Intrinsic value of Ever-Glory International Group - EVK

Previous Close

$3.95

  Intrinsic Value

$39.89

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  Rating & Target

str. buy

+910%

Previous close

$3.95

 
Intrinsic value

$39.89

 
Up/down potential

+910%

 
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, %
  9.00
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
Revenue, $m
  453
  492
  532
  575
  618
  664
  711
  760
  812
  865
  920
  978
  1,037
  1,100
  1,165
  1,233
  1,304
  1,377
  1,455
  1,535
  1,619
  1,707
  1,800
  1,896
  1,997
  2,102
  2,213
  2,329
  2,450
  2,577
Variable operating expenses, $m
  347
  377
  408
  441
  474
  509
  545
  583
  622
  663
  704
  748
  794
  842
  892
  944
  998
  1,055
  1,114
  1,175
  1,240
  1,307
  1,378
  1,451
  1,529
  1,609
  1,694
  1,783
  1,876
  1,973
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
  433
  465
  498
  533
  568
  605
  643
  683
  724
  767
  811
  857
  905
  956
  1,008
  1,063
  1,120
  1,179
  1,241
  1,305
  1,373
  1,443
  1,517
  1,593
  1,674
  1,757
  1,845
  1,937
  2,034
  2,134
Operating income, $m
  20
  27
  35
  42
  51
  59
  68
  78
  87
  98
  109
  120
  132
  144
  157
  170
  184
  199
  214
  230
  247
  265
  283
  303
  323
  345
  368
  391
  417
  443
EBITDA, $m
  26
  34
  42
  51
  59
  69
  78
  88
  99
  110
  121
  133
  145
  158
  172
  186
  201
  217
  233
  250
  268
  287
  307
  328
  349
  372
  396
  422
  448
  476
Interest expense (income), $m
  2
  2
  3
  3
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
Earnings before tax, $m
  18
  24
  31
  38
  46
  54
  62
  70
  79
  88
  99
  109
  119
  131
  142
  154
  167
  180
  194
  209
  224
  241
  258
  276
  294
  314
  335
  357
  379
  404
Tax expense, $m
  5
  7
  8
  10
  12
  14
  17
  19
  21
  24
  27
  29
  32
  35
  38
  42
  45
  49
  52
  56
  61
  65
  70
  74
  79
  85
  90
  96
  102
  109
Net income, $m
  13
  18
  23
  28
  33
  39
  45
  51
  58
  65
  72
  79
  87
  95
  104
  113
  122
  132
  142
  153
  164
  176
  188
  201
  215
  229
  244
  260
  277
  295

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
  267
  290
  314
  338
  364
  391
  419
  448
  478
  509
  542
  576
  611
  648
  686
  726
  768
  811
  857
  904
  954
  1,006
  1,060
  1,117
  1,176
  1,238
  1,303
  1,371
  1,443
  1,518
Adjusted assets (=assets-cash), $m
  267
  290
  314
  338
  364
  391
  419
  448
  478
  509
  542
  576
  611
  648
  686
  726
  768
  811
  857
  904
  954
  1,006
  1,060
  1,117
  1,176
  1,238
  1,303
  1,371
  1,443
  1,518
Revenue / Adjusted assets
  1.697
  1.697
  1.694
  1.701
  1.698
  1.698
  1.697
  1.696
  1.699
  1.699
  1.697
  1.698
  1.697
  1.698
  1.698
  1.698
  1.698
  1.698
  1.698
  1.698
  1.697
  1.697
  1.698
  1.697
  1.698
  1.698
  1.698
  1.699
  1.698
  1.698
Average production assets, $m
  29
  32
  35
  37
  40
  43
  46
  49
  53
  56
  60
  64
  67
  71
  76
  80
  85
  90
  95
  100
  105
  111
  117
  123
  130
  137
  144
  151
  159
  168
Working capital, $m
  52
  56
  61
  66
  71
  76
  81
  87
  93
  99
  105
  111
  118
  125
  133
  141
  149
  157
  166
  175
  185
  195
  205
  216
  228
  240
  252
  265
  279
  294
Total debt, $m
  50
  63
  77
  91
  106
  122
  138
  154
  172
  190
  209
  228
  248
  270
  292
  315
  339
  364
  390
  417
  446
  476
  507
  540
  574
  610
  647
  686
  728
  771
Total liabilities, $m
  154
  167
  181
  195
  210
  225
  241
  258
  275
  293
  312
  332
  352
  373
  395
  418
  442
  467
  493
  521
  549
  579
  610
  643
  677
  713
  751
  790
  831
  874
Total equity, $m
  113
  123
  133
  143
  154
  166
  178
  190
  203
  216
  230
  244
  259
  275
  291
  308
  326
  344
  363
  383
  404
  426
  449
  473
  499
  525
  553
  581
  612
  644
Total liabilities and equity, $m
  267
  290
  314
  338
  364
  391
  419
  448
  478
  509
  542
  576
  611
  648
  686
  726
  768
  811
  856
  904
  953
  1,005
  1,059
  1,116
  1,176
  1,238
  1,304
  1,371
  1,443
  1,518
Debt-to-equity ratio
  0.440
  0.520
  0.580
  0.640
  0.690
  0.730
  0.780
  0.810
  0.850
  0.880
  0.910
  0.930
  0.960
  0.980
  1.000
  1.020
  1.040
  1.060
  1.070
  1.090
  1.100
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
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
  13
  18
  23
  28
  33
  39
  45
  51
  58
  65
  72
  79
  87
  95
  104
  113
  122
  132
  142
  153
  164
  176
  188
  201
  215
  229
  244
  260
  277
  295
Depreciation, amort., depletion, $m
  6
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
Funds from operations, $m
  19
  25
  30
  36
  42
  48
  55
  62
  69
  76
  84
  92
  101
  110
  119
  129
  139
  150
  161
  173
  185
  198
  211
  226
  241
  257
  273
  291
  309
  328
Change in working capital, $m
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
  13
  14
  14
Cash from operations, $m
  15
  20
  26
  31
  37
  43
  50
  56
  63
  70
  78
  86
  94
  102
  111
  121
  131
  141
  152
  163
  175
  188
  201
  215
  229
  245
  261
  277
  295
  314
Maintenance CAPEX, $m
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
New CAPEX, $m
  -2
  -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
Cash from investing activities, $m
  -7
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -32
  -33
  -34
  -37
  -38
  -40
Free cash flow, $m
  7
  12
  17
  22
  27
  32
  38
  44
  50
  56
  63
  70
  77
  85
  93
  101
  110
  119
  129
  139
  150
  161
  173
  185
  198
  212
  226
  241
  257
  273
Issuance/(repayment) of debt, $m
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
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  
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
Total cash flow (excl. dividends), $m
  20
  25
  30
  36
  42
  48
  54
  60
  67
  74
  82
  89
  98
  106
  115
  124
  134
  144
  155
  167
  178
  191
  204
  218
  232
  247
  263
  280
  298
  317
Retained Cash Flow (-), $m
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
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
  15
  20
  25
  31
  36
  42
  48
  54
  61
  68
  75
  83
  91
  99
  107
  117
  126
  136
  146
  157
  169
  181
  194
  207
  221
  236
  251
  268
  285
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
  14
  18
  21
  24
  26
  28
  30
  31
  32
  32
  32
  31
  30
  29
  27
  25
  23
  21
  19
  16
  14
  12
  10
  8
  6
  5
  4
  3
  2
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 (EVK)

Valuation Ratios
P/E Ratio 8.3
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 1.8
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 $415.581 million for the last fiscal year's total revenue generated by Ever-Glory International Group. The default revenue input number comes from 0001 income statement of Ever-Glory International Group. 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 9% 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, 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.
    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.

Corporate tax rate of 27% is the nominal tax rate for Ever-Glory International Group. 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 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 - 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 14.796 million for Ever-Glory International Group 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 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 41.59 56.39  buy

COMPANY NEWS

▶ Ever-Glory: 3Q Earnings Snapshot   [Nov-08-18 05:06AM  Associated Press]
▶ Ever-Glory: 2Q Earnings Snapshot   [05:35AM  Associated Press]
▶ Ever-Glory: 1Q Earnings Snapshot   [May-15-18 06:18AM  Associated Press]
▶ Ever-Glory Reports Third Quarter 2017 Financial Results   [Nov-13-17 06:00AM  PR Newswire]
▶ When Should You Buy Ever-Glory International Group Inc (EVK)?   [Nov-08-17 05:29PM  Simply Wall St.]
▶ Ever-Glory Reports Second Quarter 2017 Financial Results   [Aug-14-17 06:05AM  PR Newswire]
▶ Ever-Glory Reports First Quarter 2017 Financial Results   [May-12-17 06:00AM  PR Newswire]
▶ Ever-Glory posts 4Q profit   [06:36AM  Associated Press]

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