Intrinsic value of Superior Uniform Group - SGC

Previous Close

$22.20

  Intrinsic Value

$9.49

stock screener

  Rating & Target

str. sell

-57%

  Value-price divergence*

-67%

Previous close

$22.20

 
Intrinsic value

$9.49

 
Up/down potential

-57%

 
Rating

str. sell

 
Value-price divergence*

-67%

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

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 0.3

 

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
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  253
  266
  280
  294
  310
  325
  342
  360
  378
  397
  417
  438
  461
  484
  508
  534
  561
  589
  619
  650
  683
  717
  753
  791
  830
  872
  916
  962
  1,010
  1,060
  1,114
Variable operating expenses, $m
 
  242
  254
  267
  281
  295
  311
  326
  343
  360
  379
  397
  417
  438
  460
  483
  507
  533
  560
  588
  618
  649
  681
  715
  751
  789
  828
  870
  914
  959
  1,007
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
  242
  254
  267
  281
  295
  311
  326
  343
  360
  379
  397
  417
  438
  460
  483
  507
  533
  560
  588
  618
  649
  681
  715
  751
  789
  828
  870
  914
  959
  1,007
Operating income, $m
  21
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
  96
  101
  106
EBITDA, $m
  26
  30
  31
  33
  35
  37
  38
  40
  42
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  77
  80
  84
  89
  93
  98
  103
  108
  113
  119
  125
Interest expense (income), $m
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
Earnings before tax, $m
  20
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  39
  40
  42
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91
  96
Tax expense, $m
  5
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  25
  26
Net income, $m
  15
  17
  18
  18
  19
  20
  21
  23
  24
  25
  26
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  52
  55
  58
  60
  63
  67
  70

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
  203
  214
  225
  236
  248
  261
  274
  288
  303
  318
  334
  351
  369
  388
  407
  428
  449
  472
  496
  521
  547
  574
  603
  633
  665
  699
  734
  770
  809
  849
Adjusted assets (=assets-cash), $m
  193
  203
  214
  225
  236
  248
  261
  274
  288
  303
  318
  334
  351
  369
  388
  407
  428
  449
  472
  496
  521
  547
  574
  603
  633
  665
  699
  734
  770
  809
  849
Revenue / Adjusted assets
  1.311
  1.310
  1.308
  1.307
  1.314
  1.310
  1.310
  1.314
  1.313
  1.310
  1.311
  1.311
  1.313
  1.312
  1.309
  1.312
  1.311
  1.312
  1.311
  1.310
  1.311
  1.311
  1.312
  1.312
  1.311
  1.311
  1.310
  1.311
  1.312
  1.310
  1.312
Average production assets, $m
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  72
  75
  79
  83
  87
  92
  96
  101
  106
  112
  117
  123
  129
  136
  143
  150
  158
  165
  174
  182
  192
Working capital, $m
  93
  100
  105
  110
  116
  122
  128
  135
  142
  149
  156
  164
  173
  181
  191
  200
  210
  221
  232
  244
  256
  269
  282
  297
  311
  327
  343
  361
  379
  398
  418
Total debt, $m
  42
  42
  47
  51
  56
  61
  67
  73
  78
  85
  91
  98
  105
  113
  121
  129
  138
  147
  157
  167
  177
  188
  200
  212
  225
  239
  253
  268
  283
  300
  317
Total liabilities, $m
  86
  86
  91
  95
  100
  105
  111
  117
  122
  129
  135
  142
  149
  157
  165
  173
  182
  191
  201
  211
  221
  232
  244
  256
  269
  283
  297
  312
  327
  344
  361
Total equity, $m
  111
  117
  123
  129
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
  258
  271
  285
  299
  314
  330
  347
  364
  382
  402
  422
  443
  465
  488
Total liabilities and equity, $m
  197
  203
  214
  224
  236
  248
  261
  275
  288
  303
  318
  334
  351
  369
  388
  407
  428
  449
  472
  496
  520
  546
  574
  603
  633
  665
  699
  734
  770
  809
  849
Debt-to-equity ratio
  0.378
  0.360
  0.380
  0.400
  0.420
  0.430
  0.450
  0.460
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.620
  0.630
  0.630
  0.640
  0.640
  0.650
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
  17
  18
  18
  19
  20
  21
  23
  24
  25
  26
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  52
  55
  58
  60
  63
  67
  70
Depreciation, amort., depletion, $m
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
Funds from operations, $m
  5
  22
  23
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  80
  84
  89
Change in working capital, $m
  -7
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Cash from operations, $m
  12
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  57
  59
  62
  65
  69
Maintenance CAPEX, $m
  0
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
New CAPEX, $m
  -7
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -23
  -6
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -17
  -18
  -18
  -20
  -20
  -21
  -23
  -23
  -24
  -26
  -27
Free cash flow, $m
  -11
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  42
Issuance/(repayment) of debt, $m
  18
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
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
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
Total cash flow (excl. dividends), $m
  8
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
Retained Cash Flow (-), $m
  -18
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
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
 
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  36
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
 
  9
  9
  9
  9
  9
  8
  8
  8
  7
  7
  6
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  2
  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
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Superior Uniform Group, Inc. manufactures and sells various apparel and accessories in the United States. The company operates through two segments, Uniforms and Related Products, and Remote Staffing Solutions. The Uniforms and Related Products segment manufactures and sells a range of uniforms, corporate identity apparel, career apparel, and accessories for the 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; public and private safety and security organizations; and miscellaneous service uses. It also provides various products directly related to uniforms and service apparel; and industrial laundry bags for linen suppliers and industrial launderers. This segment sells its products under the Fashion Seal Healthcare, HPI Direct, Superior I.D., Worklon, and UniVogue brand names. The Remote Staffing Solutions segment provides multilingual telemarketing and office support solutions through the recruitment and employment of qualified English-speaking agents. The company was formerly known as Superior Surgical Mfg. Co., Inc. and changed its name to Superior Uniform Group, Inc. in 1998. Superior Uniform Group, Inc. was founded in 1920 and is headquartered in Seminole, Florida.

FINANCIAL RATIOS  of  Superior Uniform Group (SGC)

Valuation Ratios
P/E Ratio 21.5
Price to Sales 1.3
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 26.8
Price to Free Cash Flow 64.4
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 5.2% 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 14.274 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 $0.3 billion.

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COMPANY NEWS

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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]
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Stock chart of SGC 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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