Intrinsic value of Louisiana-Pacific Corporation - LPX

Previous Close

$23.79

  Intrinsic Value

$40.64

stock screener

  Rating & Target

str. buy

+71%

Previous close

$23.79

 
Intrinsic value

$40.64

 
Up/down potential

+71%

 
Rating

str. buy

We calculate the intrinsic value of LPX 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 3.2

 

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
  2,885
  2,951
  3,027
  3,112
  3,206
  3,310
  3,422
  3,544
  3,676
  3,817
  3,968
  4,129
  4,300
  4,483
  4,676
  4,881
  5,098
  5,327
  5,570
  5,826
  6,096
  6,380
  6,680
  6,997
  7,330
  7,681
  8,050
  8,438
  8,847
  9,277
Variable operating expenses, $m
  2,322
  2,375
  2,436
  2,505
  2,581
  2,664
  2,755
  2,853
  2,958
  3,072
  3,191
  3,320
  3,458
  3,604
  3,760
  3,925
  4,099
  4,284
  4,478
  4,684
  4,901
  5,130
  5,372
  5,626
  5,894
  6,176
  6,473
  6,785
  7,114
  7,459
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
  2,322
  2,375
  2,436
  2,505
  2,581
  2,664
  2,755
  2,853
  2,958
  3,072
  3,191
  3,320
  3,458
  3,604
  3,760
  3,925
  4,099
  4,284
  4,478
  4,684
  4,901
  5,130
  5,372
  5,626
  5,894
  6,176
  6,473
  6,785
  7,114
  7,459
Operating income, $m
  563
  576
  590
  607
  626
  646
  668
  692
  718
  745
  777
  809
  843
  878
  916
  956
  999
  1,044
  1,091
  1,141
  1,194
  1,250
  1,309
  1,371
  1,436
  1,505
  1,577
  1,653
  1,733
  1,817
EBITDA, $m
  686
  702
  720
  740
  762
  787
  814
  843
  874
  907
  943
  982
  1,022
  1,066
  1,112
  1,160
  1,212
  1,266
  1,324
  1,385
  1,449
  1,517
  1,588
  1,663
  1,743
  1,826
  1,914
  2,006
  2,103
  2,205
Interest expense (income), $m
  0
  19
  20
  21
  22
  23
  25
  27
  28
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  70
  74
  79
  84
  89
  94
  100
  106
  112
Earnings before tax, $m
  544
  556
  569
  585
  602
  621
  641
  664
  687
  713
  743
  772
  803
  836
  871
  909
  948
  990
  1,033
  1,080
  1,129
  1,180
  1,235
  1,292
  1,353
  1,416
  1,483
  1,553
  1,627
  1,705
Tax expense, $m
  147
  150
  154
  158
  163
  168
  173
  179
  186
  193
  201
  209
  217
  226
  235
  245
  256
  267
  279
  292
  305
  319
  333
  349
  365
  382
  400
  419
  439
  460
Net income, $m
  397
  406
  416
  427
  440
  453
  468
  484
  502
  521
  542
  564
  586
  611
  636
  663
  692
  722
  754
  788
  824
  862
  901
  943
  987
  1,034
  1,083
  1,134
  1,188
  1,245

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
  1,917
  1,961
  2,011
  2,068
  2,130
  2,199
  2,274
  2,355
  2,442
  2,536
  2,636
  2,743
  2,857
  2,979
  3,107
  3,243
  3,387
  3,540
  3,701
  3,871
  4,050
  4,239
  4,439
  4,649
  4,870
  5,103
  5,349
  5,607
  5,878
  6,164
Adjusted assets (=assets-cash), $m
  1,917
  1,961
  2,011
  2,068
  2,130
  2,199
  2,274
  2,355
  2,442
  2,536
  2,636
  2,743
  2,857
  2,979
  3,107
  3,243
  3,387
  3,540
  3,701
  3,871
  4,050
  4,239
  4,439
  4,649
  4,870
  5,103
  5,349
  5,607
  5,878
  6,164
Revenue / Adjusted assets
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
  1.505
Average production assets, $m
  1,062
  1,086
  1,114
  1,145
  1,180
  1,218
  1,259
  1,304
  1,353
  1,405
  1,460
  1,519
  1,583
  1,650
  1,721
  1,796
  1,876
  1,960
  2,050
  2,144
  2,243
  2,348
  2,458
  2,575
  2,697
  2,826
  2,962
  3,105
  3,256
  3,414
Working capital, $m
  141
  145
  148
  152
  157
  162
  168
  174
  180
  187
  194
  202
  211
  220
  229
  239
  250
  261
  273
  285
  299
  313
  327
  343
  359
  376
  394
  413
  433
  455
Total debt, $m
  369
  388
  410
  434
  461
  491
  523
  558
  596
  636
  679
  725
  775
  827
  882
  941
  1,003
  1,069
  1,138
  1,211
  1,289
  1,370
  1,456
  1,547
  1,642
  1,743
  1,848
  1,960
  2,077
  2,200
Total liabilities, $m
  826
  845
  867
  891
  918
  948
  980
  1,015
  1,053
  1,093
  1,136
  1,182
  1,232
  1,284
  1,339
  1,398
  1,460
  1,526
  1,595
  1,668
  1,746
  1,827
  1,913
  2,004
  2,099
  2,200
  2,305
  2,417
  2,534
  2,657
Total equity, $m
  1,091
  1,116
  1,144
  1,177
  1,212
  1,251
  1,294
  1,340
  1,390
  1,443
  1,500
  1,561
  1,626
  1,695
  1,768
  1,845
  1,927
  2,014
  2,106
  2,202
  2,305
  2,412
  2,526
  2,645
  2,771
  2,904
  3,043
  3,190
  3,345
  3,507
Total liabilities and equity, $m
  1,917
  1,961
  2,011
  2,068
  2,130
  2,199
  2,274
  2,355
  2,443
  2,536
  2,636
  2,743
  2,858
  2,979
  3,107
  3,243
  3,387
  3,540
  3,701
  3,870
  4,051
  4,239
  4,439
  4,649
  4,870
  5,104
  5,348
  5,607
  5,879
  6,164
Debt-to-equity ratio
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.420
  0.430
  0.440
  0.450
  0.460
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.630
Adjusted equity ratio
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  397
  406
  416
  427
  440
  453
  468
  484
  502
  521
  542
  564
  586
  611
  636
  663
  692
  722
  754
  788
  824
  862
  901
  943
  987
  1,034
  1,083
  1,134
  1,188
  1,245
Depreciation, amort., depletion, $m
  123
  126
  129
  133
  137
  141
  146
  151
  156
  162
  166
  173
  180
  187
  196
  204
  213
  223
  233
  244
  255
  267
  279
  293
  307
  321
  337
  353
  370
  388
Funds from operations, $m
  520
  532
  545
  560
  576
  594
  614
  635
  658
  683
  708
  736
  766
  798
  832
  867
  905
  945
  987
  1,032
  1,079
  1,129
  1,181
  1,236
  1,294
  1,355
  1,419
  1,487
  1,558
  1,633
Change in working capital, $m
  3
  3
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
Cash from operations, $m
  517
  528
  541
  556
  572
  589
  608
  629
  652
  676
  701
  729
  758
  789
  822
  857
  895
  934
  975
  1,019
  1,066
  1,115
  1,166
  1,220
  1,278
  1,338
  1,401
  1,468
  1,538
  1,612
Maintenance CAPEX, $m
  -118
  -121
  -123
  -127
  -130
  -134
  -138
  -143
  -148
  -154
  -160
  -166
  -173
  -180
  -187
  -196
  -204
  -213
  -223
  -233
  -244
  -255
  -267
  -279
  -293
  -307
  -321
  -337
  -353
  -370
New CAPEX, $m
  -21
  -24
  -28
  -31
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -59
  -63
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -99
  -105
  -110
  -116
  -123
  -129
  -136
  -143
  -150
  -158
Cash from investing activities, $m
  -139
  -145
  -151
  -158
  -165
  -172
  -179
  -188
  -196
  -206
  -216
  -225
  -236
  -247
  -258
  -271
  -284
  -297
  -312
  -327
  -343
  -360
  -377
  -395
  -416
  -436
  -457
  -480
  -503
  -528
Free cash flow, $m
  378
  383
  390
  398
  407
  417
  429
  441
  455
  470
  486
  503
  522
  542
  564
  586
  611
  636
  664
  692
  723
  755
  789
  825
  862
  902
  944
  988
  1,035
  1,084
Issuance/(repayment) of debt, $m
  17
  19
  22
  24
  27
  30
  32
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  77
  82
  86
  91
  95
  100
  106
  111
  117
  123
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  
  17
  19
  22
  24
  27
  30
  32
  35
  38
  40
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  77
  82
  86
  91
  95
  100
  106
  111
  117
  123
Total cash flow (excl. dividends), $m
  395
  402
  412
  422
  434
  447
  461
  476
  493
  511
  529
  549
  571
  594
  619
  645
  673
  702
  733
  766
  800
  836
  875
  915
  958
  1,003
  1,050
  1,099
  1,152
  1,207
Retained Cash Flow (-), $m
  -21
  -25
  -29
  -32
  -36
  -39
  -43
  -46
  -50
  -53
  -57
  -61
  -65
  -69
  -73
  -77
  -82
  -87
  -92
  -97
  -102
  -108
  -113
  -120
  -126
  -133
  -140
  -147
  -155
  -163
Prev. year cash balance distribution, $m
  630
  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
  1,005
  377
  383
  390
  398
  408
  418
  430
  443
  457
  472
  489
  506
  526
  546
  568
  591
  615
  641
  669
  698
  729
  761
  796
  832
  870
  910
  953
  997
  1,044
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
  963
  345
  333
  321
  309
  296
  283
  269
  255
  240
  224
  208
  193
  176
  160
  144
  129
  113
  99
  85
  72
  60
  50
  41
  32
  25
  20
  15
  11
  8
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

Louisiana-Pacific Corporation is a manufacturer of building products. The Company's products are used in home construction, repair and remodeling, and outdoor structures. The Company operates in four segments, which include North America Oriented Strand Board (OSB), Siding, Engineered Wood Products (EWP) and South America. The OSB segment manufactures and distributes OSB structural panel products. The Siding segment offers two categories of products, which include SmartSide siding products and related accessories, and CanExel siding and accessories and other related products. The Engineered Wood Products (EWP) segment manufactures and distributes laminated veneer lumber, I-Joists, laminated strand lumber and other related products. The South American segment manufactures and distributes OSB and siding products in South America and certain export markets. Its engineered I-joists are used in residential and commercial flooring, and roofing systems and other structural applications.

FINANCIAL RATIOS  of  Louisiana-Pacific Corporation (LPX)

Valuation Ratios
P/E Ratio 22.9
Price to Sales 1.5
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 10
Price to Free Cash Flow 15.8
Growth Rates
Sales Growth Rate 18%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.6%
Cap. Spend. - 3 Yr. Gr. Rate 10.5%
Financial Strength
Quick Ratio 220
Current Ratio 0
LT Debt to Equity 31.3%
Total Debt to Equity 31.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.1%
Ret/ On Assets - 3 Yr. Avg. 0.1%
Return On Total Capital 9%
Ret/ On T. Cap. - 3 Yr. Avg. 0.1%
Return On Equity 13.6%
Return On Equity - 3 Yr. Avg. -0.4%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 22.8%
Gross Margin - 3 Yr. Avg. 14.3%
EBITDA Margin 12.4%
EBITDA Margin - 3 Yr. Avg. 4.2%
Operating Margin 8.3%
Oper. Margin - 3 Yr. Avg. 0.3%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. -1%
Net Profit Margin 6.7%
Net Profit Margin - 3 Yr. Avg. -0.6%
Effective Tax Rate 12.1%
Eff/ Tax Rate - 3 Yr. Avg. 13.3%
Payout Ratio 0%

LPX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LPX stock intrinsic value calculation we used $2828 million for the last fiscal year's total revenue generated by Louisiana-Pacific Corporation. The default revenue input number comes from 0001 income statement of Louisiana-Pacific 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 LPX 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 4.3%, whose default value for LPX is calculated based on our internal credit rating of Louisiana-Pacific 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 Louisiana-Pacific 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 LPX stock the variable cost ratio is equal to 80.5%.

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 LPX 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 Louisiana-Pacific Corporation.

Corporate tax rate of 27% is the nominal tax rate for Louisiana-Pacific 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 LPX 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 LPX are equal to 36.8%.

Life of production assets of 8.8 years is the average useful life of capital assets used in Louisiana-Pacific 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 LPX is equal to 4.9%. 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 - $1700.2 million for Louisiana-Pacific 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 135.201 million for Louisiana-Pacific 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 Louisiana-Pacific Corporation at the current share price and the inputted number of shares is $3.2 billion.

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