Intrinsic value of Culp - CULP

Previous Close

$22.14

  Intrinsic Value

$20.00

stock screener

  Rating & Target

hold

-10%

Previous close

$22.14

 
Intrinsic value

$20.00

 
Up/down potential

-10%

 
Rating

hold

We calculate the intrinsic value of CULP 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, %
  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
  330
  338
  346
  356
  367
  379
  392
  406
  421
  437
  454
  473
  492
  513
  535
  559
  584
  610
  638
  667
  698
  730
  765
  801
  839
  879
  921
  966
  1,013
  1,062
Variable operating expenses, $m
  298
  305
  313
  322
  332
  342
  354
  366
  380
  395
  409
  425
  443
  462
  482
  503
  525
  549
  574
  600
  628
  657
  688
  721
  755
  791
  829
  869
  911
  956
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
  298
  305
  313
  322
  332
  342
  354
  366
  380
  395
  409
  425
  443
  462
  482
  503
  525
  549
  574
  600
  628
  657
  688
  721
  755
  791
  829
  869
  911
  956
Operating income, $m
  32
  32
  33
  34
  35
  37
  38
  39
  41
  42
  46
  47
  49
  51
  54
  56
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  92
  97
  101
  106
EBITDA, $m
  40
  41
  42
  44
  45
  46
  48
  50
  52
  54
  56
  58
  60
  63
  66
  68
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
Earnings before tax, $m
  32
  32
  33
  34
  35
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  96
  100
Tax expense, $m
  9
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
Net income, $m
  23
  24
  24
  25
  26
  26
  27
  28
  29
  30
  32
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73

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
  213
  218
  224
  230
  237
  245
  253
  262
  272
  282
  293
  305
  318
  331
  346
  361
  377
  394
  412
  431
  450
  472
  494
  517
  542
  568
  595
  624
  654
  686
Adjusted assets (=assets-cash), $m
  213
  218
  224
  230
  237
  245
  253
  262
  272
  282
  293
  305
  318
  331
  346
  361
  377
  394
  412
  431
  450
  472
  494
  517
  542
  568
  595
  624
  654
  686
Revenue / Adjusted assets
  1.549
  1.550
  1.545
  1.548
  1.549
  1.547
  1.549
  1.550
  1.548
  1.550
  1.549
  1.551
  1.547
  1.550
  1.546
  1.548
  1.549
  1.548
  1.549
  1.548
  1.551
  1.547
  1.549
  1.549
  1.548
  1.548
  1.548
  1.548
  1.549
  1.548
Average production assets, $m
  59
  60
  62
  64
  66
  68
  70
  73
  75
  78
  81
  85
  88
  92
  96
  100
  104
  109
  114
  119
  125
  131
  137
  143
  150
  157
  165
  173
  181
  190
Working capital, $m
  43
  44
  45
  46
  48
  49
  51
  53
  55
  57
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  120
  126
  132
  138
Total debt, $m
  1
  2
  4
  5
  7
  9
  11
  14
  16
  19
  22
  25
  28
  32
  36
  40
  44
  48
  53
  58
  63
  68
  74
  80
  87
  94
  101
  108
  116
  124
Total liabilities, $m
  56
  57
  58
  60
  62
  64
  66
  68
  71
  74
  77
  80
  83
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  141
  148
  155
  163
  171
  179
Total equity, $m
  158
  161
  165
  170
  175
  181
  187
  194
  201
  208
  217
  225
  235
  245
  255
  267
  278
  291
  304
  318
  333
  348
  365
  382
  400
  419
  440
  461
  483
  507
Total liabilities and equity, $m
  214
  218
  223
  230
  237
  245
  253
  262
  272
  282
  294
  305
  318
  331
  345
  361
  376
  394
  411
  430
  451
  471
  494
  517
  541
  567
  595
  624
  654
  686
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.250
Adjusted equity ratio
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739
  0.739

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  23
  24
  24
  25
  26
  26
  27
  28
  29
  30
  32
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
Depreciation, amort., depletion, $m
  9
  9
  9
  9
  10
  10
  10
  10
  11
  11
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Funds from operations, $m
  32
  33
  33
  34
  35
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  74
  77
  81
  84
  88
  92
  97
Change in working capital, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
Cash from operations, $m
  31
  32
  32
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  83
  86
  90
Maintenance CAPEX, $m
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
Cash from investing activities, $m
  -8
  -8
  -10
  -10
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -22
  -23
  -25
  -26
  -28
  -29
  -30
  -32
Free cash flow, $m
  23
  23
  23
  23
  24
  24
  25
  26
  26
  27
  28
  28
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  52
  54
  56
  59
Issuance/(repayment) of debt, $m
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
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  
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Total cash flow (excl. dividends), $m
  24
  24
  25
  25
  26
  26
  27
  28
  29
  30
  30
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
Retained Cash Flow (-), $m
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Prev. year cash balance distribution, $m
  9
  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
  30
  21
  20
  20
  21
  21
  21
  21
  22
  22
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
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
  28
  19
  18
  17
  16
  15
  14
  13
  12
  12
  11
  10
  9
  8
  7
  6
  6
  5
  4
  4
  3
  3
  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

Culp, Inc. is a producer of mattress fabrics and marketer of upholstery fabrics for furniture in North America. The Company is engaged in the manufacture, sourcing and marketing of mattress fabrics and sewn covers used for covering mattresses and box springs, and upholstery fabrics, including cut and sewn kits used in production of upholstered furniture. The Company operates through two segments: mattress fabrics (Culp Home Fashions) and upholstery fabrics. Its mattress fabrics segment manufactures and markets mattress fabric and mattress covers to bedding manufacturers. Its upholstery fabrics segment markets fabrics for residential and commercial furniture, including jacquard woven fabrics, velvets, microdenier suedes, woven dobbies, knitted fabrics, piece-dyed woven products and polyurethane leather look fabrics. The Company markets a range of fabrics in the categories, including fabrics produced at its manufacturing facilities and fabrics produced by other suppliers.

FINANCIAL RATIOS  of  Culp (CULP)

Valuation Ratios
P/E Ratio 12.4
Price to Sales 0.9
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 13
Growth Rates
Sales Growth Rate -1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.1%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.5%
Ret/ On Assets - 3 Yr. Avg. 10.1%
Return On Total Capital 15.8%
Ret/ On T. Cap. - 3 Yr. Avg. 14%
Return On Equity 15.8%
Return On Equity - 3 Yr. Avg. 14.2%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 22.3%
Gross Margin - 3 Yr. Avg. 20.4%
EBITDA Margin 11.9%
EBITDA Margin - 3 Yr. Avg. 10.8%
Operating Margin 10%
Oper. Margin - 3 Yr. Avg. 8.8%
Pre-Tax Margin 9.7%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 7.1%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 27.3%

CULP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CULP stock intrinsic value calculation we used $323.725 million for the last fiscal year's total revenue generated by Culp. The default revenue input number comes from 0001 income statement of Culp. 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 CULP 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 4.3%, whose default value for CULP is calculated based on our internal credit rating of Culp, 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 Culp.
    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 CULP stock the variable cost ratio is equal to 90.4%.

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 CULP 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 Culp.

Corporate tax rate of 27% is the nominal tax rate for Culp. 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 CULP 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 CULP are equal to 17.9%.

Life of production assets of 8 years is the average useful life of capital assets used in Culp 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 CULP is equal to 13%. 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 - $163.376 million for Culp - 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 12.45 million for Culp 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 Culp at the current share price and the inputted number of shares is $0.3 billion.

COMPANY NEWS

▶ Is Culp Inc (NYSE:CULP) A Good Dividend Stock?   [Nov-09-18 01:12PM  Simply Wall St.]
▶ High Point fabric manufacturer shakes up top leadership   [Sep-21-18 07:30AM  American City Business Journals]
▶ Culp Announces Changes in Executive Management Structure   [Sep-20-18 04:15PM  Business Wire]
▶ Should You Get Rid of Culp (CULP) Now?   [Sep-13-18 08:33AM  Zacks]
▶ What Are Analysts Saying About Culp Incs (NYSE:CULP) Future?   [Aug-30-18 07:14AM  Simply Wall St.]
▶ Culp Announces Results for First Quarter Fiscal 2019   [Aug-29-18 04:15PM  Business Wire]
▶ Culp Announces Results for Fourth Quarter and Fiscal 2018   [Jun-13-18 04:15PM  Business Wire]
▶ Culp to acquire Tennessee window treatments firm   [Mar-09-18 07:47AM  American City Business Journals]
▶ Culp Announces Results for Third Quarter Fiscal 2018   [Feb-28-18 04:15PM  Business Wire]
▶ The Triad's best and worst stocks of 2017 (Slideshow)   [Jan-11-18 07:31AM  American City Business Journals]
▶ ETFs with exposure to Culp, Inc. : December 13, 2017   [Dec-13-17 01:04PM  Capital Cube]
▶ Culp Announces Results for Second Quarter Fiscal 2018   [Nov-30-17 04:15PM  Business Wire]

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