Intrinsic value of Alico - ALCO

Previous Close

$32.20

  Intrinsic Value

$5.16

stock screener

  Rating & Target

str. sell

-84%

  Value-price divergence*

-64%

Previous close

$32.20

 
Intrinsic value

$5.16

 
Up/down potential

-84%

 
Rating

str. sell

 
Value-price divergence*

-64%

*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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  144
  147
  150
  154
  158
  163
  169
  174
  180
  187
  194
  202
  210
  219
  228
  238
  249
  260
  271
  284
  297
  310
  325
  340
  356
  373
  391
  410
  430
  450
  472
Variable operating expenses, $m
 
  129
  131
  135
  139
  143
  147
  152
  158
  164
  170
  177
  184
  191
  199
  208
  217
  227
  237
  248
  259
  271
  284
  297
  311
  326
  342
  358
  375
  394
  413
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
  129
  131
  135
  139
  143
  147
  152
  158
  164
  170
  177
  184
  191
  199
  208
  217
  227
  237
  248
  259
  271
  284
  297
  311
  326
  342
  358
  375
  394
  413
Operating income, $m
  22
  18
  19
  19
  20
  20
  21
  22
  23
  23
  24
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
EBITDA, $m
  37
  34
  35
  35
  36
  38
  39
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
Interest expense (income), $m
  8
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
Earnings before tax, $m
  12
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  26
  27
  28
  29
Tax expense, $m
  5
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
Net income, $m
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21

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
  458
  468
  480
  494
  509
  525
  543
  562
  583
  605
  629
  655
  682
  711
  742
  774
  809
  845
  883
  924
  967
  1,012
  1,060
  1,110
  1,163
  1,218
  1,277
  1,339
  1,403
  1,472
Adjusted assets (=assets-cash), $m
  448
  458
  468
  480
  494
  509
  525
  543
  562
  583
  605
  629
  655
  682
  711
  742
  774
  809
  845
  883
  924
  967
  1,012
  1,060
  1,110
  1,163
  1,218
  1,277
  1,339
  1,403
  1,472
Revenue / Adjusted assets
  0.321
  0.321
  0.321
  0.321
  0.320
  0.320
  0.322
  0.320
  0.320
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.322
  0.321
  0.321
  0.322
  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
  388
  397
  407
  418
  431
  445
  460
  476
  494
  513
  533
  555
  578
  602
  628
  656
  685
  716
  748
  783
  819
  857
  898
  940
  985
  1,032
  1,082
  1,134
  1,189
  1,247
Working capital, $m
  53
  52
  53
  55
  56
  58
  60
  62
  64
  66
  69
  72
  74
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
Total debt, $m
  203
  204
  210
  218
  226
  235
  245
  257
  268
  281
  295
  310
  326
  343
  360
  379
  399
  421
  443
  467
  492
  519
  546
  576
  607
  640
  674
  710
  748
  788
  830
Total liabilities, $m
  282
  283
  289
  297
  305
  314
  324
  336
  347
  360
  374
  389
  405
  422
  439
  458
  478
  500
  522
  546
  571
  598
  625
  655
  686
  719
  753
  789
  827
  867
  909
Total equity, $m
  173
  175
  179
  183
  189
  194
  201
  207
  215
  223
  231
  240
  250
  261
  272
  283
  296
  309
  323
  337
  353
  369
  387
  405
  424
  444
  465
  488
  511
  536
  562
Total liabilities and equity, $m
  455
  458
  468
  480
  494
  508
  525
  543
  562
  583
  605
  629
  655
  683
  711
  741
  774
  809
  845
  883
  924
  967
  1,012
  1,060
  1,110
  1,163
  1,218
  1,277
  1,338
  1,403
  1,471
Debt-to-equity ratio
  1.173
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.240
  1.250
  1.260
  1.280
  1.290
  1.300
  1.310
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.450
  1.460
  1.460
  1.470
  1.480
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
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
Depreciation, amort., depletion, $m
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
Funds from operations, $m
  31
  23
  24
  24
  25
  26
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
Change in working capital, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  30
  22
  22
  23
  23
  24
  24
  25
  26
  27
  28
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
Maintenance CAPEX, $m
  0
  -15
  -15
  -16
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -47
New CAPEX, $m
  -14
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
Cash from investing activities, $m
  -13
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -37
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -63
  -67
  -70
  -74
  -77
  -82
  -86
  -90
  -94
  -99
  -105
Free cash flow, $m
  17
  0
  -2
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
Issuance/(repayment) of debt, $m
  -4
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
Issuance/(repurchase) of shares, $m
  -3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
Cash from financing (excl. dividends), $m  
  -14
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  34
  36
  37
  40
  42
  45
  47
Total cash flow (excl. dividends), $m
  3
  5
  5
  5
  4
  4
  4
  4
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
Retained Cash Flow (-), $m
  -2
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
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
 
  4
  1
  0
  -1
  -2
  -2
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
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
 
  3
  1
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
  99.9
  99.8
  99.6
  99.4
  99.1
  98.8
  98.5
  98.1
  97.7
  97.2
  96.7
  96.2
  95.7
  95.2
  94.6

Alico, Inc., together with its subsidiaries, operates as an agribusiness and land management company in the United States. The company operates through three segments: Orange Co., Conservation and Environmental Resources, and Other Operations. The Orange Co. segment engages in planting, owning, cultivating, and/or managing citrus groves to produce fruits for sale to fresh and processed citrus markets; and contracting for the harvesting, marketing, and hauling of citrus. The Conservation and Environmental Resources segment is involved in the activities related to cattle grazing, sod, native plant, and animal sales; and leasing, management, and/or conservation of unimproved native pasture land. The Other Operations segment engages in the activities related to rock mining royalties, oil exploration, and other lines of business; and ownership and/or lease of improved farmland. As of September 30, 2016, Alico, Inc. owned approximately 122,000 acres of land located in Alachua, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Lee, Martin, Osceola, and Polk counties of Florida. The company was founded in 1960 and is headquartered in Fort Myers, Florida. Alico, Inc. is a subsidiary of 734 Investors, LLC.

FINANCIAL RATIOS  of  Alico (ALCO)

Valuation Ratios
P/E Ratio 38.3
Price to Sales 1.9
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow 16.7
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 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 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 8.282 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]
▶ Insider Buying Slows to a Crawl as Earnings Season Takes Off   [Apr-18  09:10AM  at 24/7 Wall St.]
Stock chart of ALCO 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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