Intrinsic value of Movado Group - MOV

Previous Close

$28.90

  Intrinsic Value

$30.86

stock screener

  Rating & Target

hold

+7%

Previous close

$28.90

 
Intrinsic value

$30.86

 
Up/down potential

+7%

 
Rating

hold

We calculate the intrinsic value of MOV 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 0.7

 

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, %
  -7.06
  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
  553
  564
  577
  592
  609
  627
  647
  669
  693
  719
  746
  776
  807
  841
  877
  914
  954
  997
  1,042
  1,089
  1,139
  1,192
  1,248
  1,306
  1,368
  1,433
  1,502
  1,574
  1,650
  1,730
  1,814
Variable operating expenses, $m
 
  349
  357
  366
  376
  387
  400
  414
  428
  444
  461
  480
  499
  520
  542
  565
  590
  616
  644
  673
  704
  737
  771
  807
  846
  886
  928
  973
  1,020
  1,069
  1,121
Fixed operating expenses, $m
 
  165
  169
  173
  178
  182
  187
  191
  196
  201
  206
  211
  217
  222
  227
  233
  239
  245
  251
  257
  264
  270
  277
  284
  291
  298
  306
  314
  321
  329
  338
Total operating expenses, $m
  499
  514
  526
  539
  554
  569
  587
  605
  624
  645
  667
  691
  716
  742
  769
  798
  829
  861
  895
  930
  968
  1,007
  1,048
  1,091
  1,137
  1,184
  1,234
  1,287
  1,341
  1,398
  1,459
Operating income, $m
  54
  50
  51
  53
  55
  57
  61
  64
  69
  74
  79
  85
  92
  99
  107
  116
  126
  136
  147
  159
  171
  185
  199
  215
  231
  249
  268
  288
  309
  331
  355
EBITDA, $m
  66
  58
  59
  61
  63
  66
  69
  73
  78
  83
  89
  95
  103
  110
  119
  128
  138
  149
  161
  173
  186
  201
  216
  232
  249
  268
  288
  308
  331
  354
  379
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Earnings before tax, $m
  51
  50
  50
  52
  54
  56
  59
  63
  67
  72
  77
  83
  89
  96
  104
  113
  122
  132
  142
  154
  166
  179
  193
  208
  224
  242
  260
  279
  300
  322
  345
Tax expense, $m
  16
  13
  14
  14
  14
  15
  16
  17
  18
  19
  21
  22
  24
  26
  28
  30
  33
  36
  38
  42
  45
  48
  52
  56
  61
  65
  70
  75
  81
  87
  93
Net income, $m
  35
  36
  37
  38
  39
  41
  43
  46
  49
  52
  56
  60
  65
  70
  76
  82
  89
  96
  104
  112
  121
  131
  141
  152
  164
  176
  190
  204
  219
  235
  252

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  256
  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
  608
  359
  367
  377
  387
  399
  412
  426
  441
  458
  475
  494
  514
  535
  558
  582
  608
  635
  663
  693
  725
  759
  794
  832
  871
  912
  956
  1,002
  1,050
  1,101
  1,155
Adjusted assets (=assets-cash), $m
  352
  359
  367
  377
  387
  399
  412
  426
  441
  458
  475
  494
  514
  535
  558
  582
  608
  635
  663
  693
  725
  759
  794
  832
  871
  912
  956
  1,002
  1,050
  1,101
  1,155
Revenue / Adjusted assets
  1.571
  1.571
  1.572
  1.570
  1.574
  1.571
  1.570
  1.570
  1.571
  1.570
  1.571
  1.571
  1.570
  1.572
  1.572
  1.570
  1.569
  1.570
  1.572
  1.571
  1.571
  1.570
  1.572
  1.570
  1.571
  1.571
  1.571
  1.571
  1.571
  1.571
  1.571
Average production assets, $m
  37
  37
  38
  39
  40
  41
  43
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
  120
Working capital, $m
  434
  187
  191
  196
  201
  208
  214
  222
  229
  238
  247
  257
  267
  278
  290
  303
  316
  330
  345
  360
  377
  395
  413
  432
  453
  474
  497
  521
  546
  573
  600
Total debt, $m
  30
  27
  30
  34
  38
  42
  47
  52
  57
  63
  70
  77
  84
  92
  100
  109
  118
  128
  139
  150
  161
  174
  187
  200
  215
  230
  246
  263
  280
  299
  319
Total liabilities, $m
  134
  131
  134
  138
  142
  146
  151
  156
  161
  167
  174
  181
  188
  196
  204
  213
  222
  232
  243
  254
  265
  278
  291
  304
  319
  334
  350
  367
  384
  403
  423
Total equity, $m
  474
  228
  233
  239
  246
  253
  261
  270
  280
  290
  301
  313
  326
  339
  354
  369
  385
  402
  420
  440
  460
  481
  504
  527
  552
  578
  606
  635
  666
  698
  732
Total liabilities and equity, $m
  608
  359
  367
  377
  388
  399
  412
  426
  441
  457
  475
  494
  514
  535
  558
  582
  607
  634
  663
  694
  725
  759
  795
  831
  871
  912
  956
  1,002
  1,050
  1,101
  1,155
Debt-to-equity ratio
  0.063
  0.120
  0.130
  0.140
  0.150
  0.170
  0.180
  0.190
  0.210
  0.220
  0.230
  0.250
  0.260
  0.270
  0.280
  0.300
  0.310
  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
  0.440
Adjusted equity ratio
  0.619
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  35
  36
  37
  38
  39
  41
  43
  46
  49
  52
  56
  60
  65
  70
  76
  82
  89
  96
  104
  112
  121
  131
  141
  152
  164
  176
  190
  204
  219
  235
  252
Depreciation, amort., depletion, $m
  12
  7
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Funds from operations, $m
  60
  44
  44
  46
  47
  49
  52
  55
  58
  62
  66
  71
  76
  81
  88
  94
  101
  109
  118
  127
  136
  147
  158
  169
  182
  195
  209
  225
  241
  258
  276
Change in working capital, $m
  2
  4
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
  26
  28
Cash from operations, $m
  58
  40
  40
  41
  42
  43
  45
  47
  50
  53
  57
  61
  65
  70
  76
  82
  88
  95
  103
  111
  120
  129
  139
  150
  161
  174
  187
  201
  215
  231
  248
Maintenance CAPEX, $m
  0
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
New CAPEX, $m
  -6
  -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
  -5
  -5
  -5
  -5
  -6
Cash from investing activities, $m
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
Free cash flow, $m
  50
  32
  32
  32
  33
  34
  35
  37
  40
  42
  45
  49
  53
  57
  62
  68
  74
  80
  87
  94
  102
  111
  120
  130
  140
  151
  163
  176
  190
  204
  219
Issuance/(repayment) of debt, $m
  -10
  2
  3
  3
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -16
  2
  3
  3
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
Total cash flow (excl. dividends), $m
  40
  34
  35
  35
  37
  38
  40
  42
  45
  48
  52
  56
  60
  65
  71
  76
  83
  90
  97
  105
  114
  123
  133
  143
  155
  166
  179
  193
  207
  223
  239
Retained Cash Flow (-), $m
  -33
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
Prev. year cash balance distribution, $m
 
  251
  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
 
  281
  30
  29
  30
  31
  32
  34
  36
  38
  41
  44
  48
  52
  56
  61
  67
  73
  79
  86
  94
  102
  110
  120
  130
  140
  152
  164
  177
  190
  205
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
 
  269
  27
  26
  25
  24
  23
  23
  22
  22
  21
  21
  20
  20
  19
  18
  17
  16
  15
  13
  12
  11
  9
  8
  7
  5
  4
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  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
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Movado Group, Inc. designs, sources, markets and distributes watches. The Company operates through two segments: Wholesale and Retail. The Wholesale segment includes the design, development, sourcing, marketing and distribution of watches, and after-sales service activities and shipping. It sells all of its brands to jewelry store chains and department stores, as well as independent jewelers. The Retail segment includes its outlet stores. As of January 31, 2017, its subsidiary, Movado Retail Group, Inc., operated 40 outlet stores located in outlet centers across the United States. It divides its business into two geographic locations: the United States operations and International operations. It has international operations in Europe, the Americas, the Middle East and Asia. Its portfolio of brands includes Coach Watches, Concord, Ebel, ESQ Movado, Scuderia Ferrari Watches, HUGO BOSS Watches, Juicy Couture Watches, Lacoste Watches, Movado and Tommy Hilfiger Watches.

FINANCIAL RATIOS  of  Movado Group (MOV)

Valuation Ratios
P/E Ratio 19
Price to Sales 1.2
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 11.4
Price to Free Cash Flow 12.8
Growth Rates
Sales Growth Rate -7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -18.8%
Financial Strength
Quick Ratio 51
Current Ratio 0.4
LT Debt to Equity 5.3%
Total Debt to Equity 6.3%
Interest Coverage 52
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.2%
Return On Equity 7.7%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 53.3%
Gross Margin - 3 Yr. Avg. 53.2%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 13.2%
Operating Margin 9.8%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 9.2%
Pre-Tax Margin - 3 Yr. Avg. 11%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 30.5%
Payout Ratio 34.3%

MOV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MOV stock intrinsic value calculation we used $553 million for the last fiscal year's total revenue generated by Movado Group. The default revenue input number comes from 2017 income statement of Movado Group. 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 MOV 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 4.3%, whose default value for MOV is calculated based on our internal credit rating of Movado Group, 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 Movado Group.
    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 MOV stock the variable cost ratio is equal to 61.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $161 million in the base year in the intrinsic value calculation for MOV 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 Movado Group.

Corporate tax rate of 27% is the nominal tax rate for Movado Group. 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 MOV 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 MOV are equal to 6.6%.

Life of production assets of 3 years is the average useful life of capital assets used in Movado Group 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 MOV is equal to 33.1%. 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 - $474 million for Movado Group - 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 22.971 million for Movado Group 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 Movado Group at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ What Happened in the Stock Market Today   [Nov-21-17 05:09PM  Motley Fool]
▶ Movado posts 3Q profit   [06:53AM  Associated Press]
▶ Why Movado Group, Inc. Stock Rose 12.8% in August   [Sep-12-17 10:32AM  Motley Fool]
▶ What's Doing Best in New Portfolio? Take a Guess   [Aug-31-17 12:00PM  TheStreet.com]
▶ Company News for August 30, 2017   [10:30AM  Zacks]
▶ Movado posts 2Q profit   [10:04PM  Associated Press]
▶ Movado Group Acquires Olivia Burton   [06:00AM  Business Wire]
▶ Movado Group, Inc. Earnings Fall Despite Cost Cuts   [May-26-17 08:21AM  Motley Fool]
▶ Movado reports 1Q loss   [May-25-17 07:04AM  Associated Press]
▶ Movado Group, Inc.'s Earnings Sink as Retailers Struggle   [Mar-21-17 03:43PM  Motley Fool]
▶ Stocks Lower as Crude Slump Weighs on Energy Sector   [Mar-20-17 02:58PM  TheStreet.com]
▶ Why GoPro, Movado Group, and IPG Photonics Jumped Today   [Jan-30-17 05:37PM  at Motley Fool]
Financial statements of MOV
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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