Intrinsic value of Perry Ellis International - PERY

Previous Close

$24.60

  Intrinsic Value

$5.00

stock screener

  Rating & Target

str. sell

-80%

Previous close

$24.60

 
Intrinsic value

$5.00

 
Up/down potential

-80%

 
Rating

str. sell

We calculate the intrinsic value of PERY 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 0.4

 

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, %
  -4.33
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  861
  883
  907
  934
  963
  996
  1,031
  1,069
  1,109
  1,153
  1,199
  1,249
  1,302
  1,357
  1,417
  1,479
  1,546
  1,616
  1,690
  1,768
  1,851
  1,938
  2,029
  2,126
  2,227
  2,334
  2,447
  2,565
  2,689
  2,820
  2,958
Variable operating expenses, $m
 
  881
  905
  932
  962
  994
  1,029
  1,067
  1,107
  1,151
  1,197
  1,246
  1,299
  1,355
  1,414
  1,476
  1,543
  1,613
  1,687
  1,765
  1,847
  1,934
  2,025
  2,121
  2,223
  2,329
  2,442
  2,560
  2,684
  2,815
  2,952
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
  839
  881
  905
  932
  962
  994
  1,029
  1,067
  1,107
  1,151
  1,197
  1,246
  1,299
  1,355
  1,414
  1,476
  1,543
  1,613
  1,687
  1,765
  1,847
  1,934
  2,025
  2,121
  2,223
  2,329
  2,442
  2,560
  2,684
  2,815
  2,952
Operating income, $m
  22
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
EBITDA, $m
  37
  17
  18
  18
  19
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  48
  50
  52
  55
  57
Interest expense (income), $m
  7
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  17
  18
  19
  20
  22
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  43
Earnings before tax, $m
  15
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37
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
  15
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  42
  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
  593
  565
  580
  597
  616
  637
  660
  684
  710
  738
  767
  799
  833
  869
  906
  947
  989
  1,034
  1,081
  1,131
  1,184
  1,240
  1,298
  1,360
  1,425
  1,493
  1,565
  1,641
  1,721
  1,804
  1,893
Adjusted assets (=assets-cash), $m
  551
  565
  580
  597
  616
  637
  660
  684
  710
  738
  767
  799
  833
  869
  906
  947
  989
  1,034
  1,081
  1,131
  1,184
  1,240
  1,298
  1,360
  1,425
  1,493
  1,565
  1,641
  1,721
  1,804
  1,893
Revenue / Adjusted assets
  1.563
  1.563
  1.564
  1.564
  1.563
  1.564
  1.562
  1.563
  1.562
  1.562
  1.563
  1.563
  1.563
  1.562
  1.564
  1.562
  1.563
  1.563
  1.563
  1.563
  1.563
  1.563
  1.563
  1.563
  1.563
  1.563
  1.564
  1.563
  1.562
  1.563
  1.563
Average production assets, $m
  251
  257
  264
  272
  280
  290
  300
  311
  323
  336
  349
  363
  379
  395
  412
  431
  450
  470
  492
  515
  539
  564
  590
  619
  648
  679
  712
  746
  783
  821
  861
Working capital, $m
  223
  186
  191
  197
  203
  210
  218
  226
  234
  243
  253
  264
  275
  286
  299
  312
  326
  341
  357
  373
  390
  409
  428
  448
  470
  492
  516
  541
  567
  595
  624
Total debt, $m
  107
  113
  121
  130
  139
  150
  161
  173
  186
  201
  216
  232
  249
  267
  286
  306
  327
  350
  374
  399
  426
  454
  484
  515
  548
  582
  618
  657
  697
  739
  784
Total liabilities, $m
  279
  285
  293
  302
  311
  322
  333
  345
  358
  373
  388
  404
  421
  439
  458
  478
  499
  522
  546
  571
  598
  626
  656
  687
  720
  754
  790
  829
  869
  911
  956
Total equity, $m
  314
  279
  287
  296
  305
  315
  326
  338
  351
  365
  380
  396
  412
  430
  449
  469
  490
  512
  535
  560
  586
  614
  643
  673
  705
  739
  775
  812
  852
  893
  937
Total liabilities and equity, $m
  593
  564
  580
  598
  616
  637
  659
  683
  709
  738
  768
  800
  833
  869
  907
  947
  989
  1,034
  1,081
  1,131
  1,184
  1,240
  1,299
  1,360
  1,425
  1,493
  1,565
  1,641
  1,721
  1,804
  1,893
Debt-to-equity ratio
  0.341
  0.400
  0.420
  0.440
  0.460
  0.470
  0.490
  0.510
  0.530
  0.550
  0.570
  0.590
  0.600
  0.620
  0.640
  0.650
  0.670
  0.680
  0.700
  0.710
  0.730
  0.740
  0.750
  0.760
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
Adjusted equity ratio
  0.494
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37
Depreciation, amort., depletion, $m
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
Funds from operations, $m
  36
  11
  11
  11
  11
  11
  11
  11
  11
  12
  12
  12
  12
  12
  12
  12
  12
  12
  13
  13
  13
  13
  13
  13
  13
  14
  14
  14
  14
  14
  15
Change in working capital, $m
  -6
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
Cash from operations, $m
  42
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  0
  0
  -1
  -2
  -2
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
Maintenance CAPEX, $m
  0
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
New CAPEX, $m
  -13
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
Cash from investing activities, $m
  -14
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -61
  -63
  -67
  -70
  -74
  -77
  -81
  -85
  -89
Free cash flow, $m
  28
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -67
  -71
  -75
  -79
  -83
  -88
  -93
  -98
  -104
Issuance/(repayment) of debt, $m
  -51
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  44
Issuance/(repurchase) of shares, $m
  -2
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  36
  38
  40
  43
  46
  48
  51
  54
  58
  61
  65
  68
  72
  76
  81
Cash from financing (excl. dividends), $m  
  -30
  18
  20
  23
  25
  26
  29
  31
  34
  36
  39
  42
  44
  47
  50
  53
  57
  61
  64
  68
  73
  76
  81
  85
  91
  96
  101
  106
  112
  118
  125
Total cash flow (excl. dividends), $m
  -1
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
Retained Cash Flow (-), $m
  -23
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -36
  -38
  -40
  -43
  -46
  -48
  -51
  -54
  -58
  -61
  -65
  -68
  -72
  -76
  -81
Prev. year cash balance distribution, $m
 
  41
  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
 
  33
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -50
  -53
  -56
  -59
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
 
  32
  -8
  -8
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  100
  96.9
  93.5
  90.0
  86.4
  82.8
  79.2
  75.6
  72.0
  68.5
  65.0
  61.6
  58.4
  55.2
  52.1
  49.1
  46.2
  43.5
  40.9
  38.4
  36.0
  33.7
  31.6
  29.6
  27.6
  25.8
  24.1
  22.5
  21.0
  19.6
  18.2

Perry Ellis International, Inc. is an apparel company. The Company designs, sources, markets and licenses its products nationally and internationally at multiple price points and across all levels of retail distribution. It operates through four segments: Men's Sportswear and Swim, Women's Sportswear, Direct-to-Consumer and Licensing. Its Men's Sportswear and Swim, and Women's Sportswear segments are engaged in design, import and distribution of apparel to department stores and other retail outlets, primarily across the United States. Its Direct-to-Consumer segment is engaged in the sale of its branded and licensed products through its retail stores and e-commerce platform. Its Licensing segment includes royalties associated from the use of its brand names. Its brands include Perry Ellis and Original Penguin by Munsingwear (Original Penguin), Ben Hogan, Cubavera, Farah, Grand Slam, Jantzen, Laundry by Shelli Segal, Rafaella and Savane.

FINANCIAL RATIOS  of  Perry Ellis International (PERY)

Valuation Ratios
P/E Ratio 25.5
Price to Sales 0.4
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow 13.2
Growth Rates
Sales Growth Rate -4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.8%
Cap. Spend. - 3 Yr. Gr. Rate -10%
Financial Strength
Quick Ratio 42
Current Ratio 0
LT Debt to Equity 33.8%
Total Debt to Equity 34.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. -3%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. -1.8%
Return On Equity 5%
Return On Equity - 3 Yr. Avg. -2.9%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 37%
Gross Margin - 3 Yr. Avg. 35.5%
EBITDA Margin 4.3%
EBITDA Margin - 3 Yr. Avg. 3.4%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin 1.7%
Pre-Tax Margin - 3 Yr. Avg. 0.6%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. -1.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 174.5%
Payout Ratio 0%

PERY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PERY stock intrinsic value calculation we used $861 million for the last fiscal year's total revenue generated by Perry Ellis International. The default revenue input number comes from 2017 income statement of Perry Ellis International. 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 PERY stock valuation model: a) initial revenue growth rate of 2.5% 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 PERY is calculated based on our internal credit rating of Perry Ellis International, 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 Perry Ellis International.
    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 PERY stock the variable cost ratio is equal to 99.8%.

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 PERY 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 5.8% for Perry Ellis International.

Corporate tax rate of 27% is the nominal tax rate for Perry Ellis International. 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 PERY 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 PERY are equal to 29.1%.

Life of production assets of 16.7 years is the average useful life of capital assets used in Perry Ellis International 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 PERY is equal to 21.1%. 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 - $314 million for Perry Ellis International - 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 15.713 million for Perry Ellis International 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 Perry Ellis International at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Cubavera Celebrates Latin Culture   [Oct-26-17 09:00AM  GlobeNewswire]
▶ Perry Ellis eliminates George Feldenkreis' role as executive chairman   [Sep-22-17 09:35AM  American City Business Journals]
▶ Perry Ellis celebrates 50 years   [Sep-15-17 02:37PM  CNBC Videos]
▶ Perry Ellis posts 2Q profit   [Aug-24-17 09:58PM  Associated Press]
▶ Perry Ellis International Announces Gotcha License in Chile   [Jun-06-17 09:00AM  GlobeNewswire]
▶ Perry Ellis posts 1Q profit   [06:50AM  Associated Press]
▶ Perry Ellis posts 4Q profit   [07:17AM  Associated Press]
▶ Is Perry Ellis International, Inc. (PERY) A Good Stock To Buy?   [Dec-11-16 07:48AM  at Insider Monkey]
Financial statements of PERY
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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