Intrinsic value of Interfor Corporation - IFP

Previous Close

$20.30

  Intrinsic Value

$2.26

stock screener

  Rating & Target

str. sell

-89%

Previous close

$20.30

 
Intrinsic value

$2.26

 
Up/down potential

-89%

 
Rating

str. sell

We calculate the intrinsic value of IFP 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 1.4

 

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, %
  6.28
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  1,793
  1,996
  2,209
  2,432
  2,665
  2,908
  3,162
  3,426
  3,700
  3,986
  4,282
  4,591
  4,911
  5,244
  5,590
  5,950
  6,325
  6,715
  7,121
  7,544
  7,986
  8,446
  8,927
  9,429
  9,953
  10,500
  11,073
  11,671
  12,298
  12,953
  13,639
Variable operating expenses, $m
 
  2,036
  2,251
  2,477
  2,713
  2,960
  3,216
  3,484
  3,761
  4,050
  4,351
  4,647
  4,971
  5,308
  5,658
  6,023
  6,402
  6,797
  7,208
  7,637
  8,084
  8,550
  9,036
  9,544
  10,074
  10,629
  11,208
  11,814
  12,448
  13,112
  13,806
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
  1,717
  2,036
  2,251
  2,477
  2,713
  2,960
  3,216
  3,484
  3,761
  4,050
  4,351
  4,647
  4,971
  5,308
  5,658
  6,023
  6,402
  6,797
  7,208
  7,637
  8,084
  8,550
  9,036
  9,544
  10,074
  10,629
  11,208
  11,814
  12,448
  13,112
  13,806
Operating income, $m
  76
  -40
  -43
  -45
  -48
  -51
  -54
  -58
  -61
  -65
  -68
  -56
  -60
  -64
  -68
  -73
  -77
  -82
  -87
  -92
  -98
  -103
  -109
  -115
  -122
  -129
  -136
  -143
  -151
  -159
  -167
EBITDA, $m
  187
  81
  89
  98
  108
  117
  128
  138
  149
  161
  173
  185
  198
  212
  226
  240
  255
  271
  287
  305
  322
  341
  360
  381
  402
  424
  447
  471
  496
  523
  551
Interest expense (income), $m
  17
  14
  16
  19
  22
  25
  28
  31
  34
  38
  41
  45
  49
  53
  57
  61
  66
  71
  76
  81
  86
  92
  98
  104
  110
  117
  123
  131
  138
  146
  154
Earnings before tax, $m
  73
  -54
  -59
  -64
  -70
  -76
  -82
  -88
  -95
  -102
  -109
  -101
  -109
  -117
  -126
  -134
  -143
  -153
  -163
  -173
  -184
  -195
  -207
  -219
  -232
  -245
  -259
  -274
  -289
  -305
  -321
Tax expense, $m
  7
  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
Net income, $m
  66
  -54
  -59
  -64
  -70
  -76
  -82
  -88
  -95
  -102
  -109
  -101
  -109
  -117
  -126
  -134
  -143
  -153
  -163
  -173
  -184
  -195
  -207
  -219
  -232
  -245
  -259
  -274
  -289
  -305
  -321

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  19
  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
  1,302
  1,427
  1,580
  1,739
  1,906
  2,080
  2,262
  2,451
  2,647
  2,851
  3,063
  3,284
  3,513
  3,751
  3,999
  4,256
  4,524
  4,803
  5,094
  5,397
  5,712
  6,042
  6,385
  6,744
  7,119
  7,511
  7,920
  8,349
  8,797
  9,266
  9,756
Adjusted assets (=assets-cash), $m
  1,283
  1,427
  1,580
  1,739
  1,906
  2,080
  2,262
  2,451
  2,647
  2,851
  3,063
  3,284
  3,513
  3,751
  3,999
  4,256
  4,524
  4,803
  5,094
  5,397
  5,712
  6,042
  6,385
  6,744
  7,119
  7,511
  7,920
  8,349
  8,797
  9,266
  9,756
Revenue / Adjusted assets
  1.398
  1.399
  1.398
  1.399
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
  1.398
Average production assets, $m
  867
  966
  1,069
  1,177
  1,290
  1,408
  1,530
  1,658
  1,791
  1,929
  2,073
  2,222
  2,377
  2,538
  2,706
  2,880
  3,061
  3,250
  3,447
  3,651
  3,865
  4,088
  4,321
  4,563
  4,817
  5,082
  5,359
  5,649
  5,952
  6,269
  6,601
Working capital, $m
  136
  130
  144
  158
  173
  189
  206
  223
  241
  259
  278
  298
  319
  341
  363
  387
  411
  436
  463
  490
  519
  549
  580
  613
  647
  683
  720
  759
  799
  842
  887
Total debt, $m
  309
  366
  427
  491
  558
  628
  701
  777
  855
  937
  1,022
  1,111
  1,203
  1,298
  1,397
  1,501
  1,608
  1,720
  1,837
  1,958
  2,085
  2,217
  2,355
  2,498
  2,649
  2,806
  2,970
  3,142
  3,321
  3,509
  3,706
Total liabilities, $m
  515
  572
  633
  697
  764
  834
  907
  983
  1,061
  1,143
  1,228
  1,317
  1,409
  1,504
  1,603
  1,707
  1,814
  1,926
  2,043
  2,164
  2,291
  2,423
  2,561
  2,704
  2,855
  3,012
  3,176
  3,348
  3,527
  3,715
  3,912
Total equity, $m
  787
  855
  946
  1,042
  1,142
  1,246
  1,355
  1,468
  1,586
  1,708
  1,835
  1,967
  2,104
  2,247
  2,395
  2,549
  2,710
  2,877
  3,051
  3,233
  3,422
  3,619
  3,825
  4,040
  4,264
  4,499
  4,744
  5,001
  5,269
  5,550
  5,844
Total liabilities and equity, $m
  1,302
  1,427
  1,579
  1,739
  1,906
  2,080
  2,262
  2,451
  2,647
  2,851
  3,063
  3,284
  3,513
  3,751
  3,998
  4,256
  4,524
  4,803
  5,094
  5,397
  5,713
  6,042
  6,386
  6,744
  7,119
  7,511
  7,920
  8,349
  8,796
  9,265
  9,756
Debt-to-equity ratio
  0.393
  0.430
  0.450
  0.470
  0.490
  0.500
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.620
  0.630
  0.630
  0.630
  0.630
  0.630
Adjusted equity ratio
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599
  0.599

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  66
  -54
  -59
  -64
  -70
  -76
  -82
  -88
  -95
  -102
  -109
  -101
  -109
  -117
  -126
  -134
  -143
  -153
  -163
  -173
  -184
  -195
  -207
  -219
  -232
  -245
  -259
  -274
  -289
  -305
  -321
Depreciation, amort., depletion, $m
  111
  121
  132
  144
  156
  169
  182
  196
  210
  225
  241
  242
  258
  276
  294
  313
  333
  353
  375
  397
  420
  444
  470
  496
  524
  552
  583
  614
  647
  681
  718
Funds from operations, $m
  213
  67
  73
  79
  86
  93
  100
  107
  115
  123
  132
  140
  149
  159
  169
  179
  189
  200
  212
  224
  236
  249
  263
  277
  292
  307
  323
  340
  358
  377
  396
Change in working capital, $m
  14
  13
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
Cash from operations, $m
  199
  54
  59
  65
  71
  77
  84
  90
  97
  105
  112
  120
  129
  137
  146
  155
  165
  175
  185
  196
  208
  219
  232
  244
  258
  272
  286
  302
  317
  334
  352
Maintenance CAPEX, $m
  0
  -94
  -105
  -116
  -128
  -140
  -153
  -166
  -180
  -195
  -210
  -225
  -242
  -258
  -276
  -294
  -313
  -333
  -353
  -375
  -397
  -420
  -444
  -470
  -496
  -524
  -552
  -583
  -614
  -647
  -681
New CAPEX, $m
  -77
  -99
  -103
  -108
  -113
  -118
  -123
  -128
  -133
  -138
  -144
  -149
  -155
  -161
  -168
  -174
  -181
  -189
  -197
  -205
  -214
  -223
  -233
  -243
  -254
  -265
  -277
  -290
  -303
  -317
  -332
Cash from investing activities, $m
  -36
  -193
  -208
  -224
  -241
  -258
  -276
  -294
  -313
  -333
  -354
  -374
  -397
  -419
  -444
  -468
  -494
  -522
  -550
  -580
  -611
  -643
  -677
  -713
  -750
  -789
  -829
  -873
  -917
  -964
  -1,013
Free cash flow, $m
  163
  -139
  -149
  -159
  -170
  -181
  -192
  -204
  -216
  -228
  -241
  -254
  -268
  -282
  -297
  -313
  -329
  -347
  -365
  -383
  -403
  -424
  -445
  -468
  -492
  -517
  -543
  -571
  -600
  -630
  -662
Issuance/(repayment) of debt, $m
  -132
  57
  61
  64
  67
  70
  73
  76
  79
  82
  85
  88
  92
  95
  99
  103
  107
  112
  117
  121
  127
  132
  138
  144
  150
  157
  164
  172
  180
  188
  197
Issuance/(repurchase) of shares, $m
  0
  141
  150
  160
  170
  180
  191
  202
  213
  224
  236
  233
  246
  260
  274
  289
  304
  320
  337
  355
  373
  392
  413
  434
  456
  480
  504
  530
  557
  586
  615
Cash from financing (excl. dividends), $m  
  -162
  198
  211
  224
  237
  250
  264
  278
  292
  306
  321
  321
  338
  355
  373
  392
  411
  432
  454
  476
  500
  524
  551
  578
  606
  637
  668
  702
  737
  774
  812
Total cash flow (excl. dividends), $m
  3
  59
  62
  65
  67
  69
  71
  73
  76
  78
  81
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  125
  131
  137
  143
  150
Retained Cash Flow (-), $m
  -62
  -141
  -150
  -160
  -170
  -180
  -191
  -202
  -213
  -224
  -236
  -233
  -246
  -260
  -274
  -289
  -304
  -320
  -337
  -355
  -373
  -392
  -413
  -434
  -456
  -480
  -504
  -530
  -557
  -586
  -615
Prev. year cash balance distribution, $m
 
  19
  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
 
  -63
  -88
  -95
  -103
  -111
  -120
  -128
  -137
  -146
  -156
  -166
  -176
  -187
  -198
  -210
  -222
  -235
  -248
  -262
  -276
  -292
  -308
  -324
  -342
  -360
  -379
  -399
  -420
  -442
  -465
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
 
  -60
  -80
  -83
  -85
  -86
  -87
  -87
  -86
  -84
  -82
  -79
  -75
  -71
  -67
  -62
  -56
  -51
  -46
  -40
  -35
  -30
  -26
  -21
  -17
  -14
  -11
  -9
  -6
  -5
  -4
Current shareholders' claim on cash, %
  100
  90.8
  82.7
  75.6
  69.3
  63.8
  58.8
  54.3
  50.2
  46.6
  43.3
  40.4
  37.8
  35.4
  33.1
  31.0
  29.1
  27.3
  25.7
  24.1
  22.7
  21.3
  20.0
  18.8
  17.7
  16.7
  15.7
  14.8
  13.9
  13.1
  12.4

Interfor Corporation is a Canada-based lumber provider. The Company and its subsidiaries produce wood products in British Columbia, the United States Northwest and the United States South for sale to markets around the world. The Company operates through solid wood segment. The Company offers a range of products, including Clear Cedar Finger Joint Bevel Siding, Clear Cedar Solid Bevel Siding, Clear Cedar V-Joint Paneling, Dimension Lumber, Elite Cedar 5/4 Radius Edge Decking, Elite Cedar V-Joint Paneling, Elite Knotty Cedar Decking, Fineline Paneling, Japan Zairai-Beams, Japan Zairai-Ground Sill, Japan Zairai-Posts, Japan Zairai-Roof Structure, Japan Zairai-Small Structural, Reserve Boards, Reserve End-Matched Paneling, Reserve Lodgepole Pine Paneling, Reserve V-Joint Decking, Special Appearance Grade Cedar Timbers, Reserve Ponderosa Pine Paneling and Studs. The Company has approximately 20 mills across North America with annual capacity of over three billion board feet.

FINANCIAL RATIOS  of  Interfor Corporation (IFP)

Valuation Ratios
P/E Ratio 21.5
Price to Sales 0.8
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 11.7
Growth Rates
Sales Growth Rate 6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.4%
Cap. Spend. - 3 Yr. Gr. Rate 2.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 39.3%
Total Debt to Equity 39.3%
Interest Coverage 5
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 13.5%
Gross Margin - 3 Yr. Avg. 11.7%
EBITDA Margin 11.2%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 4.1%
Pre-Tax Margin - 3 Yr. Avg. 0.8%
Net Profit Margin 3.7%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 9.6%
Eff/ Tax Rate - 3 Yr. Avg. -5.6%
Payout Ratio 0%

IFP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IFP stock intrinsic value calculation we used $1793 million for the last fiscal year's total revenue generated by Interfor Corporation. The default revenue input number comes from 2016 income statement of Interfor 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 IFP stock valuation model: a) initial revenue growth rate of 11.3% 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 IFP is calculated based on our internal credit rating of Interfor 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 Interfor 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 IFP stock the variable cost ratio is equal to 102.1%.

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 IFP 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 4.4% for Interfor Corporation.

Corporate tax rate of 27% is the nominal tax rate for Interfor 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 IFP 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 IFP are equal to 48.4%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Interfor 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 IFP is equal to 6.5%. 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 - $787 million for Interfor 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 69.855 million for Interfor 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 Interfor Corporation at the current share price and the inputted number of shares is $1.4 billion.

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Financial statements of IFP
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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