Intrinsic value of Children's Place, Inc. (The) - PLCE

Previous Close

$99.37

  Intrinsic Value

$156.28

stock screener

  Rating & Target

str. buy

+57%

Previous close

$99.37

 
Intrinsic value

$156.28

 
Up/down potential

+57%

 
Rating

str. buy

We calculate the intrinsic value of PLCE 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 1.6

 

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, %
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  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
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  1,993
  2,122
  2,255
  2,394
  2,539
  2,690
  2,848
  3,012
  3,183
  3,362
  3,549
  3,744
  3,948
  4,162
  4,385
  4,619
  4,863
  5,120
  5,388
  5,669
  5,963
  6,272
  6,595
  6,935
  7,290
  7,663
  8,054
  8,464
  8,895
  9,346
Variable operating expenses, $m
  1,667
  1,772
  1,882
  1,997
  2,116
  2,240
  2,370
  2,505
  2,646
  2,793
  2,921
  3,082
  3,250
  3,426
  3,610
  3,802
  4,003
  4,214
  4,435
  4,666
  4,909
  5,163
  5,429
  5,708
  6,001
  6,308
  6,630
  6,967
  7,322
  7,693
Fixed operating expenses, $m
  150
  154
  157
  160
  164
  168
  171
  175
  179
  183
  187
  191
  195
  199
  204
  208
  213
  217
  222
  227
  232
  237
  242
  248
  253
  259
  265
  270
  276
  282
Total operating expenses, $m
  1,817
  1,926
  2,039
  2,157
  2,280
  2,408
  2,541
  2,680
  2,825
  2,976
  3,108
  3,273
  3,445
  3,625
  3,814
  4,010
  4,216
  4,431
  4,657
  4,893
  5,141
  5,400
  5,671
  5,956
  6,254
  6,567
  6,895
  7,237
  7,598
  7,975
Operating income, $m
  176
  196
  216
  237
  259
  282
  307
  332
  358
  386
  441
  471
  503
  537
  572
  609
  647
  688
  731
  775
  822
  872
  924
  979
  1,036
  1,096
  1,160
  1,227
  1,297
  1,370
EBITDA, $m
  258
  281
  305
  330
  356
  384
  412
  442
  473
  506
  540
  576
  614
  653
  695
  738
  783
  831
  881
  934
  989
  1,048
  1,109
  1,173
  1,240
  1,311
  1,385
  1,464
  1,546
  1,632
Interest expense (income), $m
  2
  3
  6
  10
  14
  18
  23
  27
  32
  37
  42
  48
  53
  59
  65
  72
  78
  86
  93
  101
  109
  117
  126
  135
  145
  155
  166
  177
  189
  202
  215
Earnings before tax, $m
  174
  190
  206
  223
  241
  260
  279
  300
  321
  344
  393
  418
  444
  471
  500
  530
  562
  595
  630
  667
  705
  746
  789
  833
  881
  930
  982
  1,037
  1,095
  1,156
Tax expense, $m
  47
  51
  56
  60
  65
  70
  75
  81
  87
  93
  106
  113
  120
  127
  135
  143
  152
  161
  170
  180
  190
  201
  213
  225
  238
  251
  265
  280
  296
  312
Net income, $m
  127
  138
  150
  163
  176
  190
  204
  219
  234
  251
  287
  305
  324
  344
  365
  387
  410
  434
  460
  487
  515
  544
  576
  608
  643
  679
  717
  757
  799
  844

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
  1,002
  1,067
  1,134
  1,204
  1,277
  1,353
  1,432
  1,514
  1,600
  1,690
  1,784
  1,882
  1,985
  2,092
  2,205
  2,322
  2,445
  2,574
  2,709
  2,850
  2,998
  3,153
  3,316
  3,486
  3,665
  3,853
  4,049
  4,256
  4,472
  4,699
Adjusted assets (=assets-cash), $m
  1,002
  1,067
  1,134
  1,204
  1,277
  1,353
  1,432
  1,514
  1,600
  1,690
  1,784
  1,882
  1,985
  2,092
  2,205
  2,322
  2,445
  2,574
  2,709
  2,850
  2,998
  3,153
  3,316
  3,486
  3,665
  3,853
  4,049
  4,256
  4,472
  4,699
Revenue / Adjusted assets
  1.989
  1.989
  1.989
  1.988
  1.988
  1.988
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
Average production assets, $m
  279
  297
  316
  335
  356
  377
  399
  422
  446
  471
  497
  524
  553
  583
  614
  647
  681
  717
  754
  794
  835
  878
  923
  971
  1,021
  1,073
  1,128
  1,185
  1,245
  1,308
Working capital, $m
  62
  66
  70
  74
  79
  83
  88
  93
  99
  104
  110
  116
  122
  129
  136
  143
  151
  159
  167
  176
  185
  194
  204
  215
  226
  238
  250
  262
  276
  290
Total debt, $m
  52
  84
  117
  152
  188
  226
  265
  306
  349
  393
  440
  489
  540
  593
  648
  707
  768
  832
  899
  969
  1,042
  1,119
  1,200
  1,284
  1,373
  1,466
  1,563
  1,666
  1,773
  1,886
Total liabilities, $m
  497
  529
  562
  597
  633
  671
  710
  751
  794
  838
  885
  934
  985
  1,038
  1,094
  1,152
  1,213
  1,277
  1,344
  1,414
  1,487
  1,564
  1,645
  1,729
  1,818
  1,911
  2,008
  2,111
  2,218
  2,331
Total equity, $m
  505
  538
  572
  607
  643
  682
  722
  763
  807
  852
  899
  949
  1,000
  1,055
  1,111
  1,170
  1,232
  1,297
  1,365
  1,436
  1,511
  1,589
  1,671
  1,757
  1,847
  1,942
  2,041
  2,145
  2,254
  2,368
Total liabilities and equity, $m
  1,002
  1,067
  1,134
  1,204
  1,276
  1,353
  1,432
  1,514
  1,601
  1,690
  1,784
  1,883
  1,985
  2,093
  2,205
  2,322
  2,445
  2,574
  2,709
  2,850
  2,998
  3,153
  3,316
  3,486
  3,665
  3,853
  4,049
  4,256
  4,472
  4,699
Debt-to-equity ratio
  0.100
  0.160
  0.210
  0.250
  0.290
  0.330
  0.370
  0.400
  0.430
  0.460
  0.490
  0.520
  0.540
  0.560
  0.580
  0.600
  0.620
  0.640
  0.660
  0.670
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
  0.770
  0.780
  0.790
  0.800
Adjusted equity ratio
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  127
  138
  150
  163
  176
  190
  204
  219
  234
  251
  287
  305
  324
  344
  365
  387
  410
  434
  460
  487
  515
  544
  576
  608
  643
  679
  717
  757
  799
  844
Depreciation, amort., depletion, $m
  82
  85
  89
  93
  97
  101
  106
  110
  115
  120
  99
  105
  111
  117
  123
  129
  136
  143
  151
  159
  167
  176
  185
  194
  204
  215
  226
  237
  249
  262
Funds from operations, $m
  209
  224
  239
  256
  273
  291
  309
  329
  350
  371
  386
  410
  435
  461
  488
  516
  546
  578
  611
  645
  682
  720
  760
  803
  847
  894
  943
  994
  1,049
  1,106
Change in working capital, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  205
  220
  235
  251
  268
  286
  305
  324
  344
  365
  381
  404
  428
  454
  481
  509
  539
  570
  602
  637
  673
  711
  750
  792
  836
  882
  931
  982
  1,035
  1,092
Maintenance CAPEX, $m
  -52
  -56
  -59
  -63
  -67
  -71
  -75
  -80
  -84
  -89
  -94
  -99
  -105
  -111
  -117
  -123
  -129
  -136
  -143
  -151
  -159
  -167
  -176
  -185
  -194
  -204
  -215
  -226
  -237
  -249
New CAPEX, $m
  -18
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -57
  -60
  -63
Cash from investing activities, $m
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -103
  -108
  -114
  -120
  -126
  -134
  -141
  -148
  -156
  -163
  -172
  -181
  -190
  -200
  -210
  -221
  -232
  -244
  -256
  -270
  -283
  -297
  -312
Free cash flow, $m
  135
  146
  157
  169
  181
  194
  207
  221
  236
  251
  260
  277
  295
  314
  333
  354
  375
  398
  422
  446
  473
  500
  529
  560
  592
  626
  661
  699
  738
  779
Issuance/(repayment) of debt, $m
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
  93
  98
  102
  107
  113
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  
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
  93
  98
  102
  107
  113
Total cash flow (excl. dividends), $m
  165
  178
  190
  203
  217
  231
  246
  262
  279
  296
  307
  326
  346
  367
  389
  412
  436
  462
  488
  517
  546
  577
  610
  644
  681
  719
  759
  801
  845
  892
Retained Cash Flow (-), $m
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
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
  134
  145
  157
  168
  180
  193
  207
  221
  235
  251
  260
  276
  294
  313
  332
  353
  374
  397
  420
  445
  472
  499
  528
  559
  591
  624
  660
  697
  736
  777
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
  128
  133
  136
  139
  140
  140
  140
  138
  135
  131
  123
  118
  112
  105
  98
  90
  81
  73
  65
  57
  49
  41
  35
  28
  23
  18
  14
  11
  8
  6
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

The Children's Place, Inc. (The Children's Place) is a pure-play children's specialty apparel retailer in North America. The Company sells apparel, accessories, footwear and other items for children. The Company operates through two segments: The Children's Place U.S. and The Children's Place International. The Children's Place U.S. segment includes the United States and Puerto Rico-based stores and revenue from the United States-based wholesale customers. The Children's Place International segment includes its Canadian-based stores, revenue from the Company's Canada wholesale customer, as well as revenue from international franchisees. The Company designs, contracts to manufacture and licenses to sell merchandise under brand names, such as The Children's Place, Place and Baby Place. The Children's Place has various departments and serves the wardrobe needs of girls and boys (sizes 4 to 14), toddler girls and boys (sizes 12 months to 5T), and baby (sizes 0 to 18 months).

FINANCIAL RATIOS  of  Children's Place, Inc. (The) (PLCE)

Valuation Ratios
P/E Ratio 17.3
Price to Sales 1
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 10.7
Growth Rates
Sales Growth Rate 3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.7%
Cap. Spend. - 3 Yr. Gr. Rate -13.7%
Financial Strength
Quick Ratio 16
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 3%
Interest Coverage 75
Management Effectiveness
Return On Assets 11.6%
Ret/ On Assets - 3 Yr. Avg. 7.9%
Return On Total Capital 19.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.2%
Return On Equity 19.9%
Return On Equity - 3 Yr. Avg. 13.3%
Asset Turnover 2
Profitability Ratios
Gross Margin 37.6%
Gross Margin - 3 Yr. Avg. 36.4%
EBITDA Margin 12%
EBITDA Margin - 3 Yr. Avg. 9.6%
Operating Margin 8.2%
Oper. Margin - 3 Yr. Avg. 6%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 4.1%
Effective Tax Rate 30.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.4%
Payout Ratio 14.7%

PLCE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PLCE stock intrinsic value calculation we used $1870 million for the last fiscal year's total revenue generated by Children's Place, Inc. (The). The default revenue input number comes from 0001 income statement of Children's Place, Inc. (The). 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 PLCE stock valuation model: a) initial revenue growth rate of 6.6% 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 PLCE is calculated based on our internal credit rating of Children's Place, Inc. (The), 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 Children's Place, Inc. (The).
    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 PLCE stock the variable cost ratio is equal to 83.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $147 million in the base year in the intrinsic value calculation for PLCE 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 12.1% for Children's Place, Inc. (The).

Corporate tax rate of 27% is the nominal tax rate for Children's Place, Inc. (The). 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 PLCE 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 PLCE are equal to 14%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Children's Place, Inc. (The) 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 PLCE is equal to 3.1%. 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 - $473.699 million for Children's Place, Inc. (The) - 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 16.169 million for Children's Place, Inc. (The) 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 Children's Place, Inc. (The) at the current share price and the inputted number of shares is $1.6 billion.

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