Intrinsic value of Barnes&Noble Education - BNED

Previous Close

$6.42

  Intrinsic Value

$7.41

stock screener

  Rating & Target

hold

+15%

Previous close

$6.42

 
Intrinsic value

$7.41

 
Up/down potential

+15%

 
Rating

hold

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 2017), $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
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  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
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
Revenue, $m
  1,943
  2,018
  2,097
  2,182
  2,273
  2,369
  2,471
  2,579
  2,694
  2,815
  2,943
  3,078
  3,221
  3,371
  3,530
  3,697
  3,873
  4,058
  4,253
  4,458
  4,674
  4,901
  5,140
  5,391
  5,655
  5,932
  6,224
  6,530
  6,852
  7,191
Variable operating expenses, $m
  1,679
  1,741
  1,808
  1,879
  1,955
  2,035
  2,120
  2,211
  2,307
  2,408
  2,461
  2,574
  2,693
  2,819
  2,952
  3,091
  3,238
  3,393
  3,556
  3,728
  3,909
  4,098
  4,298
  4,508
  4,729
  4,961
  5,205
  5,461
  5,730
  6,013
Fixed operating expenses, $m
  249
  255
  260
  266
  272
  278
  284
  290
  297
  303
  310
  317
  324
  331
  338
  346
  353
  361
  369
  377
  385
  394
  402
  411
  420
  430
  439
  449
  459
  469
Total operating expenses, $m
  1,928
  1,996
  2,068
  2,145
  2,227
  2,313
  2,404
  2,501
  2,604
  2,711
  2,771
  2,891
  3,017
  3,150
  3,290
  3,437
  3,591
  3,754
  3,925
  4,105
  4,294
  4,492
  4,700
  4,919
  5,149
  5,391
  5,644
  5,910
  6,189
  6,482
Operating income, $m
  15
  22
  29
  37
  46
  56
  67
  78
  90
  104
  172
  187
  204
  221
  240
  260
  281
  304
  328
  353
  380
  409
  439
  471
  506
  542
  580
  621
  664
  709
EBITDA, $m
  134
  143
  153
  164
  176
  189
  203
  218
  234
  251
  270
  290
  311
  333
  357
  383
  410
  439
  469
  501
  536
  572
  610
  651
  694
  739
  787
  838
  892
  948
Interest expense (income), $m
  2
  9
  10
  11
  12
  14
  15
  17
  19
  21
  22
  25
  27
  29
  31
  34
  37
  39
  42
  46
  49
  52
  56
  60
  64
  68
  72
  77
  82
  87
  93
Earnings before tax, $m
  6
  12
  18
  25
  32
  41
  50
  59
  70
  81
  147
  161
  175
  190
  206
  223
  242
  261
  282
  304
  328
  353
  379
  408
  438
  469
  503
  539
  576
  616
Tax expense, $m
  2
  3
  5
  7
  9
  11
  13
  16
  19
  22
  40
  43
  47
  51
  56
  60
  65
  71
  76
  82
  89
  95
  102
  110
  118
  127
  136
  145
  156
  166
Net income, $m
  5
  9
  13
  18
  24
  30
  36
  43
  51
  59
  108
  117
  128
  139
  150
  163
  176
  191
  206
  222
  239
  258
  277
  298
  319
  343
  367
  393
  421
  450

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
  1,348
  1,399
  1,455
  1,513
  1,576
  1,643
  1,714
  1,789
  1,868
  1,952
  2,041
  2,135
  2,234
  2,338
  2,448
  2,564
  2,686
  2,814
  2,949
  3,092
  3,241
  3,399
  3,564
  3,738
  3,921
  4,114
  4,316
  4,529
  4,752
  4,987
Adjusted assets (=assets-cash), $m
  1,348
  1,399
  1,455
  1,513
  1,576
  1,643
  1,714
  1,789
  1,868
  1,952
  2,041
  2,135
  2,234
  2,338
  2,448
  2,564
  2,686
  2,814
  2,949
  3,092
  3,241
  3,399
  3,564
  3,738
  3,921
  4,114
  4,316
  4,529
  4,752
  4,987
Revenue / Adjusted assets
  1.441
  1.442
  1.441
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
  1.442
Average production assets, $m
  647
  672
  698
  727
  757
  789
  823
  859
  897
  937
  980
  1,025
  1,073
  1,123
  1,175
  1,231
  1,290
  1,351
  1,416
  1,485
  1,556
  1,632
  1,712
  1,795
  1,883
  1,975
  2,073
  2,175
  2,282
  2,395
Working capital, $m
  305
  317
  329
  343
  357
  372
  388
  405
  423
  442
  462
  483
  506
  529
  554
  580
  608
  637
  668
  700
  734
  769
  807
  846
  888
  931
  977
  1,025
  1,076
  1,129
Total debt, $m
  182
  205
  230
  256
  285
  315
  347
  380
  416
  454
  494
  537
  581
  628
  678
  730
  785
  843
  904
  968
  1,036
  1,107
  1,181
  1,260
  1,342
  1,429
  1,520
  1,616
  1,717
  1,823
Total liabilities, $m
  608
  631
  656
  683
  711
  741
  773
  807
  843
  880
  920
  963
  1,007
  1,054
  1,104
  1,156
  1,211
  1,269
  1,330
  1,394
  1,462
  1,533
  1,608
  1,686
  1,769
  1,855
  1,947
  2,042
  2,143
  2,249
Total equity, $m
  740
  768
  799
  831
  865
  902
  941
  982
  1,026
  1,072
  1,120
  1,172
  1,226
  1,283
  1,344
  1,407
  1,474
  1,545
  1,619
  1,697
  1,779
  1,866
  1,957
  2,052
  2,153
  2,259
  2,370
  2,486
  2,609
  2,738
Total liabilities and equity, $m
  1,348
  1,399
  1,455
  1,514
  1,576
  1,643
  1,714
  1,789
  1,869
  1,952
  2,040
  2,135
  2,233
  2,337
  2,448
  2,563
  2,685
  2,814
  2,949
  3,091
  3,241
  3,399
  3,565
  3,738
  3,922
  4,114
  4,317
  4,528
  4,752
  4,987
Debt-to-equity ratio
  0.250
  0.270
  0.290
  0.310
  0.330
  0.350
  0.370
  0.390
  0.410
  0.420
  0.440
  0.460
  0.470
  0.490
  0.500
  0.520
  0.530
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
Adjusted equity ratio
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  9
  13
  18
  24
  30
  36
  43
  51
  59
  108
  117
  128
  139
  150
  163
  176
  191
  206
  222
  239
  258
  277
  298
  319
  343
  367
  393
  421
  450
Depreciation, amort., depletion, $m
  119
  121
  124
  127
  130
  133
  136
  140
  144
  148
  98
  103
  107
  112
  118
  123
  129
  135
  142
  148
  156
  163
  171
  180
  188
  198
  207
  217
  228
  239
Funds from operations, $m
  123
  130
  137
  145
  153
  162
  172
  183
  195
  207
  206
  220
  235
  251
  268
  286
  305
  326
  347
  371
  395
  421
  448
  477
  508
  540
  574
  611
  649
  689
Change in working capital, $m
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  44
  46
  48
  51
  53
Cash from operations, $m
  112
  118
  124
  131
  139
  147
  156
  166
  177
  188
  186
  199
  212
  227
  243
  260
  278
  297
  317
  338
  361
  385
  411
  438
  466
  497
  529
  562
  598
  636
Maintenance CAPEX, $m
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -90
  -94
  -98
  -103
  -107
  -112
  -118
  -123
  -129
  -135
  -142
  -148
  -156
  -163
  -171
  -180
  -188
  -198
  -207
  -217
  -228
New CAPEX, $m
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -113
Cash from investing activities, $m
  -85
  -90
  -94
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -137
  -143
  -150
  -157
  -165
  -174
  -182
  -191
  -200
  -210
  -220
  -232
  -243
  -255
  -268
  -280
  -295
  -309
  -324
  -341
Free cash flow, $m
  27
  29
  31
  33
  36
  40
  44
  48
  53
  58
  49
  56
  62
  70
  78
  87
  96
  106
  117
  128
  141
  154
  168
  183
  199
  216
  234
  253
  274
  295
Issuance/(repayment) of debt, $m
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  91
  96
  101
  106
Issuance/(repurchase) of shares, $m
  21
  20
  17
  14
  11
  7
  3
  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  
  43
  43
  42
  41
  39
  37
  35
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  91
  96
  101
  106
Total cash flow (excl. dividends), $m
  70
  72
  73
  74
  75
  77
  78
  82
  88
  96
  89
  98
  107
  117
  128
  139
  151
  164
  178
  193
  208
  225
  243
  261
  281
  303
  325
  349
  374
  401
Retained Cash Flow (-), $m
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -91
  -96
  -100
  -106
  -111
  -117
  -123
  -129
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
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  25
  26
  27
  28
  30
  31
  33
  34
Cash available for distribution, $m
  44
  43
  42
  42
  41
  40
  39
  40
  45
  50
  40
  46
  53
  60
  67
  75
  84
  93
  104
  114
  126
  138
  152
  166
  181
  197
  214
  232
  252
  272
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  41
  38
  34
  31
  28
  25
  22
  20
  19
  19
  13
  13
  12
  12
  11
  10
  9
  7
  6
  5
  4
  3
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  95.9
  92.4
  89.6
  87.3
  85.8
  84.8
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4
  84.4

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 59.7
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 4.4
Price to Free Cash Flow 9.1
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 $1874 million for the last fiscal year's total revenue generated by Barnes&Noble Education. The default revenue input number comes from 2017 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 3.7% 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 6.6%, 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 86.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $244 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 5.4% 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 0.5%.

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 33.3%.

Life of production assets of 10 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 15.7%. 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 - $714 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 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 6.00 4.12  hold
CHGG Chegg 30.21 0.61  str.sell
TWMC Trans World En 0.940 1.02  sell
AMZN Amazon.com 1,882.22 1,290.53  hold

COMPANY NEWS

▶ 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]
▶ [$$] Charting the Market   [Jul-14-17 11:25PM  Barrons.com]
▶ Barnes & Noble Education posts 4Q profit   [Jul-12-17 11:51PM  Associated Press]
▶ 3 Stocks That Have Lost Over 30% So Far in 2017   [Jul-08-17 07:46AM  Motley Fool]
▶ Cashing In On Textbook Rentals   [Mar-01-17 06:23PM  Barrons.com]
▶ Cashing In On Textbook Rentals   [06:23PM  at Barrons.com]
▶ [$$] Barnes & Noble Education Sales Weaken Amid Lower Enrollment   [Feb-28-17 10:56AM  The Wall Street Journal]
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