Intrinsic value of Universal Forest Products, Inc. - UFPI

Previous Close

$36.28

  Intrinsic Value

$25.35

stock screener

  Rating & Target

sell

-30%

Previous close

$36.28

 
Intrinsic value

$25.35

 
Up/down potential

-30%

 
Rating

sell

We calculate the intrinsic value of UFPI 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 2.2

 

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, %
  2.30
  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
  4.87
Revenue, $m
  4,592
  4,710
  4,843
  4,990
  5,151
  5,326
  5,516
  5,721
  5,940
  6,175
  6,426
  6,692
  6,976
  7,277
  7,596
  7,933
  8,290
  8,668
  9,066
  9,486
  9,929
  10,396
  10,888
  11,407
  11,953
  12,527
  13,132
  13,768
  14,436
  15,140
Variable operating expenses, $m
  4,376
  4,488
  4,613
  4,752
  4,905
  5,071
  5,250
  5,444
  5,652
  5,874
  6,084
  6,337
  6,606
  6,891
  7,193
  7,512
  7,850
  8,207
  8,585
  8,982
  9,402
  9,844
  10,310
  10,801
  11,318
  11,862
  12,435
  13,037
  13,670
  14,336
Fixed operating expenses, $m
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
Total operating expenses, $m
  4,379
  4,491
  4,616
  4,755
  4,908
  5,074
  5,253
  5,448
  5,656
  5,878
  6,088
  6,341
  6,610
  6,895
  7,197
  7,516
  7,854
  8,211
  8,590
  8,987
  9,407
  9,849
  10,315
  10,806
  11,323
  11,867
  12,440
  13,043
  13,676
  14,342
Operating income, $m
  213
  220
  227
  234
  243
  252
  262
  273
  284
  297
  337
  351
  366
  382
  399
  417
  436
  456
  477
  499
  522
  547
  573
  600
  629
  660
  692
  725
  761
  798
EBITDA, $m
  290
  297
  306
  315
  325
  336
  348
  361
  375
  390
  406
  423
  441
  460
  480
  502
  524
  548
  574
  600
  629
  658
  690
  723
  757
  794
  832
  873
  915
  960
Interest expense (income), $m
  5
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  64
  68
  72
  76
  81
Earnings before tax, $m
  201
  207
  213
  219
  227
  235
  244
  253
  264
  274
  313
  326
  339
  353
  367
  383
  400
  417
  436
  455
  476
  497
  520
  544
  569
  596
  624
  653
  684
  717
Tax expense, $m
  54
  56
  57
  59
  61
  63
  66
  68
  71
  74
  85
  88
  91
  95
  99
  103
  108
  113
  118
  123
  128
  134
  140
  147
  154
  161
  168
  176
  185
  194
Net income, $m
  147
  151
  155
  160
  166
  172
  178
  185
  192
  200
  229
  238
  247
  257
  268
  280
  292
  304
  318
  332
  347
  363
  380
  397
  416
  435
  455
  477
  500
  523

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
  1,685
  1,729
  1,777
  1,831
  1,890
  1,955
  2,024
  2,099
  2,180
  2,266
  2,358
  2,456
  2,560
  2,670
  2,787
  2,911
  3,042
  3,181
  3,327
  3,481
  3,644
  3,815
  3,996
  4,186
  4,386
  4,597
  4,819
  5,052
  5,298
  5,556
Adjusted assets (=assets-cash), $m
  1,685
  1,729
  1,777
  1,831
  1,890
  1,955
  2,024
  2,099
  2,180
  2,266
  2,358
  2,456
  2,560
  2,670
  2,787
  2,911
  3,042
  3,181
  3,327
  3,481
  3,644
  3,815
  3,996
  4,186
  4,386
  4,597
  4,819
  5,052
  5,298
  5,556
Revenue / Adjusted assets
  2.725
  2.724
  2.725
  2.725
  2.725
  2.724
  2.725
  2.726
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.726
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
  2.725
Average production assets, $m
  487
  499
  513
  529
  546
  565
  585
  606
  630
  655
  681
  709
  739
  771
  805
  841
  879
  919
  961
  1,006
  1,052
  1,102
  1,154
  1,209
  1,267
  1,328
  1,392
  1,459
  1,530
  1,605
Working capital, $m
  684
  702
  722
  743
  767
  794
  822
  852
  885
  920
  957
  997
  1,039
  1,084
  1,132
  1,182
  1,235
  1,291
  1,351
  1,413
  1,479
  1,549
  1,622
  1,700
  1,781
  1,867
  1,957
  2,051
  2,151
  2,256
Total debt, $m
  242
  257
  274
  293
  313
  336
  360
  386
  414
  444
  476
  510
  546
  585
  626
  669
  714
  762
  813
  867
  924
  983
  1,046
  1,112
  1,182
  1,255
  1,332
  1,414
  1,499
  1,589
Total liabilities, $m
  586
  602
  618
  637
  658
  680
  704
  731
  759
  789
  821
  855
  891
  929
  970
  1,013
  1,059
  1,107
  1,158
  1,211
  1,268
  1,328
  1,391
  1,457
  1,526
  1,600
  1,677
  1,758
  1,844
  1,933
Total equity, $m
  1,099
  1,127
  1,159
  1,194
  1,232
  1,274
  1,320
  1,369
  1,421
  1,477
  1,537
  1,601
  1,669
  1,741
  1,817
  1,898
  1,984
  2,074
  2,169
  2,270
  2,376
  2,487
  2,605
  2,729
  2,860
  2,997
  3,142
  3,294
  3,454
  3,622
Total liabilities and equity, $m
  1,685
  1,729
  1,777
  1,831
  1,890
  1,954
  2,024
  2,100
  2,180
  2,266
  2,358
  2,456
  2,560
  2,670
  2,787
  2,911
  3,043
  3,181
  3,327
  3,481
  3,644
  3,815
  3,996
  4,186
  4,386
  4,597
  4,819
  5,052
  5,298
  5,555
Debt-to-equity ratio
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
Adjusted equity ratio
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  147
  151
  155
  160
  166
  172
  178
  185
  192
  200
  229
  238
  247
  257
  268
  280
  292
  304
  318
  332
  347
  363
  380
  397
  416
  435
  455
  477
  500
  523
Depreciation, amort., depletion, $m
  76
  78
  79
  81
  82
  84
  86
  89
  91
  93
  69
  72
  75
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
  147
  155
  162
Funds from operations, $m
  223
  228
  234
  241
  248
  256
  264
  273
  283
  294
  297
  309
  322
  335
  350
  365
  380
  397
  415
  434
  453
  474
  496
  519
  544
  569
  596
  624
  654
  685
Change in working capital, $m
  15
  18
  20
  22
  24
  26
  28
  30
  33
  35
  37
  40
  42
  45
  48
  50
  53
  56
  59
  63
  66
  70
  73
  77
  81
  86
  90
  95
  100
  105
Cash from operations, $m
  208
  211
  215
  219
  224
  230
  236
  243
  251
  259
  260
  270
  280
  291
  302
  314
  327
  341
  356
  371
  387
  405
  423
  442
  462
  484
  506
  530
  554
  581
Maintenance CAPEX, $m
  -48
  -49
  -50
  -52
  -53
  -55
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -102
  -106
  -111
  -117
  -122
  -128
  -134
  -141
  -147
  -155
New CAPEX, $m
  -13
  -13
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
Cash from investing activities, $m
  -61
  -62
  -64
  -68
  -70
  -74
  -77
  -81
  -84
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -142
  -149
  -156
  -163
  -172
  -180
  -189
  -198
  -208
  -218
  -230
Free cash flow, $m
  147
  149
  150
  152
  154
  156
  159
  162
  166
  170
  167
  173
  178
  184
  190
  197
  205
  212
  221
  229
  239
  249
  259
  270
  282
  295
  308
  322
  336
  352
Issuance/(repayment) of debt, $m
  12
  15
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  90
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  
  12
  15
  17
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  90
Total cash flow (excl. dividends), $m
  159
  164
  167
  170
  174
  178
  183
  188
  194
  200
  199
  207
  214
  222
  231
  240
  250
  260
  271
  283
  295
  308
  322
  337
  352
  368
  385
  403
  422
  441
Retained Cash Flow (-), $m
  -25
  -28
  -32
  -35
  -39
  -42
  -45
  -49
  -53
  -56
  -60
  -64
  -68
  -72
  -76
  -81
  -85
  -90
  -95
  -101
  -106
  -112
  -118
  -124
  -131
  -137
  -145
  -152
  -160
  -168
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
  134
  136
  135
  135
  136
  136
  138
  139
  142
  144
  140
  143
  146
  150
  155
  160
  165
  170
  176
  183
  189
  197
  204
  213
  221
  231
  240
  251
  262
  273
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
  128
  125
  118
  111
  105
  99
  93
  87
  81
  76
  66
  61
  56
  50
  45
  41
  36
  31
  27
  23
  20
  16
  13
  11
  9
  7
  5
  4
  3
  2
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

Universal Forest Products, Inc. is a holding company. The Company, through its subsidiaries, supplies wood, wood composite and other products to three primary markets, such as retail, construction and industrial. Its segments include North, South, West, Alternative Materials, International, idX Holdings, Inc. (idX) and Corporate divisions. idX is a designer, manufacturer and installer of in-store environments. It designs, manufactures and markets wood and wood-alternative products for national home centers and other retailers; structural lumber and other products for the manufactured housing industry; engineered wood components for residential and commercial construction; specialty wood packaging, components and packing materials for various industries, and customized interior fixtures used in a range of retail stores, commercial and other structures. Its customers comprising retail market are national home center retailers and retail-oriented regional lumberyards, among others.

FINANCIAL RATIOS  of  Universal Forest Products, Inc. (UFPI)

Valuation Ratios
P/E Ratio 21.9
Price to Sales 0.7
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 18.6
Growth Rates
Sales Growth Rate 12.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.7%
Cap. Spend. - 3 Yr. Gr. Rate 6.2%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 12.7%
Total Debt to Equity 15.4%
Interest Coverage 33
Management Effectiveness
Return On Assets 8.7%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 11.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 12.6%
Return On Equity - 3 Yr. Avg. 10.9%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 14.7%
Gross Margin - 3 Yr. Avg. 13.6%
EBITDA Margin 6.5%
EBITDA Margin - 3 Yr. Avg. 5.9%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 4.5%
Pre-Tax Margin 5%
Pre-Tax Margin - 3 Yr. Avg. 4.4%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 2.7%
Effective Tax Rate 34.2%
Eff/ Tax Rate - 3 Yr. Avg. 34.9%
Payout Ratio 17.8%

UFPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UFPI stock intrinsic value calculation we used $4489 million for the last fiscal year's total revenue generated by Universal Forest Products, Inc.. The default revenue input number comes from 0001 income statement of Universal Forest Products, 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 UFPI stock valuation model: a) initial revenue growth rate of 2.3% 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 4.3%, whose default value for UFPI is calculated based on our internal credit rating of Universal Forest Products, 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 Universal Forest Products, 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 UFPI stock the variable cost ratio is equal to 95.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3 million in the base year in the intrinsic value calculation for UFPI 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 Universal Forest Products, Inc..

Corporate tax rate of 27% is the nominal tax rate for Universal Forest Products, 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 UFPI 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 UFPI are equal to 10.6%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Universal Forest Products, 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 UFPI is equal to 14.9%. 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 - $1073.403 million for Universal Forest Products, 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 61.298 million for Universal Forest Products, 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 Universal Forest Products, Inc. at the current share price and the inputted number of shares is $2.2 billion.

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