Intrinsic value of Tejon Ranch - TRC

Previous Close

$17.92

  Intrinsic Value

$3.84

stock screener

  Rating & Target

str. sell

-79%

Previous close

$17.92

 
Intrinsic value

$3.84

 
Up/down potential

-79%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as TRC.

We calculate the intrinsic value of TRC 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
  36
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
  112
  117
Variable operating expenses, $m
  39
  40
  41
  42
  44
  45
  47
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  115
  121
  127
Fixed operating expenses, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
Total operating expenses, $m
  43
  44
  45
  46
  48
  50
  52
  53
  55
  57
  59
  61
  64
  66
  70
  73
  76
  79
  82
  86
  89
  93
  98
  103
  107
  112
  117
  122
  129
  135
Operating income, $m
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -17
EBITDA, $m
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
Interest expense (income), $m
  0
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
Earnings before tax, $m
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
Tax expense, $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
Net income, $m
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34

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
  438
  448
  460
  473
  487
  503
  520
  538
  558
  580
  603
  627
  653
  681
  710
  741
  774
  809
  846
  885
  926
  969
  1,015
  1,063
  1,113
  1,167
  1,223
  1,282
  1,344
  1,409
Adjusted assets (=assets-cash), $m
  438
  448
  460
  473
  487
  503
  520
  538
  558
  580
  603
  627
  653
  681
  710
  741
  774
  809
  846
  885
  926
  969
  1,015
  1,063
  1,113
  1,167
  1,223
  1,282
  1,344
  1,409
Revenue / Adjusted assets
  0.082
  0.083
  0.083
  0.082
  0.082
  0.083
  0.083
  0.084
  0.082
  0.083
  0.083
  0.083
  0.083
  0.084
  0.083
  0.084
  0.083
  0.083
  0.083
  0.082
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
Average production assets, $m
  326
  334
  342
  352
  363
  374
  387
  401
  416
  432
  449
  467
  487
  507
  529
  552
  577
  603
  630
  659
  690
  722
  756
  792
  829
  869
  911
  955
  1,001
  1,050
Working capital, $m
  7
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
Total debt, $m
  71
  74
  77
  80
  84
  88
  93
  98
  103
  109
  115
  121
  128
  136
  144
  152
  161
  170
  180
  190
  201
  213
  225
  238
  251
  265
  280
  296
  313
  330
Total liabilities, $m
  117
  120
  123
  126
  130
  134
  139
  144
  149
  155
  161
  167
  174
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  284
  297
  312
  326
  342
  359
  376
Total equity, $m
  321
  329
  337
  347
  357
  369
  381
  395
  409
  425
  442
  460
  479
  499
  521
  543
  568
  593
  620
  649
  679
  710
  744
  779
  816
  855
  896
  940
  985
  1,033
Total liabilities and equity, $m
  438
  449
  460
  473
  487
  503
  520
  539
  558
  580
  603
  627
  653
  681
  711
  741
  775
  809
  846
  885
  926
  969
  1,015
  1,063
  1,113
  1,167
  1,222
  1,282
  1,344
  1,409
Debt-to-equity ratio
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.260
  0.260
  0.260
  0.270
  0.270
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
  0.310
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
Adjusted equity ratio
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
Depreciation, amort., depletion, $m
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Funds from operations, $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
  1
  1
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
Maintenance CAPEX, $m
  -11
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
New CAPEX, $m
  -3
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
Cash from investing activities, $m
  -14
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -64
  -68
  -71
  -74
  -78
  -82
Free cash flow, $m
  -14
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -37
  -39
  -41
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
Issuance/(repayment) of debt, $m
  1
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
Issuance/(repurchase) of shares, $m
  14
  18
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  58
  61
  64
  68
  71
  75
  78
  82
Cash from financing (excl. dividends), $m  
  15
  21
  23
  24
  27
  28
  31
  32
  34
  36
  38
  41
  42
  44
  47
  49
  52
  55
  58
  60
  64
  68
  70
  74
  78
  82
  86
  91
  95
  99
Total cash flow (excl. dividends), $m
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
Retained Cash Flow (-), $m
  -14
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
  -58
  -61
  -64
  -68
  -71
  -75
  -78
  -82
Prev. year cash balance distribution, $m
  80
  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
  67
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
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
  65
  -14
  -15
  -15
  -15
  -14
  -14
  -14
  -13
  -13
  -12
  -12
  -11
  -10
  -9
  -8
  -8
  -7
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  96.3
  91.8
  87.3
  82.8
  78.4
  74.1
  70.0
  66.0
  62.1
  58.4
  54.9
  51.5
  48.3
  45.3
  42.4
  39.7
  37.2
  34.8
  32.5
  30.4
  28.4
  26.6
  24.8
  23.2
  21.6
  20.2
  18.9
  17.6
  16.4
  15.3

Tejon Ranch Co. is a diversified real estate development and agribusiness company. The Company operates through five segments: Real Estate-Commercial/Industrial; Real Estate-Resort/Residential; Mineral Resources; Farming Operations, and Ranch Operations. Its Real Estate-Commercial/Industrial segment is engaged in building, land lease activities, and land and building sales. The Real Estate-Resort/Residential segment is involved in the land entitlement and development process. Within its resort/residential segment, the three active developments are MV, Centennial and Grapevine. Its mineral resources segment includes oil and gas royalty leases, rock and aggregate mining leases, a lease with National Cement and sales of water. The Farming Operations segment is engaged in the sale of wine grapes, almonds and pistachios. The Ranch Operations segment consists of grazing leases, game management, and other ancillary services supporting the ranch.

FINANCIAL RATIOS  of  Tejon Ranch (TRC)

Valuation Ratios
P/E Ratio 384.4
Price to Sales 8.4
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 64.1
Price to Free Cash Flow -19.2
Growth Rates
Sales Growth Rate -9.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.1%
Cap. Spend. - 3 Yr. Gr. Rate 3.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 22.5%
Total Debt to Equity 26.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.2%
Ret/ On Assets - 3 Yr. Avg. 0.8%
Return On Total Capital 0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 1%
Return On Equity 0.3%
Return On Equity - 3 Yr. Avg. 1.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 10.9%
Gross Margin - 3 Yr. Avg. 18.7%
EBITDA Margin 13%
EBITDA Margin - 3 Yr. Avg. 18.7%
Operating Margin -15.2%
Oper. Margin - 3 Yr. Avg. -5.7%
Pre-Tax Margin 2.2%
Pre-Tax Margin - 3 Yr. Avg. 8.6%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 6.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 16.7%
Payout Ratio 0%

TRC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRC stock intrinsic value calculation we used $35.657 million for the last fiscal year's total revenue generated by Tejon Ranch. The default revenue input number comes from 0001 income statement of Tejon Ranch. 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 TRC 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 TRC is calculated based on our internal credit rating of Tejon Ranch, 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 Tejon Ranch.
    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 TRC stock the variable cost ratio is equal to 108.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4 million in the base year in the intrinsic value calculation for TRC 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 Tejon Ranch.

Corporate tax rate of 27% is the nominal tax rate for Tejon Ranch. 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 TRC 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 TRC are equal to 897.4%.

Life of production assets of 71 years is the average useful life of capital assets used in Tejon Ranch 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 TRC is equal to 17.9%. 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 - $398.242 million for Tejon Ranch - 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 25.96 million for Tejon Ranch 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 Tejon Ranch at the current share price and the inputted number of shares is $0.5 billion.

RELATED COMPANIES Price Int.Val. Rating
WVVI Willamette Val 7.39 5.63  sell
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COMPANY NEWS

▶ Tejon: 3Q Earnings Snapshot   [Nov-06-18 09:21AM  Associated Press]
▶ Third Avenue Value Fund Exits Cavco Industries, Toyota   [Oct-04-18 04:33PM  GuruFocus.com]
▶ Tejon: 2Q Earnings Snapshot   [Aug-07-18 09:27AM  Associated Press]
▶ Tejon: 1Q Earnings Snapshot   [May-07-18 09:22AM  Associated Press]
▶ Tejon posts 4Q profit   [Mar-12-18 09:42AM  Associated Press]
▶ ETFs with exposure to Tejon Ranch Co. : December 28, 2017   [Dec-28-17 12:43PM  Capital Cube]
▶ Tejon posts 3Q loss   [Nov-09-17 06:08PM  Associated Press]
▶ Tejon Ranch Company Announces Results of Rights Offering   [Oct-30-17 04:15PM  Business Wire]
▶ ETFs with exposure to Tejon Ranch Co. : October 2, 2017   [Oct-02-17 11:08AM  Capital Cube]
▶ Tejon posts 2Q profit   [Aug-08-17 02:25PM  Associated Press]
▶ ETFs with exposure to Tejon Ranch Co. : June 14, 2017   [Jun-14-17 01:52PM  Capital Cube]
▶ ETFs with exposure to Tejon Ranch Co. : May 23, 2017   [May-23-17 01:09PM  Capital Cube]
▶ Tejon Ranch Co. Value Analysis (NYSE:TRC) : May 9, 2017   [May-09-17 05:45PM  Capital Cube]
▶ Tejon reports 1Q loss   [May-08-17 09:22AM  Associated Press]
▶ ETFs with exposure to Tejon Ranch Co. : April 24, 2017   [Apr-24-17 02:46PM  Capital Cube]
▶ Activist Fights and College Recruiting   [Apr-17-17 09:11AM  Bloomberg]
▶ ETFs with exposure to Tejon Ranch Co. : April 7, 2017   [Apr-07-17 05:37PM  Capital Cube]
▶ Tejon reports 4Q loss   [Mar-09-17 07:13PM  Associated Press]
▶ ETFs with exposure to Tejon Ranch Co. : December 9, 2016   [Dec-09-16 02:09PM  Capital Cube]
▶ Outdoor enthusiasts get to roam Tejon Ranch for a price   [Jul-05-16 06:00AM  at Los Angeles Times]

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