Intrinsic value of Inter Parfums, Inc. - IPAR

Previous Close

$66.70

  Intrinsic Value

$60.66

stock screener

  Rating & Target

hold

-9%

Previous close

$66.70

 
Intrinsic value

$60.66

 
Up/down potential

-9%

 
Rating

hold

We calculate the intrinsic value of IPAR 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 2.1

 

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, %
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  801
  938
  1,088
  1,249
  1,423
  1,607
  1,803
  2,009
  2,227
  2,454
  2,693
  2,941
  3,201
  3,470
  3,751
  4,043
  4,346
  4,661
  4,989
  5,329
  5,683
  6,051
  6,434
  6,833
  7,248
  7,681
  8,132
  8,602
  9,093
  9,606
Variable operating expenses, $m
  645
  755
  875
  1,005
  1,144
  1,292
  1,450
  1,616
  1,790
  1,973
  2,164
  2,363
  2,572
  2,789
  3,014
  3,249
  3,492
  3,745
  4,009
  4,282
  4,567
  4,862
  5,170
  5,490
  5,824
  6,172
  6,534
  6,912
  7,307
  7,718
Fixed operating expenses, $m
  39
  40
  41
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  52
  53
  54
  55
  56
  57
  59
  60
  61
  63
  64
  65
  67
  68
  70
  71
  73
Total operating expenses, $m
  684
  795
  916
  1,046
  1,186
  1,335
  1,494
  1,661
  1,836
  2,020
  2,212
  2,412
  2,622
  2,841
  3,067
  3,303
  3,547
  3,801
  4,066
  4,341
  4,627
  4,923
  5,233
  5,554
  5,889
  6,239
  6,602
  6,982
  7,378
  7,791
Operating income, $m
  118
  144
  172
  203
  236
  271
  309
  349
  390
  434
  481
  529
  578
  630
  684
  741
  799
  860
  923
  988
  1,057
  1,128
  1,202
  1,278
  1,359
  1,442
  1,529
  1,620
  1,715
  1,814
EBITDA, $m
  125
  153
  183
  215
  249
  286
  325
  367
  410
  456
  504
  554
  606
  660
  716
  775
  836
  899
  965
  1,034
  1,105
  1,179
  1,257
  1,337
  1,421
  1,508
  1,599
  1,694
  1,793
  1,896
Interest expense (income), $m
  2
  2
  6
  9
  13
  18
  22
  27
  32
  37
  43
  49
  55
  62
  69
  76
  83
  91
  99
  107
  116
  125
  134
  144
  154
  164
  175
  186
  198
  211
  223
Earnings before tax, $m
  115
  138
  163
  190
  219
  249
  282
  317
  353
  391
  432
  473
  516
  562
  609
  657
  708
  761
  816
  873
  932
  994
  1,058
  1,125
  1,195
  1,267
  1,343
  1,422
  1,505
  1,591
Tax expense, $m
  31
  37
  44
  51
  59
  67
  76
  85
  95
  106
  117
  128
  139
  152
  164
  177
  191
  205
  220
  236
  252
  268
  286
  304
  323
  342
  363
  384
  406
  430
Net income, $m
  84
  101
  119
  139
  160
  182
  206
  231
  258
  285
  315
  345
  377
  410
  444
  480
  517
  555
  595
  637
  680
  725
  772
  821
  872
  925
  980
  1,038
  1,098
  1,161

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
  832
  974
  1,130
  1,297
  1,477
  1,669
  1,872
  2,087
  2,312
  2,549
  2,796
  3,054
  3,323
  3,604
  3,895
  4,198
  4,513
  4,840
  5,181
  5,534
  5,902
  6,284
  6,682
  7,096
  7,527
  7,976
  8,444
  8,933
  9,443
  9,975
Adjusted assets (=assets-cash), $m
  832
  974
  1,130
  1,297
  1,477
  1,669
  1,872
  2,087
  2,312
  2,549
  2,796
  3,054
  3,323
  3,604
  3,895
  4,198
  4,513
  4,840
  5,181
  5,534
  5,902
  6,284
  6,682
  7,096
  7,527
  7,976
  8,444
  8,933
  9,443
  9,975
Revenue / Adjusted assets
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
  0.963
Average production assets, $m
  132
  155
  180
  206
  235
  265
  297
  332
  367
  405
  444
  485
  528
  573
  619
  667
  717
  769
  823
  879
  938
  998
  1,062
  1,127
  1,196
  1,267
  1,342
  1,419
  1,500
  1,585
Working capital, $m
  171
  201
  233
  267
  304
  344
  386
  430
  476
  525
  576
  629
  685
  743
  803
  865
  930
  998
  1,068
  1,140
  1,216
  1,295
  1,377
  1,462
  1,551
  1,644
  1,740
  1,841
  1,946
  2,056
Total debt, $m
  107
  174
  246
  325
  409
  499
  594
  694
  800
  910
  1,026
  1,147
  1,273
  1,404
  1,541
  1,682
  1,830
  1,983
  2,142
  2,308
  2,480
  2,658
  2,845
  3,038
  3,240
  3,450
  3,670
  3,898
  4,137
  4,386
Total liabilities, $m
  389
  456
  529
  607
  691
  781
  876
  976
  1,082
  1,193
  1,309
  1,429
  1,555
  1,687
  1,823
  1,965
  2,112
  2,265
  2,424
  2,590
  2,762
  2,941
  3,127
  3,321
  3,523
  3,733
  3,952
  4,181
  4,419
  4,668
Total equity, $m
  443
  518
  601
  690
  786
  888
  996
  1,110
  1,230
  1,356
  1,488
  1,625
  1,768
  1,917
  2,072
  2,233
  2,401
  2,575
  2,756
  2,944
  3,140
  3,343
  3,555
  3,775
  4,004
  4,243
  4,492
  4,752
  5,023
  5,307
Total liabilities and equity, $m
  832
  974
  1,130
  1,297
  1,477
  1,669
  1,872
  2,086
  2,312
  2,549
  2,797
  3,054
  3,323
  3,604
  3,895
  4,198
  4,513
  4,840
  5,180
  5,534
  5,902
  6,284
  6,682
  7,096
  7,527
  7,976
  8,444
  8,933
  9,442
  9,975
Debt-to-equity ratio
  0.240
  0.340
  0.410
  0.470
  0.520
  0.560
  0.600
  0.630
  0.650
  0.670
  0.690
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.780
  0.790
  0.800
  0.800
  0.800
  0.810
  0.810
  0.820
  0.820
  0.820
  0.830
Adjusted equity ratio
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532
  0.532

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  84
  101
  119
  139
  160
  182
  206
  231
  258
  285
  315
  345
  377
  410
  444
  480
  517
  555
  595
  637
  680
  725
  772
  821
  872
  925
  980
  1,038
  1,098
  1,161
Depreciation, amort., depletion, $m
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  23
  25
  27
  30
  32
  35
  37
  40
  43
  46
  49
  52
  55
  58
  62
  66
  70
  74
  78
  82
Funds from operations, $m
  92
  110
  129
  150
  173
  197
  222
  249
  278
  307
  338
  371
  404
  440
  476
  514
  554
  595
  638
  683
  729
  777
  827
  880
  934
  991
  1,050
  1,112
  1,176
  1,244
Change in working capital, $m
  27
  29
  32
  35
  37
  39
  42
  44
  46
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
Cash from operations, $m
  65
  80
  97
  116
  136
  157
  180
  205
  231
  259
  287
  317
  349
  382
  416
  452
  489
  528
  568
  610
  653
  698
  745
  794
  845
  898
  953
  1,011
  1,071
  1,134
Maintenance CAPEX, $m
  -6
  -7
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -37
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -66
  -70
  -74
  -78
New CAPEX, $m
  -21
  -23
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -71
  -74
  -78
  -81
  -85
Cash from investing activities, $m
  -27
  -30
  -33
  -36
  -40
  -42
  -46
  -49
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -148
  -155
  -163
Free cash flow, $m
  38
  51
  64
  80
  96
  115
  134
  156
  178
  202
  227
  253
  281
  310
  340
  372
  405
  439
  474
  511
  549
  589
  630
  673
  718
  765
  813
  864
  917
  972
Issuance/(repayment) of debt, $m
  61
  67
  73
  78
  84
  90
  95
  100
  106
  111
  116
  121
  126
  131
  136
  142
  147
  153
  159
  165
  172
  179
  186
  194
  202
  210
  219
  229
  239
  249
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  
  61
  67
  73
  78
  84
  90
  95
  100
  106
  111
  116
  121
  126
  131
  136
  142
  147
  153
  159
  165
  172
  179
  186
  194
  202
  210
  219
  229
  239
  249
Total cash flow (excl. dividends), $m
  99
  118
  137
  158
  181
  204
  229
  256
  284
  313
  343
  374
  407
  441
  477
  514
  552
  592
  633
  676
  721
  768
  817
  867
  920
  975
  1,033
  1,093
  1,155
  1,221
Retained Cash Flow (-), $m
  -69
  -76
  -83
  -89
  -96
  -102
  -108
  -114
  -120
  -126
  -132
  -137
  -143
  -149
  -155
  -161
  -168
  -174
  -181
  -188
  -196
  -203
  -212
  -220
  -229
  -239
  -249
  -260
  -271
  -283
Prev. year cash balance distribution, $m
  74
  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
  104
  42
  55
  69
  85
  102
  121
  142
  164
  187
  211
  237
  264
  292
  322
  352
  384
  418
  452
  488
  526
  565
  605
  647
  691
  736
  783
  833
  884
  937
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
  100
  38
  47
  57
  66
  74
  82
  89
  94
  98
  100
  101
  100
  98
  94
  90
  84
  77
  70
  62
  54
  47
  40
  33
  27
  21
  17
  13
  10
  7
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

Inter Parfums, Inc. operates in the fragrance business. The Company manufactures, markets and distributes an array of fragrance and fragrance related products. It operates through two segments: European based operations and United States based operations. The European Operations segment produces and distributes its fragrance products under license agreements with brand owners. It has a portfolio of prestige brands, which include Balmain, Boucheron, Coach, Jimmy Choo, Karl Lagerfeld, Lanvin, Paul Smith, S.T. Dupont, Repetto, Rochas, and Van Cleef & Arpels. Its prestige brand fragrance products are also marketed through its United States operations. These fragrance products are sold under various names, which include Abercrombie & Fitch, Agent Provocateur, Anna Sui, bebe, Dunhill, French Connection, Oscar de la Rent and Shanghai Tang brands. The Company sells its products to department stores, perfumeries, specialty stores, and domestic and international wholesalers and distributors.

FINANCIAL RATIOS  of  Inter Parfums, Inc. (IPAR)

Valuation Ratios
P/E Ratio 62.9
Price to Sales 4
Price to Book 5.6
Price to Tangible Book
Price to Cash Flow 37.8
Price to Free Cash Flow 42.4
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -95.2%
Cap. Spend. - 3 Yr. Gr. Rate -14.3%
Financial Strength
Quick Ratio 12
Current Ratio 0
LT Debt to Equity 14.3%
Total Debt to Equity 20.3%
Interest Coverage 35
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 7.2%
Return On Equity 9%
Return On Equity - 3 Yr. Avg. 8.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 62.6%
Gross Margin - 3 Yr. Avg. 60.6%
EBITDA Margin 16.1%
EBITDA Margin - 3 Yr. Avg. 15.1%
Operating Margin 12.9%
Oper. Margin - 3 Yr. Avg. 12.2%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 12.4%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 6.2%
Effective Tax Rate 35.8%
Eff/ Tax Rate - 3 Yr. Avg. 35.7%
Payout Ratio 54.5%

IPAR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IPAR stock intrinsic value calculation we used $676 million for the last fiscal year's total revenue generated by Inter Parfums, Inc.. The default revenue input number comes from 0001 income statement of Inter Parfums, 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 IPAR stock valuation model: a) initial revenue growth rate of 18.5% 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 IPAR is calculated based on our internal credit rating of Inter Parfums, 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 Inter Parfums, 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 IPAR stock the variable cost ratio is equal to 80.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $38 million in the base year in the intrinsic value calculation for IPAR 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 Inter Parfums, Inc..

Corporate tax rate of 27% is the nominal tax rate for Inter Parfums, 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 IPAR 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 IPAR are equal to 16.5%.

Life of production assets of 19.3 years is the average useful life of capital assets used in Inter Parfums, 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 IPAR is equal to 21.4%. 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 - $447.607 million for Inter Parfums, 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 31.397 million for Inter Parfums, 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 Inter Parfums, Inc. at the current share price and the inputted number of shares is $2.1 billion.

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