Intrinsic value of Luby's, Inc. - LUB

Previous Close

$1.49

  Intrinsic Value

$0.79

stock screener

  Rating & Target

sell

-47%

Previous close

$1.49

 
Intrinsic value

$0.79

 
Up/down potential

-47%

 
Rating

sell

We calculate the intrinsic value of LUB 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 0.0

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  372
  381
  391
  402
  414
  427
  442
  457
  474
  493
  512
  533
  555
  579
  604
  630
  658
  688
  719
  752
  787
  823
  862
  903
  946
  991
  1,039
  1,089
  1,142
  1,197
Variable operating expenses, $m
  206
  211
  216
  222
  229
  236
  244
  253
  262
  272
  281
  292
  304
  317
  331
  345
  360
  377
  394
  412
  431
  451
  472
  495
  518
  543
  569
  597
  625
  656
Fixed operating expenses, $m
  193
  197
  202
  206
  211
  215
  220
  225
  230
  235
  240
  245
  251
  256
  262
  268
  274
  280
  286
  292
  298
  305
  312
  319
  326
  333
  340
  348
  355
  363
Total operating expenses, $m
  399
  408
  418
  428
  440
  451
  464
  478
  492
  507
  521
  537
  555
  573
  593
  613
  634
  657
  680
  704
  729
  756
  784
  814
  844
  876
  909
  945
  980
  1,019
Operating income, $m
  -27
  -27
  -27
  -26
  -25
  -24
  -22
  -20
  -17
  -14
  -9
  -4
  0
  5
  11
  17
  24
  31
  39
  48
  57
  67
  78
  90
  102
  115
  130
  145
  161
  178
EBITDA, $m
  -8
  -8
  -7
  -6
  -5
  -3
  0
  3
  6
  10
  15
  20
  25
  31
  38
  46
  54
  62
  72
  82
  93
  105
  117
  131
  145
  160
  177
  194
  213
  233
Interest expense (income), $m
  2
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  22
Earnings before tax, $m
  -30
  -31
  -31
  -31
  -30
  -29
  -27
  -26
  -23
  -20
  -15
  -12
  -7
  -3
  2
  8
  14
  21
  28
  36
  45
  54
  64
  75
  86
  98
  112
  126
  141
  157
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  4
  6
  8
  10
  12
  15
  17
  20
  23
  27
  30
  34
  38
  42
Net income, $m
  -30
  -31
  -31
  -31
  -30
  -29
  -27
  -26
  -23
  -20
  -15
  -12
  -7
  -3
  2
  6
  10
  15
  21
  26
  33
  39
  47
  54
  63
  72
  81
  92
  103
  114

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
  204
  209
  214
  220
  227
  234
  242
  251
  260
  270
  281
  292
  304
  317
  331
  345
  361
  377
  394
  412
  431
  451
  472
  495
  518
  543
  569
  597
  626
  656
Adjusted assets (=assets-cash), $m
  204
  209
  214
  220
  227
  234
  242
  251
  260
  270
  281
  292
  304
  317
  331
  345
  361
  377
  394
  412
  431
  451
  472
  495
  518
  543
  569
  597
  626
  656
Revenue / Adjusted assets
  1.824
  1.823
  1.827
  1.827
  1.824
  1.825
  1.826
  1.821
  1.823
  1.826
  1.822
  1.825
  1.826
  1.826
  1.825
  1.826
  1.823
  1.825
  1.825
  1.825
  1.826
  1.825
  1.826
  1.824
  1.826
  1.825
  1.826
  1.824
  1.824
  1.825
Average production assets, $m
  180
  184
  189
  194
  200
  207
  214
  221
  230
  238
  248
  258
  269
  280
  292
  305
  318
  333
  348
  364
  381
  399
  417
  437
  458
  480
  503
  527
  553
  579
Working capital, $m
  -27
  -27
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
Total debt, $m
  41
  43
  46
  48
  51
  54
  58
  62
  66
  70
  75
  80
  85
  91
  96
  103
  110
  117
  124
  132
  140
  149
  158
  168
  179
  189
  201
  213
  225
  239
Total liabilities, $m
  89
  91
  94
  96
  99
  102
  106
  110
  114
  118
  123
  128
  133
  139
  145
  151
  158
  165
  172
  180
  188
  197
  206
  216
  227
  237
  249
  261
  273
  287
Total equity, $m
  115
  117
  121
  124
  128
  132
  136
  141
  146
  152
  158
  164
  171
  178
  186
  194
  203
  212
  222
  232
  243
  254
  266
  279
  292
  306
  321
  336
  352
  369
Total liabilities and equity, $m
  204
  208
  215
  220
  227
  234
  242
  251
  260
  270
  281
  292
  304
  317
  331
  345
  361
  377
  394
  412
  431
  451
  472
  495
  519
  543
  570
  597
  625
  656
Debt-to-equity ratio
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.440
  0.450
  0.460
  0.470
  0.480
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
  0.650
Adjusted equity ratio
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -30
  -31
  -31
  -31
  -30
  -29
  -27
  -26
  -23
  -20
  -15
  -12
  -7
  -3
  2
  6
  10
  15
  21
  26
  33
  39
  47
  54
  63
  72
  81
  92
  103
  114
Depreciation, amort., depletion, $m
  19
  19
  20
  20
  21
  21
  22
  23
  23
  24
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
Funds from operations, $m
  -12
  -12
  -12
  -11
  -9
  -8
  -6
  -3
  0
  4
  8
  13
  18
  23
  29
  34
  40
  46
  53
  60
  68
  77
  86
  95
  106
  117
  128
  141
  154
  169
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Cash from operations, $m
  -11
  -11
  -11
  -10
  -9
  -7
  -5
  -2
  1
  5
  9
  14
  19
  25
  31
  36
  42
  48
  55
  63
  71
  79
  88
  98
  109
  120
  132
  145
  158
  173
Maintenance CAPEX, $m
  -17
  -17
  -17
  -18
  -18
  -19
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
New CAPEX, $m
  -3
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
Cash from investing activities, $m
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -79
Free cash flow, $m
  -31
  -32
  -33
  -33
  -33
  -32
  -31
  -29
  -27
  -25
  -22
  -19
  -16
  -11
  -7
  -4
  0
  4
  9
  14
  20
  26
  32
  39
  47
  55
  64
  73
  83
  94
Issuance/(repayment) of debt, $m
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Issuance/(repurchase) of shares, $m
  33
  34
  34
  34
  34
  33
  32
  30
  28
  26
  21
  18
  14
  10
  6
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  35
  36
  36
  37
  37
  36
  35
  34
  32
  30
  26
  23
  19
  16
  12
  8
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
Total cash flow (excl. dividends), $m
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  4
  4
  4
  4
  5
  5
  7
  11
  17
  22
  28
  35
  42
  49
  57
  66
  75
  85
  96
  107
Retained Cash Flow (-), $m
  -33
  -34
  -34
  -34
  -34
  -33
  -32
  -30
  -28
  -26
  -21
  -18
  -14
  -10
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
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
  -29
  -30
  -30
  -30
  -30
  -29
  -27
  -26
  -23
  -21
  -18
  -14
  -10
  -6
  -3
  -3
  -2
  2
  7
  12
  17
  23
  30
  37
  44
  52
  61
  70
  80
  90
Discount rate, %
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
  -27
  -26
  -24
  -22
  -20
  -17
  -14
  -12
  -9
  -7
  -5
  -4
  -2
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  70.7
  49.8
  35.2
  25.0
  18.0
  13.1
  9.8
  7.4
  5.7
  4.6
  3.8
  3.3
  2.9
  2.7
  2.6
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5
  2.5

Luby's, Inc., is a multi-branded company operating in the restaurant industry and in the contract food services industry. The Company is managed through three segments: Company-owned restaurants, franchise operations, and Culinary Contract Services (CSS). The company-owned restaurants brands are Luby's Cafeteria, Fuddruckers, and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names. As of August 31, 2016, the Company owned and operated 175 restaurants, with 127 in Texas and the remainder in other states. The Company offers franchises for the Fuddruckers brand. As of August 31, 2016, the number of franchised restaurants were 113. Culinary Contract Services consists of contract arrangements to manage food services for clients operating in three lines of business: healthcare, higher education, and corporate dining. As of August 31, 2016, the Company had 24 Culinary Contract Services contracts.

FINANCIAL RATIOS  of  Luby's, Inc. (LUB)

Valuation Ratios
P/E Ratio -1.9
Price to Sales 0.1
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow 4.3
Price to Free Cash Flow -14.5
Growth Rates
Sales Growth Rate -6.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -27.8%
Cap. Spend. - 3 Yr. Gr. Rate -22.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 21.5%
Total Debt to Equity 21.5%
Interest Coverage -9
Management Effectiveness
Return On Assets -8.7%
Ret/ On Assets - 3 Yr. Avg. -3.7%
Return On Total Capital -12.2%
Ret/ On T. Cap. - 3 Yr. Avg. -6%
Return On Equity -14.8%
Return On Equity - 3 Yr. Avg. -7.3%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 69.1%
Gross Margin - 3 Yr. Avg. 69.1%
EBITDA Margin 0.5%
EBITDA Margin - 3 Yr. Avg. 3.4%
Operating Margin -4.8%
Oper. Margin - 3 Yr. Avg. -1.9%
Pre-Tax Margin -5.3%
Pre-Tax Margin - 3 Yr. Avg. -2.4%
Net Profit Margin -6.1%
Net Profit Margin - 3 Yr. Avg. -3%
Effective Tax Rate -15%
Eff/ Tax Rate - 3 Yr. Avg. -27.2%
Payout Ratio 0%

LUB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LUB stock intrinsic value calculation we used $365 million for the last fiscal year's total revenue generated by Luby's, Inc.. The default revenue input number comes from 0001 income statement of Luby's, 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 LUB stock valuation model: a) initial revenue growth rate of 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 7.2%, whose default value for LUB is calculated based on our internal credit rating of Luby's, 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 Luby's, 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 LUB stock the variable cost ratio is equal to 55.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $189 million in the base year in the intrinsic value calculation for LUB 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 9.6% for Luby's, Inc..

Corporate tax rate of 27% is the nominal tax rate for Luby's, 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 LUB 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 LUB are equal to 48.4%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Luby's, 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 LUB is equal to -7.2%. 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 - $112.628 million for Luby's, 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 29.760 million for Luby's, 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 Luby's, Inc. at the current share price and the inputted number of shares is $0.0 billion.

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