Intrinsic value of Sanderson Farms, Inc. - SAFM

Previous Close

$144.23

  Intrinsic Value

$142.46

stock screener

  Rating & Target

hold

-1%

Previous close

$144.23

 
Intrinsic value

$142.46

 
Up/down potential

-1%

 
Rating

hold

We calculate the intrinsic value of SAFM 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 3.2

 

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
  3,301
  3,377
  3,463
  3,561
  3,669
  3,787
  3,916
  4,056
  4,206
  4,368
  4,540
  4,725
  4,921
  5,129
  5,351
  5,585
  5,833
  6,096
  6,373
  6,666
  6,975
  7,301
  7,644
  8,006
  8,387
  8,789
  9,211
  9,656
  10,123
  10,615
Variable operating expenses, $m
  2,882
  2,948
  3,024
  3,109
  3,203
  3,306
  3,419
  3,541
  3,672
  3,813
  3,964
  4,125
  4,296
  4,478
  4,671
  4,876
  5,092
  5,322
  5,564
  5,819
  6,089
  6,374
  6,673
  6,989
  7,322
  7,672
  8,041
  8,429
  8,837
  9,267
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
  2,882
  2,948
  3,024
  3,109
  3,203
  3,306
  3,419
  3,541
  3,672
  3,813
  3,964
  4,125
  4,296
  4,478
  4,671
  4,876
  5,092
  5,322
  5,564
  5,819
  6,089
  6,374
  6,673
  6,989
  7,322
  7,672
  8,041
  8,429
  8,837
  9,267
Operating income, $m
  419
  429
  440
  452
  466
  481
  497
  515
  534
  555
  577
  600
  625
  651
  680
  709
  741
  774
  809
  847
  886
  927
  971
  1,017
  1,065
  1,116
  1,170
  1,226
  1,286
  1,348
EBITDA, $m
  532
  544
  558
  574
  591
  610
  631
  654
  678
  704
  732
  761
  793
  827
  862
  900
  940
  982
  1,027
  1,074
  1,124
  1,177
  1,232
  1,290
  1,352
  1,416
  1,484
  1,556
  1,631
  1,711
Interest expense (income), $m
  2
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  22
  23
  25
  27
  29
  31
Earnings before tax, $m
  419
  429
  439
  451
  464
  479
  495
  512
  530
  550
  571
  594
  618
  644
  671
  700
  730
  762
  796
  832
  870
  910
  952
  997
  1,043
  1,093
  1,145
  1,199
  1,256
  1,317
Tax expense, $m
  113
  116
  119
  122
  125
  129
  134
  138
  143
  149
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  257
  269
  282
  295
  309
  324
  339
  356
Net income, $m
  306
  313
  321
  329
  339
  350
  361
  374
  387
  402
  417
  434
  451
  470
  490
  511
  533
  557
  581
  608
  635
  664
  695
  728
  762
  798
  836
  875
  917
  961

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
  1,693
  1,732
  1,776
  1,826
  1,881
  1,942
  2,008
  2,080
  2,157
  2,240
  2,328
  2,423
  2,524
  2,630
  2,744
  2,864
  2,991
  3,126
  3,268
  3,418
  3,577
  3,744
  3,920
  4,106
  4,301
  4,507
  4,724
  4,952
  5,191
  5,444
Adjusted assets (=assets-cash), $m
  1,693
  1,732
  1,776
  1,826
  1,881
  1,942
  2,008
  2,080
  2,157
  2,240
  2,328
  2,423
  2,524
  2,630
  2,744
  2,864
  2,991
  3,126
  3,268
  3,418
  3,577
  3,744
  3,920
  4,106
  4,301
  4,507
  4,724
  4,952
  5,191
  5,444
Revenue / Adjusted assets
  1.950
  1.950
  1.950
  1.950
  1.951
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
  1.950
Average production assets, $m
  1,003
  1,026
  1,053
  1,082
  1,115
  1,151
  1,191
  1,233
  1,279
  1,328
  1,380
  1,436
  1,496
  1,559
  1,627
  1,698
  1,773
  1,853
  1,937
  2,026
  2,120
  2,219
  2,324
  2,434
  2,550
  2,672
  2,800
  2,935
  3,077
  3,227
Working capital, $m
  251
  257
  263
  271
  279
  288
  298
  308
  320
  332
  345
  359
  374
  390
  407
  424
  443
  463
  484
  507
  530
  555
  581
  608
  637
  668
  700
  734
  769
  807
Total debt, $m
  6
  12
  20
  28
  37
  47
  58
  70
  82
  96
  110
  126
  142
  160
  178
  198
  219
  241
  264
  289
  315
  342
  371
  402
  434
  468
  503
  541
  580
  621
Total liabilities, $m
  278
  284
  291
  299
  309
  319
  329
  341
  354
  367
  382
  397
  414
  431
  450
  470
  491
  513
  536
  561
  587
  614
  643
  673
  705
  739
  775
  812
  851
  893
Total equity, $m
  1,415
  1,448
  1,485
  1,527
  1,573
  1,624
  1,679
  1,739
  1,803
  1,873
  1,947
  2,026
  2,110
  2,199
  2,294
  2,394
  2,501
  2,613
  2,732
  2,858
  2,990
  3,130
  3,277
  3,432
  3,596
  3,768
  3,949
  4,139
  4,340
  4,551
Total liabilities and equity, $m
  1,693
  1,732
  1,776
  1,826
  1,882
  1,943
  2,008
  2,080
  2,157
  2,240
  2,329
  2,423
  2,524
  2,630
  2,744
  2,864
  2,992
  3,126
  3,268
  3,419
  3,577
  3,744
  3,920
  4,105
  4,301
  4,507
  4,724
  4,951
  5,191
  5,444
Debt-to-equity ratio
  0.000
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.040
  0.050
  0.050
  0.060
  0.060
  0.070
  0.070
  0.080
  0.080
  0.090
  0.090
  0.100
  0.100
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.140
Adjusted equity ratio
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836
  0.836

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  306
  313
  321
  329
  339
  350
  361
  374
  387
  402
  417
  434
  451
  470
  490
  511
  533
  557
  581
  608
  635
  664
  695
  728
  762
  798
  836
  875
  917
  961
Depreciation, amort., depletion, $m
  113
  115
  118
  122
  125
  129
  134
  139
  144
  149
  155
  161
  168
  175
  183
  191
  199
  208
  218
  228
  238
  249
  261
  273
  286
  300
  315
  330
  346
  363
Funds from operations, $m
  419
  428
  439
  451
  464
  479
  495
  512
  531
  551
  572
  595
  619
  645
  673
  702
  732
  765
  799
  835
  874
  914
  956
  1,001
  1,048
  1,098
  1,150
  1,205
  1,263
  1,324
Change in working capital, $m
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  30
  32
  34
  36
  37
Cash from operations, $m
  414
  422
  432
  444
  456
  470
  485
  502
  519
  539
  559
  581
  604
  629
  656
  684
  713
  745
  778
  813
  850
  889
  930
  974
  1,019
  1,067
  1,118
  1,171
  1,227
  1,286
Maintenance CAPEX, $m
  -110
  -113
  -115
  -118
  -122
  -125
  -129
  -134
  -139
  -144
  -149
  -155
  -161
  -168
  -175
  -183
  -191
  -199
  -208
  -218
  -228
  -238
  -249
  -261
  -273
  -286
  -300
  -315
  -330
  -346
New CAPEX, $m
  -21
  -23
  -26
  -30
  -33
  -36
  -39
  -42
  -46
  -49
  -52
  -56
  -60
  -63
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -99
  -104
  -110
  -116
  -122
  -128
  -135
  -142
  -150
Cash from investing activities, $m
  -131
  -136
  -141
  -148
  -155
  -161
  -168
  -176
  -185
  -193
  -201
  -211
  -221
  -231
  -242
  -254
  -266
  -279
  -292
  -307
  -322
  -337
  -353
  -371
  -389
  -408
  -428
  -450
  -472
  -496
Free cash flow, $m
  282
  287
  291
  296
  302
  309
  317
  325
  335
  346
  357
  370
  383
  398
  413
  430
  447
  466
  485
  506
  528
  552
  576
  602
  630
  659
  689
  722
  755
  791
Issuance/(repayment) of debt, $m
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  15
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
  39
  41
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  
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  15
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  36
  37
  39
  41
Total cash flow (excl. dividends), $m
  288
  293
  298
  304
  311
  319
  327
  337
  348
  359
  372
  385
  400
  415
  432
  449
  468
  488
  509
  531
  554
  579
  605
  633
  662
  693
  725
  759
  795
  833
Retained Cash Flow (-), $m
  -27
  -33
  -37
  -42
  -46
  -51
  -55
  -60
  -64
  -69
  -74
  -79
  -84
  -89
  -95
  -101
  -106
  -113
  -119
  -126
  -132
  -140
  -147
  -155
  -163
  -172
  -181
  -191
  -200
  -211
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
  261
  260
  261
  262
  264
  268
  272
  277
  283
  290
  298
  306
  316
  326
  337
  349
  362
  375
  390
  405
  422
  439
  458
  478
  499
  521
  544
  568
  594
  622
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  250
  238
  227
  216
  205
  194
  184
  173
  163
  152
  141
  131
  120
  109
  99
  89
  79
  69
  60
  52
  44
  36
  30
  24
  19
  15
  12
  9
  6
  5
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

Sanderson Farms, Inc. is a poultry processing company. The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken, and also preparation, processing, marketing and distribution of processed and minimally prepared chicken. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, casual dining operators, customers reselling frozen chicken into export markets. The Company, through its subsidiaries, Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division), conducts its chicken operations. Sanderson Farms, Inc. (Production Division) is engaged in the production of chickens to the broiler-stage. Sanderson Farms, Inc. (Foods Division) is engaged in the processing, sale and distribution of chickens. The Company, through Sanderson Farms, Inc. (Foods Division), conducts its prepared chicken business.

FINANCIAL RATIOS  of  Sanderson Farms, Inc. (SAFM)

Valuation Ratios
P/E Ratio 11.7
Price to Sales 1
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 13.6
Growth Rates
Sales Growth Rate 18.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.9%
Cap. Spend. - 3 Yr. Gr. Rate -0.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 214
Management Effectiveness
Return On Assets 17.8%
Ret/ On Assets - 3 Yr. Avg. 16.9%
Return On Total Capital 21.3%
Ret/ On T. Cap. - 3 Yr. Avg. 20.1%
Return On Equity 21.3%
Return On Equity - 3 Yr. Avg. 20.3%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 19.2%
Gross Margin - 3 Yr. Avg. 17.6%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 12.7%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin 12.7%
Pre-Tax Margin - 3 Yr. Avg. 11.7%
Net Profit Margin 8.4%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 34.1%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio 16.4%

SAFM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SAFM stock intrinsic value calculation we used $3236 million for the last fiscal year's total revenue generated by Sanderson Farms, Inc.. The default revenue input number comes from 0001 income statement of Sanderson Farms, 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 SAFM 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 4.3%, whose default value for SAFM is calculated based on our internal credit rating of Sanderson Farms, 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 Sanderson Farms, 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 SAFM stock the variable cost ratio is equal to 87.3%.

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 SAFM 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 Sanderson Farms, Inc..

Corporate tax rate of 27% is the nominal tax rate for Sanderson Farms, 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 SAFM 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 SAFM are equal to 30.4%.

Life of production assets of 8.9 years is the average useful life of capital assets used in Sanderson Farms, 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 SAFM is equal to 7.6%. 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 - $1387.893 million for Sanderson Farms, 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 22.195 million for Sanderson Farms, 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 Sanderson Farms, Inc. at the current share price and the inputted number of shares is $3.2 billion.

RELATED COMPANIES Price Int.Val. Rating
PPC Pilgrim's 26.30 34.13  str.buy
IBA Industrias Bac 50.34 20.65  str.sell
CALM Cal-Maine Food 40.75 27.14  sell
FDP Fresh Del Mont 28.20 5.68  str.sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.