Intrinsic value of Brinker International, Inc. - EAT

Previous Close

$39.54

  Intrinsic Value

$3.65

stock screener

  Rating & Target

str. sell

-91%

Previous close

$39.54

 
Intrinsic value

$3.65

 
Up/down potential

-91%

 
Rating

str. sell

We calculate the intrinsic value of EAT 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 1.5

 

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, %
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  3,235
  3,345
  3,463
  3,591
  3,728
  3,875
  4,031
  4,198
  4,376
  4,564
  4,764
  4,975
  5,198
  5,434
  5,684
  5,947
  6,224
  6,517
  6,825
  7,150
  7,492
  7,851
  8,230
  8,628
  9,047
  9,488
  9,952
  10,439
  10,951
  11,489
Variable operating expenses, $m
  2,973
  3,072
  3,181
  3,297
  3,422
  3,556
  3,700
  3,852
  4,014
  4,186
  4,349
  4,542
  4,746
  4,962
  5,189
  5,429
  5,683
  5,950
  6,231
  6,528
  6,840
  7,168
  7,514
  7,878
  8,260
  8,663
  9,086
  9,531
  9,998
  10,490
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
  2,973
  3,072
  3,181
  3,297
  3,422
  3,556
  3,700
  3,852
  4,014
  4,186
  4,349
  4,542
  4,746
  4,962
  5,189
  5,429
  5,683
  5,950
  6,231
  6,528
  6,840
  7,168
  7,514
  7,878
  8,260
  8,663
  9,086
  9,531
  9,998
  10,490
Operating income, $m
  263
  272
  282
  294
  306
  318
  332
  346
  362
  378
  414
  433
  452
  473
  494
  517
  541
  567
  594
  622
  652
  683
  716
  751
  787
  825
  866
  908
  953
  1,000
EBITDA, $m
  424
  439
  454
  471
  489
  508
  529
  551
  574
  599
  625
  652
  682
  713
  745
  780
  816
  855
  895
  938
  983
  1,030
  1,079
  1,132
  1,187
  1,244
  1,305
  1,369
  1,436
  1,507
Interest expense (income), $m
  89
  81
  37
  40
  42
  45
  48
  51
  54
  58
  61
  65
  69
  74
  78
  83
  89
  94
  100
  106
  112
  119
  126
  134
  142
  150
  159
  168
  178
  188
  199
Earnings before tax, $m
  181
  235
  243
  251
  261
  271
  281
  292
  304
  317
  349
  363
  379
  394
  411
  429
  447
  467
  488
  510
  533
  557
  582
  609
  637
  667
  698
  730
  765
  801
Tax expense, $m
  49
  63
  66
  68
  70
  73
  76
  79
  82
  86
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  150
  157
  164
  172
  180
  188
  197
  207
  216
Net income, $m
  132
  171
  177
  184
  190
  198
  205
  213
  222
  231
  255
  265
  276
  288
  300
  313
  327
  341
  356
  372
  389
  406
  425
  445
  465
  487
  509
  533
  558
  585

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
  1,390
  1,437
  1,488
  1,543
  1,602
  1,665
  1,732
  1,804
  1,880
  1,961
  2,047
  2,138
  2,234
  2,335
  2,442
  2,556
  2,675
  2,801
  2,933
  3,073
  3,219
  3,374
  3,537
  3,708
  3,888
  4,077
  4,277
  4,486
  4,706
  4,937
Adjusted assets (=assets-cash), $m
  1,390
  1,437
  1,488
  1,543
  1,602
  1,665
  1,732
  1,804
  1,880
  1,961
  2,047
  2,138
  2,234
  2,335
  2,442
  2,556
  2,675
  2,801
  2,933
  3,073
  3,219
  3,374
  3,537
  3,708
  3,888
  4,077
  4,277
  4,486
  4,706
  4,937
Revenue / Adjusted assets
  2.327
  2.328
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.328
  2.327
  2.327
  2.327
  2.327
  2.327
  2.328
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
  2.327
Average production assets, $m
  1,100
  1,137
  1,177
  1,221
  1,268
  1,317
  1,371
  1,427
  1,488
  1,552
  1,620
  1,691
  1,767
  1,848
  1,932
  2,022
  2,116
  2,216
  2,321
  2,431
  2,547
  2,669
  2,798
  2,934
  3,076
  3,226
  3,384
  3,549
  3,723
  3,906
Working capital, $m
  -291
  -301
  -312
  -323
  -336
  -349
  -363
  -378
  -394
  -411
  -429
  -448
  -468
  -489
  -512
  -535
  -560
  -587
  -614
  -643
  -674
  -707
  -741
  -777
  -814
  -854
  -896
  -939
  -986
  -1,034
Total debt, $m
  692
  735
  781
  830
  883
  940
  1,000
  1,065
  1,133
  1,206
  1,283
  1,365
  1,452
  1,543
  1,639
  1,741
  1,848
  1,962
  2,081
  2,206
  2,339
  2,478
  2,624
  2,778
  2,940
  3,111
  3,290
  3,478
  3,676
  3,885
Total liabilities, $m
  1,251
  1,294
  1,339
  1,389
  1,442
  1,499
  1,559
  1,624
  1,692
  1,765
  1,842
  1,924
  2,010
  2,102
  2,198
  2,300
  2,407
  2,520
  2,640
  2,765
  2,897
  3,037
  3,183
  3,337
  3,499
  3,670
  3,849
  4,037
  4,235
  4,444
Total equity, $m
  139
  144
  149
  154
  160
  167
  173
  180
  188
  196
  205
  214
  223
  234
  244
  256
  267
  280
  293
  307
  322
  337
  354
  371
  389
  408
  428
  449
  471
  494
Total liabilities and equity, $m
  1,390
  1,438
  1,488
  1,543
  1,602
  1,666
  1,732
  1,804
  1,880
  1,961
  2,047
  2,138
  2,233
  2,336
  2,442
  2,556
  2,674
  2,800
  2,933
  3,072
  3,219
  3,374
  3,537
  3,708
  3,888
  4,078
  4,277
  4,486
  4,706
  4,938
Debt-to-equity ratio
  4.980
  5.110
  5.240
  5.380
  5.510
  5.640
  5.770
  5.900
  6.030
  6.150
  6.270
  6.390
  6.500
  6.610
  6.710
  6.810
  6.910
  7.000
  7.090
  7.180
  7.260
  7.340
  7.420
  7.490
  7.560
  7.630
  7.690
  7.750
  7.810
  7.870
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
  132
  171
  177
  184
  190
  198
  205
  213
  222
  231
  255
  265
  276
  288
  300
  313
  327
  341
  356
  372
  389
  406
  425
  445
  465
  487
  509
  533
  558
  585
Depreciation, amort., depletion, $m
  162
  166
  172
  177
  183
  190
  197
  204
  212
  220
  210
  220
  230
  240
  251
  263
  275
  288
  301
  316
  331
  347
  363
  381
  399
  419
  439
  461
  484
  507
Funds from operations, $m
  294
  338
  349
  361
  374
  387
  402
  418
  434
  452
  465
  485
  506
  528
  551
  576
  601
  629
  657
  688
  720
  753
  788
  826
  865
  906
  949
  994
  1,042
  1,092
Change in working capital, $m
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
Cash from operations, $m
  303
  348
  360
  372
  386
  401
  416
  433
  450
  469
  483
  504
  526
  549
  574
  599
  626
  655
  685
  717
  750
  786
  822
  861
  902
  945
  990
  1,038
  1,088
  1,140
Maintenance CAPEX, $m
  -138
  -143
  -148
  -153
  -159
  -165
  -171
  -178
  -185
  -193
  -202
  -210
  -220
  -230
  -240
  -251
  -263
  -275
  -288
  -301
  -316
  -331
  -347
  -363
  -381
  -399
  -419
  -439
  -461
  -484
New CAPEX, $m
  -35
  -37
  -40
  -43
  -47
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -135
  -142
  -150
  -158
  -166
  -174
  -183
Cash from investing activities, $m
  -173
  -180
  -188
  -196
  -206
  -215
  -224
  -235
  -245
  -257
  -270
  -282
  -296
  -310
  -325
  -340
  -357
  -374
  -393
  -411
  -432
  -453
  -476
  -498
  -523
  -549
  -577
  -605
  -635
  -667
Free cash flow, $m
  129
  168
  172
  176
  181
  186
  192
  198
  204
  211
  214
  222
  230
  239
  249
  259
  270
  281
  293
  305
  318
  332
  347
  363
  379
  396
  414
  433
  453
  474
Issuance/(repayment) of debt, $m
  -814
  42
  46
  49
  53
  57
  61
  65
  69
  73
  77
  82
  86
  91
  96
  102
  107
  113
  119
  126
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
Issuance/(repurchase) of shares, $m
  725
  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  
  -89
  42
  46
  49
  53
  57
  61
  65
  69
  73
  77
  82
  86
  91
  96
  102
  107
  113
  119
  126
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
Total cash flow (excl. dividends), $m
  40
  210
  217
  225
  234
  243
  252
  262
  273
  284
  291
  304
  317
  331
  345
  361
  377
  394
  412
  431
  451
  472
  494
  517
  541
  566
  593
  621
  651
  682
Retained Cash Flow (-), $m
  -857
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
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
  -817
  205
  212
  220
  228
  237
  246
  255
  265
  276
  282
  294
  307
  320
  335
  349
  365
  381
  399
  417
  436
  456
  477
  499
  523
  547
  573
  600
  629
  659
Discount rate, %
  13.10
  13.76
  14.44
  15.16
  15.92
  16.72
  17.56
  18.43
  19.35
  20.32
  21.34
  22.41
  23.53
  24.70
  25.94
  27.23
  28.60
  30.03
  31.53
  33.10
  34.76
  36.50
  38.32
  40.24
  42.25
  44.36
  46.58
  48.91
  51.35
  53.92
PV of cash for distribution, $m
  -723
  159
  142
  125
  109
  94
  79
  66
  54
  43
  34
  26
  20
  15
  11
  7
  5
  3
  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

Brinker International, Inc. is engaged in the ownership, operation, development, and franchising of the Chili's Grill & Bar (Chili's) and Maggiano's Little Italy (Maggiano's) restaurant brands. The Company's Chili's operates Bar & Grill category of casual dining. Chili's menu features authentic Fresh Mex and Fresh Tex cuisine, including signature items, such as Baby Back Ribs smoked in-house, Hand-Crafted Burgers served with house-made garlic dill pickles, Mix and Match Fajitas, Tableside Guacamole and house-made Chips and Salsa. Maggiano's is a full-service, casual dining Italian restaurant brand. Its Maggiano's restaurants feature individual and family-style menus, and its restaurants also has banquet facilities designed to host party business or social events. The Company owns, operates or franchises restaurants, which include approximately 1,650 restaurants in the United States, over 30 countries and approximately two territories outside of the United States.

FINANCIAL RATIOS  of  Brinker International, Inc. (EAT)

Valuation Ratios
P/E Ratio 12.7
Price to Sales 0.6
Price to Book -3.9
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow 9.1
Growth Rates
Sales Growth Rate -3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.8%
Cap. Spend. - 3 Yr. Gr. Rate -8.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity -267%
Total Debt to Equity -269%
Interest Coverage 3
Management Effectiveness
Return On Assets 15%
Ret/ On Assets - 3 Yr. Avg. 15.6%
Return On Total Capital 17.5%
Ret/ On T. Cap. - 3 Yr. Avg. 20.5%
Return On Equity -41.9%
Return On Equity - 3 Yr. Avg. -924.7%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 18%
Gross Margin - 3 Yr. Avg. 19%
EBITDA Margin 14.4%
EBITDA Margin - 3 Yr. Avg. 15.1%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 9.4%
Pre-Tax Margin 6.6%
Pre-Tax Margin - 3 Yr. Avg. 8.3%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 27.8%
Eff/ Tax Rate - 3 Yr. Avg. 29.6%
Payout Ratio 47%

EAT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EAT stock intrinsic value calculation we used $3135 million for the last fiscal year's total revenue generated by Brinker International, Inc.. The default revenue input number comes from 0001 income statement of Brinker International, 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 EAT stock valuation model: a) initial revenue growth rate of 3.2% 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 13.1%, whose default value for EAT is calculated based on our internal credit rating of Brinker International, 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 Brinker International, 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 EAT stock the variable cost ratio is equal to 91.9%.

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 EAT 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 Brinker International, Inc..

Corporate tax rate of 27% is the nominal tax rate for Brinker International, 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 EAT 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 EAT are equal to 34%.

Life of production assets of 7.7 years is the average useful life of capital assets used in Brinker International, 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 EAT is equal to -9%. 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 - $-718.3 million for Brinker International, 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 37.494 million for Brinker International, 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 Brinker International, Inc. at the current share price and the inputted number of shares is $1.5 billion.

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