Intrinsic value of Carrols Restaurant Group - TAST

Previous Close

$11.40

  Intrinsic Value

$10.63

stock screener

  Rating & Target

hold

-7%

  Value-price divergence*

+4810%

Previous close

$11.40

 
Intrinsic value

$10.63

 
Up/down potential

-7%

 
Rating

hold

 
Value-price divergence*

+4810%

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

We calculate the intrinsic value of TAST 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 0.4

 

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, %
  9.90
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  944
  1,016
  1,090
  1,168
  1,248
  1,332
  1,419
  1,510
  1,604
  1,702
  1,804
  1,911
  2,022
  2,138
  2,259
  2,385
  2,517
  2,655
  2,800
  2,951
  3,108
  3,274
  3,447
  3,628
  3,818
  4,016
  4,225
  4,443
  4,672
  4,912
  5,163
Variable operating expenses, $m
 
  812
  872
  934
  998
  1,065
  1,134
  1,206
  1,281
  1,360
  1,441
  1,524
  1,613
  1,705
  1,802
  1,902
  2,008
  2,118
  2,233
  2,353
  2,479
  2,611
  2,749
  2,893
  3,045
  3,203
  3,369
  3,544
  3,726
  3,918
  4,118
Fixed operating expenses, $m
 
  161
  165
  169
  173
  178
  182
  187
  191
  196
  201
  206
  211
  216
  222
  227
  233
  239
  245
  251
  257
  264
  270
  277
  284
  291
  298
  306
  313
  321
  329
Total operating expenses, $m
  908
  973
  1,037
  1,103
  1,171
  1,243
  1,316
  1,393
  1,472
  1,556
  1,642
  1,730
  1,824
  1,921
  2,024
  2,129
  2,241
  2,357
  2,478
  2,604
  2,736
  2,875
  3,019
  3,170
  3,329
  3,494
  3,667
  3,850
  4,039
  4,239
  4,447
Operating income, $m
  36
  42
  53
  65
  77
  90
  103
  117
  131
  146
  162
  181
  198
  216
  235
  255
  277
  299
  322
  346
  372
  399
  427
  457
  489
  522
  557
  594
  632
  673
  716
EBITDA, $m
  83
  86
  100
  115
  130
  146
  163
  180
  199
  218
  238
  258
  280
  303
  327
  352
  379
  406
  436
  466
  498
  532
  567
  605
  644
  685
  728
  774
  822
  872
  926
Interest expense (income), $m
  17
  17
  19
  22
  24
  26
  28
  31
  33
  36
  39
  42
  45
  48
  51
  55
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  104
  110
  116
  123
  129
Earnings before tax, $m
  17
  25
  34
  43
  53
  64
  75
  86
  98
  110
  123
  139
  153
  169
  184
  201
  218
  237
  256
  277
  298
  321
  344
  369
  396
  423
  453
  484
  516
  550
  587
Tax expense, $m
  -28
  7
  9
  12
  14
  17
  20
  23
  26
  30
  33
  38
  41
  46
  50
  54
  59
  64
  69
  75
  80
  87
  93
  100
  107
  114
  122
  131
  139
  149
  158
Net income, $m
  45
  18
  25
  32
  39
  47
  54
  63
  71
  80
  90
  102
  112
  123
  135
  147
  159
  173
  187
  202
  218
  234
  251
  270
  289
  309
  331
  353
  377
  402
  428

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
  490
  525
  564
  604
  645
  689
  734
  781
  829
  880
  933
  988
  1,045
  1,105
  1,168
  1,233
  1,302
  1,373
  1,448
  1,526
  1,607
  1,693
  1,782
  1,876
  1,974
  2,077
  2,184
  2,297
  2,416
  2,540
  2,670
Adjusted assets (=assets-cash), $m
  488
  525
  564
  604
  645
  689
  734
  781
  829
  880
  933
  988
  1,045
  1,105
  1,168
  1,233
  1,302
  1,373
  1,448
  1,526
  1,607
  1,693
  1,782
  1,876
  1,974
  2,077
  2,184
  2,297
  2,416
  2,540
  2,670
Revenue / Adjusted assets
  1.934
  1.935
  1.933
  1.934
  1.935
  1.933
  1.933
  1.933
  1.935
  1.934
  1.934
  1.934
  1.935
  1.935
  1.934
  1.934
  1.933
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.934
  1.935
  1.934
  1.934
  1.934
  1.934
Average production assets, $m
  384
  412
  443
  474
  507
  541
  576
  613
  651
  691
  733
  776
  821
  868
  917
  968
  1,022
  1,078
  1,137
  1,198
  1,262
  1,329
  1,399
  1,473
  1,550
  1,631
  1,715
  1,804
  1,897
  1,994
  2,096
Working capital, $m
  -39
  -42
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -88
  -93
  -98
  -103
  -109
  -115
  -121
  -127
  -134
  -141
  -149
  -157
  -165
  -173
  -182
  -192
  -201
  -212
Total debt, $m
  220
  243
  269
  297
  325
  355
  385
  417
  451
  485
  521
  559
  598
  639
  682
  726
  773
  821
  872
  925
  981
  1,039
  1,100
  1,164
  1,231
  1,301
  1,375
  1,452
  1,532
  1,617
  1,706
Total liabilities, $m
  336
  358
  384
  412
  440
  470
  500
  532
  566
  600
  636
  674
  713
  754
  797
  841
  888
  936
  987
  1,040
  1,096
  1,154
  1,215
  1,279
  1,346
  1,416
  1,490
  1,567
  1,647
  1,732
  1,821
Total equity, $m
  155
  167
  179
  192
  205
  219
  233
  248
  264
  280
  297
  314
  332
  352
  371
  392
  414
  437
  460
  485
  511
  538
  567
  597
  628
  660
  695
  731
  768
  808
  849
Total liabilities and equity, $m
  491
  525
  563
  604
  645
  689
  733
  780
  830
  880
  933
  988
  1,045
  1,106
  1,168
  1,233
  1,302
  1,373
  1,447
  1,525
  1,607
  1,692
  1,782
  1,876
  1,974
  2,076
  2,185
  2,298
  2,415
  2,540
  2,670
Debt-to-equity ratio
  1.419
  1.460
  1.500
  1.550
  1.580
  1.620
  1.650
  1.680
  1.710
  1.730
  1.760
  1.780
  1.800
  1.820
  1.840
  1.850
  1.870
  1.880
  1.890
  1.910
  1.920
  1.930
  1.940
  1.950
  1.960
  1.970
  1.980
  1.990
  1.990
  2.000
  2.010
Adjusted equity ratio
  0.314
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  45
  18
  25
  32
  39
  47
  54
  63
  71
  80
  90
  102
  112
  123
  135
  147
  159
  173
  187
  202
  218
  234
  251
  270
  289
  309
  331
  353
  377
  402
  428
Depreciation, amort., depletion, $m
  47
  44
  47
  50
  53
  56
  60
  64
  67
  71
  76
  78
  82
  87
  92
  97
  102
  108
  114
  120
  126
  133
  140
  147
  155
  163
  172
  180
  190
  199
  210
Funds from operations, $m
  57
  62
  71
  81
  92
  103
  114
  126
  139
  152
  165
  179
  194
  210
  226
  244
  262
  281
  301
  322
  344
  367
  391
  417
  444
  472
  502
  533
  566
  601
  638
Change in working capital, $m
  -5
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Cash from operations, $m
  62
  65
  74
  85
  95
  106
  118
  130
  143
  156
  170
  184
  199
  215
  231
  249
  267
  286
  307
  328
  350
  374
  398
  424
  452
  480
  511
  542
  576
  611
  648
Maintenance CAPEX, $m
  0
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -92
  -97
  -102
  -108
  -114
  -120
  -126
  -133
  -140
  -147
  -155
  -163
  -172
  -180
  -190
  -199
New CAPEX, $m
  -94
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
  -97
  -102
Cash from investing activities, $m
  -96
  -67
  -71
  -75
  -80
  -85
  -89
  -95
  -99
  -105
  -111
  -116
  -123
  -129
  -136
  -143
  -151
  -158
  -167
  -175
  -184
  -193
  -203
  -214
  -224
  -236
  -248
  -261
  -273
  -287
  -301
Free cash flow, $m
  -34
  -3
  3
  9
  15
  22
  28
  36
  43
  51
  59
  67
  76
  85
  95
  106
  117
  128
  140
  153
  166
  180
  195
  211
  227
  245
  263
  282
  303
  324
  347
Issuance/(repayment) of debt, $m
  14
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  14
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
Total cash flow (excl. dividends), $m
  -20
  23
  29
  36
  44
  51
  59
  68
  76
  85
  95
  105
  115
  126
  138
  150
  163
  177
  191
  206
  222
  239
  256
  275
  294
  315
  336
  359
  383
  409
  435
Retained Cash Flow (-), $m
  -47
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
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
  17
  23
  30
  37
  45
  53
  61
  69
  78
  87
  97
  107
  118
  129
  141
  154
  167
  181
  196
  211
  228
  245
  263
  282
  302
  323
  346
  369
  394
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  10
  15
  18
  21
  24
  25
  26
  26
  26
  25
  23
  22
  20
  17
  15
  13
  11
  9
  7
  5
  4
  3
  2
  2
  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

Carrols Restaurant Group, Inc., through its subsidiaries, operates franchisee restaurants of Burger King. As of January 3, 2016, it operated 705 Burger King restaurants in 16 states of the United States. The company was founded in 1960 and is headquartered in Syracuse, New York.

FINANCIAL RATIOS  of  Carrols Restaurant Group (TAST)

Valuation Ratios
P/E Ratio 8.9
Price to Sales 0.4
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow -12.6
Growth Rates
Sales Growth Rate 9.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 64.9%
Cap. Spend. - 3 Yr. Gr. Rate 13.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 140.6%
Total Debt to Equity 141.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 19.6%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 13.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.7%
Return On Equity 34.2%
Return On Equity - 3 Yr. Avg. -2.4%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 33.4%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 1.7%
Pre-Tax Margin 1.8%
Pre-Tax Margin - 3 Yr. Avg. -0.7%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. -0.2%
Effective Tax Rate -164.7%
Eff/ Tax Rate - 3 Yr. Avg. -70.3%
Payout Ratio 0%

TAST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TAST stock intrinsic value calculation we used $944 million for the last fiscal year's total revenue generated by Carrols Restaurant Group. The default revenue input number comes from 2017 income statement of Carrols Restaurant 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 TAST stock valuation model: a) initial revenue growth rate of 7.6% 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 7.8%, whose default value for TAST is calculated based on our internal credit rating of Carrols Restaurant 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 Carrols Restaurant 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 TAST stock the variable cost ratio is equal to 80%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $157 million in the base year in the intrinsic value calculation for TAST 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 8% for Carrols Restaurant Group.

Corporate tax rate of 27% is the nominal tax rate for Carrols Restaurant 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 TAST 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 TAST are equal to 40.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Carrols Restaurant 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 TAST is equal to -4.1%. 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 - $155 million for Carrols Restaurant 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 34.951 million for Carrols Restaurant 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 Carrols Restaurant Group at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
WEN Wendy's Co 15.34 3.54  str.sell
MCD McDonald's 158.90 12.13  str.sell
JACK Jack in the Bo 97.31 11.00  str.sell
GTIM Good Times Res 2.85 0.44  str.sell
SHAK Shake Shack Cl 31.70 286.36  str.buy
HABT Habit Restaura 13.85 3.28  str.sell
SONC Sonic 24.10 3.36  str.sell
ARCO Arcos Dorados 8.80 5.02  sell

COMPANY NEWS

▶ Carrols Restaurant Group Falls Short on Higher Costs   [Aug-09-17 09:03PM  Motley Fool]
▶ Carrols Restaurant posts 2Q profit   [12:32PM  Associated Press]
▶ The Restaurant Sector Q2 Earnings Cheat Sheet   [Jul-22-17 03:39PM  Benzinga]
▶ 3 Growth Stocks for Astute Investors   [May-10-17 09:31AM  Motley Fool]
▶ Carrols Restaurant reports 1Q loss   [08:33AM  Associated Press]
▶ Carrols Restaurant posts 4Q profit   [07:19AM  Associated Press]
▶ Buying Value Stocks on the Breakout   [Feb-08-17 07:59PM  Zacks]
▶ Top Restaurant Stocks to Buy in 2017   [Feb-02-17 10:53AM  at Motley Fool]
▶ 1 Great Stock for Retirees   [Jan-05-17 02:40PM  at Motley Fool]
▶ Should You Avoid Carrols Restaurant Group, Inc. (TAST)?   [Dec-02-16 08:24AM  at Insider Monkey]
▶ Chipotle may be the worst restaurant for investors   [Oct-19-16 07:25AM  at MarketWatch]
Stock chart of TAST Financial statements of TAST
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.