Intrinsic value of Lancaster Colony Corporation - LANC

Previous Close

$148.99

  Intrinsic Value

$80.14

stock screener

  Rating & Target

sell

-46%

Previous close

$148.99

 
Intrinsic value

$80.14

 
Up/down potential

-46%

 
Rating

sell

We calculate the intrinsic value of LANC 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 4.1

 

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, %
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
Revenue, $m
  1,338
  1,458
  1,583
  1,713
  1,848
  1,988
  2,134
  2,286
  2,443
  2,607
  2,777
  2,954
  3,139
  3,331
  3,531
  3,740
  3,957
  4,184
  4,421
  4,668
  4,926
  5,196
  5,479
  5,774
  6,083
  6,406
  6,745
  7,100
  7,471
  7,860
Variable operating expenses, $m
  1,141
  1,241
  1,345
  1,454
  1,566
  1,684
  1,806
  1,932
  2,064
  2,201
  2,321
  2,469
  2,623
  2,784
  2,951
  3,125
  3,307
  3,496
  3,694
  3,901
  4,117
  4,343
  4,579
  4,825
  5,084
  5,354
  5,637
  5,933
  6,243
  6,568
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
  1,141
  1,241
  1,345
  1,454
  1,566
  1,684
  1,806
  1,932
  2,064
  2,201
  2,321
  2,469
  2,623
  2,784
  2,951
  3,125
  3,307
  3,496
  3,694
  3,901
  4,117
  4,343
  4,579
  4,825
  5,084
  5,354
  5,637
  5,933
  6,243
  6,568
Operating income, $m
  197
  217
  238
  259
  281
  304
  328
  353
  379
  406
  456
  485
  516
  547
  580
  614
  650
  687
  726
  767
  809
  854
  900
  949
  1,000
  1,053
  1,108
  1,167
  1,228
  1,292
EBITDA, $m
  241
  263
  285
  309
  333
  358
  385
  412
  440
  470
  501
  533
  566
  600
  637
  674
  713
  754
  797
  841
  888
  937
  988
  1,041
  1,097
  1,155
  1,216
  1,280
  1,347
  1,417
Interest expense (income), $m
  0
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
Earnings before tax, $m
  197
  216
  236
  257
  278
  300
  323
  347
  372
  398
  447
  475
  504
  534
  566
  599
  633
  669
  706
  746
  786
  829
  874
  920
  969
  1,020
  1,073
  1,129
  1,188
  1,249
Tax expense, $m
  53
  58
  64
  69
  75
  81
  87
  94
  100
  107
  121
  128
  136
  144
  153
  162
  171
  181
  191
  201
  212
  224
  236
  248
  262
  275
  290
  305
  321
  337
Net income, $m
  144
  158
  172
  187
  203
  219
  236
  253
  271
  290
  326
  347
  368
  390
  413
  437
  462
  488
  516
  544
  574
  605
  638
  672
  707
  745
  784
  824
  867
  912

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
  758
  826
  896
  970
  1,046
  1,126
  1,208
  1,294
  1,383
  1,476
  1,573
  1,673
  1,777
  1,886
  1,999
  2,118
  2,241
  2,369
  2,503
  2,643
  2,790
  2,943
  3,102
  3,270
  3,445
  3,628
  3,819
  4,020
  4,230
  4,451
Adjusted assets (=assets-cash), $m
  758
  826
  896
  970
  1,046
  1,126
  1,208
  1,294
  1,383
  1,476
  1,573
  1,673
  1,777
  1,886
  1,999
  2,118
  2,241
  2,369
  2,503
  2,643
  2,790
  2,943
  3,102
  3,270
  3,445
  3,628
  3,819
  4,020
  4,230
  4,451
Revenue / Adjusted assets
  1.765
  1.765
  1.767
  1.766
  1.767
  1.766
  1.767
  1.767
  1.766
  1.766
  1.765
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
  1.766
Average production assets, $m
  326
  356
  386
  418
  451
  485
  521
  558
  596
  636
  678
  721
  766
  813
  862
  912
  966
  1,021
  1,079
  1,139
  1,202
  1,268
  1,337
  1,409
  1,484
  1,563
  1,646
  1,732
  1,823
  1,918
Working capital, $m
  87
  95
  103
  111
  120
  129
  139
  149
  159
  169
  181
  192
  204
  217
  230
  243
  257
  272
  287
  303
  320
  338
  356
  375
  395
  416
  438
  461
  486
  511
Total debt, $m
  14
  29
  45
  61
  78
  95
  114
  133
  152
  173
  194
  216
  239
  263
  288
  314
  341
  369
  399
  429
  462
  495
  530
  567
  606
  646
  688
  732
  778
  827
Total liabilities, $m
  167
  182
  197
  213
  230
  248
  266
  285
  304
  325
  346
  368
  391
  415
  440
  466
  493
  521
  551
  582
  614
  647
  683
  719
  758
  798
  840
  884
  931
  979
Total equity, $m
  591
  644
  699
  756
  816
  878
  943
  1,009
  1,079
  1,151
  1,227
  1,305
  1,386
  1,471
  1,560
  1,652
  1,748
  1,848
  1,953
  2,062
  2,176
  2,295
  2,420
  2,550
  2,687
  2,830
  2,979
  3,136
  3,300
  3,472
Total liabilities and equity, $m
  758
  826
  896
  969
  1,046
  1,126
  1,209
  1,294
  1,383
  1,476
  1,573
  1,673
  1,777
  1,886
  2,000
  2,118
  2,241
  2,369
  2,504
  2,644
  2,790
  2,942
  3,103
  3,269
  3,445
  3,628
  3,819
  4,020
  4,231
  4,451
Debt-to-equity ratio
  0.020
  0.050
  0.060
  0.080
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
Adjusted equity ratio
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  144
  158
  172
  187
  203
  219
  236
  253
  271
  290
  326
  347
  368
  390
  413
  437
  462
  488
  516
  544
  574
  605
  638
  672
  707
  745
  784
  824
  867
  912
Depreciation, amort., depletion, $m
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  44
  47
  50
  53
  56
  60
  63
  67
  71
  74
  79
  83
  87
  92
  97
  102
  108
  113
  119
  125
Funds from operations, $m
  188
  204
  220
  237
  255
  273
  292
  312
  333
  354
  371
  394
  418
  443
  470
  497
  525
  555
  586
  619
  653
  688
  725
  764
  804
  847
  891
  938
  986
  1,037
Change in working capital, $m
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  180
  196
  212
  229
  246
  264
  283
  302
  323
  344
  360
  382
  406
  431
  456
  483
  511
  540
  571
  603
  636
  670
  707
  745
  784
  826
  869
  915
  962
  1,012
Maintenance CAPEX, $m
  -20
  -21
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -74
  -79
  -83
  -87
  -92
  -97
  -102
  -108
  -113
  -119
New CAPEX, $m
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
Cash from investing activities, $m
  -48
  -50
  -53
  -57
  -60
  -63
  -68
  -71
  -74
  -79
  -84
  -87
  -92
  -97
  -102
  -107
  -113
  -118
  -125
  -131
  -137
  -145
  -152
  -159
  -167
  -176
  -185
  -195
  -204
  -214
Free cash flow, $m
  133
  145
  158
  172
  186
  200
  215
  231
  248
  265
  276
  295
  314
  334
  355
  376
  399
  422
  446
  472
  498
  526
  555
  585
  617
  650
  684
  721
  758
  798
Issuance/(repayment) of debt, $m
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
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  
  14
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
Total cash flow (excl. dividends), $m
  148
  160
  174
  188
  203
  218
  234
  250
  267
  285
  298
  317
  337
  358
  379
  402
  426
  450
  476
  503
  530
  560
  590
  622
  655
  690
  727
  765
  805
  847
Retained Cash Flow (-), $m
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -125
  -130
  -136
  -143
  -150
  -157
  -164
  -172
Prev. year cash balance distribution, $m
  112
  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
  209
  107
  119
  130
  143
  156
  169
  183
  198
  213
  222
  239
  255
  273
  291
  310
  330
  350
  371
  393
  416
  440
  465
  492
  519
  547
  577
  608
  641
  675
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
  200
  98
  103
  107
  111
  113
  114
  115
  114
  112
  106
  102
  97
  92
  85
  79
  72
  64
  57
  50
  43
  37
  31
  25
  20
  16
  12
  9
  7
  5
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

Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice channels. The Company's food products include Salad dressings and sauces, Vegetable dips and fruit dips, Frozen garlic breads, Frozen Parkerhouse style yeast rolls and dinner rolls, Premium dry egg noodles, Frozen specialty noodles, Croutons and salad toppings, Flatbread wraps and pizza crusts, and Caviar. Its brands include Marzetti, Marzetti Simply Dressed, Cardini's, Girard's, Katherine's Kitchen, New York BRAND Bakery, Mamma Bella's, Sister Schubert's, Mary B's, Inn Maid, Amish Kitchen, Reames, Aunt Vi's, Flatout and Romanoff. It manufactures and sells other products pursuant to brand license agreements, including Olive Garden dressing, Jack Daniel's mustards and Hungry Girl flatbreads. A portion of its sales are dressing packets, frozen specialty noodles, pasta and flatbreads sold to industrial customers for use as ingredients or components in their products.

FINANCIAL RATIOS  of  Lancaster Colony Corporation (LANC)

Valuation Ratios
P/E Ratio 35.6
Price to Sales 3.4
Price to Book 7.1
Price to Tangible Book
Price to Cash Flow 28.4
Price to Free Cash Flow 35
Growth Rates
Sales Growth Rate 0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 58.8%
Cap. Spend. - 3 Yr. Gr. Rate 11%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 17%
Ret/ On Assets - 3 Yr. Avg. 16.8%
Return On Total Capital 21.1%
Ret/ On T. Cap. - 3 Yr. Avg. 20.6%
Return On Equity 21.1%
Return On Equity - 3 Yr. Avg. 20.6%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 26.5%
Gross Margin - 3 Yr. Avg. 25%
EBITDA Margin 16.7%
EBITDA Margin - 3 Yr. Avg. 16.7%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 14.7%
Pre-Tax Margin 14.6%
Pre-Tax Margin - 3 Yr. Avg. 14.7%
Net Profit Margin 9.6%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 34.7%
Eff/ Tax Rate - 3 Yr. Avg. 34.3%
Payout Ratio 51.3%

LANC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LANC stock intrinsic value calculation we used $1223 million for the last fiscal year's total revenue generated by Lancaster Colony Corporation. The default revenue input number comes from 0001 income statement of Lancaster Colony Corporation. 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 LANC stock valuation model: a) initial revenue growth rate of 9.4% 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 LANC is calculated based on our internal credit rating of Lancaster Colony Corporation, 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 Lancaster Colony Corporation.
    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 LANC stock the variable cost ratio is equal to 85.4%.

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 LANC 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 Lancaster Colony Corporation.

Corporate tax rate of 27% is the nominal tax rate for Lancaster Colony Corporation. 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 LANC 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 LANC are equal to 24.4%.

Life of production assets of 15.3 years is the average useful life of capital assets used in Lancaster Colony Corporation 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 LANC is equal to 6.5%. 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 - $652.282 million for Lancaster Colony Corporation - 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 27.531 million for Lancaster Colony Corporation 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 Lancaster Colony Corporation at the current share price and the inputted number of shares is $4.1 billion.

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