Intrinsic value of BRP Inc. Subordinate Voting Shares - DOO

Previous Close

$44.59

  Intrinsic Value

$12.56

stock screener

  Rating & Target

str. sell

-72%

  Value-price divergence*

0%

Previous close

$44.59

 
Intrinsic value

$12.56

 
Up/down potential

-72%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of DOO 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 4.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  8.96
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  4,172
  4,289
  4,418
  4,561
  4,715
  4,883
  5,064
  5,258
  5,465
  5,687
  5,923
  6,173
  6,440
  6,721
  7,020
  7,336
  7,669
  8,021
  8,393
  8,785
  9,198
  9,633
  10,092
  10,575
  11,083
  11,617
  12,180
  12,772
  13,394
  14,048
  14,736
Variable operating expenses, $m
 
  3,765
  3,879
  4,003
  4,139
  4,285
  4,444
  4,613
  4,795
  4,989
  5,195
  5,403
  5,636
  5,883
  6,144
  6,420
  6,712
  7,020
  7,346
  7,689
  8,050
  8,431
  8,833
  9,255
  9,700
  10,168
  10,660
  11,178
  11,723
  12,295
  12,897
Fixed operating expenses, $m
 
  214
  220
  225
  231
  236
  242
  248
  255
  261
  268
  274
  281
  288
  295
  303
  310
  318
  326
  334
  342
  351
  360
  369
  378
  387
  397
  407
  417
  428
  438
Total operating expenses, $m
  3,865
  3,979
  4,099
  4,228
  4,370
  4,521
  4,686
  4,861
  5,050
  5,250
  5,463
  5,677
  5,917
  6,171
  6,439
  6,723
  7,022
  7,338
  7,672
  8,023
  8,392
  8,782
  9,193
  9,624
  10,078
  10,555
  11,057
  11,585
  12,140
  12,723
  13,335
Operating income, $m
  306
  309
  320
  332
  346
  361
  378
  396
  416
  437
  460
  496
  522
  551
  581
  613
  647
  683
  721
  762
  805
  851
  899
  951
  1,005
  1,062
  1,123
  1,187
  1,254
  1,325
  1,400
EBITDA, $m
  439
  442
  456
  473
  491
  511
  532
  556
  582
  609
  639
  670
  704
  740
  779
  820
  863
  909
  958
  1,010
  1,065
  1,123
  1,184
  1,249
  1,318
  1,390
  1,466
  1,547
  1,632
  1,722
  1,816
Interest expense (income), $m
  48
  39
  31
  34
  37
  40
  43
  47
  51
  55
  59
  64
  69
  74
  80
  86
  92
  99
  106
  113
  121
  130
  138
  148
  157
  167
  178
  189
  201
  214
  227
Earnings before tax, $m
  327
  270
  289
  299
  310
  322
  335
  349
  365
  382
  401
  432
  454
  476
  501
  527
  554
  584
  615
  649
  684
  721
  761
  803
  848
  895
  945
  997
  1,053
  1,111
  1,173
Tax expense, $m
  70
  73
  78
  81
  84
  87
  90
  94
  99
  103
  108
  117
  122
  129
  135
  142
  150
  158
  166
  175
  185
  195
  206
  217
  229
  242
  255
  269
  284
  300
  317
Net income, $m
  257
  197
  211
  218
  226
  235
  244
  255
  267
  279
  293
  316
  331
  348
  366
  385
  405
  426
  449
  473
  499
  527
  556
  586
  619
  653
  689
  728
  768
  811
  857

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  302
  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
  2,516
  2,276
  2,345
  2,421
  2,503
  2,592
  2,688
  2,791
  2,901
  3,019
  3,144
  3,277
  3,418
  3,568
  3,726
  3,894
  4,071
  4,258
  4,455
  4,663
  4,882
  5,113
  5,357
  5,613
  5,883
  6,166
  6,465
  6,779
  7,109
  7,457
  7,822
Adjusted assets (=assets-cash), $m
  2,214
  2,276
  2,345
  2,421
  2,503
  2,592
  2,688
  2,791
  2,901
  3,019
  3,144
  3,277
  3,418
  3,568
  3,726
  3,894
  4,071
  4,258
  4,455
  4,663
  4,882
  5,113
  5,357
  5,613
  5,883
  6,166
  6,465
  6,779
  7,109
  7,457
  7,822
Revenue / Adjusted assets
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
  1.884
Average production assets, $m
  860
  883
  910
  939
  971
  1,006
  1,043
  1,083
  1,126
  1,172
  1,220
  1,272
  1,327
  1,385
  1,446
  1,511
  1,580
  1,652
  1,729
  1,810
  1,895
  1,984
  2,079
  2,178
  2,283
  2,393
  2,509
  2,631
  2,759
  2,894
  3,036
Working capital, $m
  279
  99
  102
  105
  108
  112
  116
  121
  126
  131
  136
  142
  148
  155
  161
  169
  176
  184
  193
  202
  212
  222
  232
  243
  255
  267
  280
  294
  308
  323
  339
Total debt, $m
  1,047
  741
  803
  871
  945
  1,025
  1,111
  1,204
  1,303
  1,409
  1,521
  1,641
  1,768
  1,903
  2,045
  2,196
  2,356
  2,524
  2,701
  2,889
  3,086
  3,294
  3,513
  3,744
  3,986
  4,242
  4,510
  4,793
  5,090
  5,403
  5,731
Total liabilities, $m
  2,355
  2,049
  2,111
  2,179
  2,253
  2,333
  2,419
  2,512
  2,611
  2,717
  2,829
  2,949
  3,076
  3,211
  3,353
  3,504
  3,664
  3,832
  4,009
  4,197
  4,394
  4,602
  4,821
  5,052
  5,294
  5,550
  5,818
  6,101
  6,398
  6,711
  7,039
Total equity, $m
  161
  228
  235
  242
  250
  259
  269
  279
  290
  302
  314
  328
  342
  357
  373
  389
  407
  426
  445
  466
  488
  511
  536
  561
  588
  617
  646
  678
  711
  746
  782
Total liabilities and equity, $m
  2,516
  2,277
  2,346
  2,421
  2,503
  2,592
  2,688
  2,791
  2,901
  3,019
  3,143
  3,277
  3,418
  3,568
  3,726
  3,893
  4,071
  4,258
  4,454
  4,663
  4,882
  5,113
  5,357
  5,613
  5,882
  6,167
  6,464
  6,779
  7,109
  7,457
  7,821
Debt-to-equity ratio
  6.503
  3.250
  3.420
  3.600
  3.770
  3.950
  4.130
  4.310
  4.490
  4.670
  4.840
  5.010
  5.170
  5.330
  5.490
  5.640
  5.790
  5.930
  6.060
  6.190
  6.320
  6.440
  6.560
  6.670
  6.780
  6.880
  6.980
  7.070
  7.160
  7.250
  7.330
Adjusted equity ratio
  -0.064
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  257
  197
  211
  218
  226
  235
  244
  255
  267
  279
  293
  316
  331
  348
  366
  385
  405
  426
  449
  473
  499
  527
  556
  586
  619
  653
  689
  728
  768
  811
  857
Depreciation, amort., depletion, $m
  133
  133
  136
  140
  145
  149
  154
  160
  166
  172
  179
  174
  182
  190
  198
  207
  216
  226
  237
  248
  260
  272
  285
  298
  313
  328
  344
  360
  378
  396
  416
Funds from operations, $m
  568
  330
  347
  358
  371
  384
  399
  415
  432
  451
  471
  490
  513
  537
  564
  592
  621
  653
  686
  721
  759
  798
  840
  885
  932
  981
  1,033
  1,088
  1,146
  1,208
  1,272
Change in working capital, $m
  62
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
Cash from operations, $m
  506
  327
  344
  355
  367
  380
  395
  411
  428
  446
  466
  484
  507
  531
  557
  584
  614
  645
  677
  712
  749
  788
  830
  874
  920
  969
  1,020
  1,075
  1,132
  1,193
  1,257
Maintenance CAPEX, $m
  0
  -118
  -121
  -125
  -129
  -133
  -138
  -143
  -148
  -154
  -160
  -167
  -174
  -182
  -190
  -198
  -207
  -216
  -226
  -237
  -248
  -260
  -272
  -285
  -298
  -313
  -328
  -344
  -360
  -378
  -396
New CAPEX, $m
  -187
  -24
  -27
  -29
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
  -105
  -110
  -116
  -122
  -128
  -135
  -142
Cash from investing activities, $m
  -185
  -142
  -148
  -154
  -161
  -168
  -175
  -183
  -191
  -200
  -209
  -219
  -229
  -240
  -251
  -263
  -276
  -289
  -303
  -318
  -333
  -350
  -366
  -384
  -403
  -423
  -444
  -466
  -488
  -513
  -538
Free cash flow, $m
  321
  186
  197
  201
  206
  213
  220
  228
  237
  246
  257
  265
  278
  291
  306
  321
  338
  356
  375
  395
  416
  439
  464
  489
  517
  546
  577
  609
  644
  680
  719
Issuance/(repayment) of debt, $m
  -130
  -189
  62
  68
  74
  80
  86
  93
  99
  106
  113
  120
  127
  135
  143
  151
  159
  168
  178
  187
  197
  208
  219
  231
  243
  255
  269
  283
  297
  313
  329
Issuance/(repurchase) of shares, $m
  -72
  54
  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  
  -271
  -135
  62
  68
  74
  80
  86
  93
  99
  106
  113
  120
  127
  135
  143
  151
  159
  168
  178
  187
  197
  208
  219
  231
  243
  255
  269
  283
  297
  313
  329
Total cash flow (excl. dividends), $m
  64
  51
  258
  269
  280
  293
  306
  320
  336
  352
  369
  385
  405
  426
  448
  472
  497
  524
  552
  582
  614
  647
  683
  720
  759
  801
  845
  892
  941
  993
  1,047
Retained Cash Flow (-), $m
  -180
  -252
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
Prev. year cash balance distribution, $m
 
  185
  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
 
  -16
  252
  261
  272
  284
  296
  310
  325
  340
  357
  372
  391
  411
  432
  455
  479
  505
  532
  561
  592
  624
  658
  694
  733
  773
  815
  860
  908
  958
  1,011
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  -15
  223
  216
  208
  200
  190
  180
  170
  158
  147
  133
  121
  109
  96
  85
  73
  62
  52
  43
  35
  28
  22
  17
  13
  9
  7
  5
  3
  2
  1
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

BRP Inc. is engaged in the design, development, manufacturing, distribution and marketing of power sports vehicles and propulsion systems. The Company manufactures and sells Year-Round Products consisting of all-terrain vehicles (ATVs), side-by-side vehicles (SSVs) and roadsters; Seasonal Products consisting of snowmobiles and personal watercrafts (PWCs), and Propulsion Products consisting of engines for outboard and jet boats, karts, motorcycles and recreational aircraft. The Company's diversified portfolio of brands and products includes Can-Am ATVs, SSVs and roadsters, Ski-Doo and Lynx snowmobiles, Sea-Doo PWCs, and propulsion systems consisting of Evinrude outboard boat engines and Rotax engines for jet boats, karts, motorcycles and recreational aircraft. Additionally, the Company supports its line of products with a parts, accessories and clothing (PAC) business. Its products are sold through a network of dealers, distributors and to original equipment manufacturers.

FINANCIAL RATIOS  of  BRP Inc. Subordinate Voting Shares (DOO)

Valuation Ratios
P/E Ratio 25.1
Price to Sales 1.5
Price to Book 40
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 20.2
Growth Rates
Sales Growth Rate 9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.4%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 577.6%
Total Debt to Equity 650.3%
Interest Coverage 8
Management Effectiveness
Return On Assets 11.9%
Ret/ On Assets - 3 Yr. Avg. 6.4%
Return On Total Capital 21%
Ret/ On T. Cap. - 3 Yr. Avg. 10.7%
Return On Equity 362%
Return On Equity - 3 Yr. Avg. -14%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 24.2%
Gross Margin - 3 Yr. Avg. 24%
EBITDA Margin 12.2%
EBITDA Margin - 3 Yr. Avg. 9%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 7.6%
Pre-Tax Margin 7.8%
Pre-Tax Margin - 3 Yr. Avg. 4.7%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 3.2%
Effective Tax Rate 21.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

DOO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DOO stock intrinsic value calculation we used $4172 million for the last fiscal year's total revenue generated by BRP Inc. Subordinate Voting Shares. The default revenue input number comes from 2017 income statement of BRP Inc. Subordinate Voting Shares. 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 DOO stock valuation model: a) initial revenue growth rate of 2.8% 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 6%, whose default value for DOO is calculated based on our internal credit rating of BRP Inc. Subordinate Voting Shares, 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 BRP Inc. Subordinate Voting Shares.
    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 DOO stock the variable cost ratio is equal to 87.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $209 million in the base year in the intrinsic value calculation for DOO 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 BRP Inc. Subordinate Voting Shares.

Corporate tax rate of 27% is the nominal tax rate for BRP Inc. Subordinate Voting Shares. 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 DOO 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 DOO are equal to 20.6%.

Life of production assets of 7.3 years is the average useful life of capital assets used in BRP Inc. Subordinate Voting Shares 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 DOO is equal to 2.3%. 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 - $161 million for BRP Inc. Subordinate Voting Shares - 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 103.281 million for BRP Inc. Subordinate Voting Shares 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 BRP Inc. Subordinate Voting Shares at the current share price and the inputted number of shares is $4.6 billion.

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Financial statements of DOO
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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