Intrinsic value of Nautilus - NLS

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$18.00

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$18.00

 
Intrinsic value

$38.13

 
Up/down potential

+112%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of NLS 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 0.6

 

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, %
  20.83
  15.60
  14.54
  13.59
  12.73
  11.95
  11.26
  10.63
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.69
  7.42
  7.18
  6.96
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.68
  5.62
  5.55
  5.50
Revenue, $m
  406
  469
  538
  611
  688
  771
  857
  949
  1,044
  1,144
  1,248
  1,357
  1,470
  1,587
  1,709
  1,836
  1,968
  2,105
  2,247
  2,396
  2,550
  2,710
  2,877
  3,051
  3,232
  3,421
  3,618
  3,824
  4,038
  4,263
  4,497
Variable operating expenses, $m
 
  388
  443
  502
  566
  633
  703
  777
  855
  936
  1,021
  1,103
  1,194
  1,290
  1,389
  1,492
  1,599
  1,711
  1,827
  1,947
  2,072
  2,202
  2,338
  2,479
  2,627
  2,780
  2,940
  3,108
  3,282
  3,464
  3,655
Fixed operating expenses, $m
 
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
Total operating expenses, $m
  353
  405
  461
  520
  585
  652
  723
  797
  876
  957
  1,043
  1,125
  1,217
  1,313
  1,413
  1,517
  1,624
  1,737
  1,854
  1,974
  2,100
  2,231
  2,367
  2,509
  2,658
  2,812
  2,972
  3,141
  3,316
  3,499
  3,691
Operating income, $m
  53
  64
  77
  90
  104
  119
  135
  151
  169
  187
  206
  232
  252
  274
  296
  319
  343
  368
  394
  421
  450
  479
  509
  541
  575
  609
  645
  683
  722
  764
  807
EBITDA, $m
  61
  76
  89
  103
  118
  134
  151
  168
  187
  206
  227
  248
  269
  292
  316
  341
  366
  393
  421
  449
  479
  511
  543
  577
  612
  649
  687
  727
  769
  813
  859
Interest expense (income), $m
  2
  2
  3
  3
  4
  5
  7
  8
  9
  10
  12
  13
  14
  16
  18
  19
  21
  23
  25
  26
  28
  30
  33
  35
  37
  40
  42
  45
  48
  50
  53
Earnings before tax, $m
  52
  63
  74
  86
  100
  113
  128
  143
  160
  177
  194
  219
  238
  258
  279
  300
  322
  346
  370
  395
  421
  448
  477
  506
  537
  569
  603
  638
  675
  713
  753
Tax expense, $m
  17
  17
  20
  23
  27
  31
  35
  39
  43
  48
  52
  59
  64
  70
  75
  81
  87
  93
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  193
  203
Net income, $m
  34
  46
  54
  63
  73
  83
  93
  105
  117
  129
  142
  160
  174
  188
  203
  219
  235
  252
  270
  288
  307
  327
  348
  370
  392
  416
  440
  466
  493
  521
  550

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  48
  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
  333
  329
  377
  429
  483
  541
  602
  666
  733
  803
  876
  952
  1,031
  1,114
  1,199
  1,288
  1,381
  1,477
  1,577
  1,681
  1,789
  1,902
  2,019
  2,141
  2,268
  2,401
  2,539
  2,683
  2,834
  2,991
  3,156
Adjusted assets (=assets-cash), $m
  285
  329
  377
  429
  483
  541
  602
  666
  733
  803
  876
  952
  1,031
  1,114
  1,199
  1,288
  1,381
  1,477
  1,577
  1,681
  1,789
  1,902
  2,019
  2,141
  2,268
  2,401
  2,539
  2,683
  2,834
  2,991
  3,156
Revenue / Adjusted assets
  1.425
  1.426
  1.427
  1.424
  1.424
  1.425
  1.424
  1.425
  1.424
  1.425
  1.425
  1.425
  1.426
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
Average production assets, $m
  89
  103
  118
  134
  151
  169
  188
  208
  229
  251
  273
  297
  322
  348
  374
  402
  431
  461
  492
  525
  558
  593
  630
  668
  708
  749
  792
  837
  884
  934
  985
Working capital, $m
  85
  61
  70
  80
  90
  101
  112
  124
  137
  150
  163
  178
  193
  208
  224
  241
  258
  276
  294
  314
  334
  355
  377
  400
  423
  448
  474
  501
  529
  558
  589
Total debt, $m
  64
  72
  98
  126
  156
  188
  221
  256
  293
  331
  371
  413
  456
  501
  548
  597
  647
  700
  755
  812
  871
  932
  996
  1,063
  1,133
  1,205
  1,281
  1,360
  1,442
  1,528
  1,618
Total liabilities, $m
  172
  180
  206
  234
  264
  296
  329
  364
  401
  439
  479
  521
  564
  609
  656
  705
  755
  808
  863
  920
  979
  1,040
  1,104
  1,171
  1,241
  1,313
  1,389
  1,468
  1,550
  1,636
  1,726
Total equity, $m
  161
  149
  171
  194
  219
  245
  273
  302
  332
  364
  397
  431
  467
  505
  543
  584
  626
  669
  714
  762
  811
  861
  915
  970
  1,027
  1,087
  1,150
  1,216
  1,284
  1,355
  1,430
Total liabilities and equity, $m
  333
  329
  377
  428
  483
  541
  602
  666
  733
  803
  876
  952
  1,031
  1,114
  1,199
  1,289
  1,381
  1,477
  1,577
  1,682
  1,790
  1,901
  2,019
  2,141
  2,268
  2,400
  2,539
  2,684
  2,834
  2,991
  3,156
Debt-to-equity ratio
  0.398
  0.480
  0.580
  0.650
  0.710
  0.770
  0.810
  0.850
  0.880
  0.910
  0.940
  0.960
  0.980
  0.990
  1.010
  1.020
  1.030
  1.050
  1.060
  1.070
  1.070
  1.080
  1.090
  1.100
  1.100
  1.110
  1.110
  1.120
  1.120
  1.130
  1.130
Adjusted equity ratio
  0.396
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453
  0.453

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  34
  46
  54
  63
  73
  83
  93
  105
  117
  129
  142
  160
  174
  188
  203
  219
  235
  252
  270
  288
  307
  327
  348
  370
  392
  416
  440
  466
  493
  521
  550
Depreciation, amort., depletion, $m
  8
  12
  12
  13
  14
  15
  16
  17
  18
  20
  21
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
Funds from operations, $m
  39
  57
  67
  76
  87
  98
  110
  122
  135
  148
  162
  175
  191
  207
  223
  240
  258
  277
  296
  316
  337
  359
  382
  405
  430
  456
  482
  510
  540
  570
  602
Change in working capital, $m
  -7
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
Cash from operations, $m
  46
  48
  58
  67
  77
  87
  98
  110
  122
  135
  149
  161
  176
  191
  207
  224
  241
  259
  278
  297
  317
  338
  360
  382
  406
  431
  457
  483
  511
  541
  571
Maintenance CAPEX, $m
  0
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
New CAPEX, $m
  -5
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
Cash from investing activities, $m
  -10
  -19
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -58
  -62
  -65
  -69
  -72
  -76
  -79
  -83
  -87
  -92
  -96
  -101
Free cash flow, $m
  36
  30
  37
  45
  53
  61
  70
  80
  90
  101
  113
  123
  135
  148
  162
  176
  191
  206
  222
  238
  255
  273
  292
  311
  331
  352
  374
  396
  420
  445
  470
Issuance/(repayment) of debt, $m
  -16
  24
  26
  28
  30
  32
  33
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
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  
  -19
  24
  26
  28
  30
  32
  33
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
Total cash flow (excl. dividends), $m
  17
  54
  63
  73
  82
  93
  104
  115
  127
  140
  153
  165
  179
  194
  209
  225
  241
  259
  276
  295
  314
  335
  356
  378
  400
  424
  449
  475
  502
  531
  560
Retained Cash Flow (-), $m
  -34
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -65
  -68
  -71
  -75
Prev. year cash balance distribution, $m
 
  32
  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
 
  66
  42
  49
  58
  67
  76
  86
  97
  108
  120
  130
  143
  156
  170
  184
  199
  215
  231
  248
  266
  284
  303
  322
  343
  364
  387
  410
  434
  459
  486
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
 
  63
  38
  43
  47
  52
  55
  58
  60
  62
  63
  62
  61
  59
  57
  54
  51
  47
  43
  38
  34
  29
  25
  21
  17
  14
  11
  9
  7
  5
  4
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
  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

Nautilus, Inc., a consumer fitness products company, designs, develops, sources, and markets cardio and strength fitness products, and related accessories for consumer use in the United States, Canada, and internationally. The company operates in two segments, Direct and Retail. It offers specialized cardio, treadmills, ellipticals, and bike products under the Nautilus brand; fitness equipment comprising cardio and strength products, including TreadClimber and Max Trainer specialized cardio machines, PowerRod and Revolution home gyms, and SelectTech dumbbells under the Bowflex brand; cardio products, including elliptical machine under Octane Fitness brand; and recumbent elliptical under xRide and LateralX brand names. The company also provides exercise bikes, including the Airdyne, treadmills, and ellipticals under Schwinn brand; and various kettlebell weights and weight benches under Universal brand. In addition, it engages in licensing its brands and intellectual properties. The company offers its products directly to consumers through television advertising, catalogs, and the Internet; and through a network of retail companies consisting of sporting goods stores, Internet retailers, and large-format and warehouse stores, as well as specialty retailers and independent bike dealers. Nautilus, Inc. was founded in 1986 and is headquartered in Vancouver, Washington.

FINANCIAL RATIOS  of  Nautilus (NLS)

Valuation Ratios
P/E Ratio 16.3
Price to Sales 1.4
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow 13.5
Growth Rates
Sales Growth Rate 20.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.7%
Cap. Spend. - 3 Yr. Gr. Rate 4.6%
Financial Strength
Quick Ratio 3
Current Ratio 0.3
LT Debt to Equity 29.8%
Total Debt to Equity 39.8%
Interest Coverage 27
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 11.2%
Return On Total Capital 15.7%
Ret/ On T. Cap. - 3 Yr. Avg. 17.1%
Return On Equity 23.6%
Return On Equity - 3 Yr. Avg. 21.7%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 52.2%
Gross Margin - 3 Yr. Avg. 51.7%
EBITDA Margin 15.3%
EBITDA Margin - 3 Yr. Avg. 13.5%
Operating Margin 13.1%
Oper. Margin - 3 Yr. Avg. 12.1%
Pre-Tax Margin 12.8%
Pre-Tax Margin - 3 Yr. Avg. 11.9%
Net Profit Margin 8.4%
Net Profit Margin - 3 Yr. Avg. 7.8%
Effective Tax Rate 32.7%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 0%

NLS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NLS stock intrinsic value calculation we used $406 million for the last fiscal year's total revenue generated by Nautilus. The default revenue input number comes from 2016 income statement of Nautilus. 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 NLS stock valuation model: a) initial revenue growth rate of 15.6% 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 NLS is calculated based on our internal credit rating of Nautilus, 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 Nautilus.
    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 NLS stock the variable cost ratio is equal to 82.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17 million in the base year in the intrinsic value calculation for NLS 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 Nautilus.

Corporate tax rate of 27% is the nominal tax rate for Nautilus. 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 NLS 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 NLS are equal to 21.9%.

Life of production assets of 18.8 years is the average useful life of capital assets used in Nautilus 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 NLS is equal to 13.1%. 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 - $161 million for Nautilus - 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 31.399 million for Nautilus 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 Nautilus at the current share price and the inputted number of shares is $0.6 billion.


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COMPANY NEWS

▶ Nautilus, Inc. Products Earn Prestigious Good Design Award   [Dec-21-16 09:30AM  Business Wire]
▶ Nautilus, Inc. Unveils Nautilus® 618 Performance Series   [Sep-20-16 09:30AM  Business Wire]
▶ Nautilus, Inc. Ceases Reporting in Canada   [Aug-19-16 12:40PM  Business Wire]
▶ Americans and Europeans Flunk Fitness Test   [Jul-19-16 09:30AM  Business Wire]
Stock chart of NLS Financial statements of NLS
Valuation of Stocks

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