Intrinsic value of Cavco Industries, Inc. - CVCO

Previous Close

$185.31

  Intrinsic Value

$95.58

stock screener

  Rating & Target

sell

-48%

Previous close

$185.31

 
Intrinsic value

$95.58

 
Up/down potential

-48%

 
Rating

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 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 1.7

 

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, %
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
Revenue, $m
  920
  971
  1,024
  1,080
  1,138
  1,199
  1,263
  1,329
  1,399
  1,472
  1,549
  1,630
  1,714
  1,802
  1,895
  1,992
  2,094
  2,200
  2,312
  2,430
  2,553
  2,682
  2,818
  2,960
  3,110
  3,267
  3,431
  3,604
  3,785
  3,976
Variable operating expenses, $m
  761
  803
  847
  892
  940
  990
  1,043
  1,097
  1,155
  1,215
  1,271
  1,337
  1,407
  1,479
  1,555
  1,635
  1,718
  1,806
  1,898
  1,994
  2,095
  2,202
  2,313
  2,430
  2,553
  2,681
  2,816
  2,958
  3,107
  3,263
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
  841
  884
  930
  977
  1,027
  1,079
  1,134
  1,190
  1,250
  1,312
  1,370
  1,438
  1,511
  1,585
  1,663
  1,745
  1,831
  1,921
  2,016
  2,115
  2,218
  2,328
  2,442
  2,561
  2,687
  2,818
  2,956
  3,101
  3,254
  3,413
Operating income, $m
  79
  86
  94
  102
  111
  120
  129
  139
  150
  161
  179
  191
  204
  217
  231
  246
  262
  279
  296
  315
  334
  355
  376
  399
  423
  448
  475
  503
  532
  563
EBITDA, $m
  89
  96
  104
  113
  121
  131
  140
  151
  161
  173
  185
  197
  210
  224
  239
  254
  270
  287
  305
  324
  344
  365
  387
  411
  435
  461
  488
  516
  547
  578
Interest expense (income), $m
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
  50
  53
Earnings before tax, $m
  74
  81
  88
  95
  103
  111
  119
  128
  138
  147
  164
  175
  187
  199
  212
  225
  239
  254
  270
  287
  304
  323
  342
  362
  384
  407
  431
  456
  482
  510
Tax expense, $m
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  44
  47
  50
  54
  57
  61
  65
  69
  73
  77
  82
  87
  92
  98
  104
  110
  116
  123
  130
  138
Net income, $m
  54
  59
  64
  69
  75
  81
  87
  94
  100
  108
  120
  128
  136
  145
  154
  164
  175
  186
  197
  209
  222
  236
  250
  265
  280
  297
  314
  333
  352
  372

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
  643
  678
  716
  754
  795
  838
  882
  929
  978
  1,029
  1,083
  1,139
  1,198
  1,259
  1,324
  1,392
  1,463
  1,538
  1,616
  1,698
  1,784
  1,874
  1,969
  2,069
  2,173
  2,283
  2,398
  2,519
  2,645
  2,778
Adjusted assets (=assets-cash), $m
  643
  678
  716
  754
  795
  838
  882
  929
  978
  1,029
  1,083
  1,139
  1,198
  1,259
  1,324
  1,392
  1,463
  1,538
  1,616
  1,698
  1,784
  1,874
  1,969
  2,069
  2,173
  2,283
  2,398
  2,519
  2,645
  2,778
Revenue / Adjusted assets
  1.431
  1.432
  1.430
  1.432
  1.431
  1.431
  1.432
  1.431
  1.430
  1.431
  1.430
  1.431
  1.431
  1.431
  1.431
  1.431
  1.431
  1.430
  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
  107
  113
  119
  125
  132
  139
  146
  154
  162
  171
  180
  189
  199
  209
  220
  231
  243
  255
  268
  282
  296
  311
  327
  343
  361
  379
  398
  418
  439
  461
Working capital, $m
  54
  57
  60
  64
  67
  71
  74
  78
  83
  87
  91
  96
  101
  106
  112
  118
  124
  130
  136
  143
  151
  158
  166
  175
  183
  193
  202
  213
  223
  235
Total debt, $m
  71
  82
  94
  106
  119
  132
  146
  161
  176
  192
  209
  227
  245
  265
  285
  307
  329
  353
  377
  403
  430
  459
  489
  520
  553
  587
  624
  662
  701
  743
Total liabilities, $m
  202
  214
  225
  238
  250
  264
  278
  293
  308
  324
  341
  359
  377
  397
  417
  438
  461
  484
  509
  535
  562
  590
  620
  652
  685
  719
  755
  793
  833
  875
Total equity, $m
  440
  465
  490
  517
  545
  574
  604
  636
  670
  705
  742
  780
  820
  863
  907
  953
  1,002
  1,053
  1,107
  1,163
  1,222
  1,284
  1,349
  1,417
  1,489
  1,564
  1,643
  1,725
  1,812
  1,903
Total liabilities and equity, $m
  642
  679
  715
  755
  795
  838
  882
  929
  978
  1,029
  1,083
  1,139
  1,197
  1,260
  1,324
  1,391
  1,463
  1,537
  1,616
  1,698
  1,784
  1,874
  1,969
  2,069
  2,174
  2,283
  2,398
  2,518
  2,645
  2,778
Debt-to-equity ratio
  0.160
  0.180
  0.190
  0.200
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.310
  0.320
  0.330
  0.330
  0.340
  0.350
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
  0.390
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
  54
  59
  64
  69
  75
  81
  87
  94
  100
  108
  120
  128
  136
  145
  154
  164
  175
  186
  197
  209
  222
  236
  250
  265
  280
  297
  314
  333
  352
  372
Depreciation, amort., depletion, $m
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Funds from operations, $m
  64
  69
  74
  80
  86
  92
  98
  105
  112
  120
  126
  134
  143
  152
  162
  172
  183
  194
  206
  219
  232
  246
  261
  276
  292
  310
  328
  347
  367
  388
Change in working capital, $m
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
Cash from operations, $m
  61
  66
  71
  77
  82
  88
  94
  101
  108
  115
  121
  129
  138
  147
  156
  166
  177
  188
  199
  212
  225
  238
  253
  268
  284
  300
  318
  336
  356
  377
Maintenance CAPEX, $m
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
New CAPEX, $m
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -13
  -15
  -15
  -16
  -17
  -18
  -18
  -20
  -20
  -22
  -23
  -23
  -25
  -26
  -28
  -28
  -30
  -32
  -33
  -35
  -37
Free cash flow, $m
  52
  57
  61
  66
  71
  77
  82
  88
  95
  101
  107
  114
  122
  130
  139
  148
  157
  167
  178
  189
  201
  213
  226
  240
  255
  270
  286
  303
  321
  340
Issuance/(repayment) of debt, $m
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
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  
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
Total cash flow (excl. dividends), $m
  63
  68
  73
  78
  84
  90
  96
  103
  110
  118
  124
  132
  140
  149
  159
  169
  180
  191
  203
  215
  228
  242
  256
  272
  288
  305
  322
  341
  361
  382
Retained Cash Flow (-), $m
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -87
  -91
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
  80
  43
  48
  52
  56
  61
  66
  71
  77
  82
  87
  93
  100
  107
  115
  123
  131
  140
  149
  159
  169
  180
  191
  203
  216
  230
  244
  258
  274
  291
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
  76
  40
  41
  43
  44
  44
  45
  44
  44
  43
  41
  40
  38
  36
  34
  31
  28
  26
  23
  20
  17
  15
  13
  10
  8
  7
  5
  4
  3
  2
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
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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, Inc. (CVCO)

Valuation Ratios
P/E Ratio 43.8
Price to Sales 2.2
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 37
Price to Free Cash Flow 41.6
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 million for the last fiscal year's total revenue generated by Cavco Industries, Inc.. The default revenue input number comes from 0001 income statement of Cavco Industries, 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 CVCO stock valuation model: a) initial revenue growth rate of 5.6% 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, 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 Cavco Industries, 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 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Cavco Industries, 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 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, 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 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, 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 9.116 million for Cavco Industries, 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 Cavco Industries, Inc. at the current share price and the inputted number of shares is $1.7 billion.

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