Intrinsic value of PotlatchDeltic Corporation - PCH

Previous Close

$38.05

  Intrinsic Value

$4.78

stock screener

  Rating & Target

str. sell

-87%

Previous close

$38.05

 
Intrinsic value

$4.78

 
Up/down potential

-87%

 
Rating

str. sell

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

We calculate the intrinsic value of PCH 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 2.6

 

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, %
  24.00
  22.10
  20.39
  18.85
  17.47
  16.22
  15.10
  14.09
  13.18
  12.36
  11.62
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.10
  5.99
  5.89
Revenue, $m
  1,209
  1,476
  1,777
  2,112
  2,481
  2,884
  3,319
  3,786
  4,285
  4,815
  5,375
  5,964
  6,582
  7,229
  7,905
  8,610
  9,343
  10,106
  10,900
  11,725
  12,582
  13,472
  14,398
  15,361
  16,361
  17,403
  18,486
  19,615
  20,791
  22,016
Variable operating expenses, $m
  938
  1,145
  1,378
  1,637
  1,923
  2,234
  2,571
  2,933
  3,319
  3,729
  4,161
  4,617
  5,096
  5,597
  6,120
  6,665
  7,233
  7,824
  8,438
  9,077
  9,740
  10,430
  11,146
  11,891
  12,666
  13,472
  14,311
  15,185
  16,095
  17,044
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
  938
  1,145
  1,378
  1,637
  1,923
  2,234
  2,571
  2,933
  3,319
  3,729
  4,161
  4,617
  5,096
  5,597
  6,120
  6,665
  7,233
  7,824
  8,438
  9,077
  9,740
  10,430
  11,146
  11,891
  12,666
  13,472
  14,311
  15,185
  16,095
  17,044
Operating income, $m
  271
  332
  400
  475
  559
  649
  748
  853
  966
  1,086
  1,214
  1,347
  1,487
  1,633
  1,785
  1,944
  2,110
  2,282
  2,462
  2,648
  2,842
  3,043
  3,252
  3,469
  3,695
  3,930
  4,175
  4,430
  4,695
  4,972
EBITDA, $m
  364
  444
  534
  635
  746
  867
  998
  1,139
  1,289
  1,448
  1,616
  1,793
  1,979
  2,174
  2,377
  2,589
  2,809
  3,039
  3,277
  3,525
  3,783
  4,051
  4,329
  4,619
  4,920
  5,233
  5,559
  5,898
  6,251
  6,620
Interest expense (income), $m
  28
  41
  54
  69
  86
  105
  125
  148
  172
  198
  226
  256
  288
  321
  355
  391
  429
  469
  510
  553
  597
  644
  692
  741
  793
  847
  903
  962
  1,023
  1,086
  1,152
Earnings before tax, $m
  230
  278
  331
  389
  454
  524
  600
  681
  768
  859
  958
  1,059
  1,166
  1,278
  1,394
  1,515
  1,641
  1,773
  1,909
  2,051
  2,198
  2,351
  2,510
  2,676
  2,848
  3,027
  3,213
  3,407
  3,610
  3,821
Tax expense, $m
  62
  75
  89
  105
  123
  142
  162
  184
  207
  232
  259
  286
  315
  345
  376
  409
  443
  479
  515
  554
  593
  635
  678
  722
  769
  817
  868
  920
  975
  1,032
Net income, $m
  168
  203
  241
  284
  331
  383
  438
  497
  560
  627
  699
  773
  851
  933
  1,018
  1,106
  1,198
  1,294
  1,394
  1,497
  1,605
  1,716
  1,833
  1,953
  2,079
  2,210
  2,346
  2,487
  2,635
  2,789

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
  2,885
  3,523
  4,241
  5,041
  5,922
  6,882
  7,921
  9,037
  10,228
  11,492
  12,828
  14,234
  15,710
  17,254
  18,867
  20,548
  22,299
  24,120
  26,014
  27,983
  30,028
  32,154
  34,363
  36,660
  39,049
  41,534
  44,120
  46,814
  49,620
  52,545
Adjusted assets (=assets-cash), $m
  2,885
  3,523
  4,241
  5,041
  5,922
  6,882
  7,921
  9,037
  10,228
  11,492
  12,828
  14,234
  15,710
  17,254
  18,867
  20,548
  22,299
  24,120
  26,014
  27,983
  30,028
  32,154
  34,363
  36,660
  39,049
  41,534
  44,120
  46,814
  49,620
  52,545
Revenue / Adjusted assets
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
  0.419
Average production assets, $m
  1,665
  2,033
  2,447
  2,909
  3,416
  3,971
  4,570
  5,214
  5,901
  6,630
  7,401
  8,213
  9,064
  9,955
  10,885
  11,855
  12,866
  13,917
  15,009
  16,145
  17,325
  18,552
  19,826
  21,151
  22,530
  23,963
  25,456
  27,010
  28,629
  30,316
Working capital, $m
  111
  136
  164
  194
  228
  265
  305
  348
  394
  443
  494
  549
  606
  665
  727
  792
  860
  930
  1,003
  1,079
  1,158
  1,239
  1,325
  1,413
  1,505
  1,601
  1,701
  1,805
  1,913
  2,025
Total debt, $m
  999
  1,277
  1,589
  1,937
  2,320
  2,738
  3,190
  3,675
  4,193
  4,743
  5,324
  5,936
  6,578
  7,250
  7,951
  8,683
  9,444
  10,237
  11,060
  11,917
  12,807
  13,731
  14,692
  15,691
  16,730
  17,811
  18,937
  20,108
  21,329
  22,601
Total liabilities, $m
  1,255
  1,533
  1,845
  2,193
  2,576
  2,994
  3,446
  3,931
  4,449
  4,999
  5,580
  6,192
  6,834
  7,505
  8,207
  8,938
  9,700
  10,492
  11,316
  12,172
  13,062
  13,987
  14,948
  15,947
  16,986
  18,067
  19,192
  20,364
  21,585
  22,857
Total equity, $m
  1,630
  1,991
  2,396
  2,848
  3,346
  3,888
  4,475
  5,106
  5,779
  6,493
  7,248
  8,042
  8,876
  9,748
  10,660
  11,610
  12,599
  13,628
  14,698
  15,810
  16,966
  18,167
  19,415
  20,713
  22,062
  23,466
  24,928
  26,450
  28,035
  29,688
Total liabilities and equity, $m
  2,885
  3,524
  4,241
  5,041
  5,922
  6,882
  7,921
  9,037
  10,228
  11,492
  12,828
  14,234
  15,710
  17,253
  18,867
  20,548
  22,299
  24,120
  26,014
  27,982
  30,028
  32,154
  34,363
  36,660
  39,048
  41,533
  44,120
  46,814
  49,620
  52,545
Debt-to-equity ratio
  0.610
  0.640
  0.660
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.730
  0.730
  0.740
  0.740
  0.740
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.750
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
  0.760
Adjusted equity ratio
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565
  0.565

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  168
  203
  241
  284
  331
  383
  438
  497
  560
  627
  699
  773
  851
  933
  1,018
  1,106
  1,198
  1,294
  1,394
  1,497
  1,605
  1,716
  1,833
  1,953
  2,079
  2,210
  2,346
  2,487
  2,635
  2,789
Depreciation, amort., depletion, $m
  92
  112
  135
  160
  187
  218
  250
  285
  323
  362
  402
  446
  493
  541
  592
  644
  699
  756
  816
  877
  942
  1,008
  1,078
  1,150
  1,224
  1,302
  1,383
  1,468
  1,556
  1,648
Funds from operations, $m
  261
  315
  376
  444
  519
  600
  688
  782
  883
  989
  1,101
  1,220
  1,344
  1,474
  1,609
  1,750
  1,897
  2,050
  2,209
  2,374
  2,546
  2,725
  2,910
  3,103
  3,303
  3,512
  3,729
  3,955
  4,191
  4,437
Change in working capital, $m
  22
  25
  28
  31
  34
  37
  40
  43
  46
  49
  51
  54
  57
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
  104
  108
  113
Cash from operations, $m
  239
  290
  348
  413
  485
  563
  648
  739
  837
  941
  1,050
  1,166
  1,287
  1,414
  1,547
  1,686
  1,830
  1,980
  2,136
  2,299
  2,467
  2,643
  2,825
  3,014
  3,211
  3,416
  3,629
  3,851
  4,083
  4,324
Maintenance CAPEX, $m
  -73
  -90
  -110
  -133
  -158
  -186
  -216
  -248
  -283
  -321
  -360
  -402
  -446
  -493
  -541
  -592
  -644
  -699
  -756
  -816
  -877
  -942
  -1,008
  -1,078
  -1,150
  -1,224
  -1,302
  -1,383
  -1,468
  -1,556
New CAPEX, $m
  -322
  -368
  -414
  -461
  -508
  -554
  -599
  -644
  -687
  -729
  -771
  -811
  -851
  -891
  -930
  -970
  -1,010
  -1,051
  -1,093
  -1,136
  -1,180
  -1,226
  -1,275
  -1,325
  -1,378
  -1,434
  -1,492
  -1,554
  -1,619
  -1,688
Cash from investing activities, $m
  -395
  -458
  -524
  -594
  -666
  -740
  -815
  -892
  -970
  -1,050
  -1,131
  -1,213
  -1,297
  -1,384
  -1,471
  -1,562
  -1,654
  -1,750
  -1,849
  -1,952
  -2,057
  -2,168
  -2,283
  -2,403
  -2,528
  -2,658
  -2,794
  -2,937
  -3,087
  -3,244
Free cash flow, $m
  -156
  -168
  -176
  -181
  -181
  -177
  -167
  -153
  -134
  -109
  -81
  -48
  -11
  31
  75
  124
  175
  230
  287
  347
  410
  475
  542
  612
  684
  758
  835
  914
  996
  1,080
Issuance/(repayment) of debt, $m
  244
  277
  312
  348
  383
  418
  452
  485
  518
  550
  581
  612
  642
  672
  702
  731
  762
  792
  824
  856
  890
  925
  961
  999
  1,039
  1,081
  1,125
  1,172
  1,221
  1,272
Issuance/(repurchase) of shares, $m
  147
  158
  165
  167
  166
  160
  149
  133
  113
  87
  56
  21
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  391
  435
  477
  515
  549
  578
  601
  618
  631
  637
  637
  633
  642
  672
  702
  731
  762
  792
  824
  856
  890
  925
  961
  999
  1,039
  1,081
  1,125
  1,172
  1,221
  1,272
Total cash flow (excl. dividends), $m
  235
  267
  301
  334
  368
  401
  434
  466
  497
  528
  556
  585
  631
  702
  777
  855
  937
  1,022
  1,111
  1,203
  1,299
  1,399
  1,503
  1,611
  1,723
  1,839
  1,960
  2,086
  2,216
  2,353
Retained Cash Flow (-), $m
  -315
  -360
  -406
  -452
  -497
  -543
  -587
  -630
  -673
  -714
  -755
  -795
  -834
  -872
  -911
  -950
  -989
  -1,029
  -1,070
  -1,112
  -1,156
  -1,201
  -1,248
  -1,298
  -1,350
  -1,404
  -1,461
  -1,522
  -1,585
  -1,653
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
  -80
  -93
  -105
  -117
  -130
  -141
  -153
  -165
  -176
  -187
  -199
  -210
  -203
  -170
  -134
  -95
  -52
  -7
  41
  91
  144
  198
  255
  313
  373
  435
  498
  564
  631
  700
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  -76
  -83
  -87
  -90
  -91
  -91
  -89
  -86
  -82
  -77
  -71
  -65
  -54
  -38
  -25
  -14
  -6
  -1
  3
  5
  6
  7
  6
  5
  4
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  94.6
  90.2
  86.5
  83.5
  81.1
  79.2
  77.7
  76.5
  75.7
  75.1
  74.8
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7

Potlatch Corporation is a real estate investment trust (REIT), which is primarily engaged in activities associated with timberland management, including the sale of timber, management of timberlands, and purchase and sale of timberlands. The Company is also engaged in the manufacture and sale of wood products. It operates through three segments: Resource, Wood Products and Real Estate. Its primary objectives include using its timberland investments to generate income and maximizing the long-term value of its assets. Its Resource segment manages its timberlands. Its Wood Products segment manufactures and markets lumber, plywood and residual products at mills located in Arkansas, Idaho, Michigan and Minnesota. The activities of its Real Estate segment consist primarily of the sale of non-core timberlands in the categories of higher and better use (HBU), rural recreational real estate and non-strategic properties.

FINANCIAL RATIOS  of  PotlatchDeltic Corporation (PCH)

Valuation Ratios
P/E Ratio 140.2
Price to Sales 2.6
Price to Book 9.9
Price to Tangible Book
Price to Cash Flow 15.1
Price to Free Cash Flow 18.6
Growth Rates
Sales Growth Rate 4.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -42.4%
Cap. Spend. - 3 Yr. Gr. Rate -4.6%
Financial Strength
Quick Ratio 8
Current Ratio 0.2
LT Debt to Equity 367.3%
Total Debt to Equity 374.4%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 8.3%
Return On Total Capital 1.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 21%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 22.9%
Gross Margin - 3 Yr. Avg. 23.4%
EBITDA Margin 11.5%
EBITDA Margin - 3 Yr. Avg. 18%
Operating Margin 5.8%
Oper. Margin - 3 Yr. Avg. 12.7%
Pre-Tax Margin 1.2%
Pre-Tax Margin - 3 Yr. Avg. 7.9%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate -57.1%
Eff/ Tax Rate - 3 Yr. Avg. -20.7%
Payout Ratio 554.5%

PCH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCH stock intrinsic value calculation we used $975 million for the last fiscal year's total revenue generated by PotlatchDeltic Corporation. The default revenue input number comes from 0001 income statement of PotlatchDeltic 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 PCH stock valuation model: a) initial revenue growth rate of 24% 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 6%, whose default value for PCH is calculated based on our internal credit rating of PotlatchDeltic 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 PotlatchDeltic 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 PCH stock the variable cost ratio is equal to 77.6%.

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 PCH 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 PotlatchDeltic Corporation.

Corporate tax rate of 27% is the nominal tax rate for PotlatchDeltic 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 PCH 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 PCH are equal to 137.7%.

Life of production assets of 18.4 years is the average useful life of capital assets used in PotlatchDeltic 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 PCH is equal to 9.2%. 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 - $1314.779 million for PotlatchDeltic 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 67.797 million for PotlatchDeltic 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 PotlatchDeltic Corporation at the current share price and the inputted number of shares is $2.6 billion.

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