Intrinsic value of FirstService Corporation Subordinate Vot - FSV

Previous Close

$85.62

  Intrinsic Value

$75.02

stock screener

  Rating & Target

hold

-12%

Previous close

$85.62

 
Intrinsic value

$75.02

 
Up/down potential

-12%

 
Rating

hold

We calculate the intrinsic value of FSV 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 3.0

 

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, %
  17.33
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
Revenue, $m
  2,004
  2,236
  2,481
  2,738
  3,006
  3,287
  3,579
  3,884
  4,201
  4,530
  4,872
  5,228
  5,598
  5,982
  6,382
  6,797
  7,229
  7,679
  8,148
  8,636
  9,144
  9,675
  10,229
  10,807
  11,410
  12,041
  12,700
  13,389
  14,110
  14,864
  15,653
Variable operating expenses, $m
 
  2,029
  2,247
  2,476
  2,715
  2,965
  3,225
  3,497
  3,779
  4,072
  4,378
  4,659
  4,988
  5,330
  5,686
  6,056
  6,442
  6,842
  7,260
  7,695
  8,148
  8,621
  9,114
  9,629
  10,167
  10,729
  11,316
  11,930
  12,572
  13,244
  13,948
Fixed operating expenses, $m
 
  64
  65
  67
  68
  70
  72
  74
  76
  77
  79
  81
  83
  85
  88
  90
  92
  94
  97
  99
  102
  104
  107
  109
  112
  115
  118
  121
  124
  127
  130
Total operating expenses, $m
  1,881
  2,093
  2,312
  2,543
  2,783
  3,035
  3,297
  3,571
  3,855
  4,149
  4,457
  4,740
  5,071
  5,415
  5,774
  6,146
  6,534
  6,936
  7,357
  7,794
  8,250
  8,725
  9,221
  9,738
  10,279
  10,844
  11,434
  12,051
  12,696
  13,371
  14,078
Operating income, $m
  122
  144
  169
  196
  223
  252
  282
  314
  346
  380
  416
  488
  527
  566
  608
  651
  696
  742
  791
  842
  895
  950
  1,008
  1,068
  1,131
  1,197
  1,266
  1,338
  1,414
  1,493
  1,576
EBITDA, $m
  172
  203
  230
  259
  289
  321
  354
  389
  425
  462
  501
  541
  583
  627
  672
  719
  769
  820
  873
  929
  987
  1,048
  1,111
  1,177
  1,246
  1,319
  1,394
  1,473
  1,556
  1,643
  1,734
Interest expense (income), $m
  12
  13
  17
  21
  25
  29
  33
  38
  42
  47
  52
  58
  63
  69
  75
  81
  87
  94
  101
  108
  116
  124
  132
  141
  150
  159
  169
  179
  190
  201
  212
Earnings before tax, $m
  110
  131
  152
  175
  199
  223
  249
  276
  304
  333
  363
  431
  463
  498
  533
  570
  608
  648
  690
  733
  779
  826
  876
  928
  982
  1,038
  1,097
  1,159
  1,224
  1,292
  1,363
Tax expense, $m
  37
  35
  41
  47
  54
  60
  67
  74
  82
  90
  98
  116
  125
  134
  144
  154
  164
  175
  186
  198
  210
  223
  236
  250
  265
  280
  296
  313
  331
  349
  368
Net income, $m
  45
  96
  111
  128
  145
  163
  182
  201
  222
  243
  265
  314
  338
  363
  389
  416
  444
  473
  504
  535
  569
  603
  639
  677
  717
  758
  801
  846
  894
  943
  995

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  59
  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
  1,042
  1,097
  1,217
  1,343
  1,474
  1,612
  1,755
  1,905
  2,060
  2,222
  2,390
  2,564
  2,745
  2,934
  3,130
  3,334
  3,545
  3,766
  3,996
  4,235
  4,485
  4,745
  5,017
  5,300
  5,596
  5,905
  6,228
  6,566
  6,920
  7,290
  7,677
Adjusted assets (=assets-cash), $m
  983
  1,097
  1,217
  1,343
  1,474
  1,612
  1,755
  1,905
  2,060
  2,222
  2,390
  2,564
  2,745
  2,934
  3,130
  3,334
  3,545
  3,766
  3,996
  4,235
  4,485
  4,745
  5,017
  5,300
  5,596
  5,905
  6,228
  6,566
  6,920
  7,290
  7,677
Revenue / Adjusted assets
  2.039
  2.038
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.038
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
Average production assets, $m
  224
  250
  278
  307
  337
  368
  401
  435
  470
  507
  546
  586
  627
  670
  715
  761
  810
  860
  913
  967
  1,024
  1,084
  1,146
  1,210
  1,278
  1,349
  1,422
  1,500
  1,580
  1,665
  1,753
Working capital, $m
  163
  116
  129
  142
  156
  171
  186
  202
  218
  236
  253
  272
  291
  311
  332
  353
  376
  399
  424
  449
  476
  503
  532
  562
  593
  626
  660
  696
  734
  773
  814
Total debt, $m
  339
  430
  528
  630
  736
  848
  964
  1,085
  1,211
  1,342
  1,478
  1,619
  1,766
  1,918
  2,077
  2,242
  2,414
  2,593
  2,779
  2,973
  3,175
  3,385
  3,605
  3,835
  4,075
  4,325
  4,587
  4,861
  5,147
  5,447
  5,760
Total liabilities, $m
  797
  888
  986
  1,088
  1,194
  1,306
  1,422
  1,543
  1,669
  1,800
  1,936
  2,077
  2,224
  2,376
  2,535
  2,700
  2,872
  3,051
  3,237
  3,431
  3,633
  3,843
  4,063
  4,293
  4,533
  4,783
  5,045
  5,319
  5,605
  5,905
  6,218
Total equity, $m
  245
  208
  231
  255
  280
  306
  334
  362
  391
  422
  454
  487
  522
  557
  595
  633
  674
  716
  759
  805
  852
  902
  953
  1,007
  1,063
  1,122
  1,183
  1,248
  1,315
  1,385
  1,459
Total liabilities and equity, $m
  1,042
  1,096
  1,217
  1,343
  1,474
  1,612
  1,756
  1,905
  2,060
  2,222
  2,390
  2,564
  2,746
  2,933
  3,130
  3,333
  3,546
  3,767
  3,996
  4,236
  4,485
  4,745
  5,016
  5,300
  5,596
  5,905
  6,228
  6,567
  6,920
  7,290
  7,677
Debt-to-equity ratio
  1.384
  2.070
  2.280
  2.470
  2.630
  2.770
  2.890
  3.000
  3.090
  3.180
  3.250
  3.320
  3.390
  3.440
  3.490
  3.540
  3.580
  3.620
  3.660
  3.690
  3.730
  3.760
  3.780
  3.810
  3.830
  3.850
  3.880
  3.900
  3.910
  3.930
  3.950
Adjusted equity ratio
  0.189
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  45
  96
  111
  128
  145
  163
  182
  201
  222
  243
  265
  314
  338
  363
  389
  416
  444
  473
  504
  535
  569
  603
  639
  677
  717
  758
  801
  846
  894
  943
  995
Depreciation, amort., depletion, $m
  50
  59
  61
  64
  66
  69
  72
  75
  78
  82
  85
  53
  56
  60
  64
  69
  73
  77
  82
  87
  92
  98
  103
  109
  115
  121
  128
  135
  142
  150
  158
Funds from operations, $m
  168
  154
  172
  191
  211
  232
  254
  277
  300
  325
  350
  367
  395
  424
  453
  485
  517
  551
  586
  623
  661
  701
  743
  786
  832
  879
  929
  981
  1,036
  1,093
  1,153
Change in working capital, $m
  21
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
Cash from operations, $m
  147
  142
  160
  178
  197
  218
  239
  261
  284
  308
  333
  349
  376
  404
  433
  463
  494
  527
  562
  597
  634
  673
  714
  756
  800
  847
  895
  946
  998
  1,054
  1,112
Maintenance CAPEX, $m
  0
  -20
  -23
  -25
  -28
  -30
  -33
  -36
  -39
  -42
  -46
  -49
  -53
  -56
  -60
  -64
  -69
  -73
  -77
  -82
  -87
  -92
  -98
  -103
  -109
  -115
  -121
  -128
  -135
  -142
  -150
New CAPEX, $m
  -39
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
Cash from investing activities, $m
  -177
  -46
  -50
  -54
  -58
  -61
  -66
  -70
  -74
  -79
  -84
  -89
  -94
  -99
  -105
  -111
  -117
  -123
  -129
  -137
  -144
  -151
  -160
  -168
  -177
  -186
  -195
  -205
  -216
  -226
  -238
Free cash flow, $m
  -30
  95
  110
  124
  140
  156
  173
  191
  209
  228
  248
  260
  281
  304
  328
  352
  377
  404
  432
  460
  490
  522
  554
  588
  624
  661
  700
  740
  783
  827
  874
Issuance/(repayment) of debt, $m
  67
  92
  97
  102
  107
  111
  116
  121
  126
  131
  136
  141
  147
  153
  159
  165
  172
  179
  186
  194
  202
  211
  220
  230
  240
  250
  262
  274
  286
  300
  314
Issuance/(repurchase) of shares, $m
  -10
  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  
  47
  92
  97
  102
  107
  111
  116
  121
  126
  131
  136
  141
  147
  153
  159
  165
  172
  179
  186
  194
  202
  211
  220
  230
  240
  250
  262
  274
  286
  300
  314
Total cash flow (excl. dividends), $m
  18
  188
  207
  226
  246
  267
  289
  312
  335
  359
  384
  401
  428
  457
  486
  517
  549
  583
  618
  654
  692
  732
  774
  818
  863
  911
  961
  1,014
  1,069
  1,127
  1,187
Retained Cash Flow (-), $m
  -19
  -21
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
Prev. year cash balance distribution, $m
 
  58
  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
 
  224
  184
  202
  221
  241
  262
  283
  305
  329
  353
  368
  394
  421
  449
  478
  509
  541
  574
  609
  645
  683
  722
  764
  807
  853
  900
  950
  1,002
  1,056
  1,114
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  212
  163
  166
  168
  169
  167
  163
  158
  151
  143
  130
  120
  109
  98
  86
  75
  65
  54
  45
  37
  29
  23
  17
  13
  10
  7
  5
  3
  2
  1
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

Firstservice Corporation is a provider of residential property management and other essential property services to residential and commercial customers. The Company operates through two segments: FirstService Residential and FirstService Brands. FirstService Residential is a property manager and provides ancillary services in the areas of on-site staffing, including building engineering and maintenance, full-service amenity management, security, concierge and front desk personnel, and landscaping; banking and insurance products, and energy conservation and management solutions. FirstService Brands provides essential property services to residential and commercial customers in North America through franchise networks and Company-owned locations. The principal brands in this division include Paul Davis Restoration, California Closets, Certa Pro Painters, Pillar to Post Home Inspectors, Floor Coverings International, College Pro Painters, Century Fire Protection and Service America.

FINANCIAL RATIOS  of  FirstService Corporation Subordinate Vot (FSV)

Valuation Ratios
P/E Ratio 68.2
Price to Sales 1.5
Price to Book 12.5
Price to Tangible Book
Price to Cash Flow 20.9
Price to Free Cash Flow 28.4
Growth Rates
Sales Growth Rate 17.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.4%
Cap. Spend. - 3 Yr. Gr. Rate 11.1%
Financial Strength
Quick Ratio 59
Current Ratio 0.2
LT Debt to Equity 138%
Total Debt to Equity 138.4%
Interest Coverage 10
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 8.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 19.1%
Return On Equity - 3 Yr. Avg. 16.4%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 29.2%
Gross Margin - 3 Yr. Avg. 29.6%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 7.3%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 5.2%
Pre-Tax Margin 5.5%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 33.6%
Eff/ Tax Rate - 3 Yr. Avg. 34.6%
Payout Ratio 46.7%

FSV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FSV stock intrinsic value calculation we used $2004 million for the last fiscal year's total revenue generated by FirstService Corporation Subordinate Vot. The default revenue input number comes from 2016 income statement of FirstService Corporation Subordinate Vot. 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 FSV stock valuation model: a) initial revenue growth rate of 11.6% 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 6.1%, whose default value for FSV is calculated based on our internal credit rating of FirstService Corporation Subordinate Vot, 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 FirstService Corporation Subordinate Vot.
    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 FSV stock the variable cost ratio is equal to 90.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $62 million in the base year in the intrinsic value calculation for FSV 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 3.9% for FirstService Corporation Subordinate Vot.

Corporate tax rate of 27% is the nominal tax rate for FirstService Corporation Subordinate Vot. 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 FSV 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 FSV are equal to 11.2%.

Life of production assets of 11.1 years is the average useful life of capital assets used in FirstService Corporation Subordinate Vot 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 FSV is equal to 5.2%. 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 - $245 million for FirstService Corporation Subordinate Vot - 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 34.538 million for FirstService Corporation Subordinate Vot 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 FirstService Corporation Subordinate Vot at the current share price and the inputted number of shares is $3.0 billion.

RELATED COMPANIES Price Int.Val. Rating
TCN Tricon Capital 11.38 1.84  str.sell
Financial statements of FSV
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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