Intrinsic value of Cavco Industries - CVCO

Previous Close

$118.75

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$118.75

 
Intrinsic value

$71.54

 
Up/down potential

-40%

 
Rating

sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of CVCO 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 1.1

 

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, %
  25.57
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
Revenue, $m
  712
  795
  882
  973
  1,068
  1,168
  1,272
  1,380
  1,492
  1,610
  1,731
  1,858
  1,989
  2,125
  2,267
  2,415
  2,568
  2,728
  2,895
  3,068
  3,249
  3,437
  3,634
  3,839
  4,054
  4,278
  4,512
  4,757
  5,013
  5,281
  5,562
Variable operating expenses, $m
 
  739
  819
  903
  991
  1,083
  1,178
  1,278
  1,382
  1,490
  1,602
  1,711
  1,832
  1,958
  2,089
  2,225
  2,366
  2,513
  2,667
  2,826
  2,993
  3,166
  3,348
  3,537
  3,734
  3,941
  4,156
  4,382
  4,618
  4,865
  5,123
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
  666
  739
  819
  903
  991
  1,083
  1,178
  1,278
  1,382
  1,490
  1,602
  1,711
  1,832
  1,958
  2,089
  2,225
  2,366
  2,513
  2,667
  2,826
  2,993
  3,166
  3,348
  3,537
  3,734
  3,941
  4,156
  4,382
  4,618
  4,865
  5,123
Operating income, $m
  46
  56
  62
  70
  77
  85
  93
  102
  111
  120
  129
  146
  157
  168
  179
  190
  202
  215
  228
  242
  256
  271
  286
  303
  320
  337
  356
  375
  395
  416
  438
EBITDA, $m
  50
  65
  72
  79
  87
  95
  104
  113
  122
  131
  141
  152
  162
  173
  185
  197
  210
  223
  236
  250
  265
  281
  297
  313
  331
  349
  368
  388
  409
  431
  454
Interest expense (income), $m
  4
  3
  5
  6
  8
  9
  11
  13
  14
  16
  18
  20
  22
  24
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
  78
Earnings before tax, $m
  44
  52
  58
  64
  70
  76
  82
  89
  96
  104
  111
  126
  135
  143
  152
  161
  171
  181
  192
  203
  214
  226
  238
  251
  265
  279
  294
  309
  325
  342
  360
Tax expense, $m
  15
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
  72
  75
  79
  83
  88
  92
  97
Net income, $m
  29
  38
  42
  46
  51
  55
  60
  65
  70
  76
  81
  92
  98
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
  204
  214
  226
  238
  250
  263

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  108
  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
  554
  498
  552
  609
  669
  732
  797
  865
  935
  1,008
  1,085
  1,164
  1,246
  1,332
  1,421
  1,513
  1,609
  1,709
  1,814
  1,922
  2,036
  2,154
  2,277
  2,406
  2,540
  2,680
  2,827
  2,981
  3,141
  3,309
  3,485
Adjusted assets (=assets-cash), $m
  446
  498
  552
  609
  669
  732
  797
  865
  935
  1,008
  1,085
  1,164
  1,246
  1,332
  1,421
  1,513
  1,609
  1,709
  1,814
  1,922
  2,036
  2,154
  2,277
  2,406
  2,540
  2,680
  2,827
  2,981
  3,141
  3,309
  3,485
Revenue / Adjusted assets
  1.596
  1.596
  1.598
  1.598
  1.596
  1.596
  1.596
  1.595
  1.596
  1.597
  1.595
  1.596
  1.596
  1.595
  1.595
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
  1.596
Average production assets, $m
  60
  67
  74
  82
  90
  98
  107
  116
  125
  135
  145
  156
  167
  179
  190
  203
  216
  229
  243
  258
  273
  289
  305
  323
  341
  359
  379
  400
  421
  444
  467
Working capital, $m
  174
  83
  93
  102
  112
  123
  134
  145
  157
  169
  182
  195
  209
  223
  238
  254
  270
  286
  304
  322
  341
  361
  382
  403
  426
  449
  474
  499
  526
  555
  584
Total debt, $m
  64
  77
  101
  125
  151
  178
  206
  235
  265
  297
  329
  363
  399
  436
  474
  514
  555
  598
  643
  690
  738
  789
  842
  897
  955
  1,016
  1,079
  1,145
  1,214
  1,286
  1,361
Total liabilities, $m
  201
  214
  238
  262
  288
  315
  343
  372
  402
  434
  466
  500
  536
  573
  611
  651
  692
  735
  780
  827
  875
  926
  979
  1,034
  1,092
  1,153
  1,216
  1,282
  1,351
  1,423
  1,498
Total equity, $m
  353
  284
  315
  347
  381
  417
  454
  493
  533
  575
  618
  663
  710
  759
  810
  862
  917
  974
  1,034
  1,096
  1,160
  1,228
  1,298
  1,371
  1,448
  1,528
  1,611
  1,699
  1,790
  1,886
  1,986
Total liabilities and equity, $m
  554
  498
  553
  609
  669
  732
  797
  865
  935
  1,009
  1,084
  1,163
  1,246
  1,332
  1,421
  1,513
  1,609
  1,709
  1,814
  1,923
  2,035
  2,154
  2,277
  2,405
  2,540
  2,681
  2,827
  2,981
  3,141
  3,309
  3,484
Debt-to-equity ratio
  0.181
  0.270
  0.320
  0.360
  0.400
  0.430
  0.450
  0.480
  0.500
  0.520
  0.530
  0.550
  0.560
  0.570
  0.590
  0.600
  0.610
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.680
  0.690
Adjusted equity ratio
  0.549
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  29
  38
  42
  46
  51
  55
  60
  65
  70
  76
  81
  92
  98
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
  193
  204
  214
  226
  238
  250
  263
Depreciation, amort., depletion, $m
  4
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
Funds from operations, $m
  63
  47
  52
  56
  61
  66
  71
  76
  82
  87
  93
  97
  104
  111
  117
  125
  132
  140
  148
  157
  165
  175
  184
  194
  205
  216
  227
  239
  252
  265
  278
Change in working capital, $m
  19
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Cash from operations, $m
  44
  45
  43
  47
  51
  55
  60
  65
  70
  75
  80
  84
  90
  96
  103
  109
  116
  123
  131
  138
  146
  155
  164
  173
  182
  192
  202
  213
  225
  237
  249
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
New CAPEX, $m
  -4
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -38
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -23
  -24
  -25
  -27
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
Free cash flow, $m
  6
  36
  33
  36
  40
  44
  48
  52
  56
  61
  66
  69
  74
  79
  85
  90
  96
  103
  109
  116
  123
  130
  137
  145
  153
  162
  171
  180
  190
  200
  211
Issuance/(repayment) of debt, $m
  -6
  22
  23
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
Issuance/(repurchase) of shares, $m
  1
  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  
  -4
  22
  23
  25
  26
  27
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
Total cash flow (excl. dividends), $m
  1
  58
  56
  61
  66
  71
  76
  81
  87
  92
  98
  103
  109
  116
  123
  130
  138
  146
  154
  162
  171
  181
  190
  201
  211
  222
  234
  246
  259
  272
  286
Retained Cash Flow (-), $m
  -33
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -73
  -77
  -80
  -84
  -87
  -91
  -96
  -100
Prev. year cash balance distribution, $m
 
  99
  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
 
  127
  25
  28
  32
  35
  39
  43
  46
  51
  55
  58
  62
  67
  72
  77
  83
  89
  94
  100
  107
  113
  120
  127
  135
  142
  150
  159
  167
  176
  186
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
 
  122
  23
  25
  26
  27
  28
  29
  29
  29
  29
  27
  27
  26
  24
  23
  21
  19
  17
  15
  14
  12
  10
  8
  7
  6
  4
  3
  3
  2
  1
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

Cavco Industries, Inc. engages in the design, production, and retail sale of manufactured homes in the United States. It operates through two segments, Factory-Built Housing and Financial Services. The company markets its manufactured homes under the Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Fairmont Homes, and Chariot Eagle brands. It also produces modular homes, including single and multi-section/modular ranch-style dwellings, split-level homes, Cape Cod style homes, two and three story homes, and multi-family units under the Nationwide Homes brand name. In addition, the company builds park model RVs and vacation cabins, as well as systems-built commercial structures, such as apartment buildings, condominiums, hotels, workforce housing, schools, and housing for U.S. military troops. Further, it offers conforming mortgages, non-conforming mortgages, and chattel loans to purchasers factory-built and site-built homes; and property and casualty insurance to owners of manufactured homes. As of April 2, 2016, the company owned and operated a network of 45 retail centers located in Oregon, Arizona, New Mexico, Texas, Oklahoma, Louisiana, Virginia, North Carolina, and Florida. It also distributes its homes through a network of independent distribution points in 44 states in the United States, Canada, Japan, and Mexico, as well as through planned community operators and residential developers. The company was founded in 1965 and is headquartered in Phoenix, Arizona.

FINANCIAL RATIOS  of  Cavco Industries (CVCO)

Valuation Ratios
P/E Ratio 36.6
Price to Sales 1.5
Price to Book 3
Price to Tangible Book
Price to Cash Flow 24.1
Price to Free Cash Flow 26.5
Growth Rates
Sales Growth Rate 25.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 12
Current Ratio 0.2
LT Debt to Equity 15.6%
Total Debt to Equity 18.1%
Interest Coverage 12
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 8.6%
Return On Equity - 3 Yr. Avg. 7.8%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 20.2%
Gross Margin - 3 Yr. Avg. 21.6%
EBITDA Margin 7.3%
EBITDA Margin - 3 Yr. Avg. 7.4%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 6.2%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. 3.8%
Effective Tax Rate 34.1%
Eff/ Tax Rate - 3 Yr. Avg. 33.8%
Payout Ratio 0%

CVCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVCO stock intrinsic value calculation we used $712 million for the last fiscal year's total revenue generated by Cavco Industries. The default revenue input number comes from 2016 income statement of Cavco 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 CVCO stock valuation model: a) initial revenue growth rate of 11.6% 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 CVCO is calculated based on our internal credit rating of Cavco 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 Cavco 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 CVCO stock the variable cost ratio is equal to 93.1%.

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 CVCO 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 6.1% for Cavco Industries.

Corporate tax rate of 27% is the nominal tax rate for Cavco 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 CVCO 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 CVCO are equal to 8.4%.

Life of production assets of 32 years is the average useful life of capital assets used in Cavco 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 CVCO is equal to 10.5%. 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 - $353 million for Cavco 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 8.935 million for Cavco 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 Cavco Industries at the current share price and the inputted number of shares is $1.1 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
SKY Skyline 6.65 30.70  str.buy
PATK Patrick Indust 66.20 115.20  str.buy

COMPANY NEWS

▶ Cavco posts 3Q profit   [Feb-06-17 04:42PM  Associated Press]
▶ Is Cavco Industries, Inc. (CVCO) A Good Stock To Buy?   [Dec-14-16 08:07AM  at Insider Monkey]
▶ Should You Consider Cavco Industries, Inc. (CVCO)?   [Nov-26  08:13AM  at Insider Monkey]
▶ A.M. Best Affirms Ratings of Standard Casualty Company   [Nov-04  01:36PM  Business Wire]
▶ RV/Mobile Home Industry Group Is Surging In Rankings   [Nov-02  05:49PM  at Investor's Business Daily]
▶ 10-Q for Cavco Industries, Inc.   [Aug-08  08:10PM  at Company Spotlight]
Stock chart of CVCO Financial statements of CVCO
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.