Intrinsic value of Dean Foods Company - DF

Previous Close

$2.93

  Intrinsic Value

$3.49

stock screener

  Rating & Target

hold

+19%

Previous close

$2.93

 
Intrinsic value

$3.49

 
Up/down potential

+19%

 
Rating

hold

We calculate the intrinsic value of DF 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 0.3

 

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, %
  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
  7,910
  8,092
  8,300
  8,533
  8,792
  9,076
  9,385
  9,720
  10,080
  10,467
  10,881
  11,323
  11,793
  12,292
  12,823
  13,385
  13,979
  14,608
  15,273
  15,975
  16,715
  17,496
  18,319
  19,187
  20,100
  21,062
  22,074
  23,139
  24,260
  25,439
Variable operating expenses, $m
  7,823
  8,002
  8,207
  8,438
  8,693
  8,973
  9,278
  9,608
  9,963
  10,345
  10,733
  11,169
  11,633
  12,126
  12,649
  13,203
  13,790
  14,410
  15,066
  15,758
  16,489
  17,259
  18,071
  18,927
  19,828
  20,776
  21,775
  22,826
  23,931
  25,094
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
  7,823
  8,002
  8,207
  8,438
  8,693
  8,973
  9,278
  9,608
  9,963
  10,345
  10,733
  11,169
  11,633
  12,126
  12,649
  13,203
  13,790
  14,410
  15,066
  15,758
  16,489
  17,259
  18,071
  18,927
  19,828
  20,776
  21,775
  22,826
  23,931
  25,094
Operating income, $m
  87
  90
  93
  96
  99
  103
  107
  112
  117
  122
  147
  153
  160
  167
  174
  181
  189
  198
  207
  217
  227
  237
  248
  260
  272
  285
  299
  314
  329
  345
EBITDA, $m
  249
  255
  261
  268
  277
  286
  295
  306
  317
  329
  342
  356
  371
  387
  403
  421
  440
  460
  480
  503
  526
  550
  576
  604
  632
  663
  694
  728
  763
  800
Interest expense (income), $m
  61
  56
  58
  61
  64
  67
  71
  75
  80
  85
  90
  96
  102
  108
  115
  122
  130
  138
  147
  156
  165
  175
  186
  198
  210
  222
  235
  249
  264
  279
  296
Earnings before tax, $m
  31
  31
  32
  32
  32
  32
  32
  32
  32
  32
  52
  52
  52
  52
  52
  52
  52
  51
  51
  51
  51
  51
  51
  51
  50
  50
  50
  50
  49
  49
Tax expense, $m
  8
  8
  9
  9
  9
  9
  9
  9
  9
  9
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  13
  13
  13
  13
Net income, $m
  23
  23
  23
  23
  23
  23
  23
  23
  23
  23
  38
  38
  38
  38
  38
  38
  38
  38
  37
  37
  37
  37
  37
  37
  37
  37
  36
  36
  36
  36

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
  2,161
  2,210
  2,267
  2,331
  2,402
  2,479
  2,564
  2,655
  2,753
  2,859
  2,972
  3,093
  3,221
  3,358
  3,503
  3,656
  3,818
  3,990
  4,172
  4,364
  4,566
  4,779
  5,004
  5,241
  5,490
  5,753
  6,030
  6,320
  6,627
  6,949
Adjusted assets (=assets-cash), $m
  2,161
  2,210
  2,267
  2,331
  2,402
  2,479
  2,564
  2,655
  2,753
  2,859
  2,972
  3,093
  3,221
  3,358
  3,503
  3,656
  3,818
  3,990
  4,172
  4,364
  4,566
  4,779
  5,004
  5,241
  5,490
  5,753
  6,030
  6,320
  6,627
  6,949
Revenue / Adjusted assets
  3.660
  3.662
  3.661
  3.661
  3.660
  3.661
  3.660
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
  3.661
Average production assets, $m
  1,218
  1,246
  1,278
  1,314
  1,354
  1,398
  1,445
  1,497
  1,552
  1,612
  1,676
  1,744
  1,816
  1,893
  1,975
  2,061
  2,153
  2,250
  2,352
  2,460
  2,574
  2,694
  2,821
  2,955
  3,095
  3,244
  3,399
  3,563
  3,736
  3,918
Working capital, $m
  190
  194
  199
  205
  211
  218
  225
  233
  242
  251
  261
  272
  283
  295
  308
  321
  336
  351
  367
  383
  401
  420
  440
  460
  482
  505
  530
  555
  582
  611
Total debt, $m
  942
  985
  1,034
  1,088
  1,149
  1,215
  1,288
  1,366
  1,450
  1,541
  1,638
  1,741
  1,851
  1,968
  2,092
  2,224
  2,363
  2,510
  2,666
  2,830
  3,004
  3,186
  3,379
  3,582
  3,796
  4,021
  4,258
  4,507
  4,770
  5,046
Total liabilities, $m
  1,852
  1,894
  1,943
  1,998
  2,058
  2,125
  2,197
  2,275
  2,360
  2,450
  2,547
  2,650
  2,761
  2,878
  3,002
  3,133
  3,272
  3,420
  3,575
  3,740
  3,913
  4,096
  4,288
  4,491
  4,705
  4,930
  5,167
  5,417
  5,679
  5,955
Total equity, $m
  309
  316
  324
  333
  343
  355
  367
  380
  394
  409
  425
  442
  461
  480
  501
  523
  546
  571
  597
  624
  653
  683
  716
  749
  785
  823
  862
  904
  948
  994
Total liabilities and equity, $m
  2,161
  2,210
  2,267
  2,331
  2,401
  2,480
  2,564
  2,655
  2,754
  2,859
  2,972
  3,092
  3,222
  3,358
  3,503
  3,656
  3,818
  3,991
  4,172
  4,364
  4,566
  4,779
  5,004
  5,240
  5,490
  5,753
  6,029
  6,321
  6,627
  6,949
Debt-to-equity ratio
  3.050
  3.120
  3.190
  3.270
  3.350
  3.430
  3.510
  3.600
  3.680
  3.770
  3.850
  3.940
  4.020
  4.100
  4.180
  4.250
  4.330
  4.400
  4.470
  4.540
  4.600
  4.660
  4.720
  4.780
  4.830
  4.890
  4.940
  4.990
  5.030
  5.080
Adjusted equity ratio
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143
  0.143

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  23
  23
  23
  23
  23
  23
  23
  23
  23
  23
  38
  38
  38
  38
  38
  38
  38
  38
  37
  37
  37
  37
  37
  37
  37
  37
  36
  36
  36
  36
Depreciation, amort., depletion, $m
  161
  165
  168
  173
  177
  182
  188
  194
  200
  207
  195
  203
  211
  220
  230
  240
  250
  262
  273
  286
  299
  313
  328
  344
  360
  377
  395
  414
  434
  456
Funds from operations, $m
  184
  188
  192
  196
  201
  206
  211
  217
  224
  231
  233
  241
  249
  258
  267
  277
  288
  299
  311
  323
  337
  350
  365
  380
  397
  414
  432
  451
  470
  491
Change in working capital, $m
  4
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
Cash from operations, $m
  181
  183
  187
  190
  194
  199
  204
  209
  215
  221
  223
  230
  238
  246
  255
  264
  274
  284
  295
  307
  319
  332
  345
  360
  375
  391
  407
  425
  444
  463
Maintenance CAPEX, $m
  -139
  -142
  -145
  -149
  -153
  -157
  -163
  -168
  -174
  -181
  -187
  -195
  -203
  -211
  -220
  -230
  -240
  -250
  -262
  -273
  -286
  -299
  -313
  -328
  -344
  -360
  -377
  -395
  -414
  -434
New CAPEX, $m
  -24
  -28
  -32
  -36
  -40
  -44
  -48
  -52
  -56
  -60
  -64
  -68
  -72
  -77
  -82
  -87
  -92
  -97
  -102
  -108
  -114
  -120
  -127
  -134
  -141
  -148
  -156
  -164
  -173
  -182
Cash from investing activities, $m
  -163
  -170
  -177
  -185
  -193
  -201
  -211
  -220
  -230
  -241
  -251
  -263
  -275
  -288
  -302
  -317
  -332
  -347
  -364
  -381
  -400
  -419
  -440
  -462
  -485
  -508
  -533
  -559
  -587
  -616
Free cash flow, $m
  18
  14
  10
  6
  2
  -2
  -6
  -10
  -14
  -19
  -28
  -33
  -37
  -42
  -47
  -52
  -58
  -63
  -69
  -75
  -81
  -88
  -95
  -102
  -109
  -117
  -126
  -134
  -143
  -153
Issuance/(repayment) of debt, $m
  36
  43
  49
  55
  61
  66
  72
  78
  84
  91
  97
  103
  110
  117
  124
  132
  139
  147
  156
  164
  173
  183
  193
  203
  214
  225
  237
  249
  262
  276
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
  1
  3
  5
  8
  10
Cash from financing (excl. dividends), $m  
  36
  43
  49
  55
  61
  66
  72
  78
  84
  91
  97
  103
  110
  117
  124
  132
  139
  147
  156
  164
  173
  183
  193
  203
  214
  226
  240
  254
  270
  286
Total cash flow (excl. dividends), $m
  54
  56
  58
  60
  62
  64
  66
  68
  70
  72
  69
  71
  73
  75
  77
  79
  82
  84
  87
  89
  92
  95
  98
  101
  104
  109
  114
  120
  127
  133
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
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
  48
  49
  50
  51
  52
  53
  54
  55
  56
  57
  52
  53
  54
  55
  56
  57
  58
  60
  61
  62
  63
  64
  66
  67
  69
  71
  75
  79
  83
  87
Discount rate, %
  10.10
  10.61
  11.14
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.05
  20.00
  21.00
  22.05
  23.15
  24.31
  25.52
  26.80
  28.14
  29.55
  31.02
  32.57
  34.20
  35.91
  37.71
  39.59
  41.57
PV of cash for distribution, $m
  44
  40
  37
  33
  29
  26
  22
  19
  16
  13
  10
  8
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  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
  99.9
  99.4
  98.7
  97.8
  96.6

Dean Foods Company is a food and beverage company. The Company processes and distributes fluid milk, and other dairy and dairy case products in the United States. It is engaged in manufacturing, marketing, selling and distributing a range of branded and private label dairy and dairy case products. It offers branded and private label dairy case products, including fluid milk, ice cream, cultured dairy products, creamers, ice cream mix and other dairy products to retailers, distributors, foodservice outlets, educational institutions and governmental entities across the United States. It also offers juices, teas and bottled water. As of December 31, 2016, the Company had over 50 national, regional and local dairy brands, as well as private labels. As of December 31, 2016, the Company's national, local and regional licensed brands included Alta Dena, Hygeia, PET, Arctic Splash, Jilbert, Pog, Barbers Dairy, Purity, Berkeley Farms, Land-O-Sun & design and ReadyLeaf, Broughton.

FINANCIAL RATIOS  of  Dean Foods Company (DF)

Valuation Ratios
P/E Ratio 2.2
Price to Sales 0
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 1
Price to Free Cash Flow 2.4
Growth Rates
Sales Growth Rate -5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11%
Cap. Spend. - 3 Yr. Gr. Rate -3.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 121.9%
Total Debt to Equity 145%
Interest Coverage 4
Management Effectiveness
Return On Assets 6.1%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 8.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 20.7%
Return On Equity - 3 Yr. Avg. 5.4%
Asset Turnover 3
Profitability Ratios
Gross Margin 25.8%
Gross Margin - 3 Yr. Avg. 22.6%
EBITDA Margin 5.7%
EBITDA Margin - 3 Yr. Avg. 3.4%
Operating Margin 3.4%
Oper. Margin - 3 Yr. Avg. 1.4%
Pre-Tax Margin 2.6%
Pre-Tax Margin - 3 Yr. Avg. 0.6%
Net Profit Margin 1.6%
Net Profit Margin - 3 Yr. Avg. 0.4%
Effective Tax Rate 40.4%
Eff/ Tax Rate - 3 Yr. Avg. 46.8%
Payout Ratio 27.5%

DF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DF stock intrinsic value calculation we used $7755 million for the last fiscal year's total revenue generated by Dean Foods Company. The default revenue input number comes from 0001 income statement of Dean Foods Company. 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 DF 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 10.1%, whose default value for DF is calculated based on our internal credit rating of Dean Foods Company, 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 Dean Foods Company.
    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 DF stock the variable cost ratio is equal to 98.9%.

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 DF 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 6.2% for Dean Foods Company.

Corporate tax rate of 27% is the nominal tax rate for Dean Foods Company. 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 DF 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 DF are equal to 15.4%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Dean Foods Company 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 DF is equal to 2.4%. 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 - $302.96 million for Dean Foods Company - 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 91.448 million for Dean Foods Company 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 Dean Foods Company at the current share price and the inputted number of shares is $0.3 billion.

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