Intrinsic value of G-III Apparel Group, LTD. - GIII

Previous Close

$37.75

  Intrinsic Value

$14.58

stock screener

  Rating & Target

str. sell

-61%

Previous close

$37.75

 
Intrinsic value

$14.58

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of GIII 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 1.9

 

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, %
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
Revenue, $m
  2,939
  3,078
  3,224
  3,379
  3,541
  3,712
  3,891
  4,080
  4,279
  4,488
  4,708
  4,939
  5,181
  5,436
  5,705
  5,986
  6,282
  6,593
  6,920
  7,263
  7,624
  8,002
  8,400
  8,818
  9,257
  9,717
  10,201
  10,710
  11,243
  11,804
Variable operating expenses, $m
  2,515
  2,634
  2,759
  2,890
  3,028
  3,174
  3,327
  3,488
  3,658
  3,836
  4,013
  4,210
  4,417
  4,635
  4,863
  5,103
  5,356
  5,621
  5,899
  6,192
  6,499
  6,822
  7,161
  7,517
  7,891
  8,284
  8,697
  9,130
  9,585
  10,063
Fixed operating expenses, $m
  262
  267
  273
  279
  285
  292
  298
  305
  311
  318
  325
  332
  340
  347
  355
  363
  371
  379
  387
  396
  404
  413
  422
  432
  441
  451
  461
  471
  481
  492
Total operating expenses, $m
  2,777
  2,901
  3,032
  3,169
  3,313
  3,466
  3,625
  3,793
  3,969
  4,154
  4,338
  4,542
  4,757
  4,982
  5,218
  5,466
  5,727
  6,000
  6,286
  6,588
  6,903
  7,235
  7,583
  7,949
  8,332
  8,735
  9,158
  9,601
  10,066
  10,555
Operating income, $m
  162
  177
  192
  209
  227
  246
  266
  287
  310
  334
  369
  396
  424
  455
  487
  520
  556
  594
  634
  676
  720
  767
  817
  869
  924
  982
  1,044
  1,109
  1,177
  1,249
EBITDA, $m
  194
  210
  227
  244
  263
  284
  305
  328
  352
  377
  405
  433
  463
  496
  529
  565
  603
  643
  686
  730
  777
  827
  880
  935
  994
  1,056
  1,121
  1,189
  1,262
  1,338
Interest expense (income), $m
  22
  40
  44
  48
  52
  56
  61
  66
  71
  77
  82
  88
  95
  101
  108
  116
  124
  132
  140
  149
  159
  169
  179
  190
  201
  213
  226
  239
  253
  268
  283
Earnings before tax, $m
  122
  133
  145
  157
  171
  185
  200
  216
  233
  251
  281
  301
  323
  346
  371
  397
  424
  453
  484
  517
  552
  588
  627
  668
  711
  756
  804
  855
  909
  966
Tax expense, $m
  33
  36
  39
  42
  46
  50
  54
  58
  63
  68
  76
  81
  87
  93
  100
  107
  115
  122
  131
  140
  149
  159
  169
  180
  192
  204
  217
  231
  245
  261
Net income, $m
  89
  97
  106
  115
  125
  135
  146
  158
  170
  184
  205
  220
  236
  253
  271
  290
  310
  331
  354
  377
  403
  429
  458
  487
  519
  552
  587
  624
  664
  705

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
  2,005
  2,100
  2,199
  2,305
  2,415
  2,532
  2,654
  2,783
  2,919
  3,061
  3,211
  3,369
  3,534
  3,708
  3,891
  4,083
  4,285
  4,497
  4,720
  4,954
  5,200
  5,459
  5,730
  6,015
  6,314
  6,628
  6,959
  7,305
  7,669
  8,052
Adjusted assets (=assets-cash), $m
  2,005
  2,100
  2,199
  2,305
  2,415
  2,532
  2,654
  2,783
  2,919
  3,061
  3,211
  3,369
  3,534
  3,708
  3,891
  4,083
  4,285
  4,497
  4,720
  4,954
  5,200
  5,459
  5,730
  6,015
  6,314
  6,628
  6,959
  7,305
  7,669
  8,052
Revenue / Adjusted assets
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
  1.466
Average production assets, $m
  500
  523
  548
  574
  602
  631
  662
  694
  727
  763
  800
  840
  881
  924
  970
  1,018
  1,068
  1,121
  1,176
  1,235
  1,296
  1,360
  1,428
  1,499
  1,574
  1,652
  1,734
  1,821
  1,911
  2,007
Working capital, $m
  594
  622
  651
  682
  715
  750
  786
  824
  864
  907
  951
  998
  1,047
  1,098
  1,152
  1,209
  1,269
  1,332
  1,398
  1,467
  1,540
  1,616
  1,697
  1,781
  1,870
  1,963
  2,061
  2,163
  2,271
  2,384
Total debt, $m
  429
  468
  509
  553
  599
  647
  698
  752
  808
  867
  929
  995
  1,063
  1,136
  1,211
  1,291
  1,375
  1,463
  1,555
  1,653
  1,755
  1,862
  1,974
  2,093
  2,217
  2,347
  2,484
  2,628
  2,779
  2,938
Total liabilities, $m
  832
  871
  913
  956
  1,002
  1,051
  1,102
  1,155
  1,211
  1,270
  1,333
  1,398
  1,467
  1,539
  1,615
  1,695
  1,778
  1,866
  1,959
  2,056
  2,158
  2,265
  2,378
  2,496
  2,620
  2,751
  2,888
  3,032
  3,183
  3,342
Total equity, $m
  1,173
  1,228
  1,287
  1,348
  1,413
  1,481
  1,553
  1,628
  1,707
  1,791
  1,879
  1,971
  2,068
  2,169
  2,276
  2,389
  2,507
  2,631
  2,761
  2,898
  3,042
  3,193
  3,352
  3,519
  3,694
  3,878
  4,071
  4,274
  4,487
  4,710
Total liabilities and equity, $m
  2,005
  2,099
  2,200
  2,304
  2,415
  2,532
  2,655
  2,783
  2,918
  3,061
  3,212
  3,369
  3,535
  3,708
  3,891
  4,084
  4,285
  4,497
  4,720
  4,954
  5,200
  5,458
  5,730
  6,015
  6,314
  6,629
  6,959
  7,306
  7,670
  8,052
Debt-to-equity ratio
  0.370
  0.380
  0.400
  0.410
  0.420
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
  0.610
  0.610
  0.610
  0.620
  0.620
Adjusted equity ratio
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  89
  97
  106
  115
  125
  135
  146
  158
  170
  184
  205
  220
  236
  253
  271
  290
  310
  331
  354
  377
  403
  429
  458
  487
  519
  552
  587
  624
  664
  705
Depreciation, amort., depletion, $m
  32
  33
  34
  35
  36
  38
  39
  40
  42
  44
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  70
  73
  77
  81
  85
  89
Funds from operations, $m
  121
  130
  140
  150
  161
  173
  185
  198
  212
  227
  240
  257
  275
  294
  314
  335
  357
  381
  406
  432
  460
  489
  521
  554
  588
  625
  664
  705
  748
  794
Change in working capital, $m
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  76
  80
  84
  89
  93
  98
  103
  108
  113
Cash from operations, $m
  94
  102
  110
  119
  128
  138
  149
  160
  172
  185
  196
  210
  226
  242
  259
  278
  297
  318
  340
  363
  387
  413
  440
  469
  500
  532
  566
  602
  640
  681
Maintenance CAPEX, $m
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
New CAPEX, $m
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
  -58
  -61
  -64
  -68
  -71
  -75
  -78
  -82
  -86
  -91
  -95
Cash from investing activities, $m
  -44
  -46
  -48
  -50
  -53
  -56
  -59
  -61
  -65
  -68
  -71
  -74
  -78
  -82
  -87
  -91
  -95
  -100
  -106
  -110
  -116
  -121
  -128
  -134
  -141
  -148
  -155
  -163
  -172
  -180
Free cash flow, $m
  50
  56
  62
  68
  75
  82
  90
  99
  108
  117
  125
  136
  147
  160
  173
  187
  202
  218
  234
  252
  271
  291
  313
  335
  359
  384
  411
  439
  469
  501
Issuance/(repayment) of debt, $m
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  92
  97
  102
  107
  113
  118
  124
  130
  137
  144
  151
  159
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  
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  92
  97
  102
  107
  113
  118
  124
  130
  137
  144
  151
  159
Total cash flow (excl. dividends), $m
  88
  96
  104
  112
  121
  131
  141
  152
  164
  176
  187
  201
  216
  232
  249
  267
  286
  306
  327
  349
  373
  398
  425
  453
  483
  515
  548
  583
  620
  659
Retained Cash Flow (-), $m
  -52
  -55
  -58
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -167
  -175
  -184
  -193
  -203
  -213
  -224
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
  35
  40
  45
  51
  56
  63
  69
  77
  85
  93
  99
  109
  119
  130
  142
  154
  168
  182
  197
  213
  229
  247
  266
  287
  308
  331
  355
  380
  407
  436
Discount rate, %
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
  34
  36
  38
  39
  41
  41
  42
  42
  41
  40
  38
  36
  34
  32
  29
  26
  24
  21
  18
  15
  13
  10
  8
  6
  5
  4
  3
  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

G-III Apparel Group, Ltd. designs, manufactures and markets a range of apparel products. The Company operates through two segments: wholesale operations and retail operations. Its apparel products include outerwear, dresses, sportswear, swimwear, women's suits and women's performance wear, as well as women's handbags, footwear, small leather goods, cold weather accessories and luggage. The Company's owned brands include Donna Karan, DKNY, DKNY Jeans, Vilebrequin, G-III Sports by Carl Banks, Eliza J, Black Rivet and Jessica Howard. It has fashion licenses under the Calvin Klein, Tommy Hilfiger, Karl Lagerfeld, Kenneth Cole, Cole Haan and Dockers brands. Through its team sports business, it has licenses with the National Football League, National Basketball Association, Major League Baseball and National Hockey League. It also operates retail stores under the Donna Karan, Wilsons Leather, Bass, G.H. Bass & Co., Vilebrequin and Calvin Klein Performance names.

FINANCIAL RATIOS  of  G-III Apparel Group, LTD. (GIII)

Valuation Ratios
P/E Ratio 35.3
Price to Sales 0.8
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 17.3
Price to Free Cash Flow 22.7
Growth Rates
Sales Growth Rate 1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40.5%
Cap. Spend. - 3 Yr. Gr. Rate -2.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 45.2%
Total Debt to Equity 45.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 11.5%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. 12.1%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 35.2%
Gross Margin - 3 Yr. Avg. 35.6%
EBITDA Margin 5.5%
EBITDA Margin - 3 Yr. Avg. 7.9%
Operating Margin 3.9%
Oper. Margin - 3 Yr. Avg. 6.5%
Pre-Tax Margin 3.3%
Pre-Tax Margin - 3 Yr. Avg. 6.3%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 4.1%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 34.9%
Payout Ratio 0%

GIII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GIII stock intrinsic value calculation we used $2807 million for the last fiscal year's total revenue generated by G-III Apparel Group, LTD.. The default revenue input number comes from 0001 income statement of G-III Apparel Group, LTD.. 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 GIII stock valuation model: a) initial revenue growth rate of 4.7% 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 5.6%, whose default value for GIII is calculated based on our internal credit rating of G-III Apparel Group, LTD., 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 G-III Apparel Group, LTD..
    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 GIII stock the variable cost ratio is equal to 85.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $256 million in the base year in the intrinsic value calculation for GIII 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 10.2% for G-III Apparel Group, LTD..

Corporate tax rate of 27% is the nominal tax rate for G-III Apparel Group, LTD.. 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 GIII 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 GIII are equal to 17%.

Life of production assets of 22.6 years is the average useful life of capital assets used in G-III Apparel Group, LTD. 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 GIII is equal to 20.2%. 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 - $1120.689 million for G-III Apparel Group, LTD. - 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 49.477 million for G-III Apparel Group, LTD. 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 G-III Apparel Group, LTD. at the current share price and the inputted number of shares is $1.9 billion.

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