Intrinsic value of Big Lots, Inc. - BIG

Previous Close

$38.24

  Intrinsic Value

$226.93

stock screener

  Rating & Target

str. buy

+493%

Previous close

$38.24

 
Intrinsic value

$226.93

 
Up/down potential

+493%

 
Rating

str. buy

We calculate the intrinsic value of BIG 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 1.5

 

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, %
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  5,461
  5,665
  5,884
  6,118
  6,368
  6,634
  6,916
  7,215
  7,533
  7,868
  8,223
  8,599
  8,994
  9,412
  9,853
  10,317
  10,806
  11,321
  11,863
  12,434
  13,035
  13,666
  14,331
  15,030
  15,764
  16,537
  17,348
  18,202
  19,099
  20,041
Variable operating expenses, $m
  1,327
  1,377
  1,430
  1,487
  1,547
  1,612
  1,681
  1,753
  1,830
  1,912
  1,998
  2,089
  2,186
  2,287
  2,394
  2,507
  2,626
  2,751
  2,883
  3,021
  3,167
  3,321
  3,482
  3,652
  3,831
  4,018
  4,216
  4,423
  4,641
  4,870
Fixed operating expenses, $m
  3,851
  3,936
  4,022
  4,111
  4,201
  4,294
  4,388
  4,485
  4,583
  4,684
  4,787
  4,892
  5,000
  5,110
  5,222
  5,337
  5,455
  5,575
  5,697
  5,823
  5,951
  6,082
  6,216
  6,352
  6,492
  6,635
  6,781
  6,930
  7,083
  7,238
Total operating expenses, $m
  5,178
  5,313
  5,452
  5,598
  5,748
  5,906
  6,069
  6,238
  6,413
  6,596
  6,785
  6,981
  7,186
  7,397
  7,616
  7,844
  8,081
  8,326
  8,580
  8,844
  9,118
  9,403
  9,698
  10,004
  10,323
  10,653
  10,997
  11,353
  11,724
  12,108
Operating income, $m
  283
  353
  432
  521
  619
  728
  847
  978
  1,119
  1,272
  1,438
  1,617
  1,809
  2,015
  2,236
  2,473
  2,725
  2,995
  3,283
  3,590
  3,916
  4,264
  4,633
  5,025
  5,441
  5,883
  6,352
  6,849
  7,375
  7,933
EBITDA, $m
  394
  468
  552
  646
  749
  863
  988
  1,125
  1,273
  1,433
  1,606
  1,792
  1,992
  2,207
  2,437
  2,683
  2,946
  3,226
  3,525
  3,843
  4,182
  4,542
  4,925
  5,332
  5,763
  6,221
  6,706
  7,220
  7,765
  8,341
Interest expense (income), $m
  4
  12
  14
  16
  18
  20
  23
  25
  28
  31
  34
  38
  41
  45
  49
  53
  58
  62
  67
  73
  78
  84
  90
  96
  103
  110
  117
  125
  133
  142
  151
Earnings before tax, $m
  271
  339
  416
  503
  599
  705
  822
  949
  1,088
  1,238
  1,400
  1,575
  1,764
  1,966
  2,183
  2,415
  2,663
  2,928
  3,211
  3,512
  3,833
  4,174
  4,537
  4,922
  5,332
  5,766
  6,227
  6,715
  7,233
  7,782
Tax expense, $m
  73
  92
  112
  136
  162
  190
  222
  256
  294
  334
  378
  425
  476
  531
  589
  652
  719
  791
  867
  948
  1,035
  1,127
  1,225
  1,329
  1,440
  1,557
  1,681
  1,813
  1,953
  2,101
Net income, $m
  198
  248
  304
  367
  437
  515
  600
  693
  794
  904
  1,022
  1,150
  1,287
  1,435
  1,593
  1,763
  1,944
  2,137
  2,344
  2,564
  2,798
  3,047
  3,312
  3,593
  3,892
  4,209
  4,546
  4,902
  5,280
  5,681

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
  1,711
  1,775
  1,844
  1,917
  1,996
  2,079
  2,167
  2,261
  2,361
  2,466
  2,577
  2,695
  2,819
  2,950
  3,088
  3,233
  3,386
  3,548
  3,718
  3,897
  4,085
  4,283
  4,491
  4,710
  4,940
  5,182
  5,437
  5,704
  5,985
  6,280
Adjusted assets (=assets-cash), $m
  1,711
  1,775
  1,844
  1,917
  1,996
  2,079
  2,167
  2,261
  2,361
  2,466
  2,577
  2,695
  2,819
  2,950
  3,088
  3,233
  3,386
  3,548
  3,718
  3,897
  4,085
  4,283
  4,491
  4,710
  4,940
  5,182
  5,437
  5,704
  5,985
  6,280
Revenue / Adjusted assets
  3.192
  3.192
  3.191
  3.191
  3.190
  3.191
  3.192
  3.191
  3.191
  3.191
  3.191
  3.191
  3.190
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
  3.191
Average production assets, $m
  568
  589
  612
  636
  662
  690
  719
  750
  783
  818
  855
  894
  935
  979
  1,025
  1,073
  1,124
  1,177
  1,234
  1,293
  1,356
  1,421
  1,490
  1,563
  1,639
  1,720
  1,804
  1,893
  1,986
  2,084
Working capital, $m
  393
  408
  424
  441
  458
  478
  498
  520
  542
  567
  592
  619
  648
  678
  709
  743
  778
  815
  854
  895
  938
  984
  1,032
  1,082
  1,135
  1,191
  1,249
  1,311
  1,375
  1,443
Total debt, $m
  251
  290
  330
  374
  421
  470
  523
  579
  638
  700
  767
  837
  910
  988
  1,070
  1,157
  1,248
  1,344
  1,445
  1,552
  1,664
  1,782
  1,905
  2,036
  2,173
  2,317
  2,468
  2,627
  2,794
  2,970
Total liabilities, $m
  1,018
  1,056
  1,097
  1,141
  1,187
  1,237
  1,290
  1,345
  1,405
  1,467
  1,533
  1,603
  1,677
  1,755
  1,837
  1,924
  2,015
  2,111
  2,212
  2,318
  2,430
  2,548
  2,672
  2,802
  2,939
  3,083
  3,235
  3,394
  3,561
  3,737
Total equity, $m
  693
  719
  747
  777
  808
  842
  878
  916
  956
  999
  1,044
  1,091
  1,142
  1,195
  1,250
  1,309
  1,371
  1,437
  1,506
  1,578
  1,654
  1,735
  1,819
  1,908
  2,001
  2,099
  2,202
  2,310
  2,424
  2,544
Total liabilities and equity, $m
  1,711
  1,775
  1,844
  1,918
  1,995
  2,079
  2,168
  2,261
  2,361
  2,466
  2,577
  2,694
  2,819
  2,950
  3,087
  3,233
  3,386
  3,548
  3,718
  3,896
  4,084
  4,283
  4,491
  4,710
  4,940
  5,182
  5,437
  5,704
  5,985
  6,281
Debt-to-equity ratio
  0.360
  0.400
  0.440
  0.480
  0.520
  0.560
  0.600
  0.630
  0.670
  0.700
  0.730
  0.770
  0.800
  0.830
  0.860
  0.880
  0.910
  0.940
  0.960
  0.980
  1.010
  1.030
  1.050
  1.070
  1.090
  1.100
  1.120
  1.140
  1.150
  1.170
Adjusted equity ratio
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  198
  248
  304
  367
  437
  515
  600
  693
  794
  904
  1,022
  1,150
  1,287
  1,435
  1,593
  1,763
  1,944
  2,137
  2,344
  2,564
  2,798
  3,047
  3,312
  3,593
  3,892
  4,209
  4,546
  4,902
  5,280
  5,681
Depreciation, amort., depletion, $m
  111
  116
  120
  125
  130
  135
  141
  147
  154
  160
  168
  175
  183
  192
  201
  210
  220
  231
  242
  254
  266
  279
  292
  306
  321
  337
  354
  371
  389
  409
Funds from operations, $m
  309
  363
  424
  492
  567
  650
  741
  840
  948
  1,064
  1,190
  1,325
  1,471
  1,627
  1,794
  1,973
  2,164
  2,368
  2,586
  2,817
  3,064
  3,326
  3,604
  3,900
  4,213
  4,546
  4,899
  5,273
  5,670
  6,089
Change in working capital, $m
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  58
  61
  65
  68
Cash from operations, $m
  296
  348
  408
  475
  549
  631
  721
  819
  925
  1,040
  1,164
  1,298
  1,442
  1,597
  1,763
  1,940
  2,129
  2,331
  2,547
  2,776
  3,020
  3,280
  3,556
  3,849
  4,161
  4,491
  4,841
  5,212
  5,605
  6,021
Maintenance CAPEX, $m
  -107
  -111
  -116
  -120
  -125
  -130
  -135
  -141
  -147
  -154
  -160
  -168
  -175
  -183
  -192
  -201
  -210
  -220
  -231
  -242
  -254
  -266
  -279
  -292
  -306
  -321
  -337
  -354
  -371
  -389
New CAPEX, $m
  -22
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -56
  -59
  -62
  -66
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -98
Cash from investing activities, $m
  -129
  -132
  -139
  -144
  -151
  -158
  -164
  -172
  -180
  -189
  -197
  -207
  -216
  -226
  -238
  -249
  -261
  -274
  -287
  -301
  -316
  -332
  -348
  -365
  -382
  -401
  -421
  -443
  -464
  -487
Free cash flow, $m
  167
  216
  270
  331
  399
  474
  556
  646
  745
  851
  967
  1,092
  1,226
  1,370
  1,525
  1,691
  1,868
  2,057
  2,259
  2,475
  2,704
  2,949
  3,208
  3,484
  3,778
  4,089
  4,419
  4,769
  5,141
  5,534
Issuance/(repayment) of debt, $m
  36
  38
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
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  
  36
  38
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
Total cash flow (excl. dividends), $m
  203
  254
  311
  374
  445
  523
  609
  702
  804
  914
  1,033
  1,162
  1,300
  1,448
  1,607
  1,777
  1,959
  2,153
  2,360
  2,581
  2,816
  3,066
  3,332
  3,615
  3,915
  4,233
  4,571
  4,929
  5,308
  5,710
Retained Cash Flow (-), $m
  -23
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -114
  -120
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
  179
  228
  283
  345
  413
  489
  573
  664
  764
  871
  988
  1,114
  1,249
  1,395
  1,551
  1,718
  1,897
  2,088
  2,292
  2,509
  2,740
  2,986
  3,248
  3,526
  3,821
  4,135
  4,468
  4,820
  5,194
  5,590
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
  172
  209
  246
  284
  320
  355
  387
  415
  439
  457
  469
  475
  475
  468
  455
  437
  413
  384
  353
  319
  283
  248
  213
  180
  149
  121
  96
  75
  57
  42
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

Big Lots, Inc. is a non-traditional, discount retailer operating in the United States. As of January 28, 2017, the Company operated a total of 1,432 stores. The Company operates through the discount retailing segment. As of January 28, 2017, the Company's stores are located at various states of the United States, such as Alabama, Arizona, California, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Michigan, Montana, Nevada, Nebraska, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, Texas, Utah and Washington. The Company's merchandise categories include Furniture, Seasonal, Soft Home, Food, Consumables, Hard Home, and Electronics, Toys, & Accessories.

FINANCIAL RATIOS  of  Big Lots, Inc. (BIG)

Valuation Ratios
P/E Ratio 11.1
Price to Sales 0.3
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 7.6
Growth Rates
Sales Growth Rate 0.2%
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 -3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 16.3%
Total Debt to Equity 16.3%
Interest Coverage 62
Management Effectiveness
Return On Assets 9.6%
Ret/ On Assets - 3 Yr. Avg. 8.4%
Return On Total Capital 19.9%
Ret/ On T. Cap. - 3 Yr. Avg. 16.6%
Return On Equity 22.3%
Return On Equity - 3 Yr. Avg. 18.2%
Asset Turnover 3.2
Profitability Ratios
Gross Margin 40.4%
Gross Margin - 3 Yr. Avg. 39.9%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 6.6%
Operating Margin 4.8%
Oper. Margin - 3 Yr. Avg. 4.5%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 4.5%
Net Profit Margin 2.9%
Net Profit Margin - 3 Yr. Avg. 2.6%
Effective Tax Rate 37.3%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
Payout Ratio 24.8%

BIG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BIG stock intrinsic value calculation we used $5271 million for the last fiscal year's total revenue generated by Big Lots, Inc.. The default revenue input number comes from 0001 income statement of Big Lots, 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 BIG stock valuation model: a) initial revenue growth rate of 3.6% 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 BIG is calculated based on our internal credit rating of Big Lots, 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 Big Lots, 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 BIG stock the variable cost ratio is equal to 24.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3768 million in the base year in the intrinsic value calculation for BIG 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 Big Lots, Inc..

Corporate tax rate of 27% is the nominal tax rate for Big Lots, 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 BIG 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 BIG are equal to 10.4%.

Life of production assets of 5.1 years is the average useful life of capital assets used in Big Lots, 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 BIG is equal to 7.2%. 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 - $669.587 million for Big Lots, 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 40.045 million for Big Lots, 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 Big Lots, Inc. at the current share price and the inputted number of shares is $1.5 billion.

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