Intrinsic value of Lifetime Brands, Inc. - LCUT

Previous Close

$9.51

  Intrinsic Value

$7.55

stock screener

  Rating & Target

sell

-21%

Previous close

$9.51

 
Intrinsic value

$7.55

 
Up/down potential

-21%

 
Rating

sell

We calculate the intrinsic value of LCUT 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 0.2

 

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, %
  24.90
  22.91
  21.12
  19.51
  18.06
  16.75
  15.58
  14.52
  13.57
  12.71
  11.94
  11.24
  10.62
  10.06
  9.55
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
Revenue, $m
  881
  1,082
  1,311
  1,567
  1,849
  2,159
  2,496
  2,858
  3,246
  3,658
  4,095
  4,555
  5,039
  5,546
  6,076
  6,628
  7,204
  7,803
  8,427
  9,074
  9,748
  10,447
  11,174
  11,930
  12,716
  13,534
  14,384
  15,270
  16,193
  17,154
Variable operating expenses, $m
  845
  1,031
  1,241
  1,477
  1,737
  2,022
  2,332
  2,666
  3,023
  3,403
  3,771
  4,195
  4,640
  5,107
  5,595
  6,104
  6,634
  7,186
  7,760
  8,357
  8,977
  9,621
  10,291
  10,987
  11,711
  12,463
  13,247
  14,062
  14,912
  15,797
Fixed operating expenses, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Total operating expenses, $m
  847
  1,033
  1,243
  1,479
  1,739
  2,024
  2,334
  2,668
  3,025
  3,405
  3,774
  4,198
  4,643
  5,110
  5,598
  6,107
  6,637
  7,189
  7,763
  8,360
  8,980
  9,624
  10,294
  10,990
  11,714
  12,467
  13,251
  14,066
  14,916
  15,801
Operating income, $m
  34
  50
  68
  88
  110
  135
  161
  190
  220
  253
  321
  358
  396
  436
  478
  521
  567
  614
  663
  715
  768
  823
  880
  940
  1,002
  1,067
  1,134
  1,204
  1,277
  1,353
EBITDA, $m
  84
  103
  125
  150
  178
  208
  241
  276
  313
  354
  396
  441
  488
  537
  589
  642
  698
  756
  817
  880
  945
  1,014
  1,084
  1,158
  1,234
  1,314
  1,396
  1,482
  1,572
  1,666
Interest expense (income), $m
  4
  28
  37
  48
  61
  75
  90
  107
  126
  146
  167
  189
  213
  239
  265
  293
  322
  352
  384
  417
  451
  486
  523
  562
  601
  643
  686
  731
  777
  826
  877
Earnings before tax, $m
  6
  12
  19
  27
  35
  44
  54
  64
  75
  86
  132
  144
  157
  171
  185
  199
  215
  230
  247
  264
  281
  300
  319
  339
  359
  381
  403
  427
  451
  476
Tax expense, $m
  2
  3
  5
  7
  10
  12
  15
  17
  20
  23
  36
  39
  42
  46
  50
  54
  58
  62
  67
  71
  76
  81
  86
  91
  97
  103
  109
  115
  122
  129
Net income, $m
  4
  9
  14
  20
  26
  32
  39
  47
  55
  63
  96
  105
  115
  125
  135
  146
  157
  168
  180
  193
  205
  219
  233
  247
  262
  278
  294
  311
  329
  348

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
  885
  1,088
  1,317
  1,574
  1,859
  2,170
  2,508
  2,872
  3,262
  3,676
  4,115
  4,578
  5,064
  5,574
  6,106
  6,662
  7,240
  7,843
  8,469
  9,120
  9,797
  10,500
  11,231
  11,990
  12,780
  13,602
  14,457
  15,347
  16,274
  17,240
Adjusted assets (=assets-cash), $m
  885
  1,088
  1,317
  1,574
  1,859
  2,170
  2,508
  2,872
  3,262
  3,676
  4,115
  4,578
  5,064
  5,574
  6,106
  6,662
  7,240
  7,843
  8,469
  9,120
  9,797
  10,500
  11,231
  11,990
  12,780
  13,602
  14,457
  15,347
  16,274
  17,240
Revenue / Adjusted assets
  0.995
  0.994
  0.995
  0.996
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
  0.995
Average production assets, $m
  164
  201
  244
  291
  344
  402
  464
  532
  604
  680
  762
  847
  937
  1,032
  1,130
  1,233
  1,340
  1,451
  1,567
  1,688
  1,813
  1,943
  2,078
  2,219
  2,365
  2,517
  2,675
  2,840
  3,012
  3,191
Working capital, $m
  284
  350
  423
  506
  597
  697
  806
  923
  1,048
  1,182
  1,323
  1,471
  1,628
  1,791
  1,962
  2,141
  2,327
  2,520
  2,722
  2,931
  3,149
  3,375
  3,609
  3,853
  4,107
  4,371
  4,646
  4,932
  5,230
  5,541
Total debt, $m
  413
  536
  675
  831
  1,003
  1,192
  1,397
  1,617
  1,854
  2,105
  2,371
  2,651
  2,946
  3,255
  3,577
  3,914
  4,265
  4,630
  5,009
  5,404
  5,814
  6,240
  6,683
  7,143
  7,622
  8,120
  8,638
  9,177
  9,739
  10,324
Total liabilities, $m
  536
  659
  798
  954
  1,126
  1,315
  1,520
  1,741
  1,977
  2,228
  2,494
  2,774
  3,069
  3,378
  3,700
  4,037
  4,388
  4,753
  5,132
  5,527
  5,937
  6,363
  6,806
  7,266
  7,745
  8,243
  8,761
  9,300
  9,862
  10,448
Total equity, $m
  349
  429
  519
  620
  732
  855
  988
  1,132
  1,285
  1,448
  1,621
  1,804
  1,995
  2,196
  2,406
  2,625
  2,853
  3,090
  3,337
  3,593
  3,860
  4,137
  4,425
  4,724
  5,035
  5,359
  5,696
  6,047
  6,412
  6,793
Total liabilities and equity, $m
  885
  1,088
  1,317
  1,574
  1,858
  2,170
  2,508
  2,873
  3,262
  3,676
  4,115
  4,578
  5,064
  5,574
  6,106
  6,662
  7,241
  7,843
  8,469
  9,120
  9,797
  10,500
  11,231
  11,990
  12,780
  13,602
  14,457
  15,347
  16,274
  17,241
Debt-to-equity ratio
  1.190
  1.250
  1.300
  1.340
  1.370
  1.390
  1.410
  1.430
  1.440
  1.450
  1.460
  1.470
  1.480
  1.480
  1.490
  1.490
  1.490
  1.500
  1.500
  1.500
  1.510
  1.510
  1.510
  1.510
  1.510
  1.520
  1.520
  1.520
  1.520
  1.520
Adjusted equity ratio
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394
  0.394

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  9
  14
  20
  26
  32
  39
  47
  55
  63
  96
  105
  115
  125
  135
  146
  157
  168
  180
  193
  205
  219
  233
  247
  262
  278
  294
  311
  329
  348
Depreciation, amort., depletion, $m
  50
  54
  58
  62
  68
  73
  79
  86
  93
  101
  75
  83
  92
  101
  111
  121
  131
  142
  154
  165
  178
  191
  204
  218
  232
  247
  262
  278
  295
  313
Funds from operations, $m
  54
  63
  72
  82
  93
  106
  119
  133
  148
  163
  171
  188
  207
  226
  246
  266
  288
  310
  334
  358
  383
  409
  437
  465
  494
  525
  557
  590
  624
  660
Change in working capital, $m
  57
  65
  74
  83
  91
  100
  109
  117
  125
  133
  141
  149
  156
  164
  171
  179
  186
  194
  201
  209
  217
  226
  235
  244
  254
  264
  275
  286
  298
  311
Cash from operations, $m
  -2
  -2
  -2
  0
  2
  6
  10
  16
  22
  30
  30
  40
  50
  62
  75
  88
  102
  117
  132
  149
  166
  183
  202
  221
  240
  261
  282
  304
  326
  350
Maintenance CAPEX, $m
  -13
  -16
  -20
  -24
  -29
  -34
  -39
  -46
  -52
  -59
  -67
  -75
  -83
  -92
  -101
  -111
  -121
  -131
  -142
  -154
  -165
  -178
  -191
  -204
  -218
  -232
  -247
  -262
  -278
  -295
New CAPEX, $m
  -33
  -38
  -43
  -48
  -53
  -58
  -63
  -67
  -72
  -77
  -81
  -86
  -90
  -94
  -99
  -103
  -107
  -111
  -116
  -121
  -125
  -130
  -135
  -141
  -146
  -152
  -158
  -165
  -172
  -179
Cash from investing activities, $m
  -46
  -54
  -63
  -72
  -82
  -92
  -102
  -113
  -124
  -136
  -148
  -161
  -173
  -186
  -200
  -214
  -228
  -242
  -258
  -275
  -290
  -308
  -326
  -345
  -364
  -384
  -405
  -427
  -450
  -474
Free cash flow, $m
  -48
  -56
  -64
  -72
  -79
  -86
  -92
  -97
  -102
  -106
  -118
  -121
  -123
  -124
  -125
  -126
  -126
  -126
  -126
  -125
  -125
  -125
  -124
  -124
  -123
  -123
  -123
  -123
  -124
  -124
Issuance/(repayment) of debt, $m
  107
  123
  139
  156
  172
  189
  205
  221
  236
  251
  266
  280
  295
  309
  323
  337
  351
  365
  380
  395
  410
  426
  443
  460
  479
  498
  518
  539
  562
  586
Issuance/(repurchase) of shares, $m
  65
  71
  76
  82
  86
  90
  94
  97
  99
  100
  77
  77
  77
  76
  75
  73
  71
  69
  67
  64
  61
  58
  55
  52
  49
  46
  43
  39
  36
  33
Cash from financing (excl. dividends), $m  
  172
  194
  215
  238
  258
  279
  299
  318
  335
  351
  343
  357
  372
  385
  398
  410
  422
  434
  447
  459
  471
  484
  498
  512
  528
  544
  561
  578
  598
  619
Total cash flow (excl. dividends), $m
  124
  138
  151
  165
  179
  193
  207
  220
  233
  246
  225
  237
  249
  261
  272
  284
  296
  308
  321
  333
  346
  360
  374
  389
  404
  420
  437
  455
  474
  494
Retained Cash Flow (-), $m
  -69
  -80
  -91
  -101
  -112
  -123
  -133
  -143
  -154
  -163
  -173
  -182
  -192
  -201
  -210
  -219
  -228
  -237
  -247
  -257
  -267
  -277
  -288
  -299
  -311
  -324
  -337
  -351
  -365
  -381
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
  55
  58
  61
  64
  67
  71
  74
  77
  80
  83
  52
  54
  57
  60
  63
  65
  68
  71
  74
  77
  80
  83
  86
  89
  93
  97
  101
  105
  109
  114
Discount rate, %
  9.00
  9.45
  9.92
  10.42
  10.94
  11.49
  12.06
  12.66
  13.30
  13.96
  14.66
  15.39
  16.16
  16.97
  17.82
  18.71
  19.65
  20.63
  21.66
  22.74
  23.88
  25.07
  26.33
  27.64
  29.03
  30.48
  32.00
  33.60
  35.28
  37.05
PV of cash for distribution, $m
  51
  48
  46
  43
  40
  37
  33
  30
  26
  22
  11
  10
  8
  7
  5
  4
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  75.3
  58.5
  46.7
  38.2
  31.9
  27.2
  23.5
  20.7
  18.4
  16.5
  15.4
  14.4
  13.6
  12.9
  12.3
  11.8
  11.4
  11.0
  10.7
  10.4
  10.1
  9.9
  9.7
  9.6
  9.4
  9.3
  9.2
  9.1
  9.1
  9.0

Lifetime Brands, Inc. designs, sources and sells branded kitchenware, tableware and other products used in the home. The Company operates through three segments: U.S. Wholesale, International and Retail Direct. In the U.S. Wholesale segment, the Company designs, markets and distributes its products to retailers and distributors. In the International segment, the Company includes certain business operations that are conducted outside the United States. In the Retail Direct segment, it markets and sells a limited selection of its products through its Pfaltzgraff, Mikasa, Built NY, Fred & Friends and Lifetime Sterling Internet Websites. Its product categories include two categories of products that people use to prepare, serve and consume foods: including Kitchenware (kitchen tools and gadgets, cutting boards and bakeware) and Tableware (stemware, flatware and giftware). Its Home Solutions category includes other products used in the home (thermal beverageware and food storage).

FINANCIAL RATIOS  of  Lifetime Brands, Inc. (LCUT)

Valuation Ratios
P/E Ratio 8.6
Price to Sales 0.2
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 4.6
Price to Free Cash Flow 5.1
Growth Rates
Sales Growth Rate 0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -40%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 43.9%
Total Debt to Equity 48.5%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.7%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity 8.1%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 36.6%
Gross Margin - 3 Yr. Avg. 36.4%
EBITDA Margin 6.7%
EBITDA Margin - 3 Yr. Avg. 6.2%
Operating Margin 4.6%
Oper. Margin - 3 Yr. Avg. 4.1%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 3.1%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 31.8%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 12.5%

LCUT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LCUT stock intrinsic value calculation we used $705 million for the last fiscal year's total revenue generated by Lifetime Brands, Inc.. The default revenue input number comes from 0001 income statement of Lifetime Brands, 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 LCUT stock valuation model: a) initial revenue growth rate of 24.9% 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 9%, whose default value for LCUT is calculated based on our internal credit rating of Lifetime Brands, 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 Lifetime Brands, 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 LCUT stock the variable cost ratio is equal to 96.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2 million in the base year in the intrinsic value calculation for LCUT 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 9% for Lifetime Brands, Inc..

Corporate tax rate of 27% is the nominal tax rate for Lifetime Brands, 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 LCUT 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 LCUT are equal to 18.6%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Lifetime Brands, 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 LCUT is equal to 32.3%. 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 - $279.493 million for Lifetime Brands, 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 20.762 million for Lifetime Brands, 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 Lifetime Brands, Inc. at the current share price and the inputted number of shares is $0.2 billion.

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