Intrinsic value of Alico - ALCO

Previous Close

$34.15

  Intrinsic Value

$5.13

stock screener

  Rating & Target

str. sell

-85%

  Value-price divergence*

-13%

Previous close

$34.15

 
Intrinsic value

$5.13

 
Up/down potential

-85%

 
Rating

str. sell

 
Value-price divergence*

-13%

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

We calculate the intrinsic value of ALCO 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 0.3

 

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, %
  -5.88
  10.60
  10.04
  9.54
  9.08
  8.67
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
Revenue, $m
  144
  159
  175
  192
  209
  228
  246
  266
  287
  308
  330
  353
  377
  401
  427
  454
  482
  511
  541
  573
  606
  640
  676
  714
  753
  794
  837
  882
  929
  978
  1,030
Variable operating expenses, $m
 
  139
  153
  168
  183
  199
  216
  233
  251
  269
  288
  308
  329
  351
  373
  397
  421
  446
  473
  501
  529
  560
  591
  624
  658
  694
  731
  771
  812
  855
  899
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
  122
  139
  153
  168
  183
  199
  216
  233
  251
  269
  288
  308
  329
  351
  373
  397
  421
  446
  473
  501
  529
  560
  591
  624
  658
  694
  731
  771
  812
  855
  899
Operating income, $m
  22
  20
  22
  24
  26
  29
  31
  33
  36
  39
  41
  45
  48
  51
  54
  57
  61
  65
  68
  72
  77
  81
  85
  90
  95
  100
  106
  111
  117
  124
  130
EBITDA, $m
  37
  37
  40
  44
  48
  52
  57
  61
  66
  71
  76
  81
  87
  92
  98
  104
  111
  117
  124
  132
  139
  147
  155
  164
  173
  183
  192
  203
  214
  225
  237
Interest expense (income), $m
  8
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  38
  40
  42
  45
  48
  51
  53
  57
  60
  63
  67
  70
Earnings before tax, $m
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  39
  40
  43
  45
  47
  49
  52
  54
  57
  60
Tax expense, $m
  5
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
Net income, $m
  7
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7
  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
  455
  496
  546
  598
  652
  709
  768
  829
  893
  959
  1,028
  1,099
  1,173
  1,251
  1,331
  1,414
  1,502
  1,592
  1,687
  1,785
  1,888
  1,995
  2,107
  2,224
  2,346
  2,474
  2,608
  2,748
  2,894
  3,047
  3,208
Adjusted assets (=assets-cash), $m
  448
  496
  546
  598
  652
  709
  768
  829
  893
  959
  1,028
  1,099
  1,173
  1,251
  1,331
  1,414
  1,502
  1,592
  1,687
  1,785
  1,888
  1,995
  2,107
  2,224
  2,346
  2,474
  2,608
  2,748
  2,894
  3,047
  3,208
Revenue / Adjusted assets
  0.321
  0.321
  0.321
  0.321
  0.321
  0.322
  0.320
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
Average production assets, $m
  380
  420
  462
  507
  553
  601
  650
  702
  756
  812
  871
  931
  994
  1,059
  1,127
  1,198
  1,272
  1,349
  1,429
  1,512
  1,599
  1,690
  1,785
  1,884
  1,988
  2,096
  2,209
  2,328
  2,452
  2,581
  2,717
Working capital, $m
  53
  56
  62
  68
  74
  81
  87
  94
  101
  109
  117
  125
  133
  142
  151
  161
  171
  181
  192
  203
  215
  227
  239
  253
  267
  281
  296
  312
  329
  346
  364
Total debt, $m
  203
  228
  258
  291
  324
  359
  396
  433
  473
  514
  556
  600
  646
  694
  743
  795
  849
  905
  963
  1,024
  1,088
  1,154
  1,223
  1,296
  1,371
  1,450
  1,533
  1,619
  1,709
  1,804
  1,903
Total liabilities, $m
  282
  307
  337
  370
  403
  438
  475
  512
  552
  593
  635
  679
  725
  773
  822
  874
  928
  984
  1,042
  1,103
  1,167
  1,233
  1,302
  1,375
  1,450
  1,529
  1,612
  1,698
  1,788
  1,883
  1,982
Total equity, $m
  173
  190
  209
  228
  249
  271
  293
  317
  341
  366
  393
  420
  448
  478
  508
  540
  574
  608
  644
  682
  721
  762
  805
  850
  896
  945
  996
  1,050
  1,106
  1,164
  1,225
Total liabilities and equity, $m
  455
  497
  546
  598
  652
  709
  768
  829
  893
  959
  1,028
  1,099
  1,173
  1,251
  1,330
  1,414
  1,502
  1,592
  1,686
  1,785
  1,888
  1,995
  2,107
  2,225
  2,346
  2,474
  2,608
  2,748
  2,894
  3,047
  3,207
Debt-to-equity ratio
  1.173
  1.200
  1.240
  1.270
  1.300
  1.330
  1.350
  1.370
  1.390
  1.400
  1.420
  1.430
  1.440
  1.450
  1.460
  1.470
  1.480
  1.490
  1.500
  1.500
  1.510
  1.510
  1.520
  1.520
  1.530
  1.530
  1.540
  1.540
  1.550
  1.550
  1.550
Adjusted equity ratio
  0.371
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
Depreciation, amort., depletion, $m
  15
  17
  18
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  91
  96
  101
  107
Funds from operations, $m
  31
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  85
  89
  94
  100
  105
  111
  116
  123
  129
  136
  143
  150
Change in working capital, $m
  1
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
Cash from operations, $m
  30
  20
  22
  24
  27
  29
  31
  34
  37
  39
  42
  45
  48
  51
  55
  58
  62
  66
  69
  74
  78
  82
  87
  92
  97
  102
  107
  113
  119
  125
  132
Maintenance CAPEX, $m
  0
  -15
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
New CAPEX, $m
  -14
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -87
  -91
  -95
  -99
  -104
  -108
  -113
  -118
  -124
  -130
  -136
Cash from investing activities, $m
  -13
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -90
  -95
  -100
  -104
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -154
  -161
  -169
  -178
  -186
  -195
  -205
  -215
  -226
  -237
Free cash flow, $m
  17
  -35
  -36
  -38
  -39
  -41
  -42
  -43
  -45
  -46
  -48
  -50
  -51
  -53
  -55
  -57
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -101
  -105
Issuance/(repayment) of debt, $m
  -4
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
Issuance/(repurchase) of shares, $m
  -3
  10
  9
  10
  10
  10
  10
  10
  10
  10
  11
  11
  11
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
Cash from financing (excl. dividends), $m  
  -14
  40
  40
  42
  44
  45
  46
  48
  49
  51
  53
  55
  57
  59
  61
  63
  65
  68
  70
  73
  77
  79
  82
  86
  90
  94
  98
  102
  106
  112
  117
Total cash flow (excl. dividends), $m
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Retained Cash Flow (-), $m
  -2
  -19
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -59
  -61
Prev. year cash balance distribution, $m
 
  2
  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
 
  -12
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
Discount rate, %
 
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
 
  -11
  -13
  -12
  -11
  -11
  -10
  -9
  -8
  -7
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  96.7
  93.8
  91.3
  88.9
  86.8
  84.9
  83.1
  81.5
  80.0
  78.6
  77.4
  76.2
  75.1
  74.0
  73.1
  72.1
  71.2
  70.4
  69.6
  68.8
  68.1
  67.4
  66.7
  66.0
  65.4
  64.8
  64.1
  63.5
  63.0
  62.4

Alico, Inc. is an agribusiness and natural resources management company. The Company's segments include Orange Co., Conservation and Environmental Resources and, Other Operations. Its principal lines of business are citrus groves, cattle ranching and conservation. The Orange Co. segment includes activities related to planting, owning, cultivating and/or managing citrus groves in order to produce fruit for sale to fresh and processed citrus markets, including activities related to the purchase and resale of fruit and value-added services, which include contracting for the harvesting, marketing and hauling of citrus. The conservation and environmental resources segment includes activities related to cattle grazing, sod, native plant and animal sales, leasing, management and/or conservation of unimproved native pasture land. The other operations segment consists of activities related to rock mining royalties, oil exploration and other insignificant lines of business.

FINANCIAL RATIOS  of  Alico (ALCO)

Valuation Ratios
P/E Ratio 40.6
Price to Sales 2
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 17.8
Growth Rates
Sales Growth Rate -5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate -5.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 114.5%
Total Debt to Equity 117.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 1.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 4.1%
Return On Equity - 3 Yr. Avg. 5.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 24.3%
Gross Margin - 3 Yr. Avg. 22.7%
EBITDA Margin 24.3%
EBITDA Margin - 3 Yr. Avg. 28.5%
Operating Margin 15.3%
Oper. Margin - 3 Yr. Avg. 12.1%
Pre-Tax Margin 8.3%
Pre-Tax Margin - 3 Yr. Avg. 14.7%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 41.7%
Eff/ Tax Rate - 3 Yr. Avg. 48.2%
Payout Ratio 28.6%

ALCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALCO stock intrinsic value calculation we used $144 million for the last fiscal year's total revenue generated by Alico. The default revenue input number comes from 2016 income statement of Alico. 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 ALCO stock valuation model: a) initial revenue growth rate of 10.6% 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 8.6%, whose default value for ALCO is calculated based on our internal credit rating of Alico, 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 Alico.
    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 ALCO stock the variable cost ratio is equal to 87.5%.

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 ALCO 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 Alico.

Corporate tax rate of 27% is the nominal tax rate for Alico. 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 ALCO 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 ALCO are equal to 263.9%.

Life of production assets of 25.5 years is the average useful life of capital assets used in Alico 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 ALCO is equal to 35.4%. 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 - $173 million for Alico - 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 8.332 million for Alico 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 Alico at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Alico posts 3Q profit   [Aug-07-17 07:27PM  Associated Press]
▶ ETFs with exposure to Alico, Inc. : July 7, 2017   [Jul-07-17 02:24PM  Capital Cube]
▶ Alico posts 2Q profit   [May-08-17 04:10PM  Associated Press]
▶ ETFs with exposure to Alico, Inc. : April 20, 2017   [Apr-20-17 02:11PM  Capital Cube]
▶ ETFs with exposure to Alico, Inc. : April 5, 2017   [Apr-05-17 04:16PM  Capital Cube]
▶ Alico reports 1Q loss   [Feb-06-17 04:28PM  Associated Press]
▶ ETFs with exposure to Alico, Inc. : January 24, 2017   [Jan-24-17 11:55AM  Capital Cube]
▶ New CEO at the Florida company that grows the oranges in your juice   [07:39AM  American City Business Journals]
▶ Should You Buy Alico, Inc. (ALCO)?   [Dec-20-16 04:05PM  Insider Monkey]
▶ Alico Inc (ALCO): GMT Capital Trims Some Shares   [Oct-28-16 09:09AM  at Insider Monkey]
▶ Here is What Hedge Funds Think About Alico, Inc. (ALCO)   [Nov-28  07:05AM  at Insider Monkey]
▶ Here is What Hedge Funds Think About InnerWorkings, Inc. (INWK)   [Nov-25  10:42AM  at Insider Monkey]
▶ Alico, Inc. Sets Annual Meeting Date   [Oct-29  05:13PM  GlobeNewswire]
▶ 10-Q for Alico, Inc.   [Aug-07  08:12PM  at Company Spotlight]
▶ 10-Q for Alico, Inc.   [May-13  08:11PM  at Company Spotlight]
Financial statements of ALCO
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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