Intrinsic value of Superior Uniform Group - SGC

Previous Close

$23.70

  Intrinsic Value

$10.03

stock screener

  Rating & Target

str. sell

-58%

Previous close

$23.70

 
Intrinsic value

$10.03

 
Up/down potential

-58%

 
Rating

str. sell

We calculate the intrinsic value of SGC 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 0.4

 

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, %
  20.48
  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
  253
  258
  264
  271
  278
  287
  296
  306
  317
  329
  341
  355
  369
  385
  401
  418
  437
  456
  477
  498
  521
  545
  571
  598
  626
  656
  687
  720
  755
  791
  830
Variable operating expenses, $m
 
  235
  240
  246
  253
  261
  269
  278
  288
  299
  310
  321
  334
  348
  363
  378
  395
  413
  431
  451
  471
  493
  516
  541
  566
  593
  622
  651
  683
  716
  751
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
  232
  235
  240
  246
  253
  261
  269
  278
  288
  299
  310
  321
  334
  348
  363
  378
  395
  413
  431
  451
  471
  493
  516
  541
  566
  593
  622
  651
  683
  716
  751
Operating income, $m
  21
  24
  24
  25
  25
  26
  27
  28
  29
  30
  31
  34
  35
  37
  38
  40
  42
  43
  45
  48
  50
  52
  54
  57
  60
  63
  66
  69
  72
  75
  79
EBITDA, $m
  26
  29
  30
  30
  31
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
Interest expense (income), $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
Earnings before tax, $m
  20
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  32
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  68
  72
Tax expense, $m
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
Net income, $m
  15
  16
  17
  17
  17
  18
  19
  19
  20
  21
  21
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52

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
  197
  197
  201
  207
  212
  219
  226
  234
  242
  251
  260
  271
  282
  293
  306
  319
  333
  348
  364
  380
  398
  416
  435
  456
  477
  500
  524
  549
  576
  604
  633
Adjusted assets (=assets-cash), $m
  193
  197
  201
  207
  212
  219
  226
  234
  242
  251
  260
  271
  282
  293
  306
  319
  333
  348
  364
  380
  398
  416
  435
  456
  477
  500
  524
  549
  576
  604
  633
Revenue / Adjusted assets
  1.311
  1.310
  1.313
  1.309
  1.311
  1.311
  1.310
  1.308
  1.310
  1.311
  1.312
  1.310
  1.309
  1.314
  1.310
  1.310
  1.312
  1.310
  1.310
  1.311
  1.309
  1.310
  1.313
  1.311
  1.312
  1.312
  1.311
  1.311
  1.311
  1.310
  1.311
Average production assets, $m
  44
  44
  45
  47
  48
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
Working capital, $m
  93
  97
  99
  102
  104
  108
  111
  115
  119
  123
  128
  133
  139
  144
  150
  157
  164
  171
  179
  187
  195
  204
  214
  224
  235
  246
  258
  270
  283
  297
  311
Total debt, $m
  42
  40
  42
  44
  46
  49
  52
  55
  59
  63
  67
  71
  76
  81
  86
  92
  98
  104
  111
  118
  125
  133
  141
  150
  159
  169
  179
  189
  201
  213
  225
Total liabilities, $m
  86
  84
  86
  88
  90
  93
  96
  99
  103
  107
  111
  115
  120
  125
  130
  136
  142
  148
  155
  162
  169
  177
  185
  194
  203
  213
  223
  233
  245
  257
  269
Total equity, $m
  111
  113
  116
  119
  122
  126
  130
  134
  139
  144
  150
  156
  162
  169
  176
  183
  192
  200
  209
  219
  229
  239
  250
  262
  275
  288
  301
  316
  331
  347
  364
Total liabilities and equity, $m
  197
  197
  202
  207
  212
  219
  226
  233
  242
  251
  261
  271
  282
  294
  306
  319
  334
  348
  364
  381
  398
  416
  435
  456
  478
  501
  524
  549
  576
  604
  633
Debt-to-equity ratio
  0.378
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.580
  0.590
  0.590
  0.600
  0.610
  0.610
  0.620
Adjusted equity ratio
  0.554
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  16
  17
  17
  17
  18
  19
  19
  20
  21
  21
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
Depreciation, amort., depletion, $m
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Funds from operations, $m
  5
  22
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  39
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
Change in working capital, $m
  -7
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Cash from operations, $m
  12
  20
  20
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  26
  26
  27
  29
  30
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
New CAPEX, $m
  -7
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
Cash from investing activities, $m
  -23
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -18
  -19
  -20
Free cash flow, $m
  -11
  15
  15
  14
  15
  15
  15
  15
  15
  15
  16
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
Issuance/(repayment) of debt, $m
  18
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  18
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Total cash flow (excl. dividends), $m
  8
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
  41
  42
  44
Retained Cash Flow (-), $m
  -18
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
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
 
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  22
  23
  24
  25
  26
  28
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  13
  13
  12
  11
  10
  10
  9
  8
  8
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Superior Uniform Group, Inc. (Superior) manufactures and sells a range of uniforms, corporate identity apparel, career apparel and accessories for the medical and health fields, as well as for the industrial, commercial, leisure and public safety markets. Superior operates through two segments: Uniforms and Related Products, and Remote Staffing Solutions. The Uniforms and Related Products segment consists of the sale of uniforms and related items. Its principal products are uniforms and service apparel, and related products for personnel of hospitals and health facilities; hotels, commercial buildings, residential buildings and food service facilities; retail stores; general and special purpose industrial uses; commercial enterprises, such as career apparel for banks and airlines; public and private safety and security organizations, and for miscellaneous service uses. The Remote Staffing Solutions segment consists of sales of staffing solutions.

FINANCIAL RATIOS  of  Superior Uniform Group (SGC)

Valuation Ratios
P/E Ratio 22.9
Price to Sales 1.4
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 28.7
Price to Free Cash Flow 68.8
Growth Rates
Sales Growth Rate 20.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.5%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 32.4%
Total Debt to Equity 37.8%
Interest Coverage 21
Management Effectiveness
Return On Assets 9%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 11.1%
Ret/ On T. Cap. - 3 Yr. Avg. 11.2%
Return On Equity 14.7%
Return On Equity - 3 Yr. Avg. 14.7%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 34.4%
Gross Margin - 3 Yr. Avg. 34.5%
EBITDA Margin 10.3%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin 8.3%
Oper. Margin - 3 Yr. Avg. 8.8%
Pre-Tax Margin 7.9%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 5.9%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 31.8%
Payout Ratio 33.3%

SGC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SGC stock intrinsic value calculation we used $253 million for the last fiscal year's total revenue generated by Superior Uniform Group. The default revenue input number comes from 2016 income statement of Superior Uniform Group. 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 SGC 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 4.7%, whose default value for SGC is calculated based on our internal credit rating of Superior Uniform Group, 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 Superior Uniform Group.
    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 SGC stock the variable cost ratio is equal to 90.9%.

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 SGC 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 Superior Uniform Group.

Corporate tax rate of 27% is the nominal tax rate for Superior Uniform Group. 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 SGC 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 SGC are equal to 17.2%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Superior Uniform Group 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 SGC is equal to 37.5%. 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 - $111 million for Superior Uniform Group - 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 14.772 million for Superior Uniform Group 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 Superior Uniform Group at the current share price and the inputted number of shares is $0.4 billion.

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▶ Superior Uniform posts 2Q profit   [Jul-27-17 02:53PM  Associated Press]
▶ Today's Bell Ringer, May 24, 2017   [May-24-17 09:15AM  CNBC Videos]
▶ Superior Uniform posts 1Q profit   [Apr-27-17 09:54AM  Associated Press]
▶ Alan Schwartz to Retire from Superior Uniform Group®   [Mar-15-17 11:44AM  GlobeNewswire]
▶ Superior Uniform posts 4Q profit   [09:41AM  Associated Press]
▶ Term Sheet Friday, May 7   [10:08AM  at Fortune]
Financial statements of SGC
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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