Intrinsic value of Intertape Polymer Group Inc. - ITP

Previous Close

$24.76

  Intrinsic Value

$29.77

stock screener

  Rating & Target

buy

+20%

  Value-price divergence*

-88%

Previous close

$24.76

 
Intrinsic value

$29.77

 
Up/down potential

+20%

 
Rating

buy

 
Value-price divergence*

-88%

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

We calculate the intrinsic value of ITP 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 1.5

 

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, %
  3.50
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  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
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
Revenue, $m
  1,093
  1,186
  1,283
  1,383
  1,487
  1,596
  1,709
  1,826
  1,948
  2,075
  2,207
  2,344
  2,487
  2,636
  2,791
  2,953
  3,122
  3,298
  3,482
  3,675
  3,876
  4,086
  4,306
  4,536
  4,777
  5,029
  5,293
  5,570
  5,860
  6,163
  6,482
Variable operating expenses, $m
 
  929
  1,005
  1,083
  1,165
  1,249
  1,337
  1,429
  1,524
  1,623
  1,726
  1,828
  1,940
  2,056
  2,177
  2,304
  2,435
  2,573
  2,717
  2,867
  3,024
  3,188
  3,359
  3,539
  3,727
  3,923
  4,129
  4,345
  4,571
  4,808
  5,057
Fixed operating expenses, $m
 
  139
  143
  146
  150
  154
  158
  162
  166
  170
  174
  178
  183
  187
  192
  197
  202
  207
  212
  217
  223
  228
  234
  240
  246
  252
  258
  265
  272
  278
  285
Total operating expenses, $m
  990
  1,068
  1,148
  1,229
  1,315
  1,403
  1,495
  1,591
  1,690
  1,793
  1,900
  2,006
  2,123
  2,243
  2,369
  2,501
  2,637
  2,780
  2,929
  3,084
  3,247
  3,416
  3,593
  3,779
  3,973
  4,175
  4,387
  4,610
  4,843
  5,086
  5,342
Operating income, $m
  102
  117
  135
  153
  173
  193
  214
  236
  258
  282
  307
  337
  364
  392
  421
  452
  484
  518
  553
  590
  629
  670
  712
  757
  804
  853
  905
  960
  1,017
  1,077
  1,140
EBITDA, $m
  144
  164
  185
  207
  230
  254
  279
  305
  332
  360
  390
  420
  452
  486
  521
  557
  596
  636
  678
  721
  767
  816
  866
  919
  975
  1,033
  1,094
  1,158
  1,226
  1,296
  1,371
Interest expense (income), $m
  6
  8
  10
  11
  12
  14
  15
  17
  19
  21
  22
  24
  26
  28
  31
  33
  35
  38
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  78
  82
Earnings before tax, $m
  96
  109
  125
  142
  160
  179
  198
  218
  239
  261
  284
  312
  337
  364
  391
  419
  449
  480
  513
  547
  583
  621
  661
  702
  746
  792
  840
  890
  943
  999
  1,058
Tax expense, $m
  27
  29
  34
  38
  43
  48
  54
  59
  65
  71
  77
  84
  91
  98
  106
  113
  121
  130
  139
  148
  158
  168
  178
  190
  201
  214
  227
  240
  255
  270
  286
Net income, $m
  69
  80
  92
  104
  117
  131
  145
  159
  175
  191
  208
  228
  246
  265
  285
  306
  328
  351
  375
  400
  426
  453
  482
  513
  545
  578
  613
  650
  689
  729
  772

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  28
  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
  784
  820
  887
  956
  1,029
  1,104
  1,182
  1,263
  1,347
  1,435
  1,526
  1,621
  1,720
  1,823
  1,930
  2,042
  2,159
  2,281
  2,408
  2,541
  2,680
  2,826
  2,978
  3,137
  3,303
  3,478
  3,660
  3,852
  4,052
  4,262
  4,482
Adjusted assets (=assets-cash), $m
  756
  820
  887
  956
  1,029
  1,104
  1,182
  1,263
  1,347
  1,435
  1,526
  1,621
  1,720
  1,823
  1,930
  2,042
  2,159
  2,281
  2,408
  2,541
  2,680
  2,826
  2,978
  3,137
  3,303
  3,478
  3,660
  3,852
  4,052
  4,262
  4,482
Revenue / Adjusted assets
  1.446
  1.446
  1.446
  1.447
  1.445
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
Average production assets, $m
  324
  351
  380
  409
  440
  472
  506
  541
  577
  614
  653
  694
  736
  780
  826
  874
  924
  976
  1,031
  1,088
  1,147
  1,209
  1,275
  1,343
  1,414
  1,489
  1,567
  1,649
  1,734
  1,824
  1,919
Working capital, $m
  176
  172
  186
  201
  216
  231
  248
  265
  282
  301
  320
  340
  361
  382
  405
  428
  453
  478
  505
  533
  562
  592
  624
  658
  693
  729
  767
  808
  850
  894
  940
Total debt, $m
  243
  272
  312
  354
  397
  442
  489
  538
  589
  641
  696
  753
  813
  874
  939
  1,006
  1,076
  1,150
  1,226
  1,306
  1,390
  1,477
  1,569
  1,664
  1,764
  1,869
  1,979
  2,094
  2,214
  2,341
  2,473
Total liabilities, $m
  465
  493
  533
  575
  618
  663
  710
  759
  810
  862
  917
  974
  1,034
  1,095
  1,160
  1,227
  1,297
  1,371
  1,447
  1,527
  1,611
  1,698
  1,790
  1,885
  1,985
  2,090
  2,200
  2,315
  2,435
  2,562
  2,694
Total equity, $m
  320
  327
  354
  382
  410
  440
  472
  504
  537
  572
  609
  647
  686
  727
  770
  815
  861
  910
  961
  1,014
  1,069
  1,127
  1,188
  1,252
  1,318
  1,388
  1,461
  1,537
  1,617
  1,701
  1,788
Total liabilities and equity, $m
  785
  820
  887
  957
  1,028
  1,103
  1,182
  1,263
  1,347
  1,434
  1,526
  1,621
  1,720
  1,822
  1,930
  2,042
  2,158
  2,281
  2,408
  2,541
  2,680
  2,825
  2,978
  3,137
  3,303
  3,478
  3,661
  3,852
  4,052
  4,263
  4,482
Debt-to-equity ratio
  0.759
  0.830
  0.880
  0.930
  0.970
  1.000
  1.040
  1.070
  1.100
  1.120
  1.140
  1.160
  1.180
  1.200
  1.220
  1.240
  1.250
  1.260
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.340
  1.350
  1.350
  1.360
  1.370
  1.380
  1.380
Adjusted equity ratio
  0.386
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  69
  80
  92
  104
  117
  131
  145
  159
  175
  191
  208
  228
  246
  265
  285
  306
  328
  351
  375
  400
  426
  453
  482
  513
  545
  578
  613
  650
  689
  729
  772
Depreciation, amort., depletion, $m
  42
  46
  50
  54
  57
  61
  65
  69
  74
  78
  83
  84
  89
  94
  100
  105
  111
  118
  124
  131
  138
  146
  154
  162
  170
  179
  189
  199
  209
  220
  231
Funds from operations, $m
  126
  126
  141
  158
  174
  192
  210
  229
  249
  269
  290
  312
  335
  359
  385
  411
  439
  468
  499
  531
  564
  599
  636
  674
  715
  757
  802
  849
  898
  949
  1,003
Change in working capital, $m
  -21
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  23
  24
  26
  27
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
Cash from operations, $m
  147
  113
  127
  143
  159
  176
  194
  212
  231
  251
  271
  292
  314
  338
  362
  388
  415
  443
  472
  503
  535
  569
  604
  641
  680
  721
  764
  808
  856
  905
  957
Maintenance CAPEX, $m
  0
  -39
  -42
  -46
  -49
  -53
  -57
  -61
  -65
  -69
  -74
  -79
  -84
  -89
  -94
  -100
  -105
  -111
  -118
  -124
  -131
  -138
  -146
  -154
  -162
  -170
  -179
  -189
  -199
  -209
  -220
New CAPEX, $m
  -68
  -28
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
Cash from investing activities, $m
  -124
  -67
  -71
  -76
  -80
  -85
  -90
  -96
  -101
  -107
  -113
  -120
  -126
  -133
  -140
  -148
  -155
  -163
  -173
  -181
  -191
  -200
  -211
  -222
  -233
  -245
  -257
  -271
  -285
  -299
  -314
Free cash flow, $m
  23
  46
  57
  67
  79
  91
  103
  116
  130
  144
  158
  172
  188
  205
  222
  240
  259
  279
  300
  322
  344
  368
  393
  419
  447
  476
  506
  538
  571
  606
  643
Issuance/(repayment) of debt, $m
  34
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
  110
  115
  120
  126
  132
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  26
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  77
  80
  84
  87
  91
  96
  100
  105
  110
  115
  120
  126
  132
Total cash flow (excl. dividends), $m
  47
  85
  97
  109
  122
  136
  150
  165
  180
  196
  213
  230
  248
  267
  287
  308
  330
  353
  377
  402
  428
  456
  485
  515
  547
  581
  616
  653
  692
  732
  775
Retained Cash Flow (-), $m
  -27
  -25
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -64
  -66
  -70
  -73
  -76
  -80
  -84
  -88
Prev. year cash balance distribution, $m
 
  18
  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
 
  78
  70
  82
  93
  106
  119
  133
  147
  161
  177
  192
  208
  226
  244
  263
  283
  304
  326
  349
  373
  398
  424
  452
  481
  511
  543
  576
  612
  649
  688
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
 
  75
  64
  71
  77
  82
  86
  90
  92
  93
  93
  91
  89
  86
  82
  77
  72
  66
  60
  54
  47
  41
  35
  30
  24
  20
  16
  12
  9
  7
  5
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

Intertape Polymer Group Inc., together with its subsidiaries, operates in the specialty packaging industry in North America. The company develops, manufactures, and sells various paper and film based pressure sensitive and water activated tapes; polyethylene and specialized polyolefin films; woven coated fabrics; and complementary packaging systems for industrial and retail use. Its taping solutions include hot melt carton sealing, acrylic carton sealing, natural rubber carton sealing , water-activated, masking, flat back, double-coated, filament and mop, foil, duct, and electronic/electrical tapes, as well as reinforced filament tapes; carton sealing machines; tape dispensers; retail and specialty products; and stencils. The company’s building solutions comprise geomembranes, structure fabrics, house wraps/flashings, roof underlayment, lumber wraps, specialty fabrics, and foil and duct tapes; and protecting solutions consist of air pillows, bagging equipment, shrink and stretch films, and flexible intermediate bulk container products. In addition, it provides market solutions to the aerospace, appliance, auto aftermarket, building and construction, consumer, electrical/electronic, food processing, fulfillment, general manufacturing, general packaging, geomembranes, HVAC, marine and composites, remediation and restoration, structure fabric, and transportation sectors. Further, the company engages in financing business. It sells its products to a range of industry/specialty distributors, retail stores, and end-users in various industries. Intertape Polymer Group Inc. was founded in 1981 and is headquartered in Montreal, Canada.

FINANCIAL RATIOS  of  Intertape Polymer Group Inc. (ITP)

Valuation Ratios
P/E Ratio 21.2
Price to Sales 1.3
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 18.5
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.7%
Cap. Spend. - 3 Yr. Gr. Rate 1.2%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 72.8%
Total Debt to Equity 75.9%
Interest Coverage 17
Management Effectiveness
Return On Assets 10.2%
Ret/ On Assets - 3 Yr. Avg. 10.3%
Return On Total Capital 13%
Ret/ On T. Cap. - 3 Yr. Avg. 12.9%
Return On Equity 22.5%
Return On Equity - 3 Yr. Avg. 21.2%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 23.7%
Gross Margin - 3 Yr. Avg. 21.8%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin 9.4%
Oper. Margin - 3 Yr. Avg. 8.8%
Pre-Tax Margin 8.8%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 6%
Effective Tax Rate 28.1%
Eff/ Tax Rate - 3 Yr. Avg. 27.6%
Payout Ratio 60.9%

ITP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ITP stock intrinsic value calculation we used $1093 million for the last fiscal year's total revenue generated by Intertape Polymer Group Inc.. The default revenue input number comes from 2016 income statement of Intertape Polymer Group Inc.. 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 ITP stock valuation model: a) initial revenue growth rate of 8.5% 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 ITP is calculated based on our internal credit rating of Intertape Polymer Group Inc., 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 Intertape Polymer Group Inc..
    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 ITP stock the variable cost ratio is equal to 78.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $136 million in the base year in the intrinsic value calculation for ITP 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 Intertape Polymer Group Inc..

Corporate tax rate of 27% is the nominal tax rate for Intertape Polymer Group Inc.. 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 ITP 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 ITP are equal to 29.6%.

Life of production assets of 8.3 years is the average useful life of capital assets used in Intertape Polymer Group Inc. 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 ITP is equal to 14.5%. 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 - $320 million for Intertape Polymer Group Inc. - 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 59.002 million for Intertape Polymer Group Inc. 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 Intertape Polymer Group Inc. at the current share price and the inputted number of shares is $1.5 billion.

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Stock chart of ITP Financial statements of ITP
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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