Intrinsic value of PetIQ, Inc. - PETQ

Previous Close

$34.44

  Intrinsic Value

$56.15

stock screener

  Rating & Target

str. buy

+63%

Previous close

$34.44

 
Intrinsic value

$56.15

 
Up/down potential

+63%

 
Rating

str. buy

We calculate the intrinsic value of PETQ 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 1.0

 

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, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  846
  1,308
  1,956
  2,838
  4,003
  5,504
  7,388
  9,700
  12,482
  15,766
  19,578
  23,935
  28,850
  34,326
  40,361
  46,950
  54,082
  61,747
  69,932
  78,624
  87,813
  97,488
  107,643
  118,272
  129,374
  140,951
  153,008
  165,552
  178,595
  192,151
Variable operating expenses, $m
  790
  1,209
  1,798
  2,599
  3,659
  5,022
  6,733
  8,835
  11,362
  14,345
  17,787
  21,746
  26,212
  31,187
  36,670
  42,656
  49,136
  56,100
  63,536
  71,434
  79,782
  88,572
  97,798
  107,456
  117,543
  128,061
  139,015
  150,411
  162,261
  174,578
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
  790
  1,209
  1,798
  2,599
  3,659
  5,022
  6,733
  8,835
  11,362
  14,345
  17,787
  21,746
  26,212
  31,187
  36,670
  42,656
  49,136
  56,100
  63,536
  71,434
  79,782
  88,572
  97,798
  107,456
  117,543
  128,061
  139,015
  150,411
  162,261
  174,578
Operating income, $m
  56
  98
  157
  238
  345
  482
  654
  866
  1,120
  1,420
  1,790
  2,189
  2,638
  3,139
  3,691
  4,294
  4,946
  5,647
  6,396
  7,190
  8,031
  8,916
  9,844
  10,816
  11,832
  12,891
  13,993
  15,140
  16,333
  17,573
EBITDA, $m
  89
  137
  206
  298
  421
  579
  777
  1,020
  1,312
  1,658
  2,058
  2,516
  3,033
  3,609
  4,243
  4,936
  5,686
  6,492
  7,352
  8,266
  9,232
  10,249
  11,317
  12,434
  13,602
  14,819
  16,086
  17,405
  18,776
  20,201
Interest expense (income), $m
  3
  14
  32
  57
  93
  142
  207
  290
  395
  523
  677
  859
  1,071
  1,313
  1,586
  1,889
  2,224
  2,590
  2,986
  3,411
  3,865
  4,348
  4,858
  5,395
  5,958
  6,548
  7,164
  7,807
  8,476
  9,172
  9,896
Earnings before tax, $m
  42
  67
  100
  145
  203
  275
  364
  471
  597
  743
  931
  1,118
  1,326
  1,554
  1,802
  2,069
  2,356
  2,661
  2,984
  3,325
  3,683
  4,058
  4,450
  4,858
  5,284
  5,726
  6,187
  6,665
  7,161
  7,677
Tax expense, $m
  11
  18
  27
  39
  55
  74
  98
  127
  161
  201
  251
  302
  358
  419
  486
  559
  636
  719
  806
  898
  994
  1,096
  1,201
  1,312
  1,427
  1,546
  1,670
  1,799
  1,934
  2,073
Net income, $m
  31
  49
  73
  106
  148
  201
  266
  344
  436
  543
  680
  816
  968
  1,134
  1,315
  1,511
  1,720
  1,943
  2,179
  2,427
  2,689
  2,962
  3,248
  3,547
  3,857
  4,180
  4,516
  4,865
  5,228
  5,604

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
  786
  1,214
  1,816
  2,635
  3,717
  5,110
  6,859
  9,007
  11,590
  14,639
  18,178
  22,224
  26,788
  31,872
  37,476
  43,593
  50,216
  57,333
  64,932
  73,003
  81,535
  90,518
  99,947
  109,816
  120,125
  130,874
  142,069
  153,716
  165,826
  178,413
Adjusted assets (=assets-cash), $m
  786
  1,214
  1,816
  2,635
  3,717
  5,110
  6,859
  9,007
  11,590
  14,639
  18,178
  22,224
  26,788
  31,872
  37,476
  43,593
  50,216
  57,333
  64,932
  73,003
  81,535
  90,518
  99,947
  109,816
  120,125
  130,874
  142,069
  153,716
  165,826
  178,413
Revenue / Adjusted assets
  1.076
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
  1.077
Average production assets, $m
  123
  190
  284
  411
  580
  798
  1,071
  1,407
  1,810
  2,286
  2,839
  3,471
  4,183
  4,977
  5,852
  6,808
  7,842
  8,953
  10,140
  11,401
  12,733
  14,136
  15,608
  17,149
  18,759
  20,438
  22,186
  24,005
  25,896
  27,862
Working capital, $m
  127
  196
  293
  426
  601
  826
  1,108
  1,455
  1,872
  2,365
  2,937
  3,590
  4,328
  5,149
  6,054
  7,042
  8,112
  9,262
  10,490
  11,794
  13,172
  14,623
  16,146
  17,741
  19,406
  21,143
  22,951
  24,833
  26,789
  28,823
Total debt, $m
  254
  461
  751
  1,145
  1,667
  2,338
  3,182
  4,217
  5,461
  6,931
  8,637
  10,587
  12,787
  15,238
  17,939
  20,887
  24,079
  27,510
  31,173
  35,063
  39,175
  43,505
  48,050
  52,807
  57,775
  62,957
  68,352
  73,966
  79,803
  85,870
Total liabilities, $m
  379
  585
  875
  1,270
  1,792
  2,463
  3,306
  4,341
  5,586
  7,056
  8,762
  10,712
  12,912
  15,362
  18,063
  21,012
  24,204
  27,634
  31,297
  35,187
  39,300
  43,630
  48,174
  52,931
  57,900
  63,081
  68,477
  74,091
  79,928
  85,995
Total equity, $m
  407
  629
  941
  1,365
  1,925
  2,647
  3,553
  4,666
  6,003
  7,583
  9,416
  11,512
  13,876
  16,510
  19,412
  22,581
  26,012
  29,698
  33,635
  37,816
  42,235
  46,888
  51,772
  56,885
  62,225
  67,793
  73,592
  79,625
  85,898
  92,418
Total liabilities and equity, $m
  786
  1,214
  1,816
  2,635
  3,717
  5,110
  6,859
  9,007
  11,589
  14,639
  18,178
  22,224
  26,788
  31,872
  37,475
  43,593
  50,216
  57,332
  64,932
  73,003
  81,535
  90,518
  99,946
  109,816
  120,125
  130,874
  142,069
  153,716
  165,826
  178,413
Debt-to-equity ratio
  0.620
  0.730
  0.800
  0.840
  0.870
  0.880
  0.900
  0.900
  0.910
  0.910
  0.920
  0.920
  0.920
  0.920
  0.920
  0.920
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
  0.930
Adjusted equity ratio
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  49
  73
  106
  148
  201
  266
  344
  436
  543
  680
  816
  968
  1,134
  1,315
  1,511
  1,720
  1,943
  2,179
  2,427
  2,689
  2,962
  3,248
  3,547
  3,857
  4,180
  4,516
  4,865
  5,228
  5,604
Depreciation, amort., depletion, $m
  33
  39
  48
  60
  76
  97
  122
  154
  192
  237
  268
  327
  395
  470
  552
  642
  740
  845
  957
  1,076
  1,201
  1,334
  1,472
  1,618
  1,770
  1,928
  2,093
  2,265
  2,443
  2,628
Funds from operations, $m
  64
  88
  121
  166
  224
  298
  388
  498
  628
  780
  947
  1,144
  1,362
  1,604
  1,867
  2,153
  2,460
  2,787
  3,135
  3,503
  3,890
  4,296
  4,721
  5,164
  5,627
  6,108
  6,609
  7,130
  7,671
  8,233
Change in working capital, $m
  48
  69
  97
  132
  175
  225
  283
  347
  417
  493
  572
  654
  737
  821
  905
  988
  1,070
  1,150
  1,228
  1,304
  1,378
  1,451
  1,523
  1,594
  1,665
  1,737
  1,808
  1,882
  1,956
  2,033
Cash from operations, $m
  16
  19
  24
  34
  49
  73
  106
  151
  211
  287
  376
  490
  625
  782
  962
  1,165
  1,390
  1,638
  1,907
  2,199
  2,512
  2,845
  3,198
  3,570
  3,962
  4,372
  4,801
  5,248
  5,714
  6,199
Maintenance CAPEX, $m
  -7
  -12
  -18
  -27
  -39
  -55
  -75
  -101
  -133
  -171
  -216
  -268
  -327
  -395
  -470
  -552
  -642
  -740
  -845
  -957
  -1,076
  -1,201
  -1,334
  -1,472
  -1,618
  -1,770
  -1,928
  -2,093
  -2,265
  -2,443
New CAPEX, $m
  -46
  -67
  -94
  -128
  -169
  -218
  -273
  -335
  -403
  -476
  -553
  -632
  -713
  -794
  -875
  -955
  -1,034
  -1,111
  -1,187
  -1,260
  -1,332
  -1,403
  -1,472
  -1,541
  -1,610
  -1,679
  -1,748
  -1,819
  -1,891
  -1,966
Cash from investing activities, $m
  -53
  -79
  -112
  -155
  -208
  -273
  -348
  -436
  -536
  -647
  -769
  -900
  -1,040
  -1,189
  -1,345
  -1,507
  -1,676
  -1,851
  -2,032
  -2,217
  -2,408
  -2,604
  -2,806
  -3,013
  -3,228
  -3,449
  -3,676
  -3,912
  -4,156
  -4,409
Free cash flow, $m
  -37
  -60
  -88
  -121
  -159
  -200
  -243
  -285
  -325
  -360
  -393
  -410
  -415
  -406
  -383
  -343
  -287
  -214
  -124
  -18
  104
  240
  392
  556
  734
  923
  1,124
  1,336
  1,559
  1,791
Issuance/(repayment) of debt, $m
  142
  206
  290
  395
  522
  671
  843
  1,035
  1,245
  1,470
  1,706
  1,950
  2,200
  2,451
  2,701
  2,949
  3,192
  3,430
  3,663
  3,890
  4,112
  4,330
  4,545
  4,757
  4,969
  5,181
  5,396
  5,614
  5,837
  6,067
Issuance/(repurchase) of shares, $m
  122
  173
  238
  318
  413
  521
  640
  768
  902
  1,037
  1,154
  1,280
  1,396
  1,500
  1,587
  1,658
  1,711
  1,744
  1,758
  1,753
  1,731
  1,691
  1,636
  1,566
  1,483
  1,388
  1,283
  1,168
  1,045
  916
Cash from financing (excl. dividends), $m  
  264
  379
  528
  713
  935
  1,192
  1,483
  1,803
  2,147
  2,507
  2,860
  3,230
  3,596
  3,951
  4,288
  4,607
  4,903
  5,174
  5,421
  5,643
  5,843
  6,021
  6,181
  6,323
  6,452
  6,569
  6,679
  6,782
  6,882
  6,983
Total cash flow (excl. dividends), $m
  227
  320
  441
  592
  776
  992
  1,241
  1,518
  1,822
  2,147
  2,467
  2,820
  3,181
  3,544
  3,906
  4,264
  4,616
  4,961
  5,297
  5,626
  5,947
  6,262
  6,572
  6,879
  7,185
  7,492
  7,803
  8,118
  8,441
  8,773
Retained Cash Flow (-), $m
  -153
  -222
  -312
  -424
  -561
  -722
  -906
  -1,112
  -1,338
  -1,579
  -1,833
  -2,096
  -2,364
  -2,634
  -2,903
  -3,169
  -3,430
  -3,687
  -3,937
  -4,181
  -4,419
  -4,653
  -4,884
  -5,112
  -5,340
  -5,568
  -5,799
  -6,033
  -6,273
  -6,520
Prev. year cash balance distribution, $m
  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
  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
  76
  98
  129
  168
  215
  271
  335
  406
  484
  567
  634
  724
  817
  910
  1,003
  1,095
  1,186
  1,274
  1,360
  1,445
  1,527
  1,608
  1,688
  1,767
  1,845
  1,924
  2,004
  2,085
  2,168
  2,253
Discount rate, %
  6.40
  6.72
  7.06
  7.41
  7.78
  8.17
  8.58
  9.01
  9.46
  9.93
  10.42
  10.95
  11.49
  12.07
  12.67
  13.31
  13.97
  14.67
  15.40
  16.17
  16.98
  17.83
  18.72
  19.66
  20.64
  21.67
  22.76
  23.89
  25.09
  26.34
PV of cash for distribution, $m
  72
  86
  105
  126
  148
  169
  188
  204
  215
  220
  213
  208
  199
  185
  168
  148
  128
  108
  89
  72
  57
  44
  33
  24
  17
  12
  8
  5
  3
  2
Current shareholders' claim on cash, %
  88.7
  79.8
  72.5
  66.6
  61.6
  57.5
  54.1
  51.2
  48.7
  46.5
  44.7
  43.2
  41.9
  40.7
  39.7
  38.8
  38.0
  37.4
  36.8
  36.3
  35.9
  35.5
  35.2
  34.9
  34.7
  34.5
  34.3
  34.1
  34.0
  33.9

PetIQ, Inc. is engaged in manufacturing and distributing pet medication and health and wellness products to the retail channel in the United States. The Company provides retail stores with third-party brands, including Frontline Plus, Heartgard Plus, PetAction Plus, Advecta II, Pet Lock Plus, Pet Lock Max, TruProfen and Heartshield. It distributes the products through veterinarian, retail and e-commerce channels. The Company offers its products in a range of categories, including Rx Medications, OTC Medications and Supplies, and Health and Wellness Products. Rx Medications offering includes heartworm preventatives, arthritis, thyroid, diabetes and pain treatments, antibiotics and other specialty medications. The Company manufactures Heart Shield Plus, version of Heartgard Plus, which prevents heartworm infection in dogs. The Company also manufactures TruProfen, the version of Rimadyl, which treats arthritis in dogs. OTC Medications and Supplies include flea and tick control products.

FINANCIAL RATIOS  of  PetIQ, Inc. (PETQ)

Valuation Ratios
P/E Ratio -237.5
Price to Sales 3.6
Price to Book 17.4
Price to Tangible Book
Price to Cash Flow -712.6
Price to Free Cash Flow -237.5
Growth Rates
Sales Growth Rate -2.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 63.4%
Total Debt to Equity 68.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -8.6%
Return On Total Capital -4.1%
Ret/ On T. Cap. - 3 Yr. Avg. -13.5%
Return On Equity -6.9%
Return On Equity - 3 Yr. Avg. -18.3%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 16.5%
Gross Margin - 3 Yr. Avg. 16.6%
EBITDA Margin 2%
EBITDA Margin - 3 Yr. Avg. -0.2%
Operating Margin -0.5%
Oper. Margin - 3 Yr. Avg. -2.1%
Pre-Tax Margin -1.5%
Pre-Tax Margin - 3 Yr. Avg. -2.9%
Net Profit Margin -1.5%
Net Profit Margin - 3 Yr. Avg. -2.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PETQ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PETQ stock intrinsic value calculation we used $529 million for the last fiscal year's total revenue generated by PetIQ, Inc.. The default revenue input number comes from 0001 income statement of PetIQ, Inc.. 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 PETQ stock valuation model: a) initial revenue growth rate of 60% 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 6.4%, whose default value for PETQ is calculated based on our internal credit rating of PetIQ, Inc., 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 PetIQ, Inc..
    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 PETQ stock the variable cost ratio is equal to 94.9%.

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 PETQ 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 12.4% for PetIQ, Inc..

Corporate tax rate of 27% is the nominal tax rate for PetIQ, Inc.. 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 PETQ 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 PETQ are equal to 14.5%.

Life of production assets of 10.6 years is the average useful life of capital assets used in PetIQ, Inc. 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 PETQ is equal to 15%. 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 - $256.481 million for PetIQ, Inc. - 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 28.184 million for PetIQ, Inc. 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 PetIQ, Inc. at the current share price and the inputted number of shares is $1.0 billion.

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