Intrinsic value of Denny's Corporation - DENN

Previous Close

$17.99

  Intrinsic Value

$5.66

stock screener

  Rating & Target

str. sell

-69%

Previous close

$17.99

 
Intrinsic value

$5.66

 
Up/down potential

-69%

 
Rating

str. sell

We calculate the intrinsic value of DENN 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 1.1

 

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, %
  17.70
  16.43
  15.29
  14.26
  13.33
  12.50
  11.75
  11.07
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.61
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
Revenue, $m
  742
  863
  995
  1,137
  1,289
  1,450
  1,620
  1,800
  1,988
  2,185
  2,391
  2,606
  2,830
  3,063
  3,305
  3,557
  3,818
  4,090
  4,373
  4,666
  4,972
  5,289
  5,620
  5,964
  6,323
  6,696
  7,086
  7,493
  7,917
  8,361
Variable operating expenses, $m
  640
  743
  855
  975
  1,103
  1,239
  1,383
  1,534
  1,694
  1,860
  2,020
  2,202
  2,391
  2,587
  2,792
  3,005
  3,226
  3,455
  3,694
  3,942
  4,200
  4,468
  4,747
  5,038
  5,341
  5,657
  5,986
  6,330
  6,688
  7,063
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
  640
  743
  855
  975
  1,103
  1,239
  1,383
  1,534
  1,694
  1,860
  2,020
  2,202
  2,391
  2,587
  2,792
  3,005
  3,226
  3,455
  3,694
  3,942
  4,200
  4,468
  4,747
  5,038
  5,341
  5,657
  5,986
  6,330
  6,688
  7,063
Operating income, $m
  101
  120
  140
  163
  186
  211
  238
  265
  295
  325
  371
  405
  439
  475
  513
  552
  593
  635
  679
  724
  772
  821
  872
  926
  981
  1,039
  1,100
  1,163
  1,229
  1,298
EBITDA, $m
  140
  163
  188
  215
  244
  274
  307
  341
  376
  413
  452
  493
  535
  580
  625
  673
  722
  774
  827
  883
  941
  1,001
  1,063
  1,128
  1,196
  1,267
  1,341
  1,418
  1,498
  1,582
Interest expense (income), $m
  3
  22
  14
  18
  22
  27
  32
  37
  42
  48
  54
  61
  68
  75
  82
  89
  97
  106
  114
  123
  132
  142
  152
  162
  173
  184
  196
  208
  220
  234
  248
Earnings before tax, $m
  80
  106
  123
  140
  159
  179
  201
  223
  246
  271
  310
  337
  365
  394
  424
  455
  487
  521
  556
  592
  630
  669
  710
  753
  797
  844
  892
  943
  995
  1,050
Tax expense, $m
  21
  29
  33
  38
  43
  48
  54
  60
  66
  73
  84
  91
  98
  106
  114
  123
  132
  141
  150
  160
  170
  181
  192
  203
  215
  228
  241
  254
  269
  284
Net income, $m
  58
  78
  90
  103
  116
  131
  146
  163
  180
  198
  227
  246
  266
  287
  309
  332
  356
  380
  406
  432
  460
  489
  519
  550
  582
  616
  651
  688
  727
  767

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
  395
  459
  530
  605
  686
  772
  862
  958
  1,058
  1,163
  1,273
  1,387
  1,506
  1,630
  1,759
  1,893
  2,032
  2,177
  2,327
  2,483
  2,646
  2,815
  2,991
  3,174
  3,365
  3,564
  3,771
  3,988
  4,214
  4,449
Adjusted assets (=assets-cash), $m
  395
  459
  530
  605
  686
  772
  862
  958
  1,058
  1,163
  1,273
  1,387
  1,506
  1,630
  1,759
  1,893
  2,032
  2,177
  2,327
  2,483
  2,646
  2,815
  2,991
  3,174
  3,365
  3,564
  3,771
  3,988
  4,214
  4,449
Revenue / Adjusted assets
  1.878
  1.880
  1.877
  1.879
  1.879
  1.878
  1.879
  1.879
  1.879
  1.879
  1.878
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
  1.879
Average production assets, $m
  222
  258
  298
  340
  385
  434
  484
  538
  594
  653
  715
  779
  846
  916
  988
  1,063
  1,142
  1,223
  1,307
  1,395
  1,486
  1,581
  1,680
  1,783
  1,890
  2,002
  2,119
  2,240
  2,367
  2,500
Working capital, $m
  -59
  -69
  -80
  -91
  -103
  -116
  -130
  -144
  -159
  -175
  -191
  -209
  -226
  -245
  -264
  -285
  -305
  -327
  -350
  -373
  -398
  -423
  -450
  -477
  -506
  -536
  -567
  -599
  -633
  -669
Total debt, $m
  204
  262
  325
  393
  466
  543
  624
  710
  801
  895
  994
  1,097
  1,204
  1,315
  1,431
  1,552
  1,677
  1,807
  1,943
  2,083
  2,230
  2,382
  2,540
  2,705
  2,877
  3,056
  3,243
  3,437
  3,641
  3,853
Total liabilities, $m
  355
  414
  477
  545
  617
  694
  776
  862
  952
  1,047
  1,145
  1,248
  1,356
  1,467
  1,583
  1,704
  1,829
  1,959
  2,094
  2,235
  2,381
  2,533
  2,692
  2,857
  3,028
  3,207
  3,394
  3,589
  3,792
  4,005
Total equity, $m
  39
  46
  53
  61
  69
  77
  86
  96
  106
  116
  127
  139
  151
  163
  176
  189
  203
  218
  233
  248
  265
  281
  299
  317
  336
  356
  377
  399
  421
  445
Total liabilities and equity, $m
  394
  460
  530
  606
  686
  771
  862
  958
  1,058
  1,163
  1,272
  1,387
  1,507
  1,630
  1,759
  1,893
  2,032
  2,177
  2,327
  2,483
  2,646
  2,814
  2,991
  3,174
  3,364
  3,563
  3,771
  3,988
  4,213
  4,450
Debt-to-equity ratio
  5.160
  5.700
  6.140
  6.500
  6.790
  7.040
  7.240
  7.420
  7.570
  7.700
  7.810
  7.910
  7.990
  8.070
  8.140
  8.200
  8.250
  8.300
  8.350
  8.390
  8.430
  8.460
  8.490
  8.520
  8.550
  8.570
  8.600
  8.620
  8.640
  8.660
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  58
  78
  90
  103
  116
  131
  146
  163
  180
  198
  227
  246
  266
  287
  309
  332
  356
  380
  406
  432
  460
  489
  519
  550
  582
  616
  651
  688
  727
  767
Depreciation, amort., depletion, $m
  39
  43
  48
  53
  58
  63
  69
  75
  82
  88
  81
  89
  96
  104
  112
  121
  130
  139
  149
  159
  169
  180
  191
  203
  215
  228
  241
  255
  269
  284
Funds from operations, $m
  97
  121
  137
  155
  174
  194
  215
  238
  261
  286
  308
  335
  362
  391
  422
  453
  485
  519
  554
  591
  629
  668
  710
  752
  797
  844
  892
  943
  996
  1,051
Change in working capital, $m
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -35
Cash from operations, $m
  106
  131
  148
  166
  186
  207
  229
  252
  276
  302
  324
  352
  380
  410
  441
  473
  506
  541
  577
  614
  653
  694
  736
  780
  826
  873
  923
  975
  1,029
  1,086
Maintenance CAPEX, $m
  -21
  -25
  -29
  -34
  -39
  -44
  -49
  -55
  -61
  -68
  -74
  -81
  -89
  -96
  -104
  -112
  -121
  -130
  -139
  -149
  -159
  -169
  -180
  -191
  -203
  -215
  -228
  -241
  -255
  -269
New CAPEX, $m
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -54
  -56
  -59
  -62
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -127
  -133
Cash from investing activities, $m
  -54
  -61
  -68
  -76
  -84
  -92
  -100
  -109
  -117
  -127
  -136
  -145
  -156
  -166
  -176
  -187
  -199
  -211
  -223
  -237
  -250
  -264
  -279
  -294
  -310
  -327
  -345
  -363
  -382
  -402
Free cash flow, $m
  52
  69
  79
  90
  102
  115
  129
  144
  159
  175
  188
  206
  225
  244
  264
  285
  307
  330
  353
  378
  403
  430
  457
  486
  516
  547
  579
  613
  648
  685
Issuance/(repayment) of debt, $m
  -114
  58
  63
  68
  73
  77
  82
  86
  90
  94
  99
  103
  107
  112
  116
  121
  125
  130
  135
  141
  146
  152
  158
  165
  172
  179
  187
  195
  203
  212
Issuance/(repurchase) of shares, $m
  115
  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  
  1
  58
  63
  68
  73
  77
  82
  86
  90
  94
  99
  103
  107
  112
  116
  121
  125
  130
  135
  141
  146
  152
  158
  165
  172
  179
  187
  195
  203
  212
Total cash flow (excl. dividends), $m
  53
  127
  142
  158
  175
  192
  211
  229
  249
  270
  287
  309
  332
  356
  380
  406
  432
  460
  489
  519
  550
  582
  616
  651
  688
  726
  766
  808
  851
  897
Retained Cash Flow (-), $m
  -173
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
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
  -120
  121
  135
  151
  167
  184
  201
  220
  239
  259
  276
  298
  320
  343
  367
  393
  419
  446
  474
  503
  533
  565
  598
  633
  668
  706
  745
  786
  829
  873
Discount rate, %
  12.50
  13.13
  13.78
  14.47
  15.19
  15.95
  16.75
  17.59
  18.47
  19.39
  20.36
  21.38
  22.45
  23.57
  24.75
  25.99
  27.29
  28.65
  30.08
  31.59
  33.17
  34.82
  36.57
  38.39
  40.31
  42.33
  44.45
  46.67
  49.00
  51.45
PV of cash for distribution, $m
  -107
  94
  92
  88
  82
  76
  68
  60
  52
  44
  36
  29
  23
  18
  13
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Denny's Corporation (Denny's) operates a franchised full-service restaurant chain. The Company, through its subsidiary, Denny's, Inc., owns and operates the Denny's brand. As of December 28, 2016, the Denny's brand consisted of 1,733 franchised, licensed and Company-operated restaurants around the world, including 1,610 restaurants in the United States and 123 international locations. As of December 28, 2016, 1,564 of its restaurants were franchised or licensed and 169 were Company-operated. In addition to its breakfast-all-day items, Denny's offers a selection of lunch and dinner items, including burgers, sandwiches, salads and skillet entrees, along with an assortment of beverages, appetizers and desserts. The Company's Fit Fare menu helps its guests identify items suited to their dietary needs. Most Denny's restaurants offer special items for children and seniors. The Company has restaurant locations within travel centers, primarily with Pilot and Pilot Flying J Travel Centers.

FINANCIAL RATIOS  of  Denny's Corporation (DENN)

Valuation Ratios
P/E Ratio 67.6
Price to Sales 2.5
Price to Book -18.1
Price to Tangible Book
Price to Cash Flow 18.1
Price to Free Cash Flow 25.2
Growth Rates
Sales Growth Rate 3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.9%
Cap. Spend. - 3 Yr. Gr. Rate 3.3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity -342.3%
Total Debt to Equity -346.5%
Interest Coverage 13
Management Effectiveness
Return On Assets 6.8%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 11.5%
Ret/ On T. Cap. - 3 Yr. Avg. 17.9%
Return On Equity -28.8%
Return On Equity - 3 Yr. Avg. 169.7%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 48.1%
Gross Margin - 3 Yr. Avg. 48%
EBITDA Margin 12%
EBITDA Margin - 3 Yr. Avg. 14.7%
Operating Margin 9.5%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 9.5%
Net Profit Margin 3.7%
Net Profit Margin - 3 Yr. Avg. 6%
Effective Tax Rate 47.2%
Eff/ Tax Rate - 3 Yr. Avg. 37.7%
Payout Ratio 0%

DENN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DENN stock intrinsic value calculation we used $630 million for the last fiscal year's total revenue generated by Denny's Corporation. The default revenue input number comes from 0001 income statement of Denny's 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 DENN stock valuation model: a) initial revenue growth rate of 17.7% 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 12.5%, whose default value for DENN is calculated based on our internal credit rating of Denny's 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 Denny's 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 DENN stock the variable cost ratio is equal to 86.7%.

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 DENN 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 6.8% for Denny's Corporation.

Corporate tax rate of 27% is the nominal tax rate for Denny's 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 DENN 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 DENN are equal to 29.9%.

Life of production assets of 8.8 years is the average useful life of capital assets used in Denny's 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 DENN is equal to -8%. 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 - $-133.345 million for Denny's 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 61.667 million for Denny's 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 Denny's Corporation at the current share price and the inputted number of shares is $1.1 billion.

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