Intrinsic value of Hibbett Sports - HIBB

Previous Close

$26.40

  Intrinsic Value

$38.16

stock screener

  Rating & Target

buy

+45%

Previous close

$26.40

 
Intrinsic value

$38.16

 
Up/down potential

+45%

 
Rating

buy

We calculate the intrinsic value of HIBB 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 0.5

 

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
  987
  1,010
  1,036
  1,065
  1,097
  1,133
  1,171
  1,213
  1,258
  1,307
  1,358
  1,413
  1,472
  1,534
  1,601
  1,671
  1,745
  1,823
  1,906
  1,994
  2,086
  2,184
  2,287
  2,395
  2,509
  2,629
  2,755
  2,888
  3,028
  3,175
Variable operating expenses, $m
  890
  910
  933
  960
  989
  1,021
  1,056
  1,093
  1,134
  1,177
  1,224
  1,273
  1,326
  1,382
  1,442
  1,505
  1,572
  1,643
  1,718
  1,797
  1,880
  1,968
  2,060
  2,158
  2,261
  2,369
  2,483
  2,602
  2,728
  2,861
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
  890
  910
  933
  960
  989
  1,021
  1,056
  1,093
  1,134
  1,177
  1,224
  1,273
  1,326
  1,382
  1,442
  1,505
  1,572
  1,643
  1,718
  1,797
  1,880
  1,968
  2,060
  2,158
  2,261
  2,369
  2,483
  2,602
  2,728
  2,861
Operating income, $m
  98
  100
  103
  105
  109
  112
  116
  120
  125
  129
  134
  140
  146
  152
  158
  165
  173
  181
  189
  197
  207
  216
  226
  237
  248
  260
  273
  286
  300
  314
EBITDA, $m
  109
  112
  114
  118
  121
  125
  129
  134
  139
  144
  150
  156
  163
  169
  177
  184
  193
  201
  210
  220
  230
  241
  252
  264
  277
  290
  304
  319
  334
  351
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
Earnings before tax, $m
  98
  100
  102
  105
  107
  111
  114
  118
  122
  126
  131
  136
  141
  146
  152
  159
  165
  172
  180
  188
  196
  204
  214
  223
  233
  244
  255
  267
  280
  293
Tax expense, $m
  26
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  76
  79
Net income, $m
  71
  73
  74
  76
  78
  81
  83
  86
  89
  92
  95
  99
  103
  107
  111
  116
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  214

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
  471
  482
  494
  508
  524
  541
  559
  579
  600
  623
  648
  674
  702
  732
  764
  797
  833
  870
  910
  951
  995
  1,042
  1,091
  1,143
  1,197
  1,254
  1,315
  1,378
  1,445
  1,515
Adjusted assets (=assets-cash), $m
  471
  482
  494
  508
  524
  541
  559
  579
  600
  623
  648
  674
  702
  732
  764
  797
  833
  870
  910
  951
  995
  1,042
  1,091
  1,143
  1,197
  1,254
  1,315
  1,378
  1,445
  1,515
Revenue / Adjusted assets
  2.096
  2.095
  2.097
  2.096
  2.094
  2.094
  2.095
  2.095
  2.097
  2.098
  2.096
  2.096
  2.097
  2.096
  2.096
  2.097
  2.095
  2.095
  2.095
  2.097
  2.096
  2.096
  2.096
  2.095
  2.096
  2.096
  2.095
  2.096
  2.096
  2.096
Average production assets, $m
  113
  115
  118
  121
  125
  129
  134
  138
  143
  149
  155
  161
  168
  175
  182
  190
  199
  208
  217
  227
  238
  249
  261
  273
  286
  300
  314
  329
  345
  362
Working capital, $m
  163
  167
  171
  176
  181
  187
  193
  200
  208
  216
  224
  233
  243
  253
  264
  276
  288
  301
  315
  329
  344
  360
  377
  395
  414
  434
  455
  477
  500
  524
Total debt, $m
  6
  10
  14
  18
  23
  28
  33
  40
  46
  53
  61
  69
  78
  87
  97
  107
  118
  129
  141
  154
  168
  182
  197
  213
  230
  248
  266
  286
  306
  328
Total liabilities, $m
  145
  148
  152
  157
  161
  166
  172
  178
  185
  192
  200
  208
  216
  225
  235
  246
  256
  268
  280
  293
  307
  321
  336
  352
  369
  386
  405
  424
  445
  467
Total equity, $m
  326
  333
  342
  352
  362
  374
  387
  401
  415
  431
  448
  467
  486
  507
  528
  552
  576
  602
  629
  658
  689
  721
  755
  791
  828
  868
  910
  954
  1,000
  1,048
Total liabilities and equity, $m
  471
  481
  494
  509
  523
  540
  559
  579
  600
  623
  648
  675
  702
  732
  763
  798
  832
  870
  909
  951
  996
  1,042
  1,091
  1,143
  1,197
  1,254
  1,315
  1,378
  1,445
  1,515
Debt-to-equity ratio
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.090
  0.100
  0.110
  0.120
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
  0.310
  0.310
Adjusted equity ratio
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692
  0.692

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  71
  73
  74
  76
  78
  81
  83
  86
  89
  92
  95
  99
  103
  107
  111
  116
  121
  126
  131
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  214
Depreciation, amort., depletion, $m
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
Funds from operations, $m
  82
  84
  86
  88
  91
  94
  97
  100
  103
  107
  111
  115
  120
  124
  129
  135
  141
  147
  153
  160
  167
  174
  182
  190
  199
  208
  218
  228
  239
  250
Change in working capital, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  79
  80
  82
  84
  86
  88
  90
  93
  96
  99
  102
  106
  110
  114
  119
  123
  128
  134
  139
  145
  151
  158
  165
  172
  180
  188
  197
  206
  216
  226
Maintenance CAPEX, $m
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -35
New CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
Cash from investing activities, $m
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -38
  -40
  -43
  -44
  -46
  -49
  -52
Free cash flow, $m
  66
  67
  67
  68
  70
  71
  73
  75
  77
  79
  82
  84
  87
  90
  94
  97
  101
  105
  109
  113
  118
  123
  128
  134
  140
  146
  153
  160
  167
  174
Issuance/(repayment) of debt, $m
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
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  
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Total cash flow (excl. dividends), $m
  70
  70
  71
  73
  75
  76
  79
  81
  83
  86
  89
  92
  96
  99
  103
  107
  112
  116
  121
  126
  132
  137
  144
  150
  157
  164
  171
  179
  187
  196
Retained Cash Flow (-), $m
  -6
  -7
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
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
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Cash available for distribution, $m
  64
  62
  63
  63
  64
  65
  66
  67
  69
  70
  72
  74
  76
  79
  81
  84
  87
  90
  94
  97
  101
  105
  110
  114
  119
  124
  130
  135
  141
  147
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
  61
  57
  55
  52
  49
  47
  44
  42
  39
  37
  34
  32
  29
  26
  24
  21
  19
  17
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  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
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Hibbett Sports, Inc. operates athletic specialty stores in small and mid-sized markets in the South, Southwest, Mid-Atlantic and the Midwest regions of the United States. As of January 28, 2017, the Company had operated 1,078 stores consisting of 1,059 Hibbett Sports stores and 19 smaller-format Sports Additions athletic shoe stores in 35 states. Its primary retail format is Hibbett Sports, which is an approximately 5,000 square foot store. Hibbett Sports stores offer a merchandising mix of localized apparel, footwear, equipment and accessories designed to appeal to a range of customers within each market. Its 19 Sports Additions stores are enclosed mall-based stores, averaging 2,500 square feet with approximately 90% of merchandise consisting of athletic footwear and the remainder consisting of caps and a limited assortment of apparel. Hibbett Team Sales, Inc., a subsidiary of the Company, is a supplier of customized athletic apparel, equipment and footwear.

FINANCIAL RATIOS  of  Hibbett Sports (HIBB)

Valuation Ratios
P/E Ratio 9.4
Price to Sales 0.6
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 11.7
Growth Rates
Sales Growth Rate 3.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate -10.1%
Financial Strength
Quick Ratio 39
Current Ratio 0
LT Debt to Equity 0.6%
Total Debt to Equity 0.9%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.5%
Ret/ On Assets - 3 Yr. Avg. 15.5%
Return On Total Capital 18.7%
Ret/ On T. Cap. - 3 Yr. Avg. 21.4%
Return On Equity 18.9%
Return On Equity - 3 Yr. Avg. 21.6%
Asset Turnover 2.2
Profitability Ratios
Gross Margin 34.8%
Gross Margin - 3 Yr. Avg. 35.3%
EBITDA Margin 11.9%
EBITDA Margin - 3 Yr. Avg. 13.4%
Operating Margin 10%
Oper. Margin - 3 Yr. Avg. 11.6%
Pre-Tax Margin 10%
Pre-Tax Margin - 3 Yr. Avg. 11.6%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 37.1%
Eff/ Tax Rate - 3 Yr. Avg. 37%
Payout Ratio 0%

HIBB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HIBB stock intrinsic value calculation we used $968 million for the last fiscal year's total revenue generated by Hibbett Sports. The default revenue input number comes from 2018 income statement of Hibbett Sports. 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 HIBB 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 HIBB is calculated based on our internal credit rating of Hibbett Sports, 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 Hibbett Sports.
    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 HIBB stock the variable cost ratio is equal to 90.1%.

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 HIBB 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% for Hibbett Sports.

Corporate tax rate of 27% is the nominal tax rate for Hibbett Sports. 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 HIBB stock is equal to 0.4%.

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 HIBB are equal to 11.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Hibbett Sports 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 HIBB is equal to 16.5%. 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 - $320 million for Hibbett Sports - 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 20 million for Hibbett Sports 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 Hibbett Sports at the current share price and the inputted number of shares is $0.5 billion.

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