Intrinsic value of Haverty Furniture - HVT

Previous Close

$20.94

  Intrinsic Value

$14.74

stock screener

  Rating & Target

sell

-30%

Previous close

$20.94

 
Intrinsic value

$14.74

 
Up/down potential

-30%

 
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
  836
  855
  877
  902
  930
  960
  992
  1,028
  1,066
  1,107
  1,150
  1,197
  1,247
  1,300
  1,356
  1,415
  1,478
  1,544
  1,615
  1,689
  1,767
  1,850
  1,937
  2,028
  2,125
  2,227
  2,334
  2,446
  2,565
  2,689
Variable operating expenses, $m
  787
  805
  826
  849
  875
  903
  934
  967
  1,003
  1,041
  1,082
  1,126
  1,173
  1,223
  1,276
  1,332
  1,391
  1,453
  1,519
  1,589
  1,663
  1,741
  1,822
  1,909
  2,000
  2,095
  2,196
  2,302
  2,413
  2,531
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
  787
  805
  826
  849
  875
  903
  934
  967
  1,003
  1,041
  1,082
  1,126
  1,173
  1,223
  1,276
  1,332
  1,391
  1,453
  1,519
  1,589
  1,663
  1,741
  1,822
  1,909
  2,000
  2,095
  2,196
  2,302
  2,413
  2,531
Operating income, $m
  49
  50
  52
  53
  55
  57
  59
  61
  63
  65
  68
  71
  74
  77
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  125
  131
  138
  144
  151
  159
EBITDA, $m
  80
  82
  84
  87
  89
  92
  95
  99
  102
  106
  111
  115
  120
  125
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
Interest expense (income), $m
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
Earnings before tax, $m
  46
  47
  48
  50
  51
  52
  54
  56
  58
  60
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  109
  114
  119
  125
  131
  137
Tax expense, $m
  13
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
Net income, $m
  34
  35
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100

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
  469
  480
  492
  506
  521
  538
  556
  576
  597
  620
  645
  671
  699
  728
  760
  793
  828
  866
  905
  947
  991
  1,037
  1,086
  1,137
  1,191
  1,248
  1,308
  1,371
  1,438
  1,508
Adjusted assets (=assets-cash), $m
  469
  480
  492
  506
  521
  538
  556
  576
  597
  620
  645
  671
  699
  728
  760
  793
  828
  866
  905
  947
  991
  1,037
  1,086
  1,137
  1,191
  1,248
  1,308
  1,371
  1,438
  1,508
Revenue / Adjusted assets
  1.783
  1.781
  1.783
  1.783
  1.785
  1.784
  1.784
  1.785
  1.786
  1.785
  1.783
  1.784
  1.784
  1.786
  1.784
  1.784
  1.785
  1.783
  1.785
  1.784
  1.783
  1.784
  1.784
  1.784
  1.784
  1.784
  1.784
  1.784
  1.784
  1.783
Average production assets, $m
  236
  241
  247
  254
  262
  271
  280
  290
  301
  312
  324
  338
  352
  366
  382
  399
  417
  436
  455
  476
  498
  522
  546
  572
  599
  628
  658
  690
  723
  758
Working capital, $m
  38
  38
  39
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  64
  67
  69
  73
  76
  80
  83
  87
  91
  96
  100
  105
  110
  115
  121
Total debt, $m
  58
  62
  66
  71
  77
  83
  89
  96
  104
  112
  121
  131
  141
  151
  163
  175
  187
  201
  215
  230
  246
  262
  280
  298
  318
  338
  360
  383
  407
  432
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
  409
  429
  449
  471
  494
  518
  543
Total equity, $m
  300
  307
  315
  324
  333
  344
  356
  369
  382
  397
  413
  429
  447
  466
  486
  508
  530
  554
  579
  606
  634
  664
  695
  728
  762
  799
  837
  878
  920
  965
Total liabilities and equity, $m
  469
  480
  492
  506
  521
  538
  556
  576
  597
  620
  645
  671
  699
  728
  760
  794
  828
  866
  905
  947
  991
  1,037
  1,086
  1,137
  1,191
  1,248
  1,308
  1,372
  1,438
  1,508
Debt-to-equity ratio
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  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
  0.440
  0.440
  0.450
Adjusted equity ratio
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  34
  35
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
Depreciation, amort., depletion, $m
  31
  32
  33
  33
  34
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
Funds from operations, $m
  65
  66
  68
  70
  72
  74
  76
  79
  82
  85
  88
  91
  95
  99
  103
  107
  112
  116
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
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
  64
  65
  67
  69
  70
  73
  75
  77
  80
  83
  86
  89
  93
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
Maintenance CAPEX, $m
  -30
  -31
  -32
  -33
  -33
  -34
  -36
  -37
  -38
  -40
  -41
  -43
  -44
  -46
  -48
  -50
  -53
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
New CAPEX, $m
  -4
  -5
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
Cash from investing activities, $m
  -34
  -36
  -38
  -40
  -41
  -42
  -45
  -47
  -49
  -52
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -85
  -89
  -94
  -98
  -102
  -108
  -113
  -119
  -124
  -130
Free cash flow, $m
  29
  29
  29
  29
  29
  30
  30
  30
  31
  32
  32
  33
  34
  35
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
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
  33
  33
  33
  34
  35
  36
  37
  38
  39
  40
  41
  43
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
Retained Cash Flow (-), $m
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
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
  26
  26
  25
  25
  25
  25
  25
  25
  25
  26
  26
  26
  27
  27
  28
  29
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  41
  42
  44
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
  24
  22
  21
  19
  18
  17
  16
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  5
  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 (HVT)

Valuation Ratios
P/E Ratio 15.8
Price to Sales 0.5
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 14.7
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 $819.866 million for the last fiscal year's total revenue generated by Haverty Furniture. The default revenue input number comes from 0001 income statement of Haverty Furniture. 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, 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.
    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 94.1%.

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 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.

Corporate tax rate of 27% is the nominal tax rate for Haverty Furniture. 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 28.2%.

Life of production assets of 7.6 years is the average useful life of capital assets used in Haverty Furniture 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 4.5%. 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 - $294.142 million for Haverty Furniture - 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 19.202 million for Haverty Furniture 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 at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Haverty Furniture: 3Q Earnings Snapshot   [Oct-30-18 07:23PM  Associated Press]
▶ Havertys Reports Sales for Third Quarter   [06:12AM  GlobeNewswire]
▶ 5 Small-Cap Stocks With High Dividend Yields   [Oct-03-18 04:39PM  GuruFocus.com]
▶ Haverty Furniture: 2Q Earnings Snapshot   [Jul-31-18 04:54PM  Associated Press]
▶ Havertys Reports Sales for Second Quarter   [Jul-06-18 04:09PM  GlobeNewswire]
▶ Best NasdaqGS Cyclical Dividend Paying Companies   [May-02-18 08:02AM  Simply Wall St.]
▶ Haverty Furniture: 1Q Earnings Snapshot   [May-01-18 05:13PM  Associated Press]
▶ April Top Undervalued Stock   [Apr-10-18 10:02AM  Simply Wall St.]
▶ Havertys Reports Sales for First Quarter   [06:25AM  GlobeNewswire]
▶ 5 Stocks Poised to Win in a Down Market   [Apr-05-18 06:00AM  Investopedia]
▶ Havertys Increases its Quarterly Cash Dividend   [Feb-27-18 03:45PM  GlobeNewswire]
▶ Haverty Furniture posts 4Q profit   [Feb-21-18 05:02AM  Associated Press]
▶ 5 Small Cap Value Stocks That are on Sale   [Feb-08-18 02:45PM  InvestorPlace]
▶ Small Cap Value Stocks are on Sale   [Feb-07-18 07:06PM  Zacks]
▶ Havertys Announces Quarterly Cash Dividend   [Nov-07-17 04:39PM  GlobeNewswire]
▶ Haverty Furniture posts 3Q profit   [Oct-31-17 04:53PM  Associated Press]
▶ New Strong Sell Stocks for October 12th   [Oct-12-17 09:16AM  Zacks]
▶ Furniture Stores Show September Stock Gains   [Oct-09-17 05:17PM  Motley Fool]
▶ Havertys Reports Sales for Third Quarter   [Oct-06-17 06:25AM  GlobeNewswire]
▶ New Strong Buy Stocks for October 3rd   [Oct-03-17 09:34AM  Zacks]
▶ RH Joins Elite Club Of Stocks With RS Ratings Over 90   [Sep-08-17 03:00AM  Investor's Business Daily]
▶ These 3 Stocks Just Raised Their Dividends   [Aug-14-17 07:45AM  Motley Fool]
▶ Havertys Increases its Cash Dividend by 25%   [Aug-08-17 04:18PM  GlobeNewswire]
▶ Haverty Furniture posts 2Q profit   [Jul-31-17 07:26PM  Associated Press]

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