Intrinsic value of Superior Plus Corp. - SPB

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$13.14

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$13.14

 
Intrinsic value

$1.28

 
Up/down potential

-90%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of SPB 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 1.9

 

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, %
  -10.16
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  2,024
  2,162
  2,305
  2,454
  2,608
  2,770
  2,938
  3,113
  3,295
  3,485
  3,684
  3,891
  4,108
  4,334
  4,570
  4,818
  5,077
  5,347
  5,631
  5,928
  6,238
  6,564
  6,905
  7,262
  7,637
  8,030
  8,442
  8,874
  9,327
  9,802
  10,300
Variable operating expenses, $m
 
  2,169
  2,311
  2,459
  2,613
  2,773
  2,940
  3,114
  3,296
  3,485
  3,682
  3,868
  4,084
  4,309
  4,544
  4,790
  5,047
  5,316
  5,598
  5,893
  6,202
  6,526
  6,865
  7,220
  7,593
  7,983
  8,393
  8,822
  9,272
  9,745
  10,240
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
  1,873
  2,169
  2,311
  2,459
  2,613
  2,773
  2,940
  3,114
  3,296
  3,485
  3,682
  3,868
  4,084
  4,309
  4,544
  4,790
  5,047
  5,316
  5,598
  5,893
  6,202
  6,526
  6,865
  7,220
  7,593
  7,983
  8,393
  8,822
  9,272
  9,745
  10,240
Operating income, $m
  151
  -7
  -6
  -6
  -5
  -4
  -3
  -2
  -1
  0
  2
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47
  49
  52
  54
  57
  60
EBITDA, $m
  272
  121
  129
  137
  146
  155
  164
  174
  184
  195
  206
  217
  229
  242
  255
  269
  283
  299
  314
  331
  348
  366
  386
  405
  426
  448
  471
  495
  521
  547
  575
Interest expense (income), $m
  34
  26
  29
  32
  35
  39
  42
  46
  50
  54
  58
  62
  67
  72
  77
  82
  88
  93
  99
  106
  112
  119
  126
  134
  142
  150
  159
  168
  177
  187
  198
Earnings before tax, $m
  151
  -33
  -35
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -71
  -76
  -81
  -86
  -91
  -97
  -103
  -109
  -116
  -123
  -130
  -138
Tax expense, $m
  37
  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
  295
  -33
  -35
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -71
  -76
  -81
  -86
  -91
  -97
  -103
  -109
  -116
  -123
  -130
  -138

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5
  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
  1,848
  1,969
  2,099
  2,235
  2,376
  2,522
  2,675
  2,835
  3,001
  3,174
  3,355
  3,544
  3,741
  3,947
  4,163
  4,388
  4,623
  4,870
  5,128
  5,398
  5,682
  5,978
  6,289
  6,614
  6,956
  7,313
  7,688
  8,082
  8,494
  8,927
  9,381
Adjusted assets (=assets-cash), $m
  1,843
  1,969
  2,099
  2,235
  2,376
  2,522
  2,675
  2,835
  3,001
  3,174
  3,355
  3,544
  3,741
  3,947
  4,163
  4,388
  4,623
  4,870
  5,128
  5,398
  5,682
  5,978
  6,289
  6,614
  6,956
  7,313
  7,688
  8,082
  8,494
  8,927
  9,381
Revenue / Adjusted assets
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
  1.098
Average production assets, $m
  1,002
  1,070
  1,141
  1,215
  1,291
  1,371
  1,454
  1,541
  1,631
  1,725
  1,824
  1,926
  2,033
  2,145
  2,262
  2,385
  2,513
  2,647
  2,787
  2,934
  3,088
  3,249
  3,418
  3,595
  3,780
  3,975
  4,179
  4,393
  4,617
  4,852
  5,099
Working capital, $m
  105
  125
  134
  142
  151
  161
  170
  181
  191
  202
  214
  226
  238
  251
  265
  279
  294
  310
  327
  344
  362
  381
  400
  421
  443
  466
  490
  515
  541
  569
  597
Total debt, $m
  529
  586
  651
  718
  788
  861
  937
  1,016
  1,098
  1,184
  1,274
  1,368
  1,466
  1,568
  1,675
  1,786
  1,903
  2,026
  2,154
  2,288
  2,428
  2,575
  2,729
  2,891
  3,060
  3,237
  3,423
  3,619
  3,823
  4,038
  4,263
Total liabilities, $m
  919
  976
  1,041
  1,108
  1,178
  1,251
  1,327
  1,406
  1,488
  1,574
  1,664
  1,758
  1,856
  1,958
  2,065
  2,176
  2,293
  2,416
  2,544
  2,678
  2,818
  2,965
  3,119
  3,281
  3,450
  3,627
  3,813
  4,009
  4,213
  4,428
  4,653
Total equity, $m
  929
  992
  1,058
  1,126
  1,197
  1,271
  1,348
  1,429
  1,512
  1,600
  1,691
  1,786
  1,886
  1,989
  2,098
  2,211
  2,330
  2,455
  2,585
  2,721
  2,863
  3,013
  3,170
  3,334
  3,506
  3,686
  3,875
  4,073
  4,281
  4,499
  4,728
Total liabilities and equity, $m
  1,848
  1,968
  2,099
  2,234
  2,375
  2,522
  2,675
  2,835
  3,000
  3,174
  3,355
  3,544
  3,742
  3,947
  4,163
  4,387
  4,623
  4,871
  5,129
  5,399
  5,681
  5,978
  6,289
  6,615
  6,956
  7,313
  7,688
  8,082
  8,494
  8,927
  9,381
Debt-to-equity ratio
  0.569
  0.590
  0.620
  0.640
  0.660
  0.680
  0.690
  0.710
  0.730
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.850
  0.850
  0.860
  0.870
  0.870
  0.880
  0.880
  0.890
  0.890
  0.900
  0.900
Adjusted equity ratio
  0.501
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  295
  -33
  -35
  -37
  -40
  -42
  -45
  -48
  -50
  -53
  -56
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -66
  -71
  -76
  -81
  -86
  -91
  -97
  -103
  -109
  -116
  -123
  -130
  -138
Depreciation, amort., depletion, $m
  121
  128
  135
  143
  150
  158
  167
  176
  185
  194
  204
  195
  205
  217
  229
  241
  254
  267
  282
  296
  312
  328
  345
  363
  382
  402
  422
  444
  466
  490
  515
Funds from operations, $m
  70
  95
  100
  105
  110
  116
  122
  128
  134
  141
  148
  155
  162
  170
  178
  187
  196
  205
  215
  225
  236
  248
  259
  272
  285
  298
  313
  328
  343
  360
  377
Change in working capital, $m
  -77
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
Cash from operations, $m
  147
  51
  92
  96
  101
  107
  112
  118
  124
  130
  136
  143
  150
  157
  165
  173
  181
  190
  199
  208
  218
  229
  240
  251
  263
  276
  289
  303
  317
  332
  348
Maintenance CAPEX, $m
  0
  -101
  -108
  -115
  -123
  -130
  -138
  -147
  -156
  -165
  -174
  -184
  -195
  -205
  -217
  -229
  -241
  -254
  -267
  -282
  -296
  -312
  -328
  -345
  -363
  -382
  -402
  -422
  -444
  -466
  -490
New CAPEX, $m
  -98
  -69
  -71
  -74
  -77
  -80
  -83
  -87
  -90
  -94
  -98
  -103
  -107
  -112
  -117
  -122
  -128
  -134
  -140
  -147
  -154
  -161
  -169
  -177
  -185
  -194
  -204
  -214
  -224
  -235
  -247
Cash from investing activities, $m
  292
  -170
  -179
  -189
  -200
  -210
  -221
  -234
  -246
  -259
  -272
  -287
  -302
  -317
  -334
  -351
  -369
  -388
  -407
  -429
  -450
  -473
  -497
  -522
  -548
  -576
  -606
  -636
  -668
  -701
  -737
Free cash flow, $m
  439
  -119
  -87
  -92
  -98
  -104
  -110
  -116
  -122
  -129
  -136
  -144
  -152
  -160
  -169
  -178
  -188
  -198
  -209
  -220
  -232
  -244
  -257
  -271
  -286
  -301
  -317
  -333
  -351
  -369
  -388
Issuance/(repayment) of debt, $m
  -319
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  186
  195
  205
  215
  225
Issuance/(repurchase) of shares, $m
  0
  120
  88
  94
  99
  105
  111
  117
  124
  131
  138
  146
  154
  162
  171
  180
  190
  200
  211
  222
  234
  247
  260
  274
  288
  304
  320
  336
  354
  373
  392
Cash from financing (excl. dividends), $m  
  -331
  182
  153
  161
  169
  178
  187
  196
  206
  217
  228
  240
  252
  264
  278
  292
  307
  322
  339
  356
  374
  394
  414
  435
  457
  481
  506
  531
  559
  588
  617
Total cash flow (excl. dividends), $m
  107
  -57
  -23
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -47
  -50
  -54
  -58
  -62
  -67
  -71
  -76
  -81
  -86
  -92
  -97
  -103
  -110
  -116
  -123
  -131
  -138
  -146
  -155
  -163
Retained Cash Flow (-), $m
  -215
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -104
  -109
  -114
  -119
  -124
  -130
  -136
  -143
  -149
  -157
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -229
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
 
  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
Discount rate, %
 
  5.50
  5.78
  6.06
  6.37
  6.69
  7.02
  7.37
  7.74
  8.13
  8.53
  8.96
  9.41
  9.88
  10.37
  10.89
  11.43
  12.01
  12.61
  13.24
  13.90
  14.59
  15.32
  16.09
  16.89
  17.74
  18.62
  19.56
  20.53
  21.56
  22.64
PV of cash for 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
Current shareholders' claim on cash, %
  100
  94.0
  90.0
  86.2
  82.6
  79.2
  75.9
  72.7
  69.7
  66.9
  64.1
  61.5
  59.0
  56.6
  54.2
  52.0
  49.9
  47.9
  45.9
  44.0
  42.2
  40.5
  38.8
  37.2
  35.7
  34.2
  32.8
  31.4
  30.1
  28.9
  27.7

Superior Plus Corp. engages in the energy services, specialty chemicals, and construction products distribution businesses in Canada, the United States, and internationally. Its Energy Services segment provides distribution, wholesale procurement, and related services for propane, heating oil, and other refined fuels; and sells, installs, and services HVAC equipment, as well as provides customized natural gas and electricity retail and wholesale services. The company’s Specialty Chemicals segment supplies sodium chlorate and technology to the pulp and paper industries, as well as potassium and chloralkali products. Its Construction Products Distribution segment distributes commercial and industrial insulation, as well as specialty walls and ceiling products; and specialty construction products to the walls and ceilings industry. Superior General Partner Inc. serves as the general partner of the company. Superior Plus Corp. was founded in 1996 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Superior Plus Corp. (SPB)

Valuation Ratios
P/E Ratio 6.4
Price to Sales 0.9
Price to Book 2
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 38.3
Growth Rates
Sales Growth Rate -10.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.2%
Cap. Spend. - 3 Yr. Gr. Rate 4.4%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 55%
Total Debt to Equity 56.9%
Interest Coverage 5
Management Effectiveness
Return On Assets 16.1%
Ret/ On Assets - 3 Yr. Avg. 8.1%
Return On Total Capital 19.5%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 35.9%
Return On Equity - 3 Yr. Avg. 16.9%
Asset Turnover 1
Profitability Ratios
Gross Margin 32.5%
Gross Margin - 3 Yr. Avg. 28.3%
EBITDA Margin 15.1%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 7.5%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 7.5%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 14.6%
Net Profit Margin - 3 Yr. Avg. 5.7%
Effective Tax Rate 24.5%
Eff/ Tax Rate - 3 Yr. Avg. 18.8%
Payout Ratio 34.6%

SPB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPB stock intrinsic value calculation we used $2024 million for the last fiscal year's total revenue generated by Superior Plus Corp.. The default revenue input number comes from 2016 income statement of Superior Plus Corp.. 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 SPB stock valuation model: a) initial revenue growth rate of 6.8% 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 5.5%, whose default value for SPB is calculated based on our internal credit rating of Superior Plus Corp., 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 Superior Plus Corp..
    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 SPB stock the variable cost ratio is equal to 100.4%.

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 SPB 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 4.9% for Superior Plus Corp..

Corporate tax rate of 27% is the nominal tax rate for Superior Plus Corp.. 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 SPB 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 SPB are equal to 49.5%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Superior Plus Corp. 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 SPB is equal to 5.8%. 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 - $929 million for Superior Plus Corp. - 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 142.302 million for Superior Plus Corp. 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 Superior Plus Corp. at the current share price and the inputted number of shares is $1.9 billion.


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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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