Intrinsic value of Birks Group - BGI

Previous Close

$1.64

  Intrinsic Value

$0.11

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

-74%

Previous close

$1.64

 
Intrinsic value

$0.11

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

-74%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BGI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.30
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  286
  292
  298
  306
  315
  324
  335
  346
  358
  372
  386
  401
  418
  435
  453
  473
  494
  516
  539
  563
  589
  616
  645
  676
  708
  741
  777
  814
  853
  895
  938
Variable operating expenses, $m
 
  289
  295
  303
  312
  321
  331
  343
  355
  368
  382
  397
  413
  431
  449
  468
  489
  510
  533
  558
  583
  610
  639
  669
  701
  734
  769
  806
  845
  886
  929
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  270
  289
  295
  303
  312
  321
  331
  343
  355
  368
  382
  397
  413
  431
  449
  468
  489
  510
  533
  558
  583
  610
  639
  669
  701
  734
  769
  806
  845
  886
  929
Operating income, $m
  16
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
EBITDA, $m
  21
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Interest expense (income), $m
  9
  9
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  35
Earnings before tax, $m
  5
  -6
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  5
  -6
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  183
  187
  191
  196
  201
  207
  214
  221
  229
  238
  247
  257
  267
  278
  290
  303
  316
  330
  345
  360
  377
  394
  413
  432
  453
  474
  497
  521
  546
  572
  600
Adjusted assets (=assets-cash), $m
  181
  187
  191
  196
  201
  207
  214
  221
  229
  238
  247
  257
  267
  278
  290
  303
  316
  330
  345
  360
  377
  394
  413
  432
  453
  474
  497
  521
  546
  572
  600
Revenue / Adjusted assets
  1.580
  1.561
  1.560
  1.561
  1.567
  1.565
  1.565
  1.566
  1.563
  1.563
  1.563
  1.560
  1.566
  1.565
  1.562
  1.561
  1.563
  1.564
  1.562
  1.564
  1.562
  1.563
  1.562
  1.565
  1.563
  1.563
  1.563
  1.562
  1.562
  1.565
  1.563
Average production assets, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
Working capital, $m
  28
  96
  98
  101
  104
  107
  110
  114
  118
  122
  127
  132
  137
  143
  149
  156
  162
  170
  177
  185
  194
  203
  212
  222
  233
  244
  256
  268
  281
  294
  309
Total debt, $m
  115
  108
  112
  116
  121
  127
  133
  139
  146
  154
  162
  171
  180
  190
  201
  212
  224
  237
  250
  264
  279
  295
  312
  329
  347
  367
  387
  409
  431
  455
  480
Total liabilities, $m
  175
  168
  172
  176
  181
  187
  193
  199
  206
  214
  222
  231
  240
  250
  261
  272
  284
  297
  310
  324
  339
  355
  372
  389
  407
  427
  447
  469
  491
  515
  540
Total equity, $m
  8
  19
  19
  20
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
Total liabilities and equity, $m
  183
  187
  191
  196
  201
  208
  214
  221
  229
  238
  247
  257
  267
  278
  290
  302
  316
  330
  344
  360
  377
  394
  413
  432
  452
  474
  497
  521
  546
  572
  600
Debt-to-equity ratio
  14.375
  5.790
  5.860
  5.940
  6.020
  6.110
  6.200
  6.290
  6.380
  6.480
  6.570
  6.660
  6.750
  6.840
  6.930
  7.020
  7.100
  7.180
  7.260
  7.340
  7.410
  7.480
  7.550
  7.610
  7.670
  7.730
  7.790
  7.850
  7.900
  7.950
  8.000
Adjusted equity ratio
  0.044
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  -6
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
Depreciation, amort., depletion, $m
  5
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  1
  -6
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
Change in working capital, $m
  -4
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
Cash from operations, $m
  5
  -8
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
New CAPEX, $m
  -7
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from investing activities, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Free cash flow, $m
  3
  -8
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
Issuance/(repayment) of debt, $m
  -2
  -7
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
Issuance/(repurchase) of shares, $m
  0
  16
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
Cash from financing (excl. dividends), $m  
  -2
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  27
  29
  31
  33
  35
  36
  38
  40
  42
  45
  48
  50
  53
Total cash flow (excl. dividends), $m
  0
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
Retained Cash Flow (-), $m
  -5
  -16
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -15
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -15
Discount rate, %
 
  13.80
  14.49
  15.21
  15.98
  16.77
  17.61
  18.49
  19.42
  20.39
  21.41
  22.48
  23.60
  24.78
  26.02
  27.32
  28.69
  30.12
  31.63
  33.21
  34.87
  36.62
  38.45
  40.37
  42.39
  44.51
  46.73
  49.07
  51.52
  54.10
  56.80
PV of cash for distribution, $m
 
  -13
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  63.7
  58.8
  54.2
  49.8
  45.7
  41.8
  38.2
  34.8
  31.6
  28.7
  26.0
  23.5
  21.2
  19.1
  17.2
  15.4
  13.8
  12.4
  11.0
  9.8
  8.8
  7.8
  6.9
  6.1
  5.4
  4.8
  4.2
  3.7
  3.3
  2.9

Birks Group Inc. designs, develops, makes, and retails fine jewelry, timepieces, sterling and plated silver, and gifts in the United States and Canada. It operates in two segments, Retail and Other. The company offers designed products, as well as various merchandise, including designer jewelry, diamonds, gemstone and precious metal jewelry, rings, wedding bands, earrings, bracelets, necklaces, charms, and pearls. As of March 31, 2016, it operated 46 jewelry stores, including 26 stores under the Birks brand in Canada, 2 retail locations in Calgary and Vancouver under the Brinkhaus brand, 17 stores under the Mayors brand in Florida and Georgia, and 1 store under the Rolex brand name in Orlando. The company was formerly known as Birks & Mayors Inc. and changed its name to Birks Group Inc. in October 2013. Birks Group Inc. was founded in 1879 and is headquartered in Montreal, Canada.

FINANCIAL RATIOS  of  Birks Group (BGI)

Valuation Ratios
P/E Ratio 5.9
Price to Sales 0.1
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 5.9
Price to Free Cash Flow -14.7
Growth Rates
Sales Growth Rate -5.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 587.5%
Total Debt to Equity 1437.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 7.7%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -2.4%
Return On Equity 90.9%
Return On Equity - 3 Yr. Avg. -18.3%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 38.1%
Gross Margin - 3 Yr. Avg. 39.4%
EBITDA Margin 6.6%
EBITDA Margin - 3 Yr. Avg. 3.9%
Operating Margin 5.6%
Oper. Margin - 3 Yr. Avg. 2.7%
Pre-Tax Margin 1.7%
Pre-Tax Margin - 3 Yr. Avg. -1.1%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. -1.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

BGI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BGI stock intrinsic value calculation we used $286 million for the last fiscal year's total revenue generated by Birks Group. The default revenue input number comes from 2016 income statement of Birks Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BGI stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 13.8%, whose default value for BGI is calculated based on our internal credit rating of Birks Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Birks Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BGI stock the variable cost ratio is equal to 99%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BGI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.6% for Birks Group.

Corporate tax rate of 27% is the nominal tax rate for Birks Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BGI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BGI are equal to 0.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Birks Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BGI is equal to 32.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $8 million for Birks Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 17.661 million for Birks Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Birks Group at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
DGSE DGSE Cos. 1.29 5.04  str.buy
SIG Signet Jeweler 53.89 82.35  buy
TIF Tiffany& 89.38 54.77  sell

COMPANY NEWS

▶ Birks unveils the first 200 diamonds from Quebec   [May-11-17 08:00AM  PR Newswire]
▶ Birks Group reports mid-year results   [Nov-16-16 09:00AM  PR Newswire]
▶ Birks Group reports mid-year results   [09:00AM  CNW Group]
▶ Birks Group Reports Mid-Year Results   [09:00AM  Business Wire]
▶ Penny Stocks to Watch for September 2016 (BGI)   [Sep-01-16 12:32PM  Investopedia]
▶ Birks Group Announces a Turnaround in Fiscal Year 2016:   [Jul-05-16 10:35AM  Business Wire]
▶ National Post Article   [Jul-11  05:09PM  Business Wire]
▶ Skadden Tops H1 Global M&A Rankings: Business of Law   [Jul-08  02:51PM  at Bloomberg]
▶ Bird & Bird Links to Indonesian Firms: Business of Law   [Jun-26  12:00AM  at Bloomberg]
▶ Birks Group reports Q3 revenue $94.5M vs. $101.4M a year ago   [Jan-14  04:05PM  theflyonthewall.com]
▶ HEAT, Mayors Jewelers Unveil Sparkling Partnership   [Dec-05  12:56PM  PR Newswire]
▶ Birks & Mayors Announces a Corporate Name Change   [Sep-30  02:13PM  Business Wire]
▶ Birks & Mayors Announces a $4.8 Million New Financing   [Aug-12  02:05PM  Business Wire]
▶ Birks & Mayors Announces New Financings   [Jul-31  12:44PM  Business Wire]
Stock chart of BGI Financial statements of BGI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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