Intrinsic value of Hooker Furniture - HOFT

Previous Close

$37.90

  Intrinsic Value

$53.04

stock screener

  Rating & Target

buy

+40%

Previous close

$37.90

 
Intrinsic value

$53.04

 
Up/down potential

+40%

 
Rating

buy

We calculate the intrinsic value of HOFT 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
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, %
  133.60
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  577
  629
  683
  739
  798
  859
  922
  988
  1,056
  1,127
  1,201
  1,277
  1,357
  1,440
  1,527
  1,617
  1,712
  1,810
  1,913
  2,020
  2,132
  2,248
  2,371
  2,499
  2,632
  2,772
  2,919
  3,072
  3,233
  3,402
  3,578
Variable operating expenses, $m
 
  568
  616
  667
  720
  774
  831
  890
  952
  1,015
  1,082
  1,148
  1,220
  1,295
  1,373
  1,454
  1,539
  1,627
  1,719
  1,816
  1,916
  2,021
  2,131
  2,246
  2,367
  2,492
  2,624
  2,762
  2,907
  3,058
  3,217
Fixed operating expenses, $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
Total operating expenses, $m
  538
  568
  616
  667
  720
  774
  831
  890
  952
  1,015
  1,082
  1,148
  1,220
  1,295
  1,373
  1,454
  1,539
  1,627
  1,719
  1,816
  1,916
  2,021
  2,131
  2,246
  2,367
  2,492
  2,624
  2,762
  2,907
  3,058
  3,217
Operating income, $m
  39
  61
  67
  72
  78
  84
  91
  97
  104
  111
  119
  129
  137
  145
  154
  163
  173
  183
  193
  204
  215
  227
  239
  252
  266
  280
  295
  310
  327
  344
  361
EBITDA, $m
  47
  70
  76
  83
  89
  96
  103
  110
  118
  126
  134
  143
  152
  161
  170
  181
  191
  202
  213
  225
  238
  251
  265
  279
  294
  309
  326
  343
  361
  380
  399
Interest expense (income), $m
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
Earnings before tax, $m
  39
  59
  64
  70
  75
  81
  87
  93
  99
  106
  113
  122
  129
  137
  145
  154
  162
  172
  181
  191
  201
  212
  224
  236
  248
  261
  275
  289
  304
  320
  336
Tax expense, $m
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  30
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  91
Net income, $m
  25
  43
  47
  51
  55
  59
  63
  68
  72
  77
  82
  89
  94
  100
  106
  112
  119
  125
  132
  139
  147
  155
  163
  172
  181
  191
  200
  211
  222
  233
  245

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  40
  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
  319
  304
  330
  357
  386
  415
  446
  478
  511
  545
  581
  618
  656
  697
  738
  782
  828
  875
  925
  977
  1,031
  1,087
  1,146
  1,208
  1,273
  1,341
  1,411
  1,486
  1,563
  1,645
  1,730
Adjusted assets (=assets-cash), $m
  279
  304
  330
  357
  386
  415
  446
  478
  511
  545
  581
  618
  656
  697
  738
  782
  828
  875
  925
  977
  1,031
  1,087
  1,146
  1,208
  1,273
  1,341
  1,411
  1,486
  1,563
  1,645
  1,730
Revenue / Adjusted assets
  2.068
  2.069
  2.070
  2.070
  2.067
  2.070
  2.067
  2.067
  2.067
  2.068
  2.067
  2.066
  2.069
  2.066
  2.069
  2.068
  2.068
  2.069
  2.068
  2.068
  2.068
  2.068
  2.069
  2.069
  2.068
  2.067
  2.069
  2.067
  2.068
  2.068
  2.068
Average production assets, $m
  38
  42
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  90
  95
  101
  107
  113
  119
  126
  133
  141
  148
  156
  165
  174
  183
  193
  203
  213
  225
  236
Working capital, $m
  148
  125
  135
  146
  158
  170
  183
  196
  209
  223
  238
  253
  269
  285
  302
  320
  339
  358
  379
  400
  422
  445
  469
  495
  521
  549
  578
  608
  640
  674
  708
Total debt, $m
  48
  52
  63
  74
  86
  98
  111
  124
  137
  151
  166
  181
  197
  214
  231
  249
  268
  288
  308
  329
  352
  375
  399
  425
  451
  479
  509
  539
  571
  605
  640
Total liabilities, $m
  121
  125
  136
  147
  159
  171
  184
  197
  210
  224
  239
  254
  270
  287
  304
  322
  341
  361
  381
  402
  425
  448
  472
  498
  524
  552
  582
  612
  644
  678
  713
Total equity, $m
  198
  179
  194
  210
  227
  244
  262
  281
  300
  320
  341
  363
  386
  410
  434
  460
  487
  515
  544
  574
  606
  639
  674
  710
  748
  788
  830
  874
  919
  967
  1,017
Total liabilities and equity, $m
  319
  304
  330
  357
  386
  415
  446
  478
  510
  544
  580
  617
  656
  697
  738
  782
  828
  876
  925
  976
  1,031
  1,087
  1,146
  1,208
  1,272
  1,340
  1,412
  1,486
  1,563
  1,645
  1,730
Debt-to-equity ratio
  0.242
  0.290
  0.320
  0.350
  0.380
  0.400
  0.420
  0.440
  0.460
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.600
  0.600
  0.610
  0.610
  0.620
  0.620
  0.630
  0.630
Adjusted equity ratio
  0.566
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  43
  47
  51
  55
  59
  63
  68
  72
  77
  82
  89
  94
  100
  106
  112
  119
  125
  132
  139
  147
  155
  163
  172
  181
  191
  200
  211
  222
  233
  245
Depreciation, amort., depletion, $m
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  14
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  34
  36
  38
Funds from operations, $m
  28
  52
  57
  61
  66
  70
  75
  81
  86
  91
  97
  103
  109
  115
  122
  129
  137
  144
  153
  161
  170
  179
  189
  199
  209
  220
  232
  244
  256
  269
  283
Change in working capital, $m
  -3
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
Cash from operations, $m
  31
  42
  46
  50
  54
  58
  63
  68
  72
  77
  83
  87
  93
  99
  105
  111
  118
  125
  132
  140
  148
  156
  164
  173
  183
  192
  203
  213
  224
  236
  248
Maintenance CAPEX, $m
  0
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
New CAPEX, $m
  -2
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Cash from investing activities, $m
  -88
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -31
  -32
  -33
  -36
  -37
  -40
  -41
  -44
  -45
  -48
Free cash flow, $m
  -57
  32
  36
  39
  42
  46
  50
  53
  57
  61
  66
  70
  74
  79
  84
  89
  95
  100
  106
  112
  119
  125
  132
  140
  147
  155
  163
  172
  181
  191
  201
Issuance/(repayment) of debt, $m
  48
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
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  
  48
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
Total cash flow (excl. dividends), $m
  -9
  43
  46
  50
  54
  58
  62
  66
  71
  76
  80
  85
  90
  96
  101
  107
  113
  120
  127
  134
  141
  149
  157
  165
  174
  183
  193
  203
  213
  224
  236
Retained Cash Flow (-), $m
  -42
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
Prev. year cash balance distribution, $m
 
  34
  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
 
  62
  31
  34
  37
  41
  44
  48
  52
  55
  60
  63
  67
  72
  77
  82
  87
  92
  97
  103
  109
  115
  122
  129
  136
  143
  151
  159
  167
  176
  186
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
 
  59
  28
  30
  31
  32
  32
  32
  32
  32
  31
  30
  29
  27
  26
  24
  22
  20
  18
  16
  14
  12
  10
  8
  7
  6
  4
  3
  3
  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
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Hooker Furniture Corporation is a home furnishings marketing, design and logistics company offering sourcing of residential casegoods and upholstery, as well as domestically-produced leather and fabric-upholstered furniture. The Company operates through three segments: casegoods furniture, upholstered furniture and all other. The Company's casegoods product categories include accents, home office, dining, bedroom and home entertainment furniture under the Hooker Furniture brand. Its residential upholstered seating companies include Bradington-Young, which is engaged in upscale motion and stationary leather furniture, and Sam Moore Furniture, which is engaged in upscale occasional chairs, settees, sofas and sectional seating with a focus on cover-to-frame customization. It also markets a line of imported leather upholstery under the Hooker Upholstery trade name. All other segment operates under the H Contract and Homeware brands.

FINANCIAL RATIOS  of  Hooker Furniture (HOFT)

Valuation Ratios
P/E Ratio 17.5
Price to Sales 0.8
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 14.1
Price to Free Cash Flow 15.1
Growth Rates
Sales Growth Rate 133.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 21.2%
Total Debt to Equity 24.2%
Interest Coverage 40
Management Effectiveness
Return On Assets 10.2%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 12.4%
Ret/ On T. Cap. - 3 Yr. Avg. 10.8%
Return On Equity 14.1%
Return On Equity - 3 Yr. Avg. 11.4%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 21.3%
Gross Margin - 3 Yr. Avg. 25%
EBITDA Margin 8.3%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin 6.8%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 6.8%
Pre-Tax Margin - 3 Yr. Avg. 8.1%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 35.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 20%

HOFT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HOFT stock intrinsic value calculation we used $577 million for the last fiscal year's total revenue generated by Hooker Furniture. The default revenue input number comes from 2017 income statement of Hooker Furniture. 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 HOFT stock valuation model: a) initial revenue growth rate of 9% 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 HOFT is calculated based on our internal credit rating of Hooker Furniture, 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 Hooker Furniture.
    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 HOFT stock the variable cost ratio is equal to 90.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for HOFT 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 Hooker Furniture.

Corporate tax rate of 27% is the nominal tax rate for Hooker Furniture. 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 HOFT 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 HOFT are equal to 6.6%.

Life of production assets of 6.2 years is the average useful life of capital assets used in Hooker Furniture 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 HOFT is equal to 19.8%. 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 - $198 million for Hooker Furniture - 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 11.776 million for Hooker Furniture 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 Hooker Furniture at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Hooker Furniture posts 3Q profit   [08:29AM  Associated Press]
▶ 10 Best Contemporary High End Modern Furniture Brands in USA   [Nov-06-17 10:00AM  Insider Monkey]
▶ At $45.55, Is Hooker Furniture Corporation (HOFT) A Buy?   [Sep-21-17 12:09PM  Simply Wall St.]
▶ Thinly Traded Furniture Stock With 94% Growth Crafts New Base   [Sep-08-17 11:57AM  Investor's Business Daily]
▶ Hooker Furniture posts 2Q profit   [Sep-07-17 11:46PM  Associated Press]
▶ Hooker Furniture Declares Quarterly Dividend   [Aug-30-17 08:00AM  GlobeNewswire]
▶ Jeremy Hoff Named President of Hooker Upholstery   [Aug-10-17 08:00AM  GlobeNewswire]
▶ Hooker Furniture posts 1Q profit   [08:36AM  Associated Press]
▶ Hooker Furniture to Host First Quarter Earnings Call June 6   [May-16-17 03:53PM  GlobeNewswire]
▶ Hooker Furniture posts 4Q profit   [08:18AM  Associated Press]
▶ Hooker Furniture Declares Quarterly Dividend   [Mar-01-17 10:29AM  GlobeNewswire]
▶ Hooker Furniture Corporation Promotes George Revington   [Jan-25-17 04:00PM  GlobeNewswire]
▶ Hedge Funds Are Fans of Hooker Furniture Corporation (HOFT)   [Dec-09-16 07:42PM  Insider Monkey]
▶ Why Sprint, SunPower, and Hooker Furniture Jumped Today   [Dec-07-16 06:43PM  at Motley Fool]
▶ Hooker Furniture Declares Increased Quarterly Dividend   [Nov-29-16 04:10PM  GlobeNewswire]
▶ Hooker Furniture Declares Quarterly Dividend   [Sep-01-16 08:45AM  GlobeNewswire]
Financial statements of HOFT
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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