Intrinsic value of CSS Industries - CSS

Previous Close

$29.63

  Intrinsic Value

$48.99

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  Rating & Target

str. buy

+65%

  Value-price divergence*

+50%

Previous close

$29.63

 
Intrinsic value

$48.99

 
Up/down potential

+65%

 
Rating

str. buy

 
Value-price divergence*

+50%

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

We calculate the intrinsic value of CSS 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 2017), $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 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.58
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
Revenue, $m
  322
  344
  366
  389
  414
  439
  465
  493
  521
  551
  582
  615
  649
  685
  722
  761
  801
  844
  889
  935
  984
  1,036
  1,089
  1,146
  1,205
  1,266
  1,331
  1,399
  1,471
  1,545
  1,624
Variable operating expenses, $m
 
  206
  219
  233
  247
  262
  278
  294
  311
  329
  347
  365
  385
  406
  428
  451
  475
  500
  527
  554
  583
  614
  646
  679
  714
  751
  789
  829
  872
  916
  963
Fixed operating expenses, $m
 
  106
  108
  111
  114
  117
  119
  122
  125
  129
  132
  135
  139
  142
  146
  149
  153
  157
  161
  165
  169
  173
  177
  182
  186
  191
  196
  201
  206
  211
  216
Total operating expenses, $m
  293
  312
  327
  344
  361
  379
  397
  416
  436
  458
  479
  500
  524
  548
  574
  600
  628
  657
  688
  719
  752
  787
  823
  861
  900
  942
  985
  1,030
  1,078
  1,127
  1,179
Operating income, $m
  30
  32
  39
  46
  53
  60
  68
  76
  85
  94
  103
  115
  126
  137
  148
  161
  173
  187
  201
  216
  232
  249
  266
  285
  304
  325
  346
  369
  393
  419
  445
EBITDA, $m
  38
  41
  48
  55
  63
  71
  79
  88
  97
  107
  117
  127
  139
  150
  163
  176
  189
  204
  219
  235
  251
  269
  288
  307
  328
  350
  372
  397
  422
  449
  477
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
Earnings before tax, $m
  30
  32
  39
  45
  52
  60
  67
  75
  84
  93
  102
  114
  124
  135
  147
  159
  171
  185
  199
  213
  229
  245
  263
  281
  300
  320
  342
  364
  388
  413
  439
Tax expense, $m
  1
  9
  10
  12
  14
  16
  18
  20
  23
  25
  28
  31
  34
  36
  40
  43
  46
  50
  54
  58
  62
  66
  71
  76
  81
  87
  92
  98
  105
  111
  119
Net income, $m
  29
  24
  28
  33
  38
  44
  49
  55
  61
  68
  75
  83
  91
  99
  107
  116
  125
  135
  145
  156
  167
  179
  192
  205
  219
  234
  249
  266
  283
  301
  321

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  68
  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
  339
  289
  308
  328
  348
  369
  392
  415
  439
  464
  490
  518
  546
  576
  608
  640
  675
  710
  748
  787
  829
  872
  917
  964
  1,014
  1,066
  1,121
  1,178
  1,238
  1,301
  1,367
Adjusted assets (=assets-cash), $m
  271
  289
  308
  328
  348
  369
  392
  415
  439
  464
  490
  518
  546
  576
  608
  640
  675
  710
  748
  787
  829
  872
  917
  964
  1,014
  1,066
  1,121
  1,178
  1,238
  1,301
  1,367
Revenue / Adjusted assets
  1.188
  1.190
  1.188
  1.186
  1.190
  1.190
  1.186
  1.188
  1.187
  1.188
  1.188
  1.187
  1.189
  1.189
  1.188
  1.189
  1.187
  1.189
  1.189
  1.188
  1.187
  1.188
  1.188
  1.189
  1.188
  1.188
  1.187
  1.188
  1.188
  1.188
  1.188
Average production assets, $m
  75
  79
  85
  90
  96
  101
  107
  114
  120
  127
  135
  142
  150
  158
  167
  176
  185
  195
  205
  216
  227
  239
  252
  265
  278
  293
  308
  323
  340
  357
  375
Working capital, $m
  196
  137
  146
  155
  165
  175
  185
  196
  208
  219
  232
  245
  258
  272
  287
  303
  319
  336
  354
  372
  392
  412
  434
  456
  479
  504
  530
  557
  585
  615
  646
Total debt, $m
  1
  4
  7
  10
  14
  17
  21
  25
  29
  33
  37
  42
  47
  52
  57
  62
  68
  74
  80
  87
  94
  101
  108
  116
  124
  133
  142
  152
  161
  172
  183
Total liabilities, $m
  45
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  152
  160
  168
  177
  186
  196
  205
  216
  227
Total equity, $m
  294
  241
  257
  273
  290
  308
  327
  346
  366
  387
  409
  432
  456
  481
  507
  534
  563
  593
  624
  657
  691
  727
  765
  804
  846
  889
  935
  982
  1,032
  1,085
  1,140
Total liabilities and equity, $m
  339
  289
  308
  327
  348
  369
  392
  415
  439
  464
  490
  518
  547
  577
  608
  640
  675
  711
  748
  788
  829
  872
  917
  964
  1,014
  1,066
  1,121
  1,178
  1,237
  1,301
  1,367
Debt-to-equity ratio
  0.003
  0.020
  0.030
  0.040
  0.050
  0.060
  0.060
  0.070
  0.080
  0.090
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
Adjusted equity ratio
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  29
  24
  28
  33
  38
  44
  49
  55
  61
  68
  75
  83
  91
  99
  107
  116
  125
  135
  145
  156
  167
  179
  192
  205
  219
  234
  249
  266
  283
  301
  321
Depreciation, amort., depletion, $m
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
Funds from operations, $m
  8
  32
  37
  43
  48
  54
  60
  67
  73
  81
  88
  95
  103
  112
  121
  131
  141
  151
  162
  174
  186
  199
  213
  227
  243
  259
  276
  293
  312
  332
  352
Change in working capital, $m
  -7
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  25
  26
  27
  28
  30
  31
Cash from operations, $m
  15
  24
  28
  33
  39
  44
  50
  56
  62
  69
  76
  82
  90
  98
  106
  115
  125
  134
  145
  156
  167
  179
  192
  205
  219
  234
  250
  266
  284
  302
  321
Maintenance CAPEX, $m
  0
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
New CAPEX, $m
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
Cash from investing activities, $m
  20
  -11
  -12
  -12
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -43
  -46
  -48
Free cash flow, $m
  35
  13
  17
  21
  25
  30
  35
  40
  46
  52
  58
  63
  70
  77
  84
  92
  100
  109
  118
  127
  137
  148
  159
  171
  183
  196
  210
  224
  240
  256
  273
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  0
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
Total cash flow (excl. dividends), $m
  35
  16
  20
  24
  29
  34
  39
  44
  50
  56
  62
  68
  75
  82
  90
  98
  106
  115
  124
  134
  144
  155
  167
  179
  191
  205
  219
  234
  250
  266
  284
Retained Cash Flow (-), $m
  -23
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -46
  -48
  -50
  -53
  -55
Prev. year cash balance distribution, $m
 
  68
  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
 
  68
  4
  8
  12
  16
  20
  25
  30
  35
  40
  45
  51
  57
  63
  70
  77
  85
  93
  101
  110
  119
  129
  139
  150
  161
  173
  186
  200
  214
  229
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  66
  4
  7
  10
  12
  15
  17
  19
  20
  21
  21
  22
  22
  21
  21
  20
  18
  17
  16
  14
  12
  11
  9
  8
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
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CSS Industries, Inc. is a consumer products company, which is engaged in the design, manufacture, procurement, distribution and sale of non-durable all occasion and seasonal social expression products, principally to mass market retailers in the United States and Canada. The Company's occasion and seasonal products include classroom exchange Valentines, infant products, journals, buttons, gift wrap, floral accessories, craft and educational products, Easter egg dyes and novelties, memory books, scrapbooks, stickers, stationery and other items. Its Christmas products include decorative ribbons and bows, boxed greeting cards, gift tags, gift bags, gift boxes, gift card holders, tissue paper and decorations. Valentine product offerings include classroom exchange Valentine cards and other related Valentine products, while its Easter product offerings include Dudley's brand of Easter egg dyes and related Easter seasonal products. Its brands include Paper Magic, Berwick, Offray and others.

FINANCIAL RATIOS  of  CSS Industries (CSS)

Valuation Ratios
P/E Ratio 9.3
Price to Sales 0.8
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 18
Price to Free Cash Flow 26.9
Growth Rates
Sales Growth Rate 1.6%
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 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 0.3%
Total Debt to Equity 0.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. 6.7%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 10.3%
Return On Equity - 3 Yr. Avg. 7.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 28.9%
Gross Margin - 3 Yr. Avg. 31.2%
EBITDA Margin 11.8%
EBITDA Margin - 3 Yr. Avg. 11.3%
Operating Margin 9%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 9.3%
Pre-Tax Margin - 3 Yr. Avg. 8.8%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 6.6%
Effective Tax Rate 3.3%
Eff/ Tax Rate - 3 Yr. Avg. 25.8%
Payout Ratio 24.1%

CSS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSS stock intrinsic value calculation we used $322 million for the last fiscal year's total revenue generated by CSS Industries. The default revenue input number comes from 2017 income statement of CSS Industries. 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 CSS stock valuation model: a) initial revenue growth rate of 6.7% 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 4.3%, whose default value for CSS is calculated based on our internal credit rating of CSS Industries, 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 CSS Industries.
    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 CSS stock the variable cost ratio is equal to 59.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $103 million in the base year in the intrinsic value calculation for CSS 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 3.5% for CSS Industries.

Corporate tax rate of 27% is the nominal tax rate for CSS Industries. 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 CSS 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 CSS are equal to 23.1%.

Life of production assets of 11.8 years is the average useful life of capital assets used in CSS Industries 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 CSS is equal to 39.8%. 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 - $294 million for CSS Industries - 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 9.115 million for CSS Industries 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 CSS Industries at the current share price and the inputted number of shares is $0.3 billion.

RELATED COMPANIES Price Int.Val. Rating
CTIB CTI Industries 4.00 3.13  sell
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MMM 3M 218.72 131.44  sell
PRTY Party City Hol 11.90 20.09  buy
ACCO ACCO Brands 13.00 15.61  buy

COMPANY NEWS

▶ CSS Industries reports 1Q loss   [Aug-01-17 11:37PM  Associated Press]
▶ CSS Industries reports 4Q loss   [Jun-07-17 04:50PM  Associated Press]
▶ ETFs with exposure to CSS Industries, Inc. : May 9, 2017   [May-09-17 04:29PM  Capital Cube]
▶ CSS Industries posts 3Q profit   [Feb-06-17 04:56PM  Associated Press]
▶ Is Fluidigm Corporation (FLDM) A Good Stock To Buy?   [Dec-15-16 11:19AM  at Insider Monkey]
▶ Do Hedge Funds Love UMH Properties, Inc (UMH)?   [Dec-01  12:47PM  at Insider Monkey]
▶ Is Mobileiron Inc (MOBL) A Good Stock To Buy?   [Nov-25  02:16PM  at Insider Monkey]
▶ 10-Q for CSS Industries, Inc.   [Jul-30  08:09PM  at Company Spotlight]
▶ 10-K for CSS Industries, Inc.   [May-24  08:09PM  at Company Spotlight]
Financial statements of CSS
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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