Intrinsic value of Canfor Corporation - CFP

Previous Close

$18.86

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$18.86

 
Intrinsic value

$24.47

 
Up/down potential

+30%

 
Rating

buy

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of CFP 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 2.5

 

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, %
  7.90
  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
  4,235
  4,320
  4,419
  4,533
  4,660
  4,801
  4,956
  5,125
  5,308
  5,505
  5,716
  5,942
  6,183
  6,440
  6,713
  7,002
  7,309
  7,634
  7,978
  8,341
  8,724
  9,128
  9,555
  10,004
  10,478
  10,977
  11,502
  12,055
  12,636
  13,248
  13,892
Variable operating expenses, $m
 
  2,060
  2,107
  2,161
  2,221
  2,287
  2,361
  2,440
  2,527
  2,620
  2,719
  2,805
  2,919
  3,040
  3,169
  3,306
  3,450
  3,604
  3,766
  3,937
  4,118
  4,309
  4,510
  4,723
  4,946
  5,182
  5,430
  5,691
  5,965
  6,254
  6,558
Fixed operating expenses, $m
 
  2,007
  2,057
  2,109
  2,161
  2,215
  2,271
  2,327
  2,386
  2,445
  2,506
  2,569
  2,633
  2,699
  2,767
  2,836
  2,907
  2,979
  3,054
  3,130
  3,208
  3,289
  3,371
  3,455
  3,541
  3,630
  3,721
  3,814
  3,909
  4,007
  4,107
Total operating expenses, $m
  3,932
  4,067
  4,164
  4,270
  4,382
  4,502
  4,632
  4,767
  4,913
  5,065
  5,225
  5,374
  5,552
  5,739
  5,936
  6,142
  6,357
  6,583
  6,820
  7,067
  7,326
  7,598
  7,881
  8,178
  8,487
  8,812
  9,151
  9,505
  9,874
  10,261
  10,665
Operating income, $m
  303
  253
  255
  263
  278
  299
  325
  357
  396
  440
  490
  568
  631
  701
  777
  861
  952
  1,051
  1,158
  1,273
  1,397
  1,530
  1,673
  1,826
  1,990
  2,165
  2,351
  2,550
  2,762
  2,987
  3,227
EBITDA, $m
  545
  496
  503
  517
  539
  566
  601
  642
  690
  744
  805
  873
  949
  1,032
  1,122
  1,221
  1,328
  1,444
  1,568
  1,702
  1,846
  2,000
  2,165
  2,341
  2,529
  2,729
  2,943
  3,170
  3,412
  3,669
  3,941
Interest expense (income), $m
  22
  18
  19
  21
  23
  25
  27
  30
  33
  36
  39
  43
  46
  50
  55
  59
  64
  69
  75
  80
  86
  93
  100
  107
  114
  122
  130
  139
  148
  158
  168
Earnings before tax, $m
  268
  235
  236
  242
  255
  274
  298
  327
  363
  404
  451
  525
  585
  650
  723
  802
  888
  982
  1,083
  1,193
  1,311
  1,438
  1,574
  1,720
  1,876
  2,043
  2,221
  2,411
  2,614
  2,829
  3,059
Tax expense, $m
  64
  63
  64
  65
  69
  74
  80
  88
  98
  109
  122
  142
  158
  176
  195
  216
  240
  265
  292
  322
  354
  388
  425
  464
  506
  552
  600
  651
  706
  764
  826
Net income, $m
  151
  171
  172
  177
  186
  200
  217
  239
  265
  295
  329
  383
  427
  475
  527
  585
  648
  717
  791
  871
  957
  1,049
  1,149
  1,255
  1,369
  1,491
  1,621
  1,760
  1,908
  2,065
  2,233

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  157
  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
  3,277
  3,183
  3,256
  3,340
  3,434
  3,538
  3,652
  3,777
  3,912
  4,057
  4,212
  4,379
  4,557
  4,746
  4,947
  5,160
  5,386
  5,626
  5,879
  6,146
  6,429
  6,727
  7,041
  7,372
  7,721
  8,089
  8,476
  8,883
  9,312
  9,763
  10,237
Adjusted assets (=assets-cash), $m
  3,120
  3,183
  3,256
  3,340
  3,434
  3,538
  3,652
  3,777
  3,912
  4,057
  4,212
  4,379
  4,557
  4,746
  4,947
  5,160
  5,386
  5,626
  5,879
  6,146
  6,429
  6,727
  7,041
  7,372
  7,721
  8,089
  8,476
  8,883
  9,312
  9,763
  10,237
Revenue / Adjusted assets
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
Average production assets, $m
  2,005
  2,043
  2,090
  2,144
  2,204
  2,271
  2,344
  2,424
  2,511
  2,604
  2,704
  2,811
  2,925
  3,046
  3,175
  3,312
  3,457
  3,611
  3,773
  3,945
  4,126
  4,318
  4,519
  4,732
  4,956
  5,192
  5,440
  5,702
  5,977
  6,266
  6,571
Working capital, $m
  485
  363
  371
  381
  391
  403
  416
  431
  446
  462
  480
  499
  519
  541
  564
  588
  614
  641
  670
  701
  733
  767
  803
  840
  880
  922
  966
  1,013
  1,061
  1,113
  1,167
Total debt, $m
  476
  485
  526
  574
  627
  686
  750
  821
  897
  979
  1,067
  1,161
  1,262
  1,369
  1,483
  1,604
  1,732
  1,867
  2,010
  2,162
  2,322
  2,490
  2,668
  2,856
  3,053
  3,261
  3,480
  3,711
  3,954
  4,209
  4,477
Total liabilities, $m
  1,793
  1,802
  1,843
  1,891
  1,944
  2,003
  2,067
  2,138
  2,214
  2,296
  2,384
  2,478
  2,579
  2,686
  2,800
  2,921
  3,049
  3,184
  3,327
  3,479
  3,639
  3,807
  3,985
  4,173
  4,370
  4,578
  4,797
  5,028
  5,271
  5,526
  5,794
Total equity, $m
  1,484
  1,382
  1,413
  1,450
  1,490
  1,536
  1,585
  1,639
  1,698
  1,761
  1,828
  1,900
  1,978
  2,060
  2,147
  2,240
  2,338
  2,442
  2,551
  2,668
  2,790
  2,919
  3,056
  3,200
  3,351
  3,511
  3,679
  3,855
  4,041
  4,237
  4,443
Total liabilities and equity, $m
  3,277
  3,184
  3,256
  3,341
  3,434
  3,539
  3,652
  3,777
  3,912
  4,057
  4,212
  4,378
  4,557
  4,746
  4,947
  5,161
  5,387
  5,626
  5,878
  6,147
  6,429
  6,726
  7,041
  7,373
  7,721
  8,089
  8,476
  8,883
  9,312
  9,763
  10,237
Debt-to-equity ratio
  0.321
  0.350
  0.370
  0.400
  0.420
  0.450
  0.470
  0.500
  0.530
  0.560
  0.580
  0.610
  0.640
  0.660
  0.690
  0.720
  0.740
  0.760
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.950
  0.960
  0.980
  0.990
  1.010
Adjusted equity ratio
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  151
  171
  172
  177
  186
  200
  217
  239
  265
  295
  329
  383
  427
  475
  527
  585
  648
  717
  791
  871
  957
  1,049
  1,149
  1,255
  1,369
  1,491
  1,621
  1,760
  1,908
  2,065
  2,233
Depreciation, amort., depletion, $m
  242
  243
  248
  254
  260
  268
  276
  284
  294
  304
  315
  305
  318
  331
  345
  360
  376
  392
  410
  429
  449
  469
  491
  514
  539
  564
  591
  620
  650
  681
  714
Funds from operations, $m
  622
  414
  420
  431
  447
  467
  493
  523
  559
  599
  644
  689
  745
  806
  873
  945
  1,024
  1,109
  1,201
  1,300
  1,405
  1,519
  1,640
  1,770
  1,908
  2,056
  2,213
  2,380
  2,558
  2,746
  2,947
Change in working capital, $m
  38
  7
  8
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
Cash from operations, $m
  584
  426
  412
  421
  436
  456
  480
  509
  543
  582
  626
  670
  724
  784
  850
  921
  998
  1,082
  1,172
  1,269
  1,373
  1,485
  1,604
  1,732
  1,868
  2,014
  2,169
  2,333
  2,509
  2,695
  2,893
Maintenance CAPEX, $m
  0
  -218
  -222
  -227
  -233
  -240
  -247
  -255
  -264
  -273
  -283
  -294
  -305
  -318
  -331
  -345
  -360
  -376
  -392
  -410
  -429
  -449
  -469
  -491
  -514
  -539
  -564
  -591
  -620
  -650
  -681
New CAPEX, $m
  -234
  -39
  -47
  -54
  -60
  -67
  -73
  -80
  -86
  -93
  -100
  -107
  -114
  -121
  -129
  -137
  -145
  -154
  -162
  -172
  -181
  -191
  -202
  -213
  -224
  -236
  -248
  -261
  -275
  -289
  -304
Cash from investing activities, $m
  -318
  -257
  -269
  -281
  -293
  -307
  -320
  -335
  -350
  -366
  -383
  -401
  -419
  -439
  -460
  -482
  -505
  -530
  -554
  -582
  -610
  -640
  -671
  -704
  -738
  -775
  -812
  -852
  -895
  -939
  -985
Free cash flow, $m
  266
  169
  143
  140
  143
  149
  160
  175
  193
  216
  243
  269
  305
  345
  390
  439
  493
  552
  617
  687
  763
  845
  933
  1,028
  1,130
  1,239
  1,356
  1,481
  1,614
  1,756
  1,907
Issuance/(repayment) of debt, $m
  -130
  37
  41
  47
  53
  59
  65
  70
  76
  82
  88
  94
  101
  107
  114
  121
  128
  135
  143
  151
  160
  169
  178
  187
  198
  208
  219
  231
  243
  255
  268
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
  0
Cash from financing (excl. dividends), $m  
  -205
  37
  41
  47
  53
  59
  65
  70
  76
  82
  88
  94
  101
  107
  114
  121
  128
  135
  143
  151
  160
  169
  178
  187
  198
  208
  219
  231
  243
  255
  268
Total cash flow (excl. dividends), $m
  59
  206
  184
  188
  196
  208
  224
  245
  270
  298
  332
  363
  405
  452
  503
  560
  621
  688
  760
  839
  923
  1,014
  1,111
  1,216
  1,327
  1,447
  1,575
  1,711
  1,856
  2,011
  2,176
Retained Cash Flow (-), $m
  -153
  -27
  -32
  -36
  -41
  -45
  -50
  -54
  -58
  -63
  -68
  -72
  -77
  -82
  -87
  -93
  -98
  -104
  -110
  -116
  -123
  -129
  -136
  -144
  -151
  -160
  -168
  -177
  -186
  -196
  -206
Prev. year cash balance distribution, $m
 
  129
  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
 
  308
  152
  152
  155
  163
  175
  191
  211
  236
  264
  291
  328
  370
  416
  467
  523
  584
  650
  722
  800
  884
  975
  1,072
  1,176
  1,288
  1,407
  1,534
  1,670
  1,815
  1,970
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
 
  296
  139
  132
  128
  126
  127
  129
  132
  135
  138
  138
  140
  141
  140
  137
  133
  127
  120
  111
  102
  91
  81
  70
  60
  50
  41
  33
  26
  20
  15
Current shareholders' claim on cash, %
  100
  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

Canfor Corporation operates as an integrated forest products company in Canada, Asia, the United States, Europe, and internationally. It operates through Lumber, and Pulp and Paper segments. The company manufactures and sells lumber, engineered wood products, wood chips, wood pellets, and logs, as well as generates green energy. It also produces and sells pulp and paper products, including northern bleached softwood kraft and bleached chemi-thermo mechanical pulp; and purchases and sells residual fiber products. Canfor Corporation was founded in 1938 and is based in Vancouver, Canada.

FINANCIAL RATIOS  of  Canfor Corporation (CFP)

Valuation Ratios
P/E Ratio 16.6
Price to Sales 0.6
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 4.3
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.5%
Cap. Spend. - 3 Yr. Gr. Rate -0.3%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 30.2%
Total Debt to Equity 32.1%
Interest Coverage 13
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. 8.4%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 30.4%
Gross Margin - 3 Yr. Avg. 31.3%
EBITDA Margin 12.6%
EBITDA Margin - 3 Yr. Avg. 11.9%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin 6.3%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 3.1%
Effective Tax Rate 23.9%
Eff/ Tax Rate - 3 Yr. Avg. 21.9%
Payout Ratio 0%

CFP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CFP stock intrinsic value calculation we used $4235 million for the last fiscal year's total revenue generated by Canfor Corporation. The default revenue input number comes from 2016 income statement of Canfor 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 CFP 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 CFP is calculated based on our internal credit rating of Canfor 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 Canfor 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 CFP stock the variable cost ratio is equal to 47.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1958 million in the base year in the intrinsic value calculation for CFP 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% for Canfor Corporation.

Corporate tax rate of 27% is the nominal tax rate for Canfor 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 CFP 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 CFP are equal to 47.3%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Canfor 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 CFP 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 - $1484 million for Canfor 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 134.532 million for Canfor 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 Canfor Corporation at the current share price and the inputted number of shares is $2.5 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
WFT West Fraser Ti 58.03 214.52  str.buy
IFP Interfor Corpo 19.74 2.27  str.sell
SJ Stella-Jones I 43.58 24.05  sell
WEF Western Forest 2.07 9.67  str.buy
OSB Norbord Inc. 40.26 7.48  str.sell
Stock chart of CFP Financial statements of CFP
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.