  2,143
  2,212
  2,287
  2,369
  2,456
  2,551
  2,652
  2,759
  2,874
  2,996
  3,125
  3,262
  3,407
  3,560
  3,722
  3,893
  4,073
  4,264
  4,464
  4,676
  4,898
  5,133
  5,379
  5,639
  5,912
  6,199
Revenue / Adjusted assets
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
  1.062
Average production assets, $m
  741
  758
  778
  799
  824
  850
  879
  911
  944
  981
  1,019
  1,061
  1,105
  1,152
  1,201
  1,254
  1,310
  1,369
  1,431
  1,497
  1,566
  1,639
  1,716
  1,798
  1,883
  1,973
  2,068
  2,168
  2,273
  2,383
Working capital, $m
  172
  176
  180
  186
  191
  197
  204
  211
  219
  228
  237
  246
  256
  267
  279
  291
  304
  318
  332
  347
  363
  380
  398
  417
  437
  458
  480
  503
  527
  553
Total debt, $m
  367
  388
  413
  441
  471
  505
  542
  581
  624
  670
  719
  771
  827
  886
  949
  1,015
  1,086
  1,160
  1,239
  1,322
  1,410
  1,502
  1,600
  1,702
  1,811
  1,924
  2,044
  2,170
  2,303
  2,443
Total liabilities, $m
  937
  958
  983
  1,011
  1,041
  1,075
  1,112
  1,151
  1,194
  1,240
  1,289
  1,341
  1,397
  1,456
  1,519
  1,585
  1,656
  1,730
  1,809
  1,892
  1,980
  2,072
  2,170
  2,272
  2,381
  2,494
  2,614
  2,740
  2,873
  3,013
Total equity, $m
  991
  1,014
  1,040
  1,069
  1,101
  1,137
  1,176
  1,217
  1,263
  1,311
  1,363
  1,418
  1,477
  1,540
  1,606
  1,677
  1,751
  1,830
  1,913
  2,001
  2,094
  2,192
  2,295
  2,403
  2,518
  2,638
  2,765
  2,898
  3,039
  3,186
Total liabilities and equity, $m
  1,928
  1,972
  2,023
  2,080
  2,142
  2,212
  2,288
  2,368
  2,457
  2,551
  2,652
  2,759
  2,874
  2,996
  3,125
  3,262
  3,407
  3,560
  3,722
  3,893
  4,074
  4,264
  4,465
  4,675
  4,899
  5,132
  5,379
  5,638
  5,912
  6,199
Debt-to-equity ratio
  0.370
  0.380
  0.400
  0.410
  0.430
  0.440
  0.460
  0.480
  0.490
  0.510
  0.530
  0.540
  0.560
  0.580
  0.590
  0.610
  0.620
  0.630
  0.650
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
Adjusted equity ratio
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  147
  151
  156
  161
  166
  172
  179
  186
  193
  202
  247
  256
  266
  277
  288
  300
  312
  326
  340
  354
  370
  386
  404
  422
  441
  461
  482
  505
  528
  553
Depreciation, amort., depletion, $m
  128
  129
  131
  134
  136
  139
  142
  145
  149
  153
  106
  110
  115
  120
  125
  131
  136
  143
  149
  156
  163
  171
  179
  187
  196
  206
  215
  226
  237
  248
Funds from operations, $m
  275
  281
  287
  295
  303
  311
  321
  331
  342
  354
  353
  367
  381
  397
  413
  430
  449
  468
  489
  510
  533
  557
  582
  609
  637
  667
  698
  731
  765
  801
Change in working capital, $m
  3
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
Cash from operations, $m
  272
  277
  283
  289
  297
  305
  314
  324
  334
  346
  344
  357
  371
  386
  402
  418
  436
  454
  474
  495
  517
  540
  564
  590
  617
  646
  676
  707
  741
  776
Maintenance CAPEX, $m
  -76
  -77
  -79
  -81
  -83
  -86
  -89
  -92
  -95
  -98
  -102
  -106
  -110
  -115
  -120
  -125
  -131
  -136
  -143
  -149
  -156
  -163
  -171
  -179
  -187
  -196
  -206
  -215
  -226
  -237
New CAPEX, $m
  -14
  -17
  -19
  -22
  -24
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -86
  -90
  -95
  -100
  -105
  -110
Cash from investing activities, $m
  -90
  -94
  -98
  -103
  -107
  -113
  -118
  -123
  -129
  -134
  -141
  -147
  -154
  -162
  -170
  -178
  -187
  -195
  -205
  -215
  -225
  -236
  -248
  -260
  -273
  -286
  -301
  -315
  -331
  -347
Free cash flow, $m
  182
  183
  184
  187
  189
  193
  197
  201
  206
  211
  203
  210
  217
  224
  232
  240
  249
  259
  269
  280
  292
  304
  317
  330
  344
  359
  375
  392
  410
  428
Issuance/(repayment) of debt, $m
  19
  22
  25
  28
  31
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  70
  74
  79
  83
  88
  92
  97
  103
  108
  114
  120
  126
  133
  140
Issuance/(repurchase) of shares, $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 financing (excl. dividends), $m  
  19
  22
  25
  28
  31
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  70
  74
  79
  83
  88
  92
  97
  103
  108
  114
  120
  126
  133
  140
Total cash flow (excl. dividends), $m
  201
  204
  209
  214
  220
  226
  233
  241
  249
  257
  252
  262
  272
  283
  295
  307
  320
  334
  348
  363
  379
  396
  414
  433
  453
  473
  495
  518
  543
  568
Retained Cash Flow (-), $m
  -19
  -23
  -26
  -29
  -32
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -59
  -63
  -66
  -70
  -75
  -79
  -83
  -88
  -93
  -98
  -103
  -109
  -114
  -120
  -127
  -133
  -140
  -148
Prev. year cash balance distribution, $m
  247
  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
  429
  181
  183
  185
  188
  191
  194
  199
  203
  209
  201
  207
  213
  221
  228
  237
  245
  255
  265
  275
  287
  298
  311
  324
  338
  353
  368
  385
  402
  420
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
  412
  166
  159
  152
  145
  138
  131
  124
  117
  109
  95
  88
  81
  74
  67
  60
  53
  47
  41
  35
  30
  25
  20
  17
  13
  10
  8
  6
  4
  3
Current shareholders' claim on cash, %
  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

Transcontinental Inc is a Canada-based printing company. The Company has operations in print, flexible packaging, publishing and digital media, both in Canada and the United States. The Company's segments include the Printing and Packaging Sector, and the Media Sector. The Printing and Packaging Sector includes the manufacturing activities of the Company, and generates revenues from various activities, such as the printing of retail flyers, magazines, newspapers, color books, personalized and mass marketing products, and the production of flexible packaging solutions in Canada and the United States. The Media Sector generates revenues through print and digital publishing products, in French and English, of various types, such as newspapers, educational books, specialized publications for professionals, retail promotional content, mass and personalized marketing, mobile and interactive applications, and geotargeted door-to-door and digital distribution services.

FINANCIAL RATIOS  of  Transcontinental Inc. Class A Subordinat (TCL-A)

Valuation Ratios
P/E Ratio 11
Price to Sales 1.2
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 8.5
Growth Rates
Sales Growth Rate -0.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.4%
Cap. Spend. - 3 Yr. Gr. Rate -4.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 28.5%
Total Debt to Equity 28.5%
Interest Coverage 19
Management Effectiveness
Return On Assets 10.7%
Ret/ On Assets - 3 Yr. Avg. 10.6%
Return On Total Capital 14.2%
Ret/ On T. Cap. - 3 Yr. Avg. 14.8%
Return On Equity 18.5%
Return On Equity - 3 Yr. Avg. 20.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 55.7%
Gross Margin - 3 Yr. Avg. 56.3%
EBITDA Margin 21.4%
EBITDA Margin - 3 Yr. Avg. 19.5%
Operating Margin 15%
Oper. Margin - 3 Yr. Avg. 12.8%
Pre-Tax Margin 14.2%
Pre-Tax Margin - 3 Yr. Avg. 12.2%
Net Profit Margin 10.6%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate 25.6%
Eff/ Tax Rate - 3 Yr. Avg. 19.2%
Payout Ratio 28.8%

TCL-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TCL-A stock intrinsic value calculation we used $2007 million for the last fiscal year's total revenue generated by Transcontinental Inc. Class A Subordinat. The default revenue input number comes from 2017 income statement of Transcontinental Inc. Class A Subordinat. 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 TCL-A 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 TCL-A is calculated based on our internal credit rating of Transcontinental Inc. Class A Subordinat, 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 Transcontinental Inc. Class A Subordinat.
    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 TCL-A stock the variable cost ratio is equal to 89.4%.

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 TCL-A 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 4.6% for Transcontinental Inc. Class A Subordinat.

Corporate tax rate of 27% is the nominal tax rate for Transcontinental Inc. Class A Subordinat. 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 TCL-A 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 TCL-A are equal to 36.2%.

Life of production assets of 9.6 years is the average useful life of capital assets used in Transcontinental Inc. Class A Subordinat 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 TCL-A is equal to 8.4%. 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 - $1219 million for Transcontinental Inc. Class A Subordinat - 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 77.295 million for Transcontinental Inc. Class A Subordinat 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 Transcontinental Inc. Class A Subordinat at the current share price and the inputted number of shares is $2.3 billion.

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