Intrinsic value of Infinity Property&Casualty - IPCC

Previous Close

$142.35

  Intrinsic Value

$18.18

stock screener

  Rating & Target

str. sell

-87%

Previous close

$142.35

 
Intrinsic value

$18.18

 
Up/down potential

-87%

 
Rating

str. sell

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

We calculate the intrinsic value of IPCC 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 2017), $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
   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
   2047

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
  1,548
  1,584
  1,625
  1,670
  1,721
  1,777
  1,837
  1,903
  1,973
  2,049
  2,130
  2,216
  2,308
  2,406
  2,510
  2,620
  2,736
  2,860
  2,990
  3,127
  3,272
  3,425
  3,586
  3,756
  3,934
  4,123
  4,321
  4,529
  4,749
  4,979
Variable operating expenses, $m
  1,471
  1,503
  1,540
  1,581
  1,627
  1,677
  1,732
  1,791
  1,854
  1,923
  1,922
  2,000
  2,083
  2,171
  2,265
  2,364
  2,469
  2,581
  2,698
  2,822
  2,953
  3,091
  3,236
  3,389
  3,551
  3,721
  3,899
  4,088
  4,285
  4,494
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
  1,471
  1,503
  1,540
  1,581
  1,627
  1,677
  1,732
  1,791
  1,854
  1,923
  1,922
  2,000
  2,083
  2,171
  2,265
  2,364
  2,469
  2,581
  2,698
  2,822
  2,953
  3,091
  3,236
  3,389
  3,551
  3,721
  3,899
  4,088
  4,285
  4,494
Operating income, $m
  77
  81
  85
  89
  94
  100
  106
  112
  119
  126
  208
  216
  225
  235
  245
  256
  267
  279
  292
  305
  319
  334
  350
  366
  384
  402
  422
  442
  463
  486
EBITDA, $m
  474
  485
  497
  511
  527
  544
  562
  582
  604
  627
  652
  678
  706
  736
  768
  802
  837
  875
  915
  957
  1,001
  1,048
  1,097
  1,149
  1,204
  1,262
  1,322
  1,386
  1,453
  1,524
Interest expense (income), $m
  14
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
  83
Earnings before tax, $m
  -6
  -2
  2
  6
  11
  16
  22
  29
  36
  43
  125
  133
  142
  152
  162
  172
  184
  196
  208
  222
  236
  251
  267
  283
  301
  319
  338
  359
  380
  403
Tax expense, $m
  0
  0
  0
  2
  3
  4
  6
  8
  10
  12
  34
  36
  38
  41
  44
  47
  50
  53
  56
  60
  64
  68
  72
  76
  81
  86
  91
  97
  103
  109
Net income, $m
  -6
  -2
  1
  4
  8
  12
  16
  21
  26
  31
  91
  97
  104
  111
  118
  126
  134
  143
  152
  162
  172
  183
  195
  207
  219
  233
  247
  262
  277
  294

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
  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
Adjusted assets (=assets-cash), $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
Revenue / Adjusted assets
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Average production assets, $m
  3,228
  3,303
  3,387
  3,483
  3,588
  3,704
  3,830
  3,967
  4,114
  4,272
  4,441
  4,621
  4,813
  5,017
  5,233
  5,463
  5,705
  5,962
  6,233
  6,520
  6,822
  7,141
  7,477
  7,831
  8,203
  8,596
  9,009
  9,444
  9,901
  10,382
Working capital, $m
  -1,711
  -1,750
  -1,795
  -1,846
  -1,902
  -1,963
  -2,030
  -2,102
  -2,180
  -2,264
  -2,354
  -2,449
  -2,551
  -2,659
  -2,774
  -2,895
  -3,024
  -3,160
  -3,304
  -3,455
  -3,615
  -3,784
  -3,962
  -4,150
  -4,348
  -4,556
  -4,775
  -5,005
  -5,247
  -5,502
Total debt, $m
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
  1,540
Total liabilities, $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 equity, $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 liabilities and equity, $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
Debt-to-equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -2
  1
  4
  8
  12
  16
  21
  26
  31
  91
  97
  104
  111
  118
  126
  134
  143
  152
  162
  172
  183
  195
  207
  219
  233
  247
  262
  277
  294
Depreciation, amort., depletion, $m
  397
  404
  412
  422
  433
  444
  457
  470
  485
  501
  444
  462
  481
  502
  523
  546
  571
  596
  623
  652
  682
  714
  748
  783
  820
  860
  901
  944
  990
  1,038
Funds from operations, $m
  391
  402
  414
  426
  441
  456
  473
  491
  511
  532
  535
  559
  585
  612
  641
  672
  705
  739
  776
  814
  855
  897
  942
  990
  1,040
  1,092
  1,148
  1,206
  1,268
  1,332
Change in working capital, $m
  -34
  -39
  -45
  -51
  -56
  -61
  -67
  -72
  -78
  -84
  -90
  -96
  -102
  -108
  -115
  -122
  -129
  -136
  -144
  -152
  -160
  -169
  -178
  -188
  -198
  -208
  -219
  -230
  -242
  -255
Cash from operations, $m
  424
  441
  459
  477
  497
  518
  540
  564
  589
  616
  625
  655
  687
  720
  756
  794
  833
  875
  919
  966
  1,015
  1,066
  1,120
  1,177
  1,237
  1,301
  1,367
  1,437
  1,510
  1,587
Maintenance CAPEX, $m
  -316
  -323
  -330
  -339
  -348
  -359
  -370
  -383
  -397
  -411
  -427
  -444
  -462
  -481
  -502
  -523
  -546
  -571
  -596
  -623
  -652
  -682
  -714
  -748
  -783
  -820
  -860
  -901
  -944
  -990
New CAPEX, $m
  -64
  -74
  -85
  -95
  -106
  -116
  -126
  -137
  -147
  -158
  -169
  -180
  -192
  -204
  -216
  -229
  -243
  -257
  -271
  -286
  -302
  -319
  -336
  -354
  -373
  -393
  -413
  -435
  -457
  -481
Cash from investing activities, $m
  -380
  -397
  -415
  -434
  -454
  -475
  -496
  -520
  -544
  -569
  -596
  -624
  -654
  -685
  -718
  -752
  -789
  -828
  -867
  -909
  -954
  -1,001
  -1,050
  -1,102
  -1,156
  -1,213
  -1,273
  -1,336
  -1,401
  -1,471
Free cash flow, $m
  44
  44
  43
  43
  43
  43
  43
  44
  45
  47
  28
  30
  33
  35
  38
  41
  44
  48
  52
  56
  60
  65
  70
  76
  82
  88
  94
  101
  108
  116
Issuance/(repayment) of debt, $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
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  
  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 cash flow (excl. dividends), $m
  44
  44
  43
  43
  43
  43
  43
  44
  45
  47
  28
  30
  33
  35
  38
  41
  44
  48
  52
  56
  60
  65
  70
  76
  82
  88
  94
  101
  108
  116
Retained Cash Flow (-), $m
  -6
  -2
  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
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
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Cash available for distribution, $m
  38
  42
  43
  43
  43
  43
  43
  44
  45
  47
  28
  30
  33
  35
  38
  41
  44
  48
  52
  56
  60
  65
  70
  76
  82
  88
  94
  101
  108
  116
Discount rate, %
  14.20
  14.91
  15.66
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
  25.50
  26.78
  28.12
  29.52
  31.00
  32.55
  34.17
  35.88
  37.68
  39.56
  41.54
  43.62
  45.80
  48.09
  50.49
  53.02
  55.67
  58.45
PV of cash for distribution, $m
  33
  31
  28
  23
  19
  16
  13
  10
  8
  6
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  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
  100.0
  100.0
  100.0
  100.0
  100.0

Infinity Property and Casualty Corporation is a holding company. The Company's segments include Personal Auto, Commercial Vehicle and Classic Collector (its segments are Personal Auto and Commercial Vehicle). The Company writes personal automobile insurance with a concentration on nonstandard automobile insurance, commercial vehicle insurance and classic collector automobile insurance. The Company offers personal and commercial automobile insurance in states, including Arizona, California, Florida and Texas. Personal Automobile is its insurance product, which provides coverage to individuals for liability to others for bodily injury and property damage and for physical damage to an insured's own vehicle from collision and various other perils. Commercial Vehicle provides coverage to businesses for liability to others for bodily injury and property damage and for physical damage to vehicles from collision. Classic Collector provides protection for classic collectible automobiles.

FINANCIAL RATIOS  of  Infinity Property&Casualty (IPCC)

Valuation Ratios
P/E Ratio 36.5
Price to Sales 1
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow 18.9
Growth Rates
Sales Growth Rate 3.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -53.2%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 39.2%
Total Debt to Equity 39.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. 2.5%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 5.2%
Return On Equity 6.2%
Return On Equity - 3 Yr. Avg. 7.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 7.2%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 5.9%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 2.8%
Net Profit Margin - 3 Yr. Avg. 3.4%
Effective Tax Rate 30.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.3%
Payout Ratio 53.5%

IPCC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IPCC stock intrinsic value calculation we used $1518 million for the last fiscal year's total revenue generated by Infinity Property&Casualty. The default revenue input number comes from 2017 income statement of Infinity Property&Casualty. 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 IPCC 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 14.2%, whose default value for IPCC is calculated based on our internal credit rating of Infinity Property&Casualty, 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 Infinity Property&Casualty.
    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 IPCC stock the variable cost ratio is equal to 95.1%.

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 IPCC 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 Infinity Property&Casualty.

Corporate tax rate of 27% is the nominal tax rate for Infinity Property&Casualty. 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 IPCC stock is equal to 0.3%.

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 IPCC are equal to 208.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Infinity Property&Casualty 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 IPCC is equal to -110.5%. 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 - $0 million for Infinity Property&Casualty - 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 11 million for Infinity Property&Casualty 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 Infinity Property&Casualty at the current share price and the inputted number of shares is $1.6 billion.

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