Intrinsic value of Papa John's International, Inc. - PZZA

Previous Close

$49.80

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$49.80

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of PZZA 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 1.6

 

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, %
  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
  1,604
  1,641
  1,684
  1,731
  1,783
  1,841
  1,904
  1,972
  2,045
  2,123
  2,207
  2,297
  2,392
  2,493
  2,601
  2,715
  2,836
  2,963
  3,098
  3,240
  3,390
  3,549
  3,716
  3,892
  4,077
  4,272
  4,477
  4,693
  4,921
  5,160
Variable operating expenses, $m
  682
  697
  715
  735
  757
  781
  807
  836
  866
  899
  926
  964
  1,004
  1,046
  1,091
  1,139
  1,190
  1,243
  1,300
  1,360
  1,423
  1,489
  1,559
  1,633
  1,711
  1,793
  1,879
  1,969
  2,065
  2,165
Fixed operating expenses, $m
  913
  933
  953
  974
  996
  1,018
  1,040
  1,063
  1,086
  1,110
  1,135
  1,159
  1,185
  1,211
  1,238
  1,265
  1,293
  1,321
  1,350
  1,380
  1,410
  1,441
  1,473
  1,505
  1,539
  1,572
  1,607
  1,642
  1,679
  1,715
Total operating expenses, $m
  1,595
  1,630
  1,668
  1,709
  1,753
  1,799
  1,847
  1,899
  1,952
  2,009
  2,061
  2,123
  2,189
  2,257
  2,329
  2,404
  2,483
  2,564
  2,650
  2,740
  2,833
  2,930
  3,032
  3,138
  3,250
  3,365
  3,486
  3,611
  3,744
  3,880
Operating income, $m
  10
  11
  15
  22
  31
  42
  56
  73
  92
  114
  146
  173
  203
  236
  272
  311
  353
  399
  448
  501
  558
  618
  684
  753
  828
  907
  992
  1,082
  1,178
  1,279
EBITDA, $m
  60
  62
  67
  75
  85
  98
  114
  132
  153
  176
  203
  232
  265
  300
  338
  380
  426
  474
  527
  584
  644
  709
  779
  853
  932
  1,016
  1,106
  1,202
  1,303
  1,411
Interest expense (income), $m
  7
  34
  14
  15
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  36
  38
  40
  43
  45
  48
  51
  54
  57
  61
  65
  68
  72
Earnings before tax, $m
  -23
  -2
  1
  7
  15
  25
  38
  54
  72
  92
  123
  149
  177
  208
  242
  279
  320
  363
  410
  460
  515
  573
  635
  702
  774
  850
  931
  1,017
  1,109
  1,207
Tax expense, $m
  0
  0
  0
  2
  4
  7
  10
  15
  19
  25
  33
  40
  48
  56
  65
  75
  86
  98
  111
  124
  139
  155
  172
  190
  209
  229
  251
  275
  299
  326
Net income, $m
  -23
  -2
  1
  5
  11
  19
  28
  39
  52
  67
  90
  109
  129
  152
  177
  204
  233
  265
  299
  336
  376
  418
  464
  513
  565
  620
  679
  743
  810
  881

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
  582
  596
  611
  628
  647
  668
  691
  716
  742
  771
  801
  834
  868
  905
  944
  985
  1,029
  1,076
  1,124
  1,176
  1,231
  1,288
  1,349
  1,413
  1,480
  1,551
  1,625
  1,704
  1,786
  1,873
Adjusted assets (=assets-cash), $m
  582
  596
  611
  628
  647
  668
  691
  716
  742
  771
  801
  834
  868
  905
  944
  985
  1,029
  1,076
  1,124
  1,176
  1,231
  1,288
  1,349
  1,413
  1,480
  1,551
  1,625
  1,704
  1,786
  1,873
Revenue / Adjusted assets
  2.756
  2.753
  2.756
  2.756
  2.756
  2.756
  2.755
  2.754
  2.756
  2.754
  2.755
  2.754
  2.756
  2.755
  2.755
  2.756
  2.756
  2.754
  2.756
  2.755
  2.754
  2.755
  2.755
  2.754
  2.755
  2.754
  2.755
  2.754
  2.755
  2.755
Average production assets, $m
  279
  286
  293
  301
  310
  320
  331
  343
  356
  369
  384
  400
  416
  434
  453
  472
  493
  516
  539
  564
  590
  618
  647
  677
  709
  743
  779
  817
  856
  898
Working capital, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
Total debt, $m
  257
  269
  283
  298
  315
  334
  355
  377
  401
  426
  454
  483
  514
  547
  582
  620
  659
  701
  745
  791
  840
  892
  947
  1,004
  1,065
  1,128
  1,196
  1,266
  1,340
  1,418
Total liabilities, $m
  524
  536
  550
  565
  583
  601
  622
  644
  668
  694
  721
  750
  781
  815
  850
  887
  926
  968
  1,012
  1,059
  1,108
  1,159
  1,214
  1,271
  1,332
  1,396
  1,463
  1,533
  1,608
  1,686
Total equity, $m
  58
  60
  61
  63
  65
  67
  69
  72
  74
  77
  80
  83
  87
  91
  94
  99
  103
  108
  112
  118
  123
  129
  135
  141
  148
  155
  163
  170
  179
  187
Total liabilities and equity, $m
  582
  596
  611
  628
  648
  668
  691
  716
  742
  771
  801
  833
  868
  906
  944
  986
  1,029
  1,076
  1,124
  1,177
  1,231
  1,288
  1,349
  1,412
  1,480
  1,551
  1,626
  1,703
  1,787
  1,873
Debt-to-equity ratio
  4.410
  4.520
  4.630
  4.750
  4.870
  5.000
  5.130
  5.270
  5.400
  5.530
  5.660
  5.790
  5.920
  6.050
  6.170
  6.290
  6.400
  6.520
  6.620
  6.730
  6.830
  6.930
  7.020
  7.110
  7.190
  7.280
  7.360
  7.430
  7.500
  7.570
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -23
  -2
  1
  5
  11
  19
  28
  39
  52
  67
  90
  109
  129
  152
  177
  204
  233
  265
  299
  336
  376
  418
  464
  513
  565
  620
  679
  743
  810
  881
Depreciation, amort., depletion, $m
  50
  50
  52
  53
  54
  56
  57
  59
  61
  63
  56
  59
  61
  64
  67
  69
  73
  76
  79
  83
  87
  91
  95
  100
  104
  109
  115
  120
  126
  132
Funds from operations, $m
  26
  48
  52
  58
  65
  74
  85
  98
  113
  130
  147
  168
  191
  216
  243
  273
  306
  341
  379
  419
  463
  509
  559
  612
  669
  730
  794
  863
  936
  1,013
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
  26
  48
  52
  58
  65
  74
  85
  98
  113
  130
  147
  167
  191
  216
  243
  273
  306
  341
  378
  419
  462
  509
  559
  612
  669
  729
  794
  862
  935
  1,013
Maintenance CAPEX, $m
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -69
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -104
  -109
  -115
  -120
  -126
New CAPEX, $m
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
Cash from investing activities, $m
  -46
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -90
  -95
  -99
  -104
  -109
  -115
  -120
  -126
  -132
  -138
  -145
  -153
  -160
  -168
Free cash flow, $m
  -20
  1
  3
  6
  11
  18
  27
  38
  50
  64
  78
  95
  115
  137
  161
  187
  215
  246
  279
  315
  353
  395
  439
  486
  537
  591
  649
  710
  776
  845
Issuance/(repayment) of debt, $m
  -364
  12
  14
  15
  17
  19
  20
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  57
  61
  64
  67
  71
  74
  78
Issuance/(repurchase) of shares, $m
  399
  4
  1
  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  
  35
  16
  15
  15
  17
  19
  20
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  49
  52
  55
  57
  61
  64
  67
  71
  74
  78
Total cash flow (excl. dividends), $m
  15
  16
  18
  22
  29
  37
  48
  60
  74
  90
  105
  125
  146
  170
  196
  224
  255
  288
  323
  361
  402
  446
  493
  544
  598
  655
  716
  781
  850
  923
Retained Cash Flow (-), $m
  -399
  -4
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
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
  -384
  13
  16
  20
  27
  35
  45
  57
  71
  87
  102
  121
  143
  166
  192
  220
  250
  283
  318
  356
  397
  441
  487
  537
  591
  648
  708
  773
  842
  915
Discount rate, %
  14.00
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.68
  21.72
  22.80
  23.94
  25.14
  26.40
  27.72
  29.10
  30.56
  32.09
  33.69
  35.38
  37.15
  39.00
  40.95
  43.00
  45.15
  47.41
  49.78
  52.27
  54.88
  57.63
PV of cash for distribution, $m
  -337
  10
  10
  11
  12
  13
  14
  14
  13
  12
  11
  9
  8
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  46.9
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2
  46.2

Papa John's International, Inc. (Papa John's) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark Papa John's. The Company operates through five segments: domestic Company-owned restaurants, North America commissaries, North America franchising, international operations and all other business units. North America is defined as the United States and Canada. Domestic is defined as the contiguous United States. International franchisees are defined as all franchise operations outside of the United States and Canada. As of December 25, 2016, there were 5,097 Papa John's restaurants in operation, consisting of 744 Company-owned and 4,353 franchised restaurants operating domestically in all 50 states and in 45 countries and territories. It offers pizza along with side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages.

FINANCIAL RATIOS  of  Papa John's International, Inc. (PZZA)

Valuation Ratios
P/E Ratio 17.7
Price to Sales 1.1
Price to Book -456.7
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 20.8
Growth Rates
Sales Growth Rate 4.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 43.6%
Cap. Spend. - 3 Yr. Gr. Rate 1.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity -7700%
Total Debt to Equity -7700%
Interest Coverage 24
Management Effectiveness
Return On Assets 21.4%
Ret/ On Assets - 3 Yr. Avg. 17.6%
Return On Total Capital 34.5%
Ret/ On T. Cap. - 3 Yr. Avg. 27.3%
Return On Equity 824%
Return On Equity - 3 Yr. Avg. 340.5%
Asset Turnover 3.4
Profitability Ratios
Gross Margin 20.9%
Gross Margin - 3 Yr. Avg. 29.6%
EBITDA Margin 12.1%
EBITDA Margin - 3 Yr. Avg. 10.7%
Operating Margin 9.7%
Oper. Margin - 3 Yr. Avg. 8.2%
Pre-Tax Margin 9.3%
Pre-Tax Margin - 3 Yr. Avg. 7.9%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. 5.1%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 31.4%
Payout Ratio 27.2%

PZZA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PZZA stock intrinsic value calculation we used $1573 million for the last fiscal year's total revenue generated by Papa John's International, Inc.. The default revenue input number comes from 0001 income statement of Papa John's International, 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 PZZA 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 14%, whose default value for PZZA is calculated based on our internal credit rating of Papa John's International, 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 Papa John's International, 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 PZZA stock the variable cost ratio is equal to 42.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $893 million in the base year in the intrinsic value calculation for PZZA 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 Papa John's International, Inc..

Corporate tax rate of 27% is the nominal tax rate for Papa John's International, 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 PZZA 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 PZZA are equal to 17.4%.

Life of production assets of 6.8 years is the average useful life of capital assets used in Papa John's International, 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 PZZA is equal to 0.1%. 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 - $-317.359 million for Papa John's International, 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 31.568 million for Papa John's International, 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 Papa John's International, Inc. at the current share price and the inputted number of shares is $1.6 billion.

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