Intrinsic value of Intertape Polymer Group Inc. - ITP

Previous Close

$23.05

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$23.05

 
Intrinsic value

$27.69

 
Up/down potential

+20%

 
Rating

buy

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*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 1.4

 

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, %
  3.50
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  1,093
  1,176
  1,262
  1,352
  1,445
  1,542
  1,643
  1,748
  1,857
  1,971
  2,089
  2,212
  2,341
  2,475
  2,615
  2,762
  2,915
  3,074
  3,242
  3,416
  3,599
  3,790
  3,991
  4,200
  4,420
  4,650
  4,892
  5,144
  5,409
  5,687
  5,978
Variable operating expenses, $m
 
  922
  989
  1,059
  1,132
  1,207
  1,286
  1,368
  1,453
  1,542
  1,634
  1,726
  1,826
  1,931
  2,040
  2,155
  2,274
  2,399
  2,529
  2,665
  2,808
  2,957
  3,113
  3,277
  3,448
  3,628
  3,816
  4,013
  4,220
  4,437
  4,664
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
  1,061
  1,132
  1,205
  1,282
  1,361
  1,444
  1,530
  1,619
  1,712
  1,808
  1,904
  2,009
  2,118
  2,232
  2,352
  2,476
  2,606
  2,741
  2,882
  3,031
  3,185
  3,347
  3,517
  3,694
  3,880
  4,074
  4,278
  4,492
  4,715
  4,949
Operating income, $m
  102
  115
  130
  147
  163
  181
  199
  218
  238
  259
  281
  308
  332
  357
  383
  410
  439
  469
  501
  534
  568
  605
  643
  683
  726
  770
  817
  866
  918
  972
  1,029
EBITDA, $m
  144
  161
  180
  199
  219
  240
  262
  285
  309
  334
  360
  387
  415
  445
  476
  509
  543
  579
  616
  655
  697
  740
  786
  833
  883
  936
  991
  1,049
  1,111
  1,175
  1,242
Interest expense (income), $m
  6
  8
  9
  11
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  35
  37
  39
  42
  45
  47
  50
  53
  57
  60
  63
  67
  71
  75
Earnings before tax, $m
  96
  107
  121
  136
  151
  168
  185
  202
  221
  240
  260
  285
  307
  330
  355
  380
  406
  434
  464
  494
  526
  560
  596
  633
  672
  714
  757
  803
  851
  901
  954
Tax expense, $m
  27
  29
  33
  37
  41
  45
  50
  55
  60
  65
  70
  77
  83
  89
  96
  103
  110
  117
  125
  133
  142
  151
  161
  171
  182
  193
  204
  217
  230
  243
  258
Net income, $m
  69
  78
  88
  99
  111
  122
  135
  148
  161
  175
  190
  208
  224
  241
  259
  277
  297
  317
  338
  361
  384
  409
  435
  462
  491
  521
  553
  586
  621
  658
  696

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
  813
  873
  935
  1,000
  1,067
  1,136
  1,209
  1,284
  1,363
  1,445
  1,530
  1,619
  1,712
  1,809
  1,910
  2,016
  2,126
  2,242
  2,363
  2,489
  2,621
  2,760
  2,905
  3,057
  3,216
  3,383
  3,558
  3,741
  3,933
  4,134
Adjusted assets (=assets-cash), $m
  756
  813
  873
  935
  1,000
  1,067
  1,136
  1,209
  1,284
  1,363
  1,445
  1,530
  1,619
  1,712
  1,809
  1,910
  2,016
  2,126
  2,242
  2,363
  2,489
  2,621
  2,760
  2,905
  3,057
  3,216
  3,383
  3,558
  3,741
  3,933
  4,134
Revenue / Adjusted assets
  1.446
  1.446
  1.446
  1.446
  1.445
  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
Average production assets, $m
  324
  348
  374
  400
  428
  457
  486
  517
  550
  583
  618
  655
  693
  733
  774
  817
  863
  910
  959
  1,011
  1,065
  1,122
  1,181
  1,243
  1,308
  1,376
  1,448
  1,523
  1,601
  1,683
  1,770
Working capital, $m
  176
  171
  183
  196
  210
  224
  238
  253
  269
  286
  303
  321
  339
  359
  379
  400
  423
  446
  470
  495
  522
  550
  579
  609
  641
  674
  709
  746
  784
  825
  867
Total debt, $m
  243
  268
  304
  341
  380
  420
  462
  505
  551
  598
  647
  699
  752
  808
  866
  927
  990
  1,057
  1,126
  1,199
  1,275
  1,354
  1,438
  1,525
  1,616
  1,712
  1,812
  1,917
  2,027
  2,143
  2,264
Total liabilities, $m
  465
  489
  525
  562
  601
  641
  683
  726
  772
  819
  868
  920
  973
  1,029
  1,087
  1,148
  1,211
  1,278
  1,347
  1,420
  1,496
  1,575
  1,659
  1,746
  1,837
  1,933
  2,033
  2,138
  2,248
  2,364
  2,485
Total equity, $m
  320
  325
  348
  373
  399
  426
  453
  482
  512
  544
  576
  610
  646
  683
  722
  762
  804
  848
  894
  943
  993
  1,046
  1,101
  1,159
  1,220
  1,283
  1,350
  1,419
  1,493
  1,569
  1,650
Total liabilities and equity, $m
  785
  814
  873
  935
  1,000
  1,067
  1,136
  1,208
  1,284
  1,363
  1,444
  1,530
  1,619
  1,712
  1,809
  1,910
  2,015
  2,126
  2,241
  2,363
  2,489
  2,621
  2,760
  2,905
  3,057
  3,216
  3,383
  3,557
  3,741
  3,933
  4,135
Debt-to-equity ratio
  0.759
  0.830
  0.870
  0.910
  0.950
  0.990
  1.020
  1.050
  1.070
  1.100
  1.120
  1.140
  1.160
  1.180
  1.200
  1.220
  1.230
  1.250
  1.260
  1.270
  1.280
  1.290
  1.310
  1.320
  1.330
  1.330
  1.340
  1.350
  1.360
  1.370
  1.370
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
  78
  88
  99
  111
  122
  135
  148
  161
  175
  190
  208
  224
  241
  259
  277
  297
  317
  338
  361
  384
  409
  435
  462
  491
  521
  553
  586
  621
  658
  696
Depreciation, amort., depletion, $m
  42
  46
  49
  52
  56
  59
  63
  67
  70
  74
  79
  79
  83
  88
  93
  98
  104
  110
  116
  122
  128
  135
  142
  150
  158
  166
  174
  183
  193
  203
  213
Funds from operations, $m
  126
  124
  138
  152
  166
  182
  198
  214
  232
  250
  269
  287
  308
  329
  352
  376
  401
  427
  454
  483
  513
  544
  577
  612
  648
  687
  727
  769
  814
  861
  910
Change in working capital, $m
  -21
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
Cash from operations, $m
  147
  151
  125
  139
  153
  168
  183
  199
  216
  233
  251
  269
  289
  310
  332
  355
  378
  404
  430
  457
  486
  516
  548
  582
  617
  653
  692
  733
  775
  820
  867
Maintenance CAPEX, $m
  0
  -39
  -42
  -45
  -48
  -52
  -55
  -59
  -62
  -66
  -70
  -75
  -79
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -150
  -158
  -166
  -174
  -183
  -193
  -203
New CAPEX, $m
  -68
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
Cash from investing activities, $m
  -124
  -64
  -68
  -72
  -76
  -81
  -85
  -90
  -94
  -100
  -105
  -112
  -117
  -123
  -129
  -136
  -143
  -151
  -159
  -168
  -176
  -185
  -194
  -204
  -215
  -226
  -237
  -249
  -261
  -275
  -289
Free cash flow, $m
  23
  87
  58
  67
  77
  87
  98
  109
  121
  133
  146
  158
  172
  187
  202
  218
  235
  252
  271
  290
  310
  331
  354
  377
  402
  428
  455
  483
  514
  545
  578
Issuance/(repayment) of debt, $m
  34
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  64
  66
  69
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  115
  121
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
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  64
  66
  69
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  115
  121
Total cash flow (excl. dividends), $m
  47
  122
  93
  104
  116
  128
  140
  153
  166
  181
  195
  210
  226
  243
  260
  279
  298
  319
  340
  363
  386
  411
  437
  464
  493
  523
  555
  589
  624
  661
  699
Retained Cash Flow (-), $m
  -27
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -80
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
 
  117
  70
  80
  90
  101
  112
  124
  136
  149
  163
  175
  190
  206
  222
  238
  256
  275
  294
  314
  336
  358
  382
  406
  432
  460
  489
  519
  551
  584
  619
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
 
  112
  64
  69
  74
  78
  81
  84
  85
  86
  85
  83
  81
  78
  74
  70
  65
  60
  54
  48
  43
  37
  32
  27
  22
  18
  14
  11
  9
  6
  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 19.7
Price to Sales 1.2
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 9.3
Price to Free Cash Flow 17.2
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 7.6% 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 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 60.185 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 $1.4 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
WPK Winpak Ltd. 57.90 prem.  prem.
IFX Imaflex Inc. 0.850 prem.  prem.
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.