Intrinsic value of PetMed Express, Inc. - PETS

Previous Close

$17.60

  Intrinsic Value

$31.46

stock screener

  Rating & Target

str. buy

+79%

Previous close

$17.60

 
Intrinsic value

$31.46

 
Up/down potential

+79%

 
Rating

str. buy

We calculate the intrinsic value of PETS 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 0.4

 

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
  279
  286
  293
  302
  311
  321
  332
  343
  356
  370
  384
  400
  417
  434
  453
  473
  494
  516
  540
  564
  591
  618
  647
  678
  710
  744
  780
  818
  857
  899
Variable operating expenses, $m
  112
  115
  118
  121
  125
  129
  133
  138
  143
  148
  154
  160
  167
  174
  182
  189
  198
  207
  216
  226
  237
  248
  259
  272
  285
  298
  312
  328
  343
  360
Fixed operating expenses, $m
  117
  119
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  161
  165
  169
  172
  176
  180
  184
  188
  192
  196
  201
  205
  210
  214
  219
Total operating expenses, $m
  229
  234
  240
  245
  252
  259
  266
  274
  282
  290
  299
  308
  318
  329
  340
  350
  363
  376
  388
  402
  417
  432
  447
  464
  481
  499
  517
  538
  557
  579
Operating income, $m
  51
  52
  54
  56
  59
  62
  66
  70
  75
  80
  86
  92
  98
  106
  114
  122
  131
  141
  151
  162
  174
  187
  200
  214
  229
  245
  262
  280
  299
  320
EBITDA, $m
  53
  54
  56
  59
  61
  65
  69
  73
  78
  83
  89
  95
  102
  109
  117
  126
  135
  145
  155
  166
  178
  191
  205
  219
  235
  251
  268
  287
  306
  327
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
Earnings before tax, $m
  51
  52
  54
  56
  59
  62
  66
  70
  74
  80
  85
  91
  98
  105
  113
  121
  130
  140
  150
  161
  173
  185
  199
  213
  228
  244
  261
  278
  297
  318
Tax expense, $m
  14
  14
  15
  15
  16
  17
  18
  19
  20
  21
  23
  25
  26
  28
  30
  33
  35
  38
  41
  44
  47
  50
  54
  57
  61
  66
  70
  75
  80
  86
Net income, $m
  37
  38
  39
  41
  43
  45
  48
  51
  54
  58
  62
  67
  72
  77
  82
  89
  95
  102
  110
  118
  126
  135
  145
  155
  166
  178
  190
  203
  217
  232

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
  77
  78
  80
  83
  85
  88
  91
  94
  97
  101
  105
  110
  114
  119
  124
  129
  135
  141
  148
  155
  162
  169
  177
  186
  194
  204
  214
  224
  235
  246
Adjusted assets (=assets-cash), $m
  77
  78
  80
  83
  85
  88
  91
  94
  97
  101
  105
  110
  114
  119
  124
  129
  135
  141
  148
  155
  162
  169
  177
  186
  194
  204
  214
  224
  235
  246
Revenue / Adjusted assets
  3.623
  3.667
  3.663
  3.639
  3.659
  3.648
  3.648
  3.649
  3.670
  3.663
  3.657
  3.636
  3.658
  3.647
  3.653
  3.667
  3.659
  3.660
  3.649
  3.639
  3.648
  3.657
  3.655
  3.645
  3.660
  3.647
  3.645
  3.652
  3.647
  3.654
Average production assets, $m
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  52
  54
  56
  59
  62
  64
  67
  71
  74
  77
  81
  85
  89
  93
  98
Working capital, $m
  10
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
Total debt, $m
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  19
  20
  22
  24
  26
  28
  30
  33
  35
  38
  41
  44
Total liabilities, $m
  20
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
Total equity, $m
  57
  58
  60
  61
  63
  65
  68
  70
  73
  75
  78
  82
  85
  89
  92
  96
  101
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
  183
Total liabilities and equity, $m
  77
  78
  80
  82
  85
  87
  91
  94
  98
  101
  105
  110
  114
  119
  124
  129
  135
  141
  148
  154
  161
  169
  177
  185
  195
  204
  213
  224
  235
  246
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
Adjusted equity ratio
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  37
  38
  39
  41
  43
  45
  48
  51
  54
  58
  62
  67
  72
  77
  82
  89
  95
  102
  110
  118
  126
  135
  145
  155
  166
  178
  190
  203
  217
  232
Depreciation, amort., depletion, $m
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
Funds from operations, $m
  39
  40
  42
  43
  45
  48
  51
  54
  57
  61
  65
  70
  75
  80
  86
  92
  99
  106
  114
  122
  131
  140
  150
  160
  172
  184
  196
  209
  224
  239
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  39
  40
  41
  43
  45
  48
  50
  53
  57
  61
  65
  69
  74
  79
  85
  91
  98
  105
  113
  121
  130
  139
  149
  159
  171
  182
  195
  208
  222
  237
Maintenance CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
Cash from investing activities, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -12
Free cash flow, $m
  37
  37
  38
  40
  42
  44
  47
  49
  53
  56
  60
  65
  69
  74
  80
  86
  92
  99
  106
  114
  123
  132
  141
  151
  162
  173
  185
  198
  212
  226
Issuance/(repayment) of debt, $m
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
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  
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
Total cash flow (excl. dividends), $m
  37
  38
  39
  41
  42
  45
  47
  50
  54
  57
  61
  66
  70
  76
  81
  87
  94
  101
  108
  116
  124
  133
  143
  153
  164
  176
  188
  201
  215
  229
Retained Cash Flow (-), $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
Prev. year cash balance distribution, $m
  60
  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
  96
  36
  37
  39
  41
  43
  45
  48
  51
  54
  58
  62
  67
  72
  77
  83
  89
  96
  103
  111
  119
  128
  137
  147
  158
  169
  181
  193
  206
  221
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
  92
  33
  33
  32
  31
  31
  30
  30
  29
  29
  28
  27
  25
  24
  23
  21
  19
  18
  16
  14
  12
  11
  9
  7
  6
  5
  4
  3
  2
  2
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

PetMed Express, Inc. (PetMed Express), doing business as 1800PetMeds, is a pet pharmacy. The Company markets prescription and non-prescription pet medications, and other health products for dogs and cats, direct to the consumer. It offers a selection of products for dogs and cats. Its product line contains approximately 3,000 stock keeping units (SKUS) of pet medications, health products and supplies. Its products include brands of medication, such as Frontline Plus, K9 Advantix II, Advantage II, Heartgard Plus, Sentinel, Revolution and Rimadyl. It also offers additional pet supplies for sale on its Website, which are drop shipped to its customers by third parties. These pet supplies include food, beds, crates, stairs, strollers and other pet supplies. Its products included Non-Prescription Medications (Over the Counter (OTC)) and supplies, and Prescription Medications (Rx). Its customers are located in California, Florida, Texas, New York, Virginia and Georgia, among others.

FINANCIAL RATIOS  of  PetMed Express, Inc. (PETS)

Valuation Ratios
P/E Ratio 15.1
Price to Sales 1.5
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 10
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -45%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 23.6%
Ret/ On Assets - 3 Yr. Avg. 23%
Return On Total Capital 27.3%
Ret/ On T. Cap. - 3 Yr. Avg. 25.8%
Return On Equity 27.3%
Return On Equity - 3 Yr. Avg. 25.8%
Asset Turnover 2.5
Profitability Ratios
Gross Margin 31.7%
Gross Margin - 3 Yr. Avg. 32.4%
EBITDA Margin 15.7%
EBITDA Margin - 3 Yr. Avg. 14.3%
Operating Margin 14.9%
Oper. Margin - 3 Yr. Avg. 13.6%
Pre-Tax Margin 15.3%
Pre-Tax Margin - 3 Yr. Avg. 13.8%
Net Profit Margin 9.6%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
Payout Ratio 66.7%

PETS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PETS stock intrinsic value calculation we used $274 million for the last fiscal year's total revenue generated by PetMed Express, Inc.. The default revenue input number comes from 0001 income statement of PetMed Express, 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 PETS 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 4.3%, whose default value for PETS is calculated based on our internal credit rating of PetMed Express, 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 PetMed Express, 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 PETS stock the variable cost ratio is equal to 40.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $114 million in the base year in the intrinsic value calculation for PETS 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 PetMed Express, Inc..

Corporate tax rate of 27% is the nominal tax rate for PetMed Express, 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 PETS 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 PETS are equal to 10.9%.

Life of production assets of 14.3 years is the average useful life of capital assets used in PetMed Express, 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 PETS is equal to 3.4%. 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 - $115.731 million for PetMed Express, 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 20.674 million for PetMed Express, 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 PetMed Express, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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