Intrinsic value of Cabela's - CAB

Previous Close

$61.47

  Intrinsic Value

$17.42

stock screener

  Rating & Target

str. sell

-72%

  Value-price divergence*

-59%

Previous close

$61.47

 
Intrinsic value

$17.42

 
Up/down potential

-72%

 
Rating

str. sell

 
Value-price divergence*

-59%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CAB 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 2016), $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 4.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.28
  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
  4,129
  4,212
  4,308
  4,419
  4,543
  4,681
  4,832
  4,997
  5,175
  5,367
  5,573
  5,793
  6,028
  6,279
  6,545
  6,827
  7,126
  7,443
  7,778
  8,132
  8,506
  8,900
  9,316
  9,754
  10,216
  10,702
  11,214
  11,753
  12,320
  12,917
  13,544
Variable operating expenses, $m
 
  3,887
  3,977
  4,079
  4,194
  4,321
  4,460
  4,612
  4,777
  4,954
  5,144
  5,347
  5,564
  5,795
  6,041
  6,301
  6,578
  6,870
  7,179
  7,506
  7,851
  8,214
  8,598
  9,003
  9,429
  9,878
  10,350
  10,848
  11,371
  11,922
  12,501
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
  3,855
  3,887
  3,977
  4,079
  4,194
  4,321
  4,460
  4,612
  4,777
  4,954
  5,144
  5,347
  5,564
  5,795
  6,041
  6,301
  6,578
  6,870
  7,179
  7,506
  7,851
  8,214
  8,598
  9,003
  9,429
  9,878
  10,350
  10,848
  11,371
  11,922
  12,501
Operating income, $m
  274
  324
  332
  340
  350
  360
  372
  385
  398
  413
  429
  446
  464
  483
  504
  526
  549
  573
  599
  626
  655
  685
  717
  751
  787
  824
  863
  905
  949
  995
  1,043
EBITDA, $m
  424
  478
  489
  501
  515
  531
  548
  567
  587
  609
  632
  657
  684
  712
  742
  774
  808
  844
  882
  922
  964
  1,009
  1,056
  1,106
  1,158
  1,214
  1,272
  1,333
  1,397
  1,465
  1,536
Interest expense (income), $m
  126
  157
  162
  167
  173
  180
  188
  197
  206
  216
  227
  239
  251
  265
  279
  294
  310
  327
  345
  364
  384
  405
  428
  451
  476
  502
  530
  559
  590
  622
  656
Earnings before tax, $m
  248
  168
  170
  173
  177
  180
  184
  188
  192
  197
  202
  207
  213
  219
  225
  232
  239
  246
  254
  262
  271
  280
  290
  300
  310
  322
  333
  346
  359
  373
  387
Tax expense, $m
  101
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  59
  61
  63
  64
  66
  69
  71
  73
  76
  78
  81
  84
  87
  90
  93
  97
  101
  105
Net income, $m
  147
  122
  124
  126
  129
  131
  134
  137
  140
  144
  147
  151
  155
  160
  164
  169
  174
  180
  185
  191
  198
  204
  211
  219
  227
  235
  243
  252
  262
  272
  283

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  264
  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
  8,971
  8,885
  9,090
  9,323
  9,585
  9,876
  10,195
  10,542
  10,918
  11,323
  11,757
  12,222
  12,718
  13,246
  13,808
  14,403
  15,035
  15,703
  16,409
  17,156
  17,944
  18,776
  19,653
  20,578
  21,552
  22,578
  23,658
  24,795
  25,992
  27,250
  28,574
Adjusted assets (=assets-cash), $m
  8,707
  8,885
  9,090
  9,323
  9,585
  9,876
  10,195
  10,542
  10,918
  11,323
  11,757
  12,222
  12,718
  13,246
  13,808
  14,403
  15,035
  15,703
  16,409
  17,156
  17,944
  18,776
  19,653
  20,578
  21,552
  22,578
  23,658
  24,795
  25,992
  27,250
  28,574
Revenue / Adjusted assets
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
Average production assets, $m
  915
  935
  956
  981
  1,009
  1,039
  1,073
  1,109
  1,149
  1,191
  1,237
  1,286
  1,338
  1,394
  1,453
  1,516
  1,582
  1,652
  1,727
  1,805
  1,888
  1,976
  2,068
  2,165
  2,268
  2,376
  2,489
  2,609
  2,735
  2,868
  3,007
Working capital, $m
  4,347
  2,106
  2,154
  2,210
  2,272
  2,341
  2,416
  2,498
  2,588
  2,684
  2,786
  2,897
  3,014
  3,139
  3,272
  3,414
  3,563
  3,722
  3,889
  4,066
  4,253
  4,450
  4,658
  4,877
  5,108
  5,351
  5,607
  5,876
  6,160
  6,458
  6,772
Total debt, $m
  4,742
  4,616
  4,773
  4,953
  5,154
  5,378
  5,623
  5,890
  6,179
  6,490
  6,824
  7,182
  7,563
  7,970
  8,401
  8,859
  9,345
  9,858
  10,402
  10,976
  11,582
  12,222
  12,896
  13,607
  14,356
  15,145
  15,976
  16,850
  17,771
  18,739
  19,757
Total liabilities, $m
  6,959
  6,833
  6,990
  7,170
  7,371
  7,595
  7,840
  8,107
  8,396
  8,707
  9,041
  9,399
  9,780
  10,187
  10,618
  11,076
  11,562
  12,075
  12,619
  13,193
  13,799
  14,439
  15,113
  15,824
  16,573
  17,362
  18,193
  19,067
  19,988
  20,956
  21,974
Total equity, $m
  2,012
  2,052
  2,100
  2,154
  2,214
  2,281
  2,355
  2,435
  2,522
  2,616
  2,716
  2,823
  2,938
  3,060
  3,190
  3,327
  3,473
  3,627
  3,791
  3,963
  4,145
  4,337
  4,540
  4,753
  4,978
  5,215
  5,465
  5,728
  6,004
  6,295
  6,601
Total liabilities and equity, $m
  8,971
  8,885
  9,090
  9,324
  9,585
  9,876
  10,195
  10,542
  10,918
  11,323
  11,757
  12,222
  12,718
  13,247
  13,808
  14,403
  15,035
  15,702
  16,410
  17,156
  17,944
  18,776
  19,653
  20,577
  21,551
  22,577
  23,658
  24,795
  25,992
  27,251
  28,575
Debt-to-equity ratio
  2.357
  2.250
  2.270
  2.300
  2.330
  2.360
  2.390
  2.420
  2.450
  2.480
  2.510
  2.540
  2.570
  2.600
  2.630
  2.660
  2.690
  2.720
  2.740
  2.770
  2.790
  2.820
  2.840
  2.860
  2.880
  2.900
  2.920
  2.940
  2.960
  2.980
  2.990
Adjusted equity ratio
  0.201
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231
  0.231

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  147
  122
  124
  126
  129
  131
  134
  137
  140
  144
  147
  151
  155
  160
  164
  169
  174
  180
  185
  191
  198
  204
  211
  219
  227
  235
  243
  252
  262
  272
  283
Depreciation, amort., depletion, $m
  150
  153
  157
  161
  165
  170
  176
  182
  188
  195
  203
  211
  219
  229
  238
  248
  259
  271
  283
  296
  310
  324
  339
  355
  372
  389
  408
  428
  448
  470
  493
Funds from operations, $m
  425
  276
  281
  287
  294
  302
  310
  319
  329
  339
  350
  362
  375
  388
  402
  418
  434
  451
  468
  487
  507
  528
  550
  574
  598
  624
  651
  680
  710
  742
  775
Change in working capital, $m
  -40
  41
  48
  55
  62
  69
  76
  82
  89
  96
  103
  110
  118
  125
  133
  141
  150
  158
  167
  177
  187
  197
  208
  219
  231
  243
  256
  269
  284
  298
  314
Cash from operations, $m
  465
  234
  233
  232
  232
  233
  235
  237
  240
  243
  247
  252
  257
  263
  269
  276
  284
  292
  301
  310
  320
  331
  343
  355
  367
  381
  395
  411
  427
  444
  462
Maintenance CAPEX, $m
  0
  -150
  -153
  -157
  -161
  -165
  -170
  -176
  -182
  -188
  -195
  -203
  -211
  -219
  -229
  -238
  -248
  -259
  -271
  -283
  -296
  -310
  -324
  -339
  -355
  -372
  -389
  -408
  -428
  -448
  -470
New CAPEX, $m
  -151
  -20
  -22
  -25
  -28
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -52
  -56
  -59
  -63
  -66
  -70
  -74
  -79
  -83
  -88
  -92
  -97
  -103
  -108
  -114
  -120
  -126
  -132
  -139
Cash from investing activities, $m
  -829
  -170
  -175
  -182
  -189
  -196
  -204
  -213
  -222
  -231
  -241
  -252
  -263
  -275
  -288
  -301
  -314
  -329
  -345
  -362
  -379
  -398
  -416
  -436
  -458
  -480
  -503
  -528
  -554
  -580
  -609
Free cash flow, $m
  -364
  64
  58
  51
  44
  37
  31
  24
  18
  12
  6
  0
  -6
  -12
  -18
  -24
  -31
  -38
  -44
  -51
  -59
  -66
  -74
  -82
  -90
  -99
  -108
  -117
  -127
  -137
  -148
Issuance/(repayment) of debt, $m
  308
  138
  157
  180
  202
  223
  245
  267
  289
  311
  334
  357
  381
  406
  432
  458
  485
  514
  543
  574
  606
  640
  675
  711
  749
  789
  831
  874
  920
  968
  1,018
Issuance/(repurchase) of shares, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  6
  10
  14
  19
  23
Cash from financing (excl. dividends), $m  
  311
  138
  157
  180
  202
  223
  245
  267
  289
  311
  334
  357
  381
  406
  432
  458
  485
  514
  543
  574
  606
  640
  675
  711
  749
  791
  837
  884
  934
  987
  1,041
Total cash flow (excl. dividends), $m
  -51
  202
  215
  230
  245
  260
  276
  291
  307
  324
  340
  358
  376
  394
  414
  434
  454
  476
  499
  523
  548
  574
  601
  629
  659
  693
  729
  768
  808
  850
  894
Retained Cash Flow (-), $m
  -183
  -40
  -47
  -54
  -61
  -67
  -74
  -80
  -87
  -94
  -100
  -107
  -115
  -122
  -130
  -138
  -146
  -154
  -163
  -172
  -182
  -192
  -203
  -214
  -225
  -237
  -250
  -263
  -276
  -291
  -306
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
 
  162
  168
  176
  185
  193
  202
  211
  220
  230
  240
  250
  261
  272
  284
  296
  309
  322
  336
  350
  366
  382
  398
  416
  434
  456
  480
  505
  531
  559
  588
Discount rate, %
 
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
 
  146
  137
  128
  118
  107
  96
  85
  75
  64
  55
  45
  37
  30
  24
  18
  14
  10
  7
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  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
  99.9
  99.8
  99.7
  99.6
  99.4

Cabela's Incorporated is an omni-channel retailer of hunting, fishing, camping, shooting sports and related outdoor merchandise. The Company offers its customers a selection of national and regional brand products, including its Cabela's brand. The Company's segments include Merchandising and Financial Services. The Merchandising segment sells products and services through the Company's retail stores, its e-commerce Websites (Cabelas.com and Cabelas.ca), and its catalogs. The United States merchandising and Canada merchandising operating segments have been aggregated into its Merchandising segment. The Financial Services segment issues co-branded credit cards, which are available through all of its channels. The Company's product assortment includes merchandise and equipment for hunting, fishing, marine use, camping, and recreational sport shooting, along with casual and outdoor apparel and footwear, optics, vehicle accessories, and gifts and home furnishings with an outdoor theme.

FINANCIAL RATIOS  of  Cabela's (CAB)

Valuation Ratios
P/E Ratio 28.6
Price to Sales 1
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow 13.4
Growth Rates
Sales Growth Rate 3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -63.4%
Cap. Spend. - 3 Yr. Gr. Rate -14.6%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 156%
Total Debt to Equity 235.7%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 7.7%
Return On Equity - 3 Yr. Avg. 9.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 41.2%
Gross Margin - 3 Yr. Avg. 42.5%
EBITDA Margin 12.7%
EBITDA Margin - 3 Yr. Avg. 13%
Operating Margin 6.6%
Oper. Margin - 3 Yr. Avg. 7.9%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. 7.4%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 40.7%
Eff/ Tax Rate - 3 Yr. Avg. 37.7%
Payout Ratio 0%

CAB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CAB stock intrinsic value calculation we used $4129 million for the last fiscal year's total revenue generated by Cabela's. The default revenue input number comes from 2016 income statement of Cabela's. 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 CAB 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 10.3%, whose default value for CAB is calculated based on our internal credit rating of Cabela's, 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 Cabela's.
    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 CAB stock the variable cost ratio is equal to 92.3%.

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 CAB 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 3.5% for Cabela's.

Corporate tax rate of 27% is the nominal tax rate for Cabela's. 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 CAB 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 CAB are equal to 22.2%.

Life of production assets of 6.1 years is the average useful life of capital assets used in Cabela's 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 CAB is equal to 50%. 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 - $2012 million for Cabela's - 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 69.567 million for Cabela's 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 Cabela's at the current share price and the inputted number of shares is $4.3 billion.

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Financial statements of CAB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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