Intrinsic value of Pilgrim's Pride Corporation - PPC

Previous Close

$26.30

  Intrinsic Value

$30.58

stock screener

  Rating & Target

hold

+16%

Previous close

$26.30

 
Intrinsic value

$30.58

 
Up/down potential

+16%

 
Rating

hold

We calculate the intrinsic value of PPC 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 6.5

 

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
  11,157
  11,413
  11,707
  12,036
  12,401
  12,801
  13,237
  13,709
  14,218
  14,763
  15,347
  15,970
  16,633
  17,338
  18,086
  18,878
  19,717
  20,604
  21,542
  22,532
  23,576
  24,678
  25,838
  27,062
  28,350
  29,706
  31,134
  32,637
  34,217
  35,880
Variable operating expenses, $m
  10,038
  10,265
  10,525
  10,817
  11,141
  11,495
  11,882
  12,300
  12,750
  13,234
  13,600
  14,152
  14,739
  15,364
  16,027
  16,729
  17,473
  18,259
  19,090
  19,967
  20,892
  21,868
  22,897
  23,981
  25,123
  26,325
  27,590
  28,921
  30,322
  31,795
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
  10,038
  10,265
  10,525
  10,817
  11,141
  11,495
  11,882
  12,300
  12,750
  13,234
  13,600
  14,152
  14,739
  15,364
  16,027
  16,729
  17,473
  18,259
  19,090
  19,967
  20,892
  21,868
  22,897
  23,981
  25,123
  26,325
  27,590
  28,921
  30,322
  31,795
Operating income, $m
  1,119
  1,148
  1,181
  1,219
  1,260
  1,306
  1,356
  1,409
  1,467
  1,529
  1,747
  1,818
  1,894
  1,974
  2,059
  2,149
  2,245
  2,346
  2,452
  2,565
  2,684
  2,809
  2,941
  3,081
  3,227
  3,382
  3,544
  3,715
  3,895
  4,085
EBITDA, $m
  1,495
  1,529
  1,569
  1,613
  1,662
  1,715
  1,774
  1,837
  1,905
  1,978
  2,056
  2,140
  2,229
  2,323
  2,423
  2,530
  2,642
  2,761
  2,886
  3,019
  3,159
  3,307
  3,462
  3,626
  3,799
  3,980
  4,172
  4,373
  4,585
  4,808
Interest expense (income), $m
  42
  151
  156
  162
  169
  177
  185
  195
  205
  216
  228
  240
  254
  268
  284
  300
  318
  336
  356
  376
  398
  421
  446
  471
  498
  527
  557
  588
  622
  657
  694
Earnings before tax, $m
  968
  992
  1,019
  1,050
  1,084
  1,121
  1,161
  1,205
  1,251
  1,302
  1,507
  1,564
  1,625
  1,690
  1,759
  1,831
  1,909
  1,990
  2,076
  2,167
  2,263
  2,364
  2,470
  2,582
  2,701
  2,825
  2,956
  3,094
  3,239
  3,391
Tax expense, $m
  261
  268
  275
  283
  293
  303
  313
  325
  338
  351
  407
  422
  439
  456
  475
  494
  515
  537
  561
  585
  611
  638
  667
  697
  729
  763
  798
  835
  874
  916
Net income, $m
  706
  724
  744
  766
  791
  818
  848
  879
  914
  950
  1,100
  1,142
  1,186
  1,234
  1,284
  1,337
  1,393
  1,453
  1,515
  1,582
  1,652
  1,726
  1,803
  1,885
  1,971
  2,062
  2,158
  2,258
  2,364
  2,475

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
  6,050
  6,189
  6,349
  6,527
  6,725
  6,942
  7,179
  7,434
  7,710
  8,006
  8,323
  8,660
  9,020
  9,402
  9,808
  10,238
  10,693
  11,174
  11,682
  12,219
  12,785
  13,383
  14,012
  14,676
  15,374
  16,110
  16,884
  17,699
  18,556
  19,458
Adjusted assets (=assets-cash), $m
  6,050
  6,189
  6,349
  6,527
  6,725
  6,942
  7,179
  7,434
  7,710
  8,006
  8,323
  8,660
  9,020
  9,402
  9,808
  10,238
  10,693
  11,174
  11,682
  12,219
  12,785
  13,383
  14,012
  14,676
  15,374
  16,110
  16,884
  17,699
  18,556
  19,458
Revenue / Adjusted assets
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
  1.844
Average production assets, $m
  2,990
  3,059
  3,137
  3,226
  3,323
  3,431
  3,548
  3,674
  3,810
  3,957
  4,113
  4,280
  4,458
  4,647
  4,847
  5,059
  5,284
  5,522
  5,773
  6,038
  6,318
  6,614
  6,925
  7,253
  7,598
  7,961
  8,344
  8,747
  9,170
  9,616
Working capital, $m
  625
  639
  656
  674
  694
  717
  741
  768
  796
  827
  859
  894
  931
  971
  1,013
  1,057
  1,104
  1,154
  1,206
  1,262
  1,320
  1,382
  1,447
  1,515
  1,588
  1,664
  1,744
  1,828
  1,916
  2,009
Total debt, $m
  2,403
  2,495
  2,601
  2,719
  2,849
  2,993
  3,149
  3,318
  3,501
  3,696
  3,905
  4,129
  4,366
  4,619
  4,887
  5,171
  5,472
  5,790
  6,126
  6,481
  6,855
  7,250
  7,666
  8,105
  8,567
  9,053
  9,565
  10,103
  10,670
  11,266
Total liabilities, $m
  3,999
  4,091
  4,196
  4,314
  4,445
  4,589
  4,745
  4,914
  5,096
  5,292
  5,501
  5,725
  5,962
  6,215
  6,483
  6,767
  7,068
  7,386
  7,722
  8,077
  8,451
  8,846
  9,262
  9,701
  10,162
  10,649
  11,160
  11,699
  12,265
  12,861
Total equity, $m
  2,051
  2,098
  2,152
  2,213
  2,280
  2,353
  2,434
  2,520
  2,614
  2,714
  2,821
  2,936
  3,058
  3,187
  3,325
  3,471
  3,625
  3,788
  3,960
  4,142
  4,334
  4,537
  4,750
  4,975
  5,212
  5,461
  5,724
  6,000
  6,290
  6,596
Total liabilities and equity, $m
  6,050
  6,189
  6,348
  6,527
  6,725
  6,942
  7,179
  7,434
  7,710
  8,006
  8,322
  8,661
  9,020
  9,402
  9,808
  10,238
  10,693
  11,174
  11,682
  12,219
  12,785
  13,383
  14,012
  14,676
  15,374
  16,110
  16,884
  17,699
  18,555
  19,457
Debt-to-equity ratio
  1.170
  1.190
  1.210
  1.230
  1.250
  1.270
  1.290
  1.320
  1.340
  1.360
  1.380
  1.410
  1.430
  1.450
  1.470
  1.490
  1.510
  1.530
  1.550
  1.560
  1.580
  1.600
  1.610
  1.630
  1.640
  1.660
  1.670
  1.680
  1.700
  1.710
Adjusted equity ratio
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  706
  724
  744
  766
  791
  818
  848
  879
  914
  950
  1,100
  1,142
  1,186
  1,234
  1,284
  1,337
  1,393
  1,453
  1,515
  1,582
  1,652
  1,726
  1,803
  1,885
  1,971
  2,062
  2,158
  2,258
  2,364
  2,475
Depreciation, amort., depletion, $m
  376
  381
  387
  394
  401
  409
  418
  428
  438
  449
  309
  322
  335
  349
  364
  380
  397
  415
  434
  454
  475
  497
  521
  545
  571
  599
  627
  658
  689
  723
Funds from operations, $m
  1,083
  1,105
  1,131
  1,160
  1,192
  1,227
  1,266
  1,307
  1,351
  1,399
  1,409
  1,464
  1,522
  1,583
  1,648
  1,717
  1,791
  1,868
  1,950
  2,036
  2,127
  2,223
  2,324
  2,430
  2,543
  2,661
  2,785
  2,916
  3,054
  3,198
Change in working capital, $m
  12
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  35
  37
  39
  42
  44
  47
  50
  52
  55
  58
  62
  65
  69
  72
  76
  80
  84
  89
  93
Cash from operations, $m
  1,070
  1,091
  1,115
  1,142
  1,172
  1,205
  1,241
  1,281
  1,323
  1,369
  1,377
  1,429
  1,484
  1,544
  1,606
  1,673
  1,744
  1,818
  1,897
  1,980
  2,068
  2,161
  2,259
  2,362
  2,471
  2,585
  2,705
  2,832
  2,965
  3,105
Maintenance CAPEX, $m
  -220
  -225
  -230
  -236
  -243
  -250
  -258
  -267
  -276
  -286
  -297
  -309
  -322
  -335
  -349
  -364
  -380
  -397
  -415
  -434
  -454
  -475
  -497
  -521
  -545
  -571
  -599
  -627
  -658
  -689
New CAPEX, $m
  -61
  -69
  -79
  -88
  -98
  -107
  -117
  -126
  -136
  -146
  -156
  -167
  -178
  -189
  -200
  -212
  -225
  -238
  -251
  -265
  -280
  -295
  -311
  -328
  -345
  -364
  -383
  -403
  -424
  -446
Cash from investing activities, $m
  -281
  -294
  -309
  -324
  -341
  -357
  -375
  -393
  -412
  -432
  -453
  -476
  -500
  -524
  -549
  -576
  -605
  -635
  -666
  -699
  -734
  -770
  -808
  -849
  -890
  -935
  -982
  -1,030
  -1,082
  -1,135
Free cash flow, $m
  789
  797
  806
  818
  832
  848
  866
  887
  910
  936
  923
  953
  985
  1,020
  1,057
  1,096
  1,138
  1,183
  1,231
  1,281
  1,334
  1,391
  1,451
  1,514
  1,580
  1,650
  1,724
  1,802
  1,884
  1,970
Issuance/(repayment) of debt, $m
  78
  92
  105
  118
  131
  144
  156
  169
  182
  196
  209
  223
  238
  253
  268
  284
  301
  318
  336
  355
  374
  395
  416
  438
  462
  486
  512
  539
  567
  596
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  
  78
  92
  105
  118
  131
  144
  156
  169
  182
  196
  209
  223
  238
  253
  268
  284
  301
  318
  336
  355
  374
  395
  416
  438
  462
  486
  512
  539
  567
  596
Total cash flow (excl. dividends), $m
  867
  889
  911
  936
  962
  991
  1,023
  1,057
  1,093
  1,131
  1,132
  1,176
  1,223
  1,272
  1,325
  1,380
  1,439
  1,501
  1,567
  1,636
  1,709
  1,786
  1,867
  1,952
  2,042
  2,136
  2,236
  2,340
  2,451
  2,566
Retained Cash Flow (-), $m
  -41
  -47
  -54
  -61
  -67
  -74
  -80
  -87
  -93
  -100
  -107
  -115
  -122
  -130
  -137
  -146
  -154
  -163
  -172
  -182
  -192
  -202
  -213
  -225
  -237
  -249
  -262
  -276
  -291
  -306
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
  826
  842
  857
  875
  895
  918
  943
  970
  999
  1,031
  1,025
  1,061
  1,101
  1,143
  1,187
  1,235
  1,285
  1,338
  1,394
  1,454
  1,517
  1,583
  1,653
  1,727
  1,805
  1,887
  1,973
  2,064
  2,160
  2,261
Discount rate, %
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
  772
  732
  688
  644
  599
  553
  508
  462
  417
  373
  317
  278
  241
  206
  174
  145
  118
  95
  75
  58
  44
  33
  24
  17
  12
  8
  5
  3
  2
  1
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

Pilgrim's Pride Corporation is a retail feed store. It is a producer and seller of chicken with operations in the United States, Mexico and Puerto Rico. It is engaged in the production, processing, marketing and distribution of fresh, frozen and value-added chicken products to retailers, distributors and foodservice operators. It offers a range of products to its customers through national and international distribution channels. Its fresh chicken products consist of refrigerated (non-frozen) whole chickens, whole cut-up chickens and selected chicken parts that are either marinated or non-marinated. Its prepared chicken products include ready-to-cook and individually frozen chicken parts, strips, nuggets and patties, some of which are either breaded or non-breaded and either marinated or non-marinated. As of December 25, 2016, the Company marketed its portfolio of fresh, prepared and value-added chicken products across the United States, Mexico and in approximately 80 other countries.

FINANCIAL RATIOS  of  Pilgrim's Pride Corporation (PPC)

Valuation Ratios
P/E Ratio 15.6
Price to Sales 0.9
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow 14.3
Growth Rates
Sales Growth Rate -3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 54.5%
Cap. Spend. - 3 Yr. Gr. Rate 18.6%
Financial Strength
Quick Ratio 18
Current Ratio 0
LT Debt to Equity 67.2%
Total Debt to Equity 67.9%
Interest Coverage 17
Management Effectiveness
Return On Assets 11.2%
Ret/ On Assets - 3 Yr. Avg. 18.7%
Return On Total Capital 15.3%
Ret/ On T. Cap. - 3 Yr. Avg. 25.1%
Return On Equity 26.4%
Return On Equity - 3 Yr. Avg. 34.2%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 11.5%
Gross Margin - 3 Yr. Avg. 14.4%
EBITDA Margin 11.3%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin 9%
Oper. Margin - 3 Yr. Avg. 11.9%
Pre-Tax Margin 8.5%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 34.6%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio 158.7%

PPC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PPC stock intrinsic value calculation we used $10938 million for the last fiscal year's total revenue generated by Pilgrim's Pride Corporation. The default revenue input number comes from 0001 income statement of Pilgrim's Pride 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 PPC 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 6.9%, whose default value for PPC is calculated based on our internal credit rating of Pilgrim's Pride 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 Pilgrim's Pride 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 PPC stock the variable cost ratio is equal to 90%.

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 PPC 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 6.5% for Pilgrim's Pride Corporation.

Corporate tax rate of 27% is the nominal tax rate for Pilgrim's Pride 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 PPC 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 PPC are equal to 26.8%.

Life of production assets of 13.3 years is the average useful life of capital assets used in Pilgrim's Pride 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 PPC is equal to 5.6%. 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 - $2009.8 million for Pilgrim's Pride 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 248.806 million for Pilgrim's Pride 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 Pilgrim's Pride Corporation at the current share price and the inputted number of shares is $6.5 billion.

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