Intrinsic value of Inter Parfums - IPAR

Previous Close

$47.80

  Intrinsic Value

$31.61

stock screener

  Rating & Target

sell

-34%

Previous close

$47.80

 
Intrinsic value

$31.61

 
Up/down potential

-34%

 
Rating

sell

We calculate the intrinsic value of IPAR 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
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, %
  11.09
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  521
  561
  602
  645
  689
  735
  783
  833
  885
  939
  996
  1,055
  1,116
  1,180
  1,247
  1,316
  1,389
  1,466
  1,545
  1,628
  1,716
  1,807
  1,902
  2,002
  2,107
  2,217
  2,332
  2,452
  2,578
  2,711
  2,850
Variable operating expenses, $m
 
  487
  522
  559
  598
  638
  680
  723
  768
  815
  864
  915
  969
  1,024
  1,082
  1,143
  1,206
  1,272
  1,341
  1,413
  1,489
  1,568
  1,651
  1,738
  1,829
  1,924
  2,024
  2,128
  2,238
  2,353
  2,474
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
  454
  487
  522
  559
  598
  638
  680
  723
  768
  815
  864
  915
  969
  1,024
  1,082
  1,143
  1,206
  1,272
  1,341
  1,413
  1,489
  1,568
  1,651
  1,738
  1,829
  1,924
  2,024
  2,128
  2,238
  2,353
  2,474
Operating income, $m
  67
  74
  79
  85
  91
  97
  103
  110
  117
  124
  131
  139
  147
  156
  165
  174
  183
  193
  204
  215
  226
  238
  251
  264
  278
  293
  308
  324
  340
  358
  376
EBITDA, $m
  82
  90
  97
  104
  111
  118
  126
  134
  142
  151
  160
  170
  180
  190
  201
  212
  223
  236
  249
  262
  276
  291
  306
  322
  339
  357
  375
  394
  415
  436
  458
Interest expense (income), $m
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  45
Earnings before tax, $m
  67
  72
  77
  82
  87
  92
  97
  103
  109
  115
  121
  128
  135
  142
  150
  158
  166
  175
  184
  193
  203
  213
  224
  236
  247
  260
  273
  287
  301
  316
  332
Tax expense, $m
  24
  19
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  90
Net income, $m
  33
  53
  56
  60
  63
  67
  71
  75
  79
  84
  89
  94
  99
  104
  109
  115
  121
  128
  134
  141
  148
  156
  164
  172
  181
  190
  199
  209
  220
  231
  242

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  256
  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
  682
  458
  492
  527
  563
  601
  640
  681
  724
  768
  814
  862
  912
  965
  1,019
  1,076
  1,136
  1,198
  1,263
  1,331
  1,403
  1,477
  1,555
  1,637
  1,723
  1,812
  1,906
  2,005
  2,108
  2,217
  2,330
Adjusted assets (=assets-cash), $m
  426
  458
  492
  527
  563
  601
  640
  681
  724
  768
  814
  862
  912
  965
  1,019
  1,076
  1,136
  1,198
  1,263
  1,331
  1,403
  1,477
  1,555
  1,637
  1,723
  1,812
  1,906
  2,005
  2,108
  2,217
  2,330
Revenue / Adjusted assets
  1.223
  1.225
  1.224
  1.224
  1.224
  1.223
  1.223
  1.223
  1.222
  1.223
  1.224
  1.224
  1.224
  1.223
  1.224
  1.223
  1.223
  1.224
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.224
  1.224
  1.223
  1.223
  1.223
  1.223
Average production assets, $m
  197
  212
  227
  244
  260
  278
  296
  315
  335
  355
  376
  399
  422
  446
  471
  498
  525
  554
  584
  616
  648
  683
  719
  757
  796
  838
  881
  927
  975
  1,025
  1,077
Working capital, $m
  330
  103
  111
  119
  127
  135
  144
  153
  163
  173
  183
  194
  205
  217
  229
  242
  256
  270
  284
  300
  316
  332
  350
  368
  388
  408
  429
  451
  474
  499
  524
Total debt, $m
  75
  75
  98
  122
  147
  172
  199
  227
  256
  286
  317
  350
  384
  420
  457
  496
  537
  579
  623
  670
  718
  769
  822
  878
  936
  997
  1,061
  1,128
  1,199
  1,272
  1,350
Total liabilities, $m
  312
  312
  335
  359
  384
  409
  436
  464
  493
  523
  554
  587
  621
  657
  694
  733
  774
  816
  860
  907
  955
  1,006
  1,059
  1,115
  1,173
  1,234
  1,298
  1,365
  1,436
  1,509
  1,587
Total equity, $m
  370
  146
  157
  168
  180
  192
  204
  217
  231
  245
  260
  275
  291
  308
  325
  343
  362
  382
  403
  425
  447
  471
  496
  522
  550
  578
  608
  640
  673
  707
  743
Total liabilities and equity, $m
  682
  458
  492
  527
  564
  601
  640
  681
  724
  768
  814
  862
  912
  965
  1,019
  1,076
  1,136
  1,198
  1,263
  1,332
  1,402
  1,477
  1,555
  1,637
  1,723
  1,812
  1,906
  2,005
  2,109
  2,216
  2,330
Debt-to-equity ratio
  0.203
  0.510
  0.620
  0.720
  0.820
  0.900
  0.970
  1.040
  1.110
  1.170
  1.220
  1.270
  1.320
  1.360
  1.410
  1.440
  1.480
  1.510
  1.550
  1.580
  1.610
  1.630
  1.660
  1.680
  1.700
  1.720
  1.750
  1.760
  1.780
  1.800
  1.820
Adjusted equity ratio
  0.268
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  53
  56
  60
  63
  67
  71
  75
  79
  84
  89
  94
  99
  104
  109
  115
  121
  128
  134
  141
  148
  156
  164
  172
  181
  190
  199
  209
  220
  231
  242
Depreciation, amort., depletion, $m
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  67
  71
  74
  78
  82
Funds from operations, $m
  55
  69
  73
  78
  83
  88
  94
  99
  105
  111
  117
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  208
  219
  230
  241
  254
  266
  280
  294
  309
  324
Change in working capital, $m
  0
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
Cash from operations, $m
  55
  62
  66
  70
  75
  80
  85
  90
  95
  101
  107
  113
  119
  126
  133
  140
  148
  156
  164
  173
  182
  191
  201
  211
  222
  233
  245
  258
  271
  284
  299
Maintenance CAPEX, $m
  0
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
New CAPEX, $m
  -6
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -46
  -48
  -50
  -52
Cash from investing activities, $m
  -20
  -30
  -32
  -33
  -36
  -37
  -39
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -102
  -107
  -113
  -119
  -124
  -130
Free cash flow, $m
  35
  32
  34
  37
  40
  42
  45
  49
  52
  55
  59
  62
  66
  70
  74
  78
  82
  87
  92
  97
  102
  107
  113
  119
  125
  131
  138
  145
  152
  160
  168
Issuance/(repayment) of debt, $m
  -22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
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  
  -27
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
Total cash flow (excl. dividends), $m
  3
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
  100
  105
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  245
Retained Cash Flow (-), $m
  -4
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
Prev. year cash balance distribution, $m
 
  234
  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
 
  278
  46
  49
  53
  56
  60
  63
  67
  71
  75
  80
  84
  89
  94
  99
  104
  109
  115
  121
  128
  134
  141
  148
  156
  164
  172
  181
  190
  199
  209
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
 
  266
  42
  43
  43
  44
  43
  43
  42
  41
  39
  38
  36
  34
  31
  29
  26
  24
  21
  19
  16
  14
  12
  10
  8
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Inter Parfums, Inc. operates in the fragrance business. The Company manufactures, markets and distributes an array of fragrance and fragrance related products. It operates through two segments: European based operations and United States based operations. The European Operations segment produces and distributes its fragrance products under license agreements with brand owners. It has a portfolio of prestige brands, which include Balmain, Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Lanvin, Paul Smith, S.T. Dupont, Repetto, Rochas, and Van Cleef & Arpels. Its prestige brand fragrance products are also marketed through its United States operations. These fragrance products are sold under various names, which include Abercrombie & Fitch, Agent Provocateur, Anna Sui, bebe, Dunhill, French Connection, Oscar de la Rent and Shanghai Tang brands. The Company sells its products to department stores, perfumeries, specialty stores, and domestic and international wholesalers and distributors.

FINANCIAL RATIOS  of  Inter Parfums (IPAR)

Valuation Ratios
P/E Ratio 45.1
Price to Sales 2.9
Price to Book 4
Price to Tangible Book
Price to Cash Flow 27.1
Price to Free Cash Flow 30.4
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -95.2%
Cap. Spend. - 3 Yr. Gr. Rate -14.3%
Financial Strength
Quick Ratio 12
Current Ratio 0
LT Debt to Equity 14.3%
Total Debt to Equity 20.3%
Interest Coverage 35
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 7.2%
Return On Equity 9%
Return On Equity - 3 Yr. Avg. 8.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 62.6%
Gross Margin - 3 Yr. Avg. 60.6%
EBITDA Margin 16.1%
EBITDA Margin - 3 Yr. Avg. 15.1%
Operating Margin 12.9%
Oper. Margin - 3 Yr. Avg. 12.2%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 12.4%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 6.2%
Effective Tax Rate 35.8%
Eff/ Tax Rate - 3 Yr. Avg. 35.7%
Payout Ratio 54.5%

IPAR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IPAR stock intrinsic value calculation we used $521 million for the last fiscal year's total revenue generated by Inter Parfums. The default revenue input number comes from 2016 income statement of Inter Parfums. 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 IPAR stock valuation model: a) initial revenue growth rate of 7.6% 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 IPAR is calculated based on our internal credit rating of Inter Parfums, 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 Inter Parfums.
    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 IPAR stock the variable cost ratio is equal to 86.8%.

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 IPAR 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 Inter Parfums.

Corporate tax rate of 27% is the nominal tax rate for Inter Parfums. 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 IPAR 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 IPAR are equal to 37.8%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Inter Parfums 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 IPAR is equal to 18.4%. 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 - $370 million for Inter Parfums - 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 31.3 million for Inter Parfums 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 Inter Parfums at the current share price and the inputted number of shares is $1.5 billion.

RELATED COMPANIES Price Int.Val. Rating
AVP Avon Products 2.33 0.33  str.sell
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REV Revlon Cl A 22.35 11.57  sell
COTY Coty Cl A 20.53 55.34  str.buy
ANF Abercrombie&Fi 19.92 26.47  str.buy

COMPANY NEWS

▶ Top 4 Cosmetics Stocks of 2018   [Jan-10-18 08:55AM  Investopedia]
▶ The Jimmy Choo Inter Parfums Partnership Extended to 2031   [Dec-04-17 04:05PM  Business Wire]
▶ Inter Parfums, Inc. Provides Initial 2018 Guidance   [Nov-13-17 04:05PM  Business Wire]
▶ Top 4 Cosmetics Stocks of 2017   [10:59AM  Investopedia]
▶ Inter Parfums beats 3Q profit forecasts   [Nov-08-17 05:39PM  Associated Press]
▶ Inter Parfums beats 2Q profit forecasts   [Aug-07-17 11:58PM  Associated Press]
▶ ETFs with exposure to Inter Parfums, Inc. : July 5, 2017   [Jul-05-17 12:49PM  Capital Cube]
▶ The 3 Best Dividend Stocks in Beauty Products   [May-20-17 10:00AM  Motley Fool]
▶ Inter Parfums beats Street 1Q forecasts   [May-09-17 07:16PM  Associated Press]
▶ Inter Parfums Beats Q4 Estimates as Rivals Decline   [Mar-14-17 05:52PM  Investopedia]
▶ Inter Parfums tops Street 4Q forecasts   [04:24PM  Associated Press]
Financial statements of IPAR
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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