Intrinsic value of Intertape Polymer Group Inc. - ITP

Previous Close

$18.51

  Intrinsic Value

$20.73

stock screener

  Rating & Target

hold

+12%

  Value-price divergence*

0%

Previous close

$18.51

 
Intrinsic value

$20.73

 
Up/down potential

+12%

 
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 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 1.1

 

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
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  1,093
  1,141
  1,192
  1,246
  1,303
  1,363
  1,426
  1,493
  1,563
  1,637
  1,715
  1,797
  1,884
  1,975
  2,071
  2,171
  2,277
  2,388
  2,506
  2,629
  2,758
  2,894
  3,037
  3,187
  3,344
  3,510
  3,684
  3,867
  4,058
  4,260
  4,472
Variable operating expenses, $m
 
  894
  934
  976
  1,020
  1,067
  1,117
  1,169
  1,224
  1,281
  1,342
  1,402
  1,470
  1,541
  1,615
  1,694
  1,777
  1,863
  1,955
  2,051
  2,152
  2,258
  2,369
  2,486
  2,609
  2,738
  2,874
  3,016
  3,166
  3,324
  3,489
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
  1,033
  1,077
  1,122
  1,170
  1,221
  1,275
  1,331
  1,390
  1,451
  1,516
  1,580
  1,653
  1,728
  1,807
  1,891
  1,979
  2,070
  2,167
  2,268
  2,375
  2,486
  2,603
  2,726
  2,855
  2,990
  3,132
  3,281
  3,438
  3,602
  3,774
Operating income, $m
  102
  107
  115
  123
  132
  141
  152
  162
  174
  186
  199
  217
  231
  247
  263
  280
  299
  318
  339
  360
  383
  408
  433
  461
  489
  519
  551
  585
  621
  658
  698
EBITDA, $m
  144
  152
  162
  172
  183
  194
  207
  220
  234
  248
  264
  281
  298
  317
  337
  358
  380
  403
  428
  454
  482
  511
  542
  574
  608
  645
  683
  723
  765
  810
  857
Interest expense (income), $m
  6
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  29
  31
  32
  34
  36
  39
  41
  43
  46
  49
  51
  54
Earnings before tax, $m
  96
  99
  106
  114
  122
  130
  139
  149
  160
  171
  183
  199
  213
  227
  242
  258
  275
  293
  312
  332
  353
  375
  399
  424
  451
  479
  508
  539
  572
  607
  644
Tax expense, $m
  27
  27
  29
  31
  33
  35
  38
  40
  43
  46
  49
  54
  57
  61
  65
  70
  74
  79
  84
  90
  95
  101
  108
  115
  122
  129
  137
  146
  154
  164
  174
Net income, $m
  69
  72
  77
  83
  89
  95
  102
  109
  117
  125
  133
  146
  155
  166
  177
  188
  201
  214
  228
  242
  258
  274
  291
  310
  329
  349
  371
  394
  418
  443
  470

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
  789
  824
  862
  901
  942
  986
  1,032
  1,081
  1,132
  1,186
  1,243
  1,303
  1,366
  1,432
  1,502
  1,575
  1,652
  1,733
  1,818
  1,907
  2,001
  2,100
  2,204
  2,313
  2,427
  2,548
  2,674
  2,807
  2,946
  3,093
Adjusted assets (=assets-cash), $m
  756
  789
  824
  862
  901
  942
  986
  1,032
  1,081
  1,132
  1,186
  1,243
  1,303
  1,366
  1,432
  1,502
  1,575
  1,652
  1,733
  1,818
  1,907
  2,001
  2,100
  2,204
  2,313
  2,427
  2,548
  2,674
  2,807
  2,946
  3,093
Revenue / Adjusted assets
  1.446
  1.446
  1.447
  1.445
  1.446
  1.447
  1.446
  1.447
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  1.446
  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
Average production assets, $m
  324
  338
  353
  369
  386
  403
  422
  442
  463
  485
  508
  532
  558
  585
  613
  643
  674
  707
  742
  778
  816
  857
  899
  943
  990
  1,039
  1,090
  1,144
  1,201
  1,261
  1,324
Working capital, $m
  176
  165
  173
  181
  189
  198
  207
  216
  227
  237
  249
  261
  273
  286
  300
  315
  330
  346
  363
  381
  400
  420
  440
  462
  485
  509
  534
  561
  588
  618
  648
Total debt, $m
  243
  253
  274
  297
  320
  345
  372
  399
  429
  459
  492
  526
  562
  600
  640
  681
  725
  772
  820
  872
  925
  982
  1,041
  1,103
  1,169
  1,238
  1,310
  1,386
  1,466
  1,550
  1,638
Total liabilities, $m
  465
  474
  495
  518
  541
  566
  593
  620
  650
  680
  713
  747
  783
  821
  861
  902
  946
  993
  1,041
  1,093
  1,146
  1,203
  1,262
  1,324
  1,390
  1,459
  1,531
  1,607
  1,687
  1,771
  1,859
Total equity, $m
  320
  315
  329
  344
  359
  376
  393
  412
  431
  452
  473
  496
  520
  545
  571
  599
  628
  659
  691
  725
  761
  798
  838
  879
  923
  968
  1,016
  1,067
  1,120
  1,176
  1,234
Total liabilities and equity, $m
  785
  789
  824
  862
  900
  942
  986
  1,032
  1,081
  1,132
  1,186
  1,243
  1,303
  1,366
  1,432
  1,501
  1,574
  1,652
  1,732
  1,818
  1,907
  2,001
  2,100
  2,203
  2,313
  2,427
  2,547
  2,674
  2,807
  2,947
  3,093
Debt-to-equity ratio
  0.759
  0.800
  0.830
  0.860
  0.890
  0.920
  0.940
  0.970
  0.990
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.140
  1.150
  1.170
  1.190
  1.200
  1.220
  1.230
  1.240
  1.250
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
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
  72
  77
  83
  89
  95
  102
  109
  117
  125
  133
  146
  155
  166
  177
  188
  201
  214
  228
  242
  258
  274
  291
  310
  329
  349
  371
  394
  418
  443
  470
Depreciation, amort., depletion, $m
  42
  45
  47
  49
  51
  53
  55
  57
  60
  63
  65
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
  103
  108
  114
  119
  125
  131
  138
  145
  152
  159
Funds from operations, $m
  126
  117
  124
  132
  139
  148
  157
  166
  177
  187
  199
  210
  223
  236
  251
  266
  282
  299
  317
  336
  356
  377
  400
  423
  448
  475
  502
  532
  562
  595
  629
Change in working capital, $m
  -21
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
Cash from operations, $m
  147
  110
  117
  124
  131
  139
  148
  157
  166
  177
  187
  198
  210
  223
  237
  251
  267
  283
  300
  318
  337
  358
  379
  401
  425
  450
  477
  505
  535
  566
  599
Maintenance CAPEX, $m
  0
  -39
  -41
  -43
  -44
  -46
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -114
  -119
  -125
  -131
  -138
  -145
  -152
New CAPEX, $m
  -68
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -57
  -60
  -63
Cash from investing activities, $m
  -124
  -53
  -56
  -59
  -61
  -64
  -68
  -71
  -74
  -78
  -81
  -85
  -90
  -94
  -98
  -104
  -108
  -114
  -120
  -125
  -132
  -138
  -145
  -152
  -161
  -168
  -176
  -185
  -195
  -205
  -215
Free cash flow, $m
  23
  57
  61
  65
  70
  75
  80
  86
  92
  99
  106
  112
  120
  129
  138
  148
  158
  169
  180
  192
  205
  219
  233
  249
  265
  282
  300
  320
  340
  361
  384
Issuance/(repayment) of debt, $m
  34
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  66
  69
  72
  76
  80
  84
  88
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
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  66
  69
  72
  76
  80
  84
  88
Total cash flow (excl. dividends), $m
  47
  77
  82
  88
  94
  100
  107
  114
  122
  130
  138
  146
  156
  167
  178
  189
  202
  215
  229
  243
  259
  275
  293
  311
  331
  351
  373
  396
  420
  445
  472
Retained Cash Flow (-), $m
  -27
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
  -58
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
 
  82
  68
  73
  78
  83
  89
  95
  102
  109
  117
  124
  132
  142
  151
  162
  173
  184
  196
  209
  223
  238
  253
  270
  287
  305
  325
  345
  367
  390
  414
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
 
  79
  62
  63
  64
  65
  65
  64
  64
  63
  61
  59
  56
  54
  51
  47
  44
  40
  36
  32
  28
  25
  21
  18
  15
  12
  9
  7
  6
  4
  3
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. operates in the specialty packaging industry. The Company develops, manufactures and sells a range of paper and film-based pressure sensitive and water activated tapes, polyethylene and specialized polyolefin packaging films, woven coated fabrics and complementary packaging systems for industrial and retail use. It operates in the United States, Canada and other countries. The Company's products primarily consist of carton sealing tapes, including pressure sensitive and water-activated tapes; industrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; shrink film; stretch wrap; lumberwrap, structure fabrics and geomembrane fabrics, and non-manufactured flexible intermediate bulk containers. Its subsidiaries include Intertape Polymer Corp., IPG (US) Holdings Inc., IPG (US) Inc., Intertape Polymer Inc., FIBOPE Portuguesa-Filmes Biorientados, S.A. and Intertape Polymer Europe GmbH.

FINANCIAL RATIOS  of  Intertape Polymer Group Inc. (ITP)

Valuation Ratios
P/E Ratio 15.8
Price to Sales 1
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 13.8
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 4.4% 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 59.098 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 $1.1 billion.

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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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