Intrinsic value of Four Corners Property Trust - FCPT

Previous Close

$25.25

  Intrinsic Value

$1.90

stock screener

  Rating & Target

str. sell

-92%

  Value-price divergence*

-98%

Previous close

$25.25

 
Intrinsic value

$1.90

 
Up/down potential

-92%

 
Rating

str. sell

 
Value-price divergence*

-98%

Our model is not good at valuating stocks of financial companies, such as FCPT.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of FCPT 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 2016), $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 1.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  275.76
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  124
  132
  140
  149
  158
  168
  178
  188
  199
  210
  222
  234
  247
  260
  274
  289
  304
  320
  337
  354
  373
  392
  412
  434
  456
  479
  504
  529
  556
  585
  614
Variable operating expenses, $m
 
  56
  60
  64
  68
  72
  76
  80
  85
  90
  95
  100
  105
  111
  117
  123
  130
  137
  144
  151
  159
  167
  176
  185
  195
  205
  215
  226
  238
  250
  262
Fixed operating expenses, $m
 
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  16
  16
  16
  17
  17
  18
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  23
Total operating expenses, $m
  64
  67
  72
  76
  80
  84
  89
  93
  98
  104
  109
  114
  120
  126
  133
  139
  146
  154
  161
  169
  177
  185
  195
  204
  215
  225
  236
  247
  260
  273
  285
Operating income, $m
  60
  64
  69
  74
  79
  84
  89
  95
  100
  107
  113
  120
  127
  134
  141
  149
  158
  167
  176
  185
  196
  206
  217
  229
  241
  254
  268
  282
  297
  312
  329
EBITDA, $m
  81
  95
  101
  108
  115
  123
  130
  138
  146
  155
  164
  174
  184
  194
  205
  216
  228
  241
  254
  268
  282
  297
  313
  330
  347
  365
  384
  405
  426
  448
  471
Interest expense (income), $m
  13
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  34
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
  77
Earnings before tax, $m
  77
  49
  52
  56
  60
  64
  68
  72
  76
  81
  86
  91
  96
  102
  108
  114
  120
  127
  134
  142
  149
  158
  166
  175
  185
  194
  205
  216
  227
  239
  252
Tax expense, $m
  -80
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  53
  55
  58
  61
  65
  68
Net income, $m
  157
  36
  38
  41
  44
  46
  49
  53
  56
  59
  63
  67
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  128
  135
  142
  150
  158
  166
  175
  184

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  27
  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
  937
  971
  1,033
  1,097
  1,164
  1,233
  1,306
  1,382
  1,461
  1,543
  1,629
  1,719
  1,813
  1,912
  2,014
  2,122
  2,235
  2,353
  2,476
  2,606
  2,741
  2,883
  3,032
  3,188
  3,352
  3,523
  3,703
  3,892
  4,090
  4,298
  4,516
Adjusted assets (=assets-cash), $m
  910
  971
  1,033
  1,097
  1,164
  1,233
  1,306
  1,382
  1,461
  1,543
  1,629
  1,719
  1,813
  1,912
  2,014
  2,122
  2,235
  2,353
  2,476
  2,606
  2,741
  2,883
  3,032
  3,188
  3,352
  3,523
  3,703
  3,892
  4,090
  4,298
  4,516
Revenue / Adjusted assets
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
  0.136
Average production assets, $m
  863
  919
  977
  1,038
  1,101
  1,167
  1,235
  1,307
  1,382
  1,460
  1,541
  1,626
  1,715
  1,808
  1,906
  2,008
  2,114
  2,226
  2,343
  2,465
  2,593
  2,728
  2,868
  3,016
  3,171
  3,333
  3,504
  3,682
  3,869
  4,066
  4,272
Working capital, $m
  0
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -90
  -95
  -99
  -104
  -110
  -115
  -121
  -127
  -134
Total debt, $m
  439
  471
  503
  536
  571
  607
  645
  684
  725
  768
  813
  859
  908
  959
  1,013
  1,068
  1,127
  1,188
  1,252
  1,319
  1,390
  1,463
  1,541
  1,622
  1,707
  1,796
  1,889
  1,987
  2,090
  2,198
  2,311
Total liabilities, $m
  472
  504
  536
  569
  604
  640
  678
  717
  758
  801
  846
  892
  941
  992
  1,046
  1,101
  1,160
  1,221
  1,285
  1,352
  1,423
  1,496
  1,574
  1,655
  1,740
  1,829
  1,922
  2,020
  2,123
  2,231
  2,344
Total equity, $m
  465
  467
  497
  528
  560
  593
  628
  665
  703
  742
  784
  827
  872
  919
  969
  1,021
  1,075
  1,132
  1,191
  1,253
  1,319
  1,387
  1,458
  1,534
  1,612
  1,695
  1,781
  1,872
  1,967
  2,067
  2,172
Total liabilities and equity, $m
  937
  971
  1,033
  1,097
  1,164
  1,233
  1,306
  1,382
  1,461
  1,543
  1,630
  1,719
  1,813
  1,911
  2,015
  2,122
  2,235
  2,353
  2,476
  2,605
  2,742
  2,883
  3,032
  3,189
  3,352
  3,524
  3,703
  3,892
  4,090
  4,298
  4,516
Debt-to-equity ratio
  0.944
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.030
  1.040
  1.040
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.060
  1.060
  1.060
  1.060
  1.060
  1.060
  1.060
  1.060
  1.060
  1.060
Adjusted equity ratio
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  157
  36
  38
  41
  44
  46
  49
  53
  56
  59
  63
  67
  70
  74
  79
  83
  88
  93
  98
  103
  109
  115
  121
  128
  135
  142
  150
  158
  166
  175
  184
Depreciation, amort., depletion, $m
  21
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  91
  96
  101
  106
  111
  117
  123
  129
  136
  142
Funds from operations, $m
  59
  66
  71
  75
  80
  85
  91
  96
  102
  108
  114
  121
  128
  135
  142
  150
  158
  167
  176
  186
  196
  206
  217
  228
  240
  253
  266
  280
  295
  310
  326
Change in working capital, $m
  -12
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Cash from operations, $m
  71
  68
  73
  77
  82
  87
  93
  98
  104
  110
  117
  123
  130
  138
  145
  153
  162
  171
  180
  189
  200
  210
  221
  233
  245
  258
  272
  286
  301
  316
  333
Maintenance CAPEX, $m
  0
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -64
  -67
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -111
  -117
  -123
  -129
  -136
New CAPEX, $m
  0
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -122
  -128
  -134
  -141
  -148
  -155
  -162
  -170
  -179
  -187
  -197
  -206
Cash from investing activities, $m
  -59
  -85
  -89
  -94
  -98
  -103
  -108
  -113
  -119
  -124
  -130
  -136
  -143
  -150
  -157
  -166
  -174
  -182
  -191
  -200
  -210
  -220
  -232
  -244
  -256
  -268
  -281
  -296
  -310
  -326
  -342
Free cash flow, $m
  12
  -17
  -16
  -16
  -16
  -15
  -15
  -14
  -14
  -14
  -13
  -13
  -13
  -13
  -12
  -12
  -12
  -12
  -11
  -11
  -11
  -11
  -10
  -10
  -10
  -10
  -10
  -10
  -9
  -9
  -9
Issuance/(repayment) of debt, $m
  38
  32
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  103
  108
  113
Issuance/(repurchase) of shares, $m
  1
  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  
  39
  32
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  103
  108
  113
Total cash flow (excl. dividends), $m
  51
  15
  16
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  47
  50
  53
  56
  59
  63
  67
  71
  75
  79
  84
  88
  93
  99
  104
Retained Cash Flow (-), $m
  -23
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -105
Prev. year cash balance distribution, $m
 
  27
  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
 
  13
  -14
  -13
  -13
  -12
  -12
  -12
  -11
  -11
  -10
  -10
  -9
  -9
  -8
  -8
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
Discount rate, %
 
  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
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  12
  -12
  -11
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  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

Four Corners Property Trust, Inc. is a self-administered company and real estate investment trust (REIT), which owns, acquires and leases properties for use in the restaurant and food service related industries. The Company operates through two segments: real estate operations and restaurant operations. Its real estate operations segment consists of rental revenues primarily generated by leasing restaurant properties to tenants through triple-net lease arrangements under which the tenant is primarily responsible for ongoing costs relating to the properties. Its restaurant operations segment is conducted through its taxable REIT subsidiary, Kerrow Holdings, LLC, and consists of its Kerrow Restaurant Operating Business. As of December 31, 2016, it had owned 481 properties, all within the continental United States. Of these properties, 475 were held for investment and leased to tenants under triple-net leases and had an aggregate leasable area of approximately 3.4 million square feet.

FINANCIAL RATIOS  of  Four Corners Property Trust (FCPT)

Valuation Ratios
P/E Ratio 9.6
Price to Sales 12.2
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 21.3
Price to Free Cash Flow 21.3
Growth Rates
Sales Growth Rate 275.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 94.4%
Total Debt to Equity 94.4%
Interest Coverage 7
Management Effectiveness
Return On Assets 19.7%
Ret/ On Assets - 3 Yr. Avg. 7%
Return On Total Capital 18.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.5%
Return On Equity 34.6%
Return On Equity - 3 Yr. Avg. 12.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 89.5%
EBITDA Margin - 3 Yr. Avg. 45.8%
Operating Margin 48.4%
Oper. Margin - 3 Yr. Avg. 24.2%
Pre-Tax Margin 62.1%
Pre-Tax Margin - 3 Yr. Avg. 29.8%
Net Profit Margin 126.6%
Net Profit Margin - 3 Yr. Avg. 48.3%
Effective Tax Rate -103.9%
Eff/ Tax Rate - 3 Yr. Avg. -23.5%
Payout Ratio 77.7%

FCPT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FCPT stock intrinsic value calculation we used $124 million for the last fiscal year's total revenue generated by Four Corners Property Trust. The default revenue input number comes from 2016 income statement of Four Corners Property Trust. 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 FCPT stock valuation model: a) initial revenue growth rate of 6.5% 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 7.6%, whose default value for FCPT is calculated based on our internal credit rating of Four Corners Property Trust, 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 Four Corners Property Trust.
    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 FCPT stock the variable cost ratio is equal to 42.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 million in the base year in the intrinsic value calculation for FCPT 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 3.5% for Four Corners Property Trust.

Corporate tax rate of 27% is the nominal tax rate for Four Corners Property Trust. 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 FCPT 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 FCPT are equal to 695.6%.

Life of production assets of 41.1 years is the average useful life of capital assets used in Four Corners Property Trust 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 FCPT is equal to -21.8%. 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 - $465 million for Four Corners Property Trust - 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 61.144 million for Four Corners Property Trust 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 Four Corners Property Trust at the current share price and the inputted number of shares is $1.5 billion.

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Financial statements of FCPT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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