Intrinsic value of Pope Resources - POPE

Previous Close

$70.17

  Intrinsic Value

$3.38

stock screener

  Rating & Target

str. sell

-95%

Previous close

$70.17

 
Intrinsic value

$3.38

 
Up/down potential

-95%

 
Rating

str. sell

We calculate the intrinsic value of POPE 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, %
  2.56
  23.10
  21.29
  19.66
  18.19
  16.88
  15.69
  14.62
  13.66
  12.79
  12.01
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
Revenue, $m
  80
  98
  119
  143
  169
  197
  228
  262
  298
  336
  376
  418
  463
  510
  559
  610
  663
  719
  776
  836
  899
  963
  1,030
  1,100
  1,173
  1,249
  1,327
  1,409
  1,494
  1,583
  1,676
Variable operating expenses, $m
 
  85
  103
  123
  146
  170
  197
  226
  257
  290
  324
  361
  400
  440
  482
  526
  572
  620
  670
  722
  775
  831
  889
  950
  1,012
  1,078
  1,145
  1,216
  1,290
  1,366
  1,446
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
  75
  85
  103
  123
  146
  170
  197
  226
  257
  290
  324
  361
  400
  440
  482
  526
  572
  620
  670
  722
  775
  831
  889
  950
  1,012
  1,078
  1,145
  1,216
  1,290
  1,366
  1,446
Operating income, $m
  6
  13
  16
  20
  23
  27
  31
  36
  41
  46
  52
  57
  63
  70
  77
  84
  91
  98
  106
  115
  123
  132
  141
  151
  161
  171
  182
  193
  205
  217
  230
EBITDA, $m
  19
  29
  36
  43
  51
  59
  68
  78
  89
  101
  113
  125
  139
  153
  167
  183
  199
  215
  233
  250
  269
  288
  309
  330
  351
  374
  398
  422
  448
  474
  502
Interest expense (income), $m
  0
  4
  7
  10
  14
  18
  22
  26
  31
  37
  42
  48
  54
  61
  68
  75
  83
  90
  99
  107
  116
  125
  135
  145
  155
  166
  177
  188
  200
  213
  226
Earnings before tax, $m
  2
  9
  9
  9
  9
  9
  10
  10
  10
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  7
  7
  7
  6
  6
  6
  5
  5
  5
  4
  4
  3
Tax expense, $m
  0
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
Net income, $m
  6
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
  5
  5
  5
  4
  4
  4
  4
  3
  3
  3
  3

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3
  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
  399
  488
  591
  708
  836
  977
  1,131
  1,296
  1,473
  1,662
  1,861
  2,072
  2,293
  2,525
  2,767
  3,020
  3,284
  3,558
  3,843
  4,140
  4,448
  4,768
  5,101
  5,447
  5,807
  6,181
  6,570
  6,976
  7,398
  7,838
  8,297
Adjusted assets (=assets-cash), $m
  396
  488
  591
  708
  836
  977
  1,131
  1,296
  1,473
  1,662
  1,861
  2,072
  2,293
  2,525
  2,767
  3,020
  3,284
  3,558
  3,843
  4,140
  4,448
  4,768
  5,101
  5,447
  5,807
  6,181
  6,570
  6,976
  7,398
  7,838
  8,297
Revenue / Adjusted assets
  0.202
  0.201
  0.201
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
Average production assets, $m
  358
  440
  534
  639
  755
  882
  1,021
  1,170
  1,330
  1,500
  1,680
  1,870
  2,070
  2,279
  2,498
  2,726
  2,964
  3,212
  3,469
  3,737
  4,015
  4,305
  4,605
  4,917
  5,242
  5,580
  5,931
  6,297
  6,679
  7,076
  7,490
Working capital, $m
  11
  16
  19
  23
  28
  32
  37
  43
  49
  55
  61
  68
  75
  83
  91
  99
  108
  117
  127
  136
  146
  157
  168
  179
  191
  204
  216
  230
  244
  258
  273
Total debt, $m
  130
  205
  293
  392
  502
  622
  752
  893
  1,044
  1,204
  1,374
  1,553
  1,741
  1,939
  2,145
  2,360
  2,584
  2,818
  3,061
  3,313
  3,575
  3,848
  4,131
  4,426
  4,732
  5,050
  5,381
  5,726
  6,086
  6,460
  6,851
Total liabilities, $m
  340
  415
  503
  602
  712
  832
  962
  1,103
  1,254
  1,414
  1,584
  1,763
  1,951
  2,149
  2,355
  2,570
  2,794
  3,028
  3,271
  3,523
  3,785
  4,058
  4,341
  4,636
  4,942
  5,260
  5,591
  5,936
  6,296
  6,670
  7,061
Total equity, $m
  59
  73
  88
  105
  125
  146
  168
  193
  219
  248
  277
  309
  342
  376
  412
  450
  489
  530
  573
  617
  663
  710
  760
  812
  865
  921
  979
  1,039
  1,102
  1,168
  1,236
Total liabilities and equity, $m
  399
  488
  591
  707
  837
  978
  1,130
  1,296
  1,473
  1,662
  1,861
  2,072
  2,293
  2,525
  2,767
  3,020
  3,283
  3,558
  3,844
  4,140
  4,448
  4,768
  5,101
  5,448
  5,807
  6,181
  6,570
  6,975
  7,398
  7,838
  8,297
Debt-to-equity ratio
  2.203
  2.820
  3.330
  3.720
  4.030
  4.270
  4.470
  4.620
  4.750
  4.860
  4.950
  5.030
  5.100
  5.150
  5.200
  5.240
  5.280
  5.320
  5.340
  5.370
  5.390
  5.420
  5.440
  5.450
  5.470
  5.480
  5.500
  5.510
  5.520
  5.530
  5.540
Adjusted equity ratio
  0.141
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
  5
  5
  5
  4
  4
  4
  4
  3
  3
  3
  3
Depreciation, amort., depletion, $m
  13
  16
  19
  23
  27
  32
  37
  43
  48
  55
  61
  68
  75
  83
  91
  99
  108
  117
  126
  136
  146
  157
  167
  179
  191
  203
  216
  229
  243
  257
  272
Funds from operations, $m
  0
  23
  26
  30
  34
  39
  44
  50
  55
  61
  68
  75
  82
  89
  97
  105
  114
  123
  132
  141
  151
  162
  172
  183
  195
  207
  219
  232
  246
  260
  275
Change in working capital, $m
  -5
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
Cash from operations, $m
  5
  20
  23
  26
  30
  34
  39
  44
  49
  55
  61
  68
  75
  82
  89
  97
  105
  114
  122
  132
  141
  151
  161
  172
  183
  195
  207
  219
  232
  246
  260
Maintenance CAPEX, $m
  0
  -13
  -16
  -19
  -23
  -27
  -32
  -37
  -43
  -48
  -55
  -61
  -68
  -75
  -83
  -91
  -99
  -108
  -117
  -126
  -136
  -146
  -157
  -167
  -179
  -191
  -203
  -216
  -229
  -243
  -257
New CAPEX, $m
  -2
  -83
  -94
  -105
  -116
  -127
  -138
  -149
  -160
  -170
  -180
  -190
  -200
  -209
  -219
  -228
  -238
  -248
  -258
  -268
  -278
  -289
  -300
  -312
  -325
  -338
  -352
  -366
  -381
  -397
  -414
Cash from investing activities, $m
  -40
  -96
  -110
  -124
  -139
  -154
  -170
  -186
  -203
  -218
  -235
  -251
  -268
  -284
  -302
  -319
  -337
  -356
  -375
  -394
  -414
  -435
  -457
  -479
  -504
  -529
  -555
  -582
  -610
  -640
  -671
Free cash flow, $m
  -35
  -76
  -87
  -98
  -109
  -120
  -131
  -142
  -153
  -163
  -173
  -183
  -193
  -203
  -212
  -222
  -232
  -242
  -252
  -262
  -273
  -284
  -296
  -308
  -321
  -334
  -348
  -363
  -378
  -394
  -412
Issuance/(repayment) of debt, $m
  46
  78
  88
  99
  110
  120
  130
  141
  151
  160
  170
  179
  188
  197
  206
  215
  224
  233
  243
  252
  262
  273
  283
  294
  306
  318
  331
  345
  359
  374
  390
Issuance/(repurchase) of shares, $m
  0
  7
  9
  11
  12
  14
  16
  18
  19
  21
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
Cash from financing (excl. dividends), $m  
  40
  85
  97
  110
  122
  134
  146
  159
  170
  181
  193
  204
  214
  225
  236
  246
  257
  268
  280
  291
  303
  316
  328
  341
  355
  370
  385
  402
  419
  437
  456
Total cash flow (excl. dividends), $m
  5
  9
  10
  11
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  45
Retained Cash Flow (-), $m
  6
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -66
  -68
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
 
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
Discount rate, %
 
  10.80
  11.34
  11.91
  12.50
  13.13
  13.78
  14.47
  15.20
  15.96
  16.75
  17.59
  18.47
  19.40
  20.37
  21.38
  22.45
  23.58
  24.75
  25.99
  27.29
  28.66
  30.09
  31.59
  33.17
  34.83
  36.57
  38.40
  40.32
  42.34
  44.45
PV of cash for distribution, $m
 
  -4
  -4
  -4
  -4
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.8
  95.5
  93.4
  91.3
  89.4
  87.5
  85.8
  84.2
  82.6
  81.2
  79.8
  78.5
  77.3
  76.2
  75.1
  74.0
  73.0
  72.0
  71.1
  70.2
  69.4
  68.5
  67.7
  66.9
  66.2
  65.4
  64.7
  64.0
  63.3
  62.6

Pope Resources, A Delaware Limited Partnership is engaged primarily in managing timber resources on its own properties, as well as those owned by others. The Company operates through three business segments: Fee Timber, Timberland Management and Real Estate. The Fee Timber operations consisted of growing and harvesting timber from approximately 212,000 acres that the Company owned or co-owned with its timber fund investors as tree farms, as of December 31, 2016. The Timberland Management segment is engaged in organizing and managing private equity timber funds using capital invested by third parties and the Company. The Real Estate segment's operations were focused on a portfolio of approximately 2,200 acres in the west Puget Sound region of Washington. Its subsidiaries, ORM, Inc. and Olympic Resource Management LLC, facilitate the Timberland Management activities. Its Real Estate holdings are located in the Washington counties of Pierce, Kitsap and Jefferson with sales of land.

FINANCIAL RATIOS  of  Pope Resources (POPE)

Valuation Ratios
P/E Ratio 50.5
Price to Sales 3.8
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 60.6
Price to Free Cash Flow 101
Growth Rates
Sales Growth Rate 2.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 1
Current Ratio 1
LT Debt to Equity 211.9%
Total Debt to Equity 220.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 9.7%
Return On Equity - 3 Yr. Avg. 14.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 41.3%
Gross Margin - 3 Yr. Avg. 41.9%
EBITDA Margin 18.8%
EBITDA Margin - 3 Yr. Avg. 28.2%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. 20.2%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. 16.9%
Net Profit Margin 7.5%
Net Profit Margin - 3 Yr. Avg. 11.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 1%
Payout Ratio 200%

POPE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the POPE stock intrinsic value calculation we used $80 million for the last fiscal year's total revenue generated by Pope Resources. The default revenue input number comes from 2016 income statement of Pope Resources. 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 POPE stock valuation model: a) initial revenue growth rate of 23.1% 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 10.8%, whose default value for POPE is calculated based on our internal credit rating of Pope Resources, 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 Pope Resources.
    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 POPE stock the variable cost ratio is equal to 86.3%.

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 POPE 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 Pope Resources.

Corporate tax rate of 27% is the nominal tax rate for Pope Resources. 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 POPE 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 POPE are equal to 446.9%.

Life of production assets of 27.5 years is the average useful life of capital assets used in Pope Resources 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 POPE is equal to 16.3%. 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 - $59 million for Pope Resources - 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 4.366 million for Pope Resources 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 Pope Resources at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Pope Resources Announces Unit Repurchase Authorization   [Dec-07-17 04:05PM  PR Newswire]
▶ Pope Resources Announces Quarterly Distribution   [Aug-21-17 04:05PM  PR Newswire]
▶ Pope Resources Reports Second Quarter Income Of $158,000   [Aug-04-17 09:00AM  PR Newswire]
▶ 3 Top Dividend Stocks in Lumber   [Jun-08-17 10:00AM  Motley Fool]
▶ Pope Resources Announces Quarterly Distribution   [May-22-17 06:16PM  PR Newswire]
▶ 5 Top Dividend Stocks in the Forestry Industry   [May-16-17 04:30PM  Motley Fool]
▶ Pope Resources to Conduct an Investor Conference Call   [Apr-24-17 04:15PM  PR Newswire]
▶ [$$] The Roundup   [Feb-01-17 09:28AM  at The Wall Street Journal]
▶ [$$] Olympic Resources Raises $381 Million Timber Fund   [Jan-04-17 02:42PM  at The Wall Street Journal]
▶ Pope Resources Closes $381 Million Timber Fund   [Jan-03-17 06:45PM  PR Newswire]
▶ Papal Bull? A Catholic ETF Is Born   [Apr-22-16 01:01PM  at Barrons.com]
Financial statements of POPE
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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