Intrinsic value of ONE Group Hospitality - STKS

Previous Close

$2.41

  Intrinsic Value

$0.08

stock screener

  Rating & Target

str. sell

-97%

Previous close

$2.41

 
Intrinsic value

$0.08

 
Up/down potential

-97%

 
Rating

str. sell

We calculate the intrinsic value of STKS 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, %
  18.03
  18.00
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
Revenue, $m
  72
  85
  99
  115
  131
  149
  168
  188
  209
  231
  254
  278
  304
  330
  357
  386
  415
  446
  478
  511
  546
  582
  619
  658
  699
  741
  785
  831
  878
  928
  980
Variable operating expenses, $m
 
  87
  102
  118
  135
  153
  172
  193
  215
  237
  261
  286
  312
  339
  367
  397
  427
  459
  492
  526
  561
  598
  637
  677
  718
  762
  807
  854
  903
  954
  1,008
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
  78
  87
  102
  118
  135
  153
  172
  193
  215
  237
  261
  286
  312
  339
  367
  397
  427
  459
  492
  526
  561
  598
  637
  677
  718
  762
  807
  854
  903
  954
  1,008
Operating income, $m
  -6
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -27
EBITDA, $m
  -3
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Interest expense (income), $m
  1
  1
  1
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
Earnings before tax, $m
  -6
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62
Tax expense, $m
  10
  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
Net income, $m
  -17
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  53
  60
  70
  81
  93
  105
  119
  133
  148
  164
  180
  197
  215
  234
  253
  273
  294
  316
  339
  362
  387
  412
  439
  466
  495
  525
  556
  588
  622
  657
  694
Adjusted assets (=assets-cash), $m
  51
  60
  70
  81
  93
  105
  119
  133
  148
  164
  180
  197
  215
  234
  253
  273
  294
  316
  339
  362
  387
  412
  439
  466
  495
  525
  556
  588
  622
  657
  694
Revenue / Adjusted assets
  1.412
  1.417
  1.414
  1.420
  1.409
  1.419
  1.412
  1.414
  1.412
  1.409
  1.411
  1.411
  1.414
  1.410
  1.411
  1.414
  1.412
  1.411
  1.410
  1.412
  1.411
  1.413
  1.410
  1.412
  1.412
  1.411
  1.412
  1.413
  1.412
  1.412
  1.412
Average production assets, $m
  33
  38
  45
  52
  59
  67
  76
  85
  94
  104
  115
  126
  137
  149
  161
  174
  187
  201
  216
  231
  246
  262
  279
  297
  315
  334
  354
  375
  396
  419
  442
Working capital, $m
  -4
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -27
Total debt, $m
  17
  23
  31
  40
  50
  61
  72
  84
  97
  110
  124
  138
  153
  169
  185
  202
  220
  238
  257
  277
  298
  319
  342
  365
  389
  414
  440
  468
  496
  526
  557
Total liabilities, $m
  45
  51
  59
  68
  78
  89
  100
  112
  125
  138
  152
  166
  181
  197
  213
  230
  248
  266
  285
  305
  326
  347
  370
  393
  417
  442
  468
  496
  524
  554
  585
Total equity, $m
  8
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  73
  78
  82
  87
  92
  98
  103
  109
Total liabilities and equity, $m
  53
  60
  70
  81
  93
  106
  119
  133
  148
  164
  180
  197
  215
  234
  253
  273
  294
  316
  338
  362
  387
  412
  439
  466
  495
  524
  555
  588
  622
  657
  694
Debt-to-equity ratio
  2.125
  2.410
  2.830
  3.170
  3.450
  3.680
  3.870
  4.030
  4.160
  4.280
  4.380
  4.460
  4.540
  4.610
  4.660
  4.720
  4.760
  4.800
  4.840
  4.880
  4.910
  4.940
  4.960
  4.990
  5.010
  5.030
  5.050
  5.070
  5.080
  5.100
  5.110
Adjusted equity ratio
  0.137
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -17
  -3
  -4
  -5
  -6
  -7
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62
Depreciation, amort., depletion, $m
  3
  4
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
Funds from operations, $m
  8
  0
  0
  0
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
Change in working capital, $m
  6
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  2
  1
  0
  0
  0
  -1
  -1
  -2
  -2
  -2
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
New CAPEX, $m
  -11
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -23
Cash from investing activities, $m
  -10
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -45
  -48
  -51
  -54
  -57
  -60
  -62
Free cash flow, $m
  -8
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -69
  -73
  -77
  -82
Issuance/(repayment) of debt, $m
  4
  8
  8
  9
  10
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
Issuance/(repurchase) of shares, $m
  4
  5
  6
  7
  8
  9
  11
  12
  14
  15
  17
  19
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  60
  64
  67
Cash from financing (excl. dividends), $m  
  8
  13
  14
  16
  18
  20
  22
  24
  27
  28
  31
  33
  35
  38
  40
  43
  46
  48
  51
  55
  58
  61
  64
  68
  72
  76
  80
  84
  89
  94
  98
Total cash flow (excl. dividends), $m
  0
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
Retained Cash Flow (-), $m
  12
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -40
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
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
 
  -1
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -35
  -37
  -39
  -42
  -45
  -47
  -50
Discount rate, %
 
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
 
  0
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  92.7
  85.7
  79.1
  73.0
  67.3
  62.0
  57.1
  52.6
  48.4
  44.5
  41.0
  37.7
  34.7
  32.0
  29.4
  27.1
  25.0
  23.0
  21.2
  19.5
  17.9
  16.5
  15.2
  14.0
  12.9
  11.9
  10.9
  10.1
  9.3
  8.5

The ONE Group Hospitality, Inc., formerly Committed Capital Acquisition Corporation, is a hospitality company. The Company develops, owns and operates restaurants and lounges, and provides food and beverage services for hospitality venues, including hotels, casinos and other locations across the globe. It operates through three segments: owned STK units (STKs), F&B hospitality management agreements (F&B), and Other concepts (Other). Its STKs segment consists of leased restaurant locations. Its F&B segment consists of management agreements, in which the Company operates the food and beverage services in hotels or casinos and could include an STK. Its Other segment includes owned non-STK leased locations. Its restaurant brand is STK, a multi-unit steakhouse concept with locations in metropolitan cities around the globe. Its F&B hospitality management services include developing, managing and operating restaurants, bars, rooftop lounges, pools, banqueting and catering facilities.

FINANCIAL RATIOS  of  ONE Group Hospitality (STKS)

Valuation Ratios
P/E Ratio -3.6
Price to Sales 0.8
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow 30.2
Price to Free Cash Flow -6.7
Growth Rates
Sales Growth Rate 18%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.4%
Cap. Spend. - 3 Yr. Gr. Rate 61.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 162.5%
Total Debt to Equity 212.5%
Interest Coverage -5
Management Effectiveness
Return On Assets -26.3%
Ret/ On Assets - 3 Yr. Avg. 0.4%
Return On Total Capital -57.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity -121.4%
Return On Equity - 3 Yr. Avg. -10.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 77.8%
Gross Margin - 3 Yr. Avg. 78.1%
EBITDA Margin -2.8%
EBITDA Margin - 3 Yr. Avg. 4.5%
Operating Margin -8.3%
Oper. Margin - 3 Yr. Avg. 0.9%
Pre-Tax Margin -8.3%
Pre-Tax Margin - 3 Yr. Avg. 0.9%
Net Profit Margin -23.6%
Net Profit Margin - 3 Yr. Avg. -0.6%
Effective Tax Rate -166.7%
Eff/ Tax Rate - 3 Yr. Avg. 94.4%
Payout Ratio 0%

STKS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STKS stock intrinsic value calculation we used $72 million for the last fiscal year's total revenue generated by ONE Group Hospitality. The default revenue input number comes from 2016 income statement of ONE Group Hospitality. 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 STKS stock valuation model: a) initial revenue growth rate of 18% 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 10.9%, whose default value for STKS is calculated based on our internal credit rating of ONE Group Hospitality, 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 ONE Group Hospitality.
    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 STKS stock the variable cost ratio is equal to 102.8%.

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 STKS 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 6.5% for ONE Group Hospitality.

Corporate tax rate of 27% is the nominal tax rate for ONE Group Hospitality. 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 STKS 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 STKS are equal to 45.1%.

Life of production assets of 10.8 years is the average useful life of capital assets used in ONE Group Hospitality 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 STKS 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 - $8 million for ONE Group Hospitality - 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 25.215 million for ONE Group Hospitality 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 ONE Group Hospitality at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ The ONE Group Announces Closing of Strategic Financing   [Nov-17-17 09:24AM  Business Wire]
▶ The ONE Group Announces Third Quarter 2017 Results   [Nov-13-17 04:53PM  Business Wire]
▶ Denny's refuses to dump new sausage mascot   [Sep-14-17 01:32PM  Yahoo Finance Video]
▶ The ONE Group Announces First Quarter 2017 Results   [May-15-17 04:05PM  Business Wire]
▶ The ONE Group Hospitality Announces Management Changes   [Apr-21-17 04:30PM  Business Wire]
▶ The ONE Group Announces Opening of STK Denver   [Jan-17-17 09:00AM  Business Wire]
▶ 5 Great Stocks to Beat the Restaurant Recession   [Dec-12-16 06:01PM  Zacks]
▶ The ONE Group Announces Opening of STK Ibiza   [09:00AM  Business Wire]
▶ STK Orlando Opens in Disney Springs   [09:00AM  Business Wire]
▶ The ONE Group Announces New COO   [09:00AM  Business Wire]
Financial statements of STKS
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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