Intrinsic value of Fiesta Restaurant Group - FRGI

Previous Close

$18.42

  Intrinsic Value

$7.98

stock screener

  Rating & Target

str. sell

-57%

Previous close

$18.42

 
Intrinsic value

$7.98

 
Up/down potential

-57%

 
Rating

str. sell

We calculate the intrinsic value of FRGI 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 0.5

 

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, %
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  685
  703
  724
  746
  771
  798
  826
  857
  891
  926
  964
  1,005
  1,047
  1,093
  1,141
  1,192
  1,246
  1,303
  1,363
  1,426
  1,493
  1,563
  1,637
  1,715
  1,798
  1,884
  1,975
  2,071
  2,172
  2,278
Variable operating expenses, $m
  658
  675
  695
  716
  739
  764
  791
  821
  852
  885
  909
  947
  987
  1,030
  1,075
  1,123
  1,174
  1,228
  1,284
  1,344
  1,407
  1,473
  1,543
  1,617
  1,694
  1,776
  1,862
  1,952
  2,047
  2,147
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
  658
  675
  695
  716
  739
  764
  791
  821
  852
  885
  909
  947
  987
  1,030
  1,075
  1,123
  1,174
  1,228
  1,284
  1,344
  1,407
  1,473
  1,543
  1,617
  1,694
  1,776
  1,862
  1,952
  2,047
  2,147
Operating income, $m
  27
  28
  29
  31
  32
  33
  35
  37
  39
  41
  55
  58
  60
  63
  66
  68
  72
  75
  78
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
  131
EBITDA, $m
  69
  71
  73
  75
  78
  81
  83
  87
  90
  94
  97
  101
  106
  110
  115
  120
  126
  132
  138
  144
  151
  158
  165
  173
  182
  190
  199
  209
  219
  230
Interest expense (income), $m
  2
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
Earnings before tax, $m
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  103
Tax expense, $m
  6
  6
  7
  7
  7
  7
  8
  8
  9
  9
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  21
  22
  23
  24
  26
  27
  28
Net income, $m
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  76

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
  434
  445
  458
  472
  488
  505
  523
  543
  564
  586
  610
  636
  663
  692
  722
  754
  788
  824
  862
  903
  945
  989
  1,036
  1,086
  1,138
  1,193
  1,250
  1,311
  1,375
  1,442
Adjusted assets (=assets-cash), $m
  434
  445
  458
  472
  488
  505
  523
  543
  564
  586
  610
  636
  663
  692
  722
  754
  788
  824
  862
  903
  945
  989
  1,036
  1,086
  1,138
  1,193
  1,250
  1,311
  1,375
  1,442
Revenue / Adjusted assets
  1.578
  1.580
  1.581
  1.581
  1.580
  1.580
  1.579
  1.578
  1.580
  1.580
  1.580
  1.580
  1.579
  1.579
  1.580
  1.581
  1.581
  1.581
  1.581
  1.579
  1.580
  1.580
  1.580
  1.579
  1.580
  1.579
  1.580
  1.580
  1.580
  1.580
Average production assets, $m
  322
  331
  340
  351
  362
  375
  388
  403
  419
  435
  453
  472
  492
  514
  536
  560
  586
  612
  640
  670
  702
  735
  770
  806
  845
  886
  928
  973
  1,021
  1,071
Working capital, $m
  -23
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
Total debt, $m
  81
  86
  92
  99
  106
  113
  122
  131
  140
  150
  161
  173
  185
  198
  212
  226
  242
  258
  275
  294
  313
  333
  354
  377
  400
  425
  451
  479
  507
  538
Total liabilities, $m
  196
  202
  208
  214
  221
  229
  237
  246
  255
  266
  276
  288
  300
  313
  327
  342
  357
  373
  391
  409
  428
  448
  469
  492
  515
  540
  566
  594
  623
  653
Total equity, $m
  237
  244
  251
  258
  267
  276
  286
  297
  308
  321
  334
  348
  363
  378
  395
  413
  431
  451
  472
  494
  517
  541
  567
  594
  622
  652
  684
  717
  752
  789
Total liabilities and equity, $m
  433
  446
  459
  472
  488
  505
  523
  543
  563
  587
  610
  636
  663
  691
  722
  755
  788
  824
  863
  903
  945
  989
  1,036
  1,086
  1,137
  1,192
  1,250
  1,311
  1,375
  1,442
Debt-to-equity ratio
  0.340
  0.350
  0.370
  0.380
  0.400
  0.410
  0.430
  0.440
  0.450
  0.470
  0.480
  0.500
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.610
  0.620
  0.620
  0.630
  0.640
  0.650
  0.660
  0.670
  0.670
  0.680
Adjusted equity ratio
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  76
Depreciation, amort., depletion, $m
  42
  43
  44
  45
  46
  47
  48
  50
  51
  53
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  99
Funds from operations, $m
  59
  60
  62
  63
  65
  67
  69
  72
  74
  77
  76
  79
  83
  86
  90
  94
  98
  102
  106
  111
  116
  121
  127
  133
  139
  145
  152
  159
  167
  175
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  59
  61
  62
  64
  66
  68
  70
  73
  75
  78
  78
  81
  84
  88
  91
  95
  99
  104
  108
  113
  118
  124
  129
  135
  142
  148
  155
  162
  170
  178
Maintenance CAPEX, $m
  -29
  -30
  -31
  -31
  -32
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -95
New CAPEX, $m
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
Cash from investing activities, $m
  -37
  -39
  -41
  -42
  -44
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -114
  -119
  -125
  -131
  -137
  -145
Free cash flow, $m
  23
  22
  22
  22
  22
  22
  22
  22
  22
  23
  20
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  26
  26
  27
  28
  29
  30
  31
  33
  34
Issuance/(repayment) of debt, $m
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
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  
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
Total cash flow (excl. dividends), $m
  27
  28
  28
  29
  29
  30
  30
  31
  32
  33
  30
  31
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
Retained Cash Flow (-), $m
  -6
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
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
  22
  21
  21
  21
  21
  21
  20
  20
  20
  21
  17
  18
  18
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  27
  28
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
  21
  20
  18
  17
  16
  15
  14
  13
  12
  11
  8
  7
  7
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  1
  0
  0
  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
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Fiesta Restaurant Group, Inc. owns, operates and franchises two fast-casual restaurant brands, Pollo Tropical and Taco Cabana through its subsidiaries Pollo Operations, Inc., and its subsidiaries, and Pollo Franchise, Inc., (collectively Pollo Tropical) and Taco Cabana, Inc. and its subsidiaries (collectively Taco Cabana). The Company operates through the Pollo Tropical and Taco Cabana segments. The Company's Pollo Tropical restaurants offer Caribbean menu items, featuring its bone-in chicken marinated in blend of tropical fruit juices and grilled over an open flame. The Company also offers catering for parties and corporate events. The Company's Taco Cabana restaurants serves Mexican food, including flame-grilled steak and chicken fajitas served on sizzling iron skillets, quesadillas, hand-rolled flautas, enchiladas, burritos, tacos, fresh-made flour tortillas, customizable salads served in its Cabana Bowl, and its breakfast tacos.

FINANCIAL RATIOS  of  Fiesta Restaurant Group (FRGI)

Valuation Ratios
P/E Ratio 29
Price to Sales 0.7
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow -123.2
Growth Rates
Sales Growth Rate 3.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.4%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 27.7%
Total Debt to Equity 27.7%
Interest Coverage 14
Management Effectiveness
Return On Assets 4.3%
Ret/ On Assets - 3 Yr. Avg. 8.6%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 11%
Return On Equity 6.7%
Return On Equity - 3 Yr. Avg. 14.8%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 69.8%
Gross Margin - 3 Yr. Avg. 68.9%
EBITDA Margin 9%
EBITDA Margin - 3 Yr. Avg. 12%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 7.5%
Pre-Tax Margin 3.5%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 32%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio 0%

FRGI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FRGI stock intrinsic value calculation we used $669.132 million for the last fiscal year's total revenue generated by Fiesta Restaurant Group. The default revenue input number comes from 0001 income statement of Fiesta Restaurant 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 FRGI stock valuation model: a) initial revenue growth rate of 2.4% 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 FRGI is calculated based on our internal credit rating of Fiesta Restaurant 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 Fiesta Restaurant 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 FRGI stock the variable cost ratio is equal to 96.1%.

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 FRGI 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 Fiesta Restaurant Group.

Corporate tax rate of 27% is the nominal tax rate for Fiesta Restaurant 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 FRGI 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 FRGI are equal to 47%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Fiesta Restaurant 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 FRGI is equal to -3.3%. 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 - $231.516 million for Fiesta Restaurant 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 27.266 million for Fiesta Restaurant 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 Fiesta Restaurant Group at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Fiesta Restaurant Group: 3Q Earnings Snapshot   [05:20PM  Associated Press]
▶ Fiesta Restaurant Group: 2Q Earnings Snapshot   [05:26PM  Associated Press]
▶ The 5 Best Restaurant Stocks of 2018 (So Far)   [Jul-05-18 07:00PM  Motley Fool]
▶ Why Fiesta Restaurant Group Inc. Stock Surged Today   [May-08-18 12:54PM  Motley Fool]
▶ Fiesta Restaurant Group: 1Q Earnings Snapshot   [May-07-18 05:14PM  Associated Press]
▶ Fiesta Restaurant Group posts 4Q loss   [Feb-26-18 05:20PM  Associated Press]
▶ McDonald's to open about 1,000 new stores   [Jan-31-18 01:40PM  Yahoo Finance Video]
▶ The 3 Worst-Performing Restaurant Stocks of 2017   [Dec-21-17 08:19PM  Motley Fool]
▶ Fiesta Restaurant Group posts 3Q loss   [Nov-06-17 05:19PM  Associated Press]
▶ Hurricane Irma Is Causing Destruction to Restaurant Stocks   [Sep-06-17 04:17PM  TheStreet.com]
▶ Fiesta Restaurant Group posts 2Q loss   [Aug-07-17 11:57PM  Associated Press]

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