Intrinsic value of Bassett Furniture Industries - BSET

Previous Close

$19.88

  Intrinsic Value

$20.88

stock screener

  Rating & Target

hold

+5%

Previous close

$19.88

 
Intrinsic value

$20.88

 
Up/down potential

+5%

 
Rating

hold

We calculate the intrinsic value of BSET 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 0.2

 

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, %
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  464
  477
  491
  506
  523
  542
  562
  583
  606
  630
  656
  684
  713
  745
  778
  812
  849
  888
  929
  973
  1,018
  1,066
  1,117
  1,170
  1,227
  1,286
  1,348
  1,413
  1,482
  1,555
Variable operating expenses, $m
  433
  445
  458
  473
  489
  506
  524
  544
  565
  588
  611
  636
  664
  693
  723
  756
  790
  826
  864
  905
  947
  992
  1,039
  1,089
  1,141
  1,196
  1,254
  1,315
  1,379
  1,446
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
  433
  445
  458
  473
  489
  506
  524
  544
  565
  588
  611
  636
  664
  693
  723
  756
  790
  826
  864
  905
  947
  992
  1,039
  1,089
  1,141
  1,196
  1,254
  1,315
  1,379
  1,446
Operating income, $m
  31
  32
  33
  34
  35
  36
  37
  39
  41
  42
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
  104
  109
EBITDA, $m
  45
  46
  48
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
  104
  109
  114
  119
  125
  131
  137
  144
  151
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
Earnings before tax, $m
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  43
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
Tax expense, $m
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
Net income, $m
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70

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
  301
  309
  318
  328
  339
  351
  364
  378
  393
  409
  426
  444
  463
  483
  504
  527
  551
  576
  603
  631
  660
  692
  724
  759
  795
  834
  874
  917
  961
  1,008
Adjusted assets (=assets-cash), $m
  301
  309
  318
  328
  339
  351
  364
  378
  393
  409
  426
  444
  463
  483
  504
  527
  551
  576
  603
  631
  660
  692
  724
  759
  795
  834
  874
  917
  961
  1,008
Revenue / Adjusted assets
  1.542
  1.544
  1.544
  1.543
  1.543
  1.544
  1.544
  1.542
  1.542
  1.540
  1.540
  1.541
  1.540
  1.542
  1.544
  1.541
  1.541
  1.542
  1.541
  1.542
  1.542
  1.540
  1.543
  1.542
  1.543
  1.542
  1.542
  1.541
  1.542
  1.543
Average production assets, $m
  115
  119
  122
  126
  130
  135
  140
  145
  151
  157
  163
  170
  178
  185
  194
  202
  211
  221
  231
  242
  254
  266
  278
  291
  305
  320
  336
  352
  369
  387
Working capital, $m
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
Total debt, $m
  6
  9
  12
  16
  20
  24
  28
  33
  38
  44
  50
  56
  62
  69
  77
  85
  93
  102
  111
  121
  131
  142
  154
  166
  178
  192
  206
  220
  236
  252
Total liabilities, $m
  105
  108
  111
  114
  118
  122
  127
  132
  137
  142
  148
  154
  161
  168
  175
  183
  192
  200
  210
  219
  230
  241
  252
  264
  277
  290
  304
  319
  335
  351
Total equity, $m
  196
  202
  208
  214
  221
  229
  237
  247
  256
  267
  278
  289
  302
  315
  329
  344
  359
  376
  393
  411
  431
  451
  472
  495
  519
  544
  570
  598
  627
  657
Total liabilities and equity, $m
  301
  310
  319
  328
  339
  351
  364
  379
  393
  409
  426
  443
  463
  483
  504
  527
  551
  576
  603
  630
  661
  692
  724
  759
  796
  834
  874
  917
  962
  1,008
Debt-to-equity ratio
  0.030
  0.040
  0.060
  0.070
  0.090
  0.100
  0.120
  0.130
  0.150
  0.160
  0.180
  0.190
  0.210
  0.220
  0.230
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.320
  0.330
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.380
Adjusted equity ratio
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652
  0.652

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
Depreciation, amort., depletion, $m
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  18
  19
  20
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
Funds from operations, $m
  37
  38
  39
  40
  41
  42
  44
  45
  47
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  107
  112
Change in working capital, $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 operations, $m
  37
  37
  38
  40
  41
  42
  43
  45
  47
  48
  50
  51
  54
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
Maintenance CAPEX, $m
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
New CAPEX, $m
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
Cash from investing activities, $m
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -22
  -23
  -23
  -25
  -26
  -28
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -50
  -53
  -56
  -59
Free cash flow, $m
  21
  22
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  28
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
Issuance/(repayment) of debt, $m
  2
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
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  
  2
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
Total cash flow (excl. dividends), $m
  24
  25
  25
  26
  27
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
Retained Cash Flow (-), $m
  -5
  -5
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
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
  19
  19
  19
  19
  19
  20
  20
  20
  20
  21
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
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
  18
  18
  17
  16
  15
  14
  13
  13
  12
  11
  10
  9
  8
  7
  7
  6
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
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

Bassett Furniture Industries, Incorporated is a manufacturer, importer and retailer of home furnishings. The Company's segments include Wholesale, Retail - Company-owned stores and Logistical services. Its wholesale home furnishings segment is involved in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (licensee-owned stores and Company-owned stores) and independent furniture retailers. Its retail segment consists of Company-owned stores. It operates its logistical services segment through its subsidiary, Zenith Freight Lines, LLC, which provides shipping, delivery and warehousing services. Its portfolio of products includes Canopy Bed, Nightstands, Baby Bedding, Bedside Tables, Chaise Lounge, Writing Desks, Kitchen Furniture, Computer Hutch, Game Tables and Fabric Ottomans. Its range of furniture products and accessories are sold through a nation-wide network of over 90 retail stores known as Bassett Home Furnishings.

FINANCIAL RATIOS  of  Bassett Furniture Industries (BSET)

Valuation Ratios
P/E Ratio 13.3
Price to Sales 0.5
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 5.5
Price to Free Cash Flow 12.5
Growth Rates
Sales Growth Rate 0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 57.1%
Cap. Spend. - 3 Yr. Gr. Rate 9.5%
Financial Strength
Quick Ratio 19
Current Ratio 0.1
LT Debt to Equity 2.2%
Total Debt to Equity 3.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 8.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.5%
Return On Equity 8.9%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 61.3%
Gross Margin - 3 Yr. Avg. 57.7%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. 8.3%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 6.2%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. 5.9%
Net Profit Margin 3.7%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 38.5%
Eff/ Tax Rate - 3 Yr. Avg. 38.7%
Payout Ratio 37.5%

BSET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BSET stock intrinsic value calculation we used $452.503 million for the last fiscal year's total revenue generated by Bassett Furniture Industries. The default revenue input number comes from 0001 income statement of Bassett Furniture Industries. 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 BSET stock valuation model: a) initial revenue growth rate of 2.5% 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 BSET is calculated based on our internal credit rating of Bassett Furniture Industries, 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 Bassett Furniture Industries.
    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 BSET stock the variable cost ratio is equal to 93.4%.

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 BSET 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 Bassett Furniture Industries.

Corporate tax rate of 27% is the nominal tax rate for Bassett Furniture Industries. 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 BSET 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 BSET are equal to 24.9%.

Life of production assets of 9.1 years is the average useful life of capital assets used in Bassett Furniture Industries 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 BSET is equal to 0.5%. 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 - $191.46 million for Bassett Furniture Industries - 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 10.736 million for Bassett Furniture Industries 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 Bassett Furniture Industries at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Bassett: Fiscal 3Q Earnings Snapshot   [Sep-27-18 09:14AM  Associated Press]
▶ New Strong Sell Stocks for September 24th   [Sep-24-18 08:39AM  Zacks]
▶ Bassett Increases Quarterly Dividend   [Jul-12-18 09:08AM  GlobeNewswire]
▶ Bassett: Fiscal 2Q Earnings Snapshot   [Jun-28-18 09:11AM  Associated Press]
▶ Bassett reports 1Q loss   [Mar-28-18 09:21AM  Associated Press]
▶ Bassett Announces Board Appointment   [Mar-13-18 04:54PM  GlobeNewswire]
▶ Bassett Declares Quarterly Dividend   [Mar-08-18 04:53PM  GlobeNewswire]
▶ New Strong Sell Stocks for February 5th   [Feb-05-18 08:45AM  Zacks]
▶ New Strong Sell Stocks for January 25th   [Jan-25-18 08:48AM  Zacks]
▶ Bassett posts 4Q profit   [Jan-18-18 09:17AM  Associated Press]
▶ Bassett Declares Quarterly Dividend   [Jan-11-18 04:22PM  GlobeNewswire]
▶ Bassett Declares Special Dividend   [08:55AM  GlobeNewswire]
▶ Bassett Declares Quarterly Dividend   [Oct-05-17 02:34PM  GlobeNewswire]
▶ Bassett Furniture Donates Cribs for Hurricane Victims   [Oct-04-17 04:54PM  GlobeNewswire]
▶ Bassett posts 3Q profit   [Sep-28-17 09:41PM  Associated Press]
▶ Bassett Increases Quarterly Dividend   [Jul-13-17 04:18PM  GlobeNewswire]
▶ Bassett posts 2Q profit   [Jun-29-17 07:12PM  Associated Press]
▶ Bassett posts 1Q profit   [09:12AM  Associated Press]
▶ Bassett Declares Quarterly Dividend   [09:00AM  GlobeNewswire]
▶ 8 High-Yield Stocks With Falling Prices   [Feb-21-17 05:51PM  GuruFocus.com]
▶ New Strong Sell Stocks for February 6th   [Feb-06-17 10:12AM  Zacks]

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