Intrinsic value of Weyco Group - WEYS

Previous Close

$28.19

  Intrinsic Value

$13.80

stock screener

  Rating & Target

str. sell

-51%

Previous close

$28.19

 
Intrinsic value

$13.80

 
Up/down potential

-51%

 
Rating

str. sell

We calculate the intrinsic value of WEYS 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 0.3

 

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, %
  -7.48
  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
  297
  303
  310
  318
  327
  337
  348
  359
  372
  386
  401
  417
  434
  452
  471
  491
  513
  535
  559
  585
  612
  640
  670
  702
  735
  770
  807
  845
  886
  929
  974
Variable operating expenses, $m
 
  190
  194
  199
  204
  211
  217
  225
  233
  241
  251
  259
  270
  281
  293
  306
  319
  333
  348
  364
  381
  398
  417
  437
  457
  479
  502
  526
  551
  578
  606
Fixed operating expenses, $m
 
  94
  97
  99
  102
  104
  107
  109
  112
  115
  118
  121
  124
  127
  130
  133
  137
  140
  143
  147
  151
  155
  158
  162
  166
  171
  175
  179
  184
  188
  193
Total operating expenses, $m
  276
  284
  291
  298
  306
  315
  324
  334
  345
  356
  369
  380
  394
  408
  423
  439
  456
  473
  491
  511
  532
  553
  575
  599
  623
  650
  677
  705
  735
  766
  799
Operating income, $m
  21
  19
  19
  20
  21
  22
  23
  25
  27
  30
  33
  37
  40
  44
  48
  52
  57
  62
  68
  74
  80
  87
  95
  103
  111
  120
  130
  140
  151
  163
  175
EBITDA, $m
  25
  24
  24
  25
  26
  27
  29
  31
  33
  35
  38
  42
  45
  49
  53
  58
  63
  68
  74
  81
  87
  95
  102
  111
  120
  129
  139
  150
  161
  173
  186
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
Earnings before tax, $m
  22
  19
  19
  20
  21
  22
  23
  25
  27
  29
  32
  36
  39
  43
  47
  51
  56
  61
  66
  72
  78
  85
  92
  100
  108
  117
  126
  136
  147
  158
  170
Tax expense, $m
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
Net income, $m
  16
  14
  14
  14
  15
  16
  17
  18
  20
  21
  23
  26
  29
  31
  34
  37
  41
  44
  48
  53
  57
  62
  67
  73
  79
  85
  92
  100
  107
  116
  124

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  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
  268
  255
  261
  268
  275
  283
  293
  303
  313
  325
  337
  351
  365
  380
  396
  413
  431
  451
  471
  492
  515
  539
  564
  591
  619
  648
  679
  712
  746
  782
  820
Adjusted assets (=assets-cash), $m
  250
  255
  261
  268
  275
  283
  293
  303
  313
  325
  337
  351
  365
  380
  396
  413
  431
  451
  471
  492
  515
  539
  564
  591
  619
  648
  679
  712
  746
  782
  820
Revenue / Adjusted assets
  1.188
  1.188
  1.188
  1.187
  1.189
  1.191
  1.188
  1.185
  1.188
  1.188
  1.190
  1.188
  1.189
  1.189
  1.189
  1.189
  1.190
  1.186
  1.187
  1.189
  1.188
  1.187
  1.188
  1.188
  1.187
  1.188
  1.189
  1.187
  1.188
  1.188
  1.188
Average production assets, $m
  69
  70
  72
  74
  76
  78
  81
  83
  86
  90
  93
  97
  101
  105
  109
  114
  119
  124
  130
  136
  142
  149
  155
  163
  170
  179
  187
  196
  206
  216
  226
Working capital, $m
  117
  105
  108
  110
  113
  117
  121
  125
  129
  134
  139
  145
  150
  157
  163
  170
  178
  186
  194
  203
  212
  222
  233
  243
  255
  267
  280
  293
  308
  322
  338
Total debt, $m
  4
  1
  3
  4
  6
  8
  11
  13
  16
  19
  22
  25
  29
  32
  36
  41
  45
  50
  55
  60
  66
  72
  78
  84
  91
  99
  106
  114
  123
  132
  141
Total liabilities, $m
  67
  63
  65
  66
  68
  70
  73
  75
  78
  81
  84
  87
  91
  94
  98
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  161
  168
  176
  185
  194
  203
Total equity, $m
  202
  192
  196
  201
  207
  213
  220
  228
  236
  244
  254
  264
  274
  286
  298
  311
  324
  339
  354
  370
  387
  405
  424
  444
  465
  487
  511
  535
  561
  588
  617
Total liabilities and equity, $m
  269
  255
  261
  267
  275
  283
  293
  303
  314
  325
  338
  351
  365
  380
  396
  414
  431
  451
  471
  492
  515
  539
  564
  590
  618
  648
  679
  711
  746
  782
  820
Debt-to-equity ratio
  0.020
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
Adjusted equity ratio
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  14
  14
  14
  15
  16
  17
  18
  20
  21
  23
  26
  29
  31
  34
  37
  41
  44
  48
  53
  57
  62
  67
  73
  79
  85
  92
  100
  107
  116
  124
Depreciation, amort., depletion, $m
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
Funds from operations, $m
  72
  18
  19
  19
  20
  21
  22
  23
  25
  27
  29
  31
  34
  36
  40
  43
  47
  50
  55
  59
  64
  69
  75
  81
  87
  94
  102
  109
  118
  126
  136
Change in working capital, $m
  25
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
Cash from operations, $m
  47
  16
  16
  16
  17
  17
  18
  19
  21
  22
  24
  26
  28
  30
  33
  36
  39
  43
  46
  50
  55
  60
  65
  70
  76
  82
  89
  96
  103
  111
  120
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -4
  -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
  -11
New CAPEX, $m
  -6
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
Cash from investing activities, $m
  -7
  -4
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
Free cash flow, $m
  40
  12
  11
  11
  11
  11
  12
  13
  14
  15
  16
  17
  19
  21
  23
  26
  28
  31
  35
  38
  42
  46
  50
  55
  60
  66
  71
  78
  84
  91
  99
Issuance/(repayment) of debt, $m
  -28
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
Issuance/(repurchase) of shares, $m
  -8
  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  
  -35
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
Total cash flow (excl. dividends), $m
  5
  13
  13
  13
  13
  13
  14
  15
  16
  18
  19
  21
  23
  25
  27
  30
  33
  36
  40
  43
  47
  52
  57
  62
  67
  73
  79
  86
  93
  100
  108
Retained Cash Flow (-), $m
  -4
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
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
 
  23
  8
  8
  7
  7
  7
  8
  8
  9
  10
  11
  12
  13
  15
  17
  19
  22
  24
  27
  30
  34
  38
  42
  46
  51
  56
  61
  67
  73
  80
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
 
  22
  8
  7
  6
  6
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
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

Weyco Group, Inc. is engaged in the design and distribution of footwear. The Company designs and markets footwear for men, women and children. The Company operates through two segments: the North American wholesale segment (wholesale) and the North American retail segment (retail). The Company also has other wholesale and retail businesses overseas, which include its businesses in Australia, South Africa and Asia Pacific (collectively known as Florsheim Australia), and its wholesale and retail businesses in Europe (Florsheim Europe). Its products consist of leather dress shoes and casual footwear composed of man-made materials or leather. In addition, the Company offers outdoor boots, shoes and sandals. As of December 31, 2016, the Company's shoes were marketed throughout the United States and Canada in over 10,000 shoe, clothing and department stores. As of December 31, 2016, the retail segment consisted of 13 Company-operated stores and an Internet business in the United States.

FINANCIAL RATIOS  of  Weyco Group (WEYS)

Valuation Ratios
P/E Ratio 18.5
Price to Sales 1
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate -7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 200%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 2%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 7.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.5%
Return On Equity 8%
Return On Equity - 3 Yr. Avg. 9.1%
Asset Turnover 1
Profitability Ratios
Gross Margin 37.7%
Gross Margin - 3 Yr. Avg. 38.1%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. 10%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 22.7%
Eff/ Tax Rate - 3 Yr. Avg. 32%
Payout Ratio 56.3%

WEYS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WEYS stock intrinsic value calculation we used $297 million for the last fiscal year's total revenue generated by Weyco Group. The default revenue input number comes from 2016 income statement of Weyco 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 WEYS 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 WEYS is calculated based on our internal credit rating of Weyco 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 Weyco 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 WEYS stock the variable cost ratio is equal to 62.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $92 million in the base year in the intrinsic value calculation for WEYS 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 Weyco Group.

Corporate tax rate of 27% is the nominal tax rate for Weyco 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 WEYS 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 WEYS are equal to 23.2%.

Life of production assets of 20 years is the average useful life of capital assets used in Weyco 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 WEYS is equal to 34.7%. 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 - $202 million for Weyco 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 10.237 million for Weyco 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 Weyco Group at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Weyco Reports Second Quarter Sales And Earnings   [Aug-08-17 04:05PM  PR Newswire]
▶ LD Micro Index Reconstitution as of August 1, 2017   [Aug-01-17 09:40AM  ACCESSWIRE]
▶ New Strong Sell Stocks for May 9th   [May-09-17 10:57AM  Zacks]
▶ Weyco posts 1Q profit   [May-02-17 06:47PM  Associated Press]
▶ Weyco posts 4Q profit   [Mar-08-17 06:00PM  Associated Press]
▶ ETFs with exposure to Weyco Group, Inc. : January 6, 2017   [Jan-06-17 12:19PM  Capital Cube]
▶ Weyco reports a 13% drop in sales   [Nov-07-16 06:30PM  at bizjournals.com]
▶ Profits flat, sales up 4% for Florsheim, BOGS designer Weyco   [Nov-02  05:10PM  at bizjournals.com]
▶ 10-Q for Weyco Group, Inc.   [Aug-09  08:13PM  at Company Spotlight]
▶ 10-Q for Weyco Group, Inc.   [May-09  08:09PM  at Company Spotlight]
▶ 10-K for Weyco Group, Inc.   [May-06  08:12PM  at Company Spotlight]
Financial statements of WEYS
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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