Intrinsic value of Diversified Restaurant Holdings - SAUC

Previous Close

$2.24

  Intrinsic Value

$0.56

stock screener

  Rating & Target

str. sell

-75%

  Value-price divergence*

0%

Previous close

$2.24

 
Intrinsic value

$0.56

 
Up/down potential

-75%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of SAUC 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 0.1

 

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, %
  15.17
  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
  4.87
Revenue, $m
  167
  171
  175
  180
  186
  192
  198
  205
  213
  221
  230
  239
  249
  260
  271
  283
  295
  308
  322
  337
  353
  369
  387
  405
  424
  445
  466
  489
  512
  537
  563
Variable operating expenses, $m
 
  132
  135
  139
  143
  147
  152
  157
  163
  169
  175
  177
  185
  193
  201
  210
  219
  229
  239
  250
  262
  274
  287
  301
  315
  330
  346
  363
  380
  399
  418
Fixed operating expenses, $m
 
  32
  33
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  50
  51
  52
  53
  55
  56
  57
  59
  60
  62
  63
  65
Total operating expenses, $m
  159
  164
  168
  172
  177
  182
  188
  194
  201
  208
  215
  218
  227
  236
  245
  255
  265
  276
  287
  300
  313
  326
  340
  356
  371
  387
  405
  423
  442
  462
  483
Operating income, $m
  7
  7
  8
  8
  9
  9
  10
  11
  12
  13
  15
  21
  23
  24
  26
  28
  30
  32
  35
  37
  40
  43
  46
  50
  53
  57
  61
  66
  70
  75
  80
EBITDA, $m
  22
  18
  19
  20
  20
  21
  22
  24
  25
  26
  28
  30
  32
  34
  36
  38
  41
  44
  46
  50
  53
  57
  60
  64
  69
  73
  78
  83
  89
  95
  101
Interest expense (income), $m
  6
  6
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
Earnings before tax, $m
  1
  1
  2
  3
  3
  4
  4
  5
  6
  7
  8
  14
  15
  16
  18
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  50
  54
  58
  62
Tax expense, $m
  -3
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
Net income, $m
  -6
  1
  2
  2
  2
  3
  3
  4
  4
  5
  6
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  37
  39
  42
  45

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4
  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
  133
  136
  140
  143
  148
  153
  158
  163
  169
  176
  183
  190
  198
  207
  216
  225
  235
  246
  257
  269
  281
  294
  308
  323
  338
  354
  371
  389
  408
  428
  448
Adjusted assets (=assets-cash), $m
  129
  136
  140
  143
  148
  153
  158
  163
  169
  176
  183
  190
  198
  207
  216
  225
  235
  246
  257
  269
  281
  294
  308
  323
  338
  354
  371
  389
  408
  428
  448
Revenue / Adjusted assets
  1.295
  1.257
  1.250
  1.259
  1.257
  1.255
  1.253
  1.258
  1.260
  1.256
  1.257
  1.258
  1.258
  1.256
  1.255
  1.258
  1.255
  1.252
  1.253
  1.253
  1.256
  1.255
  1.256
  1.254
  1.254
  1.257
  1.256
  1.257
  1.255
  1.255
  1.257
Average production assets, $m
  61
  62
  63
  65
  67
  69
  72
  74
  77
  80
  83
  87
  90
  94
  98
  102
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  204
Working capital, $m
  -14
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Total debt, $m
  121
  106
  110
  113
  117
  121
  126
  131
  136
  142
  149
  155
  162
  170
  178
  186
  195
  205
  215
  226
  237
  249
  261
  274
  288
  303
  318
  334
  351
  369
  388
Total liabilities, $m
  137
  122
  126
  129
  133
  137
  142
  147
  152
  158
  165
  171
  178
  186
  194
  202
  211
  221
  231
  242
  253
  265
  277
  290
  304
  319
  334
  350
  367
  385
  404
Total equity, $m
  -4
  14
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
Total liabilities and equity, $m
  133
  136
  140
  143
  148
  152
  158
  163
  169
  176
  183
  190
  198
  207
  216
  224
  234
  246
  257
  269
  281
  294
  308
  322
  338
  354
  371
  389
  408
  428
  449
Debt-to-equity ratio
  -30.250
  7.820
  7.850
  7.880
  7.920
  7.950
  7.990
  8.020
  8.060
  8.090
  8.130
  8.160
  8.190
  8.230
  8.260
  8.290
  8.320
  8.350
  8.380
  8.400
  8.430
  8.460
  8.480
  8.500
  8.530
  8.550
  8.570
  8.590
  8.610
  8.630
  8.640
Adjusted equity ratio
  -0.062
  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
  -6
  1
  2
  2
  2
  3
  3
  4
  4
  5
  6
  10
  11
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  34
  37
  39
  42
  45
Depreciation, amort., depletion, $m
  15
  11
  11
  12
  12
  12
  12
  12
  13
  13
  13
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
Funds from operations, $m
  11
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  42
  45
  48
  51
  54
  58
  62
  66
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  11
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  22
  23
  25
  27
  28
  30
  32
  35
  37
  40
  42
  45
  48
  52
  55
  59
  63
  67
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
New CAPEX, $m
  -13
  -1
  -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
  -9
  -9
  -9
Cash from investing activities, $m
  -13
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -13
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -22
  -24
  -25
  -27
  -28
  -28
Free cash flow, $m
  -2
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
Issuance/(repayment) of debt, $m
  -5
  -15
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
Issuance/(repurchase) of shares, $m
  0
  17
  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  
  -5
  2
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
Total cash flow (excl. dividends), $m
  -7
  7
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  35
  38
  40
  43
  46
  50
  53
  57
Retained Cash Flow (-), $m
  21
  -18
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Prev. year cash balance distribution, $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 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
 
  -11
  8
  9
  9
  10
  10
  11
  12
  13
  14
  13
  14
  16
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  36
  39
  41
  44
  48
  51
  55
Discount rate, %
 
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.68
  21.72
  22.80
  23.94
  25.14
  26.40
  27.72
  29.10
  30.56
  32.09
  33.69
  35.38
  37.15
  39.00
  40.95
  43.00
  45.15
  47.41
  49.78
  52.27
  54.88
  57.63
  60.51
PV of cash for distribution, $m
 
  -9
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Diversified Restaurant Holdings, Inc. operates as a restaurant company in the United States. It operates Buffalo Wild Wings Grill & Bar franchised restaurants, which primarily offer chicken wings, boneless wings, and other items, including chicken tenders, Wild Flatbreads, popcorn shrimps, specialty hamburgers and sandwiches, wraps, soft tacos, appetizers, and salads. As of June 21, 2016, it operated 64 Buffalo Wild Wings Grill & Bar franchised restaurants in Florida, Illinois, Indiana, Michigan, and Missouri. The company was founded in 1999 and is headquartered in Southfield, Michigan.

FINANCIAL RATIOS  of  Diversified Restaurant Holdings (SAUC)

Valuation Ratios
P/E Ratio -9.9
Price to Sales 0.4
Price to Book -14.9
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow -29.8
Growth Rates
Sales Growth Rate 15.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35%
Cap. Spend. - 3 Yr. Gr. Rate -12.3%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity -2750%
Total Debt to Equity -3025%
Interest Coverage 1
Management Effectiveness
Return On Assets 12%
Ret/ On Assets - 3 Yr. Avg. -0.1%
Return On Total Capital -4.6%
Ret/ On T. Cap. - 3 Yr. Avg. -6.4%
Return On Equity -92.3%
Return On Equity - 3 Yr. Avg. -53.1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 71.9%
Gross Margin - 3 Yr. Avg. 71.6%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 9%
Operating Margin 4.8%
Oper. Margin - 3 Yr. Avg. 2%
Pre-Tax Margin 0.6%
Pre-Tax Margin - 3 Yr. Avg. -0.8%
Net Profit Margin -3.6%
Net Profit Margin - 3 Yr. Avg. -5.1%
Effective Tax Rate -300%
Eff/ Tax Rate - 3 Yr. Avg. -77.8%
Payout Ratio -33.3%

SAUC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SAUC stock intrinsic value calculation we used $167 million for the last fiscal year's total revenue generated by Diversified Restaurant Holdings. The default revenue input number comes from 2016 income statement of Diversified Restaurant Holdings. 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 SAUC stock valuation model: a) initial revenue growth rate of 2.3% 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 14.7%, whose default value for SAUC is calculated based on our internal credit rating of Diversified Restaurant Holdings, 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 Diversified Restaurant Holdings.
    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 SAUC stock the variable cost ratio is equal to 77.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $31 million in the base year in the intrinsic value calculation for SAUC 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 4.9% for Diversified Restaurant Holdings.

Corporate tax rate of 27% is the nominal tax rate for Diversified Restaurant Holdings. 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 SAUC 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 SAUC are equal to 36.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Diversified Restaurant Holdings 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 SAUC is equal to -4.2%. 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 - $-4 million for Diversified Restaurant Holdings - 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 26.525 million for Diversified Restaurant Holdings 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 Diversified Restaurant Holdings at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
DAVE Famous Dave 4.25 0.74  str.sell
BWLD Buffalo Wild W 108.70 89.32  sell
RRGB Red Robin Gour 59.30 32.95  sell
EAT Brinker Intern 33.83 12.13  str.sell
BJRI BJ's Resta 32.30 44.06  buy
CHUY Chuy's Hol 20.20 15.82  sell
TXRH Texas Roadhous 48.58 38.34  sell
NDLS Noodles Cl A 3.75 0.19  str.sell
DRI Darden Restaur 83.99 25.54  str.sell

COMPANY NEWS

▶ Diversified Restaurant reports 2Q loss   [Aug-05-17 01:13AM  Associated Press]
▶ Diversified Restaurant posts 1Q profit   [May-04-17 07:21PM  Associated Press]
▶ Diversified Restaurant reports 4Q loss   [06:44AM  Associated Press]
▶ Diversified Restaurant Holdings to Present at NobleCon13   [Jan-17-17 04:15PM  GlobeNewswire]
Stock chart of SAUC Financial statements of SAUC
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.