Intrinsic value of Lands' End, Inc. - LE

Previous Close

$12.70

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$12.70

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of LE 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 0.4

 

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, %
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  5.00
Revenue, $m
  1,476
  1,548
  1,625
  1,705
  1,789
  1,877
  1,970
  2,068
  2,170
  2,278
  2,391
  2,510
  2,634
  2,765
  2,903
  3,048
  3,199
  3,359
  3,526
  3,702
  3,887
  4,081
  4,284
  4,498
  4,723
  4,958
  5,206
  5,466
  5,739
  6,026
Variable operating expenses, $m
  1,642
  1,721
  1,804
  1,891
  1,983
  2,079
  2,180
  2,286
  2,397
  2,515
  2,601
  2,730
  2,866
  3,008
  3,158
  3,315
  3,481
  3,654
  3,836
  4,028
  4,228
  4,439
  4,661
  4,894
  5,138
  5,394
  5,664
  5,947
  6,244
  6,556
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
  1,642
  1,721
  1,804
  1,891
  1,983
  2,079
  2,180
  2,286
  2,397
  2,515
  2,601
  2,730
  2,866
  3,008
  3,158
  3,315
  3,481
  3,654
  3,836
  4,028
  4,228
  4,439
  4,661
  4,894
  5,138
  5,394
  5,664
  5,947
  6,244
  6,556
Operating income, $m
  -166
  -173
  -180
  -187
  -194
  -202
  -210
  -218
  -227
  -237
  -210
  -221
  -232
  -243
  -255
  -268
  -281
  -295
  -310
  -325
  -342
  -359
  -377
  -395
  -415
  -436
  -458
  -481
  -505
  -530
EBITDA, $m
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -159
  -166
  -175
  -183
  -193
  -202
  -212
  -223
  -234
  -245
  -258
  -270
  -284
  -298
  -313
  -329
  -345
  -362
  -380
  -399
  -419
  -440
  -462
Interest expense (income), $m
  22
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  54
  57
  61
  65
  69
  73
  78
  82
  87
  93
  98
  104
  110
  116
  123
  130
  138
  145
  154
  162
Earnings before tax, $m
  -193
  -201
  -210
  -220
  -230
  -240
  -251
  -262
  -274
  -287
  -264
  -278
  -292
  -308
  -324
  -341
  -359
  -378
  -397
  -418
  -440
  -463
  -487
  -512
  -538
  -566
  -595
  -626
  -658
  -692
Tax expense, $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
Net income, $m
  -193
  -201
  -210
  -220
  -230
  -240
  -251
  -262
  -274
  -287
  -264
  -278
  -292
  -308
  -324
  -341
  -359
  -378
  -397
  -418
  -440
  -463
  -487
  -512
  -538
  -566
  -595
  -626
  -658
  -692

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
  1,179
  1,237
  1,298
  1,362
  1,429
  1,499
  1,573
  1,651
  1,733
  1,819
  1,910
  2,004
  2,104
  2,209
  2,319
  2,434
  2,555
  2,683
  2,816
  2,957
  3,104
  3,259
  3,422
  3,593
  3,772
  3,960
  4,158
  4,366
  4,584
  4,813
Adjusted assets (=assets-cash), $m
  1,179
  1,237
  1,298
  1,362
  1,429
  1,499
  1,573
  1,651
  1,733
  1,819
  1,910
  2,004
  2,104
  2,209
  2,319
  2,434
  2,555
  2,683
  2,816
  2,957
  3,104
  3,259
  3,422
  3,593
  3,772
  3,960
  4,158
  4,366
  4,584
  4,813
Revenue / Adjusted assets
  1.252
  1.251
  1.252
  1.252
  1.252
  1.252
  1.252
  1.253
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
Average production assets, $m
  329
  345
  362
  380
  399
  419
  439
  461
  484
  508
  533
  560
  587
  617
  647
  680
  713
  749
  786
  826
  867
  910
  955
  1,003
  1,053
  1,106
  1,161
  1,219
  1,280
  1,344
Working capital, $m
  161
  169
  177
  186
  195
  205
  215
  225
  237
  248
  261
  274
  287
  301
  316
  332
  349
  366
  384
  404
  424
  445
  467
  490
  515
  540
  567
  596
  626
  657
Total debt, $m
  526
  568
  613
  659
  708
  759
  813
  870
  929
  992
  1,057
  1,126
  1,199
  1,275
  1,355
  1,439
  1,527
  1,620
  1,717
  1,819
  1,926
  2,039
  2,157
  2,281
  2,412
  2,548
  2,692
  2,843
  3,002
  3,168
Total liabilities, $m
  857
  899
  943
  990
  1,039
  1,090
  1,144
  1,201
  1,260
  1,323
  1,388
  1,457
  1,530
  1,606
  1,686
  1,770
  1,858
  1,950
  2,048
  2,150
  2,257
  2,370
  2,488
  2,612
  2,742
  2,879
  3,023
  3,174
  3,333
  3,499
Total equity, $m
  322
  338
  354
  372
  390
  409
  430
  451
  473
  497
  521
  547
  574
  603
  633
  665
  698
  732
  769
  807
  848
  890
  934
  981
  1,030
  1,081
  1,135
  1,192
  1,251
  1,314
Total liabilities and equity, $m
  1,179
  1,237
  1,297
  1,362
  1,429
  1,499
  1,574
  1,652
  1,733
  1,820
  1,909
  2,004
  2,104
  2,209
  2,319
  2,435
  2,556
  2,682
  2,817
  2,957
  3,105
  3,260
  3,422
  3,593
  3,772
  3,960
  4,158
  4,366
  4,584
  4,813
Debt-to-equity ratio
  1.640
  1.680
  1.730
  1.770
  1.810
  1.850
  1.890
  1.930
  1.960
  2.000
  2.030
  2.060
  2.090
  2.110
  2.140
  2.170
  2.190
  2.210
  2.230
  2.250
  2.270
  2.290
  2.310
  2.330
  2.340
  2.360
  2.370
  2.390
  2.400
  2.410
Adjusted equity ratio
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273
  0.273

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -193
  -201
  -210
  -220
  -230
  -240
  -251
  -262
  -274
  -287
  -264
  -278
  -292
  -308
  -324
  -341
  -359
  -378
  -397
  -418
  -440
  -463
  -487
  -512
  -538
  -566
  -595
  -626
  -658
  -692
Depreciation, amort., depletion, $m
  53
  54
  55
  56
  57
  58
  59
  60
  61
  62
  27
  28
  30
  31
  33
  34
  36
  38
  40
  41
  44
  46
  48
  50
  53
  56
  58
  61
  64
  68
Funds from operations, $m
  -139
  -147
  -155
  -164
  -173
  -182
  -192
  -203
  -213
  -225
  -237
  -250
  -263
  -277
  -292
  -307
  -323
  -340
  -358
  -377
  -396
  -417
  -439
  -462
  -485
  -511
  -537
  -565
  -594
  -624
Change in working capital, $m
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
Cash from operations, $m
  -147
  -155
  -164
  -173
  -182
  -192
  -202
  -213
  -225
  -237
  -249
  -263
  -277
  -291
  -307
  -323
  -340
  -357
  -376
  -396
  -416
  -438
  -461
  -485
  -510
  -536
  -564
  -593
  -624
  -656
Maintenance CAPEX, $m
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -41
  -44
  -46
  -48
  -50
  -53
  -56
  -58
  -61
  -64
New CAPEX, $m
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -61
  -64
Cash from investing activities, $m
  -32
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -82
  -87
  -91
  -96
  -100
  -106
  -111
  -116
  -122
  -128
Free cash flow, $m
  -179
  -188
  -198
  -209
  -220
  -232
  -244
  -257
  -271
  -285
  -300
  -316
  -332
  -350
  -368
  -387
  -408
  -429
  -451
  -475
  -499
  -525
  -552
  -581
  -610
  -642
  -675
  -709
  -746
  -784
Issuance/(repayment) of debt, $m
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
  69
  72
  76
  80
  84
  88
  93
  97
  102
  107
  113
  118
  124
  130
  137
  144
  151
  159
  166
Issuance/(repurchase) of shares, $m
  207
  217
  227
  237
  248
  259
  271
  284
  297
  311
  288
  304
  320
  336
  354
  373
  392
  413
  434
  457
  480
  505
  531
  559
  587
  618
  649
  683
  718
  754
Cash from financing (excl. dividends), $m  
  247
  259
  271
  283
  297
  310
  325
  341
  357
  374
  354
  373
  392
  412
  434
  457
  480
  506
  531
  559
  587
  618
  649
  683
  717
  755
  793
  834
  877
  920
Total cash flow (excl. dividends), $m
  69
  71
  73
  75
  77
  79
  81
  83
  86
  88
  54
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  93
  97
  102
  107
  113
  118
  124
  130
  137
Retained Cash Flow (-), $m
  -207
  -217
  -227
  -237
  -248
  -259
  -271
  -284
  -297
  -311
  -288
  -304
  -320
  -336
  -354
  -373
  -392
  -413
  -434
  -457
  -480
  -505
  -531
  -559
  -587
  -618
  -649
  -683
  -718
  -754
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
  -139
  -146
  -154
  -162
  -171
  -180
  -190
  -200
  -211
  -222
  -234
  -247
  -260
  -274
  -288
  -304
  -320
  -336
  -354
  -372
  -392
  -412
  -434
  -456
  -480
  -505
  -531
  -558
  -587
  -617
Discount rate, %
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
  -129
  -125
  -121
  -117
  -111
  -105
  -98
  -91
  -83
  -75
  -67
  -59
  -51
  -44
  -37
  -31
  -25
  -20
  -16
  -12
  -9
  -7
  -5
  -3
  -2
  -2
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  66.4
  44.1
  29.3
  19.5
  13.0
  8.7
  5.8
  3.9
  2.6
  1.7
  1.2
  0.8
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Lands' End, Inc. (Lands' End) is a multi-channel retailer of casual clothing, accessories and footwear, as well as home products. The Company operates through two segments: Direct and Retail. The Company offers products through catalogs, online at www.landsend.com. The Direct segment sells products through the Company's e-commerce Websites, international Websites and direct mail catalogs. The Retail segment sells products and services through Lands' End Shops at Sears across the United States, the Company's standalone Lands' End Inlet stores and international shop-in-shops. The Company's product categories include Apparel and Non-apparel. The Non-apparel category offers accessories, footwear and home goods. The Company provides embroidery, monogramming, gift wrapping, shipping and other services. In addition, the Company offers sheets and pillowcases, duvet covers and comforters, blankets and throws, mattress pads, towels, rugs and mats, school uniforms and shower curtains.

FINANCIAL RATIOS  of  Lands' End, Inc. (LE)

Valuation Ratios
P/E Ratio -3.7
Price to Sales 0.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 16.9
Price to Free Cash Flow -45.2
Growth Rates
Sales Growth Rate -5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 27%
Financial Strength
Quick Ratio 43
Current Ratio 0
LT Debt to Equity 180.8%
Total Debt to Equity 182.7%
Interest Coverage -7
Management Effectiveness
Return On Assets -8.1%
Ret/ On Assets - 3 Yr. Avg. -0.5%
Return On Total Capital -13.3%
Ret/ On T. Cap. - 3 Yr. Avg. -2.3%
Return On Equity -33.5%
Return On Equity - 3 Yr. Avg. -8.7%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 43.1%
Gross Margin - 3 Yr. Avg. 45.5%
EBITDA Margin -10.3%
EBITDA Margin - 3 Yr. Avg. 0.2%
Operating Margin -11.4%
Oper. Margin - 3 Yr. Avg. -0.9%
Pre-Tax Margin -13.4%
Pre-Tax Margin - 3 Yr. Avg. -2.6%
Net Profit Margin -8.2%
Net Profit Margin - 3 Yr. Avg. -1.6%
Effective Tax Rate 38.5%
Eff/ Tax Rate - 3 Yr. Avg. 36.1%
Payout Ratio 0%

LE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LE stock intrinsic value calculation we used $1407 million for the last fiscal year's total revenue generated by Lands' End, Inc.. The default revenue input number comes from 0001 income statement of Lands' End, 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 LE stock valuation model: a) initial revenue growth rate of 4.9% 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 7.4%, whose default value for LE is calculated based on our internal credit rating of Lands' End, 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 Lands' End, 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 LE stock the variable cost ratio is equal to 111.4%.

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 LE 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 Lands' End, Inc..

Corporate tax rate of 27% is the nominal tax rate for Lands' End, 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 LE 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 LE are equal to 22.3%.

Life of production assets of 19.9 years is the average useful life of capital assets used in Lands' End, 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 LE is equal to 10.9%. 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 - $307.093 million for Lands' End, 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 32.212 million for Lands' End, 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 Lands' End, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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