Intrinsic value of Vitamin Shoppe - VSI

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$10.45

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of VSI 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 0.2

 

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, %
  1.74
  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
  1,289
  1,292
  1,322
  1,356
  1,394
  1,436
  1,483
  1,533
  1,588
  1,647
  1,710
  1,778
  1,850
  1,927
  2,008
  2,095
  2,187
  2,284
  2,387
  2,495
  2,610
  2,731
  2,859
  2,993
  3,135
  3,284
  3,441
  3,606
  3,780
  3,964
  4,156
Variable operating expenses, $m
 
  1,182
  1,209
  1,239
  1,273
  1,311
  1,353
  1,398
  1,447
  1,500
  1,556
  1,593
  1,657
  1,726
  1,799
  1,877
  1,959
  2,046
  2,138
  2,235
  2,338
  2,446
  2,561
  2,681
  2,808
  2,942
  3,083
  3,231
  3,387
  3,551
  3,723
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
  1,244
  1,182
  1,209
  1,239
  1,273
  1,311
  1,353
  1,398
  1,447
  1,500
  1,556
  1,593
  1,657
  1,726
  1,799
  1,877
  1,959
  2,046
  2,138
  2,235
  2,338
  2,446
  2,561
  2,681
  2,808
  2,942
  3,083
  3,231
  3,387
  3,551
  3,723
Operating income, $m
  46
  110
  113
  117
  121
  125
  130
  135
  141
  147
  154
  185
  193
  201
  209
  218
  228
  238
  249
  260
  272
  285
  298
  312
  327
  342
  358
  376
  394
  413
  433
EBITDA, $m
  85
  153
  157
  161
  165
  171
  176
  182
  188
  195
  203
  211
  220
  229
  238
  249
  260
  271
  283
  296
  310
  324
  339
  355
  372
  390
  408
  428
  449
  470
  493
Interest expense (income), $m
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
Earnings before tax, $m
  36
  106
  109
  113
  116
  120
  125
  130
  135
  141
  147
  178
  185
  192
  200
  209
  218
  227
  237
  248
  259
  271
  283
  296
  310
  324
  340
  356
  373
  390
  409
Tax expense, $m
  11
  29
  29
  30
  31
  33
  34
  35
  36
  38
  40
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  105
  110
Net income, $m
  25
  78
  80
  82
  85
  88
  91
  95
  99
  103
  107
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  216
  226
  237
  248
  260
  272
  285
  299

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3
  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
  734
  749
  766
  786
  808
  832
  859
  888
  920
  954
  991
  1,030
  1,072
  1,116
  1,164
  1,214
  1,267
  1,323
  1,383
  1,446
  1,512
  1,582
  1,656
  1,734
  1,816
  1,903
  1,994
  2,089
  2,190
  2,296
  2,408
Adjusted assets (=assets-cash), $m
  731
  749
  766
  786
  808
  832
  859
  888
  920
  954
  991
  1,030
  1,072
  1,116
  1,164
  1,214
  1,267
  1,323
  1,383
  1,446
  1,512
  1,582
  1,656
  1,734
  1,816
  1,903
  1,994
  2,089
  2,190
  2,296
  2,408
Revenue / Adjusted assets
  1.763
  1.725
  1.726
  1.725
  1.725
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.727
  1.725
  1.726
  1.726
  1.726
  1.726
  1.725
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
  1.726
Average production assets, $m
  223
  233
  238
  244
  251
  259
  267
  276
  286
  296
  308
  320
  333
  347
  361
  377
  394
  411
  430
  449
  470
  492
  515
  539
  564
  591
  619
  649
  680
  713
  748
Working capital, $m
  152
  154
  157
  161
  166
  171
  176
  182
  189
  196
  204
  212
  220
  229
  239
  249
  260
  272
  284
  297
  311
  325
  340
  356
  373
  391
  409
  429
  450
  472
  495
Total debt, $m
  132
  120
  126
  133
  141
  150
  160
  171
  182
  194
  208
  222
  237
  253
  270
  288
  308
  328
  350
  372
  396
  422
  449
  477
  506
  538
  571
  605
  642
  680
  721
Total liabilities, $m
  294
  271
  277
  284
  292
  301
  311
  322
  333
  345
  359
  373
  388
  404
  421
  439
  459
  479
  501
  523
  547
  573
  600
  628
  657
  689
  722
  756
  793
  831
  872
Total equity, $m
  440
  478
  489
  501
  515
  531
  548
  567
  587
  609
  632
  657
  684
  712
  742
  774
  808
  844
  882
  922
  965
  1,009
  1,057
  1,106
  1,159
  1,214
  1,272
  1,333
  1,397
  1,465
  1,536
Total liabilities and equity, $m
  734
  749
  766
  785
  807
  832
  859
  889
  920
  954
  991
  1,030
  1,072
  1,116
  1,163
  1,213
  1,267
  1,323
  1,383
  1,445
  1,512
  1,582
  1,657
  1,734
  1,816
  1,903
  1,994
  2,089
  2,190
  2,296
  2,408
Debt-to-equity ratio
  0.300
  0.250
  0.260
  0.270
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.420
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
Adjusted equity ratio
  0.602
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  78
  80
  82
  85
  88
  91
  95
  99
  103
  107
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  216
  226
  237
  248
  260
  272
  285
  299
Depreciation, amort., depletion, $m
  39
  43
  43
  44
  45
  45
  46
  47
  47
  48
  49
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
  43
  46
  48
  50
  52
  55
  58
  60
Funds from operations, $m
  86
  121
  123
  126
  129
  133
  137
  141
  146
  151
  156
  156
  162
  168
  175
  183
  191
  199
  208
  217
  227
  237
  248
  260
  272
  284
  298
  312
  327
  343
  359
Change in working capital, $m
  -7
  3
  4
  4
  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
  22
  23
Cash from operations, $m
  93
  117
  120
  122
  125
  128
  131
  135
  140
  144
  149
  148
  153
  159
  166
  173
  180
  187
  196
  204
  213
  223
  233
  244
  255
  267
  279
  292
  306
  321
  336
Maintenance CAPEX, $m
  0
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -46
  -48
  -50
  -52
  -55
  -58
New CAPEX, $m
  -40
  -5
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
Cash from investing activities, $m
  -40
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -55
  -57
  -60
  -63
  -65
  -69
  -73
  -76
  -80
  -83
  -88
  -93
Free cash flow, $m
  53
  94
  96
  97
  98
  100
  102
  105
  107
  110
  114
  111
  114
  119
  123
  128
  133
  138
  144
  150
  156
  163
  170
  178
  186
  194
  203
  213
  223
  233
  244
Issuance/(repayment) of debt, $m
  2
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
Issuance/(repurchase) of shares, $m
  -66
  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  
  -65
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
Total cash flow (excl. dividends), $m
  -12
  99
  102
  104
  106
  109
  112
  115
  119
  123
  127
  125
  130
  135
  140
  146
  152
  159
  165
  173
  180
  189
  197
  206
  216
  226
  236
  247
  259
  271
  284
Retained Cash Flow (-), $m
  35
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
  -71
Prev. year cash balance distribution, $m
 
  7
  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
 
  96
  91
  91
  92
  93
  95
  97
  99
  101
  104
  100
  103
  106
  110
  114
  118
  123
  127
  133
  138
  144
  150
  156
  163
  170
  178
  186
  195
  204
  213
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
 
  92
  83
  80
  76
  72
  69
  65
  62
  58
  54
  47
  44
  40
  37
  33
  30
  27
  23
  20
  18
  15
  12
  10
  8
  7
  5
  4
  3
  2
  2
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

Vitamin Shoppe, Inc., through its subsidiaries, operates as a multi-channel specialty retailer and contract manufacturer of nutritional products in the United States and internationally. It operates through three segments: Retail, Direct, and Manufacturing. The company provides custom manufacturing and private labeling services for VMS products, as well as develops and markets own branded products. It offers vitamins, minerals, herbs, specialty supplements, sports nutrition, and other health and wellness products of approximately 800 brands, including national brands comprising Optimum Nutrition, Cellucor, Garden of Life, Quest Nutrition, Solaray, Solgar, and Nature’s Way; and own brands, such as Vitamin Shoppe, BodyTech, True Athlete, Mytrition, plnt, ProBioCare, Next Step, Nutri-Force Sport, and Betancourt Nutrition. The company sells its products through Vitamin Shoppe, Super Supplements, and Vitapath retail stores; and catalogs, as well as through its vitaminshoppe.com Website. As of December 7, 2016, it operated approximately 750 company-operated retail stores; and 5 franchise stores in Guatemala, 4 franchise stores in Panama, 3 franchise stores in Costa Rica, and 2 franchise stores in Paraguay. The company was formerly known as VS Holdings, Inc. and changed its name to Vitamin Shoppe, Inc. in November 2009. Vitamin Shoppe, Inc. was founded in 1977 and is headquartered in Secaucus, New Jersey.

FINANCIAL RATIOS  of  Vitamin Shoppe (VSI)

Valuation Ratios
P/E Ratio 9.8
Price to Sales 0.2
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 2.6
Price to Free Cash Flow 4.6
Growth Rates
Sales Growth Rate 1.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.6%
Cap. Spend. - 3 Yr. Gr. Rate -1.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 27.5%
Total Debt to Equity 30%
Interest Coverage 10
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 8.2%
Return On Equity 5.5%
Return On Equity - 3 Yr. Avg. 9%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 33%
Gross Margin - 3 Yr. Avg. 33.1%
EBITDA Margin 6.1%
EBITDA Margin - 3 Yr. Avg. 9.1%
Operating Margin 3.5%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 2.8%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 30.6%
Eff/ Tax Rate - 3 Yr. Avg. 36.8%
Payout Ratio 0%

VSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VSI stock intrinsic value calculation we used $1267 million for the last fiscal year's total revenue generated by Vitamin Shoppe. The default revenue input number comes from 2016 income statement of Vitamin Shoppe. 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 VSI 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 VSI is calculated based on our internal credit rating of Vitamin Shoppe, 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 Vitamin Shoppe.
    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 VSI stock the variable cost ratio is equal to 91.5%.

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 VSI 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 Vitamin Shoppe.

Corporate tax rate of 27% is the nominal tax rate for Vitamin Shoppe. 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 VSI 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 VSI are equal to 18%.

Life of production assets of 12.4 years is the average useful life of capital assets used in Vitamin Shoppe 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 VSI is equal to 11.9%. 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 - $475 million for Vitamin Shoppe - 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 22.903 million for Vitamin Shoppe 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 Vitamin Shoppe at the current share price and the inputted number of shares is $0.2 billion.


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COMPANY NEWS

▶ Vitamin Shoppe misses 1Q profit forecasts   [06:16AM  Associated Press]
▶ Multiple Vitamin Shoppe Insiders Reduce Holdings   [Mar-13-17 03:26PM  GuruFocus.com]
▶ Vitamin Shoppe reports 4Q loss   [06:18AM  Associated Press]
▶ Is Chegg Inc (CHGG) A Good Stock To Buy Right Now?   [Dec-10-16 03:00PM  at Insider Monkey]
▶ Is Vitamin Shoppe Inc (VSI) Going to Burn These Hedge Funds?   [Dec-07-16 10:34PM  at Insider Monkey]
▶ Vitamin Shoppe, Inc. Announces International Expansion   [Aug-31-16 04:30PM  PR Newswire]
▶ Why GNC Holdings Inc. Stock Tumbled Today   [Jul-28-16 01:19PM  at Motley Fool]
Stock chart of VSI Financial statements of VSI Annual reports of VSI
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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