Intrinsic value of Cavco Industries - CVCO

Previous Close

$169.05

  Intrinsic Value

$131.25

stock screener

  Rating & Target

sell

-22%

Previous close

$169.05

 
Intrinsic value

$131.25

 
Up/down potential

-22%

 
Rating

sell

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

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, %
  8.71
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  774
  841
  911
  984
  1,060
  1,139
  1,221
  1,306
  1,394
  1,486
  1,582
  1,681
  1,785
  1,892
  2,005
  2,122
  2,244
  2,372
  2,505
  2,644
  2,790
  2,942
  3,101
  3,267
  3,441
  3,624
  3,814
  4,014
  4,224
  4,443
  4,673
Variable operating expenses, $m
 
  692
  749
  808
  870
  934
  1,001
  1,070
  1,142
  1,217
  1,294
  1,368
  1,453
  1,540
  1,632
  1,727
  1,827
  1,931
  2,039
  2,152
  2,271
  2,395
  2,524
  2,659
  2,801
  2,949
  3,105
  3,267
  3,438
  3,616
  3,803
Fixed operating expenses, $m
 
  84
  86
  88
  91
  93
  95
  97
  100
  102
  105
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
Total operating expenses, $m
  717
  776
  835
  896
  961
  1,027
  1,096
  1,167
  1,242
  1,319
  1,399
  1,476
  1,563
  1,653
  1,748
  1,846
  1,949
  2,056
  2,167
  2,283
  2,405
  2,533
  2,665
  2,804
  2,949
  3,101
  3,261
  3,427
  3,602
  3,784
  3,975
Operating income, $m
  57
  65
  76
  88
  100
  112
  125
  138
  152
  167
  182
  205
  222
  239
  257
  276
  296
  317
  338
  361
  385
  410
  436
  463
  492
  522
  554
  587
  622
  659
  697
EBITDA, $m
  61
  75
  86
  98
  110
  122
  135
  149
  163
  178
  194
  210
  227
  244
  263
  282
  302
  323
  345
  368
  393
  418
  445
  473
  502
  533
  565
  599
  634
  672
  711
Interest expense (income), $m
  3
  3
  3
  4
  5
  6
  7
  8
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  48
  51
Earnings before tax, $m
  55
  63
  73
  83
  94
  106
  118
  130
  143
  156
  170
  192
  207
  223
  240
  257
  276
  295
  315
  336
  358
  381
  405
  430
  457
  485
  514
  545
  577
  611
  647
Tax expense, $m
  17
  17
  20
  23
  25
  29
  32
  35
  39
  42
  46
  52
  56
  60
  65
  69
  74
  80
  85
  91
  97
  103
  109
  116
  123
  131
  139
  147
  156
  165
  175
Net income, $m
  38
  46
  53
  61
  69
  77
  86
  95
  104
  114
  124
  140
  151
  163
  175
  188
  201
  215
  230
  245
  261
  278
  295
  314
  333
  354
  375
  398
  421
  446
  472

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  144
  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
  607
  503
  545
  589
  634
  681
  730
  781
  834
  889
  946
  1,005
  1,067
  1,132
  1,199
  1,269
  1,342
  1,419
  1,498
  1,582
  1,669
  1,760
  1,855
  1,954
  2,058
  2,167
  2,281
  2,401
  2,526
  2,657
  2,795
Adjusted assets (=assets-cash), $m
  463
  503
  545
  589
  634
  681
  730
  781
  834
  889
  946
  1,005
  1,067
  1,132
  1,199
  1,269
  1,342
  1,419
  1,498
  1,582
  1,669
  1,760
  1,855
  1,954
  2,058
  2,167
  2,281
  2,401
  2,526
  2,657
  2,795
Revenue / Adjusted assets
  1.672
  1.672
  1.672
  1.671
  1.672
  1.673
  1.673
  1.672
  1.671
  1.672
  1.672
  1.673
  1.673
  1.671
  1.672
  1.672
  1.672
  1.672
  1.672
  1.671
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
  1.672
Average production assets, $m
  67
  72
  78
  85
  91
  98
  105
  112
  120
  128
  136
  145
  153
  163
  172
  183
  193
  204
  215
  227
  240
  253
  267
  281
  296
  312
  328
  345
  363
  382
  402
Working capital, $m
  217
  86
  93
  100
  108
  116
  125
  133
  142
  152
  161
  171
  182
  193
  205
  216
  229
  242
  256
  270
  285
  300
  316
  333
  351
  370
  389
  409
  431
  453
  477
Total debt, $m
  58
  70
  89
  108
  128
  149
  171
  194
  218
  242
  268
  294
  322
  351
  381
  412
  445
  479
  515
  552
  591
  632
  674
  718
  765
  814
  865
  918
  974
  1,033
  1,094
Total liabilities, $m
  213
  225
  244
  263
  283
  304
  326
  349
  373
  397
  423
  449
  477
  506
  536
  567
  600
  634
  670
  707
  746
  787
  829
  873
  920
  969
  1,020
  1,073
  1,129
  1,188
  1,249
Total equity, $m
  394
  278
  301
  326
  351
  377
  404
  432
  461
  491
  523
  556
  590
  626
  663
  702
  742
  785
  829
  875
  923
  973
  1,026
  1,081
  1,138
  1,198
  1,262
  1,328
  1,397
  1,469
  1,545
Total liabilities and equity, $m
  607
  503
  545
  589
  634
  681
  730
  781
  834
  888
  946
  1,005
  1,067
  1,132
  1,199
  1,269
  1,342
  1,419
  1,499
  1,582
  1,669
  1,760
  1,855
  1,954
  2,058
  2,167
  2,282
  2,401
  2,526
  2,657
  2,794
Debt-to-equity ratio
  0.147
  0.250
  0.290
  0.330
  0.370
  0.400
  0.420
  0.450
  0.470
  0.490
  0.510
  0.530
  0.550
  0.560
  0.570
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
Adjusted equity ratio
  0.540
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553
  0.553

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  46
  53
  61
  69
  77
  86
  95
  104
  114
  124
  140
  151
  163
  175
  188
  201
  215
  230
  245
  261
  278
  295
  314
  333
  354
  375
  398
  421
  446
  472
Depreciation, amort., depletion, $m
  4
  9
  10
  10
  10
  10
  10
  11
  11
  11
  12
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
Funds from operations, $m
  56
  55
  63
  71
  79
  87
  96
  106
  115
  125
  136
  145
  156
  168
  181
  194
  208
  222
  237
  253
  269
  286
  304
  323
  343
  364
  386
  409
  433
  459
  486
Change in working capital, $m
  11
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
Cash from operations, $m
  45
  48
  56
  63
  71
  79
  88
  97
  106
  116
  126
  135
  146
  157
  169
  182
  195
  209
  223
  238
  254
  271
  288
  306
  326
  346
  367
  389
  412
  436
  462
Maintenance CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
New CAPEX, $m
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -7
  -8
  -8
  -9
  -10
  -10
  -10
  -10
  -12
  -12
  -12
  -14
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -21
  -21
  -22
  -23
  -24
  -26
  -26
  -28
  -30
  -31
  -33
Free cash flow, $m
  38
  40
  47
  54
  62
  70
  78
  86
  95
  104
  114
  122
  132
  143
  154
  166
  179
  192
  205
  219
  234
  250
  266
  283
  301
  320
  340
  361
  382
  405
  430
Issuance/(repayment) of debt, $m
  -4
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  44
  47
  49
  51
  53
  56
  59
  61
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  
  -3
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  44
  47
  49
  51
  53
  56
  59
  61
Total cash flow (excl. dividends), $m
  35
  58
  66
  74
  82
  91
  100
  109
  119
  129
  139
  148
  160
  172
  184
  198
  211
  226
  241
  256
  273
  290
  309
  328
  348
  369
  391
  414
  438
  464
  491
Retained Cash Flow (-), $m
  -41
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -73
  -76
Prev. year cash balance distribution, $m
 
  138
  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
 
  174
  43
  50
  57
  65
  73
  81
  89
  98
  108
  115
  126
  136
  147
  159
  171
  183
  197
  210
  225
  240
  256
  273
  290
  308
  328
  348
  369
  392
  415
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
 
  167
  39
  43
  47
  50
  53
  55
  56
  56
  56
  55
  54
  52
  49
  47
  43
  40
  36
  32
  29
  25
  21
  18
  15
  12
  10
  7
  6
  4
  3
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. designs and produces factory-built homes. The Company operates through two segments: factory-built housing, which includes wholesale and retail systems-built housing operations, and financial services, which includes manufactured housing consumer finance and insurance. Its factory-built homes are primarily distributed through a network of independent and the Company-owned retailers, planned community operators and residential developers. It markets its products under the brands, including Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Fairmont Homes and Chariot Eagle. It is also a builder of park model recreational vehicle (RVs), vacation cabins and systems-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand. It also produces a range of Cape Cod-style homes and multi-family units, and builds commercial modular structures, including apartment buildings, schools and housing for the United States military troops.

FINANCIAL RATIOS  of  Cavco Industries (CVCO)

Valuation Ratios
P/E Ratio 40
Price to Sales 2
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 33.8
Price to Free Cash Flow 38
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio 24
Current Ratio 0.2
LT Debt to Equity 13.2%
Total Debt to Equity 14.7%
Interest Coverage 19
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 6.1%
Return On Total Capital 8.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 10.2%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 20.4%
Gross Margin - 3 Yr. Avg. 21%
EBITDA Margin 8%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 30.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.4%
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 $774 million for the last fiscal year's total revenue generated by Cavco Industries. The default revenue input number comes from 2017 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 8.7% 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 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 82.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $82 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 4.9% 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 8.6%.

Life of production assets of 34.1 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 10.2%. 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 - $394 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 9.043 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 $1.5 billion.

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COMPANY NEWS

▶ Cavco posts 3Q profit   [Feb-06-18 06:01PM  Associated Press]
▶ Cavco Industries, Inc. to Host Earnings Call   [Nov-08-17 11:00AM  ACCESSWIRE]
▶ Cavco posts 2Q profit   [Nov-07-17 05:59PM  Associated Press]
▶ Cavco Industries Gets IBD Stock Rating Upgrade   [Sep-06-17 03:00AM  Investor's Business Daily]
▶ Cavco posts 1Q profit   [Aug-07-17 10:48PM  Associated Press]
▶ Cavco Industries Gets A Composite Rating Upgrade   [Jul-03-17 11:02AM  Investor's Business Daily]
▶ Company News for June 14, 2017   [10:28AM  Zacks]
▶ Cavco posts 4Q profit   [Jun-12-17 04:18PM  Associated Press]
▶ 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]
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.

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