Intrinsic value of Deckers Outdoor Corporation - DECK

Previous Close

$174.24

  Intrinsic Value

$7.46

stock screener

  Rating & Target

str. sell

-96%

Previous close

$174.24

 
Intrinsic value

$7.46

 
Up/down potential

-96%

 
Rating

str. sell

We calculate the intrinsic value of DECK 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 5.1

 

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, %
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  2,051
  2,206
  2,366
  2,533
  2,706
  2,886
  3,073
  3,268
  3,471
  3,682
  3,902
  4,131
  4,370
  4,620
  4,881
  5,153
  5,437
  5,734
  6,045
  6,370
  6,711
  7,067
  7,440
  7,830
  8,239
  8,667
  9,116
  9,587
  10,081
  10,598
Variable operating expenses, $m
  2,053
  2,207
  2,367
  2,533
  2,705
  2,885
  3,072
  3,266
  3,468
  3,679
  3,891
  4,120
  4,358
  4,607
  4,867
  5,138
  5,422
  5,718
  6,028
  6,353
  6,692
  7,047
  7,419
  7,808
  8,216
  8,643
  9,091
  9,560
  10,052
  10,568
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
  2,053
  2,207
  2,367
  2,533
  2,705
  2,885
  3,072
  3,266
  3,468
  3,679
  3,891
  4,120
  4,358
  4,607
  4,867
  5,138
  5,422
  5,718
  6,028
  6,353
  6,692
  7,047
  7,419
  7,808
  8,216
  8,643
  9,091
  9,560
  10,052
  10,568
Operating income, $m
  -1
  -1
  -1
  0
  0
  1
  1
  2
  2
  3
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
EBITDA, $m
  52
  56
  60
  64
  68
  73
  78
  82
  88
  93
  98
  104
  110
  117
  123
  130
  137
  145
  153
  161
  169
  178
  188
  198
  208
  219
  230
  242
  254
  268
Interest expense (income), $m
  5
  5
  8
  12
  16
  20
  24
  28
  33
  38
  42
  48
  53
  58
  64
  70
  76
  83
  90
  97
  105
  112
  121
  129
  138
  148
  157
  168
  179
  190
  202
Earnings before tax, $m
  -6
  -9
  -13
  -16
  -19
  -23
  -27
  -31
  -35
  -39
  -37
  -41
  -46
  -51
  -57
  -62
  -68
  -74
  -80
  -87
  -94
  -101
  -108
  -116
  -125
  -133
  -142
  -152
  -162
  -172
Tax expense, $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
Net income, $m
  -6
  -9
  -13
  -16
  -19
  -23
  -27
  -31
  -35
  -39
  -37
  -41
  -46
  -51
  -57
  -62
  -68
  -74
  -80
  -87
  -94
  -101
  -108
  -116
  -125
  -133
  -142
  -152
  -162
  -172

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
  1,103
  1,186
  1,272
  1,362
  1,455
  1,551
  1,652
  1,757
  1,866
  1,979
  2,098
  2,221
  2,350
  2,484
  2,624
  2,770
  2,923
  3,083
  3,250
  3,425
  3,608
  3,799
  4,000
  4,210
  4,430
  4,660
  4,901
  5,154
  5,420
  5,698
Adjusted assets (=assets-cash), $m
  1,103
  1,186
  1,272
  1,362
  1,455
  1,551
  1,652
  1,757
  1,866
  1,979
  2,098
  2,221
  2,350
  2,484
  2,624
  2,770
  2,923
  3,083
  3,250
  3,425
  3,608
  3,799
  4,000
  4,210
  4,430
  4,660
  4,901
  5,154
  5,420
  5,698
Revenue / Adjusted assets
  1.859
  1.860
  1.860
  1.860
  1.860
  1.861
  1.860
  1.860
  1.860
  1.861
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
  1.860
Average production assets, $m
  281
  302
  324
  347
  371
  395
  421
  448
  475
  504
  535
  566
  599
  633
  669
  706
  745
  786
  828
  873
  919
  968
  1,019
  1,073
  1,129
  1,187
  1,249
  1,313
  1,381
  1,452
Working capital, $m
  316
  340
  364
  390
  417
  444
  473
  503
  534
  567
  601
  636
  673
  711
  752
  794
  837
  883
  931
  981
  1,033
  1,088
  1,146
  1,206
  1,269
  1,335
  1,404
  1,476
  1,552
  1,632
Total debt, $m
  58
  84
  111
  139
  169
  199
  231
  264
  299
  335
  372
  411
  452
  494
  538
  584
  633
  683
  736
  791
  849
  910
  973
  1,039
  1,109
  1,182
  1,258
  1,338
  1,422
  1,510
Total liabilities, $m
  349
  375
  402
  430
  460
  490
  522
  555
  590
  626
  663
  702
  743
  785
  829
  875
  924
  974
  1,027
  1,082
  1,140
  1,201
  1,264
  1,330
  1,400
  1,473
  1,549
  1,629
  1,713
  1,800
Total equity, $m
  754
  811
  870
  931
  995
  1,061
  1,130
  1,202
  1,276
  1,354
  1,435
  1,519
  1,607
  1,699
  1,795
  1,895
  1,999
  2,109
  2,223
  2,343
  2,468
  2,599
  2,736
  2,879
  3,030
  3,187
  3,353
  3,526
  3,707
  3,897
Total liabilities and equity, $m
  1,103
  1,186
  1,272
  1,361
  1,455
  1,551
  1,652
  1,757
  1,866
  1,980
  2,098
  2,221
  2,350
  2,484
  2,624
  2,770
  2,923
  3,083
  3,250
  3,425
  3,608
  3,800
  4,000
  4,209
  4,430
  4,660
  4,902
  5,155
  5,420
  5,697
Debt-to-equity ratio
  0.080
  0.100
  0.130
  0.150
  0.170
  0.190
  0.200
  0.220
  0.230
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
Adjusted equity ratio
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684
  0.684

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -9
  -13
  -16
  -19
  -23
  -27
  -31
  -35
  -39
  -37
  -41
  -46
  -51
  -57
  -62
  -68
  -74
  -80
  -87
  -94
  -101
  -108
  -116
  -125
  -133
  -142
  -152
  -162
  -172
Depreciation, amort., depletion, $m
  53
  57
  60
  64
  68
  72
  76
  81
  85
  90
  88
  93
  98
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  195
  205
  215
  226
  238
Funds from operations, $m
  47
  48
  48
  48
  49
  49
  49
  50
  50
  51
  51
  51
  52
  52
  53
  54
  54
  55
  56
  56
  57
  58
  59
  59
  60
  61
  62
  63
  64
  66
Change in working capital, $m
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  80
Cash from operations, $m
  24
  24
  23
  23
  22
  21
  20
  20
  19
  18
  17
  16
  15
  14
  13
  12
  10
  9
  8
  6
  5
  3
  1
  -1
  -3
  -5
  -7
  -9
  -11
  -14
Maintenance CAPEX, $m
  -43
  -46
  -50
  -53
  -57
  -61
  -65
  -69
  -73
  -78
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -122
  -129
  -136
  -143
  -151
  -159
  -167
  -176
  -185
  -195
  -205
  -215
  -226
New CAPEX, $m
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -59
  -62
  -64
  -68
  -71
Cash from investing activities, $m
  -63
  -67
  -72
  -76
  -81
  -86
  -91
  -96
  -101
  -107
  -113
  -119
  -126
  -132
  -140
  -147
  -155
  -163
  -172
  -181
  -190
  -200
  -210
  -220
  -232
  -244
  -257
  -269
  -283
  -297
Free cash flow, $m
  -39
  -43
  -48
  -53
  -59
  -64
  -70
  -76
  -82
  -89
  -96
  -103
  -110
  -118
  -127
  -135
  -144
  -154
  -164
  -174
  -185
  -197
  -209
  -221
  -234
  -248
  -263
  -278
  -294
  -311
Issuance/(repayment) of debt, $m
  26
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
Issuance/(repurchase) of shares, $m
  60
  66
  71
  77
  83
  89
  96
  103
  110
  117
  118
  126
  134
  143
  152
  162
  172
  183
  195
  206
  219
  232
  246
  260
  275
  291
  308
  325
  343
  363
Cash from financing (excl. dividends), $m  
  86
  92
  98
  105
  112
  120
  128
  136
  144
  153
  155
  165
  175
  185
  196
  208
  220
  234
  248
  261
  277
  292
  309
  326
  344
  364
  384
  405
  427
  451
Total cash flow (excl. dividends), $m
  47
  49
  50
  52
  54
  56
  58
  60
  62
  64
  59
  62
  64
  67
  70
  73
  77
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
Retained Cash Flow (-), $m
  -60
  -66
  -71
  -77
  -83
  -89
  -96
  -103
  -110
  -117
  -118
  -126
  -134
  -143
  -152
  -162
  -172
  -183
  -195
  -206
  -219
  -232
  -246
  -260
  -275
  -291
  -308
  -325
  -343
  -363
Prev. year cash balance distribution, $m
  241
  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
  227
  -17
  -21
  -25
  -29
  -34
  -38
  -43
  -48
  -53
  -58
  -64
  -70
  -76
  -82
  -89
  -96
  -103
  -111
  -119
  -127
  -136
  -145
  -155
  -165
  -176
  -187
  -198
  -211
  -223
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
  218
  -16
  -18
  -21
  -23
  -24
  -26
  -27
  -27
  -28
  -28
  -27
  -27
  -25
  -24
  -23
  -21
  -19
  -17
  -15
  -13
  -11
  -10
  -8
  -6
  -5
  -4
  -3
  -2
  -2
Current shareholders' claim on cash, %
  98.4
  96.9
  95.3
  93.8
  92.2
  90.7
  89.2
  87.8
  86.3
  84.9
  83.5
  82.2
  80.9
  79.5
  78.2
  76.9
  75.7
  74.4
  73.2
  71.9
  70.7
  69.5
  68.3
  67.1
  65.9
  64.8
  63.7
  62.5
  61.4
  60.3

Deckers Outdoor Corporation is engaged in designing, marketing and distributing footwear, apparel and accessories for both everyday casual lifestyle use and high performance activities. The Company's segments include operations of its brands, such as UGG, Teva, Sanuk and other brands; wholesale divisions, and Direct-to-Consumer (DTC) business, which includes E-Commerce business and retail store business. The Company sells accessories, such as handbags and loungewear, through domestic and international retailers, international distributors and directly to end user consumers both domestically and internationally, through its Websites, call centers and retail stores. The Company markets its products primarily under three brands: UGG, Teva and Sanuk. The Company's other brands include Hoka One One (Hoka), Ahnu and Koolaburra by UGG (Koolaburra). It has a total of over 150 retail stores across the world.

FINANCIAL RATIOS  of  Deckers Outdoor Corporation (DECK)

Valuation Ratios
P/E Ratio 929
Price to Sales 3.1
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 28
Price to Free Cash Flow 36.2
Growth Rates
Sales Growth Rate -4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.7%
Cap. Spend. - 3 Yr. Gr. Rate -15.3%
Financial Strength
Quick Ratio 292
Current Ratio 0.2
LT Debt to Equity 3.4%
Total Debt to Equity 3.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.1%
Ret/ On Assets - 3 Yr. Avg. 8.4%
Return On Total Capital 0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.9%
Return On Equity 0.6%
Return On Equity - 3 Yr. Avg. 10.4%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 46.6%
Gross Margin - 3 Yr. Avg. 46.7%
EBITDA Margin 2.8%
EBITDA Margin - 3 Yr. Avg. 9.7%
Operating Margin -0.1%
Oper. Margin - 3 Yr. Avg. 7%
Pre-Tax Margin -0.4%
Pre-Tax Margin - 3 Yr. Avg. 6.7%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 185.7%
Eff/ Tax Rate - 3 Yr. Avg. 78.2%
Payout Ratio 0%

DECK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DECK stock intrinsic value calculation we used $1903 million for the last fiscal year's total revenue generated by Deckers Outdoor Corporation. The default revenue input number comes from 0001 income statement of Deckers Outdoor Corporation. 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 DECK stock valuation model: a) initial revenue growth rate of 7.8% 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 DECK is calculated based on our internal credit rating of Deckers Outdoor Corporation, 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 Deckers Outdoor Corporation.
    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 DECK stock the variable cost ratio is equal to 100.1%.

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 DECK 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 14.2% for Deckers Outdoor Corporation.

Corporate tax rate of 27% is the nominal tax rate for Deckers Outdoor Corporation. 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 DECK 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 DECK are equal to 13.7%.

Life of production assets of 6.1 years is the average useful life of capital assets used in Deckers Outdoor Corporation 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 DECK is equal to 15.4%. 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 - $940.779 million for Deckers Outdoor Corporation - 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 29.132 million for Deckers Outdoor Corporation 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 Deckers Outdoor Corporation at the current share price and the inputted number of shares is $5.1 billion.

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