Intrinsic value of Castle Brands - ROX

Previous Close

$0.95

  Intrinsic Value

$0.18

stock screener

  Rating & Target

str. sell

-81%

Previous close

$0.95

 
Intrinsic value

$0.18

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of ROX 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 0.2

 

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, %
  10.80
  10.22
  9.70
  9.23
  8.81
  8.42
  8.08
  7.77
  7.50
  7.25
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.71
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
Revenue, $m
  100
  110
  120
  132
  143
  155
  168
  181
  194
  208
  223
  238
  254
  271
  288
  305
  324
  343
  363
  385
  406
  429
  453
  478
  504
  532
  560
  590
  622
  654
Variable operating expenses, $m
  81
  89
  97
  106
  116
  125
  135
  146
  157
  168
  179
  192
  204
  217
  231
  246
  260
  276
  292
  309
  327
  345
  364
  384
  405
  427
  450
  474
  500
  526
Fixed operating expenses, $m
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
Total operating expenses, $m
  93
  102
  110
  119
  129
  139
  149
  160
  172
  183
  194
  208
  220
  233
  248
  263
  277
  294
  310
  328
  346
  364
  384
  404
  426
  448
  472
  496
  523
  549
Operating income, $m
  7
  8
  10
  12
  14
  16
  18
  21
  23
  25
  29
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  65
  69
  74
  78
  83
  88
  94
  99
  105
EBITDA, $m
  8
  10
  11
  13
  15
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  67
  71
  76
  81
  86
  91
  97
  103
  109
Interest expense (income), $m
  1
  4
  4
  5
  6
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
  37
Earnings before tax, $m
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  54
  57
  61
  64
  68
Tax expense, $m
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
Net income, $m
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50

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
  67
  74
  81
  88
  96
  104
  112
  121
  130
  140
  149
  160
  170
  181
  193
  205
  217
  230
  244
  258
  272
  288
  304
  321
  338
  356
  376
  396
  417
  439
Adjusted assets (=assets-cash), $m
  67
  74
  81
  88
  96
  104
  112
  121
  130
  140
  149
  160
  170
  181
  193
  205
  217
  230
  244
  258
  272
  288
  304
  321
  338
  356
  376
  396
  417
  439
Revenue / Adjusted assets
  1.493
  1.486
  1.481
  1.500
  1.490
  1.490
  1.500
  1.496
  1.492
  1.486
  1.497
  1.488
  1.494
  1.497
  1.492
  1.488
  1.493
  1.491
  1.488
  1.492
  1.493
  1.490
  1.490
  1.489
  1.491
  1.494
  1.489
  1.490
  1.492
  1.490
Average production assets, $m
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
Working capital, $m
  42
  46
  51
  56
  60
  65
  71
  76
  82
  88
  94
  101
  107
  114
  121
  129
  137
  145
  153
  162
  172
  181
  191
  202
  213
  224
  236
  249
  262
  276
Total debt, $m
  43
  49
  56
  62
  69
  77
  84
  92
  100
  109
  118
  127
  136
  146
  156
  167
  178
  190
  202
  215
  228
  242
  256
  271
  287
  304
  321
  339
  358
  378
Total liabilities, $m
  60
  66
  73
  79
  86
  94
  101
  109
  117
  126
  135
  144
  153
  163
  174
  184
  195
  207
  219
  232
  245
  259
  273
  289
  304
  321
  338
  356
  375
  395
Total equity, $m
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
Total liabilities and equity, $m
  67
  73
  81
  88
  96
  104
  112
  121
  130
  140
  150
  160
  170
  181
  193
  204
  217
  230
  243
  258
  272
  288
  303
  321
  338
  357
  376
  396
  417
  439
Debt-to-equity ratio
  6.450
  6.690
  6.890
  7.070
  7.230
  7.360
  7.490
  7.600
  7.690
  7.780
  7.860
  7.930
  8.000
  8.060
  8.120
  8.170
  8.220
  8.260
  8.300
  8.340
  8.380
  8.410
  8.440
  8.470
  8.500
  8.520
  8.550
  8.570
  8.590
  8.610
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Funds from operations, $m
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  35
  37
  39
  42
  44
  47
  50
  53
Change in working capital, $m
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  -1
  0
  0
  1
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  35
  37
  39
Maintenance CAPEX, $m
  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
  -3
  -3
  -3
  -3
  -3
New CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
Cash from investing activities, $m
  0
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
Free cash flow, $m
  -2
  -1
  -1
  0
  1
  2
  2
  3
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  33
  35
Issuance/(repayment) of debt, $m
  4
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
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  
  4
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
Total cash flow (excl. dividends), $m
  3
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  36
  38
  40
  43
  46
  48
  51
  55
Retained Cash Flow (-), $m
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
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
  0
  4
  5
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
Discount rate, %
  14.10
  14.81
  15.55
  16.32
  17.14
  18.00
  18.90
  19.84
  20.83
  21.87
  22.97
  24.12
  25.32
  26.59
  27.92
  29.31
  30.78
  32.32
  33.93
  35.63
  37.41
  39.28
  41.25
  43.31
  45.47
  47.75
  50.13
  52.64
  55.27
  58.04
PV of cash for distribution, $m
  0
  3
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2

Castle Brands Inc. develops and markets premium and super premium brands in the beverage alcohol categories. The Company is engaged in the sale of premium beverage alcohol. Its beverage alcohol categories include rum, whiskey, liqueurs, vodka and tequila. Its brands include Gosling's rum, Gosling's Stormy Ginger Beer, Gosling's Dark 'n Stormy ready-to-drink cocktail, Jefferson's bourbon, Jefferson's Reserve, Jefferson's Ocean Aged at Sea, Jefferson's Wine Finish Collection, Jefferson's The Manhattan: Barrel Finished Cocktail, Jefferson's Chef's Collaboration, Jefferson's Wood Experiment, Jefferson's Presidential Select, Jefferson's Rye whiskey, Pallini liqueurs, Clontarf Irish whiskey, Knappogue Castle Whiskey, Brady's Irish Cream, Boru vodka, Tierras tequila, Celtic Honey liqueur and Gozio amaretto. It has operations in two geographic areas: International and the United States. The Company distributes its products in all 50 states of the United States and the District of Columbia.

FINANCIAL RATIOS  of  Castle Brands (ROX)

Valuation Ratios
P/E Ratio -154.8
Price to Sales 2
Price to Book 77.4
Price to Tangible Book
Price to Cash Flow -77.4
Price to Free Cash Flow -77.4
Growth Rates
Sales Growth Rate 6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 1750%
Total Debt to Equity 1750%
Interest Coverage 2
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -3.5%
Return On Total Capital -2.9%
Ret/ On T. Cap. - 3 Yr. Avg. -8.6%
Return On Equity -9.5%
Return On Equity - 3 Yr. Avg. -15.6%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 41.6%
Gross Margin - 3 Yr. Avg. 40.1%
EBITDA Margin 3.9%
EBITDA Margin - 3 Yr. Avg. 2.2%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin 1.3%
Pre-Tax Margin - 3 Yr. Avg. -0.7%
Net Profit Margin -1.3%
Net Profit Margin - 3 Yr. Avg. -4.2%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -16.7%
Payout Ratio 0%

ROX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ROX stock intrinsic value calculation we used $89.897517 million for the last fiscal year's total revenue generated by Castle Brands. The default revenue input number comes from 0001 income statement of Castle Brands. 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 ROX stock valuation model: a) initial revenue growth rate of 10.8% 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 14.1%, whose default value for ROX is calculated based on our internal credit rating of Castle Brands, 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 Castle Brands.
    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 ROX stock the variable cost ratio is equal to 81.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12 million in the base year in the intrinsic value calculation for ROX 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 10.3% for Castle Brands.

Corporate tax rate of 27% is the nominal tax rate for Castle Brands. 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 ROX 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 ROX are equal to 4.7%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Castle Brands 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 ROX is equal to 42.2%. 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 - $4.421068 million for Castle Brands - 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 168.476 million for Castle Brands 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 Castle Brands at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Castle Brands: Fiscal 2Q Earnings Snapshot   [Nov-08-18 07:23PM  Associated Press]
▶ The 7 Best Penny Stocks to Buy   [Nov-01-18 12:12PM  InvestorPlace]
▶ Bear of the Day: Anheuser-Busch InBev (BUD)   [Oct-09-18 07:00AM  Zacks]
▶ Castle Brands: Fiscal 1Q Earnings Snapshot   [06:13PM  Associated Press]
▶ Castle Brands: Fiscal 4Q Earnings Snapshot   [Jun-14-18 05:01PM  Associated Press]
▶ 3 of the Best Penny Stocks To Buy Right Now   [May-16-18 10:09AM  InvestorPlace]
▶ Castle Brands posts 3Q profit   [Feb-08-18 06:13PM  Associated Press]
▶ Castle Brands Announces Bourbon Inventory Acquisitions   [Jan-04-18 08:30AM  PR Newswire]
▶ Why Castle Brands Inc Stock Jumped Thursday   [Dec-07-17 12:46PM  Motley Fool]
▶ Castle Brands posts 2Q loss   [Nov-09-17 07:35PM  Associated Press]
▶ Castle Brands reports 1Q loss   [12:33AM  Associated Press]
▶ ETFs with exposure to Castle Brands, Inc. : July 7, 2017   [Jul-07-17 03:27PM  Capital Cube]
▶ ETFs with exposure to Castle Brands, Inc. : June 26, 2017   [Jun-26-17 04:48PM  Capital Cube]
▶ Company News for June 16, 2017   [10:11AM  Zacks]
▶ Castle Brands posts 4Q profit   [Jun-14-17 05:02PM  Associated Press]
▶ ETFs with exposure to Castle Brands, Inc. : April 5, 2017   [Apr-05-17 05:23PM  Capital Cube]

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