Intrinsic value of Lakeland Industries - LAKE

Previous Close

$14.40

  Intrinsic Value

$10.77

stock screener

  Rating & Target

sell

-25%

Previous close

$14.40

 
Intrinsic value

$10.77

 
Up/down potential

-25%

 
Rating

sell

We calculate the intrinsic value of LAKE 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 0.1

 

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, %
  -14.00
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  86
  94
  102
  110
  119
  128
  138
  148
  158
  169
  180
  192
  204
  216
  229
  243
  257
  272
  287
  303
  320
  338
  356
  376
  396
  417
  439
  462
  486
  512
  538
Variable operating expenses, $m
 
  60
  65
  71
  76
  82
  88
  95
  101
  108
  115
  122
  130
  138
  146
  155
  164
  174
  184
  194
  205
  216
  228
  240
  253
  266
  280
  295
  311
  327
  344
Fixed operating expenses, $m
 
  26
  26
  27
  28
  28
  29
  30
  30
  31
  32
  33
  34
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  48
  49
  50
  51
  52
Total operating expenses, $m
  79
  86
  91
  98
  104
  110
  117
  125
  131
  139
  147
  155
  164
  172
  181
  191
  201
  212
  223
  234
  246
  258
  271
  284
  298
  312
  328
  344
  361
  378
  396
Operating income, $m
  7
  8
  10
  13
  15
  18
  21
  24
  27
  30
  33
  36
  40
  44
  47
  52
  56
  60
  65
  70
  75
  80
  86
  92
  98
  104
  111
  118
  126
  134
  142
EBITDA, $m
  8
  9
  12
  14
  17
  19
  22
  25
  28
  32
  35
  38
  42
  46
  50
  54
  58
  63
  68
  73
  78
  84
  89
  95
  102
  109
  116
  123
  131
  139
  148
Interest expense (income), $m
  1
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
Earnings before tax, $m
  6
  8
  10
  13
  15
  18
  20
  23
  26
  29
  32
  35
  39
  42
  46
  50
  54
  58
  63
  68
  72
  78
  83
  89
  95
  101
  108
  115
  122
  130
  138
Tax expense, $m
  2
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
Net income, $m
  4
  6
  8
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  36
  39
  43
  46
  49
  53
  57
  61
  65
  69
  74
  79
  84
  89
  95
  100

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10
  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
  85
  82
  89
  96
  104
  112
  120
  129
  138
  147
  157
  167
  178
  188
  200
  212
  224
  237
  250
  265
  279
  295
  311
  327
  345
  363
  383
  403
  424
  446
  469
Adjusted assets (=assets-cash), $m
  75
  82
  89
  96
  104
  112
  120
  129
  138
  147
  157
  167
  178
  188
  200
  212
  224
  237
  250
  265
  279
  295
  311
  327
  345
  363
  383
  403
  424
  446
  469
Revenue / Adjusted assets
  1.147
  1.146
  1.146
  1.146
  1.144
  1.143
  1.150
  1.147
  1.145
  1.150
  1.146
  1.150
  1.146
  1.149
  1.145
  1.146
  1.147
  1.148
  1.148
  1.143
  1.147
  1.146
  1.145
  1.150
  1.148
  1.149
  1.146
  1.146
  1.146
  1.148
  1.147
Average production assets, $m
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
Working capital, $m
  48
  47
  51
  55
  60
  64
  69
  74
  79
  84
  90
  96
  102
  108
  115
  121
  129
  136
  144
  152
  160
  169
  178
  188
  198
  208
  219
  231
  243
  256
  269
Total debt, $m
  6
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
Total liabilities, $m
  13
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
Total equity, $m
  72
  73
  79
  86
  93
  100
  107
  115
  123
  131
  140
  149
  159
  168
  178
  189
  200
  212
  224
  236
  249
  263
  277
  292
  308
  325
  342
  360
  379
  398
  419
Total liabilities and equity, $m
  85
  82
  89
  96
  104
  112
  120
  129
  138
  147
  157
  167
  178
  188
  199
  212
  224
  237
  251
  264
  279
  295
  310
  327
  345
  364
  383
  403
  424
  446
  469
Debt-to-equity ratio
  0.083
  0.020
  0.030
  0.040
  0.040
  0.050
  0.050
  0.060
  0.060
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.080
  0.080
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
Adjusted equity ratio
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893
  0.893

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  6
  8
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  36
  39
  43
  46
  49
  53
  57
  61
  65
  69
  74
  79
  84
  89
  95
  100
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Funds from operations, $m
  17
  7
  9
  10
  12
  14
  16
  18
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  69
  73
  78
  83
  88
  94
  100
  106
Change in working capital, $m
  6
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
Cash from operations, $m
  11
  3
  5
  6
  8
  10
  12
  13
  15
  18
  20
  22
  24
  27
  30
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  68
  72
  77
  82
  87
  93
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
New CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -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
Cash from investing activities, $m
  0
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
Free cash flow, $m
  11
  1
  3
  4
  6
  8
  9
  11
  13
  15
  17
  19
  21
  24
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  66
  70
  75
  80
  85
Issuance/(repayment) of debt, $m
  -8
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
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  
  -8
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Total cash flow (excl. dividends), $m
  3
  2
  4
  5
  7
  8
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  45
  48
  52
  55
  59
  63
  68
  72
  77
  82
  87
Retained Cash Flow (-), $m
  -4
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
Prev. year cash balance distribution, $m
 
  5
  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
 
  1
  -3
  -2
  0
  1
  3
  4
  6
  8
  9
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  44
  47
  50
  54
  58
  62
  67
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
 
  1
  -3
  -1
  0
  1
  2
  3
  4
  4
  5
  5
  6
  6
  6
  6
  5
  5
  5
  4
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  1
Current shareholders' claim on cash, %
  100
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8
  99.8

Lakeland Industries, Inc. (Lakeland) manufactures and sells a line of safety garments and accessories for the industrial and public protective clothing market. The Company's product categories include limited use/disposable protective clothing; high-end chemical protective suits; firefighting, flame resistant personal protective equipment (FR PPE) and heat protective apparel; reusable woven garments; high visibility clothing, and glove and sleeves. The Company's products are sold by its in-house customer service group, its regional sales managers and independent sales representatives to a network of over 1,200 North American safety and mill supply distributors. These distributors in turn supply end user industrial customers, such as integrated oil, chemical/petrochemical, utilities, automobile, steel, glass, construction, smelting, munition plants, janitorial, pharmaceutical, mortuaries and high technology electronics manufacturers, as well as scientific and medical laboratories.

FINANCIAL RATIOS  of  Lakeland Industries (LAKE)

Valuation Ratios
P/E Ratio 26.1
Price to Sales 1.2
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 9.5
Growth Rates
Sales Growth Rate -14%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 1.4%
Total Debt to Equity 8.3%
Interest Coverage 7
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.4%
Return On Equity 5.7%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 1
Profitability Ratios
Gross Margin 37.2%
Gross Margin - 3 Yr. Avg. 35.9%
EBITDA Margin 9.3%
EBITDA Margin - 3 Yr. Avg. 9.2%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 7.1%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. -68.7%
Payout Ratio 0%

LAKE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LAKE stock intrinsic value calculation we used $86 million for the last fiscal year's total revenue generated by Lakeland Industries. The default revenue input number comes from 2017 income statement of Lakeland Industries. 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 LAKE stock valuation model: a) initial revenue growth rate of 9.1% 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 LAKE is calculated based on our internal credit rating of Lakeland Industries, 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 Lakeland Industries.
    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 LAKE stock the variable cost ratio is equal to 64%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $25 million in the base year in the intrinsic value calculation for LAKE 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 10.5% for Lakeland Industries.

Corporate tax rate of 27% is the nominal tax rate for Lakeland Industries. 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 LAKE 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 LAKE are equal to 9.9%.

Life of production assets of 9.5 years is the average useful life of capital assets used in Lakeland Industries 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 LAKE is equal to 50%. 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 - $72 million for Lakeland Industries - 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 8.032 million for Lakeland Industries 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 Lakeland Industries at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ New Strong Buy Stocks for October 18th   [Oct-18-17 10:28AM  Zacks]
▶ Lakeland Industries posts 2Q profit   [Sep-13-17 11:30PM  Associated Press]
▶ Lakeland Industries Announces Upcoming Investor Events   [Sep-07-17 11:01AM  PR Newswire]
▶ Company News for June 16, 2017   [10:11AM  Zacks]
▶ Lakeland Industries posts 1Q profit   [Jun-14-17 04:14PM  Associated Press]
▶ Lakeland Industries posts 4Q profit   [Apr-26-17 05:30PM  Associated Press]
▶ Top Ranked Value Stocks to Buy for February 7th   [Feb-07-17 10:38AM  Zacks]
▶ 5 Stocks with Striking Net Profit Margin   [Jan-20-17 08:13AM  Zacks]
▶ Lakeland Industries to Present at Upcoming Conferences   [Oct-24-16 10:06AM  PR Newswire]
▶ Lakeland Industries Receives Buy Rating (LAKE)   [Oct-10-16 09:53AM  at Investopedia]
Financial statements of LAKE
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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