Intrinsic value of BRF S.A. - BRFS

Previous Close

$8.84

  Intrinsic Value

$0.37

stock screener

  Rating & Target

str. sell

-96%

Previous close

$8.84

 
Intrinsic value

$0.37

 
Up/down potential

-96%

 
Rating

str. sell

We calculate the intrinsic value of BRFS 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 0001), $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 7.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  10,311
  10,548
  10,819
  11,124
  11,461
  11,831
  12,234
  12,670
  13,140
  13,644
  14,184
  14,759
  15,372
  16,024
  16,715
  17,447
  18,223
  19,043
  19,909
  20,824
  21,789
  22,807
  23,880
  25,011
  26,201
  27,455
  28,775
  30,163
  31,624
  33,160
Variable operating expenses, $m
  9,760
  9,980
  10,231
  10,512
  10,825
  11,167
  11,540
  11,944
  12,378
  12,845
  13,127
  13,660
  14,227
  14,830
  15,470
  16,148
  16,865
  17,624
  18,426
  19,272
  20,166
  21,108
  22,101
  23,147
  24,249
  25,409
  26,631
  27,916
  29,268
  30,690
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
  9,760
  9,980
  10,231
  10,512
  10,825
  11,167
  11,540
  11,944
  12,378
  12,845
  13,127
  13,660
  14,227
  14,830
  15,470
  16,148
  16,865
  17,624
  18,426
  19,272
  20,166
  21,108
  22,101
  23,147
  24,249
  25,409
  26,631
  27,916
  29,268
  30,690
Operating income, $m
  551
  569
  589
  611
  637
  664
  694
  727
  762
  799
  1,057
  1,100
  1,145
  1,194
  1,245
  1,300
  1,358
  1,419
  1,483
  1,552
  1,623
  1,699
  1,779
  1,863
  1,952
  2,046
  2,144
  2,247
  2,356
  2,471
EBITDA, $m
  1,253
  1,281
  1,314
  1,351
  1,392
  1,437
  1,486
  1,539
  1,596
  1,657
  1,723
  1,793
  1,867
  1,946
  2,030
  2,119
  2,214
  2,313
  2,418
  2,530
  2,647
  2,771
  2,901
  3,038
  3,183
  3,335
  3,495
  3,664
  3,842
  4,028
Interest expense (income), $m
  269
  1,112
  1,147
  1,189
  1,237
  1,291
  1,350
  1,416
  1,487
  1,564
  1,647
  1,736
  1,832
  1,934
  2,042
  2,157
  2,279
  2,409
  2,546
  2,691
  2,844
  3,006
  3,177
  3,357
  3,546
  3,746
  3,957
  4,178
  4,412
  4,657
  4,916
Earnings before tax, $m
  -561
  -578
  -600
  -625
  -654
  -686
  -722
  -760
  -802
  -848
  -680
  -732
  -788
  -848
  -912
  -979
  -1,051
  -1,127
  -1,208
  -1,293
  -1,382
  -1,477
  -1,577
  -1,683
  -1,794
  -1,911
  -2,035
  -2,164
  -2,301
  -2,445
Tax expense, $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
Net income, $m
  -561
  -578
  -600
  -625
  -654
  -686
  -722
  -760
  -802
  -848
  -680
  -732
  -788
  -848
  -912
  -979
  -1,051
  -1,127
  -1,208
  -1,293
  -1,382
  -1,477
  -1,577
  -1,683
  -1,794
  -1,911
  -2,035
  -2,164
  -2,301
  -2,445

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  13,934
  14,255
  14,621
  15,032
  15,488
  15,988
  16,532
  17,122
  17,757
  18,438
  19,167
  19,945
  20,773
  21,654
  22,588
  23,578
  24,625
  25,734
  26,904
  28,141
  29,445
  30,821
  32,270
  33,798
  35,407
  37,101
  38,884
  40,761
  42,735
  44,811
Adjusted assets (=assets-cash), $m
  13,934
  14,255
  14,621
  15,032
  15,488
  15,988
  16,532
  17,122
  17,757
  18,438
  19,167
  19,945
  20,773
  21,654
  22,588
  23,578
  24,625
  25,734
  26,904
  28,141
  29,445
  30,821
  32,270
  33,798
  35,407
  37,101
  38,884
  40,761
  42,735
  44,811
Revenue / Adjusted assets
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
  0.740
Average production assets, $m
  4,795
  4,905
  5,031
  5,173
  5,329
  5,501
  5,689
  5,892
  6,110
  6,345
  6,595
  6,863
  7,148
  7,451
  7,772
  8,113
  8,474
  8,855
  9,258
  9,683
  10,132
  10,605
  11,104
  11,630
  12,184
  12,767
  13,380
  14,026
  14,705
  15,420
Working capital, $m
  1,093
  1,118
  1,147
  1,179
  1,215
  1,254
  1,297
  1,343
  1,393
  1,446
  1,503
  1,565
  1,629
  1,699
  1,772
  1,849
  1,932
  2,019
  2,110
  2,207
  2,310
  2,418
  2,531
  2,651
  2,777
  2,910
  3,050
  3,197
  3,352
  3,515
Total debt, $m
  6,592
  6,833
  7,108
  7,418
  7,760
  8,136
  8,546
  8,989
  9,466
  9,979
  10,527
  11,112
  11,735
  12,397
  13,099
  13,844
  14,632
  15,465
  16,345
  17,275
  18,256
  19,290
  20,381
  21,530
  22,740
  24,014
  25,355
  26,766
  28,250
  29,811
Total liabilities, $m
  10,478
  10,719
  10,995
  11,304
  11,647
  12,023
  12,432
  12,876
  13,353
  13,866
  14,414
  14,999
  15,622
  16,284
  16,986
  17,730
  18,518
  19,352
  20,232
  21,162
  22,143
  23,177
  24,267
  25,416
  26,626
  27,900
  29,241
  30,652
  32,137
  33,698
Total equity, $m
  3,456
  3,535
  3,626
  3,728
  3,841
  3,965
  4,100
  4,246
  4,404
  4,573
  4,753
  4,946
  5,152
  5,370
  5,602
  5,847
  6,107
  6,382
  6,672
  6,979
  7,302
  7,643
  8,003
  8,382
  8,781
  9,201
  9,643
  10,109
  10,598
  11,113
Total liabilities and equity, $m
  13,934
  14,254
  14,621
  15,032
  15,488
  15,988
  16,532
  17,122
  17,757
  18,439
  19,167
  19,945
  20,774
  21,654
  22,588
  23,577
  24,625
  25,734
  26,904
  28,141
  29,445
  30,820
  32,270
  33,798
  35,407
  37,101
  38,884
  40,761
  42,735
  44,811
Debt-to-equity ratio
  1.910
  1.930
  1.960
  1.990
  2.020
  2.050
  2.080
  2.120
  2.150
  2.180
  2.210
  2.250
  2.280
  2.310
  2.340
  2.370
  2.400
  2.420
  2.450
  2.480
  2.500
  2.520
  2.550
  2.570
  2.590
  2.610
  2.630
  2.650
  2.670
  2.680
Adjusted equity ratio
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248
  0.248

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -561
  -578
  -600
  -625
  -654
  -686
  -722
  -760
  -802
  -848
  -680
  -732
  -788
  -848
  -912
  -979
  -1,051
  -1,127
  -1,208
  -1,293
  -1,382
  -1,477
  -1,577
  -1,683
  -1,794
  -1,911
  -2,035
  -2,164
  -2,301
  -2,445
Depreciation, amort., depletion, $m
  702
  713
  726
  740
  756
  773
  792
  813
  835
  858
  666
  693
  722
  753
  785
  820
  856
  894
  935
  978
  1,023
  1,071
  1,122
  1,175
  1,231
  1,290
  1,352
  1,417
  1,485
  1,558
Funds from operations, $m
  141
  134
  125
  114
  102
  87
  70
  52
  32
  10
  -13
  -39
  -66
  -95
  -127
  -160
  -195
  -233
  -272
  -315
  -359
  -406
  -456
  -508
  -563
  -622
  -683
  -748
  -816
  -887
Change in working capital, $m
  21
  25
  29
  32
  36
  39
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  82
  87
  92
  97
  102
  108
  114
  120
  126
  133
  140
  147
  155
  163
Cash from operations, $m
  119
  109
  97
  82
  66
  48
  28
  6
  -18
  -43
  -71
  -100
  -131
  -164
  -200
  -238
  -277
  -320
  -364
  -411
  -461
  -514
  -569
  -628
  -690
  -754
  -823
  -895
  -971
  -1,050
Maintenance CAPEX, $m
  -475
  -484
  -495
  -508
  -522
  -538
  -556
  -575
  -595
  -617
  -641
  -666
  -693
  -722
  -753
  -785
  -820
  -856
  -894
  -935
  -978
  -1,023
  -1,071
  -1,122
  -1,175
  -1,231
  -1,290
  -1,352
  -1,417
  -1,485
New CAPEX, $m
  -94
  -110
  -126
  -142
  -157
  -172
  -187
  -203
  -218
  -234
  -251
  -268
  -285
  -303
  -321
  -341
  -361
  -381
  -403
  -425
  -449
  -473
  -499
  -526
  -554
  -583
  -614
  -646
  -679
  -714
Cash from investing activities, $m
  -569
  -594
  -621
  -650
  -679
  -710
  -743
  -778
  -813
  -851
  -892
  -934
  -978
  -1,025
  -1,074
  -1,126
  -1,181
  -1,237
  -1,297
  -1,360
  -1,427
  -1,496
  -1,570
  -1,648
  -1,729
  -1,814
  -1,904
  -1,998
  -2,096
  -2,199
Free cash flow, $m
  -450
  -485
  -525
  -568
  -613
  -663
  -715
  -772
  -831
  -895
  -962
  -1,034
  -1,109
  -1,189
  -1,274
  -1,363
  -1,457
  -1,557
  -1,662
  -1,772
  -1,888
  -2,011
  -2,140
  -2,275
  -2,418
  -2,568
  -2,726
  -2,892
  -3,067
  -3,250
Issuance/(repayment) of debt, $m
  201
  241
  275
  309
  343
  376
  409
  443
  478
  512
  548
  585
  623
  662
  702
  744
  788
  833
  880
  930
  981
  1,034
  1,090
  1,149
  1,210
  1,274
  1,341
  1,411
  1,484
  1,561
Issuance/(repurchase) of shares, $m
  634
  658
  691
  727
  767
  810
  857
  907
  960
  1,017
  860
  925
  994
  1,066
  1,143
  1,225
  1,311
  1,402
  1,498
  1,599
  1,706
  1,818
  1,937
  2,062
  2,193
  2,331
  2,477
  2,630
  2,791
  2,960
Cash from financing (excl. dividends), $m  
  835
  899
  966
  1,036
  1,110
  1,186
  1,266
  1,350
  1,438
  1,529
  1,408
  1,510
  1,617
  1,728
  1,845
  1,969
  2,099
  2,235
  2,378
  2,529
  2,687
  2,852
  3,027
  3,211
  3,403
  3,605
  3,818
  4,041
  4,275
  4,521
Total cash flow (excl. dividends), $m
  385
  414
  442
  469
  496
  524
  551
  578
  606
  635
  446
  476
  507
  539
  572
  606
  641
  678
  717
  757
  799
  842
  888
  935
  985
  1,037
  1,092
  1,149
  1,209
  1,271
Retained Cash Flow (-), $m
  -634
  -658
  -691
  -727
  -767
  -810
  -857
  -907
  -960
  -1,017
  -860
  -925
  -994
  -1,066
  -1,143
  -1,225
  -1,311
  -1,402
  -1,498
  -1,599
  -1,706
  -1,818
  -1,937
  -2,062
  -2,193
  -2,331
  -2,477
  -2,630
  -2,791
  -2,960
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
  -249
  -244
  -249
  -258
  -271
  -287
  -306
  -328
  -354
  -382
  -414
  -449
  -487
  -527
  -572
  -619
  -669
  -724
  -781
  -842
  -907
  -976
  -1,049
  -1,126
  -1,208
  -1,294
  -1,385
  -1,481
  -1,582
  -1,689
Discount rate, %
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
  -229
  -206
  -190
  -177
  -165
  -153
  -143
  -132
  -121
  -109
  -98
  -86
  -75
  -64
  -54
  -45
  -36
  -28
  -22
  -16
  -12
  -9
  -6
  -4
  -3
  -2
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  91.9
  84.3
  77.2
  70.5
  64.3
  58.5
  53.1
  48.1
  43.4
  39.2
  36.0
  33.0
  30.1
  27.4
  24.9
  22.6
  20.4
  18.4
  16.6
  14.9
  13.4
  12.0
  10.7
  9.5
  8.5
  7.5
  6.7
  5.9
  5.3
  4.6

BRF S.A. is a multinational Brazilian company that owns a diverse portfolio of products and is a producer of foods. The Company's segments include Brazil, Latin America (LATAM), Europe, Middle East and North of Africa (MENA), Asia, Africa and Other Segments. These segments include sales of all distribution channels and operations subdivided in to poultry, pork and other, processed, and other sales. The poultry operations include the production and sale of whole poultry and in-natura cuts. The pork and other operations involve the production and sale of in-natura cuts. The processed operations include the production and sale of processed foods, frozen and processed products derived from poultry, pork and beef, margarine, vegetable and soybean-based products. The other sales operations include the commercialization of flour for food service and others. Other segments include sale of in-natura beef cuts, agricultural products and animal feed.

FINANCIAL RATIOS  of  BRF S.A. (BRFS)

Valuation Ratios
P/E Ratio -59.9
Price to Sales 0.7
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 12.3
Price to Free Cash Flow -25.2
Growth Rates
Sales Growth Rate 4.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.5%
Cap. Spend. - 3 Yr. Gr. Rate 9.1%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 132.8%
Total Debt to Equity 160.2%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital -1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity -2.9%
Return On Equity - 3 Yr. Avg. 11%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 22.3%
Gross Margin - 3 Yr. Avg. 27.7%
EBITDA Margin 6.3%
EBITDA Margin - 3 Yr. Avg. 11.8%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. 10.2%
Pre-Tax Margin -0.9%
Pre-Tax Margin - 3 Yr. Avg. 5.2%
Net Profit Margin -1.1%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate -16%
Eff/ Tax Rate - 3 Yr. Avg. -5.7%
Payout Ratio -315.3%

BRFS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BRFS stock intrinsic value calculation we used $10109 million for the last fiscal year's total revenue generated by BRF S.A.. The default revenue input number comes from 0001 income statement of BRF S.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 BRFS stock valuation model: a) initial revenue growth rate of 2% 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 8.6%, whose default value for BRFS is calculated based on our internal credit rating of BRF S.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 BRF S.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 BRFS stock the variable cost ratio is equal to 94.7%.

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 BRFS 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 17.4% for BRF S.A..

Corporate tax rate of 27% is the nominal tax rate for BRF S.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 BRFS 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 BRFS are equal to 46.5%.

Life of production assets of 9.9 years is the average useful life of capital assets used in BRF S.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 BRFS is equal to 10.6%. 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 - $3382.75445485 million for BRF S.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 811.864 million for BRF S.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 BRF S.A. at the current share price and the inputted number of shares is $7.2 billion.

RELATED COMPANIES Price Int.Val. Rating
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