Intrinsic value of J. Alexander's Holdings - JAX

Previous Close

$10.50

  Intrinsic Value

$1.90

stock screener

  Rating & Target

str. sell

-82%

  Value-price divergence*

-71%

Previous close

$10.50

 
Intrinsic value

$1.90

 
Up/down potential

-82%

 
Rating

str. sell

 
Value-price divergence*

-71%

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

We calculate the intrinsic value of JAX 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 2017), $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 0.2

 

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, %
  0.92
  7.40
  7.16
  6.94
  6.75
  6.57
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
Revenue, $m
  220
  236
  253
  271
  289
  308
  328
  348
  370
  392
  415
  440
  465
  491
  519
  548
  578
  609
  642
  677
  713
  750
  790
  831
  874
  920
  967
  1,017
  1,070
  1,124
  1,182
Variable operating expenses, $m
 
  228
  244
  261
  278
  296
  315
  335
  355
  377
  399
  421
  445
  470
  496
  524
  553
  583
  614
  647
  682
  718
  756
  795
  837
  880
  926
  973
  1,023
  1,076
  1,131
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
  209
  228
  244
  261
  278
  296
  315
  335
  355
  377
  399
  421
  445
  470
  496
  524
  553
  583
  614
  647
  682
  718
  756
  795
  837
  880
  926
  973
  1,023
  1,076
  1,131
Operating income, $m
  10
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
EBITDA, $m
  19
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  85
  90
Interest expense (income), $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
Earnings before tax, $m
  10
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
  40
Tax expense, $m
  3
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
Net income, $m
  7
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7
  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
  163
  168
  180
  192
  205
  218
  233
  247
  262
  278
  295
  312
  330
  348
  368
  388
  410
  432
  455
  480
  505
  532
  560
  589
  620
  652
  686
  721
  759
  797
  838
Adjusted assets (=assets-cash), $m
  156
  168
  180
  192
  205
  218
  233
  247
  262
  278
  295
  312
  330
  348
  368
  388
  410
  432
  455
  480
  505
  532
  560
  589
  620
  652
  686
  721
  759
  797
  838
Revenue / Adjusted assets
  1.410
  1.405
  1.406
  1.411
  1.410
  1.413
  1.408
  1.409
  1.412
  1.410
  1.407
  1.410
  1.409
  1.411
  1.410
  1.412
  1.410
  1.410
  1.411
  1.410
  1.412
  1.410
  1.411
  1.411
  1.410
  1.411
  1.410
  1.411
  1.410
  1.410
  1.411
Average production assets, $m
  63
  68
  72
  77
  83
  88
  94
  100
  106
  112
  119
  126
  133
  141
  148
  157
  165
  174
  184
  193
  204
  215
  226
  238
  250
  263
  277
  291
  306
  322
  338
Working capital, $m
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -70
Total debt, $m
  23
  20
  24
  29
  33
  38
  43
  48
  54
  59
  65
  71
  77
  84
  91
  98
  106
  114
  122
  130
  139
  149
  159
  169
  180
  191
  203
  216
  229
  242
  257
Total liabilities, $m
  62
  59
  63
  68
  72
  77
  82
  87
  93
  98
  104
  110
  116
  123
  130
  137
  145
  153
  161
  169
  178
  188
  198
  208
  219
  230
  242
  255
  268
  281
  296
Total equity, $m
  101
  108
  116
  124
  133
  141
  150
  160
  170
  180
  191
  202
  213
  225
  238
  251
  265
  280
  295
  310
  327
  344
  362
  381
  401
  422
  444
  467
  491
  516
  542
Total liabilities and equity, $m
  163
  167
  179
  192
  205
  218
  232
  247
  263
  278
  295
  312
  329
  348
  368
  388
  410
  433
  456
  479
  505
  532
  560
  589
  620
  652
  686
  722
  759
  797
  838
Debt-to-equity ratio
  0.228
  0.190
  0.210
  0.230
  0.250
  0.270
  0.290
  0.300
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
  0.470
Adjusted equity ratio
  0.603
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Depreciation, amort., depletion, $m
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  35
  37
  38
Funds from operations, $m
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  29
  30
  32
  34
  36
  37
  39
  41
  44
  46
  48
  50
  53
  56
  59
  61
  65
  68
Change in working capital, $m
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  27
  29
  31
  32
  34
  36
  37
  39
  41
  44
  46
  48
  50
  53
  56
  59
  61
  65
  68
  71
Maintenance CAPEX, $m
  0
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
New CAPEX, $m
  -21
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
Cash from investing activities, $m
  -21
  -12
  -13
  -13
  -14
  -14
  -16
  -17
  -17
  -18
  -20
  -21
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -38
  -39
  -41
  -44
  -45
  -48
  -51
  -53
Free cash flow, $m
  -5
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
Issuance/(repayment) of debt, $m
  2
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Issuance/(repurchase) of shares, $m
  -3
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  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  
  -2
  6
  6
  5
  6
  6
  6
  6
  6
  7
  7
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Total cash flow (excl. dividends), $m
  -7
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
Retained Cash Flow (-), $m
  -3
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Prev. year cash balance distribution, $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 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
 
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
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
 
  3
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  99.0
  98.0
  97.2
  96.5
  95.9
  95.4
  95.0
  94.7
  94.4
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2
  94.2

J. Alexander's Holdings, Inc., through its subsidiaries, owns and operates three complementary dining restaurant concepts: J. Alexander's, Redlands Grill and Stoney River Steakhouse and Grill (Stoney River). The Company is engaged in providing contemporary American cuisines. J. Alexander's is an upscale dining restaurant offering a contemporary American menu. J. Alexander's menu features rib of beef; hardwood-grilled steaks, seafood and chicken; pasta; salads; soups; and assorted sandwiches, appetizers and desserts. Stoney River's menu features its Coffee-Cured Filet Mignon made with select tenderloin, as well as other beef options. On Sundays, Redlands Grill offers a selection of made-from-scratch brunch items, including Belgian waffles, eggs benedict, huevos ranchero, quiche, omelettes, and lemon and ricotta hotcakes. The Redlands Grill on West End also has a wine program that offers over 35 wines by the glass and maintains over 140 bottles.

FINANCIAL RATIOS  of  J. Alexander's Holdings (JAX)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 0.7
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow -30.9
Growth Rates
Sales Growth Rate 0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 90.9%
Cap. Spend. - 3 Yr. Gr. Rate 24.6%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 14.9%
Total Debt to Equity 22.8%
Interest Coverage 11
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 5.8%
Return On Equity 7%
Return On Equity - 3 Yr. Avg. 7.3%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 18.2%
Gross Margin - 3 Yr. Avg. 18.1%
EBITDA Margin 9.1%
EBITDA Margin - 3 Yr. Avg. 9.3%
Operating Margin 5%
Oper. Margin - 3 Yr. Avg. 4.9%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 4.1%
Net Profit Margin 3.2%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 14.8%
Payout Ratio 0%

JAX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the JAX stock intrinsic value calculation we used $220 million for the last fiscal year's total revenue generated by J. Alexander's Holdings. The default revenue input number comes from 2017 income statement of J. Alexander's Holdings. 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 JAX stock valuation model: a) initial revenue growth rate of 7.4% 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 JAX is calculated based on our internal credit rating of J. Alexander's Holdings, 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 J. Alexander's Holdings.
    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 JAX stock the variable cost ratio is equal to 96.4%.

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 JAX 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 4.5% for J. Alexander's Holdings.

Corporate tax rate of 27% is the nominal tax rate for J. Alexander's Holdings. 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 JAX 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 JAX are equal to 28.6%.

Life of production assets of 8.8 years is the average useful life of capital assets used in J. Alexander's Holdings 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 JAX is equal to -5.9%. 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 - $101 million for J. Alexander's Holdings - 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 14.844 million for J. Alexander's Holdings 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 J. Alexander's Holdings at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ [$$] Activist Investor Marathon Slams Restaurant Deal   [01:25AM  The Wall Street Journal]
▶ J. Alexander's posts 2Q profit   [Aug-10-17 10:23PM  Associated Press]
▶ Nashville-based J. Alexander's makes $200 million buy   [Aug-04-17 01:25PM  American City Business Journals]
▶ J. Alexander's posts 1Q profit   [May-02-17 06:10PM  Associated Press]
▶ J. Alexanders Holdings, Inc. Opens Lexington Restaurant   [Mar-13-17 10:14AM  Business Wire]
▶ J. Alexander's posts 4Q profit   [Mar-02-17 04:39PM  Associated Press]
▶ New J. Alexanders restaurant opens next to Crabtree Valley Mall   [Dec-13-16 08:30AM  at bizjournals.com]
▶ New J. Alexanders restaurant opens next to Crabtree Valley Mall   [08:30AM  American City Business Journals]
▶ J. Alexanders Announces Opening of Raleigh Restaurant   [Dec-12-16 11:09AM  Business Wire]
▶ Heres the Smart Moneys Take On J Alexanders Holdings Inc (JAX)   [Dec-05-16 12:20PM  at Insider Monkey]
▶ Is Century Casinos, Inc. (CNTY) A Good Stock To Buy?   [Dec-07  03:09PM  at Insider Monkey]
▶ Do Hedge Funds Love J Alexanders Holdings Inc (JAX)?   [Nov-30  10:45AM  at Insider Monkey]
▶ NV5 Holdings Inc (NVEE) In A Holding Pattern With Smart Money   [Nov-24  08:28AM  at Insider Monkey]
Financial statements of JAX
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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