Intrinsic value of Capital Product Partners L.P. - CPLP

Previous Close

$10.49

  Intrinsic Value

$8.75

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  Rating & Target

hold

-17%

Previous close

$10.49

 
Intrinsic value

$8.75

 
Up/down potential

-17%

 
Rating

hold

We calculate the intrinsic value of CPLP 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 1.3

 

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, %
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
Revenue, $m
  257
  265
  274
  284
  295
  306
  319
  332
  345
  360
  376
  392
  410
  428
  448
  469
  490
  513
  538
  563
  590
  618
  648
  679
  712
  747
  783
  822
  862
  904
Variable operating expenses, $m
  172
  174
  176
  177
  179
  181
  184
  186
  188
  191
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
  134
  140
  147
  154
  162
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
  172
  174
  176
  177
  179
  181
  184
  186
  188
  191
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  127
  134
  140
  147
  154
  162
Operating income, $m
  84
  91
  99
  107
  116
  125
  135
  146
  157
  169
  309
  322
  337
  352
  368
  385
  403
  422
  441
  462
  484
  508
  532
  558
  585
  613
  643
  675
  708
  742
EBITDA, $m
  287
  296
  307
  318
  330
  343
  356
  371
  386
  403
  420
  439
  458
  479
  501
  524
  548
  574
  601
  630
  660
  691
  724
  759
  796
  835
  876
  919
  964
  1,011
Interest expense (income), $m
  24
  25
  25
  26
  27
  29
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  95
Earnings before tax, $m
  60
  66
  72
  79
  87
  95
  104
  113
  123
  134
  271
  283
  296
  309
  323
  337
  353
  369
  386
  405
  424
  444
  465
  487
  511
  535
  561
  588
  617
  647
Tax expense, $m
  16
  18
  20
  21
  24
  26
  28
  31
  33
  36
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  126
  132
  138
  145
  152
  159
  167
  175
Net income, $m
  44
  48
  53
  58
  64
  70
  76
  83
  90
  98
  198
  207
  216
  225
  236
  246
  258
  270
  282
  295
  309
  324
  339
  356
  373
  391
  410
  430
  450
  472

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
  1,510
  1,560
  1,614
  1,672
  1,735
  1,802
  1,874
  1,951
  2,032
  2,119
  2,211
  2,308
  2,411
  2,520
  2,635
  2,757
  2,885
  3,020
  3,162
  3,312
  3,470
  3,637
  3,812
  3,996
  4,190
  4,393
  4,608
  4,833
  5,070
  5,319
Adjusted assets (=assets-cash), $m
  1,510
  1,560
  1,614
  1,672
  1,735
  1,802
  1,874
  1,951
  2,032
  2,119
  2,211
  2,308
  2,411
  2,520
  2,635
  2,757
  2,885
  3,020
  3,162
  3,312
  3,470
  3,637
  3,812
  3,996
  4,190
  4,393
  4,608
  4,833
  5,070
  5,319
Revenue / Adjusted assets
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
Average production assets, $m
  1,357
  1,402
  1,450
  1,503
  1,559
  1,620
  1,684
  1,753
  1,827
  1,905
  1,987
  2,075
  2,167
  2,265
  2,369
  2,478
  2,593
  2,714
  2,842
  2,977
  3,119
  3,269
  3,426
  3,591
  3,765
  3,949
  4,141
  4,344
  4,557
  4,780
Working capital, $m
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -110
Total debt, $m
  470
  488
  507
  529
  551
  576
  602
  630
  659
  691
  724
  759
  797
  836
  878
  922
  969
  1,018
  1,069
  1,124
  1,181
  1,242
  1,305
  1,372
  1,442
  1,516
  1,594
  1,676
  1,762
  1,852
Total liabilities, $m
  548
  566
  586
  607
  630
  654
  680
  708
  738
  769
  803
  838
  875
  915
  957
  1,001
  1,047
  1,096
  1,148
  1,202
  1,260
  1,320
  1,384
  1,450
  1,521
  1,595
  1,673
  1,754
  1,840
  1,931
Total equity, $m
  962
  994
  1,028
  1,065
  1,105
  1,148
  1,194
  1,243
  1,295
  1,350
  1,408
  1,470
  1,536
  1,605
  1,679
  1,756
  1,838
  1,924
  2,014
  2,110
  2,211
  2,317
  2,428
  2,545
  2,669
  2,799
  2,935
  3,079
  3,229
  3,388
Total liabilities and equity, $m
  1,510
  1,560
  1,614
  1,672
  1,735
  1,802
  1,874
  1,951
  2,033
  2,119
  2,211
  2,308
  2,411
  2,520
  2,636
  2,757
  2,885
  3,020
  3,162
  3,312
  3,471
  3,637
  3,812
  3,995
  4,190
  4,394
  4,608
  4,833
  5,069
  5,319
Debt-to-equity ratio
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.520
  0.520
  0.520
  0.520
  0.530
  0.530
  0.530
  0.530
  0.530
  0.530
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.540
  0.550
  0.550
Adjusted equity ratio
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637
  0.637

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  48
  53
  58
  64
  70
  76
  83
  90
  98
  198
  207
  216
  225
  236
  246
  258
  270
  282
  295
  309
  324
  339
  356
  373
  391
  410
  430
  450
  472
Depreciation, amort., depletion, $m
  203
  205
  208
  211
  214
  217
  221
  225
  229
  233
  112
  117
  122
  127
  133
  139
  146
  152
  160
  167
  175
  184
  192
  202
  212
  222
  233
  244
  256
  269
Funds from operations, $m
  246
  253
  261
  269
  278
  287
  297
  308
  319
  331
  310
  323
  338
  353
  369
  385
  403
  422
  442
  463
  485
  508
  532
  557
  584
  613
  642
  674
  706
  741
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from operations, $m
  247
  254
  262
  270
  279
  288
  299
  309
  321
  333
  312
  325
  340
  355
  371
  388
  406
  425
  445
  466
  488
  511
  536
  561
  588
  617
  647
  678
  711
  746
Maintenance CAPEX, $m
  -74
  -76
  -79
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -127
  -133
  -139
  -146
  -152
  -160
  -167
  -175
  -184
  -192
  -202
  -212
  -222
  -233
  -244
  -256
New CAPEX, $m
  -41
  -45
  -49
  -52
  -56
  -60
  -65
  -69
  -73
  -78
  -83
  -88
  -93
  -98
  -103
  -109
  -115
  -121
  -128
  -135
  -142
  -149
  -157
  -166
  -174
  -183
  -193
  -202
  -213
  -224
Cash from investing activities, $m
  -115
  -121
  -128
  -133
  -140
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -220
  -230
  -242
  -254
  -267
  -280
  -295
  -309
  -324
  -341
  -358
  -376
  -395
  -415
  -435
  -457
  -480
Free cash flow, $m
  133
  133
  135
  136
  138
  140
  143
  146
  149
  152
  122
  126
  130
  135
  140
  146
  152
  158
  164
  171
  179
  186
  195
  203
  212
  222
  232
  243
  254
  266
Issuance/(repayment) of debt, $m
  15
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  37
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  90
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  
  15
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  37
  40
  42
  44
  47
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  90
Total cash flow (excl. dividends), $m
  148
  151
  154
  157
  161
  165
  169
  174
  179
  184
  155
  161
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  258
  270
  283
  296
  310
  325
  340
  357
Retained Cash Flow (-), $m
  -29
  -32
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -69
  -73
  -77
  -82
  -86
  -91
  -96
  -101
  -106
  -111
  -117
  -123
  -130
  -136
  -144
  -151
  -159
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
  119
  120
  120
  120
  121
  122
  123
  125
  127
  129
  97
  99
  102
  105
  109
  112
  116
  121
  125
  130
  135
  141
  147
  153
  159
  166
  174
  181
  190
  198
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  113
  107
  101
  94
  88
  82
  76
  69
  63
  58
  38
  34
  31
  27
  24
  20
  18
  15
  12
  10
  8
  6
  5
  4
  3
  2
  2
  1
  1
  0
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Capital Product Partners L.P. is an international owner of tanker, container and drybulk vessels. The Company's fleet consisted of 36 high specification vessels with an average age of approximately 7.4 years, as of December 31, 2016. As of December 31, 2016, its fleet consisted of four Suezmax crude oil tankers, 21 medium range product tankers, 10 post-panamax container carrier vessels and one Capesize bulk carrier. The Company's vessels are capable of carrying a range of cargoes, including crude oil, refined oil products, such as gasoline, diesel, fuel oil and jet fuel, edible oils and certain chemicals, such as ethanol, as well as dry cargo and containerized goods. Its fleet consists of product tankers, such as Aktoras, Aiolos, Agisilaos, Akeraios and Apostolos; crude tankers, such as Amoureux, Aias, Amore Mio II and Miltiadis M II; drybulk vessels, such as Cape Agamemnon, and container carrier vessels, such as Archimidis, Agamemnon and Hyundai Platinum.

FINANCIAL RATIOS  of  Capital Product Partners L.P. (CPLP)

Valuation Ratios
P/E Ratio 24.6
Price to Sales 5.3
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 20
Growth Rates
Sales Growth Rate 10%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.3%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 60.6%
Total Debt to Equity 64.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 3.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.4%
Return On Equity 5.6%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 95.5%
Gross Margin - 3 Yr. Avg. 96.4%
EBITDA Margin 67.4%
EBITDA Margin - 3 Yr. Avg. 68.3%
Operating Margin 31.4%
Oper. Margin - 3 Yr. Avg. 32.1%
Pre-Tax Margin 21.5%
Pre-Tax Margin - 3 Yr. Avg. 23.1%
Net Profit Margin 21.5%
Net Profit Margin - 3 Yr. Avg. 23.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 130.8%

CPLP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CPLP stock intrinsic value calculation we used $249 million for the last fiscal year's total revenue generated by Capital Product Partners L.P.. The default revenue input number comes from 0001 income statement of Capital Product Partners L.P.. 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 CPLP stock valuation model: a) initial revenue growth rate of 3.1% 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 5.4%, whose default value for CPLP is calculated based on our internal credit rating of Capital Product Partners L.P., 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 Capital Product Partners L.P..
    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 CPLP stock the variable cost ratio is equal to 68.7%.

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 CPLP 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 Capital Product Partners L.P..

Corporate tax rate of 27% is the nominal tax rate for Capital Product Partners L.P.. 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 CPLP 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 CPLP are equal to 528.7%.

Life of production assets of 17.8 years is the average useful life of capital assets used in Capital Product Partners L.P. 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 CPLP is equal to -12.2%. 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 - $933.405 million for Capital Product Partners L.P. - 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 127.248 million for Capital Product Partners L.P. 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 Capital Product Partners L.P. at the current share price and the inputted number of shares is $1.3 billion.

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