Intrinsic value of International Paper - IP

Previous Close

$57.63

  Intrinsic Value

$68.52

stock screener

  Rating & Target

hold

+19%

  Value-price divergence*

-39%

Previous close

$57.63

 
Intrinsic value

$68.52

 
Up/down potential

+19%

 
Rating

hold

 
Value-price divergence*

-39%

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

We calculate the intrinsic value of IP 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 23.6

 

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, %
  -5.75
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  21,079
  22,723
  24,432
  26,208
  28,053
  29,971
  31,965
  34,039
  36,197
  38,443
  40,782
  43,219
  45,760
  48,410
  51,175
  54,062
  57,076
  60,226
  63,519
  66,962
  70,563
  74,331
  78,276
  82,405
  86,730
  91,260
  96,007
  100,981
  106,194
  111,660
  117,390
Variable operating expenses, $m
 
  14,948
  16,047
  17,189
  18,376
  19,609
  20,891
  22,225
  23,612
  25,057
  26,561
  27,792
  29,426
  31,130
  32,908
  34,764
  36,702
  38,728
  40,845
  43,059
  45,375
  47,798
  50,334
  52,990
  55,771
  58,684
  61,736
  64,935
  68,287
  71,802
  75,486
Fixed operating expenses, $m
 
  5,918
  6,066
  6,218
  6,373
  6,533
  6,696
  6,863
  7,035
  7,211
  7,391
  7,576
  7,765
  7,960
  8,159
  8,362
  8,572
  8,786
  9,005
  9,231
  9,461
  9,698
  9,940
  10,189
  10,444
  10,705
  10,972
  11,247
  11,528
  11,816
  12,111
Total operating expenses, $m
  19,533
  20,866
  22,113
  23,407
  24,749
  26,142
  27,587
  29,088
  30,647
  32,268
  33,952
  35,368
  37,191
  39,090
  41,067
  43,126
  45,274
  47,514
  49,850
  52,290
  54,836
  57,496
  60,274
  63,179
  66,215
  69,389
  72,708
  76,182
  79,815
  83,618
  87,597
Operating income, $m
  1,546
  1,856
  2,318
  2,801
  3,304
  3,829
  4,378
  4,951
  5,549
  6,175
  6,830
  7,852
  8,569
  9,321
  10,109
  10,935
  11,802
  12,712
  13,668
  14,672
  15,727
  16,835
  18,001
  19,226
  20,515
  21,871
  23,298
  24,799
  26,379
  28,042
  29,792
EBITDA, $m
  2,773
  2,884
  3,398
  3,934
  4,493
  5,077
  5,686
  6,322
  6,986
  7,680
  8,406
  9,165
  9,960
  10,793
  11,665
  12,579
  13,537
  14,543
  15,599
  16,708
  17,872
  19,095
  20,380
  21,732
  23,152
  24,646
  26,217
  27,869
  29,608
  31,436
  33,361
Interest expense (income), $m
  682
  731
  878
  1,031
  1,190
  1,354
  1,526
  1,704
  1,889
  2,082
  2,282
  2,491
  2,709
  2,936
  3,172
  3,419
  3,677
  3,946
  4,228
  4,522
  4,829
  5,151
  5,487
  5,840
  6,208
  6,595
  6,999
  7,423
  7,867
  8,333
  8,821
Earnings before tax, $m
  956
  1,126
  1,440
  1,770
  2,114
  2,475
  2,852
  3,247
  3,660
  4,094
  4,548
  5,360
  5,860
  6,385
  6,936
  7,516
  8,125
  8,766
  9,440
  10,150
  10,898
  11,685
  12,514
  13,387
  14,307
  15,277
  16,299
  17,376
  18,512
  19,709
  20,971
Tax expense, $m
  247
  304
  389
  478
  571
  668
  770
  877
  988
  1,105
  1,228
  1,447
  1,582
  1,724
  1,873
  2,029
  2,194
  2,367
  2,549
  2,741
  2,942
  3,155
  3,379
  3,614
  3,863
  4,125
  4,401
  4,692
  4,998
  5,321
  5,662
Net income, $m
  904
  822
  1,051
  1,292
  1,543
  1,807
  2,082
  2,370
  2,672
  2,988
  3,320
  3,913
  4,278
  4,661
  5,064
  5,487
  5,931
  6,399
  6,892
  7,410
  7,955
  8,530
  9,135
  9,772
  10,444
  11,152
  11,898
  12,685
  13,514
  14,388
  15,309

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,033
  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
  33,093
  34,586
  37,187
  39,890
  42,699
  45,618
  48,653
  51,810
  55,094
  58,513
  62,073
  65,783
  69,650
  73,683
  77,892
  82,285
  86,874
  91,669
  96,680
  101,920
  107,402
  113,138
  119,141
  125,427
  132,009
  138,904
  146,129
  153,700
  161,635
  169,954
  178,675
Adjusted assets (=assets-cash), $m
  32,060
  34,586
  37,187
  39,890
  42,699
  45,618
  48,653
  51,810
  55,094
  58,513
  62,073
  65,783
  69,650
  73,683
  77,892
  82,285
  86,874
  91,669
  96,680
  101,920
  107,402
  113,138
  119,141
  125,427
  132,009
  138,904
  146,129
  153,700
  161,635
  169,954
  178,675
Revenue / Adjusted assets
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
  0.657
Average production assets, $m
  6,401
  6,908
  7,427
  7,967
  8,528
  9,111
  9,717
  10,348
  11,004
  11,687
  12,398
  13,139
  13,911
  14,717
  15,557
  16,435
  17,351
  18,309
  19,310
  20,356
  21,451
  22,597
  23,796
  25,051
  26,366
  27,743
  29,186
  30,698
  32,283
  33,944
  35,686
Working capital, $m
  2,601
  1,954
  2,101
  2,254
  2,413
  2,578
  2,749
  2,927
  3,113
  3,306
  3,507
  3,717
  3,935
  4,163
  4,401
  4,649
  4,909
  5,179
  5,463
  5,759
  6,068
  6,392
  6,732
  7,087
  7,459
  7,848
  8,257
  8,684
  9,133
  9,603
  10,096
Total debt, $m
  11,314
  13,309
  15,621
  18,024
  20,521
  23,116
  25,815
  28,621
  31,541
  34,580
  37,745
  41,043
  44,481
  48,066
  51,808
  55,714
  59,793
  64,055
  68,511
  73,169
  78,042
  83,141
  88,478
  94,066
  99,918
  106,048
  112,471
  119,201
  126,256
  133,651
  141,404
Total liabilities, $m
  28,752
  30,747
  33,059
  35,462
  37,959
  40,554
  43,253
  46,059
  48,979
  52,018
  55,183
  58,481
  61,919
  65,504
  69,246
  73,152
  77,231
  81,493
  85,949
  90,607
  95,480
  100,579
  105,916
  111,504
  117,356
  123,486
  129,909
  136,639
  143,694
  151,089
  158,842
Total equity, $m
  4,341
  3,839
  4,128
  4,428
  4,740
  5,064
  5,400
  5,751
  6,115
  6,495
  6,890
  7,302
  7,731
  8,179
  8,646
  9,134
  9,643
  10,175
  10,731
  11,313
  11,922
  12,558
  13,225
  13,922
  14,653
  15,418
  16,220
  17,061
  17,941
  18,865
  19,833
Total liabilities and equity, $m
  33,093
  34,586
  37,187
  39,890
  42,699
  45,618
  48,653
  51,810
  55,094
  58,513
  62,073
  65,783
  69,650
  73,683
  77,892
  82,286
  86,874
  91,668
  96,680
  101,920
  107,402
  113,137
  119,141
  125,426
  132,009
  138,904
  146,129
  153,700
  161,635
  169,954
  178,675
Debt-to-equity ratio
  2.606
  3.470
  3.780
  4.070
  4.330
  4.570
  4.780
  4.980
  5.160
  5.320
  5.480
  5.620
  5.750
  5.880
  5.990
  6.100
  6.200
  6.300
  6.380
  6.470
  6.550
  6.620
  6.690
  6.760
  6.820
  6.880
  6.930
  6.990
  7.040
  7.080
  7.130
Adjusted equity ratio
  0.103
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111
  0.111

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  904
  822
  1,051
  1,292
  1,543
  1,807
  2,082
  2,370
  2,672
  2,988
  3,320
  3,913
  4,278
  4,661
  5,064
  5,487
  5,931
  6,399
  6,892
  7,410
  7,955
  8,530
  9,135
  9,772
  10,444
  11,152
  11,898
  12,685
  13,514
  14,388
  15,309
Depreciation, amort., depletion, $m
  1,227
  1,027
  1,079
  1,133
  1,189
  1,248
  1,308
  1,371
  1,437
  1,505
  1,576
  1,314
  1,391
  1,472
  1,556
  1,643
  1,735
  1,831
  1,931
  2,036
  2,145
  2,260
  2,380
  2,505
  2,637
  2,774
  2,919
  3,070
  3,228
  3,394
  3,569
Funds from operations, $m
  2,549
  1,849
  2,130
  2,425
  2,733
  3,054
  3,390
  3,741
  4,109
  4,493
  4,896
  5,227
  5,669
  6,133
  6,619
  7,130
  7,667
  8,230
  8,823
  9,445
  10,100
  10,789
  11,514
  12,278
  13,081
  13,926
  14,817
  15,755
  16,742
  17,782
  18,877
Change in working capital, $m
  71
  141
  147
  153
  159
  165
  171
  178
  186
  193
  201
  210
  219
  228
  238
  248
  259
  271
  283
  296
  310
  324
  339
  355
  372
  390
  408
  428
  448
  470
  493
Cash from operations, $m
  2,478
  1,707
  1,983
  2,272
  2,574
  2,889
  3,219
  3,563
  3,923
  4,300
  4,695
  5,017
  5,451
  5,905
  6,382
  6,882
  7,407
  7,959
  8,539
  9,149
  9,791
  10,465
  11,175
  11,922
  12,709
  13,537
  14,409
  15,327
  16,294
  17,312
  18,385
Maintenance CAPEX, $m
  0
  -640
  -691
  -743
  -797
  -853
  -911
  -972
  -1,035
  -1,100
  -1,169
  -1,240
  -1,314
  -1,391
  -1,472
  -1,556
  -1,643
  -1,735
  -1,831
  -1,931
  -2,036
  -2,145
  -2,260
  -2,380
  -2,505
  -2,637
  -2,774
  -2,919
  -3,070
  -3,228
  -3,394
New CAPEX, $m
  -1,348
  -507
  -519
  -540
  -561
  -583
  -606
  -630
  -656
  -683
  -711
  -741
  -772
  -806
  -841
  -878
  -916
  -958
  -1,001
  -1,047
  -1,095
  -1,146
  -1,199
  -1,255
  -1,315
  -1,377
  -1,443
  -1,512
  -1,585
  -1,661
  -1,742
Cash from investing activities, $m
  -3,498
  -1,147
  -1,210
  -1,283
  -1,358
  -1,436
  -1,517
  -1,602
  -1,691
  -1,783
  -1,880
  -1,981
  -2,086
  -2,197
  -2,313
  -2,434
  -2,559
  -2,693
  -2,832
  -2,978
  -3,131
  -3,291
  -3,459
  -3,635
  -3,820
  -4,014
  -4,217
  -4,431
  -4,655
  -4,889
  -5,136
Free cash flow, $m
  -1,020
  560
  773
  990
  1,216
  1,453
  1,701
  1,961
  2,232
  2,517
  2,815
  3,037
  3,364
  3,708
  4,069
  4,449
  4,847
  5,267
  5,708
  6,172
  6,660
  7,175
  7,717
  8,287
  8,889
  9,523
  10,191
  10,896
  11,639
  12,422
  13,248
Issuance/(repayment) of debt, $m
  1,861
  2,234
  2,312
  2,403
  2,497
  2,595
  2,698
  2,806
  2,920
  3,039
  3,165
  3,298
  3,438
  3,586
  3,741
  3,906
  4,079
  4,262
  4,455
  4,659
  4,873
  5,099
  5,337
  5,588
  5,852
  6,130
  6,423
  6,730
  7,054
  7,395
  7,754
Issuance/(repurchase) of shares, $m
  -132
  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  
  1,715
  2,234
  2,312
  2,403
  2,497
  2,595
  2,698
  2,806
  2,920
  3,039
  3,165
  3,298
  3,438
  3,586
  3,741
  3,906
  4,079
  4,262
  4,455
  4,659
  4,873
  5,099
  5,337
  5,588
  5,852
  6,130
  6,423
  6,730
  7,054
  7,395
  7,754
Total cash flow (excl. dividends), $m
  716
  2,795
  3,085
  3,392
  3,713
  4,049
  4,400
  4,767
  5,152
  5,556
  5,980
  6,335
  6,802
  7,294
  7,811
  8,354
  8,927
  9,529
  10,163
  10,830
  11,533
  12,274
  13,054
  13,875
  14,741
  15,653
  16,614
  17,627
  18,693
  19,818
  21,002
Retained Cash Flow (-), $m
  -457
  -292
  -289
  -300
  -312
  -324
  -337
  -350
  -365
  -379
  -395
  -412
  -429
  -448
  -467
  -488
  -509
  -532
  -556
  -582
  -608
  -637
  -666
  -698
  -731
  -765
  -802
  -840
  -881
  -923
  -968
Prev. year cash balance distribution, $m
 
  794
  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
 
  3,297
  2,797
  3,092
  3,401
  3,725
  4,063
  4,417
  4,788
  5,177
  5,585
  5,923
  6,373
  6,846
  7,344
  7,867
  8,417
  8,997
  9,606
  10,249
  10,925
  11,637
  12,387
  13,178
  14,010
  14,888
  15,812
  16,786
  17,813
  18,894
  20,034
Discount rate, %
 
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
 
  3,022
  2,330
  2,321
  2,279
  2,204
  2,101
  1,974
  1,826
  1,663
  1,491
  1,295
  1,123
  957
  800
  656
  526
  413
  317
  238
  174
  124
  86
  58
  38
  24
  15
  9
  5
  3
  1
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

International Paper Company operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, Africa, and the Middle East. The company operates through four segments: Industrial Packaging, Global Cellulose Fibers, Printing Papers, and Consumer Packaging. The Industrial Packaging segment manufactures containerboards, including linerboard, medium, whitetop, recycled linerboard, recycled medium, and saturating kraft. The Global Cellulose Fibers segment provides fluff, market, and specialty pulps that are used in absorbent hygiene products, tissue and paper products, and non-absorbent end applications. The Printing Papers segment produces printing and writing papers, such as uncoated papers for end use applications, including brochures, pamphlets, greeting cards, books, annual reports, and direct mail, as well as envelopes, tablets, business forms, and file folders. This segment sells uncoated papers under the Hammermill, Springhill, Williamsburg, Postmark, Accent, Great White, Chamex, Ballet, Rey, Pol, and Svetocopy brand names. The Consumer Packaging segment offers coated paperboards for various packaging and foodservice end uses, such as food, cosmetics, pharmaceuticals, and tobacco products under the Everest, Fortress, and Starcote brand names. This segment also produces cups, lids, food containers, and plates. The company sells its packaging products, paper products, and other products directly to end users and converters, as well as through agents, resellers, and paper distributors. International Paper Company was founded in 1898 and is headquartered in Memphis, Tennessee.

FINANCIAL RATIOS  of  International Paper (IP)

Valuation Ratios
P/E Ratio 28.6
Price to Sales 1.2
Price to Book 6
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 22.9
Growth Rates
Sales Growth Rate -5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 2.4%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 255.1%
Total Debt to Equity 260.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 6.3%
Ret/ On T. Cap. - 3 Yr. Avg. 5.5%
Return On Equity 22%
Return On Equity - 3 Yr. Avg. 17.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 28.1%
Gross Margin - 3 Yr. Avg. 30%
EBITDA Margin 13.6%
EBITDA Margin - 3 Yr. Avg. 13.6%
Operating Margin 7.3%
Oper. Margin - 3 Yr. Avg. 7.5%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 4.6%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. 3.6%
Effective Tax Rate 25.8%
Eff/ Tax Rate - 3 Yr. Avg. 25.6%
Payout Ratio 81.1%

IP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IP stock intrinsic value calculation we used $21079 million for the last fiscal year's total revenue generated by International Paper. The default revenue input number comes from 2016 income statement of International Paper. 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 IP stock valuation model: a) initial revenue growth rate of 7.8% 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 9.1%, whose default value for IP is calculated based on our internal credit rating of International Paper, 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 International Paper.
    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 IP stock the variable cost ratio is equal to 65.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5774 million in the base year in the intrinsic value calculation for IP 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 6.6% for International Paper.

Corporate tax rate of 27% is the nominal tax rate for International Paper. 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 IP 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 IP are equal to 30.4%.

Life of production assets of 10 years is the average useful life of capital assets used in International Paper 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 IP is equal to 8.6%. 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 - $4341 million for International Paper - 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 409.726 million for International Paper 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 International Paper at the current share price and the inputted number of shares is $23.6 billion.

RELATED COMPANIES Price Int.Val. Rating
WRK WestRock 59.12 27.79  str.sell
KS KapStone Paper 22.43 14.95  sell
PKG Packaging of A 111.51 198.53  str.buy
CLW Clearwater Pap 48.80 39.42  hold
UFS Domtar 38.93 25.57  sell

COMPANY NEWS

▶ Retired Sherwin-Williams exec, chairman of Rock & Roll Hall of Fame joins IP board   [Jul-17-17 02:25PM  American City Business Journals]
▶ IP warehouse suffers fire, cause under investigation   [Jul-13-17 03:25PM  American City Business Journals]
▶ International Paper Declares Dividend   [Jul-11-17 04:01PM  PR Newswire]
▶ IP to sell business in China   [02:25PM  American City Business Journals]
▶ [$$] International Paper: 25% Upside and a Nice Yield   [May-27-17 01:23AM  Barrons.com]
▶ International Paper promotes executive to investor relations   [May-15-17 02:20PM  American City Business Journals]
▶ International Paper Declares Dividend   [May-09-17 09:51AM  PR Newswire]
▶ International Paper tops Street 1Q forecasts   [07:08AM  Associated Press]
▶ IP resumes operations at mill following explosion   [12:02PM  American City Business Journals]
▶ IP launches new community-focused team   [Mar-23-17 04:00PM  at bizjournals.com]
▶ IP launches new community-focused team   [04:00PM  American City Business Journals]
▶ IIROC Trade Resumption - IP   [Mar-20-17 11:30AM  PR Newswire]
▶ IIROC Trade Resumption - IP   [11:30AM  CNW Group]
▶ IIROC Trading Halt - IP   [10:44AM  PR Newswire]
▶ IIROC Trading Halt - IP   [10:44AM  CNW Group]
▶ IP earns global recognition   [Mar-13-17 09:20AM  at bizjournals.com]
▶ IP earns global recognition   [09:20AM  American City Business Journals]
▶ /C O R R E C T I O N -- International Paper/   [Mar-08-17 06:16PM  PR Newswire]
▶ These 3 Stocks Are Undeniably Cheap   [Mar-06-17 12:51PM  at Motley Fool]
▶ International Paper Announces Senior Leadership Moves   [Feb-22-17 11:00AM  PR Newswire]
Stock chart of IP Financial statements of IP Annual reports of IP
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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