Turning Point Brands, Inc. (NYSE:TPB) Shares Could Be 32% Below Their Intrinsic Value Estimate

Simply Wall St.12-06

Key Insights The projected fair value for Turning Point Brands is US$94.06 based on 2 Stage Free Cash Flow to Equity Turning Point Brands' US$64.01 share price signals that it might be 32% ...

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(NYSE:TPB) Shares Could Be 32% Below Their Intrinsic Value Estimate","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n The projected fair value for Turning Point Brands is US$94.06 based on 2 Stage Free Cash Flow to Equity \n Turning Point Brands' US$64.01 share price signals that it might be 32% ...</p>\n\n<a href=\"https://finance.yahoo.com/news/turning-point-brands-inc-nyse-141736225.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Turning Point Brands, Inc. (NYSE:TPB) Shares Could Be 32% Below Their Intrinsic Value Estimate</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTurning Point Brands, Inc. (NYSE:TPB) Shares Could Be 32% Below Their Intrinsic Value Estimate\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-12-06 22:17 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/turning-point-brands-inc-nyse-141736225.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n The projected fair value for Turning Point Brands is US$94.06 based on 2 Stage Free Cash Flow to Equity \n Turning Point Brands' US$64.01 share price signals that it might be 32% ...</p>\n\n<a href=\"https://finance.yahoo.com/news/turning-point-brands-inc-nyse-141736225.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NYSE","symbol_name":"纽交所","start_time":0,"source_url":"https://finance.yahoo.com/news/turning-point-brands-inc-nyse-141736225.html","article_id":"2489234817","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/cGhEVfHWExNj3PkgQ5uodA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/9061fa58de7973af7a47e9d478418cc3"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2489234817","pubTimestamp":1733494656,"columns":[],"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"The projected fair value for Turning Point Brands is US$94.06 based on 2 Stage Free Cash Flow to Equity. Turning Point Brands' US$64.01 share price signals that it might be 32% undervalued. Our fair value estimate is 45% higher than Turning Point Brands' analyst price target of US$65.00. In this article we are going to estimate the intrinsic value of Turning Point Brands, Inc.  by taking the expected future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow  model. Before you think you won't be able to understand it, just read on!We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.Check out our latest analysis for Turning Point Brands","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NYSE":"纽交所","TV":"墨西哥电视","TPB":"Turning Point Brands Inc.","BK4075":"烟草","FCF":"第一联邦金融","BK4211":"区域性银行","BK4100":"有线和卫星","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc"},"translate_title":"Turning Point Brands，Inc.（纽约证券交易所股票代码：TPB）的股价可能比其内在价值预期低32%","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DCF":1,"FCF":1,"NYSE":1,"TPB":1,"TV":1},"content_text":"Key Insights\n\n The projected fair value for Turning Point Brands is US$94.06 based on 2 Stage Free Cash Flow to Equity \n Turning Point Brands' US$64.01 share price signals that it might be 32% undervalued \n Our fair value estimate is 45% higher than Turning Point Brands' analyst price target of US$65.00 \n\n In this article we are going to estimate the intrinsic value of Turning Point Brands, Inc. (NYSE:TPB) by taking the expected future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. \n We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. \n Check out our latest analysis for Turning Point Brands \n The Method \n We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: \n 10-year free cash flow (FCF) estimate \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$65.1m\nUS$69.4m\nUS$69.6m\nUS$70.4m\nUS$71.4m\nUS$72.7m\nUS$74.3m\nUS$75.9m\nUS$77.7m\nUS$79.6m\n\n\nGrowth Rate Estimate Source\nAnalyst x3\nAnalyst x2\nEst @ 0.36%\nEst @ 1.04%\nEst @ 1.51%\nEst @ 1.84%\nEst @ 2.08%\nEst @ 2.24%\nEst @ 2.35%\nEst @ 2.43%\n\n\n Present Value ($, Millions) Discounted @ 6.4% \nUS$61.2\nUS$61.3\nUS$57.8\nUS$54.8\nUS$52.3\nUS$50.0\nUS$48.0\nUS$46.1\nUS$44.3\nUS$42.7\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$518m\n We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.4%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$80m× (1 + 2.6%) ÷ (6.4%– 2.6%) = US$2.1b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$2.1b÷ ( 1 + 6.4%)10= US$1.1b\n The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$1.7b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$64.0, the company appears quite good value at a 32% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NYSE:TPB Discounted Cash Flow December 6th 2024\n \n\n Important Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Turning Point Brands as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.4%, which is based on a levered beta of 0.927. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Turning Point Brands\n\n\nStrength\n\nEarnings growth over the past year exceeded the industry.\n\n\nDebt is well covered by earnings and cashflows.\n\n\nBalance sheet summary for TPB.\n\n\n\nWeakness\n\nDividend is low compared to the top 25% of dividend payers in the Tobacco market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 3 years.\n\n\nTrading below our estimate of fair value by more than 20%.\n\n\n\nThreat\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for TPB?\n\n\n\n Looking Ahead: \n Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Can we work out why the company is trading at a discount to intrinsic value? For Turning Point Brands, we've compiled three fundamental items you should further examine: \n\n Risks: Case in point, we've spotted   1 warning sign for Turning Point Brands  you should be aware of. \nFuture Earnings: How does TPB's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.\n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"dataReport","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2489234817"}