Intrinsic value of Primo Water - PRMW

Previous Close

$14.08

  Intrinsic Value

$3.25

stock screener

  Rating & Target

str. sell

-77%

Previous close

$14.08

 
Intrinsic value

$3.25

 
Up/down potential

-77%

 
Rating

str. sell

We calculate the intrinsic value of PRMW 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 0.5

 

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
  292
  299
  306
  315
  324
  335
  346
  359
  372
  386
  401
  418
  435
  453
  473
  494
  516
  539
  563
  589
  617
  645
  676
  708
  741
  777
  814
  854
  895
  938
Variable operating expenses, $m
  263
  268
  275
  282
  289
  298
  307
  317
  328
  340
  329
  342
  356
  371
  387
  404
  422
  441
  461
  483
  505
  529
  553
  580
  607
  636
  667
  699
  733
  769
Fixed operating expenses, $m
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
Total operating expenses, $m
  277
  283
  290
  297
  305
  314
  323
  334
  345
  357
  347
  360
  375
  390
  406
  424
  442
  462
  482
  505
  527
  552
  576
  604
  631
  661
  692
  725
  759
  796
Operating income, $m
  15
  16
  17
  18
  19
  21
  23
  24
  27
  29
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  90
  94
  99
  105
  110
  116
  122
  129
  136
  143
EBITDA, $m
  56
  58
  59
  61
  63
  65
  67
  70
  73
  76
  79
  83
  87
  91
  95
  100
  105
  110
  115
  121
  127
  134
  140
  148
  155
  163
  172
  181
  190
  200
Interest expense (income), $m
  5
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
Earnings before tax, $m
  -5
  -5
  -5
  -4
  -3
  -2
  -2
  -1
  0
  2
  27
  28
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
  66
  70
  74
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
Net income, $m
  -5
  -5
  -5
  -4
  -3
  -2
  -2
  -1
  0
  1
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  35
  36
  39
  41
  43
  45
  48
  51
  54

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
  392
  401
  411
  423
  435
  449
  465
  481
  499
  518
  539
  561
  584
  609
  635
  663
  692
  723
  756
  791
  828
  866
  907
  950
  995
  1,043
  1,093
  1,146
  1,201
  1,260
Adjusted assets (=assets-cash), $m
  392
  401
  411
  423
  435
  449
  465
  481
  499
  518
  539
  561
  584
  609
  635
  663
  692
  723
  756
  791
  828
  866
  907
  950
  995
  1,043
  1,093
  1,146
  1,201
  1,260
Revenue / Adjusted assets
  0.745
  0.746
  0.745
  0.745
  0.745
  0.746
  0.744
  0.746
  0.745
  0.745
  0.744
  0.745
  0.745
  0.744
  0.745
  0.745
  0.746
  0.746
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.744
Average production assets, $m
  229
  235
  241
  247
  255
  263
  272
  282
  292
  303
  315
  328
  342
  356
  372
  388
  405
  424
  443
  463
  485
  507
  531
  556
  583
  611
  640
  671
  703
  738
Working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
Total debt, $m
  280
  287
  296
  305
  315
  327
  339
  353
  367
  383
  400
  417
  436
  456
  478
  500
  524
  550
  577
  605
  635
  666
  699
  734
  771
  810
  851
  894
  939
  986
Total liabilities, $m
  319
  326
  335
  344
  354
  366
  378
  392
  406
  422
  439
  456
  475
  495
  517
  539
  563
  589
  616
  644
  674
  705
  738
  773
  810
  849
  890
  933
  978
  1,025
Total equity, $m
  73
  75
  76
  79
  81
  84
  86
  90
  93
  96
  100
  104
  109
  113
  118
  123
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
Total liabilities and equity, $m
  392
  401
  411
  423
  435
  450
  464
  482
  499
  518
  539
  560
  584
  608
  635
  662
  692
  724
  757
  791
  828
  866
  907
  950
  995
  1,043
  1,093
  1,146
  1,201
  1,259
Debt-to-equity ratio
  3.840
  3.850
  3.870
  3.880
  3.890
  3.910
  3.920
  3.940
  3.960
  3.970
  3.990
  4.000
  4.020
  4.030
  4.050
  4.060
  4.070
  4.090
  4.100
  4.110
  4.120
  4.130
  4.150
  4.160
  4.170
  4.180
  4.180
  4.190
  4.200
  4.210
Adjusted equity ratio
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  -5
  -5
  -4
  -3
  -2
  -2
  -1
  0
  1
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  35
  36
  39
  41
  43
  45
  48
  51
  54
Depreciation, amort., depletion, $m
  42
  42
  42
  43
  44
  44
  45
  46
  46
  47
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  55
  57
Funds from operations, $m
  36
  37
  38
  39
  40
  42
  43
  45
  47
  48
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  95
  100
  105
  111
Change in working capital, $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 operations, $m
  36
  37
  38
  39
  40
  42
  43
  45
  47
  48
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  95
  100
  105
  111
Maintenance CAPEX, $m
  -17
  -18
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
New CAPEX, $m
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
Cash from investing activities, $m
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -61
  -63
  -66
  -69
  -73
  -76
  -81
  -84
  -89
Free cash flow, $m
  14
  14
  14
  14
  14
  14
  14
  14
  14
  15
  8
  9
  9
  9
  10
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  20
  21
  22
Issuance/(repayment) of debt, $m
  7
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
Issuance/(repurchase) of shares, $m
  7
  7
  6
  6
  6
  5
  4
  4
  3
  2
  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  
  14
  14
  14
  15
  16
  16
  16
  17
  18
  18
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
Total cash flow (excl. dividends), $m
  27
  28
  29
  29
  30
  30
  31
  31
  32
  33
  25
  26
  28
  29
  31
  33
  34
  36
  38
  41
  43
  45
  48
  50
  53
  56
  59
  63
  66
  70
Retained Cash Flow (-), $m
  -7
  -7
  -6
  -6
  -6
  -5
  -4
  -4
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
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
  21
  21
  22
  23
  24
  25
  26
  28
  29
  29
  21
  22
  23
  25
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
Discount rate, %
  11.90
  12.50
  13.12
  13.78
  14.46
  15.19
  15.95
  16.74
  17.58
  18.46
  19.38
  20.35
  21.37
  22.44
  23.56
  24.74
  25.98
  27.28
  28.64
  30.07
  31.57
  33.15
  34.81
  36.55
  38.38
  40.30
  42.31
  44.43
  46.65
  48.98
PV of cash for distribution, $m
  18
  17
  15
  14
  12
  11
  9
  8
  7
  5
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.7
  97.5
  96.4
  95.4
  94.5
  93.7
  93.0
  92.5
  92.1
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8
  91.8

Primo Water Corporation (Primo) provides multi-gallon purified bottled water, self-service refill water and water dispensers. The Company's products are sold through various retailers in the United States and Canada. It operates through two segments: Primo Water (Water) and Primo Dispensers (Dispensers). The Water segment consists of the sale of multi-gallon purified bottled water (Exchange) and its self-service filtered drinking water (Refill). The Dispensers segment sells water dispensers that are designed to dispense Primo and other dispenser-compatible bottled water. As of December 31, 2016, its products were offered in the United States and in Canada at over 46,000 combined retail locations. Exchange and Refill provide consumers the ability of either exchanging empty bottles and purchasing full bottles or refilling the empty bottles at any participating retailer. The Company sources three- and five-gallon water bottles from various independent vendors for use in Exchange.

FINANCIAL RATIOS  of  Primo Water (PRMW)

Valuation Ratios
P/E Ratio -68.8
Price to Sales 2.9
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow 25.8
Price to Free Cash Flow 137.5
Growth Rates
Sales Growth Rate 12.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 62.5%
Cap. Spend. - 3 Yr. Gr. Rate 13.2%
Financial Strength
Quick Ratio 8
Current Ratio 0
LT Debt to Equity 421.9%
Total Debt to Equity 425%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.4%
Ret/ On Assets - 3 Yr. Avg. -3.5%
Return On Total Capital -3.1%
Ret/ On T. Cap. - 3 Yr. Avg. -8.2%
Return On Equity -13.3%
Return On Equity - 3 Yr. Avg. -17.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 29.4%
Gross Margin - 3 Yr. Avg. 27.5%
EBITDA Margin 7%
EBITDA Margin - 3 Yr. Avg. 6.1%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. -1.2%
Pre-Tax Margin -4.2%
Pre-Tax Margin - 3 Yr. Avg. -5%
Net Profit Margin -4.2%
Net Profit Margin - 3 Yr. Avg. -5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

PRMW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PRMW stock intrinsic value calculation we used $286.074 million for the last fiscal year's total revenue generated by Primo Water. The default revenue input number comes from 0001 income statement of Primo Water. 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 PRMW 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 11.9%, whose default value for PRMW is calculated based on our internal credit rating of Primo Water, 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 Primo Water.
    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 PRMW stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14 million in the base year in the intrinsic value calculation for PRMW 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 7.4% for Primo Water.

Corporate tax rate of 27% is the nominal tax rate for Primo Water. 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 PRMW 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 PRMW are equal to 78.6%.

Life of production assets of 12.9 years is the average useful life of capital assets used in Primo Water 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 PRMW is equal to -0.3%. 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 - $71.471 million for Primo Water - 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 37.695 million for Primo Water 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 Primo Water at the current share price and the inputted number of shares is $0.5 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Primo Water continues Black Friday promotion throughout the year   [Nov-13-18 02:59PM  American City Business Journals]
▶ Glacier brand discontinuation contributes to $58M loss for Primo Water   [Nov-08-18 07:00AM  American City Business Journals]
▶ 3 Stocks Move Wednesday   [03:23PM  GuruFocus.com]
▶ Primo Water: 3Q Earnings Snapshot   [07:32PM  Associated Press]
▶ The Top 4 Suppliers of Lowe's (LOW)   [Nov-05-18 11:05AM  Investopedia]
▶ Triad water provider meets high demand as hurricane approaches   [07:34AM  American City Business Journals]
▶ Primo Water: 2Q Earnings Snapshot   [Aug-07-18 07:44PM  Associated Press]
▶ Primo Water Completes Refinancing of Credit Facilities   [Jun-25-18 08:52AM  GlobeNewswire]
▶ Triad corporation files to issue $65 million in stock   [May-18-18 05:03PM  American City Business Journals]
▶ Primo Water: 1Q Earnings Snapshot   [May-09-18 05:06AM  Associated Press]
▶ Primo Water Announces First Quarter 2018 Financial Results   [May-08-18 04:05PM  GlobeNewswire]
▶ NBA star Chris Paul joins ownership group of Dash baseball team   [Apr-10-18 03:00PM  American City Business Journals]
▶ Primo's new CEO gets 26% bump, but what about Billy Prim?   [Mar-30-18 03:50PM  American City Business Journals]
▶ Primo Water misses Street 4Q forecasts   [Mar-06-18 06:27PM  Associated Press]
▶ Primo Water Q4 Earnings Preview   [09:04AM  Benzinga]
▶ The Triad's best and worst stocks of 2017 (Slideshow)   [Jan-11-18 07:31AM  American City Business Journals]
▶ Primo Water to Participate in the 2018 ICR Conference   [Dec-20-17 08:00AM  GlobeNewswire]
▶ Primo Water beats Street 3Q forecasts   [Nov-07-17 07:53PM  Associated Press]
▶ ETFs with exposure to Primo Water Corp. : August 24, 2017   [Aug-24-17 03:57PM  Capital Cube]
▶ Primo Water reports 2Q loss   [Aug-08-17 05:55PM  Associated Press]
▶ ETFs with exposure to Primo Water Corp. : June 13, 2017   [Jun-13-17 12:51PM  Capital Cube]
▶ ETFs with exposure to Primo Water Corp. : May 18, 2017   [May-18-17 01:57PM  Capital Cube]
▶ Primo Water reports 1Q loss   [May-09-17 05:48PM  Associated Press]
▶ Triad company names new CEO   [May-02-17 08:01AM  American City Business Journals]
▶ ETFs with exposure to Primo Water Corp. : April 20, 2017   [Apr-20-17 02:27PM  Capital Cube]
▶ Primo Water Announces Resolution of Contingent Liabilities   [Apr-07-17 08:45AM  GlobeNewswire]
▶ ETFs with exposure to Primo Water Corp. : April 5, 2017   [Apr-05-17 05:19PM  Capital Cube]
▶ Primo Water reports 4Q loss   [Mar-15-17 05:06PM  Associated Press]

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