Discounted Cash Flow Calculation for DB:5WC using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
Note: Free cash flow to equity valuations ignore the company's cash or debt.
DB:5WC DCF 1st Stage: Next 10 year cash flow forecast
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Clearwater Paper's share price is below the future cash flow value, and at a moderate discount (> 20%).
Clearwater Paper's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Clearwater Paper's earnings available for a low price, and how does
this compare to other companies in the same industry?
Clearwater Paper's earnings are expected to grow significantly at over 20% yearly.
Clearwater Paper's revenue is expected to grow by 2.9% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Clearwater Paper's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
0/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Clearwater Paper's finances.
The net worth of a company is the difference between its assets and liabilities.
Clearwater Paper is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Clearwater Paper's long term commitments exceed its cash and other short term assets.
This treemap shows a more detailed breakdown of
Clearwater Paper's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
High level of physical assets or inventory.
Debt is not covered by short term assets, assets are 0.5x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Ms. Linda K. Massman has been the President and Chief Executive Officer of Clearwater Paper Corporation since November 1, 2011 and January 1, 2013 respectively. Ms. Massman served as the Chief Financial Officer and Vice President of Finance at Cellu Tissue Holdings, Inc. since December 27, 2010. She served as the Chief Financial Officer and Vice President of Finance of Cellu Tissue City-forest LLC and Cellu Tissue-CityForest LLC. She served as a Business Strategy Consultant for Accenture. She served as the Chief Operating Officer of Clearwater Paper Corporation from November 1, 2011 to December 2012. She served as the Chief Financial Officer of Clearwater Paper Corporation (formerly, Potlatch Forest Products Corporation) from December 2008 to November 2011 and served as its Senior Vice President of Finance from May 2011 to November 2011. She served as Vice President of Finance at Clearwater Paper Corporation from December 2008 to May 2011. From September 2008 to December 2008, She served as a Vice President of Potlatch Corporation. From May 2002 to August 2008, she served as Group Vice President of Finance and Corporate Planning for SUPERVALU Inc. She served as Vice President of Business Planning and Operations at Viquity Corporation from 1999 to 2001. She also serves as a Director at Clearwater Paper - Wiggins, LLC. She has been a Director of Treehouse Foods, Inc. since July 28, 2016. She served as an Independent Director of Black Hills Corporation from January 28, 2015 to July 1, 2018. She has been Director of Cellu Tissue Holdings, Inc. since December 27, 2010 and Clearwater Paper Corporation since January 1, 2013. She also serves on the American Forest & Paper Association board. She earned a Bachelor's Degree in Business Administration in finance from the University of North Dakota and an MBA from Harvard University.
Linda's compensation has been consistent with company performance over the past year, both up more than 20%.
Linda's remuneration is higher than average for companies of similar size in Germany.
Management Team Tenure
Average tenure and age of the
management team in years:
The tenure for the Clearwater Paper management team is about average.
Clearwater Paper Corporation produces and sells private label tissue and bleached paperboard products in the United States and internationally. It operates in two segments, Consumer Products, and Pulp and Paperboard. The Consumer Products segment manufactures and sells a line of at-home tissue products, including bathroom tissues, paper towels, facial tissues, and napkins; recycled fiber value grade products; and away-from-home products, such as conventional one- and two-ply bath tissues, two-ply paper towels, hard wound towels, and dispenser napkins. It sells its products to retailers and wholesale distributors, including grocery, drug, and discount stores, as well as mass merchants. The Pulp and Paperboard segment provides folding cartons, liquid packaging, cups, plates, blister and carded packaging, top sheet, and commercial printing items, as well as hardwood and softwood pulp. It also offers custom sheeting, slitting, and cutting services. The company is headquartered in Spokane, Washington.
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