Intrinsic value of Dillard's, Inc. - DDS

Previous Close

$57.24

  Intrinsic Value

$53.65

stock screener

  Rating & Target

hold

-6%

Previous close

$57.24

 
Intrinsic value

$53.65

 
Up/down potential

-6%

 
Rating

hold

We calculate the intrinsic value of DDS 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 1.5

 

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, %
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  6,693
  6,979
  7,283
  7,605
  7,945
  8,305
  8,685
  9,086
  9,509
  9,955
  10,424
  10,920
  11,441
  11,990
  12,567
  13,175
  13,814
  14,486
  15,193
  15,936
  16,718
  17,539
  18,402
  19,309
  20,262
  21,264
  22,316
  23,421
  24,583
  25,803
Variable operating expenses, $m
  6,358
  6,630
  6,919
  7,224
  7,548
  7,889
  8,250
  8,631
  9,033
  9,457
  9,903
  10,374
  10,869
  11,390
  11,939
  12,516
  13,123
  13,762
  14,434
  15,140
  15,882
  16,662
  17,482
  18,344
  19,249
  20,201
  21,200
  22,250
  23,354
  24,513
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
  6,358
  6,630
  6,919
  7,224
  7,548
  7,889
  8,250
  8,631
  9,033
  9,457
  9,903
  10,374
  10,869
  11,390
  11,939
  12,516
  13,123
  13,762
  14,434
  15,140
  15,882
  16,662
  17,482
  18,344
  19,249
  20,201
  21,200
  22,250
  23,354
  24,513
Operating income, $m
  335
  349
  364
  380
  397
  415
  434
  454
  475
  498
  521
  546
  572
  599
  628
  659
  691
  724
  760
  797
  836
  877
  920
  965
  1,013
  1,063
  1,116
  1,171
  1,229
  1,290
EBITDA, $m
  576
  601
  627
  655
  684
  715
  748
  783
  819
  857
  898
  941
  985
  1,033
  1,082
  1,135
  1,190
  1,248
  1,309
  1,373
  1,440
  1,511
  1,585
  1,663
  1,745
  1,832
  1,922
  2,017
  2,117
  2,222
Interest expense (income), $m
  62
  59
  66
  73
  81
  89
  97
  106
  115
  125
  136
  147
  159
  171
  184
  198
  212
  227
  243
  260
  277
  296
  315
  336
  357
  380
  404
  429
  455
  482
  511
Earnings before tax, $m
  275
  283
  291
  300
  309
  318
  328
  339
  350
  362
  374
  387
  401
  415
  431
  447
  464
  481
  500
  519
  540
  562
  584
  608
  633
  660
  687
  716
  747
  779
Tax expense, $m
  74
  76
  79
  81
  83
  86
  89
  91
  95
  98
  101
  105
  108
  112
  116
  121
  125
  130
  135
  140
  146
  152
  158
  164
  171
  178
  186
  193
  202
  210
Net income, $m
  201
  207
  213
  219
  225
  232
  240
  247
  256
  264
  273
  283
  293
  303
  314
  326
  338
  351
  365
  379
  394
  410
  427
  444
  462
  481
  502
  523
  545
  569

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
  3,838
  4,002
  4,176
  4,360
  4,556
  4,762
  4,980
  5,210
  5,452
  5,708
  5,977
  6,261
  6,560
  6,875
  7,206
  7,554
  7,921
  8,306
  8,712
  9,138
  9,586
  10,057
  10,552
  11,072
  11,618
  12,193
  12,796
  13,430
  14,096
  14,795
Adjusted assets (=assets-cash), $m
  3,838
  4,002
  4,176
  4,360
  4,556
  4,762
  4,980
  5,210
  5,452
  5,708
  5,977
  6,261
  6,560
  6,875
  7,206
  7,554
  7,921
  8,306
  8,712
  9,138
  9,586
  10,057
  10,552
  11,072
  11,618
  12,193
  12,796
  13,430
  14,096
  14,795
Revenue / Adjusted assets
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
  1.744
Average production assets, $m
  1,814
  1,891
  1,974
  2,061
  2,153
  2,251
  2,354
  2,462
  2,577
  2,698
  2,825
  2,959
  3,100
  3,249
  3,406
  3,570
  3,744
  3,926
  4,117
  4,319
  4,531
  4,753
  4,987
  5,233
  5,491
  5,763
  6,048
  6,347
  6,662
  6,993
Working capital, $m
  696
  726
  757
  791
  826
  864
  903
  945
  989
  1,035
  1,084
  1,136
  1,190
  1,247
  1,307
  1,370
  1,437
  1,507
  1,580
  1,657
  1,739
  1,824
  1,914
  2,008
  2,107
  2,211
  2,321
  2,436
  2,557
  2,683
Total debt, $m
  813
  901
  994
  1,093
  1,198
  1,308
  1,425
  1,548
  1,678
  1,815
  1,960
  2,112
  2,272
  2,441
  2,618
  2,805
  3,001
  3,208
  3,425
  3,654
  3,894
  4,146
  4,412
  4,690
  4,983
  5,291
  5,614
  5,954
  6,311
  6,686
Total liabilities, $m
  2,057
  2,145
  2,238
  2,337
  2,442
  2,552
  2,669
  2,792
  2,922
  3,059
  3,204
  3,356
  3,516
  3,685
  3,862
  4,049
  4,246
  4,452
  4,669
  4,898
  5,138
  5,390
  5,656
  5,934
  6,227
  6,535
  6,859
  7,198
  7,555
  7,930
Total equity, $m
  1,781
  1,857
  1,938
  2,023
  2,114
  2,209
  2,311
  2,417
  2,530
  2,648
  2,773
  2,905
  3,044
  3,190
  3,344
  3,505
  3,675
  3,854
  4,042
  4,240
  4,448
  4,666
  4,896
  5,137
  5,391
  5,657
  5,937
  6,231
  6,540
  6,865
Total liabilities and equity, $m
  3,838
  4,002
  4,176
  4,360
  4,556
  4,761
  4,980
  5,209
  5,452
  5,707
  5,977
  6,261
  6,560
  6,875
  7,206
  7,554
  7,921
  8,306
  8,711
  9,138
  9,586
  10,056
  10,552
  11,071
  11,618
  12,192
  12,796
  13,429
  14,095
  14,795
Debt-to-equity ratio
  0.460
  0.490
  0.510
  0.540
  0.570
  0.590
  0.620
  0.640
  0.660
  0.690
  0.710
  0.730
  0.750
  0.770
  0.780
  0.800
  0.820
  0.830
  0.850
  0.860
  0.880
  0.890
  0.900
  0.910
  0.920
  0.940
  0.950
  0.960
  0.960
  0.970
Adjusted equity ratio
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  201
  207
  213
  219
  225
  232
  240
  247
  256
  264
  273
  283
  293
  303
  314
  326
  338
  351
  365
  379
  394
  410
  427
  444
  462
  481
  502
  523
  545
  569
Depreciation, amort., depletion, $m
  242
  252
  263
  275
  287
  300
  314
  328
  344
  360
  377
  395
  413
  433
  454
  476
  499
  523
  549
  576
  604
  634
  665
  698
  732
  768
  806
  846
  888
  932
Funds from operations, $m
  443
  459
  476
  494
  512
  532
  553
  576
  599
  624
  650
  677
  706
  737
  768
  802
  838
  875
  914
  955
  998
  1,044
  1,091
  1,142
  1,194
  1,250
  1,308
  1,369
  1,433
  1,501
Change in working capital, $m
  28
  30
  32
  33
  35
  37
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  74
  77
  81
  85
  90
  94
  99
  104
  109
  115
  121
  127
Cash from operations, $m
  415
  429
  444
  460
  477
  495
  514
  534
  555
  577
  601
  626
  652
  679
  708
  739
  771
  805
  840
  878
  917
  958
  1,002
  1,047
  1,095
  1,146
  1,199
  1,254
  1,313
  1,374
Maintenance CAPEX, $m
  -232
  -242
  -252
  -263
  -275
  -287
  -300
  -314
  -328
  -344
  -360
  -377
  -395
  -413
  -433
  -454
  -476
  -499
  -523
  -549
  -576
  -604
  -634
  -665
  -698
  -732
  -768
  -806
  -846
  -888
New CAPEX, $m
  -70
  -78
  -82
  -87
  -92
  -97
  -103
  -109
  -115
  -121
  -127
  -134
  -141
  -149
  -157
  -165
  -173
  -182
  -192
  -201
  -212
  -223
  -234
  -246
  -258
  -271
  -285
  -300
  -315
  -331
Cash from investing activities, $m
  -302
  -320
  -334
  -350
  -367
  -384
  -403
  -423
  -443
  -465
  -487
  -511
  -536
  -562
  -590
  -619
  -649
  -681
  -715
  -750
  -788
  -827
  -868
  -911
  -956
  -1,003
  -1,053
  -1,106
  -1,161
  -1,219
Free cash flow, $m
  112
  110
  110
  110
  110
  110
  111
  111
  112
  113
  114
  115
  116
  117
  119
  120
  122
  123
  125
  127
  129
  132
  134
  137
  139
  142
  145
  148
  152
  155
Issuance/(repayment) of debt, $m
  82
  88
  93
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  169
  178
  187
  196
  207
  217
  228
  240
  252
  265
  279
  293
  308
  323
  340
  357
  375
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  
  82
  88
  93
  99
  105
  111
  117
  123
  130
  137
  144
  152
  160
  169
  178
  187
  196
  207
  217
  228
  240
  252
  265
  279
  293
  308
  323
  340
  357
  375
Total cash flow (excl. dividends), $m
  194
  198
  203
  209
  215
  221
  228
  235
  242
  250
  258
  267
  276
  286
  296
  307
  318
  330
  343
  356
  370
  384
  399
  415
  432
  450
  469
  488
  509
  530
Retained Cash Flow (-), $m
  -72
  -76
  -81
  -86
  -91
  -96
  -101
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -170
  -179
  -188
  -198
  -208
  -218
  -230
  -241
  -254
  -266
  -280
  -294
  -309
  -325
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
  122
  121
  122
  123
  124
  125
  127
  128
  130
  131
  133
  135
  138
  140
  143
  145
  148
  151
  154
  158
  162
  166
  170
  174
  179
  183
  189
  194
  200
  206
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
  117
  111
  106
  101
  96
  91
  86
  80
  74
  69
  63
  58
  52
  47
  42
  37
  32
  28
  24
  20
  17
  14
  11
  9
  7
  5
  4
  3
  2
  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
  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

Dillard's, Inc. is a retailer of fashion apparel, cosmetics and home furnishing. As of January 28, 2017, the Company operated 293 Dillard's stores, including 25 clearance centers, and an Internet store offering a selection of merchandise, including fashion apparel for women, men and children, accessories, cosmetics, home furnishings and other consumer goods. The Company's segments include the Retail operations segment and the Construction segment. The Retail operations segment includes the operation of the Company's retail department stores. The Construction segment includes the operations of CDI Contractors, LLC (CDI), a general contracting construction company. CDI's business includes constructing and remodeling stores for the Company. As of January 28, 2017, the Company operated retail department stores in 29 states, primarily in the southwest, southeast and midwest regions of the United States.

FINANCIAL RATIOS  of  Dillard's, Inc. (DDS)

Valuation Ratios
P/E Ratio 10.9
Price to Sales 0.3
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 3.6
Price to Free Cash Flow 4.5
Growth Rates
Sales Growth Rate -5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.7%
Cap. Spend. - 3 Yr. Gr. Rate 2%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 42.6%
Total Debt to Equity 47.8%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.4%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. 13.4%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 35.9%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. 10.6%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 6.7%
Pre-Tax Margin 4%
Pre-Tax Margin - 3 Yr. Avg. 5.9%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 3.8%
Effective Tax Rate 34.5%
Eff/ Tax Rate - 3 Yr. Avg. 34.7%
Payout Ratio 5.9%

DDS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DDS stock intrinsic value calculation we used $6423 million for the last fiscal year's total revenue generated by Dillard's, Inc.. The default revenue input number comes from 0001 income statement of Dillard'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 DDS stock valuation model: a) initial revenue growth rate of 4.2% 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 DDS is calculated based on our internal credit rating of Dillard'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 Dillard'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 DDS stock the variable cost ratio is equal to 95%.

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 DDS 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 8.1% for Dillard's, Inc..

Corporate tax rate of 27% is the nominal tax rate for Dillard'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 DDS 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 DDS are equal to 27.1%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Dillard'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 DDS is equal to 10.4%. 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 - $1708.155 million for Dillard'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 26.305 million for Dillard'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 Dillard's, Inc. at the current share price and the inputted number of shares is $1.5 billion.

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