Intrinsic value of LightInTheBox Holding ADR - LITB

Previous Close

$2.40

  Intrinsic Value

$0.25

stock screener

  Rating & Target

str. sell

-90%

  Value-price divergence*

0%

Previous close

$2.40

 
Intrinsic value

$0.25

 
Up/down potential

-90%

 
Rating

str. sell

 
Value-price divergence*

0%

*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
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  292
  318
  346
  374
  404
  435
  467
  500
  534
  570
  608
  646
  687
  729
  773
  819
  866
  916
  968
  1,022
  1,079
  1,138
  1,200
  1,264
  1,332
  1,403
  1,477
  1,555
  1,636
  1,721
  1,811
Variable operating expenses, $m
 
  356
  387
  419
  452
  487
  522
  560
  598
  639
  680
  724
  769
  816
  865
  916
  970
  1,026
  1,084
  1,144
  1,208
  1,274
  1,343
  1,416
  1,492
  1,571
  1,654
  1,741
  1,832
  1,927
  2,027
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
  302
  356
  387
  419
  452
  487
  522
  560
  598
  639
  680
  724
  769
  816
  865
  916
  970
  1,026
  1,084
  1,144
  1,208
  1,274
  1,343
  1,416
  1,492
  1,571
  1,654
  1,741
  1,832
  1,927
  2,027
Operating income, $m
  -9
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -77
  -82
  -87
  -92
  -98
  -104
  -110
  -116
  -122
  -129
  -136
  -144
  -151
  -159
  -168
  -177
  -186
  -196
  -206
  -217
EBITDA, $m
  -8
  -38
  -41
  -44
  -48
  -52
  -55
  -59
  -63
  -68
  -72
  -77
  -82
  -86
  -92
  -97
  -103
  -109
  -115
  -121
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -184
  -194
  -204
  -215
Interest expense (income), $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
Earnings before tax, $m
  -9
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -64
  -68
  -73
  -77
  -82
  -87
  -93
  -98
  -104
  -110
  -117
  -123
  -130
  -138
  -145
  -153
  -161
  -170
  -179
  -189
  -199
  -209
  -220
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
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -64
  -68
  -73
  -77
  -82
  -87
  -93
  -98
  -104
  -110
  -117
  -123
  -130
  -138
  -145
  -153
  -161
  -170
  -179
  -189
  -199
  -209
  -220

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
  31
  33
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
  121
  128
  135
  142
  149
  157
  165
  174
Adjusted assets (=assets-cash), $m
  28
  31
  33
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
  121
  128
  135
  142
  149
  157
  165
  174
Revenue / Adjusted assets
  10.429
  10.258
  10.485
  10.389
  10.359
  10.357
  10.378
  10.417
  10.471
  10.364
  10.483
  10.419
  10.409
  10.414
  10.446
  10.500
  10.434
  10.409
  10.409
  10.429
  10.476
  10.440
  10.435
  10.446
  10.406
  10.393
  10.401
  10.436
  10.420
  10.430
  10.408
Average production assets, $m
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Working capital, $m
  62
  -31
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -79
  -83
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -128
  -135
  -142
  -149
  -157
  -165
  -174
Total debt, $m
  0
  -25
  -22
  -20
  -17
  -15
  -12
  -9
  -6
  -3
  0
  4
  7
  11
  15
  19
  23
  27
  32
  36
  41
  46
  52
  57
  63
  69
  75
  82
  89
  97
  104
Total liabilities, $m
  52
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
  127
  134
  141
  149
  156
Total equity, $m
  66
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
Total liabilities and equity, $m
  118
  30
  33
  36
  39
  41
  44
  48
  51
  54
  58
  62
  66
  70
  74
  79
  83
  88
  93
  98
  103
  109
  116
  121
  128
  134
  141
  149
  157
  166
  173
Debt-to-equity ratio
  0.000
  -8.040
  -6.690
  -5.500
  -4.430
  -3.480
  -2.620
  -1.850
  -1.150
  -0.510
  0.070
  0.610
  1.100
  1.560
  1.980
  2.370
  2.740
  3.080
  3.400
  3.690
  3.970
  4.230
  4.480
  4.710
  4.930
  5.130
  5.330
  5.510
  5.690
  5.850
  6.010
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
  -38
  -41
  -44
  -48
  -51
  -55
  -59
  -64
  -68
  -73
  -77
  -82
  -87
  -93
  -98
  -104
  -110
  -117
  -123
  -130
  -138
  -145
  -153
  -161
  -170
  -179
  -189
  -199
  -209
  -220
Depreciation, amort., depletion, $m
  1
  0
  0
  0
  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
  2
Funds from operations, $m
  -29
  -38
  -40
  -44
  -47
  -51
  -55
  -59
  -63
  -67
  -72
  -77
  -82
  -87
  -92
  -98
  -103
  -109
  -116
  -122
  -129
  -136
  -144
  -152
  -160
  -169
  -178
  -187
  -197
  -207
  -218
Change in working capital, $m
  -14
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from operations, $m
  -15
  -35
  -38
  -41
  -44
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -138
  -146
  -154
  -162
  -171
  -180
  -189
  -199
  -210
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -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
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
Free cash flow, $m
  -15
  -36
  -38
  -41
  -45
  -49
  -52
  -56
  -60
  -65
  -69
  -74
  -79
  -84
  -89
  -94
  -100
  -106
  -112
  -118
  -125
  -132
  -139
  -147
  -155
  -164
  -172
  -182
  -191
  -201
  -212
Issuance/(repayment) of debt, $m
  0
  -25
  2
  2
  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
Issuance/(repurchase) of shares, $m
  -1
  65
  41
  44
  48
  52
  56
  60
  64
  68
  73
  78
  83
  88
  93
  99
  105
  111
  117
  124
  131
  138
  146
  154
  162
  171
  180
  189
  199
  210
  221
Cash from financing (excl. dividends), $m  
  75
  40
  43
  46
  51
  55
  59
  63
  67
  71
  76
  81
  86
  92
  97
  103
  109
  115
  121
  129
  136
  143
  151
  160
  168
  177
  186
  196
  206
  217
  229
Total cash flow (excl. dividends), $m
  59
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
Retained Cash Flow (-), $m
  -68
  -65
  -41
  -44
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -78
  -83
  -88
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -138
  -146
  -154
  -162
  -171
  -180
  -189
  -199
  -210
  -221
Prev. year cash balance distribution, $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
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
 
  30
  -36
  -39
  -42
  -46
  -50
  -53
  -57
  -62
  -66
  -70
  -75
  -80
  -85
  -90
  -96
  -102
  -108
  -114
  -120
  -127
  -134
  -142
  -149
  -157
  -166
  -175
  -184
  -194
  -204
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
 
  29
  -33
  -34
  -35
  -36
  -36
  -36
  -36
  -35
  -35
  -33
  -32
  -30
  -29
  -27
  -24
  -22
  -20
  -18
  -15
  -13
  -11
  -9
  -8
  -6
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  100
  50.0
  7.6
  1.2
  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

LightInTheBox Holding Co., Ltd. (LightInTheBox) is an online retail company that delivers products directly to consumers around the world. The Company offers a range of products through www.lightinthebox.com, www.miniinthebox.com and its other Websites, as well as mobile applications, which are available in approximately 30 languages. It has over 687,800 product listings. The Company also offers a range of other products in its other general merchandise product category. Its major markets are Europe and North America. The Company's product offerings include apparel and other general merchandise. Its apparel category includes customized, special occasion apparel and fast fashion. Its other general merchandise category includes small accessories and gadgets, home and garden, electronics and communication devices and other products. The Company has additional Websites for specific products and geographic regions, including www.ouku.com for products targeting its Chinese customer base.

FINANCIAL RATIOS  of  LightInTheBox Holding ADR (LITB)

Valuation Ratios
P/E Ratio -36.8
Price to Sales 1.1
Price to Book 5
Price to Tangible Book
Price to Cash Flow -22.1
Price to Free Cash Flow -22.1
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 $292 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 9% 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 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 112%.

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 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 0.5%.

Life of production assets of 2.5 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 -9.6%. 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 - $66 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 66.289 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]
Financial statements 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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