Intrinsic value of Bed Bath & Beyond Inc. - BBBY

Previous Close

$11.57

  Intrinsic Value

$92.14

stock screener

  Rating & Target

str. buy

+696%

Previous close

$11.57

 
Intrinsic value

$92.14

 
Up/down potential

+696%

 
Rating

str. buy

We calculate the intrinsic value of BBBY 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, %
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  12,670
  13,030
  13,428
  13,865
  14,339
  14,853
  15,406
  16,000
  16,635
  17,312
  18,032
  18,798
  19,611
  20,472
  21,383
  22,346
  23,364
  24,439
  25,573
  26,769
  28,029
  29,357
  30,755
  32,227
  33,777
  35,408
  37,123
  38,928
  40,825
  42,820
Variable operating expenses, $m
  11,487
  11,808
  12,163
  12,552
  12,975
  13,433
  13,926
  14,455
  15,021
  15,625
  16,077
  16,759
  17,484
  18,251
  19,064
  19,923
  20,830
  21,788
  22,799
  23,865
  24,989
  26,173
  27,419
  28,732
  30,114
  31,568
  33,097
  34,706
  36,397
  38,176
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
  11,487
  11,808
  12,163
  12,552
  12,975
  13,433
  13,926
  14,455
  15,021
  15,625
  16,077
  16,759
  17,484
  18,251
  19,064
  19,923
  20,830
  21,788
  22,799
  23,865
  24,989
  26,173
  27,419
  28,732
  30,114
  31,568
  33,097
  34,706
  36,397
  38,176
Operating income, $m
  1,183
  1,222
  1,265
  1,313
  1,364
  1,420
  1,480
  1,544
  1,613
  1,687
  1,956
  2,039
  2,127
  2,220
  2,319
  2,424
  2,534
  2,651
  2,774
  2,903
  3,040
  3,184
  3,336
  3,495
  3,663
  3,840
  4,026
  4,222
  4,428
  4,644
EBITDA, $m
  1,652
  1,699
  1,751
  1,808
  1,870
  1,937
  2,009
  2,087
  2,169
  2,258
  2,352
  2,451
  2,557
  2,670
  2,789
  2,914
  3,047
  3,187
  3,335
  3,491
  3,655
  3,828
  4,011
  4,203
  4,405
  4,618
  4,841
  5,077
  5,324
  5,584
Interest expense (income), $m
  81
  81
  86
  93
  100
  108
  117
  126
  136
  147
  159
  171
  184
  198
  213
  228
  245
  262
  281
  300
  321
  343
  365
  390
  415
  442
  470
  500
  531
  563
  598
Earnings before tax, $m
  1,103
  1,136
  1,172
  1,213
  1,256
  1,303
  1,354
  1,408
  1,466
  1,528
  1,785
  1,855
  1,929
  2,008
  2,091
  2,179
  2,272
  2,370
  2,473
  2,582
  2,697
  2,819
  2,946
  3,080
  3,222
  3,370
  3,527
  3,691
  3,864
  4,046
Tax expense, $m
  298
  307
  317
  327
  339
  352
  366
  380
  396
  413
  482
  501
  521
  542
  565
  588
  613
  640
  668
  697
  728
  761
  795
  832
  870
  910
  952
  997
  1,043
  1,093
Net income, $m
  805
  829
  856
  885
  917
  951
  988
  1,028
  1,070
  1,116
  1,303
  1,354
  1,408
  1,466
  1,526
  1,591
  1,658
  1,730
  1,806
  1,885
  1,969
  2,058
  2,151
  2,249
  2,352
  2,460
  2,575
  2,695
  2,821
  2,954

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
  7,224
  7,429
  7,656
  7,905
  8,175
  8,468
  8,784
  9,122
  9,484
  9,870
  10,281
  10,717
  11,181
  11,671
  12,191
  12,740
  13,321
  13,933
  14,580
  15,261
  15,980
  16,737
  17,534
  18,374
  19,257
  20,187
  21,165
  22,194
  23,275
  24,413
Adjusted assets (=assets-cash), $m
  7,224
  7,429
  7,656
  7,905
  8,175
  8,468
  8,784
  9,122
  9,484
  9,870
  10,281
  10,717
  11,181
  11,671
  12,191
  12,740
  13,321
  13,933
  14,580
  15,261
  15,980
  16,737
  17,534
  18,374
  19,257
  20,187
  21,165
  22,194
  23,275
  24,413
Revenue / Adjusted assets
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
  1.754
Average production assets, $m
  2,281
  2,345
  2,417
  2,496
  2,581
  2,674
  2,773
  2,880
  2,994
  3,116
  3,246
  3,384
  3,530
  3,685
  3,849
  4,022
  4,206
  4,399
  4,603
  4,818
  5,045
  5,284
  5,536
  5,801
  6,080
  6,373
  6,682
  7,007
  7,349
  7,708
Working capital, $m
  1,115
  1,147
  1,182
  1,220
  1,262
  1,307
  1,356
  1,408
  1,464
  1,523
  1,587
  1,654
  1,726
  1,802
  1,882
  1,966
  2,056
  2,151
  2,250
  2,356
  2,467
  2,583
  2,706
  2,836
  2,972
  3,116
  3,267
  3,426
  3,593
  3,768
Total debt, $m
  1,602
  1,723
  1,857
  2,004
  2,163
  2,336
  2,522
  2,722
  2,935
  3,163
  3,406
  3,663
  3,936
  4,226
  4,533
  4,857
  5,199
  5,561
  5,942
  6,344
  6,768
  7,215
  7,685
  8,180
  8,702
  9,250
  9,827
  10,434
  11,072
  11,744
Total liabilities, $m
  4,262
  4,383
  4,517
  4,664
  4,823
  4,996
  5,182
  5,382
  5,595
  5,823
  6,066
  6,323
  6,597
  6,886
  7,193
  7,517
  7,859
  8,221
  8,602
  9,004
  9,428
  9,875
  10,345
  10,840
  11,362
  11,910
  12,487
  13,094
  13,733
  14,404
Total equity, $m
  2,962
  3,046
  3,139
  3,241
  3,352
  3,472
  3,601
  3,740
  3,888
  4,047
  4,215
  4,394
  4,584
  4,785
  4,998
  5,223
  5,461
  5,713
  5,978
  6,257
  6,552
  6,862
  7,189
  7,533
  7,895
  8,277
  8,678
  9,099
  9,543
  10,009
Total liabilities and equity, $m
  7,224
  7,429
  7,656
  7,905
  8,175
  8,468
  8,783
  9,122
  9,483
  9,870
  10,281
  10,717
  11,181
  11,671
  12,191
  12,740
  13,320
  13,934
  14,580
  15,261
  15,980
  16,737
  17,534
  18,373
  19,257
  20,187
  21,165
  22,193
  23,276
  24,413
Debt-to-equity ratio
  0.540
  0.570
  0.590
  0.620
  0.650
  0.670
  0.700
  0.730
  0.750
  0.780
  0.810
  0.830
  0.860
  0.880
  0.910
  0.930
  0.950
  0.970
  0.990
  1.010
  1.030
  1.050
  1.070
  1.090
  1.100
  1.120
  1.130
  1.150
  1.160
  1.170
Adjusted equity ratio
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  805
  829
  856
  885
  917
  951
  988
  1,028
  1,070
  1,116
  1,303
  1,354
  1,408
  1,466
  1,526
  1,591
  1,658
  1,730
  1,806
  1,885
  1,969
  2,058
  2,151
  2,249
  2,352
  2,460
  2,575
  2,695
  2,821
  2,954
Depreciation, amort., depletion, $m
  469
  477
  486
  495
  506
  517
  529
  542
  556
  571
  396
  413
  430
  449
  469
  491
  513
  536
  561
  588
  615
  644
  675
  707
  741
  777
  815
  855
  896
  940
Funds from operations, $m
  1,274
  1,306
  1,342
  1,380
  1,423
  1,468
  1,517
  1,570
  1,626
  1,686
  1,699
  1,767
  1,839
  1,915
  1,996
  2,081
  2,171
  2,266
  2,367
  2,473
  2,584
  2,702
  2,826
  2,956
  3,093
  3,238
  3,389
  3,549
  3,717
  3,894
Change in working capital, $m
  28
  32
  35
  38
  42
  45
  49
  52
  56
  60
  63
  67
  71
  76
  80
  85
  90
  95
  100
  105
  111
  117
  123
  130
  136
  143
  151
  159
  167
  176
Cash from operations, $m
  1,246
  1,274
  1,307
  1,342
  1,381
  1,423
  1,469
  1,518
  1,571
  1,627
  1,635
  1,699
  1,767
  1,839
  1,916
  1,996
  2,082
  2,172
  2,267
  2,368
  2,473
  2,585
  2,703
  2,827
  2,957
  3,094
  3,239
  3,390
  3,550
  3,718
Maintenance CAPEX, $m
  -272
  -278
  -286
  -295
  -304
  -315
  -326
  -338
  -351
  -365
  -380
  -396
  -413
  -430
  -449
  -469
  -491
  -513
  -536
  -561
  -588
  -615
  -644
  -675
  -707
  -741
  -777
  -815
  -855
  -896
New CAPEX, $m
  -54
  -65
  -72
  -79
  -85
  -92
  -100
  -107
  -114
  -122
  -130
  -138
  -146
  -155
  -164
  -173
  -183
  -193
  -204
  -215
  -227
  -239
  -252
  -265
  -279
  -294
  -309
  -325
  -342
  -359
Cash from investing activities, $m
  -326
  -343
  -358
  -374
  -389
  -407
  -426
  -445
  -465
  -487
  -510
  -534
  -559
  -585
  -613
  -642
  -674
  -706
  -740
  -776
  -815
  -854
  -896
  -940
  -986
  -1,035
  -1,086
  -1,140
  -1,197
  -1,255
Free cash flow, $m
  920
  932
  949
  969
  991
  1,016
  1,043
  1,073
  1,105
  1,140
  1,126
  1,166
  1,208
  1,254
  1,302
  1,354
  1,408
  1,466
  1,527
  1,591
  1,659
  1,731
  1,807
  1,886
  1,971
  2,059
  2,152
  2,251
  2,354
  2,463
Issuance/(repayment) of debt, $m
  110
  121
  134
  147
  160
  173
  186
  200
  213
  228
  242
  258
  273
  290
  306
  324
  342
  361
  381
  402
  424
  447
  470
  495
  521
  549
  577
  607
  638
  671
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  110
  121
  134
  147
  160
  173
  186
  200
  213
  228
  242
  258
  273
  290
  306
  324
  342
  361
  381
  402
  424
  447
  470
  495
  521
  549
  577
  607
  638
  671
Total cash flow (excl. dividends), $m
  1,030
  1,053
  1,083
  1,115
  1,151
  1,189
  1,229
  1,273
  1,319
  1,368
  1,368
  1,423
  1,482
  1,543
  1,609
  1,678
  1,750
  1,827
  1,908
  1,993
  2,083
  2,177
  2,277
  2,382
  2,492
  2,608
  2,730
  2,858
  2,992
  3,134
Retained Cash Flow (-), $m
  -73
  -84
  -93
  -102
  -111
  -120
  -129
  -139
  -148
  -158
  -168
  -179
  -190
  -201
  -213
  -225
  -238
  -251
  -265
  -280
  -295
  -310
  -327
  -344
  -362
  -381
  -401
  -422
  -444
  -466
Prev. year cash balance distribution, $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 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
  957
  968
  990
  1,013
  1,040
  1,069
  1,100
  1,134
  1,170
  1,209
  1,200
  1,244
  1,292
  1,342
  1,396
  1,452
  1,512
  1,576
  1,643
  1,714
  1,788
  1,867
  1,950
  2,037
  2,130
  2,227
  2,329
  2,436
  2,549
  2,668
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
  917
  887
  861
  834
  806
  776
  743
  709
  672
  634
  570
  531
  491
  451
  410
  369
  329
  290
  253
  218
  185
  155
  128
  104
  83
  65
  50
  38
  28
  20
Current shareholders' claim on cash, %
  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

Bed Bath & Beyond Inc. is a retailer, which operates under the names Bed Bath & Beyond (BBB), Christmas Tree Shops, Christmas Tree Shops andThat! or andThat! (collectively, CTS), Harmon or Harmon Face Values (collectively, Harmon), buybuy BABY (Baby) and World Market, Cost Plus World Market or Cost Plus (collectively, Cost Plus World Market). The Company operates in two segments: North American Retail and Institutional Sales. The Company sells a range of domestics merchandise and home furnishings. Domestics merchandise includes categories, such as bed linens and related items, bath items and kitchen textiles. Home furnishings include categories, such as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables and juvenile products. The Company operates approximately 1,530 stores plus its various Websites, other interactive platforms and distribution facilities.

FINANCIAL RATIOS  of  Bed Bath & Beyond Inc. (BBBY)

Valuation Ratios
P/E Ratio 2.5
Price to Sales 0.1
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 1.6
Price to Free Cash Flow 2.5
Growth Rates
Sales Growth Rate 0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 14%
Cap. Spend. - 3 Yr. Gr. Rate 3.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 54.9%
Total Debt to Equity 54.9%
Interest Coverage 14
Management Effectiveness
Return On Assets 11.1%
Ret/ On Assets - 3 Yr. Avg. 13.2%
Return On Total Capital 16.6%
Ret/ On T. Cap. - 3 Yr. Avg. 20.1%
Return On Equity 26%
Return On Equity - 3 Yr. Avg. 28.8%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 37.5%
Gross Margin - 3 Yr. Avg. 38.2%
EBITDA Margin 11.8%
EBITDA Margin - 3 Yr. Avg. 13.6%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 8.7%
Pre-Tax Margin - 3 Yr. Avg. 10.8%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 6.9%
Effective Tax Rate 35.7%
Eff/ Tax Rate - 3 Yr. Avg. 36.2%
Payout Ratio 8.2%

BBBY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BBBY stock intrinsic value calculation we used $12349 million for the last fiscal year's total revenue generated by Bed Bath & Beyond Inc.. The default revenue input number comes from 0001 income statement of Bed Bath & Beyond Inc.. 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 BBBY stock valuation model: a) initial revenue growth rate of 2.6% 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 BBBY is calculated based on our internal credit rating of Bed Bath & Beyond Inc., 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 Bed Bath & Beyond Inc..
    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 BBBY stock the variable cost ratio is equal to 90.7%.

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 BBBY 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 5.4% for Bed Bath & Beyond Inc..

Corporate tax rate of 27% is the nominal tax rate for Bed Bath & Beyond Inc.. 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 BBBY 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 BBBY are equal to 18%.

Life of production assets of 8.2 years is the average useful life of capital assets used in Bed Bath & Beyond Inc. 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 BBBY is equal to 8.8%. 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 - $2888.628 million for Bed Bath & Beyond Inc. - 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 137.255 million for Bed Bath & Beyond Inc. 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 Bed Bath & Beyond Inc. at the current share price and the inputted number of shares is $1.6 billion.

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