Intrinsic value of Biglari Holdings Inc. - BH

Previous Close

$137.61

  Intrinsic Value

$60.74

stock screener

  Rating & Target

str. sell

-56%

Previous close

$137.61

 
Intrinsic value

$60.74

 
Up/down potential

-56%

 
Rating

str. sell

We calculate the intrinsic value of BH 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 0.3

 

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
  826
  845
  867
  891
  918
  948
  980
  1,015
  1,053
  1,093
  1,136
  1,183
  1,232
  1,284
  1,339
  1,398
  1,460
  1,526
  1,595
  1,669
  1,746
  1,827
  1,913
  2,004
  2,099
  2,200
  2,306
  2,417
  2,534
  2,657
Variable operating expenses, $m
  717
  733
  752
  773
  796
  822
  849
  879
  912
  947
  977
  1,017
  1,059
  1,104
  1,151
  1,202
  1,255
  1,312
  1,371
  1,434
  1,501
  1,571
  1,645
  1,723
  1,805
  1,891
  1,982
  2,078
  2,178
  2,284
Fixed operating expenses, $m
  115
  118
  121
  123
  126
  129
  132
  134
  137
  140
  144
  147
  150
  153
  157
  160
  164
  167
  171
  175
  178
  182
  186
  191
  195
  199
  203
  208
  212
  217
Total operating expenses, $m
  832
  851
  873
  896
  922
  951
  981
  1,013
  1,049
  1,087
  1,121
  1,164
  1,209
  1,257
  1,308
  1,362
  1,419
  1,479
  1,542
  1,609
  1,679
  1,753
  1,831
  1,914
  2,000
  2,090
  2,185
  2,286
  2,390
  2,501
Operating income, $m
  -6
  -6
  -6
  -5
  -4
  -2
  -1
  1
  4
  6
  16
  19
  23
  27
  31
  36
  41
  47
  53
  60
  67
  74
  82
  91
  100
  110
  120
  131
  143
  156
EBITDA, $m
  18
  19
  20
  21
  23
  25
  27
  30
  33
  37
  40
  45
  50
  55
  60
  66
  73
  80
  87
  96
  104
  114
  123
  134
  145
  157
  170
  184
  198
  213
Interest expense (income), $m
  0
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
Earnings before tax, $m
  -25
  -26
  -26
  -27
  -27
  -26
  -26
  -25
  -25
  -24
  -16
  -14
  -13
  -11
  -9
  -6
  -4
  -1
  2
  6
  10
  14
  18
  23
  28
  34
  40
  46
  53
  61
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  11
  12
  14
  16
Net income, $m
  -25
  -26
  -26
  -27
  -27
  -26
  -26
  -25
  -25
  -24
  -16
  -14
  -13
  -11
  -9
  -6
  -4
  -1
  2
  4
  7
  10
  13
  17
  21
  25
  29
  34
  39
  44

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
  1,050
  1,074
  1,102
  1,133
  1,167
  1,205
  1,246
  1,290
  1,338
  1,389
  1,444
  1,503
  1,565
  1,631
  1,702
  1,776
  1,855
  1,939
  2,027
  2,120
  2,218
  2,322
  2,431
  2,546
  2,668
  2,795
  2,930
  3,071
  3,220
  3,376
Adjusted assets (=assets-cash), $m
  1,050
  1,074
  1,102
  1,133
  1,167
  1,205
  1,246
  1,290
  1,338
  1,389
  1,444
  1,503
  1,565
  1,631
  1,702
  1,776
  1,855
  1,939
  2,027
  2,120
  2,218
  2,322
  2,431
  2,546
  2,668
  2,795
  2,930
  3,071
  3,220
  3,376
Revenue / Adjusted assets
  0.787
  0.787
  0.787
  0.786
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
  0.787
Average production assets, $m
  326
  333
  342
  351
  362
  374
  386
  400
  415
  431
  448
  466
  485
  506
  528
  551
  575
  601
  629
  657
  688
  720
  754
  790
  827
  867
  908
  952
  998
  1,047
Working capital, $m
  -87
  -89
  -91
  -94
  -96
  -100
  -103
  -107
  -111
  -115
  -119
  -124
  -129
  -135
  -141
  -147
  -153
  -160
  -168
  -175
  -183
  -192
  -201
  -210
  -220
  -231
  -242
  -254
  -266
  -279
Total debt, $m
  255
  266
  278
  292
  307
  324
  342
  362
  383
  406
  431
  457
  485
  514
  546
  579
  614
  651
  691
  732
  776
  822
  871
  922
  976
  1,033
  1,093
  1,156
  1,223
  1,292
Total liabilities, $m
  468
  479
  491
  505
  520
  537
  556
  575
  597
  620
  644
  670
  698
  728
  759
  792
  827
  865
  904
  946
  989
  1,036
  1,084
  1,136
  1,190
  1,247
  1,307
  1,370
  1,436
  1,506
Total equity, $m
  582
  595
  610
  627
  646
  667
  690
  715
  741
  770
  800
  832
  867
  904
  943
  984
  1,028
  1,074
  1,123
  1,175
  1,229
  1,286
  1,347
  1,411
  1,478
  1,549
  1,623
  1,701
  1,784
  1,870
Total liabilities and equity, $m
  1,050
  1,074
  1,101
  1,132
  1,166
  1,204
  1,246
  1,290
  1,338
  1,390
  1,444
  1,502
  1,565
  1,632
  1,702
  1,776
  1,855
  1,939
  2,027
  2,121
  2,218
  2,322
  2,431
  2,547
  2,668
  2,796
  2,930
  3,071
  3,220
  3,376
Debt-to-equity ratio
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.650
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
Adjusted equity ratio
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -25
  -26
  -26
  -27
  -27
  -26
  -26
  -25
  -25
  -24
  -16
  -14
  -13
  -11
  -9
  -6
  -4
  -1
  2
  4
  7
  10
  13
  17
  21
  25
  29
  34
  39
  44
Depreciation, amort., depletion, $m
  25
  25
  25
  26
  27
  27
  28
  29
  29
  30
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  55
  57
Funds from operations, $m
  -1
  -1
  -1
  -1
  0
  1
  2
  3
  5
  7
  9
  11
  14
  17
  20
  24
  28
  32
  36
  40
  45
  49
  54
  60
  66
  72
  79
  86
  93
  101
Change in working capital, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
Cash from operations, $m
  1
  1
  1
  2
  3
  4
  5
  7
  9
  11
  13
  16
  19
  22
  26
  30
  34
  39
  43
  48
  53
  58
  63
  69
  76
  83
  90
  97
  106
  114
Maintenance CAPEX, $m
  -17
  -18
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -24
  -25
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
New CAPEX, $m
  -7
  -7
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
Cash from investing activities, $m
  -24
  -25
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -42
  -44
  -48
  -50
  -52
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -98
  -104
Free cash flow, $m
  -23
  -24
  -25
  -26
  -27
  -28
  -28
  -28
  -28
  -28
  -27
  -27
  -26
  -25
  -24
  -22
  -20
  -18
  -17
  -15
  -14
  -12
  -10
  -8
  -5
  -2
  1
  4
  7
  11
Issuance/(repayment) of debt, $m
  9
  11
  12
  14
  15
  17
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
Issuance/(repurchase) of shares, $m
  37
  39
  42
  44
  46
  47
  49
  50
  51
  52
  46
  47
  47
  48
  48
  48
  47
  47
  47
  47
  47
  47
  47
  47
  47
  46
  45
  45
  44
  42
Cash from financing (excl. dividends), $m  
  46
  50
  54
  58
  61
  64
  67
  70
  72
  75
  70
  73
  75
  78
  79
  81
  82
  84
  86
  89
  91
  93
  96
  98
  101
  103
  105
  108
  110
  112
Total cash flow (excl. dividends), $m
  23
  26
  29
  31
  34
  37
  39
  42
  45
  47
  43
  46
  49
  52
  56
  59
  62
  66
  70
  74
  78
  82
  86
  91
  96
  101
  106
  112
  117
  124
Retained Cash Flow (-), $m
  -37
  -39
  -42
  -44
  -46
  -47
  -49
  -50
  -51
  -52
  -46
  -47
  -47
  -48
  -48
  -48
  -47
  -47
  -49
  -52
  -54
  -57
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -87
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
  -14
  -14
  -13
  -13
  -12
  -11
  -10
  -8
  -7
  -5
  -3
  0
  2
  5
  8
  11
  15
  19
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  -13
  -12
  -11
  -10
  -8
  -7
  -6
  -4
  -3
  -2
  -1
  0
  1
  1
  1
  2
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  91.6
  83.5
  75.9
  68.9
  62.4
  56.5
  51.1
  46.3
  42.0
  38.2
  35.2
  32.5
  30.0
  27.9
  25.9
  24.2
  22.6
  21.2
  20.0
  18.8
  17.8
  16.9
  16.0
  15.3
  14.6
  14.0
  13.4
  12.9
  12.4
  12.0

Biglari Holdings Inc. is a holding company owning subsidiaries engaged in various business activities, including media, property and casualty insurance, and restaurants The Company's segments include Restaurant Operations, First Guard, Maxim, Other and Corporate. The Company's restaurant operations' activities are conducted through approximately two restaurant concepts operated by subsidiaries Steak n Shake Inc. (Steak n Shake) and Western Sizzlin Corporation (Western). Steak n Shake is engaged in the ownership, operation and franchising of Steak n Shake restaurants. Western is engaged primarily in the franchising of restaurants. The Company's insurance business consists of First Guard Insurance Company and its agency, 1st Guard Corporation. First Guard is a direct underwriter of commercial trucking insurance, selling physical damage and non-trucking liability insurance to truckers. Its media business consists of Maxim. Maxim's business lies principally in media and licensing.

FINANCIAL RATIOS  of  Biglari Holdings Inc. (BH)

Valuation Ratios
P/E Ratio 2.9
Price to Sales 0.3
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 4.5
Price to Free Cash Flow 5.6
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.1%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio 14
Current Ratio 0.1
LT Debt to Equity 53%
Total Debt to Equity 54.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 9.5%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 12.6%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 20.1%
Return On Equity - 3 Yr. Avg. 12%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 21.4%
Gross Margin - 3 Yr. Avg. 21.2%
EBITDA Margin 19.9%
EBITDA Margin - 3 Yr. Avg. 13.3%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 17.2%
Pre-Tax Margin - 3 Yr. Avg. 10.4%
Net Profit Margin 11.6%
Net Profit Margin - 3 Yr. Avg. 7.2%
Effective Tax Rate 32.2%
Eff/ Tax Rate - 3 Yr. Avg. 41.4%
Payout Ratio 0%

BH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BH stock intrinsic value calculation we used $810 million for the last fiscal year's total revenue generated by Biglari Holdings Inc.. The default revenue input number comes from 0001 income statement of Biglari Holdings 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 BH 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 6%, whose default value for BH is calculated based on our internal credit rating of Biglari Holdings 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 Biglari Holdings 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 BH stock the variable cost ratio is equal to 86.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $113 million in the base year in the intrinsic value calculation for BH 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 7.8% for Biglari Holdings Inc..

Corporate tax rate of 27% is the nominal tax rate for Biglari Holdings 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 BH 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 BH are equal to 39.4%.

Life of production assets of 18.3 years is the average useful life of capital assets used in Biglari Holdings 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 BH is equal to -10.5%. 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 - $570.455 million for Biglari Holdings 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 2.068 million for Biglari Holdings 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 Biglari Holdings Inc. at the current share price and the inputted number of shares is $0.3 billion.

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