Intrinsic value of Inter Parfums - IPAR

Previous Close

$42.30

  Intrinsic Value

$34.40

stock screener

  Rating & Target

hold

-19%

  Value-price divergence*

-12%

Previous close

$42.30

 
Intrinsic value

$34.40

 
Up/down potential

-19%

 
Rating

hold

 
Value-price divergence*

-12%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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 2016), $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 1.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.09
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
  5.72
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
Revenue, $m
  521
  575
  631
  689
  751
  814
  880
  949
  1,021
  1,095
  1,172
  1,253
  1,336
  1,423
  1,513
  1,607
  1,705
  1,807
  1,913
  2,024
  2,140
  2,261
  2,387
  2,519
  2,656
  2,800
  2,951
  3,109
  3,274
  3,447
  3,627
Variable operating expenses, $m
 
  499
  548
  598
  651
  707
  764
  824
  886
  950
  1,018
  1,087
  1,160
  1,235
  1,313
  1,395
  1,480
  1,568
  1,661
  1,757
  1,857
  1,962
  2,072
  2,186
  2,306
  2,431
  2,562
  2,698
  2,842
  2,992
  3,149
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
  454
  499
  548
  598
  651
  707
  764
  824
  886
  950
  1,018
  1,087
  1,160
  1,235
  1,313
  1,395
  1,480
  1,568
  1,661
  1,757
  1,857
  1,962
  2,072
  2,186
  2,306
  2,431
  2,562
  2,698
  2,842
  2,992
  3,149
Operating income, $m
  67
  76
  83
  91
  99
  107
  116
  125
  135
  145
  155
  165
  176
  188
  200
  212
  225
  239
  253
  267
  282
  298
  315
  332
  351
  370
  390
  410
  432
  455
  479
EBITDA, $m
  82
  92
  101
  111
  121
  131
  142
  153
  164
  176
  189
  201
  215
  229
  243
  259
  274
  291
  308
  326
  344
  364
  384
  405
  427
  450
  475
  500
  527
  554
  583
Interest expense (income), $m
  2
  2
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  56
  59
Earnings before tax, $m
  67
  74
  80
  87
  94
  101
  109
  116
  125
  133
  142
  151
  160
  170
  180
  191
  202
  214
  226
  238
  251
  265
  279
  294
  310
  326
  343
  361
  380
  399
  420
Tax expense, $m
  24
  20
  22
  23
  25
  27
  29
  31
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  64
  68
  72
  75
  79
  84
  88
  93
  98
  103
  108
  113
Net income, $m
  33
  54
  59
  64
  69
  74
  79
  85
  91
  97
  103
  110
  117
  124
  132
  139
  147
  156
  165
  174
  183
  193
  204
  215
  226
  238
  251
  264
  277
  292
  307

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  256
  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
  682
  470
  516
  564
  614
  666
  720
  776
  835
  895
  958
  1,024
  1,092
  1,163
  1,237
  1,314
  1,394
  1,477
  1,564
  1,655
  1,750
  1,848
  1,952
  2,059
  2,172
  2,290
  2,413
  2,542
  2,677
  2,818
  2,966
Adjusted assets (=assets-cash), $m
  426
  470
  516
  564
  614
  666
  720
  776
  835
  895
  958
  1,024
  1,092
  1,163
  1,237
  1,314
  1,394
  1,477
  1,564
  1,655
  1,750
  1,848
  1,952
  2,059
  2,172
  2,290
  2,413
  2,542
  2,677
  2,818
  2,966
Revenue / Adjusted assets
  1.223
  1.223
  1.223
  1.222
  1.223
  1.222
  1.222
  1.223
  1.223
  1.223
  1.223
  1.224
  1.223
  1.224
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
  1.223
Average production assets, $m
  197
  217
  238
  261
  284
  308
  333
  359
  386
  414
  443
  473
  505
  538
  572
  607
  644
  683
  723
  765
  809
  855
  902
  952
  1,004
  1,059
  1,116
  1,175
  1,237
  1,303
  1,371
Working capital, $m
  330
  106
  116
  127
  138
  150
  162
  175
  188
  201
  216
  230
  246
  262
  278
  296
  314
  332
  352
  372
  394
  416
  439
  463
  489
  515
  543
  572
  602
  634
  667
Total debt, $m
  75
  83
  114
  147
  181
  216
  253
  292
  331
  373
  416
  460
  507
  555
  606
  658
  712
  769
  828
  890
  955
  1,022
  1,092
  1,165
  1,242
  1,322
  1,406
  1,494
  1,586
  1,682
  1,783
Total liabilities, $m
  312
  320
  351
  384
  418
  453
  490
  529
  568
  610
  653
  697
  744
  792
  843
  895
  949
  1,006
  1,065
  1,127
  1,192
  1,259
  1,329
  1,402
  1,479
  1,559
  1,643
  1,731
  1,823
  1,919
  2,020
Total equity, $m
  370
  150
  165
  180
  196
  212
  230
  248
  266
  286
  306
  327
  348
  371
  395
  419
  445
  471
  499
  528
  558
  590
  623
  657
  693
  730
  770
  811
  854
  899
  946
Total liabilities and equity, $m
  682
  470
  516
  564
  614
  665
  720
  777
  834
  896
  959
  1,024
  1,092
  1,163
  1,238
  1,314
  1,394
  1,477
  1,564
  1,655
  1,750
  1,849
  1,952
  2,059
  2,172
  2,289
  2,413
  2,542
  2,677
  2,818
  2,966
Debt-to-equity ratio
  0.203
  0.550
  0.690
  0.820
  0.920
  1.020
  1.100
  1.180
  1.240
  1.310
  1.360
  1.410
  1.450
  1.500
  1.530
  1.570
  1.600
  1.630
  1.660
  1.690
  1.710
  1.730
  1.750
  1.770
  1.790
  1.810
  1.830
  1.840
  1.860
  1.870
  1.880
Adjusted equity ratio
  0.268
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319
  0.319

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  54
  59
  64
  69
  74
  79
  85
  91
  97
  103
  110
  117
  124
  132
  139
  147
  156
  165
  174
  183
  193
  204
  215
  226
  238
  251
  264
  277
  292
  307
Depreciation, amort., depletion, $m
  15
  17
  18
  20
  22
  23
  25
  27
  29
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  62
  65
  69
  73
  77
  81
  85
  90
  94
  99
  105
Funds from operations, $m
  55
  71
  77
  83
  90
  97
  105
  112
  120
  129
  137
  146
  156
  165
  175
  186
  197
  208
  220
  232
  245
  259
  273
  287
  303
  319
  336
  353
  372
  391
  411
Change in working capital, $m
  0
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  27
  28
  29
  30
  32
  33
Cash from operations, $m
  55
  61
  67
  73
  79
  86
  93
  100
  107
  115
  123
  131
  140
  149
  159
  168
  179
  189
  200
  212
  224
  236
  250
  263
  277
  292
  308
  324
  341
  359
  378
Maintenance CAPEX, $m
  0
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -94
  -99
New CAPEX, $m
  -6
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -68
Cash from investing activities, $m
  -20
  -35
  -38
  -40
  -43
  -46
  -48
  -51
  -54
  -57
  -61
  -64
  -68
  -72
  -75
  -80
  -83
  -88
  -92
  -97
  -102
  -108
  -113
  -119
  -125
  -131
  -138
  -145
  -152
  -159
  -167
Free cash flow, $m
  35
  25
  29
  32
  36
  40
  44
  48
  53
  57
  62
  67
  72
  78
  83
  89
  95
  102
  108
  115
  122
  129
  137
  145
  153
  161
  170
  180
  189
  199
  210
Issuance/(repayment) of debt, $m
  -22
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
Issuance/(repurchase) of shares, $m
  -1
  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  
  -27
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
Total cash flow (excl. dividends), $m
  3
  55
  60
  65
  70
  75
  81
  87
  93
  99
  105
  112
  119
  126
  134
  142
  150
  158
  167
  177
  186
  196
  207
  218
  229
  242
  254
  267
  281
  296
  311
Retained Cash Flow (-), $m
  -4
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
Prev. year cash balance distribution, $m
 
  234
  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
 
  276
  45
  50
  54
  59
  64
  69
  74
  79
  85
  91
  97
  104
  110
  117
  124
  132
  139
  148
  156
  165
  174
  184
  194
  204
  215
  226
  238
  251
  264
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
 
  264
  42
  43
  45
  46
  46
  46
  46
  46
  45
  43
  41
  39
  37
  34
  32
  29
  26
  23
  20
  17
  14
  12
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  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 (IPAR)

Valuation Ratios
P/E Ratio 39.9
Price to Sales 2.5
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 23.9
Price to Free Cash Flow 26.9
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 $521 million for the last fiscal year's total revenue generated by Inter Parfums. The default revenue input number comes from 2016 income statement of Inter Parfums. 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 10.3% 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, 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.
    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 86.8%.

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 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 3.5% for Inter Parfums.

Corporate tax rate of 27% is the nominal tax rate for Inter Parfums. 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 37.8%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Inter Parfums 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 18.4%. 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 - $370 million for Inter Parfums - 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 31.307 million for Inter Parfums 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 at the current share price and the inputted number of shares is $1.3 billion.

RELATED COMPANIES Price Int.Val. Rating
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COTY Coty Cl A 15.85 483.37  str.buy
COH Coach Inc. 40.35 33.65  hold
ANF Abercrombie&Fi 13.76 7.58  sell

COMPANY NEWS

▶ Inter Parfums beats 2Q profit forecasts   [Aug-07-17 11:58PM  Associated Press]
▶ ETFs with exposure to Inter Parfums, Inc. : July 5, 2017   [Jul-05-17 12:49PM  Capital Cube]
▶ The 3 Best Dividend Stocks in Beauty Products   [May-20-17 10:00AM  Motley Fool]
▶ Inter Parfums beats Street 1Q forecasts   [May-09-17 07:16PM  Associated Press]
▶ Top 4 Cosmetics Stocks of 2017   [Apr-13-17 11:44AM  Investopedia]
▶ Inter Parfums Beats Q4 Estimates as Rivals Decline   [Mar-14-17 05:52PM  Investopedia]
▶ Inter Parfums tops Street 4Q forecasts   [04:24PM  Associated Press]
Financial statements of IPAR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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