Intrinsic value of Capital Product Partners - CPLP

Previous Close

$3.43

  Intrinsic Value

$3.35

stock screener

  Rating & Target

hold

-2%

  Value-price divergence*

-78%

Previous close

$3.43

 
Intrinsic value

$3.35

 
Up/down potential

-2%

 
Rating

hold

 
Value-price divergence*

-78%

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

We calculate the intrinsic value of CPLP 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 0.5

 

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, %
  10.00
  3.40
  3.56
  3.70
  3.83
  3.95
  4.06
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.92
Revenue, $m
  242
  250
  259
  269
  279
  290
  302
  314
  328
  342
  357
  373
  389
  407
  426
  445
  466
  488
  511
  536
  561
  588
  617
  647
  678
  711
  746
  782
  821
  861
  903
Variable operating expenses, $m
 
  167
  173
  180
  187
  194
  202
  210
  219
  229
  239
  249
  260
  272
  285
  298
  312
  327
  342
  358
  376
  394
  413
  433
  454
  476
  499
  523
  549
  576
  604
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
  166
  167
  173
  180
  187
  194
  202
  210
  219
  229
  239
  249
  260
  272
  285
  298
  312
  327
  342
  358
  376
  394
  413
  433
  454
  476
  499
  523
  549
  576
  604
Operating income, $m
  76
  83
  86
  89
  92
  96
  100
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  162
  169
  177
  186
  195
  204
  214
  224
  235
  247
  259
  272
  285
  299
EBITDA, $m
  163
  83
  86
  89
  92
  96
  100
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  162
  169
  177
  186
  195
  204
  214
  224
  235
  247
  259
  272
  285
  299
Interest expense (income), $m
  24
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
Earnings before tax, $m
  52
  60
  62
  64
  66
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  109
  115
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
  200
  210
Tax expense, $m
  0
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  57
Net income, $m
  52
  44
  45
  47
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  107
  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
  1,599
  1,545
  1,600
  1,659
  1,722
  1,790
  1,863
  1,940
  2,023
  2,110
  2,202
  2,300
  2,403
  2,513
  2,628
  2,750
  2,878
  3,014
  3,156
  3,307
  3,465
  3,631
  3,807
  3,991
  4,185
  4,389
  4,603
  4,829
  5,065
  5,314
  5,576
Adjusted assets (=assets-cash), $m
  1,492
  1,545
  1,600
  1,659
  1,722
  1,790
  1,863
  1,940
  2,023
  2,110
  2,202
  2,300
  2,403
  2,513
  2,628
  2,750
  2,878
  3,014
  3,156
  3,307
  3,465
  3,631
  3,807
  3,991
  4,185
  4,389
  4,603
  4,829
  5,065
  5,314
  5,576
Revenue / Adjusted assets
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
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
  26
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
Total debt, $m
  602
  584
  608
  633
  660
  688
  719
  752
  787
  823
  863
  904
  948
  994
  1,043
  1,094
  1,149
  1,206
  1,266
  1,330
  1,397
  1,467
  1,541
  1,619
  1,701
  1,787
  1,878
  1,973
  2,074
  2,179
  2,290
Total liabilities, $m
  671
  653
  677
  702
  729
  757
  788
  821
  856
  892
  932
  973
  1,017
  1,063
  1,112
  1,163
  1,218
  1,275
  1,335
  1,399
  1,466
  1,536
  1,610
  1,688
  1,770
  1,856
  1,947
  2,042
  2,143
  2,248
  2,359
Total equity, $m
  928
  891
  923
  957
  994
  1,033
  1,075
  1,120
  1,167
  1,217
  1,271
  1,327
  1,387
  1,450
  1,516
  1,587
  1,661
  1,739
  1,821
  1,908
  1,999
  2,095
  2,196
  2,303
  2,415
  2,532
  2,656
  2,786
  2,923
  3,066
  3,217
Total liabilities and equity, $m
  1,599
  1,544
  1,600
  1,659
  1,723
  1,790
  1,863
  1,941
  2,023
  2,109
  2,203
  2,300
  2,404
  2,513
  2,628
  2,750
  2,879
  3,014
  3,156
  3,307
  3,465
  3,631
  3,806
  3,991
  4,185
  4,388
  4,603
  4,828
  5,066
  5,314
  5,576
Debt-to-equity ratio
  0.649
  0.660
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
  0.690
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
Adjusted equity ratio
  0.550
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  52
  44
  45
  47
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
Depreciation, amort., depletion, $m
  87
  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
  169
  44
  45
  47
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  76
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
Change in working capital, $m
  14
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
Cash from operations, $m
  155
  44
  46
  48
  50
  51
  54
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
  157
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
  -91
  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
  -92
  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
  63
  44
  46
  48
  50
  51
  54
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
  157
Issuance/(repayment) of debt, $m
  18
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  91
  95
  100
  105
  111
Issuance/(repurchase) of shares, $m
  5
  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  
  21
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  91
  95
  100
  105
  111
Total cash flow (excl. dividends), $m
  84
  67
  69
  73
  76
  80
  84
  88
  93
  97
  102
  107
  112
  118
  124
  130
  136
  143
  150
  158
  165
  173
  182
  191
  201
  210
  221
  232
  243
  255
  268
Retained Cash Flow (-), $m
  10
  -30
  -32
  -34
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -151
Prev. year cash balance distribution, $m
 
  67
  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
 
  104
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  117
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  98
  33
  32
  30
  29
  27
  25
  23
  22
  20
  18
  16
  14
  12
  11
  9
  8
  6
  5
  4
  3
  3
  2
  1
  1
  1
  1
  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
  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

Capital Product Partners L.P., a shipping company, provides marine transportation services in Greece. It transports a range of cargoes, including crude oil; refined oil products, such as gasoline, diesel, fuel oil and jet fuel, and edible oils; chemicals, such as ethanol; and dry cargo and containerized goods under short-term voyage charters, and medium to long-term time and bareboat charters. As of December 31, 2016, the company owned a fleet of 36 vessels, which consisted of 4 Suezmax crude oil tankers, 21 medium range product tankers, 10 post-panamax container vessels, and 1 capesize bulk carrier. Capital GP L.L.C. serves as a general partner of the company. Capital Product Partners L.P. was founded in 2007 and is headquartered in Piraeus, Greece.

FINANCIAL RATIOS  of  Capital Product Partners (CPLP)

Valuation Ratios
P/E Ratio 8.1
Price to Sales 1.7
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow 6.5
Growth Rates
Sales Growth Rate 10%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.3%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 60.6%
Total Debt to Equity 64.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 3.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.4%
Return On Equity 5.6%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 95.5%
Gross Margin - 3 Yr. Avg. 96.4%
EBITDA Margin 67.4%
EBITDA Margin - 3 Yr. Avg. 68.3%
Operating Margin 31.4%
Oper. Margin - 3 Yr. Avg. 32.1%
Pre-Tax Margin 21.5%
Pre-Tax Margin - 3 Yr. Avg. 23.1%
Net Profit Margin 21.5%
Net Profit Margin - 3 Yr. Avg. 23.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 130.8%

CPLP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPLP stock intrinsic value calculation we used $242 million for the last fiscal year's total revenue generated by Capital Product Partners. The default revenue input number comes from 2016 income statement of Capital Product Partners. 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 CPLP stock valuation model: a) initial revenue growth rate of 3.4% 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 6.1%, whose default value for CPLP is calculated based on our internal credit rating of Capital Product Partners, 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 Capital Product Partners.
    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 CPLP stock the variable cost ratio is equal to 66.9%.

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 CPLP 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 4.1% for Capital Product Partners.

Corporate tax rate of 27% is the nominal tax rate for Capital Product Partners. 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 CPLP 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 CPLP are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Capital Product Partners 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 CPLP is equal to -10%. 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 - $928 million for Capital Product Partners - 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 135.901 million for Capital Product Partners 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 Capital Product Partners at the current share price and the inputted number of shares is $0.5 billion.

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Stock chart of CPLP Financial statements of CPLP
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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