Intrinsic value of Dick's Sporting Goods Inc - DKS

Previous Close

$34.35

  Intrinsic Value

$35.32

stock screener

  Rating & Target

hold

+3%

Previous close

$34.35

 
Intrinsic value

$35.32

 
Up/down potential

+3%

 
Rating

hold

We calculate the intrinsic value of DKS 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 3.4

 

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
  8,762
  8,963
  9,194
  9,452
  9,739
  10,053
  10,396
  10,766
  11,166
  11,594
  12,052
  12,542
  13,062
  13,616
  14,203
  14,826
  15,485
  16,181
  16,918
  17,695
  18,515
  19,380
  20,292
  21,253
  22,264
  23,330
  24,451
  25,631
  26,872
  28,178
Variable operating expenses, $m
  8,262
  8,451
  8,667
  8,910
  9,179
  9,474
  9,795
  10,143
  10,518
  10,920
  11,311
  11,770
  12,259
  12,779
  13,330
  13,914
  14,532
  15,186
  15,877
  16,607
  17,376
  18,188
  19,044
  19,945
  20,895
  21,895
  22,947
  24,054
  25,219
  26,445
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
  8,262
  8,451
  8,667
  8,910
  9,179
  9,474
  9,795
  10,143
  10,518
  10,920
  11,311
  11,770
  12,259
  12,779
  13,330
  13,914
  14,532
  15,186
  15,877
  16,607
  17,376
  18,188
  19,044
  19,945
  20,895
  21,895
  22,947
  24,054
  25,219
  26,445
Operating income, $m
  500
  513
  527
  543
  560
  580
  601
  623
  648
  674
  741
  771
  803
  837
  874
  912
  952
  995
  1,041
  1,088
  1,139
  1,192
  1,248
  1,307
  1,369
  1,435
  1,504
  1,576
  1,653
  1,733
EBITDA, $m
  757
  774
  794
  817
  841
  868
  898
  930
  965
  1,002
  1,041
  1,083
  1,128
  1,176
  1,227
  1,281
  1,338
  1,398
  1,461
  1,529
  1,599
  1,674
  1,753
  1,836
  1,923
  2,015
  2,112
  2,214
  2,321
  2,434
Interest expense (income), $m
  5
  15
  25
  37
  51
  67
  84
  103
  123
  145
  169
  195
  223
  252
  283
  317
  352
  389
  429
  471
  515
  561
  611
  663
  717
  775
  836
  900
  967
  1,038
  1,112
Earnings before tax, $m
  485
  487
  490
  492
  494
  496
  498
  500
  503
  505
  546
  549
  551
  554
  557
  560
  563
  566
  570
  574
  577
  581
  585
  590
  594
  599
  604
  609
  615
  621
Tax expense, $m
  131
  132
  132
  133
  133
  134
  134
  135
  136
  136
  147
  148
  149
  150
  150
  151
  152
  153
  154
  155
  156
  157
  158
  159
  160
  162
  163
  165
  166
  168
Net income, $m
  354
  356
  357
  359
  360
  362
  364
  365
  367
  369
  399
  401
  402
  405
  407
  409
  411
  414
  416
  419
  421
  424
  427
  431
  434
  437
  441
  445
  449
  453

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
  4,289
  4,387
  4,500
  4,627
  4,767
  4,921
  5,088
  5,270
  5,465
  5,675
  5,899
  6,139
  6,394
  6,665
  6,952
  7,257
  7,579
  7,920
  8,281
  8,661
  9,063
  9,486
  9,932
  10,403
  10,898
  11,419
  11,968
  12,546
  13,153
  13,792
Adjusted assets (=assets-cash), $m
  4,289
  4,387
  4,500
  4,627
  4,767
  4,921
  5,088
  5,270
  5,465
  5,675
  5,899
  6,139
  6,394
  6,665
  6,952
  7,257
  7,579
  7,920
  8,281
  8,661
  9,063
  9,486
  9,932
  10,403
  10,898
  11,419
  11,968
  12,546
  13,153
  13,792
Revenue / Adjusted assets
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
  2.043
Average production assets, $m
  1,831
  1,873
  1,921
  1,976
  2,035
  2,101
  2,173
  2,250
  2,334
  2,423
  2,519
  2,621
  2,730
  2,846
  2,968
  3,099
  3,236
  3,382
  3,536
  3,698
  3,870
  4,050
  4,241
  4,442
  4,653
  4,876
  5,110
  5,357
  5,616
  5,889
Working capital, $m
  491
  502
  515
  529
  545
  563
  582
  603
  625
  649
  675
  702
  731
  762
  795
  830
  867
  906
  947
  991
  1,037
  1,085
  1,136
  1,190
  1,247
  1,306
  1,369
  1,435
  1,505
  1,578
Total debt, $m
  110
  163
  224
  292
  367
  450
  540
  638
  743
  856
  977
  1,106
  1,243
  1,388
  1,543
  1,707
  1,881
  2,064
  2,258
  2,463
  2,679
  2,906
  3,146
  3,399
  3,666
  3,946
  4,242
  4,552
  4,879
  5,223
Total liabilities, $m
  2,307
  2,360
  2,421
  2,489
  2,565
  2,647
  2,738
  2,835
  2,940
  3,053
  3,174
  3,303
  3,440
  3,586
  3,740
  3,904
  4,078
  4,261
  4,455
  4,660
  4,876
  5,104
  5,344
  5,597
  5,863
  6,144
  6,439
  6,750
  7,076
  7,420
Total equity, $m
  1,981
  2,027
  2,079
  2,138
  2,202
  2,273
  2,351
  2,435
  2,525
  2,622
  2,726
  2,836
  2,954
  3,079
  3,212
  3,353
  3,502
  3,659
  3,826
  4,001
  4,187
  4,383
  4,589
  4,806
  5,035
  5,276
  5,529
  5,796
  6,077
  6,372
Total liabilities and equity, $m
  4,288
  4,387
  4,500
  4,627
  4,767
  4,920
  5,089
  5,270
  5,465
  5,675
  5,900
  6,139
  6,394
  6,665
  6,952
  7,257
  7,580
  7,920
  8,281
  8,661
  9,063
  9,487
  9,933
  10,403
  10,898
  11,420
  11,968
  12,546
  13,153
  13,792
Debt-to-equity ratio
  0.060
  0.080
  0.110
  0.140
  0.170
  0.200
  0.230
  0.260
  0.290
  0.330
  0.360
  0.390
  0.420
  0.450
  0.480
  0.510
  0.540
  0.560
  0.590
  0.620
  0.640
  0.660
  0.690
  0.710
  0.730
  0.750
  0.770
  0.790
  0.800
  0.820
Adjusted equity ratio
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  354
  356
  357
  359
  360
  362
  364
  365
  367
  369
  399
  401
  402
  405
  407
  409
  411
  414
  416
  419
  421
  424
  427
  431
  434
  437
  441
  445
  449
  453
Depreciation, amort., depletion, $m
  257
  262
  267
  274
  281
  289
  297
  307
  317
  327
  300
  312
  325
  339
  353
  369
  385
  403
  421
  440
  461
  482
  505
  529
  554
  580
  608
  638
  669
  701
Funds from operations, $m
  611
  618
  625
  633
  641
  651
  661
  672
  683
  696
  699
  713
  727
  743
  760
  778
  796
  816
  837
  859
  882
  907
  932
  959
  988
  1,018
  1,049
  1,083
  1,117
  1,154
Change in working capital, $m
  10
  11
  13
  14
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
Cash from operations, $m
  601
  606
  612
  618
  625
  633
  642
  651
  661
  672
  673
  685
  698
  712
  727
  743
  759
  777
  796
  815
  836
  858
  881
  906
  931
  958
  987
  1,016
  1,048
  1,081
Maintenance CAPEX, $m
  -213
  -218
  -223
  -229
  -235
  -242
  -250
  -259
  -268
  -278
  -288
  -300
  -312
  -325
  -339
  -353
  -369
  -385
  -403
  -421
  -440
  -461
  -482
  -505
  -529
  -554
  -580
  -608
  -638
  -669
New CAPEX, $m
  -38
  -42
  -48
  -54
  -60
  -66
  -72
  -77
  -83
  -90
  -96
  -102
  -109
  -116
  -123
  -130
  -138
  -146
  -154
  -162
  -171
  -181
  -191
  -201
  -211
  -223
  -234
  -247
  -259
  -273
Cash from investing activities, $m
  -251
  -260
  -271
  -283
  -295
  -308
  -322
  -336
  -351
  -368
  -384
  -402
  -421
  -441
  -462
  -483
  -507
  -531
  -557
  -583
  -611
  -642
  -673
  -706
  -740
  -777
  -814
  -855
  -897
  -942
Free cash flow, $m
  350
  346
  341
  335
  330
  325
  320
  315
  310
  304
  289
  283
  277
  272
  266
  259
  253
  246
  239
  232
  224
  217
  208
  200
  191
  182
  172
  161
  151
  140
Issuance/(repayment) of debt, $m
  45
  53
  61
  68
  75
  83
  90
  98
  105
  113
  121
  129
  137
  146
  155
  164
  174
  183
  194
  205
  216
  228
  240
  253
  266
  281
  295
  311
  327
  344
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  
  45
  53
  61
  68
  75
  83
  90
  98
  105
  113
  121
  129
  137
  146
  155
  164
  174
  183
  194
  205
  216
  228
  240
  253
  266
  281
  295
  311
  327
  344
Total cash flow (excl. dividends), $m
  395
  399
  401
  404
  406
  408
  410
  412
  415
  417
  409
  412
  415
  417
  420
  423
  426
  430
  433
  437
  440
  444
  449
  453
  457
  462
  467
  472
  478
  483
Retained Cash Flow (-), $m
  -40
  -46
  -52
  -58
  -65
  -71
  -77
  -84
  -90
  -97
  -104
  -111
  -118
  -125
  -133
  -141
  -149
  -158
  -166
  -176
  -185
  -196
  -206
  -217
  -229
  -241
  -254
  -267
  -281
  -295
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
  355
  354
  349
  345
  341
  337
  333
  329
  325
  320
  306
  301
  297
  292
  287
  283
  277
  272
  267
  261
  255
  249
  242
  236
  229
  221
  213
  205
  197
  188
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
  340
  324
  304
  284
  264
  244
  225
  205
  186
  168
  145
  129
  113
  98
  84
  72
  60
  50
  41
  33
  26
  21
  16
  12
  9
  6
  5
  3
  2
  1
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

Dick's Sporting Goods, Inc. is an omni-channel sporting goods retailer offering an assortment of sports equipment, apparel, footwear and accessories in its specialty retail stores primarily in the eastern United States. The Company also owns and operates Golf Galaxy, Field & Stream and other specialty concept stores, and Dick's Team Sports HQ, an all-in-one youth sports digital platform offering free league management services, mobile applications for scheduling, communications and live scorekeeping, custom uniforms and FanWear and access to donations and sponsorships. The Company offers its products through a content-rich e-commerce platform that is integrated with its store network and provides customers with the convenience and expertise of a 24-hour storefront. It offers products to its customers through its retail stores and online. The Company offers hardlines, which include items, such as sporting goods equipment, fitness equipment, golf equipment, and hunting and fishing gear.

FINANCIAL RATIOS  of  Dick's Sporting Goods Inc (DKS)

Valuation Ratios
P/E Ratio 13.2
Price to Sales 0.5
Price to Book 2
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow 11.6
Growth Rates
Sales Growth Rate 9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.1%
Cap. Spend. - 3 Yr. Gr. Rate 4.3%
Financial Strength
Quick Ratio 165
Current Ratio 0
LT Debt to Equity 0.2%
Total Debt to Equity 0.3%
Interest Coverage 93
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 9.3%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 17.7%
Return On Equity 15.4%
Return On Equity - 3 Yr. Avg. 17.7%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 29.9%
Gross Margin - 3 Yr. Avg. 30.2%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. 9.9%
Operating Margin 5.7%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 5.8%
Pre-Tax Margin - 3 Yr. Avg. 7.1%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 37.3%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 23.7%

DKS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DKS stock intrinsic value calculation we used $8590 million for the last fiscal year's total revenue generated by Dick's Sporting Goods Inc. The default revenue input number comes from 0001 income statement of Dick's Sporting Goods 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 DKS 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 4.3%, whose default value for DKS is calculated based on our internal credit rating of Dick's Sporting Goods 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 Dick's Sporting Goods 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 DKS stock the variable cost ratio is equal to 94.3%.

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 DKS 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 22.8% for Dick's Sporting Goods Inc.

Corporate tax rate of 27% is the nominal tax rate for Dick's Sporting Goods 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 DKS 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 DKS are equal to 20.9%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Dick's Sporting Goods 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 DKS is equal to 5.6%. 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 - $1941.501 million for Dick's Sporting Goods 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 98.385 million for Dick's Sporting Goods 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 Dick's Sporting Goods Inc at the current share price and the inputted number of shares is $3.4 billion.

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