Intrinsic value of LightInTheBox Holding ADR - LITB

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$2.85

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of LITB 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, %
  -9.88
  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
  292
  330
  338
  347
  357
  367
  379
  392
  406
  421
  437
  455
  473
  493
  514
  536
  559
  584
  610
  638
  667
  698
  731
  765
  802
  840
  880
  922
  967
  1,014
  1,063
Variable operating expenses, $m
 
  285
  291
  299
  307
  316
  326
  338
  350
  363
  376
  391
  407
  424
  442
  461
  481
  503
  525
  549
  574
  601
  629
  659
  690
  723
  757
  794
  832
  872
  915
Fixed operating expenses, $m
 
  88
  90
  93
  95
  97
  100
  102
  105
  107
  110
  113
  116
  119
  122
  125
  128
  131
  134
  137
  141
  144
  148
  152
  156
  159
  163
  168
  172
  176
  180
Total operating expenses, $m
  302
  373
  381
  392
  402
  413
  426
  440
  455
  470
  486
  504
  523
  543
  564
  586
  609
  634
  659
  686
  715
  745
  777
  811
  846
  882
  920
  962
  1,004
  1,048
  1,095
Operating income, $m
  -9
  -42
  -43
  -44
  -45
  -46
  -47
  -48
  -48
  -49
  -49
  -50
  -50
  -50
  -50
  -50
  -50
  -49
  -49
  -49
  -48
  -47
  -46
  -45
  -44
  -42
  -41
  -39
  -37
  -35
  -32
EBITDA, $m
  -8
  -42
  -43
  -44
  -45
  -46
  -46
  -47
  -48
  -48
  -48
  -49
  -49
  -49
  -49
  -49
  -49
  -49
  -48
  -48
  -47
  -46
  -45
  -44
  -43
  -41
  -39
  -38
  -35
  -33
  -31
Interest expense (income), $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Earnings before tax, $m
  -9
  -42
  -42
  -43
  -44
  -45
  -46
  -47
  -47
  -48
  -48
  -49
  -49
  -49
  -49
  -49
  -49
  -49
  -48
  -48
  -47
  -47
  -46
  -45
  -44
  -42
  -41
  -39
  -37
  -35
  -33
Tax expense, $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
Net income, $m
  -9
  -42
  -42
  -43
  -44
  -45
  -46
  -47
  -47
  -48
  -48
  -49
  -49
  -49
  -49
  -49
  -49
  -49
  -48
  -48
  -47
  -47
  -46
  -45
  -44
  -42
  -41
  -39
  -37
  -35
  -33

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  90
  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
  118
  24
  25
  26
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
Adjusted assets (=assets-cash), $m
  28
  24
  25
  26
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
Revenue / Adjusted assets
  10.429
  13.750
  13.520
  13.346
  13.731
  13.593
  13.536
  13.517
  13.533
  13.581
  13.656
  13.382
  13.514
  13.694
  13.526
  13.400
  13.634
  13.581
  13.556
  13.574
  13.612
  13.423
  13.537
  13.421
  13.593
  13.548
  13.538
  13.559
  13.431
  13.520
  13.456
Average production assets, $m
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
Working capital, $m
  62
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -128
Total debt, $m
  0
  -35
  -34
  -34
  -33
  -33
  -32
  -31
  -30
  -29
  -28
  -27
  -25
  -24
  -23
  -21
  -20
  -18
  -16
  -14
  -13
  -10
  -8
  -6
  -4
  -1
  2
  4
  7
  11
  14
Total liabilities, $m
  52
  22
  23
  23
  24
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  41
  43
  44
  47
  49
  51
  53
  56
  59
  61
  64
  68
  71
Total equity, $m
  66
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Total liabilities and equity, $m
  118
  24
  26
  26
  27
  27
  28
  29
  30
  31
  32
  33
  36
  37
  38
  40
  41
  43
  46
  48
  49
  52
  54
  57
  59
  62
  66
  68
  71
  76
  79
Debt-to-equity ratio
  0.000
  -14.280
  -13.760
  -13.190
  -12.580
  -11.950
  -11.290
  -10.620
  -9.950
  -9.270
  -8.600
  -7.930
  -7.270
  -6.620
  -5.980
  -5.360
  -4.760
  -4.180
  -3.610
  -3.060
  -2.530
  -2.020
  -1.530
  -1.050
  -0.600
  -0.160
  0.260
  0.660
  1.040
  1.410
  1.760
Adjusted equity ratio
  -0.857
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -9
  -42
  -42
  -43
  -44
  -45
  -46
  -47
  -47
  -48
  -48
  -49
  -49
  -49
  -49
  -49
  -49
  -49
  -48
  -48
  -47
  -47
  -46
  -45
  -44
  -42
  -41
  -39
  -37
  -35
  -33
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
Funds from operations, $m
  -29
  -42
  -41
  -43
  -44
  -44
  -45
  -46
  -46
  -47
  -47
  -48
  -48
  -48
  -48
  -48
  -48
  -48
  -47
  -47
  -46
  -46
  -45
  -44
  -42
  -41
  -39
  -38
  -36
  -33
  -31
Change in working capital, $m
  -14
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Cash from operations, $m
  -15
  -41
  -41
  -42
  -42
  -43
  -44
  -44
  -45
  -45
  -46
  -46
  -46
  -46
  -46
  -46
  -45
  -45
  -44
  -44
  -43
  -42
  -41
  -39
  -38
  -36
  -35
  -33
  -30
  -28
  -25
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
New CAPEX, $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 investing activities, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
Free cash flow, $m
  -15
  -42
  -41
  -42
  -43
  -44
  -44
  -45
  -46
  -46
  -46
  -47
  -47
  -47
  -47
  -47
  -46
  -46
  -45
  -45
  -44
  -43
  -42
  -41
  -40
  -38
  -36
  -34
  -32
  -30
  -27
Issuance/(repayment) of debt, $m
  0
  -35
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Issuance/(repurchase) of shares, $m
  -1
  81
  41
  42
  42
  43
  44
  44
  45
  45
  45
  46
  46
  46
  46
  45
  45
  45
  44
  43
  42
  41
  40
  39
  37
  36
  34
  32
  29
  27
  24
Cash from financing (excl. dividends), $m  
  75
  46
  42
  43
  43
  44
  45
  45
  46
  46
  46
  47
  47
  47
  47
  46
  47
  47
  46
  45
  44
  43
  42
  41
  39
  39
  37
  35
  32
  30
  27
Total cash flow (excl. dividends), $m
  59
  -77
  -41
  -42
  -42
  -43
  -44
  -44
  -45
  -45
  -45
  -45
  -46
  -45
  -45
  -45
  -45
  -44
  -44
  -43
  -42
  -41
  -40
  -39
  -37
  -35
  -34
  -31
  -29
  -27
  -24
Retained Cash Flow (-), $m
  -68
  -35
  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
Prev. year cash balance distribution, $m
 
  31
  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
 
  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
Discount rate, %
 
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for 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
Current shareholders' claim on cash, %
  100
  50.0
  2.8
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

LightInTheBox Holding Co., Ltd., through its subsidiaries, operates as an online retail company worldwide. The company provides apparel products, including customized, special occasion, and fast fashion apparel products; and other general merchandise products, such as accessories and gadgets, home and garden products, electronics and communication devices, and other products. It offers its products through lightinthebox.com, miniinthebox.com, ouku.com, and other Websites, as well as through mobile applications; and sells its products through online marketplace platforms. The company also provides logistic and marketing services; and mobile application software development and information technology support services. LightInTheBox Holding Co., Ltd. was founded in 2007 and is headquartered in Beijing, the People’s Republic of China.

FINANCIAL RATIOS  of  LightInTheBox Holding ADR (LITB)

Valuation Ratios
P/E Ratio -43.6
Price to Sales 1.3
Price to Book 6
Price to Tangible Book
Price to Cash Flow -26.2
Price to Free Cash Flow -26.2
Growth Rates
Sales Growth Rate -9.9%
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 NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -10.4%
Ret/ On Assets - 3 Yr. Avg. -28.5%
Return On Total Capital -28.1%
Ret/ On T. Cap. - 3 Yr. Avg. -88.9%
Return On Equity -28.1%
Return On Equity - 3 Yr. Avg. -88.9%
Asset Turnover 3.4
Profitability Ratios
Gross Margin 35.6%
Gross Margin - 3 Yr. Avg. 36.5%
EBITDA Margin -2.7%
EBITDA Margin - 3 Yr. Avg. -7.2%
Operating Margin -3.4%
Oper. Margin - 3 Yr. Avg. -7.9%
Pre-Tax Margin -3.1%
Pre-Tax Margin - 3 Yr. Avg. -7.7%
Net Profit Margin -3.1%
Net Profit Margin - 3 Yr. Avg. -7.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

LITB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LITB stock intrinsic value calculation we used $324 million for the last fiscal year's total revenue generated by LightInTheBox Holding ADR. The default revenue input number comes from 2016 income statement of LightInTheBox Holding ADR. 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 LITB 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 5.9%, whose default value for LITB is calculated based on our internal credit rating of LightInTheBox Holding ADR, 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 LightInTheBox Holding ADR.
    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 LITB stock the variable cost ratio is equal to 86.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $86 million in the base year in the intrinsic value calculation for LITB 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 LightInTheBox Holding ADR.

Corporate tax rate of 27% is the nominal tax rate for LightInTheBox Holding ADR. 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 LITB 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 LITB are equal to 0.8%.

Life of production assets of 1.8 years is the average useful life of capital assets used in LightInTheBox Holding ADR 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 LITB is equal to -12%. 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 - $-2 million for LightInTheBox Holding ADR - 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 66.524 million for LightInTheBox Holding ADR 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 LightInTheBox Holding ADR at the current share price and the inputted number of shares is $0.2 billion.


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COMPANY NEWS

▶ 5 Top China Stocks to Buy for 2017   [Dec-29-16 05:19PM  Zacks]
▶ LightInTheBox Announces Appointment of New Director   [Jun-08-16 07:00AM  PR Newswire]
▶ LIGHTINTHEBOX HOLDING CO., LTD. Financials   [01:04PM  EDGAR Online Financials]
▶ Can Vipshop Keep Going After Last Week's 13% Pop?   [Apr-18-16 10:00AM  at Motley Fool]
Stock chart of LITB Financial statements of LITB Annual reports of LITB
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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