Intrinsic value of WSP Global Inc. - WSP

Previous Close

$51.39

  Intrinsic Value

$62.13

stock screener

  Rating & Target

buy

+21%

  Value-price divergence*

0%

Previous close

$51.39

 
Intrinsic value

$62.13

 
Up/down potential

+21%

 
Rating

buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of WSP 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 5.3

 

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, %
  5.21
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  6,380
  6,712
  7,059
  7,424
  7,806
  8,206
  8,626
  9,067
  9,529
  10,014
  10,522
  11,055
  11,615
  12,202
  12,819
  13,466
  14,144
  14,857
  15,605
  16,390
  17,213
  18,078
  18,986
  19,939
  20,940
  21,990
  23,093
  24,250
  25,466
  26,742
  28,081
Variable operating expenses, $m
 
  6,375
  6,691
  7,022
  7,369
  7,733
  8,114
  8,514
  8,934
  9,374
  9,836
  10,042
  10,551
  11,084
  11,644
  12,232
  12,848
  13,495
  14,175
  14,888
  15,636
  16,422
  17,246
  18,112
  19,021
  19,975
  20,977
  22,028
  23,132
  24,291
  25,508
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
  6,077
  6,375
  6,691
  7,022
  7,369
  7,733
  8,114
  8,514
  8,934
  9,374
  9,836
  10,042
  10,551
  11,084
  11,644
  12,232
  12,848
  13,495
  14,175
  14,888
  15,636
  16,422
  17,246
  18,112
  19,021
  19,975
  20,977
  22,028
  23,132
  24,291
  25,508
Operating income, $m
  303
  337
  369
  402
  437
  474
  512
  552
  595
  639
  686
  1,013
  1,064
  1,118
  1,175
  1,234
  1,296
  1,361
  1,430
  1,502
  1,577
  1,657
  1,740
  1,827
  1,919
  2,015
  2,116
  2,222
  2,334
  2,451
  2,573
EBITDA, $m
  463
  648
  681
  716
  753
  792
  832
  875
  920
  966
  1,015
  1,067
  1,121
  1,177
  1,237
  1,299
  1,365
  1,434
  1,506
  1,582
  1,661
  1,744
  1,832
  1,924
  2,021
  2,122
  2,228
  2,340
  2,457
  2,580
  2,710
Interest expense (income), $m
  36
  32
  38
  44
  50
  57
  64
  71
  78
  86
  94
  103
  112
  122
  132
  142
  153
  165
  177
  190
  203
  217
  232
  248
  264
  281
  299
  318
  338
  358
  380
Earnings before tax, $m
  266
  304
  330
  358
  387
  417
  448
  482
  516
  553
  591
  910
  952
  996
  1,043
  1,092
  1,143
  1,196
  1,253
  1,312
  1,374
  1,439
  1,508
  1,579
  1,655
  1,734
  1,817
  1,904
  1,996
  2,092
  2,193
Tax expense, $m
  67
  82
  89
  97
  104
  113
  121
  130
  139
  149
  160
  246
  257
  269
  282
  295
  309
  323
  338
  354
  371
  389
  407
  426
  447
  468
  491
  514
  539
  565
  592
Net income, $m
  199
  222
  241
  261
  282
  304
  327
  352
  377
  404
  432
  664
  695
  727
  761
  797
  834
  873
  915
  958
  1,003
  1,051
  1,101
  1,153
  1,208
  1,266
  1,326
  1,390
  1,457
  1,527
  1,601

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  231
  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
  6,129
  6,203
  6,524
  6,861
  7,214
  7,584
  7,973
  8,380
  8,807
  9,255
  9,725
  10,218
  10,735
  11,278
  11,847
  12,445
  13,072
  13,731
  14,422
  15,147
  15,909
  16,708
  17,547
  18,428
  19,353
  20,324
  21,343
  22,413
  23,536
  24,715
  25,953
Adjusted assets (=assets-cash), $m
  5,898
  6,203
  6,524
  6,861
  7,214
  7,584
  7,973
  8,380
  8,807
  9,255
  9,725
  10,218
  10,735
  11,278
  11,847
  12,445
  13,072
  13,731
  14,422
  15,147
  15,909
  16,708
  17,547
  18,428
  19,353
  20,324
  21,343
  22,413
  23,536
  24,715
  25,953
Revenue / Adjusted assets
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
  1.082
Average production assets, $m
  663
  698
  734
  772
  812
  853
  897
  943
  991
  1,041
  1,094
  1,150
  1,208
  1,269
  1,333
  1,400
  1,471
  1,545
  1,623
  1,705
  1,790
  1,880
  1,975
  2,074
  2,178
  2,287
  2,402
  2,522
  2,648
  2,781
  2,920
Working capital, $m
  524
  470
  494
  520
  546
  574
  604
  635
  667
  701
  737
  774
  813
  854
  897
  943
  990
  1,040
  1,092
  1,147
  1,205
  1,265
  1,329
  1,396
  1,466
  1,539
  1,616
  1,698
  1,783
  1,872
  1,966
Total debt, $m
  1,082
  1,088
  1,258
  1,436
  1,622
  1,818
  2,023
  2,238
  2,463
  2,699
  2,948
  3,208
  3,481
  3,768
  4,068
  4,384
  4,715
  5,063
  5,428
  5,811
  6,213
  6,635
  7,078
  7,543
  8,031
  8,544
  9,082
  9,647
  10,240
  10,863
  11,516
Total liabilities, $m
  3,269
  3,275
  3,445
  3,623
  3,809
  4,005
  4,210
  4,425
  4,650
  4,886
  5,135
  5,395
  5,668
  5,955
  6,255
  6,571
  6,902
  7,250
  7,615
  7,998
  8,400
  8,822
  9,265
  9,730
  10,218
  10,731
  11,269
  11,834
  12,427
  13,050
  13,703
Total equity, $m
  2,860
  2,928
  3,080
  3,238
  3,405
  3,580
  3,763
  3,955
  4,157
  4,368
  4,590
  4,823
  5,067
  5,323
  5,592
  5,874
  6,170
  6,481
  6,807
  7,150
  7,509
  7,886
  8,282
  8,698
  9,135
  9,593
  10,074
  10,579
  11,109
  11,666
  12,250
Total liabilities and equity, $m
  6,129
  6,203
  6,525
  6,861
  7,214
  7,585
  7,973
  8,380
  8,807
  9,254
  9,725
  10,218
  10,735
  11,278
  11,847
  12,445
  13,072
  13,731
  14,422
  15,148
  15,909
  16,708
  17,547
  18,428
  19,353
  20,324
  21,343
  22,413
  23,536
  24,716
  25,953
Debt-to-equity ratio
  0.378
  0.370
  0.410
  0.440
  0.480
  0.510
  0.540
  0.570
  0.590
  0.620
  0.640
  0.670
  0.690
  0.710
  0.730
  0.750
  0.760
  0.780
  0.800
  0.810
  0.830
  0.840
  0.850
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
Adjusted equity ratio
  0.446
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  199
  222
  241
  261
  282
  304
  327
  352
  377
  404
  432
  664
  695
  727
  761
  797
  834
  873
  915
  958
  1,003
  1,051
  1,101
  1,153
  1,208
  1,266
  1,326
  1,390
  1,457
  1,527
  1,601
Depreciation, amort., depletion, $m
  160
  311
  313
  314
  316
  318
  320
  322
  325
  327
  330
  54
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  92
  97
  102
  107
  112
  118
  124
  130
  136
Funds from operations, $m
  338
  533
  554
  576
  599
  623
  648
  674
  702
  731
  761
  718
  751
  787
  824
  862
  903
  946
  990
  1,037
  1,087
  1,138
  1,193
  1,250
  1,310
  1,373
  1,439
  1,508
  1,581
  1,657
  1,737
Change in working capital, $m
  -49
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  52
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
Cash from operations, $m
  387
  510
  530
  550
  572
  595
  618
  643
  669
  697
  726
  681
  712
  746
  780
  817
  855
  896
  938
  982
  1,029
  1,078
  1,129
  1,183
  1,240
  1,299
  1,362
  1,427
  1,496
  1,568
  1,644
Maintenance CAPEX, $m
  0
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -130
New CAPEX, $m
  -144
  -36
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -115
  -120
  -126
  -133
  -139
Cash from investing activities, $m
  -309
  -67
  -69
  -72
  -76
  -80
  -84
  -88
  -92
  -96
  -102
  -106
  -112
  -117
  -123
  -129
  -136
  -143
  -150
  -158
  -166
  -174
  -182
  -191
  -201
  -211
  -222
  -232
  -244
  -257
  -269
Free cash flow, $m
  78
  443
  461
  478
  496
  515
  535
  556
  577
  600
  624
  574
  600
  628
  657
  687
  719
  753
  788
  825
  864
  904
  947
  992
  1,039
  1,088
  1,140
  1,194
  1,251
  1,311
  1,374
Issuance/(repayment) of debt, $m
  81
  160
  170
  178
  186
  195
  205
  215
  225
  237
  248
  260
  273
  287
  301
  316
  331
  348
  365
  383
  402
  422
  443
  465
  488
  513
  538
  565
  593
  623
  654
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  
  41
  160
  170
  178
  186
  195
  205
  215
  225
  237
  248
  260
  273
  287
  301
  316
  331
  348
  365
  383
  402
  422
  443
  465
  488
  513
  538
  565
  593
  623
  654
Total cash flow (excl. dividends), $m
  96
  604
  630
  656
  682
  710
  740
  770
  803
  837
  872
  834
  873
  915
  958
  1,003
  1,051
  1,101
  1,153
  1,208
  1,266
  1,326
  1,390
  1,457
  1,527
  1,601
  1,678
  1,759
  1,845
  1,934
  2,028
Retained Cash Flow (-), $m
  56
  -145
  -152
  -159
  -167
  -175
  -183
  -192
  -202
  -211
  -222
  -233
  -244
  -256
  -269
  -282
  -296
  -311
  -326
  -342
  -359
  -377
  -396
  -416
  -436
  -458
  -481
  -505
  -530
  -557
  -584
Prev. year cash balance distribution, $m
 
  77
  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
 
  536
  479
  497
  516
  536
  556
  578
  601
  625
  650
  602
  629
  658
  689
  721
  754
  790
  827
  866
  906
  949
  994
  1,041
  1,091
  1,143
  1,197
  1,254
  1,314
  1,377
  1,444
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  513
  437
  430
  421
  410
  398
  384
  368
  350
  331
  276
  258
  240
  220
  200
  180
  161
  141
  123
  105
  89
  74
  61
  49
  39
  30
  23
  17
  12
  9
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

WSP Global Inc. is a professional services company. The Company's segments are Canada, Americas (US and South America), EMEIA (Europe, Middle East, India and Africa) and APAC (Asia Pacific, including primarily Asia and Australia). It offers services in project delivery and consulting. It offers various project services throughout the project execution phases. It operates in sectors, such as property and buildings, including services, such as disciplines of structural and mechanical, electrical and plumbing engineering; transportation and infrastructure, which includes planning, analyzing, designing and managing projects for rail, transit, aviation, bridges, tunnels, highways, ports, roads and urban infrastructure; environment, including services covering air, land, water and health on environmental matters, such as risk management and permitting authorizations; industry, including consulting and engineering services; resources (including mining and oil and gas), and power and energy.

FINANCIAL RATIOS  of  WSP Global Inc. (WSP)

Valuation Ratios
P/E Ratio 26.2
Price to Sales 0.8
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 13.5
Price to Free Cash Flow 21.4
Growth Rates
Sales Growth Rate 5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 37.1%
Cap. Spend. - 3 Yr. Gr. Rate 37.8%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 32.4%
Total Debt to Equity 37.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 5.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4.5%
Return On Equity 6.9%
Return On Equity - 3 Yr. Avg. 6.1%
Asset Turnover 1
Profitability Ratios
Gross Margin 76.7%
Gross Margin - 3 Yr. Avg. 77.2%
EBITDA Margin 7.2%
EBITDA Margin - 3 Yr. Avg. 6.8%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 4.3%
Pre-Tax Margin 4.2%
Pre-Tax Margin - 3 Yr. Avg. 3.8%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 25.2%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 34.2%

WSP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WSP stock intrinsic value calculation we used $6380 million for the last fiscal year's total revenue generated by WSP Global Inc.. The default revenue input number comes from 2016 income statement of WSP Global 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 WSP stock valuation model: a) initial revenue growth rate of 5.2% 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 4.5%, whose default value for WSP is calculated based on our internal credit rating of WSP Global 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 WSP Global 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 WSP stock the variable cost ratio is equal to 95.2%.

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 WSP 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 WSP Global Inc..

Corporate tax rate of 27% is the nominal tax rate for WSP Global 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 WSP 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 WSP are equal to 10.4%.

Life of production assets of 21.4 years is the average useful life of capital assets used in WSP Global 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 WSP is equal to 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 - $2860 million for WSP Global 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 102.458 million for WSP Global 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 WSP Global Inc. at the current share price and the inputted number of shares is $5.3 billion.

RELATED COMPANIES Price Int.Val. Rating
STN Stantec Inc. 34.65 136.70  str.buy
SNC SNC-Lavalin Gr 56.07 51.16  hold
ECI EnerCare Inc. 20.25 18.99  hold
Financial statements of WSP
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.