Intrinsic value of Hooker Furniture Corporation - HOFT

Previous Close

$26.37

  Intrinsic Value

$46.93

stock screener

  Rating & Target

str. buy

+78%

Previous close

$26.37

 
Intrinsic value

$46.93

 
Up/down potential

+78%

 
Rating

str. buy

We calculate the intrinsic value of HOFT 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 0.3

 

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, %
  8.60
  8.24
  7.92
  7.62
  7.36
  7.13
  6.91
  6.72
  6.55
  6.39
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
Revenue, $m
  674
  730
  788
  848
  910
  975
  1,043
  1,113
  1,185
  1,261
  1,340
  1,422
  1,508
  1,597
  1,690
  1,787
  1,888
  1,994
  2,105
  2,220
  2,341
  2,467
  2,599
  2,737
  2,882
  3,034
  3,192
  3,359
  3,533
  3,716
Variable operating expenses, $m
  572
  619
  668
  719
  771
  826
  883
  942
  1,004
  1,068
  1,132
  1,201
  1,273
  1,348
  1,427
  1,509
  1,594
  1,684
  1,777
  1,874
  1,976
  2,083
  2,195
  2,311
  2,434
  2,561
  2,696
  2,836
  2,983
  3,137
Fixed operating expenses, $m
  50
  51
  52
  53
  55
  56
  57
  58
  60
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
  83
  84
  86
  88
  90
  92
  94
Total operating expenses, $m
  622
  670
  720
  772
  826
  882
  940
  1,000
  1,064
  1,129
  1,194
  1,265
  1,338
  1,414
  1,495
  1,578
  1,665
  1,756
  1,851
  1,950
  2,053
  2,162
  2,276
  2,394
  2,518
  2,647
  2,784
  2,926
  3,075
  3,231
Operating income, $m
  52
  60
  67
  76
  84
  93
  102
  112
  122
  133
  146
  158
  170
  182
  195
  209
  223
  238
  254
  270
  287
  305
  324
  344
  364
  386
  409
  433
  458
  484
EBITDA, $m
  60
  68
  76
  84
  93
  103
  113
  123
  133
  144
  156
  168
  180
  193
  207
  221
  236
  252
  268
  285
  303
  322
  342
  363
  384
  407
  431
  456
  483
  510
Interest expense (income), $m
  1
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  32
  33
Earnings before tax, $m
  49
  56
  63
  71
  79
  87
  96
  105
  114
  124
  137
  147
  158
  170
  182
  195
  208
  222
  236
  251
  267
  284
  302
  320
  339
  359
  381
  403
  426
  451
Tax expense, $m
  13
  15
  17
  19
  21
  24
  26
  28
  31
  33
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  77
  81
  86
  92
  97
  103
  109
  115
  122
Net income, $m
  36
  41
  46
  52
  58
  64
  70
  76
  83
  90
  100
  108
  116
  124
  133
  142
  152
  162
  172
  184
  195
  207
  220
  234
  248
  262
  278
  294
  311
  329

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
  380
  411
  444
  477
  513
  549
  587
  626
  667
  710
  755
  801
  849
  899
  952
  1,006
  1,063
  1,123
  1,185
  1,250
  1,318
  1,389
  1,464
  1,541
  1,623
  1,708
  1,798
  1,891
  1,989
  2,092
Adjusted assets (=assets-cash), $m
  380
  411
  444
  477
  513
  549
  587
  626
  667
  710
  755
  801
  849
  899
  952
  1,006
  1,063
  1,123
  1,185
  1,250
  1,318
  1,389
  1,464
  1,541
  1,623
  1,708
  1,798
  1,891
  1,989
  2,092
Revenue / Adjusted assets
  1.774
  1.776
  1.775
  1.778
  1.774
  1.776
  1.777
  1.778
  1.777
  1.776
  1.775
  1.775
  1.776
  1.776
  1.775
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.775
  1.776
  1.776
  1.776
  1.775
  1.776
  1.776
  1.776
Average production assets, $m
  65
  70
  76
  81
  87
  94
  100
  107
  114
  121
  129
  137
  145
  153
  162
  172
  181
  191
  202
  213
  225
  237
  250
  263
  277
  291
  306
  322
  339
  357
Working capital, $m
  141
  153
  165
  177
  190
  204
  218
  233
  248
  264
  280
  297
  315
  334
  353
  374
  395
  417
  440
  464
  489
  516
  543
  572
  602
  634
  667
  702
  738
  777
Total debt, $m
  64
  74
  86
  97
  109
  122
  135
  149
  163
  177
  193
  209
  225
  242
  260
  279
  299
  319
  341
  363
  386
  411
  436
  463
  491
  521
  551
  584
  617
  653
Total liabilities, $m
  131
  141
  153
  164
  176
  189
  202
  216
  230
  244
  260
  275
  292
  309
  327
  346
  366
  386
  408
  430
  453
  478
  503
  530
  558
  588
  618
  651
  684
  720
Total equity, $m
  249
  270
  291
  313
  336
  360
  385
  411
  438
  466
  495
  525
  557
  590
  624
  660
  698
  737
  777
  820
  865
  911
  960
  1,011
  1,065
  1,121
  1,179
  1,241
  1,305
  1,372
Total liabilities and equity, $m
  380
  411
  444
  477
  512
  549
  587
  627
  668
  710
  755
  800
  849
  899
  951
  1,006
  1,064
  1,123
  1,185
  1,250
  1,318
  1,389
  1,463
  1,541
  1,623
  1,709
  1,797
  1,892
  1,989
  2,092
Debt-to-equity ratio
  0.260
  0.280
  0.290
  0.310
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.450
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.480
Adjusted equity ratio
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656
  0.656

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  36
  41
  46
  52
  58
  64
  70
  76
  83
  90
  100
  108
  116
  124
  133
  142
  152
  162
  172
  184
  195
  207
  220
  234
  248
  262
  278
  294
  311
  329
Depreciation, amort., depletion, $m
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
Funds from operations, $m
  43
  49
  55
  61
  67
  73
  80
  87
  94
  102
  109
  118
  126
  135
  145
  155
  165
  176
  187
  199
  212
  225
  238
  253
  268
  284
  300
  318
  336
  355
Change in working capital, $m
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
Cash from operations, $m
  32
  37
  43
  48
  54
  60
  66
  72
  79
  86
  93
  100
  108
  117
  125
  134
  144
  154
  164
  175
  186
  198
  211
  224
  238
  252
  267
  283
  300
  317
Maintenance CAPEX, $m
  -4
  -5
  -5
  -6
  -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
  -25
New CAPEX, $m
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
Cash from investing activities, $m
  -9
  -10
  -11
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -20
  -20
  -21
  -23
  -23
  -25
  -26
  -28
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -41
  -43
Free cash flow, $m
  23
  27
  32
  37
  42
  47
  53
  58
  64
  71
  76
  83
  90
  98
  105
  113
  122
  130
  140
  149
  159
  170
  181
  192
  205
  217
  231
  245
  259
  275
Issuance/(repayment) of debt, $m
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  35
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  
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
  34
  35
Total cash flow (excl. dividends), $m
  33
  38
  43
  48
  54
  60
  66
  72
  79
  85
  92
  99
  107
  115
  123
  132
  141
  151
  161
  172
  183
  194
  206
  219
  233
  247
  261
  277
  293
  310
Retained Cash Flow (-), $m
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -56
  -59
  -61
  -64
  -67
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
  13
  18
  22
  26
  31
  36
  41
  46
  52
  57
  62
  69
  75
  82
  89
  96
  104
  112
  120
  129
  138
  148
  158
  168
  179
  191
  203
  215
  229
  243
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
  13
  16
  19
  22
  24
  26
  28
  29
  30
  30
  30
  29
  29
  27
  26
  24
  23
  21
  19
  16
  14
  12
  10
  9
  7
  6
  4
  3
  2
  2
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
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Hooker Furniture Corporation is a home furnishings marketing, design and logistics company offering sourcing of residential casegoods and upholstery, as well as domestically-produced leather and fabric-upholstered furniture. The Company operates through three segments: casegoods furniture, upholstered furniture and all other. The Company's casegoods product categories include accents, home office, dining, bedroom and home entertainment furniture under the Hooker Furniture brand. Its residential upholstered seating companies include Bradington-Young, which is engaged in upscale motion and stationary leather furniture, and Sam Moore Furniture, which is engaged in upscale occasional chairs, settees, sofas and sectional seating with a focus on cover-to-frame customization. It also markets a line of imported leather upholstery under the Hooker Upholstery trade name. All other segment operates under the H Contract and Homeware brands.

FINANCIAL RATIOS  of  Hooker Furniture Corporation (HOFT)

Valuation Ratios
P/E Ratio 12.2
Price to Sales 0.5
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 9.8
Price to Free Cash Flow 10.5
Growth Rates
Sales Growth Rate 133.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 21.2%
Total Debt to Equity 24.2%
Interest Coverage 40
Management Effectiveness
Return On Assets 10.2%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 12.4%
Ret/ On T. Cap. - 3 Yr. Avg. 10.8%
Return On Equity 14.1%
Return On Equity - 3 Yr. Avg. 11.4%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 21.3%
Gross Margin - 3 Yr. Avg. 25%
EBITDA Margin 8.3%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin 6.8%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 6.8%
Pre-Tax Margin - 3 Yr. Avg. 8.1%
Net Profit Margin 4.3%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 35.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 20%

HOFT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HOFT stock intrinsic value calculation we used $621 million for the last fiscal year's total revenue generated by Hooker Furniture Corporation. The default revenue input number comes from 0001 income statement of Hooker Furniture Corporation. 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 HOFT stock valuation model: a) initial revenue growth rate of 8.6% 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 HOFT is calculated based on our internal credit rating of Hooker Furniture Corporation, 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 Hooker Furniture Corporation.
    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 HOFT stock the variable cost ratio is equal to 84.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $49 million in the base year in the intrinsic value calculation for HOFT 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 Hooker Furniture Corporation.

Corporate tax rate of 27% is the nominal tax rate for Hooker Furniture Corporation. 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 HOFT 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 HOFT are equal to 9.6%.

Life of production assets of 13.7 years is the average useful life of capital assets used in Hooker Furniture Corporation 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 HOFT is equal to 20.9%. 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 - $229.46 million for Hooker Furniture Corporation - 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 11.785 million for Hooker Furniture Corporation 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 Hooker Furniture Corporation at the current share price and the inputted number of shares is $0.3 billion.

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