Intrinsic value of Lumber Liquidators Holdings, Inc - LL

Previous Close

$10.49

  Intrinsic Value

$44.27

stock screener

  Rating & Target

str. buy

+322%

Previous close

$10.49

 
Intrinsic value

$44.27

 
Up/down potential

+322%

 
Rating

str. buy

We calculate the intrinsic value of LL 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 0.3

 

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, %
  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
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
Revenue, $m
  1,083
  1,139
  1,197
  1,259
  1,324
  1,391
  1,462
  1,537
  1,615
  1,697
  1,783
  1,873
  1,968
  2,067
  2,172
  2,281
  2,396
  2,517
  2,643
  2,776
  2,916
  3,062
  3,216
  3,377
  3,547
  3,725
  3,911
  4,107
  4,313
  4,529
Variable operating expenses, $m
  238
  250
  263
  277
  291
  306
  321
  338
  355
  373
  391
  410
  431
  453
  476
  500
  525
  551
  579
  608
  639
  671
  704
  740
  777
  816
  857
  900
  945
  992
Fixed operating expenses, $m
  882
  901
  921
  941
  962
  983
  1,005
  1,027
  1,050
  1,073
  1,096
  1,121
  1,145
  1,170
  1,196
  1,222
  1,249
  1,277
  1,305
  1,334
  1,363
  1,393
  1,424
  1,455
  1,487
  1,520
  1,553
  1,587
  1,622
  1,658
Total operating expenses, $m
  1,120
  1,151
  1,184
  1,218
  1,253
  1,289
  1,326
  1,365
  1,405
  1,446
  1,487
  1,531
  1,576
  1,623
  1,672
  1,722
  1,774
  1,828
  1,884
  1,942
  2,002
  2,064
  2,128
  2,195
  2,264
  2,336
  2,410
  2,487
  2,567
  2,650
Operating income, $m
  -38
  -13
  13
  41
  70
  102
  136
  172
  211
  252
  296
  343
  392
  444
  500
  559
  622
  689
  760
  835
  914
  999
  1,088
  1,183
  1,283
  1,389
  1,502
  1,620
  1,746
  1,879
EBITDA, $m
  -19
  7
  34
  63
  93
  126
  161
  199
  238
  281
  326
  373
  424
  478
  536
  597
  662
  730
  803
  880
  962
  1,049
  1,141
  1,238
  1,342
  1,451
  1,566
  1,688
  1,817
  1,954
Interest expense (income), $m
  0
  1
  1
  2
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
Earnings before tax, $m
  -38
  -15
  11
  38
  67
  98
  131
  167
  204
  244
  288
  333
  382
  433
  488
  546
  607
  673
  742
  816
  894
  977
  1,064
  1,157
  1,256
  1,360
  1,471
  1,587
  1,711
  1,842
Tax expense, $m
  0
  0
  3
  10
  18
  26
  35
  45
  55
  66
  78
  90
  103
  117
  132
  147
  164
  182
  200
  220
  241
  264
  287
  313
  339
  367
  397
  429
  462
  497
Net income, $m
  -38
  -15
  8
  28
  49
  72
  96
  122
  149
  178
  210
  243
  279
  316
  356
  398
  443
  491
  542
  596
  653
  713
  777
  845
  917
  993
  1,074
  1,159
  1,249
  1,345

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
  432
  455
  478
  503
  528
  555
  584
  614
  645
  677
  712
  748
  786
  825
  867
  911
  957
  1,005
  1,055
  1,108
  1,164
  1,222
  1,284
  1,348
  1,416
  1,487
  1,561
  1,640
  1,722
  1,808
Adjusted assets (=assets-cash), $m
  432
  455
  478
  503
  528
  555
  584
  614
  645
  677
  712
  748
  786
  825
  867
  911
  957
  1,005
  1,055
  1,108
  1,164
  1,222
  1,284
  1,348
  1,416
  1,487
  1,561
  1,640
  1,722
  1,808
Revenue / Adjusted assets
  2.507
  2.503
  2.504
  2.503
  2.508
  2.506
  2.503
  2.503
  2.504
  2.507
  2.504
  2.504
  2.504
  2.505
  2.505
  2.504
  2.504
  2.504
  2.505
  2.505
  2.505
  2.506
  2.505
  2.505
  2.505
  2.505
  2.505
  2.504
  2.505
  2.505
Average production assets, $m
  118
  124
  131
  137
  144
  152
  159
  168
  176
  185
  194
  204
  215
  225
  237
  249
  261
  274
  288
  303
  318
  334
  351
  368
  387
  406
  426
  448
  470
  494
Working capital, $m
  105
  110
  116
  122
  128
  135
  142
  149
  157
  165
  173
  182
  191
  201
  211
  221
  232
  244
  256
  269
  283
  297
  312
  328
  344
  361
  379
  398
  418
  439
Total debt, $m
  26
  37
  50
  62
  76
  90
  104
  120
  136
  153
  171
  189
  209
  230
  251
  274
  298
  322
  349
  376
  405
  435
  467
  500
  535
  572
  611
  651
  694
  739
Total liabilities, $m
  224
  235
  248
  260
  274
  288
  302
  318
  334
  351
  369
  387
  407
  428
  449
  472
  496
  520
  547
  574
  603
  633
  665
  698
  733
  770
  809
  849
  892
  937
Total equity, $m
  208
  219
  230
  242
  255
  268
  281
  296
  311
  327
  343
  360
  379
  398
  418
  439
  461
  484
  509
  534
  561
  589
  619
  650
  682
  717
  753
  790
  830
  871
Total liabilities and equity, $m
  432
  454
  478
  502
  529
  556
  583
  614
  645
  678
  712
  747
  786
  826
  867
  911
  957
  1,004
  1,056
  1,108
  1,164
  1,222
  1,284
  1,348
  1,415
  1,487
  1,562
  1,639
  1,722
  1,808
Debt-to-equity ratio
  0.120
  0.170
  0.220
  0.260
  0.300
  0.340
  0.370
  0.410
  0.440
  0.470
  0.500
  0.530
  0.550
  0.580
  0.600
  0.620
  0.650
  0.670
  0.690
  0.700
  0.720
  0.740
  0.750
  0.770
  0.780
  0.800
  0.810
  0.820
  0.840
  0.850
Adjusted equity ratio
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -38
  -15
  8
  28
  49
  72
  96
  122
  149
  178
  210
  243
  279
  316
  356
  398
  443
  491
  542
  596
  653
  713
  777
  845
  917
  993
  1,074
  1,159
  1,249
  1,345
Depreciation, amort., depletion, $m
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  29
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
  75
Funds from operations, $m
  -20
  5
  29
  50
  72
  96
  121
  148
  177
  207
  240
  274
  311
  350
  392
  436
  483
  533
  585
  641
  701
  764
  830
  901
  975
  1,054
  1,138
  1,227
  1,320
  1,419
Change in working capital, $m
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
Cash from operations, $m
  -25
  0
  23
  44
  66
  89
  114
  141
  169
  199
  231
  265
  302
  341
  382
  425
  472
  521
  573
  628
  687
  749
  815
  885
  959
  1,037
  1,120
  1,208
  1,300
  1,398
Maintenance CAPEX, $m
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -65
  -68
  -71
New CAPEX, $m
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -24
Cash from investing activities, $m
  -22
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -44
  -45
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -68
  -71
  -74
  -78
  -82
  -86
  -90
  -95
Free cash flow, $m
  -47
  -24
  -2
  17
  38
  60
  83
  108
  135
  164
  194
  226
  261
  297
  336
  378
  422
  468
  518
  570
  626
  685
  748
  814
  885
  959
  1,038
  1,122
  1,210
  1,304
Issuance/(repayment) of debt, $m
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
Issuance/(repurchase) of shares, $m
  49
  25
  3
  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  
  60
  37
  15
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
Total cash flow (excl. dividends), $m
  13
  13
  13
  30
  51
  74
  98
  124
  151
  181
  212
  245
  280
  318
  358
  400
  445
  493
  544
  598
  655
  716
  780
  848
  920
  996
  1,077
  1,162
  1,253
  1,348
Retained Cash Flow (-), $m
  -49
  -25
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
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
  -36
  -13
  2
  18
  39
  61
  84
  109
  136
  165
  195
  227
  262
  299
  338
  379
  423
  470
  520
  572
  628
  687
  750
  817
  887
  962
  1,041
  1,125
  1,213
  1,307
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
  -35
  -12
  2
  15
  30
  44
  57
  68
  78
  86
  93
  97
  100
  100
  99
  96
  92
  87
  80
  73
  65
  57
  49
  42
  35
  28
  22
  17
  13
  10
Current shareholders' claim on cash, %
  86.0
  79.6
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8
  78.8

Lumber Liquidators Holdings, Inc. is a multi-channel specialty retailer of hardwood flooring, and hardwood flooring enhancements and accessories. The Company offers hardwood species, engineered hardwood, laminate and resilient vinyl flooring direct to the consumer. Its product categories include Solid and Engineered Hardwood; Laminate; Bamboo, Cork, Vinyl Plank and Other, Moldings and Accessories, and Non-Merchandise Services. It features the renewable flooring products, bamboo and cork, and provides a selection of flooring enhancements and accessories, including moldings, noise-reducing underlay, adhesives and flooring tools. It operates in a holding company structure with Lumber Liquidators Holdings, Inc. serving as its parent company and certain direct and indirect subsidiaries, including Lumber Liquidators, Inc., Lumber Liquidators Services, LLC, Lumber Liquidators Production, LLC, and Lumber Liquidators Canada ULC, conducting its operations.

FINANCIAL RATIOS  of  Lumber Liquidators Holdings, Inc (LL)

Valuation Ratios
P/E Ratio -4.3
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -10.6
Price to Free Cash Flow -8
Growth Rates
Sales Growth Rate -1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -59.1%
Cap. Spend. - 3 Yr. Gr. Rate -20.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 17.3%
Total Debt to Equity 17.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -14.7%
Ret/ On Assets - 3 Yr. Avg. -4.3%
Return On Total Capital -24.3%
Ret/ On T. Cap. - 3 Yr. Avg. -7.5%
Return On Equity -27.1%
Return On Equity - 3 Yr. Avg. -8.6%
Asset Turnover 2
Profitability Ratios
Gross Margin 31.6%
Gross Margin - 3 Yr. Avg. 33.4%
EBITDA Margin -7.9%
EBITDA Margin - 3 Yr. Avg. -1.1%
Operating Margin -9.7%
Oper. Margin - 3 Yr. Avg. -2.7%
Pre-Tax Margin -9.8%
Pre-Tax Margin - 3 Yr. Avg. -2.8%
Net Profit Margin -7.2%
Net Profit Margin - 3 Yr. Avg. -2.3%
Effective Tax Rate 26.6%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 0%

LL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LL stock intrinsic value calculation we used $1029 million for the last fiscal year's total revenue generated by Lumber Liquidators Holdings, Inc. The default revenue input number comes from 0001 income statement of Lumber Liquidators Holdings, 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 LL stock valuation model: a) initial revenue growth rate of 5.2% 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 LL is calculated based on our internal credit rating of Lumber Liquidators Holdings, 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 Lumber Liquidators Holdings, 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 LL stock the variable cost ratio is equal to 22%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $863 million in the base year in the intrinsic value calculation for LL 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 Lumber Liquidators Holdings, Inc.

Corporate tax rate of 27% is the nominal tax rate for Lumber Liquidators Holdings, 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 LL 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 LL are equal to 10.9%.

Life of production assets of 6.6 years is the average useful life of capital assets used in Lumber Liquidators Holdings, 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 LL is equal to 9.7%. 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 - $197.847 million for Lumber Liquidators Holdings, 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 28.620 million for Lumber Liquidators Holdings, 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 Lumber Liquidators Holdings, Inc at the current share price and the inputted number of shares is $0.3 billion.

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