Intrinsic value of Cavco Industries - CVCO

Previous Close

$235.90

  Intrinsic Value

$89.60

stock screener

  Rating & Target

str. sell

-62%

Previous close

$235.90

 
Intrinsic value

$89.60

 
Up/down potential

-62%

 
Rating

str. sell

We calculate the intrinsic value of CVCO 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 2.1

 

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, %
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  841
  910
  982
  1,057
  1,135
  1,215
  1,299
  1,387
  1,478
  1,572
  1,670
  1,773
  1,879
  1,991
  2,106
  2,227
  2,354
  2,485
  2,623
  2,767
  2,918
  3,075
  3,240
  3,412
  3,592
  3,781
  3,979
  4,186
  4,404
  4,631
Variable operating expenses, $m
  697
  754
  813
  874
  938
  1,004
  1,073
  1,145
  1,219
  1,297
  1,369
  1,453
  1,540
  1,632
  1,727
  1,826
  1,929
  2,037
  2,150
  2,268
  2,391
  2,520
  2,655
  2,797
  2,944
  3,099
  3,261
  3,431
  3,609
  3,796
Fixed operating expenses, $m
  79
  80
  82
  84
  86
  88
  90
  92
  94
  96
  98
  100
  102
  104
  107
  109
  111
  114
  116
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
Total operating expenses, $m
  776
  834
  895
  958
  1,024
  1,092
  1,163
  1,237
  1,313
  1,393
  1,467
  1,553
  1,642
  1,736
  1,834
  1,935
  2,040
  2,151
  2,266
  2,387
  2,513
  2,644
  2,782
  2,927
  3,077
  3,235
  3,400
  3,573
  3,754
  3,944
Operating income, $m
  65
  76
  87
  99
  111
  123
  137
  150
  165
  180
  203
  220
  237
  255
  273
  293
  313
  334
  357
  380
  405
  430
  457
  485
  515
  546
  579
  613
  649
  687
EBITDA, $m
  88
  100
  112
  125
  139
  153
  168
  183
  199
  215
  233
  251
  270
  290
  310
  332
  354
  378
  403
  429
  456
  484
  514
  546
  578
  613
  649
  687
  727
  769
Interest expense (income), $m
  3
  4
  5
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  35
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  77
Earnings before tax, $m
  61
  70
  80
  91
  101
  112
  124
  136
  149
  162
  184
  198
  213
  229
  245
  262
  280
  299
  319
  339
  361
  383
  407
  432
  458
  486
  515
  545
  577
  611
Tax expense, $m
  16
  19
  22
  24
  27
  30
  33
  37
  40
  44
  50
  53
  57
  62
  66
  71
  76
  81
  86
  92
  97
  104
  110
  117
  124
  131
  139
  147
  156
  165
Net income, $m
  45
  51
  59
  66
  74
  82
  90
  99
  109
  118
  134
  144
  155
  167
  179
  191
  204
  218
  233
  248
  263
  280
  297
  316
  335
  355
  376
  398
  421
  446

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
  634
  686
  740
  797
  856
  917
  980
  1,046
  1,114
  1,186
  1,260
  1,337
  1,417
  1,501
  1,589
  1,680
  1,775
  1,874
  1,978
  2,087
  2,200
  2,319
  2,443
  2,573
  2,709
  2,852
  3,001
  3,157
  3,321
  3,493
Adjusted assets (=assets-cash), $m
  634
  686
  740
  797
  856
  917
  980
  1,046
  1,114
  1,186
  1,260
  1,337
  1,417
  1,501
  1,589
  1,680
  1,775
  1,874
  1,978
  2,087
  2,200
  2,319
  2,443
  2,573
  2,709
  2,852
  3,001
  3,157
  3,321
  3,493
Revenue / Adjusted assets
  1.326
  1.327
  1.327
  1.326
  1.326
  1.325
  1.326
  1.326
  1.327
  1.325
  1.325
  1.326
  1.326
  1.326
  1.325
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
  1.326
Average production assets, $m
  148
  160
  173
  186
  200
  214
  229
  244
  260
  277
  294
  312
  331
  350
  371
  392
  414
  437
  462
  487
  513
  541
  570
  600
  632
  665
  700
  737
  775
  815
Working capital, $m
  76
  82
  88
  95
  102
  109
  117
  125
  133
  141
  150
  160
  169
  179
  190
  200
  212
  224
  236
  249
  263
  277
  292
  307
  323
  340
  358
  377
  396
  417
Total debt, $m
  69
  88
  107
  127
  148
  169
  192
  215
  239
  264
  291
  318
  346
  376
  407
  439
  473
  508
  545
  583
  624
  666
  710
  756
  804
  854
  907
  962
  1,020
  1,081
Total liabilities, $m
  224
  243
  262
  282
  303
  324
  347
  370
  394
  420
  446
  473
  502
  531
  562
  595
  628
  664
  700
  739
  779
  821
  865
  911
  959
  1,009
  1,062
  1,118
  1,176
  1,236
Total equity, $m
  410
  443
  478
  515
  553
  592
  633
  676
  720
  766
  814
  864
  916
  970
  1,026
  1,085
  1,147
  1,211
  1,278
  1,348
  1,421
  1,498
  1,578
  1,662
  1,750
  1,842
  1,938
  2,039
  2,145
  2,256
Total liabilities and equity, $m
  634
  686
  740
  797
  856
  916
  980
  1,046
  1,114
  1,186
  1,260
  1,337
  1,418
  1,501
  1,588
  1,680
  1,775
  1,875
  1,978
  2,087
  2,200
  2,319
  2,443
  2,573
  2,709
  2,851
  3,000
  3,157
  3,321
  3,492
Debt-to-equity ratio
  0.170
  0.200
  0.220
  0.250
  0.270
  0.290
  0.300
  0.320
  0.330
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
Adjusted equity ratio
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646
  0.646

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  45
  51
  59
  66
  74
  82
  90
  99
  109
  118
  134
  144
  155
  167
  179
  191
  204
  218
  233
  248
  263
  280
  297
  316
  335
  355
  376
  398
  421
  446
Depreciation, amort., depletion, $m
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
Funds from operations, $m
  67
  75
  84
  93
  102
  111
  121
  132
  143
  154
  163
  176
  188
  202
  216
  231
  246
  262
  279
  296
  315
  334
  354
  376
  398
  421
  446
  472
  499
  527
Change in working capital, $m
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
Cash from operations, $m
  61
  69
  77
  86
  95
  104
  114
  124
  134
  145
  155
  166
  179
  192
  205
  220
  234
  250
  266
  283
  301
  320
  340
  360
  382
  404
  428
  453
  479
  507
Maintenance CAPEX, $m
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
New CAPEX, $m
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
Cash from investing activities, $m
  -26
  -27
  -29
  -30
  -33
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -96
  -102
  -106
  -112
  -118
Free cash flow, $m
  36
  42
  49
  56
  63
  70
  78
  86
  94
  103
  110
  119
  129
  139
  150
  161
  173
  185
  198
  212
  226
  241
  256
  273
  290
  308
  327
  347
  367
  389
Issuance/(repayment) of debt, $m
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
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  
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
Total cash flow (excl. dividends), $m
  54
  61
  68
  75
  83
  92
  100
  109
  118
  128
  136
  146
  157
  169
  181
  194
  207
  221
  235
  250
  266
  283
  300
  319
  338
  358
  380
  402
  425
  450
Retained Cash Flow (-), $m
  -33
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
Prev. year cash balance distribution, $m
  17
  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
  38
  27
  33
  39
  45
  52
  59
  66
  74
  82
  88
  96
  105
  115
  124
  135
  145
  156
  168
  180
  193
  206
  220
  235
  250
  266
  283
  301
  320
  339
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
  36
  25
  29
  32
  35
  38
  40
  41
  42
  43
  42
  41
  40
  39
  37
  34
  32
  29
  26
  23
  20
  17
  14
  12
  10
  8
  6
  5
  3
  3
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
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Cavco Industries, Inc. designs and produces factory-built homes. The Company operates through two segments: factory-built housing, which includes wholesale and retail systems-built housing operations, and financial services, which includes manufactured housing consumer finance and insurance. Its factory-built homes are primarily distributed through a network of independent and the Company-owned retailers, planned community operators and residential developers. It markets its products under the brands, including Cavco Homes, Fleetwood Homes, Palm Harbor Homes, Fairmont Homes and Chariot Eagle. It is also a builder of park model recreational vehicle (RVs), vacation cabins and systems-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand. It also produces a range of Cape Cod-style homes and multi-family units, and builds commercial modular structures, including apartment buildings, schools and housing for the United States military troops.

FINANCIAL RATIOS  of  Cavco Industries (CVCO)

Valuation Ratios
P/E Ratio 55.8
Price to Sales 2.7
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 47.1
Price to Free Cash Flow 53
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio 24
Current Ratio 0.2
LT Debt to Equity 13.2%
Total Debt to Equity 14.7%
Interest Coverage 19
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 6.1%
Return On Total Capital 8.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 10.2%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 20.4%
Gross Margin - 3 Yr. Avg. 21%
EBITDA Margin 8%
EBITDA Margin - 3 Yr. Avg. 7.8%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 6.9%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 30.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.4%
Payout Ratio 0%

CVCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVCO stock intrinsic value calculation we used $774 million for the last fiscal year's total revenue generated by Cavco Industries. The default revenue input number comes from 2017 income statement of Cavco 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 CVCO stock valuation model: a) initial revenue growth rate of 8.6% 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 CVCO is calculated based on our internal credit rating of Cavco 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 Cavco 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 CVCO stock the variable cost ratio is equal to 83%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $77 million in the base year in the intrinsic value calculation for CVCO 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 7.5% for Cavco Industries.

Corporate tax rate of 27% is the nominal tax rate for Cavco 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 CVCO 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 CVCO are equal to 17.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Cavco 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 CVCO is equal to 9%. 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 - $394 million for Cavco 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 9 million for Cavco 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 Cavco Industries at the current share price and the inputted number of shares is $2.1 billion.

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COMPANY NEWS

▶ Cavco Industries, Inc. to Host Earnings Call   [Aug-07-18 11:00AM  ACCESSWIRE]
▶ Cavco: Fiscal 1Q Earnings Snapshot   [Aug-06-18 05:45PM  Associated Press]
▶ Cavco: Fiscal 4Q Earnings Snapshot   [04:20PM  Associated Press]
▶ Cavco posts 3Q profit   [Feb-06-18 06:01PM  Associated Press]
▶ Cavco Industries, Inc. to Host Earnings Call   [Nov-08-17 11:00AM  ACCESSWIRE]
▶ Cavco posts 2Q profit   [Nov-07-17 05:59PM  Associated Press]
▶ Cavco Industries Gets IBD Stock Rating Upgrade   [Sep-06-17 03:00AM  Investor's Business Daily]
▶ Cavco posts 1Q profit   [Aug-07-17 10:48PM  Associated Press]
▶ Cavco Industries Gets A Composite Rating Upgrade   [Jul-03-17 11:02AM  Investor's Business Daily]
▶ Company News for June 14, 2017   [10:28AM  Zacks]
▶ Cavco posts 4Q profit   [Jun-12-17 04:18PM  Associated Press]
▶ Cavco posts 3Q profit   [Feb-06-17 04:42PM  Associated Press]
▶ Is Cavco Industries, Inc. (CVCO) A Good Stock To Buy?   [Dec-14-16 08:07AM  at Insider Monkey]
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