Intrinsic value of Inter Parfums - IPAR

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$35.70

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$35.70

 
Intrinsic value

$38.74

 
Up/down potential

+9%

 
Rating

hold

 
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 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

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 1.1

 

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
  14.40
  13.46
  12.61
  11.85
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.65
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
Revenue, $m
  521
  596
  676
  762
  852
  947
  1,047
  1,151
  1,261
  1,375
  1,494
  1,617
  1,746
  1,880
  2,018
  2,163
  2,313
  2,469
  2,631
  2,800
  2,975
  3,158
  3,348
  3,547
  3,753
  3,969
  4,194
  4,430
  4,675
  4,932
  5,201
Variable operating expenses, $m
 
  517
  587
  661
  739
  822
  909
  999
  1,094
  1,193
  1,297
  1,404
  1,515
  1,631
  1,752
  1,877
  2,007
  2,143
  2,284
  2,430
  2,582
  2,741
  2,906
  3,078
  3,258
  3,445
  3,641
  3,845
  4,058
  4,281
  4,514
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
  517
  587
  661
  739
  822
  909
  999
  1,094
  1,193
  1,297
  1,404
  1,515
  1,631
  1,752
  1,877
  2,007
  2,143
  2,284
  2,430
  2,582
  2,741
  2,906
  3,078
  3,258
  3,445
  3,641
  3,845
  4,058
  4,281
  4,514
Operating income, $m
  67
  79
  89
  101
  112
  125
  138
  152
  166
  181
  197
  213
  230
  248
  266
  285
  305
  326
  347
  370
  393
  417
  442
  468
  495
  524
  554
  585
  617
  651
  686
EBITDA, $m
  82
  96
  109
  122
  137
  152
  168
  185
  203
  221
  240
  260
  281
  302
  324
  348
  372
  397
  423
  450
  478
  508
  538
  570
  603
  638
  674
  712
  752
  793
  836
Interest expense (income), $m
  2
  2
  3
  5
  7
  8
  10
  12
  14
  16
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  83
  88
Earnings before tax, $m
  67
  77
  86
  96
  106
  117
  128
  140
  152
  165
  179
  193
  207
  222
  238
  254
  271
  289
  307
  327
  346
  367
  389
  411
  435
  459
  485
  511
  539
  568
  599
Tax expense, $m
  24
  21
  23
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  60
  64
  69
  73
  78
  83
  88
  94
  99
  105
  111
  117
  124
  131
  138
  146
  153
  162
Net income, $m
  33
  56
  63
  70
  77
  85
  93
  102
  111
  121
  130
  141
  151
  162
  174
  186
  198
  211
  224
  238
  253
  268
  284
  300
  317
  335
  354
  373
  394
  415
  437

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
  487
  553
  623
  696
  774
  856
  942
  1,031
  1,124
  1,221
  1,322
  1,428
  1,537
  1,650
  1,768
  1,891
  2,019
  2,151
  2,289
  2,433
  2,582
  2,738
  2,900
  3,069
  3,245
  3,430
  3,622
  3,823
  4,033
  4,252
Adjusted assets (=assets-cash), $m
  426
  487
  553
  623
  696
  774
  856
  942
  1,031
  1,124
  1,221
  1,322
  1,428
  1,537
  1,650
  1,768
  1,891
  2,019
  2,151
  2,289
  2,433
  2,582
  2,738
  2,900
  3,069
  3,245
  3,430
  3,622
  3,823
  4,033
  4,252
Revenue / Adjusted assets
  1.223
  1.224
  1.222
  1.223
  1.224
  1.224
  1.223
  1.222
  1.223
  1.223
  1.224
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
Average production assets, $m
  202
  231
  262
  295
  331
  367
  406
  447
  489
  533
  580
  628
  677
  729
  783
  839
  897
  958
  1,021
  1,086
  1,154
  1,225
  1,299
  1,376
  1,456
  1,540
  1,627
  1,719
  1,814
  1,914
  2,018
Working capital, $m
  338
  119
  135
  152
  170
  189
  209
  230
  252
  275
  299
  323
  349
  376
  404
  433
  463
  494
  526
  560
  595
  632
  670
  709
  751
  794
  839
  886
  935
  986
  1,040
Total debt, $m
  75
  95
  140
  187
  237
  290
  346
  404
  465
  529
  595
  664
  735
  810
  887
  967
  1,051
  1,138
  1,228
  1,322
  1,420
  1,521
  1,627
  1,738
  1,853
  1,973
  2,099
  2,230
  2,366
  2,509
  2,659
Total liabilities, $m
  312
  332
  377
  424
  474
  527
  583
  641
  702
  766
  832
  901
  972
  1,047
  1,124
  1,204
  1,288
  1,375
  1,465
  1,559
  1,657
  1,758
  1,864
  1,975
  2,090
  2,210
  2,336
  2,467
  2,603
  2,746
  2,896
Total equity, $m
  370
  155
  176
  199
  222
  247
  273
  300
  329
  359
  390
  422
  455
  490
  526
  564
  603
  644
  686
  730
  776
  824
  873
  925
  979
  1,035
  1,094
  1,155
  1,219
  1,286
  1,356
Total liabilities and equity, $m
  682
  487
  553
  623
  696
  774
  856
  941
  1,031
  1,125
  1,222
  1,323
  1,427
  1,537
  1,650
  1,768
  1,891
  2,019
  2,151
  2,289
  2,433
  2,582
  2,737
  2,900
  3,069
  3,245
  3,430
  3,622
  3,822
  4,032
  4,252
Debt-to-equity ratio
  0.203
  0.610
  0.790
  0.940
  1.070
  1.180
  1.270
  1.350
  1.410
  1.470
  1.530
  1.570
  1.610
  1.650
  1.680
  1.710
  1.740
  1.770
  1.790
  1.810
  1.830
  1.850
  1.860
  1.880
  1.890
  1.910
  1.920
  1.930
  1.940
  1.950
  1.960
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
  56
  63
  70
  77
  85
  93
  102
  111
  121
  130
  141
  151
  162
  174
  186
  198
  211
  224
  238
  253
  268
  284
  300
  317
  335
  354
  373
  394
  415
  437
Depreciation, amort., depletion, $m
  15
  17
  19
  22
  24
  27
  30
  33
  36
  40
  43
  46
  50
  54
  58
  62
  66
  71
  76
  80
  86
  91
  96
  102
  108
  114
  121
  127
  134
  142
  149
Funds from operations, $m
  55
  73
  82
  92
  102
  112
  124
  135
  147
  160
  173
  187
  201
  216
  232
  248
  265
  282
  300
  319
  338
  359
  380
  402
  425
  449
  474
  501
  528
  557
  586
Change in working capital, $m
  0
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
Cash from operations, $m
  55
  50
  66
  75
  84
  93
  104
  114
  126
  137
  150
  162
  176
  190
  204
  219
  235
  251
  268
  285
  303
  322
  342
  362
  384
  406
  429
  453
  479
  505
  533
Maintenance CAPEX, $m
  0
  -15
  -17
  -19
  -22
  -24
  -27
  -30
  -33
  -36
  -40
  -43
  -46
  -50
  -54
  -58
  -62
  -66
  -71
  -76
  -80
  -86
  -91
  -96
  -102
  -108
  -114
  -121
  -127
  -134
  -142
New CAPEX, $m
  -6
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -100
  -104
Cash from investing activities, $m
  -20
  -44
  -48
  -52
  -57
  -61
  -66
  -71
  -75
  -80
  -86
  -91
  -96
  -102
  -108
  -114
  -120
  -126
  -134
  -141
  -148
  -157
  -165
  -173
  -182
  -192
  -201
  -212
  -222
  -234
  -246
Free cash flow, $m
  35
  6
  18
  22
  27
  32
  38
  44
  50
  57
  64
  72
  79
  88
  96
  105
  114
  124
  134
  144
  155
  166
  177
  189
  202
  214
  228
  242
  256
  271
  287
Issuance/(repayment) of debt, $m
  -22
  42
  45
  47
  50
  53
  56
  58
  61
  64
  66
  69
  72
  74
  77
  80
  84
  87
  90
  94
  98
  102
  106
  110
  115
  120
  125
  131
  137
  143
  149
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
  42
  45
  47
  50
  53
  56
  58
  61
  64
  66
  69
  72
  74
  77
  80
  84
  87
  90
  94
  98
  102
  106
  110
  115
  120
  125
  131
  137
  143
  149
Total cash flow (excl. dividends), $m
  3
  48
  63
  70
  77
  85
  93
  102
  111
  120
  130
  140
  151
  162
  173
  185
  198
  211
  224
  238
  252
  268
  283
  300
  317
  335
  353
  373
  393
  414
  436
Retained Cash Flow (-), $m
  -4
  -19
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
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
 
  262
  42
  47
  54
  60
  67
  75
  82
  91
  99
  108
  117
  127
  137
  148
  159
  170
  182
  194
  207
  220
  234
  248
  263
  278
  294
  311
  329
  347
  366
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
 
  252
  38
  41
  44
  47
  49
  50
  51
  52
  52
  51
  50
  48
  46
  43
  40
  37
  33
  30
  26
  23
  19
  16
  13
  11
  9
  7
  5
  4
  3
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

Inter Parfums, Inc., together with its subsidiaries, manufactures, markets, and distributes a range of fragrances and fragrance related products worldwide. It offers its fragrance and cosmetic products under the Balmain, Boucheron, Jimmy Choo, Karl Lagerfeld, Lanvin, Montblanc, Paul Smith, S.T. Dupont, Repetto, Van Cleef & Arpels, Abercrombie & Fitch, Agent Provocateur, Rochas, Anna Sui, Banana Republic, bebe, Coach, Dunhill, French Connection, Gap, Hollister, Oscar de la Renta, and Shanghai Tang brands. It markets and sells its products to department stores, perfumeries, specialty retailers, mass market retailers, supermarkets, domestic and international wholesalers, and distributors. The company was formerly known as Jean Philippe Fragrances, Inc. and changed its name to Inter Parfums, Inc. in July 1999. Inter Parfums, Inc. was founded in 1985 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Inter Parfums (IPAR)

Valuation Ratios
P/E Ratio 33.7
Price to Sales 2.1
Price to Book 3
Price to Tangible Book
Price to Cash Flow 20.2
Price to Free Cash Flow 22.7
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 0.1
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 14.4% 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 38.8%.

Life of production assets of 13.5 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 20%. 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 30.917 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 $1.1 billion.


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COMPANY NEWS

▶ Top 4 Cosmetics Stocks of 2017   [Apr-13-17 11:44AM  Investopedia]
▶ Inter Parfums Beats Q4 Estimates as Rivals Decline   [Mar-14-17 05:52PM  Investopedia]
▶ Inter Parfums tops Street 4Q forecasts   [04:24PM  Associated Press]
Stock chart of IPAR 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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