Intrinsic value of Destination Maternity - DEST

Previous Close

$4.92

  Intrinsic Value

$0.66

stock screener

  Rating & Target

str. sell

-87%

Previous close

$4.92

 
Intrinsic value

$0.66

 
Up/down potential

-87%

 
Rating

str. sell

We calculate the intrinsic value of DEST 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 0.1

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  414
  424
  435
  447
  461
  475
  492
  509
  528
  548
  570
  593
  618
  644
  672
  701
  732
  765
  800
  837
  876
  916
  960
  1,005
  1,053
  1,103
  1,156
  1,212
  1,271
  1,332
Variable operating expenses, $m
  234
  239
  245
  252
  260
  268
  277
  287
  298
  309
  321
  334
  348
  363
  379
  395
  413
  431
  451
  472
  494
  517
  541
  567
  594
  622
  652
  683
  716
  751
Fixed operating expenses, $m
  201
  206
  210
  215
  220
  224
  229
  234
  240
  245
  250
  256
  261
  267
  273
  279
  285
  291
  298
  304
  311
  318
  325
  332
  339
  347
  355
  362
  370
  378
Total operating expenses, $m
  435
  445
  455
  467
  480
  492
  506
  521
  538
  554
  571
  590
  609
  630
  652
  674
  698
  722
  749
  776
  805
  835
  866
  899
  933
  969
  1,007
  1,045
  1,086
  1,129
Operating income, $m
  -21
  -21
  -21
  -20
  -19
  -17
  -15
  -12
  -9
  -6
  -2
  3
  8
  14
  20
  27
  34
  42
  51
  61
  71
  82
  94
  106
  120
  134
  150
  166
  184
  203
EBITDA, $m
  -5
  -5
  -5
  -3
  -2
  1
  3
  6
  10
  15
  19
  25
  31
  38
  45
  53
  61
  71
  81
  92
  103
  116
  129
  143
  159
  175
  193
  211
  231
  252
Interest expense (income), $m
  0
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
Earnings before tax, $m
  -24
  -25
  -25
  -25
  -24
  -23
  -21
  -19
  -16
  -13
  -10
  -6
  -1
  3
  9
  15
  21
  29
  36
  45
  54
  64
  74
  86
  98
  111
  125
  140
  156
  173
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  6
  8
  10
  12
  15
  17
  20
  23
  26
  30
  34
  38
  42
  47
Net income, $m
  -24
  -25
  -25
  -25
  -24
  -23
  -21
  -19
  -16
  -13
  -10
  -6
  -1
  3
  7
  11
  16
  21
  27
  33
  39
  46
  54
  62
  71
  81
  91
  102
  114
  126

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
  166
  170
  174
  179
  184
  190
  197
  204
  211
  220
  228
  238
  247
  258
  269
  281
  293
  306
  320
  335
  351
  367
  384
  402
  422
  442
  463
  485
  509
  534
Adjusted assets (=assets-cash), $m
  166
  170
  174
  179
  184
  190
  197
  204
  211
  220
  228
  238
  247
  258
  269
  281
  293
  306
  320
  335
  351
  367
  384
  402
  422
  442
  463
  485
  509
  534
Revenue / Adjusted assets
  2.494
  2.494
  2.500
  2.497
  2.505
  2.500
  2.497
  2.495
  2.502
  2.491
  2.500
  2.492
  2.502
  2.496
  2.498
  2.495
  2.498
  2.500
  2.500
  2.499
  2.496
  2.496
  2.500
  2.500
  2.495
  2.495
  2.497
  2.499
  2.497
  2.494
Average production assets, $m
  77
  78
  80
  83
  85
  88
  91
  94
  98
  101
  105
  110
  114
  119
  124
  130
  135
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  247
Working capital, $m
  27
  28
  29
  30
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  51
  53
  55
  58
  60
  63
  66
  69
  73
  76
  80
  84
  88
Total debt, $m
  39
  42
  45
  49
  53
  57
  62
  68
  73
  79
  86
  93
  100
  108
  116
  125
  135
  145
  155
  166
  178
  190
  203
  217
  231
  246
  262
  279
  296
  315
Total liabilities, $m
  124
  127
  131
  134
  138
  143
  148
  153
  159
  165
  171
  178
  186
  193
  202
  211
  220
  230
  240
  251
  263
  275
  288
  302
  316
  331
  347
  364
  382
  400
Total equity, $m
  41
  42
  44
  45
  46
  48
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
Total liabilities and equity, $m
  165
  169
  175
  179
  184
  191
  197
  204
  212
  220
  228
  237
  248
  257
  269
  281
  293
  307
  320
  335
  351
  367
  384
  403
  421
  441
  463
  485
  509
  533
Debt-to-equity ratio
  0.940
  0.990
  1.040
  1.090
  1.150
  1.210
  1.270
  1.330
  1.390
  1.450
  1.500
  1.560
  1.620
  1.680
  1.730
  1.780
  1.840
  1.890
  1.930
  1.980
  2.030
  2.070
  2.110
  2.150
  2.190
  2.230
  2.260
  2.300
  2.330
  2.360
Adjusted equity ratio
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -25
  -25
  -25
  -24
  -23
  -21
  -19
  -16
  -13
  -10
  -6
  -1
  3
  7
  11
  16
  21
  27
  33
  39
  46
  54
  62
  71
  81
  91
  102
  114
  126
Depreciation, amort., depletion, $m
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
Funds from operations, $m
  -9
  -9
  -9
  -8
  -7
  -5
  -3
  0
  3
  7
  11
  16
  21
  26
  31
  37
  43
  49
  56
  64
  72
  80
  90
  100
  110
  122
  134
  147
  161
  175
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
Cash from operations, $m
  -10
  -10
  -10
  -9
  -8
  -6
  -4
  -1
  2
  6
  10
  15
  20
  25
  30
  35
  41
  47
  54
  61
  69
  78
  87
  97
  107
  118
  130
  143
  157
  171
Maintenance CAPEX, $m
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
Cash from investing activities, $m
  -17
  -17
  -18
  -18
  -20
  -20
  -21
  -21
  -22
  -24
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
Free cash flow, $m
  -26
  -27
  -27
  -27
  -27
  -26
  -24
  -22
  -20
  -18
  -14
  -11
  -7
  -3
  1
  5
  9
  14
  19
  25
  31
  38
  45
  53
  61
  70
  80
  90
  101
  113
Issuance/(repayment) of debt, $m
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
Issuance/(repurchase) of shares, $m
  25
  26
  26
  26
  25
  24
  23
  21
  18
  15
  12
  8
  4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  28
  29
  29
  30
  29
  28
  28
  26
  24
  21
  19
  15
  11
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
Total cash flow (excl. dividends), $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  9
  13
  18
  24
  30
  36
  43
  50
  58
  66
  76
  85
  96
  107
  119
  131
Retained Cash Flow (-), $m
  -25
  -26
  -26
  -26
  -25
  -24
  -23
  -21
  -18
  -15
  -12
  -8
  -4
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
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
  -24
  -24
  -24
  -23
  -23
  -21
  -19
  -17
  -15
  -11
  -8
  -4
  1
  2
  6
  10
  15
  20
  26
  32
  39
  46
  54
  62
  71
  80
  90
  101
  113
  125
Discount rate, %
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
  -22
  -21
  -19
  -17
  -15
  -13
  -10
  -8
  -6
  -4
  -2
  -1
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  74.5
  55.5
  41.5
  31.2
  23.9
  18.5
  14.7
  11.9
  10.0
  8.6
  7.7
  7.1
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9
  6.9

Destination Maternity Corporation, formerly Mothers Work, Inc. is a designer and retailer of maternity apparel in the United States. The Company operates a chain of maternity apparel specialty stores. The Company operates through the design, manufacture, and sale of maternity apparel and related accessories segment. It operates approximately 1,815 retail locations, including over 540 stores in the United States, Canada and Puerto Rico, and approximately 1,280 leased departments located within department stores and baby specialty stores throughout the United States, in Puerto Rico and, in England. The Company sells merchandise on the Internet, primarily through its Motherhood.com, APeaInThePod.com and DestinationMaternity.com Websites. The Company also sells its merchandise through its Canadian Website, MotherhoodCanada.ca, through Amazon.com in the United States, and through Websites of certain of its retail partners.

FINANCIAL RATIOS  of  Destination Maternity (DEST)

Valuation Ratios
P/E Ratio -2.1
Price to Sales 0.2
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 6.3
Price to Free Cash Flow -34.5
Growth Rates
Sales Growth Rate -13%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55.2%
Cap. Spend. - 3 Yr. Gr. Rate -20.9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 50.8%
Total Debt to Equity 70.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -16.7%
Ret/ On Assets - 3 Yr. Avg. -8.7%
Return On Total Capital -27.7%
Ret/ On T. Cap. - 3 Yr. Avg. -14.9%
Return On Equity -42.9%
Return On Equity - 3 Yr. Avg. -20.5%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 52.3%
Gross Margin - 3 Yr. Avg. 47.7%
EBITDA Margin 2.3%
EBITDA Margin - 3 Yr. Avg. -3.2%
Operating Margin -0.9%
Oper. Margin - 3 Yr. Avg. -6.1%
Pre-Tax Margin -1.8%
Pre-Tax Margin - 3 Yr. Avg. -6.7%
Net Profit Margin -7.6%
Net Profit Margin - 3 Yr. Avg. -6.2%
Effective Tax Rate -312.5%
Eff/ Tax Rate - 3 Yr. Avg. -76.8%
Payout Ratio 0%

DEST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DEST stock intrinsic value calculation we used $406.207 million for the last fiscal year's total revenue generated by Destination Maternity. The default revenue input number comes from 0001 income statement of Destination Maternity. 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 DEST stock valuation model: a) initial revenue growth rate of 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 6.9%, whose default value for DEST is calculated based on our internal credit rating of Destination Maternity, 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 Destination Maternity.
    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 DEST stock the variable cost ratio is equal to 56.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $197 million in the base year in the intrinsic value calculation for DEST 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 10.2% for Destination Maternity.

Corporate tax rate of 27% is the nominal tax rate for Destination Maternity. 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 DEST 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 DEST are equal to 18.5%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Destination Maternity 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 DEST is equal to 6.6%. 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 - $40.668 million for Destination Maternity - 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 15.021 million for Destination Maternity 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 Destination Maternity at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Destination Maternity Announces Military Discount Program   [Nov-07-18 04:05PM  Business Wire]
▶ Destination Maternity to close up to a quarter of its stores in the coming years   [Nov-02-18 08:12AM  American City Business Journals]
▶ Destination Maternity: Fiscal 2Q Earnings Snapshot   [Sep-10-18 06:55AM  Associated Press]
▶ Destination Maternity Announces Extension of CEO Contract   [Jul-30-18 04:22PM  Business Wire]
▶ Destination Maternity: Fiscal 1Q Earnings Snapshot   [Jun-14-18 07:01AM  Associated Press]
▶ Destination Maternity board is a 'circus,' says investor, as proxy battle intensifies   [May-22-18 01:00PM  American City Business Journals]
▶ [$$] Destination Maternity Under Fire From Activist Investor Group   [May-08-18 05:27PM  The Wall Street Journal]
▶ Destination Maternity faces second proxy battle in as many years   [May-04-18 07:31AM  American City Business Journals]
▶ Destination Maternity: Fiscal 4Q Earnings Snapshot   [Apr-19-18 07:05AM  Associated Press]
▶ Destination Maternity embraces company that waged proxy battle against it   [Apr-03-18 01:12PM  American City Business Journals]
▶ Destination Maternity Strengthens Balance Sheet   [Feb-01-18 04:05PM  PR Newswire]
▶ Destination Maternity Appoints New Board Member   [Dec-21-17 04:05PM  PR Newswire]
▶ Destination Maternity reports 3Q loss   [06:59AM  Associated Press]
▶ Destination Maternity reports 2Q loss   [Sep-07-17 10:11PM  Associated Press]

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