Intrinsic value of TreeHouse Foods - THS

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$80.24

  Intrinsic Value

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  Value-price divergence*

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*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 4.6

 

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
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  6,175
  9,880
  15,265
  22,828
  33,123
  46,731
  64,245
  86,235
  113,232
  145,702
  184,034
  228,528
  279,397
  336,768
  400,687
  471,137
  548,046
  631,302
  720,773
  816,313
  917,779
  1,025,037
  1,137,976
  1,256,510
  1,380,586
  1,510,183
  1,645,321
  1,786,055
  1,932,480
  2,084,729
  2,242,972
Variable operating expenses, $m
 
  9,002
  13,775
  20,479
  29,604
  41,666
  57,189
  76,681
  100,610
  129,391
  163,367
  202,561
  247,650
  298,502
  355,158
  417,603
  485,772
  559,569
  638,874
  723,558
  813,494
  908,564
  1,008,670
  1,113,736
  1,223,713
  1,338,585
  1,458,367
  1,583,110
  1,712,897
  1,847,847
  1,988,109
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
  9,002
  13,775
  20,479
  29,604
  41,666
  57,189
  76,681
  100,610
  129,391
  163,367
  202,561
  247,650
  298,502
  355,158
  417,603
  485,772
  559,569
  638,874
  723,558
  813,494
  908,564
  1,008,670
  1,113,736
  1,223,713
  1,338,585
  1,458,367
  1,583,110
  1,712,897
  1,847,847
  1,988,109
Operating income, $m
  -97
  878
  1,490
  2,349
  3,519
  5,065
  7,055
  9,554
  12,622
  16,311
  20,667
  25,967
  31,747
  38,266
  45,529
  53,534
  62,273
  71,733
  81,900
  92,756
  104,285
  116,472
  129,305
  142,774
  156,873
  171,598
  186,954
  202,945
  219,583
  236,883
  254,863
EBITDA, $m
  191
  1,341
  2,071
  3,098
  4,495
  6,341
  8,718
  11,702
  15,366
  19,772
  24,974
  31,012
  37,915
  45,700
  54,374
  63,934
  74,371
  85,669
  97,810
  110,775
  124,544
  139,099
  154,425
  170,510
  187,348
  204,934
  223,273
  242,371
  262,241
  282,901
  304,375
Interest expense (income), $m
  93
  125
  235
  394
  618
  923
  1,326
  1,844
  2,495
  3,295
  4,256
  5,391
  6,708
  8,214
  9,913
  11,805
  13,891
  16,168
  18,633
  21,282
  24,110
  27,114
  30,290
  33,633
  37,142
  40,816
  44,653
  48,654
  52,820
  57,155
  61,663
Earnings before tax, $m
  -195
  753
  1,255
  1,955
  2,901
  4,142
  5,729
  7,710
  10,126
  13,016
  16,411
  20,576
  25,039
  30,052
  35,616
  41,729
  48,382
  55,566
  63,267
  71,474
  80,175
  89,358
  99,016
  109,141
  119,730
  130,783
  142,301
  154,291
  166,763
  179,727
  193,201
Tax expense, $m
  34
  203
  339
  528
  783
  1,118
  1,547
  2,082
  2,734
  3,514
  4,431
  5,556
  6,761
  8,114
  9,616
  11,267
  13,063
  15,003
  17,082
  19,298
  21,647
  24,127
  26,734
  29,468
  32,327
  35,311
  38,421
  41,659
  45,026
  48,526
  52,164
Net income, $m
  -229
  549
  916
  1,427
  2,117
  3,024
  4,182
  5,628
  7,392
  9,502
  11,980
  15,021
  18,279
  21,938
  26,000
  30,462
  35,319
  40,563
  46,185
  52,176
  58,528
  65,232
  72,282
  79,673
  87,403
  95,471
  103,880
  112,633
  121,737
  131,201
  141,037

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
  10,356
  16,001
  23,929
  34,720
  48,984
  67,342
  90,393
  118,692
  152,728
  192,907
  239,547
  292,869
  353,006
  420,008
  493,854
  574,471
  661,743
  755,528
  855,675
  962,032
  1,074,462
  1,192,847
  1,317,097
  1,447,155
  1,583,001
  1,724,655
  1,872,175
  2,025,661
  2,185,251
  2,351,124
Adjusted assets (=assets-cash), $m
  6,473
  10,356
  16,001
  23,929
  34,720
  48,984
  67,342
  90,393
  118,692
  152,728
  192,907
  239,547
  292,869
  353,006
  420,008
  493,854
  574,471
  661,743
  755,528
  855,675
  962,032
  1,074,462
  1,192,847
  1,317,097
  1,447,155
  1,583,001
  1,724,655
  1,872,175
  2,025,661
  2,185,251
  2,351,124
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
  2,944
  4,549
  6,803
  9,871
  13,926
  19,145
  25,698
  33,743
  43,419
  54,842
  68,101
  83,260
  100,357
  119,405
  140,399
  163,318
  188,128
  214,790
  243,261
  273,498
  305,461
  339,117
  374,440
  411,415
  450,035
  490,306
  532,245
  575,879
  621,249
  668,406
Working capital, $m
  868
  1,373
  2,122
  3,173
  4,604
  6,496
  8,930
  11,987
  15,739
  20,253
  25,581
  31,765
  38,836
  46,811
  55,696
  65,488
  76,178
  87,751
  100,188
  113,468
  127,571
  142,480
  158,179
  174,655
  191,901
  209,915
  228,700
  248,262
  268,615
  289,777
  311,773
Total debt, $m
  2,791
  5,107
  8,572
  13,440
  20,066
  28,824
  40,096
  54,249
  71,625
  92,523
  117,193
  145,830
  178,570
  215,494
  256,633
  301,975
  351,473
  405,058
  462,642
  524,132
  589,436
  658,468
  731,156
  807,445
  887,301
  970,711
  1,057,686
  1,148,264
  1,242,504
  1,340,492
  1,442,338
Total liabilities, $m
  4,043
  6,359
  9,824
  14,692
  21,318
  30,076
  41,348
  55,501
  72,877
  93,775
  118,445
  147,082
  179,822
  216,746
  257,885
  303,227
  352,725
  406,310
  463,894
  525,384
  590,688
  659,720
  732,408
  808,697
  888,553
  971,963
  1,058,938
  1,149,516
  1,243,756
  1,341,744
  1,443,590
Total equity, $m
  2,503
  3,998
  6,176
  9,237
  13,402
  18,908
  25,994
  34,892
  45,815
  58,953
  74,462
  92,465
  113,048
  136,260
  162,123
  190,628
  221,746
  255,433
  291,634
  330,290
  371,344
  414,742
  460,439
  508,399
  558,602
  611,039
  665,717
  722,660
  781,905
  843,507
  907,534
Total liabilities and equity, $m
  6,546
  10,357
  16,000
  23,929
  34,720
  48,984
  67,342
  90,393
  118,692
  152,728
  192,907
  239,547
  292,870
  353,006
  420,008
  493,855
  574,471
  661,743
  755,528
  855,674
  962,032
  1,074,462
  1,192,847
  1,317,096
  1,447,155
  1,583,002
  1,724,655
  1,872,176
  2,025,661
  2,185,251
  2,351,124
Debt-to-equity ratio
  1.115
  1.280
  1.390
  1.460
  1.500
  1.520
  1.540
  1.550
  1.560
  1.570
  1.570
  1.580
  1.580
  1.580
  1.580
  1.580
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
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
  549
  916
  1,427
  2,117
  3,024
  4,182
  5,628
  7,392
  9,502
  11,980
  15,021
  18,279
  21,938
  26,000
  30,462
  35,319
  40,563
  46,185
  52,176
  58,528
  65,232
  72,282
  79,673
  87,403
  95,471
  103,880
  112,633
  121,737
  131,201
  141,037
Depreciation, amort., depletion, $m
  288
  463
  582
  749
  976
  1,276
  1,663
  2,148
  2,744
  3,461
  4,307
  5,045
  6,167
  7,434
  8,845
  10,400
  12,098
  13,935
  15,910
  18,019
  20,259
  22,627
  25,120
  27,736
  30,475
  33,336
  36,319
  39,426
  42,658
  46,018
  49,512
Funds from operations, $m
  548
  1,012
  1,498
  2,176
  3,093
  4,300
  5,845
  7,776
  10,136
  12,963
  16,287
  20,065
  24,446
  29,372
  34,845
  40,862
  47,417
  54,498
  62,095
  70,195
  78,787
  87,858
  97,401
  107,409
  117,878
  128,807
  140,199
  152,058
  164,395
  177,220
  190,548
Change in working capital, $m
  69
  515
  748
  1,051
  1,431
  1,892
  2,434
  3,057
  3,753
  4,513
  5,328
  6,185
  7,071
  7,974
  8,885
  9,793
  10,690
  11,573
  12,436
  13,280
  14,104
  14,909
  15,699
  16,476
  17,247
  18,014
  18,784
  19,562
  20,353
  21,163
  21,996
Cash from operations, $m
  479
  1,152
  749
  1,124
  1,662
  2,408
  3,411
  4,720
  6,384
  8,450
  10,959
  13,880
  17,375
  21,397
  25,960
  31,070
  36,726
  42,926
  49,659
  56,915
  64,683
  72,949
  81,703
  90,933
  100,632
  110,793
  121,415
  132,496
  144,042
  156,057
  168,552
Maintenance CAPEX, $m
  0
  -136
  -218
  -337
  -504
  -731
  -1,032
  -1,418
  -1,904
  -2,499
  -3,216
  -4,062
  -5,045
  -6,167
  -7,434
  -8,845
  -10,400
  -12,098
  -13,935
  -15,910
  -18,019
  -20,259
  -22,627
  -25,120
  -27,736
  -30,475
  -33,336
  -36,319
  -39,426
  -42,658
  -46,018
New CAPEX, $m
  -187
  -1,102
  -1,605
  -2,254
  -3,068
  -4,055
  -5,219
  -6,553
  -8,045
  -9,676
  -11,423
  -13,259
  -15,159
  -17,096
  -19,048
  -20,994
  -22,919
  -24,811
  -26,662
  -28,471
  -30,237
  -31,963
  -33,656
  -35,323
  -36,975
  -38,620
  -40,271
  -41,939
  -43,635
  -45,370
  -47,156
Cash from investing activities, $m
  -2,831
  -1,238
  -1,823
  -2,591
  -3,572
  -4,786
  -6,251
  -7,971
  -9,949
  -12,175
  -14,639
  -17,321
  -20,204
  -23,263
  -26,482
  -29,839
  -33,319
  -36,909
  -40,597
  -44,381
  -48,256
  -52,222
  -56,283
  -60,443
  -64,711
  -69,095
  -73,607
  -78,258
  -83,061
  -88,028
  -93,174
Free cash flow, $m
  -2,352
  -87
  -1,073
  -1,467
  -1,909
  -2,378
  -2,840
  -3,252
  -3,565
  -3,726
  -3,680
  -3,441
  -2,829
  -1,867
  -522
  1,231
  3,408
  6,017
  9,061
  12,534
  16,427
  20,727
  25,420
  30,490
  35,921
  41,698
  47,808
  54,239
  60,981
  68,029
  75,377
Issuance/(repayment) of debt, $m
  1,577
  2,382
  3,466
  4,868
  6,626
  8,759
  11,272
  14,153
  17,375
  20,898
  24,670
  28,637
  32,740
  36,924
  41,139
  45,342
  49,499
  53,585
  57,584
  61,490
  65,304
  69,032
  72,688
  76,289
  79,856
  83,410
  86,976
  90,577
  94,240
  97,988
  101,846
Issuance/(repurchase) of shares, $m
  835
  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  
  2,378
  2,382
  3,466
  4,868
  6,626
  8,759
  11,272
  14,153
  17,375
  20,898
  24,670
  28,637
  32,740
  36,924
  41,139
  45,342
  49,499
  53,585
  57,584
  61,490
  65,304
  69,032
  72,688
  76,289
  79,856
  83,410
  86,976
  90,577
  94,240
  97,988
  101,846
Total cash flow (excl. dividends), $m
  27
  2,295
  2,392
  3,401
  4,716
  6,381
  8,432
  10,901
  13,810
  17,172
  20,990
  25,196
  29,911
  35,057
  40,617
  46,573
  52,906
  59,602
  66,645
  74,024
  81,731
  89,759
  98,108
  106,779
  115,777
  125,108
  134,783
  144,816
  155,221
  166,017
  177,224
Retained Cash Flow (-), $m
  -648
  -1,502
  -2,179
  -3,060
  -4,165
  -5,506
  -7,086
  -8,898
  -10,923
  -13,138
  -15,509
  -18,003
  -20,582
  -23,213
  -25,863
  -28,505
  -31,118
  -33,687
  -36,201
  -38,657
  -41,054
  -43,398
  -45,696
  -47,960
  -50,202
  -52,437
  -54,678
  -56,943
  -59,245
  -61,602
  -64,027
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
 
  801
  213
  341
  551
  874
  1,346
  2,004
  2,887
  4,034
  5,481
  7,193
  9,329
  11,845
  14,754
  18,068
  21,788
  25,915
  30,444
  35,368
  40,677
  46,361
  52,412
  58,819
  65,574
  72,671
  80,105
  87,873
  95,976
  104,416
  113,197
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
 
  738
  180
  261
  379
  535
  726
  942
  1,169
  1,391
  1,588
  1,727
  1,830
  1,868
  1,841
  1,752
  1,613
  1,435
  1,236
  1,030
  830
  648
  488
  356
  251
  170
  111
  70
  43
  25
  14
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

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 -19.9
Price to Sales 0.7
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 15.6
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 60% 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 $4.6 billion.


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Stock chart of THS Financial statements of THS Annual reports of THS
Valuation of Stocks

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