Intrinsic value of Limoneira - LMNR

Previous Close

$21.39

  Intrinsic Value

$2.40

stock screener

  Rating & Target

str. sell

-89%

Previous close

$21.39

 
Intrinsic value

$2.40

 
Up/down potential

-89%

 
Rating

str. sell

We calculate the intrinsic value of LMNR 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 0.3

 

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, %
  12.00
  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
  112
  114
  117
  120
  123
  127
  131
  136
  140
  146
  151
  157
  164
  170
  178
  185
  193
  202
  211
  221
  231
  241
  253
  265
  277
  290
  304
  319
  334
  350
  367
Variable operating expenses, $m
 
  66
  68
  70
  71
  74
  76
  79
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  160
  168
  176
  185
  194
  203
  213
Fixed operating expenses, $m
 
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
  54
  55
  56
  58
  59
  61
  62
  64
  66
  67
  69
  71
  72
  74
  76
  78
  80
  82
Total operating expenses, $m
  103
  106
  109
  112
  114
  118
  121
  125
  129
  133
  138
  142
  147
  153
  158
  163
  170
  176
  183
  190
  198
  206
  213
  222
  231
  240
  250
  261
  272
  283
  295
Operating income, $m
  9
  8
  8
  8
  9
  9
  10
  11
  11
  12
  14
  15
  16
  18
  20
  21
  23
  26
  28
  30
  33
  36
  39
  43
  46
  50
  54
  58
  63
  68
  73
EBITDA, $m
  14
  13
  13
  14
  14
  15
  16
  17
  18
  19
  20
  22
  24
  25
  27
  30
  32
  35
  37
  40
  43
  47
  50
  54
  58
  63
  67
  72
  78
  83
  89
Interest expense (income), $m
  1
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
Earnings before tax, $m
  13
  5
  5
  5
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  20
  22
  24
  27
  29
  32
  35
  38
  41
  45
  49
  53
  57
Tax expense, $m
  5
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
Net income, $m
  8
  4
  4
  4
  4
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  20
  21
  23
  26
  28
  30
  33
  36
  39
  42

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  305
  311
  318
  327
  336
  346
  357
  369
  382
  397
  412
  428
  446
  464
  484
  505
  527
  550
  575
  601
  629
  658
  689
  721
  755
  791
  829
  869
  911
  955
  1,001
Adjusted assets (=assets-cash), $m
  305
  311
  318
  327
  336
  346
  357
  369
  382
  397
  412
  428
  446
  464
  484
  505
  527
  550
  575
  601
  629
  658
  689
  721
  755
  791
  829
  869
  911
  955
  1,001
Revenue / Adjusted assets
  0.367
  0.367
  0.368
  0.367
  0.366
  0.367
  0.367
  0.369
  0.366
  0.368
  0.367
  0.367
  0.368
  0.366
  0.368
  0.366
  0.366
  0.367
  0.367
  0.368
  0.367
  0.366
  0.367
  0.368
  0.367
  0.367
  0.367
  0.367
  0.367
  0.366
  0.367
Average production assets, $m
  91
  92
  94
  97
  100
  103
  106
  110
  113
  118
  122
  127
  132
  138
  143
  150
  156
  163
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  270
  283
  297
Working capital, $m
  -5
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
Total debt, $m
  91
  94
  98
  103
  108
  113
  119
  126
  133
  141
  149
  158
  167
  177
  188
  200
  212
  224
  238
  252
  267
  283
  300
  317
  336
  355
  376
  398
  420
  444
  470
Total liabilities, $m
  167
  169
  173
  178
  183
  188
  194
  201
  208
  216
  224
  233
  242
  252
  263
  275
  287
  299
  313
  327
  342
  358
  375
  392
  411
  430
  451
  473
  495
  519
  545
Total equity, $m
  139
  142
  145
  149
  153
  158
  163
  168
  174
  181
  188
  195
  203
  212
  221
  230
  240
  251
  262
  274
  287
  300
  314
  329
  344
  361
  378
  396
  415
  435
  456
Total liabilities and equity, $m
  306
  311
  318
  327
  336
  346
  357
  369
  382
  397
  412
  428
  445
  464
  484
  505
  527
  550
  575
  601
  629
  658
  689
  721
  755
  791
  829
  869
  910
  954
  1,001
Debt-to-equity ratio
  0.655
  0.660
  0.680
  0.690
  0.700
  0.720
  0.730
  0.750
  0.760
  0.780
  0.790
  0.810
  0.820
  0.840
  0.850
  0.870
  0.880
  0.890
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.980
  0.990
  0.990
  1.000
  1.010
  1.020
  1.030
Adjusted equity ratio
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  4
  4
  4
  4
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  18
  20
  21
  23
  26
  28
  30
  33
  36
  39
  42
Depreciation, amort., depletion, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
Funds from operations, $m
  12
  9
  9
  9
  9
  10
  10
  11
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  54
  58
Change in working capital, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  14
  9
  9
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  33
  35
  38
  41
  44
  47
  51
  54
  58
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
New CAPEX, $m
  -31
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
Cash from investing activities, $m
  -12
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -12
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
Free cash flow, $m
  2
  2
  2
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  27
  29
Issuance/(repayment) of debt, $m
  1
  3
  4
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  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  
  0
  3
  4
  4
  5
  7
  7
  8
  8
  9
  9
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Total cash flow (excl. dividends), $m
  3
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  18
  20
  21
  23
  25
  27
  30
  32
  35
  38
  41
  44
  47
  51
  54
Retained Cash Flow (-), $m
  -5
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
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
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  21
  23
  25
  28
  30
  33
Discount rate, %
 
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
 
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  99.8
  99.6
  99.4
  99.2
  98.9
  98.7
  98.6
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5
  98.5

Limoneira Company is engaged in agribusiness and real estate development. The Company's operations consist of fruit production, sales and marketing, rental operations, real estate development and capital investment activities. The Company's segments include lemon operations, other agribusiness, rental operations and real estate development. The Company has three business divisions: agribusiness, rental operations and real estate development. The Company operates its packinghouses in Santa Paula, California and Yuma, Arizona. The Company's water resources include water rights, usage rights and pumping rights to the water in aquifers. The Company's agribusiness includes farming, harvesting, lemon packing and lemon sales operations. The rental operations division includes residential and commercial rentals, leased land operations and organic recycling. The real estate development division includes developable land parcels, multi-family housing and single-family homes.

FINANCIAL RATIOS  of  Limoneira (LMNR)

Valuation Ratios
P/E Ratio 37.9
Price to Sales 2.7
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow -17.8
Growth Rates
Sales Growth Rate 12%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.4%
Cap. Spend. - 3 Yr. Gr. Rate 23%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 63.3%
Total Debt to Equity 65.5%
Interest Coverage 14
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 2.9%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 3.5%
Return On Equity 5.9%
Return On Equity - 3 Yr. Avg. 5.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 20.5%
Gross Margin - 3 Yr. Avg. 20.9%
EBITDA Margin 17%
EBITDA Margin - 3 Yr. Avg. 15.5%
Operating Margin 8%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin 11.6%
Pre-Tax Margin - 3 Yr. Avg. 11.1%
Net Profit Margin 7.1%
Net Profit Margin - 3 Yr. Avg. 7%
Effective Tax Rate 38.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.1%
Payout Ratio 37.5%

LMNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LMNR stock intrinsic value calculation we used $112 million for the last fiscal year's total revenue generated by Limoneira. The default revenue input number comes from 2016 income statement of Limoneira. 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 LMNR 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 7.4%, whose default value for LMNR is calculated based on our internal credit rating of Limoneira, 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 Limoneira.
    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 LMNR stock the variable cost ratio is equal to 58%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $39 million in the base year in the intrinsic value calculation for LMNR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Limoneira.

Corporate tax rate of 27% is the nominal tax rate for Limoneira. 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 LMNR 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 LMNR are equal to 80.8%.

Life of production assets of 18.3 years is the average useful life of capital assets used in Limoneira 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 LMNR 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 - $139 million for Limoneira - 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 14.405 million for Limoneira 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 Limoneira at the current share price and the inputted number of shares is $0.3 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ ETFs with exposure to Limoneira Co. : September 29, 2017   [Sep-29-17 10:33AM  Capital Cube]
▶ Limoneira Declares Quarterly Dividend   [Sep-27-17 08:30AM  Business Wire]
▶ ETFs with exposure to Limoneira Co. : September 18, 2017   [Sep-18-17 06:13PM  Capital Cube]
▶ Company News For Sep 13, 2017   [Sep-13-17 10:39AM  Zacks]
▶ Limoneira posts 3Q profit   [Sep-11-17 07:54PM  Associated Press]
▶ Limoneira Declares Quarterly Dividend   [Jun-29-17 08:30AM  Business Wire]
▶ ETFs with exposure to Limoneira Co. : June 26, 2017   [Jun-26-17 04:22PM  Capital Cube]
▶ ETFs with exposure to Limoneira Co. : June 13, 2017   [Jun-13-17 12:40PM  Capital Cube]
▶ Limoneira beats 2Q profit forecasts   [Jun-08-17 04:10PM  Associated Press]
▶ Limoneira Adds US East Coast Based Sales Management Talent   [May-30-17 08:30AM  Business Wire]
▶ Limoneira and Tesla Power up to Save Energy Costs   [May-22-17 08:30AM  Business Wire]
▶ Limoneira Declares Quarterly Dividend   [Mar-29-17 08:30AM  Business Wire]
▶ Limoneira Is More Than Just Lemons   [Mar-17-17 03:15PM  TheStreet.com]
▶ Limoneira reports 1Q loss   [Mar-13-17 04:08PM  Associated Press]
▶ Limoneira to Present at the 29th Annual ROTH Conference   [Mar-07-17 08:30AM  Business Wire]
▶ Limoneira to Present at the 2017 ICR Conference   [Jan-03-17 08:30AM  Business Wire]
▶ Limoneira Declares Quarterly Dividend   [Dec-16-16 08:30AM  Business Wire]
▶ Limoneira Declares Quarterly Dividend   [Sep-23-16 08:30AM  Business Wire]
Financial statements of LMNR
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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