Intrinsic value of Orchids Paper Products - TIS

Previous Close

$1.67

  Intrinsic Value

$2.83

stock screener

  Rating & Target

str. buy

+69%

Previous close

$1.67

 
Intrinsic value

$2.83

 
Up/down potential

+69%

 
Rating

str. buy

We calculate the intrinsic value of TIS 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 0.0

 

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, %
  19.30
  17.87
  16.58
  15.42
  14.38
  13.44
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.15
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
  5.83
  5.75
  5.67
Revenue, $m
  194
  228
  266
  307
  352
  399
  449
  502
  558
  617
  679
  743
  811
  881
  953
  1,029
  1,108
  1,190
  1,275
  1,363
  1,455
  1,550
  1,650
  1,753
  1,861
  1,973
  2,090
  2,212
  2,339
  2,472
Variable operating expenses, $m
  172
  202
  235
  271
  310
  352
  396
  442
  491
  543
  595
  651
  710
  771
  835
  902
  970
  1,042
  1,117
  1,194
  1,274
  1,358
  1,445
  1,536
  1,630
  1,728
  1,831
  1,937
  2,049
  2,165
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
  172
  202
  235
  271
  310
  352
  396
  442
  491
  543
  595
  651
  710
  771
  835
  902
  970
  1,042
  1,117
  1,194
  1,274
  1,358
  1,445
  1,536
  1,630
  1,728
  1,831
  1,937
  2,049
  2,165
Operating income, $m
  22
  26
  31
  36
  41
  47
  54
  60
  67
  74
  84
  92
  101
  109
  118
  128
  137
  148
  158
  169
  180
  192
  205
  217
  231
  245
  259
  274
  290
  306
EBITDA, $m
  42
  49
  57
  66
  75
  86
  96
  108
  120
  132
  146
  159
  174
  189
  204
  221
  238
  255
  273
  292
  312
  332
  354
  376
  399
  423
  448
  474
  502
  530
Interest expense (income), $m
  3
  9
  11
  14
  16
  19
  22
  25
  29
  32
  36
  40
  44
  49
  53
  58
  63
  68
  74
  79
  85
  91
  98
  104
  111
  118
  125
  133
  141
  149
  158
Earnings before tax, $m
  13
  15
  17
  20
  22
  25
  28
  31
  35
  38
  44
  48
  52
  56
  60
  64
  69
  74
  79
  84
  89
  95
  101
  107
  113
  119
  126
  133
  141
  149
Tax expense, $m
  3
  4
  5
  5
  6
  7
  8
  8
  9
  10
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
Net income, $m
  9
  11
  13
  14
  16
  18
  21
  23
  25
  28
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  78
  82
  87
  92
  97
  103
  108

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
  415
  489
  570
  658
  753
  854
  962
  1,076
  1,196
  1,322
  1,454
  1,592
  1,736
  1,886
  2,042
  2,204
  2,372
  2,548
  2,730
  2,919
  3,115
  3,320
  3,533
  3,754
  3,985
  4,225
  4,475
  4,736
  5,008
  5,292
Adjusted assets (=assets-cash), $m
  415
  489
  570
  658
  753
  854
  962
  1,076
  1,196
  1,322
  1,454
  1,592
  1,736
  1,886
  2,042
  2,204
  2,372
  2,548
  2,730
  2,919
  3,115
  3,320
  3,533
  3,754
  3,985
  4,225
  4,475
  4,736
  5,008
  5,292
Revenue / Adjusted assets
  0.467
  0.466
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
  0.467
Average production assets, $m
  333
  393
  458
  528
  604
  685
  772
  863
  959
  1,061
  1,166
  1,277
  1,393
  1,513
  1,638
  1,768
  1,903
  2,044
  2,190
  2,342
  2,500
  2,664
  2,834
  3,012
  3,197
  3,390
  3,590
  3,800
  4,018
  4,246
Working capital, $m
  20
  24
  28
  32
  37
  41
  47
  52
  58
  64
  71
  77
  84
  92
  99
  107
  115
  124
  133
  142
  151
  161
  172
  182
  194
  205
  217
  230
  243
  257
Total debt, $m
  210
  254
  302
  354
  410
  469
  533
  600
  671
  746
  824
  905
  990
  1,079
  1,171
  1,267
  1,367
  1,470
  1,578
  1,690
  1,806
  1,927
  2,052
  2,183
  2,319
  2,461
  2,609
  2,764
  2,924
  3,092
Total liabilities, $m
  245
  289
  337
  389
  445
  505
  569
  636
  707
  781
  859
  941
  1,026
  1,114
  1,207
  1,302
  1,402
  1,506
  1,613
  1,725
  1,841
  1,962
  2,088
  2,219
  2,355
  2,497
  2,645
  2,799
  2,960
  3,128
Total equity, $m
  170
  200
  233
  269
  308
  349
  393
  440
  489
  541
  595
  651
  710
  771
  835
  901
  970
  1,042
  1,116
  1,194
  1,274
  1,358
  1,445
  1,535
  1,630
  1,728
  1,830
  1,937
  2,048
  2,165
Total liabilities and equity, $m
  415
  489
  570
  658
  753
  854
  962
  1,076
  1,196
  1,322
  1,454
  1,592
  1,736
  1,885
  2,042
  2,203
  2,372
  2,548
  2,729
  2,919
  3,115
  3,320
  3,533
  3,754
  3,985
  4,225
  4,475
  4,736
  5,008
  5,293
Debt-to-equity ratio
  1.240
  1.270
  1.290
  1.310
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.390
  1.390
  1.400
  1.400
  1.410
  1.410
  1.410
  1.410
  1.420
  1.420
  1.420
  1.420
  1.420
  1.420
  1.420
  1.430
  1.430
  1.430
  1.430
Adjusted equity ratio
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  11
  13
  14
  16
  18
  21
  23
  25
  28
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  78
  82
  87
  92
  97
  103
  108
Depreciation, amort., depletion, $m
  20
  23
  26
  30
  34
  38
  43
  48
  53
  58
  61
  67
  73
  80
  86
  93
  100
  108
  115
  123
  132
  140
  149
  159
  168
  178
  189
  200
  211
  223
Funds from operations, $m
  29
  34
  39
  44
  50
  57
  63
  70
  78
  86
  93
  102
  111
  120
  130
  140
  151
  161
  173
  184
  197
  209
  223
  236
  251
  266
  281
  297
  314
  332
Change in working capital, $m
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  26
  30
  35
  40
  46
  52
  58
  65
  72
  80
  87
  95
  104
  113
  122
  132
  142
  153
  164
  175
  187
  199
  212
  226
  239
  254
  269
  285
  301
  318
Maintenance CAPEX, $m
  -15
  -18
  -21
  -24
  -28
  -32
  -36
  -41
  -45
  -50
  -56
  -61
  -67
  -73
  -80
  -86
  -93
  -100
  -108
  -115
  -123
  -132
  -140
  -149
  -159
  -168
  -178
  -189
  -200
  -211
New CAPEX, $m
  -55
  -60
  -65
  -71
  -76
  -81
  -86
  -91
  -96
  -101
  -106
  -111
  -115
  -120
  -125
  -130
  -135
  -141
  -146
  -152
  -158
  -164
  -171
  -178
  -185
  -193
  -201
  -209
  -218
  -228
Cash from investing activities, $m
  -70
  -78
  -86
  -95
  -104
  -113
  -122
  -132
  -141
  -151
  -162
  -172
  -182
  -193
  -205
  -216
  -228
  -241
  -254
  -267
  -281
  -296
  -311
  -327
  -344
  -361
  -379
  -398
  -418
  -439
Free cash flow, $m
  -44
  -47
  -51
  -55
  -58
  -61
  -64
  -67
  -70
  -72
  -75
  -77
  -79
  -81
  -82
  -84
  -86
  -88
  -90
  -92
  -94
  -96
  -99
  -101
  -104
  -107
  -110
  -114
  -117
  -121
Issuance/(repayment) of debt, $m
  41
  44
  48
  52
  56
  60
  64
  67
  71
  74
  78
  82
  85
  89
  92
  96
  100
  104
  108
  112
  116
  121
  126
  131
  136
  142
  148
  154
  161
  168
Issuance/(repurchase) of shares, $m
  19
  19
  21
  22
  22
  23
  23
  24
  24
  24
  22
  22
  21
  21
  20
  19
  19
  18
  17
  16
  15
  14
  14
  13
  12
  11
  10
  9
  9
  8
Cash from financing (excl. dividends), $m  
  60
  63
  69
  74
  78
  83
  87
  91
  95
  98
  100
  104
  106
  110
  112
  115
  119
  122
  125
  128
  131
  135
  140
  144
  148
  153
  158
  163
  170
  176
Total cash flow (excl. dividends), $m
  16
  16
  18
  19
  20
  21
  23
  24
  25
  26
  25
  26
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
Retained Cash Flow (-), $m
  -28
  -30
  -33
  -36
  -39
  -41
  -44
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -66
  -69
  -72
  -74
  -77
  -80
  -84
  -87
  -91
  -94
  -98
  -102
  -107
  -111
  -116
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
  -12
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -25
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
Discount rate, %
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
  -11
  -12
  -12
  -11
  -11
  -10
  -10
  -9
  -8
  -7
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  84.2
  72.3
  63.1
  55.7
  49.8
  45.0
  41.1
  37.8
  35.1
  32.8
  31.0
  29.5
  28.2
  27.1
  26.1
  25.3
  24.5
  23.9
  23.4
  22.9
  22.5
  22.1
  21.8
  21.5
  21.3
  21.1
  20.9
  20.8
  20.6
  20.5

Orchids Paper Products Company is a supplier of consumer tissue products. The Company produces bulk tissue paper, known as parent rolls, and converts parent rolls into finished products, including paper towels, bathroom tissue and paper napkins. The Company offers customers a range of private label products across the value, premium and ultra-premium market segments. The Company sells its products to grocery stores, grocery wholesalers and cooperatives, convenience stores, janitorial supply stores and stores in the food service market. The Company's products are sold primarily under its customers' private labels and, to a lesser extent, under its brand names, such as Orchids Supreme, Clean Scents, Tackle, Colortex, My Size, Velvet and Big Mopper. The Company sells its products under private labels to its core customer base in the at home market, which consists primarily of dollar stores, discount retailers and grocery stores that offer alternatives across a range of products.

FINANCIAL RATIOS  of  Orchids Paper Products (TIS)

Valuation Ratios
P/E Ratio 1.3
Price to Sales 0.1
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 0.6
Price to Free Cash Flow -0.3
Growth Rates
Sales Growth Rate -2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 41.3%
Cap. Spend. - 3 Yr. Gr. Rate 49.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 100.8%
Total Debt to Equity 106%
Interest Coverage 7
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 7%
Return On Equity 9.7%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 18.3%
Gross Margin - 3 Yr. Avg. 18.5%
EBITDA Margin 20.1%
EBITDA Margin - 3 Yr. Avg. 18.9%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin 10.4%
Pre-Tax Margin - 3 Yr. Avg. 10.7%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 7.5%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. 29.7%
Payout Ratio 107.7%

TIS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TIS stock intrinsic value calculation we used $162.484 million for the last fiscal year's total revenue generated by Orchids Paper Products. The default revenue input number comes from 0001 income statement of Orchids Paper Products. 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 TIS stock valuation model: a) initial revenue growth rate of 19.3% 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 9%, whose default value for TIS is calculated based on our internal credit rating of Orchids Paper Products, 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 Orchids Paper Products.
    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 TIS stock the variable cost ratio is equal to 88.9%.

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 TIS 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 Orchids Paper Products.

Corporate tax rate of 27% is the nominal tax rate for Orchids Paper Products. 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 TIS 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 TIS are equal to 171.8%.

Life of production assets of 19 years is the average useful life of capital assets used in Orchids Paper Products 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 TIS is equal to 10.4%. 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 - $141.787 million for Orchids Paper Products - 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 10.67 million for Orchids Paper Products 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 Orchids Paper Products at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Orchids Paper: 2Q Earnings Snapshot   [Aug-09-18 06:16PM  Associated Press]
▶ Orchids Paper: 1Q Earnings Snapshot   [Apr-25-18 07:13PM  Associated Press]
▶ Orchids Paper Products Company to Host Earnings Call   [Mar-06-18 07:15AM  ACCESSWIRE]
▶ Orchids Paper posts 3Q profit   [Nov-08-17 05:03AM  Associated Press]
▶ Orchids Paper reports 2Q loss   [Aug-07-17 10:35PM  Associated Press]
▶ New Strong Sell Stocks for July 6th   [Jul-06-17 11:18AM  Zacks]
▶ Orchids Paper reports 1Q loss   [05:00AM  Associated Press]
▶ Orchids Paper meets 4Q profit forecasts   [05:03AM  Associated Press]
▶ Small Caps With Big Yields   [Dec-14-16 09:30AM  at Forbes]

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