Intrinsic value of Deltic Timber - DEL

Previous Close

$92.95

  Intrinsic Value

$5.13

stock screener

  Rating & Target

str. sell

-94%

Previous close

$92.95

 
Intrinsic value

$5.13

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of DEL 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 1.1

 

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, %
  12.89
  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
  219
  223
  229
  234
  241
  248
  256
  265
  274
  285
  296
  307
  320
  333
  347
  362
  378
  395
  413
  431
  451
  472
  494
  517
  542
  568
  595
  623
  653
  685
  718
Variable operating expenses, $m
 
  134
  137
  140
  144
  148
  153
  158
  164
  170
  177
  184
  191
  199
  208
  217
  226
  236
  247
  258
  270
  282
  295
  309
  324
  339
  356
  373
  391
  410
  430
Fixed operating expenses, $m
 
  71
  72
  74
  76
  78
  80
  82
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
Total operating expenses, $m
  198
  205
  209
  214
  220
  226
  233
  240
  248
  256
  265
  275
  284
  294
  305
  317
  328
  341
  355
  368
  383
  398
  414
  431
  449
  467
  487
  507
  529
  551
  575
Operating income, $m
  22
  19
  19
  20
  21
  22
  23
  25
  26
  28
  31
  33
  36
  39
  42
  46
  50
  54
  58
  63
  68
  74
  80
  86
  93
  100
  108
  116
  125
  134
  144
EBITDA, $m
  45
  43
  43
  45
  46
  48
  50
  52
  55
  58
  62
  65
  69
  74
  79
  84
  89
  95
  102
  108
  116
  123
  132
  141
  150
  160
  170
  182
  194
  206
  220
Interest expense (income), $m
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
Earnings before tax, $m
  13
  10
  10
  10
  10
  11
  12
  13
  14
  16
  18
  19
  22
  24
  26
  29
  32
  36
  39
  43
  47
  52
  57
  62
  67
  73
  80
  86
  94
  101
  109
Tax expense, $m
  4
  3
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  22
  23
  25
  27
  30
Net income, $m
  9
  7
  7
  7
  8
  8
  9
  10
  10
  12
  13
  14
  16
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  49
  54
  58
  63
  68
  74
  80

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  555
  560
  573
  587
  604
  622
  642
  664
  688
  713
  741
  770
  801
  835
  870
  908
  947
  989
  1,034
  1,081
  1,131
  1,183
  1,238
  1,297
  1,358
  1,423
  1,491
  1,562
  1,638
  1,717
  1,800
Adjusted assets (=assets-cash), $m
  549
  560
  573
  587
  604
  622
  642
  664
  688
  713
  741
  770
  801
  835
  870
  908
  947
  989
  1,034
  1,081
  1,131
  1,183
  1,238
  1,297
  1,358
  1,423
  1,491
  1,562
  1,638
  1,717
  1,800
Revenue / Adjusted assets
  0.399
  0.398
  0.400
  0.399
  0.399
  0.399
  0.399
  0.399
  0.398
  0.400
  0.399
  0.399
  0.400
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
Average production assets, $m
  456
  465
  475
  488
  501
  516
  533
  551
  571
  592
  615
  639
  665
  693
  722
  753
  786
  821
  858
  897
  938
  982
  1,028
  1,076
  1,127
  1,181
  1,237
  1,297
  1,359
  1,425
  1,494
Working capital, $m
  10
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Total debt, $m
  241
  247
  254
  262
  272
  282
  293
  305
  318
  332
  347
  364
  381
  399
  419
  440
  462
  485
  510
  536
  563
  592
  623
  655
  689
  725
  763
  803
  844
  888
  934
Total liabilities, $m
  304
  310
  317
  325
  335
  345
  356
  368
  381
  395
  410
  427
  444
  462
  482
  503
  525
  548
  573
  599
  626
  655
  686
  718
  752
  788
  826
  866
  907
  951
  997
Total equity, $m
  251
  250
  255
  262
  269
  278
  286
  296
  307
  318
  330
  343
  357
  372
  388
  405
  423
  441
  461
  482
  504
  528
  552
  578
  606
  634
  665
  697
  730
  766
  803
Total liabilities and equity, $m
  555
  560
  572
  587
  604
  623
  642
  664
  688
  713
  740
  770
  801
  834
  870
  908
  948
  989
  1,034
  1,081
  1,130
  1,183
  1,238
  1,296
  1,358
  1,422
  1,491
  1,563
  1,637
  1,717
  1,800
Debt-to-equity ratio
  0.960
  0.990
  1.000
  1.000
  1.010
  1.020
  1.020
  1.030
  1.040
  1.040
  1.050
  1.060
  1.070
  1.070
  1.080
  1.090
  1.090
  1.100
  1.110
  1.110
  1.120
  1.120
  1.130
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.160
Adjusted equity ratio
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446
  0.446

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  7
  7
  7
  8
  8
  9
  10
  10
  12
  13
  14
  16
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  49
  54
  58
  63
  68
  74
  80
Depreciation, amort., depletion, $m
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
Funds from operations, $m
  52
  31
  31
  32
  33
  34
  36
  37
  39
  41
  44
  46
  49
  52
  56
  59
  63
  68
  72
  77
  82
  87
  93
  100
  106
  113
  121
  129
  137
  146
  155
Change in working capital, $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
  1
  1
  1
  1
Cash from operations, $m
  44
  30
  31
  32
  33
  34
  36
  37
  39
  41
  44
  46
  49
  52
  56
  59
  63
  67
  72
  77
  82
  87
  93
  99
  106
  113
  120
  128
  136
  145
  155
Maintenance CAPEX, $m
  0
  -23
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -69
  -72
New CAPEX, $m
  -39
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -56
  -59
  -63
  -66
  -69
Cash from investing activities, $m
  -41
  -32
  -34
  -36
  -39
  -40
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -62
  -64
  -67
  -71
  -75
  -78
  -82
  -86
  -90
  -96
  -100
  -105
  -111
  -116
  -121
  -128
  -135
  -141
Free cash flow, $m
  3
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -8
  -9
  -9
  -9
  -9
  -9
  -9
  -8
  -8
  -7
  -7
  -6
  -5
  -4
  -3
  -1
  0
  2
  4
  6
  8
  11
  14
Issuance/(repayment) of debt, $m
  17
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
Issuance/(repurchase) of shares, $m
  -13
  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  
  3
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
Total cash flow (excl. dividends), $m
  5
  4
  4
  4
  4
  4
  4
  4
  5
  5
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  23
  25
  28
  31
  34
  38
  42
  46
  50
  55
  60
Retained Cash Flow (-), $m
  3
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
Prev. year cash balance distribution, $m
 
  6
  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
 
  6
  -2
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -2
  -1
  0
  2
  3
  5
  7
  9
  11
  14
  17
  19
  23
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
 
  5
  -1
  -2
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  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
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Deltic Timber Corporation is a vertically integrated natural resources company. The Company is engaged in the growing and harvesting of timber and the manufacturing and marketing of lumber and medium density fiberboard (MDF). It operates through four segments: Woodlands, which manages all aspects of the Company's timberlands; Manufacturing, which consists of its approximately two sawmills that manufacture a range of softwood lumber products and the Del-Tin Fiber plant that produces MDF; Real Estate, which includes the Company's four real estate developments and a related country club operation, and Corporate. It is also engaged in real estate development in central Arkansas. As of December 31, 2016, it developed and operated its own seed orchard. Its sawmills are located at Ola in central Arkansas and at Waldo in south Arkansas. It is engaged in developing the Chenal Valley, which is an upscale planned community, with approximately 4,300 acres of residential and commercial properties.

FINANCIAL RATIOS  of  Deltic Timber (DEL)

Valuation Ratios
P/E Ratio 125.9
Price to Sales 5.2
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 25.8
Price to Free Cash Flow 226.6
Growth Rates
Sales Growth Rate 12.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 39.3%
Cap. Spend. - 3 Yr. Gr. Rate 6.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 96%
Total Debt to Equity 96%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 1.9%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity 3.6%
Return On Equity - 3 Yr. Avg. 4.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 31.5%
Gross Margin - 3 Yr. Avg. 29.3%
EBITDA Margin 20.5%
EBITDA Margin - 3 Yr. Avg. 19.1%
Operating Margin 9.6%
Oper. Margin - 3 Yr. Avg. 10.1%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 6.9%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. 4.8%
Effective Tax Rate 30.8%
Eff/ Tax Rate - 3 Yr. Avg. 28.9%
Payout Ratio 55.6%

DEL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DEL stock intrinsic value calculation we used $219 million for the last fiscal year's total revenue generated by Deltic Timber. The default revenue input number comes from 2016 income statement of Deltic Timber. 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 DEL 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 DEL is calculated based on our internal credit rating of Deltic Timber, 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 Deltic Timber.
    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 DEL stock the variable cost ratio is equal to 59.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $69 million in the base year in the intrinsic value calculation for DEL 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 3.9% for Deltic Timber.

Corporate tax rate of 27% is the nominal tax rate for Deltic Timber. 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 DEL 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 DEL are equal to 208%.

Life of production assets of 19.8 years is the average useful life of capital assets used in Deltic Timber 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 DEL is equal to 1.8%. 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 - $251 million for Deltic Timber - 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 12.231 million for Deltic Timber 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 Deltic Timber at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ [$$] Potlatch to Combine With Deltic Timber in Stock Swap   [12:13AM  The Wall Street Journal]
▶ Deltic posts 3Q profit   [05:41PM  Associated Press]
▶ [$$] Potlatch to Combine With Deltic Timber in Stock Swap   [01:28PM  The Wall Street Journal]
▶ [$$] Potlatch Nears Deal to Combine With Deltic Timber in Stock Swap   [Oct-22-17 07:36PM  The Wall Street Journal]
▶ Deltic Schedules Third Quarter Conference Call   [Oct-10-17 10:02AM  Business Wire]
▶ Deltic Timber Declares Quarterly Dividend   [Oct-05-17 04:05PM  Business Wire]
▶ 5 Stocks That Look Good Short   [Aug-27-17 10:00AM  TheStreet.com]
▶ Deltic Timber Showing Weak Roots   [Aug-22-17 05:19PM  TheStreet.com]
▶ Deltic Timber Showing Weak Roots   [03:19PM  TheStreet.com]
▶ Deltic posts 2Q profit   [Aug-04-17 03:11AM  Associated Press]
▶ Deltic Announces Preliminary Second Quarter 2017 Results   [Aug-02-17 05:51PM  Business Wire]
▶ Deltic Schedules Second Quarter Conference Call   [Jul-11-17 09:56AM  Business Wire]
▶ ETFs with exposure to Deltic Timber Corp. : June 26, 2017   [Jun-26-17 03:49PM  Capital Cube]
▶ Deltic Timber Declares Quarterly Dividend   [Jun-15-17 04:39PM  Business Wire]
▶ Deltic posts 1Q profit   [05:02AM  Associated Press]
▶ Deltic Announces Preliminary First Quarter 2017 Results   [May-03-17 05:16PM  Business Wire]
▶ Deltic Schedules First Quarter Conference Call   [Apr-17-17 06:15PM  Business Wire]
▶ Deltic posts 4Q profit   [06:45AM  Associated Press]
▶ Deltic Issues Statement   [01:30PM  PR Newswire]
▶ Deltic Schedules Fourth Quarter Conference Call   [Jan-17-17 02:23PM  Business Wire]
Financial statements of DEL
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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