Intrinsic value of Destination XL Group - DXLG

Previous Close

$1.60

  Intrinsic Value

$0.45

stock screener

  Rating & Target

str. sell

-72%

  Value-price divergence*

+21%

Previous close

$1.60

 
Intrinsic value

$0.45

 
Up/down potential

-72%

 
Rating

str. sell

 
Value-price divergence*

+21%

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

We calculate the intrinsic value of DXLG 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 0.1

 

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, %
  1.81
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  450
  459
  470
  482
  495
  510
  527
  545
  564
  585
  607
  631
  657
  684
  713
  744
  777
  811
  848
  886
  927
  970
  1,015
  1,063
  1,113
  1,166
  1,222
  1,281
  1,343
  1,408
  1,476
Variable operating expenses, $m
 
  115
  118
  121
  124
  128
  132
  137
  142
  147
  152
  158
  165
  172
  179
  187
  195
  204
  213
  222
  233
  243
  255
  267
  279
  293
  307
  322
  337
  353
  371
Fixed operating expenses, $m
 
  353
  361
  370
  380
  389
  399
  409
  419
  430
  440
  451
  463
  474
  486
  498
  511
  523
  537
  550
  564
  578
  592
  607
  622
  638
  654
  670
  687
  704
  722
Total operating expenses, $m
  449
  468
  479
  491
  504
  517
  531
  546
  561
  577
  592
  609
  628
  646
  665
  685
  706
  727
  750
  772
  797
  821
  847
  874
  901
  931
  961
  992
  1,024
  1,057
  1,093
Operating income, $m
  1
  -9
  -10
  -10
  -9
  -7
  -4
  -1
  3
  8
  15
  22
  29
  38
  48
  59
  71
  84
  98
  114
  131
  149
  168
  189
  212
  236
  262
  289
  319
  350
  384
EBITDA, $m
  32
  4
  4
  4
  5
  7
  10
  14
  19
  25
  32
  39
  48
  58
  68
  80
  93
  107
  122
  139
  157
  176
  197
  219
  243
  269
  296
  325
  357
  390
  426
Interest expense (income), $m
  3
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  19
  20
Earnings before tax, $m
  -2
  -11
  -13
  -13
  -12
  -11
  -8
  -5
  -1
  4
  10
  16
  24
  32
  41
  52
  63
  76
  89
  104
  120
  138
  156
  176
  198
  221
  246
  273
  301
  332
  364
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  4
  6
  9
  11
  14
  17
  20
  24
  28
  32
  37
  42
  48
  54
  60
  67
  74
  81
  90
  98
Net income, $m
  -2
  -11
  -13
  -13
  -12
  -11
  -8
  -5
  -1
  3
  7
  12
  17
  23
  30
  38
  46
  55
  65
  76
  88
  100
  114
  129
  145
  162
  180
  199
  220
  242
  266

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  269
  268
  274
  281
  289
  298
  308
  318
  330
  342
  355
  369
  384
  400
  417
  435
  454
  474
  495
  518
  542
  567
  593
  621
  651
  682
  714
  749
  785
  823
  863
Adjusted assets (=assets-cash), $m
  263
  268
  274
  281
  289
  298
  308
  318
  330
  342
  355
  369
  384
  400
  417
  435
  454
  474
  495
  518
  542
  567
  593
  621
  651
  682
  714
  749
  785
  823
  863
Revenue / Adjusted assets
  1.711
  1.713
  1.715
  1.715
  1.713
  1.711
  1.711
  1.714
  1.709
  1.711
  1.710
  1.710
  1.711
  1.710
  1.710
  1.710
  1.711
  1.711
  1.713
  1.710
  1.710
  1.711
  1.712
  1.712
  1.710
  1.710
  1.711
  1.710
  1.711
  1.711
  1.710
Average production assets, $m
  127
  129
  132
  136
  140
  144
  149
  154
  159
  165
  171
  178
  185
  193
  201
  210
  219
  229
  239
  250
  261
  274
  286
  300
  314
  329
  345
  361
  379
  397
  416
Working capital, $m
  23
  69
  71
  73
  75
  77
  80
  82
  85
  88
  92
  95
  99
  103
  108
  112
  117
  122
  128
  134
  140
  146
  153
  161
  168
  176
  185
  193
  203
  213
  223
Total debt, $m
  63
  61
  65
  69
  75
  80
  87
  94
  101
  109
  118
  127
  137
  148
  159
  171
  184
  197
  211
  226
  242
  258
  276
  294
  314
  334
  356
  379
  403
  428
  454
Total liabilities, $m
  181
  178
  182
  186
  192
  197
  204
  211
  218
  226
  235
  244
  254
  265
  276
  288
  301
  314
  328
  343
  359
  375
  393
  411
  431
  451
  473
  496
  520
  545
  571
Total equity, $m
  89
  91
  93
  95
  98
  101
  104
  108
  111
  116
  120
  125
  130
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  230
  241
  253
  265
  278
  292
Total liabilities and equity, $m
  270
  269
  275
  281
  290
  298
  308
  319
  329
  342
  355
  369
  384
  400
  417
  435
  454
  474
  495
  518
  542
  567
  594
  621
  651
  681
  714
  749
  785
  823
  863
Debt-to-equity ratio
  0.708
  0.670
  0.700
  0.730
  0.760
  0.800
  0.830
  0.870
  0.910
  0.950
  0.980
  1.020
  1.060
  1.090
  1.130
  1.160
  1.200
  1.230
  1.260
  1.290
  1.320
  1.350
  1.380
  1.400
  1.430
  1.450
  1.470
  1.500
  1.520
  1.540
  1.560
Adjusted equity ratio
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338
  0.338

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2
  -11
  -13
  -13
  -12
  -11
  -8
  -5
  -1
  3
  7
  12
  17
  23
  30
  38
  46
  55
  65
  76
  88
  100
  114
  129
  145
  162
  180
  199
  220
  242
  266
Depreciation, amort., depletion, $m
  31
  13
  13
  14
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  42
Funds from operations, $m
  41
  2
  1
  1
  2
  4
  7
  10
  15
  19
  24
  30
  36
  43
  50
  59
  68
  78
  89
  101
  114
  128
  143
  159
  176
  195
  214
  235
  258
  282
  308
Change in working capital, $m
  6
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
Cash from operations, $m
  35
  0
  -1
  -1
  0
  2
  4
  8
  12
  16
  21
  26
  32
  39
  46
  54
  63
  73
  84
  95
  108
  121
  136
  152
  168
  187
  206
  227
  249
  272
  297
Maintenance CAPEX, $m
  0
  -13
  -13
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
New CAPEX, $m
  -29
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
Cash from investing activities, $m
  -29
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -20
  -22
  -22
  -24
  -25
  -27
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
Free cash flow, $m
  6
  -15
  -17
  -18
  -18
  -17
  -15
  -12
  -9
  -6
  -2
  2
  7
  12
  18
  25
  33
  41
  50
  60
  71
  83
  96
  110
  124
  140
  157
  175
  195
  216
  238
Issuance/(repayment) of debt, $m
  -5
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  21
  22
  23
  24
  25
  26
Issuance/(repurchase) of shares, $m
  0
  13
  15
  15
  15
  13
  11
  9
  5
  1
  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  
  -5
  17
  19
  20
  20
  19
  17
  16
  13
  9
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  21
  22
  23
  24
  25
  26
Total cash flow (excl. dividends), $m
  0
  2
  2
  2
  2
  3
  3
  3
  3
  4
  7
  11
  17
  23
  30
  37
  46
  55
  65
  75
  87
  100
  113
  128
  144
  161
  179
  198
  219
  241
  265
Retained Cash Flow (-), $m
  -1
  -13
  -15
  -15
  -15
  -13
  -11
  -9
  -5
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
Prev. year cash balance distribution, $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 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
 
  -11
  -13
  -13
  -12
  -11
  -8
  -5
  -1
  0
  2
  7
  12
  17
  24
  31
  39
  48
  57
  68
  79
  91
  104
  119
  134
  150
  168
  187
  207
  228
  251
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  -11
  -11
  -11
  -10
  -8
  -6
  -3
  -1
  0
  1
  3
  4
  5
  6
  7
  8
  8
  8
  7
  7
  6
  5
  5
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  85.7
  72.5
  61.3
  52.2
  45.1
  40.0
  36.6
  34.8
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4
  34.4

Destination XL Group, Inc., together with its subsidiaries, operates as a specialty retailer of big and tall men’s apparel in the United States and England. Its stores offer sportswear and dresswear; shoes; accessories, such as belts, ties, socks; fashion-neutral items, including jeans, casual slacks, tee-shirts, polo shirts, dress shirts, and suit separates; casual clothing; lifestyle products comprising chairs, outdoor accessories, travel accessories, bed and bath products, and fitness equipment. The company operates its stores under the Destination XL, Casual Male XL, Casual Male XL Outlets, DXL Outlets, Rochester Clothing, ShoesXL, and LivingXL names. It also provides sportswear and loungewear, sportcoats, dress shirts, neckwear, tailor-related separates, blazers, dress slacks, vintage-screen T-shirts and wovens, camp shirts, printed woven shirts, and relaxed island-inspired pants under various private labels. The company operates 166 Destination XL stores, 125 Casual Male XL retail stores, 40 Casual Male XL outlet stores, 9 DXL outlet stores, and 5 Rochester Clothing stores. It also offers its products through DestinationXL.com and bigandtall.com e-commerce sites. The company was formerly known as Casual Male Retail Group, Inc. and changed its name to Destination XL Group, Inc. in February 2013. Destination XL Group, Inc. was founded in 1976 and is headquartered in Canton, Massachusetts.

FINANCIAL RATIOS  of  Destination XL Group (DXLG)

Valuation Ratios
P/E Ratio -40.6
Price to Sales 0.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 2.3
Price to Free Cash Flow 13.5
Growth Rates
Sales Growth Rate 1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.1%
Cap. Spend. - 3 Yr. Gr. Rate -11.7%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 13.5%
Total Debt to Equity 70.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. -1.7%
Return On Total Capital -1.3%
Ret/ On T. Cap. - 3 Yr. Avg. -5.1%
Return On Equity -2.3%
Return On Equity - 3 Yr. Avg. -7.8%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 45.6%
Gross Margin - 3 Yr. Avg. 45.9%
EBITDA Margin 7.1%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin 0.2%
Oper. Margin - 3 Yr. Avg. -1%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. -1.6%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. -1.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

DXLG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DXLG stock intrinsic value calculation we used $450 million for the last fiscal year's total revenue generated by Destination XL Group. The default revenue input number comes from 2017 income statement of Destination XL Group. 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 DXLG stock valuation model: a) initial revenue growth rate of 2% 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 5.2%, whose default value for DXLG is calculated based on our internal credit rating of Destination XL Group, 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 Destination XL Group.
    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 DXLG stock the variable cost ratio is equal to 25.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $344 million in the base year in the intrinsic value calculation for DXLG 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 4.6% for Destination XL Group.

Corporate tax rate of 27% is the nominal tax rate for Destination XL Group. 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 DXLG 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 DXLG are equal to 28.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Destination XL Group 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 DXLG is equal to 15.1%. 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 - $89 million for Destination XL Group - 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 49.183 million for Destination XL Group 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 Destination XL Group at the current share price and the inputted number of shares is $0.1 billion.

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Stock chart of DXLG Financial statements of DXLG
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