Intrinsic value of Hanesbrands - HBI

Previous Close

$24.31

  Intrinsic Value

$52.65

stock screener

  Rating & Target

str. buy

+117%

  Value-price divergence*

+26%

Previous close

$24.31

 
Intrinsic value

$52.65

 
Up/down potential

+117%

 
Rating

str. buy

 
Value-price divergence*

+26%

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

We calculate the intrinsic value of HBI 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 8.9

 

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, %
  5.16
  13.20
  12.38
  11.64
  10.98
  10.38
  9.84
  9.36
  8.92
  8.53
  8.18
  7.86
  7.57
  7.32
  7.08
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
  5.43
  5.39
Revenue, $m
  6,028
  6,824
  7,668
  8,561
  9,501
  10,487
  11,519
  12,597
  13,721
  14,892
  16,109
  17,376
  18,691
  20,059
  21,480
  22,957
  24,492
  26,089
  27,750
  29,479
  31,280
  33,156
  35,111
  37,150
  39,277
  41,498
  43,817
  46,240
  48,773
  51,421
  54,191
Variable operating expenses, $m
 
  2,681
  2,999
  3,336
  3,690
  4,061
  4,450
  4,856
  5,280
  5,721
  6,179
  6,547
  7,042
  7,558
  8,093
  8,649
  9,228
  9,830
  10,455
  11,107
  11,785
  12,492
  13,229
  13,997
  14,798
  15,635
  16,509
  17,422
  18,376
  19,374
  20,417
Fixed operating expenses, $m
 
  3,016
  3,091
  3,168
  3,247
  3,329
  3,412
  3,497
  3,585
  3,674
  3,766
  3,860
  3,957
  4,056
  4,157
  4,261
  4,367
  4,477
  4,589
  4,703
  4,821
  4,941
  5,065
  5,191
  5,321
  5,454
  5,591
  5,730
  5,874
  6,021
  6,171
Total operating expenses, $m
  5,253
  5,697
  6,090
  6,504
  6,937
  7,390
  7,862
  8,353
  8,865
  9,395
  9,945
  10,407
  10,999
  11,614
  12,250
  12,910
  13,595
  14,307
  15,044
  15,810
  16,606
  17,433
  18,294
  19,188
  20,119
  21,089
  22,100
  23,152
  24,250
  25,395
  26,588
Operating income, $m
  776
  1,127
  1,578
  2,058
  2,564
  3,098
  3,658
  4,244
  4,857
  5,497
  6,164
  6,969
  7,692
  8,446
  9,230
  10,047
  10,897
  11,783
  12,706
  13,669
  14,674
  15,722
  16,817
  17,962
  19,158
  20,409
  21,718
  23,088
  24,523
  26,027
  27,602
EBITDA, $m
  879
  1,296
  1,755
  2,242
  2,756
  3,298
  3,867
  4,463
  5,086
  5,736
  6,414
  7,120
  7,855
  8,620
  9,417
  10,246
  11,110
  12,009
  12,947
  13,925
  14,945
  16,010
  17,122
  18,284
  19,499
  20,769
  22,098
  23,490
  24,947
  26,473
  28,073
Interest expense (income), $m
  1
  123
  148
  175
  203
  233
  264
  297
  331
  367
  404
  443
  483
  525
  568
  614
  660
  709
  760
  813
  868
  925
  984
  1,046
  1,111
  1,179
  1,249
  1,323
  1,400
  1,480
  1,564
Earnings before tax, $m
  571
  1,005
  1,430
  1,883
  2,361
  2,864
  3,393
  3,947
  4,526
  5,130
  5,760
  6,526
  7,209
  7,921
  8,662
  9,433
  10,237
  11,074
  11,946
  12,857
  13,806
  14,798
  15,833
  16,915
  18,046
  19,230
  20,468
  21,765
  23,123
  24,546
  26,038
Tax expense, $m
  34
  271
  386
  508
  637
  773
  916
  1,066
  1,222
  1,385
  1,555
  1,762
  1,947
  2,139
  2,339
  2,547
  2,764
  2,990
  3,226
  3,471
  3,728
  3,995
  4,275
  4,567
  4,873
  5,192
  5,526
  5,877
  6,243
  6,627
  7,030
Net income, $m
  539
  733
  1,044
  1,374
  1,723
  2,091
  2,477
  2,881
  3,304
  3,745
  4,205
  4,764
  5,263
  5,782
  6,323
  6,886
  7,473
  8,084
  8,721
  9,385
  10,078
  10,802
  11,558
  12,348
  13,174
  14,038
  14,942
  15,889
  16,880
  17,919
  19,008

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  465
  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
  6,930
  7,515
  8,445
  9,429
  10,464
  11,550
  12,687
  13,874
  15,112
  16,401
  17,742
  19,136
  20,585
  22,091
  23,656
  25,283
  26,974
  28,732
  30,562
  32,466
  34,449
  36,515
  38,668
  40,914
  43,257
  45,703
  48,257
  50,926
  53,715
  56,631
  59,681
Adjusted assets (=assets-cash), $m
  6,465
  7,515
  8,445
  9,429
  10,464
  11,550
  12,687
  13,874
  15,112
  16,401
  17,742
  19,136
  20,585
  22,091
  23,656
  25,283
  26,974
  28,732
  30,562
  32,466
  34,449
  36,515
  38,668
  40,914
  43,257
  45,703
  48,257
  50,926
  53,715
  56,631
  59,681
Revenue / Adjusted assets
  0.932
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
  0.908
Average production assets, $m
  993
  1,126
  1,265
  1,413
  1,568
  1,730
  1,901
  2,079
  2,264
  2,457
  2,658
  2,867
  3,084
  3,310
  3,544
  3,788
  4,041
  4,305
  4,579
  4,864
  5,161
  5,471
  5,793
  6,130
  6,481
  6,847
  7,230
  7,630
  8,048
  8,484
  8,941
Working capital, $m
  1,695
  1,658
  1,863
  2,080
  2,309
  2,548
  2,799
  3,061
  3,334
  3,619
  3,915
  4,222
  4,542
  4,874
  5,220
  5,579
  5,952
  6,340
  6,743
  7,163
  7,601
  8,057
  8,532
  9,027
  9,544
  10,084
  10,648
  11,236
  11,852
  12,495
  13,168
Total debt, $m
  3,742
  4,228
  4,995
  5,805
  6,658
  7,553
  8,490
  9,468
  10,488
  11,550
  12,655
  13,804
  14,998
  16,239
  17,529
  18,869
  20,262
  21,711
  23,219
  24,788
  26,422
  28,124
  29,899
  31,749
  33,680
  35,695
  37,800
  39,999
  42,297
  44,700
  47,213
Total liabilities, $m
  5,707
  6,192
  6,959
  7,769
  8,622
  9,517
  10,454
  11,432
  12,452
  13,514
  14,619
  15,768
  16,962
  18,203
  19,493
  20,833
  22,226
  23,675
  25,183
  26,752
  28,386
  30,088
  31,863
  33,713
  35,644
  37,659
  39,764
  41,963
  44,261
  46,664
  49,177
Total equity, $m
  1,224
  1,323
  1,486
  1,659
  1,842
  2,033
  2,233
  2,442
  2,660
  2,887
  3,123
  3,368
  3,623
  3,888
  4,164
  4,450
  4,747
  5,057
  5,379
  5,714
  6,063
  6,427
  6,806
  7,201
  7,613
  8,044
  8,493
  8,963
  9,454
  9,967
  10,504
Total liabilities and equity, $m
  6,931
  7,515
  8,445
  9,428
  10,464
  11,550
  12,687
  13,874
  15,112
  16,401
  17,742
  19,136
  20,585
  22,091
  23,657
  25,283
  26,973
  28,732
  30,562
  32,466
  34,449
  36,515
  38,669
  40,914
  43,257
  45,703
  48,257
  50,926
  53,715
  56,631
  59,681
Debt-to-equity ratio
  3.057
  3.200
  3.360
  3.500
  3.620
  3.720
  3.800
  3.880
  3.940
  4.000
  4.050
  4.100
  4.140
  4.180
  4.210
  4.240
  4.270
  4.290
  4.320
  4.340
  4.360
  4.380
  4.390
  4.410
  4.420
  4.440
  4.450
  4.460
  4.470
  4.480
  4.490
Adjusted equity ratio
  0.126
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  539
  733
  1,044
  1,374
  1,723
  2,091
  2,477
  2,881
  3,304
  3,745
  4,205
  4,764
  5,263
  5,782
  6,323
  6,886
  7,473
  8,084
  8,721
  9,385
  10,078
  10,802
  11,558
  12,348
  13,174
  14,038
  14,942
  15,889
  16,880
  17,919
  19,008
Depreciation, amort., depletion, $m
  103
  169
  176
  184
  192
  201
  210
  219
  229
  239
  250
  151
  162
  174
  187
  199
  213
  227
  241
  256
  272
  288
  305
  323
  341
  360
  381
  402
  424
  447
  471
Funds from operations, $m
  502
  902
  1,221
  1,559
  1,916
  2,292
  2,687
  3,101
  3,533
  3,984
  4,454
  4,915
  5,425
  5,956
  6,510
  7,085
  7,685
  8,310
  8,962
  9,641
  10,350
  11,090
  11,863
  12,671
  13,515
  14,398
  15,322
  16,290
  17,303
  18,365
  19,478
Change in working capital, $m
  -104
  193
  205
  217
  228
  240
  251
  262
  273
  284
  296
  308
  320
  332
  345
  359
  373
  388
  404
  420
  438
  456
  475
  495
  517
  540
  564
  589
  615
  643
  673
Cash from operations, $m
  606
  709
  1,015
  1,342
  1,687
  2,052
  2,436
  2,839
  3,260
  3,700
  4,159
  4,607
  5,105
  5,624
  6,164
  6,727
  7,312
  7,922
  8,558
  9,221
  9,913
  10,634
  11,388
  12,175
  12,998
  13,859
  14,759
  15,701
  16,688
  17,722
  18,805
Maintenance CAPEX, $m
  0
  -52
  -59
  -67
  -74
  -83
  -91
  -100
  -109
  -119
  -129
  -140
  -151
  -162
  -174
  -187
  -199
  -213
  -227
  -241
  -256
  -272
  -288
  -305
  -323
  -341
  -360
  -381
  -402
  -424
  -447
New CAPEX, $m
  -83
  -133
  -139
  -147
  -155
  -163
  -170
  -178
  -185
  -193
  -201
  -209
  -217
  -226
  -234
  -244
  -253
  -263
  -274
  -285
  -297
  -310
  -323
  -336
  -351
  -366
  -383
  -400
  -418
  -437
  -457
Cash from investing activities, $m
  -967
  -185
  -198
  -214
  -229
  -246
  -261
  -278
  -294
  -312
  -330
  -349
  -368
  -388
  -408
  -431
  -452
  -476
  -501
  -526
  -553
  -582
  -611
  -641
  -674
  -707
  -743
  -781
  -820
  -861
  -904
Free cash flow, $m
  -361
  524
  817
  1,128
  1,458
  1,807
  2,175
  2,561
  2,965
  3,387
  3,828
  4,258
  4,737
  5,236
  5,756
  6,296
  6,860
  7,446
  8,058
  8,695
  9,360
  10,053
  10,777
  11,534
  12,324
  13,151
  14,016
  14,921
  15,869
  16,861
  17,902
Issuance/(repayment) of debt, $m
  1,153
  720
  767
  810
  853
  895
  937
  978
  1,020
  1,062
  1,105
  1,149
  1,194
  1,241
  1,290
  1,340
  1,393
  1,449
  1,508
  1,569
  1,634
  1,702
  1,774
  1,850
  1,931
  2,015
  2,105
  2,199
  2,298
  2,403
  2,513
Issuance/(repurchase) of shares, $m
  -380
  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  
  678
  720
  767
  810
  853
  895
  937
  978
  1,020
  1,062
  1,105
  1,149
  1,194
  1,241
  1,290
  1,340
  1,393
  1,449
  1,508
  1,569
  1,634
  1,702
  1,774
  1,850
  1,931
  2,015
  2,105
  2,199
  2,298
  2,403
  2,513
Total cash flow (excl. dividends), $m
  308
  1,245
  1,583
  1,938
  2,311
  2,702
  3,111
  3,539
  3,985
  4,449
  4,933
  5,407
  5,931
  6,477
  7,045
  7,637
  8,253
  8,895
  9,565
  10,264
  10,993
  11,755
  12,552
  13,384
  14,255
  15,166
  16,120
  17,120
  18,167
  19,264
  20,415
Retained Cash Flow (-), $m
  52
  -153
  -164
  -173
  -182
  -191
  -200
  -209
  -218
  -227
  -236
  -245
  -255
  -265
  -275
  -286
  -298
  -310
  -322
  -335
  -349
  -364
  -379
  -395
  -412
  -430
  -450
  -470
  -491
  -513
  -537
Prev. year cash balance distribution, $m
 
  55
  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
 
  1,146
  1,420
  1,765
  2,129
  2,511
  2,911
  3,330
  3,767
  4,223
  4,697
  5,162
  5,676
  6,212
  6,770
  7,350
  7,955
  8,586
  9,243
  9,929
  10,644
  11,392
  12,173
  12,989
  13,843
  14,736
  15,671
  16,650
  17,676
  18,751
  19,878
Discount rate, %
 
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
 
  1,048
  1,178
  1,317
  1,414
  1,470
  1,485
  1,463
  1,408
  1,325
  1,221
  1,094
  966
  834
  705
  583
  470
  371
  285
  214
  156
  111
  77
  51
  33
  21
  13
  7
  4
  2
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Hanesbrands Inc., a consumer goods company, designs, manufactures, sources, and sells various basic apparel for men, women, and children in the United States. The company operates through four segments: Innerwear, Activewear, Direct to Consumer, and International. It sells bras, panties, shapewears, hosiery, men’s underwear, children’s underwear, and socks; and other activewear, such as T-shirts, fleece, sport shirts, performance T-shirts and shorts, sports bras, and thermals, as well as licensed logo apparel in collegiate bookstores, mass retailers, and other channels. The company licenses its Champion name for footwear and sports accessories. It provides its products primarily under the Hanes, Champion, Maidenform, DIM, Playtex, Bali, JMS/Just My Size, Nur Die/Nur Der, L’eggs, Lovable, Wonderbra, Flexees, Lilyette, Gear for Sports, Bonds, Berlei, Shock Absorber, Abanderado, Rinbros, and Zorba brand names. The company markets its products through retailers, wholesalers, and third party embellishers, as well as directly to consumers. As of December 31, 2016, it operated 252 outlet stores in the United States and the Commonwealth of Puerto Rico, as well as 460 retail and outlet stores internationally; and Websites under the Hanes, One Hanes Place, JMS/Just My Size, and Champion names.. The company also sells its products in Europe, Australia, Asia, Latin America, Canada, the Middle East, Africa, and the Caribbean. Hanesbrands Inc. was founded in 1901 and is headquartered in Winston-Salem, North Carolina.

FINANCIAL RATIOS  of  Hanesbrands (HBI)

Valuation Ratios
P/E Ratio 17.1
Price to Sales 1.5
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow 15.2
Price to Free Cash Flow 17.6
Growth Rates
Sales Growth Rate 5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.2%
Cap. Spend. - 3 Yr. Gr. Rate 13.5%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 286.6%
Total Debt to Equity 305.7%
Interest Coverage 572
Management Effectiveness
Return On Assets 8.6%
Ret/ On Assets - 3 Yr. Avg. 8.4%
Return On Total Capital 12.2%
Ret/ On T. Cap. - 3 Yr. Avg. 12.3%
Return On Equity 43.1%
Return On Equity - 3 Yr. Avg. 35.4%
Asset Turnover 1
Profitability Ratios
Gross Margin 37.8%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin 11.2%
EBITDA Margin - 3 Yr. Avg. 10.6%
Operating Margin 12.9%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 8.8%
Net Profit Margin 8.9%
Net Profit Margin - 3 Yr. Avg. 8%
Effective Tax Rate 6%
Eff/ Tax Rate - 3 Yr. Avg. 9.5%
Payout Ratio 31%

HBI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HBI stock intrinsic value calculation we used $6028 million for the last fiscal year's total revenue generated by Hanesbrands. The default revenue input number comes from 2016 income statement of Hanesbrands. 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 HBI stock valuation model: a) initial revenue growth rate of 13.2% 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 9.3%, whose default value for HBI is calculated based on our internal credit rating of Hanesbrands, 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 Hanesbrands.
    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 HBI stock the variable cost ratio is equal to 39.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2942 million in the base year in the intrinsic value calculation for HBI 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 3.5% for Hanesbrands.

Corporate tax rate of 27% is the nominal tax rate for Hanesbrands. 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 HBI 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 HBI are equal to 16.5%.

Life of production assets of 19 years is the average useful life of capital assets used in Hanesbrands 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 HBI is equal to 24.3%. 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 - $1224 million for Hanesbrands - 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 367.164 million for Hanesbrands 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 Hanesbrands at the current share price and the inputted number of shares is $8.9 billion.

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Stock chart of HBI Financial statements of HBI
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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