Intrinsic value of Flexsteel Industries, Inc. - FLXS

Previous Close

$23.15

  Intrinsic Value

$43.76

stock screener

  Rating & Target

str. buy

+89%

Previous close

$23.15

 
Intrinsic value

$43.76

 
Up/down potential

+89%

 
Rating

str. buy

We calculate the intrinsic value of FLXS 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 0.2

 

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
  499
  510
  523
  538
  554
  572
  592
  613
  636
  660
  686
  714
  744
  775
  809
  844
  881
  921
  963
  1,007
  1,054
  1,103
  1,155
  1,210
  1,267
  1,328
  1,392
  1,459
  1,530
  1,604
Variable operating expenses, $m
  459
  469
  481
  494
  509
  525
  543
  562
  582
  604
  618
  644
  670
  699
  729
  761
  795
  830
  868
  908
  950
  994
  1,041
  1,091
  1,142
  1,197
  1,255
  1,315
  1,379
  1,446
Fixed operating expenses, $m
  -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
  -2
  -2
  -2
  -2
  -2
Total operating expenses, $m
  458
  468
  480
  493
  508
  524
  542
  561
  581
  603
  617
  643
  669
  698
  728
  760
  794
  829
  866
  906
  948
  992
  1,039
  1,089
  1,140
  1,195
  1,253
  1,313
  1,377
  1,444
Operating income, $m
  41
  42
  44
  45
  47
  48
  50
  53
  55
  57
  69
  72
  75
  78
  81
  85
  88
  92
  96
  101
  106
  110
  116
  121
  127
  133
  139
  146
  153
  160
EBITDA, $m
  58
  59
  61
  62
  64
  66
  68
  71
  73
  76
  79
  82
  86
  89
  93
  97
  102
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  184
Interest expense (income), $m
  0
  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
Earnings before tax, $m
  41
  42
  43
  45
  46
  48
  50
  52
  54
  57
  68
  71
  74
  77
  80
  83
  87
  90
  94
  99
  103
  108
  113
  118
  123
  129
  135
  141
  148
  155
Tax expense, $m
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  18
  19
  20
  21
  22
  22
  23
  24
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
Net income, $m
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  103
  108
  113

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
  287
  294
  301
  310
  319
  329
  341
  353
  366
  380
  395
  411
  428
  446
  465
  486
  507
  530
  554
  580
  607
  635
  665
  697
  730
  765
  801
  840
  881
  923
Adjusted assets (=assets-cash), $m
  287
  294
  301
  310
  319
  329
  341
  353
  366
  380
  395
  411
  428
  446
  465
  486
  507
  530
  554
  580
  607
  635
  665
  697
  730
  765
  801
  840
  881
  923
Revenue / Adjusted assets
  1.739
  1.735
  1.738
  1.735
  1.737
  1.739
  1.736
  1.737
  1.738
  1.737
  1.737
  1.737
  1.738
  1.738
  1.740
  1.737
  1.738
  1.738
  1.738
  1.736
  1.736
  1.737
  1.737
  1.736
  1.736
  1.736
  1.738
  1.737
  1.737
  1.738
Average production assets, $m
  82
  84
  86
  89
  91
  94
  98
  101
  105
  109
  113
  118
  123
  128
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  219
  230
  241
  252
  265
Working capital, $m
  107
  110
  113
  116
  119
  123
  127
  132
  137
  142
  148
  154
  160
  167
  174
  181
  190
  198
  207
  217
  227
  237
  248
  260
  272
  286
  299
  314
  329
  345
Total debt, $m
  1
  2
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  22
  25
  28
  31
  34
  37
  41
  45
  49
  53
  58
  63
  68
  73
  78
  84
  90
  97
Total liabilities, $m
  43
  44
  45
  47
  48
  50
  51
  53
  55
  57
  60
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
Total equity, $m
  244
  249
  256
  263
  271
  280
  289
  300
  311
  323
  335
  349
  363
  379
  395
  413
  431
  450
  471
  492
  515
  539
  565
  591
  619
  649
  680
  713
  748
  784
Total liabilities and equity, $m
  287
  293
  301
  310
  319
  330
  340
  353
  366
  380
  395
  411
  428
  446
  465
  486
  508
  530
  555
  580
  607
  635
  665
  696
  729
  764
  801
  840
  881
  923
Debt-to-equity ratio
  0.000
  0.010
  0.010
  0.020
  0.020
  0.030
  0.030
  0.040
  0.040
  0.050
  0.050
  0.060
  0.060
  0.070
  0.070
  0.070
  0.080
  0.080
  0.090
  0.090
  0.100
  0.100
  0.100
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
  0.120
Adjusted equity ratio
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849
  0.849

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  103
  108
  113
Depreciation, amort., depletion, $m
  17
  17
  17
  17
  17
  18
  18
  18
  19
  19
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
Funds from operations, $m
  47
  48
  49
  50
  51
  53
  55
  56
  58
  60
  60
  62
  65
  68
  70
  73
  77
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  125
  131
  137
Change in working capital, $m
  2
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
Cash from operations, $m
  44
  45
  46
  47
  48
  49
  50
  52
  53
  55
  54
  56
  59
  61
  63
  66
  68
  71
  74
  78
  81
  85
  88
  92
  97
  101
  106
  111
  116
  121
Maintenance CAPEX, $m
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
Cash from investing activities, $m
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -18
  -18
  -19
  -20
  -21
  -21
  -23
  -24
  -26
  -26
  -28
  -29
  -31
  -32
  -34
  -35
Free cash flow, $m
  36
  36
  36
  36
  37
  38
  39
  39
  40
  41
  40
  42
  43
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
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  
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
Total cash flow (excl. dividends), $m
  36
  37
  37
  38
  38
  39
  40
  41
  42
  44
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
Retained Cash Flow (-), $m
  -5
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
Prev. year cash balance distribution, $m
  3
  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
  34
  31
  31
  31
  31
  31
  31
  31
  31
  32
  30
  30
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
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
  33
  28
  27
  25
  24
  22
  21
  19
  18
  17
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
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

Flexsteel Industries, Inc. is a manufacturer, importer, marketer and distributor of residential and commercial upholstered and wood furniture products in the United States. The Company offers its products for contract under categories, such as hospitality, healthcare, senior living, government and commercial office. It offers furniture for common areas, guest rooms, dining areas, patient rooms, resident rooms, work spaces, reception areas, administrative and collaborative spaces. Its range of offering includes chairs, sofas, benches, ottomans, pillows, barstools, tables, headboards, group seating, desks & hutches, causeway collection, presentation boards, bookcases, recliners and storage. It also offers sectionals, reclining furniture, lift reclining furniture, media consoles, night stands and side tables, among others, for home. It offers various products for recreation, such as bucket seats, fold-n-tumble, dinette seating, helm seating and modular sectionals.

FINANCIAL RATIOS  of  Flexsteel Industries, Inc. (FLXS)

Valuation Ratios
P/E Ratio 7.5
Price to Sales 0.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow 13.9
Growth Rates
Sales Growth Rate -6.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 85.7%
Cap. Spend. - 3 Yr. Gr. Rate 26.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 10.9%
Ret/ On T. Cap. - 3 Yr. Avg. 11.5%
Return On Equity 10.9%
Return On Equity - 3 Yr. Avg. 11.8%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 23.2%
Gross Margin - 3 Yr. Avg. 23.2%
EBITDA Margin 9.8%
EBITDA Margin - 3 Yr. Avg. 9.3%
Operating Margin 7.9%
Oper. Margin - 3 Yr. Avg. 7.7%
Pre-Tax Margin 8.1%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 5.1%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
Payout Ratio 25%

FLXS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FLXS stock intrinsic value calculation we used $489 million for the last fiscal year's total revenue generated by Flexsteel Industries, Inc.. The default revenue input number comes from 0001 income statement of Flexsteel Industries, 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 FLXS 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 FLXS is calculated based on our internal credit rating of Flexsteel Industries, 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 Flexsteel Industries, 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 FLXS stock the variable cost ratio is equal to 92%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $-1 million in the base year in the intrinsic value calculation for FLXS 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 Flexsteel Industries, Inc..

Corporate tax rate of 27% is the nominal tax rate for Flexsteel Industries, 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 FLXS 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 FLXS are equal to 16.5%.

Life of production assets of 11 years is the average useful life of capital assets used in Flexsteel Industries, 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 FLXS is equal to 21.5%. 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 - $241.698 million for Flexsteel Industries, 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 7.890 million for Flexsteel Industries, 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 Flexsteel Industries, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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