Intrinsic value of Consolidated-Tomoka Land - CTO

Previous Close

$63.55

  Intrinsic Value

$25.37

stock screener

  Rating & Target

str. sell

-60%

Previous close

$63.55

 
Intrinsic value

$25.37

 
Up/down potential

-60%

 
Rating

str. sell

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

We calculate the intrinsic value of CTO 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 0.4

 

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, %
  65.12
  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
  71
  72
  74
  76
  78
  80
  83
  86
  89
  92
  96
  100
  104
  108
  113
  117
  123
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  222
  233
Variable operating expenses, $m
 
  29
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  83
  88
  92
Fixed operating expenses, $m
 
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
Total operating expenses, $m
  34
  35
  35
  36
  38
  39
  40
  41
  42
  43
  46
  47
  49
  51
  52
  55
  57
  59
  62
  65
  68
  70
  73
  77
  80
  84
  87
  92
  95
  100
  105
Operating income, $m
  37
  38
  39
  40
  41
  42
  43
  45
  47
  48
  50
  52
  55
  57
  60
  62
  65
  68
  72
  75
  79
  83
  87
  91
  96
  100
  105
  111
  116
  122
  129
EBITDA, $m
  45
  49
  51
  52
  53
  55
  57
  59
  61
  63
  66
  69
  71
  75
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  136
  143
  150
  158
  166
Interest expense (income), $m
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
Earnings before tax, $m
  28
  31
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
Tax expense, $m
  12
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Net income, $m
  16
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  72

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  0
  0
  0
  0
  0
  0
  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
  409
  409
  419
  429
  441
  455
  469
  485
  503
  521
  541
  563
  586
  610
  636
  663
  692
  723
  756
  790
  826
  865
  905
  948
  992
  1,040
  1,089
  1,142
  1,197
  1,255
  1,316
Adjusted assets (=assets-cash), $m
  401
  409
  419
  429
  441
  455
  469
  485
  503
  521
  541
  563
  586
  610
  636
  663
  692
  723
  756
  790
  826
  865
  905
  948
  992
  1,040
  1,089
  1,142
  1,197
  1,255
  1,316
Revenue / Adjusted assets
  0.177
  0.176
  0.177
  0.177
  0.177
  0.176
  0.177
  0.177
  0.177
  0.177
  0.177
  0.178
  0.177
  0.177
  0.178
  0.176
  0.178
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
  0.177
Average production assets, $m
  343
  349
  357
  367
  377
  388
  401
  415
  429
  445
  462
  481
  500
  521
  543
  566
  591
  617
  645
  675
  706
  738
  773
  809
  847
  888
  930
  975
  1,022
  1,071
  1,124
Working capital, $m
  0
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Total debt, $m
  166
  171
  177
  184
  192
  201
  211
  221
  232
  244
  257
  271
  286
  302
  319
  337
  356
  376
  397
  419
  443
  468
  494
  522
  551
  582
  614
  648
  684
  722
  762
Total liabilities, $m
  260
  266
  272
  279
  287
  296
  306
  316
  327
  339
  352
  366
  381
  397
  414
  432
  451
  471
  492
  514
  538
  563
  589
  617
  646
  677
  709
  743
  779
  817
  857
Total equity, $m
  148
  143
  146
  150
  154
  159
  164
  169
  175
  182
  189
  196
  204
  213
  222
  231
  242
  252
  264
  276
  288
  302
  316
  331
  346
  363
  380
  398
  418
  438
  459
Total liabilities and equity, $m
  408
  409
  418
  429
  441
  455
  470
  485
  502
  521
  541
  562
  585
  610
  636
  663
  693
  723
  756
  790
  826
  865
  905
  948
  992
  1,040
  1,089
  1,141
  1,197
  1,255
  1,316
Debt-to-equity ratio
  1.122
  1.200
  1.210
  1.230
  1.250
  1.270
  1.290
  1.300
  1.320
  1.340
  1.360
  1.380
  1.400
  1.420
  1.440
  1.450
  1.470
  1.490
  1.510
  1.520
  1.540
  1.550
  1.560
  1.580
  1.590
  1.600
  1.620
  1.630
  1.640
  1.650
  1.660
Adjusted equity ratio
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349
  0.349

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  72
Depreciation, amort., depletion, $m
  8
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  22
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
Funds from operations, $m
  -1
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
  104
  109
Change in working capital, $m
  -15
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  14
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
Maintenance CAPEX, $m
  0
  -11
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
New CAPEX, $m
  -97
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
Cash from investing activities, $m
  -23
  -18
  -20
  -21
  -22
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -36
  -38
  -39
  -41
  -44
  -46
  -49
  -51
  -53
  -57
  -59
  -62
  -65
  -68
  -72
  -76
  -79
  -83
  -88
Free cash flow, $m
  -9
  16
  15
  15
  14
  14
  14
  13
  13
  13
  13
  13
  13
  13
  14
  14
  14
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
Issuance/(repayment) of debt, $m
  21
  5
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
Issuance/(repurchase) of shares, $m
  -7
  0
  0
  0
  0
  0
  0
  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  
  14
  5
  6
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
Total cash flow (excl. dividends), $m
  5
  21
  21
  22
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  57
  59
  62
Retained Cash Flow (-), $m
  -13
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
Prev. year cash balance distribution, $m
 
  8
  0
  0
  0
  0
  0
  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
 
  27
  18
  18
  18
  18
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  23
  24
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  25
  15
  14
  13
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  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
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Consolidated-Tomoka Land Co. is a real estate operating company. As of December 31, 2016, the Company owned and managed 31 commercial real estate properties in 10 states in the United States. Its segments include Income Properties, Commercial Loan Investments, Real Estate Operations, Golf Operations, and Agriculture and Other. It also leases land for billboards; has agricultural operations that are managed by a third party, which consists of leasing land for hay and sod production, timber harvesting and hunting leases, and owns and manages subsurface interests. As of December 31, 2016, the Company owned 21 single-tenant and 10 multi-tenant income-producing properties with approximately 1,700,000 square feet of gross leasable space. As of December 31, 2016, it also owned and managed a land portfolio of approximately 9,800 acres. Its income property operations consist of income-producing properties and its business is focused on investing in additional income-producing properties.

FINANCIAL RATIOS  of  Consolidated-Tomoka Land (CTO)

Valuation Ratios
P/E Ratio 22.7
Price to Sales 5.1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 25.9
Price to Free Cash Flow -4.4
Growth Rates
Sales Growth Rate 65.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.5%
Cap. Spend. - 3 Yr. Gr. Rate 18.8%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 112.2%
Total Debt to Equity 112.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.7%
Return On Equity 11.3%
Return On Equity - 3 Yr. Avg. 7.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 63.4%
Gross Margin - 3 Yr. Avg. 65.8%
EBITDA Margin 60.6%
EBITDA Margin - 3 Yr. Avg. 52.7%
Operating Margin 52.1%
Oper. Margin - 3 Yr. Avg. 44.9%
Pre-Tax Margin 39.4%
Pre-Tax Margin - 3 Yr. Avg. 33.3%
Net Profit Margin 22.5%
Net Profit Margin - 3 Yr. Avg. 19.3%
Effective Tax Rate 42.9%
Eff/ Tax Rate - 3 Yr. Avg. 41.9%
Payout Ratio 6.3%

CTO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTO stock intrinsic value calculation we used $71 million for the last fiscal year's total revenue generated by Consolidated-Tomoka Land. The default revenue input number comes from 2016 income statement of Consolidated-Tomoka Land. 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 CTO 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 8.2%, whose default value for CTO is calculated based on our internal credit rating of Consolidated-Tomoka Land, 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 Consolidated-Tomoka Land.
    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 CTO stock the variable cost ratio is equal to 39.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for CTO 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 4.2% for Consolidated-Tomoka Land.

Corporate tax rate of 27% is the nominal tax rate for Consolidated-Tomoka Land. 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 CTO 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 CTO are equal to 482.4%.

Life of production assets of 42.8 years is the average useful life of capital assets used in Consolidated-Tomoka Land 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 CTO is equal to -11.3%. 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 - $148 million for Consolidated-Tomoka Land - 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 5.581 million for Consolidated-Tomoka Land 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 Consolidated-Tomoka Land at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Consolidated-Tomoka posts 3Q profit   [Oct-18-17 04:34PM  Associated Press]
▶ Where's the Hedging?   [Aug-29-17 06:15PM  GuruFocus.com]
▶ Consolidated-Tomoka posts 2Q profit   [Jul-19-17 11:00PM  Associated Press]
▶ Consolidated-Tomoka posts 1Q profit   [Apr-17-17 04:36PM  Associated Press]
▶ Consolidated-Tomoka Mails Letter to Shareholders   [Mar-30-17 08:24AM  Business Wire]
▶ 4 new tenants join Winter Park retail complex   [Feb-03-17 02:45PM  at bizjournals.com]
Financial statements of CTO
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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