Intrinsic value of Escalade - ESCA

Previous Close

$13.30

  Intrinsic Value

$8.92

stock screener

  Rating & Target

sell

-33%

Previous close

$13.30

 
Intrinsic value

$8.92

 
Up/down potential

-33%

 
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

Revenue (in 2016), $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 0.2

 

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
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
Revenue, $m
  168
  182
  196
  212
  227
  243
  260
  278
  296
  315
  335
  356
  377
  400
  423
  447
  473
  499
  527
  556
  586
  618
  651
  685
  722
  760
  799
  841
  885
  931
  979
Variable operating expenses, $m
 
  151
  163
  176
  189
  202
  216
  230
  245
  261
  277
  292
  309
  328
  347
  367
  388
  410
  432
  456
  481
  507
  534
  562
  592
  623
  656
  690
  726
  764
  803
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
  177
  190
  203
  217
  231
  245
  261
  277
  294
  309
  326
  346
  365
  386
  407
  430
  452
  477
  502
  529
  556
  585
  616
  647
  681
  715
  752
  791
  830
Operating income, $m
  15
  17
  20
  22
  24
  27
  30
  32
  35
  38
  41
  47
  50
  54
  58
  61
  66
  70
  74
  79
  84
  89
  94
  100
  106
  112
  119
  126
  133
  140
  148
EBITDA, $m
  20
  23
  25
  28
  31
  33
  36
  40
  43
  46
  50
  53
  57
  61
  65
  70
  74
  79
  84
  89
  95
  100
  106
  113
  119
  126
  133
  141
  149
  157
  166
Interest expense (income), $m
  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
  10
Earnings before tax, $m
  16
  16
  18
  21
  23
  25
  28
  30
  33
  36
  39
  44
  47
  50
  54
  57
  61
  65
  69
  74
  78
  83
  88
  93
  99
  105
  111
  117
  124
  131
  138
Tax expense, $m
  5
  4
  5
  6
  6
  7
  7
  8
  9
  10
  10
  12
  13
  14
  15
  15
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
  35
  37
Net income, $m
  11
  12
  13
  15
  17
  18
  20
  22
  24
  26
  28
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  96
  101

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
  175
  189
  203
  217
  232
  248
  265
  281
  299
  318
  337
  357
  378
  399
  422
  446
  470
  496
  523
  551
  581
  612
  644
  678
  714
  751
  790
  831
  874
Adjusted assets (=assets-cash), $m
  150
  162
  175
  189
  203
  217
  232
  248
  265
  281
  299
  318
  337
  357
  378
  399
  422
  446
  470
  496
  523
  551
  581
  612
  644
  678
  714
  751
  790
  831
  874
Revenue / Adjusted assets
  1.120
  1.123
  1.120
  1.122
  1.118
  1.120
  1.121
  1.121
  1.117
  1.121
  1.120
  1.119
  1.119
  1.120
  1.119
  1.120
  1.121
  1.119
  1.121
  1.121
  1.120
  1.122
  1.120
  1.119
  1.121
  1.121
  1.119
  1.120
  1.120
  1.120
  1.120
Average production assets, $m
  33
  36
  39
  41
  45
  48
  51
  54
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
  121
  128
  134
  141
  149
  157
  165
  173
  182
  192
Working capital, $m
  58
  63
  68
  73
  78
  84
  90
  96
  102
  109
  116
  123
  130
  138
  146
  154
  163
  172
  182
  192
  202
  213
  225
  236
  249
  262
  276
  290
  305
  321
  338
Total debt, $m
  25
  28
  32
  36
  41
  46
  50
  55
  61
  66
  72
  78
  84
  90
  97
  104
  111
  119
  127
  135
  143
  152
  162
  172
  182
  193
  204
  216
  229
  242
  256
Total liabilities, $m
  49
  52
  56
  60
  65
  70
  74
  79
  85
  90
  96
  102
  108
  114
  121
  128
  135
  143
  151
  159
  167
  176
  186
  196
  206
  217
  228
  240
  253
  266
  280
Total equity, $m
  102
  110
  119
  128
  138
  148
  158
  169
  180
  191
  203
  216
  229
  243
  257
  271
  287
  303
  320
  337
  356
  375
  395
  416
  438
  461
  485
  511
  537
  565
  594
Total liabilities and equity, $m
  151
  162
  175
  188
  203
  218
  232
  248
  265
  281
  299
  318
  337
  357
  378
  399
  422
  446
  471
  496
  523
  551
  581
  612
  644
  678
  713
  751
  790
  831
  874
Debt-to-equity ratio
  0.245
  0.250
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.350
  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
  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
  17
  18
  20
  22
  24
  26
  28
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  96
  101
Depreciation, amort., depletion, $m
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
Funds from operations, $m
  8
  17
  19
  21
  23
  25
  27
  29
  32
  34
  36
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  101
  107
  113
  119
Change in working capital, $m
  -4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  17
Cash from operations, $m
  12
  12
  14
  16
  18
  19
  21
  23
  25
  27
  30
  31
  34
  36
  39
  42
  45
  48
  51
  54
  57
  61
  65
  69
  73
  77
  82
  86
  92
  97
  102
Maintenance CAPEX, $m
  0
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
New CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
Cash from investing activities, $m
  -10
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -17
  -19
  -20
  -20
  -22
  -23
  -24
  -25
  -26
Free cash flow, $m
  2
  7
  8
  9
  11
  12
  13
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
Issuance/(repayment) of debt, $m
  2
  4
  4
  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
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
  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
Total cash flow (excl. dividends), $m
  5
  11
  12
  14
  15
  17
  18
  20
  22
  24
  26
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  64
  67
  71
  76
  80
  85
  90
Retained Cash Flow (-), $m
  -6
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
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
 
  2
  3
  4
  6
  7
  8
  9
  11
  12
  14
  15
  16
  18
  20
  21
  23
  25
  27
  29
  32
  34
  36
  39
  42
  44
  47
  50
  53
  57
  60
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
 
  2
  3
  4
  5
  5
  6
  6
  7
  7
  7
  7
  7
  7
  7
  6
  6
  5
  5
  5
  4
  4
  3
  3
  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 17.3
Price to Sales 1.1
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 15.8
Price to Free Cash Flow 21.1
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 8.3% 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 14.364 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

▶ 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]
▶ 10-K for Escalade, Inc.   [Feb-27  07:08PM  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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