Intrinsic value of Netshoes (Cayman) - NETS

Previous Close

$1.60

  Intrinsic Value

$0.89

stock screener

  Rating & Target

sell

-44%

Previous close

$1.60

 
Intrinsic value

$0.89

 
Up/down potential

-44%

 
Rating

sell

We calculate the intrinsic value of NETS 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, %
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  609
  650
  692
  735
  781
  828
  877
  929
  982
  1,038
  1,097
  1,158
  1,222
  1,288
  1,358
  1,431
  1,507
  1,587
  1,671
  1,758
  1,850
  1,946
  2,047
  2,153
  2,264
  2,380
  2,501
  2,629
  2,763
  2,903
Variable operating expenses, $m
  575
  613
  652
  693
  736
  780
  826
  875
  925
  977
  1,029
  1,086
  1,146
  1,208
  1,274
  1,342
  1,414
  1,489
  1,567
  1,649
  1,735
  1,825
  1,920
  2,019
  2,123
  2,232
  2,346
  2,466
  2,591
  2,723
Fixed operating expenses, $m
  55
  56
  58
  59
  60
  62
  63
  64
  66
  67
  69
  70
  72
  73
  75
  76
  78
  80
  82
  83
  85
  87
  89
  91
  93
  95
  97
  99
  102
  104
Total operating expenses, $m
  630
  669
  710
  752
  796
  842
  889
  939
  991
  1,044
  1,098
  1,156
  1,218
  1,281
  1,349
  1,418
  1,492
  1,569
  1,649
  1,732
  1,820
  1,912
  2,009
  2,110
  2,216
  2,327
  2,443
  2,565
  2,693
  2,827
Operating income, $m
  -21
  -20
  -18
  -17
  -15
  -14
  -12
  -10
  -8
  -6
  0
  2
  4
  7
  10
  12
  15
  19
  22
  26
  30
  34
  38
  43
  48
  53
  58
  64
  70
  77
EBITDA, $m
  -10
  -8
  -7
  -5
  -2
  0
  2
  4
  7
  10
  12
  15
  19
  22
  26
  29
  33
  37
  42
  47
  51
  57
  62
  68
  74
  81
  88
  95
  103
  111
Interest expense (income), $m
  0
  34
  41
  50
  59
  68
  77
  87
  97
  108
  119
  131
  143
  156
  169
  183
  197
  212
  228
  245
  262
  280
  300
  320
  340
  362
  385
  410
  435
  461
  489
Earnings before tax, $m
  -54
  -61
  -68
  -75
  -83
  -91
  -99
  -107
  -116
  -125
  -131
  -141
  -151
  -162
  -173
  -185
  -197
  -209
  -223
  -236
  -251
  -266
  -281
  -298
  -315
  -333
  -351
  -371
  -391
  -413
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
  -54
  -61
  -68
  -75
  -83
  -91
  -99
  -107
  -116
  -125
  -131
  -141
  -151
  -162
  -173
  -185
  -197
  -209
  -223
  -236
  -251
  -266
  -281
  -298
  -315
  -333
  -351
  -371
  -391
  -413

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
  482
  514
  548
  582
  618
  656
  695
  735
  778
  822
  868
  917
  967
  1,020
  1,075
  1,133
  1,193
  1,257
  1,323
  1,392
  1,465
  1,541
  1,621
  1,704
  1,792
  1,884
  1,980
  2,082
  2,188
  2,299
Adjusted assets (=assets-cash), $m
  482
  514
  548
  582
  618
  656
  695
  735
  778
  822
  868
  917
  967
  1,020
  1,075
  1,133
  1,193
  1,257
  1,323
  1,392
  1,465
  1,541
  1,621
  1,704
  1,792
  1,884
  1,980
  2,082
  2,188
  2,299
Revenue / Adjusted assets
  1.263
  1.265
  1.263
  1.263
  1.264
  1.262
  1.262
  1.264
  1.262
  1.263
  1.264
  1.263
  1.264
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
  1.263
Average production assets, $m
  40
  43
  46
  49
  52
  55
  58
  61
  65
  69
  72
  76
  81
  85
  90
  94
  99
  105
  110
  116
  122
  128
  135
  142
  149
  157
  165
  174
  182
  192
Working capital, $m
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
Total debt, $m
  107
  128
  151
  174
  199
  224
  250
  278
  307
  337
  368
  401
  435
  471
  508
  547
  588
  631
  676
  723
  772
  823
  878
  934
  993
  1,056
  1,121
  1,189
  1,261
  1,337
Total liabilities, $m
  327
  348
  371
  394
  418
  444
  470
  498
  527
  557
  588
  621
  655
  691
  728
  767
  808
  851
  896
  943
  992
  1,043
  1,097
  1,154
  1,213
  1,276
  1,341
  1,409
  1,481
  1,556
Total equity, $m
  156
  166
  177
  188
  200
  212
  224
  238
  251
  266
  281
  296
  312
  329
  347
  366
  385
  406
  427
  450
  473
  498
  524
  551
  579
  609
  640
  672
  707
  743
Total liabilities and equity, $m
  483
  514
  548
  582
  618
  656
  694
  736
  778
  823
  869
  917
  967
  1,020
  1,075
  1,133
  1,193
  1,257
  1,323
  1,393
  1,465
  1,541
  1,621
  1,705
  1,792
  1,885
  1,981
  2,081
  2,188
  2,299
Debt-to-equity ratio
  0.690
  0.770
  0.850
  0.930
  1.000
  1.060
  1.120
  1.170
  1.220
  1.270
  1.310
  1.350
  1.390
  1.430
  1.460
  1.500
  1.530
  1.550
  1.580
  1.610
  1.630
  1.650
  1.680
  1.700
  1.720
  1.730
  1.750
  1.770
  1.780
  1.800
Adjusted equity ratio
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -54
  -61
  -68
  -75
  -83
  -91
  -99
  -107
  -116
  -125
  -131
  -141
  -151
  -162
  -173
  -185
  -197
  -209
  -223
  -236
  -251
  -266
  -281
  -298
  -315
  -333
  -351
  -371
  -391
  -413
Depreciation, amort., depletion, $m
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  33
  34
Funds from operations, $m
  -44
  -50
  -56
  -63
  -70
  -77
  -85
  -93
  -101
  -109
  -118
  -127
  -137
  -147
  -157
  -168
  -179
  -191
  -203
  -216
  -229
  -243
  -257
  -272
  -288
  -305
  -322
  -340
  -359
  -378
Change in working capital, $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
  1
  1
  1
Cash from operations, $m
  -44
  -50
  -57
  -63
  -70
  -78
  -85
  -93
  -101
  -110
  -118
  -128
  -137
  -147
  -157
  -168
  -179
  -191
  -203
  -216
  -229
  -243
  -258
  -273
  -289
  -305
  -322
  -340
  -359
  -379
Maintenance CAPEX, $m
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
New CAPEX, $m
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -15
  -16
  -16
  -17
  -18
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -35
  -36
  -37
  -40
  -42
Free cash flow, $m
  -53
  -60
  -67
  -74
  -82
  -90
  -98
  -107
  -116
  -125
  -135
  -145
  -155
  -166
  -177
  -189
  -201
  -214
  -228
  -242
  -256
  -271
  -287
  -304
  -321
  -339
  -358
  -378
  -399
  -421
Issuance/(repayment) of debt, $m
  20
  22
  22
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
Issuance/(repurchase) of shares, $m
  64
  71
  79
  86
  94
  103
  111
  120
  130
  139
  146
  157
  168
  179
  191
  203
  216
  230
  244
  259
  274
  290
  307
  325
  343
  362
  383
  404
  426
  449
Cash from financing (excl. dividends), $m  
  84
  93
  101
  109
  118
  128
  137
  148
  159
  169
  177
  190
  202
  215
  228
  242
  257
  273
  289
  306
  323
  342
  361
  382
  402
  424
  448
  472
  498
  524
Total cash flow (excl. dividends), $m
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  71
  74
  77
  81
  85
  89
  94
  98
  103
Retained Cash Flow (-), $m
  -64
  -71
  -79
  -86
  -94
  -103
  -111
  -120
  -130
  -139
  -146
  -157
  -168
  -179
  -191
  -203
  -216
  -230
  -244
  -259
  -274
  -290
  -307
  -325
  -343
  -362
  -383
  -404
  -426
  -449
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
  -32
  -38
  -44
  -51
  -58
  -65
  -72
  -79
  -87
  -95
  -103
  -112
  -121
  -130
  -140
  -150
  -160
  -171
  -183
  -195
  -207
  -220
  -233
  -247
  -262
  -277
  -293
  -310
  -327
  -346
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
  -31
  -35
  -39
  -42
  -45
  -47
  -48
  -49
  -50
  -50
  -49
  -48
  -46
  -44
  -41
  -38
  -35
  -32
  -28
  -25
  -21
  -18
  -15
  -13
  -10
  -8
  -6
  -5
  -4
  -3
Current shareholders' claim on cash, %
  61.4
  37.1
  22.2
  13.0
  7.6
  4.4
  2.5
  1.4
  0.8
  0.4
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Netshoes (Cayman) Limited is a sports and lifestyle online retailer in Latin America. The Company focuses on offering an online consumer platform in Latin America. The Company operates through two segments: Brazil and International. The Company operates in Brazil, Argentina, and Mexico. The Brazil segment consists of retail sales of consumer products from all of its verticals (which includes sales of sporting goods and related garments, as well as fashion and beauty goods) carried out through its sites Netshoes.com.br and Zattini.com.br and third-party sites that it manages, as well as its business to business offline operation. The International segment consists of retail sales of consumer products (mainly sporting goods and related garments) from its sites Netshoes.com.ar and Netshoes.com.mx in Argentina and Mexico.

FINANCIAL RATIOS  of  Netshoes (Cayman) (NETS)

Valuation Ratios
P/E Ratio -1
Price to Sales 0.1
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -7.1
Price to Free Cash Flow -1.6
Growth Rates
Sales Growth Rate 15.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 53.3%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 251.3%
Total Debt to Equity 312.8%
Interest Coverage 0
Management Effectiveness
Return On Assets -13.6%
Ret/ On Assets - 3 Yr. Avg. -19.1%
Return On Total Capital -26.8%
Ret/ On T. Cap. - 3 Yr. Avg. -31.1%
Return On Equity -73.8%
Return On Equity - 3 Yr. Avg. -76.7%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 31.6%
Gross Margin - 3 Yr. Avg. 32.6%
EBITDA Margin -6.9%
EBITDA Margin - 3 Yr. Avg. -7.8%
Operating Margin -4.2%
Oper. Margin - 3 Yr. Avg. -5.8%
Pre-Tax Margin -8.7%
Pre-Tax Margin - 3 Yr. Avg. -9.4%
Net Profit Margin -8.7%
Net Profit Margin - 3 Yr. Avg. -9.4%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

NETS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NETS stock intrinsic value calculation we used $570.524312896 million for the last fiscal year's total revenue generated by Netshoes (Cayman). The default revenue input number comes from 0001 income statement of Netshoes (Cayman). 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 NETS stock valuation model: a) initial revenue growth rate of 6.8% 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 NETS is calculated based on our internal credit rating of Netshoes (Cayman), 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 Netshoes (Cayman).
    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 NETS stock the variable cost ratio is equal to 94.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $54 million in the base year in the intrinsic value calculation for NETS 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 38.8% for Netshoes (Cayman).

Corporate tax rate of 27% is the nominal tax rate for Netshoes (Cayman). 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 NETS 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 NETS are equal to 6.6%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Netshoes (Cayman) 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 NETS is equal to 0.4%. 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 - $145.982784657 million for Netshoes (Cayman) - 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 31.056 million for Netshoes (Cayman) 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 Netshoes (Cayman) at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Netshoes Limited Announces Second Quarter 2018 Results   [Aug-09-18 04:54PM  Business Wire]
▶ Netshoes Limited Announces First Quarter 2018 Results   [May-14-18 05:02PM  Business Wire]
▶ Netshoes Limited Reports Third Quarter 2017 Results   [Nov-13-17 05:00PM  Business Wire]
▶ Netshoes Limited Reports Second Quarter 2017 Results   [Aug-14-17 04:20PM  Business Wire]

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