Intrinsic value of Kirkland's - KIRK

Previous Close

$11.34

  Intrinsic Value

$12.56

stock screener

  Rating & Target

hold

+11%

Previous close

$11.34

 
Intrinsic value

$12.56

 
Up/down potential

+11%

 
Rating

hold

We calculate the intrinsic value of KIRK 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 2017), $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 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
Revenue, $m
  628
  664
  702
  741
  782
  825
  870
  916
  965
  1,017
  1,070
  1,127
  1,185
  1,247
  1,312
  1,379
  1,450
  1,525
  1,603
  1,685
  1,771
  1,861
  1,955
  2,055
  2,159
  2,268
  2,382
  2,503
  2,629
  2,761
Variable operating expenses, $m
  600
  634
  670
  707
  746
  787
  830
  874
  921
  970
  1,021
  1,075
  1,131
  1,190
  1,251
  1,316
  1,384
  1,455
  1,529
  1,607
  1,689
  1,775
  1,865
  1,960
  2,059
  2,163
  2,273
  2,387
  2,508
  2,634
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
  600
  634
  670
  707
  746
  787
  830
  874
  921
  970
  1,021
  1,075
  1,131
  1,190
  1,251
  1,316
  1,384
  1,455
  1,529
  1,607
  1,689
  1,775
  1,865
  1,960
  2,059
  2,163
  2,273
  2,387
  2,508
  2,634
Operating income, $m
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  57
  60
  63
  67
  70
  74
  78
  81
  86
  90
  95
  99
  104
  110
  115
  121
  127
EBITDA, $m
  40
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  89
  93
  98
  103
  108
  114
  119
  126
  132
  139
  146
  153
  161
  169
  177
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  24
  25
Earnings before tax, $m
  29
  30
  31
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
Tax expense, $m
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
Net income, $m
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74

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
  286
  302
  319
  337
  355
  375
  395
  417
  439
  462
  487
  512
  539
  567
  596
  627
  659
  693
  729
  766
  805
  846
  889
  934
  981
  1,031
  1,083
  1,138
  1,195
  1,255
Adjusted assets (=assets-cash), $m
  286
  302
  319
  337
  355
  375
  395
  417
  439
  462
  487
  512
  539
  567
  596
  627
  659
  693
  729
  766
  805
  846
  889
  934
  981
  1,031
  1,083
  1,138
  1,195
  1,255
Revenue / Adjusted assets
  2.196
  2.199
  2.201
  2.199
  2.203
  2.200
  2.203
  2.197
  2.198
  2.201
  2.197
  2.201
  2.199
  2.199
  2.201
  2.199
  2.200
  2.201
  2.199
  2.200
  2.200
  2.200
  2.199
  2.200
  2.201
  2.200
  2.199
  2.199
  2.200
  2.200
Average production assets, $m
  114
  121
  128
  135
  142
  150
  158
  167
  176
  185
  195
  205
  216
  227
  239
  251
  264
  278
  292
  307
  322
  339
  356
  374
  393
  413
  434
  455
  478
  503
Working capital, $m
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  67
  71
  75
  79
  83
  87
  91
  96
  101
  106
  112
  117
  123
  129
  136
  143
  150
  158
  166
  174
Total debt, $m
  8
  16
  25
  34
  43
  53
  63
  74
  85
  97
  110
  122
  136
  150
  165
  181
  197
  214
  232
  251
  270
  291
  313
  335
  359
  384
  411
  438
  467
  498
Total liabilities, $m
  144
  153
  161
  170
  180
  189
  200
  210
  222
  233
  246
  259
  272
  286
  301
  317
  333
  350
  368
  387
  406
  427
  449
  472
  495
  521
  547
  574
  603
  634
Total equity, $m
  141
  149
  158
  167
  176
  186
  196
  206
  217
  229
  241
  253
  267
  281
  295
  310
  326
  343
  361
  379
  398
  419
  440
  462
  486
  510
  536
  563
  591
  621
Total liabilities and equity, $m
  285
  302
  319
  337
  356
  375
  396
  416
  439
  462
  487
  512
  539
  567
  596
  627
  659
  693
  729
  766
  804
  846
  889
  934
  981
  1,031
  1,083
  1,137
  1,194
  1,255
Debt-to-equity ratio
  0.060
  0.110
  0.160
  0.200
  0.250
  0.290
  0.320
  0.360
  0.390
  0.430
  0.450
  0.480
  0.510
  0.530
  0.560
  0.580
  0.600
  0.620
  0.640
  0.660
  0.680
  0.700
  0.710
  0.730
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
Adjusted equity ratio
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495
  0.495

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
Depreciation, amort., depletion, $m
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  19
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
Funds from operations, $m
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
Cash from operations, $m
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
Maintenance CAPEX, $m
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -46
  -48
New CAPEX, $m
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
Cash from investing activities, $m
  -17
  -18
  -19
  -20
  -20
  -22
  -23
  -25
  -26
  -27
  -29
  -29
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -47
  -48
  -51
  -54
  -56
  -59
  -62
  -65
  -69
  -72
Free cash flow, $m
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
Issuance/(repayment) of debt, $m
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
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  
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Total cash flow (excl. dividends), $m
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  68
  71
  75
Retained Cash Flow (-), $m
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
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
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Cash available for distribution, $m
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
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
  14
  13
  13
  13
  12
  12
  12
  11
  11
  10
  10
  9
  8
  8
  7
  6
  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

Kirkland's, Inc. is a specialty retailer of home decor and gifts in the United States. The Company's merchandise categories include wall decor, art, mirrors, lamps, decorative accessories, accent furniture, textiles, fragrance and accessories, frames, housewares, impulse and personal accessories, outdoor living and artificial floral products. The Company's stores also offer a range of holiday merchandise during seasonal periods, as well as items carried throughout the year suitable for gift-giving. The Company's average stores generally carry approximately 4,700 Stock Keeping Units (SKUs). The Company's stores operate under various names, such as Kirkland's, Kirkland's Home, Kirkland's Home Outlet, Kirkland's Outlet and The Kirkland Collection. It operates approximately 380 stores in over 30 states, as well as an e-commerce enabled Website, www.kirklands.com. Its stores' locations include Texas, Florida, California, Georgia, North Carolina, Alabama, Arizona, Virginia and Ohio.

FINANCIAL RATIOS  of  Kirkland's (KIRK)

Valuation Ratios
P/E Ratio 16.4
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 3.5
Price to Free Cash Flow 9
Growth Rates
Sales Growth Rate 5.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.6%
Cap. Spend. - 3 Yr. Gr. Rate 12.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 8.7%
Ret/ On T. Cap. - 3 Yr. Avg. 11.3%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. 11.3%
Asset Turnover 2.4
Profitability Ratios
Gross Margin 37.2%
Gross Margin - 3 Yr. Avg. 38.7%
EBITDA Margin 7.1%
EBITDA Margin - 3 Yr. Avg. 8.4%
Operating Margin 2.9%
Oper. Margin - 3 Yr. Avg. 4.4%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 4.4%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.9%
Payout Ratio 0%

KIRK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KIRK stock intrinsic value calculation we used $594 million for the last fiscal year's total revenue generated by Kirkland's. The default revenue input number comes from 2017 income statement of Kirkland's. 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 KIRK stock valuation model: a) initial revenue growth rate of 5.8% 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 KIRK is calculated based on our internal credit rating of Kirkland's, 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 Kirkland's.
    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 KIRK stock the variable cost ratio is equal to 95.4%.

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 KIRK 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 Kirkland's.

Corporate tax rate of 27% is the nominal tax rate for Kirkland's. 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 KIRK stock is equal to 0.5%.

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 KIRK are equal to 18.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Kirkland's 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 KIRK is equal to 6.3%. 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 - $134 million for Kirkland's - 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 16 million for Kirkland's 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 Kirkland's at the current share price and the inputted number of shares is $0.2 billion.

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RH RH 137.69 81.47  hold
TJX TJX 95.19 76.85  hold
WSM Williams-Sonom 61.30 53.51  hold
HOME At Home Group 36.32 0.08  str.sell

COMPANY NEWS

▶ At US$012.79, Is Kirklands Inc (NASDAQ:KIRK) A Buy?   [Jun-25-18 12:33PM  Simply Wall St.]
▶ Kirkland's: Fiscal 1Q Earnings Snapshot   [06:53AM  Associated Press]
▶ Nashville public company CEO resigns   [Apr-06-18 08:09AM  American City Business Journals]
▶ Kirkland's Announces CEO Transition   [Apr-05-18 05:05PM  PR Newswire]
▶ What Is Kirklands Incs (NASDAQ:KIRK) Share Price Doing?   [Mar-23-18 05:18PM  Simply Wall St.]
▶ Kirkland's, Inc. to Host Earnings Call   [Mar-16-18 09:00AM  ACCESSWIRE]
▶ Kirkland's posts 4Q profit   [07:01AM  Associated Press]
▶ Best-In-Class NasdaqGS Undervalued Stocks   [Mar-09-18 09:02AM  Simply Wall St.]
▶ Two more retailers plan stores in Howe Bout Arden shopping center   [Feb-23-18 06:58PM  American City Business Journals]
▶ ETFs with exposure to Kirklands, Inc. : December 21, 2017   [Dec-21-17 11:34AM  Capital Cube]
▶ Stock Market News For Nov 22, 2017   [Nov-22-17 10:11AM  Zacks]
▶ Kirkland's reports 3Q loss   [Nov-21-17 06:49AM  Associated Press]
▶ New Strong Buy Stocks for October 11th   [Oct-11-17 10:28AM  Zacks]
▶ Kirkland's reports 2Q loss   [Aug-22-17 10:06PM  Associated Press]
▶ Kirkland's reports 2Q loss   [07:02AM  Associated Press]
▶ Bed Bath & Beyond Stock Crushed on Tough Quarter   [Jun-23-17 01:05PM  The Wall Street Journal]
▶ ETFs with exposure to Kirklands, Inc. : June 9, 2017   [Jun-09-17 01:42PM  Capital Cube]
▶ Tivity Health Names Adam C. Holland Chief Financial Officer   [May-25-17 01:30PM  GlobeNewswire]
▶ Nokia and Agilent rise; Alexion, Kirkland's fall   [May-23-17 05:24PM  Associated Press]
▶ Kirkland's reports 1Q loss   [06:40AM  Associated Press]
▶ ETFs with exposure to Kirklands, Inc. : April 5, 2017   [Apr-05-17 04:59PM  Capital Cube]
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