Intrinsic value of Landec Corporation - LNDC

Previous Close

$9.53

  Intrinsic Value

$2.05

stock screener

  Rating & Target

str. sell

-79%

Previous close

$9.53

 
Intrinsic value

$2.05

 
Up/down potential

-79%

 
Rating

str. sell

We calculate the intrinsic value of LNDC 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 0.3

 

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, %
  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
  534
  547
  561
  577
  594
  613
  634
  657
  681
  707
  735
  765
  797
  831
  866
  904
  945
  987
  1,032
  1,079
  1,129
  1,182
  1,238
  1,296
  1,358
  1,423
  1,492
  1,564
  1,639
  1,719
Variable operating expenses, $m
  518
  529
  543
  558
  575
  593
  613
  634
  658
  683
  702
  730
  761
  793
  827
  863
  902
  942
  985
  1,030
  1,078
  1,128
  1,182
  1,237
  1,296
  1,358
  1,424
  1,492
  1,565
  1,641
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
  518
  529
  543
  558
  575
  593
  613
  634
  658
  683
  702
  730
  761
  793
  827
  863
  902
  942
  985
  1,030
  1,078
  1,128
  1,182
  1,237
  1,296
  1,358
  1,424
  1,492
  1,565
  1,641
Operating income, $m
  17
  17
  18
  19
  19
  20
  21
  22
  23
  25
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
EBITDA, $m
  35
  36
  37
  38
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  70
  74
  77
  81
  84
  88
  93
  97
  102
  107
  112
Interest expense (income), $m
  2
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
Earnings before tax, $m
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
Tax expense, $m
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
Net income, $m
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41

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
  413
  422
  433
  445
  459
  474
  490
  507
  526
  546
  568
  591
  615
  641
  669
  698
  729
  762
  797
  834
  872
  913
  956
  1,001
  1,049
  1,099
  1,152
  1,207
  1,266
  1,327
Adjusted assets (=assets-cash), $m
  413
  422
  433
  445
  459
  474
  490
  507
  526
  546
  568
  591
  615
  641
  669
  698
  729
  762
  797
  834
  872
  913
  956
  1,001
  1,049
  1,099
  1,152
  1,207
  1,266
  1,327
Revenue / Adjusted assets
  1.293
  1.296
  1.296
  1.297
  1.294
  1.293
  1.294
  1.296
  1.295
  1.295
  1.294
  1.294
  1.296
  1.296
  1.294
  1.295
  1.296
  1.295
  1.295
  1.294
  1.295
  1.295
  1.295
  1.295
  1.295
  1.295
  1.295
  1.296
  1.295
  1.295
Average production assets, $m
  189
  193
  198
  204
  210
  216
  224
  232
  240
  250
  260
  270
  281
  293
  306
  319
  333
  348
  364
  381
  399
  417
  437
  458
  479
  502
  527
  552
  579
  607
Working capital, $m
  38
  39
  40
  42
  43
  44
  46
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
Total debt, $m
  76
  80
  84
  88
  93
  99
  105
  111
  119
  126
  134
  143
  152
  162
  172
  183
  195
  207
  220
  234
  249
  264
  280
  297
  315
  334
  354
  375
  397
  420
Total liabilities, $m
  155
  159
  163
  167
  172
  178
  184
  191
  198
  205
  213
  222
  231
  241
  252
  263
  274
  287
  300
  313
  328
  343
  359
  376
  394
  413
  433
  454
  476
  499
Total equity, $m
  258
  263
  270
  278
  286
  296
  306
  316
  328
  341
  354
  369
  384
  400
  417
  436
  455
  476
  497
  520
  544
  570
  596
  625
  654
  686
  719
  753
  790
  828
Total liabilities and equity, $m
  413
  422
  433
  445
  458
  474
  490
  507
  526
  546
  567
  591
  615
  641
  669
  699
  729
  763
  797
  833
  872
  913
  955
  1,001
  1,048
  1,099
  1,152
  1,207
  1,266
  1,327
Debt-to-equity ratio
  0.300
  0.300
  0.310
  0.320
  0.330
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.490
  0.490
  0.500
  0.500
  0.510
Adjusted equity ratio
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  41
Depreciation, amort., depletion, $m
  18
  18
  19
  19
  19
  20
  20
  20
  21
  21
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
Funds from operations, $m
  27
  28
  29
  29
  30
  31
  32
  33
  34
  35
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Cash from operations, $m
  27
  27
  28
  28
  29
  29
  30
  31
  32
  33
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
Maintenance CAPEX, $m
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
New CAPEX, $m
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
Cash from investing activities, $m
  -14
  -14
  -16
  -17
  -17
  -19
  -19
  -20
  -22
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -58
  -60
Free cash flow, $m
  13
  12
  12
  12
  11
  11
  11
  11
  10
  10
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
Issuance/(repayment) of debt, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
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  
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
Total cash flow (excl. dividends), $m
  16
  16
  16
  16
  16
  17
  17
  17
  17
  18
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
Retained Cash Flow (-), $m
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
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
  11
  10
  9
  8
  8
  7
  7
  6
  6
  5
  3
  2
  2
  1
  1
  1
  0
  0
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
Discount rate, %
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
  10
  9
  8
  7
  6
  5
  4
  4
  3
  2
  1
  1
  1
  0
  0
  0
  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

Landec Corporation designs, develops, manufactures and sells a range of health and wellness products for food and biomaterials markets. The Company licenses technology applications to partners. The Company operates through three segments: Packaged Fresh Vegetables, Food Export and Biomaterials. The Packaged Fresh Vegetables segment markets and packs specialty packaged whole and fresh-cut fruit and vegetables, the majority of which incorporate the BreatheWay specialty packaging for the retail grocery, club store and food services industry. The Food Export segment is engaged in the purchase and sale of whole commodity fruit and vegetable products primarily to Asia. The Biomaterials segment sells products utilizing hyaluronan, a polysaccharide that is distributed in the extracellular matrix of connective tissues in both animals and humans, and non-hyaluronan (HA) products for medical use primarily in the ophthalmic, orthopedic and other markets.

FINANCIAL RATIOS  of  Landec Corporation (LNDC)

Valuation Ratios
P/E Ratio 23.8
Price to Sales 0.5
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 43.7
Growth Rates
Sales Growth Rate -1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.9%
Cap. Spend. - 3 Yr. Gr. Rate 8.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 20.3%
Total Debt to Equity 23.8%
Interest Coverage 9
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity 5%
Return On Equity - 3 Yr. Avg. 2%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 15.6%
Gross Margin - 3 Yr. Avg. 13.6%
EBITDA Margin 5.3%
EBITDA Margin - 3 Yr. Avg. 3.1%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 0.8%
Pre-Tax Margin 2.8%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 34%
Payout Ratio 0%

LNDC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LNDC stock intrinsic value calculation we used $524 million for the last fiscal year's total revenue generated by Landec Corporation. The default revenue input number comes from 0001 income statement of Landec 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 LNDC 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 5.2%, whose default value for LNDC is calculated based on our internal credit rating of Landec 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 Landec 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 LNDC stock the variable cost ratio is equal to 96.9%.

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 LNDC 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 Landec Corporation.

Corporate tax rate of 27% is the nominal tax rate for Landec 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 LNDC 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 LNDC are equal to 35.3%.

Life of production assets of 18 years is the average useful life of capital assets used in Landec 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 LNDC is equal to 7.2%. 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 - $252.562 million for Landec 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 29.170 million for Landec 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 Landec Corporation at the current share price and the inputted number of shares is $0.3 billion.

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