Intrinsic value of Transcontinental Inc. Class A Subordinat - TCL-A

Previous Close

$27.80

  Intrinsic Value

$36.59

stock screener

  Rating & Target

buy

+32%

Previous close

$27.80

 
Intrinsic value

$36.59

 
Up/down potential

+32%

 
Rating

buy

We calculate the intrinsic value of TCL-A 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 2.2

 

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, %
  0.90
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  2,020
  2,062
  2,112
  2,168
  2,230
  2,299
  2,375
  2,457
  2,546
  2,641
  2,744
  2,853
  2,970
  3,094
  3,226
  3,366
  3,514
  3,671
  3,837
  4,012
  4,197
  4,392
  4,597
  4,814
  5,042
  5,283
  5,536
  5,802
  6,083
  6,378
  6,688
Variable operating expenses, $m
 
  1,795
  1,837
  1,884
  1,937
  1,996
  2,060
  2,129
  2,204
  2,285
  2,372
  2,413
  2,512
  2,617
  2,728
  2,847
  2,972
  3,105
  3,245
  3,393
  3,549
  3,714
  3,888
  4,072
  4,265
  4,468
  4,682
  4,907
  5,145
  5,394
  5,656
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
  1,807
  1,795
  1,837
  1,884
  1,937
  1,996
  2,060
  2,129
  2,204
  2,285
  2,372
  2,413
  2,512
  2,617
  2,728
  2,847
  2,972
  3,105
  3,245
  3,393
  3,549
  3,714
  3,888
  4,072
  4,265
  4,468
  4,682
  4,907
  5,145
  5,394
  5,656
Operating income, $m
  213
  267
  275
  283
  293
  304
  315
  328
  342
  356
  372
  440
  458
  477
  498
  519
  542
  566
  592
  619
  647
  677
  709
  743
  778
  815
  854
  895
  938
  984
  1,032
EBITDA, $m
  346
  388
  397
  408
  420
  433
  447
  462
  479
  497
  516
  537
  559
  582
  607
  633
  661
  691
  722
  755
  790
  826
  865
  906
  949
  994
  1,042
  1,092
  1,145
  1,200
  1,259
Interest expense (income), $m
  16
  15
  16
  17
  19
  20
  21
  23
  25
  27
  29
  31
  33
  36
  39
  41
  44
  48
  51
  55
  58
  62
  67
  71
  76
  81
  86
  91
  97
  103
  110
Earnings before tax, $m
  197
  252
  258
  266
  274
  284
  294
  305
  317
  330
  343
  409
  425
  441
  459
  478
  498
  519
  541
  564
  589
  615
  642
  671
  702
  734
  768
  804
  841
  880
  922
Tax expense, $m
  51
  68
  70
  72
  74
  77
  79
  82
  86
  89
  93
  110
  115
  119
  124
  129
  134
  140
  146
  152
  159
  166
  173
  181
  190
  198
  207
  217
  227
  238
  249
Net income, $m
  146
  184
  189
  194
  200
  207
  215
  223
  231
  241
  251
  299
  310
  322
  335
  349
  363
  379
  395
  412
  430
  449
  469
  490
  512
  536
  561
  587
  614
  643
  673

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17
  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
  2,062
  2,087
  2,137
  2,194
  2,257
  2,327
  2,404
  2,487
  2,577
  2,673
  2,777
  2,888
  3,006
  3,132
  3,265
  3,407
  3,557
  3,715
  3,883
  4,060
  4,248
  4,445
  4,653
  4,873
  5,104
  5,347
  5,603
  5,873
  6,157
  6,455
  6,769
Adjusted assets (=assets-cash), $m
  2,045
  2,087
  2,137
  2,194
  2,257
  2,327
  2,404
  2,487
  2,577
  2,673
  2,777
  2,888
  3,006
  3,132
  3,265
  3,407
  3,557
  3,715
  3,883
  4,060
  4,248
  4,445
  4,653
  4,873
  5,104
  5,347
  5,603
  5,873
  6,157
  6,455
  6,769
Revenue / Adjusted assets
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
  0.988
Average production assets, $m
  521
  532
  545
  559
  575
  593
  613
  634
  657
  681
  708
  736
  766
  798
  832
  868
  907
  947
  990
  1,035
  1,083
  1,133
  1,186
  1,242
  1,301
  1,363
  1,428
  1,497
  1,569
  1,645
  1,725
Working capital, $m
  165
  151
  154
  158
  163
  168
  173
  179
  186
  193
  200
  208
  217
  226
  235
  246
  257
  268
  280
  293
  306
  321
  336
  351
  368
  386
  404
  424
  444
  466
  488
Total debt, $m
  348
  370
  394
  421
  452
  486
  523
  564
  607
  654
  705
  758
  816
  877
  942
  1,011
  1,084
  1,161
  1,242
  1,328
  1,419
  1,515
  1,616
  1,723
  1,835
  1,954
  2,078
  2,209
  2,347
  2,492
  2,645
Total liabilities, $m
  994
  1,015
  1,039
  1,066
  1,097
  1,131
  1,168
  1,209
  1,252
  1,299
  1,350
  1,403
  1,461
  1,522
  1,587
  1,656
  1,729
  1,806
  1,887
  1,973
  2,064
  2,160
  2,261
  2,368
  2,480
  2,599
  2,723
  2,854
  2,992
  3,137
  3,290
Total equity, $m
  1,069
  1,073
  1,099
  1,128
  1,160
  1,196
  1,236
  1,278
  1,324
  1,374
  1,427
  1,484
  1,545
  1,610
  1,678
  1,751
  1,828
  1,910
  1,996
  2,087
  2,183
  2,285
  2,392
  2,504
  2,623
  2,748
  2,880
  3,019
  3,165
  3,318
  3,479
Total liabilities and equity, $m
  2,063
  2,088
  2,138
  2,194
  2,257
  2,327
  2,404
  2,487
  2,576
  2,673
  2,777
  2,887
  3,006
  3,132
  3,265
  3,407
  3,557
  3,716
  3,883
  4,060
  4,247
  4,445
  4,653
  4,872
  5,103
  5,347
  5,603
  5,873
  6,157
  6,455
  6,769
Debt-to-equity ratio
  0.326
  0.340
  0.360
  0.370
  0.390
  0.410
  0.420
  0.440
  0.460
  0.480
  0.490
  0.510
  0.530
  0.540
  0.560
  0.580
  0.590
  0.610
  0.620
  0.640
  0.650
  0.660
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
Adjusted equity ratio
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  146
  184
  189
  194
  200
  207
  215
  223
  231
  241
  251
  299
  310
  322
  335
  349
  363
  379
  395
  412
  430
  449
  469
  490
  512
  536
  561
  587
  614
  643
  673
Depreciation, amort., depletion, $m
  133
  121
  123
  125
  127
  129
  132
  134
  137
  141
  144
  97
  101
  105
  110
  114
  119
  125
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  206
  217
  227
Funds from operations, $m
  276
  305
  311
  319
  327
  336
  346
  357
  369
  381
  395
  395
  411
  427
  445
  463
  483
  503
  525
  548
  572
  598
  625
  654
  684
  715
  749
  784
  820
  859
  900
Change in working capital, $m
  3
  3
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
Cash from operations, $m
  273
  302
  308
  315
  323
  331
  341
  351
  362
  374
  387
  388
  402
  418
  435
  453
  472
  492
  513
  535
  559
  584
  610
  638
  667
  698
  730
  764
  800
  838
  877
Maintenance CAPEX, $m
  0
  -68
  -70
  -72
  -74
  -76
  -78
  -81
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -110
  -114
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -163
  -171
  -179
  -188
  -197
  -206
  -217
New CAPEX, $m
  -77
  -12
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
Cash from investing activities, $m
  -152
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -106
  -111
  -116
  -121
  -127
  -133
  -139
  -146
  -152
  -159
  -168
  -175
  -184
  -192
  -202
  -212
  -222
  -233
  -244
  -257
  -269
  -282
  -297
Free cash flow, $m
  121
  222
  225
  229
  233
  238
  243
  249
  256
  263
  271
  266
  275
  285
  296
  307
  319
  332
  345
  360
  375
  391
  408
  426
  445
  464
  485
  507
  531
  555
  581
Issuance/(repayment) of debt, $m
  -58
  22
  24
  28
  31
  34
  37
  40
  44
  47
  50
  54
  57
  61
  65
  69
  73
  77
  82
  86
  91
  96
  101
  107
  112
  118
  125
  131
  138
  145
  153
Issuance/(repurchase) of shares, $m
  -21
  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  
  -88
  22
  24
  28
  31
  34
  37
  40
  44
  47
  50
  54
  57
  61
  65
  69
  73
  77
  82
  86
  91
  96
  101
  107
  112
  118
  125
  131
  138
  145
  153
Total cash flow (excl. dividends), $m
  34
  243
  249
  256
  264
  272
  280
  290
  300
  310
  322
  320
  333
  346
  361
  376
  392
  409
  427
  446
  466
  487
  509
  532
  557
  583
  610
  639
  669
  700
  733
Retained Cash Flow (-), $m
  -53
  -21
  -26
  -29
  -33
  -36
  -39
  -43
  -46
  -50
  -53
  -57
  -61
  -65
  -69
  -73
  -77
  -82
  -86
  -91
  -96
  -101
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -153
  -161
Prev. year cash balance distribution, $m
 
  17
  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
 
  239
  224
  227
  231
  236
  241
  247
  253
  261
  268
  263
  272
  282
  292
  303
  315
  328
  341
  355
  370
  385
  402
  420
  438
  458
  478
  500
  523
  547
  572
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
 
  229
  205
  198
  190
  183
  175
  167
  158
  150
  141
  125
  116
  107
  98
  89
  80
  71
  63
  55
  47
  40
  33
  28
  22
  18
  14
  11
  8
  6
  4
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

Transcontinental Inc. is a printing company. The Company has operations in print, flexible packaging, publishing and digital media, both in Canada and the United States. The Company's segments include the Printing and Packaging Sector, and the Media Sector. The Printing and Packaging Sector includes the manufacturing activities of the Company, and generates revenues from various activities, such as the printing of retail flyers, magazines, newspapers, color books, personalized and mass marketing products, and the production of flexible packaging solutions in Canada and the United States. The Media Sector generates revenues through print and digital publishing products, in French and English, of various types, such as newspapers, educational books, specialized publications for professionals, retail promotional content, mass and personalized marketing, mobile and interactive applications, and geotargeted door-to-door and digital distribution services.

FINANCIAL RATIOS  of  Transcontinental Inc. Class A Subordinat (TCL-A)

Valuation Ratios
P/E Ratio 14.7
Price to Sales 1.1
Price to Book 2
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow 10.9
Growth Rates
Sales Growth Rate 0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.5%
Cap. Spend. - 3 Yr. Gr. Rate 0.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 32.6%
Total Debt to Equity 32.6%
Interest Coverage 13
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 9.2%
Return On Total Capital 10.4%
Ret/ On T. Cap. - 3 Yr. Avg. 13.1%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 19%
Asset Turnover 1
Profitability Ratios
Gross Margin 56.1%
Gross Margin - 3 Yr. Avg. 56.3%
EBITDA Margin 17.1%
EBITDA Margin - 3 Yr. Avg. 17.3%
Operating Margin 10.5%
Oper. Margin - 3 Yr. Avg. 10.6%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 10%
Net Profit Margin 7.2%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 25.9%
Eff/ Tax Rate - 3 Yr. Avg. 19.3%
Payout Ratio 38.4%

TCL-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TCL-A stock intrinsic value calculation we used $2020 million for the last fiscal year's total revenue generated by Transcontinental Inc. Class A Subordinat. The default revenue input number comes from 2016 income statement of Transcontinental Inc. Class A Subordinat. 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 TCL-A stock valuation model: a) initial revenue growth rate of 2.1% 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 TCL-A is calculated based on our internal credit rating of Transcontinental Inc. Class A Subordinat, 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 Transcontinental Inc. Class A Subordinat.
    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 TCL-A stock the variable cost ratio is equal to 87.1%.

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 TCL-A 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 4.4% for Transcontinental Inc. Class A Subordinat.

Corporate tax rate of 27% is the nominal tax rate for Transcontinental Inc. Class A Subordinat. 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 TCL-A 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 TCL-A are equal to 25.8%.

Life of production assets of 7.6 years is the average useful life of capital assets used in Transcontinental Inc. Class A Subordinat 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 TCL-A is equal to 7.3%. 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 - $1069 million for Transcontinental Inc. Class A Subordinat - 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 77.577 million for Transcontinental Inc. Class A Subordinat 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 Transcontinental Inc. Class A Subordinat at the current share price and the inputted number of shares is $2.2 billion.

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Financial statements of TCL-A
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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