Intrinsic value of Freshpet, Inc. - FRPT

Previous Close

$45.51

  Intrinsic Value

$0.14

stock screener

  Rating & Target

str. sell

-100%

Previous close

$45.51

 
Intrinsic value

$0.14

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of FRPT 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 1.6

 

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, %
  29.70
  27.23
  25.01
  23.01
  21.21
  19.59
  18.13
  16.81
  15.63
  14.57
  13.61
  12.75
  11.98
  11.28
  10.65
  10.09
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
Revenue, $m
  250
  318
  398
  490
  594
  710
  838
  979
  1,133
  1,298
  1,474
  1,662
  1,861
  2,071
  2,292
  2,523
  2,765
  3,017
  3,279
  3,553
  3,837
  4,133
  4,440
  4,759
  5,091
  5,435
  5,794
  6,167
  6,555
  6,959
Variable operating expenses, $m
  253
  319
  396
  484
  585
  697
  822
  958
  1,107
  1,266
  1,427
  1,609
  1,802
  2,005
  2,219
  2,443
  2,677
  2,921
  3,175
  3,440
  3,715
  4,001
  4,298
  4,607
  4,928
  5,262
  5,609
  5,970
  6,346
  6,737
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
  253
  319
  396
  484
  585
  697
  822
  958
  1,107
  1,266
  1,427
  1,609
  1,802
  2,005
  2,219
  2,443
  2,677
  2,921
  3,175
  3,440
  3,715
  4,001
  4,298
  4,607
  4,928
  5,262
  5,609
  5,970
  6,346
  6,737
Operating income, $m
  -2
  0
  2
  5
  9
  12
  17
  21
  26
  31
  47
  53
  59
  66
  73
  80
  88
  96
  104
  113
  122
  132
  141
  152
  162
  173
  185
  196
  209
  222
EBITDA, $m
  26
  33
  42
  51
  62
  74
  88
  103
  119
  136
  154
  174
  195
  217
  240
  264
  290
  316
  344
  372
  402
  433
  465
  499
  533
  569
  607
  646
  687
  729
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
Earnings before tax, $m
  -2
  0
  2
  4
  7
  10
  14
  18
  22
  26
  41
  46
  52
  57
  63
  70
  76
  83
  90
  97
  105
  113
  121
  130
  139
  148
  157
  167
  178
  189
Tax expense, $m
  0
  0
  0
  1
  2
  3
  4
  5
  6
  7
  11
  13
  14
  15
  17
  19
  21
  22
  24
  26
  28
  30
  33
  35
  37
  40
  43
  45
  48
  51
Net income, $m
  -2
  0
  1
  3
  5
  8
  10
  13
  16
  19
  30
  34
  38
  42
  46
  51
  55
  60
  66
  71
  77
  82
  88
  95
  101
  108
  115
  122
  130
  138

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
  182
  231
  289
  355
  430
  515
  608
  710
  821
  941
  1,069
  1,205
  1,350
  1,502
  1,662
  1,830
  2,005
  2,188
  2,378
  2,576
  2,782
  2,997
  3,220
  3,451
  3,692
  3,942
  4,202
  4,472
  4,753
  5,046
Adjusted assets (=assets-cash), $m
  182
  231
  289
  355
  430
  515
  608
  710
  821
  941
  1,069
  1,205
  1,350
  1,502
  1,662
  1,830
  2,005
  2,188
  2,378
  2,576
  2,782
  2,997
  3,220
  3,451
  3,692
  3,942
  4,202
  4,472
  4,753
  5,046
Revenue / Adjusted assets
  1.374
  1.377
  1.377
  1.380
  1.381
  1.379
  1.378
  1.379
  1.380
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
  1.379
Average production assets, $m
  131
  167
  209
  257
  312
  373
  440
  514
  595
  681
  774
  873
  977
  1,087
  1,203
  1,325
  1,451
  1,584
  1,722
  1,865
  2,014
  2,170
  2,331
  2,498
  2,673
  2,854
  3,042
  3,238
  3,441
  3,653
Working capital, $m
  7
  9
  11
  13
  16
  19
  23
  26
  31
  35
  40
  45
  50
  56
  62
  68
  75
  81
  89
  96
  104
  112
  120
  128
  137
  147
  156
  167
  177
  188
Total debt, $m
  5
  12
  20
  28
  38
  49
  62
  75
  90
  106
  123
  141
  160
  180
  201
  223
  246
  270
  295
  322
  349
  377
  406
  437
  469
  502
  536
  572
  609
  648
Total liabilities, $m
  24
  30
  38
  47
  57
  68
  80
  94
  108
  124
  141
  159
  178
  198
  219
  241
  265
  289
  314
  340
  367
  396
  425
  456
  487
  520
  555
  590
  627
  666
Total equity, $m
  158
  200
  251
  308
  374
  447
  528
  617
  713
  817
  928
  1,046
  1,172
  1,304
  1,443
  1,588
  1,740
  1,899
  2,064
  2,236
  2,415
  2,601
  2,795
  2,995
  3,204
  3,421
  3,647
  3,882
  4,126
  4,380
Total liabilities and equity, $m
  182
  230
  289
  355
  431
  515
  608
  711
  821
  941
  1,069
  1,205
  1,350
  1,502
  1,662
  1,829
  2,005
  2,188
  2,378
  2,576
  2,782
  2,997
  3,220
  3,451
  3,691
  3,941
  4,202
  4,472
  4,753
  5,046
Debt-to-equity ratio
  0.030
  0.060
  0.080
  0.090
  0.100
  0.110
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
Adjusted equity ratio
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868
  0.868

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  0
  1
  3
  5
  8
  10
  13
  16
  19
  30
  34
  38
  42
  46
  51
  55
  60
  66
  71
  77
  82
  88
  95
  101
  108
  115
  122
  130
  138
Depreciation, amort., depletion, $m
  28
  33
  39
  46
  53
  62
  71
  82
  93
  105
  107
  121
  136
  151
  167
  184
  202
  220
  239
  259
  280
  301
  324
  347
  371
  396
  422
  450
  478
  507
Funds from operations, $m
  26
  33
  41
  49
  59
  70
  81
  95
  109
  124
  138
  155
  173
  193
  213
  235
  257
  280
  305
  330
  356
  384
  412
  442
  472
  504
  537
  572
  608
  645
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
Cash from operations, $m
  25
  31
  38
  47
  56
  66
  78
  91
  105
  120
  133
  150
  168
  187
  207
  228
  251
  274
  298
  323
  349
  376
  404
  433
  463
  495
  528
  562
  597
  634
Maintenance CAPEX, $m
  -14
  -18
  -23
  -29
  -36
  -43
  -52
  -61
  -71
  -83
  -95
  -107
  -121
  -136
  -151
  -167
  -184
  -202
  -220
  -239
  -259
  -280
  -301
  -324
  -347
  -371
  -396
  -422
  -450
  -478
New CAPEX, $m
  -30
  -36
  -42
  -48
  -55
  -61
  -68
  -74
  -80
  -87
  -93
  -99
  -105
  -110
  -116
  -121
  -127
  -132
  -138
  -144
  -149
  -155
  -161
  -168
  -174
  -181
  -188
  -196
  -204
  -212
Cash from investing activities, $m
  -44
  -54
  -65
  -77
  -91
  -104
  -120
  -135
  -151
  -170
  -188
  -206
  -226
  -246
  -267
  -288
  -311
  -334
  -358
  -383
  -408
  -435
  -462
  -492
  -521
  -552
  -584
  -618
  -654
  -690
Free cash flow, $m
  -19
  -23
  -27
  -31
  -34
  -38
  -41
  -44
  -47
  -50
  -55
  -56
  -58
  -59
  -59
  -60
  -60
  -60
  -60
  -60
  -60
  -59
  -59
  -58
  -58
  -57
  -57
  -56
  -56
  -56
Issuance/(repayment) of debt, $m
  5
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
Issuance/(repurchase) of shares, $m
  38
  43
  49
  54
  60
  66
  71
  76
  80
  85
  81
  85
  88
  90
  93
  95
  97
  98
  100
  101
  102
  104
  105
  106
  108
  109
  111
  112
  114
  117
Cash from financing (excl. dividends), $m  
  43
  50
  57
  63
  70
  77
  83
  89
  95
  101
  98
  103
  107
  110
  114
  117
  120
  122
  125
  127
  129
  132
  134
  137
  140
  142
  145
  148
  151
  156
Total cash flow (excl. dividends), $m
  24
  27
  30
  33
  36
  39
  42
  45
  48
  51
  43
  46
  49
  52
  54
  57
  59
  62
  65
  67
  70
  73
  76
  79
  82
  85
  88
  92
  95
  99
Retained Cash Flow (-), $m
  -38
  -43
  -50
  -58
  -65
  -73
  -81
  -89
  -96
  -104
  -111
  -118
  -125
  -132
  -139
  -145
  -152
  -159
  -165
  -172
  -179
  -186
  -193
  -201
  -209
  -217
  -226
  -235
  -244
  -254
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
  -14
  -16
  -20
  -25
  -30
  -34
  -39
  -44
  -48
  -53
  -68
  -72
  -76
  -80
  -85
  -89
  -93
  -97
  -101
  -105
  -109
  -113
  -118
  -122
  -127
  -132
  -137
  -143
  -149
  -155
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
  -13
  -15
  -18
  -21
  -23
  -25
  -26
  -27
  -28
  -28
  -32
  -31
  -29
  -27
  -25
  -23
  -20
  -18
  -16
  -13
  -11
  -9
  -8
  -6
  -5
  -4
  -3
  -2
  -2
  -1
Current shareholders' claim on cash, %
  96.9
  94.4
  92.1
  90.1
  88.4
  86.9
  85.5
  84.3
  83.2
  82.3
  81.5
  80.7
  80.1
  79.4
  78.9
  78.4
  77.9
  77.5
  77.0
  76.7
  76.3
  76.0
  75.7
  75.4
  75.1
  74.9
  74.6
  74.4
  74.2
  74.0

Freshpet, Inc. is a manufacturer of fresh, refrigerated pet food distributed across North America. The Company operates in the segment of manufacturing, marketing and distribution of pet food and pet treats for dogs and cats. The Company's products consist of dog food, cat food, and dog and cat treats. Its recipes include real, fresh meat and varying combinations of vegetables, leafy greens and anti-oxidant rich fruits, without the use of preservatives, additives or artificial ingredients. All of its products are sold under the Freshpet brand name, with ingredients, packaging and labeling customized by class of retail. It also offers fresh treats across all classes of retail under the Dognation and Dog Joy labels. The Company's products are available in various forms, including slice and serve rolls, bagged meals and tubs. All of the Company's products are manufactured in the United States.

FINANCIAL RATIOS  of  Freshpet, Inc. (FRPT)

Valuation Ratios
P/E Ratio -515.2
Price to Sales 11.6
Price to Book 14.3
Price to Tangible Book
Price to Cash Flow 118.9
Price to Free Cash Flow -90.9
Growth Rates
Sales Growth Rate 14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.1%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 6.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.5%
Ret/ On Assets - 3 Yr. Avg. -14.2%
Return On Total Capital -2.7%
Ret/ On T. Cap. - 3 Yr. Avg. -18.8%
Return On Equity -2.8%
Return On Equity - 3 Yr. Avg. -36%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 45.1%
Gross Margin - 3 Yr. Avg. 46.9%
EBITDA Margin 5.3%
EBITDA Margin - 3 Yr. Avg. -7.1%
Operating Margin -1.5%
Oper. Margin - 3 Yr. Avg. -3.9%
Pre-Tax Margin -2.3%
Pre-Tax Margin - 3 Yr. Avg. -16.1%
Net Profit Margin -2.3%
Net Profit Margin - 3 Yr. Avg. -16.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

FRPT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FRPT stock intrinsic value calculation we used $193 million for the last fiscal year's total revenue generated by Freshpet, Inc.. The default revenue input number comes from 0001 income statement of Freshpet, 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 FRPT stock valuation model: a) initial revenue growth rate of 29.7% 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 FRPT is calculated based on our internal credit rating of Freshpet, 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 Freshpet, 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 FRPT stock the variable cost ratio is equal to 102.1%.

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 FRPT 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 Freshpet, Inc..

Corporate tax rate of 27% is the nominal tax rate for Freshpet, 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 FRPT 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 FRPT are equal to 52.5%.

Life of production assets of 7.2 years is the average useful life of capital assets used in Freshpet, 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 FRPT is equal to 2.7%. 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 - $121.474475 million for Freshpet, 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 35.714 million for Freshpet, 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 Freshpet, Inc. at the current share price and the inputted number of shares is $1.6 billion.

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