Intrinsic value of Cavco Industries - CVCO

Previous Close

$210.76

  Intrinsic Value

$223.67

stock screener

  Rating & Target

hold

+6%

Previous close

$210.76

 
Intrinsic value

$223.67

 
Up/down potential

+6%

 
Rating

hold

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 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 1.9

 

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, %
  19.10
  17.69
  16.42
  15.28
  14.25
  13.33
  12.49
  11.74
  11.07
  10.46
  9.92
  9.42
  8.98
  8.58
  8.23
  7.90
  7.61
  7.35
  7.12
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
Revenue, $m
  1,038
  1,221
  1,422
  1,639
  1,873
  2,122
  2,387
  2,668
  2,963
  3,273
  3,597
  3,936
  4,290
  4,658
  5,041
  5,440
  5,854
  6,284
  6,731
  7,196
  7,679
  8,182
  8,705
  9,249
  9,815
  10,405
  11,020
  11,662
  12,331
  13,029
Variable operating expenses, $m
  858
  1,008
  1,172
  1,350
  1,541
  1,745
  1,962
  2,192
  2,433
  2,687
  2,944
  3,222
  3,511
  3,813
  4,126
  4,452
  4,791
  5,143
  5,510
  5,890
  6,285
  6,697
  7,124
  7,570
  8,033
  8,516
  9,020
  9,545
  10,092
  10,664
Fixed operating expenses, $m
  80
  81
  83
  85
  87
  89
  91
  93
  95
  97
  99
  101
  104
  106
  108
  110
  113
  115
  118
  121
  123
  126
  129
  131
  134
  137
  140
  143
  147
  150
Total operating expenses, $m
  938
  1,089
  1,255
  1,435
  1,628
  1,834
  2,053
  2,285
  2,528
  2,784
  3,043
  3,323
  3,615
  3,919
  4,234
  4,562
  4,904
  5,258
  5,628
  6,011
  6,408
  6,823
  7,253
  7,701
  8,167
  8,653
  9,160
  9,688
  10,239
  10,814
Operating income, $m
  100
  132
  167
  204
  245
  288
  334
  383
  435
  489
  554
  613
  675
  740
  807
  877
  950
  1,025
  1,104
  1,186
  1,271
  1,359
  1,451
  1,547
  1,647
  1,751
  1,860
  1,973
  2,092
  2,215
EBITDA, $m
  113
  145
  180
  219
  260
  305
  352
  402
  454
  510
  568
  629
  692
  758
  827
  898
  972
  1,050
  1,130
  1,214
  1,301
  1,391
  1,485
  1,583
  1,685
  1,792
  1,903
  2,019
  2,139
  2,266
Interest expense (income), $m
  3
  4
  7
  10
  14
  17
  21
  25
  30
  34
  39
  44
  50
  55
  61
  67
  73
  80
  87
  94
  101
  109
  117
  125
  134
  143
  152
  162
  172
  183
  194
Earnings before tax, $m
  96
  125
  156
  191
  227
  267
  309
  354
  401
  450
  510
  564
  620
  679
  740
  804
  870
  939
  1,010
  1,085
  1,162
  1,242
  1,326
  1,414
  1,505
  1,599
  1,698
  1,801
  1,909
  2,022
Tax expense, $m
  26
  34
  42
  51
  61
  72
  83
  95
  108
  121
  138
  152
  167
  183
  200
  217
  235
  253
  273
  293
  314
  335
  358
  382
  406
  432
  459
  486
  515
  546
Net income, $m
  70
  91
  114
  139
  166
  195
  226
  258
  292
  328
  372
  412
  453
  496
  540
  587
  635
  685
  737
  792
  848
  907
  968
  1,032
  1,098
  1,168
  1,240
  1,315
  1,394
  1,476

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
  725
  853
  994
  1,145
  1,309
  1,483
  1,668
  1,864
  2,070
  2,287
  2,514
  2,751
  2,998
  3,255
  3,523
  3,801
  4,091
  4,392
  4,704
  5,029
  5,366
  5,718
  6,083
  6,463
  6,859
  7,271
  7,701
  8,149
  8,617
  9,105
Adjusted assets (=assets-cash), $m
  725
  853
  994
  1,145
  1,309
  1,483
  1,668
  1,864
  2,070
  2,287
  2,514
  2,751
  2,998
  3,255
  3,523
  3,801
  4,091
  4,392
  4,704
  5,029
  5,366
  5,718
  6,083
  6,463
  6,859
  7,271
  7,701
  8,149
  8,617
  9,105
Revenue / Adjusted assets
  1.432
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
Average production assets, $m
  120
  142
  165
  190
  217
  246
  277
  309
  344
  380
  417
  457
  498
  540
  585
  631
  679
  729
  781
  835
  891
  949
  1,010
  1,073
  1,139
  1,207
  1,278
  1,353
  1,430
  1,511
Working capital, $m
  61
  72
  84
  97
  110
  125
  141
  157
  175
  193
  212
  232
  253
  275
  297
  321
  345
  371
  397
  425
  453
  483
  514
  546
  579
  614
  650
  688
  728
  769
Total debt, $m
  97
  137
  181
  229
  280
  335
  394
  455
  520
  589
  660
  735
  813
  894
  978
  1,066
  1,157
  1,252
  1,350
  1,452
  1,559
  1,669
  1,784
  1,904
  2,029
  2,159
  2,294
  2,435
  2,582
  2,736
Total liabilities, $m
  228
  269
  313
  361
  412
  467
  525
  587
  652
  720
  792
  866
  944
  1,025
  1,110
  1,197
  1,289
  1,383
  1,482
  1,584
  1,690
  1,801
  1,916
  2,036
  2,161
  2,290
  2,426
  2,567
  2,714
  2,868
Total equity, $m
  497
  585
  681
  785
  896
  1,016
  1,143
  1,277
  1,418
  1,567
  1,722
  1,884
  2,054
  2,230
  2,413
  2,604
  2,802
  3,008
  3,222
  3,445
  3,676
  3,917
  4,167
  4,427
  4,698
  4,981
  5,275
  5,582
  5,903
  6,237
Total liabilities and equity, $m
  725
  854
  994
  1,146
  1,308
  1,483
  1,668
  1,864
  2,070
  2,287
  2,514
  2,750
  2,998
  3,255
  3,523
  3,801
  4,091
  4,391
  4,704
  5,029
  5,366
  5,718
  6,083
  6,463
  6,859
  7,271
  7,701
  8,149
  8,617
  9,105
Debt-to-equity ratio
  0.190
  0.230
  0.270
  0.290
  0.310
  0.330
  0.340
  0.360
  0.370
  0.380
  0.380
  0.390
  0.400
  0.400
  0.410
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.440
  0.440
  0.440
Adjusted equity ratio
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685
  0.685

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  70
  91
  114
  139
  166
  195
  226
  258
  292
  328
  372
  412
  453
  496
  540
  587
  635
  685
  737
  792
  848
  907
  968
  1,032
  1,098
  1,168
  1,240
  1,315
  1,394
  1,476
Depreciation, amort., depletion, $m
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  14
  15
  17
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
Funds from operations, $m
  82
  104
  128
  154
  182
  211
  243
  277
  312
  349
  386
  427
  469
  514
  560
  608
  658
  709
  763
  820
  878
  939
  1,002
  1,068
  1,136
  1,208
  1,282
  1,360
  1,441
  1,526
Change in working capital, $m
  10
  11
  12
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  24
  25
  26
  27
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
Cash from operations, $m
  72
  93
  116
  141
  168
  197
  228
  260
  295
  331
  367
  407
  448
  492
  537
  584
  633
  684
  737
  792
  849
  909
  971
  1,036
  1,103
  1,173
  1,246
  1,322
  1,402
  1,485
Maintenance CAPEX, $m
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
New CAPEX, $m
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -78
  -81
Cash from investing activities, $m
  -22
  -25
  -28
  -30
  -33
  -36
  -39
  -42
  -44
  -47
  -51
  -53
  -56
  -60
  -62
  -65
  -69
  -73
  -76
  -80
  -84
  -88
  -93
  -97
  -102
  -106
  -111
  -117
  -123
  -129
Free cash flow, $m
  50
  68
  88
  110
  134
  161
  189
  218
  250
  284
  317
  354
  392
  433
  475
  518
  564
  612
  661
  712
  766
  821
  879
  939
  1,001
  1,067
  1,134
  1,205
  1,279
  1,356
Issuance/(repayment) of debt, $m
  37
  40
  44
  48
  51
  55
  58
  62
  65
  68
  71
  75
  78
  81
  84
  88
  91
  95
  98
  102
  106
  111
  115
  120
  125
  130
  135
  141
  147
  154
Issuance/(repurchase) of shares, $m
  10
  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  
  47
  40
  44
  48
  51
  55
  58
  62
  65
  68
  71
  75
  78
  81
  84
  88
  91
  95
  98
  102
  106
  111
  115
  120
  125
  130
  135
  141
  147
  154
Total cash flow (excl. dividends), $m
  97
  108
  132
  158
  186
  215
  247
  280
  315
  352
  388
  428
  470
  514
  559
  606
  655
  706
  759
  814
  872
  932
  994
  1,059
  1,126
  1,196
  1,270
  1,346
  1,426
  1,510
Retained Cash Flow (-), $m
  -80
  -88
  -96
  -104
  -112
  -119
  -127
  -134
  -141
  -148
  -155
  -162
  -169
  -176
  -183
  -191
  -198
  -206
  -214
  -222
  -231
  -241
  -250
  -260
  -271
  -282
  -294
  -307
  -320
  -334
Prev. year cash balance distribution, $m
  40
  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
  57
  20
  36
  54
  74
  96
  120
  146
  174
  203
  233
  266
  301
  337
  376
  415
  457
  500
  545
  592
  641
  691
  744
  798
  855
  914
  975
  1,039
  1,106
  1,176
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
  54
  19
  31
  45
  57
  70
  81
  91
  100
  107
  110
  113
  114
  113
  110
  106
  99
  92
  84
  75
  66
  57
  49
  41
  33
  27
  21
  16
  12
  9
Current shareholders' claim on cash, %
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4
  99.4

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 49.9
Price to Sales 2.4
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 42.1
Price to Free Cash Flow 47.4
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 $871.235 million for the last fiscal year's total revenue generated by Cavco Industries. The default revenue input number comes from 0001 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 19.1% 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 82.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $78 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 11.6%.

Life of production assets of 35.2 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 5.9%. 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 - $457.106 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 8.992 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 $1.9 billion.

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COMPANY NEWS

▶ Third Avenue Value Fund Exits Cavco Industries, Toyota   [Oct-04-18 04:33PM  GuruFocus.com]
▶ 9 Housing Stocks to Buy   [Aug-31-18 02:14PM  InvestorPlace]
▶ 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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