Intrinsic value of La-Z-Boy Incorporated - LZB

Previous Close

$32.32

  Intrinsic Value

$26.81

stock screener

  Rating & Target

hold

-17%

Previous close

$32.32

 
Intrinsic value

$26.81

 
Up/down potential

-17%

 
Rating

hold

We calculate the intrinsic value of LZB 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 1.5

 

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, %
  13.00
  12.20
  11.48
  10.83
  10.25
  9.72
  9.25
  8.83
  8.44
  8.10
  7.79
  7.51
  7.26
  7.03
  6.83
  6.65
  6.48
  6.33
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.57
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  1,790
  2,008
  2,239
  2,481
  2,736
  3,002
  3,279
  3,569
  3,870
  4,184
  4,510
  4,848
  5,200
  5,566
  5,946
  6,341
  6,752
  7,180
  7,625
  8,089
  8,572
  9,076
  9,601
  10,149
  10,721
  11,319
  11,943
  12,596
  13,279
  13,993
Variable operating expenses, $m
  1,631
  1,829
  2,038
  2,258
  2,488
  2,729
  2,981
  3,243
  3,516
  3,800
  4,086
  4,393
  4,712
  5,043
  5,388
  5,746
  6,119
  6,506
  6,909
  7,330
  7,767
  8,224
  8,700
  9,196
  9,715
  10,256
  10,822
  11,414
  12,032
  12,679
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
  1,631
  1,829
  2,038
  2,258
  2,488
  2,729
  2,981
  3,243
  3,516
  3,800
  4,086
  4,393
  4,712
  5,043
  5,388
  5,746
  6,119
  6,506
  6,909
  7,330
  7,767
  8,224
  8,700
  9,196
  9,715
  10,256
  10,822
  11,414
  12,032
  12,679
Operating income, $m
  159
  179
  201
  224
  247
  272
  299
  326
  354
  383
  423
  455
  488
  522
  558
  595
  634
  674
  716
  759
  805
  852
  901
  953
  1,006
  1,063
  1,121
  1,182
  1,246
  1,314
EBITDA, $m
  198
  222
  247
  274
  302
  332
  362
  394
  428
  462
  498
  536
  575
  615
  657
  701
  746
  794
  843
  894
  948
  1,003
  1,061
  1,122
  1,185
  1,251
  1,320
  1,392
  1,468
  1,547
Interest expense (income), $m
  1
  0
  2
  4
  6
  9
  11
  14
  16
  19
  22
  25
  28
  31
  35
  38
  42
  45
  49
  53
  58
  62
  67
  72
  77
  82
  87
  93
  99
  105
  112
Earnings before tax, $m
  159
  177
  197
  217
  239
  261
  285
  310
  335
  362
  398
  427
  457
  488
  520
  554
  588
  625
  662
  702
  742
  785
  830
  876
  925
  975
  1,028
  1,083
  1,141
  1,202
Tax expense, $m
  43
  48
  53
  59
  65
  71
  77
  84
  90
  98
  108
  115
  123
  132
  140
  149
  159
  169
  179
  189
  200
  212
  224
  237
  250
  263
  278
  293
  308
  324
Net income, $m
  116
  129
  144
  159
  174
  191
  208
  226
  245
  264
  291
  312
  334
  356
  380
  404
  430
  456
  483
  512
  542
  573
  606
  640
  675
  712
  751
  791
  833
  877

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
  1,009
  1,132
  1,262
  1,399
  1,542
  1,692
  1,849
  2,012
  2,182
  2,358
  2,542
  2,733
  2,931
  3,137
  3,352
  3,575
  3,806
  4,047
  4,298
  4,560
  4,832
  5,116
  5,412
  5,721
  6,044
  6,380
  6,733
  7,100
  7,485
  7,888
Adjusted assets (=assets-cash), $m
  1,009
  1,132
  1,262
  1,399
  1,542
  1,692
  1,849
  2,012
  2,182
  2,358
  2,542
  2,733
  2,931
  3,137
  3,352
  3,575
  3,806
  4,047
  4,298
  4,560
  4,832
  5,116
  5,412
  5,721
  6,044
  6,380
  6,733
  7,100
  7,485
  7,888
Revenue / Adjusted assets
  1.774
  1.774
  1.774
  1.773
  1.774
  1.774
  1.773
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
  1.774
Average production assets, $m
  251
  281
  313
  347
  383
  420
  459
  500
  542
  586
  631
  679
  728
  779
  832
  888
  945
  1,005
  1,068
  1,132
  1,200
  1,271
  1,344
  1,421
  1,501
  1,585
  1,672
  1,763
  1,859
  1,959
Working capital, $m
  226
  253
  282
  313
  345
  378
  413
  450
  488
  527
  568
  611
  655
  701
  749
  799
  851
  905
  961
  1,019
  1,080
  1,144
  1,210
  1,279
  1,351
  1,426
  1,505
  1,587
  1,673
  1,763
Total debt, $m
  36
  75
  116
  159
  204
  251
  300
  351
  405
  460
  518
  578
  640
  705
  772
  842
  915
  991
  1,069
  1,151
  1,237
  1,326
  1,419
  1,516
  1,617
  1,723
  1,834
  1,949
  2,070
  2,196
Total liabilities, $m
  317
  355
  396
  439
  484
  531
  580
  632
  685
  741
  798
  858
  920
  985
  1,052
  1,122
  1,195
  1,271
  1,350
  1,432
  1,517
  1,606
  1,699
  1,796
  1,898
  2,003
  2,114
  2,230
  2,350
  2,477
Total equity, $m
  692
  777
  866
  960
  1,058
  1,161
  1,268
  1,380
  1,497
  1,618
  1,744
  1,875
  2,011
  2,152
  2,299
  2,452
  2,611
  2,777
  2,949
  3,128
  3,315
  3,510
  3,713
  3,925
  4,146
  4,377
  4,618
  4,871
  5,135
  5,411
Total liabilities and equity, $m
  1,009
  1,132
  1,262
  1,399
  1,542
  1,692
  1,848
  2,012
  2,182
  2,359
  2,542
  2,733
  2,931
  3,137
  3,351
  3,574
  3,806
  4,048
  4,299
  4,560
  4,832
  5,116
  5,412
  5,721
  6,044
  6,380
  6,732
  7,101
  7,485
  7,888
Debt-to-equity ratio
  0.050
  0.100
  0.130
  0.170
  0.190
  0.220
  0.240
  0.250
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
  0.410
Adjusted equity ratio
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  116
  129
  144
  159
  174
  191
  208
  226
  245
  264
  291
  312
  334
  356
  380
  404
  430
  456
  483
  512
  542
  573
  606
  640
  675
  712
  751
  791
  833
  877
Depreciation, amort., depletion, $m
  39
  43
  47
  51
  55
  59
  64
  69
  74
  79
  75
  81
  87
  93
  99
  106
  113
  120
  127
  135
  143
  151
  160
  169
  179
  189
  199
  210
  221
  233
Funds from operations, $m
  155
  172
  190
  209
  229
  250
  272
  295
  318
  343
  366
  393
  420
  449
  479
  510
  542
  576
  611
  647
  685
  724
  766
  809
  854
  901
  950
  1,001
  1,054
  1,110
Change in working capital, $m
  26
  28
  29
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
Cash from operations, $m
  129
  145
  161
  179
  197
  217
  237
  258
  280
  303
  325
  350
  376
  403
  431
  460
  490
  522
  554
  589
  624
  661
  699
  740
  782
  825
  871
  919
  968
  1,021
Maintenance CAPEX, $m
  -26
  -30
  -33
  -37
  -41
  -46
  -50
  -55
  -59
  -65
  -70
  -75
  -81
  -87
  -93
  -99
  -106
  -113
  -120
  -127
  -135
  -143
  -151
  -160
  -169
  -179
  -189
  -199
  -210
  -221
New CAPEX, $m
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -96
  -100
Cash from investing activities, $m
  -55
  -61
  -65
  -71
  -77
  -83
  -89
  -96
  -101
  -109
  -116
  -122
  -130
  -138
  -146
  -154
  -164
  -173
  -182
  -192
  -203
  -214
  -225
  -237
  -249
  -263
  -276
  -290
  -306
  -321
Free cash flow, $m
  74
  84
  95
  108
  120
  134
  148
  163
  179
  195
  210
  227
  246
  265
  285
  306
  327
  349
  372
  397
  422
  448
  475
  503
  532
  563
  595
  628
  663
  699
Issuance/(repayment) of debt, $m
  36
  39
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
  97
  101
  106
  111
  116
  121
  126
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  
  36
  39
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
  97
  101
  106
  111
  116
  121
  126
Total cash flow (excl. dividends), $m
  110
  123
  136
  150
  165
  181
  197
  214
  232
  251
  267
  287
  308
  330
  352
  376
  400
  425
  451
  479
  507
  537
  568
  600
  634
  669
  705
  744
  784
  826
Retained Cash Flow (-), $m
  -80
  -84
  -89
  -94
  -98
  -103
  -107
  -112
  -117
  -121
  -126
  -131
  -136
  -141
  -147
  -153
  -159
  -165
  -172
  -179
  -187
  -195
  -203
  -212
  -221
  -231
  -241
  -252
  -264
  -276
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
  30
  38
  47
  57
  67
  78
  90
  102
  116
  129
  141
  156
  172
  188
  205
  223
  241
  260
  279
  299
  320
  342
  365
  388
  412
  438
  464
  491
  520
  550
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
  28
  35
  41
  47
  52
  57
  61
  64
  66
  68
  67
  67
  65
  63
  60
  57
  52
  48
  43
  38
  33
  28
  24
  20
  16
  13
  10
  8
  6
  4
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

La-Z-Boy Incorporated manufactures, markets, imports, exports, distributes and retails upholstery furniture products. The Company also imports, distributes and retails accessories and casegoods (wood) furniture products. The Company's segments include the Upholstery segment, the Casegoods segment and the Retail segment. The Company is the producer of reclining chairs and manufacturer/distributor of residential furniture in the United States. The Company sells its products, primarily in the United States and Canada, as well as internationally, to furniture retailers and directly to consumers through stores that it owns and operates. The Company has a network of approximately 340 La-Z-Boy Furniture Galleries stores and over 560 Comfort Studio locations. The Company owns approximately 120 of the La-Z-Boy Furniture Galleries stores. The Company's other brands include England, Kincaid, American Drew and Hammary.

FINANCIAL RATIOS  of  La-Z-Boy Incorporated (LZB)

Valuation Ratios
P/E Ratio 18.2
Price to Sales 1
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 10.7
Price to Free Cash Flow 12.4
Growth Rates
Sales Growth Rate -0.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate -10.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0.2%
Total Debt to Equity 0.2%
Interest Coverage 132
Management Effectiveness
Return On Assets 10.3%
Ret/ On Assets - 3 Yr. Avg. 9.9%
Return On Total Capital 15.1%
Ret/ On T. Cap. - 3 Yr. Avg. 14.4%
Return On Equity 15.1%
Return On Equity - 3 Yr. Avg. 14.5%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 39.9%
Gross Margin - 3 Yr. Avg. 37.8%
EBITDA Margin 10.6%
EBITDA Margin - 3 Yr. Avg. 9.9%
Operating Margin 8.6%
Oper. Margin - 3 Yr. Avg. 7.9%
Pre-Tax Margin 8.6%
Pre-Tax Margin - 3 Yr. Avg. 8.1%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 33.6%
Eff/ Tax Rate - 3 Yr. Avg. 34.6%
Payout Ratio 24.4%

LZB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LZB stock intrinsic value calculation we used $1584 million for the last fiscal year's total revenue generated by La-Z-Boy Incorporated. The default revenue input number comes from 0001 income statement of La-Z-Boy Incorporated. 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 LZB stock valuation model: a) initial revenue growth rate of 13% 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 LZB is calculated based on our internal credit rating of La-Z-Boy Incorporated, 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 La-Z-Boy Incorporated.
    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 LZB stock the variable cost ratio is equal to 91.2%.

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 LZB 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 La-Z-Boy Incorporated.

Corporate tax rate of 27% is the nominal tax rate for La-Z-Boy Incorporated. 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 LZB 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 LZB are equal to 14%.

Life of production assets of 8.4 years is the average useful life of capital assets used in La-Z-Boy Incorporated 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 LZB is equal to 12.6%. 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 - $612.181 million for La-Z-Boy Incorporated - 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 46.601 million for La-Z-Boy Incorporated 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 La-Z-Boy Incorporated at the current share price and the inputted number of shares is $1.5 billion.

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