Intrinsic value of Ever-Glory International Group - EVK

Previous Close

$2.30

  Intrinsic Value

$8.33

stock screener

  Rating & Target

str. buy

+262%

Previous close

$2.30

 
Intrinsic value

$8.33

 
Up/down potential

+262%

 
Rating

str. buy

We calculate the intrinsic value of EVK 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 0.0

 

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, %
  -6.65
  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
  393
  401
  410
  421
  432
  446
  460
  476
  493
  511
  530
  551
  574
  598
  623
  650
  678
  708
  740
  774
  810
  847
  887
  928
  972
  1,019
  1,067
  1,119
  1,173
  1,229
  1,289
Variable operating expenses, $m
 
  315
  322
  331
  340
  350
  362
  374
  387
  402
  417
  433
  451
  470
  490
  511
  533
  557
  582
  608
  636
  666
  697
  730
  764
  801
  839
  879
  922
  966
  1,013
Fixed operating expenses, $m
 
  78
  80
  82
  84
  86
  88
  90
  93
  95
  97
  100
  102
  105
  107
  110
  113
  116
  119
  121
  125
  128
  131
  134
  137
  141
  144
  148
  152
  156
  159
Total operating expenses, $m
  383
  393
  402
  413
  424
  436
  450
  464
  480
  497
  514
  533
  553
  575
  597
  621
  646
  673
  701
  729
  761
  794
  828
  864
  901
  942
  983
  1,027
  1,074
  1,122
  1,172
Operating income, $m
  10
  8
  8
  8
  9
  9
  10
  11
  13
  14
  16
  18
  21
  23
  26
  29
  32
  36
  40
  44
  49
  54
  59
  65
  71
  77
  84
  91
  99
  108
  116
EBITDA, $m
  18
  11
  11
  12
  12
  13
  14
  16
  17
  19
  21
  23
  26
  28
  31
  35
  38
  42
  46
  51
  56
  61
  67
  73
  79
  86
  93
  101
  109
  118
  128
Interest expense (income), $m
  2
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
Earnings before tax, $m
  10
  8
  8
  8
  8
  9
  10
  11
  12
  13
  15
  17
  19
  21
  23
  26
  29
  33
  36
  40
  44
  49
  53
  59
  64
  70
  77
  83
  91
  98
  106
Tax expense, $m
  4
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  21
  22
  24
  27
  29
Net income, $m
  7
  6
  6
  6
  6
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  19
  21
  24
  26
  29
  32
  36
  39
  43
  47
  51
  56
  61
  66
  72
  78

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  45
  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
  201
  159
  163
  167
  172
  177
  183
  189
  196
  203
  211
  219
  228
  237
  247
  258
  269
  281
  294
  307
  321
  336
  352
  369
  386
  404
  424
  444
  466
  488
  512
Adjusted assets (=assets-cash), $m
  156
  159
  163
  167
  172
  177
  183
  189
  196
  203
  211
  219
  228
  237
  247
  258
  269
  281
  294
  307
  321
  336
  352
  369
  386
  404
  424
  444
  466
  488
  512
Revenue / Adjusted assets
  2.519
  2.522
  2.515
  2.521
  2.512
  2.520
  2.514
  2.519
  2.515
  2.517
  2.512
  2.516
  2.518
  2.523
  2.522
  2.519
  2.520
  2.520
  2.517
  2.521
  2.523
  2.521
  2.520
  2.515
  2.518
  2.522
  2.517
  2.520
  2.517
  2.518
  2.518
Average production assets, $m
  17
  17
  18
  18
  19
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
Working capital, $m
  59
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
  141
Total debt, $m
  29
  2
  4
  6
  9
  12
  15
  18
  22
  26
  31
  35
  40
  45
  51
  57
  63
  70
  77
  84
  92
  101
  109
  119
  128
  139
  149
  161
  173
  185
  199
Total liabilities, $m
  116
  89
  91
  93
  96
  99
  102
  105
  109
  113
  118
  122
  127
  132
  138
  144
  150
  157
  164
  171
  179
  188
  196
  206
  215
  226
  236
  248
  260
  272
  286
Total equity, $m
  85
  70
  72
  74
  76
  78
  81
  83
  86
  90
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  187
  196
  206
  216
  226
Total liabilities and equity, $m
  201
  159
  163
  167
  172
  177
  183
  188
  195
  203
  211
  219
  228
  237
  247
  258
  269
  281
  294
  307
  321
  337
  352
  369
  386
  405
  423
  444
  466
  488
  512
Debt-to-equity ratio
  0.341
  0.030
  0.050
  0.080
  0.120
  0.150
  0.180
  0.220
  0.260
  0.290
  0.330
  0.360
  0.400
  0.430
  0.470
  0.500
  0.530
  0.560
  0.590
  0.620
  0.650
  0.680
  0.700
  0.730
  0.750
  0.780
  0.800
  0.820
  0.840
  0.860
  0.880
Adjusted equity ratio
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  6
  6
  6
  6
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  19
  21
  24
  26
  29
  32
  36
  39
  43
  47
  51
  56
  61
  66
  72
  78
Depreciation, amort., depletion, $m
  8
  3
  4
  4
  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
Funds from operations, $m
  71
  9
  9
  9
  10
  10
  11
  12
  13
  14
  15
  17
  19
  20
  22
  25
  27
  30
  33
  36
  39
  43
  47
  51
  55
  60
  65
  70
  76
  82
  89
Change in working capital, $m
  27
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
Cash from operations, $m
  44
  8
  8
  8
  9
  9
  9
  10
  11
  12
  13
  15
  16
  18
  20
  22
  24
  27
  29
  32
  35
  39
  42
  46
  50
  55
  60
  65
  70
  76
  82
Maintenance CAPEX, $m
  0
  -3
  -3
  -4
  -4
  -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
New CAPEX, $m
  -11
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
Cash from investing activities, $m
  -11
  -3
  -3
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -14
Free cash flow, $m
  33
  5
  4
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  12
  14
  15
  17
  19
  22
  24
  27
  30
  33
  37
  41
  45
  49
  53
  58
  64
  69
Issuance/(repayment) of debt, $m
  -9
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -8
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Total cash flow (excl. dividends), $m
  23
  7
  6
  7
  7
  8
  8
  9
  10
  11
  12
  14
  15
  17
  19
  21
  24
  26
  29
  32
  35
  38
  42
  46
  50
  55
  60
  65
  70
  76
  82
Retained Cash Flow (-), $m
  -6
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Prev. year cash balance distribution, $m
 
  16
  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
 
  21
  5
  5
  5
  5
  6
  6
  7
  8
  9
  10
  11
  13
  15
  17
  19
  21
  23
  26
  29
  32
  35
  39
  43
  47
  51
  56
  61
  66
  72
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
 
  20
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  3
  3
  3
  2
  2
  1
  1
  1
  1
  1
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
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Ever-Glory International Group, Inc. (Ever-Glory), through its subsidiaries, is a retailer of branded fashion apparel. Ever-Glory is also a global apparel supply chain solution provider with a focus on casual wear, outerwear and sportswear brands. The Company operates through two segments: Wholesale and Retail. The Company's wholesale business consists of wholesale-channel sales made principally to brands and department stores located across Europe, the United States, Japan and People's Republic of China (PRC). Ever-Glory's retail business consists of retail-channel sales directly to consumers through retail stores located across the PRC, as well as sales through online stores at Tmall and Dangdang mall, among others. Ever-Glory services various brands and retail stores by providing a range of services of supply chain management on fabric development and design, sampling, sourcing, quality control, manufacturing, logistics, customs clearance and distribution.

FINANCIAL RATIOS  of  Ever-Glory International Group (EVK)

Valuation Ratios
P/E Ratio 4.9
Price to Sales 0.1
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 0.8
Price to Free Cash Flow 1
Growth Rates
Sales Growth Rate -6.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.4%
Cap. Spend. - 3 Yr. Gr. Rate 6.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 34.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 5.9%
Ret/ On T. Cap. - 3 Yr. Avg. 10%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 17.2%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 30.8%
Gross Margin - 3 Yr. Avg. 29.3%
EBITDA Margin 5.1%
EBITDA Margin - 3 Yr. Avg. 6.4%
Operating Margin 2.5%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 31.7%
Payout Ratio 0%

EVK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EVK stock intrinsic value calculation we used $393 million for the last fiscal year's total revenue generated by Ever-Glory International Group. The default revenue input number comes from 2016 income statement of Ever-Glory International 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 EVK 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 4.3%, whose default value for EVK is calculated based on our internal credit rating of Ever-Glory International 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 Ever-Glory International 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 EVK stock the variable cost ratio is equal to 78.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $76 million in the base year in the intrinsic value calculation for EVK 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 5.4% for Ever-Glory International Group.

Corporate tax rate of 27% is the nominal tax rate for Ever-Glory International 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 EVK 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 EVK are equal to 4.3%.

Life of production assets of 2.1 years is the average useful life of capital assets used in Ever-Glory International 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 EVK is equal to 10.9%. 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 - $85 million for Ever-Glory International 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 14.791 million for Ever-Glory International 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 Ever-Glory International Group at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
GIII G-III Apparel 33.83 11.70  str.sell

COMPANY NEWS

▶ Ever-Glory Reports Third Quarter 2017 Financial Results   [Nov-13-17 06:00AM  PR Newswire]
▶ When Should You Buy Ever-Glory International Group Inc (EVK)?   [Nov-08-17 05:29PM  Simply Wall St.]
▶ Ever-Glory Reports Second Quarter 2017 Financial Results   [Aug-14-17 06:05AM  PR Newswire]
▶ Ever-Glory Reports First Quarter 2017 Financial Results   [May-12-17 06:00AM  PR Newswire]
▶ Ever-Glory posts 4Q profit   [06:36AM  Associated Press]
▶ News from the world of adhesives and sealants   [Apr-21  09:20AM  at noodls]
Financial statements of EVK
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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