Intrinsic value of Tuesday Morning - TUES

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$1.80

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$1.80

 
Intrinsic value

$1.29

 
Up/down potential

-28%

 
Rating

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 TUES 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, %
  5.52
  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
  956
  975
  998
  1,023
  1,052
  1,084
  1,119
  1,157
  1,198
  1,243
  1,290
  1,341
  1,396
  1,454
  1,515
  1,581
  1,650
  1,723
  1,801
  1,883
  1,969
  2,061
  2,157
  2,258
  2,365
  2,478
  2,596
  2,721
  2,852
  2,991
  3,136
Variable operating expenses, $m
 
  961
  984
  1,009
  1,037
  1,069
  1,103
  1,141
  1,181
  1,225
  1,272
  1,323
  1,376
  1,433
  1,494
  1,559
  1,627
  1,699
  1,776
  1,856
  1,942
  2,032
  2,127
  2,227
  2,332
  2,443
  2,560
  2,683
  2,813
  2,949
  3,092
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
  954
  961
  984
  1,009
  1,037
  1,069
  1,103
  1,141
  1,181
  1,225
  1,272
  1,323
  1,376
  1,433
  1,494
  1,559
  1,627
  1,699
  1,776
  1,856
  1,942
  2,032
  2,127
  2,227
  2,332
  2,443
  2,560
  2,683
  2,813
  2,949
  3,092
Operating income, $m
  2
  14
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
EBITDA, $m
  18
  30
  30
  31
  32
  33
  34
  35
  37
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
Interest expense (income), $m
  1
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
Earnings before tax, $m
  4
  14
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
Tax expense, $m
  0
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
Net income, $m
  4
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  14
  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
  362
  355
  363
  372
  383
  395
  407
  421
  436
  452
  470
  488
  508
  529
  552
  575
  601
  627
  656
  685
  717
  750
  785
  822
  861
  902
  945
  991
  1,038
  1,089
  1,142
Adjusted assets (=assets-cash), $m
  348
  355
  363
  372
  383
  395
  407
  421
  436
  452
  470
  488
  508
  529
  552
  575
  601
  627
  656
  685
  717
  750
  785
  822
  861
  902
  945
  991
  1,038
  1,089
  1,142
Revenue / Adjusted assets
  2.747
  2.746
  2.749
  2.750
  2.747
  2.744
  2.749
  2.748
  2.748
  2.750
  2.745
  2.748
  2.748
  2.749
  2.745
  2.750
  2.745
  2.748
  2.745
  2.749
  2.746
  2.748
  2.748
  2.747
  2.747
  2.747
  2.747
  2.746
  2.748
  2.747
  2.746
Average production assets, $m
  83
  84
  86
  88
  90
  93
  96
  99
  103
  107
  111
  115
  120
  125
  130
  136
  142
  148
  155
  162
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  270
Working capital, $m
  139
  128
  131
  134
  138
  142
  147
  152
  157
  163
  169
  176
  183
  190
  199
  207
  216
  226
  236
  247
  258
  270
  283
  296
  310
  325
  340
  356
  374
  392
  411
Total debt, $m
  0
  3
  6
  10
  14
  18
  23
  28
  34
  41
  47
  54
  62
  70
  79
  88
  98
  108
  119
  131
  143
  156
  170
  184
  199
  215
  232
  249
  268
  287
  308
Total liabilities, $m
  135
  138
  141
  145
  149
  153
  158
  163
  169
  176
  182
  189
  197
  205
  214
  223
  233
  243
  254
  266
  278
  291
  305
  319
  334
  350
  367
  384
  403
  422
  443
Total equity, $m
  227
  217
  222
  228
  234
  241
  249
  258
  267
  277
  287
  299
  311
  324
  338
  352
  368
  384
  401
  419
  439
  459
  481
  503
  527
  552
  578
  606
  636
  666
  699
Total liabilities and equity, $m
  362
  355
  363
  373
  383
  394
  407
  421
  436
  453
  469
  488
  508
  529
  552
  575
  601
  627
  655
  685
  717
  750
  786
  822
  861
  902
  945
  990
  1,039
  1,088
  1,142
Debt-to-equity ratio
  0.000
  0.010
  0.030
  0.040
  0.060
  0.070
  0.090
  0.110
  0.130
  0.150
  0.160
  0.180
  0.200
  0.220
  0.230
  0.250
  0.270
  0.280
  0.300
  0.310
  0.330
  0.340
  0.350
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
Adjusted equity ratio
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612
  0.612

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
Depreciation, amort., depletion, $m
  16
  16
  16
  17
  17
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
Funds from operations, $m
  -5
  26
  27
  27
  28
  29
  29
  30
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  73
  77
Change in working capital, $m
  -13
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
Cash from operations, $m
  8
  35
  24
  24
  24
  24
  25
  25
  26
  27
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  51
  53
  55
  58
Maintenance CAPEX, $m
  0
  -16
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
New CAPEX, $m
  -47
  -1
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
Cash from investing activities, $m
  -38
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -25
  -27
  -28
  -29
  -31
  -32
  -33
  -36
  -37
  -38
  -41
  -42
  -45
  -46
  -49
  -51
  -54
  -56
  -59
  -61
Free cash flow, $m
  -30
  18
  6
  5
  5
  4
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  0
  0
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -4
Issuance/(repayment) of debt, $m
  0
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  16
Cash from financing (excl. dividends), $m  
  -1
  3
  3
  4
  4
  5
  5
  5
  6
  7
  8
  9
  10
  11
  13
  13
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
Total cash flow (excl. dividends), $m
  -31
  21
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
Retained Cash Flow (-), $m
  -7
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
Prev. year cash balance distribution, $m
 
  14
  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
 
  30
  4
  3
  2
  2
  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
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
 
  29
  3
  3
  2
  1
  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
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.6
  98.9
  98.0
  96.8
  95.5
  94.0
  92.3
  90.5
  88.6
  86.5
  84.5
  82.3
  80.2
  78.0
  75.7
  73.5
  71.3
  69.1
  66.9
  64.7
  62.5
  60.4

Tuesday Morning Corporation operates as a retailer of upscale decorative home accessories, housewares, seasonal goods, and gifts in the United States. The company offers various products, such as home décor, furniture, bed and bath, kitchen, toys, crafts, pets, and seasonal goods, as well as home furnishings items. It also provides a range of branded merchandise, including Peacock Alley, Sferra, Lenox, Waterford, and Hartmann. The company operated 750 discount retail stores in 41 states. Tuesday Morning Corporation was founded in 1974 and is headquartered in Dallas, Texas.

FINANCIAL RATIOS  of  Tuesday Morning (TUES)

Valuation Ratios
P/E Ratio 20.1
Price to Sales 0.1
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 10
Price to Free Cash Flow -2.1
Growth Rates
Sales Growth Rate 5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 193.8%
Cap. Spend. - 3 Yr. Gr. Rate 36.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 5
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 1.8%
Return On Equity - 3 Yr. Avg. 0.5%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 35.8%
Gross Margin - 3 Yr. Avg. 35.6%
EBITDA Margin 2.2%
EBITDA Margin - 3 Yr. Avg. 1.7%
Operating Margin 0.2%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin 0.4%
Pre-Tax Margin - 3 Yr. Avg. 0.1%
Net Profit Margin 0.4%
Net Profit Margin - 3 Yr. Avg. 0.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

TUES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TUES stock intrinsic value calculation we used $956 million for the last fiscal year's total revenue generated by Tuesday Morning. The default revenue input number comes from 2016 income statement of Tuesday Morning. 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 TUES 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 4.3%, whose default value for TUES is calculated based on our internal credit rating of Tuesday Morning, 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 Tuesday Morning.
    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 TUES stock the variable cost ratio is equal to 98.6%.

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 TUES 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 Tuesday Morning.

Corporate tax rate of 27% is the nominal tax rate for Tuesday Morning. 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 TUES 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 TUES are equal to 8.6%.

Life of production assets of 5.2 years is the average useful life of capital assets used in Tuesday Morning 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 TUES is equal to 13.1%. 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 - $227 million for Tuesday Morning - 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 43.917 million for Tuesday Morning 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 Tuesday Morning at the current share price and the inputted number of shares is $0.1 billion.


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COMPANY NEWS

▶ Singing the Monday Morning Value Blues Over Tuesday Morning   [May-08-17 09:00AM  TheStreet.com]
▶ Tuesday Morning reports 3Q loss   [May-04-17 09:16AM  Associated Press]
▶ Tuesday Morning relocating stores to boost sales   [Apr-05-17 12:40PM  American City Business Journals]
▶ Tuesday Morning posts 2Q profit   [08:42AM  Associated Press]
▶ Tuesday Morning turnaround executive leaves the company   [Jan-17-17 05:10PM  at bizjournals.com]
▶ Tuesday Morning turnaround executive leaves the company   [05:10PM  American City Business Journals]
▶ Should You Avoid Tuesday Morning Corporation (TUES)?   [Dec-15-16 09:19AM  at Insider Monkey]
▶ Tuesday Morning going back to its roots to improve profits   [Oct-14-16 08:35AM  at bizjournals.com]
▶ Moody's Affirms Five Classes of RCCMT 2014-1   [Jul-21-16 06:52PM  at Moody's]
▶ Why Tuesday Morning Shares Fell 22% Last Month   [Jun-07-16 06:19PM  at Motley Fool]
▶ A New Day May Be Dawning At Tuesday Morning   [Jun-02-16 01:47PM  at Forbes]
▶ Why Tuesday Morning Corporation Stock Plunged Today   [Jan-29-16 06:22PM  at Motley Fool]
▶ 5 Stocks Insiders Love Right Now   [Jan-20-16 08:33AM  at TheStreet]
Stock chart of TUES Financial statements of TUES Annual reports of TUES
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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