Intrinsic value of Calavo Growers, Inc. - CVGW

Previous Close

$98.51

  Intrinsic Value

$34.24

stock screener

  Rating & Target

str. sell

-65%

Previous close

$98.51

 
Intrinsic value

$34.24

 
Up/down potential

-65%

 
Rating

str. sell

We calculate the intrinsic value of CVGW 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 1.7

 

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, %
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
Revenue, $m
  1,134
  1,181
  1,232
  1,285
  1,342
  1,402
  1,465
  1,532
  1,603
  1,677
  1,756
  1,839
  1,926
  2,018
  2,115
  2,216
  2,324
  2,436
  2,555
  2,679
  2,810
  2,948
  3,093
  3,245
  3,405
  3,573
  3,750
  3,935
  4,130
  4,335
Variable operating expenses, $m
  1,072
  1,116
  1,163
  1,214
  1,266
  1,323
  1,382
  1,444
  1,510
  1,580
  1,641
  1,719
  1,800
  1,886
  1,977
  2,072
  2,172
  2,277
  2,388
  2,505
  2,627
  2,756
  2,891
  3,034
  3,183
  3,340
  3,505
  3,679
  3,861
  4,052
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
  1,072
  1,116
  1,163
  1,214
  1,266
  1,323
  1,382
  1,444
  1,510
  1,580
  1,641
  1,719
  1,800
  1,886
  1,977
  2,072
  2,172
  2,277
  2,388
  2,505
  2,627
  2,756
  2,891
  3,034
  3,183
  3,340
  3,505
  3,679
  3,861
  4,052
Operating income, $m
  62
  65
  68
  72
  75
  79
  83
  88
  92
  97
  114
  120
  126
  132
  138
  145
  152
  159
  167
  175
  183
  192
  202
  212
  222
  233
  244
  257
  269
  283
EBITDA, $m
  87
  90
  94
  98
  103
  107
  112
  117
  122
  128
  134
  141
  147
  154
  162
  169
  178
  186
  195
  205
  215
  225
  236
  248
  260
  273
  287
  301
  316
  331
Interest expense (income), $m
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
Earnings before tax, $m
  61
  64
  67
  70
  73
  77
  81
  85
  89
  94
  111
  116
  121
  126
  132
  138
  145
  152
  159
  166
  174
  183
  191
  201
  210
  220
  231
  242
  254
  266
Tax expense, $m
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  69
  72
Net income, $m
  44
  47
  49
  51
  54
  56
  59
  62
  65
  68
  81
  84
  88
  92
  97
  101
  106
  111
  116
  121
  127
  133
  140
  146
  153
  161
  169
  177
  185
  194

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
  383
  399
  416
  434
  453
  473
  495
  517
  541
  566
  593
  621
  650
  681
  714
  749
  785
  823
  863
  905
  949
  996
  1,045
  1,096
  1,150
  1,207
  1,266
  1,329
  1,395
  1,464
Adjusted assets (=assets-cash), $m
  383
  399
  416
  434
  453
  473
  495
  517
  541
  566
  593
  621
  650
  681
  714
  749
  785
  823
  863
  905
  949
  996
  1,045
  1,096
  1,150
  1,207
  1,266
  1,329
  1,395
  1,464
Revenue / Adjusted assets
  2.961
  2.960
  2.962
  2.961
  2.962
  2.964
  2.960
  2.963
  2.963
  2.963
  2.961
  2.961
  2.963
  2.963
  2.962
  2.959
  2.961
  2.960
  2.961
  2.960
  2.961
  2.960
  2.960
  2.961
  2.961
  2.960
  2.962
  2.961
  2.961
  2.961
Average production assets, $m
  136
  142
  148
  154
  161
  168
  176
  184
  192
  201
  211
  221
  231
  242
  254
  266
  279
  292
  307
  322
  337
  354
  371
  389
  409
  429
  450
  472
  496
  520
Working capital, $m
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  124
  130
  136
  143
  150
  157
  165
  173
Total debt, $m
  19
  24
  29
  34
  39
  45
  51
  57
  64
  71
  78
  86
  94
  103
  112
  121
  132
  142
  153
  165
  177
  190
  204
  218
  233
  249
  266
  283
  302
  321
Total liabilities, $m
  107
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  209
  219
  230
  241
  252
  265
  278
  291
  306
  321
  337
  353
  371
  389
  408
Total equity, $m
  276
  288
  300
  313
  327
  341
  357
  373
  390
  408
  428
  448
  469
  491
  515
  540
  566
  593
  622
  652
  684
  718
  753
  790
  829
  870
  913
  958
  1,006
  1,056
Total liabilities and equity, $m
  383
  399
  416
  434
  453
  473
  495
  517
  541
  566
  593
  621
  650
  681
  714
  749
  785
  823
  863
  904
  949
  996
  1,044
  1,096
  1,150
  1,207
  1,266
  1,329
  1,395
  1,464
Debt-to-equity ratio
  0.070
  0.080
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  47
  49
  51
  54
  56
  59
  62
  65
  68
  81
  84
  88
  92
  97
  101
  106
  111
  116
  121
  127
  133
  140
  146
  153
  161
  169
  177
  185
  194
Depreciation, amort., depletion, $m
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  49
Funds from operations, $m
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  166
  174
  183
  192
  201
  211
  221
  232
  243
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  97
  102
  106
  111
  116
  122
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  204
  214
  224
  235
Maintenance CAPEX, $m
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
New CAPEX, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
Cash from investing activities, $m
  -18
  -19
  -19
  -20
  -21
  -22
  -24
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -41
  -44
  -46
  -49
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -71
Free cash flow, $m
  50
  52
  53
  55
  57
  60
  62
  64
  67
  70
  69
  72
  75
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
  164
Issuance/(repayment) of debt, $m
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
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  
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
Total cash flow (excl. dividends), $m
  54
  56
  58
  60
  63
  65
  68
  71
  73
  77
  77
  80
  84
  87
  91
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  183
Retained Cash Flow (-), $m
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
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
  43
  45
  46
  47
  49
  51
  52
  54
  56
  58
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  127
  133
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  41
  41
  40
  39
  38
  37
  35
  34
  32
  31
  27
  25
  24
  22
  20
  18
  16
  14
  12
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  1
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
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Calavo Growers, Inc. operates in the avocado industry. The Company provides value-added fresh food. The Company distributes its products both domestically and internationally and internationally. It operates in three business segments: Fresh products, Calavo Foods and Renaissance Food Group, LLC (RFG). The Company is engaged in marketing and distributing avocados, prepared avocados and other perishable foods, which allows it to deliver an array of fresh and prepared food products to food distributors, produce wholesalers, supermarkets, convenience stores and restaurants on a worldwide basis. The Company procures avocados principally from California and Mexico. Through its various operating facilities, the Company sorts, packs, and/or ripens avocados, tomatoes and/or Hawaiian grown papayas; processes and packages fresh cut fruit and vegetables, salads, wraps, sandwiches, fresh snacking products and a range of behind-the-glass deli items, and produces and packages guacamole and salsa.

FINANCIAL RATIOS  of  Calavo Growers, Inc. (CVGW)

Valuation Ratios
P/E Ratio 46.7
Price to Sales 1.6
Price to Book 7.1
Price to Tangible Book
Price to Cash Flow 27.9
Price to Free Cash Flow 101.6
Growth Rates
Sales Growth Rate 15%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 104.5%
Cap. Spend. - 3 Yr. Gr. Rate 30.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0.4%
Total Debt to Equity 8.6%
Interest Coverage 59
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 11.1%
Return On Total Capital 14.9%
Ret/ On T. Cap. - 3 Yr. Avg. 14.5%
Return On Equity 16.2%
Return On Equity - 3 Yr. Avg. 16.7%
Asset Turnover 3.1
Profitability Ratios
Gross Margin 10.7%
Gross Margin - 3 Yr. Avg. 10.7%
EBITDA Margin 6.5%
EBITDA Margin - 3 Yr. Avg. 6.7%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. 5.7%
Pre-Tax Margin 5.4%
Pre-Tax Margin - 3 Yr. Avg. 5.6%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 36.2%
Eff/ Tax Rate - 3 Yr. Avg. 36.7%
Payout Ratio 43.2%

CVGW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVGW stock intrinsic value calculation we used $1089 million for the last fiscal year's total revenue generated by Calavo Growers, Inc.. The default revenue input number comes from 0001 income statement of Calavo Growers, Inc.. 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 CVGW stock valuation model: a) initial revenue growth rate of 4.1% 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 4.3%, whose default value for CVGW is calculated based on our internal credit rating of Calavo Growers, Inc., 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 Calavo Growers, Inc..
    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 CVGW stock the variable cost ratio is equal to 94.6%.

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 CVGW 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 Calavo Growers, Inc..

Corporate tax rate of 27% is the nominal tax rate for Calavo Growers, Inc.. 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 CVGW 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 CVGW are equal to 12%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Calavo Growers, Inc. 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 CVGW is equal to 4%. 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 - $264.959 million for Calavo Growers, Inc. - 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 17.566 million for Calavo Growers, Inc. 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 Calavo Growers, Inc. at the current share price and the inputted number of shares is $1.7 billion.

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