Intrinsic value of Barnes&Noble Education - BNED

Previous Close

$6.29

  Intrinsic Value

$3.30

stock screener

  Rating & Target

sell

-48%

Previous close

$6.29

 
Intrinsic value

$3.30

 
Up/down potential

-48%

 
Rating

sell

We calculate the intrinsic value of BNED 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, %
  4.30
  4.37
  4.43
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.89
  4.91
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
Revenue, $m
  2,298
  2,399
  2,505
  2,618
  2,736
  2,862
  2,994
  3,134
  3,281
  3,437
  3,600
  3,772
  3,953
  4,144
  4,344
  4,555
  4,777
  5,011
  5,256
  5,514
  5,785
  6,069
  6,369
  6,683
  7,014
  7,361
  7,726
  8,109
  8,511
  8,934
Variable operating expenses, $m
  2,281
  2,380
  2,484
  2,594
  2,711
  2,834
  2,964
  3,101
  3,245
  3,398
  3,531
  3,700
  3,877
  4,064
  4,261
  4,468
  4,686
  4,914
  5,155
  5,408
  5,674
  5,953
  6,247
  6,555
  6,879
  7,220
  7,577
  7,953
  8,348
  8,762
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
  2,281
  2,380
  2,484
  2,594
  2,711
  2,834
  2,964
  3,101
  3,245
  3,398
  3,531
  3,700
  3,877
  4,064
  4,261
  4,468
  4,686
  4,914
  5,155
  5,408
  5,674
  5,953
  6,247
  6,555
  6,879
  7,220
  7,577
  7,953
  8,348
  8,762
Operating income, $m
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  69
  72
  76
  79
  83
  87
  92
  96
  101
  106
  111
  116
  122
  128
  135
  141
  148
  156
  163
  171
EBITDA, $m
  86
  89
  93
  98
  102
  107
  112
  117
  122
  128
  134
  141
  147
  154
  162
  170
  178
  187
  196
  206
  216
  226
  237
  249
  261
  274
  288
  302
  317
  333
Interest expense (income), $m
  2
  11
  13
  14
  16
  18
  19
  21
  23
  25
  28
  30
  32
  35
  38
  41
  44
  47
  50
  54
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
  106
Earnings before tax, $m
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  50
  51
  53
  54
  56
  57
  59
  61
  63
  65
Tax expense, $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  11
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  16
  17
  18
Net income, $m
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  29
  29
  30
  30
  31
  32
  33
  34
  34
  35
  36
  37
  38
  40
  41
  42
  43
  45
  46
  48

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
  1,084
  1,131
  1,181
  1,234
  1,290
  1,349
  1,412
  1,478
  1,547
  1,620
  1,697
  1,778
  1,864
  1,954
  2,048
  2,148
  2,252
  2,362
  2,478
  2,600
  2,727
  2,862
  3,003
  3,151
  3,307
  3,470
  3,642
  3,823
  4,013
  4,212
Adjusted assets (=assets-cash), $m
  1,084
  1,131
  1,181
  1,234
  1,290
  1,349
  1,412
  1,478
  1,547
  1,620
  1,697
  1,778
  1,864
  1,954
  2,048
  2,148
  2,252
  2,362
  2,478
  2,600
  2,727
  2,862
  3,003
  3,151
  3,307
  3,470
  3,642
  3,823
  4,013
  4,212
Revenue / Adjusted assets
  2.120
  2.121
  2.121
  2.122
  2.121
  2.122
  2.120
  2.120
  2.121
  2.122
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.122
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
  2.121
Average production assets, $m
  329
  343
  358
  374
  391
  409
  428
  448
  469
  491
  515
  539
  565
  593
  621
  651
  683
  717
  752
  788
  827
  868
  911
  956
  1,003
  1,053
  1,105
  1,160
  1,217
  1,278
Working capital, $m
  301
  314
  328
  343
  358
  375
  392
  411
  430
  450
  472
  494
  518
  543
  569
  597
  626
  656
  689
  722
  758
  795
  834
  876
  919
  964
  1,012
  1,062
  1,115
  1,170
Total debt, $m
  221
  247
  275
  304
  335
  367
  402
  438
  476
  516
  559
  603
  650
  700
  752
  806
  864
  924
  988
  1,055
  1,125
  1,199
  1,277
  1,358
  1,444
  1,534
  1,628
  1,728
  1,832
  1,942
Total liabilities, $m
  596
  622
  650
  679
  710
  742
  776
  813
  851
  891
  934
  978
  1,025
  1,075
  1,127
  1,181
  1,239
  1,299
  1,363
  1,430
  1,500
  1,574
  1,651
  1,733
  1,819
  1,909
  2,003
  2,103
  2,207
  2,317
Total equity, $m
  488
  509
  532
  555
  581
  607
  635
  665
  696
  729
  764
  800
  839
  879
  922
  966
  1,014
  1,063
  1,115
  1,170
  1,227
  1,288
  1,351
  1,418
  1,488
  1,562
  1,639
  1,720
  1,806
  1,895
Total liabilities and equity, $m
  1,084
  1,131
  1,182
  1,234
  1,291
  1,349
  1,411
  1,478
  1,547
  1,620
  1,698
  1,778
  1,864
  1,954
  2,049
  2,147
  2,253
  2,362
  2,478
  2,600
  2,727
  2,862
  3,002
  3,151
  3,307
  3,471
  3,642
  3,823
  4,013
  4,212
Debt-to-equity ratio
  0.450
  0.490
  0.520
  0.550
  0.580
  0.600
  0.630
  0.660
  0.680
  0.710
  0.730
  0.750
  0.780
  0.800
  0.820
  0.830
  0.850
  0.870
  0.890
  0.900
  0.920
  0.930
  0.940
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
Adjusted equity ratio
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  29
  29
  30
  30
  31
  32
  33
  34
  34
  35
  36
  37
  38
  40
  41
  42
  43
  45
  46
  48
Depreciation, amort., depletion, $m
  68
  70
  72
  74
  76
  79
  81
  84
  86
  89
  65
  68
  72
  75
  79
  82
  86
  91
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  162
Funds from operations, $m
  73
  75
  77
  80
  82
  85
  88
  91
  94
  97
  94
  97
  101
  105
  110
  114
  119
  124
  130
  135
  141
  147
  154
  160
  168
  175
  183
  191
  200
  209
Change in working capital, $m
  12
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
Cash from operations, $m
  60
  62
  63
  65
  67
  69
  70
  73
  75
  77
  72
  75
  78
  81
  84
  87
  90
  94
  97
  101
  106
  110
  114
  119
  124
  130
  135
  141
  147
  154
Maintenance CAPEX, $m
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -82
  -86
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
New CAPEX, $m
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -60
Cash from investing activities, $m
  -53
  -56
  -58
  -61
  -64
  -68
  -71
  -74
  -78
  -81
  -85
  -90
  -94
  -99
  -104
  -109
  -114
  -119
  -126
  -132
  -139
  -146
  -153
  -160
  -168
  -177
  -185
  -195
  -205
  -214
Free cash flow, $m
  8
  6
  5
  3
  2
  1
  0
  -2
  -3
  -4
  -13
  -15
  -17
  -18
  -20
  -22
  -24
  -26
  -28
  -31
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -57
  -61
Issuance/(repayment) of debt, $m
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
  58
  60
  64
  67
  70
  74
  78
  82
  86
  90
  95
  99
  104
  110
Issuance/(repurchase) of shares, $m
  15
  17
  18
  18
  19
  20
  21
  22
  23
  25
  6
  7
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  29
  32
  34
  37
  39
  42
Cash from financing (excl. dividends), $m  
  40
  43
  46
  47
  50
  53
  55
  58
  61
  65
  48
  52
  56
  59
  63
  68
  72
  76
  82
  86
  91
  97
  103
  109
  115
  122
  129
  136
  143
  152
Total cash flow (excl. dividends), $m
  48
  48
  50
  51
  52
  54
  55
  57
  59
  60
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  58
  61
  65
  68
  71
  75
  79
  83
  87
  91
Retained Cash Flow (-), $m
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -67
  -70
  -74
  -77
  -81
  -85
  -90
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
  28
  27
  27
  27
  27
  27
  27
  27
  27
  27
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Discount rate, %
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
  27
  24
  23
  21
  20
  18
  17
  15
  14
  12
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  95.5
  91.1
  86.8
  82.7
  78.8
  75.0
  71.4
  68.0
  64.8
  61.6
  60.9
  60.1
  59.2
  58.2
  57.1
  56.0
  54.9
  53.7
  52.4
  51.2
  49.9
  48.6
  47.2
  45.9
  44.6
  43.3
  42.0
  40.7
  39.4
  38.1

Barnes & Noble Education, Inc. is a contract operator of bookstores on college and university campuses across the United States and a provider of digital education services. The Company offers a support system, and a retail and digital learning experience for students. Through its subsidiary, Barnes & Noble College Booksellers, LLC, the Company operates approximately 750 campus bookstores and the school-branded e-commerce sites for each store, serving over five million college students and their faculty. The Company offers a set of products and services to help students, faculty and administrators achieve their shared educational and social goals. Its suite of product offerings includes Textbook and Course Material Sales, Textbook and Course Material Rentals, General Merchandise, Trade, Digital Education and Brand Partnerships. The Company also offers other merchandise, such as laptops and other technology products, notebooks, backpacks, school and dormitory supplies and related items.

FINANCIAL RATIOS  of  Barnes&Noble Education (BNED)

Valuation Ratios
P/E Ratio 58.5
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 4.3
Price to Free Cash Flow 8.9
Growth Rates
Sales Growth Rate 3.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.4%
Cap. Spend. - 3 Yr. Gr. Rate -1.6%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 8.4%
Total Debt to Equity 22.4%
Interest Coverage 6
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1.3%
Return On Equity 0.7%
Return On Equity - 3 Yr. Avg. 1.3%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 24.4%
Gross Margin - 3 Yr. Avg. 24.8%
EBITDA Margin 3.5%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 0.7%
Oper. Margin - 3 Yr. Avg. 1%
Pre-Tax Margin 0.5%
Pre-Tax Margin - 3 Yr. Avg. 0.9%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 0.4%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 64.1%
Payout Ratio 0%

BNED stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BNED stock intrinsic value calculation we used $2203.617 million for the last fiscal year's total revenue generated by Barnes&Noble Education. The default revenue input number comes from 0001 income statement of Barnes&Noble Education. 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 BNED stock valuation model: a) initial revenue growth rate of 4.3% 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 5.3%, whose default value for BNED is calculated based on our internal credit rating of Barnes&Noble Education, 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 Barnes&Noble Education.
    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 BNED stock the variable cost ratio is equal to 99.3%.

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 BNED 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 5.8% for Barnes&Noble Education.

Corporate tax rate of 27% is the nominal tax rate for Barnes&Noble Education. 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 BNED 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 BNED are equal to 14.3%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Barnes&Noble Education 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 BNED is equal to 13.1%. 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 - $467.963 million for Barnes&Noble Education - 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 46.917 million for Barnes&Noble Education 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 Barnes&Noble Education at the current share price and the inputted number of shares is $0.3 billion.

RELATED COMPANIES Price Int.Val. Rating
BKS Barnes&Noble 6.61 0.11  str.sell
CHGG Chegg 25.26 0.54  str.sell
TWMC Trans World En 0.980 0.65  sell
AMZN Amazon.com 1,764.03 2,694.69  buy

COMPANY NEWS

▶ Barnes & Noble Education Expands Partnership with OpenStax   [Aug-21-18 09:45AM  Business Wire]
▶ Yahoo Finance Live: Market Movers - Jul 23rd, 2018   [Jul-23-18 11:26AM  Yahoo Finance Video]
▶ Carroll University selects Barnes & Noble College to manage bookstore operations   [Jul-16-18 02:45PM  American City Business Journals]
▶ [$$] Charting the Market   [Sep-01-17 11:40PM  Barrons.com]
▶ Barnes & Noble Education posts 1Q loss   [Aug-31-17 08:03PM  Associated Press]
▶ Company News For August 31, 2017   [10:07AM  Zacks]
▶ A Gray Afternoon for 3 Stocks   [Aug-30-17 05:32PM  GuruFocus.com]
▶ A Battle is Brewing in the New World of Homework Help   [Aug-04-17 03:23PM  Barrons.com]
▶ [$$] Barnes & Noble Education Names New CEO   [Jul-20-17 09:45AM  The Wall Street Journal]
▶ [$$] Charting the Market   [Jul-14-17 11:25PM  Barrons.com]
▶ Barnes & Noble Education posts 4Q profit   [Jul-12-17 11:51PM  Associated Press]
▶ 3 Stocks That Have Lost Over 30% So Far in 2017   [Jul-08-17 07:46AM  Motley Fool]

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