Intrinsic value of Conifer Holdings - CNFR

Previous Close

$6.65

  Intrinsic Value

$13.60

stock screener

  Rating & Target

str. buy

+104%

  Value-price divergence*

0%

Previous close

$6.65

 
Intrinsic value

$13.60

 
Up/down potential

+104%

 
Rating

str. buy

 
Value-price divergence*

0%

Our model is not good at valuating stocks of financial companies, such as CNFR.

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

We calculate the intrinsic value of CNFR 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 0.0

 

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, %
  32.39
  32.40
  29.66
  27.19
  24.97
  22.98
  21.18
  19.56
  18.11
  16.79
  15.62
  14.55
  13.60
  12.74
  11.96
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
Revenue, $m
  0
  124
  161
  205
  257
  315
  382
  457
  540
  630
  729
  835
  949
  1,069
  1,197
  1,332
  1,474
  1,623
  1,778
  1,940
  2,109
  2,284
  2,467
  2,657
  2,854
  3,059
  3,272
  3,494
  3,724
  3,964
  4,213
Variable operating expenses, $m
 
  123
  160
  203
  254
  312
  378
  452
  534
  624
  721
  826
  938
  1,058
  1,184
  1,318
  1,458
  1,605
  1,758
  1,918
  2,085
  2,259
  2,440
  2,628
  2,823
  3,026
  3,236
  3,456
  3,683
  3,920
  4,167
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
  102
  123
  160
  203
  254
  312
  378
  452
  534
  624
  721
  826
  938
  1,058
  1,184
  1,318
  1,458
  1,605
  1,758
  1,918
  2,085
  2,259
  2,440
  2,628
  2,823
  3,026
  3,236
  3,456
  3,683
  3,920
  4,167
Operating income, $m
  -8
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  46
EBITDA, $m
  -8
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  46
Interest expense (income), $m
  1
  1
  4
  8
  12
  16
  22
  28
  35
  43
  52
  61
  71
  82
  93
  105
  118
  131
  145
  160
  175
  191
  207
  224
  242
  261
  280
  300
  321
  343
  365
Earnings before tax, $m
  -9
  0
  -2
  -5
  -9
  -13
  -18
  -23
  -29
  -36
  -44
  -52
  -60
  -70
  -80
  -90
  -101
  -113
  -125
  -138
  -152
  -166
  -180
  -195
  -211
  -227
  -244
  -262
  -280
  -299
  -319
Tax expense, $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
Net income, $m
  -8
  0
  -2
  -5
  -9
  -13
  -18
  -23
  -29
  -36
  -44
  -52
  -60
  -70
  -80
  -90
  -101
  -113
  -125
  -138
  -152
  -166
  -180
  -195
  -211
  -227
  -244
  -262
  -280
  -299
  -319

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  204
  270
  350
  445
  556
  684
  829
  991
  1,171
  1,368
  1,581
  1,811
  2,058
  2,320
  2,597
  2,890
  3,197
  3,520
  3,856
  4,208
  4,574
  4,955
  5,351
  5,763
  6,191
  6,636
  7,099
  7,579
  8,079
  8,599
  9,140
Adjusted assets (=assets-cash), $m
  204
  270
  350
  445
  556
  684
  829
  991
  1,171
  1,368
  1,581
  1,811
  2,058
  2,320
  2,597
  2,890
  3,197
  3,520
  3,856
  4,208
  4,574
  4,955
  5,351
  5,763
  6,191
  6,636
  7,099
  7,579
  8,079
  8,599
  9,140
Revenue / Adjusted assets
  0.000
  0.459
  0.460
  0.461
  0.462
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
Average production assets, $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
Working capital, $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
Total debt, $m
  18
  62
  115
  179
  253
  338
  435
  543
  663
  794
  937
  1,090
  1,254
  1,429
  1,614
  1,810
  2,015
  2,230
  2,454
  2,689
  2,933
  3,187
  3,451
  3,726
  4,012
  4,308
  4,617
  4,937
  5,271
  5,617
  5,978
Total liabilities, $m
  136
  180
  233
  297
  371
  456
  553
  661
  781
  912
  1,055
  1,208
  1,372
  1,547
  1,732
  1,928
  2,133
  2,348
  2,572
  2,807
  3,051
  3,305
  3,569
  3,844
  4,130
  4,426
  4,735
  5,055
  5,389
  5,735
  6,096
Total equity, $m
  68
  90
  117
  148
  185
  228
  276
  330
  390
  455
  527
  603
  685
  772
  865
  962
  1,065
  1,172
  1,284
  1,401
  1,523
  1,650
  1,782
  1,919
  2,062
  2,210
  2,364
  2,524
  2,690
  2,863
  3,043
Total liabilities and equity, $m
  204
  270
  350
  445
  556
  684
  829
  991
  1,171
  1,367
  1,582
  1,811
  2,057
  2,319
  2,597
  2,890
  3,198
  3,520
  3,856
  4,208
  4,574
  4,955
  5,351
  5,763
  6,192
  6,636
  7,099
  7,579
  8,079
  8,598
  9,139
Debt-to-equity ratio
  0.265
  0.690
  0.990
  1.210
  1.370
  1.490
  1.580
  1.650
  1.700
  1.740
  1.780
  1.810
  1.830
  1.850
  1.870
  1.880
  1.890
  1.900
  1.910
  1.920
  1.930
  1.930
  1.940
  1.940
  1.950
  1.950
  1.950
  1.960
  1.960
  1.960
  1.960
Adjusted equity ratio
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -8
  0
  -2
  -5
  -9
  -13
  -18
  -23
  -29
  -36
  -44
  -52
  -60
  -70
  -80
  -90
  -101
  -113
  -125
  -138
  -152
  -166
  -180
  -195
  -211
  -227
  -244
  -262
  -280
  -299
  -319
Depreciation, amort., depletion, $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
Funds from operations, $m
  19
  0
  -2
  -5
  -9
  -13
  -18
  -23
  -29
  -36
  -44
  -52
  -60
  -70
  -80
  -90
  -101
  -113
  -125
  -138
  -152
  -166
  -180
  -195
  -211
  -227
  -244
  -262
  -280
  -299
  -319
Change in working capital, $m
  13
  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 operations, $m
  6
  0
  -2
  -5
  -9
  -13
  -18
  -23
  -29
  -36
  -44
  -52
  -60
  -70
  -80
  -90
  -101
  -113
  -125
  -138
  -152
  -166
  -180
  -195
  -211
  -227
  -244
  -262
  -280
  -299
  -319
Maintenance CAPEX, $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
New CAPEX, $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 investing activities, $m
  -11
  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
Free cash flow, $m
  -5
  0
  -2
  -5
  -9
  -13
  -18
  -23
  -29
  -36
  -44
  -52
  -60
  -70
  -80
  -90
  -101
  -113
  -125
  -138
  -152
  -166
  -180
  -195
  -211
  -227
  -244
  -262
  -280
  -299
  -319
Issuance/(repayment) of debt, $m
  5
  44
  53
  63
  74
  85
  97
  108
  120
  131
  142
  153
  164
  175
  185
  195
  205
  215
  225
  234
  244
  254
  264
  275
  286
  297
  308
  321
  333
  347
  361
Issuance/(repurchase) of shares, $m
  -1
  22
  29
  37
  46
  56
  66
  77
  89
  102
  115
  128
  142
  157
  172
  188
  204
  220
  238
  255
  273
  292
  312
  332
  353
  375
  398
  422
  446
  472
  499
Cash from financing (excl. dividends), $m  
  4
  66
  82
  100
  120
  141
  163
  185
  209
  233
  257
  281
  306
  332
  357
  383
  409
  435
  463
  489
  517
  546
  576
  607
  639
  672
  706
  743
  779
  819
  860
Total cash flow (excl. dividends), $m
  0
  66
  80
  95
  111
  128
  145
  162
  179
  197
  214
  230
  246
  262
  278
  293
  308
  322
  337
  351
  366
  381
  396
  412
  428
  445
  462
  481
  500
  520
  541
Retained Cash Flow (-), $m
  9
  -22
  -29
  -37
  -46
  -56
  -66
  -77
  -89
  -102
  -115
  -128
  -142
  -157
  -172
  -188
  -204
  -220
  -238
  -255
  -273
  -292
  -312
  -332
  -353
  -375
  -398
  -422
  -446
  -472
  -499
Prev. year cash balance distribution, $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 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
 
  44
  51
  58
  65
  72
  79
  85
  90
  95
  99
  102
  104
  105
  105
  105
  104
  102
  99
  96
  93
  89
  84
  80
  75
  70
  64
  59
  53
  48
  42
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  41
  44
  46
  47
  47
  46
  44
  41
  38
  34
  30
  25
  21
  17
  14
  11
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  69.4
  48.1
  33.5
  23.5
  16.6
  11.9
  8.6
  6.2
  4.6
  3.4
  2.6
  1.9
  1.5
  1.1
  0.9
  0.7
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0

Conifer Holdings, Inc., an insurance holding company, offers insurance coverage in specialty commercial and specialty personal product lines. It underwrites property, general liability, commercial multi-peril, and liquor liability policies. The company serves the commercial insurance needs of owner-operated businesses in the markets, including hospitality, such as restaurants, bars, taverns, and bowling centers, as well as small grocery and convenience stores; artisan contractors comprising plumbers, painters, carpenters, electricians, and other independent contractors; security service providers, such as companies that provide security guard services, security alarm products and services, and private investigative services; and automobile repair and used car facilities. It also provides specialty homeowners' insurance products, including catastrophic coverage, including hurricane and wind coverage homeowners in Florida, Hawaii and Texas; and dwelling insurance tailored for owners of lower value homes in Illinois, Indiana, Louisiana, and Texas. Conifer Holdings, Inc. markets and sells insurance products through a network of approximately 5,500 independent agents in 50 states. The company was founded in 2009 and is headquartered in Birmingham, Michigan.

FINANCIAL RATIOS  of  Conifer Holdings (CNFR)

Valuation Ratios
P/E Ratio -6.3
Price to Sales 0.5
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 8.5
Growth Rates
Sales Growth Rate 32.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 26.5%
Total Debt to Equity 26.5%
Interest Coverage -8
Management Effectiveness
Return On Assets -3.7%
Ret/ On Assets - 3 Yr. Avg. -2.6%
Return On Total Capital -9.1%
Ret/ On T. Cap. - 3 Yr. Avg. -7.2%
Return On Equity -11%
Return On Equity - 3 Yr. Avg. -10.3%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -8.5%
EBITDA Margin - 3 Yr. Avg. -5.6%
Operating Margin -8.5%
Oper. Margin - 3 Yr. Avg. -6.2%
Pre-Tax Margin -9.6%
Pre-Tax Margin - 3 Yr. Avg. -7%
Net Profit Margin -8.5%
Net Profit Margin - 3 Yr. Avg. -6.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CNFR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNFR stock intrinsic value calculation we used $94 million for the last fiscal year's total revenue generated by Conifer Holdings. The default revenue input number comes from 2016 income statement of Conifer Holdings. 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 CNFR stock valuation model: a) initial revenue growth rate of 32.4% 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 7.3%, whose default value for CNFR is calculated based on our internal credit rating of Conifer Holdings, 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 Conifer Holdings.
    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 CNFR stock the variable cost ratio is equal to 98.9%.

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 CNFR 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 6.5% for Conifer Holdings.

Corporate tax rate of 27% is the nominal tax rate for Conifer Holdings. 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 CNFR 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 CNFR are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Conifer Holdings 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 CNFR is equal to 0%. 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 - $68 million for Conifer Holdings - 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 7.422 million for Conifer Holdings 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 Conifer Holdings at the current share price and the inputted number of shares is $0.0 billion.

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Stock chart of CNFR Financial statements of CNFR
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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