Intrinsic value of Premium Brands Holdings Corporation - PBH

Previous Close

$104.55

  Intrinsic Value

$59.45

stock screener

  Rating & Target

sell

-43%

Previous close

$104.55

 
Intrinsic value

$59.45

 
Up/down potential

-43%

 
Rating

sell

We calculate the intrinsic value of PBH 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  25.39
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
Revenue, $m
  1,862
  2,160
  2,482
  2,827
  3,195
  3,585
  3,997
  4,431
  4,886
  5,361
  5,858
  6,375
  6,914
  7,475
  8,058
  8,663
  9,293
  9,947
  10,626
  11,333
  12,068
  12,833
  13,629
  14,458
  15,322
  16,223
  17,162
  18,142
  19,165
  20,234
  21,350
Variable operating expenses, $m
 
  1,926
  2,208
  2,511
  2,833
  3,176
  3,537
  3,917
  4,316
  4,733
  5,168
  5,590
  6,063
  6,554
  7,065
  7,596
  8,148
  8,721
  9,317
  9,937
  10,582
  11,252
  11,950
  12,677
  13,435
  14,224
  15,048
  15,907
  16,804
  17,741
  18,720
Fixed operating expenses, $m
 
  109
  111
  114
  117
  120
  123
  126
  129
  132
  136
  139
  143
  146
  150
  154
  157
  161
  165
  169
  174
  178
  182
  187
  192
  197
  201
  206
  212
  217
  222
Total operating expenses, $m
  1,767
  2,035
  2,319
  2,625
  2,950
  3,296
  3,660
  4,043
  4,445
  4,865
  5,304
  5,729
  6,206
  6,700
  7,215
  7,750
  8,305
  8,882
  9,482
  10,106
  10,756
  11,430
  12,132
  12,864
  13,627
  14,421
  15,249
  16,113
  17,016
  17,958
  18,942
Operating income, $m
  95
  125
  162
  202
  245
  290
  338
  388
  441
  496
  554
  646
  709
  775
  843
  914
  987
  1,064
  1,144
  1,227
  1,313
  1,403
  1,496
  1,594
  1,696
  1,802
  1,913
  2,028
  2,149
  2,276
  2,408
EBITDA, $m
  130
  181
  221
  264
  311
  360
  412
  467
  525
  586
  649
  715
  783
  855
  929
  1,007
  1,087
  1,171
  1,258
  1,348
  1,442
  1,541
  1,643
  1,749
  1,860
  1,976
  2,097
  2,223
  2,355
  2,493
  2,637
Interest expense (income), $m
  15
  16
  20
  25
  30
  35
  40
  46
  52
  59
  65
  72
  80
  87
  95
  104
  112
  121
  130
  140
  150
  160
  171
  182
  194
  206
  219
  232
  246
  261
  276
Earnings before tax, $m
  95
  110
  142
  177
  215
  255
  297
  342
  388
  437
  489
  574
  629
  687
  748
  810
  875
  943
  1,013
  1,087
  1,163
  1,243
  1,325
  1,412
  1,502
  1,596
  1,694
  1,796
  1,903
  2,015
  2,132
Tax expense, $m
  26
  30
  38
  48
  58
  69
  80
  92
  105
  118
  132
  155
  170
  186
  202
  219
  236
  255
  274
  293
  314
  335
  358
  381
  405
  431
  457
  485
  514
  544
  576
Net income, $m
  69
  80
  104
  130
  157
  186
  217
  249
  284
  319
  357
  419
  460
  502
  546
  591
  639
  688
  740
  793
  849
  907
  968
  1,031
  1,096
  1,165
  1,236
  1,311
  1,389
  1,471
  1,556

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
  1,121
  1,278
  1,468
  1,673
  1,891
  2,122
  2,365
  2,622
  2,891
  3,172
  3,466
  3,772
  4,091
  4,423
  4,768
  5,126
  5,499
  5,886
  6,288
  6,706
  7,141
  7,594
  8,065
  8,555
  9,066
  9,599
  10,155
  10,735
  11,340
  11,973
  12,633
Adjusted assets (=assets-cash), $m
  1,102
  1,278
  1,468
  1,673
  1,891
  2,122
  2,365
  2,622
  2,891
  3,172
  3,466
  3,772
  4,091
  4,423
  4,768
  5,126
  5,499
  5,886
  6,288
  6,706
  7,141
  7,594
  8,065
  8,555
  9,066
  9,599
  10,155
  10,735
  11,340
  11,973
  12,633
Revenue / Adjusted assets
  1.690
  1.690
  1.691
  1.690
  1.690
  1.689
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
  1.690
Average production assets, $m
  355
  410
  472
  537
  607
  681
  760
  842
  928
  1,019
  1,113
  1,211
  1,314
  1,420
  1,531
  1,646
  1,766
  1,890
  2,019
  2,153
  2,293
  2,438
  2,590
  2,747
  2,911
  3,082
  3,261
  3,447
  3,641
  3,844
  4,057
Working capital, $m
  190
  222
  256
  291
  329
  369
  412
  456
  503
  552
  603
  657
  712
  770
  830
  892
  957
  1,025
  1,095
  1,167
  1,243
  1,322
  1,404
  1,489
  1,578
  1,671
  1,768
  1,869
  1,974
  2,084
  2,199
Total debt, $m
  427
  515
  632
  757
  891
  1,032
  1,182
  1,339
  1,504
  1,677
  1,857
  2,045
  2,240
  2,443
  2,655
  2,874
  3,103
  3,340
  3,586
  3,843
  4,109
  4,387
  4,676
  4,976
  5,290
  5,616
  5,957
  6,313
  6,684
  7,071
  7,476
Total liabilities, $m
  695
  783
  900
  1,025
  1,159
  1,300
  1,450
  1,607
  1,772
  1,945
  2,125
  2,313
  2,508
  2,711
  2,923
  3,142
  3,371
  3,608
  3,854
  4,111
  4,377
  4,655
  4,944
  5,244
  5,558
  5,884
  6,225
  6,581
  6,952
  7,339
  7,744
Total equity, $m
  426
  495
  568
  647
  732
  821
  915
  1,015
  1,119
  1,228
  1,341
  1,460
  1,583
  1,712
  1,845
  1,984
  2,128
  2,278
  2,433
  2,595
  2,764
  2,939
  3,121
  3,311
  3,509
  3,715
  3,930
  4,154
  4,389
  4,633
  4,889
Total liabilities and equity, $m
  1,121
  1,278
  1,468
  1,672
  1,891
  2,121
  2,365
  2,622
  2,891
  3,173
  3,466
  3,773
  4,091
  4,423
  4,768
  5,126
  5,499
  5,886
  6,287
  6,706
  7,141
  7,594
  8,065
  8,555
  9,067
  9,599
  10,155
  10,735
  11,341
  11,972
  12,633
Debt-to-equity ratio
  1.002
  1.040
  1.110
  1.170
  1.220
  1.260
  1.290
  1.320
  1.340
  1.370
  1.380
  1.400
  1.410
  1.430
  1.440
  1.450
  1.460
  1.470
  1.470
  1.480
  1.490
  1.490
  1.500
  1.500
  1.510
  1.510
  1.520
  1.520
  1.520
  1.530
  1.530
Adjusted equity ratio
  0.381
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  69
  80
  104
  130
  157
  186
  217
  249
  284
  319
  357
  419
  460
  502
  546
  591
  639
  688
  740
  793
  849
  907
  968
  1,031
  1,096
  1,165
  1,236
  1,311
  1,389
  1,471
  1,556
Depreciation, amort., depletion, $m
  35
  55
  59
  62
  66
  70
  75
  80
  84
  90
  95
  68
  74
  80
  86
  93
  100
  107
  114
  122
  130
  138
  146
  155
  164
  174
  184
  195
  206
  217
  229
Funds from operations, $m
  171
  135
  162
  192
  223
  257
  292
  329
  368
  409
  452
  487
  534
  582
  632
  684
  739
  795
  854
  915
  979
  1,045
  1,114
  1,186
  1,261
  1,339
  1,421
  1,506
  1,595
  1,688
  1,785
Change in working capital, $m
  21
  31
  33
  36
  38
  40
  42
  45
  47
  49
  51
  53
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
Cash from operations, $m
  150
  104
  129
  156
  185
  216
  249
  284
  321
  360
  400
  434
  478
  524
  572
  622
  674
  728
  784
  842
  903
  966
  1,032
  1,100
  1,172
  1,246
  1,324
  1,405
  1,490
  1,578
  1,670
Maintenance CAPEX, $m
  0
  -20
  -23
  -27
  -30
  -34
  -38
  -43
  -48
  -52
  -58
  -63
  -68
  -74
  -80
  -86
  -93
  -100
  -107
  -114
  -122
  -130
  -138
  -146
  -155
  -164
  -174
  -184
  -195
  -206
  -217
New CAPEX, $m
  -43
  -56
  -61
  -66
  -70
  -74
  -78
  -82
  -86
  -90
  -94
  -98
  -102
  -106
  -111
  -115
  -120
  -124
  -129
  -134
  -140
  -145
  -151
  -158
  -164
  -171
  -178
  -186
  -194
  -203
  -212
Cash from investing activities, $m
  -237
  -76
  -84
  -93
  -100
  -108
  -116
  -125
  -134
  -142
  -152
  -161
  -170
  -180
  -191
  -201
  -213
  -224
  -236
  -248
  -262
  -275
  -289
  -304
  -319
  -335
  -352
  -370
  -389
  -409
  -429
Free cash flow, $m
  -87
  29
  45
  64
  85
  108
  133
  159
  187
  217
  248
  273
  307
  344
  381
  420
  461
  504
  548
  594
  642
  691
  743
  796
  852
  911
  971
  1,034
  1,100
  1,169
  1,241
Issuance/(repayment) of debt, $m
  138
  107
  117
  125
  133
  142
  149
  157
  165
  173
  180
  188
  195
  203
  211
  220
  228
  237
  247
  256
  267
  277
  289
  301
  313
  327
  341
  355
  371
  388
  405
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  
  138
  107
  117
  125
  133
  142
  149
  157
  165
  173
  180
  188
  195
  203
  211
  220
  228
  237
  247
  256
  267
  277
  289
  301
  313
  327
  341
  355
  371
  388
  405
Total cash flow (excl. dividends), $m
  51
  136
  162
  189
  219
  250
  282
  316
  352
  390
  429
  461
  503
  547
  593
  640
  690
  741
  795
  850
  908
  969
  1,032
  1,097
  1,166
  1,237
  1,312
  1,390
  1,472
  1,557
  1,646
Retained Cash Flow (-), $m
  -106
  -69
  -74
  -79
  -84
  -89
  -94
  -99
  -104
  -109
  -114
  -119
  -123
  -128
  -133
  -139
  -144
  -150
  -156
  -162
  -168
  -175
  -182
  -190
  -198
  -206
  -215
  -224
  -234
  -245
  -256
Prev. year cash balance distribution, $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 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
 
  67
  88
  110
  134
  160
  188
  217
  248
  281
  315
  342
  379
  418
  459
  501
  545
  591
  639
  688
  740
  793
  849
  907
  968
  1,031
  1,097
  1,166
  1,237
  1,312
  1,390
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  63
  77
  88
  99
  107
  113
  117
  118
  117
  114
  106
  99
  92
  83
  73
  64
  54
  45
  37
  30
  23
  18
  13
  10
  7
  5
  3
  2
  1
  1
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

Premium Brands Holdings Corp is a Canada-based company that, through its subsidiaries, owns a range of specialty food manufacturing and food distribution businesses. The Company's segments include Specialty Foods and Premium Food Distribution. Its family of brands and businesses include Conte Foods, Larosa Foods, McSweeney’s, Direct Plus, OvenPride and Island City Baking. Its Specialty Foods segment consists of the Company’s specialty food manufacturing businesses and includes Harvest, Grimm’s, Freybe, Hygaard, Quality Fast Foods, Hempler’s, Made-Rite Meat Products, Creekside, Stuyver’s, Duso’s, SK Food Group, Deli Chef, SJ Fine Foods, Piller’s, Isernio’s, Expresco and Belmont Meats. The Premium Food Distribution segment consists of the Company’s differentiated distribution and wholesale businesses and includes Centennial Foodservice, B&C Food Distributors, Harlan Fairbanks, Worldsource, E1even, Wescadia, Maximum Seafood, Ocean Miracle, Leadbetter Foods, C&C Packing and Premier Meats.

FINANCIAL RATIOS  of  Premium Brands Holdings Corporation (PBH)

Valuation Ratios
P/E Ratio 45
Price to Sales 1.7
Price to Book 7.3
Price to Tangible Book
Price to Cash Flow 20.7
Price to Free Cash Flow 29
Growth Rates
Sales Growth Rate 25.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 48.3%
Cap. Spend. - 3 Yr. Gr. Rate 21.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 95.5%
Total Debt to Equity 100.2%
Interest Coverage 7
Management Effectiveness
Return On Assets 8.1%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 18.5%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 18.9%
Gross Margin - 3 Yr. Avg. 18.9%
EBITDA Margin 7.8%
EBITDA Margin - 3 Yr. Avg. 6.4%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 3.3%
Pre-Tax Margin 5.1%
Pre-Tax Margin - 3 Yr. Avg. 3.3%
Net Profit Margin 3.7%
Net Profit Margin - 3 Yr. Avg. 1.8%
Effective Tax Rate 27.4%
Eff/ Tax Rate - 3 Yr. Avg. 34.5%
Payout Ratio 62.3%

PBH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PBH stock intrinsic value calculation we used $1862 million for the last fiscal year's total revenue generated by Premium Brands Holdings Corporation. The default revenue input number comes from 2016 income statement of Premium Brands Holdings 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 PBH stock valuation model: a) initial revenue growth rate of 16% 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 6.9%, whose default value for PBH is calculated based on our internal credit rating of Premium Brands Holdings 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 Premium Brands Holdings 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 PBH stock the variable cost ratio is equal to 89.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $106 million in the base year in the intrinsic value calculation for PBH 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 Premium Brands Holdings Corporation.

Corporate tax rate of 27% is the nominal tax rate for Premium Brands Holdings 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 PBH 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 PBH are equal to 19%.

Life of production assets of 17.7 years is the average useful life of capital assets used in Premium Brands Holdings 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 PBH is equal to 10.3%. 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 - $426 million for Premium Brands Holdings 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 29.953 million for Premium Brands Holdings 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 Premium Brands Holdings Corporation at the current share price and the inputted number of shares is $3.1 billion.

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Financial statements of PBH
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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