Intrinsic value of CatchMark Timber Trust - CTT

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$11.42

  Intrinsic Value

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  Value-price divergence*

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$11.42

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

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

We calculate the intrinsic value of CTT 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 2013), $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
2013(a)
   2014
   2015
   2016
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -27.27
  28.60
  26.24
  24.12
  22.20
  20.48
  18.94
  17.54
  16.29
  15.16
  14.14
  13.23
  12.41
  11.67
  11.00
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.24
  6.11
Revenue, $m
  32
  41
  52
  64
  79
  95
  113
  133
  154
  178
  203
  230
  258
  288
  320
  353
  388
  425
  462
  502
  543
  586
  630
  676
  724
  774
  826
  880
  936
  994
  1,055
Variable operating expenses, $m
 
  24
  31
  38
  47
  56
  67
  79
  92
  106
  121
  136
  153
  171
  190
  210
  231
  252
  275
  298
  323
  348
  374
  402
  430
  460
  491
  523
  556
  591
  627
Fixed operating expenses, $m
 
  24
  24
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
Total operating expenses, $m
  41
  48
  55
  63
  72
  82
  94
  106
  120
  135
  150
  166
  184
  203
  222
  243
  265
  287
  311
  335
  361
  387
  414
  443
  472
  503
  535
  568
  602
  638
  675
Operating income, $m
  -9
  -7
  -3
  1
  7
  13
  19
  27
  35
  43
  53
  63
  74
  85
  97
  110
  123
  137
  152
  167
  183
  199
  216
  234
  252
  272
  292
  312
  334
  357
  380
EBITDA, $m
  0
  -7
  -3
  1
  7
  13
  19
  27
  35
  43
  53
  63
  74
  85
  97
  110
  123
  137
  152
  167
  183
  199
  216
  234
  252
  272
  292
  312
  334
  357
  380
Interest expense (income), $m
  1
  2
  2
  3
  4
  5
  6
  7
  8
  10
  11
  13
  15
  16
  18
  20
  23
  25
  27
  30
  32
  35
  38
  40
  43
  47
  50
  53
  57
  60
  64
Earnings before tax, $m
  -13
  -9
  -5
  -2
  3
  8
  13
  19
  26
  34
  42
  50
  59
  69
  79
  90
  101
  113
  125
  137
  151
  164
  179
  194
  209
  225
  242
  259
  278
  296
  316
Tax expense, $m
  0
  0
  0
  0
  1
  2
  4
  5
  7
  9
  11
  14
  16
  19
  21
  24
  27
  30
  34
  37
  41
  44
  48
  52
  56
  61
  65
  70
  75
  80
  85
Net income, $m
  -13
  -9
  -5
  -2
  2
  6
  10
  14
  19
  25
  30
  37
  43
  50
  58
  65
  74
  82
  91
  100
  110
  120
  130
  141
  153
  164
  177
  189
  203
  216
  231

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  339
  424
  536
  665
  812
  979
  1,164
  1,368
  1,591
  1,832
  2,091
  2,368
  2,662
  2,972
  3,299
  3,642
  4,002
  4,377
  4,768
  5,175
  5,599
  6,039
  6,497
  6,973
  7,468
  7,982
  8,516
  9,071
  9,650
  10,251
  10,878
Adjusted assets (=assets-cash), $m
  330
  424
  536
  665
  812
  979
  1,164
  1,368
  1,591
  1,832
  2,091
  2,368
  2,662
  2,972
  3,299
  3,642
  4,002
  4,377
  4,768
  5,175
  5,599
  6,039
  6,497
  6,973
  7,468
  7,982
  8,516
  9,071
  9,650
  10,251
  10,878
Revenue / Adjusted assets
  0.097
  0.097
  0.097
  0.096
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
  0.097
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
  -12
  -15
  -18
  -22
  -27
  -32
  -37
  -43
  -50
  -57
  -65
  -73
  -81
  -90
  -99
  -109
  -119
  -130
  -141
  -153
  -165
  -177
  -190
  -204
  -218
  -232
  -247
  -263
  -279
  -296
Total debt, $m
  52
  69
  89
  112
  138
  168
  201
  238
  278
  321
  367
  417
  469
  525
  584
  645
  709
  776
  846
  919
  995
  1,074
  1,156
  1,241
  1,330
  1,422
  1,517
  1,617
  1,720
  1,828
  1,940
Total liabilities, $m
  59
  76
  96
  119
  145
  175
  208
  245
  285
  328
  374
  424
  476
  532
  591
  652
  716
  783
  853
  926
  1,002
  1,081
  1,163
  1,248
  1,337
  1,429
  1,524
  1,624
  1,727
  1,835
  1,947
Total equity, $m
  280
  348
  440
  546
  667
  804
  956
  1,123
  1,306
  1,504
  1,717
  1,944
  2,185
  2,440
  2,709
  2,990
  3,285
  3,593
  3,914
  4,249
  4,597
  4,958
  5,334
  5,725
  6,131
  6,553
  6,992
  7,448
  7,922
  8,416
  8,931
Total liabilities and equity, $m
  339
  424
  536
  665
  812
  979
  1,164
  1,368
  1,591
  1,832
  2,091
  2,368
  2,661
  2,972
  3,300
  3,642
  4,001
  4,376
  4,767
  5,175
  5,599
  6,039
  6,497
  6,973
  7,468
  7,982
  8,516
  9,072
  9,649
  10,251
  10,878
Debt-to-equity ratio
  0.186
  0.200
  0.200
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
  0.220
Adjusted equity ratio
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -13
  -9
  -5
  -2
  2
  6
  10
  14
  19
  25
  30
  37
  43
  50
  58
  65
  74
  82
  91
  100
  110
  120
  130
  141
  153
  164
  177
  189
  203
  216
  231
Depreciation, amort., depletion, $m
  9
  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
  -2
  -9
  -5
  -2
  2
  6
  10
  14
  19
  25
  30
  37
  43
  50
  58
  65
  74
  82
  91
  100
  110
  120
  130
  141
  153
  164
  177
  189
  203
  216
  231
Change in working capital, $m
  -1
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
Cash from operations, $m
  -1
  -6
  -2
  2
  6
  10
  15
  20
  25
  31
  37
  44
  51
  59
  67
  75
  83
  92
  102
  111
  122
  132
  143
  154
  166
  178
  191
  204
  218
  233
  248
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
  -2
  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
  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
Free cash flow, $m
  -1
  -6
  -2
  2
  6
  10
  15
  20
  25
  31
  37
  44
  51
  59
  67
  75
  83
  92
  102
  111
  122
  132
  143
  154
  166
  178
  191
  204
  218
  233
  248
Issuance/(repayment) of debt, $m
  -80
  17
  20
  23
  26
  30
  33
  37
  40
  43
  46
  50
  53
  56
  59
  61
  64
  67
  70
  73
  76
  79
  82
  85
  89
  92
  96
  99
  103
  108
  112
Issuance/(repurchase) of shares, $m
  103
  57
  74
  81
  89
  97
  104
  111
  118
  124
  129
  133
  137
  141
  143
  145
  147
  148
  149
  150
  151
  151
  151
  151
  151
  152
  152
  152
  153
  153
  154
Cash from financing (excl. dividends), $m  
  11
  74
  94
  104
  115
  127
  137
  148
  158
  167
  175
  183
  190
  197
  202
  206
  211
  215
  219
  223
  227
  230
  233
  236
  240
  244
  248
  251
  256
  261
  266
Total cash flow (excl. dividends), $m
  9
  11
  17
  25
  32
  40
  48
  56
  65
  74
  84
  94
  104
  114
  125
  136
  148
  160
  172
  184
  197
  211
  225
  239
  255
  270
  287
  304
  322
  340
  360
Retained Cash Flow (-), $m
  -70
  -77
  -91
  -106
  -121
  -137
  -152
  -168
  -183
  -198
  -213
  -227
  -241
  -255
  -268
  -282
  -295
  -308
  -321
  -334
  -348
  -362
  -376
  -391
  -406
  -422
  -439
  -456
  -475
  -494
  -514
Prev. year cash balance distribution, $m
 
  9
  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
 
  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
Discount rate, %
 
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for 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
Current shareholders' claim on cash, %
  100
  88.2
  77.8
  69.7
  63.2
  57.9
  53.5
  49.9
  46.8
  44.1
  41.9
  39.9
  38.2
  36.7
  35.4
  34.2
  33.2
  32.3
  31.5
  30.7
  30.1
  29.4
  28.9
  28.4
  27.9
  27.5
  27.1
  26.7
  26.4
  26.1
  25.8

CatchMark Timber Trust, Inc., a real estate investment trust (REIT), focuses on the acquisition of timberland properties in the United States. It intends to acquire timberland properties throughout the timber-producing regions of the United States and, to a lesser extent, in timber-producing regions outside the United States. The company intends to qualify as a REIT under the Internal Revenue Code of 1986. Wells Timberland REIT was founded in September 2005. It was formerly known as Wells Real Estate Investment Trust IV, Inc. and changed its name to Wells Timber Real Estate Investment Trust, Inc. in November 2005 and changed to Wells Timberland REIT, Inc. in 2006. CatchMark Timber Trust, Inc. is headquartered in Norcross, Georgia.

FINANCIAL RATIOS  of  CatchMark Timber Trust (CTT)

Valuation Ratios
P/E Ratio -12.2
Price to Sales 5
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow -158.7
Price to Free Cash Flow -52.9
Growth Rates
Sales Growth Rate -27.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -91.3%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 18.6%
Total Debt to Equity 18.6%
Interest Coverage -12
Management Effectiveness
Return On Assets -3.5%
Ret/ On Assets - 3 Yr. Avg. -3.2%
Return On Total Capital -3.9%
Ret/ On T. Cap. - 3 Yr. Avg. -3.4%
Return On Equity -5.3%
Return On Equity - 3 Yr. Avg. -5.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 43.8%
Gross Margin - 3 Yr. Avg. 41.6%
EBITDA Margin -9.4%
EBITDA Margin - 3 Yr. Avg. -0.9%
Operating Margin -28.1%
Oper. Margin - 3 Yr. Avg. -17.4%
Pre-Tax Margin -40.6%
Pre-Tax Margin - 3 Yr. Avg. -30.4%
Net Profit Margin -40.6%
Net Profit Margin - 3 Yr. Avg. -30.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -92.3%

CTT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTT stock intrinsic value calculation we used $32 million for the last fiscal year's total revenue generated by CatchMark Timber Trust. The default revenue input number comes from 2013 income statement of CatchMark Timber 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 CTT stock valuation model: a) initial revenue growth rate of 28.6% 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 6.7%, whose default value for CTT is calculated based on our internal credit rating of CatchMark Timber 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 CatchMark Timber 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 CTT stock the variable cost ratio is equal to 59.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $23 million in the base year in the intrinsic value calculation for CTT 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 3.5% for CatchMark Timber Trust.

Corporate tax rate of 27% is the nominal tax rate for CatchMark Timber 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 CTT 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 CTT are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in CatchMark Timber 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 CTT is equal to -28.1%. 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 - $280 million for CatchMark Timber 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 38.867 million for CatchMark Timber 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 CatchMark Timber Trust at the current share price and the inputted number of shares is $0.4 billion.


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COMPANY NEWS

▶ 3 Top Dividend Stocks in Lumber   [Jun-08-17 10:00AM  Motley Fool]
▶ 5 Top Dividend Stocks in the Forestry Industry   [May-16-17 04:30PM  Motley Fool]
▶ CatchMark reports 1Q loss   [May-04-17 06:07PM  Associated Press]
▶ CatchMark reports 4Q loss   [Feb-16-17 05:26PM  Associated Press]
▶ Should You Buy Catchmark Timber Trust Inc (CTT)?   [Dec-14-16 03:40PM  at Insider Monkey]
▶ Timber REIT Giants Branching Out   [Nov-09  06:45AM  at Forbes]
Stock chart of CTT Financial statements of CTT Annual reports of CTT
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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