Intrinsic value of Nautilus - NLS

Previous Close

$13.25

  Intrinsic Value

$26.53

stock screener

  Rating & Target

str. buy

+100%

Previous close

$13.25

 
Intrinsic value

$26.53

 
Up/down potential

+100%

 
Rating

str. buy

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  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
  5.17
Revenue, $m
  406
  441
  477
  515
  554
  595
  638
  682
  727
  775
  825
  876
  930
  986
  1,044
  1,105
  1,168
  1,235
  1,304
  1,376
  1,451
  1,530
  1,613
  1,699
  1,790
  1,884
  1,983
  2,087
  2,196
  2,310
  2,429
Variable operating expenses, $m
 
  365
  394
  425
  457
  490
  524
  560
  597
  636
  676
  712
  756
  801
  849
  898
  950
  1,003
  1,060
  1,118
  1,180
  1,244
  1,311
  1,381
  1,455
  1,531
  1,612
  1,696
  1,785
  1,877
  1,974
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
  382
  412
  443
  476
  509
  544
  580
  618
  657
  698
  734
  779
  824
  873
  923
  975
  1,029
  1,087
  1,145
  1,208
  1,273
  1,340
  1,411
  1,486
  1,563
  1,644
  1,729
  1,819
  1,912
  2,010
Operating income, $m
  53
  59
  65
  72
  79
  86
  93
  101
  109
  118
  126
  142
  151
  161
  172
  182
  194
  205
  218
  231
  244
  258
  273
  288
  304
  321
  339
  358
  377
  398
  419
EBITDA, $m
  61
  70
  77
  84
  91
  99
  107
  115
  124
  133
  142
  152
  162
  173
  184
  195
  207
  220
  233
  247
  261
  276
  292
  308
  325
  343
  362
  382
  403
  425
  448
Interest expense (income), $m
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
Earnings before tax, $m
  52
  57
  63
  69
  76
  82
  89
  96
  104
  112
  120
  134
  143
  152
  162
  172
  183
  193
  205
  217
  229
  242
  256
  270
  285
  301
  318
  335
  353
  372
  392
Tax expense, $m
  17
  15
  17
  19
  20
  22
  24
  26
  28
  30
  32
  36
  39
  41
  44
  46
  49
  52
  55
  59
  62
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
Net income, $m
  34
  42
  46
  51
  55
  60
  65
  70
  76
  82
  87
  98
  105
  111
  118
  126
  133
  141
  150
  158
  167
  177
  187
  197
  208
  220
  232
  244
  258
  272
  286

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
  309
  335
  361
  389
  418
  447
  478
  510
  544
  579
  615
  653
  692
  733
  775
  820
  866
  915
  966
  1,019
  1,074
  1,132
  1,192
  1,256
  1,322
  1,392
  1,465
  1,541
  1,621
  1,705
Adjusted assets (=assets-cash), $m
  285
  309
  335
  361
  389
  418
  447
  478
  510
  544
  579
  615
  653
  692
  733
  775
  820
  866
  915
  966
  1,019
  1,074
  1,132
  1,192
  1,256
  1,322
  1,392
  1,465
  1,541
  1,621
  1,705
Revenue / Adjusted assets
  1.425
  1.427
  1.424
  1.427
  1.424
  1.423
  1.427
  1.427
  1.425
  1.425
  1.425
  1.424
  1.424
  1.425
  1.424
  1.426
  1.424
  1.426
  1.425
  1.424
  1.424
  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
  97
  105
  113
  121
  130
  140
  149
  159
  170
  181
  192
  204
  216
  229
  242
  256
  270
  286
  301
  318
  335
  353
  372
  392
  413
  434
  457
  481
  506
  532
Working capital, $m
  85
  58
  63
  67
  73
  78
  84
  89
  95
  102
  108
  115
  122
  129
  137
  145
  153
  162
  171
  180
  190
  200
  211
  223
  234
  247
  260
  273
  288
  303
  318
Total debt, $m
  64
  61
  75
  90
  105
  120
  137
  154
  171
  190
  209
  228
  249
  270
  293
  316
  340
  366
  392
  420
  449
  479
  511
  544
  579
  615
  653
  693
  735
  779
  824
Total liabilities, $m
  172
  169
  183
  198
  213
  228
  245
  262
  279
  298
  317
  336
  357
  378
  401
  424
  448
  474
  500
  528
  557
  587
  619
  652
  687
  723
  761
  801
  843
  887
  932
Total equity, $m
  161
  140
  152
  164
  176
  189
  203
  217
  231
  246
  262
  279
  296
  313
  332
  351
  371
  392
  414
  437
  461
  487
  513
  540
  569
  599
  631
  664
  698
  734
  772
Total liabilities and equity, $m
  333
  309
  335
  362
  389
  417
  448
  479
  510
  544
  579
  615
  653
  691
  733
  775
  819
  866
  914
  965
  1,018
  1,074
  1,132
  1,192
  1,256
  1,322
  1,392
  1,465
  1,541
  1,621
  1,704
Debt-to-equity ratio
  0.398
  0.440
  0.500
  0.550
  0.590
  0.640
  0.670
  0.710
  0.740
  0.770
  0.800
  0.820
  0.840
  0.860
  0.880
  0.900
  0.920
  0.930
  0.950
  0.960
  0.970
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.060
  1.070
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
  42
  46
  51
  55
  60
  65
  70
  76
  82
  87
  98
  105
  111
  118
  126
  133
  141
  150
  158
  167
  177
  187
  197
  208
  220
  232
  244
  258
  272
  286
Depreciation, amort., depletion, $m
  8
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
Funds from operations, $m
  39
  53
  58
  63
  68
  73
  79
  85
  91
  97
  103
  108
  115
  123
  130
  138
  147
  156
  165
  174
  184
  195
  206
  217
  229
  242
  255
  269
  283
  299
  314
Change in working capital, $m
  -7
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
Cash from operations, $m
  46
  49
  53
  58
  63
  68
  73
  79
  85
  91
  97
  102
  108
  115
  123
  131
  139
  147
  156
  165
  174
  184
  195
  206
  217
  229
  242
  255
  269
  284
  299
Maintenance CAPEX, $m
  0
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
New CAPEX, $m
  -5
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Cash from investing activities, $m
  -10
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -29
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
Free cash flow, $m
  36
  36
  40
  44
  48
  53
  57
  62
  67
  72
  77
  81
  86
  92
  99
  105
  112
  119
  126
  134
  142
  150
  159
  168
  178
  188
  198
  209
  221
  233
  246
Issuance/(repayment) of debt, $m
  -16
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
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
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
Total cash flow (excl. dividends), $m
  17
  50
  54
  59
  63
  68
  73
  79
  84
  90
  96
  101
  107
  114
  121
  128
  136
  144
  153
  162
  171
  180
  191
  201
  212
  224
  236
  249
  263
  277
  292
Retained Cash Flow (-), $m
  -34
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
  -36
  -38
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
 
  70
  42
  47
  51
  55
  60
  65
  70
  75
  80
  84
  90
  96
  102
  109
  116
  123
  131
  139
  147
  155
  164
  174
  184
  194
  205
  216
  228
  241
  254
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
 
  67
  39
  40
  42
  43
  43
  44
  43
  43
  42
  40
  38
  37
  34
  32
  29
  27
  24
  21
  19
  16
  14
  11
  9
  8
  6
  5
  4
  3
  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
  100.0
  100.0
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Nautilus, Inc. is a consumer fitness products company. The Company operates through two segments: Direct and Retail. Its principal business activities include designing, developing, sourcing and marketing of cardio and strength fitness products and related accessories for consumer use, primarily in the United States and Canada, but also in international markets outside North America. The Direct business offers products directly to consumers through television advertising, catalogs and the Internet. In its Direct business, the Company markets and sells its products, principally Bowflex cardio and strength products, directly to consumers. The Retail business offers its products through a network of independent retail companies and specialty retailers with stores and Websites located in the United States and internationally. In its Retail business, the Company markets and sells a line of consumer fitness equipment under the Nautilus, Octane Fitness, Schwinn, Universal and Bowflex brands.

FINANCIAL RATIOS  of  Nautilus (NLS)

Valuation Ratios
P/E Ratio 12
Price to Sales 1
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow 10
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 8.6% 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 31.248 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 $0.4 billion.

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COMPANY NEWS

▶ Top Cheap Stocks This Week   [Jan-16-18 09:02AM  Simply Wall St.]
▶ Nautilus, Inc. Launches New Ecommerce-Enabled Websites   [Jan-11-18 08:30AM  Business Wire]
▶ Is There Now An Opportunity In Nautilus Inc (NYSE:NLS)?   [Dec-19-17 08:05PM  Simply Wall St.]
▶ ETFs with exposure to Nautilus, Inc. : November 17, 2017   [Nov-17-17 12:33PM  Capital Cube]
▶ ETFs with exposure to Nautilus, Inc. : November 7, 2017   [Nov-07-17 10:33AM  Capital Cube]
▶ Why Nautilus, Inc.'s Shares Plunged 24% Today   [Oct-31-17 01:29PM  Motley Fool]
▶ Should You Buy Nautilus Inc (NLS) At This PE Ratio?   [Oct-30-17 06:51PM  Simply Wall St.]
▶ Nautilus beats 3Q profit forecasts   [04:15PM  Associated Press]
▶ Nautilus Inc to Host Earnings Call   [10:10AM  ACCESSWIRE]
▶ ETFs with exposure to Nautilus, Inc. : August 21, 2017   [Aug-21-17 04:43PM  Capital Cube]
▶ Nautilus misses Street 2Q forecasts   [Jul-31-17 09:16PM  Associated Press]
▶ Nautilus, Inc. Value Analysis (NYSE:NLS) : June 27, 2017   [Jun-27-17 04:38PM  Capital Cube]
▶ ETFs with exposure to Nautilus, Inc. : May 12, 2017   [May-12-17 04:16PM  Capital Cube]
▶ Why Shares of Nautilus Inc. Popped 11% Today   [May-02-17 05:15PM  Motley Fool]
▶ Nautilus meets 1Q profit forecasts   [May-01-17 04:12PM  Associated Press]
▶ These 3 Stocks Are Up Over 500% in the Last Five Years   [Apr-26-17 03:06PM  Motley Fool]
▶ Nautilus, Inc. Products Earn Prestigious Good Design Award   [Dec-21-16 09:30AM  Business Wire]
Financial statements of NLS
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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