Intrinsic value of Haverty Furniture Companies, Inc. - HVT

Previous Close

$19.01

  Intrinsic Value

$12.72

stock screener

  Rating & Target

sell

-33%

Previous close

$19.01

 
Intrinsic value

$12.72

 
Up/down potential

-33%

 
Rating

sell

We calculate the intrinsic value of HVT 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 0.4

 

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, %
  2.00
  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
  834
  854
  875
  900
  927
  957
  990
  1,025
  1,063
  1,104
  1,148
  1,194
  1,244
  1,297
  1,353
  1,412
  1,475
  1,541
  1,611
  1,685
  1,763
  1,846
  1,932
  2,024
  2,120
  2,222
  2,328
  2,441
  2,559
  2,683
Variable operating expenses, $m
  788
  807
  827
  851
  876
  905
  936
  969
  1,005
  1,043
  1,085
  1,129
  1,175
  1,225
  1,278
  1,334
  1,393
  1,456
  1,522
  1,592
  1,666
  1,744
  1,826
  1,913
  2,004
  2,099
  2,200
  2,306
  2,418
  2,536
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
  788
  807
  827
  851
  876
  905
  936
  969
  1,005
  1,043
  1,085
  1,129
  1,175
  1,225
  1,278
  1,334
  1,393
  1,456
  1,522
  1,592
  1,666
  1,744
  1,826
  1,913
  2,004
  2,099
  2,200
  2,306
  2,418
  2,536
Operating income, $m
  46
  47
  48
  50
  51
  53
  54
  56
  58
  61
  63
  66
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
  148
EBITDA, $m
  76
  78
  80
  82
  85
  88
  90
  94
  97
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  245
Interest expense (income), $m
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
Earnings before tax, $m
  43
  44
  45
  46
  47
  49
  50
  52
  53
  55
  57
  59
  62
  64
  66
  69
  72
  75
  78
  81
  85
  88
  92
  96
  101
  105
  110
  115
  120
  126
Tax expense, $m
  12
  12
  12
  12
  13
  13
  14
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
Net income, $m
  31
  32
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  67
  70
  74
  77
  80
  84
  88
  92

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
  449
  459
  471
  484
  499
  515
  533
  552
  572
  594
  618
  643
  669
  698
  728
  760
  794
  829
  867
  907
  949
  993
  1,040
  1,089
  1,141
  1,196
  1,253
  1,314
  1,377
  1,444
Adjusted assets (=assets-cash), $m
  449
  459
  471
  484
  499
  515
  533
  552
  572
  594
  618
  643
  669
  698
  728
  760
  794
  829
  867
  907
  949
  993
  1,040
  1,089
  1,141
  1,196
  1,253
  1,314
  1,377
  1,444
Revenue / Adjusted assets
  1.857
  1.861
  1.858
  1.860
  1.858
  1.858
  1.857
  1.857
  1.858
  1.859
  1.858
  1.857
  1.859
  1.858
  1.859
  1.858
  1.858
  1.859
  1.858
  1.858
  1.858
  1.859
  1.858
  1.859
  1.858
  1.858
  1.858
  1.858
  1.858
  1.858
Average production assets, $m
  228
  233
  239
  246
  253
  261
  270
  280
  290
  301
  313
  326
  340
  354
  369
  385
  403
  421
  440
  460
  481
  504
  528
  553
  579
  606
  636
  666
  699
  733
Working capital, $m
  38
  39
  40
  41
  43
  44
  46
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  112
  118
  123
Total debt, $m
  54
  58
  62
  67
  73
  79
  86
  93
  100
  109
  118
  127
  137
  148
  159
  171
  184
  197
  211
  226
  242
  259
  276
  295
  314
  335
  356
  379
  403
  428
Total liabilities, $m
  169
  173
  177
  182
  188
  194
  200
  207
  215
  223
  232
  242
  252
  262
  274
  286
  298
  312
  326
  341
  357
  373
  391
  410
  429
  450
  471
  494
  518
  543
Total equity, $m
  280
  287
  294
  302
  311
  322
  332
  344
  357
  371
  385
  401
  418
  435
  454
  474
  495
  518
  541
  566
  592
  620
  649
  680
  712
  746
  782
  820
  859
  901
Total liabilities and equity, $m
  449
  460
  471
  484
  499
  516
  532
  551
  572
  594
  617
  643
  670
  697
  728
  760
  793
  830
  867
  907
  949
  993
  1,040
  1,090
  1,141
  1,196
  1,253
  1,314
  1,377
  1,444
Debt-to-equity ratio
  0.190
  0.200
  0.210
  0.220
  0.230
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
Adjusted equity ratio
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624
  0.624

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  31
  32
  33
  34
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  48
  50
  52
  55
  57
  59
  62
  65
  67
  70
  74
  77
  80
  84
  88
  92
Depreciation, amort., depletion, $m
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
Funds from operations, $m
  62
  63
  65
  66
  68
  70
  73
  75
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
Cash from operations, $m
  61
  62
  64
  65
  67
  69
  71
  73
  76
  79
  82
  85
  88
  91
  95
  99
  103
  108
  112
  117
  122
  128
  134
  140
  146
  153
  160
  168
  176
  184
Maintenance CAPEX, $m
  -30
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -93
New CAPEX, $m
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
Cash from investing activities, $m
  -35
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -47
  -50
  -52
  -55
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -82
  -86
  -91
  -95
  -100
  -105
  -110
  -116
  -121
  -127
Free cash flow, $m
  27
  27
  27
  27
  27
  27
  27
  28
  28
  29
  29
  30
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  57
Issuance/(repayment) of debt, $m
  3
  4
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  19
  21
  22
  23
  24
  25
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
  4
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  19
  21
  22
  23
  24
  25
Total cash flow (excl. dividends), $m
  30
  31
  31
  32
  32
  33
  34
  35
  36
  37
  38
  40
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
Retained Cash Flow (-), $m
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
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
  24
  24
  24
  23
  23
  23
  23
  23
  23
  23
  24
  24
  24
  25
  25
  26
  26
  27
  28
  29
  29
  30
  31
  32
  33
  35
  36
  37
  39
  40
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
  23
  22
  21
  19
  18
  17
  16
  14
  13
  12
  11
  10
  9
  8
  7
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Haverty Furniture Companies, Inc. is a retailer of residential furniture and accessories. The Company sells home furnishings in its retail stores and through its Website, havertys.com. As of December 31, 2016, the Company had 124 stores in 16 states in the Southern and Midwest regions. As of December 31, 2016, the Company's retail store space totaled approximately 4.5 million square feet for 124 stores. It also offers financing through a third-party finance company, as well as an internal revolving charge credit plan. The Company's retail locations are operated using the Havertys name. It offers mattress product lines, such as Sealy, Tempur-Pedic, Serta, Stearns & Foster and Beautyrest Black. The Company's customers are college educated women in middle to upper-middle income households. The Company stores are located in areas, including Florida, Texas, North Carolina, Tennessee and Maryland.

FINANCIAL RATIOS  of  Haverty Furniture Companies, Inc. (HVT)

Valuation Ratios
P/E Ratio 14.3
Price to Sales 0.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 13.4
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.1%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio 21
Current Ratio 0.2
LT Debt to Equity 18.4%
Total Debt to Equity 19.5%
Interest Coverage 16
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 5%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. 7.4%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 54%
Gross Margin - 3 Yr. Avg. 53.8%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 5.8%
Oper. Margin - 3 Yr. Avg. 5.1%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. 4.8%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 2.7%
Effective Tax Rate 39.1%
Eff/ Tax Rate - 3 Yr. Avg. 47%
Payout Ratio 107.1%

HVT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HVT stock intrinsic value calculation we used $818 million for the last fiscal year's total revenue generated by Haverty Furniture Companies, Inc.. The default revenue input number comes from 0001 income statement of Haverty Furniture Companies, 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 HVT 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 HVT is calculated based on our internal credit rating of Haverty Furniture Companies, 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 Haverty Furniture Companies, 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 HVT stock the variable cost ratio is equal to 94.5%.

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 HVT 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 Haverty Furniture Companies, Inc..

Corporate tax rate of 27% is the nominal tax rate for Haverty Furniture Companies, 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 HVT 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 HVT are equal to 27.3%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Haverty Furniture Companies, 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 HVT is equal to 4.6%. 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 - $274.629 million for Haverty Furniture Companies, 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 20.571 million for Haverty Furniture Companies, 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 Haverty Furniture Companies, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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