Intrinsic value of Nautilus - NLS

Previous Close

$18.30

  Intrinsic Value

$19.39

stock screener

  Rating & Target

hold

+6%

  Value-price divergence*

-21%

Previous close

$18.30

 
Intrinsic value

$19.39

 
Up/down potential

+6%

 
Rating

hold

 
Value-price divergence*

-21%

*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
  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
  406
  414
  424
  435
  447
  460
  475
  491
  509
  528
  548
  570
  593
  617
  644
  671
  701
  732
  765
  800
  836
  875
  916
  959
  1,004
  1,052
  1,103
  1,156
  1,211
  1,270
  1,332
Variable operating expenses, $m
 
  343
  351
  359
  369
  380
  392
  406
  420
  435
  452
  463
  482
  502
  523
  546
  570
  595
  622
  650
  680
  711
  744
  779
  816
  855
  896
  939
  985
  1,032
  1,082
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
  360
  369
  377
  388
  399
  412
  426
  441
  456
  474
  485
  505
  525
  547
  571
  595
  621
  649
  677
  708
  740
  773
  809
  847
  887
  928
  972
  1,019
  1,067
  1,118
Operating income, $m
  53
  54
  55
  57
  59
  61
  63
  66
  68
  71
  75
  84
  88
  92
  96
  101
  106
  111
  117
  123
  129
  135
  142
  150
  157
  166
  174
  183
  193
  203
  214
EBITDA, $m
  61
  65
  66
  68
  70
  72
  75
  78
  81
  84
  87
  91
  95
  99
  104
  109
  114
  120
  126
  132
  139
  146
  153
  161
  169
  178
  187
  197
  207
  218
  229
Interest expense (income), $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
Earnings before tax, $m
  52
  52
  53
  55
  57
  59
  61
  63
  66
  68
  71
  81
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
  134
  141
  148
  156
  164
  172
  181
  191
  200
Tax expense, $m
  17
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
  47
  49
  51
  54
Net income, $m
  34
  38
  39
  40
  41
  43
  44
  46
  48
  50
  52
  59
  62
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  103
  108
  114
  120
  126
  132
  139
  146

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
  291
  297
  305
  314
  323
  333
  345
  357
  370
  385
  400
  416
  433
  452
  471
  492
  514
  537
  561
  587
  614
  643
  673
  705
  738
  774
  811
  850
  891
  935
Adjusted assets (=assets-cash), $m
  285
  291
  297
  305
  314
  323
  333
  345
  357
  370
  385
  400
  416
  433
  452
  471
  492
  514
  537
  561
  587
  614
  643
  673
  705
  738
  774
  811
  850
  891
  935
Revenue / Adjusted assets
  1.425
  1.423
  1.428
  1.426
  1.424
  1.424
  1.426
  1.423
  1.426
  1.427
  1.423
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.424
  1.425
  1.426
  1.424
  1.425
  1.425
  1.425
  1.424
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
Average production assets, $m
  89
  91
  93
  95
  98
  101
  104
  108
  111
  116
  120
  125
  130
  135
  141
  147
  153
  160
  167
  175
  183
  192
  201
  210
  220
  230
  241
  253
  265
  278
  292
Working capital, $m
  85
  54
  55
  57
  59
  60
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
  151
  159
  166
  174
Total debt, $m
  64
  51
  55
  59
  63
  69
  74
  81
  87
  95
  102
  111
  120
  129
  139
  150
  161
  173
  186
  199
  213
  228
  244
  260
  278
  296
  315
  336
  357
  380
  403
Total liabilities, $m
  172
  159
  163
  167
  171
  177
  182
  189
  195
  203
  210
  219
  228
  237
  247
  258
  269
  281
  294
  307
  321
  336
  352
  368
  386
  404
  423
  444
  465
  488
  511
Total equity, $m
  161
  132
  135
  138
  142
  146
  151
  156
  162
  168
  174
  181
  188
  196
  205
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  335
  351
  367
  385
  404
  423
Total liabilities and equity, $m
  333
  291
  298
  305
  313
  323
  333
  345
  357
  371
  384
  400
  416
  433
  452
  471
  492
  514
  537
  561
  587
  614
  643
  673
  705
  739
  774
  811
  850
  892
  934
Debt-to-equity ratio
  0.398
  0.390
  0.410
  0.430
  0.450
  0.470
  0.490
  0.520
  0.540
  0.560
  0.590
  0.610
  0.630
  0.660
  0.680
  0.700
  0.720
  0.740
  0.760
  0.780
  0.800
  0.820
  0.840
  0.850
  0.870
  0.880
  0.900
  0.910
  0.930
  0.940
  0.950
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
  38
  39
  40
  41
  43
  44
  46
  48
  50
  52
  59
  62
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  103
  108
  114
  120
  126
  132
  139
  146
Depreciation, amort., depletion, $m
  8
  11
  11
  11
  11
  12
  12
  12
  12
  12
  13
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
Funds from operations, $m
  39
  49
  50
  51
  53
  54
  56
  58
  60
  62
  65
  66
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  120
  126
  132
  139
  146
  154
  162
Change in working capital, $m
  -7
  1
  1
  1
  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
Cash from operations, $m
  46
  48
  49
  50
  51
  53
  54
  56
  58
  60
  62
  63
  65
  68
  71
  74
  78
  82
  85
  89
  94
  98
  103
  109
  114
  120
  126
  132
  139
  146
  154
Maintenance CAPEX, $m
  0
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
New CAPEX, $m
  -5
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
Cash from investing activities, $m
  -10
  -7
  -7
  -7
  -8
  -8
  -8
  -10
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -25
  -27
  -29
Free cash flow, $m
  36
  42
  42
  43
  43
  44
  45
  47
  48
  50
  51
  52
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  93
  98
  103
  108
  113
  119
  125
Issuance/(repayment) of debt, $m
  -16
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
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
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
Total cash flow (excl. dividends), $m
  17
  45
  46
  47
  48
  50
  51
  53
  55
  57
  59
  60
  63
  65
  68
  72
  75
  78
  82
  86
  91
  95
  100
  105
  110
  116
  122
  128
  135
  142
  149
Retained Cash Flow (-), $m
  -34
  -3
  -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
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
 
  74
  43
  43
  44
  45
  46
  48
  49
  51
  53
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  96
  101
  106
  111
  117
  123
  130
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
 
  71
  39
  38
  36
  35
  34
  32
  31
  29
  28
  25
  24
  22
  20
  18
  17
  15
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
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
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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 16.6
Price to Sales 1.4
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 12.3
Price to Free Cash Flow 13.8
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 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 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 30.467 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. 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]
▶ 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 Annual reports 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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