Intrinsic value of Tilly's - TLYS

Previous Close

$11.88

  Intrinsic Value

$9.88

stock screener

  Rating & Target

hold

-17%

  Value-price divergence*

-44%

Previous close

$11.88

 
Intrinsic value

$9.88

 
Up/down potential

-17%

 
Rating

hold

 
Value-price divergence*

-44%

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

We calculate the intrinsic value of TLYS 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, %
  3.27
  2.20
  2.48
  2.73
  2.96
  3.16
  3.35
  3.51
  3.66
  3.79
  3.92
  4.02
  4.12
  4.21
  4.29
  4.36
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
Revenue, $m
  569
  582
  596
  612
  630
  650
  672
  696
  721
  748
  778
  809
  842
  878
  916
  955
  998
  1,042
  1,090
  1,140
  1,192
  1,248
  1,306
  1,368
  1,433
  1,502
  1,574
  1,649
  1,729
  1,813
  1,901
Variable operating expenses, $m
 
  549
  563
  578
  595
  614
  634
  657
  681
  707
  734
  764
  795
  829
  864
  902
  942
  984
  1,029
  1,076
  1,125
  1,178
  1,233
  1,291
  1,353
  1,417
  1,485
  1,557
  1,632
  1,712
  1,795
Fixed operating expenses, $m
 
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
Total operating expenses, $m
  550
  562
  577
  592
  609
  629
  649
  672
  697
  723
  751
  781
  812
  847
  882
  921
  961
  1,004
  1,049
  1,097
  1,146
  1,200
  1,255
  1,314
  1,377
  1,441
  1,510
  1,582
  1,658
  1,739
  1,822
Operating income, $m
  19
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  51
  54
  57
  60
  63
  67
  71
  75
  79
EBITDA, $m
  42
  39
  39
  41
  42
  43
  45
  47
  48
  51
  53
  55
  58
  60
  63
  66
  70
  73
  77
  81
  85
  89
  94
  99
  104
  110
  116
  122
  128
  135
  142
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
Earnings before tax, $m
  20
  19
  20
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
Tax expense, $m
  9
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
Net income, $m
  11
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  134
  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
  291
  160
  164
  169
  174
  179
  185
  192
  199
  207
  215
  223
  232
  242
  253
  264
  275
  288
  301
  314
  329
  344
  360
  377
  395
  414
  434
  455
  477
  500
  525
Adjusted assets (=assets-cash), $m
  157
  160
  164
  169
  174
  179
  185
  192
  199
  207
  215
  223
  232
  242
  253
  264
  275
  288
  301
  314
  329
  344
  360
  377
  395
  414
  434
  455
  477
  500
  525
Revenue / Adjusted assets
  3.624
  3.638
  3.634
  3.621
  3.621
  3.631
  3.632
  3.625
  3.623
  3.614
  3.619
  3.628
  3.629
  3.628
  3.621
  3.617
  3.629
  3.618
  3.621
  3.631
  3.623
  3.628
  3.628
  3.629
  3.628
  3.628
  3.627
  3.624
  3.625
  3.626
  3.621
Average production assets, $m
  95
  97
  99
  102
  105
  108
  112
  115
  120
  124
  129
  134
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  217
  227
  238
  249
  261
  274
  287
  301
  316
Working capital, $m
  130
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Total debt, $m
  1
  2
  5
  8
  11
  14
  18
  22
  27
  32
  37
  43
  48
  55
  61
  69
  76
  84
  92
  101
  111
  120
  131
  142
  153
  165
  178
  192
  206
  221
  236
Total liabilities, $m
  101
  103
  106
  109
  112
  115
  119
  123
  128
  133
  138
  144
  149
  156
  162
  170
  177
  185
  193
  202
  212
  221
  232
  243
  254
  266
  279
  293
  307
  322
  337
Total equity, $m
  189
  57
  59
  60
  62
  64
  66
  69
  71
  74
  77
  80
  83
  86
  90
  94
  98
  103
  107
  112
  117
  123
  129
  135
  141
  148
  155
  162
  170
  179
  187
Total liabilities and equity, $m
  290
  160
  165
  169
  174
  179
  185
  192
  199
  207
  215
  224
  232
  242
  252
  264
  275
  288
  300
  314
  329
  344
  361
  378
  395
  414
  434
  455
  477
  501
  524
Debt-to-equity ratio
  0.005
  0.040
  0.080
  0.130
  0.170
  0.220
  0.280
  0.330
  0.380
  0.430
  0.480
  0.530
  0.580
  0.630
  0.680
  0.730
  0.770
  0.820
  0.860
  0.900
  0.940
  0.980
  1.020
  1.050
  1.090
  1.120
  1.150
  1.180
  1.210
  1.240
  1.260
Adjusted equity ratio
  0.350
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
Depreciation, amort., depletion, $m
  23
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
  43
  45
  48
  50
  52
  55
  57
  60
  63
Funds from operations, $m
  58
  33
  34
  35
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  90
  94
  99
  104
  110
  115
Change in working capital, $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
Cash from operations, $m
  48
  33
  34
  35
  36
  37
  39
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  95
  100
  105
  110
  116
Maintenance CAPEX, $m
  0
  -19
  -19
  -20
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -60
New CAPEX, $m
  -17
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
Cash from investing activities, $m
  -22
  -21
  -21
  -23
  -23
  -24
  -26
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -43
  -44
  -47
  -49
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
  -75
Free cash flow, $m
  26
  12
  12
  13
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  33
  35
  37
  39
  41
Issuance/(repayment) of debt, $m
  -1
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  1
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
Total cash flow (excl. dividends), $m
  28
  15
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  57
Retained Cash Flow (-), $m
  -16
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Prev. year cash balance distribution, $m
 
  133
  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
 
  146
  14
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  140
  12
  12
  12
  11
  11
  10
  10
  10
  9
  9
  8
  8
  7
  6
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
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Tilly's, Inc. is a destination specialty retailer of casual apparel, footwear and accessories for young men, young women, boys and girls. The Company offers an unparalleled selection of relevant brands, styles, colors, sizes and price points. The Company's apparel merchandise includes branded, fashion and styles for tops, outerwear, bottoms and dresses. Its accessories merchandise includes backpacks, hats, sunglasses, headphones, handbags, watches, jewelry and others. The Company offers its products through stores and Website. The Company operates over 220 stores in approximately 30 states. The Company's stores are located in malls, lifestyle centers, power centers, community centers, outlet centers and street-front locations. The Company also operates an e-commerce platform for desktop and mobile. The Company's third-party brands include AYC, Adidas, Billabong, Converse, Hurley, Nixon, JanSport, LRG and Stance, among others.

FINANCIAL RATIOS  of  Tilly's (TLYS)

Valuation Ratios
P/E Ratio 31.1
Price to Sales 0.6
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 11
Growth Rates
Sales Growth Rate 3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.1%
Cap. Spend. - 3 Yr. Gr. Rate -16.9%
Financial Strength
Quick Ratio 134
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.9%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.6%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 2
Profitability Ratios
Gross Margin 29.5%
Gross Margin - 3 Yr. Avg. 30%
EBITDA Margin 7.6%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 3.3%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 3.5%
Pre-Tax Margin - 3 Yr. Avg. 3.7%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 2%
Effective Tax Rate 45%
Eff/ Tax Rate - 3 Yr. Avg. 46.6%
Payout Ratio 0%

TLYS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TLYS stock intrinsic value calculation we used $569 million for the last fiscal year's total revenue generated by Tilly's. The default revenue input number comes from 2017 income statement of Tilly's. 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 TLYS stock valuation model: a) initial revenue growth rate of 2.2% 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 4.3%, whose default value for TLYS is calculated based on our internal credit rating of Tilly's, 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 Tilly's.
    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 TLYS stock the variable cost ratio is equal to 94.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13 million in the base year in the intrinsic value calculation for TLYS 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 Tilly's.

Corporate tax rate of 27% is the nominal tax rate for Tilly's. 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 TLYS 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 TLYS are equal to 16.6%.

Life of production assets of 4.1 years is the average useful life of capital assets used in Tilly's 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 TLYS is equal to -0.5%. 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 - $189 million for Tilly's - 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 31.806 million for Tilly's 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 Tilly's at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ ETFs with exposure to Tillys, Inc. : September 7, 2017   [Sep-07-17 02:01PM  Capital Cube]
▶ Tillys, Inc.: Strong price momentum but will it sustain?   [Aug-24-17 02:35PM  Capital Cube]
▶ Tilly's reports 2Q loss   [Aug-23-17 09:15PM  Associated Press]
▶ LD Micro Index Reconstitution as of August 1, 2017   [Aug-01-17 09:40AM  ACCESSWIRE]
▶ Tillys, Inc.: Strong price momentum but will it sustain?   [May-25-17 11:40AM  Capital Cube]
▶ Why Tilly's Inc.'s Shares Popped 25% Today   [May-24-17 12:52PM  Motley Fool]
▶ Tilly's reports 1Q loss   [04:11PM  Associated Press]
▶ ETFs with exposure to Tillys, Inc. : April 7, 2017   [Apr-07-17 05:36PM  Capital Cube]
▶ Tilly's beats Street 4Q forecasts   [04:38PM  Associated Press]
▶ Tillys, Inc.: Strong price momentum but will it sustain?   [Feb-01-17 04:36PM  Capital Cube]
▶ Tillys, Inc. to Present at The ICR Conference 2017   [Dec-22-16 04:52PM  Business Wire]
▶ Is TRC Companies, Inc. (TRR) A Good Stock To Buy?   [Dec-18-16 09:35AM  at Insider Monkey]
▶ Hedge Funds Are Betting On Tillys Inc (TLYS)   [Dec-12-16 09:10AM  at Insider Monkey]
▶ Why Tilly's, Inc. Stock Is Up   [02:11PM  at Motley Fool]
Financial statements of TLYS
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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