Intrinsic value of CSS Industries - CSS

Previous Close

$26.28

  Intrinsic Value

$7.15

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  Rating & Target

str. sell

-73%

  Value-price divergence*

-57%

Previous close

$26.28

 
Intrinsic value

$7.15

 
Up/down potential

-73%

 
Rating

str. sell

 
Value-price divergence*

-57%

*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 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 0.2

 

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, %
  1.28
  11.40
  10.76
  10.18
  9.67
  9.20
  8.78
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  317
  353
  391
  431
  473
  516
  561
  609
  658
  709
  762
  817
  874
  933
  995
  1,060
  1,127
  1,196
  1,269
  1,344
  1,423
  1,506
  1,591
  1,681
  1,775
  1,872
  1,975
  2,081
  2,193
  2,310
  2,433
Variable operating expenses, $m
 
  323
  357
  394
  431
  471
  512
  555
  600
  646
  694
  742
  794
  848
  904
  963
  1,024
  1,087
  1,153
  1,222
  1,293
  1,368
  1,446
  1,528
  1,613
  1,701
  1,794
  1,891
  1,993
  2,099
  2,211
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
  290
  323
  357
  394
  431
  471
  512
  555
  600
  646
  694
  742
  794
  848
  904
  963
  1,024
  1,087
  1,153
  1,222
  1,293
  1,368
  1,446
  1,528
  1,613
  1,701
  1,794
  1,891
  1,993
  2,099
  2,211
Operating income, $m
  27
  30
  34
  37
  41
  45
  49
  54
  58
  63
  68
  75
  80
  85
  91
  97
  103
  109
  116
  123
  130
  137
  145
  153
  162
  171
  180
  190
  200
  211
  222
EBITDA, $m
  35
  39
  43
  48
  52
  57
  62
  68
  73
  79
  84
  91
  97
  104
  110
  118
  125
  133
  141
  149
  158
  167
  177
  186
  197
  208
  219
  231
  243
  256
  270
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  27
  30
  34
  37
  41
  44
  48
  53
  57
  61
  66
  73
  78
  83
  88
  94
  100
  106
  112
  119
  126
  133
  140
  148
  156
  165
  174
  183
  193
  203
  214
Tax expense, $m
  10
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  58
Net income, $m
  17
  22
  24
  27
  30
  32
  35
  38
  41
  45
  48
  53
  57
  60
  64
  68
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
  127
  134
  141
  148
  156

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  80
  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
  310
  256
  284
  313
  343
  375
  407
  442
  477
  514
  553
  593
  634
  677
  722
  769
  818
  868
  921
  976
  1,033
  1,093
  1,155
  1,220
  1,288
  1,359
  1,433
  1,511
  1,592
  1,677
  1,765
Adjusted assets (=assets-cash), $m
  230
  256
  284
  313
  343
  375
  407
  442
  477
  514
  553
  593
  634
  677
  722
  769
  818
  868
  921
  976
  1,033
  1,093
  1,155
  1,220
  1,288
  1,359
  1,433
  1,511
  1,592
  1,677
  1,765
Revenue / Adjusted assets
  1.378
  1.379
  1.377
  1.377
  1.379
  1.376
  1.378
  1.378
  1.379
  1.379
  1.378
  1.378
  1.379
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.377
  1.378
  1.378
  1.377
  1.378
  1.378
  1.377
  1.378
  1.377
  1.378
  1.377
  1.378
Average production assets, $m
  64
  71
  79
  87
  95
  104
  113
  123
  133
  143
  154
  165
  177
  189
  201
  214
  228
  242
  256
  272
  288
  304
  321
  340
  358
  378
  399
  420
  443
  467
  491
Working capital, $m
  177
  108
  120
  132
  145
  158
  172
  186
  201
  217
  233
  250
  267
  286
  305
  324
  345
  366
  388
  411
  436
  461
  487
  514
  543
  573
  604
  637
  671
  707
  744
Total debt, $m
  0
  5
  9
  14
  19
  25
  30
  36
  42
  48
  55
  62
  69
  76
  84
  92
  100
  109
  118
  127
  137
  147
  157
  168
  180
  192
  205
  218
  232
  246
  261
Total liabilities, $m
  38
  44
  48
  53
  58
  64
  69
  75
  81
  87
  94
  101
  108
  115
  123
  131
  139
  148
  157
  166
  176
  186
  196
  207
  219
  231
  244
  257
  271
  285
  300
Total equity, $m
  271
  213
  236
  260
  285
  311
  338
  367
  396
  427
  459
  492
  526
  562
  599
  638
  679
  721
  764
  810
  857
  907
  959
  1,013
  1,069
  1,128
  1,189
  1,254
  1,321
  1,392
  1,465
Total liabilities and equity, $m
  309
  257
  284
  313
  343
  375
  407
  442
  477
  514
  553
  593
  634
  677
  722
  769
  818
  869
  921
  976
  1,033
  1,093
  1,155
  1,220
  1,288
  1,359
  1,433
  1,511
  1,592
  1,677
  1,765
Debt-to-equity ratio
  0.000
  0.020
  0.040
  0.050
  0.070
  0.080
  0.090
  0.100
  0.110
  0.110
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
Adjusted equity ratio
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  17
  22
  24
  27
  30
  32
  35
  38
  41
  45
  48
  53
  57
  60
  64
  68
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
  127
  134
  141
  148
  156
Depreciation, amort., depletion, $m
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  16
  17
  18
  20
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
Funds from operations, $m
  -1
  31
  34
  37
  41
  45
  48
  52
  56
  61
  65
  69
  74
  79
  84
  89
  95
  101
  107
  113
  120
  126
  134
  141
  149
  157
  165
  174
  184
  193
  204
Change in working capital, $m
  -16
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
Cash from operations, $m
  15
  20
  23
  25
  28
  31
  34
  38
  41
  45
  49
  52
  56
  61
  65
  70
  74
  79
  84
  90
  95
  101
  107
  114
  120
  127
  134
  142
  149
  158
  166
Maintenance CAPEX, $m
  0
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
New CAPEX, $m
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -14
  -13
  -15
  -16
  -16
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -30
  -33
  -35
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -70
Free cash flow, $m
  1
  6
  8
  10
  11
  13
  15
  17
  19
  22
  24
  26
  29
  31
  34
  37
  40
  43
  46
  50
  53
  57
  60
  64
  68
  72
  77
  81
  86
  91
  96
Issuance/(repayment) of debt, $m
  0
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
Issuance/(repurchase) of shares, $m
  -11
  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  
  -11
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
Total cash flow (excl. dividends), $m
  -10
  11
  13
  14
  16
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  45
  48
  52
  55
  59
  63
  67
  71
  75
  80
  85
  89
  94
  100
  105
  111
Retained Cash Flow (-), $m
  -1
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -47
  -50
  -52
  -54
  -56
  -59
  -62
  -64
  -67
  -70
  -74
Prev. year cash balance distribution, $m
 
  80
  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
 
  69
  -10
  -10
  -9
  -8
  -6
  -5
  -4
  -3
  -1
  0
  1
  3
  5
  6
  8
  10
  12
  13
  15
  17
  19
  21
  23
  26
  28
  30
  32
  35
  37
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
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -2
  -1
  0
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  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
  100.0

CSS Industries, Inc., a consumer products company, engages in the design, manufacture, procurement, distribution, and sale of various occasion and seasonal social expression products primarily to mass market retailers in the United States and Canada. Its occasion and seasonal products include decorative ribbons and bows, classroom exchange Valentines, infant products, journals, buttons, boxed greeting cards, gift tags, gift card holders, gift bags, gift wrap, decorations, floral accessories, craft and educational products, Easter egg dyes and novelties, memory books, scrapbooks, stickers, stationery, and other items. The company offers its products primarily under the Paper Magic, Berwick, Offray, C.R. Gibson, Markings, Stepping Stones, Tapestry, Seastone, DudleyÂ’s, Eureka, Stickerfitti, Favorite Findings, and La Mode brand names. CSS Industries, Inc. sells its products to mass market, craft, specialty, and floral retail and wholesale distribution customers, as well as to the education market through account sales managers, sales representatives, product specialists, and a network of independent manufacturersÂ’ representatives. The company was founded in 1923 and is headquartered in Plymouth Meeting, Pennsylvania.

FINANCIAL RATIOS  of  CSS Industries (CSS)

Valuation Ratios
P/E Ratio 14
Price to Sales 0.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 15.8
Price to Free Cash Flow 26.4
Growth Rates
Sales Growth Rate 1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.4
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.5%
Ret/ On Assets - 3 Yr. Avg. 5.9%
Return On Total Capital 6.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.7%
Return On Equity 6.3%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 32.2%
Gross Margin - 3 Yr. Avg. 32.3%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 11.2%
Operating Margin 8.5%
Oper. Margin - 3 Yr. Avg. 8.5%
Pre-Tax Margin 8.5%
Pre-Tax Margin - 3 Yr. Avg. 8.6%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 37%
Eff/ Tax Rate - 3 Yr. Avg. 35.4%
Payout Ratio 41.2%

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 $317 million for the last fiscal year's total revenue generated by CSS Industries. The default revenue input number comes from 2016 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 11.4% 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 91.5%.

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 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 20.2%.

Life of production assets of 10.3 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 30.6%. 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 - $271 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 8.773 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 $0.2 billion.

RELATED COMPANIES Price Int.Val. Rating
CTIB CTI Industries 4.60 2.91  sell
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MMM 3M 205.35 143.59  sell
PRTY Party City Hol 13.70 19.64  buy
ACCO ACCO Brands 10.75 20.65  str.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]
Stock chart of CSS 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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