Intrinsic value of Duluth Holdings Inc. - DLTH

Previous Close

$22.06

  Intrinsic Value

$28.36

stock screener

  Rating & Target

buy

+29%

Previous close

$22.06

 
Intrinsic value

$28.36

 
Up/down potential

+29%

 
Rating

buy

We calculate the intrinsic value of DLTH 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 0.7

 

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, %
  27.40
  25.16
  23.14
  21.33
  19.70
  18.23
  16.90
  15.71
  14.64
  13.68
  12.81
  12.03
  11.33
  10.69
  10.12
  9.61
  9.15
  8.74
  8.36
  8.03
  7.72
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
Revenue, $m
  600
  751
  925
  1,122
  1,343
  1,588
  1,856
  2,148
  2,463
  2,799
  3,158
  3,538
  3,939
  4,360
  4,801
  5,263
  5,744
  6,246
  6,769
  7,312
  7,876
  8,463
  9,073
  9,707
  10,366
  11,051
  11,763
  12,505
  13,276
  14,080
Variable operating expenses, $m
  541
  675
  828
  1,003
  1,198
  1,414
  1,651
  1,909
  2,187
  2,485
  2,791
  3,126
  3,480
  3,853
  4,243
  4,650
  5,076
  5,519
  5,981
  6,461
  6,960
  7,479
  8,017
  8,578
  9,160
  9,765
  10,395
  11,050
  11,732
  12,442
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
  541
  675
  828
  1,003
  1,198
  1,414
  1,651
  1,909
  2,187
  2,485
  2,791
  3,126
  3,480
  3,853
  4,243
  4,650
  5,076
  5,519
  5,981
  6,461
  6,960
  7,479
  8,017
  8,578
  9,160
  9,765
  10,395
  11,050
  11,732
  12,442
Operating income, $m
  59
  76
  97
  120
  145
  174
  205
  239
  276
  315
  367
  412
  458
  507
  559
  612
  668
  727
  788
  851
  916
  985
  1,056
  1,129
  1,206
  1,286
  1,369
  1,455
  1,545
  1,638
EBITDA, $m
  79
  99
  122
  148
  177
  210
  245
  283
  325
  369
  417
  467
  520
  575
  633
  694
  758
  824
  893
  965
  1,039
  1,117
  1,197
  1,281
  1,368
  1,458
  1,552
  1,650
  1,752
  1,858
Interest expense (income), $m
  0
  3
  6
  10
  14
  18
  23
  29
  35
  42
  49
  56
  65
  73
  82
  92
  102
  112
  123
  135
  147
  159
  172
  185
  199
  213
  228
  244
  260
  277
  294
Earnings before tax, $m
  55
  70
  87
  106
  127
  150
  176
  204
  234
  266
  311
  347
  385
  425
  467
  510
  556
  603
  653
  704
  758
  813
  871
  931
  993
  1,058
  1,125
  1,195
  1,268
  1,344
Tax expense, $m
  15
  19
  23
  29
  34
  41
  48
  55
  63
  72
  84
  94
  104
  115
  126
  138
  150
  163
  176
  190
  205
  220
  235
  251
  268
  286
  304
  323
  342
  363
Net income, $m
  40
  51
  63
  77
  93
  110
  129
  149
  171
  194
  227
  253
  281
  310
  341
  373
  406
  441
  477
  514
  553
  594
  636
  679
  725
  772
  821
  872
  926
  981

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
  284
  356
  438
  532
  636
  752
  879
  1,018
  1,167
  1,326
  1,496
  1,676
  1,866
  2,065
  2,274
  2,493
  2,721
  2,959
  3,206
  3,464
  3,731
  4,009
  4,298
  4,598
  4,910
  5,235
  5,572
  5,924
  6,289
  6,670
Adjusted assets (=assets-cash), $m
  284
  356
  438
  532
  636
  752
  879
  1,018
  1,167
  1,326
  1,496
  1,676
  1,866
  2,065
  2,274
  2,493
  2,721
  2,959
  3,206
  3,464
  3,731
  4,009
  4,298
  4,598
  4,910
  5,235
  5,572
  5,924
  6,289
  6,670
Revenue / Adjusted assets
  2.113
  2.110
  2.112
  2.109
  2.112
  2.112
  2.111
  2.110
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
  2.111
Average production assets, $m
  104
  130
  160
  194
  232
  275
  321
  372
  426
  484
  546
  612
  681
  754
  831
  910
  994
  1,081
  1,171
  1,265
  1,363
  1,464
  1,570
  1,679
  1,793
  1,912
  2,035
  2,163
  2,297
  2,436
Working capital, $m
  57
  71
  88
  107
  128
  151
  176
  204
  234
  266
  300
  336
  374
  414
  456
  500
  546
  593
  643
  695
  748
  804
  862
  922
  985
  1,050
  1,118
  1,188
  1,261
  1,338
Total debt, $m
  52
  80
  112
  148
  189
  234
  284
  338
  396
  458
  524
  595
  669
  747
  828
  913
  1,002
  1,095
  1,192
  1,292
  1,396
  1,505
  1,617
  1,734
  1,856
  1,983
  2,114
  2,251
  2,394
  2,542
Total liabilities, $m
  111
  139
  171
  207
  248
  293
  343
  397
  455
  517
  583
  654
  728
  805
  887
  972
  1,061
  1,154
  1,250
  1,351
  1,455
  1,564
  1,676
  1,793
  1,915
  2,042
  2,173
  2,310
  2,453
  2,601
Total equity, $m
  173
  217
  267
  324
  388
  459
  536
  621
  712
  809
  913
  1,022
  1,138
  1,260
  1,387
  1,521
  1,660
  1,805
  1,956
  2,113
  2,276
  2,446
  2,622
  2,805
  2,995
  3,193
  3,399
  3,613
  3,836
  4,069
Total liabilities and equity, $m
  284
  356
  438
  531
  636
  752
  879
  1,018
  1,167
  1,326
  1,496
  1,676
  1,866
  2,065
  2,274
  2,493
  2,721
  2,959
  3,206
  3,464
  3,731
  4,010
  4,298
  4,598
  4,910
  5,235
  5,572
  5,923
  6,289
  6,670
Debt-to-equity ratio
  0.300
  0.370
  0.420
  0.460
  0.490
  0.510
  0.530
  0.540
  0.560
  0.570
  0.570
  0.580
  0.590
  0.590
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
Adjusted equity ratio
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  40
  51
  63
  77
  93
  110
  129
  149
  171
  194
  227
  253
  281
  310
  341
  373
  406
  441
  477
  514
  553
  594
  636
  679
  725
  772
  821
  872
  926
  981
Depreciation, amort., depletion, $m
  20
  23
  25
  28
  32
  36
  40
  44
  49
  55
  49
  55
  61
  68
  75
  82
  90
  97
  105
  114
  123
  132
  141
  151
  162
  172
  183
  195
  207
  219
Funds from operations, $m
  61
  74
  89
  106
  125
  146
  169
  193
  220
  249
  276
  309
  343
  378
  416
  455
  495
  538
  582
  628
  676
  725
  777
  831
  886
  944
  1,004
  1,067
  1,132
  1,200
Change in working capital, $m
  12
  14
  17
  19
  21
  23
  26
  28
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  70
  73
  76
Cash from operations, $m
  49
  59
  72
  87
  104
  122
  143
  166
  190
  217
  242
  272
  304
  338
  374
  411
  450
  490
  532
  576
  622
  670
  719
  770
  824
  879
  937
  997
  1,059
  1,124
Maintenance CAPEX, $m
  -7
  -9
  -12
  -14
  -17
  -21
  -25
  -29
  -33
  -38
  -44
  -49
  -55
  -61
  -68
  -75
  -82
  -90
  -97
  -105
  -114
  -123
  -132
  -141
  -151
  -162
  -172
  -183
  -195
  -207
New CAPEX, $m
  -23
  -26
  -30
  -34
  -38
  -42
  -46
  -50
  -54
  -58
  -62
  -66
  -69
  -73
  -76
  -80
  -83
  -87
  -90
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -123
  -128
  -134
  -139
Cash from investing activities, $m
  -30
  -35
  -42
  -48
  -55
  -63
  -71
  -79
  -87
  -96
  -106
  -115
  -124
  -134
  -144
  -155
  -165
  -177
  -187
  -199
  -212
  -225
  -238
  -251
  -265
  -281
  -295
  -311
  -329
  -346
Free cash flow, $m
  19
  24
  30
  38
  48
  59
  72
  86
  102
  120
  137
  158
  180
  204
  229
  256
  284
  314
  345
  377
  410
  445
  482
  519
  558
  599
  641
  685
  731
  778
Issuance/(repayment) of debt, $m
  24
  28
  32
  36
  41
  45
  50
  54
  58
  62
  66
  70
  74
  78
  82
  85
  89
  93
  96
  100
  104
  108
  113
  117
  122
  127
  132
  137
  143
  149
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  
  24
  28
  32
  36
  41
  45
  50
  54
  58
  62
  66
  70
  74
  78
  82
  85
  89
  93
  96
  100
  104
  108
  113
  117
  122
  127
  132
  137
  143
  149
Total cash flow (excl. dividends), $m
  42
  52
  63
  75
  89
  104
  121
  140
  161
  182
  203
  228
  254
  282
  311
  341
  373
  407
  441
  477
  515
  554
  594
  636
  680
  726
  773
  822
  873
  927
Retained Cash Flow (-), $m
  -37
  -44
  -50
  -57
  -64
  -71
  -78
  -84
  -91
  -97
  -104
  -110
  -116
  -122
  -128
  -133
  -139
  -145
  -151
  -157
  -163
  -170
  -176
  -183
  -190
  -198
  -206
  -214
  -223
  -232
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
  5
  8
  12
  18
  25
  34
  44
  56
  70
  85
  99
  118
  138
  160
  183
  208
  234
  262
  290
  320
  352
  384
  418
  453
  490
  528
  567
  608
  650
  694
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
  5
  8
  11
  15
  19
  24
  30
  35
  40
  45
  47
  50
  53
  54
  54
  53
  51
  48
  45
  41
  36
  32
  27
  23
  19
  15
  12
  9
  7
  5
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

Duluth Holdings Inc. is a lifestyle brand of men's and women's casual wear, workwear and accessories. The Company offers a line of functional products, such as its Longtail T shirts, Buck Naked underwear and Fire Hose work pants. The Company's segments include direct and retail. The direct segment includes revenues from the Company's Website and catalogs. The retail segment includes revenues from the Company's retail and outlet stores. The Company offers its products under the Duluth Trading brand. The Company's Website, www.duluthtrading.com, serves as a storefront for its product assortment. As of January 29, 2017, the Company operated 14 retail stores and two outlet stores. The Company's stores range in size from approximately 6,000 to 14,000 selling square feet. The Company's products also include Ballroom jeans, Duluthflex clothing, Armachillo shirts, Dry on the Fly pants, Armachillo underwear and No-Yank Tank.

FINANCIAL RATIOS  of  Duluth Holdings Inc. (DLTH)

Valuation Ratios
P/E Ratio 34
Price to Sales 1.9
Price to Book 6.4
Price to Tangible Book
Price to Cash Flow 35.7
Price to Free Cash Flow -79.4
Growth Rates
Sales Growth Rate 23.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 314.3%
Cap. Spend. - 3 Yr. Gr. Rate 48.6%
Financial Strength
Quick Ratio 24
Current Ratio 0.1
LT Debt to Equity 2.7%
Total Debt to Equity 3.6%
Interest Coverage 0
Management Effectiveness
Return On Assets 15.2%
Ret/ On Assets - 3 Yr. Avg. 27.1%
Return On Total Capital 20.1%
Ret/ On T. Cap. - 3 Yr. Avg. 40.4%
Return On Equity 21%
Return On Equity - 3 Yr. Avg. 45.2%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 56.9%
Gross Margin - 3 Yr. Avg. 56.9%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 10.8%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 9.7%
Pre-Tax Margin 9.3%
Pre-Tax Margin - 3 Yr. Avg. 9.7%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 8.3%
Effective Tax Rate 37.1%
Eff/ Tax Rate - 3 Yr. Avg. 13.5%
Payout Ratio 0%

DLTH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DLTH stock intrinsic value calculation we used $471 million for the last fiscal year's total revenue generated by Duluth Holdings Inc.. The default revenue input number comes from 0001 income statement of Duluth Holdings 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 DLTH stock valuation model: a) initial revenue growth rate of 27.4% 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 DLTH is calculated based on our internal credit rating of Duluth Holdings 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 Duluth Holdings 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 DLTH stock the variable cost ratio is equal to 90.7%.

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 DLTH 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 12.3% for Duluth Holdings Inc..

Corporate tax rate of 27% is the nominal tax rate for Duluth Holdings 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 DLTH 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 DLTH are equal to 17.3%.

Life of production assets of 11.1 years is the average useful life of capital assets used in Duluth Holdings 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 DLTH is equal to 9.5%. 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 - $136.07 million for Duluth Holdings 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 32.579 million for Duluth Holdings 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 Duluth Holdings Inc. at the current share price and the inputted number of shares is $0.7 billion.

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