Intrinsic value of Dollar Tree - DLTR

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$79.00

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$79.00

 
Intrinsic value

$72.74

 
Up/down potential

-8%

 
Rating

hold

 
Value-price divergence* premium content

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

We calculate the intrinsic value of DLTR 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 18.4

 

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, %
  33.69
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.00
Revenue, $m
  20,719
  21,776
  22,884
  24,047
  25,267
  26,547
  27,890
  29,299
  30,778
  32,330
  33,959
  35,669
  37,463
  39,347
  41,325
  43,400
  45,579
  47,867
  50,268
  52,789
  55,435
  58,214
  61,131
  64,194
  67,409
  70,785
  74,329
  78,050
  81,957
  86,059
  90,367
Variable operating expenses, $m
 
  19,006
  19,948
  20,936
  21,973
  23,060
  24,202
  25,399
  26,656
  27,975
  29,359
  30,310
  31,835
  33,435
  35,116
  36,879
  38,731
  40,675
  42,715
  44,857
  47,106
  49,467
  51,946
  54,549
  57,281
  60,149
  63,161
  66,323
  69,643
  73,129
  76,789
Fixed operating expenses, $m
 
  943
  967
  991
  1,016
  1,041
  1,067
  1,094
  1,121
  1,149
  1,178
  1,207
  1,237
  1,268
  1,300
  1,332
  1,366
  1,400
  1,435
  1,471
  1,508
  1,545
  1,584
  1,623
  1,664
  1,706
  1,748
  1,792
  1,837
  1,883
  1,930
Total operating expenses, $m
  19,014
  19,949
  20,915
  21,927
  22,989
  24,101
  25,269
  26,493
  27,777
  29,124
  30,537
  31,517
  33,072
  34,703
  36,416
  38,211
  40,097
  42,075
  44,150
  46,328
  48,614
  51,012
  53,530
  56,172
  58,945
  61,855
  64,909
  68,115
  71,480
  75,012
  78,719
Operating income, $m
  1,705
  1,826
  1,969
  2,120
  2,278
  2,445
  2,621
  2,806
  3,001
  3,206
  3,422
  4,152
  4,392
  4,644
  4,909
  5,188
  5,482
  5,792
  6,118
  6,461
  6,822
  7,201
  7,601
  8,022
  8,464
  8,930
  9,420
  9,935
  10,477
  11,048
  11,648
EBITDA, $m
  2,343
  2,700
  2,862
  3,032
  3,211
  3,400
  3,599
  3,808
  4,028
  4,260
  4,503
  4,760
  5,030
  5,314
  5,613
  5,928
  6,259
  6,608
  6,975
  7,360
  7,766
  8,194
  8,643
  9,116
  9,613
  10,136
  10,687
  11,265
  11,874
  12,515
  13,188
Interest expense (income), $m
  329
  296
  320
  346
  372
  401
  430
  461
  494
  528
  563
  601
  640
  682
  725
  771
  818
  869
  921
  977
  1,035
  1,096
  1,160
  1,227
  1,298
  1,372
  1,450
  1,531
  1,617
  1,707
  1,802
Earnings before tax, $m
  1,329
  1,531
  1,649
  1,774
  1,906
  2,045
  2,191
  2,345
  2,507
  2,679
  2,859
  3,551
  3,751
  3,962
  4,184
  4,418
  4,664
  4,923
  5,196
  5,484
  5,787
  6,105
  6,441
  6,794
  7,166
  7,558
  7,970
  8,404
  8,860
  9,341
  9,846
Tax expense, $m
  433
  413
  445
  479
  515
  552
  592
  633
  677
  723
  772
  959
  1,013
  1,070
  1,130
  1,193
  1,259
  1,329
  1,403
  1,481
  1,562
  1,648
  1,739
  1,834
  1,935
  2,041
  2,152
  2,269
  2,392
  2,522
  2,658
Net income, $m
  896
  1,117
  1,204
  1,295
  1,391
  1,493
  1,599
  1,712
  1,830
  1,955
  2,087
  2,592
  2,738
  2,892
  3,054
  3,225
  3,405
  3,594
  3,793
  4,003
  4,224
  4,457
  4,702
  4,960
  5,231
  5,517
  5,818
  6,135
  6,468
  6,819
  7,188

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  870
  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
  15,702
  15,587
  16,381
  17,213
  18,086
  19,003
  19,964
  20,973
  22,031
  23,142
  24,309
  25,532
  26,817
  28,165
  29,581
  31,067
  32,626
  34,264
  35,983
  37,787
  39,682
  41,671
  43,759
  45,951
  48,253
  50,669
  53,206
  55,870
  58,667
  61,603
  64,686
Adjusted assets (=assets-cash), $m
  14,832
  15,587
  16,381
  17,213
  18,086
  19,003
  19,964
  20,973
  22,031
  23,142
  24,309
  25,532
  26,817
  28,165
  29,581
  31,067
  32,626
  34,264
  35,983
  37,787
  39,682
  41,671
  43,759
  45,951
  48,253
  50,669
  53,206
  55,870
  58,667
  61,603
  64,686
Revenue / Adjusted assets
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
  1.397
Average production assets, $m
  6,226
  6,533
  6,865
  7,214
  7,580
  7,964
  8,367
  8,790
  9,233
  9,699
  10,188
  10,701
  11,239
  11,804
  12,397
  13,020
  13,674
  14,360
  15,080
  15,837
  16,631
  17,464
  18,339
  19,258
  20,223
  21,235
  22,299
  23,415
  24,587
  25,818
  27,110
Working capital, $m
  1,832
  1,176
  1,236
  1,299
  1,364
  1,434
  1,506
  1,582
  1,662
  1,746
  1,834
  1,926
  2,023
  2,125
  2,232
  2,344
  2,461
  2,585
  2,714
  2,851
  2,994
  3,144
  3,301
  3,466
  3,640
  3,822
  4,014
  4,215
  4,426
  4,647
  4,880
Total debt, $m
  6,446
  6,811
  7,355
  7,925
  8,523
  9,151
  9,809
  10,500
  11,225
  11,987
  12,785
  13,624
  14,504
  15,427
  16,397
  17,415
  18,483
  19,605
  20,782
  22,018
  23,316
  24,678
  26,109
  27,610
  29,187
  30,842
  32,580
  34,405
  36,321
  38,332
  40,444
Total liabilities, $m
  10,312
  10,677
  11,221
  11,791
  12,389
  13,017
  13,675
  14,366
  15,091
  15,853
  16,651
  17,490
  18,370
  19,293
  20,263
  21,281
  22,349
  23,471
  24,648
  25,884
  27,182
  28,544
  29,975
  31,476
  33,053
  34,708
  36,446
  38,271
  40,187
  42,198
  44,310
Total equity, $m
  5,390
  4,910
  5,160
  5,422
  5,697
  5,986
  6,289
  6,606
  6,940
  7,290
  7,657
  8,043
  8,447
  8,872
  9,318
  9,786
  10,277
  10,793
  11,335
  11,903
  12,500
  13,126
  13,784
  14,475
  15,200
  15,961
  16,760
  17,599
  18,480
  19,405
  20,376
Total liabilities and equity, $m
  15,702
  15,587
  16,381
  17,213
  18,086
  19,003
  19,964
  20,972
  22,031
  23,143
  24,308
  25,533
  26,817
  28,165
  29,581
  31,067
  32,626
  34,264
  35,983
  37,787
  39,682
  41,670
  43,759
  45,951
  48,253
  50,669
  53,206
  55,870
  58,667
  61,603
  64,686
Debt-to-equity ratio
  1.196
  1.390
  1.430
  1.460
  1.500
  1.530
  1.560
  1.590
  1.620
  1.640
  1.670
  1.690
  1.720
  1.740
  1.760
  1.780
  1.800
  1.820
  1.830
  1.850
  1.870
  1.880
  1.890
  1.910
  1.920
  1.930
  1.940
  1.950
  1.970
  1.980
  1.980
Adjusted equity ratio
  0.305
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  896
  1,117
  1,204
  1,295
  1,391
  1,493
  1,599
  1,712
  1,830
  1,955
  2,087
  2,592
  2,738
  2,892
  3,054
  3,225
  3,405
  3,594
  3,793
  4,003
  4,224
  4,457
  4,702
  4,960
  5,231
  5,517
  5,818
  6,135
  6,468
  6,819
  7,188
Depreciation, amort., depletion, $m
  638
  874
  892
  912
  933
  955
  978
  1,002
  1,027
  1,053
  1,081
  608
  639
  671
  704
  740
  777
  816
  857
  900
  945
  992
  1,042
  1,094
  1,149
  1,207
  1,267
  1,330
  1,397
  1,467
  1,540
Funds from operations, $m
  1,811
  1,991
  2,096
  2,207
  2,324
  2,448
  2,577
  2,714
  2,857
  3,009
  3,168
  3,200
  3,377
  3,563
  3,759
  3,965
  4,182
  4,410
  4,650
  4,903
  5,169
  5,449
  5,744
  6,054
  6,380
  6,724
  7,085
  7,465
  7,865
  8,286
  8,728
Change in working capital, $m
  138
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  97
  102
  107
  112
  118
  124
  130
  136
  143
  150
  158
  165
  174
  182
  191
  201
  211
  222
  233
Cash from operations, $m
  1,673
  1,928
  2,037
  2,145
  2,259
  2,378
  2,505
  2,638
  2,778
  2,925
  3,080
  3,108
  3,280
  3,461
  3,652
  3,853
  4,064
  4,286
  4,521
  4,767
  5,026
  5,299
  5,586
  5,889
  6,207
  6,542
  6,894
  7,264
  7,654
  8,064
  8,495
Maintenance CAPEX, $m
  0
  -354
  -371
  -390
  -410
  -431
  -452
  -475
  -499
  -525
  -551
  -579
  -608
  -639
  -671
  -704
  -740
  -777
  -816
  -857
  -900
  -945
  -992
  -1,042
  -1,094
  -1,149
  -1,207
  -1,267
  -1,330
  -1,397
  -1,467
New CAPEX, $m
  -566
  -307
  -333
  -349
  -366
  -384
  -403
  -423
  -444
  -466
  -489
  -513
  -538
  -565
  -593
  -623
  -654
  -686
  -720
  -756
  -794
  -834
  -875
  -919
  -965
  -1,013
  -1,063
  -1,116
  -1,172
  -1,231
  -1,292
Cash from investing activities, $m
  -484
  -661
  -704
  -739
  -776
  -815
  -855
  -898
  -943
  -991
  -1,040
  -1,092
  -1,146
  -1,204
  -1,264
  -1,327
  -1,394
  -1,463
  -1,536
  -1,613
  -1,694
  -1,779
  -1,867
  -1,961
  -2,059
  -2,162
  -2,270
  -2,383
  -2,502
  -2,628
  -2,759
Free cash flow, $m
  1,189
  1,267
  1,333
  1,406
  1,483
  1,564
  1,649
  1,739
  1,835
  1,935
  2,040
  2,016
  2,134
  2,257
  2,388
  2,526
  2,670
  2,823
  2,984
  3,154
  3,333
  3,521
  3,719
  3,928
  4,148
  4,380
  4,624
  4,881
  5,151
  5,436
  5,736
Issuance/(repayment) of debt, $m
  -1,074
  517
  543
  570
  598
  628
  659
  691
  725
  761
  799
  838
  880
  924
  970
  1,018
  1,068
  1,122
  1,177
  1,236
  1,298
  1,362
  1,430
  1,502
  1,577
  1,655
  1,738
  1,825
  1,916
  2,011
  2,112
Issuance/(repurchase) of shares, $m
  42
  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  
  -1,061
  517
  543
  570
  598
  628
  659
  691
  725
  761
  799
  838
  880
  924
  970
  1,018
  1,068
  1,122
  1,177
  1,236
  1,298
  1,362
  1,430
  1,502
  1,577
  1,655
  1,738
  1,825
  1,916
  2,011
  2,112
Total cash flow (excl. dividends), $m
  130
  1,785
  1,876
  1,976
  2,081
  2,191
  2,308
  2,430
  2,560
  2,696
  2,839
  2,855
  3,014
  3,181
  3,358
  3,543
  3,739
  3,945
  4,162
  4,390
  4,630
  4,883
  5,149
  5,430
  5,725
  6,035
  6,362
  6,705
  7,067
  7,448
  7,848
Retained Cash Flow (-), $m
  -983
  -238
  -250
  -262
  -275
  -289
  -303
  -318
  -333
  -350
  -367
  -386
  -405
  -425
  -446
  -468
  -491
  -516
  -541
  -568
  -597
  -627
  -658
  -691
  -725
  -761
  -799
  -839
  -881
  -925
  -971
Prev. year cash balance distribution, $m
 
  718
  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
 
  2,265
  1,626
  1,714
  1,806
  1,903
  2,005
  2,113
  2,226
  2,346
  2,472
  2,469
  2,609
  2,756
  2,912
  3,075
  3,248
  3,429
  3,620
  3,821
  4,033
  4,257
  4,492
  4,739
  5,000
  5,274
  5,563
  5,866
  6,186
  6,523
  6,877
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  2,113
  1,406
  1,363
  1,311
  1,251
  1,183
  1,109
  1,029
  944
  857
  729
  648
  567
  490
  417
  349
  287
  232
  183
  142
  108
  80
  58
  41
  29
  19
  12
  8
  5
  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

Dollar Tree, Inc. operates discount retail stores in the United States and Canada. The company operates in two segments, Dollar Tree and Family Dollar. The Dollar Tree segment offers merchandise at the fixed price of $1.00. It provides consumable merchandise, including candy and food, and health and beauty care products, as well as everyday consumables, such as household paper and chemicals, and frozen and refrigerated food; various merchandise, including toys, durable housewares, gifts, stationery products, party goods, greeting cards, softlines, and other items; and seasonal goods consisting of Valentine's Day, Easter, Halloween, and Christmas merchandise. This segment operates under the Dollar Tree, Dollar Tree Canada, Deals, and Dollar Tree Deals brands, as well as 10 distribution centers in the United States and 2 in Canada, and a store support center in Chesapeake, Virginia. The Family Dollar segment offers consumable merchandise, including food, tobacco, health and beauty aids, household chemicals, paper products, hardware and automotive supplies, diapers, batteries, and pet food and supplies; home products, such as housewares, home d├ęcor, and giftware, as well as blankets, sheets, and towels; apparel and accessories merchandise, including clothing, fashion accessories, and shoes; and seasonal and electronics merchandise, such as Valentine's Day, Easter, Halloween, and Christmas merchandise, as well as personal electronics consisting of pre-paid cellular phones and services, stationery and school supplies, and toys. This segment operates under the Family Dollar brand, 11 distribution centers, and a store support center in Matthews, North Carolina. As of January 30, 2016, the company operated 13,851 stores in 48 states and the District of Columbia, and 5 Canadian provinces. Dollar Tree, Inc. was founded in 1986 and is based in Chesapeake, Virginia.

FINANCIAL RATIOS  of  Dollar Tree (DLTR)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 0.9
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow 16.9
Growth Rates
Sales Growth Rate 33.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.7%
Cap. Spend. - 3 Yr. Gr. Rate 11.3%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 116.8%
Total Debt to Equity 119.6%
Interest Coverage 5
Management Effectiveness
Return On Assets 7.1%
Ret/ On Assets - 3 Yr. Avg. 11%
Return On Total Capital 7.5%
Ret/ On T. Cap. - 3 Yr. Avg. 12.9%
Return On Equity 18.3%
Return On Equity - 3 Yr. Avg. 22.6%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 30.9%
Gross Margin - 3 Yr. Avg. 32.1%
EBITDA Margin 11.1%
EBITDA Margin - 3 Yr. Avg. 11.4%
Operating Margin 8.2%
Oper. Margin - 3 Yr. Avg. 9%
Pre-Tax Margin 6.4%
Pre-Tax Margin - 3 Yr. Avg. 6.8%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 32.6%
Eff/ Tax Rate - 3 Yr. Avg. 35.6%
Payout Ratio 0%

DLTR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DLTR stock intrinsic value calculation we used $20719 million for the last fiscal year's total revenue generated by Dollar Tree. The default revenue input number comes from 2017 income statement of Dollar Tree. 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 DLTR stock valuation model: a) initial revenue growth rate of 5.1% 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 7.2%, whose default value for DLTR is calculated based on our internal credit rating of Dollar Tree, 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 Dollar Tree.
    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 DLTR stock the variable cost ratio is equal to 87.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $920 million in the base year in the intrinsic value calculation for DLTR 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 4.7% for Dollar Tree.

Corporate tax rate of 27% is the nominal tax rate for Dollar Tree. 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 DLTR 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 DLTR are equal to 30%.

Life of production assets of 17.6 years is the average useful life of capital assets used in Dollar Tree 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 DLTR is equal to 5.4%. 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 - $5390 million for Dollar Tree - 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 233.367 million for Dollar Tree 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 Dollar Tree at the current share price and the inputted number of shares is $18.4 billion.


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COMPANY NEWS

▶ Chuck Royce Continues to Buy These 10 Stocks   [May-16-17 03:34PM  GuruFocus.com]
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▶ Cramer: Earnings Season Is Better Than Many Believe   [Apr-20-17 07:01PM  TheStreet.com]
▶ Johnson County (no, not that one) lands $110M Dollar Tree facility   [Apr-18-17 02:35PM  American City Business Journals]
▶ ETFs with exposure to Dollar Tree, Inc. : April 17, 2017   [Apr-17-17 12:52PM  Capital Cube]
▶ 4 Reasons To Buy Wal-Mart   [Apr-07-17 03:07PM  Barrons.com]
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▶ Jim Cramer -- Stocks Getting a Boost From Border Tax Doubts   [Mar-29-17 10:48AM  TheStreet.com]
▶ Why Credit Suisse Is Very Cautious on Dollar Stores   [Mar-23-17 04:07PM  24/7 Wall St.]
▶ [$$] Big Lots Same-Store Sales Rise But Revenue Falls   [Mar-03-17 08:41AM  at The Wall Street Journal]
▶ [$$] Dollar Tree's Profit, Margins Rise as Sales Climb   [11:42AM  at The Wall Street Journal]
Stock chart of DLTR Financial statements of DLTR Annual reports of DLTR
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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