Intrinsic value of Castle Brands - ROX

Previous Close

$1.15

  Intrinsic Value

$0.37

stock screener

  Rating & Target

str. sell

-67%

Previous close

$1.15

 
Intrinsic value

$0.37

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of ROX 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 0.2

 

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, %
  6.94
  23.50
  21.65
  19.99
  18.49
  17.14
  15.92
  14.83
  13.85
  12.96
  12.17
  11.45
  10.81
  10.22
  9.70
  9.23
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
Revenue, $m
  77
  95
  116
  139
  164
  193
  223
  256
  292
  330
  370
  412
  457
  504
  552
  603
  657
  712
  769
  829
  892
  956
  1,023
  1,093
  1,166
  1,241
  1,320
  1,401
  1,487
  1,575
  1,668
Variable operating expenses, $m
 
  77
  93
  112
  132
  155
  180
  206
  235
  265
  297
  331
  367
  405
  444
  485
  528
  572
  618
  667
  717
  768
  822
  879
  937
  998
  1,061
  1,126
  1,195
  1,266
  1,340
Fixed operating expenses, $m
 
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
Total operating expenses, $m
  75
  90
  107
  126
  146
  170
  195
  221
  251
  281
  314
  348
  384
  423
  462
  504
  547
  592
  638
  688
  738
  790
  844
  902
  961
  1,022
  1,086
  1,151
  1,221
  1,293
  1,367
Operating income, $m
  2
  5
  9
  13
  18
  23
  29
  35
  41
  48
  56
  64
  72
  81
  90
  100
  110
  120
  131
  142
  154
  166
  178
  192
  205
  220
  234
  250
  266
  283
  300
EBITDA, $m
  3
  6
  10
  15
  20
  25
  31
  38
  45
  52
  60
  69
  77
  87
  96
  107
  117
  128
  140
  151
  164
  177
  190
  204
  219
  234
  249
  266
  283
  301
  319
Interest expense (income), $m
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
Earnings before tax, $m
  1
  4
  7
  11
  15
  20
  24
  30
  36
  42
  48
  55
  62
  70
  78
  86
  95
  104
  113
  123
  133
  144
  155
  166
  178
  191
  204
  217
  231
  246
  261
Tax expense, $m
  0
  1
  2
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  45
  48
  51
  55
  59
  62
  66
  70
Net income, $m
  -1
  3
  5
  8
  11
  14
  18
  22
  26
  30
  35
  40
  46
  51
  57
  63
  69
  76
  83
  90
  97
  105
  113
  121
  130
  139
  149
  158
  169
  179
  190

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1
  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
  54
  65
  80
  96
  113
  133
  154
  176
  201
  227
  255
  284
  314
  347
  380
  415
  452
  490
  530
  571
  614
  658
  704
  752
  802
  854
  908
  965
  1,023
  1,084
  1,148
Adjusted assets (=assets-cash), $m
  53
  65
  80
  96
  113
  133
  154
  176
  201
  227
  255
  284
  314
  347
  380
  415
  452
  490
  530
  571
  614
  658
  704
  752
  802
  854
  908
  965
  1,023
  1,084
  1,148
Revenue / Adjusted assets
  1.453
  1.462
  1.450
  1.448
  1.451
  1.451
  1.448
  1.455
  1.453
  1.454
  1.451
  1.451
  1.455
  1.452
  1.453
  1.453
  1.454
  1.453
  1.451
  1.452
  1.453
  1.453
  1.453
  1.453
  1.454
  1.453
  1.454
  1.452
  1.454
  1.453
  1.453
Average production assets, $m
  8
  9
  11
  13
  16
  19
  22
  25
  28
  32
  36
  40
  44
  49
  54
  59
  64
  69
  75
  80
  86
  93
  99
  106
  113
  120
  128
  136
  144
  153
  162
Working capital, $m
  32
  38
  47
  56
  66
  78
  90
  103
  118
  133
  149
  166
  184
  203
  223
  243
  265
  287
  310
  334
  359
  385
  412
  441
  470
  500
  532
  565
  599
  635
  672
Total debt, $m
  35
  42
  55
  69
  85
  102
  121
  142
  164
  187
  212
  238
  266
  295
  325
  357
  390
  424
  460
  497
  535
  575
  617
  660
  705
  752
  800
  851
  904
  959
  1,016
Total liabilities, $m
  52
  59
  72
  86
  102
  119
  138
  159
  181
  204
  229
  255
  283
  312
  342
  374
  407
  441
  477
  514
  552
  592
  634
  677
  722
  769
  817
  868
  921
  976
  1,033
Total equity, $m
  2
  7
  8
  10
  11
  13
  15
  18
  20
  23
  25
  28
  31
  35
  38
  42
  45
  49
  53
  57
  61
  66
  70
  75
  80
  85
  91
  96
  102
  108
  115
Total liabilities and equity, $m
  54
  66
  80
  96
  113
  132
  153
  177
  201
  227
  254
  283
  314
  347
  380
  416
  452
  490
  530
  571
  613
  658
  704
  752
  802
  854
  908
  964
  1,023
  1,084
  1,148
Debt-to-equity ratio
  17.500
  6.400
  6.860
  7.220
  7.500
  7.720
  7.890
  8.040
  8.150
  8.250
  8.330
  8.400
  8.460
  8.510
  8.550
  8.590
  8.620
  8.650
  8.680
  8.700
  8.720
  8.740
  8.760
  8.770
  8.790
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
Adjusted equity ratio
  0.019
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1
  3
  5
  8
  11
  14
  18
  22
  26
  30
  35
  40
  46
  51
  57
  63
  69
  76
  83
  90
  97
  105
  113
  121
  130
  139
  149
  158
  169
  179
  190
Depreciation, amort., depletion, $m
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
Funds from operations, $m
  -7
  4
  7
  10
  13
  17
  21
  25
  29
  34
  40
  45
  51
  57
  63
  70
  77
  84
  92
  99
  108
  116
  125
  134
  143
  153
  164
  174
  186
  197
  209
Change in working capital, $m
  -5
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
Cash from operations, $m
  -2
  -3
  -2
  0
  3
  5
  8
  11
  15
  19
  23
  28
  33
  38
  44
  49
  55
  62
  68
  75
  82
  90
  98
  106
  114
  123
  132
  141
  151
  161
  172
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
New CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -20
  -3
  -3
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -12
  -14
  -15
  -15
  -16
  -18
  -19
  -19
  -20
  -22
  -23
  -24
  -26
  -27
Free cash flow, $m
  -22
  -6
  -5
  -3
  -1
  1
  3
  6
  9
  12
  16
  20
  24
  28
  33
  38
  43
  49
  55
  61
  67
  73
  80
  87
  95
  102
  110
  118
  127
  136
  145
Issuance/(repayment) of debt, $m
  21
  7
  13
  14
  16
  17
  19
  21
  22
  23
  25
  26
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
Issuance/(repurchase) of shares, $m
  0
  3
  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  
  21
  10
  13
  14
  16
  17
  19
  21
  22
  23
  25
  26
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  57
Total cash flow (excl. dividends), $m
  -1
  4
  8
  11
  14
  18
  22
  26
  31
  35
  41
  46
  51
  57
  63
  70
  76
  83
  90
  98
  105
  114
  122
  131
  140
  149
  159
  169
  180
  191
  202
Retained Cash Flow (-), $m
  17
  -6
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
Prev. year cash balance distribution, $m
 
  1
  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
 
  -1
  7
  9
  13
  16
  20
  24
  28
  33
  38
  43
  48
  54
  60
  66
  73
  79
  86
  94
  101
  109
  117
  126
  135
  144
  153
  163
  174
  185
  196
Discount rate, %
 
  13.70
  14.39
  15.10
  15.86
  16.65
  17.49
  18.36
  19.28
  20.24
  21.25
  22.32
  23.43
  24.60
  25.83
  27.13
  28.48
  29.91
  31.40
  32.97
  34.62
  36.35
  38.17
  40.08
  42.08
  44.18
  46.39
  48.71
  51.15
  53.71
  56.39
PV of cash for distribution, $m
 
  -1
  5
  6
  7
  7
  8
  7
  7
  6
  5
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
  78.3
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  78.3
  78.3
  78.3
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  78.3

Castle Brands Inc. develops and markets premium and super premium brands in the beverage alcohol categories. The Company is engaged in the sale of premium beverage alcohol. Its beverage alcohol categories include rum, whiskey, liqueurs, vodka and tequila. Its brands include Gosling's rum, Gosling's Stormy Ginger Beer, Gosling's Dark 'n Stormy ready-to-drink cocktail, Jefferson's bourbon, Jefferson's Reserve, Jefferson's Ocean Aged at Sea, Jefferson's Wine Finish Collection, Jefferson's The Manhattan: Barrel Finished Cocktail, Jefferson's Chef's Collaboration, Jefferson's Wood Experiment, Jefferson's Presidential Select, Jefferson's Rye whiskey, Pallini liqueurs, Clontarf Irish whiskey, Knappogue Castle Whiskey, Brady's Irish Cream, Boru vodka, Tierras tequila, Celtic Honey liqueur and Gozio amaretto. It has operations in two geographic areas: International and the United States. The Company distributes its products in all 50 states of the United States and the District of Columbia.

FINANCIAL RATIOS  of  Castle Brands (ROX)

Valuation Ratios
P/E Ratio -187.4
Price to Sales 2.4
Price to Book 93.7
Price to Tangible Book
Price to Cash Flow -93.7
Price to Free Cash Flow -93.7
Growth Rates
Sales Growth Rate 6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 1750%
Total Debt to Equity 1750%
Interest Coverage 2
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -3.5%
Return On Total Capital -2.9%
Ret/ On T. Cap. - 3 Yr. Avg. -8.6%
Return On Equity -9.5%
Return On Equity - 3 Yr. Avg. -15.6%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 41.6%
Gross Margin - 3 Yr. Avg. 40.1%
EBITDA Margin 3.9%
EBITDA Margin - 3 Yr. Avg. 2.2%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin 1.3%
Pre-Tax Margin - 3 Yr. Avg. -0.7%
Net Profit Margin -1.3%
Net Profit Margin - 3 Yr. Avg. -4.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -16.7%
Payout Ratio 0%

ROX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ROX stock intrinsic value calculation we used $77 million for the last fiscal year's total revenue generated by Castle Brands. The default revenue input number comes from 2017 income statement of Castle Brands. 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 ROX stock valuation model: a) initial revenue growth rate of 23.5% 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 13.7%, whose default value for ROX is calculated based on our internal credit rating of Castle Brands, 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 Castle Brands.
    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 ROX stock the variable cost ratio is equal to 80.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13 million in the base year in the intrinsic value calculation for ROX 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 4.1% for Castle Brands.

Corporate tax rate of 27% is the nominal tax rate for Castle Brands. 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 ROX 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 ROX are equal to 9.7%.

Life of production assets of 8.5 years is the average useful life of capital assets used in Castle Brands 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 ROX is equal to 40.3%. 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 - $2 million for Castle Brands - 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 164.306 million for Castle Brands 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 Castle Brands at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Castle Brands posts 2Q loss   [Nov-09-17 07:35PM  Associated Press]
▶ Castle Brands reports 1Q loss   [12:33AM  Associated Press]
▶ ETFs with exposure to Castle Brands, Inc. : July 7, 2017   [Jul-07-17 03:27PM  Capital Cube]
▶ ETFs with exposure to Castle Brands, Inc. : June 26, 2017   [Jun-26-17 04:48PM  Capital Cube]
▶ Company News for June 16, 2017   [10:11AM  Zacks]
▶ Castle Brands posts 4Q profit   [Jun-14-17 05:02PM  Associated Press]
▶ ETFs with exposure to Castle Brands, Inc. : April 5, 2017   [Apr-05-17 05:23PM  Capital Cube]
▶ Robix Announces Grant of Options   [Oct-12-16 06:34PM  GlobeNewswire]
Financial statements of ROX
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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