Intrinsic value of Children's Place - PLCE

Previous Close

$134.52

  Intrinsic Value

$78.90

stock screener

  Rating & Target

sell

-41%

Previous close

$134.52

 
Intrinsic value

$78.90

 
Up/down potential

-41%

 
Rating

sell

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 2.6

 

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, %
  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
  1,908
  1,952
  2,002
  2,058
  2,120
  2,189
  2,263
  2,344
  2,431
  2,524
  2,624
  2,731
  2,844
  2,965
  3,092
  3,228
  3,371
  3,523
  3,683
  3,853
  4,031
  4,220
  4,418
  4,627
  4,848
  5,079
  5,324
  5,580
  5,851
  6,135
Variable operating expenses, $m
  1,597
  1,633
  1,675
  1,723
  1,775
  1,832
  1,894
  1,962
  2,035
  2,113
  2,196
  2,286
  2,380
  2,481
  2,588
  2,702
  2,822
  2,949
  3,083
  3,225
  3,374
  3,532
  3,698
  3,873
  4,057
  4,252
  4,456
  4,671
  4,897
  5,135
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
  1,747
  1,787
  1,832
  1,883
  1,939
  2,000
  2,065
  2,137
  2,214
  2,296
  2,383
  2,477
  2,575
  2,680
  2,792
  2,910
  3,035
  3,166
  3,305
  3,452
  3,606
  3,769
  3,940
  4,121
  4,310
  4,511
  4,721
  4,941
  5,173
  5,417
Operating income, $m
  161
  165
  169
  175
  182
  189
  198
  207
  217
  229
  241
  254
  269
  284
  300
  318
  337
  357
  378
  401
  425
  451
  478
  506
  537
  569
  603
  639
  677
  718
EBITDA, $m
  214
  219
  225
  233
  241
  251
  261
  273
  286
  299
  314
  331
  348
  367
  387
  408
  431
  455
  481
  509
  538
  569
  601
  636
  673
  711
  752
  796
  841
  889
Interest expense (income), $m
  2
  3
  4
  5
  7
  8
  10
  12
  14
  17
  20
  22
  25
  29
  32
  36
  39
  44
  48
  52
  57
  62
  68
  73
  79
  86
  92
  99
  107
  115
  123
Earnings before tax, $m
  158
  161
  164
  169
  173
  179
  186
  193
  201
  209
  219
  229
  240
  252
  265
  278
  293
  309
  326
  344
  363
  383
  404
  427
  451
  477
  504
  532
  563
  595
Tax expense, $m
  43
  43
  44
  46
  47
  48
  50
  52
  54
  56
  59
  62
  65
  68
  71
  75
  79
  83
  88
  93
  98
  103
  109
  115
  122
  129
  136
  144
  152
  161
Net income, $m
  115
  117
  120
  123
  127
  131
  135
  141
  146
  153
  160
  167
  175
  184
  193
  203
  214
  226
  238
  251
  265
  279
  295
  312
  329
  348
  368
  389
  411
  434

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
  959
  981
  1,006
  1,035
  1,066
  1,100
  1,138
  1,179
  1,222
  1,269
  1,319
  1,373
  1,430
  1,490
  1,555
  1,623
  1,695
  1,771
  1,852
  1,937
  2,027
  2,121
  2,221
  2,326
  2,437
  2,554
  2,677
  2,806
  2,942
  3,084
Adjusted assets (=assets-cash), $m
  959
  981
  1,006
  1,035
  1,066
  1,100
  1,138
  1,179
  1,222
  1,269
  1,319
  1,373
  1,430
  1,490
  1,555
  1,623
  1,695
  1,771
  1,852
  1,937
  2,027
  2,121
  2,221
  2,326
  2,437
  2,554
  2,677
  2,806
  2,942
  3,084
Revenue / Adjusted assets
  1.990
  1.990
  1.990
  1.988
  1.989
  1.990
  1.989
  1.988
  1.989
  1.989
  1.989
  1.989
  1.989
  1.990
  1.988
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.990
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
  1.989
Average production assets, $m
  267
  273
  280
  288
  297
  306
  317
  328
  340
  353
  367
  382
  398
  415
  433
  452
  472
  493
  516
  539
  564
  591
  619
  648
  679
  711
  745
  781
  819
  859
Working capital, $m
  59
  60
  62
  64
  66
  68
  70
  73
  75
  78
  81
  85
  88
  92
  96
  100
  105
  109
  114
  119
  125
  131
  137
  143
  150
  157
  165
  173
  181
  190
Total debt, $m
  31
  42
  54
  68
  84
  101
  119
  139
  161
  184
  209
  236
  264
  294
  326
  360
  396
  433
  473
  516
  560
  607
  657
  709
  764
  822
  882
  947
  1,014
  1,085
Total liabilities, $m
  476
  487
  499
  513
  529
  546
  564
  585
  606
  629
  654
  681
  709
  739
  771
  805
  841
  879
  919
  961
  1,005
  1,052
  1,102
  1,154
  1,209
  1,267
  1,328
  1,392
  1,459
  1,530
Total equity, $m
  483
  495
  507
  521
  537
  555
  574
  594
  616
  640
  665
  692
  721
  751
  784
  818
  854
  893
  933
  976
  1,021
  1,069
  1,120
  1,173
  1,228
  1,287
  1,349
  1,414
  1,483
  1,555
Total liabilities and equity, $m
  959
  982
  1,006
  1,034
  1,066
  1,101
  1,138
  1,179
  1,222
  1,269
  1,319
  1,373
  1,430
  1,490
  1,555
  1,623
  1,695
  1,772
  1,852
  1,937
  2,026
  2,121
  2,222
  2,327
  2,437
  2,554
  2,677
  2,806
  2,942
  3,085
Debt-to-equity ratio
  0.060
  0.080
  0.110
  0.130
  0.160
  0.180
  0.210
  0.230
  0.260
  0.290
  0.310
  0.340
  0.370
  0.390
  0.420
  0.440
  0.460
  0.490
  0.510
  0.530
  0.550
  0.570
  0.590
  0.600
  0.620
  0.640
  0.650
  0.670
  0.680
  0.700
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
  115
  117
  120
  123
  127
  131
  135
  141
  146
  153
  160
  167
  175
  184
  193
  203
  214
  226
  238
  251
  265
  279
  295
  312
  329
  348
  368
  389
  411
  434
Depreciation, amort., depletion, $m
  53
  55
  56
  58
  59
  61
  63
  66
  68
  71
  73
  76
  80
  83
  87
  90
  94
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
  164
  172
Funds from operations, $m
  169
  172
  176
  181
  186
  192
  199
  206
  214
  223
  233
  244
  255
  267
  280
  294
  308
  324
  341
  359
  378
  398
  419
  441
  465
  490
  517
  545
  575
  606
Change in working capital, $m
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  168
  171
  174
  179
  184
  190
  197
  204
  212
  221
  230
  240
  251
  263
  276
  289
  304
  319
  336
  353
  372
  392
  413
  435
  458
  483
  509
  537
  566
  597
Maintenance CAPEX, $m
  -52
  -53
  -55
  -56
  -58
  -59
  -61
  -63
  -66
  -68
  -71
  -73
  -76
  -80
  -83
  -87
  -90
  -94
  -99
  -103
  -108
  -113
  -118
  -124
  -130
  -136
  -142
  -149
  -156
  -164
New CAPEX, $m
  -6
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
Cash from investing activities, $m
  -58
  -59
  -62
  -64
  -67
  -69
  -71
  -74
  -78
  -81
  -85
  -88
  -92
  -97
  -101
  -106
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -153
  -161
  -168
  -176
  -185
  -194
  -204
Free cash flow, $m
  110
  111
  113
  115
  118
  121
  125
  129
  134
  139
  145
  152
  159
  167
  175
  184
  194
  204
  215
  227
  239
  252
  267
  282
  298
  315
  333
  352
  372
  394
Issuance/(repayment) of debt, $m
  9
  11
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  67
  71
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  
  9
  11
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  61
  64
  67
  71
Total cash flow (excl. dividends), $m
  119
  122
  125
  129
  133
  138
  143
  149
  156
  163
  170
  178
  187
  197
  207
  218
  229
  242
  255
  269
  284
  299
  316
  334
  353
  373
  394
  416
  440
  465
Retained Cash Flow (-), $m
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -20
  -22
  -24
  -25
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
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
  109
  111
  113
  115
  117
  121
  124
  129
  134
  139
  145
  151
  159
  166
  174
  183
  193
  203
  214
  226
  238
  252
  266
  281
  297
  314
  332
  351
  371
  393
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
  105
  102
  98
  94
  91
  88
  84
  81
  77
  73
  69
  65
  60
  56
  51
  47
  42
  37
  33
  29
  25
  21
  17
  14
  12
  9
  7
  5
  4
  3
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 (PLCE)

Valuation Ratios
P/E Ratio 23.4
Price to Sales 1.3
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 12
Price to Free Cash Flow 14.5
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 $1870.275 million for the last fiscal year's total revenue generated by Children's Place. The default revenue input number comes from 0001 income statement of Children's Place. 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 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 PLCE is calculated based on our internal credit rating of Children's Place, 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.
    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.

Corporate tax rate of 27% is the nominal tax rate for Children's Place. 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 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 - 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 19.06 million for Children's Place 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 at the current share price and the inputted number of shares is $2.6 billion.

RELATED COMPANIES Price Int.Val. Rating
CRI Carters 89.05 107.59  hold
GPS Gap 26.22 245.46  str.buy
DEST Destination Ma 5.21 0.66  str.sell
ASNA Ascena Retail 3.91 7.08  buy
AEO American Eagle 20.93 19.22  sell
KSS Kohl's 73.22 144.83  str.buy

COMPANY NEWS

▶ Why Children's Place Inc Stock Was Sliding Today   [Nov-05-18 01:32PM  Motley Fool]
▶ 20 Stocks With Big Short-Squeeze Potential   [Oct-25-18 03:02PM  InvestorPlace]
▶ 6 Underperforming Stocks in Gurus' Portfolios   [Sep-18-18 06:00PM  GuruFocus.com]
▶ Company News For Aug 24, 2018   [10:19AM  Zacks]
▶ Trade of the Day: Childrens Place Inc (PLCE)   [Aug-20-18 09:21AM  InvestorPlace]
▶ 3 Top Retail Stocks to Buy in August   [Aug-08-18 10:41AM  Motley Fool]
▶ How Oppenheimer's Rosin Is Trading Children's Place   [Jun-27-18 04:40PM  Bloomberg Video]
▶ Berko: That's right, the women are smarter so let your wife have input on investments   [Jun-22-18 06:05AM  American City Business Journals]
▶ Jim Cramer: It's Getting Hot   [May-17-18 07:01PM  TheStreet.com]
▶ New Strong Sell Stocks for April 19th   [Apr-19-18 06:44AM  Zacks]
▶ New Strong Sell Stocks for April 11th   [Apr-11-18 09:27AM  Zacks]
▶ Retail Check Up: The Children's Place   [Mar-27-18 07:30PM  Forbes]
▶ Company News For Mar 21, 2018   [10:29AM  Zacks]
▶ Why Oracle, Twitter, and Children's Place Slumped Today   [Mar-20-18 04:31PM  Motley Fool]
▶ Children's Place Stock Plunges On So-So Sales, Weak Guidance   [04:03PM  Investor's Business Daily]
▶ The Children's Place: 10% off sale   [11:15AM  Barrons.com]
▶ Good Stocks To Protect Your Portfolio During A Bear Market   [Mar-19-18 04:05PM  Simply Wall St.]
▶ Navigating 2018's new market challenges   [Mar-16-18 07:18PM  CNBC Videos]

CONTACT US       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.