Intrinsic value of Winpak Ltd. - WPK

Previous Close

$43.77

  Intrinsic Value

$35.39

stock screener

  Rating & Target

hold

-19%

Previous close

$43.77

 
Intrinsic value

$35.39

 
Up/down potential

-19%

 
Rating

hold

We calculate the intrinsic value of WPK 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 2.8

 

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, %
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  1,147
  1,185
  1,227
  1,273
  1,321
  1,373
  1,429
  1,488
  1,551
  1,617
  1,688
  1,763
  1,842
  1,926
  2,014
  2,107
  2,206
  2,309
  2,419
  2,534
  2,655
  2,782
  2,917
  3,058
  3,206
  3,362
  3,527
  3,699
  3,881
  4,072
Variable operating expenses, $m
  675
  698
  723
  749
  778
  808
  841
  876
  913
  952
  992
  1,036
  1,082
  1,131
  1,183
  1,238
  1,296
  1,357
  1,421
  1,489
  1,560
  1,635
  1,713
  1,796
  1,884
  1,975
  2,072
  2,173
  2,280
  2,392
Fixed operating expenses, $m
  256
  261
  267
  273
  279
  285
  291
  298
  304
  311
  318
  325
  332
  339
  347
  354
  362
  370
  378
  386
  395
  404
  412
  421
  431
  440
  450
  460
  470
  480
Total operating expenses, $m
  931
  959
  990
  1,022
  1,057
  1,093
  1,132
  1,174
  1,217
  1,263
  1,310
  1,361
  1,414
  1,470
  1,530
  1,592
  1,658
  1,727
  1,799
  1,875
  1,955
  2,039
  2,125
  2,217
  2,315
  2,415
  2,522
  2,633
  2,750
  2,872
Operating income, $m
  216
  226
  238
  251
  265
  280
  297
  315
  334
  355
  379
  403
  428
  455
  484
  515
  548
  583
  620
  659
  700
  744
  791
  840
  892
  947
  1,005
  1,066
  1,131
  1,199
EBITDA, $m
  265
  277
  291
  305
  321
  339
  358
  378
  400
  424
  449
  476
  505
  536
  569
  603
  640
  679
  721
  765
  811
  861
  913
  968
  1,026
  1,087
  1,152
  1,221
  1,293
  1,369
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
Earnings before tax, $m
  216
  226
  237
  250
  263
  278
  295
  312
  331
  352
  375
  399
  424
  450
  479
  509
  541
  575
  611
  650
  690
  733
  779
  827
  878
  932
  989
  1,049
  1,112
  1,180
Tax expense, $m
  58
  61
  64
  67
  71
  75
  80
  84
  89
  95
  101
  108
  114
  122
  129
  137
  146
  155
  165
  175
  186
  198
  210
  223
  237
  252
  267
  283
  300
  318
Net income, $m
  158
  165
  173
  182
  192
  203
  215
  228
  242
  257
  274
  291
  309
  329
  349
  371
  395
  420
  446
  474
  504
  535
  569
  604
  641
  680
  722
  766
  812
  861

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
  925
  956
  990
  1,026
  1,065
  1,107
  1,152
  1,200
  1,251
  1,304
  1,361
  1,422
  1,486
  1,553
  1,624
  1,700
  1,779
  1,862
  1,951
  2,043
  2,141
  2,244
  2,352
  2,466
  2,586
  2,712
  2,844
  2,983
  3,130
  3,284
Adjusted assets (=assets-cash), $m
  925
  956
  990
  1,026
  1,065
  1,107
  1,152
  1,200
  1,251
  1,304
  1,361
  1,422
  1,486
  1,553
  1,624
  1,700
  1,779
  1,862
  1,951
  2,043
  2,141
  2,244
  2,352
  2,466
  2,586
  2,712
  2,844
  2,983
  3,130
  3,284
Revenue / Adjusted assets
  1.240
  1.240
  1.239
  1.241
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.239
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
Average production assets, $m
  546
  564
  584
  606
  629
  654
  680
  708
  738
  770
  804
  839
  877
  917
  959
  1,003
  1,050
  1,099
  1,151
  1,206
  1,264
  1,324
  1,388
  1,456
  1,526
  1,601
  1,679
  1,761
  1,847
  1,938
Working capital, $m
  214
  222
  230
  238
  247
  257
  267
  278
  290
  302
  316
  330
  344
  360
  377
  394
  412
  432
  452
  474
  496
  520
  545
  572
  600
  629
  659
  692
  726
  761
Total debt, $m
  7
  15
  23
  33
  43
  53
  65
  77
  90
  103
  118
  133
  149
  166
  185
  204
  224
  245
  267
  291
  316
  342
  369
  398
  429
  461
  494
  530
  567
  606
Total liabilities, $m
  235
  243
  251
  261
  271
  281
  293
  305
  318
  331
  346
  361
  377
  394
  413
  432
  452
  473
  495
  519
  544
  570
  597
  626
  657
  689
  722
  758
  795
  834
Total equity, $m
  690
  713
  738
  766
  795
  826
  860
  895
  933
  973
  1,016
  1,061
  1,108
  1,159
  1,212
  1,268
  1,327
  1,389
  1,455
  1,524
  1,597
  1,674
  1,755
  1,840
  1,929
  2,023
  2,122
  2,226
  2,335
  2,450
Total liabilities and equity, $m
  925
  956
  989
  1,027
  1,066
  1,107
  1,153
  1,200
  1,251
  1,304
  1,362
  1,422
  1,485
  1,553
  1,625
  1,700
  1,779
  1,862
  1,950
  2,043
  2,141
  2,244
  2,352
  2,466
  2,586
  2,712
  2,844
  2,984
  3,130
  3,284
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
Adjusted equity ratio
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  158
  165
  173
  182
  192
  203
  215
  228
  242
  257
  274
  291
  309
  329
  349
  371
  395
  420
  446
  474
  504
  535
  569
  604
  641
  680
  722
  766
  812
  861
Depreciation, amort., depletion, $m
  50
  51
  53
  55
  57
  59
  61
  64
  66
  69
  70
  74
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
  170
Funds from operations, $m
  207
  216
  226
  237
  249
  262
  276
  292
  308
  326
  344
  365
  386
  409
  433
  459
  487
  516
  547
  580
  615
  651
  690
  731
  775
  821
  869
  920
  974
  1,031
Change in working capital, $m
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
Cash from operations, $m
  200
  209
  218
  229
  240
  253
  266
  281
  296
  313
  331
  351
  371
  393
  417
  442
  469
  497
  527
  558
  592
  628
  665
  705
  747
  791
  838
  888
  940
  995
Maintenance CAPEX, $m
  -46
  -48
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -70
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -140
  -147
  -154
  -162
New CAPEX, $m
  -17
  -18
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -91
Cash from investing activities, $m
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -88
  -92
  -97
  -102
  -106
  -112
  -117
  -122
  -128
  -135
  -141
  -148
  -156
  -164
  -172
  -180
  -189
  -199
  -208
  -218
  -229
  -240
  -253
Free cash flow, $m
  137
  143
  149
  156
  164
  173
  182
  193
  204
  217
  230
  244
  260
  277
  294
  314
  334
  355
  378
  403
  429
  456
  485
  516
  549
  583
  620
  659
  699
  743
Issuance/(repayment) of debt, $m
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
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  
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
Total cash flow (excl. dividends), $m
  144
  150
  157
  165
  174
  183
  194
  205
  217
  231
  244
  260
  276
  294
  313
  333
  354
  377
  401
  426
  453
  482
  513
  545
  579
  615
  653
  694
  737
  782
Retained Cash Flow (-), $m
  -22
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
Prev. year cash balance distribution, $m
  285
  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
  407
  127
  132
  138
  145
  152
  160
  169
  180
  190
  202
  215
  229
  243
  259
  277
  295
  314
  335
  357
  381
  405
  432
  460
  490
  521
  555
  590
  627
  667
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
  390
  116
  115
  114
  112
  110
  108
  106
  103
  100
  96
  92
  87
  82
  76
  70
  64
  58
  52
  45
  39
  34
  28
  23
  19
  15
  12
  9
  7
  5
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

Winpak Ltd. manufactures and distributes packaging materials and related packaging machines. The Company's products are used for packaging of perishable foods, beverages and in healthcare applications. It operates through six segments: modified atmosphere packaging, specialty films, rigid containers, lidding, biaxially oriented nylon and packaging machinery. The Company's packaging is used for markets and applications, including fresh and processed meats, poultry, cheese, medical device packaging, high performance pouch applications and high-barrier films for converting applications. Its specialty films include barrier and non-barrier films, which are used applications, such as printing, laminating, and bag making, including shrink bags. Its rigid containers include portion control and single-serve containers, as well as plastic sheet and custom retort trays, which are used for applications, such as food, pet food, beverage, dairy, industrial and healthcare.

FINANCIAL RATIOS  of  Winpak Ltd. (WPK)

Valuation Ratios
P/E Ratio 20.2
Price to Sales 2.6
Price to Book 3
Price to Tangible Book
Price to Cash Flow 16.7
Price to Free Cash Flow 39.5
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 34.2%
Cap. Spend. - 3 Yr. Gr. Rate 7.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.7%
Ret/ On Assets - 3 Yr. Avg. 12.3%
Return On Total Capital 15.9%
Ret/ On T. Cap. - 3 Yr. Avg. 15.4%
Return On Equity 15.9%
Return On Equity - 3 Yr. Avg. 15.4%
Asset Turnover 1
Profitability Ratios
Gross Margin 32.8%
Gross Margin - 3 Yr. Avg. 31.2%
EBITDA Margin 23.5%
EBITDA Margin - 3 Yr. Avg. 21.7%
Operating Margin 19.2%
Oper. Margin - 3 Yr. Avg. 17.4%
Pre-Tax Margin 19.2%
Pre-Tax Margin - 3 Yr. Avg. 17.4%
Net Profit Margin 12.7%
Net Profit Margin - 3 Yr. Avg. 11.7%
Effective Tax Rate 31.5%
Eff/ Tax Rate - 3 Yr. Avg. 31%
Payout Ratio 5.7%

WPK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WPK stock intrinsic value calculation we used $1111 million for the last fiscal year's total revenue generated by Winpak Ltd.. The default revenue input number comes from 2016 income statement of Winpak Ltd.. 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 WPK stock valuation model: a) initial revenue growth rate of 3.2% 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 WPK is calculated based on our internal credit rating of Winpak Ltd., 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 Winpak Ltd..
    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 WPK stock the variable cost ratio is equal to 58.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $250 million in the base year in the intrinsic value calculation for WPK 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 3.5% for Winpak Ltd..

Corporate tax rate of 27% is the nominal tax rate for Winpak Ltd.. 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 WPK 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 WPK are equal to 47.6%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Winpak Ltd. 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 WPK is equal to 18.7%. 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 - $953 million for Winpak Ltd. - 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 64.957 million for Winpak Ltd. 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 Winpak Ltd. at the current share price and the inputted number of shares is $2.8 billion.

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