Intrinsic value of Citi Trends - CTRN

Previous Close

$24.68

  Intrinsic Value

$19.51

stock screener

  Rating & Target

sell

-21%

Previous close

$24.68

 
Intrinsic value

$19.51

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of CTRN 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  1.61
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
Revenue, $m
  695
  764
  836
  911
  989
  1,070
  1,154
  1,242
  1,333
  1,428
  1,527
  1,629
  1,736
  1,846
  1,962
  2,082
  2,207
  2,337
  2,473
  2,615
  2,763
  2,918
  3,079
  3,248
  3,425
  3,609
  3,802
  4,005
  4,216
  4,438
  4,670
Variable operating expenses, $m
 
  737
  806
  879
  954
  1,032
  1,114
  1,199
  1,287
  1,378
  1,473
  1,572
  1,675
  1,782
  1,893
  2,009
  2,130
  2,255
  2,387
  2,524
  2,666
  2,816
  2,972
  3,134
  3,305
  3,483
  3,669
  3,864
  4,069
  4,282
  4,506
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
  676
  737
  806
  879
  954
  1,032
  1,114
  1,199
  1,287
  1,378
  1,473
  1,572
  1,675
  1,782
  1,893
  2,009
  2,130
  2,255
  2,387
  2,524
  2,666
  2,816
  2,972
  3,134
  3,305
  3,483
  3,669
  3,864
  4,069
  4,282
  4,506
Operating income, $m
  19
  27
  29
  32
  35
  37
  40
  43
  47
  50
  53
  57
  61
  65
  69
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
  126
  133
  140
  148
  155
  163
EBITDA, $m
  36
  39
  42
  46
  50
  54
  59
  63
  68
  73
  78
  83
  88
  94
  100
  106
  112
  119
  126
  133
  140
  148
  156
  165
  174
  183
  193
  203
  214
  225
  237
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
Earnings before tax, $m
  19
  27
  29
  31
  33
  36
  38
  41
  44
  46
  49
  52
  56
  59
  62
  66
  70
  74
  78
  82
  86
  91
  96
  101
  106
  111
  117
  123
  129
  136
  143
Tax expense, $m
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
Net income, $m
  13
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  90
  94
  99
  104

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  87
  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
  333
  270
  296
  322
  350
  379
  409
  440
  472
  506
  540
  577
  614
  654
  694
  737
  781
  827
  875
  926
  978
  1,033
  1,090
  1,150
  1,212
  1,278
  1,346
  1,418
  1,492
  1,571
  1,653
Adjusted assets (=assets-cash), $m
  246
  270
  296
  322
  350
  379
  409
  440
  472
  506
  540
  577
  614
  654
  694
  737
  781
  827
  875
  926
  978
  1,033
  1,090
  1,150
  1,212
  1,278
  1,346
  1,418
  1,492
  1,571
  1,653
Revenue / Adjusted assets
  2.825
  2.830
  2.824
  2.829
  2.826
  2.823
  2.822
  2.823
  2.824
  2.822
  2.828
  2.823
  2.827
  2.823
  2.827
  2.825
  2.826
  2.826
  2.826
  2.824
  2.825
  2.825
  2.825
  2.824
  2.826
  2.824
  2.825
  2.824
  2.826
  2.825
  2.825
Average production assets, $m
  55
  60
  66
  72
  78
  85
  91
  98
  105
  113
  121
  129
  137
  146
  155
  164
  174
  185
  195
  207
  218
  231
  243
  257
  271
  285
  300
  316
  333
  351
  369
Working capital, $m
  137
  55
  60
  66
  71
  77
  83
  89
  96
  103
  110
  117
  125
  133
  141
  150
  159
  168
  178
  188
  199
  210
  222
  234
  247
  260
  274
  288
  304
  320
  336
Total debt, $m
  0
  11
  22
  34
  46
  59
  72
  86
  100
  115
  130
  146
  163
  181
  199
  217
  237
  258
  279
  301
  324
  349
  374
  400
  428
  457
  487
  519
  552
  587
  623
Total liabilities, $m
  109
  120
  131
  143
  155
  168
  181
  195
  209
  224
  239
  255
  272
  290
  308
  326
  346
  367
  388
  410
  433
  458
  483
  509
  537
  566
  596
  628
  661
  696
  732
Total equity, $m
  224
  151
  165
  180
  195
  211
  228
  245
  263
  282
  301
  321
  342
  364
  387
  410
  435
  461
  488
  516
  545
  575
  607
  640
  675
  712
  750
  790
  831
  875
  921
Total liabilities and equity, $m
  333
  271
  296
  323
  350
  379
  409
  440
  472
  506
  540
  576
  614
  654
  695
  736
  781
  828
  876
  926
  978
  1,033
  1,090
  1,149
  1,212
  1,278
  1,346
  1,418
  1,492
  1,571
  1,653
Debt-to-equity ratio
  0.000
  0.070
  0.130
  0.190
  0.240
  0.280
  0.320
  0.350
  0.380
  0.410
  0.430
  0.460
  0.480
  0.500
  0.510
  0.530
  0.540
  0.560
  0.570
  0.580
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
Adjusted equity ratio
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557
  0.557

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  90
  94
  99
  104
Depreciation, amort., depletion, $m
  17
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
Funds from operations, $m
  44
  32
  34
  37
  40
  43
  46
  50
  53
  56
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  107
  112
  118
  125
  131
  138
  146
  153
  161
  169
  178
Change in working capital, $m
  4
  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
  15
  15
  16
  17
Cash from operations, $m
  40
  27
  29
  32
  34
  37
  40
  43
  46
  50
  53
  57
  60
  64
  68
  72
  77
  81
  86
  91
  96
  101
  107
  113
  119
  125
  132
  139
  146
  153
  161
Maintenance CAPEX, $m
  0
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -67
  -70
New CAPEX, $m
  -24
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
Cash from investing activities, $m
  -25
  -16
  -18
  -19
  -20
  -22
  -24
  -25
  -27
  -28
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -85
  -88
Free cash flow, $m
  15
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
  53
  56
  59
  63
  66
  69
  73
Issuance/(repayment) of debt, $m
  0
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
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  
  -1
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
Total cash flow (excl. dividends), $m
  14
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
  54
  56
  60
  63
  66
  70
  73
  77
  81
  85
  90
  94
  99
  104
  109
Retained Cash Flow (-), $m
  -12
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
Prev. year cash balance distribution, $m
 
  87
  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
 
  94
  8
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
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
 
  91
  8
  8
  9
  9
  10
  10
  10
  10
  10
  10
  9
  9
  8
  8
  7
  7
  6
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
  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
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Citi Trends, Inc. is a retailer of urban fashion apparel and accessories. The Company's segment is retail operations. The Company operates approximately 520 stores in both urban and rural markets in over 30 states. The Company offers products under its brands, such as Citi Steps and Red Ape. The Company's merchandise includes apparel, accessories and home. Within apparel, the Company offers fashion sportswear for men, women and children, including offerings for newborns, infants, toddlers, boys and girls. Accessories include handbags, jewelry, footwear, belts, intimate apparel, scrubs and sleepwear. The Company's home merchandise includes decorative home product, functional home product, beauty, books, toys and electronic accessories. The Company sources its merchandise from approximately 1,700 vendors, consisting of domestic manufacturers and importers.


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FINANCIAL RATIOS  of  Citi Trends (CTRN)

Valuation Ratios
P/E Ratio 28.3
Price to Sales 0.5
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 23
Growth Rates
Sales Growth Rate 1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 6%
Return On Equity 6%
Return On Equity - 3 Yr. Avg. 6%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 38.4%
Gross Margin - 3 Yr. Avg. 38.3%
EBITDA Margin 5.2%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin 2.7%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 2.6%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 27.7%
Payout Ratio 30.8%

CTRN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTRN stock intrinsic value calculation we used $695 million for the last fiscal year's total revenue generated by Citi Trends. The default revenue input number comes from 2017 income statement of Citi Trends. 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 CTRN stock valuation model: a) initial revenue growth rate of 9.9% 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 CTRN is calculated based on our internal credit rating of Citi Trends, 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 Citi Trends.
    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 CTRN stock the variable cost ratio is equal to 96.5%.

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 CTRN 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 Citi Trends.

Corporate tax rate of 27% is the nominal tax rate for Citi Trends. 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 CTRN 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 CTRN are equal to 7.9%.

Life of production assets of 3.2 years is the average useful life of capital assets used in Citi Trends 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 CTRN is equal to 7.2%. 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 - $224 million for Citi Trends - 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 13.761 million for Citi Trends 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 Citi Trends at the current share price and the inputted number of shares is $0.3 billion.

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AEO American Eagle 18.79 19.14  hold
GPS Gap 35.48 42.55  buy
GES Guess? 18.84 16.08  hold
URBN Urban Outfitte 35.10 32.82  hold
BURL Burlington Sto 126.66 20.61  str.sell
SSI Stage Stores 1.73 58.42  str.buy

COMPANY NEWS

▶ Citi Trends Announces 2017 Holiday Sales Results   [Jan-08-18 04:05PM  Business Wire]
▶ Is Citi Trends Inc (CTRN) Undervalued?   [Nov-23-17 06:41AM  Simply Wall St.]
▶ Citi Trends posts 3Q profit   [Nov-21-17 06:51AM  Associated Press]
▶ Citi Trends Declares Dividend   [Nov-16-17 08:17AM  Business Wire]
▶ Citi Trends reports 2Q loss   [Aug-16-17 09:58PM  Associated Press]
▶ ETFs with exposure to Citi Trends, Inc. : July 10, 2017   [Jul-10-17 02:15PM  Capital Cube]
▶ ETFs with exposure to Citi Trends, Inc. : June 13, 2017   [Jun-13-17 12:24PM  Capital Cube]
▶ ETFs with exposure to Citi Trends, Inc. : June 2, 2017   [Jun-02-17 02:00PM  Capital Cube]
▶ Macellum Sets the Record Straight   [07:00AM  PR Newswire]
▶ Stock Market News for May 18, 2017   [May-18-17 09:43AM  Zacks]
▶ Citi Trends posts 1Q profit   [06:50AM  Associated Press]
▶ Citi Trends Announces Higher First Quarter 2017 Sales   [May-03-17 06:45AM  Business Wire]
▶ Stock Market News for April 11, 2017   [Apr-11-17 09:51AM  Zacks]
▶ ETFs with exposure to Citi Trends, Inc. : April 7, 2017   [Apr-07-17 04:17PM  Capital Cube]
▶ CEO Mazzola of Activist-Targeted Citi Trends Resigns   [Mar-23-17 05:16PM  TheStreet.com]
▶ Is Citi Trends, Inc. (CTRN) A Good Stock To Buy?   [Dec-09-16 05:01AM  at Insider Monkey]
Financial statements of CTRN
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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