Intrinsic value of Panera Bread Cl A - PNRA

Previous Close

$314.93

  Intrinsic Value

$156.80

stock screener

  Rating & Target

str. sell

-50%

  Value-price divergence*

-57%

Previous close

$314.93

 
Intrinsic value

$156.80

 
Up/down potential

-50%

 
Rating

str. sell

 
Value-price divergence*

-57%

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

We calculate the intrinsic value of PNRA 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 7.2

 

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, %
  4.21
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  2,795
  2,971
  3,154
  3,345
  3,544
  3,752
  3,968
  4,194
  4,430
  4,676
  4,933
  5,202
  5,484
  5,778
  6,086
  6,408
  6,746
  7,100
  7,470
  7,858
  8,265
  8,691
  9,138
  9,607
  10,098
  10,613
  11,154
  11,721
  12,316
  12,940
  13,595
Variable operating expenses, $m
 
  2,703
  2,869
  3,042
  3,222
  3,410
  3,606
  3,810
  4,024
  4,247
  4,480
  4,711
  4,966
  5,233
  5,512
  5,804
  6,109
  6,430
  6,765
  7,117
  7,485
  7,871
  8,276
  8,700
  9,145
  9,612
  10,101
  10,615
  11,154
  11,719
  12,312
Fixed operating expenses, $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
Total operating expenses, $m
  2,556
  2,703
  2,869
  3,042
  3,222
  3,410
  3,606
  3,810
  4,024
  4,247
  4,480
  4,711
  4,966
  5,233
  5,512
  5,804
  6,109
  6,430
  6,765
  7,117
  7,485
  7,871
  8,276
  8,700
  9,145
  9,612
  10,101
  10,615
  11,154
  11,719
  12,312
Operating income, $m
  240
  268
  285
  303
  322
  342
  362
  384
  406
  429
  453
  491
  517
  545
  574
  605
  637
  670
  705
  742
  780
  820
  862
  907
  953
  1,002
  1,053
  1,106
  1,162
  1,221
  1,283
EBITDA, $m
  394
  371
  394
  417
  442
  468
  495
  523
  553
  583
  616
  649
  684
  721
  759
  800
  842
  886
  932
  980
  1,031
  1,084
  1,140
  1,199
  1,260
  1,324
  1,392
  1,462
  1,537
  1,614
  1,696
Interest expense (income), $m
  8
  14
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  44
  48
  52
  55
  59
  64
  68
  73
  78
  83
  88
  94
  99
  106
  112
  119
  126
  133
  141
Earnings before tax, $m
  230
  254
  269
  285
  301
  318
  336
  355
  374
  394
  415
  450
  473
  497
  523
  549
  577
  606
  637
  669
  702
  737
  774
  813
  854
  896
  941
  987
  1,036
  1,088
  1,142
Tax expense, $m
  85
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  121
  128
  134
  141
  148
  156
  164
  172
  181
  190
  199
  209
  220
  230
  242
  254
  267
  280
  294
  308
Net income, $m
  146
  185
  196
  208
  220
  232
  245
  259
  273
  288
  303
  328
  345
  363
  382
  401
  421
  443
  465
  488
  513
  538
  565
  593
  623
  654
  687
  721
  757
  794
  834

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  106
  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
  1,302
  1,271
  1,350
  1,431
  1,517
  1,605
  1,698
  1,795
  1,895
  2,001
  2,111
  2,226
  2,346
  2,472
  2,604
  2,742
  2,887
  3,038
  3,196
  3,362
  3,536
  3,719
  3,910
  4,111
  4,321
  4,541
  4,773
  5,015
  5,270
  5,537
  5,817
Adjusted assets (=assets-cash), $m
  1,196
  1,271
  1,350
  1,431
  1,517
  1,605
  1,698
  1,795
  1,895
  2,001
  2,111
  2,226
  2,346
  2,472
  2,604
  2,742
  2,887
  3,038
  3,196
  3,362
  3,536
  3,719
  3,910
  4,111
  4,321
  4,541
  4,773
  5,015
  5,270
  5,537
  5,817
Revenue / Adjusted assets
  2.337
  2.338
  2.336
  2.338
  2.336
  2.338
  2.337
  2.336
  2.338
  2.337
  2.337
  2.337
  2.338
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
  2.337
Average production assets, $m
  849
  903
  959
  1,017
  1,077
  1,141
  1,206
  1,275
  1,347
  1,422
  1,500
  1,582
  1,667
  1,757
  1,850
  1,948
  2,051
  2,158
  2,271
  2,389
  2,512
  2,642
  2,778
  2,920
  3,070
  3,226
  3,391
  3,563
  3,744
  3,934
  4,133
Working capital, $m
  -137
  -241
  -256
  -271
  -287
  -304
  -321
  -340
  -359
  -379
  -400
  -421
  -444
  -468
  -493
  -519
  -546
  -575
  -605
  -637
  -669
  -704
  -740
  -778
  -818
  -860
  -903
  -949
  -998
  -1,048
  -1,101
Total debt, $m
  428
  474
  539
  607
  678
  752
  829
  910
  994
  1,082
  1,173
  1,269
  1,370
  1,475
  1,584
  1,699
  1,820
  1,946
  2,078
  2,216
  2,361
  2,513
  2,672
  2,839
  3,014
  3,198
  3,391
  3,593
  3,805
  4,027
  4,261
Total liabilities, $m
  1,013
  1,059
  1,124
  1,192
  1,263
  1,337
  1,414
  1,495
  1,579
  1,667
  1,758
  1,854
  1,955
  2,060
  2,169
  2,284
  2,405
  2,531
  2,663
  2,801
  2,946
  3,098
  3,257
  3,424
  3,599
  3,783
  3,976
  4,178
  4,390
  4,612
  4,846
Total equity, $m
  289
  212
  225
  239
  253
  268
  284
  300
  317
  334
  353
  372
  392
  413
  435
  458
  482
  507
  534
  562
  591
  621
  653
  686
  722
  758
  797
  838
  880
  925
  971
Total liabilities and equity, $m
  1,302
  1,271
  1,349
  1,431
  1,516
  1,605
  1,698
  1,795
  1,896
  2,001
  2,111
  2,226
  2,347
  2,473
  2,604
  2,742
  2,887
  3,038
  3,197
  3,363
  3,537
  3,719
  3,910
  4,110
  4,321
  4,541
  4,773
  5,016
  5,270
  5,537
  5,817
Debt-to-equity ratio
  1.481
  2.230
  2.390
  2.540
  2.680
  2.810
  2.920
  3.040
  3.140
  3.240
  3.330
  3.410
  3.500
  3.570
  3.640
  3.710
  3.770
  3.830
  3.890
  3.950
  4.000
  4.050
  4.090
  4.140
  4.180
  4.220
  4.250
  4.290
  4.320
  4.360
  4.390
Adjusted equity ratio
  0.153
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167
  0.167

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  146
  185
  196
  208
  220
  232
  245
  259
  273
  288
  303
  328
  345
  363
  382
  401
  421
  443
  465
  488
  513
  538
  565
  593
  623
  654
  687
  721
  757
  794
  834
Depreciation, amort., depletion, $m
  154
  103
  108
  114
  120
  126
  133
  140
  147
  154
  162
  158
  167
  176
  185
  195
  205
  216
  227
  239
  251
  264
  278
  292
  307
  323
  339
  356
  374
  393
  413
Funds from operations, $m
  449
  288
  304
  322
  340
  358
  378
  399
  420
  442
  465
  487
  512
  539
  567
  596
  626
  658
  692
  727
  764
  803
  843
  886
  930
  977
  1,026
  1,077
  1,131
  1,188
  1,247
Change in working capital, $m
  61
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
Cash from operations, $m
  388
  302
  319
  337
  356
  375
  396
  417
  439
  462
  486
  508
  535
  563
  592
  622
  654
  687
  722
  759
  797
  837
  879
  923
  970
  1,018
  1,070
  1,123
  1,179
  1,238
  1,300
Maintenance CAPEX, $m
  0
  -85
  -90
  -96
  -102
  -108
  -114
  -121
  -127
  -135
  -142
  -150
  -158
  -167
  -176
  -185
  -195
  -205
  -216
  -227
  -239
  -251
  -264
  -278
  -292
  -307
  -323
  -339
  -356
  -374
  -393
New CAPEX, $m
  -200
  -54
  -56
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -86
  -89
  -94
  -98
  -103
  -107
  -113
  -118
  -124
  -130
  -136
  -142
  -149
  -157
  -164
  -172
  -181
  -190
  -199
Cash from investing activities, $m
  -175
  -139
  -146
  -154
  -162
  -171
  -180
  -190
  -199
  -210
  -220
  -232
  -244
  -256
  -270
  -283
  -298
  -312
  -329
  -345
  -363
  -381
  -400
  -420
  -441
  -464
  -487
  -511
  -537
  -564
  -592
Free cash flow, $m
  213
  163
  173
  183
  194
  204
  216
  228
  240
  253
  266
  277
  291
  306
  322
  339
  356
  374
  394
  413
  434
  456
  479
  503
  528
  555
  583
  612
  642
  674
  707
Issuance/(repayment) of debt, $m
  21
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  184
  193
  202
  212
  222
  233
Issuance/(repurchase) of shares, $m
  -373
  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  
  -349
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  184
  193
  202
  212
  222
  233
Total cash flow (excl. dividends), $m
  -136
  226
  239
  251
  265
  278
  293
  308
  324
  340
  358
  372
  391
  411
  432
  454
  477
  501
  526
  552
  579
  608
  638
  670
  704
  739
  775
  814
  854
  896
  941
Retained Cash Flow (-), $m
  208
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
Prev. year cash balance distribution, $m
 
  89
  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
 
  303
  225
  238
  250
  264
  277
  292
  307
  323
  339
  353
  371
  390
  410
  431
  452
  475
  499
  524
  550
  578
  607
  637
  668
  702
  737
  773
  812
  852
  894
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  290
  206
  207
  206
  204
  201
  197
  192
  185
  178
  168
  158
  148
  138
  126
  115
  103
  92
  81
  70
  60
  50
  42
  34
  27
  21
  17
  13
  9
  7
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

Panera Bread Company, together with its subsidiaries, owns, operates, and franchises retail bakery-cafes. The company operates through three segments: Company Bakery-Cafe Operations, Franchise Operations, and Fresh Dough and Other Product Operations. It operates bakery-cafes under the Panera Bread, Saint Louis Bread Co., and Paradise Bakery & Café names that offer daily baked goods, including freshly baked bagels, breads, muffins, scones, rolls, and sweet goods; made-to-order sandwiches on freshly baked breads; soups; freshly prepared and hand-tossed salads; pasta dishes; and custom roasted coffees and cafe beverages, such as hot or cold espresso and cappuccino drinks and smoothies through on-premise sales, as well as provides catering services. The company also supplies fresh dough, produce, tuna, cream cheese, and proprietary sweet goods items. As of December 27, 2016, it operated 902 company-owned bakery-cafes and 1,134 franchise-operated bakery-cafes in the United States, the District of Columbia, and Ontario. The company was formerly known as Au Bon Pain Co., Inc. and changed its name to Panera Bread Company in August 1998. Panera Bread Company was founded in 1981 and is based in St. Louis, Missouri.

FINANCIAL RATIOS  of  Panera Bread Cl A (PNRA)

Valuation Ratios
P/E Ratio 49.5
Price to Sales 2.6
Price to Book 25
Price to Tangible Book
Price to Cash Flow 18.6
Price to Free Cash Flow 38.5
Growth Rates
Sales Growth Rate 4.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.7%
Cap. Spend. - 3 Yr. Gr. Rate 0.8%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 142.2%
Total Debt to Equity 148.1%
Interest Coverage 30
Management Effectiveness
Return On Assets 11%
Ret/ On Assets - 3 Yr. Avg. 11.9%
Return On Total Capital 18%
Ret/ On T. Cap. - 3 Yr. Avg. 19.5%
Return On Equity 37.2%
Return On Equity - 3 Yr. Avg. 28.7%
Asset Turnover 2
Profitability Ratios
Gross Margin 68.3%
Gross Margin - 3 Yr. Avg. 67.7%
EBITDA Margin 14%
EBITDA Margin - 3 Yr. Avg. 14.6%
Operating Margin 8.6%
Oper. Margin - 3 Yr. Avg. 9.5%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 9.3%
Net Profit Margin 5.2%
Net Profit Margin - 3 Yr. Avg. 6%
Effective Tax Rate 37%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 0%

PNRA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PNRA stock intrinsic value calculation we used $2795 million for the last fiscal year's total revenue generated by Panera Bread Cl A. The default revenue input number comes from 2016 income statement of Panera Bread Cl A. 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 PNRA stock valuation model: a) initial revenue growth rate of 6.3% 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 4.3%, whose default value for PNRA is calculated based on our internal credit rating of Panera Bread Cl A, 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 Panera Bread Cl A.
    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 PNRA stock the variable cost ratio is equal to 91%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PNRA 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 Panera Bread Cl A.

Corporate tax rate of 27% is the nominal tax rate for Panera Bread Cl A. 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 PNRA 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 PNRA are equal to 30.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Panera Bread Cl A 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 PNRA is equal to -8.1%. 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 - $289 million for Panera Bread Cl A - 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 22.709 million for Panera Bread Cl A 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 Panera Bread Cl A at the current share price and the inputted number of shares is $7.2 billion.

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Stock chart of PNRA Financial statements of PNRA
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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