Intrinsic value of FirstService Corporation Subordinate Vot - FSV

Previous Close

$81.00

  Intrinsic Value

$82.32

stock screener

  Rating & Target

hold

+2%

  Value-price divergence*

0%

Previous close

$81.00

 
Intrinsic value

$82.32

 
Up/down potential

+2%

 
Rating

hold

 
Value-price divergence*

0%

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

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 2.8

 

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
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  2,004
  2,267
  2,545
  2,839
  3,149
  3,474
  3,814
  4,168
  4,538
  4,923
  5,324
  5,741
  6,174
  6,624
  7,091
  7,577
  8,082
  8,608
  9,154
  9,723
  10,316
  10,933
  11,577
  12,248
  12,949
  13,680
  14,443
  15,241
  16,075
  16,947
  17,859
Variable operating expenses, $m
 
  2,056
  2,304
  2,566
  2,842
  3,131
  3,434
  3,750
  4,080
  4,423
  4,780
  5,115
  5,501
  5,902
  6,318
  6,751
  7,202
  7,670
  8,157
  8,664
  9,192
  9,742
  10,316
  10,914
  11,538
  12,189
  12,869
  13,580
  14,323
  15,100
  15,913
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
  2,120
  2,369
  2,633
  2,910
  3,201
  3,506
  3,824
  4,156
  4,500
  4,859
  5,196
  5,584
  5,987
  6,406
  6,841
  7,294
  7,764
  8,254
  8,763
  9,294
  9,846
  10,423
  11,023
  11,650
  12,304
  12,987
  13,701
  14,447
  15,227
  16,043
Operating income, $m
  122
  147
  176
  207
  239
  272
  308
  345
  383
  423
  465
  544
  589
  636
  685
  736
  789
  844
  901
  960
  1,022
  1,087
  1,155
  1,225
  1,299
  1,376
  1,456
  1,540
  1,628
  1,720
  1,816
EBITDA, $m
  172
  206
  238
  271
  306
  343
  382
  423
  465
  509
  554
  602
  652
  703
  757
  812
  870
  930
  993
  1,059
  1,127
  1,198
  1,272
  1,349
  1,429
  1,514
  1,602
  1,694
  1,790
  1,891
  1,996
Interest expense (income), $m
  12
  13
  17
  22
  26
  31
  36
  41
  47
  52
  58
  65
  71
  78
  85
  92
  100
  107
  115
  124
  133
  142
  152
  161
  172
  183
  194
  206
  218
  231
  245
Earnings before tax, $m
  110
  134
  159
  185
  213
  241
  272
  303
  336
  371
  406
  480
  518
  558
  600
  644
  689
  736
  785
  836
  890
  945
  1,003
  1,064
  1,127
  1,193
  1,262
  1,334
  1,410
  1,489
  1,571
Tax expense, $m
  37
  36
  43
  50
  57
  65
  73
  82
  91
  100
  110
  129
  140
  151
  162
  174
  186
  199
  212
  226
  240
  255
  271
  287
  304
  322
  341
  360
  381
  402
  424
Net income, $m
  45
  98
  116
  135
  155
  176
  198
  221
  245
  271
  297
  350
  378
  408
  438
  470
  503
  537
  573
  611
  649
  690
  732
  777
  823
  871
  921
  974
  1,029
  1,087
  1,147

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
  1,112
  1,248
  1,393
  1,544
  1,704
  1,870
  2,044
  2,226
  2,415
  2,611
  2,815
  3,028
  3,248
  3,478
  3,716
  3,964
  4,222
  4,490
  4,769
  5,059
  5,362
  5,678
  6,007
  6,350
  6,709
  7,083
  7,475
  7,884
  8,311
  8,759
Adjusted assets (=assets-cash), $m
  983
  1,112
  1,248
  1,393
  1,544
  1,704
  1,870
  2,044
  2,226
  2,415
  2,611
  2,815
  3,028
  3,248
  3,478
  3,716
  3,964
  4,222
  4,490
  4,769
  5,059
  5,362
  5,678
  6,007
  6,350
  6,709
  7,083
  7,475
  7,884
  8,311
  8,759
Revenue / Adjusted assets
  2.039
  2.039
  2.039
  2.038
  2.040
  2.039
  2.040
  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
  2.039
  2.039
  2.039
  2.039
Average production assets, $m
  224
  254
  285
  318
  353
  389
  427
  467
  508
  551
  596
  643
  691
  742
  794
  849
  905
  964
  1,025
  1,089
  1,155
  1,225
  1,297
  1,372
  1,450
  1,532
  1,618
  1,707
  1,800
  1,898
  2,000
Working capital, $m
  163
  118
  132
  148
  164
  181
  198
  217
  236
  256
  277
  299
  321
  344
  369
  394
  420
  448
  476
  506
  536
  569
  602
  637
  673
  711
  751
  793
  836
  881
  929
Total debt, $m
  339
  442
  553
  670
  793
  922
  1,057
  1,198
  1,345
  1,498
  1,657
  1,823
  1,995
  2,173
  2,359
  2,552
  2,753
  2,961
  3,179
  3,405
  3,640
  3,885
  4,141
  4,408
  4,686
  4,976
  5,280
  5,596
  5,928
  6,274
  6,636
Total liabilities, $m
  797
  900
  1,011
  1,128
  1,251
  1,380
  1,515
  1,656
  1,803
  1,956
  2,115
  2,281
  2,453
  2,631
  2,817
  3,010
  3,211
  3,419
  3,637
  3,863
  4,098
  4,343
  4,599
  4,866
  5,144
  5,434
  5,738
  6,054
  6,386
  6,732
  7,094
Total equity, $m
  245
  211
  237
  265
  293
  324
  355
  388
  423
  459
  496
  535
  575
  617
  661
  706
  753
  802
  853
  906
  961
  1,019
  1,079
  1,141
  1,207
  1,275
  1,346
  1,420
  1,498
  1,579
  1,664
Total liabilities and equity, $m
  1,042
  1,111
  1,248
  1,393
  1,544
  1,704
  1,870
  2,044
  2,226
  2,415
  2,611
  2,816
  3,028
  3,248
  3,478
  3,716
  3,964
  4,221
  4,490
  4,769
  5,059
  5,362
  5,678
  6,007
  6,351
  6,709
  7,084
  7,474
  7,884
  8,311
  8,758
Debt-to-equity ratio
  1.384
  2.090
  2.330
  2.530
  2.700
  2.850
  2.970
  3.080
  3.180
  3.260
  3.340
  3.410
  3.470
  3.520
  3.570
  3.610
  3.660
  3.690
  3.730
  3.760
  3.790
  3.810
  3.840
  3.860
  3.880
  3.900
  3.920
  3.940
  3.960
  3.970
  3.990
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
  98
  116
  135
  155
  176
  198
  221
  245
  271
  297
  350
  378
  408
  438
  470
  503
  537
  573
  611
  649
  690
  732
  777
  823
  871
  921
  974
  1,029
  1,087
  1,147
Depreciation, amort., depletion, $m
  50
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  58
  62
  67
  72
  76
  82
  87
  92
  98
  104
  110
  117
  124
  131
  138
  146
  154
  162
  171
  180
Funds from operations, $m
  168
  157
  178
  200
  223
  247
  273
  299
  327
  356
  386
  408
  441
  475
  510
  546
  585
  624
  666
  709
  754
  800
  849
  900
  953
  1,009
  1,067
  1,128
  1,191
  1,258
  1,327
Change in working capital, $m
  21
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
Cash from operations, $m
  147
  143
  163
  184
  207
  230
  255
  281
  308
  336
  366
  386
  418
  451
  485
  521
  558
  597
  637
  679
  723
  768
  816
  865
  917
  971
  1,027
  1,086
  1,148
  1,212
  1,280
Maintenance CAPEX, $m
  0
  -20
  -23
  -26
  -29
  -32
  -35
  -38
  -42
  -46
  -50
  -54
  -58
  -62
  -67
  -72
  -76
  -82
  -87
  -92
  -98
  -104
  -110
  -117
  -124
  -131
  -138
  -146
  -154
  -162
  -171
New CAPEX, $m
  -39
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -89
  -93
  -98
  -102
Cash from investing activities, $m
  -177
  -50
  -54
  -59
  -64
  -68
  -73
  -78
  -83
  -89
  -95
  -101
  -106
  -112
  -119
  -126
  -133
  -141
  -148
  -156
  -164
  -173
  -182
  -192
  -202
  -213
  -224
  -235
  -247
  -260
  -273
Free cash flow, $m
  -30
  93
  109
  126
  144
  162
  182
  203
  225
  247
  271
  286
  312
  338
  366
  395
  425
  457
  489
  523
  558
  595
  633
  673
  715
  758
  804
  851
  901
  952
  1,007
Issuance/(repayment) of debt, $m
  67
  104
  111
  117
  123
  129
  135
  141
  147
  153
  159
  165
  172
  179
  186
  193
  201
  209
  217
  226
  235
  245
  256
  267
  278
  290
  303
  317
  331
  346
  362
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
  104
  111
  117
  123
  129
  135
  141
  147
  153
  159
  165
  172
  179
  186
  193
  201
  209
  217
  226
  235
  245
  256
  267
  278
  290
  303
  317
  331
  346
  362
Total cash flow (excl. dividends), $m
  18
  198
  220
  243
  267
  291
  317
  344
  371
  400
  430
  451
  484
  517
  552
  588
  626
  665
  706
  749
  794
  840
  889
  940
  993
  1,049
  1,107
  1,168
  1,232
  1,299
  1,369
Retained Cash Flow (-), $m
  -19
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -78
  -81
  -85
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
 
  231
  194
  215
  238
  261
  285
  311
  337
  364
  393
  413
  443
  475
  508
  543
  579
  616
  655
  696
  738
  783
  829
  877
  928
  981
  1,036
  1,094
  1,154
  1,218
  1,284
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
 
  218
  171
  177
  181
  183
  182
  179
  174
  168
  159
  146
  135
  123
  111
  98
  86
  74
  62
  52
  42
  34
  26
  20
  15
  11
  8
  5
  4
  2
  2
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 64.5
Price to Sales 1.4
Price to Book 11.8
Price to Tangible Book
Price to Cash Flow 19.7
Price to Free Cash Flow 26.9
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. 6.9%
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 13.1% 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 34.603 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 $2.8 billion.

RELATED COMPANIES Price Int.Val. Rating
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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