Intrinsic value of Camden Property Trust - CPT

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$86.13

  Intrinsic Value

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  Value-price divergence*

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

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

We calculate the intrinsic value of CPT 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 7.5

 

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, %
  4.78
  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
  876
  894
  914
  938
  964
  993
  1,025
  1,060
  1,098
  1,139
  1,182
  1,229
  1,279
  1,332
  1,389
  1,448
  1,512
  1,579
  1,650
  1,725
  1,805
  1,888
  1,976
  2,069
  2,167
  2,270
  2,379
  2,493
  2,614
  2,740
  2,874
Variable operating expenses, $m
 
  357
  366
  375
  386
  397
  410
  424
  439
  455
  473
  492
  512
  533
  555
  579
  605
  632
  660
  690
  722
  755
  791
  828
  867
  908
  952
  997
  1,046
  1,096
  1,149
Fixed operating expenses, $m
 
  391
  400
  410
  421
  431
  442
  453
  464
  476
  488
  500
  512
  525
  538
  552
  566
  580
  594
  609
  624
  640
  656
  672
  689
  706
  724
  742
  761
  780
  799
Total operating expenses, $m
  722
  748
  766
  785
  807
  828
  852
  877
  903
  931
  961
  992
  1,024
  1,058
  1,093
  1,131
  1,171
  1,212
  1,254
  1,299
  1,346
  1,395
  1,447
  1,500
  1,556
  1,614
  1,676
  1,739
  1,807
  1,876
  1,948
Operating income, $m
  154
  146
  148
  152
  158
  165
  173
  183
  195
  207
  222
  238
  255
  274
  295
  317
  342
  368
  396
  426
  458
  493
  530
  569
  611
  656
  703
  754
  808
  865
  925
EBITDA, $m
  404
  401
  409
  420
  433
  449
  466
  486
  508
  533
  560
  589
  620
  655
  692
  731
  774
  819
  867
  919
  974
  1,033
  1,095
  1,161
  1,231
  1,305
  1,383
  1,467
  1,555
  1,648
  1,746
Interest expense (income), $m
  93
  89
  92
  94
  97
  100
  104
  108
  112
  117
  122
  127
  133
  139
  146
  153
  160
  168
  177
  185
  195
  205
  215
  226
  237
  250
  262
  276
  290
  305
  321
Earnings before tax, $m
  457
  56
  57
  58
  61
  64
  69
  75
  82
  90
  100
  110
  122
  135
  149
  164
  181
  199
  219
  241
  264
  288
  315
  343
  374
  406
  441
  478
  518
  560
  604
Tax expense, $m
  2
  15
  15
  16
  16
  17
  19
  20
  22
  24
  27
  30
  33
  36
  40
  44
  49
  54
  59
  65
  71
  78
  85
  93
  101
  110
  119
  129
  140
  151
  163
Net income, $m
  820
  41
  41
  42
  44
  47
  51
  55
  60
  66
  73
  80
  89
  98
  109
  120
  132
  146
  160
  176
  192
  211
  230
  251
  273
  297
  322
  349
  378
  409
  441

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  237
  0
  0
  0
  0
  0
  0
  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
  6,028
  5,917
  6,053
  6,209
  6,384
  6,577
  6,790
  7,021
  7,271
  7,541
  7,830
  8,140
  8,470
  8,822
  9,196
  9,592
  10,013
  10,458
  10,928
  11,425
  11,950
  12,504
  13,089
  13,704
  14,353
  15,036
  15,756
  16,513
  17,310
  18,148
  19,030
Adjusted assets (=assets-cash), $m
  5,791
  5,917
  6,053
  6,209
  6,384
  6,577
  6,790
  7,021
  7,271
  7,541
  7,830
  8,140
  8,470
  8,822
  9,196
  9,592
  10,013
  10,458
  10,928
  11,425
  11,950
  12,504
  13,089
  13,704
  14,353
  15,036
  15,756
  16,513
  17,310
  18,148
  19,030
Revenue / Adjusted assets
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
  0.151
Average production assets, $m
  5,082
  5,183
  5,303
  5,439
  5,592
  5,761
  5,947
  6,150
  6,369
  6,605
  6,859
  7,130
  7,419
  7,728
  8,055
  8,402
  8,771
  9,160
  9,573
  10,008
  10,468
  10,953
  11,465
  12,004
  12,573
  13,171
  13,801
  14,465
  15,163
  15,897
  16,669
Working capital, $m
  0
  -242
  -248
  -254
  -261
  -269
  -278
  -287
  -298
  -309
  -320
  -333
  -347
  -361
  -376
  -393
  -410
  -428
  -447
  -468
  -489
  -512
  -536
  -561
  -587
  -615
  -645
  -676
  -708
  -743
  -779
Total debt, $m
  2,481
  2,545
  2,616
  2,697
  2,788
  2,888
  2,999
  3,119
  3,249
  3,389
  3,540
  3,701
  3,872
  4,055
  4,250
  4,456
  4,675
  4,906
  5,151
  5,409
  5,682
  5,970
  6,274
  6,594
  6,932
  7,287
  7,661
  8,055
  8,469
  8,905
  9,364
Total liabilities, $m
  3,013
  3,077
  3,148
  3,229
  3,320
  3,420
  3,531
  3,651
  3,781
  3,921
  4,072
  4,233
  4,404
  4,587
  4,782
  4,988
  5,207
  5,438
  5,683
  5,941
  6,214
  6,502
  6,806
  7,126
  7,464
  7,819
  8,193
  8,587
  9,001
  9,437
  9,896
Total equity, $m
  3,015
  2,840
  2,906
  2,980
  3,064
  3,157
  3,259
  3,370
  3,490
  3,620
  3,758
  3,907
  4,066
  4,234
  4,414
  4,604
  4,806
  5,020
  5,246
  5,484
  5,736
  6,002
  6,282
  6,578
  6,889
  7,217
  7,563
  7,926
  8,309
  8,711
  9,134
Total liabilities and equity, $m
  6,028
  5,917
  6,054
  6,209
  6,384
  6,577
  6,790
  7,021
  7,271
  7,541
  7,830
  8,140
  8,470
  8,821
  9,196
  9,592
  10,013
  10,458
  10,929
  11,425
  11,950
  12,504
  13,088
  13,704
  14,353
  15,036
  15,756
  16,513
  17,310
  18,148
  19,030
Debt-to-equity ratio
  0.823
  0.900
  0.900
  0.900
  0.910
  0.910
  0.920
  0.930
  0.930
  0.940
  0.940
  0.950
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
  0.980
  0.990
  0.990
  0.990
  1.000
  1.000
  1.010
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
Adjusted equity ratio
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  820
  41
  41
  42
  44
  47
  51
  55
  60
  66
  73
  80
  89
  98
  109
  120
  132
  146
  160
  176
  192
  211
  230
  251
  273
  297
  322
  349
  378
  409
  441
Depreciation, amort., depletion, $m
  250
  255
  261
  268
  275
  284
  293
  303
  314
  325
  338
  351
  365
  381
  397
  414
  432
  451
  472
  493
  516
  540
  565
  591
  619
  649
  680
  713
  747
  783
  821
Funds from operations, $m
  443
  296
  302
  310
  320
  331
  344
  358
  374
  391
  411
  432
  454
  479
  505
  534
  564
  597
  632
  669
  708
  750
  795
  842
  892
  945
  1,002
  1,062
  1,125
  1,192
  1,262
Change in working capital, $m
  0
  -5
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
Cash from operations, $m
  443
  263
  308
  317
  327
  339
  352
  367
  384
  402
  422
  444
  468
  493
  521
  550
  581
  615
  651
  689
  730
  773
  819
  867
  919
  973
  1,031
  1,093
  1,157
  1,226
  1,298
Maintenance CAPEX, $m
  0
  -250
  -255
  -261
  -268
  -275
  -284
  -293
  -303
  -314
  -325
  -338
  -351
  -365
  -381
  -397
  -414
  -432
  -451
  -472
  -493
  -516
  -540
  -565
  -591
  -619
  -649
  -680
  -713
  -747
  -783
New CAPEX, $m
  -343
  -102
  -119
  -136
  -153
  -170
  -186
  -203
  -219
  -236
  -253
  -271
  -289
  -308
  -327
  -347
  -368
  -390
  -412
  -436
  -460
  -485
  -512
  -539
  -568
  -599
  -630
  -663
  -698
  -734
  -772
Cash from investing activities, $m
  690
  -352
  -374
  -397
  -421
  -445
  -470
  -496
  -522
  -550
  -578
  -609
  -640
  -673
  -708
  -744
  -782
  -822
  -863
  -908
  -953
  -1,001
  -1,052
  -1,104
  -1,159
  -1,218
  -1,279
  -1,343
  -1,411
  -1,481
  -1,555
Free cash flow, $m
  1,133
  -89
  -67
  -81
  -94
  -106
  -118
  -128
  -138
  -148
  -156
  -165
  -173
  -180
  -187
  -194
  -201
  -207
  -213
  -218
  -223
  -228
  -233
  -237
  -241
  -244
  -248
  -251
  -253
  -255
  -257
Issuance/(repayment) of debt, $m
  -247
  64
  71
  81
  91
  101
  110
  120
  130
  140
  150
  161
  172
  183
  194
  206
  219
  231
  245
  259
  273
  288
  304
  320
  337
  355
  374
  394
  414
  436
  459
Issuance/(repurchase) of shares, $m
  0
  0
  61
  75
  87
  98
  109
  119
  128
  137
  145
  152
  160
  166
  172
  178
  184
  189
  194
  198
  202
  206
  209
  212
  215
  217
  219
  220
  221
  222
  222
Cash from financing (excl. dividends), $m  
  -241
  64
  132
  156
  178
  199
  219
  239
  258
  277
  295
  313
  332
  349
  366
  384
  403
  420
  439
  457
  475
  494
  513
  532
  552
  572
  593
  614
  635
  658
  681
Total cash flow (excl. dividends), $m
  892
  -25
  4
  0
  -3
  -6
  -7
  -8
  -8
  -7
  -6
  -4
  -1
  3
  7
  12
  18
  25
  32
  40
  50
  60
  71
  83
  97
  111
  126
  143
  161
  181
  201
Retained Cash Flow (-), $m
  -198
  -62
  -65
  -75
  -84
  -93
  -102
  -111
  -120
  -129
  -139
  -149
  -159
  -169
  -179
  -190
  -202
  -214
  -226
  -239
  -252
  -266
  -280
  -296
  -311
  -328
  -345
  -363
  -382
  -402
  -423
Prev. year cash balance distribution, $m
 
  237
  0
  0
  0
  0
  0
  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
 
  149
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
 
  139
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  99.1
  98.1
  97.0
  95.8
  94.5
  93.1
  91.7
  90.3
  88.8
  87.4
  86.0
  84.6
  83.3
  81.9
  80.6
  79.4
  78.2
  77.0
  75.9
  74.8
  73.8
  72.8
  71.8
  70.9
  70.1
  69.3
  68.5
  67.8
  67.1

Camden Property Trust is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, development, acquisition, management, and disposition of multifamily residential apartment communities. The firm’s properties principally consist of mid-rise buildings and two-and three-story buildings with various amenities, such as swimming pools and a clubhouse, whirlpool spas, tennis courts, and controlled-access gates. Camden Property Trust was founded on May 25, 1993 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Camden Property Trust (CPT)

Valuation Ratios
P/E Ratio 10.3
Price to Sales 9.6
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 19
Price to Free Cash Flow 84.3
Growth Rates
Sales Growth Rate 4.8%
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 -0.8%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 82.3%
Total Debt to Equity 82.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 15.1%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 14.9%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 28.1%
Return On Equity - 3 Yr. Avg. 15.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 61.2%
Gross Margin - 3 Yr. Avg. 60.7%
EBITDA Margin 91.3%
EBITDA Margin - 3 Yr. Avg. 78.5%
Operating Margin 17.6%
Oper. Margin - 3 Yr. Avg. 16%
Pre-Tax Margin 52.2%
Pre-Tax Margin - 3 Yr. Avg. 39%
Net Profit Margin 93.6%
Net Profit Margin - 3 Yr. Avg. 53.5%
Effective Tax Rate 0.4%
Eff/ Tax Rate - 3 Yr. Avg. 0.5%
Payout Ratio 80.9%

CPT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPT stock intrinsic value calculation we used $876 million for the last fiscal year's total revenue generated by Camden Property Trust. The default revenue input number comes from 2016 income statement of Camden Property Trust. 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 CPT 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 7.3%, whose default value for CPT is calculated based on our internal credit rating of Camden Property Trust, 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 Camden Property Trust.
    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 CPT stock the variable cost ratio is equal to 40%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $381 million in the base year in the intrinsic value calculation for CPT 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 3.6% for Camden Property Trust.

Corporate tax rate of 27% is the nominal tax rate for Camden Property Trust. 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 CPT 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 CPT are equal to 580.1%.

Life of production assets of 20.3 years is the average useful life of capital assets used in Camden Property Trust 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 CPT is equal to -27.1%. 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 - $3015 million for Camden Property Trust - 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 87.185 million for Camden Property Trust 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 Camden Property Trust at the current share price and the inputted number of shares is $7.5 billion.


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COMPANY NEWS

▶ Camden reports 1Q results   [May-04-17 04:54PM  Associated Press]
▶ Houston Preps for the Big Game   [Feb-03-17 03:26PM  at Bloomberg]
▶ Does Camden Property Trust (CPT) Represent a Good Investment?   [Dec-13-16 05:25PM  at Insider Monkey]
▶ Investors Are Clamoring For Teleflex Incorporated (TFX)   [Nov-26-16 01:57PM  at Insider Monkey]
▶ MAA Buys Post Properties: 4 Reasons to Like the Deal   [Aug-15-16 09:34AM  at Barrons.com]
Stock chart of CPT Financial statements of CPT Annual reports of CPT
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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