Intrinsic value of Winpak Ltd. - WPK

Previous Close

$50.84

  Intrinsic Value

$34.38

stock screener

  Rating & Target

sell

-32%

  Value-price divergence*

0%

Previous close

$50.84

 
Intrinsic value

$34.38

 
Up/down potential

-32%

 
Rating

sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of WPK 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 3.3

 

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, %
  3.16
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  1,111
  1,147
  1,185
  1,227
  1,273
  1,321
  1,373
  1,429
  1,488
  1,551
  1,617
  1,688
  1,763
  1,842
  1,926
  2,014
  2,107
  2,206
  2,309
  2,419
  2,534
  2,655
  2,782
  2,917
  3,058
  3,206
  3,362
  3,527
  3,699
  3,881
  4,072
Variable operating expenses, $m
 
  675
  698
  723
  749
  778
  808
  841
  876
  913
  952
  992
  1,036
  1,082
  1,131
  1,183
  1,238
  1,296
  1,357
  1,421
  1,489
  1,560
  1,635
  1,713
  1,796
  1,884
  1,975
  2,072
  2,173
  2,280
  2,392
Fixed operating expenses, $m
 
  256
  263
  269
  276
  283
  290
  297
  305
  312
  320
  328
  336
  345
  353
  362
  371
  380
  390
  400
  410
  420
  430
  441
  452
  463
  475
  487
  499
  512
  524
Total operating expenses, $m
  898
  931
  961
  992
  1,025
  1,061
  1,098
  1,138
  1,181
  1,225
  1,272
  1,320
  1,372
  1,427
  1,484
  1,545
  1,609
  1,676
  1,747
  1,821
  1,899
  1,980
  2,065
  2,154
  2,248
  2,347
  2,450
  2,559
  2,672
  2,792
  2,916
Operating income, $m
  213
  215
  225
  235
  247
  260
  275
  291
  307
  326
  346
  368
  391
  415
  441
  469
  498
  530
  563
  598
  636
  675
  717
  762
  809
  859
  912
  968
  1,027
  1,089
  1,155
EBITDA, $m
  261
  265
  276
  288
  302
  317
  334
  352
  371
  392
  415
  439
  465
  492
  522
  553
  586
  622
  659
  699
  741
  786
  834
  884
  937
  993
  1,052
  1,115
  1,181
  1,251
  1,325
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
Earnings before tax, $m
  213
  215
  224
  235
  246
  259
  273
  289
  305
  323
  342
  365
  387
  411
  436
  463
  492
  522
  555
  590
  626
  665
  706
  750
  796
  845
  897
  952
  1,010
  1,071
  1,135
Tax expense, $m
  67
  58
  61
  63
  67
  70
  74
  78
  82
  87
  92
  98
  104
  111
  118
  125
  133
  141
  150
  159
  169
  180
  191
  203
  215
  228
  242
  257
  273
  289
  307
Net income, $m
  141
  157
  164
  171
  180
  189
  200
  211
  223
  236
  250
  266
  282
  300
  318
  338
  359
  381
  405
  430
  457
  486
  516
  548
  581
  617
  655
  695
  737
  782
  829

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  285
  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
  1,181
  925
  956
  990
  1,026
  1,065
  1,107
  1,152
  1,200
  1,251
  1,304
  1,361
  1,422
  1,486
  1,553
  1,624
  1,700
  1,779
  1,862
  1,951
  2,043
  2,141
  2,244
  2,352
  2,466
  2,586
  2,712
  2,844
  2,983
  3,130
  3,284
Adjusted assets (=assets-cash), $m
  896
  925
  956
  990
  1,026
  1,065
  1,107
  1,152
  1,200
  1,251
  1,304
  1,361
  1,422
  1,486
  1,553
  1,624
  1,700
  1,779
  1,862
  1,951
  2,043
  2,141
  2,244
  2,352
  2,466
  2,586
  2,712
  2,844
  2,983
  3,130
  3,284
Revenue / Adjusted assets
  1.240
  1.240
  1.240
  1.239
  1.241
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.239
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
Average production assets, $m
  529
  546
  564
  584
  606
  629
  654
  680
  708
  738
  770
  804
  839
  877
  917
  959
  1,003
  1,050
  1,099
  1,151
  1,206
  1,264
  1,324
  1,388
  1,456
  1,526
  1,601
  1,679
  1,761
  1,847
  1,938
Working capital, $m
  493
  214
  222
  230
  238
  247
  257
  267
  278
  290
  302
  316
  330
  344
  360
  377
  394
  412
  432
  452
  474
  496
  520
  545
  572
  600
  629
  659
  692
  726
  761
Total debt, $m
  0
  7
  15
  23
  33
  43
  53
  65
  77
  90
  103
  118
  133
  149
  166
  185
  204
  224
  245
  267
  291
  316
  342
  369
  398
  429
  461
  494
  530
  567
  606
Total liabilities, $m
  228
  235
  243
  251
  261
  271
  281
  293
  305
  318
  331
  346
  361
  377
  394
  413
  432
  452
  473
  495
  519
  544
  570
  597
  626
  657
  689
  722
  758
  795
  834
Total equity, $m
  953
  690
  713
  738
  766
  795
  826
  860
  895
  933
  973
  1,016
  1,061
  1,108
  1,159
  1,212
  1,268
  1,327
  1,389
  1,455
  1,524
  1,597
  1,674
  1,755
  1,840
  1,929
  2,023
  2,122
  2,226
  2,335
  2,450
Total liabilities and equity, $m
  1,181
  925
  956
  989
  1,027
  1,066
  1,107
  1,153
  1,200
  1,251
  1,304
  1,362
  1,422
  1,485
  1,553
  1,625
  1,700
  1,779
  1,862
  1,950
  2,043
  2,141
  2,244
  2,352
  2,466
  2,586
  2,712
  2,844
  2,984
  3,130
  3,284
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
Adjusted equity ratio
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746
  0.746

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  141
  157
  164
  171
  180
  189
  200
  211
  223
  236
  250
  266
  282
  300
  318
  338
  359
  381
  405
  430
  457
  486
  516
  548
  581
  617
  655
  695
  737
  782
  829
Depreciation, amort., depletion, $m
  48
  50
  51
  53
  55
  57
  59
  61
  64
  66
  69
  70
  74
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
  162
  170
Funds from operations, $m
  88
  207
  215
  224
  235
  246
  259
  272
  287
  302
  319
  337
  356
  377
  399
  422
  447
  473
  502
  531
  563
  596
  632
  669
  709
  751
  795
  842
  892
  944
  999
Change in working capital, $m
  -82
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
Cash from operations, $m
  170
  200
  208
  217
  226
  237
  249
  262
  276
  291
  307
  324
  342
  362
  383
  406
  430
  455
  482
  511
  541
  574
  608
  644
  683
  723
  766
  811
  859
  910
  963
Maintenance CAPEX, $m
  0
  -46
  -48
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -70
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -140
  -147
  -154
  -162
New CAPEX, $m
  -98
  -17
  -18
  -20
  -22
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -91
Cash from investing activities, $m
  -98
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -88
  -92
  -97
  -102
  -106
  -112
  -117
  -122
  -128
  -135
  -141
  -148
  -156
  -164
  -172
  -180
  -189
  -199
  -208
  -218
  -229
  -240
  -253
Free cash flow, $m
  72
  136
  141
  147
  154
  161
  169
  178
  188
  199
  210
  222
  236
  251
  266
  283
  301
  320
  341
  363
  386
  410
  436
  464
  494
  525
  558
  593
  630
  669
  710
Issuance/(repayment) of debt, $m
  0
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
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  
  -2
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
Total cash flow (excl. dividends), $m
  70
  143
  149
  156
  163
  171
  180
  189
  200
  211
  224
  237
  251
  267
  283
  301
  320
  340
  362
  385
  409
  435
  463
  492
  523
  555
  590
  626
  665
  706
  749
Retained Cash Flow (-), $m
  -136
  -22
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
Prev. year cash balance distribution, $m
 
  285
  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
 
  406
  126
  130
  136
  142
  148
  156
  164
  174
  184
  194
  206
  219
  233
  248
  264
  281
  300
  319
  340
  362
  386
  411
  438
  466
  496
  528
  561
  597
  635
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
 
  390
  115
  113
  112
  110
  108
  105
  103
  100
  96
  92
  88
  83
  78
  73
  67
  61
  55
  49
  43
  37
  32
  27
  22
  18
  14
  11
  9
  7
  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

Winpak Ltd. manufactures and distributes packaging materials and related packaging machines. The Company's products are used for packaging of perishable foods, beverages and in healthcare applications. It operates through six segments: modified atmosphere packaging, specialty films, rigid containers, lidding, biaxially oriented nylon and packaging machinery. The Company's packaging is used for markets and applications, including fresh and processed meats, poultry, cheese, medical device packaging, high performance pouch applications and high-barrier films for converting applications. Its specialty films include barrier and non-barrier films, which are used applications, such as printing, laminating, and bag making, including shrink bags. Its rigid containers include portion control and single-serve containers, as well as plastic sheet and custom retort trays, which are used for applications, such as food, pet food, beverage, dairy, industrial and healthcare.

FINANCIAL RATIOS  of  Winpak Ltd. (WPK)

Valuation Ratios
P/E Ratio 23.4
Price to Sales 3
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 19.4
Price to Free Cash Flow 45.9
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 34.2%
Cap. Spend. - 3 Yr. Gr. Rate 7.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.7%
Ret/ On Assets - 3 Yr. Avg. 12.3%
Return On Total Capital 15.9%
Ret/ On T. Cap. - 3 Yr. Avg. 15.4%
Return On Equity 15.9%
Return On Equity - 3 Yr. Avg. 15.4%
Asset Turnover 1
Profitability Ratios
Gross Margin 32.8%
Gross Margin - 3 Yr. Avg. 31.2%
EBITDA Margin 23.5%
EBITDA Margin - 3 Yr. Avg. 21.7%
Operating Margin 19.2%
Oper. Margin - 3 Yr. Avg. 17.4%
Pre-Tax Margin 19.2%
Pre-Tax Margin - 3 Yr. Avg. 17.4%
Net Profit Margin 12.7%
Net Profit Margin - 3 Yr. Avg. 11.7%
Effective Tax Rate 31.5%
Eff/ Tax Rate - 3 Yr. Avg. 31%
Payout Ratio 5.7%

WPK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WPK stock intrinsic value calculation we used $1111 million for the last fiscal year's total revenue generated by Winpak Ltd.. The default revenue input number comes from 2016 income statement of Winpak Ltd.. 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 WPK stock valuation model: a) initial revenue growth rate of 3.2% 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 WPK is calculated based on our internal credit rating of Winpak Ltd., 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 Winpak Ltd..
    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 WPK stock the variable cost ratio is equal to 58.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $250 million in the base year in the intrinsic value calculation for WPK 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 Winpak Ltd..

Corporate tax rate of 27% is the nominal tax rate for Winpak Ltd.. 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 WPK 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 WPK are equal to 47.6%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Winpak Ltd. 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 WPK is equal to 18.7%. 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 - $953 million for Winpak Ltd. - 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 65.01 million for Winpak Ltd. 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 Winpak Ltd. at the current share price and the inputted number of shares is $3.3 billion.

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Financial statements of WPK
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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