Transcontinental (TCL.B:TSE) Fundamental Valuation Report

Fundamental Valuation Report

Transcontinental(TCL.B:TSE)

Consumer Cyclical:Publishing

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$19.92 (CAD) 17/12/2018

Weighted Valuation
$27.56 (CAD)

Overall Rating
Undervalued by 38.3%

Valuation Models Analyst Consensus: $28.13 (CAD)
(in order of importance) Multiples: $26.70 (CAD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (TCL.B:TSE CAD)

Price 0.00
Range 0.00 – 0.00
52 week 0.00 – 0.00
Open 0.00
Vol / Avg. 0/0
Mkt cap 0
P/E 0.00
Div/yield 0.00/0.00
EPS 0.00
Shares 0
Beta 0.00

Company Description

Transcontinental Inc is a Canadian media company that publishes, prints, and packages various properties across North America. The company operates over 175 regional newspaper publications throughout Canada, including Les Affaires, Metro, Finance et Investissement, and Investment Executive. The largest source of revenue for the company is its printing and packaging segment, which is one of the largest operators in Canada. It prints various books, magazines, newspapers, marketing materials, and catalogs, as well as offering distribution services to its clients.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for TCL.B:TSE

Using a discounted cash flow model we generated an intrinsic value of $68.58 (CAD) for TCL.B:TSE

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

TCL.B:TSE Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $68.58 1% 5% 1% 5%
WACC (or Ke) 5.58 $86.92 $56.39
Terminal Growth Rate 0.60 $57.44 $85.33
Tax Rate 0.36 $75.41 $61.75
Cash Flow 633,521,247 $63.97 $73.20
Capital Expenditures -37,620,000 $68.32 $68.85
Long Term Debt 348,000,000 $68.78 $68.38

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $41.01 (CAD) for TCL.B:TSE. We also generated a valuation of $42.05 (CAD) using other metrics and comparables.
The comparable companies were John Wiley & Sons (JW.A:NYS), Meredith (MDP:NYS) and New York Times (NYT:NYS).

Company TCL.B:TSE End Date Value
Earnings/Share $2.58 (CAD)
Book Value/Share $18.30 (CAD)
Sales/Share $29.03 (CAD)
Cash Flow/Share $4.18 (CAD)
EBITDA/Share $6.45 (CAD)
Price Based on Comps Adjustment Factor (%)
$95.91 (CAD) -19.5
$57.82 (CAD) -74.0
$51.79 (CAD) -63.3
$87.03 (CAD) -71.2
$92.15 (CAD) -14.6
TCL.B:TSE Ratios Used Average Values JW.A:NYS MDP:NYS NYT:NYS
7.36 PE Ratio 136.57 15.32 59.03 335.38
1.11 PB Ratio 3.16 2.70 2.39 4.40
0.70 PS Ratio 1.78 1.79 0.99 2.58
4.86 PCF Ratio 43.63 10.23 39.83 80.82
6.24 EV to EBITDA 14.28 9.69 11.53 21.62

Multiples

Using a multiples approach we generated a valuation of  $26.70 (CAD) for TCL.B:TSE

Company TCL.B:TSE End Date Value
Earnings/Share $2.58 (CAD)
Book Value/Share $18.30 (CAD)
Sales/Share $29.03 (CAD)
Cash Flow/Share $4.18 (CAD)
EBITDA/Share $6.45 (CAD)
Price Based on Comps Adjustment Factor
$24.44 (CAD) 0
$28.84 (CAD) 0
$23.07 (CAD) 0
$21.90 (CAD) 0
$35.26 (CAD) 0
Ratios Ratio Average
PE Ratio 9.47
PB Ratio 1.58
PS Ratio 0.79
PCF Ratio 5.24
EV to EBITDA 5.46

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  TCL.B:TSE for the last 10 years was  1.53

We ran the Adjusted Book Value for  TCL.B:TSE and generated a book value of  $18.71 (CAD)
By multiplying these we get an adjusted valuation of  $28.70 (CAD)

Analyst Data

In the Stockcalc database there are 8 analysts that provide a valuation for TCL.B:TSE. The 8 analysts have a concensus valuation for TCL.B:TSE for 2019 of $28.13 (CAD).

TCL.B:TSE Transcontinental

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 2 0 4.2500 Outperform 2018-12-14

Current Price: 19.92 CAD

Analyst Consensus
CAD Millions 2019 2020 2021
Mean EPS 2.75 2.89 2.99
# EPS Analysts 8 7 1
Mean Revenue 3,117.60 3,105.00 3,099.10
# Revenue Analysts 8 7 1
Mean Target Price 28.13
Mean Cash Flow 4.54 5.01 5.61
Mean EBITDA
Mean Net Income
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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