Intrinsic value of Escalade - ESCA

Previous Close

$12.45

  Intrinsic Value

$8.59

stock screener

  Rating & Target

sell

-31%

Previous close

$12.45

 
Intrinsic value

$8.59

 
Up/down potential

-31%

 
Rating

sell

We calculate the intrinsic value of ESCA 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
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, %
  7.69
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  168
  181
  194
  208
  223
  238
  254
  270
  287
  305
  323
  342
  362
  383
  405
  428
  451
  476
  502
  529
  558
  587
  619
  651
  685
  721
  758
  798
  839
  882
  927
Variable operating expenses, $m
 
  151
  162
  173
  185
  197
  210
  224
  238
  252
  267
  281
  297
  314
  332
  351
  370
  391
  412
  434
  458
  482
  508
  534
  562
  592
  622
  655
  688
  724
  761
Fixed operating expenses, $m
 
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
Total operating expenses, $m
  153
  164
  176
  187
  199
  212
  225
  239
  254
  268
  284
  298
  314
  332
  350
  370
  389
  411
  432
  455
  479
  504
  530
  557
  586
  616
  647
  680
  714
  751
  788
Operating income, $m
  15
  17
  19
  21
  24
  26
  28
  31
  34
  36
  39
  44
  48
  51
  54
  58
  62
  66
  70
  74
  79
  84
  89
  94
  99
  105
  111
  118
  125
  132
  139
EBITDA, $m
  20
  22
  25
  27
  30
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  74
  79
  84
  89
  94
  100
  106
  112
  119
  125
  132
  140
  148
  156
Interest expense (income), $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
Earnings before tax, $m
  16
  16
  18
  20
  22
  24
  27
  29
  31
  34
  37
  42
  44
  48
  51
  54
  58
  61
  65
  69
  73
  78
  83
  88
  93
  98
  104
  110
  116
  123
  130
Tax expense, $m
  5
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
Net income, $m
  11
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  30
  32
  35
  37
  39
  42
  45
  48
  51
  54
  57
  60
  64
  68
  72
  76
  80
  85
  90
  95

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  151
  162
  174
  186
  199
  212
  226
  241
  256
  272
  288
  306
  323
  342
  362
  382
  403
  425
  448
  473
  498
  525
  552
  581
  612
  644
  677
  712
  749
  788
  828
Adjusted assets (=assets-cash), $m
  150
  162
  174
  186
  199
  212
  226
  241
  256
  272
  288
  306
  323
  342
  362
  382
  403
  425
  448
  473
  498
  525
  552
  581
  612
  644
  677
  712
  749
  788
  828
Revenue / Adjusted assets
  1.120
  1.117
  1.115
  1.118
  1.121
  1.123
  1.124
  1.120
  1.121
  1.121
  1.122
  1.118
  1.121
  1.120
  1.119
  1.120
  1.119
  1.120
  1.121
  1.118
  1.120
  1.118
  1.121
  1.120
  1.119
  1.120
  1.120
  1.121
  1.120
  1.119
  1.120
Average production assets, $m
  33
  35
  38
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
  128
  134
  141
  149
  156
  164
  173
  182
Working capital, $m
  58
  62
  67
  72
  77
  82
  88
  93
  99
  105
  111
  118
  125
  132
  140
  148
  156
  164
  173
  183
  192
  203
  213
  225
  236
  249
  262
  275
  289
  304
  320
Total debt, $m
  25
  28
  32
  36
  40
  44
  48
  53
  58
  63
  68
  74
  80
  85
  92
  98
  105
  112
  119
  127
  135
  144
  153
  162
  172
  182
  193
  204
  216
  228
  241
Total liabilities, $m
  49
  52
  56
  60
  64
  68
  72
  77
  82
  87
  92
  98
  104
  109
  116
  122
  129
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
Total equity, $m
  102
  110
  118
  126
  135
  144
  154
  164
  174
  185
  196
  208
  220
  233
  246
  260
  274
  289
  305
  321
  339
  357
  376
  395
  416
  438
  461
  484
  509
  536
  563
Total liabilities and equity, $m
  151
  162
  174
  186
  199
  212
  226
  241
  256
  272
  288
  306
  324
  342
  362
  382
  403
  425
  448
  472
  498
  525
  553
  581
  612
  644
  678
  712
  749
  788
  828
Debt-to-equity ratio
  0.245
  0.250
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.400
  0.400
  0.400
  0.410
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
  0.430
  0.430
Adjusted equity ratio
  0.673
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  30
  32
  35
  37
  39
  42
  45
  48
  51
  54
  57
  60
  64
  68
  72
  76
  80
  85
  90
  95
Depreciation, amort., depletion, $m
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
Funds from operations, $m
  8
  17
  19
  20
  22
  24
  26
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  85
  90
  95
  100
  106
  112
Change in working capital, $m
  -4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
Cash from operations, $m
  12
  13
  14
  16
  17
  19
  21
  22
  24
  26
  28
  30
  32
  35
  37
  39
  42
  45
  48
  51
  54
  57
  61
  65
  68
  72
  77
  81
  86
  91
  96
Maintenance CAPEX, $m
  0
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
New CAPEX, $m
  -3
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
Cash from investing activities, $m
  -10
  -5
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -10
  -10
  -10
  -11
  -11
  -11
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -17
  -19
  -20
  -20
  -22
  -23
  -23
  -25
Free cash flow, $m
  2
  7
  8
  9
  11
  12
  13
  15
  16
  18
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
Issuance/(repayment) of debt, $m
  2
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
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
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
Total cash flow (excl. dividends), $m
  5
  11
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
Retained Cash Flow (-), $m
  -6
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
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
 
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
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
 
  3
  4
  4
  5
  5
  6
  6
  7
  7
  7
  7
  7
  6
  6
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
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

Escalade, Incorporated (Escalade) is a manufacturer and distributor of sporting goods through its subsidiary Escalade Sports. The Company operates in Sporting Goods (Escalade Sports) segment. Escalade Sports manufactures, imports and distributes sporting goods brands in basketball goals, archery, indoor and outdoor game recreation and fitness products through sporting goods retailers, specialty dealers, key online retailers, traditional department stores and mass merchants. Escalade offers table tennis tables, residential in-ground basketball goals and in archery bows. Its brands, owned or distributed include Bear Archery, Trophy Ridge, Whisker Biscuit, Cajun Bowfishing, STIGA, Ping-Pong, Prince, Goalrilla, Goaliath, Silverback, Hoopstar, Goalsetter, Woodplay, Childlife, The STEP, USWeight, Atomic, Redline, Mizerak, Minnesota Fats, Accudart, Arachnid, Nodor, Pickleball Now, Onix and Viva Sol. Escalade Sports manufactures in the United States and Mexico, and imports product from Asia.

FINANCIAL RATIOS  of  Escalade (ESCA)

Valuation Ratios
P/E Ratio 16.2
Price to Sales 1.1
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 14.8
Price to Free Cash Flow 19.8
Growth Rates
Sales Growth Rate 7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 23.5%
Total Debt to Equity 24.5%
Interest Coverage 17
Management Effectiveness
Return On Assets 7.9%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 8.9%
Ret/ On T. Cap. - 3 Yr. Avg. 10%
Return On Equity 11.1%
Return On Equity - 3 Yr. Avg. 12.5%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 26.2%
Gross Margin - 3 Yr. Avg. 27.8%
EBITDA Margin 13.1%
EBITDA Margin - 3 Yr. Avg. 14.9%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 9.6%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 11.4%
Net Profit Margin 6.5%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 31.3%
Eff/ Tax Rate - 3 Yr. Avg. 30.4%
Payout Ratio 54.5%

ESCA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ESCA stock intrinsic value calculation we used $168 million for the last fiscal year's total revenue generated by Escalade. The default revenue input number comes from 2016 income statement of Escalade. 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 ESCA stock valuation model: a) initial revenue growth rate of 7.7% 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 ESCA is calculated based on our internal credit rating of Escalade, 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 Escalade.
    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 ESCA stock the variable cost ratio is equal to 83.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13 million in the base year in the intrinsic value calculation for ESCA 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 4.2% for Escalade.

Corporate tax rate of 27% is the nominal tax rate for Escalade. 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 ESCA 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 ESCA are equal to 19.6%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Escalade 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 ESCA is equal to 34.5%. 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 - $102 million for Escalade - 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 14.721 million for Escalade 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 Escalade at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Escalade Sports Partners With Vuly   [Jan-30-18 04:20PM  PR Newswire]
▶ ETFs with exposure to Escalade, Inc. : December 19, 2017   [Dec-19-17 12:54PM  Capital Cube]
▶ ETFs with exposure to Escalade, Inc. : November 27, 2017   [Nov-27-17 01:23PM  Capital Cube]
▶ ETFs with exposure to Escalade, Inc. : November 15, 2017   [Nov-15-17 11:48AM  Capital Cube]
▶ Escalade posts 3Q profit   [Nov-02-17 08:41AM  Associated Press]
▶ ETFs with exposure to Escalade, Inc. : October 3, 2017   [Oct-03-17 11:13AM  Capital Cube]
▶ ETFs with exposure to Escalade, Inc. : August 25, 2017   [Aug-25-17 04:22PM  Capital Cube]
▶ Escalade posts 2Q profit   [Jul-31-17 11:01PM  Associated Press]
▶ ETFs with exposure to Escalade, Inc. : May 8, 2017   [May-08-17 04:29PM  Capital Cube]
▶ ETFs with exposure to Escalade, Inc. : April 24, 2017   [Apr-24-17 02:27PM  Capital Cube]
▶ Escalade posts 1Q profit   [Apr-20-17 08:35AM  Associated Press]
▶ ETFs with exposure to Escalade, Inc. : April 5, 2017   [Apr-05-17 04:43PM  Capital Cube]
▶ Escalade posts 4Q profit   [Feb-23-17 08:51AM  Associated Press]
▶ ETFs with exposure to Escalade, Inc. : November 2, 2016   [Nov-02-16 01:47PM  Capital Cube]
▶ INVESTIndiana announces executive presentation schedule   [Sep-06-16 10:00AM  GlobeNewswire]
▶ Escalade Announces Quarterly Dividend Of $0.11 Per Share   [Feb-25-16 05:00PM  PR Newswire]
▶ Smith & Wesson Hunts for Acquisitions   [Jan-21-16 09:28AM  at TheStreet]
▶ Bear Archery Set to Unveil New Crossbows Opening Morning   [Jan-05-16 06:39PM  PR Newswire]
▶ Escalade Announces Executive Management Change   [Dec-07  05:54PM  PR Newswire]
▶ 10-Q for Escalade, Inc.   [Aug-08  08:10PM  at Company Spotlight]
▶ 10-Q for Escalade, Inc.   [Apr-23  08:10PM  at Company Spotlight]
Financial statements of ESCA
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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