Intrinsic value of Movado Group Inc. - MOV

Previous Close

$26.26

  Intrinsic Value

$18.28

stock screener

  Rating & Target

sell

-30%

Previous close

$26.26

 
Intrinsic value

$18.28

 
Up/down potential

-30%

 
Rating

sell

We calculate the intrinsic value of MOV 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 0.6

 

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, %
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  623
  679
  739
  800
  865
  931
  1,001
  1,073
  1,148
  1,225
  1,306
  1,390
  1,478
  1,569
  1,664
  1,763
  1,866
  1,974
  2,086
  2,204
  2,326
  2,454
  2,588
  2,728
  2,874
  3,028
  3,188
  3,356
  3,532
  3,716
Variable operating expenses, $m
  563
  613
  666
  721
  778
  838
  899
  963
  1,030
  1,099
  1,163
  1,238
  1,316
  1,397
  1,482
  1,570
  1,662
  1,758
  1,858
  1,962
  2,071
  2,185
  2,304
  2,429
  2,559
  2,696
  2,839
  2,988
  3,145
  3,309
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
  563
  613
  666
  721
  778
  838
  899
  963
  1,030
  1,099
  1,163
  1,238
  1,316
  1,397
  1,482
  1,570
  1,662
  1,758
  1,858
  1,962
  2,071
  2,185
  2,304
  2,429
  2,559
  2,696
  2,839
  2,988
  3,145
  3,309
Operating income, $m
  60
  66
  73
  79
  86
  94
  101
  109
  117
  126
  143
  152
  162
  172
  182
  193
  205
  216
  229
  242
  255
  269
  284
  299
  315
  332
  349
  368
  387
  407
EBITDA, $m
  79
  86
  93
  101
  109
  118
  126
  136
  145
  155
  165
  176
  187
  198
  210
  223
  236
  250
  264
  279
  294
  310
  327
  345
  363
  383
  403
  424
  446
  470
Interest expense (income), $m
  1
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
Earnings before tax, $m
  59
  64
  70
  76
  82
  88
  95
  102
  109
  116
  132
  140
  149
  157
  166
  176
  186
  196
  207
  218
  230
  242
  255
  268
  282
  297
  312
  328
  345
  363
Tax expense, $m
  16
  17
  19
  20
  22
  24
  26
  27
  29
  31
  36
  38
  40
  42
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  89
  93
  98
Net income, $m
  43
  47
  51
  55
  60
  64
  69
  74
  79
  85
  97
  102
  109
  115
  122
  128
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265

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
  554
  605
  658
  713
  770
  829
  891
  955
  1,022
  1,091
  1,163
  1,238
  1,316
  1,397
  1,482
  1,570
  1,662
  1,758
  1,858
  1,962
  2,071
  2,185
  2,305
  2,429
  2,560
  2,696
  2,839
  2,988
  3,145
  3,309
Adjusted assets (=assets-cash), $m
  554
  605
  658
  713
  770
  829
  891
  955
  1,022
  1,091
  1,163
  1,238
  1,316
  1,397
  1,482
  1,570
  1,662
  1,758
  1,858
  1,962
  2,071
  2,185
  2,305
  2,429
  2,560
  2,696
  2,839
  2,988
  3,145
  3,309
Revenue / Adjusted assets
  1.125
  1.122
  1.123
  1.122
  1.123
  1.123
  1.123
  1.124
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
  1.123
Average production assets, $m
  55
  60
  66
  71
  77
  83
  89
  95
  102
  109
  116
  124
  132
  140
  148
  157
  166
  176
  186
  196
  207
  218
  230
  243
  256
  269
  284
  299
  314
  331
Working capital, $m
  210
  229
  249
  270
  291
  314
  337
  361
  387
  413
  440
  469
  498
  529
  561
  594
  629
  665
  703
  743
  784
  827
  872
  919
  969
  1,020
  1,074
  1,131
  1,190
  1,252
Total debt, $m
  40
  55
  70
  87
  104
  121
  140
  159
  178
  199
  220
  243
  266
  290
  315
  341
  369
  397
  427
  458
  490
  524
  559
  596
  635
  676
  718
  762
  809
  858
Total liabilities, $m
  165
  180
  195
  212
  229
  246
  265
  284
  303
  324
  345
  368
  391
  415
  440
  466
  494
  522
  552
  583
  615
  649
  684
  721
  760
  801
  843
  888
  934
  983
Total equity, $m
  390
  425
  462
  501
  541
  583
  626
  672
  718
  767
  818
  870
  925
  982
  1,042
  1,104
  1,168
  1,236
  1,306
  1,380
  1,456
  1,536
  1,620
  1,708
  1,799
  1,895
  1,996
  2,101
  2,211
  2,326
Total liabilities and equity, $m
  555
  605
  657
  713
  770
  829
  891
  956
  1,021
  1,091
  1,163
  1,238
  1,316
  1,397
  1,482
  1,570
  1,662
  1,758
  1,858
  1,963
  2,071
  2,185
  2,304
  2,429
  2,559
  2,696
  2,839
  2,989
  3,145
  3,309
Debt-to-equity ratio
  0.100
  0.130
  0.150
  0.170
  0.190
  0.210
  0.220
  0.240
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
  0.340
  0.350
  0.350
  0.350
  0.360
  0.360
  0.360
  0.370
  0.370
Adjusted equity ratio
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703
  0.703

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  43
  47
  51
  55
  60
  64
  69
  74
  79
  85
  97
  102
  109
  115
  122
  128
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  228
  240
  252
  265
Depreciation, amort., depletion, $m
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  56
  59
  62
Funds from operations, $m
  62
  66
  72
  77
  82
  88
  94
  100
  107
  114
  118
  126
  133
  141
  149
  158
  167
  176
  186
  196
  207
  218
  230
  242
  254
  268
  281
  296
  311
  327
Change in working capital, $m
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
Cash from operations, $m
  43
  47
  52
  56
  61
  66
  71
  76
  82
  87
  91
  97
  104
  111
  117
  125
  132
  140
  148
  157
  166
  175
  184
  194
  205
  216
  227
  239
  252
  265
Maintenance CAPEX, $m
  -10
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -56
  -59
New CAPEX, $m
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
Cash from investing activities, $m
  -15
  -15
  -16
  -17
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -59
  -62
  -65
  -69
  -72
  -75
Free cash flow, $m
  29
  32
  35
  38
  42
  45
  49
  53
  57
  61
  63
  68
  73
  78
  83
  88
  93
  99
  105
  111
  118
  124
  131
  139
  146
  154
  162
  171
  180
  189
Issuance/(repayment) of debt, $m
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  42
  44
  47
  49
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  
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  42
  44
  47
  49
Total cash flow (excl. dividends), $m
  43
  47
  51
  55
  59
  63
  67
  72
  77
  82
  85
  90
  96
  102
  108
  114
  121
  128
  135
  142
  150
  158
  167
  176
  185
  195
  205
  215
  227
  238
Retained Cash Flow (-), $m
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -100
  -105
  -110
  -115
Prev. year cash balance distribution, $m
  115
  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
  124
  11
  13
  16
  18
  21
  24
  27
  30
  33
  34
  38
  41
  45
  48
  52
  56
  60
  64
  69
  73
  78
  83
  88
  93
  99
  104
  110
  116
  123
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
  119
  10
  12
  13
  14
  15
  16
  17
  17
  17
  16
  16
  16
  15
  14
  13
  12
  11
  10
  9
  8
  6
  5
  4
  4
  3
  2
  2
  1
  1
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
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Movado Group, Inc. designs, sources, markets and distributes watches. The Company operates through two segments: Wholesale and Retail. The Wholesale segment includes the design, development, sourcing, marketing and distribution of watches, and after-sales service activities and shipping. It sells all of its brands to jewelry store chains and department stores, as well as independent jewelers. The Retail segment includes its outlet stores. As of January 31, 2017, its subsidiary, Movado Retail Group, Inc., operated 40 outlet stores located in outlet centers across the United States. It divides its business into two geographic locations: the United States operations and International operations. It has international operations in Europe, the Americas, the Middle East and Asia. Its portfolio of brands includes Coach Watches, Concord, Ebel, ESQ Movado, Scuderia Ferrari Watches, HUGO BOSS Watches, Juicy Couture Watches, Lacoste Watches, Movado and Tommy Hilfiger Watches.

FINANCIAL RATIOS  of  Movado Group Inc. (MOV)

Valuation Ratios
P/E Ratio 17.2
Price to Sales 1.1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 11.6
Growth Rates
Sales Growth Rate -7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -18.8%
Financial Strength
Quick Ratio 51
Current Ratio 0.4
LT Debt to Equity 5.3%
Total Debt to Equity 6.3%
Interest Coverage 52
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.2%
Return On Equity 7.7%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 53.3%
Gross Margin - 3 Yr. Avg. 53.2%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 13.2%
Operating Margin 9.8%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 9.2%
Pre-Tax Margin - 3 Yr. Avg. 11%
Net Profit Margin 6.3%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 30.5%
Payout Ratio 34.3%

MOV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MOV stock intrinsic value calculation we used $568 million for the last fiscal year's total revenue generated by Movado Group Inc.. The default revenue input number comes from 0001 income statement of Movado Group 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 MOV stock valuation model: a) initial revenue growth rate of 9.6% 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 MOV is calculated based on our internal credit rating of Movado Group 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 Movado Group 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 MOV stock the variable cost ratio is equal to 90.5%.

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 MOV 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 5.5% for Movado Group Inc..

Corporate tax rate of 27% is the nominal tax rate for Movado Group 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 MOV 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 MOV are equal to 8.9%.

Life of production assets of 5.3 years is the average useful life of capital assets used in Movado Group 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 MOV is equal to 33.7%. 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 - $470.335 million for Movado Group 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 23.096 million for Movado Group 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 Movado Group Inc. at the current share price and the inputted number of shares is $0.6 billion.

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