Intrinsic value of Big 5 Sporting Goods Corporation - BGFV

Previous Close

$2.55

  Intrinsic Value

$7.12

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  Rating & Target

str. buy

+179%

Previous close

$2.55

 
Intrinsic value

$7.12

 
Up/down potential

+179%

 
Rating

str. buy

We calculate the intrinsic value of BGFV 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 0.1

 

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
  1,008
  1,031
  1,057
  1,087
  1,120
  1,156
  1,196
  1,238
  1,284
  1,334
  1,386
  1,443
  1,502
  1,566
  1,634
  1,705
  1,781
  1,861
  1,946
  2,035
  2,130
  2,229
  2,334
  2,444
  2,561
  2,683
  2,812
  2,948
  3,091
  3,241
Variable operating expenses, $m
  208
  213
  218
  224
  231
  238
  246
  254
  264
  273
  276
  288
  299
  312
  326
  340
  355
  371
  388
  406
  424
  444
  465
  487
  510
  535
  561
  588
  616
  646
Fixed operating expenses, $m
  819
  837
  855
  874
  893
  913
  933
  953
  974
  996
  1,018
  1,040
  1,063
  1,086
  1,110
  1,135
  1,160
  1,185
  1,211
  1,238
  1,265
  1,293
  1,321
  1,350
  1,380
  1,410
  1,441
  1,473
  1,506
  1,539
Total operating expenses, $m
  1,027
  1,050
  1,073
  1,098
  1,124
  1,151
  1,179
  1,207
  1,238
  1,269
  1,294
  1,328
  1,362
  1,398
  1,436
  1,475
  1,515
  1,556
  1,599
  1,644
  1,689
  1,737
  1,786
  1,837
  1,890
  1,945
  2,002
  2,061
  2,122
  2,185
Operating income, $m
  -19
  -19
  -16
  -11
  -4
  6
  17
  31
  46
  64
  92
  115
  140
  168
  198
  231
  266
  305
  347
  392
  440
  492
  547
  607
  670
  738
  810
  887
  969
  1,056
EBITDA, $m
  4
  5
  8
  14
  21
  31
  43
  58
  74
  93
  114
  137
  164
  192
  223
  257
  294
  334
  377
  424
  473
  527
  584
  645
  710
  780
  854
  933
  1,017
  1,107
Interest expense (income), $m
  1
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  29
  31
  33
Earnings before tax, $m
  -23
  -23
  -21
  -16
  -9
  0
  11
  24
  39
  56
  84
  106
  130
  157
  186
  218
  253
  290
  331
  375
  422
  472
  527
  585
  647
  713
  783
  858
  938
  1,024
Tax expense, $m
  0
  0
  0
  0
  0
  0
  3
  6
  11
  15
  23
  29
  35
  42
  50
  59
  68
  78
  89
  101
  114
  128
  142
  158
  175
  192
  211
  232
  253
  276
Net income, $m
  -23
  -23
  -21
  -16
  -9
  0
  8
  17
  28
  41
  61
  77
  95
  114
  136
  159
  184
  212
  242
  274
  308
  345
  384
  427
  472
  520
  572
  627
  685
  747

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
  428
  438
  449
  462
  476
  491
  508
  526
  545
  566
  589
  613
  638
  665
  694
  724
  756
  790
  826
  864
  904
  947
  991
  1,038
  1,087
  1,139
  1,194
  1,252
  1,312
  1,376
Adjusted assets (=assets-cash), $m
  428
  438
  449
  462
  476
  491
  508
  526
  545
  566
  589
  613
  638
  665
  694
  724
  756
  790
  826
  864
  904
  947
  991
  1,038
  1,087
  1,139
  1,194
  1,252
  1,312
  1,376
Revenue / Adjusted assets
  2.355
  2.354
  2.354
  2.353
  2.353
  2.354
  2.354
  2.354
  2.356
  2.357
  2.353
  2.354
  2.354
  2.355
  2.354
  2.355
  2.356
  2.356
  2.356
  2.355
  2.356
  2.354
  2.355
  2.355
  2.356
  2.356
  2.355
  2.355
  2.356
  2.355
Average production assets, $m
  79
  80
  82
  85
  87
  90
  93
  97
  100
  104
  108
  113
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
  241
  253
Working capital, $m
  173
  177
  182
  187
  193
  199
  206
  213
  221
  229
  238
  248
  258
  269
  281
  293
  306
  320
  335
  350
  366
  383
  401
  420
  440
  462
  484
  507
  532
  557
Total debt, $m
  77
  83
  89
  97
  105
  114
  123
  134
  145
  158
  171
  185
  199
  215
  232
  250
  268
  288
  309
  331
  355
  379
  405
  433
  461
  492
  524
  557
  593
  630
Total liabilities, $m
  249
  255
  262
  269
  277
  286
  296
  307
  318
  330
  343
  357
  372
  388
  404
  422
  441
  461
  482
  504
  527
  552
  578
  605
  634
  664
  696
  730
  765
  802
Total equity, $m
  178
  183
  187
  193
  198
  205
  212
  219
  227
  236
  245
  255
  266
  277
  289
  302
  315
  330
  345
  360
  377
  395
  413
  433
  453
  475
  498
  522
  547
  574
Total liabilities and equity, $m
  427
  438
  449
  462
  475
  491
  508
  526
  545
  566
  588
  612
  638
  665
  693
  724
  756
  791
  827
  864
  904
  947
  991
  1,038
  1,087
  1,139
  1,194
  1,252
  1,312
  1,376
Debt-to-equity ratio
  0.430
  0.450
  0.480
  0.500
  0.530
  0.560
  0.580
  0.610
  0.640
  0.670
  0.700
  0.720
  0.750
  0.780
  0.800
  0.830
  0.850
  0.870
  0.900
  0.920
  0.940
  0.960
  0.980
  1.000
  1.020
  1.030
  1.050
  1.070
  1.080
  1.100
Adjusted equity ratio
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -23
  -23
  -21
  -16
  -9
  0
  8
  17
  28
  41
  61
  77
  95
  114
  136
  159
  184
  212
  242
  274
  308
  345
  384
  427
  472
  520
  572
  627
  685
  747
Depreciation, amort., depletion, $m
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  22
  23
  23
  24
  25
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  51
Funds from operations, $m
  0
  1
  4
  9
  16
  25
  34
  44
  56
  70
  83
  100
  118
  139
  161
  186
  212
  241
  272
  305
  341
  380
  421
  465
  512
  562
  616
  673
  733
  798
Change in working capital, $m
  3
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
Cash from operations, $m
  -3
  -3
  -1
  4
  10
  19
  27
  37
  48
  61
  74
  90
  108
  128
  150
  173
  199
  227
  257
  290
  325
  363
  403
  446
  492
  541
  593
  649
  709
  772
Maintenance CAPEX, $m
  -15
  -16
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -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
Cash from investing activities, $m
  -17
  -18
  -18
  -18
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -28
  -29
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
Free cash flow, $m
  -20
  -21
  -19
  -15
  -9
  -1
  6
  15
  25
  37
  49
  64
  81
  99
  120
  142
  167
  193
  222
  253
  286
  322
  360
  401
  445
  492
  542
  595
  652
  712
Issuance/(repayment) of debt, $m
  5
  6
  7
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
Issuance/(repurchase) of shares, $m
  27
  27
  25
  21
  15
  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
Cash from financing (excl. dividends), $m  
  32
  33
  32
  28
  23
  16
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
Total cash flow (excl. dividends), $m
  11
  12
  13
  13
  14
  14
  16
  26
  37
  49
  62
  78
  96
  115
  137
  160
  185
  213
  243
  275
  309
  346
  386
  428
  473
  522
  573
  628
  687
  749
Retained Cash Flow (-), $m
  -27
  -27
  -25
  -21
  -15
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
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
  -16
  -15
  -13
  -8
  -1
  8
  9
  18
  29
  41
  52
  68
  85
  104
  125
  147
  172
  199
  228
  259
  293
  329
  367
  409
  453
  500
  551
  604
  662
  723
Discount rate, %
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
  -15
  -14
  -11
  -6
  -1
  5
  6
  10
  15
  19
  22
  25
  28
  29
  30
  30
  30
  28
  26
  24
  21
  19
  16
  13
  11
  9
  7
  5
  4
  3
Current shareholders' claim on cash, %
  82.0
  67.4
  56.3
  48.5
  43.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6
  41.6

Big 5 Sporting Goods Corporation is a sporting goods retailer in the western United States. The Company offers a range of products in a sporting goods store format. The Company also offers products online through its e-commerce platform. The Company's product mix includes athletic shoes, apparel and accessories, as well as a range of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, winter and summer recreation, and roller sports. The Company purchases merchandise from sporting goods equipment, athletic footwear and apparel manufacturers. It offers various brands, such as adidas, Coleman, Footjoy, JanSport, Rawlings, Spalding, Asics, Columbia, Franklin, Lifetime, Razor, Speedo, Bearpaw, Crocs, Gildan, Mizuno, Rollerblade and Timex. The Company operated 432 stores and an e-commerce platform under the name Big 5 Sporting Goods, as of January 1, 2017.

FINANCIAL RATIOS  of  Big 5 Sporting Goods Corporation (BGFV)

Valuation Ratios
P/E Ratio 3.3
Price to Sales 0.1
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 0.8
Price to Free Cash Flow 0.9
Growth Rates
Sales Growth Rate -0.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -44%
Cap. Spend. - 3 Yr. Gr. Rate -8.6%
Financial Strength
Quick Ratio 8
Current Ratio 0
LT Debt to Equity 5.9%
Total Debt to Equity 6.3%
Interest Coverage 29
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 8.4%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 31.7%
Gross Margin - 3 Yr. Avg. 31.8%
EBITDA Margin 4.7%
EBITDA Margin - 3 Yr. Avg. 4.8%
Operating Margin 2.8%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 39.3%
Eff/ Tax Rate - 3 Yr. Avg. 38.9%
Payout Ratio 64.7%

BGFV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BGFV stock intrinsic value calculation we used $988 million for the last fiscal year's total revenue generated by Big 5 Sporting Goods Corporation. The default revenue input number comes from 0001 income statement of Big 5 Sporting Goods Corporation. 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 BGFV 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 5%, whose default value for BGFV is calculated based on our internal credit rating of Big 5 Sporting Goods Corporation, 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 Big 5 Sporting Goods Corporation.
    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 BGFV stock the variable cost ratio is equal to 20.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $801 million in the base year in the intrinsic value calculation for BGFV 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 Big 5 Sporting Goods Corporation.

Corporate tax rate of 27% is the nominal tax rate for Big 5 Sporting Goods Corporation. 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 BGFV 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 BGFV are equal to 7.8%.

Life of production assets of 3.9 years is the average useful life of capital assets used in Big 5 Sporting Goods Corporation 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 BGFV is equal to 17.2%. 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 - $174.861 million for Big 5 Sporting Goods Corporation - 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 21.451 million for Big 5 Sporting Goods Corporation 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 Big 5 Sporting Goods Corporation at the current share price and the inputted number of shares is $0.1 billion.

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