Intrinsic value of Conifer Holdings - CNFR

Previous Close

$5.85

  Intrinsic Value

$6.73

stock screener

  Rating & Target

hold

+15%

Previous close

$5.85

 
Intrinsic value

$6.73

 
Up/down potential

+15%

 
Rating

hold

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

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
  13.00
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  0
  106
  119
  133
  147
  162
  178
  195
  212
  230
  248
  268
  288
  309
  330
  353
  376
  401
  426
  453
  480
  509
  539
  570
  602
  636
  672
  709
  748
  788
  830
Variable operating expenses, $m
 
  105
  118
  131
  146
  161
  176
  192
  209
  227
  246
  265
  285
  305
  327
  349
  372
  396
  421
  448
  475
  503
  533
  563
  596
  629
  664
  701
  739
  779
  821
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
  105
  118
  131
  146
  161
  176
  192
  209
  227
  246
  265
  285
  305
  327
  349
  372
  396
  421
  448
  475
  503
  533
  563
  596
  629
  664
  701
  739
  779
  821
Operating income, $m
  -8
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
EBITDA, $m
  -8
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Interest expense (income), $m
  1
  1
  2
  4
  5
  6
  8
  9
  11
  12
  14
  16
  17
  19
  21
  23
  26
  28
  30
  32
  35
  37
  40
  43
  46
  49
  52
  56
  59
  63
  66
Earnings before tax, $m
  -9
  0
  -1
  -2
  -3
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
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
  -1
  -2
  -3
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57

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
  230
  259
  288
  319
  352
  386
  422
  459
  498
  539
  580
  624
  669
  716
  765
  816
  869
  924
  982
  1,041
  1,103
  1,168
  1,236
  1,306
  1,380
  1,457
  1,537
  1,621
  1,709
  1,801
Adjusted assets (=assets-cash), $m
  204
  230
  259
  288
  319
  352
  386
  422
  459
  498
  539
  580
  624
  669
  716
  765
  816
  869
  924
  982
  1,041
  1,103
  1,168
  1,236
  1,306
  1,380
  1,457
  1,537
  1,621
  1,709
  1,801
Revenue / Adjusted assets
  0.000
  0.461
  0.459
  0.462
  0.461
  0.460
  0.461
  0.462
  0.462
  0.462
  0.460
  0.462
  0.462
  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
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
  36
  54
  74
  95
  117
  140
  164
  188
  214
  241
  269
  298
  328
  360
  393
  426
  462
  498
  537
  577
  618
  661
  706
  753
  803
  854
  907
  964
  1,022
  1,083
Total liabilities, $m
  136
  154
  172
  192
  213
  235
  258
  282
  306
  332
  359
  387
  416
  446
  478
  511
  544
  580
  616
  655
  695
  736
  779
  824
  871
  921
  972
  1,025
  1,082
  1,140
  1,201
Total equity, $m
  68
  77
  86
  96
  106
  117
  129
  141
  153
  166
  179
  193
  208
  223
  239
  255
  272
  289
  308
  327
  347
  367
  389
  412
  435
  460
  485
  512
  540
  569
  600
Total liabilities and equity, $m
  204
  231
  258
  288
  319
  352
  387
  423
  459
  498
  538
  580
  624
  669
  717
  766
  816
  869
  924
  982
  1,042
  1,103
  1,168
  1,236
  1,306
  1,381
  1,457
  1,537
  1,622
  1,709
  1,801
Debt-to-equity ratio
  0.265
  0.470
  0.630
  0.770
  0.890
  1.000
  1.090
  1.160
  1.230
  1.290
  1.350
  1.390
  1.440
  1.470
  1.510
  1.540
  1.570
  1.600
  1.620
  1.640
  1.660
  1.680
  1.700
  1.720
  1.730
  1.750
  1.760
  1.770
  1.780
  1.800
  1.810
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
  -1
  -2
  -3
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
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
  -1
  -2
  -3
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
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
  -1
  -2
  -3
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
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
  -1
  -2
  -3
  -4
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
Issuance/(repayment) of debt, $m
  5
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  61
Issuance/(repurchase) of shares, $m
  -1
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  44
  47
  49
  53
  56
  59
  63
  67
  70
  74
  79
  83
  88
Cash from financing (excl. dividends), $m  
  4
  27
  29
  32
  35
  37
  40
  43
  46
  49
  52
  55
  58
  61
  64
  69
  72
  76
  81
  85
  89
  94
  99
  104
  110
  116
  121
  128
  135
  142
  149
Total cash flow (excl. dividends), $m
  0
  26
  28
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
Retained Cash Flow (-), $m
  9
  -9
  -10
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -41
  -44
  -47
  -49
  -53
  -56
  -59
  -63
  -67
  -70
  -74
  -79
  -83
  -88
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
 
  18
  18
  18
  18
  17
  17
  17
  17
  16
  16
  15
  15
  14
  14
  13
  13
  12
  11
  11
  10
  10
  9
  8
  8
  7
  7
  6
  5
  5
  4
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
 
  16
  15
  14
  13
  11
  10
  9
  8
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  84.8
  71.4
  59.8
  49.9
  41.6
  34.6
  28.7
  23.8
  19.7
  16.3
  13.5
  11.2
  9.3
  7.7
  6.3
  5.2
  4.3
  3.6
  3.0
  2.4
  2.0
  1.7
  1.4
  1.1
  0.9
  0.8
  0.6
  0.5
  0.4
  0.4

Conifer Holdings, Inc. is an insurance holding company. Through its insurance company subsidiaries, the Company offers insurance coverage in both specialty commercial and specialty personal product lines. It operates through two segments: commercial lines and personal lines. It is engaged in underwriting and marketing insurance coverage, and administering claims processing for such policies. The Company offers coverage for property, liability, automobile, and other miscellaneous coverage primarily to owner-operated small and mid-sized businesses, professional organizations and hospitality businesses, such as restaurants, bars and taverns. The Company offers coverage for low-value dwelling, wind-exposed homeowners and automobile. Its personal lines products include Catastrophe coverage, including hurricane and wind coverage, to underserved homeowners in Florida, Hawaii and Texas, and Dwelling insurance.

FINANCIAL RATIOS  of  Conifer Holdings (CNFR)

Valuation Ratios
P/E Ratio -5.6
Price to Sales 0.5
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 7.4
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 13% 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 8.332 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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COMPANY NEWS

▶ Conifer Holdings Inc to Host Earnings Call   [Nov-09-17 06:40AM  ACCESSWIRE]
▶ Conifer Holdings Raises $30 Million in Subordinated Notes   [Oct-12-17 01:03PM  GlobeNewswire]
▶ New Strong Sell Stocks for September 28th   [Sep-28-17 09:27AM  Zacks]
▶ New Strong Sell Stocks for September 25th   [Sep-25-17 08:49AM  Zacks]
▶ 'Irreconcilable Difference' Makes This Company Worth a Look   [Sep-01-17 12:33PM  GuruFocus.com]
▶ New Strong Sell Stocks for April 6th   [Apr-06-17 09:11AM  Zacks]
▶ New Strong Sell Stocks for March 22nd   [Mar-22-17 11:17AM  Zacks]
▶ These 2 Insurance Stocks Are a Good Bet   [Oct-13-16 12:00PM  TheStreet.com]
▶ Conifer Holdings downgraded by Sandler O'Neill   [Apr-29-16 08:59AM  Briefing.com]
▶ Here's How Much CMBS Exposure Insurers Have   [Feb-17-16 11:18AM  at Barrons.com]
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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