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
$35.50 (CAD) 09/10/2020

Weighted Valuation
$36.34 (CAD)

Overall Rating
Fairly valued to slightly Undervalued by 2.4%

Valuation Models Comparables: $31.50 (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
According to Analyst consensus at $39.57 this stock is Undervalued

Company Overview (EMP.A:TSE CAD)

Price 35.50
Range 34.70 – 35.63
52 week 24.29 – 36.94
Open 35.47
Vol / Avg. 589128/391948
Mkt cap 9.55B
P/E 16.51
Div/yield 0.48/0.01
EPS 2.15
Shares 269.11M
Beta 0.32

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 include the investment in Crombie REIT, which is an open-ended Canadian real estate investment trust, as well as the 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 $133.15 (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: $133.15 1% 5% 1% 5%
WACC (or Ke) 3.54 $188.93 $101.96
Terminal Growth Rate 0.00 $104.11 $185.04
Tax Rate 0.26 $142.71 $123.59
Cash Flow 2,053,094,250 $125.24 $141.05
Capital Expenditures -265,080,000 $132.18 $134.12
Long Term Debt 1,936,900,000 $133.51 $132.79

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $31.50 (CAD) for EMP.A:TSE. We also generated a valuation of $50.40 (CAD) using other metrics and comparables.
The comparable companies were Alimentation Couche-Tard (ATD.B:TSE), Loblaw Cos (L:TSE), Metro (MRU:TSE) and George Weston (WN:TSE).

Company EMP.A:TSE End Date Value
Earnings/Share $2.15 (CAD)
Book Value/Share $14.58 (CAD)
Sales/Share $97.96 (CAD)
Cash Flow/Share $7.70 (CAD)
EBITDA/Share $7.06 (CAD)
Price Based on Comps Adjustment Factor (%)
$40.16 (CAD) -11.6
$37.39 (CAD) -54.2
$59.23 (CAD) -44.0
$32.16 (CAD) -28.5
$62.43 (CAD) -17.4
EMP.A:TSE Ratios Used Average Values ATD.B:TSE L:TSE MRU:TSE WN:TSE
16.51 PE Ratio 18.68 14.68 22.58 19.64 17.81
2.43 PB Ratio 2.56 3.40 2.23 2.50 2.13
0.36 PS Ratio 0.60 0.76 0.51 0.86 0.28
4.61 PCF Ratio 7.50 9.04 5.20 12.89 2.87
8.08 EV to EBITDA 8.84 8.93 8.01 12.12 6.29


Using a multiples approach we generated a valuation of  $47.41 (CAD) for EMP.A:TSE

Company EMP.A:TSE End Date Value
Earnings/Share $2.15 (CAD)
Book Value/Share $14.58 (CAD)
Sales/Share $97.96 (CAD)
Cash Flow/Share $7.70 (CAD)
EBITDA/Share $7.06 (CAD)
Price Based on Comps Adjustment Factor
$56.18 (CAD) 0
$26.13 (CAD) 0
$27.97 (CAD) 0
$57.08 (CAD) 0
$69.71 (CAD) 0
Ratios Ratio Average
PE Ratio 26.13
PB Ratio 1.79
PS Ratio 0.29
PCF Ratio 7.42
EV to EBITDA 9.87

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  1.60

We ran the Adjusted Book Value for  EMP.A:TSE and generated a book value of  $14.58 (CAD)
By multiplying these we get an adjusted valuation of  $23.34 (CAD)

Analyst Data

In the Stockcalc database there are 7 analysts that provide a valuation for EMP.A:TSE. The 7 analysts have a concensus valuation for EMP.A:TSE for 2021 of $39.57 (CAD).

EMP.A:TSE Empire Co

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 2 0 4.1429 Outperform 2020-9-9

Current Price: 35.5 CAD

Analyst Consensus
CAD Millions 2021 2022 2023
Mean EPS 2.28 2.54 2.88
# EPS Analysts 7 7 3
Mean Revenue 27,162.90 27,412.10 28,474.30
# Revenue Analysts 7 7 3
Mean Target Price 39.57
Mean Cash Flow 5.30 5.52
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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