Intrinsic value of International Paper - IP

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$52.78

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$52.78

 
Intrinsic value

$26.40

 
Up/down potential

-50%

 
Rating

sell

 
Value-price divergence* premium content

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*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 21.6

 

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
  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
  21,079
  21,501
  21,995
  22,560
  23,195
  23,898
  24,670
  25,510
  26,419
  27,399
  28,451
  29,576
  30,776
  32,054
  33,412
  34,854
  36,381
  37,998
  39,708
  41,514
  43,422
  45,434
  47,557
  49,794
  52,152
  54,634
  57,248
  60,000
  62,895
  65,941
  69,145
Variable operating expenses, $m
 
  14,162
  14,480
  14,844
  15,252
  15,704
  16,200
  16,740
  17,325
  17,955
  18,631
  19,018
  19,790
  20,612
  21,485
  22,412
  23,394
  24,434
  25,534
  26,695
  27,922
  29,216
  30,581
  32,020
  33,536
  35,132
  36,813
  38,582
  40,444
  42,403
  44,463
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
  20,080
  20,546
  21,062
  21,625
  22,237
  22,896
  23,603
  24,360
  25,166
  26,022
  26,594
  27,555
  28,572
  29,644
  30,774
  31,966
  33,220
  34,539
  35,926
  37,383
  38,914
  40,521
  42,209
  43,980
  45,837
  47,785
  49,829
  51,972
  54,219
  56,574
Operating income, $m
  1,546
  1,420
  1,449
  1,499
  1,570
  1,662
  1,774
  1,906
  2,059
  2,233
  2,428
  2,981
  3,220
  3,482
  3,768
  4,079
  4,415
  4,778
  5,168
  5,588
  6,038
  6,520
  7,036
  7,586
  8,172
  8,798
  9,463
  10,171
  10,923
  11,722
  12,571
EBITDA, $m
  2,773
  2,762
  2,814
  2,890
  2,991
  3,116
  3,264
  3,435
  3,631
  3,851
  4,095
  4,364
  4,660
  4,981
  5,331
  5,709
  6,116
  6,555
  7,025
  7,530
  8,069
  8,645
  9,259
  9,914
  10,611
  11,352
  12,140
  12,977
  13,864
  14,806
  15,804
Interest expense (income), $m
  682
  731
  769
  814
  865
  922
  985
  1,055
  1,131
  1,213
  1,301
  1,396
  1,497
  1,605
  1,720
  1,843
  1,972
  2,110
  2,256
  2,410
  2,573
  2,744
  2,926
  3,117
  3,319
  3,531
  3,755
  3,990
  4,238
  4,499
  4,773
Earnings before tax, $m
  956
  689
  679
  685
  705
  739
  788
  851
  928
  1,020
  1,127
  1,586
  1,723
  1,877
  2,048
  2,236
  2,442
  2,668
  2,913
  3,178
  3,466
  3,776
  4,110
  4,469
  4,854
  5,267
  5,708
  6,181
  6,685
  7,224
  7,797
Tax expense, $m
  247
  186
  183
  185
  190
  200
  213
  230
  251
  276
  304
  428
  465
  507
  553
  604
  659
  720
  786
  858
  936
  1,019
  1,110
  1,207
  1,311
  1,422
  1,541
  1,669
  1,805
  1,950
  2,105
Net income, $m
  904
  503
  496
  500
  515
  540
  575
  621
  678
  745
  823
  1,158
  1,258
  1,370
  1,495
  1,632
  1,783
  1,947
  2,126
  2,320
  2,530
  2,756
  3,000
  3,262
  3,543
  3,845
  4,167
  4,512
  4,880
  5,273
  5,692

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
  33,345
  32,976
  33,735
  34,602
  35,575
  36,654
  37,837
  39,126
  40,521
  42,023
  43,636
  45,361
  47,202
  49,163
  51,246
  53,456
  55,799
  58,279
  60,901
  63,672
  66,598
  69,685
  72,940
  76,372
  79,987
  83,795
  87,804
  92,024
  96,465
  101,137
  106,051
Adjusted assets (=assets-cash), $m
  32,312
  32,976
  33,735
  34,602
  35,575
  36,654
  37,837
  39,126
  40,521
  42,023
  43,636
  45,361
  47,202
  49,163
  51,246
  53,456
  55,799
  58,279
  60,901
  63,672
  66,598
  69,685
  72,940
  76,372
  79,987
  83,795
  87,804
  92,024
  96,465
  101,137
  106,051
Revenue / Adjusted assets
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
Average production assets, $m
  13,396
  13,674
  13,989
  14,348
  14,752
  15,199
  15,690
  16,224
  16,803
  17,426
  18,095
  18,810
  19,574
  20,386
  21,250
  22,167
  23,138
  24,167
  25,254
  26,403
  27,616
  28,896
  30,246
  31,669
  33,168
  34,747
  36,410
  38,160
  40,001
  41,939
  43,976
Working capital, $m
  2,897
  2,150
  2,200
  2,256
  2,319
  2,390
  2,467
  2,551
  2,642
  2,740
  2,845
  2,958
  3,078
  3,205
  3,341
  3,485
  3,638
  3,800
  3,971
  4,151
  4,342
  4,543
  4,756
  4,979
  5,215
  5,463
  5,725
  6,000
  6,290
  6,594
  6,915
Total debt, $m
  11,314
  11,659
  12,334
  13,106
  13,972
  14,932
  15,985
  17,132
  18,373
  19,711
  21,146
  22,682
  24,320
  26,065
  27,919
  29,886
  31,971
  34,178
  36,512
  38,978
  41,582
  44,329
  47,227
  50,281
  53,498
  56,888
  60,456
  64,212
  68,164
  72,322
  76,695
Total liabilities, $m
  29,004
  29,349
  30,024
  30,796
  31,662
  32,622
  33,675
  34,822
  36,063
  37,401
  38,836
  40,372
  42,010
  43,755
  45,609
  47,576
  49,661
  51,868
  54,202
  56,668
  59,272
  62,019
  64,917
  67,971
  71,188
  74,578
  78,146
  81,902
  85,854
  90,012
  94,385
Total equity, $m
  4,341
  3,627
  3,711
  3,806
  3,913
  4,032
  4,162
  4,304
  4,457
  4,623
  4,800
  4,990
  5,192
  5,408
  5,637
  5,880
  6,138
  6,411
  6,699
  7,004
  7,326
  7,665
  8,023
  8,401
  8,799
  9,217
  9,658
  10,123
  10,611
  11,125
  11,666
Total liabilities and equity, $m
  33,345
  32,976
  33,735
  34,602
  35,575
  36,654
  37,837
  39,126
  40,520
  42,024
  43,636
  45,362
  47,202
  49,163
  51,246
  53,456
  55,799
  58,279
  60,901
  63,672
  66,598
  69,684
  72,940
  76,372
  79,987
  83,795
  87,804
  92,025
  96,465
  101,137
  106,051
Debt-to-equity ratio
  2.606
  3.210
  3.320
  3.440
  3.570
  3.700
  3.840
  3.980
  4.120
  4.260
  4.410
  4.550
  4.680
  4.820
  4.950
  5.080
  5.210
  5.330
  5.450
  5.570
  5.680
  5.780
  5.890
  5.990
  6.080
  6.170
  6.260
  6.340
  6.420
  6.500
  6.570
Adjusted equity ratio
  0.102
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  904
  503
  496
  500
  515
  540
  575
  621
  678
  745
  823
  1,158
  1,258
  1,370
  1,495
  1,632
  1,783
  1,947
  2,126
  2,320
  2,530
  2,756
  3,000
  3,262
  3,543
  3,845
  4,167
  4,512
  4,880
  5,273
  5,692
Depreciation, amort., depletion, $m
  1,227
  1,342
  1,365
  1,391
  1,421
  1,454
  1,490
  1,529
  1,572
  1,618
  1,667
  1,383
  1,439
  1,499
  1,563
  1,630
  1,701
  1,777
  1,857
  1,941
  2,031
  2,125
  2,224
  2,329
  2,439
  2,555
  2,677
  2,806
  2,941
  3,084
  3,234
Funds from operations, $m
  2,549
  1,845
  1,861
  1,891
  1,936
  1,994
  2,065
  2,151
  2,250
  2,363
  2,490
  2,541
  2,697
  2,869
  3,058
  3,262
  3,484
  3,724
  3,983
  4,262
  4,561
  4,881
  5,224
  5,591
  5,982
  6,400
  6,844
  7,318
  7,822
  8,357
  8,926
Change in working capital, $m
  71
  42
  49
  57
  63
  70
  77
  84
  91
  98
  105
  112
  120
  128
  136
  144
  153
  162
  171
  181
  191
  201
  212
  224
  236
  248
  261
  275
  290
  305
  320
Cash from operations, $m
  2,478
  2,853
  1,811
  1,835
  1,872
  1,923
  1,988
  2,067
  2,159
  2,265
  2,385
  2,428
  2,577
  2,742
  2,922
  3,118
  3,332
  3,563
  3,812
  4,081
  4,370
  4,680
  5,012
  5,367
  5,746
  6,151
  6,583
  7,043
  7,532
  8,052
  8,605
Maintenance CAPEX, $m
  0
  -985
  -1,005
  -1,029
  -1,055
  -1,085
  -1,118
  -1,154
  -1,193
  -1,235
  -1,281
  -1,330
  -1,383
  -1,439
  -1,499
  -1,563
  -1,630
  -1,701
  -1,777
  -1,857
  -1,941
  -2,031
  -2,125
  -2,224
  -2,329
  -2,439
  -2,555
  -2,677
  -2,806
  -2,941
  -3,084
New CAPEX, $m
  -1,348
  -278
  -315
  -360
  -404
  -447
  -491
  -534
  -578
  -623
  -669
  -715
  -763
  -813
  -864
  -917
  -971
  -1,028
  -1,087
  -1,149
  -1,213
  -1,280
  -1,350
  -1,423
  -1,499
  -1,579
  -1,663
  -1,750
  -1,841
  -1,937
  -2,038
Cash from investing activities, $m
  -3,498
  -1,263
  -1,320
  -1,389
  -1,459
  -1,532
  -1,609
  -1,688
  -1,771
  -1,858
  -1,950
  -2,045
  -2,146
  -2,252
  -2,363
  -2,480
  -2,601
  -2,729
  -2,864
  -3,006
  -3,154
  -3,311
  -3,475
  -3,647
  -3,828
  -4,018
  -4,218
  -4,427
  -4,647
  -4,878
  -5,122
Free cash flow, $m
  -1,020
  1,589
  491
  447
  414
  391
  380
  379
  387
  406
  435
  382
  431
  490
  559
  639
  730
  833
  948
  1,075
  1,215
  1,369
  1,537
  1,720
  1,919
  2,133
  2,365
  2,616
  2,885
  3,174
  3,484
Issuance/(repayment) of debt, $m
  1,861
  584
  675
  772
  866
  960
  1,053
  1,147
  1,241
  1,337
  1,435
  1,536
  1,639
  1,745
  1,854
  1,967
  2,085
  2,207
  2,334
  2,466
  2,604
  2,747
  2,897
  3,054
  3,218
  3,389
  3,568
  3,756
  3,952
  4,158
  4,373
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
  584
  675
  772
  866
  960
  1,053
  1,147
  1,241
  1,337
  1,435
  1,536
  1,639
  1,745
  1,854
  1,967
  2,085
  2,207
  2,334
  2,466
  2,604
  2,747
  2,897
  3,054
  3,218
  3,389
  3,568
  3,756
  3,952
  4,158
  4,373
Total cash flow (excl. dividends), $m
  716
  2,173
  1,166
  1,218
  1,280
  1,351
  1,433
  1,526
  1,629
  1,743
  1,870
  1,918
  2,069
  2,234
  2,413
  2,606
  2,815
  3,040
  3,282
  3,541
  3,819
  4,117
  4,435
  4,774
  5,136
  5,522
  5,934
  6,371
  6,837
  7,332
  7,857
Retained Cash Flow (-), $m
  -457
  -80
  -83
  -95
  -107
  -119
  -130
  -142
  -153
  -165
  -177
  -190
  -203
  -216
  -229
  -243
  -258
  -273
  -288
  -305
  -322
  -340
  -358
  -377
  -398
  -419
  -441
  -464
  -488
  -514
  -541
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
 
  2,887
  1,083
  1,123
  1,173
  1,233
  1,303
  1,384
  1,475
  1,578
  1,692
  1,728
  1,867
  2,019
  2,184
  2,363
  2,558
  2,767
  2,993
  3,236
  3,497
  3,777
  4,076
  4,397
  4,739
  5,104
  5,493
  5,907
  6,348
  6,818
  7,317
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
 
  2,646
  902
  843
  786
  730
  674
  618
  563
  507
  452
  378
  329
  282
  238
  197
  160
  127
  99
  75
  56
  40
  28
  19
  13
  8
  5
  3
  2
  1
  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 26.2
Price to Sales 1.1
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow 21
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 0.1
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 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 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 63.6%.

Life of production assets of 13.6 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 10%. 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 408.429 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 $21.6 billion.


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COMPANY NEWS

▶ 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]
▶ International Paper A Buy As Box Demand Remains Robust   [Jan-25-17 12:22PM  at Barrons.com]
▶ Just How 'American' Are the Big U.S. Manufacturers That Met With Trump?   [Jan-24-17 05:11PM  at The Wall Street Journal]
▶ Pensacola Mill Incident   [Jan-23-17 04:22PM  PR Newswire]
▶ Kroger Co. adds high-profile Memphis CEO to its board   [Jan-13-17 12:28PM  at bizjournals.com]
▶ International Paper Declares Dividend   [Jan-10-17 04:01PM  PR Newswire]
▶ Hate Checking Your Portfolio? Try These 3 Stocks   [Nov-29-16 10:02AM  at Motley Fool]
Stock chart of IP Financial statements 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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