Intrinsic value of Sears Holdings - SHLD

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$7.78

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$7.78

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of SHLD 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 0.8

 

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, %
  -11.96
  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
  22,138
  22,581
  23,100
  23,694
  24,360
  25,099
  25,909
  26,792
  27,747
  28,776
  29,880
  31,061
  32,322
  33,664
  35,091
  36,605
  38,209
  39,907
  41,702
  43,600
  45,603
  47,717
  49,946
  52,296
  54,772
  57,379
  60,124
  63,014
  66,055
  69,254
  72,619
Variable operating expenses, $m
 
  15,241
  15,591
  15,991
  16,441
  16,938
  17,484
  18,079
  18,722
  19,416
  20,160
  20,929
  21,778
  22,683
  23,644
  24,664
  25,744
  26,889
  28,098
  29,377
  30,727
  32,151
  33,653
  35,236
  36,904
  38,661
  40,511
  42,458
  44,507
  46,662
  48,929
Fixed operating expenses, $m
 
  9,640
  9,881
  10,128
  10,381
  10,641
  10,907
  11,180
  11,459
  11,746
  12,039
  12,340
  12,649
  12,965
  13,289
  13,621
  13,962
  14,311
  14,669
  15,035
  15,411
  15,796
  16,191
  16,596
  17,011
  17,436
  17,872
  18,319
  18,777
  19,246
  19,728
Total operating expenses, $m
  24,116
  24,881
  25,472
  26,119
  26,822
  27,579
  28,391
  29,259
  30,181
  31,162
  32,199
  33,269
  34,427
  35,648
  36,933
  38,285
  39,706
  41,200
  42,767
  44,412
  46,138
  47,947
  49,844
  51,832
  53,915
  56,097
  58,383
  60,777
  63,284
  65,908
  68,657
Operating income, $m
  -1,978
  -2,301
  -2,372
  -2,426
  -2,462
  -2,480
  -2,482
  -2,467
  -2,435
  -2,385
  -2,319
  -2,207
  -2,105
  -1,983
  -1,842
  -1,680
  -1,498
  -1,293
  -1,065
  -812
  -535
  -230
  102
  464
  856
  1,282
  1,741
  2,237
  2,771
  3,345
  3,962
EBITDA, $m
  -1,603
  -1,916
  -1,979
  -2,023
  -2,049
  -2,056
  -2,044
  -2,015
  -1,968
  -1,902
  -1,818
  -1,715
  -1,592
  -1,450
  -1,286
  -1,100
  -892
  -660
  -404
  -121
  188
  526
  893
  1,292
  1,724
  2,191
  2,694
  3,236
  3,818
  4,443
  5,113
Interest expense (income), $m
  275
  299
  -53
  -38
  -22
  -3
  18
  41
  66
  94
  123
  154
  188
  224
  262
  302
  345
  391
  439
  490
  544
  601
  661
  724
  791
  861
  936
  1,014
  1,096
  1,182
  1,273
Earnings before tax, $m
  -2,395
  -2,599
  -2,319
  -2,387
  -2,440
  -2,478
  -2,500
  -2,508
  -2,501
  -2,479
  -2,442
  -2,362
  -2,293
  -2,207
  -2,104
  -1,983
  -1,843
  -1,683
  -1,504
  -1,303
  -1,079
  -831
  -559
  -261
  65
  420
  806
  1,224
  1,675
  2,163
  2,689
Tax expense, $m
  -174
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  18
  113
  218
  330
  452
  584
  726
Net income, $m
  -2,221
  -2,599
  -2,319
  -2,387
  -2,440
  -2,478
  -2,500
  -2,508
  -2,501
  -2,479
  -2,442
  -2,362
  -2,293
  -2,207
  -2,104
  -1,983
  -1,843
  -1,683
  -1,504
  -1,303
  -1,079
  -831
  -559
  -261
  48
  307
  588
  893
  1,223
  1,579
  1,963

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  286
  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
  9,362
  9,258
  9,471
  9,715
  9,988
  10,291
  10,623
  10,985
  11,376
  11,798
  12,251
  12,735
  13,252
  13,803
  14,387
  15,008
  15,666
  16,362
  17,098
  17,876
  18,697
  19,564
  20,478
  21,442
  22,457
  23,526
  24,651
  25,836
  27,083
  28,394
  29,774
Adjusted assets (=assets-cash), $m
  9,076
  9,258
  9,471
  9,715
  9,988
  10,291
  10,623
  10,985
  11,376
  11,798
  12,251
  12,735
  13,252
  13,803
  14,387
  15,008
  15,666
  16,362
  17,098
  17,876
  18,697
  19,564
  20,478
  21,442
  22,457
  23,526
  24,651
  25,836
  27,083
  28,394
  29,774
Revenue / Adjusted assets
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
  2.439
Average production assets, $m
  4,151
  4,223
  4,320
  4,431
  4,555
  4,693
  4,845
  5,010
  5,189
  5,381
  5,588
  5,808
  6,044
  6,295
  6,562
  6,845
  7,145
  7,463
  7,798
  8,153
  8,528
  8,923
  9,340
  9,779
  10,242
  10,730
  11,243
  11,784
  12,352
  12,950
  13,580
Working capital, $m
  315
  632
  647
  663
  682
  703
  725
  750
  777
  806
  837
  870
  905
  943
  983
  1,025
  1,070
  1,117
  1,168
  1,221
  1,277
  1,336
  1,398
  1,464
  1,534
  1,607
  1,683
  1,764
  1,850
  1,939
  2,033
Total debt, $m
  4,163
  -691
  -499
  -280
  -34
  239
  538
  863
  1,216
  1,595
  2,003
  2,439
  2,904
  3,399
  3,926
  4,484
  5,076
  5,703
  6,365
  7,065
  7,805
  8,585
  9,407
  10,274
  11,188
  12,150
  13,163
  14,229
  15,352
  16,532
  17,774
Total liabilities, $m
  13,186
  8,332
  8,524
  8,743
  8,989
  9,262
  9,561
  9,886
  10,239
  10,618
  11,026
  11,462
  11,927
  12,422
  12,949
  13,507
  14,099
  14,726
  15,388
  16,088
  16,828
  17,608
  18,430
  19,297
  20,211
  21,173
  22,186
  23,252
  24,375
  25,555
  26,797
Total equity, $m
  -3,824
  926
  947
  971
  999
  1,029
  1,062
  1,098
  1,138
  1,180
  1,225
  1,274
  1,325
  1,380
  1,439
  1,501
  1,567
  1,636
  1,710
  1,788
  1,870
  1,956
  2,048
  2,144
  2,246
  2,353
  2,465
  2,584
  2,708
  2,839
  2,977
Total liabilities and equity, $m
  9,362
  9,258
  9,471
  9,714
  9,988
  10,291
  10,623
  10,984
  11,377
  11,798
  12,251
  12,736
  13,252
  13,802
  14,388
  15,008
  15,666
  16,362
  17,098
  17,876
  18,698
  19,564
  20,478
  21,441
  22,457
  23,526
  24,651
  25,836
  27,083
  28,394
  29,774
Debt-to-equity ratio
  -1.089
  -0.750
  -0.530
  -0.290
  -0.030
  0.230
  0.510
  0.790
  1.070
  1.350
  1.630
  1.910
  2.190
  2.460
  2.730
  2.990
  3.240
  3.490
  3.720
  3.950
  4.170
  4.390
  4.590
  4.790
  4.980
  5.160
  5.340
  5.510
  5.670
  5.820
  5.970
Adjusted equity ratio
  -0.453
  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
  -2,221
  -2,599
  -2,319
  -2,387
  -2,440
  -2,478
  -2,500
  -2,508
  -2,501
  -2,479
  -2,442
  -2,362
  -2,293
  -2,207
  -2,104
  -1,983
  -1,843
  -1,683
  -1,504
  -1,303
  -1,079
  -831
  -559
  -261
  48
  307
  588
  893
  1,223
  1,579
  1,963
Depreciation, amort., depletion, $m
  375
  385
  393
  402
  413
  425
  437
  451
  467
  483
  500
  492
  512
  533
  556
  580
  606
  632
  661
  691
  723
  756
  792
  829
  868
  909
  953
  999
  1,047
  1,097
  1,151
Funds from operations, $m
  -548
  -2,215
  -1,926
  -1,985
  -2,027
  -2,053
  -2,063
  -2,057
  -2,034
  -1,996
  -1,941
  -1,869
  -1,780
  -1,673
  -1,547
  -1,402
  -1,237
  -1,051
  -843
  -612
  -356
  -75
  232
  568
  916
  1,216
  1,541
  1,892
  2,270
  2,677
  3,114
Change in working capital, $m
  833
  12
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  38
  40
  42
  45
  48
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
Cash from operations, $m
  -1,381
  -2,617
  -1,941
  -2,002
  -2,046
  -2,074
  -2,085
  -2,081
  -2,061
  -2,025
  -1,972
  -1,903
  -1,816
  -1,711
  -1,587
  -1,445
  -1,282
  -1,099
  -893
  -665
  -412
  -134
  170
  502
  846
  1,143
  1,464
  1,811
  2,185
  2,587
  3,019
Maintenance CAPEX, $m
  0
  -352
  -358
  -366
  -375
  -386
  -398
  -411
  -425
  -440
  -456
  -474
  -492
  -512
  -533
  -556
  -580
  -606
  -632
  -661
  -691
  -723
  -756
  -792
  -829
  -868
  -909
  -953
  -999
  -1,047
  -1,097
New CAPEX, $m
  -142
  -72
  -97
  -111
  -125
  -138
  -152
  -165
  -179
  -192
  -207
  -221
  -236
  -251
  -267
  -283
  -300
  -318
  -336
  -355
  -375
  -395
  -417
  -439
  -463
  -488
  -513
  -540
  -569
  -598
  -629
Cash from investing activities, $m
  244
  -424
  -455
  -477
  -500
  -524
  -550
  -576
  -604
  -632
  -663
  -695
  -728
  -763
  -800
  -839
  -880
  -924
  -968
  -1,016
  -1,066
  -1,118
  -1,173
  -1,231
  -1,292
  -1,356
  -1,422
  -1,493
  -1,568
  -1,645
  -1,726
Free cash flow, $m
  -1,137
  -3,040
  -2,396
  -2,479
  -2,546
  -2,598
  -2,635
  -2,657
  -2,664
  -2,657
  -2,635
  -2,597
  -2,544
  -2,474
  -2,388
  -2,284
  -2,162
  -2,022
  -1,861
  -1,680
  -1,478
  -1,252
  -1,003
  -729
  -446
  -213
  41
  318
  617
  942
  1,293
Issuance/(repayment) of debt, $m
  1,165
  -4,568
  192
  219
  246
  273
  299
  326
  352
  380
  408
  436
  465
  495
  526
  559
  592
  627
  663
  700
  739
  780
  823
  867
  914
  962
  1,013
  1,066
  1,122
  1,180
  1,242
Issuance/(repurchase) of shares, $m
  0
  12,358
  2,225
  2,284
  2,327
  2,356
  2,369
  2,367
  2,351
  2,320
  2,272
  2,209
  2,130
  2,034
  1,920
  1,788
  1,636
  1,465
  1,272
  1,058
  821
  559
  272
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,185
  7,790
  2,417
  2,503
  2,573
  2,629
  2,668
  2,693
  2,703
  2,700
  2,680
  2,645
  2,595
  2,529
  2,446
  2,347
  2,228
  2,092
  1,935
  1,758
  1,560
  1,339
  1,095
  867
  914
  962
  1,013
  1,066
  1,122
  1,180
  1,242
Total cash flow (excl. dividends), $m
  48
  -7,608
  -2,204
  -2,260
  -2,300
  -2,325
  -2,336
  -2,331
  -2,312
  -2,277
  -2,227
  -2,161
  -2,078
  -1,979
  -1,861
  -1,725
  -1,570
  -1,395
  -1,199
  -980
  -739
  -472
  -181
  138
  468
  750
  1,054
  1,384
  1,740
  2,122
  2,534
Retained Cash Flow (-), $m
  1,861
  -4,750
  -21
  -24
  -27
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -102
  -107
  -113
  -118
  -125
  -131
  -138
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
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  42
  367
  643
  942
  1,266
  1,615
  1,991
  2,396
Discount rate, %
 
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.65
  23.79
  24.98
  26.23
  27.54
  28.91
  30.36
  31.88
  33.47
  35.14
  36.90
  38.75
  40.68
  42.72
  44.85
  47.10
  49.45
  51.92
  54.52
  57.25
  60.11
  63.11
  66.27
PV of cash for 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
Current shareholders' claim on cash, %
  100
  50.0
  14.7
  4.3
  1.3
  0.4
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Sears Holdings Corporation operates as a retailer in the United States. It operates in two segments, Kmart and Sears Domestic. The Kmart segment operates retail stores that offer a range of products, including consumer electronics, seasonal merchandise, outdoor living, toys, lawn and garden equipment, food and consumables, and apparel; and in-store pharmacies. It provides merchandise under the Jaclyn Smith, Joe Boxer, and Alphaline labels; Sears brand products, such as Kenmore, Craftsman, and DieHard; and Kenmore-branded products. As of October 31, 2015, this segment operated approximately 952 Kmart stores. The Sears Domestic segment operates stores that provide appliances, consumer electronics/connected solutions, tools, sporting goods, outdoor living, lawn and garden equipment, apparel, footwear, jewelry, and accessories, as well as automotive services and products, such as tires, batteries, and home fashion products. It also offers appliances and services to commercial customers in the single-family residential construction/remodel, property management, multi-family new construction, and government/military sectors; appliance and plumbing fixtures to architects, designers, and new construction or remodeling customers; parts and repair services for appliances, lawn and garden equipment, consumer electronics, floor care products, and heating and cooling systems; and home improvement services, as well as protection agreements and product installation services. This segment provides merchandise under the Kenmore, Craftsman, DieHard, Covington, Canyon River Blues, Metaphor, Outdoor Life, Structure, and Apostrophe brands, as well as under the Roadhandler, Ty Pennington Style, and Alphaline brands. As of October 31, 2015, this segment operated 735 Sears stores. Sears Holdings Corporation was founded in 1899 and is based in Hoffman Estates, Illinois.

FINANCIAL RATIOS  of  Sears Holdings (SHLD)

Valuation Ratios
P/E Ratio -0.4
Price to Sales 0
Price to Book -0.2
Price to Tangible Book
Price to Cash Flow -0.6
Price to Free Cash Flow -0.5
Growth Rates
Sales Growth Rate -12%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -32.7%
Cap. Spend. - 3 Yr. Gr. Rate -15.5%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity -93.4%
Total Debt to Equity -108.9%
Interest Coverage -8
Management Effectiveness
Return On Assets -19%
Ret/ On Assets - 3 Yr. Avg. -11.9%
Return On Total Capital -328.6%
Ret/ On T. Cap. - 3 Yr. Avg. -141.9%
Return On Equity 76.8%
Return On Equity - 3 Yr. Avg. -90.9%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 22.2%
Gross Margin - 3 Yr. Avg. 22.9%
EBITDA Margin -7.9%
EBITDA Margin - 3 Yr. Avg. -4.5%
Operating Margin -8.9%
Oper. Margin - 3 Yr. Avg. -5.9%
Pre-Tax Margin -10.8%
Pre-Tax Margin - 3 Yr. Avg. -7.2%
Net Profit Margin -10%
Net Profit Margin - 3 Yr. Avg. -6.6%
Effective Tax Rate 7.3%
Eff/ Tax Rate - 3 Yr. Avg. 6.1%
Payout Ratio 0%

SHLD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SHLD stock intrinsic value calculation we used $22138 million for the last fiscal year's total revenue generated by Sears Holdings. The default revenue input number comes from 2017 income statement of Sears 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 SHLD 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 16.1%, whose default value for SHLD is calculated based on our internal credit rating of Sears 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 Sears 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 SHLD stock the variable cost ratio is equal to 67.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9405 million in the base year in the intrinsic value calculation for SHLD 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 7.7% for Sears Holdings.

Corporate tax rate of 27% is the nominal tax rate for Sears 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 SHLD 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 SHLD are equal to 18.7%.

Life of production assets of 11.8 years is the average useful life of capital assets used in Sears 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 SHLD is equal to 2.8%. 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 - $-3824 million for Sears 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 104.439 million for Sears 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 Sears Holdings at the current share price and the inputted number of shares is $0.8 billion.


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COMPANY NEWS

▶ [$$] Ratings Firms Issue Downgrades for Mall-Backed Debt   [May-24-17 12:26AM  The Wall Street Journal]
▶ [$$] Sears Pushes Back Debt Payments   [12:26AM  The Wall Street Journal]
▶ [$$] Ratings Firms Issue Downgrades for Mall-Backed Debt   [02:31PM  The Wall Street Journal]
▶ [$$] Sears Pushes Back Debt Payments   [09:08AM  The Wall Street Journal]
▶ Why Sears' Eddie Lampert Needs A Reality Check   [May-22-17 07:10AM  Forbes]
▶ Can Real Estate Save Macy's Inc Stock?   [09:00AM  Motley Fool]
▶ Sears demolition underway at Orlando Fashion Square mall   [02:50PM  American City Business Journals]
▶ [$$] Three Zombie Retailers in Danger of Disappearing   [10:23AM  The Wall Street Journal]
▶ Macy's v Sears: What's the Difference?   [01:14PM  Barrons.com]
▶ Here's How Home Depot Is Trying to Destroy Dying Sears   [May-16-17 08:30PM  TheStreet.com]
▶ Sears loses $6 million patent lawsuit to father-and-son company   [01:28PM  American City Business Journals]
▶ [$$] Fitch: More Retail Stress Will Follow Rue21 Bankruptcy   [12:41PM  The Wall Street Journal]
▶ Sears has a bigger problem than plunging sales   [12:23PM  Business Insider]
▶ Retail And E-Commerce News And Stocks To Watch   [08:47AM  Investor's Business Daily]
▶ [$$] The Hong Kong Company Behind the Sears Lawsuit   [07:44AM  The Wall Street Journal]
▶ [$$] Sears Sues Chinese Vendor Over Contract Dispute   [05:09PM  The Wall Street Journal]
▶ Sears Stock Tanks As CEO Accuses Suppliers Of Exploiting It   [04:20PM  Investor's Business Daily]
▶ Sears CEO slams Craftsman supplier for trying to get out of contract   [03:45PM  American City Business Journals]
▶ Sears won't roll over for vendors   [02:56PM  CNBC Videos]
▶ [$$] Verizon pips AT&T for Straight Path in bidding war   [May-11-17 06:17PM  Financial Times]
▶ Sears CEO: There's still time for a turnaround   [09:00AM  American City Business Journals]
▶ Sears CEO says there's still time to turnaround the struggling retailer   [04:05PM  American City Business Journals]
Stock chart of SHLD Financial statements of SHLD Annual reports of SHLD
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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