Intrinsic value of Abercrombie & Fitch Company - ANF

Previous Close

$24.66

  Intrinsic Value

$17.30

stock screener

  Rating & Target

sell

-30%

Previous close

$24.66

 
Intrinsic value

$17.30

 
Up/down potential

-30%

 
Rating

sell

We calculate the intrinsic value of ANF 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 0001), $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 1.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  3,563
  3,645
  3,738
  3,844
  3,960
  4,088
  4,227
  4,378
  4,540
  4,715
  4,901
  5,100
  5,312
  5,537
  5,776
  6,029
  6,297
  6,580
  6,879
  7,195
  7,529
  7,881
  8,251
  8,642
  9,053
  9,487
  9,943
  10,422
  10,927
  11,458
Variable operating expenses, $m
  2,337
  2,391
  2,452
  2,521
  2,598
  2,682
  2,773
  2,872
  2,978
  3,093
  3,215
  3,346
  3,484
  3,632
  3,789
  3,955
  4,131
  4,316
  4,513
  4,720
  4,939
  5,170
  5,413
  5,669
  5,939
  6,223
  6,522
  6,837
  7,168
  7,516
Fixed operating expenses, $m
  1,179
  1,205
  1,232
  1,259
  1,287
  1,315
  1,344
  1,373
  1,404
  1,435
  1,466
  1,498
  1,531
  1,565
  1,599
  1,635
  1,671
  1,707
  1,745
  1,783
  1,823
  1,863
  1,904
  1,945
  1,988
  2,032
  2,077
  2,122
  2,169
  2,217
Total operating expenses, $m
  3,516
  3,596
  3,684
  3,780
  3,885
  3,997
  4,117
  4,245
  4,382
  4,528
  4,681
  4,844
  5,015
  5,197
  5,388
  5,590
  5,802
  6,023
  6,258
  6,503
  6,762
  7,033
  7,317
  7,614
  7,927
  8,255
  8,599
  8,959
  9,337
  9,733
Operating income, $m
  46
  48
  54
  63
  76
  91
  110
  133
  158
  187
  220
  256
  296
  340
  387
  439
  495
  556
  622
  692
  767
  848
  935
  1,027
  1,126
  1,231
  1,344
  1,463
  1,590
  1,725
EBITDA, $m
  206
  212
  222
  235
  253
  274
  300
  329
  362
  398
  439
  484
  534
  588
  646
  709
  778
  851
  930
  1,014
  1,105
  1,201
  1,305
  1,415
  1,532
  1,656
  1,789
  1,930
  2,079
  2,238
Interest expense (income), $m
  15
  17
  18
  19
  21
  22
  24
  27
  29
  32
  34
  37
  41
  44
  48
  51
  55
  60
  64
  69
  74
  80
  85
  91
  98
  104
  111
  119
  126
  135
  143
Earnings before tax, $m
  30
  31
  35
  43
  53
  67
  84
  104
  127
  153
  182
  215
  252
  292
  336
  384
  436
  492
  552
  618
  688
  763
  844
  930
  1,022
  1,120
  1,225
  1,336
  1,455
  1,581
Tax expense, $m
  8
  8
  9
  11
  14
  18
  23
  28
  34
  41
  49
  58
  68
  79
  91
  104
  118
  133
  149
  167
  186
  206
  228
  251
  276
  302
  331
  361
  393
  427
Net income, $m
  22
  22
  26
  31
  39
  49
  61
  76
  92
  112
  133
  157
  184
  213
  245
  280
  318
  359
  403
  451
  502
  557
  616
  679
  746
  818
  894
  976
  1,062
  1,154

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  2,201
  2,251
  2,309
  2,374
  2,446
  2,525
  2,611
  2,704
  2,804
  2,912
  3,027
  3,150
  3,281
  3,420
  3,567
  3,724
  3,889
  4,064
  4,249
  4,444
  4,650
  4,868
  5,097
  5,338
  5,592
  5,860
  6,141
  6,438
  6,749
  7,077
Adjusted assets (=assets-cash), $m
  2,201
  2,251
  2,309
  2,374
  2,446
  2,525
  2,611
  2,704
  2,804
  2,912
  3,027
  3,150
  3,281
  3,420
  3,567
  3,724
  3,889
  4,064
  4,249
  4,444
  4,650
  4,868
  5,097
  5,338
  5,592
  5,860
  6,141
  6,438
  6,749
  7,077
Revenue / Adjusted assets
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
  1.619
Average production assets, $m
  798
  816
  837
  861
  887
  916
  947
  981
  1,017
  1,056
  1,098
  1,142
  1,190
  1,240
  1,294
  1,350
  1,410
  1,474
  1,541
  1,612
  1,686
  1,765
  1,848
  1,936
  2,028
  2,125
  2,227
  2,335
  2,448
  2,567
Working capital, $m
  82
  84
  86
  88
  91
  94
  97
  101
  104
  108
  113
  117
  122
  127
  133
  139
  145
  151
  158
  165
  173
  181
  190
  199
  208
  218
  229
  240
  251
  264
Total debt, $m
  322
  347
  376
  409
  445
  485
  528
  574
  625
  679
  737
  798
  864
  934
  1,008
  1,086
  1,169
  1,257
  1,350
  1,448
  1,552
  1,661
  1,776
  1,897
  2,024
  2,159
  2,300
  2,449
  2,605
  2,770
Total liabilities, $m
  1,105
  1,130
  1,159
  1,192
  1,228
  1,268
  1,311
  1,357
  1,408
  1,462
  1,520
  1,581
  1,647
  1,717
  1,791
  1,869
  1,952
  2,040
  2,133
  2,231
  2,334
  2,444
  2,558
  2,680
  2,807
  2,941
  3,083
  3,232
  3,388
  3,553
Total equity, $m
  1,096
  1,121
  1,150
  1,182
  1,218
  1,257
  1,300
  1,347
  1,397
  1,450
  1,508
  1,569
  1,634
  1,703
  1,777
  1,854
  1,937
  2,024
  2,116
  2,213
  2,316
  2,424
  2,538
  2,658
  2,785
  2,918
  3,058
  3,206
  3,361
  3,524
Total liabilities and equity, $m
  2,201
  2,251
  2,309
  2,374
  2,446
  2,525
  2,611
  2,704
  2,805
  2,912
  3,028
  3,150
  3,281
  3,420
  3,568
  3,723
  3,889
  4,064
  4,249
  4,444
  4,650
  4,868
  5,096
  5,338
  5,592
  5,859
  6,141
  6,438
  6,749
  7,077
Debt-to-equity ratio
  0.290
  0.310
  0.330
  0.350
  0.370
  0.390
  0.410
  0.430
  0.450
  0.470
  0.490
  0.510
  0.530
  0.550
  0.570
  0.590
  0.600
  0.620
  0.640
  0.650
  0.670
  0.690
  0.700
  0.710
  0.730
  0.740
  0.750
  0.760
  0.780
  0.790
Adjusted equity ratio
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498
  0.498

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  22
  22
  26
  31
  39
  49
  61
  76
  92
  112
  133
  157
  184
  213
  245
  280
  318
  359
  403
  451
  502
  557
  616
  679
  746
  818
  894
  976
  1,062
  1,154
Depreciation, amort., depletion, $m
  160
  163
  167
  172
  177
  183
  189
  196
  203
  211
  220
  228
  238
  248
  259
  270
  282
  295
  308
  322
  337
  353
  370
  387
  406
  425
  445
  467
  490
  513
Funds from operations, $m
  181
  186
  193
  203
  216
  232
  250
  272
  296
  323
  353
  386
  422
  461
  504
  550
  600
  654
  711
  773
  839
  910
  985
  1,066
  1,151
  1,243
  1,340
  1,442
  1,552
  1,668
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
Cash from operations, $m
  180
  184
  191
  201
  214
  229
  247
  268
  292
  319
  348
  381
  417
  456
  499
  544
  594
  647
  705
  766
  832
  902
  977
  1,057
  1,142
  1,233
  1,329
  1,431
  1,540
  1,656
Maintenance CAPEX, $m
  -156
  -160
  -163
  -167
  -172
  -177
  -183
  -189
  -196
  -203
  -211
  -220
  -228
  -238
  -248
  -259
  -270
  -282
  -295
  -308
  -322
  -337
  -353
  -370
  -387
  -406
  -425
  -445
  -467
  -490
New CAPEX, $m
  -17
  -18
  -21
  -24
  -26
  -29
  -31
  -34
  -36
  -39
  -42
  -45
  -47
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -113
  -119
Cash from investing activities, $m
  -173
  -178
  -184
  -191
  -198
  -206
  -214
  -223
  -232
  -242
  -253
  -265
  -275
  -288
  -301
  -316
  -330
  -345
  -362
  -379
  -397
  -416
  -436
  -458
  -479
  -503
  -527
  -552
  -580
  -609
Free cash flow, $m
  7
  6
  7
  10
  15
  23
  33
  45
  60
  76
  96
  117
  141
  168
  197
  229
  264
  302
  343
  387
  435
  486
  541
  600
  663
  730
  802
  879
  960
  1,047
Issuance/(repayment) of debt, $m
  21
  25
  29
  33
  36
  40
  43
  47
  50
  54
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
  121
  128
  134
  141
  149
  157
  165
Issuance/(repurchase) of shares, $m
  0
  3
  3
  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
  0
  0
Cash from financing (excl. dividends), $m  
  21
  28
  32
  34
  36
  40
  43
  47
  50
  54
  58
  62
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
  121
  128
  134
  141
  149
  157
  165
Total cash flow (excl. dividends), $m
  28
  34
  39
  44
  51
  63
  76
  92
  110
  130
  153
  179
  207
  238
  271
  307
  347
  390
  436
  485
  538
  595
  656
  721
  790
  864
  943
  1,027
  1,117
  1,212
Retained Cash Flow (-), $m
  -22
  -25
  -29
  -32
  -36
  -39
  -43
  -46
  -50
  -54
  -57
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -127
  -133
  -140
  -148
  -155
  -163
Prev. year cash balance distribution, $m
  168
  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
  175
  9
  10
  11
  16
  23
  33
  45
  60
  77
  96
  118
  142
  168
  198
  230
  265
  302
  343
  388
  435
  487
  542
  601
  664
  731
  803
  880
  961
  1,048
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
  167
  8
  9
  9
  12
  17
  22
  28
  34
  40
  46
  50
  54
  56
  58
  58
  58
  56
  53
  49
  45
  40
  36
  31
  26
  21
  17
  14
  10
  8
Current shareholders' claim on cash, %
  100.0
  99.8
  99.6
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5

Abercrombie & Fitch Co. is a specialty retailer who primarily sells its products through store and direct-to-consumer operations, as well as through various wholesale, franchise and licensing arrangements. The Company operates through two segments: Abercrombie, which includes the Company's Abercrombie & Fitch and abercrombie kids brands, and Hollister, which includes the Company's Hollister and Gilly Hicks brands. The Company offers an array of apparel products, including knit tops, woven shirts, graphic t-shirts, fleece, sweaters, jeans, woven pants, shorts, outerwear, dresses, intimates and swimwear, and personal care products and accessories for men, women and kids under the Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands. The Company has operations in North America, Europe, Asia and the Middle East. As of January 28, 2017, the Company operated 709 stores in the United States and 189 stores outside of the United States.

FINANCIAL RATIOS  of  Abercrombie & Fitch Company (ANF)

Valuation Ratios
P/E Ratio 417.7
Price to Sales 0.5
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 38
Growth Rates
Sales Growth Rate -5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.4%
Cap. Spend. - 3 Yr. Gr. Rate -3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 21.2%
Total Debt to Equity 21.2%
Interest Coverage 1
Management Effectiveness
Return On Assets -1.5%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital 0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 1.8%
Return On Equity 0.3%
Return On Equity - 3 Yr. Avg. 2.1%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 61%
Gross Margin - 3 Yr. Avg. 61.4%
EBITDA Margin 6.2%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 0.5%
Oper. Margin - 3 Yr. Avg. 1.8%
Pre-Tax Margin -0.1%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 0.1%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 366.7%
Eff/ Tax Rate - 3 Yr. Avg. 147.7%
Payout Ratio 1350%

ANF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ANF stock intrinsic value calculation we used $3493 million for the last fiscal year's total revenue generated by Abercrombie & Fitch Company. The default revenue input number comes from 0001 income statement of Abercrombie & Fitch Company. 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 ANF 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 ANF is calculated based on our internal credit rating of Abercrombie & Fitch Company, 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 Abercrombie & Fitch Company.
    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 ANF stock the variable cost ratio is equal to 65.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1154 million in the base year in the intrinsic value calculation for ANF 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 5.5% for Abercrombie & Fitch Company.

Corporate tax rate of 27% is the nominal tax rate for Abercrombie & Fitch Company. 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 ANF 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 ANF are equal to 22.4%.

Life of production assets of 4 years is the average useful life of capital assets used in Abercrombie & Fitch Company 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 ANF is equal to 2.3%. 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 - $1242.379 million for Abercrombie & Fitch Company - 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 66.313 million for Abercrombie & Fitch Company 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 Abercrombie & Fitch Company at the current share price and the inputted number of shares is $1.6 billion.

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