Intrinsic value of Innovative Industrial Properties, Inc. - IIPR

Previous Close

$86.21

  Intrinsic Value

$6.76

stock screener

  Rating & Target

str. sell

-92%

Previous close

$86.21

 
Intrinsic value

$6.76

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of IIPR 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 0.8

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  24
  37
  55
  80
  114
  156
  209
  275
  354
  447
  555
  679
  818
  973
  1,144
  1,331
  1,534
  1,751
  1,983
  2,229
  2,490
  2,764
  3,052
  3,354
  3,668
  3,997
  4,339
  4,694
  5,064
  5,449
Variable operating expenses, $m
  8
  12
  18
  27
  38
  52
  70
  92
  118
  149
  185
  226
  272
  324
  381
  443
  511
  583
  660
  742
  829
  921
  1,016
  1,117
  1,222
  1,331
  1,445
  1,563
  1,686
  1,814
Fixed operating expenses, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
Total operating expenses, $m
  13
  17
  23
  32
  44
  58
  76
  98
  124
  155
  191
  232
  279
  331
  388
  450
  518
  590
  668
  750
  837
  929
  1,024
  1,125
  1,231
  1,340
  1,454
  1,572
  1,695
  1,824
Operating income, $m
  11
  20
  32
  48
  70
  98
  134
  178
  230
  292
  364
  446
  539
  642
  756
  881
  1,016
  1,160
  1,315
  1,479
  1,653
  1,836
  2,028
  2,228
  2,438
  2,657
  2,885
  3,122
  3,368
  3,625
EBITDA, $m
  17
  28
  45
  67
  97
  136
  184
  243
  315
  399
  497
  608
  735
  875
  1,030
  1,199
  1,382
  1,579
  1,789
  2,012
  2,248
  2,497
  2,757
  3,030
  3,315
  3,613
  3,922
  4,244
  4,579
  4,927
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  4
  5
  7
  10
  13
  16
  20
  24
  30
  35
  42
  49
  56
  64
  73
  82
  91
  101
  112
  123
  135
  147
  160
  173
  186
Earnings before tax, $m
  11
  19
  31
  47
  68
  95
  129
  170
  220
  279
  348
  426
  515
  613
  721
  839
  967
  1,104
  1,251
  1,407
  1,571
  1,744
  1,926
  2,116
  2,315
  2,522
  2,738
  2,962
  3,196
  3,438
Tax expense, $m
  3
  5
  8
  13
  18
  26
  35
  46
  60
  75
  94
  115
  139
  165
  195
  227
  261
  298
  338
  380
  424
  471
  520
  571
  625
  681
  739
  800
  863
  928
Net income, $m
  8
  14
  23
  34
  49
  69
  94
  124
  161
  204
  254
  311
  376
  447
  526
  613
  706
  806
  913
  1,027
  1,147
  1,273
  1,406
  1,545
  1,690
  1,841
  1,999
  2,163
  2,333
  2,510

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
  400
  618
  924
  1,341
  1,892
  2,601
  3,491
  4,584
  5,899
  7,451
  9,252
  11,312
  13,634
  16,222
  19,074
  22,188
  25,559
  29,181
  33,049
  37,157
  41,499
  46,072
  50,871
  55,894
  61,141
  66,612
  72,310
  78,238
  84,402
  90,809
Adjusted assets (=assets-cash), $m
  400
  618
  924
  1,341
  1,892
  2,601
  3,491
  4,584
  5,899
  7,451
  9,252
  11,312
  13,634
  16,222
  19,074
  22,188
  25,559
  29,181
  33,049
  37,157
  41,499
  46,072
  50,871
  55,894
  61,141
  66,612
  72,310
  78,238
  84,402
  90,809
Revenue / Adjusted assets
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
Average production assets, $m
  172
  266
  398
  577
  814
  1,119
  1,502
  1,973
  2,538
  3,206
  3,981
  4,868
  5,867
  6,981
  8,208
  9,548
  10,998
  12,557
  14,222
  15,989
  17,858
  19,826
  21,891
  24,052
  26,310
  28,665
  31,116
  33,667
  36,320
  39,077
Working capital, $m
  -13
  -19
  -29
  -42
  -59
  -82
  -110
  -144
  -185
  -234
  -290
  -355
  -428
  -509
  -599
  -696
  -802
  -916
  -1,037
  -1,166
  -1,302
  -1,446
  -1,596
  -1,754
  -1,919
  -2,090
  -2,269
  -2,455
  -2,649
  -2,850
Total debt, $m
  6
  15
  28
  45
  67
  96
  133
  178
  232
  295
  369
  453
  549
  655
  772
  899
  1,038
  1,186
  1,345
  1,513
  1,691
  1,879
  2,075
  2,281
  2,496
  2,721
  2,954
  3,197
  3,450
  3,713
Total liabilities, $m
  16
  25
  38
  55
  78
  107
  143
  188
  242
  305
  379
  464
  559
  665
  782
  910
  1,048
  1,196
  1,355
  1,523
  1,701
  1,889
  2,086
  2,292
  2,507
  2,731
  2,965
  3,208
  3,460
  3,723
Total equity, $m
  384
  593
  886
  1,286
  1,814
  2,494
  3,348
  4,396
  5,657
  7,145
  8,873
  10,848
  13,075
  15,557
  18,292
  21,278
  24,511
  27,985
  31,694
  35,634
  39,798
  44,183
  48,785
  53,602
  58,634
  63,881
  69,345
  75,030
  80,942
  87,085
Total liabilities and equity, $m
  400
  618
  924
  1,341
  1,892
  2,601
  3,491
  4,584
  5,899
  7,450
  9,252
  11,312
  13,634
  16,222
  19,074
  22,188
  25,559
  29,181
  33,049
  37,157
  41,499
  46,072
  50,871
  55,894
  61,141
  66,612
  72,310
  78,238
  84,402
  90,808
Debt-to-equity ratio
  0.020
  0.030
  0.030
  0.030
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
Adjusted equity ratio
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959
  0.959

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  14
  23
  34
  49
  69
  94
  124
  161
  204
  254
  311
  376
  447
  526
  613
  706
  806
  913
  1,027
  1,147
  1,273
  1,406
  1,545
  1,690
  1,841
  1,999
  2,163
  2,333
  2,510
Depreciation, amort., depletion, $m
  6
  9
  13
  19
  27
  37
  50
  66
  85
  107
  133
  162
  196
  233
  274
  318
  367
  419
  474
  533
  595
  661
  730
  802
  877
  955
  1,037
  1,122
  1,211
  1,303
Funds from operations, $m
  14
  23
  36
  53
  77
  106
  144
  190
  246
  311
  387
  473
  571
  680
  800
  931
  1,073
  1,225
  1,387
  1,560
  1,742
  1,934
  2,136
  2,347
  2,567
  2,797
  3,036
  3,285
  3,544
  3,812
Change in working capital, $m
  -5
  -7
  -10
  -13
  -17
  -22
  -28
  -34
  -41
  -49
  -57
  -65
  -73
  -81
  -90
  -98
  -106
  -114
  -121
  -129
  -136
  -143
  -151
  -158
  -165
  -172
  -179
  -186
  -193
  -201
Cash from operations, $m
  18
  30
  45
  66
  94
  129
  172
  224
  287
  360
  443
  538
  644
  761
  889
  1,029
  1,178
  1,338
  1,509
  1,689
  1,879
  2,078
  2,286
  2,504
  2,732
  2,968
  3,215
  3,471
  3,737
  4,014
Maintenance CAPEX, $m
  -4
  -6
  -9
  -13
  -19
  -27
  -37
  -50
  -66
  -85
  -107
  -133
  -162
  -196
  -233
  -274
  -318
  -367
  -419
  -474
  -533
  -595
  -661
  -730
  -802
  -877
  -955
  -1,037
  -1,122
  -1,211
New CAPEX, $m
  -65
  -94
  -132
  -179
  -237
  -305
  -383
  -470
  -566
  -668
  -775
  -886
  -999
  -1,114
  -1,227
  -1,340
  -1,450
  -1,559
  -1,664
  -1,768
  -1,869
  -1,968
  -2,065
  -2,162
  -2,258
  -2,354
  -2,452
  -2,551
  -2,652
  -2,757
Cash from investing activities, $m
  -69
  -100
  -141
  -192
  -256
  -332
  -420
  -520
  -632
  -753
  -882
  -1,019
  -1,161
  -1,310
  -1,460
  -1,614
  -1,768
  -1,926
  -2,083
  -2,242
  -2,402
  -2,563
  -2,726
  -2,892
  -3,060
  -3,231
  -3,407
  -3,588
  -3,774
  -3,968
Free cash flow, $m
  -50
  -70
  -95
  -126
  -162
  -204
  -248
  -296
  -345
  -393
  -439
  -481
  -518
  -548
  -571
  -585
  -590
  -587
  -574
  -553
  -523
  -485
  -440
  -387
  -328
  -263
  -193
  -117
  -38
  46
Issuance/(repayment) of debt, $m
  6
  9
  13
  17
  23
  29
  37
  45
  54
  64
  74
  84
  95
  106
  117
  128
  138
  149
  159
  168
  178
  187
  197
  206
  215
  224
  234
  243
  253
  263
Issuance/(repurchase) of shares, $m
  135
  195
  271
  366
  479
  611
  760
  924
  1,100
  1,284
  1,474
  1,664
  1,852
  2,034
  2,209
  2,373
  2,527
  2,668
  2,796
  2,913
  3,017
  3,112
  3,196
  3,272
  3,342
  3,406
  3,465
  3,523
  3,578
  3,634
Cash from financing (excl. dividends), $m  
  141
  204
  284
  383
  502
  640
  797
  969
  1,154
  1,348
  1,548
  1,748
  1,947
  2,140
  2,326
  2,501
  2,665
  2,817
  2,955
  3,081
  3,195
  3,299
  3,393
  3,478
  3,557
  3,630
  3,699
  3,766
  3,831
  3,897
Total cash flow (excl. dividends), $m
  91
  134
  188
  256
  339
  436
  548
  673
  809
  955
  1,109
  1,267
  1,429
  1,593
  1,755
  1,916
  2,074
  2,229
  2,380
  2,528
  2,672
  2,814
  2,953
  3,091
  3,229
  3,367
  3,506
  3,648
  3,793
  3,943
Retained Cash Flow (-), $m
  -143
  -209
  -294
  -400
  -528
  -680
  -854
  -1,048
  -1,261
  -1,488
  -1,728
  -1,975
  -2,227
  -2,482
  -2,735
  -2,986
  -3,233
  -3,474
  -3,709
  -3,939
  -4,164
  -4,385
  -4,602
  -4,817
  -5,032
  -5,247
  -5,464
  -5,685
  -5,911
  -6,144
Prev. year cash balance distribution, $m
  24
  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
  -28
  -75
  -105
  -143
  -189
  -244
  -306
  -376
  -452
  -533
  -619
  -708
  -798
  -889
  -980
  -1,070
  -1,158
  -1,245
  -1,329
  -1,411
  -1,492
  -1,571
  -1,649
  -1,726
  -1,803
  -1,880
  -1,958
  -2,037
  -2,118
  -2,201
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
  -27
  -69
  -92
  -118
  -147
  -177
  -207
  -235
  -259
  -280
  -294
  -302
  -303
  -299
  -288
  -272
  -252
  -229
  -205
  -179
  -154
  -130
  -108
  -88
  -70
  -55
  -42
  -32
  -23
  -17
Current shareholders' claim on cash, %
  85.0
  73.3
  64.1
  56.8
  50.9
  46.0
  42.0
  38.6
  35.8
  33.4
  31.4
  29.7
  28.2
  26.9
  25.7
  24.7
  23.8
  23.0
  22.3
  21.7
  21.1
  20.6
  20.2
  19.8
  19.4
  19.0
  18.7
  18.4
  18.2
  17.9

Innovative Industrial Properties, Inc. is focused on the acquisition, ownership and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities. The Company intends to acquire its properties through sale-leaseback transactions and third-party purchases. It is focused on leasing its properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including maintenance, taxes and insurance. The Company intends to conduct business in an umbrella partnership real estate investment trust (UPREIT), structure through its operating partnership. The Company's real estate investments will consist of primarily properties suitable for cultivation and production of medical-use cannabis.

FINANCIAL RATIOS  of  Innovative Industrial Properties, Inc. (IIPR)

Valuation Ratios
P/E Ratio -216.8
Price to Sales 0
Price to Book 14.5
Price to Tangible Book
Price to Cash Flow 433.6
Price to Free Cash Flow -31
Growth Rates
Sales Growth Rate -100%
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 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -12.7%
Ret/ On Assets - 3 Yr. Avg. -4.2%
Return On Total Capital -13.3%
Ret/ On T. Cap. - 3 Yr. Avg. -4.4%
Return On Equity -13.3%
Return On Equity - 3 Yr. Avg. -4.4%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

IIPR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IIPR stock intrinsic value calculation we used $15 million for the last fiscal year's total revenue generated by Innovative Industrial Properties, Inc.. The default revenue input number comes from 0001 income statement of Innovative Industrial Properties, 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 IIPR stock valuation model: a) initial revenue growth rate of 60% 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 IIPR is calculated based on our internal credit rating of Innovative Industrial Properties, 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 Innovative Industrial Properties, 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 IIPR stock the variable cost ratio is equal to 33.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 million in the base year in the intrinsic value calculation for IIPR 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 Innovative Industrial Properties, Inc..

Corporate tax rate of 27% is the nominal tax rate for Innovative Industrial Properties, 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 IIPR 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 IIPR are equal to 717.2%.

Life of production assets of 40.9 years is the average useful life of capital assets used in Innovative Industrial Properties, 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 IIPR is equal to -52.3%. 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 - $264.292 million for Innovative Industrial Properties, 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 9.776 million for Innovative Industrial Properties, 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 Innovative Industrial Properties, Inc. at the current share price and the inputted number of shares is $0.8 billion.

RELATED COMPANIES Price Int.Val. Rating
IIPR Innovative Ind 86.21 6.76  str.sell
HIFR InfraREIT, Inc 21.33 3.06  str.sell
AMT American Tower 188.89 132.43  sell

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