Intrinsic value of Birks Group - BGI

Previous Close

$1.28

  Intrinsic Value

$0.54

stock screener

  Rating & Target

str. sell

-58%

Previous close

$1.28

 
Intrinsic value

$0.54

 
Up/down potential

-58%

 
Rating

str. sell

We calculate the intrinsic value of BGI 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 0.0

 

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
  117
  119
  122
  126
  130
  134
  138
  143
  149
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  236
  247
  258
  270
  283
  296
  311
  326
  341
  358
  375
Variable operating expenses, $m
  121
  124
  127
  130
  134
  138
  143
  148
  154
  160
  166
  172
  180
  187
  195
  204
  213
  222
  233
  243
  255
  266
  279
  292
  306
  321
  336
  352
  369
  387
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
  121
  124
  127
  130
  134
  138
  143
  148
  154
  160
  166
  172
  180
  187
  195
  204
  213
  222
  233
  243
  255
  266
  279
  292
  306
  321
  336
  352
  369
  387
Operating income, $m
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
EBITDA, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
Interest expense (income), $m
  8
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
Earnings before tax, $m
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
Tax expense, $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
Net income, $m
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25

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
  95
  98
  100
  103
  106
  110
  113
  117
  122
  126
  131
  137
  142
  148
  155
  162
  169
  176
  184
  193
  202
  211
  221
  232
  243
  254
  266
  279
  293
  307
Adjusted assets (=assets-cash), $m
  95
  98
  100
  103
  106
  110
  113
  117
  122
  126
  131
  137
  142
  148
  155
  162
  169
  176
  184
  193
  202
  211
  221
  232
  243
  254
  266
  279
  293
  307
Revenue / Adjusted assets
  1.232
  1.214
  1.220
  1.223
  1.226
  1.218
  1.221
  1.222
  1.221
  1.222
  1.221
  1.219
  1.225
  1.223
  1.219
  1.216
  1.219
  1.222
  1.223
  1.223
  1.223
  1.223
  1.222
  1.220
  1.218
  1.224
  1.226
  1.222
  1.222
  1.221
Average production assets, $m
  15
  16
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
Working capital, $m
  49
  50
  52
  53
  55
  57
  59
  61
  63
  65
  68
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  120
  125
  131
  138
  144
  151
  159
Total debt, $m
  37
  38
  40
  42
  44
  47
  50
  53
  56
  59
  63
  67
  71
  75
  80
  85
  90
  96
  101
  108
  114
  121
  128
  136
  144
  152
  161
  171
  181
  191
Total liabilities, $m
  70
  71
  73
  75
  77
  80
  83
  86
  89
  92
  96
  100
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  161
  169
  177
  186
  194
  204
  214
  224
Total equity, $m
  26
  26
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  63
  66
  69
  72
  75
  79
  83
Total liabilities and equity, $m
  96
  97
  100
  103
  106
  110
  114
  118
  122
  126
  131
  137
  142
  148
  155
  162
  169
  177
  185
  193
  201
  211
  221
  232
  243
  255
  266
  279
  293
  307
Debt-to-equity ratio
  1.420
  1.450
  1.480
  1.510
  1.550
  1.580
  1.620
  1.660
  1.700
  1.730
  1.770
  1.810
  1.840
  1.880
  1.910
  1.950
  1.980
  2.010
  2.040
  2.070
  2.100
  2.120
  2.150
  2.170
  2.200
  2.220
  2.240
  2.260
  2.290
  2.300
Adjusted equity ratio
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
Depreciation, amort., depletion, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Funds from operations, $m
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
Change in working capital, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Cash from operations, $m
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
Maintenance CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
New CAPEX, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -2
  -2
  -2
  -2
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
Free cash flow, $m
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
Issuance/(repayment) of debt, $m
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Issuance/(repurchase) of shares, $m
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
Cash from financing (excl. dividends), $m  
  9
  9
  10
  10
  10
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  22
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  38
  39
Total cash flow (excl. dividends), $m
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
Retained Cash Flow (-), $m
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
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
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Discount rate, %
  10.20
  10.71
  11.25
  11.81
  12.40
  13.02
  13.67
  14.35
  15.07
  15.82
  16.61
  17.45
  18.32
  19.23
  20.20
  21.21
  22.27
  23.38
  24.55
  25.77
  27.06
  28.42
  29.84
  31.33
  32.90
  34.54
  36.27
  38.08
  39.99
  41.98
PV of cash for distribution, $m
  -5
  -5
  -5
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  71.0
  50.4
  35.6
  25.0
  17.5
  12.2
  8.4
  5.8
  4.0
  2.7
  1.9
  1.3
  0.9
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
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Birks Group Inc is a Canada-based company engaged in designing, developing, making and retail of jewelry, timepieces and gifts. The Company operates through two segments: Retail and Other. The Company's Retail segment consists of all its retail operations in the United States and Canada on a combined basis. As of October 23, 2017, the Retail segment operated 28 stores across Canada under the Birks brand, as well as two retail locations in Calgary and Vancouver under the Brinkhaus brand. The Company's Other segment consists primarily of its e-commerce business, gold exchange business, which purchases gold and other precious metals from clients and refines the metals purchased, and wholesale business. The Company's merchandise includes designer jewelry, diamond, gemstone and precious metal jewelry.

FINANCIAL RATIOS  of  Birks Group (BGI)

Valuation Ratios
P/E Ratio 4.6
Price to Sales 0.1
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 3.3
Price to Free Cash Flow 11.5
Growth Rates
Sales Growth Rate 0.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -28.6%
Cap. Spend. - 3 Yr. Gr. Rate -6.5%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 238.5%
Total Debt to Equity 800%
Interest Coverage 1
Management Effectiveness
Return On Assets 7.2%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 47.6%
Return On Equity - 3 Yr. Avg. 10.9%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 37.6%
Gross Margin - 3 Yr. Avg. 38.3%
EBITDA Margin 4.5%
EBITDA Margin - 3 Yr. Avg. 4.4%
Operating Margin 2.8%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. -0.4%
Net Profit Margin 1.7%
Net Profit Margin - 3 Yr. Avg. 0.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

BGI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BGI stock intrinsic value calculation we used $114.378 million for the last fiscal year's total revenue generated by Birks Group. The default revenue input number comes from 0001 income statement of Birks 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 BGI 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 10.2%, whose default value for BGI is calculated based on our internal credit rating of Birks 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 Birks 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 BGI stock the variable cost ratio is equal to 103.5%.

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 BGI 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 7.2% for Birks Group.

Corporate tax rate of 27% is the nominal tax rate for Birks 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 BGI 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 BGI are equal to 13%.

Life of production assets of 6.4 years is the average useful life of capital assets used in Birks 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 BGI is equal to 42.3%. 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 - $25.187 million for Birks 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 10.243 million for Birks 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 Birks Group at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
DGSE DGSE Cos. 0.520 1.06  str.buy
SIG Signet Jeweler 55.35 140.29  str.buy
TIF Tiffany& 109.10 159.95  buy

COMPANY NEWS

▶ Birks Group closes new term loan with Crystal   [Jul-09-18 05:00PM  CNW Group]
▶ Birks Group Reports Fiscal 2018 Results   [Jul-03-18 08:55AM  CNW Group]
▶ Birks launches u·plan in Canada   [Mar-23-18 09:00AM  PR Newswire]
▶ Birks launches u·plan in Canada   [09:00AM  CNW Group]
▶ Birks unveils the first 200 diamonds from Quebec   [May-11-17 08:00AM  PR Newswire]
▶ Birks Group reports mid-year results   [Nov-16-16 09:00AM  PR Newswire]
▶ Birks Group reports mid-year results   [09:00AM  CNW Group]
▶ Birks Group Reports Mid-Year Results   [09:00AM  Business Wire]
▶ Penny Stocks to Watch for September 2016 (BGI)   [Sep-01-16 12:32PM  Investopedia]
▶ Birks Group Announces a Turnaround in Fiscal Year 2016:   [Jul-05-16 10:35AM  Business Wire]
▶ National Post Article   [Jul-11  05:09PM  Business Wire]
▶ Skadden Tops H1 Global M&A Rankings: Business of Law   [Jul-08  02:51PM  at Bloomberg]
▶ Bird & Bird Links to Indonesian Firms: Business of Law   [Jun-26  12:00AM  at Bloomberg]
▶ Birks Group reports Q3 revenue $94.5M vs. $101.4M a year ago   [Jan-14  04:05PM  theflyonthewall.com]
▶ HEAT, Mayors Jewelers Unveil Sparkling Partnership   [Dec-05  12:56PM  PR Newswire]
▶ Birks & Mayors Announces a Corporate Name Change   [Sep-30  02:13PM  Business Wire]
▶ Birks & Mayors Announces a $4.8 Million New Financing   [Aug-12  02:05PM  Business Wire]
▶ Birks & Mayors Announces New Financings   [Jul-31  12:44PM  Business Wire]

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