Intrinsic value of DAVIDsTEA - DTEA

Previous Close

$2.02

  Intrinsic Value

$0.93

stock screener

  Rating & Target

str. sell

-54%

Previous close

$2.02

 
Intrinsic value

$0.93

 
Up/down potential

-54%

 
Rating

str. sell

We calculate the intrinsic value of DTEA 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
  228
  234
  240
  247
  254
  262
  271
  281
  291
  302
  314
  327
  341
  355
  370
  387
  404
  422
  441
  461
  483
  505
  529
  554
  581
  608
  638
  668
  701
  735
Variable operating expenses, $m
  236
  241
  247
  254
  262
  270
  279
  289
  300
  312
  323
  337
  351
  365
  381
  398
  416
  434
  454
  475
  497
  520
  545
  570
  597
  626
  656
  688
  721
  756
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
  236
  241
  247
  254
  262
  270
  279
  289
  300
  312
  323
  337
  351
  365
  381
  398
  416
  434
  454
  475
  497
  520
  545
  570
  597
  626
  656
  688
  721
  756
Operating income, $m
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
EBITDA, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
Earnings before tax, $m
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Tax expense, $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
Net income, $m
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27

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
  111
  114
  117
  120
  124
  128
  132
  137
  142
  147
  153
  159
  166
  173
  180
  188
  196
  205
  215
  224
  235
  246
  257
  270
  282
  296
  310
  325
  341
  357
Adjusted assets (=assets-cash), $m
  111
  114
  117
  120
  124
  128
  132
  137
  142
  147
  153
  159
  166
  173
  180
  188
  196
  205
  215
  224
  235
  246
  257
  270
  282
  296
  310
  325
  341
  357
Revenue / Adjusted assets
  2.054
  2.053
  2.051
  2.058
  2.048
  2.047
  2.053
  2.051
  2.049
  2.054
  2.052
  2.057
  2.054
  2.052
  2.056
  2.059
  2.061
  2.059
  2.051
  2.058
  2.055
  2.053
  2.058
  2.052
  2.060
  2.054
  2.058
  2.055
  2.056
  2.059
Average production assets, $m
  47
  48
  49
  50
  52
  53
  55
  57
  59
  62
  64
  67
  69
  72
  76
  79
  82
  86
  90
  94
  99
  103
  108
  113
  118
  124
  130
  136
  143
  150
Working capital, $m
  14
  14
  15
  15
  15
  16
  17
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
Total debt, $m
  1
  2
  3
  5
  6
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  34
  37
  41
  45
  49
  54
  58
  63
  69
  74
  80
  86
  92
  99
  106
Total liabilities, $m
  47
  49
  50
  51
  53
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  121
  126
  132
  139
  146
  153
Total equity, $m
  64
  65
  67
  69
  71
  73
  76
  78
  81
  84
  88
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  141
  147
  154
  162
  170
  178
  186
  195
  205
Total liabilities and equity, $m
  111
  114
  117
  120
  124
  127
  132
  136
  141
  147
  153
  159
  166
  173
  180
  188
  197
  206
  215
  225
  235
  246
  257
  269
  283
  296
  310
  325
  341
  358
Debt-to-equity ratio
  0.010
  0.030
  0.050
  0.070
  0.090
  0.110
  0.130
  0.150
  0.170
  0.190
  0.210
  0.230
  0.250
  0.270
  0.290
  0.310
  0.330
  0.350
  0.370
  0.380
  0.400
  0.410
  0.430
  0.440
  0.460
  0.470
  0.480
  0.500
  0.510
  0.520
Adjusted equity ratio
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573
  0.573

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Depreciation, amort., depletion, $m
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Funds from operations, $m
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
Change in working capital, $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
Maintenance CAPEX, $m
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
New CAPEX, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
Cash from investing activities, $m
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -17
  -18
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
Free cash flow, $m
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
Issuance/(repurchase) of shares, $m
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  33
  34
  36
Cash from financing (excl. dividends), $m  
  9
  10
  10
  11
  12
  13
  13
  14
  14
  15
  15
  17
  18
  19
  19
  20
  22
  23
  24
  25
  27
  29
  30
  31
  33
  35
  37
  39
  41
  43
Total cash flow (excl. dividends), $m
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Retained Cash Flow (-), $m
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
Prev. year cash balance distribution, $m
  39
  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
  32
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
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
  31
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -5
  -5
  -5
  -5
  -4
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  83.9
  70.2
  58.4
  48.4
  40.0
  32.9
  27.0
  22.0
  18.0
  14.6
  11.9
  9.7
  7.9
  6.4
  5.1
  4.1
  3.3
  2.7
  2.1
  1.7
  1.4
  1.1
  0.9
  0.7
  0.6
  0.4
  0.3
  0.3
  0.2
  0.2

DAVIDsTEA Inc. is engaged in the retail and online sale of tea, tea accessories, and food and beverages in Canada and in the United States. The Company's segments include Canada and the U.S. The Company is a branded retailer of specialty tea, offering approximately 150 loose-leaf teas, pre-packaged teas, tea sachets and tea-related gifts, accessories, and food and beverages primarily through approximately 190 DAVIDsTEA stores, which are operated by the Company, and its Website, davidstea.com. Additionally, the Company offers on-the-go tea beverages in its retail stores. The Company's tea accessories include tea mugs, travel mugs, teacup sets, teapots, tea makers, kettles, infusers, filters, frothers, tins and spoons. The Company offers beverages range from the standard hot or iced tea to its Tea Lattes. The Company's different flavors of loose-leaf tea span eight tea categories: white, green, oolong, black, pu'erh, mate, rooibos and herbal tea.

FINANCIAL RATIOS  of  DAVIDsTEA (DTEA)

Valuation Ratios
P/E Ratio -17.1
Price to Sales 0.3
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 6.4
Price to Free Cash Flow -6.4
Growth Rates
Sales Growth Rate 19.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 23.1%
Cap. Spend. - 3 Yr. Gr. Rate 21.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -2.4%
Ret/ On Assets - 3 Yr. Avg. -33.5%
Return On Total Capital -3%
Ret/ On T. Cap. - 3 Yr. Avg. -31.1%
Return On Equity -3%
Return On Equity - 3 Yr. Avg. -113.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 52.7%
EBITDA Margin 1.9%
EBITDA Margin - 3 Yr. Avg. -18.6%
Operating Margin -3.1%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin -2.5%
Pre-Tax Margin - 3 Yr. Avg. -22.6%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. -23.2%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 7.3%
Payout Ratio 0%

DTEA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DTEA stock intrinsic value calculation we used $224.015 million for the last fiscal year's total revenue generated by DAVIDsTEA. The default revenue input number comes from 0001 income statement of DAVIDsTEA. 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 DTEA 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 DTEA is calculated based on our internal credit rating of DAVIDsTEA, 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 DAVIDsTEA.
    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 DTEA stock the variable cost ratio is equal to 103.1%.

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 DTEA 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 DAVIDsTEA.

Corporate tax rate of 27% is the nominal tax rate for DAVIDsTEA. 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 DTEA 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 DTEA are equal to 20.4%.

Life of production assets of 4.8 years is the average useful life of capital assets used in DAVIDsTEA 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 DTEA is equal to 6.1%. 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 - $101.368 million for DAVIDsTEA - 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 25.935 million for DAVIDsTEA 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 DAVIDsTEA at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ DAVIDsTEA Announces Discontinuance of Highland Lawsuit   [Oct-24-18 04:30PM  GlobeNewswire]
▶ DAVIDsTEA Comments on Trading Activity   [Oct-02-18 05:00PM  GlobeNewswire]
▶ DAVIDsTEA Comments on Trading Activity   [Sep-21-18 11:18AM  GlobeNewswire]
▶ DAVIDsTEA Appoints Pat De Marco, CPA, CA as Lead Director   [Sep-14-18 04:01PM  GlobeNewswire]
▶ DAVIDsTEA Appoints two new Independent Directors   [Aug-24-18 08:45AM  GlobeNewswire]
▶ DAVIDsTEA Categorically Rejects Latest Highland Lawsuit   [Jul-31-18 04:30PM  GlobeNewswire]
▶ DAVIDsTEA Announces Board Resignation   [Jul-27-18 07:00AM  GlobeNewswire]
▶ DAVIDsTEA Announces Board Resignation   [Jul-13-18 07:00AM  GlobeNewswire]
▶ Rainy Day Investments Calls for Change at DAVIDsTEA   [May-17-18 07:30AM  GlobeNewswire]
▶ Should You Buy DAVIDsTEA Inc (NASDAQ:DTEA)?   [10:02AM  Simply Wall St.]
▶ Rainy Day Investments Comments on DavidsTea Press Release   [Mar-23-18 10:49AM  GlobeNewswire]
▶ DAVIDsTEA Provides Strategic Alternatives Update   [Mar-22-18 08:00AM  GlobeNewswire]
▶ DavidsTea reports 3Q loss   [Dec-07-17 04:24PM  Associated Press]
▶ DavidsTea reports 2Q loss   [Sep-07-17 09:31PM  Associated Press]
▶ DavidsTea reports 1Q loss   [Jun-07-17 04:17PM  Associated Press]
▶ What Makes DAVIDsTEA Inc. (DTEA) a Strong Sell?   [May-11-17 08:35AM  Zacks]
▶ DavidsTea posts 4Q profit   [04:32PM  Associated Press]
▶ LD Micro Index Reconstitution as of February 1, 2017   [Feb-01-17 09:45AM  Accesswire]
▶ How FRP Holdings Inc (FRPH) Stacks Up Against Its Peers   [Dec-19-16 06:00AM  Insider Monkey]
▶ Is Aquinox Pharmaceuticals Inc (AQXP) A Good Stock To Buy?   [Dec-18-16 10:13PM  Insider Monkey]

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