Intrinsic value of Haverty Furniture - HVT

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$24.35

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$24.35

 
Intrinsic value

$16.86

 
Up/down potential

-31%

 
Rating

sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of HVT 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 0.5

 

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, %
  2.11
  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
  4.87
Revenue, $m
  822
  841
  863
  887
  914
  943
  975
  1,010
  1,048
  1,088
  1,131
  1,177
  1,225
  1,277
  1,333
  1,391
  1,453
  1,518
  1,587
  1,660
  1,737
  1,818
  1,904
  1,994
  2,089
  2,189
  2,294
  2,405
  2,521
  2,644
  2,772
Variable operating expenses, $m
 
  792
  812
  835
  861
  888
  919
  951
  987
  1,025
  1,065
  1,108
  1,154
  1,203
  1,255
  1,310
  1,368
  1,430
  1,495
  1,564
  1,636
  1,713
  1,793
  1,878
  1,968
  2,062
  2,161
  2,265
  2,375
  2,490
  2,612
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
  774
  792
  812
  835
  861
  888
  919
  951
  987
  1,025
  1,065
  1,108
  1,154
  1,203
  1,255
  1,310
  1,368
  1,430
  1,495
  1,564
  1,636
  1,713
  1,793
  1,878
  1,968
  2,062
  2,161
  2,265
  2,375
  2,490
  2,612
Operating income, $m
  48
  49
  50
  51
  53
  55
  57
  59
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  139
  146
  153
  161
EBITDA, $m
  77
  78
  80
  83
  85
  88
  91
  94
  98
  101
  105
  110
  114
  119
  124
  130
  135
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  247
  259
Interest expense (income), $m
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  17
  18
  19
  20
  21
  23
  24
Earnings before tax, $m
  46
  46
  47
  48
  49
  51
  52
  54
  56
  58
  60
  62
  64
  66
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  109
  114
  119
  125
  131
  137
Tax expense, $m
  18
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
Net income, $m
  28
  33
  34
  35
  36
  37
  38
  39
  41
  42
  43
  45
  47
  49
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  63
  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
  455
  401
  411
  423
  436
  450
  465
  482
  500
  519
  539
  561
  584
  609
  635
  663
  693
  724
  757
  792
  828
  867
  908
  951
  996
  1,044
  1,094
  1,147
  1,202
  1,261
  1,322
Adjusted assets (=assets-cash), $m
  392
  401
  411
  423
  436
  450
  465
  482
  500
  519
  539
  561
  584
  609
  635
  663
  693
  724
  757
  792
  828
  867
  908
  951
  996
  1,044
  1,094
  1,147
  1,202
  1,261
  1,322
Revenue / Adjusted assets
  2.097
  2.097
  2.100
  2.097
  2.096
  2.096
  2.097
  2.095
  2.096
  2.096
  2.098
  2.098
  2.098
  2.097
  2.099
  2.098
  2.097
  2.097
  2.096
  2.096
  2.098
  2.097
  2.097
  2.097
  2.097
  2.097
  2.097
  2.097
  2.097
  2.097
  2.097
Average production assets, $m
  232
  237
  243
  250
  258
  266
  275
  285
  295
  307
  319
  332
  346
  360
  376
  392
  410
  428
  448
  468
  490
  513
  537
  562
  589
  617
  647
  678
  711
  745
  782
Working capital, $m
  98
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
Total debt, $m
  55
  56
  61
  66
  71
  77
  84
  91
  99
  107
  116
  126
  136
  146
  158
  170
  183
  196
  210
  226
  241
  258
  276
  295
  314
  335
  357
  380
  404
  429
  456
Total liabilities, $m
  173
  174
  179
  184
  189
  195
  202
  209
  217
  225
  234
  244
  254
  264
  276
  288
  301
  314
  328
  344
  359
  376
  394
  413
  432
  453
  475
  498
  522
  547
  574
Total equity, $m
  282
  227
  233
  239
  247
  255
  263
  273
  283
  294
  305
  318
  331
  345
  360
  375
  392
  410
  428
  448
  469
  491
  514
  538
  564
  591
  619
  649
  680
  714
  748
Total liabilities and equity, $m
  455
  401
  412
  423
  436
  450
  465
  482
  500
  519
  539
  562
  585
  609
  636
  663
  693
  724
  756
  792
  828
  867
  908
  951
  996
  1,044
  1,094
  1,147
  1,202
  1,261
  1,322
Debt-to-equity ratio
  0.195
  0.250
  0.260
  0.270
  0.290
  0.300
  0.320
  0.330
  0.350
  0.360
  0.380
  0.400
  0.410
  0.420
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.610
Adjusted equity ratio
  0.559
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  33
  34
  35
  36
  37
  38
  39
  41
  42
  43
  45
  47
  49
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
Depreciation, amort., depletion, $m
  29
  30
  30
  31
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
Funds from operations, $m
  61
  63
  65
  66
  68
  70
  73
  75
  78
  80
  83
  87
  90
  94
  97
  101
  106
  110
  115
  120
  126
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
Cash from operations, $m
  60
  65
  64
  65
  67
  69
  71
  73
  76
  79
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  146
  152
  159
  167
  175
  183
  192
Maintenance CAPEX, $m
  0
  -29
  -30
  -30
  -31
  -32
  -33
  -34
  -36
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
New CAPEX, $m
  -30
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
Cash from investing activities, $m
  -13
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -47
  -48
  -50
  -53
  -55
  -58
  -61
  -63
  -66
  -69
  -73
  -77
  -81
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -129
Free cash flow, $m
  47
  30
  28
  28
  28
  28
  29
  29
  30
  30
  31
  32
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  60
  62
Issuance/(repayment) of debt, $m
  -3
  4
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Issuance/(repurchase) of shares, $m
  -21
  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  
  -24
  4
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
Total cash flow (excl. dividends), $m
  23
  34
  32
  33
  34
  34
  35
  36
  37
  39
  40
  41
  43
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
Retained Cash Flow (-), $m
  20
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
Prev. year cash balance distribution, $m
 
  60
  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
 
  89
  27
  26
  26
  27
  27
  27
  27
  28
  28
  29
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
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
 
  86
  24
  23
  22
  21
  19
  18
  17
  16
  15
  14
  13
  11
  10
  9
  8
  7
  6
  6
  5
  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

Haverty Furniture Companies, Inc. operates as a specialty retailer of residential furniture and accessories in the United States. The company also offers mattress product lines under the Sealy, Serta, Stearns & Foster, and Tempur-Pedic names. It sells home furnishings through its retail stores, as well as through its Website. As of December 31, 2015, the company operated 121 stores in 16 states in the Southern and Midwest regions. Haverty Furniture Companies, Inc. was founded in 1885 and is based in Atlanta, Georgia.

FINANCIAL RATIOS  of  Haverty Furniture (HVT)

Valuation Ratios
P/E Ratio 18.4
Price to Sales 0.6
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 8.6
Price to Free Cash Flow 17.1
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.1%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 21
Current Ratio 0.2
LT Debt to Equity 18.4%
Total Debt to Equity 19.5%
Interest Coverage 16
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. 7.4%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 54%
Gross Margin - 3 Yr. Avg. 53.8%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 5.8%
Oper. Margin - 3 Yr. Avg. 5.1%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. 4.8%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 2.7%
Effective Tax Rate 39.1%
Eff/ Tax Rate - 3 Yr. Avg. 47%
Payout Ratio 107.1%

HVT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HVT stock intrinsic value calculation we used $822 million for the last fiscal year's total revenue generated by Haverty Furniture. The default revenue input number comes from 2016 income statement of Haverty 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 HVT stock valuation model: a) initial revenue growth rate of 2.3% 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 HVT is calculated based on our internal credit rating of Haverty 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 Haverty 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 HVT stock the variable cost ratio is equal to 94.2%.

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 HVT 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 5.6% for Haverty Furniture.

Corporate tax rate of 27% is the nominal tax rate for Haverty 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 HVT 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 HVT are equal to 28.2%.

Life of production assets of 8 years is the average useful life of capital assets used in Haverty 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 HVT is equal to 4.6%. 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 - $282 million for Haverty 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 21.876 million for Haverty 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 Haverty Furniture at the current share price and the inputted number of shares is $0.5 billion.


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COMPANY NEWS

▶ Havertys Reports Sales for First Quarter   [Apr-07-17 06:42AM  GlobeNewswire]
▶ Havertys Announces Quarterly Cash Dividend   [Feb-23-17 04:12PM  GlobeNewswire]
▶ Haverty Furniture posts 4Q profit   [Feb-21-17 06:08PM  Associated Press]
▶ Havertys Reports Sales for Fourth Quarter   [Jan-09-17 06:22AM  GlobeNewswire]
▶ Is Haverty Furniture Companies, Inc. (HVT) A Good Stock To Buy?   [Dec-09-16 06:00PM  at Insider Monkey]
▶ Heres Why These Five Stocks Are In Spotlight Today   [Oct-10-16 01:11PM  at Insider Monkey]
▶ Havertys Reports Sales for Third Quarter   [Oct-07-16 06:20AM  GlobeNewswire]
▶ Havertys Reports Sales for Second Quarter   [06:46AM  GlobeNewswire]
▶ Havertys Announces Quarterly Cash Dividend   [May-10-16 03:30PM  GlobeNewswire]
Stock chart of HVT Financial statements of HVT
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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