Intrinsic value of Dunkin' Brands Group, Inc. - DNKN

Previous Close

$71.78

  Intrinsic Value

$2.61

stock screener

  Rating & Target

str. sell

-96%

Previous close

$71.78

 
Intrinsic value

$2.61

 
Up/down potential

-96%

 
Rating

str. sell

We calculate the intrinsic value of DNKN 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 5.9

 

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
  1,348
  1,379
  1,415
  1,455
  1,499
  1,547
  1,600
  1,657
  1,718
  1,784
  1,855
  1,930
  2,010
  2,095
  2,186
  2,282
  2,383
  2,490
  2,604
  2,723
  2,849
  2,983
  3,123
  3,271
  3,426
  3,590
  3,763
  3,945
  4,136
  4,337
Variable operating expenses, $m
  725
  741
  760
  781
  804
  829
  856
  886
  918
  953
  969
  1,008
  1,050
  1,094
  1,141
  1,191
  1,244
  1,300
  1,360
  1,422
  1,488
  1,557
  1,631
  1,708
  1,789
  1,875
  1,965
  2,060
  2,160
  2,264
Fixed operating expenses, $m
  224
  229
  234
  239
  244
  250
  255
  261
  266
  272
  278
  284
  291
  297
  304
  310
  317
  324
  331
  338
  346
  353
  361
  369
  377
  386
  394
  403
  412
  421
Total operating expenses, $m
  949
  970
  994
  1,020
  1,048
  1,079
  1,111
  1,147
  1,184
  1,225
  1,247
  1,292
  1,341
  1,391
  1,445
  1,501
  1,561
  1,624
  1,691
  1,760
  1,834
  1,910
  1,992
  2,077
  2,166
  2,261
  2,359
  2,463
  2,572
  2,685
Operating income, $m
  400
  409
  421
  435
  451
  469
  489
  510
  534
  559
  608
  638
  670
  704
  741
  780
  822
  866
  913
  963
  1,016
  1,072
  1,131
  1,194
  1,260
  1,330
  1,404
  1,482
  1,564
  1,651
EBITDA, $m
  465
  476
  489
  504
  522
  541
  562
  586
  612
  639
  669
  702
  736
  774
  813
  856
  901
  948
  999
  1,053
  1,110
  1,170
  1,234
  1,302
  1,373
  1,449
  1,528
  1,613
  1,701
  1,795
Interest expense (income), $m
  94
  165
  108
  112
  116
  121
  127
  133
  139
  146
  154
  162
  171
  180
  190
  200
  212
  223
  236
  249
  263
  278
  294
  310
  327
  346
  365
  385
  407
  429
  453
Earnings before tax, $m
  235
  301
  310
  319
  330
  342
  356
  371
  388
  406
  446
  467
  490
  514
  540
  568
  598
  630
  664
  700
  738
  778
  821
  866
  914
  965
  1,019
  1,075
  1,135
  1,199
Tax expense, $m
  63
  81
  84
  86
  89
  92
  96
  100
  105
  110
  120
  126
  132
  139
  146
  153
  162
  170
  179
  189
  199
  210
  222
  234
  247
  261
  275
  290
  307
  324
Net income, $m
  171
  220
  226
  233
  241
  250
  260
  271
  283
  296
  326
  341
  358
  375
  395
  415
  437
  460
  484
  511
  538
  568
  599
  632
  667
  704
  744
  785
  829
  875

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
  3,431
  3,510
  3,600
  3,702
  3,814
  3,937
  4,071
  4,216
  4,372
  4,540
  4,720
  4,911
  5,115
  5,332
  5,562
  5,806
  6,064
  6,337
  6,625
  6,929
  7,251
  7,589
  7,946
  8,323
  8,719
  9,136
  9,575
  10,037
  10,523
  11,034
Adjusted assets (=assets-cash), $m
  3,431
  3,510
  3,600
  3,702
  3,814
  3,937
  4,071
  4,216
  4,372
  4,540
  4,720
  4,911
  5,115
  5,332
  5,562
  5,806
  6,064
  6,337
  6,625
  6,929
  7,251
  7,589
  7,946
  8,323
  8,719
  9,136
  9,575
  10,037
  10,523
  11,034
Revenue / Adjusted assets
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
Average production assets, $m
  1,339
  1,370
  1,405
  1,445
  1,488
  1,536
  1,589
  1,645
  1,706
  1,772
  1,842
  1,917
  1,996
  2,081
  2,171
  2,266
  2,366
  2,473
  2,585
  2,704
  2,830
  2,962
  3,101
  3,248
  3,402
  3,565
  3,737
  3,917
  4,107
  4,306
Working capital, $m
  -297
  -303
  -311
  -320
  -330
  -340
  -352
  -365
  -378
  -393
  -408
  -425
  -442
  -461
  -481
  -502
  -524
  -548
  -573
  -599
  -627
  -656
  -687
  -720
  -754
  -790
  -828
  -868
  -910
  -954
Total debt, $m
  2,001
  2,072
  2,153
  2,244
  2,345
  2,456
  2,576
  2,707
  2,848
  2,999
  3,160
  3,333
  3,516
  3,711
  3,918
  4,138
  4,370
  4,616
  4,875
  5,149
  5,438
  5,743
  6,064
  6,403
  6,759
  7,135
  7,530
  7,946
  8,383
  8,843
Total liabilities, $m
  3,088
  3,159
  3,240
  3,331
  3,432
  3,543
  3,664
  3,794
  3,935
  4,086
  4,248
  4,420
  4,604
  4,799
  5,006
  5,225
  5,457
  5,703
  5,962
  6,236
  6,526
  6,830
  7,152
  7,490
  7,847
  8,222
  8,618
  9,033
  9,471
  9,931
Total equity, $m
  343
  351
  360
  370
  381
  394
  407
  422
  437
  454
  472
  491
  512
  533
  556
  581
  606
  634
  662
  693
  725
  759
  795
  832
  872
  914
  958
  1,004
  1,052
  1,103
Total liabilities and equity, $m
  3,431
  3,510
  3,600
  3,701
  3,813
  3,937
  4,071
  4,216
  4,372
  4,540
  4,720
  4,911
  5,116
  5,332
  5,562
  5,806
  6,063
  6,337
  6,624
  6,929
  7,251
  7,589
  7,947
  8,322
  8,719
  9,136
  9,576
  10,037
  10,523
  11,034
Debt-to-equity ratio
  5.830
  5.900
  5.980
  6.060
  6.150
  6.240
  6.330
  6.420
  6.510
  6.600
  6.700
  6.790
  6.870
  6.960
  7.040
  7.130
  7.210
  7.280
  7.360
  7.430
  7.500
  7.570
  7.630
  7.690
  7.750
  7.810
  7.860
  7.920
  7.970
  8.010
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
  171
  220
  226
  233
  241
  250
  260
  271
  283
  296
  326
  341
  358
  375
  395
  415
  437
  460
  484
  511
  538
  568
  599
  632
  667
  704
  744
  785
  829
  875
Depreciation, amort., depletion, $m
  66
  67
  68
  69
  71
  72
  74
  76
  78
  80
  61
  64
  67
  69
  72
  76
  79
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
  131
  137
  144
Funds from operations, $m
  237
  287
  294
  302
  311
  322
  334
  347
  361
  376
  387
  405
  424
  445
  467
  490
  516
  542
  571
  601
  633
  667
  703
  741
  781
  823
  868
  916
  966
  1,019
Change in working capital, $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
Cash from operations, $m
  243
  293
  301
  311
  321
  333
  345
  359
  374
  391
  403
  422
  442
  464
  487
  512
  538
  566
  596
  627
  661
  696
  733
  773
  815
  859
  906
  956
  1,008
  1,063
Maintenance CAPEX, $m
  -44
  -45
  -46
  -47
  -48
  -50
  -51
  -53
  -55
  -57
  -59
  -61
  -64
  -67
  -69
  -72
  -76
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
  -125
  -131
  -137
New CAPEX, $m
  -27
  -31
  -35
  -40
  -44
  -48
  -52
  -57
  -61
  -65
  -70
  -75
  -80
  -85
  -90
  -95
  -101
  -106
  -113
  -119
  -125
  -132
  -139
  -147
  -155
  -163
  -171
  -180
  -190
  -200
Cash from investing activities, $m
  -71
  -76
  -81
  -87
  -92
  -98
  -103
  -110
  -116
  -122
  -129
  -136
  -144
  -152
  -159
  -167
  -177
  -185
  -195
  -205
  -215
  -226
  -238
  -250
  -263
  -276
  -290
  -305
  -321
  -337
Free cash flow, $m
  173
  218
  221
  224
  229
  235
  242
  250
  258
  268
  273
  285
  298
  312
  328
  344
  362
  380
  401
  422
  445
  469
  495
  523
  552
  583
  616
  651
  687
  726
Issuance/(repayment) of debt, $m
  -1,049
  71
  81
  91
  101
  111
  121
  131
  141
  151
  162
  172
  184
  195
  207
  219
  232
  246
  259
  274
  289
  305
  321
  339
  357
  375
  395
  416
  437
  460
Issuance/(repurchase) of shares, $m
  941
  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  
  -108
  71
  81
  91
  101
  111
  121
  131
  141
  151
  162
  172
  184
  195
  207
  219
  232
  246
  259
  274
  289
  305
  321
  339
  357
  375
  395
  416
  437
  460
Total cash flow (excl. dividends), $m
  65
  289
  302
  315
  330
  346
  362
  380
  399
  419
  435
  458
  482
  508
  535
  563
  594
  626
  660
  696
  734
  774
  817
  861
  909
  959
  1,011
  1,066
  1,125
  1,186
Retained Cash Flow (-), $m
  -1,113
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
Prev. year cash balance distribution, $m
  57
  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
  -991
  281
  293
  305
  319
  333
  349
  366
  383
  402
  417
  439
  462
  486
  512
  539
  568
  599
  631
  666
  702
  740
  781
  824
  869
  917
  967
  1,020
  1,076
  1,135
Discount rate, %
  14.20
  14.91
  15.66
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
  25.50
  26.78
  28.12
  29.52
  31.00
  32.55
  34.17
  35.88
  37.68
  39.56
  41.54
  43.62
  45.80
  48.09
  50.49
  53.02
  55.67
  58.45
PV of cash for distribution, $m
  -868
  213
  189
  166
  144
  123
  103
  85
  69
  55
  42
  32
  24
  18
  12
  9
  6
  4
  2
  1
  1
  0
  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

Dunkin' Brands Group, Inc. is a franchisor of quick service restaurants (QSRs) serving hot and cold coffee and baked goods, as well as hard serve ice cream. The Company franchises restaurants under its Dunkin' Donuts and Baskin-Robbins brands. The Company operates through four segments: Dunkin' Donuts-U.S., Dunkin' Donuts International, Baskin-Robbins International and Baskin-Robbins-U.S. The Dunkin' Donuts U.S. segment is the United States QSR concept, and markets donut and bagel categories for servings. The Baskin-Robbins-U.S. segment is engaged in serving hard-serve ice cream, and develops and sells a range of frozen ice cream treats, such as cones, cakes, sundaes and frozen beverages. The Company's Dunkin' Donuts International segment franchisees are responsible for sourcing their own supplies with its standards. As of December 31, 2016, Baskin-Robbins International segment had a manufacturing network, which consisted of 14 facilities.

FINANCIAL RATIOS  of  Dunkin' Brands Group, Inc. (DNKN)

Valuation Ratios
P/E Ratio 33.5
Price to Sales 7.9
Price to Book -40.3
Price to Tangible Book
Price to Cash Flow 23.8
Price to Free Cash Flow 25.1
Growth Rates
Sales Growth Rate 2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -13.5%
Financial Strength
Quick Ratio 14
Current Ratio 0.3
LT Debt to Equity -1477.9%
Total Debt to Equity -1493.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 7.9%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 8.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.1%
Return On Equity -102.1%
Return On Equity - 3 Yr. Avg. 28.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 83.7%
Gross Margin - 3 Yr. Avg. 83.1%
EBITDA Margin 54.3%
EBITDA Margin - 3 Yr. Avg. 48.3%
Operating Margin 50.1%
Oper. Margin - 3 Yr. Avg. 43.4%
Pre-Tax Margin 37.8%
Pre-Tax Margin - 3 Yr. Avg. 32.3%
Net Profit Margin 23.6%
Net Profit Margin - 3 Yr. Avg. 20%
Effective Tax Rate 37.4%
Eff/ Tax Rate - 3 Yr. Avg. 38.9%
Payout Ratio 56.1%

DNKN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DNKN stock intrinsic value calculation we used $1322 million for the last fiscal year's total revenue generated by Dunkin' Brands Group, Inc.. The default revenue input number comes from 0001 income statement of Dunkin' Brands Group, 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 DNKN 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 14.2%, whose default value for DNKN is calculated based on our internal credit rating of Dunkin' Brands Group, 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 Dunkin' Brands Group, 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 DNKN stock the variable cost ratio is equal to 53.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $219 million in the base year in the intrinsic value calculation for DNKN 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 5.4% for Dunkin' Brands Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Dunkin' Brands Group, 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 DNKN 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 DNKN are equal to 99.3%.

Life of production assets of 54 years is the average useful life of capital assets used in Dunkin' Brands Group, 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 DNKN is equal to -22%. 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 - $-712.797 million for Dunkin' Brands Group, 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 82.600 million for Dunkin' Brands Group, 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 Dunkin' Brands Group, Inc. at the current share price and the inputted number of shares is $5.9 billion.

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