Intrinsic value of Orchids Paper Products - TIS

Previous Close

$11.19

  Intrinsic Value

$2.97

stock screener

  Rating & Target

str. sell

-73%

Previous close

$11.19

 
Intrinsic value

$2.97

 
Up/down potential

-73%

 
Rating

str. sell

We calculate the intrinsic value of TIS 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -2.38
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
Revenue, $m
  164
  185
  206
  229
  253
  278
  304
  332
  360
  390
  421
  453
  486
  520
  556
  594
  633
  673
  715
  759
  805
  852
  902
  953
  1,008
  1,064
  1,123
  1,184
  1,249
  1,316
  1,387
Variable operating expenses, $m
 
  138
  154
  171
  189
  208
  228
  248
  269
  291
  314
  337
  362
  388
  415
  442
  471
  502
  533
  566
  600
  635
  672
  710
  751
  793
  837
  883
  931
  981
  1,033
Fixed operating expenses, $m
 
  25
  25
  26
  26
  27
  28
  29
  29
  30
  31
  31
  32
  33
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  46
  47
  48
  49
  50
Total operating expenses, $m
  146
  163
  179
  197
  215
  235
  256
  277
  298
  321
  345
  368
  394
  421
  449
  477
  507
  539
  570
  604
  639
  675
  713
  752
  794
  837
  883
  930
  979
  1,030
  1,083
Operating income, $m
  19
  22
  27
  32
  37
  43
  49
  55
  62
  69
  76
  84
  92
  100
  108
  117
  126
  135
  145
  155
  166
  177
  189
  201
  213
  227
  241
  255
  270
  286
  303
EBITDA, $m
  32
  37
  43
  50
  57
  65
  73
  81
  90
  99
  109
  119
  129
  140
  151
  162
  174
  187
  200
  213
  227
  242
  258
  274
  291
  308
  327
  346
  366
  387
  409
Interest expense (income), $m
  3
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  42
  44
  46
  49
Earnings before tax, $m
  17
  17
  21
  25
  30
  35
  40
  45
  51
  56
  62
  69
  76
  82
  90
  97
  104
  112
  121
  129
  138
  148
  157
  168
  178
  190
  201
  214
  226
  240
  254
Tax expense, $m
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  20
  22
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  48
  51
  54
  58
  61
  65
  69
Net income, $m
  13
  12
  15
  19
  22
  25
  29
  33
  37
  41
  45
  51
  55
  60
  65
  71
  76
  82
  88
  94
  101
  108
  115
  122
  130
  138
  147
  156
  165
  175
  185

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9
  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
  320
  350
  391
  435
  480
  528
  577
  629
  683
  740
  798
  859
  922
  988
  1,056
  1,127
  1,200
  1,277
  1,357
  1,440
  1,527
  1,617
  1,711
  1,809
  1,912
  2,019
  2,131
  2,247
  2,370
  2,497
  2,631
Adjusted assets (=assets-cash), $m
  311
  350
  391
  435
  480
  528
  577
  629
  683
  740
  798
  859
  922
  988
  1,056
  1,127
  1,200
  1,277
  1,357
  1,440
  1,527
  1,617
  1,711
  1,809
  1,912
  2,019
  2,131
  2,247
  2,370
  2,497
  2,631
Revenue / Adjusted assets
  0.527
  0.529
  0.527
  0.526
  0.527
  0.527
  0.527
  0.528
  0.527
  0.527
  0.528
  0.527
  0.527
  0.526
  0.527
  0.527
  0.528
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
  0.527
Average production assets, $m
  227
  255
  285
  316
  349
  384
  420
  458
  497
  538
  581
  625
  671
  719
  768
  820
  874
  929
  988
  1,048
  1,111
  1,177
  1,245
  1,317
  1,391
  1,469
  1,551
  1,636
  1,725
  1,818
  1,915
Working capital, $m
  27
  28
  31
  35
  38
  42
  46
  50
  55
  59
  64
  69
  74
  79
  85
  90
  96
  102
  109
  115
  122
  130
  137
  145
  153
  162
  171
  180
  190
  200
  211
Total debt, $m
  141
  157
  181
  206
  232
  260
  288
  318
  350
  382
  416
  451
  488
  526
  565
  606
  649
  693
  740
  788
  838
  890
  945
  1,002
  1,061
  1,123
  1,188
  1,255
  1,326
  1,400
  1,477
Total liabilities, $m
  187
  203
  227
  252
  278
  306
  334
  364
  396
  428
  462
  497
  534
  572
  611
  652
  695
  739
  786
  834
  884
  936
  991
  1,048
  1,107
  1,169
  1,234
  1,301
  1,372
  1,446
  1,523
Total equity, $m
  133
  147
  165
  183
  202
  222
  243
  265
  288
  311
  336
  362
  388
  416
  444
  474
  505
  538
  571
  606
  643
  681
  720
  762
  805
  850
  897
  946
  998
  1,051
  1,108
Total liabilities and equity, $m
  320
  350
  392
  435
  480
  528
  577
  629
  684
  739
  798
  859
  922
  988
  1,055
  1,126
  1,200
  1,277
  1,357
  1,440
  1,527
  1,617
  1,711
  1,810
  1,912
  2,019
  2,131
  2,247
  2,370
  2,497
  2,631
Debt-to-equity ratio
  1.060
  1.060
  1.100
  1.120
  1.150
  1.170
  1.190
  1.200
  1.220
  1.230
  1.240
  1.250
  1.260
  1.260
  1.270
  1.280
  1.280
  1.290
  1.290
  1.300
  1.300
  1.310
  1.310
  1.310
  1.320
  1.320
  1.320
  1.330
  1.330
  1.330
  1.330
Adjusted equity ratio
  0.399
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  12
  15
  19
  22
  25
  29
  33
  37
  41
  45
  51
  55
  60
  65
  71
  76
  82
  88
  94
  101
  108
  115
  122
  130
  138
  147
  156
  165
  175
  185
Depreciation, amort., depletion, $m
  13
  15
  17
  18
  20
  22
  24
  26
  28
  31
  33
  35
  37
  40
  43
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  82
  86
  91
  96
  101
  106
Funds from operations, $m
  22
  27
  32
  37
  42
  48
  53
  59
  65
  72
  79
  85
  93
  100
  108
  116
  125
  134
  143
  153
  163
  173
  184
  196
  207
  220
  233
  247
  261
  276
  292
Change in working capital, $m
  -6
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
Cash from operations, $m
  28
  24
  29
  33
  38
  44
  49
  55
  61
  67
  74
  80
  88
  95
  103
  111
  119
  127
  136
  146
  156
  166
  177
  188
  199
  211
  224
  237
  251
  266
  281
Maintenance CAPEX, $m
  0
  -13
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -28
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -82
  -86
  -91
  -96
  -101
New CAPEX, $m
  -89
  -28
  -30
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -66
  -68
  -71
  -75
  -78
  -81
  -85
  -89
  -93
  -97
Cash from investing activities, $m
  -78
  -41
  -44
  -48
  -51
  -54
  -57
  -61
  -64
  -69
  -73
  -76
  -81
  -85
  -90
  -95
  -100
  -105
  -110
  -115
  -121
  -128
  -133
  -140
  -148
  -155
  -163
  -171
  -180
  -189
  -198
Free cash flow, $m
  -50
  -17
  -15
  -14
  -12
  -10
  -8
  -6
  -4
  -1
  1
  4
  7
  10
  13
  16
  20
  23
  27
  31
  34
  38
  43
  47
  52
  56
  61
  66
  72
  77
  83
Issuance/(repayment) of debt, $m
  66
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  35
  37
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  77
Issuance/(repurchase) of shares, $m
  0
  4
  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
Cash from financing (excl. dividends), $m  
  68
  27
  26
  25
  26
  28
  29
  30
  31
  33
  34
  35
  37
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  77
Total cash flow (excl. dividends), $m
  18
  10
  10
  11
  14
  17
  21
  24
  28
  31
  35
  39
  43
  48
  52
  57
  62
  68
  73
  79
  85
  91
  97
  104
  111
  118
  126
  134
  142
  151
  160
Retained Cash Flow (-), $m
  1
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
Prev. year cash balance distribution, $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
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
 
  -4
  -7
  -7
  -5
  -3
  0
  2
  5
  8
  11
  14
  17
  20
  24
  27
  31
  35
  39
  44
  48
  53
  58
  63
  68
  73
  79
  85
  91
  97
  104
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
 
  -4
  -6
  -6
  -4
  -2
  0
  1
  2
  3
  4
  4
  4
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  96.6
  95.2
  95.2
  95.2
  95.2
  95.2
  95.2
  95.2
  95.2
  95.2
  95.2
  95.2
  95.2
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Orchids Paper Products Company is a supplier of consumer tissue products. The Company produces bulk tissue paper, known as parent rolls, and converts parent rolls into finished products, including paper towels, bathroom tissue and paper napkins. The Company offers customers a range of private label products across the value, premium and ultra-premium market segments. The Company sells its products to grocery stores, grocery wholesalers and cooperatives, convenience stores, janitorial supply stores and stores in the food service market. The Company's products are sold primarily under its customers' private labels and, to a lesser extent, under its brand names, such as Orchids Supreme, Clean Scents, Tackle, Colortex, My Size, Velvet and Big Mopper. The Company sells its products under private labels to its core customer base in the at home market, which consists primarily of dollar stores, discount retailers and grocery stores that offer alternatives across a range of products.

FINANCIAL RATIOS  of  Orchids Paper Products (TIS)

Valuation Ratios
P/E Ratio 8.9
Price to Sales 0.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 4.1
Price to Free Cash Flow -1.9
Growth Rates
Sales Growth Rate -2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.3%
Cap. Spend. - 3 Yr. Gr. Rate 49.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 100.8%
Total Debt to Equity 106%
Interest Coverage 7
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 7%
Return On Equity 9.7%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 18.3%
Gross Margin - 3 Yr. Avg. 18.5%
EBITDA Margin 20.1%
EBITDA Margin - 3 Yr. Avg. 18.9%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin 10.4%
Pre-Tax Margin - 3 Yr. Avg. 10.7%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 7.5%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. 29.7%
Payout Ratio 107.7%

TIS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TIS stock intrinsic value calculation we used $164 million for the last fiscal year's total revenue generated by Orchids Paper Products. The default revenue input number comes from 2016 income statement of Orchids Paper Products. 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 TIS stock valuation model: a) initial revenue growth rate of 12.5% 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 TIS is calculated based on our internal credit rating of Orchids Paper Products, 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 Orchids Paper Products.
    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 TIS stock the variable cost ratio is equal to 75%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $24 million in the base year in the intrinsic value calculation for TIS 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 Orchids Paper Products.

Corporate tax rate of 27% is the nominal tax rate for Orchids Paper Products. 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 TIS 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 TIS are equal to 138.1%.

Life of production assets of 18 years is the average useful life of capital assets used in Orchids Paper Products 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 TIS is equal to 15.2%. 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 - $133 million for Orchids Paper Products - 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 10.527 million for Orchids Paper Products 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 Orchids Paper Products at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Orchids Paper posts 3Q profit   [Nov-08-17 05:03AM  Associated Press]
▶ Orchids Paper reports 2Q loss   [Aug-07-17 10:35PM  Associated Press]
▶ New Strong Sell Stocks for July 6th   [Jul-06-17 11:18AM  Zacks]
▶ Orchids Paper reports 1Q loss   [05:00AM  Associated Press]
▶ Orchids Paper meets 4Q profit forecasts   [05:03AM  Associated Press]
▶ Small Caps With Big Yields   [Dec-14-16 09:30AM  at Forbes]
Financial statements of TIS
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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