Intrinsic value of Fossil Group, Inc. - FOSL

Previous Close

$13.07

  Intrinsic Value

$2.03

stock screener

  Rating & Target

str. sell

-84%

Previous close

$13.07

 
Intrinsic value

$2.03

 
Up/down potential

-84%

 
Rating

str. sell

We calculate the intrinsic value of FOSL 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 0.6

 

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
  2,592
  2,651
  2,720
  2,796
  2,881
  2,974
  3,075
  3,185
  3,303
  3,430
  3,565
  3,710
  3,864
  4,028
  4,201
  4,386
  4,580
  4,787
  5,004
  5,234
  5,477
  5,733
  6,003
  6,287
  6,586
  6,901
  7,233
  7,582
  7,949
  8,335
Variable operating expenses, $m
  2,985
  3,054
  3,132
  3,219
  3,316
  3,423
  3,539
  3,664
  3,799
  3,945
  4,081
  4,247
  4,423
  4,611
  4,810
  5,021
  5,244
  5,480
  5,729
  5,992
  6,270
  6,563
  6,872
  7,197
  7,540
  7,900
  8,280
  8,680
  9,100
  9,542
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
  2,985
  3,054
  3,132
  3,219
  3,316
  3,423
  3,539
  3,664
  3,799
  3,945
  4,081
  4,247
  4,423
  4,611
  4,810
  5,021
  5,244
  5,480
  5,729
  5,992
  6,270
  6,563
  6,872
  7,197
  7,540
  7,900
  8,280
  8,680
  9,100
  9,542
Operating income, $m
  -394
  -402
  -412
  -423
  -435
  -449
  -464
  -479
  -497
  -515
  -516
  -537
  -559
  -583
  -608
  -635
  -663
  -693
  -725
  -758
  -793
  -830
  -869
  -910
  -954
  -999
  -1,047
  -1,098
  -1,151
  -1,207
EBITDA, $m
  -321
  -328
  -337
  -346
  -357
  -368
  -381
  -394
  -409
  -425
  -441
  -459
  -478
  -499
  -520
  -543
  -567
  -593
  -620
  -648
  -678
  -710
  -743
  -778
  -815
  -854
  -896
  -939
  -984
  -1,032
Interest expense (income), $m
  27
  40
  42
  44
  47
  50
  53
  57
  61
  65
  70
  75
  80
  86
  92
  98
  105
  113
  120
  128
  137
  146
  155
  165
  176
  187
  199
  211
  224
  238
  253
Earnings before tax, $m
  -434
  -444
  -456
  -470
  -485
  -502
  -521
  -540
  -562
  -585
  -591
  -617
  -645
  -675
  -707
  -740
  -776
  -813
  -853
  -895
  -939
  -986
  -1,035
  -1,086
  -1,141
  -1,198
  -1,259
  -1,322
  -1,389
  -1,460
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
  -434
  -444
  -456
  -470
  -485
  -502
  -521
  -540
  -562
  -585
  -591
  -617
  -645
  -675
  -707
  -740
  -776
  -813
  -853
  -895
  -939
  -986
  -1,035
  -1,086
  -1,141
  -1,198
  -1,259
  -1,322
  -1,389
  -1,460

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
  1,607
  1,644
  1,686
  1,733
  1,786
  1,844
  1,906
  1,974
  2,048
  2,126
  2,210
  2,300
  2,396
  2,497
  2,605
  2,719
  2,840
  2,968
  3,103
  3,245
  3,396
  3,554
  3,721
  3,898
  4,083
  4,278
  4,484
  4,700
  4,928
  5,168
Adjusted assets (=assets-cash), $m
  1,607
  1,644
  1,686
  1,733
  1,786
  1,844
  1,906
  1,974
  2,048
  2,126
  2,210
  2,300
  2,396
  2,497
  2,605
  2,719
  2,840
  2,968
  3,103
  3,245
  3,396
  3,554
  3,721
  3,898
  4,083
  4,278
  4,484
  4,700
  4,928
  5,168
Revenue / Adjusted assets
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
  1.613
Average production assets, $m
  277
  284
  291
  299
  308
  318
  329
  341
  353
  367
  381
  397
  413
  431
  450
  469
  490
  512
  535
  560
  586
  613
  642
  673
  705
  738
  774
  811
  851
  892
Working capital, $m
  384
  392
  402
  414
  426
  440
  455
  471
  489
  508
  528
  549
  572
  596
  622
  649
  678
  708
  741
  775
  811
  848
  888
  930
  975
  1,021
  1,070
  1,122
  1,176
  1,234
Total debt, $m
  416
  439
  465
  495
  528
  564
  604
  647
  692
  742
  795
  851
  911
  975
  1,042
  1,114
  1,190
  1,270
  1,355
  1,444
  1,539
  1,639
  1,744
  1,854
  1,971
  2,093
  2,223
  2,358
  2,501
  2,652
Total liabilities, $m
  1,009
  1,032
  1,059
  1,089
  1,122
  1,158
  1,197
  1,240
  1,286
  1,335
  1,388
  1,444
  1,504
  1,568
  1,636
  1,707
  1,783
  1,864
  1,948
  2,038
  2,132
  2,232
  2,337
  2,448
  2,564
  2,687
  2,816
  2,952
  3,095
  3,245
Total equity, $m
  598
  611
  627
  645
  664
  686
  709
  734
  762
  791
  822
  856
  891
  929
  969
  1,011
  1,056
  1,104
  1,154
  1,207
  1,263
  1,322
  1,384
  1,450
  1,519
  1,592
  1,668
  1,749
  1,833
  1,922
Total liabilities and equity, $m
  1,607
  1,643
  1,686
  1,734
  1,786
  1,844
  1,906
  1,974
  2,048
  2,126
  2,210
  2,300
  2,395
  2,497
  2,605
  2,718
  2,839
  2,968
  3,102
  3,245
  3,395
  3,554
  3,721
  3,898
  4,083
  4,279
  4,484
  4,701
  4,928
  5,167
Debt-to-equity ratio
  0.700
  0.720
  0.740
  0.770
  0.790
  0.820
  0.850
  0.880
  0.910
  0.940
  0.970
  0.990
  1.020
  1.050
  1.080
  1.100
  1.130
  1.150
  1.170
  1.200
  1.220
  1.240
  1.260
  1.280
  1.300
  1.320
  1.330
  1.350
  1.360
  1.380
Adjusted equity ratio
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372
  0.372

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -434
  -444
  -456
  -470
  -485
  -502
  -521
  -540
  -562
  -585
  -591
  -617
  -645
  -675
  -707
  -740
  -776
  -813
  -853
  -895
  -939
  -986
  -1,035
  -1,086
  -1,141
  -1,198
  -1,259
  -1,322
  -1,389
  -1,460
Depreciation, amort., depletion, $m
  73
  74
  75
  77
  79
  81
  83
  85
  88
  90
  75
  78
  81
  85
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
Funds from operations, $m
  -361
  -370
  -381
  -393
  -407
  -422
  -438
  -455
  -474
  -495
  -516
  -540
  -564
  -591
  -619
  -648
  -680
  -713
  -748
  -785
  -824
  -865
  -909
  -955
  -1,003
  -1,054
  -1,107
  -1,163
  -1,222
  -1,285
Change in working capital, $m
  8
  9
  10
  11
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
Cash from operations, $m
  -368
  -379
  -391
  -405
  -419
  -435
  -453
  -472
  -492
  -513
  -536
  -561
  -587
  -615
  -644
  -676
  -709
  -743
  -780
  -819
  -860
  -903
  -949
  -997
  -1,047
  -1,100
  -1,156
  -1,215
  -1,277
  -1,342
Maintenance CAPEX, $m
  -53
  -54
  -56
  -57
  -59
  -60
  -62
  -65
  -67
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -145
  -152
  -159
  -167
New CAPEX, $m
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
Cash from investing activities, $m
  -59
  -60
  -63
  -65
  -68
  -70
  -73
  -77
  -80
  -83
  -87
  -90
  -94
  -99
  -104
  -108
  -113
  -118
  -123
  -130
  -136
  -142
  -149
  -156
  -164
  -172
  -180
  -189
  -198
  -208
Free cash flow, $m
  -427
  -440
  -454
  -470
  -487
  -506
  -526
  -548
  -571
  -596
  -623
  -651
  -682
  -714
  -747
  -783
  -821
  -862
  -904
  -949
  -996
  -1,045
  -1,098
  -1,153
  -1,211
  -1,272
  -1,336
  -1,404
  -1,475
  -1,550
Issuance/(repayment) of debt, $m
  19
  23
  27
  30
  33
  36
  39
  43
  46
  49
  53
  56
  60
  64
  68
  72
  76
  80
  85
  90
  94
  100
  105
  111
  117
  123
  129
  136
  143
  150
Issuance/(repurchase) of shares, $m
  446
  458
  472
  488
  505
  524
  544
  566
  589
  614
  622
  651
  681
  713
  747
  783
  821
  861
  903
  948
  995
  1,045
  1,097
  1,152
  1,210
  1,271
  1,335
  1,403
  1,474
  1,549
Cash from financing (excl. dividends), $m  
  465
  481
  499
  518
  538
  560
  583
  609
  635
  663
  675
  707
  741
  777
  815
  855
  897
  941
  988
  1,038
  1,089
  1,145
  1,202
  1,263
  1,327
  1,394
  1,464
  1,539
  1,617
  1,699
Total cash flow (excl. dividends), $m
  38
  41
  45
  48
  51
  54
  57
  61
  64
  67
  52
  56
  59
  63
  67
  71
  75
  80
  84
  89
  94
  99
  104
  110
  116
  122
  128
  135
  142
  149
Retained Cash Flow (-), $m
  -446
  -458
  -472
  -488
  -505
  -524
  -544
  -566
  -589
  -614
  -622
  -651
  -681
  -713
  -747
  -783
  -821
  -861
  -903
  -948
  -995
  -1,045
  -1,097
  -1,152
  -1,210
  -1,271
  -1,335
  -1,403
  -1,474
  -1,549
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
  -408
  -417
  -428
  -440
  -454
  -470
  -487
  -505
  -525
  -547
  -570
  -595
  -622
  -650
  -680
  -712
  -745
  -781
  -819
  -859
  -901
  -946
  -993
  -1,042
  -1,094
  -1,149
  -1,207
  -1,268
  -1,332
  -1,400
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
  -391
  -381
  -372
  -362
  -352
  -341
  -329
  -316
  -302
  -287
  -271
  -254
  -236
  -218
  -200
  -181
  -162
  -144
  -126
  -109
  -93
  -78
  -65
  -53
  -43
  -34
  -26
  -20
  -15
  -11
Current shareholders' claim on cash, %
  59.3
  35.0
  20.6
  12.1
  7.1
  4.1
  2.4
  1.4
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  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
  0.0

Fossil Group, Inc. is a design, marketing and distribution company that specializes in consumer fashion accessories. The Company's segments include Americas, Europe and Asia. Each segment includes sales to wholesale and distributor customers, and sales through the Company-owned retail stores and e-commerce activities based on the location of the selling entity. The Americas segment includes sales to customers based in Canada, Latin America and the United States. The Europe segment includes sales to customers based in European countries, the Middle East and Africa. The Asia segment includes sales to customers based in Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand. The Company's principal offerings include a line of men's and women's fashion watches and jewelry, handbags, small leather goods, belts, sunglasses and soft accessories.

FINANCIAL RATIOS  of  Fossil Group, Inc. (FOSL)

Valuation Ratios
P/E Ratio 8
Price to Sales 0.2
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 3
Price to Free Cash Flow 4.4
Growth Rates
Sales Growth Rate -5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.5%
Cap. Spend. - 3 Yr. Gr. Rate -7%
Financial Strength
Quick Ratio 12
Current Ratio 0.1
LT Debt to Equity 60.6%
Total Debt to Equity 63.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 13.9%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 22.8%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 51.9%
Gross Margin - 3 Yr. Avg. 54.4%
EBITDA Margin 7.8%
EBITDA Margin - 3 Yr. Avg. 13.3%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 9.8%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 9.8%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 6.7%
Effective Tax Rate 24.6%
Eff/ Tax Rate - 3 Yr. Avg. 27.2%
Payout Ratio 0%

FOSL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FOSL stock intrinsic value calculation we used $2541 million for the last fiscal year's total revenue generated by Fossil Group, Inc.. The default revenue input number comes from 0001 income statement of Fossil 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 FOSL 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 FOSL is calculated based on our internal credit rating of Fossil 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 Fossil 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 FOSL stock the variable cost ratio is equal to 115.2%.

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 FOSL 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 10.1% for Fossil Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Fossil 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 FOSL 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 FOSL are equal to 10.7%.

Life of production assets of 5.1 years is the average useful life of capital assets used in Fossil 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 FOSL is equal to 14.8%. 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 - $585.543 million for Fossil 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 49.608 million for Fossil 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 Fossil Group, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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