Intrinsic value of Overstock.com, Inc. - OSTK

Previous Close

$16.90

  Intrinsic Value

$61.34

stock screener

  Rating & Target

str. buy

+263%

Previous close

$16.90

 
Intrinsic value

$61.34

 
Up/down potential

+263%

 
Rating

str. buy

We calculate the intrinsic value of OSTK 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 0.5

 

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, %
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  1,813
  1,886
  1,963
  2,046
  2,133
  2,226
  2,324
  2,428
  2,538
  2,654
  2,777
  2,906
  3,042
  3,186
  3,337
  3,497
  3,664
  3,841
  4,026
  4,222
  4,427
  4,643
  4,870
  5,109
  5,360
  5,624
  5,901
  6,192
  6,498
  6,820
Variable operating expenses, $m
  361
  375
  390
  407
  424
  442
  462
  482
  504
  527
  549
  575
  602
  630
  660
  691
  725
  759
  796
  835
  875
  918
  963
  1,010
  1,060
  1,112
  1,167
  1,224
  1,285
  1,349
Fixed operating expenses, $m
  1,498
  1,531
  1,565
  1,599
  1,635
  1,670
  1,707
  1,745
  1,783
  1,822
  1,862
  1,903
  1,945
  1,988
  2,032
  2,077
  2,122
  2,169
  2,217
  2,265
  2,315
  2,366
  2,418
  2,471
  2,526
  2,581
  2,638
  2,696
  2,756
  2,816
Total operating expenses, $m
  1,859
  1,906
  1,955
  2,006
  2,059
  2,112
  2,169
  2,227
  2,287
  2,349
  2,411
  2,478
  2,547
  2,618
  2,692
  2,768
  2,847
  2,928
  3,013
  3,100
  3,190
  3,284
  3,381
  3,481
  3,586
  3,693
  3,805
  3,920
  4,041
  4,165
Operating income, $m
  -46
  -21
  8
  40
  75
  113
  155
  201
  251
  305
  365
  428
  495
  568
  645
  729
  817
  912
  1,014
  1,121
  1,236
  1,359
  1,489
  1,627
  1,774
  1,930
  2,096
  2,272
  2,458
  2,655
EBITDA, $m
  -14
  13
  42
  75
  112
  152
  196
  243
  295
  351
  411
  476
  545
  620
  700
  786
  877
  975
  1,080
  1,191
  1,309
  1,435
  1,569
  1,711
  1,862
  2,023
  2,193
  2,373
  2,564
  2,767
Interest expense (income), $m
  1
  2
  3
  4
  4
  5
  6
  7
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
Earnings before tax, $m
  -48
  -23
  4
  35
  70
  107
  149
  194
  243
  296
  355
  417
  483
  554
  631
  712
  800
  893
  993
  1,099
  1,213
  1,333
  1,461
  1,598
  1,743
  1,896
  2,060
  2,233
  2,417
  2,611
Tax expense, $m
  0
  0
  1
  10
  19
  29
  40
  52
  66
  80
  96
  112
  130
  150
  170
  192
  216
  241
  268
  297
  327
  360
  395
  431
  471
  512
  556
  603
  652
  705
Net income, $m
  -48
  -23
  3
  26
  51
  78
  109
  141
  177
  216
  259
  304
  353
  405
  460
  520
  584
  652
  725
  802
  885
  973
  1,067
  1,166
  1,272
  1,384
  1,504
  1,630
  1,764
  1,906

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
  451
  469
  488
  509
  530
  553
  578
  604
  631
  660
  690
  723
  756
  792
  830
  869
  911
  955
  1,001
  1,050
  1,101
  1,154
  1,211
  1,270
  1,333
  1,398
  1,467
  1,540
  1,616
  1,696
Adjusted assets (=assets-cash), $m
  451
  469
  488
  509
  530
  553
  578
  604
  631
  660
  690
  723
  756
  792
  830
  869
  911
  955
  1,001
  1,050
  1,101
  1,154
  1,211
  1,270
  1,333
  1,398
  1,467
  1,540
  1,616
  1,696
Revenue / Adjusted assets
  4.020
  4.021
  4.023
  4.020
  4.025
  4.025
  4.021
  4.020
  4.022
  4.021
  4.025
  4.019
  4.024
  4.023
  4.020
  4.024
  4.022
  4.022
  4.022
  4.021
  4.021
  4.023
  4.021
  4.023
  4.021
  4.023
  4.022
  4.021
  4.021
  4.021
Average production assets, $m
  149
  155
  161
  168
  175
  183
  191
  199
  208
  218
  228
  238
  249
  261
  274
  287
  300
  315
  330
  346
  363
  381
  399
  419
  440
  461
  484
  508
  533
  559
Working capital, $m
  -160
  -166
  -173
  -180
  -188
  -196
  -205
  -214
  -223
  -234
  -244
  -256
  -268
  -280
  -294
  -308
  -322
  -338
  -354
  -372
  -390
  -409
  -429
  -450
  -472
  -495
  -519
  -545
  -572
  -600
Total debt, $m
  50
  61
  72
  84
  97
  111
  126
  141
  157
  174
  193
  212
  232
  253
  275
  299
  324
  350
  377
  406
  437
  469
  502
  538
  575
  614
  655
  698
  743
  791
Total liabilities, $m
  268
  279
  290
  303
  316
  329
  344
  359
  375
  393
  411
  430
  450
  471
  494
  517
  542
  568
  596
  625
  655
  687
  721
  756
  793
  832
  873
  916
  961
  1,009
Total equity, $m
  183
  190
  198
  206
  215
  224
  234
  245
  256
  267
  280
  293
  306
  321
  336
  352
  369
  387
  405
  425
  446
  468
  490
  514
  540
  566
  594
  624
  654
  687
Total liabilities and equity, $m
  451
  469
  488
  509
  531
  553
  578
  604
  631
  660
  691
  723
  756
  792
  830
  869
  911
  955
  1,001
  1,050
  1,101
  1,155
  1,211
  1,270
  1,333
  1,398
  1,467
  1,540
  1,615
  1,696
Debt-to-equity ratio
  0.270
  0.320
  0.360
  0.410
  0.450
  0.500
  0.540
  0.580
  0.620
  0.650
  0.690
  0.720
  0.760
  0.790
  0.820
  0.850
  0.880
  0.900
  0.930
  0.960
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.140
  1.150
Adjusted equity ratio
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -48
  -23
  3
  26
  51
  78
  109
  141
  177
  216
  259
  304
  353
  405
  460
  520
  584
  652
  725
  802
  885
  973
  1,067
  1,166
  1,272
  1,384
  1,504
  1,630
  1,764
  1,906
Depreciation, amort., depletion, $m
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  97
  102
  107
  112
Funds from operations, $m
  -16
  10
  38
  62
  88
  117
  149
  183
  221
  261
  305
  352
  402
  457
  515
  577
  644
  715
  791
  872
  958
  1,049
  1,147
  1,250
  1,360
  1,477
  1,600
  1,732
  1,871
  2,018
Change in working capital, $m
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Cash from operations, $m
  -10
  16
  44
  69
  96
  125
  158
  193
  231
  272
  315
  363
  414
  469
  528
  591
  659
  731
  807
  889
  976
  1,068
  1,167
  1,271
  1,382
  1,500
  1,625
  1,757
  1,898
  2,046
Maintenance CAPEX, $m
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
New CAPEX, $m
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Cash from investing activities, $m
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -64
  -68
  -71
  -74
  -78
  -82
  -86
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -127
  -133
Free cash flow, $m
  -44
  -20
  7
  30
  55
  83
  113
  146
  182
  221
  262
  307
  356
  408
  464
  524
  588
  656
  729
  807
  890
  978
  1,072
  1,172
  1,278
  1,390
  1,510
  1,637
  1,771
  1,913
Issuance/(repayment) of debt, $m
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  48
Issuance/(repurchase) of shares, $m
  55
  31
  5
  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  
  65
  42
  16
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  48
Total cash flow (excl. dividends), $m
  21
  22
  23
  42
  68
  96
  127
  161
  198
  238
  280
  326
  376
  429
  486
  547
  612
  682
  756
  836
  920
  1,010
  1,105
  1,207
  1,315
  1,429
  1,551
  1,680
  1,816
  1,961
Retained Cash Flow (-), $m
  -55
  -31
  -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
  -32
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
  -34
  -9
  15
  34
  59
  87
  118
  151
  187
  226
  268
  313
  362
  415
  471
  531
  595
  664
  738
  816
  899
  988
  1,083
  1,183
  1,290
  1,403
  1,523
  1,650
  1,785
  1,929
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
  -32
  -8
  13
  28
  46
  63
  79
  94
  107
  118
  127
  134
  138
  139
  138
  135
  130
  122
  114
  104
  93
  82
  71
  60
  50
  41
  33
  26
  19
  15
Current shareholders' claim on cash, %
  90.8
  86.1
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4
  85.4

Overstock.com, Inc. is an online retailer and incubator of blockchain technology. Through its online retail business, the Company offers a range of price-competitive brand name, non-brand name and closeout products, including furniture, home decor, bedding and bath, housewares, jewelry and watches, apparel and designer accessories, health and beauty products, electronics and computers, and sporting goods. It operates Retail and Medici businesses. Its Retail business consists of its Direct and Partner segments. Its Other segment consists of Medici. The Company also sells various books, magazines, compact discs (CDs), digital versatile discs (DVDs) and video games. The Company sells these products and services through its Internet Websites located at www.overstock.com, www.o.co and www.o.biz. The Company's other offerings include Worldstock Fair Trade, Main Street Revolution, Farmers Market, Pet Adoptions, Insurance and Supplier Oasis.

FINANCIAL RATIOS  of  Overstock.com, Inc. (OSTK)

Valuation Ratios
P/E Ratio 33.1
Price to Sales 0.2
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 10.7
Price to Free Cash Flow -13.4
Growth Rates
Sales Growth Rate 8.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 61
Current Ratio 0
LT Debt to Equity 32%
Total Debt to Equity 33.7%
Interest Coverage 22
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 6.5%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 8%
Return On Equity - 3 Yr. Avg. 5.6%
Asset Turnover 3.9
Profitability Ratios
Gross Margin 18.4%
Gross Margin - 3 Yr. Avg. 18.5%
EBITDA Margin 2.9%
EBITDA Margin - 3 Yr. Avg. 2.3%
Operating Margin 0.2%
Oper. Margin - 3 Yr. Avg. 0.3%
Pre-Tax Margin 1.2%
Pre-Tax Margin - 3 Yr. Avg. 0.7%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 47.6%
Eff/ Tax Rate - 3 Yr. Avg. 48.4%
Payout Ratio 0%

OSTK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OSTK stock intrinsic value calculation we used $1745 million for the last fiscal year's total revenue generated by Overstock.com, Inc.. The default revenue input number comes from 0001 income statement of Overstock.com, 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 OSTK stock valuation model: a) initial revenue growth rate of 3.9% 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 OSTK is calculated based on our internal credit rating of Overstock.com, 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 Overstock.com, 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 OSTK stock the variable cost ratio is equal to 19.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1466 million in the base year in the intrinsic value calculation for OSTK 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 5.9% for Overstock.com, Inc..

Corporate tax rate of 27% is the nominal tax rate for Overstock.com, 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 OSTK 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 OSTK are equal to 8.2%.

Life of production assets of 4.7 years is the average useful life of capital assets used in Overstock.com, 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 OSTK is equal to -8.8%. 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 - $175.628 million for Overstock.com, 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 32.146 million for Overstock.com, 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 Overstock.com, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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