Intrinsic value of Destination XL Group - DXLG

Previous Close

$1.90

  Intrinsic Value

$1.36

stock screener

  Rating & Target

sell

-29%

  Value-price divergence*

+237%

Previous close

$1.90

 
Intrinsic value

$1.36

 
Up/down potential

-29%

 
Rating

sell

 
Value-price divergence*

+237%

*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
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  450
  461
  474
  488
  504
  520
  539
  559
  580
  603
  627
  653
  680
  709
  740
  773
  808
  845
  883
  924
  967
  1,013
  1,060
  1,111
  1,164
  1,220
  1,279
  1,341
  1,406
  1,474
  1,546
Variable operating expenses, $m
 
  116
  119
  122
  126
  131
  135
  140
  146
  151
  157
  164
  171
  178
  186
  194
  203
  212
  222
  232
  243
  254
  266
  279
  292
  306
  321
  336
  353
  370
  388
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
  469
  480
  492
  506
  520
  534
  549
  565
  581
  597
  615
  634
  652
  672
  692
  714
  735
  759
  782
  807
  832
  858
  886
  914
  944
  975
  1,006
  1,040
  1,074
  1,110
Operating income, $m
  1
  -7
  -6
  -5
  -3
  1
  5
  9
  15
  22
  29
  38
  47
  57
  69
  81
  94
  109
  125
  142
  161
  181
  202
  225
  250
  276
  304
  334
  366
  400
  436
EBITDA, $m
  32
  19
  20
  23
  26
  30
  35
  41
  48
  56
  65
  74
  85
  97
  110
  125
  140
  157
  175
  194
  215
  238
  262
  288
  315
  345
  376
  410
  445
  483
  524
Interest expense (income), $m
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  20
  21
Earnings before tax, $m
  -2
  -10
  -9
  -8
  -6
  -3
  1
  5
  11
  17
  24
  32
  41
  50
  61
  73
  86
  100
  115
  132
  150
  169
  189
  212
  235
  261
  288
  317
  348
  380
  416
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  3
  5
  6
  9
  11
  14
  17
  20
  23
  27
  31
  36
  40
  46
  51
  57
  64
  70
  78
  85
  94
  103
  112
Net income, $m
  -2
  -10
  -9
  -8
  -6
  -3
  1
  4
  8
  12
  17
  23
  30
  37
  45
  53
  63
  73
  84
  96
  109
  123
  138
  154
  172
  190
  210
  231
  254
  278
  303

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
  270
  277
  285
  294
  304
  315
  326
  339
  352
  366
  382
  398
  415
  433
  452
  472
  494
  516
  540
  565
  592
  620
  649
  680
  713
  747
  783
  822
  862
  904
Adjusted assets (=assets-cash), $m
  263
  270
  277
  285
  294
  304
  315
  326
  339
  352
  366
  382
  398
  415
  433
  452
  472
  494
  516
  540
  565
  592
  620
  649
  680
  713
  747
  783
  822
  862
  904
Revenue / Adjusted assets
  1.711
  1.707
  1.711
  1.712
  1.714
  1.711
  1.711
  1.715
  1.711
  1.713
  1.713
  1.709
  1.709
  1.708
  1.709
  1.710
  1.712
  1.711
  1.711
  1.711
  1.712
  1.711
  1.710
  1.712
  1.712
  1.711
  1.712
  1.713
  1.710
  1.710
  1.710
Average production assets, $m
  127
  130
  134
  138
  142
  147
  152
  158
  164
  170
  177
  184
  192
  200
  209
  218
  228
  238
  249
  261
  273
  286
  299
  313
  328
  344
  361
  378
  396
  416
  436
Working capital, $m
  23
  70
  72
  74
  76
  79
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  128
  133
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  223
  233
Total debt, $m
  63
  61
  66
  72
  78
  84
  91
  99
  107
  116
  126
  136
  146
  158
  169
  182
  196
  210
  225
  241
  257
  275
  293
  313
  333
  355
  378
  402
  427
  453
  481
Total liabilities, $m
  181
  178
  183
  189
  195
  201
  208
  216
  224
  233
  243
  253
  263
  275
  286
  299
  313
  327
  342
  358
  374
  392
  410
  430
  450
  472
  495
  519
  544
  570
  598
Total equity, $m
  89
  91
  94
  96
  99
  103
  106
  110
  115
  119
  124
  129
  134
  140
  146
  153
  160
  167
  174
  183
  191
  200
  209
  219
  230
  241
  253
  265
  278
  291
  305
Total liabilities and equity, $m
  270
  269
  277
  285
  294
  304
  314
  326
  339
  352
  367
  382
  397
  415
  432
  452
  473
  494
  516
  541
  565
  592
  619
  649
  680
  713
  748
  784
  822
  861
  903
Debt-to-equity ratio
  0.708
  0.670
  0.710
  0.740
  0.780
  0.820
  0.860
  0.900
  0.940
  0.980
  1.010
  1.050
  1.090
  1.120
  1.160
  1.190
  1.230
  1.260
  1.290
  1.320
  1.350
  1.370
  1.400
  1.430
  1.450
  1.470
  1.500
  1.520
  1.540
  1.560
  1.580
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
  -10
  -9
  -8
  -6
  -3
  1
  4
  8
  12
  17
  23
  30
  37
  45
  53
  63
  73
  84
  96
  109
  123
  138
  154
  172
  190
  210
  231
  254
  278
  303
Depreciation, amort., depletion, $m
  31
  26
  27
  28
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
Funds from operations, $m
  41
  16
  17
  20
  23
  26
  31
  35
  40
  46
  53
  60
  68
  77
  86
  97
  108
  121
  134
  148
  164
  180
  198
  217
  237
  259
  282
  307
  333
  361
  391
Change in working capital, $m
  6
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
Cash from operations, $m
  35
  15
  16
  17
  20
  24
  28
  32
  37
  43
  49
  56
  64
  72
  82
  92
  103
  115
  128
  142
  157
  174
  191
  209
  229
  251
  273
  297
  323
  351
  380
Maintenance CAPEX, $m
  0
  -25
  -26
  -27
  -28
  -28
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
New CAPEX, $m
  -29
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
Cash from investing activities, $m
  -29
  -28
  -30
  -31
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -42
  -45
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -64
  -68
  -70
  -74
  -78
  -82
  -86
  -89
  -94
  -98
  -103
Free cash flow, $m
  6
  -14
  -14
  -13
  -12
  -9
  -6
  -4
  0
  4
  8
  13
  19
  26
  33
  41
  50
  59
  70
  81
  93
  106
  120
  135
  152
  169
  188
  208
  229
  252
  276
Issuance/(repayment) of debt, $m
  -5
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
Issuance/(repurchase) of shares, $m
  0
  12
  12
  11
  9
  6
  3
  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  
  -5
  16
  17
  16
  15
  13
  10
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
Total cash flow (excl. dividends), $m
  0
  2
  3
  3
  3
  4
  4
  4
  8
  12
  18
  23
  30
  37
  45
  54
  63
  73
  85
  97
  110
  124
  139
  155
  172
  191
  211
  232
  254
  278
  304
Retained Cash Flow (-), $m
  -1
  -12
  -12
  -11
  -9
  -6
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -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
 
  -9
  -9
  -8
  -6
  -3
  0
  0
  4
  8
  13
  18
  25
  31
  39
  47
  56
  66
  77
  89
  101
  115
  129
  145
  162
  180
  199
  220
  242
  265
  290
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
 
  -9
  -8
  -7
  -5
  -2
  0
  0
  2
  4
  6
  8
  9
  10
  11
  11
  11
  11
  10
  9
  9
  8
  7
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  88.3
  78.3
  70.3
  64.4
  60.6
  58.8
  58.8
  58.8
  58.8
  58.8
  58.8
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  58.8
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  58.8

Destination XL Group, Inc. is a specialty retailer of men's apparel with retail and direct operations in the United States and London, England. The Company operates through the Big & Tall Men's Apparel segment. The Company operates under the trade names of Destination XL, DXL, Casual Male XL, Casual Male XL outlets, DXL outlets, Rochester Clothing, ShoesXL and LivingXL. The Company operates approximately 170 Destination XL stores, 125 Casual Male XL retail stores, 40 Casual Male XL outlet stores, nine DXL outlet stores and five Rochester Clothing stores. Its direct business includes its DestinationXL.com and bigandtall.com e-commerce sites, which support its stores, brands and product extensions. Through its multiple brands, which include both branded apparel and private-label, the Company offers a range of merchandise. The Company carries various designer brands, including Cole Haan, Allen Edmonds, Timberland, Calvin Klein, Lacoste, Donald J. Pliner and Bruno Magli.

FINANCIAL RATIOS  of  Destination XL Group (DXLG)

Valuation Ratios
P/E Ratio -48.2
Price to Sales 0.2
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 16.1
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 2.5% 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 4.1 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 47.265 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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COMPANY NEWS

▶ Destination XL reports 2Q loss   [Aug-24-17 09:57PM  Associated Press]
▶ Here's Where 10 At-Risk Retailers Stand Now   [Aug-08-17 06:00AM  Motley Fool]
▶ New Strong Sell Stocks for June 22nd   [Jun-22-17 09:50AM  Zacks]
▶ New Strong Sell Stocks for June 8th   [Jun-08-17 10:48AM  Zacks]
▶ New Strong Sell Stocks for June 6th   [Jun-06-17 10:46AM  Zacks]
▶ Destination XL reports 1Q loss   [07:12AM  Associated Press]
▶ Destination XL posts 4Q profit   [07:17AM  Associated Press]
▶ LD Micro Index Reconstitution as of February 1, 2017   [Feb-01-17 09:45AM  Accesswire]
▶ Mens retailer to open in South County   [Jan-12-17 03:15PM  at bizjournals.com]
▶ Should You Avoid Destination XL Group Inc (DXLG)?   [Dec-12-16 05:49PM  at Insider Monkey]
▶ Contrarian Retail Plays   [May-20-16 04:26PM  at Forbes]
Financial statements of DXLG
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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