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Home Value Stock Idea KPPC – KapStone Paper

KPPC – KapStone Paper
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UserPost

5:12 pm
December 22, 2009


Jae Jun

Admin

posts 1336
4

Thanks for the purchase although I'm trying to streamline the process I have in updating, maintaining and sending. Seems to be taking up so much time lately.

Let me know if you have any questions about the use of the spreadsheet. A quick search should show you everything as well.

11:03 am
December 22, 2009


croicodile

Member

posts 6
3

Jae,

Thank you for the comments. I have never heard of EPV until now. I did a search on your site and immediately ordered the majority of the recommended books, including the EPV one. :). Also, the spreadsheets are awesome. I encourage anyone who reads these forums to get them. I feel like they're worth WAY more money than I spent. 

3:06 am
December 18, 2009


Jae Jun

Admin

posts 1336
2

croicodile great great name. I just undertood it. Laughing hard at the moment Laughing

Excellent job on your first valuation. I think you are seeing already how to value stocks quantatively.

IMHO KPPC isn't an easy company to value. Short erratic history and I don't have much of an idea about the industry it operates in. Here are my values

DCF: $9.39 (I use owner earnings so FCF is less than the normal way)

Graham: $15.83

EPV: negative number due to debt

What do you think about the business it is in?

Do you think that the intrinsic value can be met or is the industry very difficult whereby reaching intrinsic value will be a battle?

What about other pros and cons about the company? e.g. competition, CEO compensation, what did they mention in the conference calls etc.

4:35 am
December 16, 2009


croicodile

Member

posts 6
1

Post edited 9:36 am – December 16, 2009 by croicodile

This is my first attempt at valuing a stock ever so any suggestions or comments are very welcome!

KPPC – KapStone Paper makes paper and packing products. Search KPPC on Jae's site to find a link to a nice write up.

I'm going to attempt to value the company via DCF and Jae's modified Grahamn formula.

~~~~~~~~~~

DCF

The company has growth book value by about 24% in 2007,2008, and 2009. Also, the CROIC has been 21%, 5%, and 24% respectively. I averaged the CROIC and I come up with a growth percentage of 17%. I will be reducing the free cash flow growth by 10%. I read F Wall Street (Thanks Jae)  and in his DCF analysis, he lowered JNJs growth by 5% annually. I decided to be more aggressive as the growth is higher. Here are the numbers:



2009 114.00
2010 134.78
2011 156.88
2012 180.04
2013 203.96
2014 228.35
2015 252.93
2016 277.42
2017 301.61
2018 325.27

Future value is current shareholder equity + sum of future free cash flows 322 + 2175 = 2497.

I divided this by shares outstanding 2497/45 = 55.4

=PV(10%,10,0,-55.4)  My required rate of return is 10%. The value comes out to $21.36. Add in our 50% MOS = $10.68

~~~~~~~~~~~

Jae's Grahamn Formula

I normalized earnings over the past three years. Also, I reduced the growth rate from 17% to 10% as the numbers seemed to high.

=1.06 *( (7+1.5*15)* 4.4 / 6.05) = $22.74. Add in our 50% MOS = $11.37.

How did I do? I'm sure I probably messed up somewhere. Any help would be greatly appreciated. A special thank you to Jae for his posts on getting me started in investing. Thank you, everyone!
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