DCF Studio

    IP · NYQ · Consumer Cyclical

    International Paper Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 16.77

    Market price

    USD 34.53

    Implied upside

    -51.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 16.77-51.4%
    Exit multiple
    USD 41.46+20.1%
    Market price
    USD 34.53

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 24.5bnUSD 25.4bnUSD 26.4bnUSD 27.4bnUSD 28.4bn+3.8%
    EBITUSD 1.0bnUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.2bn+3.8%
    NOPATUSD 846.8mUSD 878.5mUSD 911.5mUSD 945.7mUSD 981.2m+3.8%
    Add depreciation & amortisationUSD 2.1bnUSD 2.2bnUSD 2.3bnUSD 2.3bnUSD 2.4bn+3.8%
    Less capital expenditureUSD -1.5bnUSD -1.6bnUSD -1.7bnUSD -1.7bnUSD -1.8bn+3.8%
    Less increase in working capitalUSD 345.9kUSD 358.9kUSD 372.4kUSD 386.4kUSD 400.9k-3.8%
    Free cashflow to firmUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bnUSD 1.6bn+3.8%
    Discount factor0.96010.88500.81580.75210.6932-
    Present valueUSD 1.3bnUSD 1.3bnUSD 1.2bnUSD 1.2bnUSD 1.1bn-4.4%
    Present Value Of The ForecastUSD 6.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.922Reported 0.883, pulled toward 1.0 (Blume)
    Cost of equity10.07%Risk-free + beta x equity risk premium
    Cost of debt6.83%Interest expense / average total debt
    Market capitalisationUSD 18.3bn63.9% of capital
    Total debtUSD 10.3bn36.1% of capital, book value as a proxy
    Tax rate16.9%Effective, capped at statutory
    WACC8.48%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 16.77

    65% of EV

    Forecast FCFF, final year
    USD 1.6bn
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (29.5% of NOPAT)
    USD -403.8m
    Capitalised
    USD 966.3m
    ROIC (WACC floor)
    8.5%
    Terminal value, undiscounted
    USD 16.6bn
    Terminal value, discounted
    USD 11.5bn
    Enterprise value
    USD 17.7bn
    Less net debt
    USD 9.2bn
    Equity value
    USD 8.5bn

    Exit at 9.6x EBITDA

    Value per shareUSD 41.46

    80% of EV

    Terminal value, undiscounted
    USD 34.6bn
    Terminal value, discounted
    USD 24.0bn
    Enterprise value
    USD 30.1bn
    Less net debt
    USD 9.2bn
    Equity value
    USD 21.0bn

    Spread between methods: 85%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.48%26.6226.7726.9327.0927.25
    7.48%20.9121.0521.1821.3121.44
    8.48%16.5516.6616.7716.8816.99
    9.48%13.1013.2013.2913.3913.48
    10.48%10.3110.3910.4710.5610.64

    Outlined: this model. Green text: above today's price of 34.53. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year3.8%14.1%+10.3pp
    EBIT margin4.2%7.3%+3.1pp
    Discount rate8.5%5.5%-3.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.