Intrinsic value of Fred's, Inc. - FRED

Previous Close

$0.39

  Intrinsic Value

$0.44

stock screener

  Rating & Target

hold

+12%

Previous close

$0.39

 
Intrinsic value

$0.44

 
Up/down potential

+12%

 
Rating

hold

We calculate the intrinsic value of FRED 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 0.0

 

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
  1,841
  1,883
  1,932
  1,986
  2,046
  2,112
  2,184
  2,262
  2,346
  2,436
  2,533
  2,635
  2,745
  2,861
  2,985
  3,115
  3,254
  3,400
  3,555
  3,718
  3,891
  4,072
  4,264
  4,466
  4,678
  4,902
  5,138
  5,386
  5,647
  5,921
Variable operating expenses, $m
  607
  621
  637
  654
  674
  695
  718
  744
  771
  800
  820
  853
  888
  926
  966
  1,008
  1,053
  1,100
  1,150
  1,203
  1,259
  1,318
  1,380
  1,445
  1,514
  1,586
  1,663
  1,743
  1,827
  1,916
Fixed operating expenses, $m
  1,403
  1,434
  1,466
  1,498
  1,531
  1,565
  1,599
  1,634
  1,670
  1,707
  1,744
  1,783
  1,822
  1,862
  1,903
  1,945
  1,988
  2,031
  2,076
  2,122
  2,168
  2,216
  2,265
  2,315
  2,366
  2,418
  2,471
  2,525
  2,581
  2,638
Total operating expenses, $m
  2,010
  2,055
  2,103
  2,152
  2,205
  2,260
  2,317
  2,378
  2,441
  2,507
  2,564
  2,636
  2,710
  2,788
  2,869
  2,953
  3,041
  3,131
  3,226
  3,325
  3,427
  3,534
  3,645
  3,760
  3,880
  4,004
  4,134
  4,268
  4,408
  4,554
Operating income, $m
  -169
  -172
  -170
  -166
  -158
  -147
  -133
  -115
  -95
  -70
  -31
  0
  35
  73
  116
  162
  213
  268
  328
  393
  463
  538
  619
  706
  799
  898
  1,004
  1,118
  1,238
  1,367
EBITDA, $m
  -127
  -129
  -127
  -121
  -113
  -101
  -85
  -66
  -44
  -19
  11
  44
  80
  121
  165
  214
  267
  325
  387
  455
  528
  606
  690
  780
  876
  979
  1,090
  1,207
  1,332
  1,465
Interest expense (income), $m
  2
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  48
  51
  54
  57
Earnings before tax, $m
  -178
  -181
  -180
  -177
  -169
  -159
  -146
  -129
  -109
  -86
  -48
  -18
  15
  52
  93
  139
  188
  241
  299
  362
  430
  503
  582
  666
  757
  853
  957
  1,067
  1,185
  1,310
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  4
  14
  25
  37
  51
  65
  81
  98
  116
  136
  157
  180
  204
  230
  258
  288
  320
  354
Net income, $m
  -178
  -181
  -180
  -177
  -169
  -159
  -146
  -129
  -109
  -86
  -48
  -18
  11
  38
  68
  101
  137
  176
  219
  265
  314
  367
  425
  486
  552
  623
  698
  779
  865
  957

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
  609
  623
  639
  657
  677
  699
  723
  749
  777
  806
  838
  872
  909
  947
  988
  1,031
  1,077
  1,126
  1,177
  1,231
  1,288
  1,348
  1,411
  1,478
  1,549
  1,623
  1,701
  1,783
  1,869
  1,960
Adjusted assets (=assets-cash), $m
  609
  623
  639
  657
  677
  699
  723
  749
  777
  806
  838
  872
  909
  947
  988
  1,031
  1,077
  1,126
  1,177
  1,231
  1,288
  1,348
  1,411
  1,478
  1,549
  1,623
  1,701
  1,783
  1,869
  1,960
Revenue / Adjusted assets
  3.023
  3.022
  3.023
  3.023
  3.022
  3.021
  3.021
  3.020
  3.019
  3.022
  3.023
  3.022
  3.020
  3.021
  3.021
  3.021
  3.021
  3.020
  3.020
  3.020
  3.021
  3.021
  3.022
  3.022
  3.020
  3.020
  3.021
  3.021
  3.021
  3.021
Average production assets, $m
  153
  156
  160
  165
  170
  175
  181
  188
  195
  202
  210
  219
  228
  237
  248
  259
  270
  282
  295
  309
  323
  338
  354
  371
  388
  407
  426
  447
  469
  491
Working capital, $m
  158
  162
  166
  171
  176
  182
  188
  195
  202
  210
  218
  227
  236
  246
  257
  268
  280
  292
  306
  320
  335
  350
  367
  384
  402
  422
  442
  463
  486
  509
Total debt, $m
  175
  185
  196
  209
  223
  238
  255
  273
  292
  313
  335
  359
  384
  411
  439
  469
  501
  535
  571
  609
  648
  690
  734
  781
  830
  882
  936
  993
  1,053
  1,117
Total liabilities, $m
  425
  435
  446
  458
  472
  487
  504
  522
  541
  562
  584
  608
  633
  660
  689
  719
  751
  784
  820
  858
  898
  940
  984
  1,030
  1,079
  1,131
  1,185
  1,243
  1,303
  1,366
Total equity, $m
  185
  189
  194
  199
  205
  212
  219
  227
  235
  244
  254
  264
  275
  287
  299
  312
  326
  341
  357
  373
  390
  408
  428
  448
  469
  492
  515
  540
  566
  594
Total liabilities and equity, $m
  610
  624
  640
  657
  677
  699
  723
  749
  776
  806
  838
  872
  908
  947
  988
  1,031
  1,077
  1,125
  1,177
  1,231
  1,288
  1,348
  1,412
  1,478
  1,548
  1,623
  1,700
  1,783
  1,869
  1,960
Debt-to-equity ratio
  0.950
  0.980
  1.010
  1.050
  1.090
  1.120
  1.160
  1.200
  1.240
  1.280
  1.320
  1.360
  1.390
  1.430
  1.470
  1.500
  1.540
  1.570
  1.600
  1.630
  1.660
  1.690
  1.720
  1.740
  1.770
  1.790
  1.820
  1.840
  1.860
  1.880
Adjusted equity ratio
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -178
  -181
  -180
  -177
  -169
  -159
  -146
  -129
  -109
  -86
  -48
  -18
  11
  38
  68
  101
  137
  176
  219
  265
  314
  367
  425
  486
  552
  623
  698
  779
  865
  957
Depreciation, amort., depletion, $m
  42
  43
  44
  44
  45
  47
  48
  49
  50
  52
  42
  44
  46
  47
  50
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  94
  98
Funds from operations, $m
  -136
  -138
  -137
  -132
  -124
  -113
  -98
  -80
  -59
  -34
  -6
  25
  57
  86
  118
  153
  191
  233
  278
  326
  379
  435
  496
  560
  630
  704
  784
  868
  959
  1,055
Change in working capital, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
Cash from operations, $m
  -140
  -142
  -141
  -137
  -129
  -118
  -104
  -87
  -66
  -42
  -15
  17
  47
  76
  107
  142
  179
  220
  264
  312
  364
  419
  479
  543
  612
  685
  763
  847
  936
  1,031
Maintenance CAPEX, $m
  -30
  -31
  -31
  -32
  -33
  -34
  -35
  -36
  -38
  -39
  -40
  -42
  -44
  -46
  -47
  -50
  -52
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -94
New CAPEX, $m
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  -33
  -35
  -35
  -37
  -38
  -39
  -41
  -42
  -45
  -46
  -48
  -51
  -53
  -56
  -57
  -61
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
Free cash flow, $m
  -173
  -176
  -176
  -173
  -167
  -158
  -145
  -130
  -111
  -88
  -63
  -34
  -6
  21
  49
  81
  116
  154
  195
  240
  288
  340
  396
  456
  520
  589
  662
  741
  825
  915
Issuance/(repayment) of debt, $m
  8
  10
  11
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
Issuance/(repurchase) of shares, $m
  182
  185
  185
  182
  176
  166
  153
  137
  118
  95
  58
  29
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  190
  195
  196
  195
  190
  181
  170
  155
  137
  116
  80
  53
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
Total cash flow (excl. dividends), $m
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  17
  18
  20
  47
  78
  111
  148
  188
  231
  277
  328
  382
  440
  502
  569
  640
  717
  798
  885
  978
Retained Cash Flow (-), $m
  -182
  -185
  -185
  -182
  -176
  -166
  -153
  -137
  -118
  -95
  -58
  -29
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
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
  -164
  -166
  -165
  -161
  -153
  -143
  -129
  -112
  -91
  -68
  -41
  -10
  9
  36
  66
  98
  134
  173
  215
  261
  310
  363
  421
  482
  548
  618
  693
  773
  859
  951
Discount rate, %
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
  -151
  -139
  -124
  -108
  -91
  -74
  -57
  -43
  -29
  -18
  -9
  -2
  1
  4
  5
  6
  6
  6
  5
  4
  3
  3
  2
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  41.0
  16.9
  7.0
  3.0
  1.3
  0.6
  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
  0.0
  0.0
  0.0
  0.0

Fred's, Inc. (Fred's) is engaged in the sale of general merchandise through its retail discount stores and full service pharmacies. The Company sells general merchandise to its over 20 franchisees. The Company has approximately 660 retail stores, over 370 pharmacies, and approximately three specialty pharmacy facilities located in over 15 states mainly in the Southeastern United States. The Company is licensed to dispense pharmaceuticals in approximately 50 states. The Company operates approximately 640 company-owned stores, including over 60 express stores (or Xpress stores). Fred's is a combination of pharmacy, dollar store and mass merchant strategically located in smaller markets. It offers various product categories, including consumables, such as tobacco, food and beverage, prescription pharmaceuticals, paper and cleaning supplies, pet supplies, health and beauty aids, and discretionary products, such as home decor, seasonal merchandise, auto and hardware, and lawn and garden.

FINANCIAL RATIOS  of  Fred's, Inc. (FRED)

Valuation Ratios
P/E Ratio -0.2
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow -0.5
Price to Free Cash Flow -0.2
Growth Rates
Sales Growth Rate -1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.5%
Cap. Spend. - 3 Yr. Gr. Rate -6.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 38.3%
Total Debt to Equity 38.3%
Interest Coverage -38
Management Effectiveness
Return On Assets -9.1%
Ret/ On Assets - 3 Yr. Avg. -4.8%
Return On Total Capital -14.5%
Ret/ On T. Cap. - 3 Yr. Avg. -7.6%
Return On Equity -18.1%
Return On Equity - 3 Yr. Avg. -8.8%
Asset Turnover 3
Profitability Ratios
Gross Margin 24%
Gross Margin - 3 Yr. Avg. 25%
EBITDA Margin -1.3%
EBITDA Margin - 3 Yr. Avg. -0%
Operating Margin -3.5%
Oper. Margin - 3 Yr. Avg. -2.1%
Pre-Tax Margin -3.6%
Pre-Tax Margin - 3 Yr. Avg. -2.2%
Net Profit Margin -3.2%
Net Profit Margin - 3 Yr. Avg. -1.7%
Effective Tax Rate 13%
Eff/ Tax Rate - 3 Yr. Avg. 31.8%
Payout Ratio -13.4%

FRED stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FRED stock intrinsic value calculation we used $1805 million for the last fiscal year's total revenue generated by Fred's, Inc.. The default revenue input number comes from 0001 income statement of Fred's, 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 FRED 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 9.1%, whose default value for FRED is calculated based on our internal credit rating of Fred's, 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 Fred's, 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 FRED stock the variable cost ratio is equal to 33%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1373 million in the base year in the intrinsic value calculation for FRED 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 Fred's, Inc..

Corporate tax rate of 27% is the nominal tax rate for Fred's, 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 FRED 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 FRED are equal to 8.3%.

Life of production assets of 4.1 years is the average useful life of capital assets used in Fred's, 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 FRED is equal to 8.6%. 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 - $181.048 million for Fred's, 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 37.687 million for Fred's, 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 Fred's, Inc. at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
DG Dollar General 135.69 123.93  hold
BIG Big Lots, Inc. 29.02 229.21  str.buy
FIVE Five Below, In 131.82 75.01  sell
DLTR Dollar Tree, I 110.31 111.56  hold
TUES Tuesday Mornin 1.52 0.96  str.sell
COST Costco Wholesa 260.15 136.48  sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.