Intrinsic value of Clearwater Paper - CLW

Previous Close

$23.60

  Intrinsic Value

$34.71

stock screener

  Rating & Target

buy

+47%

Previous close

$23.60

 
Intrinsic value

$34.71

 
Up/down potential

+47%

 
Rating

buy

We calculate the intrinsic value of CLW 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 2017), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

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
  1,765
  1,805
  1,852
  1,904
  1,961
  2,025
  2,094
  2,168
  2,249
  2,335
  2,427
  2,526
  2,631
  2,742
  2,861
  2,986
  3,119
  3,259
  3,407
  3,564
  3,729
  3,903
  4,087
  4,280
  4,484
  4,698
  4,924
  5,162
  5,412
  5,675
Variable operating expenses, $m
  1,651
  1,688
  1,731
  1,779
  1,832
  1,890
  1,954
  2,023
  2,096
  2,176
  2,233
  2,324
  2,420
  2,523
  2,632
  2,747
  2,869
  2,998
  3,135
  3,279
  3,431
  3,591
  3,760
  3,938
  4,125
  4,323
  4,530
  4,749
  4,979
  5,221
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
  1,651
  1,688
  1,731
  1,779
  1,832
  1,890
  1,954
  2,023
  2,096
  2,176
  2,233
  2,324
  2,420
  2,523
  2,632
  2,747
  2,869
  2,998
  3,135
  3,279
  3,431
  3,591
  3,760
  3,938
  4,125
  4,323
  4,530
  4,749
  4,979
  5,221
Operating income, $m
  113
  117
  120
  125
  129
  134
  140
  146
  152
  159
  194
  202
  210
  219
  229
  239
  250
  261
  273
  285
  298
  312
  327
  342
  359
  376
  394
  413
  433
  454
EBITDA, $m
  272
  278
  285
  293
  302
  312
  322
  334
  346
  359
  374
  389
  405
  422
  440
  460
  480
  502
  524
  548
  574
  601
  629
  659
  690
  723
  758
  794
  833
  873
Interest expense (income), $m
  27
  39
  41
  42
  44
  46
  48
  50
  53
  56
  59
  62
  66
  70
  74
  78
  82
  87
  92
  98
  103
  109
  116
  122
  129
  137
  145
  153
  162
  171
  180
Earnings before tax, $m
  74
  76
  78
  81
  83
  86
  89
  93
  96
  100
  132
  136
  141
  146
  151
  156
  162
  168
  175
  182
  189
  197
  205
  213
  222
  231
  241
  251
  262
  274
Tax expense, $m
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  68
  71
  74
Net income, $m
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  96
  99
  103
  106
  110
  114
  118
  123
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  200

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
  1,838
  1,880
  1,929
  1,983
  2,043
  2,109
  2,181
  2,259
  2,342
  2,432
  2,528
  2,631
  2,740
  2,856
  2,980
  3,110
  3,249
  3,395
  3,549
  3,712
  3,884
  4,066
  4,257
  4,459
  4,671
  4,894
  5,129
  5,377
  5,637
  5,911
Adjusted assets (=assets-cash), $m
  1,838
  1,880
  1,929
  1,983
  2,043
  2,109
  2,181
  2,259
  2,342
  2,432
  2,528
  2,631
  2,740
  2,856
  2,980
  3,110
  3,249
  3,395
  3,549
  3,712
  3,884
  4,066
  4,257
  4,459
  4,671
  4,894
  5,129
  5,377
  5,637
  5,911
Revenue / Adjusted assets
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
  0.960
Average production assets, $m
  1,304
  1,334
  1,368
  1,407
  1,449
  1,496
  1,547
  1,602
  1,662
  1,726
  1,794
  1,867
  1,944
  2,026
  2,114
  2,207
  2,305
  2,408
  2,518
  2,634
  2,756
  2,884
  3,020
  3,163
  3,314
  3,472
  3,639
  3,815
  3,999
  4,194
Working capital, $m
  9
  9
  9
  10
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  25
  26
  27
  28
Total debt, $m
  750
  779
  812
  849
  890
  935
  983
  1,036
  1,093
  1,155
  1,220
  1,290
  1,364
  1,444
  1,527
  1,616
  1,711
  1,810
  1,915
  2,026
  2,143
  2,267
  2,397
  2,535
  2,679
  2,831
  2,991
  3,160
  3,337
  3,524
Total liabilities, $m
  1,252
  1,281
  1,313
  1,350
  1,391
  1,436
  1,485
  1,538
  1,595
  1,656
  1,722
  1,792
  1,866
  1,945
  2,029
  2,118
  2,212
  2,312
  2,417
  2,528
  2,645
  2,769
  2,899
  3,036
  3,181
  3,333
  3,493
  3,662
  3,839
  4,026
Total equity, $m
  586
  600
  615
  633
  652
  673
  696
  721
  747
  776
  807
  839
  874
  911
  951
  992
  1,036
  1,083
  1,132
  1,184
  1,239
  1,297
  1,358
  1,422
  1,490
  1,561
  1,636
  1,715
  1,798
  1,886
Total liabilities and equity, $m
  1,838
  1,881
  1,928
  1,983
  2,043
  2,109
  2,181
  2,259
  2,342
  2,432
  2,529
  2,631
  2,740
  2,856
  2,980
  3,110
  3,248
  3,395
  3,549
  3,712
  3,884
  4,066
  4,257
  4,458
  4,671
  4,894
  5,129
  5,377
  5,637
  5,912
Debt-to-equity ratio
  1.280
  1.300
  1.320
  1.340
  1.360
  1.390
  1.410
  1.440
  1.460
  1.490
  1.510
  1.540
  1.560
  1.580
  1.610
  1.630
  1.650
  1.670
  1.690
  1.710
  1.730
  1.750
  1.770
  1.780
  1.800
  1.810
  1.830
  1.840
  1.860
  1.870
Adjusted equity ratio
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  54
  56
  57
  59
  61
  63
  65
  68
  70
  73
  96
  99
  103
  106
  110
  114
  118
  123
  128
  133
  138
  143
  149
  155
  162
  169
  176
  184
  192
  200
Depreciation, amort., depletion, $m
  158
  161
  165
  168
  173
  177
  182
  188
  194
  200
  179
  187
  194
  203
  211
  221
  230
  241
  252
  263
  276
  288
  302
  316
  331
  347
  364
  381
  400
  419
Funds from operations, $m
  212
  217
  222
  227
  234
  240
  248
  256
  264
  273
  276
  286
  297
  309
  322
  335
  349
  364
  379
  396
  413
  432
  451
  472
  493
  516
  540
  565
  591
  619
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  212
  217
  222
  227
  233
  240
  247
  255
  264
  273
  275
  286
  297
  308
  321
  334
  348
  363
  379
  395
  413
  431
  450
  471
  492
  515
  539
  564
  590
  618
Maintenance CAPEX, $m
  -128
  -130
  -133
  -137
  -141
  -145
  -150
  -155
  -160
  -166
  -173
  -179
  -187
  -194
  -203
  -211
  -221
  -230
  -241
  -252
  -263
  -276
  -288
  -302
  -316
  -331
  -347
  -364
  -381
  -400
New CAPEX, $m
  -25
  -30
  -34
  -38
  -43
  -47
  -51
  -55
  -59
  -64
  -68
  -73
  -78
  -82
  -87
  -93
  -98
  -104
  -110
  -116
  -122
  -129
  -136
  -143
  -151
  -159
  -167
  -176
  -185
  -194
Cash from investing activities, $m
  -153
  -160
  -167
  -175
  -184
  -192
  -201
  -210
  -219
  -230
  -241
  -252
  -265
  -276
  -290
  -304
  -319
  -334
  -351
  -368
  -385
  -405
  -424
  -445
  -467
  -490
  -514
  -540
  -566
  -594
Free cash flow, $m
  59
  56
  54
  52
  50
  48
  47
  45
  44
  43
  34
  33
  33
  32
  31
  30
  30
  29
  28
  28
  27
  27
  26
  26
  25
  25
  25
  24
  24
  24
Issuance/(repayment) of debt, $m
  25
  29
  33
  37
  41
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
  105
  111
  117
  124
  130
  137
  145
  152
  160
  169
  177
  187
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  25
  29
  33
  37
  41
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
  105
  111
  117
  124
  130
  137
  145
  152
  160
  169
  177
  187
Total cash flow (excl. dividends), $m
  84
  85
  87
  89
  91
  93
  96
  98
  101
  104
  100
  103
  107
  111
  115
  119
  124
  128
  133
  139
  144
  150
  157
  163
  170
  177
  185
  193
  201
  210
Retained Cash Flow (-), $m
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
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
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
Cash available for distribution, $m
  72
  71
  71
  71
  72
  72
  73
  73
  74
  75
  69
  71
  72
  74
  76
  77
  80
  82
  84
  87
  90
  92
  96
  99
  102
  106
  110
  114
  118
  123
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
  67
  62
  56
  51
  47
  42
  38
  33
  29
  25
  20
  17
  14
  12
  10
  8
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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

Clearwater Paper Corporation manufactures consumer tissue, away-from-home (AFH) tissue, parent roll tissue, bleached paperboard and pulp at manufacturing facilities across the nation. The Company operates through two segments: Consumer Products segment, and Pulp and Paperboard segment. The Company's Consumer Products segment manufactures and sells a line of at-home tissue products, as well as AFH products. The Company's Pulp and Paperboard segment manufactures and markets bleached paperboard for the packaging industry. It is a producer of solid bleach sulfate (SBS) paperboard. The Company is a supplier of private label tissue to a range of retailers and wholesale distributors, including grocery, drug, mass merchants and discount stores. In addition, the Company produces bleached paperboard used by printers and packaging converters, and offers services that include custom sheeting, slitting and cutting.

FINANCIAL RATIOS  of  Clearwater Paper (CLW)

Valuation Ratios
P/E Ratio 7.8
Price to Sales 0.2
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 21.6
Growth Rates
Sales Growth Rate -1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20.2%
Cap. Spend. - 3 Yr. Gr. Rate 11.2%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 126.2%
Total Debt to Equity 154.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 7.2%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 13.8%
Gross Margin - 3 Yr. Avg. 13.5%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 10.1%
Operating Margin 6.4%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 3.6%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 2%
Effective Tax Rate 38.3%
Eff/ Tax Rate - 3 Yr. Avg. 63.3%
Payout Ratio 0%

CLW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CLW stock intrinsic value calculation we used $1730 million for the last fiscal year's total revenue generated by Clearwater Paper. The default revenue input number comes from 2017 income statement of Clearwater Paper. 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 CLW 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 7.4%, whose default value for CLW is calculated based on our internal credit rating of Clearwater Paper, 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 Clearwater Paper.
    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 CLW stock the variable cost ratio is equal to 93.6%.

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 CLW 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 5.4% for Clearwater Paper.

Corporate tax rate of 27% is the nominal tax rate for Clearwater Paper. 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 CLW stock is equal to 0.2%.

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 CLW are equal to 73.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Clearwater Paper 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 CLW is equal to 0.5%. 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 - $575 million for Clearwater Paper - 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 16 million for Clearwater Paper 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 Clearwater Paper at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ At US$023.6, Is Clearwater Paper Corporation (NYSE:CLW) A Buy?   [Jun-21-18 02:18PM  Simply Wall St.]
▶ Clearwater Paper: 1Q Earnings Snapshot   [Apr-19-18 04:14PM  Associated Press]
▶ New Strong Sell Stocks for April 13th   [Apr-13-18 06:38AM  Zacks]
▶ New Strong Sell Stocks for April 10th   [Apr-10-18 07:48AM  Zacks]
▶ Clearwater Paper Adds New Board Member   [Mar-01-18 04:15PM  Business Wire]
▶ Clearwater Paper posts 4Q profit   [Feb-05-18 04:58PM  Associated Press]
▶ Clearwater Paper Announces New Board Chair   [Dec-04-17 11:30AM  Business Wire]
▶ Clearwater Paper posts 3Q profit   [Oct-19-17 04:43PM  Associated Press]
▶ Clearwater Paper posts 2Q profit   [Aug-02-17 10:57PM  Associated Press]
▶ Clearwater Paper posts 1Q profit   [Apr-20-17 04:34PM  Associated Press]
▶ New Strong Sell Stocks for February 21st   [Feb-21-17 10:28AM  Zacks]
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