Intrinsic value of Lifetime Brands - LCUT

Previous Close

$16.45

  Intrinsic Value

$11.45

stock screener

  Rating & Target

sell

-30%

  Value-price divergence*

-93%

Previous close

$16.45

 
Intrinsic value

$11.45

 
Up/down potential

-30%

 
Rating

sell

 
Value-price divergence*

-93%

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

We calculate the intrinsic value of LCUT 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 0.2

 

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, %
  0.85
  2.00
  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
Revenue, $m
  593
  605
  619
  635
  653
  672
  694
  718
  743
  771
  800
  832
  866
  902
  940
  981
  1,023
  1,069
  1,117
  1,168
  1,222
  1,278
  1,338
  1,401
  1,467
  1,537
  1,611
  1,688
  1,769
  1,855
  1,945
Variable operating expenses, $m
 
  363
  371
  381
  391
  403
  416
  430
  446
  462
  480
  497
  517
  539
  562
  586
  612
  639
  668
  698
  730
  764
  800
  837
  877
  919
  963
  1,009
  1,057
  1,109
  1,163
Fixed operating expenses, $m
 
  220
  226
  232
  237
  243
  249
  256
  262
  269
  275
  282
  289
  296
  304
  311
  319
  327
  335
  344
  352
  361
  370
  379
  389
  399
  409
  419
  429
  440
  451
Total operating expenses, $m
  566
  583
  597
  613
  628
  646
  665
  686
  708
  731
  755
  779
  806
  835
  866
  897
  931
  966
  1,003
  1,042
  1,082
  1,125
  1,170
  1,216
  1,266
  1,318
  1,372
  1,428
  1,486
  1,549
  1,614
Operating income, $m
  27
  22
  22
  22
  24
  26
  29
  32
  36
  40
  45
  53
  59
  66
  74
  83
  93
  103
  114
  126
  139
  153
  168
  184
  201
  220
  239
  260
  283
  306
  332
EBITDA, $m
  41
  33
  33
  34
  36
  39
  42
  45
  50
  55
  60
  67
  74
  82
  90
  100
  110
  121
  133
  146
  160
  175
  191
  208
  226
  246
  267
  289
  312
  338
  364
Interest expense (income), $m
  4
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  21
Earnings before tax, $m
  22
  18
  18
  18
  20
  21
  24
  27
  30
  35
  39
  46
  52
  59
  67
  75
  84
  94
  104
  116
  128
  141
  155
  171
  187
  204
  223
  243
  264
  287
  311
Tax expense, $m
  7
  5
  5
  5
  5
  6
  6
  7
  8
  9
  11
  12
  14
  16
  18
  20
  23
  25
  28
  31
  35
  38
  42
  46
  50
  55
  60
  66
  71
  78
  84
Net income, $m
  16
  13
  13
  13
  14
  16
  17
  20
  22
  25
  29
  34
  38
  43
  49
  55
  61
  68
  76
  84
  93
  103
  113
  125
  137
  149
  163
  177
  193
  210
  227

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8
  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
  400
  400
  409
  419
  431
  444
  459
  474
  491
  509
  529
  550
  572
  596
  621
  648
  676
  707
  738
  772
  807
  845
  884
  926
  970
  1,016
  1,064
  1,116
  1,169
  1,226
  1,286
Adjusted assets (=assets-cash), $m
  392
  400
  409
  419
  431
  444
  459
  474
  491
  509
  529
  550
  572
  596
  621
  648
  676
  707
  738
  772
  807
  845
  884
  926
  970
  1,016
  1,064
  1,116
  1,169
  1,226
  1,286
Revenue / Adjusted assets
  1.513
  1.513
  1.513
  1.516
  1.515
  1.514
  1.512
  1.515
  1.513
  1.515
  1.512
  1.513
  1.514
  1.513
  1.514
  1.514
  1.513
  1.512
  1.514
  1.513
  1.514
  1.512
  1.514
  1.513
  1.512
  1.513
  1.514
  1.513
  1.513
  1.513
  1.512
Average production assets, $m
  100
  102
  104
  107
  110
  113
  117
  121
  125
  129
  134
  140
  145
  151
  158
  165
  172
  180
  188
  196
  205
  215
  225
  235
  246
  258
  271
  284
  297
  312
  327
Working capital, $m
  165
  169
  173
  178
  183
  188
  194
  201
  208
  216
  224
  233
  242
  252
  263
  275
  287
  299
  313
  327
  342
  358
  375
  392
  411
  430
  451
  473
  495
  519
  545
Total debt, $m
  96
  92
  96
  102
  107
  114
  121
  129
  137
  146
  156
  166
  177
  189
  202
  215
  229
  244
  259
  276
  294
  312
  332
  352
  374
  397
  421
  446
  473
  501
  530
Total liabilities, $m
  202
  198
  202
  208
  213
  220
  227
  235
  243
  252
  262
  272
  283
  295
  308
  321
  335
  350
  365
  382
  400
  418
  438
  458
  480
  503
  527
  552
  579
  607
  636
Total equity, $m
  198
  202
  207
  212
  218
  224
  232
  240
  248
  257
  267
  278
  289
  301
  314
  327
  342
  357
  373
  390
  408
  427
  447
  468
  490
  513
  538
  563
  591
  619
  649
Total liabilities and equity, $m
  400
  400
  409
  420
  431
  444
  459
  475
  491
  509
  529
  550
  572
  596
  622
  648
  677
  707
  738
  772
  808
  845
  885
  926
  970
  1,016
  1,065
  1,115
  1,170
  1,226
  1,285
Debt-to-equity ratio
  0.485
  0.460
  0.470
  0.480
  0.490
  0.510
  0.520
  0.540
  0.550
  0.570
  0.580
  0.600
  0.610
  0.630
  0.640
  0.660
  0.670
  0.680
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
Adjusted equity ratio
  0.485
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505
  0.505

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  13
  13
  13
  14
  16
  17
  20
  22
  25
  29
  34
  38
  43
  49
  55
  61
  68
  76
  84
  93
  103
  113
  125
  137
  149
  163
  177
  193
  210
  227
Depreciation, amort., depletion, $m
  14
  12
  12
  12
  12
  13
  13
  13
  14
  14
  15
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
Funds from operations, $m
  29
  25
  25
  26
  27
  28
  30
  33
  36
  40
  44
  48
  53
  58
  64
  71
  78
  86
  95
  104
  114
  125
  136
  148
  161
  175
  190
  206
  223
  241
  260
Change in working capital, $m
  -1
  3
  4
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
Cash from operations, $m
  30
  21
  21
  21
  22
  23
  24
  26
  29
  32
  35
  39
  43
  48
  54
  60
  66
  74
  81
  90
  99
  109
  119
  130
  143
  156
  169
  184
  200
  217
  235
Maintenance CAPEX, $m
  0
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
New CAPEX, $m
  -3
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
Cash from investing activities, $m
  -24
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -20
  -21
  -21
  -23
  -23
  -25
  -26
  -28
  -29
  -31
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
Free cash flow, $m
  6
  9
  8
  8
  8
  9
  9
  11
  13
  15
  17
  20
  24
  28
  32
  37
  43
  49
  55
  62
  70
  79
  88
  97
  108
  119
  131
  144
  158
  173
  188
Issuance/(repayment) of debt, $m
  -4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Issuance/(repurchase) of shares, $m
  2
  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  
  -2
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Total cash flow (excl. dividends), $m
  3
  13
  13
  13
  14
  15
  17
  19
  21
  24
  27
  30
  35
  39
  45
  50
  57
  64
  71
  79
  88
  97
  107
  118
  130
  142
  155
  169
  185
  201
  218
Retained Cash Flow (-), $m
  1
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
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
 
  9
  8
  8
  8
  8
  9
  11
  12
  15
  17
  20
  23
  27
  32
  37
  42
  48
  55
  62
  70
  78
  87
  97
  107
  119
  131
  144
  157
  172
  188
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  9
  7
  7
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  8
  7
  7
  6
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
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Lifetime Brands, Inc. designs, sources, and sells branded kitchenware, tableware, and other products used in the home in the United States and internationally. The company operates through three segments: U.S. Wholesale, International, and Retail Direct. It offers kitchenware products, including kitchen tools and gadgets, cutlery, cutting boards, shears, cookware, bakeware, and novelty housewares and other products; and tableware products comprising dinnerware, stemware, flatware, and giftware. The company also provides home solutions, which comprise other products used in the home, such as pantryware, spice racks, thermal beverageware, food storage, and home décor, as well as neoprene travel products consisting of bags, totes, cases, and sleeves; and sterling silver and pewter giftware products. In addition, it primarily owns or licenses various brands, including Farberware, KitchenAid, Mikasa, KitchenCraft, Pfaltzgraff, Fred, Sabatier, masterclass, Kamenstein, Towle, and Built NY brands; and offers tableware products under the La Cafetière and Randwyck private label brands. The company serves mass merchants, specialty stores, national chains, department stores, warehouse clubs, supermarkets, off-price retailers, and Internet retailers, as well as directly to consumers through its Pfaltzgraff, Mikasa, Fred and Friends, Built NY, Lifetime Sterling, and The English Table Internet Websites. Lifetime Brands, Inc. was founded in 1945 and is headquartered in Garden City, New York.

FINANCIAL RATIOS  of  Lifetime Brands (LCUT)

Valuation Ratios
P/E Ratio 15
Price to Sales 0.4
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 8.9
Growth Rates
Sales Growth Rate 0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 43.9%
Total Debt to Equity 48.5%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity 8.1%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 36.6%
Gross Margin - 3 Yr. Avg. 36.4%
EBITDA Margin 6.7%
EBITDA Margin - 3 Yr. Avg. 6.2%
Operating Margin 4.6%
Oper. Margin - 3 Yr. Avg. 4.1%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 3.1%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 31.8%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 12.5%

LCUT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LCUT stock intrinsic value calculation we used $593 million for the last fiscal year's total revenue generated by Lifetime Brands. The default revenue input number comes from 2016 income statement of Lifetime Brands. 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 LCUT stock valuation model: a) initial revenue growth rate of 2% 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 5.6%, whose default value for LCUT is calculated based on our internal credit rating of Lifetime Brands, 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 Lifetime Brands.
    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 LCUT stock the variable cost ratio is equal to 60%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $215 million in the base year in the intrinsic value calculation for LCUT 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 4.1% for Lifetime Brands.

Corporate tax rate of 27% is the nominal tax rate for Lifetime Brands. 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 LCUT 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 LCUT are equal to 16.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Lifetime Brands 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 LCUT is equal to 28%. 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 - $198 million for Lifetime Brands - 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 13.858 million for Lifetime Brands 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 Lifetime Brands at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Lifetime Brands reports 2Q loss   [Aug-08-17 07:28PM  Associated Press]
▶ Lifetime Brands reports 1Q loss   [10:25AM  Associated Press]
▶ Lifetime Brands posts 4Q profit   [07:14AM  Associated Press]
▶ Hedge Funds Are Buying Sterling Construction Company, Inc. (STRL)   [Dec-14-16 02:01AM  at Insider Monkey]
▶ [$$] Bar-Code Readers Get Makeover to Spur Bustling Warehouses   [Jan-07-16 05:30AM  at The Wall Street Journal]
Stock chart of LCUT Financial statements of LCUT
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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