Intrinsic value of Ever-Glory International Group, Inc. - EVK

Previous Close

$3.75

  Intrinsic Value

$21.63

stock screener

  Rating & Target

str. buy

+477%

Previous close

$3.75

 
Intrinsic value

$21.63

 
Up/down potential

+477%

 
Rating

str. buy

We calculate the intrinsic value of EVK 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, %
  4.30
  4.37
  4.43
  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
  4.89
  4.91
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
Revenue, $m
  434
  453
  473
  494
  517
  540
  565
  592
  619
  649
  680
  712
  746
  782
  820
  860
  902
  946
  992
  1,041
  1,092
  1,146
  1,202
  1,262
  1,324
  1,390
  1,458
  1,531
  1,607
  1,687
Variable operating expenses, $m
  333
  347
  362
  379
  396
  414
  433
  453
  474
  496
  517
  542
  568
  595
  624
  654
  686
  720
  755
  792
  831
  872
  915
  960
  1,007
  1,057
  1,109
  1,165
  1,222
  1,283
Fixed operating expenses, $m
  86
  88
  90
  92
  94
  96
  98
  100
  102
  104
  107
  109
  111
  114
  116
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  154
  158
  161
Total operating expenses, $m
  419
  435
  452
  471
  490
  510
  531
  553
  576
  600
  624
  651
  679
  709
  740
  773
  808
  844
  882
  922
  964
  1,008
  1,054
  1,102
  1,152
  1,205
  1,260
  1,319
  1,380
  1,444
Operating income, $m
  15
  18
  21
  24
  27
  31
  35
  39
  43
  48
  56
  61
  67
  73
  80
  87
  94
  102
  110
  119
  129
  139
  149
  160
  172
  185
  198
  212
  227
  242
EBITDA, $m
  24
  26
  30
  33
  37
  41
  45
  49
  54
  59
  65
  71
  77
  83
  90
  98
  106
  114
  123
  133
  143
  153
  165
  177
  189
  203
  217
  232
  247
  264
Interest expense (income), $m
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  13
  14
  15
  16
  18
  19
  20
  21
  22
  24
Earnings before tax, $m
  13
  16
  18
  21
  24
  27
  31
  34
  38
  42
  50
  54
  60
  65
  71
  77
  84
  91
  99
  107
  115
  124
  134
  144
  155
  166
  178
  191
  204
  218
Tax expense, $m
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  13
  15
  16
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  42
  45
  48
  51
  55
  59
Net income, $m
  10
  11
  13
  15
  17
  20
  22
  25
  28
  31
  36
  40
  44
  48
  52
  56
  61
  67
  72
  78
  84
  91
  98
  105
  113
  121
  130
  139
  149
  159

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
  256
  267
  279
  291
  304
  318
  333
  348
  365
  382
  400
  419
  440
  461
  483
  506
  531
  557
  584
  613
  643
  675
  708
  743
  780
  818
  859
  902
  946
  993
Adjusted assets (=assets-cash), $m
  256
  267
  279
  291
  304
  318
  333
  348
  365
  382
  400
  419
  440
  461
  483
  506
  531
  557
  584
  613
  643
  675
  708
  743
  780
  818
  859
  902
  946
  993
Revenue / Adjusted assets
  1.695
  1.697
  1.695
  1.698
  1.701
  1.698
  1.697
  1.701
  1.696
  1.699
  1.700
  1.699
  1.695
  1.696
  1.698
  1.700
  1.699
  1.698
  1.699
  1.698
  1.698
  1.698
  1.698
  1.699
  1.697
  1.699
  1.697
  1.697
  1.699
  1.699
Average production assets, $m
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  49
  51
  53
  56
  59
  61
  64
  68
  71
  74
  78
  82
  86
  90
  95
  99
  104
  110
Working capital, $m
  49
  52
  54
  56
  59
  62
  64
  67
  71
  74
  77
  81
  85
  89
  93
  98
  103
  108
  113
  119
  124
  131
  137
  144
  151
  158
  166
  175
  183
  192
Total debt, $m
  44
  50
  57
  64
  72
  80
  88
  97
  107
  117
  127
  138
  150
  162
  175
  188
  202
  217
  233
  250
  267
  285
  304
  324
  346
  368
  391
  416
  442
  469
Total liabilities, $m
  147
  154
  160
  168
  175
  183
  192
  201
  210
  220
  231
  242
  253
  265
  278
  292
  306
  321
  337
  353
  370
  389
  408
  428
  449
  471
  495
  519
  545
  572
Total equity, $m
  108
  113
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  186
  195
  205
  215
  225
  236
  248
  260
  273
  286
  300
  315
  331
  347
  364
  382
  401
  421
Total liabilities and equity, $m
  255
  267
  278
  291
  304
  318
  333
  349
  365
  382
  401
  420
  439
  460
  483
  507
  531
  557
  585
  613
  643
  675
  708
  743
  780
  818
  859
  901
  946
  993
Debt-to-equity ratio
  0.400
  0.440
  0.480
  0.520
  0.560
  0.590
  0.630
  0.660
  0.690
  0.720
  0.750
  0.780
  0.800
  0.830
  0.850
  0.880
  0.900
  0.920
  0.940
  0.960
  0.980
  1.000
  1.010
  1.030
  1.050
  1.060
  1.070
  1.090
  1.100
  1.110
Adjusted equity ratio
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10
  11
  13
  15
  17
  20
  22
  25
  28
  31
  36
  40
  44
  48
  52
  56
  61
  67
  72
  78
  84
  91
  98
  105
  113
  121
  130
  139
  149
  159
Depreciation, amort., depletion, $m
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  18
  20
  22
  24
  27
  29
  32
  35
  39
  42
  45
  49
  53
  58
  63
  68
  73
  79
  85
  91
  98
  106
  113
  121
  130
  139
  149
  159
  170
  181
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Cash from operations, $m
  16
  18
  20
  22
  24
  27
  29
  32
  35
  39
  42
  45
  49
  54
  58
  63
  68
  74
  80
  86
  92
  99
  107
  115
  123
  132
  141
  151
  161
  172
Maintenance CAPEX, $m
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from investing activities, $m
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
Free cash flow, $m
  10
  11
  13
  14
  16
  18
  21
  23
  26
  29
  31
  34
  38
  42
  46
  50
  54
  59
  64
  70
  76
  82
  88
  95
  102
  110
  118
  127
  136
  146
Issuance/(repayment) of debt, $m
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
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  
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
Total cash flow (excl. dividends), $m
  15
  17
  19
  22
  24
  26
  29
  32
  35
  39
  42
  45
  49
  54
  58
  63
  69
  74
  80
  86
  93
  100
  107
  115
  124
  132
  142
  152
  162
  173
Retained Cash Flow (-), $m
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
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
  11
  13
  14
  16
  18
  21
  23
  26
  28
  31
  34
  37
  41
  45
  49
  53
  58
  63
  68
  74
  80
  87
  93
  100
  108
  116
  125
  134
  143
  153
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
  10
  12
  12
  13
  14
  15
  16
  16
  16
  16
  16
  16
  16
  15
  14
  14
  13
  12
  11
  9
  8
  7
  6
  5
  4
  3
  3
  2
  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

Ever-Glory International Group, Inc. (Ever-Glory), through its subsidiaries, is a retailer of branded fashion apparel. Ever-Glory is also a global apparel supply chain solution provider with a focus on casual wear, outerwear and sportswear brands. The Company operates through two segments: Wholesale and Retail. The Company's wholesale business consists of wholesale-channel sales made principally to brands and department stores located across Europe, the United States, Japan and People's Republic of China (PRC). Ever-Glory's retail business consists of retail-channel sales directly to consumers through retail stores located across the PRC, as well as sales through online stores at Tmall and Dangdang mall, among others. Ever-Glory services various brands and retail stores by providing a range of services of supply chain management on fabric development and design, sampling, sourcing, quality control, manufacturing, logistics, customs clearance and distribution.

FINANCIAL RATIOS  of  Ever-Glory International Group, Inc. (EVK)

Valuation Ratios
P/E Ratio 7.9
Price to Sales 0.1
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 1.3
Price to Free Cash Flow 1.7
Growth Rates
Sales Growth Rate -6.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15.4%
Cap. Spend. - 3 Yr. Gr. Rate 6.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 34.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 6.3%
Return On Total Capital 5.9%
Ret/ On T. Cap. - 3 Yr. Avg. 10%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 17.2%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 30.8%
Gross Margin - 3 Yr. Avg. 29.3%
EBITDA Margin 5.1%
EBITDA Margin - 3 Yr. Avg. 6.4%
Operating Margin 2.5%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 2.5%
Pre-Tax Margin - 3 Yr. Avg. 3.9%
Net Profit Margin 1.8%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 31.7%
Payout Ratio 0%

EVK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EVK stock intrinsic value calculation we used $416 million for the last fiscal year's total revenue generated by Ever-Glory International Group, Inc.. The default revenue input number comes from 0001 income statement of Ever-Glory International 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 EVK stock valuation model: a) initial revenue growth rate of 4.3% 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 EVK is calculated based on our internal credit rating of Ever-Glory International 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 Ever-Glory International 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 EVK stock the variable cost ratio is equal to 76.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $84 million in the base year in the intrinsic value calculation for EVK 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 Ever-Glory International Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Ever-Glory International 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 EVK 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 EVK are equal to 6.5%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Ever-Glory International 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 EVK is equal to 11.4%. 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 - $103.76 million for Ever-Glory International 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 14.797 million for Ever-Glory International 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 Ever-Glory International Group, Inc. at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
GIII G-III Apparel 37.75 35.26  hold

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