Intrinsic value of Carter's, Inc. - CRI

Previous Close

$95.91

  Intrinsic Value

$111.80

stock screener

  Rating & Target

hold

+17%

Previous close

$95.91

 
Intrinsic value

$111.80

 
Up/down potential

+17%

 
Rating

hold

We calculate the intrinsic value of CRI 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 4.3

 

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, %
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.11
  5.09
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
Revenue, $m
  3,659
  3,865
  4,081
  4,305
  4,540
  4,786
  5,043
  5,312
  5,594
  5,889
  6,198
  6,521
  6,860
  7,215
  7,588
  7,978
  8,387
  8,816
  9,267
  9,739
  10,234
  10,753
  11,298
  11,870
  12,470
  13,100
  13,761
  14,455
  15,183
  15,947
Variable operating expenses, $m
  3,206
  3,382
  3,567
  3,760
  3,962
  4,173
  4,394
  4,625
  4,867
  5,120
  5,321
  5,599
  5,890
  6,195
  6,515
  6,850
  7,201
  7,570
  7,956
  8,362
  8,787
  9,233
  9,701
  10,192
  10,707
  11,248
  11,815
  12,411
  13,036
  13,692
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
  3,206
  3,382
  3,567
  3,760
  3,962
  4,173
  4,394
  4,625
  4,867
  5,120
  5,321
  5,599
  5,890
  6,195
  6,515
  6,850
  7,201
  7,570
  7,956
  8,362
  8,787
  9,233
  9,701
  10,192
  10,707
  11,248
  11,815
  12,411
  13,036
  13,692
Operating income, $m
  454
  483
  513
  545
  578
  613
  649
  687
  727
  769
  876
  922
  970
  1,020
  1,073
  1,128
  1,186
  1,247
  1,310
  1,377
  1,447
  1,521
  1,598
  1,678
  1,763
  1,852
  1,946
  2,044
  2,147
  2,255
EBITDA, $m
  582
  615
  649
  685
  722
  761
  802
  845
  890
  937
  986
  1,037
  1,091
  1,148
  1,207
  1,269
  1,334
  1,403
  1,474
  1,549
  1,628
  1,711
  1,797
  1,888
  1,984
  2,084
  2,189
  2,299
  2,415
  2,537
Interest expense (income), $m
  25
  34
  38
  42
  46
  50
  55
  60
  65
  70
  76
  81
  87
  94
  100
  107
  115
  122
  130
  139
  148
  157
  166
  177
  187
  199
  210
  223
  236
  249
  263
Earnings before tax, $m
  420
  445
  472
  499
  528
  558
  590
  623
  657
  693
  795
  835
  876
  920
  966
  1,013
  1,064
  1,116
  1,172
  1,230
  1,290
  1,354
  1,421
  1,491
  1,565
  1,642
  1,723
  1,808
  1,898
  1,992
Tax expense, $m
  113
  120
  127
  135
  143
  151
  159
  168
  177
  187
  215
  225
  237
  248
  261
  274
  287
  301
  316
  332
  348
  366
  384
  403
  422
  443
  465
  488
  512
  538
Net income, $m
  307
  325
  344
  364
  385
  407
  430
  455
  480
  506
  580
  609
  640
  671
  705
  740
  776
  815
  855
  898
  942
  988
  1,037
  1,089
  1,142
  1,199
  1,258
  1,320
  1,385
  1,454

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
  2,176
  2,298
  2,426
  2,560
  2,699
  2,846
  2,998
  3,158
  3,326
  3,501
  3,685
  3,877
  4,079
  4,290
  4,511
  4,743
  4,986
  5,242
  5,509
  5,790
  6,084
  6,393
  6,717
  7,057
  7,414
  7,789
  8,181
  8,594
  9,027
  9,481
Adjusted assets (=assets-cash), $m
  2,176
  2,298
  2,426
  2,560
  2,699
  2,846
  2,998
  3,158
  3,326
  3,501
  3,685
  3,877
  4,079
  4,290
  4,511
  4,743
  4,986
  5,242
  5,509
  5,790
  6,084
  6,393
  6,717
  7,057
  7,414
  7,789
  8,181
  8,594
  9,027
  9,481
Revenue / Adjusted assets
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
  1.682
Average production assets, $m
  725
  765
  808
  852
  899
  948
  999
  1,052
  1,108
  1,166
  1,227
  1,291
  1,358
  1,429
  1,502
  1,580
  1,661
  1,746
  1,835
  1,928
  2,026
  2,129
  2,237
  2,350
  2,469
  2,594
  2,725
  2,862
  3,006
  3,158
Working capital, $m
  578
  611
  645
  680
  717
  756
  797
  839
  884
  930
  979
  1,030
  1,084
  1,140
  1,199
  1,261
  1,325
  1,393
  1,464
  1,539
  1,617
  1,699
  1,785
  1,876
  1,970
  2,070
  2,174
  2,284
  2,399
  2,520
Total debt, $m
  661
  732
  806
  883
  964
  1,049
  1,137
  1,229
  1,326
  1,427
  1,534
  1,645
  1,761
  1,883
  2,011
  2,145
  2,286
  2,434
  2,588
  2,750
  2,921
  3,099
  3,286
  3,483
  3,689
  3,906
  4,133
  4,371
  4,621
  4,884
Total liabilities, $m
  1,257
  1,328
  1,402
  1,479
  1,560
  1,645
  1,733
  1,826
  1,922
  2,024
  2,130
  2,241
  2,357
  2,479
  2,607
  2,742
  2,882
  3,030
  3,184
  3,347
  3,517
  3,695
  3,883
  4,079
  4,285
  4,502
  4,729
  4,967
  5,217
  5,480
Total equity, $m
  918
  970
  1,024
  1,080
  1,139
  1,201
  1,265
  1,333
  1,403
  1,477
  1,555
  1,636
  1,721
  1,810
  1,904
  2,002
  2,104
  2,212
  2,325
  2,443
  2,568
  2,698
  2,835
  2,978
  3,129
  3,287
  3,453
  3,627
  3,809
  4,001
Total liabilities and equity, $m
  2,175
  2,298
  2,426
  2,559
  2,699
  2,846
  2,998
  3,159
  3,325
  3,501
  3,685
  3,877
  4,078
  4,289
  4,511
  4,744
  4,986
  5,242
  5,509
  5,790
  6,085
  6,393
  6,718
  7,057
  7,414
  7,789
  8,182
  8,594
  9,026
  9,481
Debt-to-equity ratio
  0.720
  0.750
  0.790
  0.820
  0.850
  0.870
  0.900
  0.920
  0.940
  0.970
  0.990
  1.010
  1.020
  1.040
  1.060
  1.070
  1.090
  1.100
  1.110
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.210
  1.220
Adjusted equity ratio
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422
  0.422

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  307
  325
  344
  364
  385
  407
  430
  455
  480
  506
  580
  609
  640
  671
  705
  740
  776
  815
  855
  898
  942
  988
  1,037
  1,089
  1,142
  1,199
  1,258
  1,320
  1,385
  1,454
Depreciation, amort., depletion, $m
  128
  132
  136
  140
  144
  148
  153
  158
  163
  168
  110
  115
  121
  128
  134
  141
  148
  156
  164
  172
  181
  190
  200
  210
  220
  232
  243
  256
  268
  282
Funds from operations, $m
  435
  457
  480
  504
  529
  556
  583
  612
  642
  674
  690
  725
  761
  799
  839
  881
  925
  971
  1,019
  1,070
  1,123
  1,179
  1,237
  1,298
  1,363
  1,430
  1,501
  1,576
  1,654
  1,736
Change in working capital, $m
  31
  33
  34
  36
  37
  39
  41
  43
  44
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  100
  104
  110
  115
  121
Cash from operations, $m
  404
  424
  446
  469
  492
  517
  543
  570
  598
  627
  641
  673
  707
  743
  780
  819
  860
  903
  948
  995
  1,045
  1,096
  1,151
  1,208
  1,268
  1,331
  1,397
  1,466
  1,539
  1,615
Maintenance CAPEX, $m
  -61
  -65
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -110
  -115
  -121
  -128
  -134
  -141
  -148
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -220
  -232
  -243
  -256
  -268
New CAPEX, $m
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -119
  -125
  -131
  -137
  -144
  -151
Cash from investing activities, $m
  -101
  -106
  -111
  -117
  -123
  -129
  -136
  -142
  -150
  -157
  -165
  -174
  -182
  -191
  -202
  -211
  -222
  -233
  -245
  -257
  -270
  -284
  -298
  -313
  -329
  -345
  -363
  -380
  -400
  -419
Free cash flow, $m
  303
  319
  335
  352
  370
  388
  407
  427
  448
  470
  476
  500
  525
  551
  579
  608
  638
  670
  703
  738
  774
  813
  853
  895
  939
  986
  1,034
  1,085
  1,139
  1,195
Issuance/(repayment) of debt, $m
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
  141
  147
  155
  162
  170
  179
  187
  197
  206
  216
  227
  238
  250
  263
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  
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
  116
  122
  128
  134
  141
  147
  155
  162
  170
  179
  187
  197
  206
  216
  227
  238
  250
  263
Total cash flow (excl. dividends), $m
  371
  390
  409
  429
  450
  472
  496
  520
  545
  571
  582
  611
  641
  673
  707
  742
  779
  817
  858
  900
  945
  991
  1,040
  1,092
  1,145
  1,202
  1,261
  1,324
  1,389
  1,458
Retained Cash Flow (-), $m
  -49
  -52
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -118
  -124
  -130
  -137
  -143
  -151
  -158
  -166
  -174
  -183
  -192
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
  322
  338
  355
  373
  391
  411
  431
  452
  474
  497
  505
  530
  556
  584
  613
  644
  676
  710
  745
  782
  820
  861
  903
  948
  995
  1,044
  1,096
  1,150
  1,207
  1,266
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
  309
  309
  309
  307
  303
  298
  291
  283
  272
  261
  240
  226
  212
  196
  180
  164
  147
  131
  115
  99
  85
  71
  59
  48
  39
  30
  24
  18
  13
  10
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

Carter's, Inc. (Carter's) is a marketer of apparel for babies and young children in the United States and Canada. The Company owns two brand names in the children's apparel industry, Carter's and OshKosh B'gosh (OshKosh). The Company operates through five segments: Carter's Retail, Carter's Wholesale, OshKosh Retail, OshKosh Wholesale and International. Its International segment includes company-operated retail stores and online Websites, wholesale operations, and royalty income from its international licensees. It markets products for consumers, and offer various product categories, including baby, sleepwear, play clothes, and related accessories. Its multi-channel international business model - retail stores, online and wholesale - enables it to reach a range of consumers around the world. As of December 31, 2016, its channels included approximately 18,000 wholesale locations, 792 stores in the United States, 164 stores in Canada, and its Canadian and the United States Websites.

FINANCIAL RATIOS  of  Carter's, Inc. (CRI)

Valuation Ratios
P/E Ratio 18.2
Price to Sales 1.5
Price to Book 6
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 16.8
Growth Rates
Sales Growth Rate 6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.4%
Cap. Spend. - 3 Yr. Gr. Rate -16.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 73.6%
Total Debt to Equity 73.6%
Interest Coverage 17
Management Effectiveness
Return On Assets 13.9%
Ret/ On Assets - 3 Yr. Avg. 12.8%
Return On Total Capital 18.3%
Ret/ On T. Cap. - 3 Yr. Avg. 16.6%
Return On Equity 31%
Return On Equity - 3 Yr. Avg. 28.6%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 43.1%
Gross Margin - 3 Yr. Avg. 41.9%
EBITDA Margin 15.5%
EBITDA Margin - 3 Yr. Avg. 14.9%
Operating Margin 13.3%
Oper. Margin - 3 Yr. Avg. 12.6%
Pre-Tax Margin 12.4%
Pre-Tax Margin - 3 Yr. Avg. 11.7%
Net Profit Margin 8.1%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 34.8%
Eff/ Tax Rate - 3 Yr. Avg. 35.3%
Payout Ratio 25.6%

CRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRI stock intrinsic value calculation we used $3462 million for the last fiscal year's total revenue generated by Carter's, Inc.. The default revenue input number comes from 0001 income statement of Carter's, 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 CRI stock valuation model: a) initial revenue growth rate of 5.7% 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 4.3%, whose default value for CRI is calculated based on our internal credit rating of Carter's, 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 Carter's, 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 CRI stock the variable cost ratio is equal to 87.7%.

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 CRI 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 5.7% for Carter's, Inc..

Corporate tax rate of 27% is the nominal tax rate for Carter's, 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 CRI 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 CRI are equal to 19.8%.

Life of production assets of 11.2 years is the average useful life of capital assets used in Carter's, 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 CRI is equal to 15.8%. 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 - $869.433 million for Carter's, 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 45.335 million for Carter's, 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 Carter's, Inc. at the current share price and the inputted number of shares is $4.3 billion.

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