Intrinsic value of UCP Cl A - UCP

Previous Close

$11.44

  Intrinsic Value

$96.00

stock screener

  Rating & Target

str. buy

+739%

  Value-price divergence*

-115%

Previous close

$11.44

 
Intrinsic value

$96.00

 
Up/down potential

+739%

 
Rating

str. buy

 
Value-price divergence*

-115%

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

We calculate the intrinsic value of UCP 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 0.1

 

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, %
  25.09
  39.70
  36.23
  33.11
  30.30
  27.77
  25.49
  23.44
  21.60
  19.94
  18.44
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
Revenue, $m
  349
  488
  664
  884
  1,152
  1,472
  1,847
  2,280
  2,772
  3,325
  3,938
  4,612
  5,344
  6,135
  6,983
  7,887
  8,845
  9,856
  10,919
  12,033
  13,199
  14,416
  15,684
  17,004
  18,377
  19,805
  21,288
  22,830
  24,432
  26,098
  27,829
Variable operating expenses, $m
 
  467
  636
  846
  1,102
  1,409
  1,768
  2,182
  2,653
  3,182
  3,769
  4,413
  5,115
  5,872
  6,683
  7,548
  8,464
  9,432
  10,449
  11,516
  12,631
  13,796
  15,010
  16,273
  17,587
  18,953
  20,373
  21,848
  23,382
  24,975
  26,632
Fixed operating expenses, $m
 
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
Total operating expenses, $m
  340
  473
  642
  852
  1,109
  1,416
  1,775
  2,189
  2,660
  3,189
  3,777
  4,421
  5,123
  5,880
  6,691
  7,557
  8,473
  9,441
  10,458
  11,526
  12,641
  13,806
  15,020
  16,284
  17,598
  18,964
  20,384
  21,860
  23,394
  24,987
  26,645
Operating income, $m
  9
  15
  22
  32
  43
  56
  72
  91
  112
  135
  162
  190
  222
  256
  292
  330
  371
  415
  460
  508
  558
  610
  664
  721
  779
  840
  904
  970
  1,039
  1,110
  1,184
EBITDA, $m
  10
  15
  22
  32
  43
  57
  73
  92
  113
  136
  163
  192
  223
  257
  294
  333
  374
  418
  463
  511
  562
  614
  669
  726
  785
  846
  910
  977
  1,046
  1,118
  1,192
Interest expense (income), $m
  0
  6
  10
  16
  23
  32
  43
  56
  70
  87
  105
  125
  148
  172
  199
  227
  257
  289
  323
  358
  396
  435
  475
  518
  562
  607
  655
  705
  756
  810
  865
Earnings before tax, $m
  9
  9
  12
  15
  19
  24
  29
  35
  42
  49
  57
  65
  74
  83
  93
  103
  114
  125
  137
  149
  162
  175
  189
  203
  218
  233
  249
  265
  282
  300
  319
Tax expense, $m
  -5
  2
  3
  4
  5
  6
  8
  10
  11
  13
  15
  18
  20
  22
  25
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  72
  76
  81
  86
Net income, $m
  9
  7
  9
  11
  14
  18
  21
  26
  31
  36
  41
  47
  54
  61
  68
  75
  83
  92
  100
  109
  118
  128
  138
  148
  159
  170
  182
  194
  206
  219
  233

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  41
  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
  434
  549
  748
  996
  1,297
  1,657
  2,080
  2,567
  3,122
  3,744
  4,435
  5,193
  6,018
  6,909
  7,864
  8,882
  9,960
  11,099
  12,296
  13,551
  14,864
  16,234
  17,662
  19,149
  20,695
  22,303
  23,973
  25,710
  27,514
  29,389
  31,339
Adjusted assets (=assets-cash), $m
  393
  549
  748
  996
  1,297
  1,657
  2,080
  2,567
  3,122
  3,744
  4,435
  5,193
  6,018
  6,909
  7,864
  8,882
  9,960
  11,099
  12,296
  13,551
  14,864
  16,234
  17,662
  19,149
  20,695
  22,303
  23,973
  25,710
  27,514
  29,389
  31,339
Revenue / Adjusted assets
  0.888
  0.889
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
Average production assets, $m
  1
  1
  2
  3
  3
  4
  6
  7
  8
  10
  12
  14
  16
  18
  21
  24
  27
  30
  33
  36
  40
  43
  47
  51
  55
  59
  64
  68
  73
  78
  83
Working capital, $m
  0
  -49
  -66
  -88
  -115
  -147
  -185
  -228
  -277
  -332
  -394
  -461
  -534
  -614
  -698
  -789
  -884
  -986
  -1,092
  -1,203
  -1,320
  -1,442
  -1,568
  -1,700
  -1,838
  -1,980
  -2,129
  -2,283
  -2,443
  -2,610
  -2,783
Total debt, $m
  161
  293
  462
  671
  927
  1,232
  1,590
  2,003
  2,472
  2,999
  3,584
  4,227
  4,926
  5,680
  6,489
  7,351
  8,264
  9,229
  10,243
  11,306
  12,418
  13,578
  14,788
  16,047
  17,357
  18,718
  20,133
  21,604
  23,132
  24,721
  26,372
Total liabilities, $m
  333
  465
  634
  843
  1,099
  1,404
  1,762
  2,175
  2,644
  3,171
  3,756
  4,399
  5,098
  5,852
  6,661
  7,523
  8,436
  9,401
  10,415
  11,478
  12,590
  13,750
  14,960
  16,219
  17,529
  18,890
  20,305
  21,776
  23,304
  24,893
  26,544
Total equity, $m
  101
  84
  114
  152
  198
  254
  318
  393
  478
  573
  679
  795
  921
  1,057
  1,203
  1,359
  1,524
  1,698
  1,881
  2,073
  2,274
  2,484
  2,702
  2,930
  3,166
  3,412
  3,668
  3,934
  4,210
  4,497
  4,795
Total liabilities and equity, $m
  434
  549
  748
  995
  1,297
  1,658
  2,080
  2,568
  3,122
  3,744
  4,435
  5,194
  6,019
  6,909
  7,864
  8,882
  9,960
  11,099
  12,296
  13,551
  14,864
  16,234
  17,662
  19,149
  20,695
  22,302
  23,973
  25,710
  27,514
  29,390
  31,339
Debt-to-equity ratio
  1.594
  3.490
  4.030
  4.410
  4.670
  4.860
  5.000
  5.100
  5.180
  5.240
  5.280
  5.320
  5.350
  5.370
  5.390
  5.410
  5.420
  5.430
  5.440
  5.450
  5.460
  5.470
  5.470
  5.480
  5.480
  5.490
  5.490
  5.490
  5.500
  5.500
  5.500
Adjusted equity ratio
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  7
  9
  11
  14
  18
  21
  26
  31
  36
  41
  47
  54
  61
  68
  75
  83
  92
  100
  109
  118
  128
  138
  148
  159
  170
  182
  194
  206
  219
  233
Depreciation, amort., depletion, $m
  1
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
Funds from operations, $m
  -7
  7
  9
  12
  15
  18
  22
  26
  31
  37
  43
  49
  55
  63
  70
  78
  86
  95
  103
  113
  122
  132
  143
  153
  164
  176
  188
  201
  214
  227
  241
Change in working capital, $m
  -11
  -14
  -18
  -22
  -27
  -32
  -38
  -43
  -49
  -55
  -61
  -67
  -73
  -79
  -85
  -90
  -96
  -101
  -106
  -111
  -117
  -122
  -127
  -132
  -137
  -143
  -148
  -154
  -160
  -167
  -173
Cash from operations, $m
  4
  21
  27
  33
  41
  50
  59
  70
  81
  92
  104
  116
  129
  142
  155
  168
  182
  196
  210
  224
  239
  254
  269
  285
  302
  319
  336
  355
  374
  394
  414
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
New CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
Cash from investing activities, $m
  -1
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
Free cash flow, $m
  3
  20
  26
  33
  40
  49
  58
  68
  78
  90
  101
  113
  125
  138
  150
  163
  177
  190
  204
  217
  232
  246
  261
  277
  293
  309
  326
  344
  362
  381
  401
Issuance/(repayment) of debt, $m
  4
  132
  168
  210
  255
  305
  358
  413
  470
  527
  585
  642
  699
  754
  809
  862
  914
  964
  1,014
  1,063
  1,112
  1,161
  1,210
  1,259
  1,310
  1,362
  1,415
  1,471
  1,528
  1,588
  1,651
Issuance/(repurchase) of shares, $m
  -1
  17
  22
  27
  32
  38
  43
  49
  54
  59
  64
  69
  72
  76
  78
  80
  82
  83
  83
  83
  83
  82
  81
  79
  78
  76
  74
  72
  70
  68
  66
Cash from financing (excl. dividends), $m  
  -3
  149
  190
  237
  287
  343
  401
  462
  524
  586
  649
  711
  771
  830
  887
  942
  996
  1,047
  1,097
  1,146
  1,195
  1,243
  1,291
  1,338
  1,388
  1,438
  1,489
  1,543
  1,598
  1,656
  1,717
Total cash flow (excl. dividends), $m
  1
  169
  216
  269
  328
  391
  459
  530
  602
  676
  750
  824
  896
  968
  1,037
  1,105
  1,172
  1,237
  1,301
  1,364
  1,426
  1,489
  1,551
  1,615
  1,680
  1,746
  1,815
  1,886
  1,960
  2,037
  2,118
Retained Cash Flow (-), $m
  -11
  -24
  -30
  -38
  -46
  -55
  -65
  -75
  -85
  -95
  -106
  -116
  -126
  -136
  -146
  -156
  -165
  -174
  -183
  -192
  -201
  -210
  -218
  -227
  -237
  -246
  -256
  -266
  -276
  -287
  -298
Prev. year cash balance distribution, $m
 
  41
  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
 
  186
  186
  231
  282
  336
  394
  455
  518
  581
  645
  708
  770
  831
  891
  950
  1,007
  1,063
  1,117
  1,172
  1,225
  1,279
  1,333
  1,388
  1,443
  1,501
  1,559
  1,621
  1,684
  1,750
  1,820
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  172
  157
  178
  195
  208
  216
  218
  214
  205
  192
  175
  157
  137
  116
  97
  79
  63
  49
  37
  27
  20
  14
  9
  6
  4
  2
  2
  1
  0
  0
Current shareholders' claim on cash, %
  100
  75.1
  58.0
  45.8
  36.9
  30.3
  25.4
  21.6
  18.6
  16.3
  14.4
  12.9
  11.7
  10.7
  9.9
  9.2
  8.6
  8.1
  7.6
  7.3
  7.0
  6.7
  6.4
  6.2
  6.0
  5.9
  5.7
  5.6
  5.5
  5.4
  5.3

UCP, Inc. operates as a homebuilder and land developer in California, Washington, North Carolina, South Carolina, and Tennessee. The company operates in two segments, Homebuilding and Land Development. It designs, constructs, and sells single-family homes under the Benchmark Communities brand name. The company also develops and sells lots to third-party homebuilders. As of December 31, 2015, it owned or controlled 5,878 lots. The company was founded in 2004 and is based in San Jose, California. UCP, Inc. is a subsidiary of PICO Holdings, Inc.

FINANCIAL RATIOS  of  UCP Cl A (UCP)

Valuation Ratios
P/E Ratio 10
Price to Sales 0.3
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 22.6
Price to Free Cash Flow 22.6
Growth Rates
Sales Growth Rate 25.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 159.4%
Total Debt to Equity 159.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. 0.4%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 9.4%
Return On Equity - 3 Yr. Avg. 2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 18.3%
Gross Margin - 3 Yr. Avg. 18.1%
EBITDA Margin 2.9%
EBITDA Margin - 3 Yr. Avg. 0.6%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin 2.6%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 0.2%
Effective Tax Rate -55.6%
Eff/ Tax Rate - 3 Yr. Avg. -18.5%
Payout Ratio 0%

UCP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UCP stock intrinsic value calculation we used $349 million for the last fiscal year's total revenue generated by UCP Cl A. The default revenue input number comes from 2016 income statement of UCP 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 UCP stock valuation model: a) initial revenue growth rate of 39.7% 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 8.3%, whose default value for UCP is calculated based on our internal credit rating of UCP 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 UCP 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 UCP stock the variable cost ratio is equal to 95.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6 million in the base year in the intrinsic value calculation for UCP 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 UCP Cl A.

Corporate tax rate of 27% is the nominal tax rate for UCP 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 UCP 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 UCP are equal to 0.3%.

Life of production assets of 10 years is the average useful life of capital assets used in UCP 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 UCP is equal to -10%. 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 - $101 million for UCP 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 7.699 million for UCP 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 UCP Cl A at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
LEN Lennar Cl A 51.88 119.06  str.buy
DHI D.R. Horton 35.69 116.35  str.buy
PICO PICO Holdings 16.20 68.01  str.buy
PHM PulteGroup 25.28 47.86  str.buy
KBH KB Home 22.21 65.01  str.buy
WLH William Lyon H 22.60 11.88  str.sell
HOV Hovnanian Ente 2.02 0.80  str.sell
LGIH LGI Homes 45.98 35.36  hold
Stock chart of UCP Financial statements of UCP
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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