Intrinsic value of International Paper - IP

Previous Close

$54.21

  Intrinsic Value

$78.05

stock screener

  Rating & Target

buy

+44%

Previous close

$54.21

 
Intrinsic value

$78.05

 
Up/down potential

+44%

 
Rating

buy

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 22.4

 

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, %
  -5.75
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
Revenue, $m
  21,079
  22,871
  24,735
  26,673
  28,687
  30,780
  32,955
  35,216
  37,566
  40,010
  42,553
  45,200
  47,957
  50,829
  53,822
  56,944
  60,202
  63,603
  67,154
  70,864
  74,743
  78,798
  83,040
  87,478
  92,123
  96,986
  102,079
  107,414
  113,004
  118,861
  125,000
Variable operating expenses, $m
 
  13,808
  14,906
  16,048
  17,234
  18,467
  19,748
  21,080
  22,464
  23,904
  25,402
  26,625
  28,249
  29,940
  31,704
  33,543
  35,461
  37,465
  39,556
  41,742
  44,027
  46,415
  48,914
  51,528
  54,264
  57,129
  60,129
  63,271
  66,564
  70,014
  73,630
Fixed operating expenses, $m
 
  7,198
  7,377
  7,562
  7,751
  7,945
  8,143
  8,347
  8,556
  8,770
  8,989
  9,213
  9,444
  9,680
  9,922
  10,170
  10,424
  10,685
  10,952
  11,226
  11,506
  11,794
  12,089
  12,391
  12,701
  13,018
  13,344
  13,677
  14,019
  14,370
  14,729
Total operating expenses, $m
  19,603
  21,006
  22,283
  23,610
  24,985
  26,412
  27,891
  29,427
  31,020
  32,674
  34,391
  35,838
  37,693
  39,620
  41,626
  43,713
  45,885
  48,150
  50,508
  52,968
  55,533
  58,209
  61,003
  63,919
  66,965
  70,147
  73,473
  76,948
  80,583
  84,384
  88,359
Operating income, $m
  1,476
  1,865
  2,451
  3,063
  3,702
  4,368
  5,063
  5,789
  6,546
  7,337
  8,163
  9,362
  10,265
  11,209
  12,197
  13,232
  14,316
  15,453
  16,646
  17,897
  19,210
  20,589
  22,037
  23,559
  25,158
  26,839
  28,607
  30,465
  32,420
  34,477
  36,641
EBITDA, $m
  2,703
  3,081
  3,739
  4,426
  5,142
  5,889
  6,668
  7,480
  8,328
  9,213
  10,136
  11,101
  12,110
  13,165
  14,268
  15,423
  16,633
  17,901
  19,230
  20,624
  22,086
  23,621
  25,232
  26,925
  28,703
  30,571
  32,535
  34,599
  36,769
  39,051
  41,451
Interest expense (income), $m
  682
  731
  892
  1,058
  1,231
  1,411
  1,598
  1,792
  1,994
  2,204
  2,422
  2,649
  2,886
  3,132
  3,388
  3,656
  3,935
  4,225
  4,529
  4,846
  5,178
  5,524
  5,886
  6,265
  6,661
  7,076
  7,511
  7,965
  8,442
  8,941
  9,464
Earnings before tax, $m
  956
  1,134
  1,559
  2,005
  2,471
  2,957
  3,465
  3,997
  4,552
  5,133
  5,740
  6,713
  7,379
  8,077
  8,809
  9,576
  10,382
  11,228
  12,116
  13,050
  14,032
  15,065
  16,151
  17,294
  18,497
  19,763
  21,096
  22,500
  23,979
  25,536
  27,177
Tax expense, $m
  247
  306
  421
  541
  667
  798
  936
  1,079
  1,229
  1,386
  1,550
  1,812
  1,992
  2,181
  2,378
  2,586
  2,803
  3,031
  3,271
  3,524
  3,789
  4,067
  4,361
  4,669
  4,994
  5,336
  5,696
  6,075
  6,474
  6,895
  7,338
Net income, $m
  904
  828
  1,138
  1,464
  1,804
  2,159
  2,530
  2,918
  3,323
  3,747
  4,190
  4,900
  5,386
  5,896
  6,430
  6,991
  7,579
  8,196
  8,845
  9,527
  10,243
  10,997
  11,790
  12,624
  13,502
  14,427
  15,400
  16,425
  17,504
  18,641
  19,839

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
  34,811
  37,648
  40,598
  43,663
  46,849
  50,160
  53,601
  57,178
  60,899
  64,769
  68,798
  72,994
  77,365
  81,921
  86,674
  91,632
  96,808
  102,213
  107,861
  113,764
  119,936
  126,392
  133,147
  140,218
  147,620
  155,372
  163,492
  171,999
  180,914
  190,258
Adjusted assets (=assets-cash), $m
  32,060
  34,811
  37,648
  40,598
  43,663
  46,849
  50,160
  53,601
  57,178
  60,899
  64,769
  68,798
  72,994
  77,365
  81,921
  86,674
  91,632
  96,808
  102,213
  107,861
  113,764
  119,936
  126,392
  133,147
  140,218
  147,620
  155,372
  163,492
  171,999
  180,914
  190,258
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
  6,953
  7,519
  8,108
  8,721
  9,357
  10,018
  10,706
  11,420
  12,163
  12,936
  13,741
  14,579
  15,452
  16,362
  17,311
  18,301
  19,335
  20,415
  21,543
  22,722
  23,955
  25,244
  26,593
  28,005
  29,484
  31,032
  32,654
  34,353
  36,134
  38,000
Working capital, $m
  2,601
  1,967
  2,127
  2,294
  2,467
  2,647
  2,834
  3,029
  3,231
  3,441
  3,660
  3,887
  4,124
  4,371
  4,629
  4,897
  5,177
  5,470
  5,775
  6,094
  6,428
  6,777
  7,141
  7,523
  7,923
  8,341
  8,779
  9,238
  9,718
  10,222
  10,750
Total debt, $m
  11,314
  13,509
  16,031
  18,653
  21,379
  24,211
  27,154
  30,213
  33,393
  36,701
  40,142
  43,724
  47,453
  51,339
  55,390
  59,615
  64,023
  68,624
  73,429
  78,450
  83,698
  89,185
  94,925
  100,930
  107,216
  113,796
  120,688
  127,906
  135,469
  143,395
  151,702
Total liabilities, $m
  28,752
  30,947
  33,469
  36,091
  38,817
  41,649
  44,592
  47,651
  50,831
  54,139
  57,580
  61,162
  64,891
  68,777
  72,828
  77,053
  81,461
  86,062
  90,867
  95,888
  101,136
  106,623
  112,363
  118,368
  124,654
  131,234
  138,126
  145,344
  152,907
  160,833
  169,140
Total equity, $m
  4,341
  3,864
  4,179
  4,506
  4,847
  5,200
  5,568
  5,950
  6,347
  6,760
  7,189
  7,637
  8,102
  8,588
  9,093
  9,621
  10,171
  10,746
  11,346
  11,973
  12,628
  13,313
  14,030
  14,779
  15,564
  16,386
  17,246
  18,148
  19,092
  20,081
  21,119
Total liabilities and equity, $m
  33,093
  34,811
  37,648
  40,597
  43,664
  46,849
  50,160
  53,601
  57,178
  60,899
  64,769
  68,799
  72,993
  77,365
  81,921
  86,674
  91,632
  96,808
  102,213
  107,861
  113,764
  119,936
  126,393
  133,147
  140,218
  147,620
  155,372
  163,492
  171,999
  180,914
  190,259
Debt-to-equity ratio
  2.606
  3.500
  3.840
  4.140
  4.410
  4.660
  4.880
  5.080
  5.260
  5.430
  5.580
  5.730
  5.860
  5.980
  6.090
  6.200
  6.290
  6.390
  6.470
  6.550
  6.630
  6.700
  6.770
  6.830
  6.890
  6.940
  7.000
  7.050
  7.100
  7.140
  7.180
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
  828
  1,138
  1,464
  1,804
  2,159
  2,530
  2,918
  3,323
  3,747
  4,190
  4,900
  5,386
  5,896
  6,430
  6,991
  7,579
  8,196
  8,845
  9,527
  10,243
  10,997
  11,790
  12,624
  13,502
  14,427
  15,400
  16,425
  17,504
  18,641
  19,839
Depreciation, amort., depletion, $m
  1,227
  1,216
  1,288
  1,363
  1,440
  1,521
  1,605
  1,692
  1,782
  1,876
  1,974
  1,739
  1,845
  1,956
  2,071
  2,191
  2,317
  2,447
  2,584
  2,727
  2,876
  3,032
  3,195
  3,366
  3,545
  3,732
  3,928
  4,133
  4,348
  4,574
  4,810
Funds from operations, $m
  2,549
  2,044
  2,427
  2,826
  3,244
  3,680
  4,134
  4,609
  5,105
  5,623
  6,164
  6,640
  7,232
  7,852
  8,501
  9,182
  9,895
  10,644
  11,429
  12,254
  13,120
  14,029
  14,986
  15,991
  17,047
  18,159
  19,328
  20,558
  21,853
  23,215
  24,649
Change in working capital, $m
  71
  154
  160
  167
  173
  180
  187
  194
  202
  210
  219
  228
  237
  247
  257
  268
  280
  292
  305
  319
  334
  349
  365
  382
  399
  418
  438
  459
  481
  504
  528
Cash from operations, $m
  2,478
  1,890
  2,266
  2,660
  3,071
  3,500
  3,947
  4,415
  4,903
  5,413
  5,946
  6,412
  6,995
  7,605
  8,244
  8,913
  9,615
  10,351
  11,124
  11,935
  12,786
  13,681
  14,621
  15,609
  16,648
  17,741
  18,890
  20,100
  21,372
  22,711
  24,121
Maintenance CAPEX, $m
  0
  -810
  -880
  -952
  -1,026
  -1,104
  -1,184
  -1,268
  -1,355
  -1,446
  -1,540
  -1,637
  -1,739
  -1,845
  -1,956
  -2,071
  -2,191
  -2,317
  -2,447
  -2,584
  -2,727
  -2,876
  -3,032
  -3,195
  -3,366
  -3,545
  -3,732
  -3,928
  -4,133
  -4,348
  -4,574
New CAPEX, $m
  -1,348
  -552
  -567
  -589
  -612
  -636
  -661
  -687
  -714
  -743
  -773
  -805
  -838
  -873
  -910
  -949
  -990
  -1,034
  -1,080
  -1,128
  -1,179
  -1,233
  -1,289
  -1,349
  -1,412
  -1,478
  -1,548
  -1,622
  -1,699
  -1,781
  -1,866
Cash from investing activities, $m
  -3,498
  -1,362
  -1,447
  -1,541
  -1,638
  -1,740
  -1,845
  -1,955
  -2,069
  -2,189
  -2,313
  -2,442
  -2,577
  -2,718
  -2,866
  -3,020
  -3,181
  -3,351
  -3,527
  -3,712
  -3,906
  -4,109
  -4,321
  -4,544
  -4,778
  -5,023
  -5,280
  -5,550
  -5,832
  -6,129
  -6,440
Free cash flow, $m
  -1,020
  528
  820
  1,119
  1,432
  1,759
  2,102
  2,459
  2,833
  3,224
  3,633
  3,970
  4,418
  4,886
  5,378
  5,893
  6,434
  7,001
  7,597
  8,222
  8,880
  9,572
  10,299
  11,064
  11,870
  12,717
  13,610
  14,550
  15,540
  16,582
  17,681
Issuance/(repayment) of debt, $m
  1,861
  2,434
  2,522
  2,622
  2,725
  2,832
  2,943
  3,059
  3,180
  3,307
  3,441
  3,582
  3,730
  3,886
  4,051
  4,225
  4,408
  4,601
  4,805
  5,021
  5,248
  5,487
  5,739
  6,005
  6,286
  6,581
  6,891
  7,219
  7,563
  7,925
  8,307
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
  2,434
  2,522
  2,622
  2,725
  2,832
  2,943
  3,059
  3,180
  3,307
  3,441
  3,582
  3,730
  3,886
  4,051
  4,225
  4,408
  4,601
  4,805
  5,021
  5,248
  5,487
  5,739
  6,005
  6,286
  6,581
  6,891
  7,219
  7,563
  7,925
  8,307
Total cash flow (excl. dividends), $m
  716
  2,962
  3,342
  3,741
  4,157
  4,592
  5,045
  5,518
  6,013
  6,532
  7,074
  7,551
  8,147
  8,773
  9,429
  10,118
  10,842
  11,602
  12,402
  13,243
  14,128
  15,059
  16,039
  17,070
  18,155
  19,298
  20,501
  21,768
  23,103
  24,508
  25,988
Retained Cash Flow (-), $m
  -457
  -317
  -315
  -327
  -340
  -354
  -367
  -382
  -397
  -413
  -430
  -447
  -466
  -485
  -506
  -527
  -550
  -575
  -600
  -627
  -655
  -685
  -717
  -750
  -785
  -822
  -860
  -901
  -944
  -990
  -1,037
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
 
  3,439
  3,027
  3,414
  3,817
  4,238
  4,677
  5,136
  5,616
  6,119
  6,644
  7,104
  7,682
  8,287
  8,923
  9,590
  10,291
  11,028
  11,802
  12,616
  13,473
  14,374
  15,322
  16,320
  17,370
  18,476
  19,641
  20,867
  22,158
  23,518
  24,951
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
 
  3,152
  2,522
  2,562
  2,557
  2,508
  2,419
  2,295
  2,142
  1,966
  1,774
  1,553
  1,354
  1,158
  972
  799
  643
  507
  390
  293
  215
  153
  106
  72
  47
  30
  18
  11
  6
  3
  2
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 is a paper and packaging company with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia, Africa and the Middle East. The Company's segments include Industrial Packaging, Global Cellulose Fibers, Printing Papers and Consumer Packaging. The Company is a manufacturer of containerboard in the United States. Its products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. The Company's cellulose fibers product portfolio includes fluff, market and specialty pulps. The Company is a producer of printing and writing papers. The products in Printing Papers segment include uncoated papers. The Company is a producer of solid bleached sulfate board. As of December 31, 2016, the Company operated 29 pulp, paper and packaging mills, 170 converting and packaging plants, 16 recycling plants and three bag facilities in the United States.

FINANCIAL RATIOS  of  International Paper (IP)

Valuation Ratios
P/E Ratio 26.9
Price to Sales 1.2
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 9.8
Price to Free Cash Flow 21.5
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%
Oper. Margin - 3 Yr. Avg. 7.4%
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 8.5% 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 60.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7022 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 7.9 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 412.987 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 $22.4 billion.

RELATED COMPANIES Price Int.Val. Rating
WRK WestRock 59.50 29.85  str.sell
KS KapStone Paper 20.98 15.11  sell
PKG Packaging of A 112.47 243.36  str.buy
CLW Clearwater Pap 45.10 38.69  hold
UFS Domtar 46.20 25.85  sell

COMPANY NEWS

▶ Value-Adding Dividend Stocks To Buy Now   [09:02AM  Simply Wall St.]
▶ Top 3 Stocks for Retirees to Consider   [Oct-30-17 06:13PM  Motley Fool]
▶ Atlanta-based manufacturer inks $6B partnership   [Oct-25-17 03:19PM  American City Business Journals]
▶ IP talks billion-dollar deal, hurricanes and more   [02:00PM  American City Business Journals]
▶ International Paper tops 3Q profit forecasts   [07:21AM  Associated Press]
▶ IP announces $1.8 billion transaction   [Oct-24-17 12:50PM  American City Business Journals]
▶ Roberts awarded CFO Lifetime Achievement Award   [Oct-23-17 12:40PM  American City Business Journals]
▶ 3 Stocks to Help You Build Retirement Wealth   [Oct-14-17 10:31AM  Motley Fool]
▶ IP adds Fortune 500 CEO and public company exec to its board   [Oct-12-17 01:15PM  American City Business Journals]
▶ IP investing $300M for conversion at Alabama mill   [Sep-22-17 10:35AM  American City Business Journals]
▶ International Paper Could Be Nearing a Breakout   [Sep-15-17 11:15AM  TheStreet.com]
▶ How Weyerhaeuser Treats Its Shareholders   [Sep-13-17 09:06AM  Market Realist]
▶ Teva Pharma showing strong gains, IQ100 up 22%   [Sep-12-17 01:11PM  CNBC Videos]
▶ IP completes sale in China   [Sep-07-17 03:40PM  American City Business Journals]
▶ Trump shuts down council after slew of CEOs quit   [Aug-16-17 02:01PM  Yahoo Finance]
▶ Cramer's lightning round: Don't touch this pharma play   [Aug-15-17 06:58PM  CNBC Videos]
▶ Genesee & Wyomings North American Revenues in 2Q17   [Aug-07-17 11:05AM  Market Realist]
▶ Corporate News Blog - WestRock Acquires Hannapak   [Aug-03-17 07:20AM  ACCESSWIRE]
▶ Memphis company announces $1B pension contribution   [Aug-02-17 02:50PM  American City Business Journals]
▶ International Paper beats Street 2Q forecasts   [Jul-27-17 10:33PM  Associated Press]
▶ Retired Sherwin-Williams exec, chairman of Rock & Roll Hall of Fame joins IP board   [Jul-17-17 02:25PM  American City Business Journals]
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.