Empire Co (EMP.A:TSE) Fundamental Valuation Report

Fundamental Valuation Report

Empire Co(EMP.A:TSE)

Consumer Defensive:Grocery Stores

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

Close Price/Date
$28.68 (CAD) 07/01/2019

Weighted Valuation
$31.74 (CAD)

Overall Rating
Undervalued by 10.7%

Valuation Models Analyst Consensus: $31.75 (CAD)
(in order of importance) Discounted Cash Flow: $33.81 (CAD)
Multiples: $27.58 (CAD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (EMP.A:TSE CAD)

Price 28.68
Range 27.76 – 28.70
52 week 22.49 – 29.03
Open 27.93
Vol / Avg. 612767/816760
Mkt cap 7.79B
P/E 30.86
Div/yield 0.42/0.01
EPS 0.59
Shares 271.69M
Beta -0.17

Company Description

Empire Co Ltd key businesses are food retailing, investments, and other operations. The food retailing division operates through Empire’s subsidiary Sobeys and represents nearly all of the company’s income. This segment owns, affiliates, or franchises more than 1,500 stores in 10 provinces, under retail banners including Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, Lawton’s Drug Stores, and multiple retail fuel locations. The company’s investment and other operations segment includes the investment in Crombie REIT, which is an open-ended Canadian real estate investment trust, as well as Genstar Development Partnership.

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 EMP.A:TSE

Using a discounted cash flow model we generated an intrinsic value of $33.81 (CAD) for EMP.A:TSE

Sensitivity Analysis

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

EMP.A:TSE Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $33.81 1% 5% 1% 5%
WACC (or Ke) 9.45 $41.24 $28.37
Terminal Growth Rate 3.00 $29.00 $40.38
Tax Rate 0.24 $36.37 $31.25
Cash Flow 866,350,144 $32.08 $35.53
Capital Expenditures 165,080,000 $34.11 $33.51
Long Term Debt 1,936,900,000 $34.16 $33.45

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $19.15 (CAD) for EMP.A:TSE. We also generated a valuation of $31.35 (CAD) using other metrics and comparables.
The comparable companies were Loblaw Cos (L:TSE), Metro (MRU:TSE) and George Weston (WN:TSE).

Company EMP.A:TSE End Date Value
Earnings/Share $1.21 (CAD)
Book Value/Share $14.17 (CAD)
Sales/Share $90.30 (CAD)
Cash Flow/Share $3.19 (CAD)
EBITDA/Share $2.84 (CAD)
Price Based on Comps Adjustment Factor (%)
$35.91 (CAD) -18.0
$29.88 (CAD) -61.8
$46.02 (CAD) -50.0
$21.09 (CAD) -32.1
$24.45 (CAD) -26.9
EMP.A:TSE Ratios Used Average Values L:TSE MRU:TSE WN:TSE
23.83 PE Ratio 29.68 41.86 6.61 40.56
2.03 PB Ratio 2.11 1.86 2.15 2.32
0.32 PS Ratio 0.51 0.50 0.79 0.24
9.04 PCF Ratio 8.53 7.15 15.13 3.32
9.01 EV to EBITDA 8.62 11.17 6.02 8.67


Using a multiples approach we generated a valuation of  $27.58 (CAD) for EMP.A:TSE

Company EMP.A:TSE End Date Value
Earnings/Share $1.21 (CAD)
Book Value/Share $14.17 (CAD)
Sales/Share $90.30 (CAD)
Cash Flow/Share $3.19 (CAD)
EBITDA/Share $2.84 (CAD)
Price Based on Comps Adjustment Factor
$41.68 (CAD) 0
$20.46 (CAD) 0
$24.49 (CAD) 0
$22.79 (CAD) 0
$28.50 (CAD) 0
Ratios Ratio Average
PE Ratio 34.45
PB Ratio 1.44
PS Ratio 0.27
PCF Ratio 7.15
EV to EBITDA 10.05

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  EMP.A:TSE for the last 10 years was  1.43

We ran the Adjusted Book Value for  EMP.A:TSE and generated a book value of  $14.17 (CAD)
By multiplying these we get an adjusted valuation of  $20.27 (CAD)

Analyst Data

In the Stockcalc database there are 8 analysts that provide a valuation for EMP.A:TSE. The 8 analysts have a concensus valuation for EMP.A:TSE for 2020 of $31.75 (CAD).

EMP.A:TSE Empire Co

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 3 0 4.0000 Outperform 2019-1-4

Current Price: 28.68 CAD

Analyst Consensus
CAD Millions 2019 2020 2021
Mean EPS 1.44 2.07 2.09
# EPS Analysts 8 8 3
Mean Revenue 25,024.10 25,948.30 26,379.10
# Revenue Analysts 7 7 3
Mean Target Price 31.75
Mean Cash Flow 2.60 2.91
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.

Notice to User

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