Intrinsic value of Guess?, Inc. - GES

Previous Close

$14.88

  Intrinsic Value

$38.59

stock screener

  Rating & Target

str. buy

+159%

Previous close

$14.88

 
Intrinsic value

$38.59

 
Up/down potential

+159%

 
Rating

str. buy

We calculate the intrinsic value of GES 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 1.2

 

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, %
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
  5.72
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
Revenue, $m
  2,607
  2,862
  3,128
  3,406
  3,694
  3,995
  4,307
  4,631
  4,969
  5,319
  5,683
  6,062
  6,456
  6,865
  7,292
  7,736
  8,199
  8,681
  9,184
  9,709
  10,257
  10,830
  11,428
  12,053
  12,707
  13,390
  14,106
  14,854
  15,638
  16,459
Variable operating expenses, $m
  1,966
  2,157
  2,357
  2,566
  2,783
  3,009
  3,244
  3,488
  3,741
  4,005
  4,275
  4,559
  4,856
  5,164
  5,485
  5,819
  6,167
  6,530
  6,908
  7,303
  7,715
  8,146
  8,595
  9,065
  9,557
  10,071
  10,609
  11,173
  11,762
  12,380
Fixed operating expenses, $m
  540
  551
  564
  576
  589
  602
  615
  628
  642
  656
  671
  686
  701
  716
  732
  748
  764
  781
  798
  816
  834
  852
  871
  890
  910
  930
  950
  971
  992
  1,014
Total operating expenses, $m
  2,506
  2,708
  2,921
  3,142
  3,372
  3,611
  3,859
  4,116
  4,383
  4,661
  4,946
  5,245
  5,557
  5,880
  6,217
  6,567
  6,931
  7,311
  7,706
  8,119
  8,549
  8,998
  9,466
  9,955
  10,467
  11,001
  11,559
  12,144
  12,754
  13,394
Operating income, $m
  102
  154
  207
  264
  323
  384
  448
  515
  585
  658
  738
  817
  899
  986
  1,076
  1,170
  1,268
  1,371
  1,478
  1,591
  1,709
  1,832
  1,962
  2,097
  2,240
  2,389
  2,546
  2,711
  2,884
  3,065
EBITDA, $m
  171
  228
  289
  352
  418
  487
  559
  633
  711
  793
  878
  966
  1,058
  1,155
  1,255
  1,360
  1,470
  1,584
  1,704
  1,830
  1,961
  2,098
  2,243
  2,394
  2,552
  2,719
  2,893
  3,076
  3,268
  3,470
Interest expense (income), $m
  1
  3
  9
  15
  21
  27
  34
  41
  48
  55
  63
  71
  80
  89
  98
  107
  117
  127
  138
  149
  161
  173
  186
  199
  213
  227
  242
  258
  274
  292
  310
Earnings before tax, $m
  99
  145
  193
  243
  295
  350
  407
  467
  529
  594
  666
  737
  811
  888
  968
  1,053
  1,141
  1,233
  1,329
  1,430
  1,536
  1,647
  1,763
  1,885
  2,013
  2,147
  2,288
  2,436
  2,592
  2,755
Tax expense, $m
  27
  39
  52
  66
  80
  95
  110
  126
  143
  160
  180
  199
  219
  240
  261
  284
  308
  333
  359
  386
  415
  445
  476
  509
  543
  580
  618
  658
  700
  744
Net income, $m
  72
  106
  141
  177
  216
  256
  297
  341
  386
  434
  487
  538
  592
  648
  707
  768
  833
  900
  970
  1,044
  1,121
  1,202
  1,287
  1,376
  1,469
  1,567
  1,670
  1,778
  1,892
  2,011

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
  1,826
  2,004
  2,191
  2,385
  2,587
  2,797
  3,016
  3,243
  3,479
  3,725
  3,980
  4,245
  4,521
  4,808
  5,106
  5,417
  5,742
  6,079
  6,432
  6,799
  7,183
  7,584
  8,003
  8,440
  8,898
  9,377
  9,878
  10,402
  10,951
  11,526
Adjusted assets (=assets-cash), $m
  1,826
  2,004
  2,191
  2,385
  2,587
  2,797
  3,016
  3,243
  3,479
  3,725
  3,980
  4,245
  4,521
  4,808
  5,106
  5,417
  5,742
  6,079
  6,432
  6,799
  7,183
  7,584
  8,003
  8,440
  8,898
  9,377
  9,878
  10,402
  10,951
  11,526
Revenue / Adjusted assets
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
  1.428
Average production assets, $m
  321
  352
  385
  419
  454
  491
  530
  570
  611
  654
  699
  746
  794
  844
  897
  952
  1,008
  1,068
  1,130
  1,194
  1,262
  1,332
  1,406
  1,483
  1,563
  1,647
  1,735
  1,827
  1,924
  2,024
Working capital, $m
  305
  335
  366
  398
  432
  467
  504
  542
  581
  622
  665
  709
  755
  803
  853
  905
  959
  1,016
  1,075
  1,136
  1,200
  1,267
  1,337
  1,410
  1,487
  1,567
  1,650
  1,738
  1,830
  1,926
Total debt, $m
  118
  197
  280
  367
  457
  551
  648
  750
  855
  964
  1,078
  1,197
  1,320
  1,447
  1,581
  1,719
  1,864
  2,015
  2,172
  2,336
  2,507
  2,686
  2,872
  3,068
  3,272
  3,485
  3,709
  3,943
  4,187
  4,444
Total liabilities, $m
  814
  894
  977
  1,064
  1,154
  1,248
  1,345
  1,446
  1,552
  1,661
  1,775
  1,893
  2,016
  2,144
  2,277
  2,416
  2,561
  2,711
  2,869
  3,033
  3,204
  3,382
  3,569
  3,764
  3,969
  4,182
  4,406
  4,639
  4,884
  5,141
Total equity, $m
  1,012
  1,110
  1,214
  1,321
  1,433
  1,550
  1,671
  1,797
  1,928
  2,064
  2,205
  2,352
  2,505
  2,663
  2,829
  3,001
  3,181
  3,368
  3,563
  3,767
  3,979
  4,201
  4,434
  4,676
  4,930
  5,195
  5,472
  5,763
  6,067
  6,385
Total liabilities and equity, $m
  1,826
  2,004
  2,191
  2,385
  2,587
  2,798
  3,016
  3,243
  3,480
  3,725
  3,980
  4,245
  4,521
  4,807
  5,106
  5,417
  5,742
  6,079
  6,432
  6,800
  7,183
  7,583
  8,003
  8,440
  8,899
  9,377
  9,878
  10,402
  10,951
  11,526
Debt-to-equity ratio
  0.120
  0.180
  0.230
  0.280
  0.320
  0.360
  0.390
  0.420
  0.440
  0.470
  0.490
  0.510
  0.530
  0.540
  0.560
  0.570
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.680
  0.680
  0.690
  0.700
Adjusted equity ratio
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  72
  106
  141
  177
  216
  256
  297
  341
  386
  434
  487
  538
  592
  648
  707
  768
  833
  900
  970
  1,044
  1,121
  1,202
  1,287
  1,376
  1,469
  1,567
  1,670
  1,778
  1,892
  2,011
Depreciation, amort., depletion, $m
  69
  75
  81
  88
  95
  103
  110
  118
  127
  135
  140
  149
  159
  169
  179
  190
  202
  214
  226
  239
  252
  266
  281
  297
  313
  329
  347
  365
  385
  405
Funds from operations, $m
  141
  181
  222
  266
  311
  358
  408
  459
  513
  569
  626
  687
  751
  817
  886
  959
  1,034
  1,113
  1,196
  1,283
  1,373
  1,468
  1,568
  1,672
  1,782
  1,897
  2,017
  2,144
  2,277
  2,416
Change in working capital, $m
  28
  30
  31
  32
  34
  35
  37
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
Cash from operations, $m
  112
  151
  191
  233
  277
  323
  371
  421
  474
  528
  584
  643
  705
  769
  836
  907
  980
  1,057
  1,137
  1,221
  1,309
  1,401
  1,498
  1,599
  1,705
  1,817
  1,934
  2,056
  2,185
  2,320
Maintenance CAPEX, $m
  -58
  -64
  -70
  -77
  -84
  -91
  -98
  -106
  -114
  -122
  -131
  -140
  -149
  -159
  -169
  -179
  -190
  -202
  -214
  -226
  -239
  -252
  -266
  -281
  -297
  -313
  -329
  -347
  -365
  -385
New CAPEX, $m
  -31
  -31
  -33
  -34
  -36
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -74
  -77
  -80
  -84
  -88
  -92
  -96
  -101
Cash from investing activities, $m
  -89
  -95
  -103
  -111
  -120
  -128
  -136
  -146
  -155
  -165
  -176
  -187
  -197
  -209
  -221
  -234
  -247
  -261
  -276
  -291
  -306
  -322
  -340
  -358
  -377
  -397
  -417
  -439
  -461
  -486
Free cash flow, $m
  24
  55
  88
  122
  158
  195
  235
  276
  318
  363
  408
  457
  507
  560
  615
  673
  733
  796
  862
  931
  1,003
  1,079
  1,158
  1,241
  1,329
  1,420
  1,516
  1,617
  1,723
  1,835
Issuance/(repayment) of debt, $m
  76
  80
  83
  87
  90
  94
  98
  101
  105
  109
  114
  118
  123
  128
  133
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  214
  223
  234
  245
  256
Issuance/(repurchase) of shares, $m
  22
  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  
  98
  80
  83
  87
  90
  94
  98
  101
  105
  109
  114
  118
  123
  128
  133
  139
  145
  151
  157
  164
  171
  179
  187
  195
  204
  214
  223
  234
  245
  256
Total cash flow (excl. dividends), $m
  122
  135
  171
  209
  248
  289
  332
  377
  424
  472
  522
  575
  630
  688
  748
  811
  877
  947
  1,019
  1,095
  1,174
  1,257
  1,345
  1,436
  1,533
  1,634
  1,740
  1,851
  1,968
  2,091
Retained Cash Flow (-), $m
  -95
  -99
  -103
  -108
  -112
  -117
  -121
  -126
  -131
  -136
  -141
  -147
  -153
  -159
  -165
  -172
  -180
  -187
  -195
  -204
  -213
  -222
  -232
  -243
  -254
  -265
  -278
  -290
  -304
  -318
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
  27
  36
  68
  101
  136
  173
  211
  251
  293
  336
  381
  428
  477
  529
  583
  639
  698
  759
  824
  891
  962
  1,035
  1,113
  1,194
  1,279
  1,368
  1,462
  1,561
  1,664
  1,773
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
  26
  33
  59
  83
  105
  125
  143
  157
  168
  176
  181
  183
  182
  178
  171
  162
  152
  140
  127
  113
  99
  86
  73
  61
  50
  40
  31
  24
  18
  13
Current shareholders' claim on cash, %
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2

Guess?, Inc. designs, markets, distributes and licenses a lifestyle collections of apparel and accessories for men, women and children. The Company operates through five segments: Americas Retail, Europe, Asia, Americas Wholesale and Licensing. The Americas Retail segment includes the Company's retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company's retail, e-commerce and wholesale operations in Europe and the Middle East. The Asia segment includes the Company's retail, e-commerce and wholesale operations in Asia. The Asia segment includes the Company's retail, e-commerce and wholesale operations in Asia. The Licensing segment includes the around the world licensing operations of the Company. Its apparel is marketed under various names, including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, MARCIANO, Question Mark and Triangle Design, GUESS Kids, Baby GUESS, YES, G by GUESS and GUESS by MARCIANO.

FINANCIAL RATIOS  of  Guess?, Inc. (GES)

Valuation Ratios
P/E Ratio 54.4
Price to Sales 0.6
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow -62.5
Growth Rates
Sales Growth Rate 0.2%
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 3.9%
Financial Strength
Quick Ratio 396
Current Ratio 0.2
LT Debt to Equity 2.4%
Total Debt to Equity 2.5%
Interest Coverage 55
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.2%
Return On Equity 2.3%
Return On Equity - 3 Yr. Avg. 6.2%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 33.7%
Gross Margin - 3 Yr. Avg. 35.1%
EBITDA Margin 5.6%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 2.4%
Pre-Tax Margin - 3 Yr. Avg. 4.7%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 53.7%
Eff/ Tax Rate - 3 Yr. Avg. 39.6%
Payout Ratio 334.8%

GES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GES stock intrinsic value calculation we used $2364 million for the last fiscal year's total revenue generated by Guess?, Inc.. The default revenue input number comes from 0001 income statement of Guess?, 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 GES stock valuation model: a) initial revenue growth rate of 10.3% 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 GES is calculated based on our internal credit rating of Guess?, 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 Guess?, 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 GES stock the variable cost ratio is equal to 75.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $528 million in the base year in the intrinsic value calculation for GES 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 7.4% for Guess?, Inc..

Corporate tax rate of 27% is the nominal tax rate for Guess?, 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 GES 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 GES are equal to 12.3%.

Life of production assets of 4.9 years is the average useful life of capital assets used in Guess?, 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 GES is equal to 11.7%. 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 - $916.819 million for Guess?, 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 81.105 million for Guess?, 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 Guess?, Inc. at the current share price and the inputted number of shares is $1.2 billion.

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