Intrinsic value of CI Financial Corp. - CIX

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$26.79

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$26.79

 
Intrinsic value

$34.26

 
Up/down potential

+28%

 
Rating

buy

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

We calculate the intrinsic value of CIX 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 7.1

 

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, %
  -2.50
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  1,948
  1,999
  2,055
  2,118
  2,187
  2,262
  2,343
  2,430
  2,524
  2,624
  2,731
  2,845
  2,965
  3,093
  3,229
  3,373
  3,525
  3,686
  3,855
  4,034
  4,223
  4,421
  4,631
  4,851
  5,084
  5,328
  5,585
  5,856
  6,141
  6,440
  6,755
Variable operating expenses, $m
 
  1,222
  1,253
  1,288
  1,326
  1,367
  1,412
  1,460
  1,512
  1,567
  1,626
  1,570
  1,637
  1,707
  1,782
  1,862
  1,946
  2,034
  2,128
  2,226
  2,331
  2,440
  2,556
  2,678
  2,806
  2,941
  3,083
  3,232
  3,389
  3,554
  3,728
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
  1,242
  1,222
  1,253
  1,288
  1,326
  1,367
  1,412
  1,460
  1,512
  1,567
  1,626
  1,570
  1,637
  1,707
  1,782
  1,862
  1,946
  2,034
  2,128
  2,226
  2,331
  2,440
  2,556
  2,678
  2,806
  2,941
  3,083
  3,232
  3,389
  3,554
  3,728
Operating income, $m
  706
  777
  802
  830
  861
  895
  931
  970
  1,012
  1,057
  1,105
  1,275
  1,329
  1,386
  1,447
  1,511
  1,580
  1,651
  1,727
  1,808
  1,892
  1,981
  2,075
  2,174
  2,278
  2,388
  2,503
  2,624
  2,752
  2,886
  3,027
EBITDA, $m
  716
  937
  964
  993
  1,025
  1,060
  1,098
  1,139
  1,183
  1,230
  1,280
  1,333
  1,390
  1,450
  1,514
  1,581
  1,652
  1,728
  1,807
  1,891
  1,980
  2,073
  2,171
  2,274
  2,383
  2,498
  2,618
  2,745
  2,879
  3,019
  3,167
Interest expense (income), $m
  15
  27
  28
  30
  32
  34
  36
  39
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  80
  85
  91
  97
  103
  109
  116
  123
  131
  139
  147
  156
  165
Earnings before tax, $m
  690
  750
  774
  800
  829
  861
  895
  931
  971
  1,013
  1,057
  1,224
  1,275
  1,328
  1,385
  1,445
  1,509
  1,576
  1,647
  1,722
  1,801
  1,885
  1,972
  2,065
  2,162
  2,264
  2,372
  2,485
  2,605
  2,730
  2,862
Tax expense, $m
  187
  203
  209
  216
  224
  232
  242
  251
  262
  273
  285
  330
  344
  359
  374
  390
  407
  426
  445
  465
  486
  509
  533
  557
  584
  611
  640
  671
  703
  737
  773
Net income, $m
  503
  548
  565
  584
  605
  628
  653
  680
  708
  739
  772
  893
  930
  970
  1,011
  1,055
  1,102
  1,151
  1,203
  1,257
  1,315
  1,376
  1,440
  1,507
  1,578
  1,653
  1,732
  1,814
  1,901
  1,993
  2,089

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  203
  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
  3,459
  3,342
  3,437
  3,542
  3,657
  3,783
  3,918
  4,064
  4,221
  4,388
  4,567
  4,757
  4,959
  5,173
  5,400
  5,641
  5,895
  6,163
  6,447
  6,746
  7,061
  7,394
  7,744
  8,113
  8,501
  8,910
  9,340
  9,793
  10,269
  10,769
  11,295
Adjusted assets (=assets-cash), $m
  3,256
  3,342
  3,437
  3,542
  3,657
  3,783
  3,918
  4,064
  4,221
  4,388
  4,567
  4,757
  4,959
  5,173
  5,400
  5,641
  5,895
  6,163
  6,447
  6,746
  7,061
  7,394
  7,744
  8,113
  8,501
  8,910
  9,340
  9,793
  10,269
  10,769
  11,295
Revenue / Adjusted assets
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
Average production assets, $m
  1,210
  1,241
  1,276
  1,315
  1,358
  1,405
  1,455
  1,509
  1,567
  1,630
  1,696
  1,766
  1,841
  1,921
  2,005
  2,095
  2,189
  2,289
  2,394
  2,505
  2,622
  2,746
  2,876
  3,013
  3,157
  3,309
  3,469
  3,637
  3,813
  3,999
  4,195
Working capital, $m
  24
  -184
  -189
  -195
  -201
  -208
  -216
  -224
  -232
  -241
  -251
  -262
  -273
  -285
  -297
  -310
  -324
  -339
  -355
  -371
  -388
  -407
  -426
  -446
  -468
  -490
  -514
  -539
  -565
  -592
  -621
Total debt, $m
  759
  803
  853
  908
  969
  1,035
  1,106
  1,183
  1,265
  1,353
  1,447
  1,547
  1,653
  1,766
  1,885
  2,012
  2,146
  2,287
  2,436
  2,593
  2,759
  2,934
  3,118
  3,312
  3,517
  3,732
  3,958
  4,196
  4,446
  4,710
  4,986
Total liabilities, $m
  1,713
  1,758
  1,808
  1,863
  1,924
  1,990
  2,061
  2,138
  2,220
  2,308
  2,402
  2,502
  2,608
  2,721
  2,840
  2,967
  3,101
  3,242
  3,391
  3,548
  3,714
  3,889
  4,073
  4,267
  4,472
  4,687
  4,913
  5,151
  5,401
  5,665
  5,941
Total equity, $m
  1,745
  1,584
  1,629
  1,679
  1,734
  1,793
  1,857
  1,926
  2,001
  2,080
  2,165
  2,255
  2,350
  2,452
  2,560
  2,674
  2,794
  2,921
  3,056
  3,198
  3,347
  3,505
  3,671
  3,845
  4,030
  4,223
  4,427
  4,642
  4,867
  5,105
  5,354
Total liabilities and equity, $m
  3,458
  3,342
  3,437
  3,542
  3,658
  3,783
  3,918
  4,064
  4,221
  4,388
  4,567
  4,757
  4,958
  5,173
  5,400
  5,641
  5,895
  6,163
  6,447
  6,746
  7,061
  7,394
  7,744
  8,112
  8,502
  8,910
  9,340
  9,793
  10,268
  10,770
  11,295
Debt-to-equity ratio
  0.435
  0.510
  0.520
  0.540
  0.560
  0.580
  0.600
  0.610
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
  0.740
  0.750
  0.770
  0.780
  0.800
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
Adjusted equity ratio
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  503
  548
  565
  584
  605
  628
  653
  680
  708
  739
  772
  893
  930
  970
  1,011
  1,055
  1,102
  1,151
  1,203
  1,257
  1,315
  1,376
  1,440
  1,507
  1,578
  1,653
  1,732
  1,814
  1,901
  1,993
  2,089
Depreciation, amort., depletion, $m
  10
  160
  162
  163
  164
  166
  168
  169
  171
  173
  176
  59
  61
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  100
  105
  110
  116
  121
  127
  133
  140
Funds from operations, $m
  690
  708
  726
  747
  770
  794
  821
  849
  880
  912
  947
  952
  992
  1,034
  1,078
  1,125
  1,175
  1,227
  1,282
  1,341
  1,402
  1,467
  1,536
  1,608
  1,684
  1,763
  1,847
  1,936
  2,029
  2,126
  2,229
Change in working capital, $m
  35
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
Cash from operations, $m
  655
  756
  732
  753
  776
  801
  828
  857
  888
  922
  957
  963
  1,003
  1,045
  1,091
  1,138
  1,189
  1,242
  1,298
  1,357
  1,420
  1,486
  1,555
  1,628
  1,705
  1,786
  1,871
  1,961
  2,055
  2,154
  2,258
Maintenance CAPEX, $m
  0
  -40
  -41
  -43
  -44
  -45
  -47
  -49
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -87
  -92
  -96
  -100
  -105
  -110
  -116
  -121
  -127
  -133
New CAPEX, $m
  -12
  -32
  -35
  -39
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -71
  -75
  -80
  -84
  -89
  -94
  -100
  -105
  -111
  -117
  -123
  -130
  -137
  -144
  -152
  -160
  -168
  -177
  -186
  -195
Cash from investing activities, $m
  -133
  -72
  -76
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -128
  -134
  -141
  -148
  -156
  -164
  -173
  -181
  -191
  -201
  -210
  -222
  -233
  -244
  -257
  -270
  -284
  -298
  -313
  -328
Free cash flow, $m
  522
  684
  655
  671
  689
  709
  731
  754
  780
  807
  837
  836
  869
  905
  942
  982
  1,024
  1,069
  1,116
  1,166
  1,219
  1,275
  1,333
  1,395
  1,460
  1,529
  1,601
  1,677
  1,757
  1,841
  1,929
Issuance/(repayment) of debt, $m
  199
  44
  50
  55
  61
  66
  71
  77
  82
  88
  94
  100
  106
  113
  119
  126
  134
  141
  149
  157
  166
  175
  184
  194
  204
  215
  226
  238
  250
  263
  277
Issuance/(repurchase) of shares, $m
  -291
  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  
  -92
  44
  50
  55
  61
  66
  71
  77
  82
  88
  94
  100
  106
  113
  119
  126
  134
  141
  149
  157
  166
  175
  184
  194
  204
  215
  226
  238
  250
  263
  277
Total cash flow (excl. dividends), $m
  430
  728
  705
  727
  750
  775
  802
  831
  862
  895
  930
  936
  975
  1,017
  1,062
  1,109
  1,158
  1,210
  1,266
  1,324
  1,385
  1,450
  1,518
  1,589
  1,665
  1,744
  1,827
  1,915
  2,007
  2,104
  2,206
Retained Cash Flow (-), $m
  149
  -42
  -45
  -50
  -55
  -59
  -64
  -69
  -74
  -79
  -85
  -90
  -96
  -102
  -108
  -114
  -120
  -127
  -134
  -142
  -150
  -158
  -166
  -175
  -184
  -194
  -204
  -214
  -226
  -237
  -249
Prev. year cash balance distribution, $m
 
  203
  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
 
  889
  660
  677
  695
  716
  738
  762
  788
  816
  846
  846
  880
  916
  954
  995
  1,038
  1,083
  1,131
  1,182
  1,236
  1,292
  1,352
  1,414
  1,480
  1,550
  1,623
  1,700
  1,782
  1,867
  1,957
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
 
  852
  604
  589
  573
  555
  536
  515
  493
  469
  443
  402
  375
  348
  320
  292
  264
  236
  208
  182
  157
  134
  112
  93
  75
  60
  47
  36
  28
  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

CI Financial Corp. is a publicly owned asset management holding company. Through its subsidiaries, the firm manages separate client focused equity, fixed income, and alternative investments portfolios. It also manages mutual funds, hedge funds, and fund of funds for its clients through its subsidiaries. The firm was founded in 1965 and is based in Toronto, Canada.

FINANCIAL RATIOS  of  CI Financial Corp. (CIX)

Valuation Ratios
P/E Ratio 14.1
Price to Sales 3.6
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 10.9
Price to Free Cash Flow 11.1
Growth Rates
Sales Growth Rate -2.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 200%
Cap. Spend. - 3 Yr. Gr. Rate 19.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.4
LT Debt to Equity 43.5%
Total Debt to Equity 43.5%
Interest Coverage 47
Management Effectiveness
Return On Assets 15.2%
Ret/ On Assets - 3 Yr. Avg. 16.9%
Return On Total Capital 20.3%
Ret/ On T. Cap. - 3 Yr. Avg. 22.4%
Return On Equity 27.6%
Return On Equity - 3 Yr. Avg. 28.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 36.7%
EBITDA Margin - 3 Yr. Avg. 38.7%
Operating Margin 36.2%
Oper. Margin - 3 Yr. Avg. 38%
Pre-Tax Margin 35.4%
Pre-Tax Margin - 3 Yr. Avg. 37.2%
Net Profit Margin 25.8%
Net Profit Margin - 3 Yr. Avg. 27.2%
Effective Tax Rate 27.1%
Eff/ Tax Rate - 3 Yr. Avg. 27%
Payout Ratio 73.4%

CIX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CIX stock intrinsic value calculation we used $1948 million for the last fiscal year's total revenue generated by CI Financial Corp.. The default revenue input number comes from 2016 income statement of CI Financial Corp.. 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 CIX stock valuation model: a) initial revenue growth rate of 2.6% 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 CIX is calculated based on our internal credit rating of CI Financial Corp., 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 CI Financial Corp..
    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 CIX stock the variable cost ratio is equal to 61.3%.

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 CIX 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 CI Financial Corp..

Corporate tax rate of 27% is the nominal tax rate for CI Financial Corp.. 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 CIX 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 CIX are equal to 62.1%.

Life of production assets of 238.6 years is the average useful life of capital assets used in CI Financial Corp. 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 CIX is equal to -9.2%. 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 - $1745 million for CI Financial Corp. - 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 264.516 million for CI Financial Corp. 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 CI Financial Corp. at the current share price and the inputted number of shares is $7.1 billion.


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Stock chart of CIX Financial statements of CIX
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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