Intrinsic value of Francesca's Holdings - FRAN

Previous Close

$7.75

  Intrinsic Value

$17.00

stock screener

  Rating & Target

str. buy

+119%

Previous close

$7.75

 
Intrinsic value

$17.00

 
Up/down potential

+119%

 
Rating

str. buy

We calculate the intrinsic value of FRAN 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 2018), $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 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047
   2048

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
  481
  493
  505
  519
  535
  552
  571
  592
  614
  637
  662
  689
  718
  748
  780
  815
  851
  889
  930
  972
  1,017
  1,065
  1,115
  1,168
  1,223
  1,282
  1,344
  1,408
  1,477
  1,548
Variable operating expenses, $m
  415
  424
  435
  447
  461
  476
  492
  509
  528
  549
  570
  593
  618
  644
  672
  701
  733
  766
  800
  837
  876
  917
  960
  1,005
  1,053
  1,104
  1,157
  1,213
  1,271
  1,333
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
  415
  424
  435
  447
  461
  476
  492
  509
  528
  549
  570
  593
  618
  644
  672
  701
  733
  766
  800
  837
  876
  917
  960
  1,005
  1,053
  1,104
  1,157
  1,213
  1,271
  1,333
Operating income, $m
  67
  68
  70
  72
  74
  77
  79
  82
  85
  89
  92
  96
  100
  104
  108
  113
  118
  124
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
  205
  215
EBITDA, $m
  75
  77
  79
  81
  84
  87
  90
  93
  96
  100
  104
  108
  113
  117
  122
  128
  133
  139
  146
  152
  160
  167
  175
  183
  192
  201
  211
  221
  232
  243
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
Earnings before tax, $m
  67
  68
  70
  72
  74
  76
  79
  81
  84
  87
  91
  94
  98
  102
  106
  111
  116
  121
  126
  131
  137
  144
  150
  157
  164
  172
  180
  189
  198
  207
Tax expense, $m
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  33
  34
  35
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
Net income, $m
  49
  50
  51
  53
  54
  56
  58
  59
  62
  64
  66
  69
  72
  74
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
  151

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
  189
  193
  198
  204
  210
  217
  224
  232
  241
  250
  260
  271
  282
  294
  307
  320
  334
  349
  365
  382
  400
  418
  438
  459
  481
  503
  528
  553
  580
  608
Adjusted assets (=assets-cash), $m
  189
  193
  198
  204
  210
  217
  224
  232
  241
  250
  260
  271
  282
  294
  307
  320
  334
  349
  365
  382
  400
  418
  438
  459
  481
  503
  528
  553
  580
  608
Revenue / Adjusted assets
  2.545
  2.554
  2.551
  2.544
  2.548
  2.544
  2.549
  2.552
  2.548
  2.548
  2.546
  2.542
  2.546
  2.544
  2.541
  2.547
  2.548
  2.547
  2.548
  2.545
  2.543
  2.548
  2.546
  2.545
  2.543
  2.549
  2.545
  2.546
  2.547
  2.546
Average production assets, $m
  86
  88
  90
  92
  95
  98
  102
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  181
  190
  198
  208
  218
  228
  239
  251
  263
  276
Working capital, $m
  9
  9
  10
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
Total debt, $m
  1
  3
  5
  7
  9
  12
  14
  18
  21
  24
  28
  32
  36
  41
  46
  51
  56
  62
  68
  75
  81
  89
  96
  104
  112
  121
  130
  140
  150
  161
Total liabilities, $m
  72
  74
  76
  78
  80
  83
  86
  89
  92
  96
  99
  103
  108
  112
  117
  122
  128
  133
  139
  146
  153
  160
  167
  175
  184
  192
  202
  211
  222
  232
Total equity, $m
  117
  120
  123
  126
  130
  134
  139
  144
  149
  155
  161
  167
  174
  182
  189
  198
  207
  216
  226
  236
  247
  258
  271
  283
  297
  311
  326
  342
  358
  376
Total liabilities and equity, $m
  189
  194
  199
  204
  210
  217
  225
  233
  241
  251
  260
  270
  282
  294
  306
  320
  335
  349
  365
  382
  400
  418
  438
  458
  481
  503
  528
  553
  580
  608
Debt-to-equity ratio
  0.010
  0.020
  0.040
  0.050
  0.070
  0.090
  0.100
  0.120
  0.140
  0.160
  0.170
  0.190
  0.210
  0.230
  0.240
  0.260
  0.270
  0.290
  0.300
  0.320
  0.330
  0.340
  0.350
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
Adjusted equity ratio
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618
  0.618

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  49
  50
  51
  53
  54
  56
  58
  59
  62
  64
  66
  69
  72
  74
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
  151
Depreciation, amort., depletion, $m
  9
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
Funds from operations, $m
  57
  59
  60
  62
  64
  66
  68
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142
  148
  155
  163
  171
  179
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  57
  58
  60
  61
  63
  65
  67
  70
  72
  75
  78
  81
  84
  87
  91
  95
  99
  103
  108
  112
  118
  123
  129
  134
  141
  147
  154
  162
  169
  177
Maintenance CAPEX, $m
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
New CAPEX, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
Cash from investing activities, $m
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -15
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
Free cash flow, $m
  47
  48
  49
  50
  51
  53
  54
  56
  58
  60
  62
  64
  66
  69
  72
  75
  78
  81
  85
  88
  92
  96
  101
  105
  110
  115
  121
  126
  132
  138
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
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
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
Total cash flow (excl. dividends), $m
  48
  50
  51
  52
  54
  55
  57
  59
  61
  63
  66
  68
  71
  74
  77
  80
  83
  87
  91
  95
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
Retained Cash Flow (-), $m
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
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
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
Cash available for distribution, $m
  45
  47
  48
  49
  50
  51
  52
  54
  56
  57
  59
  62
  64
  66
  69
  72
  74
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
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
  43
  43
  42
  40
  39
  37
  35
  34
  32
  30
  28
  26
  24
  22
  20
  18
  16
  14
  12
  11
  9
  8
  6
  5
  4
  3
  2
  2
  1
  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

Francesca's Holdings Corporation is a holding company. The Company is a specialty retailer, which operates a chain of boutiques across the United States. The Company offers a mix of apparel, jewelry, accessories and gifts. As of January 28, 2017, the Company operated 671 boutiques in 48 states and the District of Columbia, and also served its customers through www.francescas.com, its e-commerce Website. The Company offers apparel, such as dresses, fashion tops, sweaters, cardigans and wraps, bottoms, outerwear and jackets, tees and tanks, and intimates. The Company provides jewelry, such as necklaces, earrings, bracelets and rings. The Company offers accessories, such as handbags, clutches, wallets, shoes, belts, hats, scarves, sunglasses, watches and hair accessories. The Company provides gifts, such as fragrance, candles, bath and body, home accessories, books, wall art, nail polish and miscellaneous items. The Company operates its boutiques under the francesca's brand.

FINANCIAL RATIOS  of  Francesca's Holdings (FRAN)

Valuation Ratios
P/E Ratio 6.9
Price to Sales 0.6
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 4
Price to Free Cash Flow 5.8
Growth Rates
Sales Growth Rate 10.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.3%
Cap. Spend. - 3 Yr. Gr. Rate -2.5%
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 21.9%
Ret/ On Assets - 3 Yr. Avg. 21.1%
Return On Total Capital 34.6%
Ret/ On T. Cap. - 3 Yr. Avg. 32.4%
Return On Equity 34.6%
Return On Equity - 3 Yr. Avg. 33.7%
Asset Turnover 2.5
Profitability Ratios
Gross Margin 47%
Gross Margin - 3 Yr. Avg. 47.3%
EBITDA Margin 17.9%
EBITDA Margin - 3 Yr. Avg. 17.7%
Operating Margin 14%
Oper. Margin - 3 Yr. Avg. 14%
Pre-Tax Margin 14%
Pre-Tax Margin - 3 Yr. Avg. 13.9%
Net Profit Margin 8.6%
Net Profit Margin - 3 Yr. Avg. 8.6%
Effective Tax Rate 38.2%
Eff/ Tax Rate - 3 Yr. Avg. 38.5%
Payout Ratio 0%

FRAN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FRAN stock intrinsic value calculation we used $472 million for the last fiscal year's total revenue generated by Francesca's Holdings. The default revenue input number comes from 2018 income statement of Francesca's Holdings. 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 FRAN 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 FRAN is calculated based on our internal credit rating of Francesca's Holdings, 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 Francesca's Holdings.
    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 FRAN stock the variable cost ratio is equal to 86.1%.

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 FRAN 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 Francesca's Holdings.

Corporate tax rate of 27% is the nominal tax rate for Francesca's Holdings. 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 FRAN stock is equal to 0.5%.

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 FRAN are equal to 17.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Francesca's Holdings 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 FRAN is equal to 1.9%. 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 - $114 million for Francesca's Holdings - 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 36 million for Francesca's Holdings 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 Francesca's Holdings at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ These 4 Penny Stocks May Very Well Be Worth the Risk   [Jul-19-18 02:49PM  InvestorPlace]
▶ Why Francesca's Holdings Stock Popped 27.7% in June   [Jul-06-18 10:00AM  Motley Fool]
▶ Should You Buy Francescas Holdings Corporation (NASDAQ:FRAN)?   [Jun-25-18 10:38AM  Simply Wall St.]
▶ Francesca's Holdings: Fiscal 1Q Earnings Snapshot   [Jun-05-18 07:44AM  Associated Press]
▶ Francesca's Holdings meets 4Q profit forecasts   [07:51AM  Associated Press]
▶ Value Stocks Investors Love   [Feb-06-18 09:02AM  Simply Wall St.]
▶ Top OTCPK Companies To Buy For Cheap   [Jan-07-18 08:02AM  Simply Wall St.]
▶ Why Francesca's Holdings Corp Stock Plummeted Friday   [Jan-05-18 02:14PM  Motley Fool]
▶ Francescas announces another exec departure, another quarter of poor sales   [Dec-20-17 04:05PM  American City Business Journals]
▶ Why Francesca's Holdings Corp Stock Fell Tuesday   [Dec-05-17 02:11PM  Motley Fool]
▶ Fed Chair Decision Boosts Markets   [11:41AM  GuruFocus.com]
▶ Francesca's Holdings misses Street 3Q forecasts   [07:39AM  Associated Press]
▶ Francescas names new C-level exec from J.C. Penney amid strategy changes   [Nov-14-17 01:00PM  American City Business Journals]
▶ Francesca's, Conn's expect a drop in sales after Harvey's devastation   [Sep-07-17 02:15PM  American City Business Journals]
▶ Francesca's Holdings beats Street 2Q forecasts   [Sep-06-17 10:25PM  Associated Press]
▶ C-suite exec leaves Francesca's after less than 2 years   [02:10PM  American City Business Journals]
▶ New Strong Sell Stocks for June 27th   [Jun-27-17 10:09AM  Zacks]
▶ Why Francesca's Holdings Corp. Stock Plunged Today   [Jun-06-17 01:48PM  Motley Fool]
▶ Why Macy's is Getting Walloped   [11:40AM  Barrons.com]
▶ Francesca's Holdings misses Street 1Q forecasts   [07:36AM  Associated Press]
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