Intrinsic value of TreeHouse Foods - THS

Previous Close

$71.08

  Intrinsic Value

$101.41

stock screener

  Rating & Target

buy

+43%

  Value-price divergence*

+965%

Previous close

$71.08

 
Intrinsic value

$101.41

 
Up/down potential

+43%

 
Rating

buy

 
Value-price divergence*

+965%

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

We calculate the intrinsic value of THS 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 4.1

 

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, %
  92.61
  20.90
  19.31
  17.88
  16.59
  15.43
  14.39
  13.45
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.95
  7.65
  7.39
  7.15
  6.93
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
Revenue, $m
  6,175
  7,466
  8,907
  10,500
  12,242
  14,131
  16,164
  18,338
  20,650
  23,096
  25,673
  28,380
  31,215
  34,177
  37,268
  40,487
  43,836
  47,320
  50,940
  54,703
  58,613
  62,677
  66,901
  71,294
  75,863
  80,618
  85,570
  90,727
  96,102
  101,707
  107,554
Variable operating expenses, $m
 
  6,862
  8,140
  9,551
  11,095
  12,770
  14,572
  16,499
  18,548
  20,716
  23,001
  25,155
  27,668
  30,294
  33,033
  35,886
  38,855
  41,943
  45,152
  48,487
  51,953
  55,555
  59,299
  63,193
  67,243
  71,458
  75,847
  80,418
  85,183
  90,150
  95,333
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
  6,272
  6,862
  8,140
  9,551
  11,095
  12,770
  14,572
  16,499
  18,548
  20,716
  23,001
  25,155
  27,668
  30,294
  33,033
  35,886
  38,855
  41,943
  45,152
  48,487
  51,953
  55,555
  59,299
  63,193
  67,243
  71,458
  75,847
  80,418
  85,183
  90,150
  95,333
Operating income, $m
  -97
  604
  767
  948
  1,146
  1,361
  1,592
  1,839
  2,102
  2,380
  2,672
  3,225
  3,547
  3,883
  4,235
  4,600
  4,981
  5,377
  5,788
  6,216
  6,660
  7,122
  7,602
  8,101
  8,620
  9,160
  9,723
  10,309
  10,920
  11,557
  12,221
EBITDA, $m
  191
  1,013
  1,209
  1,425
  1,661
  1,918
  2,193
  2,489
  2,802
  3,134
  3,484
  3,851
  4,236
  4,638
  5,057
  5,494
  5,949
  6,421
  6,913
  7,423
  7,954
  8,505
  9,079
  9,675
  10,295
  10,940
  11,612
  12,312
  13,041
  13,802
  14,595
Interest expense (income), $m
  93
  125
  163
  206
  253
  305
  361
  421
  485
  554
  626
  702
  783
  867
  954
  1,046
  1,141
  1,240
  1,343
  1,451
  1,562
  1,678
  1,798
  1,923
  2,053
  2,188
  2,329
  2,476
  2,628
  2,788
  2,954
Earnings before tax, $m
  -195
  478
  604
  742
  893
  1,056
  1,231
  1,418
  1,616
  1,826
  2,046
  2,522
  2,764
  3,017
  3,280
  3,555
  3,840
  4,137
  4,445
  4,765
  5,098
  5,444
  5,804
  6,178
  6,567
  6,972
  7,394
  7,833
  8,291
  8,769
  9,268
Tax expense, $m
  34
  129
  163
  200
  241
  285
  332
  383
  436
  493
  552
  681
  746
  815
  886
  960
  1,037
  1,117
  1,200
  1,287
  1,376
  1,470
  1,567
  1,668
  1,773
  1,882
  1,996
  2,115
  2,239
  2,368
  2,502
Net income, $m
  -229
  349
  441
  542
  652
  771
  899
  1,035
  1,180
  1,333
  1,494
  1,841
  2,018
  2,202
  2,395
  2,595
  2,803
  3,020
  3,245
  3,479
  3,722
  3,974
  4,237
  4,510
  4,794
  5,090
  5,398
  5,718
  6,053
  6,401
  6,765

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  73
  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
  6,546
  7,826
  9,337
  11,006
  12,832
  14,812
  16,944
  19,222
  21,645
  24,209
  26,911
  29,748
  32,720
  35,825
  39,065
  42,439
  45,950
  49,601
  53,397
  57,341
  61,439
  65,699
  70,127
  74,731
  79,521
  84,506
  89,696
  95,102
  100,736
  106,611
  112,740
Adjusted assets (=assets-cash), $m
  6,473
  7,826
  9,337
  11,006
  12,832
  14,812
  16,944
  19,222
  21,645
  24,209
  26,911
  29,748
  32,720
  35,825
  39,065
  42,439
  45,950
  49,601
  53,397
  57,341
  61,439
  65,699
  70,127
  74,731
  79,521
  84,506
  89,696
  95,102
  100,736
  106,611
  112,740
Revenue / Adjusted assets
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
  0.954
Average production assets, $m
  1,843
  2,225
  2,654
  3,129
  3,648
  4,211
  4,817
  5,465
  6,154
  6,882
  7,651
  8,457
  9,302
  10,185
  11,106
  12,065
  13,063
  14,101
  15,180
  16,302
  17,467
  18,678
  19,937
  21,246
  22,607
  24,024
  25,500
  27,037
  28,639
  30,309
  32,051
Working capital, $m
  868
  1,038
  1,238
  1,459
  1,702
  1,964
  2,247
  2,549
  2,870
  3,210
  3,569
  3,945
  4,339
  4,751
  5,180
  5,628
  6,093
  6,577
  7,081
  7,604
  8,147
  8,712
  9,299
  9,910
  10,545
  11,206
  11,894
  12,611
  13,358
  14,137
  14,950
Total debt, $m
  2,791
  3,553
  4,481
  5,506
  6,627
  7,843
  9,151
  10,551
  12,038
  13,612
  15,271
  17,013
  18,838
  20,745
  22,734
  24,805
  26,961
  29,203
  31,534
  33,955
  36,472
  39,087
  41,806
  44,633
  47,574
  50,635
  53,821
  57,141
  60,600
  64,207
  67,971
Total liabilities, $m
  4,043
  4,805
  5,733
  6,758
  7,879
  9,095
  10,403
  11,803
  13,290
  14,864
  16,523
  18,265
  20,090
  21,997
  23,986
  26,057
  28,213
  30,455
  32,786
  35,207
  37,724
  40,339
  43,058
  45,885
  48,826
  51,887
  55,073
  58,393
  61,852
  65,459
  69,223
Total equity, $m
  2,503
  3,021
  3,604
  4,248
  4,953
  5,718
  6,540
  7,420
  8,355
  9,345
  10,388
  11,483
  12,630
  13,829
  15,079
  16,381
  17,737
  19,146
  20,611
  22,134
  23,716
  25,360
  27,069
  28,846
  30,695
  32,619
  34,623
  36,709
  38,884
  41,152
  43,518
Total liabilities and equity, $m
  6,546
  7,826
  9,337
  11,006
  12,832
  14,813
  16,943
  19,223
  21,645
  24,209
  26,911
  29,748
  32,720
  35,826
  39,065
  42,438
  45,950
  49,601
  53,397
  57,341
  61,440
  65,699
  70,127
  74,731
  79,521
  84,506
  89,696
  95,102
  100,736
  106,611
  112,741
Debt-to-equity ratio
  1.115
  1.180
  1.240
  1.300
  1.340
  1.370
  1.400
  1.420
  1.440
  1.460
  1.470
  1.480
  1.490
  1.500
  1.510
  1.510
  1.520
  1.530
  1.530
  1.530
  1.540
  1.540
  1.540
  1.550
  1.550
  1.550
  1.550
  1.560
  1.560
  1.560
  1.560
Adjusted equity ratio
  0.375
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -229
  349
  441
  542
  652
  771
  899
  1,035
  1,180
  1,333
  1,494
  1,841
  2,018
  2,202
  2,395
  2,595
  2,803
  3,020
  3,245
  3,479
  3,722
  3,974
  4,237
  4,510
  4,794
  5,090
  5,398
  5,718
  6,053
  6,401
  6,765
Depreciation, amort., depletion, $m
  288
  409
  441
  476
  515
  557
  602
  649
  701
  755
  811
  626
  689
  754
  823
  894
  968
  1,045
  1,124
  1,208
  1,294
  1,384
  1,477
  1,574
  1,675
  1,780
  1,889
  2,003
  2,121
  2,245
  2,374
Funds from operations, $m
  548
  759
  882
  1,018
  1,167
  1,328
  1,500
  1,685
  1,880
  2,087
  2,305
  2,468
  2,707
  2,957
  3,217
  3,489
  3,771
  4,064
  4,369
  4,686
  5,015
  5,358
  5,714
  6,084
  6,469
  6,869
  7,286
  7,721
  8,174
  8,647
  9,139
Change in working capital, $m
  69
  179
  200
  221
  242
  263
  283
  302
  321
  340
  358
  376
  394
  412
  430
  447
  466
  484
  503
  523
  544
  565
  587
  611
  635
  661
  688
  717
  747
  779
  813
Cash from operations, $m
  479
  579
  682
  797
  925
  1,065
  1,218
  1,382
  1,559
  1,747
  1,947
  2,091
  2,313
  2,545
  2,788
  3,041
  3,305
  3,580
  3,866
  4,163
  4,472
  4,793
  5,126
  5,473
  5,833
  6,208
  6,598
  7,004
  7,427
  7,867
  8,327
Maintenance CAPEX, $m
  0
  -136
  -165
  -197
  -232
  -270
  -312
  -357
  -405
  -456
  -510
  -567
  -626
  -689
  -754
  -823
  -894
  -968
  -1,045
  -1,124
  -1,208
  -1,294
  -1,384
  -1,477
  -1,574
  -1,675
  -1,780
  -1,889
  -2,003
  -2,121
  -2,245
New CAPEX, $m
  -187
  -382
  -430
  -475
  -519
  -563
  -606
  -648
  -689
  -729
  -768
  -807
  -845
  -883
  -921
  -959
  -998
  -1,038
  -1,079
  -1,121
  -1,165
  -1,211
  -1,259
  -1,309
  -1,362
  -1,417
  -1,475
  -1,537
  -1,602
  -1,670
  -1,742
Cash from investing activities, $m
  -2,831
  -518
  -595
  -672
  -751
  -833
  -918
  -1,005
  -1,094
  -1,185
  -1,278
  -1,374
  -1,471
  -1,572
  -1,675
  -1,782
  -1,892
  -2,006
  -2,124
  -2,245
  -2,373
  -2,505
  -2,643
  -2,786
  -2,936
  -3,092
  -3,255
  -3,426
  -3,605
  -3,791
  -3,987
Free cash flow, $m
  -2,352
  61
  87
  126
  174
  232
  300
  378
  466
  563
  669
  718
  842
  973
  1,112
  1,259
  1,413
  1,574
  1,742
  1,917
  2,099
  2,288
  2,484
  2,687
  2,898
  3,117
  3,343
  3,578
  3,822
  4,076
  4,339
Issuance/(repayment) of debt, $m
  1,577
  828
  928
  1,025
  1,121
  1,216
  1,309
  1,399
  1,488
  1,574
  1,659
  1,742
  1,825
  1,907
  1,989
  2,072
  2,156
  2,242
  2,330
  2,422
  2,517
  2,615
  2,719
  2,827
  2,941
  3,061
  3,187
  3,319
  3,460
  3,607
  3,763
Issuance/(repurchase) of shares, $m
  835
  176
  142
  103
  53
  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  
  2,378
  1,004
  1,070
  1,128
  1,174
  1,216
  1,309
  1,399
  1,488
  1,574
  1,659
  1,742
  1,825
  1,907
  1,989
  2,072
  2,156
  2,242
  2,330
  2,422
  2,517
  2,615
  2,719
  2,827
  2,941
  3,061
  3,187
  3,319
  3,460
  3,607
  3,763
Total cash flow (excl. dividends), $m
  27
  1,064
  1,158
  1,253
  1,348
  1,448
  1,608
  1,777
  1,953
  2,137
  2,328
  2,460
  2,666
  2,880
  3,101
  3,331
  3,569
  3,816
  4,073
  4,339
  4,616
  4,903
  5,203
  5,514
  5,839
  6,177
  6,530
  6,898
  7,282
  7,683
  8,102
Retained Cash Flow (-), $m
  -648
  -525
  -583
  -644
  -705
  -764
  -823
  -880
  -935
  -990
  -1,043
  -1,095
  -1,147
  -1,199
  -1,250
  -1,302
  -1,355
  -1,409
  -1,465
  -1,522
  -1,582
  -1,644
  -1,709
  -1,777
  -1,849
  -1,924
  -2,003
  -2,087
  -2,175
  -2,268
  -2,366
Prev. year cash balance distribution, $m
 
  7
  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
 
  546
  574
  609
  643
  683
  786
  897
  1,018
  1,147
  1,285
  1,365
  1,519
  1,681
  1,851
  2,029
  2,214
  2,407
  2,608
  2,817
  3,034
  3,259
  3,494
  3,737
  3,990
  4,253
  4,526
  4,811
  5,107
  5,415
  5,737
Discount rate, %
 
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
 
  503
  484
  465
  442
  418
  424
  422
  412
  396
  372
  328
  298
  265
  231
  197
  164
  133
  106
  82
  62
  46
  33
  23
  15
  10
  6
  4
  2
  1
  1
Current shareholders' claim on cash, %
  100
  95.9
  93.2
  91.5
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9
  90.9

TreeHouse Foods, Inc. operates as a food and beverage manufacturer in the United States and Canada. The company operates through North American Retail Grocery, Food Away From Home, and Industrial and Export segments. It sells branded and private label products, including non-dairy powdered creamers; sweeteners; condensed, ready to serve, and powdered soups, broths, and gravies; refrigerated and shelf stable salad dressings and sauces; pickles and related products; Mexican and other sauces; jams and pie fillings; aseptic products; liquid non-dairy creamer; powdered drinks; single serve hot beverages; specialty teas; hot cereals; baking and mix powders; macaroni and cheese; skillet dinners; snack nuts, trail mixes, dried fruit, and other wholesome snacks; nuts; and other products. The company sells its pickles under the Farman’s, Nalley, Peter Piper, and Steinfeld’s brand names; sauces and syrups under the Bennett’s, Hoffman House, Roddenbery’s Northwoods, and San Antonio names; non-dairy powdered creamer under the Cremora name; non-dairy refrigerated liquid creamer under the Mocha Mix name; single serve hot beverages under the Caza Trail and Grove Square names; snack nuts and trail mixes under the Ann’s House of Nuts and Amport names; other refrigerated products under the Second Nature name; jams and other sauces under the E.D. Smith and Habitant names; oatmeal under the McCann’s name; refrigerated dressings and sauces under the Naturally Fresh name; mayonnaise, dressings, and sauces under the Cains and Olde Cape Cod names; and cleaning cloths under the Knox gelatin and J-Cloth names, as well as other products under the Schwartz and Saucemaker names. It sells its products through various distribution channels comprising grocery retailers and foodservice distributors, as well as food manufacturers and repackagers of foodservice products. TreeHouse Foods, Inc. was founded in 1862 and is based in Oak Brook, Illinois.

FINANCIAL RATIOS  of  TreeHouse Foods (THS)

Valuation Ratios
P/E Ratio -17.6
Price to Sales 0.7
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 13.8
Growth Rates
Sales Growth Rate 92.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 117.4%
Cap. Spend. - 3 Yr. Gr. Rate 18.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 108.9%
Total Debt to Equity 111.5%
Interest Coverage -1
Management Effectiveness
Return On Assets -2.3%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital -5.5%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity -10.5%
Return On Equity - 3 Yr. Avg. 0.6%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 18.2%
Gross Margin - 3 Yr. Avg. 19.6%
EBITDA Margin 3%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin -1.6%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin -3.2%
Pre-Tax Margin - 3 Yr. Avg. 2.3%
Net Profit Margin -3.7%
Net Profit Margin - 3 Yr. Avg. 1%
Effective Tax Rate -17.4%
Eff/ Tax Rate - 3 Yr. Avg. 16.5%
Payout Ratio 0%

THS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the THS stock intrinsic value calculation we used $6175 million for the last fiscal year's total revenue generated by TreeHouse Foods. The default revenue input number comes from 2016 income statement of TreeHouse Foods. 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 THS stock valuation model: a) initial revenue growth rate of 20.9% 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 8.5%, whose default value for THS is calculated based on our internal credit rating of TreeHouse Foods, 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 TreeHouse Foods.
    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 THS stock the variable cost ratio is equal to 92.6%.

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 THS 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 4.6% for TreeHouse Foods.

Corporate tax rate of 27% is the nominal tax rate for TreeHouse Foods. 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 THS 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 THS are equal to 29.8%.

Life of production assets of 13.5 years is the average useful life of capital assets used in TreeHouse Foods 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 THS is equal to 13.9%. 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 - $2503 million for TreeHouse Foods - 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 57.236 million for TreeHouse Foods 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 TreeHouse Foods at the current share price and the inputted number of shares is $4.1 billion.

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COMPANY NEWS

▶ TreeHouse reports 2Q loss   [07:21AM  Associated Press]
▶ New Strong Sell Stocks for May 31st   [May-31-17 09:23AM  Zacks]
▶ Cramer: Why Hain Prompts Hesitation   [07:01PM  TheStreet.com]
▶ Why TreeHouse Foods Inc. Stock Is Falling Today   [May-04-17 02:41PM  Motley Fool]
▶ [$$] TreeHouse Foods to Sell Soup and Infant-Feeding Business to Insight   [Apr-25-17 01:54PM  The Wall Street Journal]
▶ David Rolfe Comments on Treehouse Foods   [Apr-14-17 04:56PM  GuruFocus.com]
▶ Cramer: Market Takes Sucker Punch From Ryan   [Apr-05-17 07:37PM  TheStreet.com]
▶ Treehouse Foods: Cramer's Top Takeaways   [06:20AM  TheStreet.com]
▶ Why TreeHouse Foods Inc. Stock Popped Today   [01:51PM  at Motley Fool]
Stock chart of THS Financial statements of THS
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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