Intrinsic value of Ingles Markets, Incorporated - IMKTA

Previous Close

$31.58

  Intrinsic Value

$65.32

stock screener

  Rating & Target

str. buy

+107%

Previous close

$31.58

 
Intrinsic value

$65.32

 
Up/down potential

+107%

 
Rating

str. buy

We calculate the intrinsic value of IMKTA 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 0.6

 

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
  4,285
  4,488
  4,702
  4,926
  5,163
  5,412
  5,674
  5,950
  6,239
  6,544
  6,864
  7,201
  7,555
  7,927
  8,318
  8,729
  9,160
  9,614
  10,090
  10,591
  11,116
  11,668
  12,248
  12,858
  13,497
  14,169
  14,875
  15,616
  16,394
  17,212
Variable operating expenses, $m
  4,142
  4,332
  4,532
  4,742
  4,964
  5,197
  5,442
  5,700
  5,971
  6,257
  6,426
  6,741
  7,073
  7,421
  7,787
  8,172
  8,576
  9,000
  9,446
  9,915
  10,407
  10,924
  11,466
  12,037
  12,636
  13,265
  13,925
  14,619
  15,348
  16,113
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
  4,142
  4,332
  4,532
  4,742
  4,964
  5,197
  5,442
  5,700
  5,971
  6,257
  6,426
  6,741
  7,073
  7,421
  7,787
  8,172
  8,576
  9,000
  9,446
  9,915
  10,407
  10,924
  11,466
  12,037
  12,636
  13,265
  13,925
  14,619
  15,348
  16,113
Operating income, $m
  143
  156
  170
  184
  199
  215
  232
  249
  268
  287
  438
  460
  482
  506
  531
  557
  585
  614
  644
  676
  710
  745
  782
  821
  862
  904
  950
  997
  1,047
  1,099
EBITDA, $m
  392
  410
  430
  450
  472
  495
  518
  544
  570
  598
  627
  658
  690
  724
  760
  798
  837
  878
  922
  968
  1,016
  1,066
  1,119
  1,175
  1,233
  1,295
  1,359
  1,427
  1,498
  1,573
Interest expense (income), $m
  47
  48
  51
  54
  58
  61
  65
  69
  74
  78
  83
  88
  93
  99
  105
  111
  117
  124
  131
  139
  147
  155
  164
  173
  182
  192
  203
  214
  226
  238
  251
Earnings before tax, $m
  96
  105
  116
  126
  138
  150
  162
  176
  190
  204
  350
  366
  383
  401
  420
  440
  461
  482
  505
  529
  555
  581
  609
  638
  669
  701
  735
  771
  808
  848
Tax expense, $m
  26
  28
  31
  34
  37
  40
  44
  47
  51
  55
  95
  99
  103
  108
  113
  119
  124
  130
  136
  143
  150
  157
  164
  172
  181
  189
  199
  208
  218
  229
Net income, $m
  70
  77
  84
  92
  101
  109
  119
  128
  138
  149
  256
  267
  280
  293
  307
  321
  336
  352
  369
  386
  405
  424
  445
  466
  488
  512
  537
  563
  590
  619

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
  1,911
  2,001
  2,096
  2,196
  2,302
  2,413
  2,530
  2,652
  2,782
  2,918
  3,060
  3,210
  3,368
  3,534
  3,708
  3,892
  4,084
  4,286
  4,499
  4,722
  4,956
  5,202
  5,461
  5,732
  6,018
  6,317
  6,632
  6,962
  7,309
  7,674
Adjusted assets (=assets-cash), $m
  1,911
  2,001
  2,096
  2,196
  2,302
  2,413
  2,530
  2,652
  2,782
  2,918
  3,060
  3,210
  3,368
  3,534
  3,708
  3,892
  4,084
  4,286
  4,499
  4,722
  4,956
  5,202
  5,461
  5,732
  6,018
  6,317
  6,632
  6,962
  7,309
  7,674
Revenue / Adjusted assets
  2.242
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.244
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
  2.243
Average production assets, $m
  1,346
  1,409
  1,476
  1,547
  1,621
  1,699
  1,782
  1,868
  1,959
  2,055
  2,155
  2,261
  2,372
  2,489
  2,612
  2,741
  2,876
  3,019
  3,168
  3,325
  3,490
  3,664
  3,846
  4,037
  4,238
  4,449
  4,671
  4,903
  5,148
  5,405
Working capital, $m
  249
  260
  273
  286
  299
  314
  329
  345
  362
  380
  398
  418
  438
  460
  482
  506
  531
  558
  585
  614
  645
  677
  710
  746
  783
  822
  863
  906
  951
  998
Total debt, $m
  924
  985
  1,049
  1,116
  1,188
  1,262
  1,341
  1,424
  1,511
  1,603
  1,699
  1,800
  1,906
  2,018
  2,136
  2,259
  2,389
  2,525
  2,668
  2,818
  2,976
  3,142
  3,317
  3,500
  3,692
  3,894
  4,106
  4,329
  4,562
  4,808
Total liabilities, $m
  1,288
  1,349
  1,413
  1,480
  1,551
  1,626
  1,705
  1,788
  1,875
  1,966
  2,063
  2,164
  2,270
  2,382
  2,499
  2,623
  2,753
  2,889
  3,032
  3,182
  3,340
  3,506
  3,681
  3,864
  4,056
  4,258
  4,470
  4,693
  4,926
  5,172
Total equity, $m
  623
  652
  683
  716
  750
  787
  825
  865
  907
  951
  998
  1,047
  1,098
  1,152
  1,209
  1,269
  1,331
  1,397
  1,467
  1,539
  1,616
  1,696
  1,780
  1,869
  1,962
  2,059
  2,162
  2,270
  2,383
  2,502
Total liabilities and equity, $m
  1,911
  2,001
  2,096
  2,196
  2,301
  2,413
  2,530
  2,653
  2,782
  2,917
  3,061
  3,211
  3,368
  3,534
  3,708
  3,892
  4,084
  4,286
  4,499
  4,721
  4,956
  5,202
  5,461
  5,733
  6,018
  6,317
  6,632
  6,963
  7,309
  7,674
Debt-to-equity ratio
  1.480
  1.510
  1.530
  1.560
  1.580
  1.600
  1.630
  1.650
  1.670
  1.680
  1.700
  1.720
  1.740
  1.750
  1.770
  1.780
  1.790
  1.810
  1.820
  1.830
  1.840
  1.850
  1.860
  1.870
  1.880
  1.890
  1.900
  1.910
  1.910
  1.920
Adjusted equity ratio
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326
  0.326

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  70
  77
  84
  92
  101
  109
  119
  128
  138
  149
  256
  267
  280
  293
  307
  321
  336
  352
  369
  386
  405
  424
  445
  466
  488
  512
  537
  563
  590
  619
Depreciation, amort., depletion, $m
  248
  254
  260
  266
  273
  279
  287
  294
  302
  311
  189
  198
  208
  218
  229
  240
  252
  265
  278
  292
  306
  321
  337
  354
  372
  390
  410
  430
  452
  474
Funds from operations, $m
  318
  331
  344
  358
  373
  389
  405
  422
  441
  460
  445
  466
  488
  511
  536
  561
  588
  617
  647
  678
  711
  746
  782
  820
  860
  902
  947
  993
  1,042
  1,093
Change in working capital, $m
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  47
Cash from operations, $m
  307
  319
  332
  345
  359
  374
  390
  406
  424
  442
  426
  446
  467
  490
  513
  538
  563
  591
  619
  649
  681
  714
  748
  785
  823
  863
  906
  950
  997
  1,046
Maintenance CAPEX, $m
  -113
  -118
  -124
  -129
  -136
  -142
  -149
  -156
  -164
  -172
  -180
  -189
  -198
  -208
  -218
  -229
  -240
  -252
  -265
  -278
  -292
  -306
  -321
  -337
  -354
  -372
  -390
  -410
  -430
  -452
New CAPEX, $m
  -62
  -64
  -67
  -71
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
  -111
  -117
  -123
  -129
  -136
  -142
  -150
  -157
  -165
  -173
  -182
  -191
  -201
  -211
  -222
  -233
  -244
  -257
Cash from investing activities, $m
  -175
  -182
  -191
  -200
  -210
  -220
  -231
  -243
  -255
  -268
  -281
  -295
  -309
  -325
  -341
  -358
  -376
  -394
  -415
  -435
  -457
  -479
  -503
  -528
  -555
  -583
  -612
  -643
  -674
  -709
Free cash flow, $m
  133
  137
  141
  145
  149
  154
  159
  164
  169
  175
  145
  151
  158
  165
  172
  180
  188
  196
  205
  214
  224
  234
  245
  256
  268
  281
  294
  308
  322
  337
Issuance/(repayment) of debt, $m
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  96
  101
  106
  112
  117
  123
  130
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
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  
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  96
  101
  106
  112
  117
  123
  130
  136
  143
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
Total cash flow (excl. dividends), $m
  191
  198
  205
  213
  221
  229
  237
  246
  256
  266
  241
  253
  264
  277
  289
  303
  317
  332
  348
  364
  382
  400
  419
  439
  460
  483
  506
  530
  556
  583
Retained Cash Flow (-), $m
  -27
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -113
  -119
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
  164
  169
  174
  180
  186
  193
  199
  206
  214
  222
  195
  204
  213
  222
  233
  243
  254
  266
  279
  292
  305
  320
  335
  351
  367
  385
  403
  423
  443
  464
Discount rate, %
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
  151
  142
  133
  124
  114
  104
  94
  84
  74
  64
  47
  40
  34
  28
  23
  18
  14
  11
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  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

Ingles Markets, Incorporated (Ingles) is a supermarket chain in the southeast United States. The Company's segments include retail grocery and other. Its other segment consists of fluid dairy operations and shopping center rentals. As of September 24, 2016, the Company operated 201 supermarkets in Georgia, North Carolina, South Carolina, Tennessee, Virginia and Alabama. The Company locates its supermarkets primarily in suburban areas, small towns and rural communities. Ingles supermarkets offer customers a range of food products, including grocery, meat and dairy products, produce, frozen foods and other perishables and non-food products. Its non-food products include fuel centers, pharmacies, health and beauty care products and general merchandise. The Company focuses on selling products to its customers through the development of organic products, bakery departments and prepared foods, including delicatessen sections.

FINANCIAL RATIOS  of  Ingles Markets, Incorporated (IMKTA)

Valuation Ratios
P/E Ratio 11.8
Price to Sales 0.2
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 4.1
Price to Free Cash Flow 22.9
Growth Rates
Sales Growth Rate 5.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.2%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 169.5%
Total Debt to Equity 171.8%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 4.2%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 12.5%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 24.1%
Gross Margin - 3 Yr. Avg. 24%
EBITDA Margin 6%
EBITDA Margin - 3 Yr. Avg. 6.3%
Operating Margin 3.2%
Oper. Margin - 3 Yr. Avg. 3.4%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. 2.3%
Net Profit Margin 1.3%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 35.7%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 24.1%

IMKTA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IMKTA stock intrinsic value calculation we used $4093 million for the last fiscal year's total revenue generated by Ingles Markets, Incorporated. The default revenue input number comes from 0001 income statement of Ingles Markets, Incorporated. 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 IMKTA 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 8.5%, whose default value for IMKTA is calculated based on our internal credit rating of Ingles Markets, Incorporated, 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 Ingles Markets, Incorporated.
    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 IMKTA stock the variable cost ratio is equal to 96.8%.

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 IMKTA 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 5.5% for Ingles Markets, Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Ingles Markets, Incorporated. 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 IMKTA 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 IMKTA are equal to 31.4%.

Life of production assets of 11.4 years is the average useful life of capital assets used in Ingles Markets, Incorporated 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 IMKTA is equal to 5.8%. 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 - $595.413808 million for Ingles Markets, Incorporated - 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 20.260 million for Ingles Markets, Incorporated 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 Ingles Markets, Incorporated at the current share price and the inputted number of shares is $0.6 billion.

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