Intrinsic value of Capital Product Partners - CPLP

Previous Close

$3.53

  Intrinsic Value

$3.35

stock screener

  Rating & Target

hold

-5%

  Value-price divergence*

-14%

Previous close

$3.53

 
Intrinsic value

$3.35

 
Up/down potential

-5%

 
Rating

hold

 
Value-price divergence*

-14%

*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
  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
  242
  247
  253
  259
  266
  274
  283
  293
  303
  315
  327
  340
  353
  368
  384
  400
  418
  436
  456
  477
  499
  522
  546
  572
  599
  627
  657
  689
  722
  757
  794
Variable operating expenses, $m
 
  165
  169
  173
  178
  184
  189
  196
  203
  210
  219
  227
  236
  246
  257
  268
  279
  292
  305
  319
  334
  349
  365
  382
  401
  420
  440
  461
  483
  506
  531
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
  165
  169
  173
  178
  184
  189
  196
  203
  210
  219
  227
  236
  246
  257
  268
  279
  292
  305
  319
  334
  349
  365
  382
  401
  420
  440
  461
  483
  506
  531
Operating income, $m
  76
  82
  84
  86
  88
  91
  94
  97
  100
  104
  108
  112
  117
  122
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
  263
EBITDA, $m
  163
  82
  84
  86
  88
  91
  94
  97
  100
  104
  108
  112
  117
  122
  127
  132
  138
  144
  151
  158
  165
  173
  181
  189
  198
  208
  218
  228
  239
  251
  263
Interest expense (income), $m
  24
  23
  24
  24
  25
  26
  27
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  68
  71
  74
  78
Earnings before tax, $m
  52
  59
  60
  62
  63
  65
  67
  69
  72
  74
  77
  80
  83
  87
  90
  94
  98
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  160
  168
  176
  185
Tax expense, $m
  0
  16
  16
  17
  17
  18
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  38
  40
  41
  43
  45
  48
  50
Net income, $m
  52
  43
  44
  45
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135

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
  1,524
  1,559
  1,599
  1,644
  1,694
  1,748
  1,808
  1,872
  1,942
  2,016
  2,096
  2,181
  2,272
  2,368
  2,470
  2,578
  2,693
  2,814
  2,942
  3,077
  3,220
  3,370
  3,529
  3,696
  3,872
  4,057
  4,252
  4,457
  4,673
  4,900
Adjusted assets (=assets-cash), $m
  1,492
  1,524
  1,559
  1,599
  1,644
  1,694
  1,748
  1,808
  1,872
  1,942
  2,016
  2,096
  2,181
  2,272
  2,368
  2,470
  2,578
  2,693
  2,814
  2,942
  3,077
  3,220
  3,370
  3,529
  3,696
  3,872
  4,057
  4,252
  4,457
  4,673
  4,900
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
  -42
  -43
  -44
  -45
  -46
  -48
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -116
  -122
  -128
  -134
Total debt, $m
  602
  576
  590
  607
  626
  647
  671
  696
  723
  752
  784
  818
  854
  892
  933
  976
  1,022
  1,070
  1,121
  1,175
  1,233
  1,293
  1,357
  1,424
  1,494
  1,569
  1,647
  1,730
  1,816
  1,908
  2,004
Total liabilities, $m
  671
  645
  659
  676
  695
  716
  740
  765
  792
  821
  853
  887
  923
  961
  1,002
  1,045
  1,091
  1,139
  1,190
  1,244
  1,302
  1,362
  1,426
  1,493
  1,563
  1,638
  1,716
  1,799
  1,885
  1,977
  2,073
Total equity, $m
  928
  879
  899
  923
  948
  977
  1,009
  1,043
  1,080
  1,120
  1,163
  1,209
  1,258
  1,311
  1,366
  1,425
  1,488
  1,554
  1,624
  1,698
  1,776
  1,858
  1,945
  2,036
  2,133
  2,234
  2,341
  2,453
  2,572
  2,696
  2,827
Total liabilities and equity, $m
  1,599
  1,524
  1,558
  1,599
  1,643
  1,693
  1,749
  1,808
  1,872
  1,941
  2,016
  2,096
  2,181
  2,272
  2,368
  2,470
  2,579
  2,693
  2,814
  2,942
  3,078
  3,220
  3,371
  3,529
  3,696
  3,872
  4,057
  4,252
  4,457
  4,673
  4,900
Debt-to-equity ratio
  0.649
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.680
  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
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
  43
  44
  45
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
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
  43
  44
  45
  46
  48
  49
  51
  52
  54
  56
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  117
  123
  129
  135
Change in working capital, $m
  14
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Cash from operations, $m
  155
  44
  45
  46
  47
  49
  51
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
  141
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
  45
  46
  47
  49
  51
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  107
  112
  117
  122
  128
  134
  141
Issuance/(repayment) of debt, $m
  18
  14
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  64
  67
  71
  74
  78
  82
  87
  91
  96
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
  14
  15
  17
  19
  21
  23
  25
  27
  29
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  64
  67
  71
  74
  78
  82
  87
  91
  96
Total cash flow (excl. dividends), $m
  84
  57
  60
  63
  66
  70
  74
  78
  81
  86
  90
  94
  99
  104
  109
  115
  120
  126
  133
  139
  146
  153
  161
  169
  177
  186
  195
  205
  215
  226
  237
Retained Cash Flow (-), $m
  10
  -18
  -20
  -23
  -26
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -102
  -107
  -113
  -118
  -125
  -131
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
 
  106
  39
  40
  40
  41
  42
  43
  44
  46
  47
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  85
  88
  92
  97
  101
  106
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
 
  100
  35
  33
  31
  29
  27
  25
  23
  21
  19
  17
  15
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  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
  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. is an international owner of tanker, container and drybulk vessels. The Company's fleet consisted of 36 high specification vessels with an average age of approximately 7.4 years, as of December 31, 2016. As of December 31, 2016, its fleet consisted of four Suezmax crude oil tankers, 21 medium range product tankers, 10 post-panamax container carrier vessels and one Capesize bulk carrier. The Company's vessels are capable of carrying a range of cargoes, including crude oil, refined oil products, such as gasoline, diesel, fuel oil and jet fuel, edible oils and certain chemicals, such as ethanol, as well as dry cargo and containerized goods. Its fleet consists of product tankers, such as Aktoras, Aiolos, Agisilaos, Akeraios and Apostolos; crude tankers, such as Amoureux, Aias, Amore Mio II and Miltiadis M II; drybulk vessels, such as Cape Agamemnon, and container carrier vessels, such as Archimidis, Agamemnon and Hyundai Platinum.

FINANCIAL RATIOS  of  Capital Product Partners (CPLP)

Valuation Ratios
P/E Ratio 8.3
Price to Sales 1.8
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 6.7
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 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 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 0 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 -16.9%. 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 134.69 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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Financial statements of CPLP
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