Intrinsic value of Smart&Final Stores - SFS

Previous Close

$6.70

  Intrinsic Value

$10.66

stock screener

  Rating & Target

str. buy

+59%

Previous close

$6.70

 
Intrinsic value

$10.66

 
Up/down potential

+59%

 
Rating

str. buy

We calculate the intrinsic value of SFS 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, %
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  4,772
  4,984
  5,209
  5,447
  5,698
  5,963
  6,242
  6,536
  6,846
  7,172
  7,516
  7,878
  8,258
  8,659
  9,080
  9,522
  9,988
  10,477
  10,992
  11,532
  12,101
  12,698
  13,325
  13,984
  14,677
  15,404
  16,169
  16,971
  17,815
  18,700
Variable operating expenses, $m
  4,716
  4,923
  5,141
  5,372
  5,616
  5,874
  6,145
  6,431
  6,732
  7,050
  7,307
  7,658
  8,028
  8,417
  8,827
  9,257
  9,710
  10,185
  10,686
  11,211
  11,764
  12,344
  12,954
  13,595
  14,268
  14,975
  15,718
  16,499
  17,318
  18,179
Fixed operating expenses, $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 operating expenses, $m
  4,716
  4,923
  5,141
  5,372
  5,616
  5,874
  6,145
  6,431
  6,732
  7,050
  7,307
  7,658
  8,028
  8,417
  8,827
  9,257
  9,710
  10,185
  10,686
  11,211
  11,764
  12,344
  12,954
  13,595
  14,268
  14,975
  15,718
  16,499
  17,318
  18,179
Operating income, $m
  56
  62
  68
  75
  82
  89
  97
  105
  114
  123
  209
  219
  230
  241
  253
  265
  278
  292
  306
  321
  337
  354
  371
  390
  409
  429
  450
  473
  496
  521
EBITDA, $m
  203
  212
  221
  231
  242
  253
  265
  277
  291
  304
  319
  334
  351
  368
  385
  404
  424
  445
  467
  490
  514
  539
  566
  594
  623
  654
  686
  720
  756
  794
Interest expense (income), $m
  30
  38
  41
  45
  48
  52
  56
  61
  65
  70
  76
  81
  87
  93
  99
  106
  113
  120
  128
  136
  144
  153
  163
  173
  183
  194
  206
  218
  230
  244
  258
Earnings before tax, $m
  18
  21
  23
  26
  29
  33
  36
  40
  43
  47
  128
  133
  137
  142
  147
  153
  158
  164
  170
  177
  184
  191
  198
  206
  215
  224
  233
  242
  253
  263
Tax expense, $m
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
Net income, $m
  13
  15
  17
  19
  21
  24
  26
  29
  32
  34
  94
  97
  100
  104
  108
  111
  116
  120
  124
  129
  134
  139
  145
  151
  157
  163
  170
  177
  184
  192

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
  1,889
  1,973
  2,062
  2,156
  2,256
  2,361
  2,471
  2,588
  2,710
  2,839
  2,975
  3,119
  3,269
  3,428
  3,594
  3,770
  3,954
  4,148
  4,351
  4,565
  4,790
  5,027
  5,275
  5,536
  5,810
  6,098
  6,401
  6,719
  7,052
  7,403
Adjusted assets (=assets-cash), $m
  1,889
  1,973
  2,062
  2,156
  2,256
  2,361
  2,471
  2,588
  2,710
  2,839
  2,975
  3,119
  3,269
  3,428
  3,594
  3,770
  3,954
  4,148
  4,351
  4,565
  4,790
  5,027
  5,275
  5,536
  5,810
  6,098
  6,401
  6,719
  7,052
  7,403
Revenue / Adjusted assets
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
  2.526
Average production assets, $m
  940
  982
  1,026
  1,073
  1,123
  1,175
  1,230
  1,288
  1,349
  1,413
  1,481
  1,552
  1,627
  1,706
  1,789
  1,876
  1,968
  2,064
  2,165
  2,272
  2,384
  2,501
  2,625
  2,755
  2,891
  3,035
  3,185
  3,343
  3,509
  3,684
Working capital, $m
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
Total debt, $m
  760
  826
  895
  968
  1,045
  1,127
  1,213
  1,303
  1,398
  1,499
  1,604
  1,716
  1,833
  1,956
  2,085
  2,222
  2,365
  2,515
  2,674
  2,840
  3,015
  3,198
  3,391
  3,594
  3,807
  4,031
  4,266
  4,513
  4,772
  5,045
Total liabilities, $m
  1,468
  1,533
  1,602
  1,676
  1,753
  1,834
  1,920
  2,011
  2,106
  2,206
  2,312
  2,423
  2,540
  2,663
  2,793
  2,929
  3,072
  3,223
  3,381
  3,547
  3,722
  3,906
  4,099
  4,302
  4,515
  4,738
  4,973
  5,220
  5,480
  5,752
Total equity, $m
  421
  440
  460
  481
  503
  526
  551
  577
  604
  633
  664
  695
  729
  764
  802
  841
  882
  925
  970
  1,018
  1,068
  1,121
  1,176
  1,235
  1,296
  1,360
  1,427
  1,498
  1,573
  1,651
Total liabilities and equity, $m
  1,889
  1,973
  2,062
  2,157
  2,256
  2,360
  2,471
  2,588
  2,710
  2,839
  2,976
  3,118
  3,269
  3,427
  3,595
  3,770
  3,954
  4,148
  4,351
  4,565
  4,790
  5,027
  5,275
  5,537
  5,811
  6,098
  6,400
  6,718
  7,053
  7,403
Debt-to-equity ratio
  1.800
  1.880
  1.950
  2.010
  2.080
  2.140
  2.200
  2.260
  2.310
  2.370
  2.420
  2.470
  2.510
  2.560
  2.600
  2.640
  2.680
  2.720
  2.760
  2.790
  2.820
  2.850
  2.880
  2.910
  2.940
  2.960
  2.990
  3.010
  3.030
  3.060
Adjusted equity ratio
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223
  0.223

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  15
  17
  19
  21
  24
  26
  29
  32
  34
  94
  97
  100
  104
  108
  111
  116
  120
  124
  129
  134
  139
  145
  151
  157
  163
  170
  177
  184
  192
Depreciation, amort., depletion, $m
  147
  150
  153
  157
  160
  164
  168
  172
  177
  182
  110
  115
  121
  126
  132
  139
  146
  153
  160
  168
  177
  185
  194
  204
  214
  225
  236
  248
  260
  273
Funds from operations, $m
  160
  165
  170
  176
  182
  188
  194
  201
  209
  216
  203
  212
  221
  230
  240
  250
  261
  273
  285
  297
  311
  325
  339
  355
  371
  388
  406
  425
  444
  465
Change in working capital, $m
  0
  0
  0
  0
  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
  -1
Cash from operations, $m
  160
  165
  170
  176
  182
  188
  195
  202
  209
  217
  204
  212
  221
  231
  240
  251
  262
  273
  285
  298
  311
  325
  340
  355
  372
  389
  407
  425
  445
  466
Maintenance CAPEX, $m
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -115
  -121
  -126
  -132
  -139
  -146
  -153
  -160
  -168
  -177
  -185
  -194
  -204
  -214
  -225
  -236
  -248
  -260
New CAPEX, $m
  -38
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
  -96
  -101
  -107
  -112
  -118
  -124
  -130
  -136
  -143
  -151
  -158
  -166
  -174
Cash from investing activities, $m
  -105
  -112
  -117
  -123
  -128
  -135
  -142
  -149
  -156
  -164
  -173
  -181
  -190
  -200
  -209
  -219
  -231
  -242
  -254
  -267
  -280
  -295
  -309
  -324
  -340
  -357
  -376
  -394
  -414
  -434
Free cash flow, $m
  56
  54
  53
  53
  53
  53
  53
  53
  52
  52
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
  31
Issuance/(repayment) of debt, $m
  61
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  136
  143
  151
  158
  166
  175
  184
  193
  203
  213
  224
  235
  247
  259
  272
Issuance/(repurchase) of shares, $m
  5
  4
  3
  2
  1
  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  
  66
  69
  72
  75
  78
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  136
  143
  151
  158
  166
  175
  184
  193
  203
  213
  224
  235
  247
  259
  272
Total cash flow (excl. dividends), $m
  122
  123
  125
  128
  131
  134
  139
  143
  148
  153
  137
  143
  148
  154
  161
  167
  174
  182
  189
  197
  206
  215
  224
  234
  244
  255
  266
  278
  291
  304
Retained Cash Flow (-), $m
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
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
  103
  104
  105
  107
  109
  111
  114
  117
  120
  124
  107
  111
  115
  119
  123
  128
  133
  138
  144
  150
  156
  162
  169
  176
  183
  191
  199
  207
  216
  226
Discount rate, %
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
  96
  89
  83
  76
  69
  63
  57
  51
  46
  40
  29
  25
  21
  18
  15
  12
  9
  7
  6
  4
  3
  2
  2
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  99.0
  98.4
  97.9
  97.6
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5
  97.5

Smart & Final Stores, Inc. is a food retailer. The Company is engaged in the business of selling fresh perishables and everyday grocery items, together with foodservice, packaging and janitorial products. The Company operates through two segments: Smart & Final, and Cash and Carry. The Smart & Final segment focuses on both household and business customers. Its Smart & Final stores offer various selections of fresh perishables and everyday grocery items, together with a focused selection of foodservice, packaging and janitorial products, under both national and private label brands. The Cash & Carry segment focuses primarily on restaurants, caterers and a range of other foodservice businesses. It operates non-membership warehouse-style grocery stores under the Smart & Final banner in California, Arizona, and Nevada. The Company also operates non-membership warehouse-style grocery stores in Washington, Oregon, California, Idaho, Utah, and Nevada under the Cash & Carry banner.

FINANCIAL RATIOS  of  Smart&Final Stores (SFS)

Valuation Ratios
P/E Ratio 37.6
Price to Sales 0.1
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow -9
Growth Rates
Sales Growth Rate 9.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.2%
Cap. Spend. - 3 Yr. Gr. Rate 22.4%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 111.8%
Total Debt to Equity 123%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 2.3%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 14.5%
Gross Margin - 3 Yr. Avg. 14.8%
EBITDA Margin 2.9%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. 1.1%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate -18.2%
Eff/ Tax Rate - 3 Yr. Avg. 17.8%
Payout Ratio 0%

SFS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SFS stock intrinsic value calculation we used $4570.565 million for the last fiscal year's total revenue generated by Smart&Final Stores. The default revenue input number comes from 0001 income statement of Smart&Final Stores. 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 SFS stock valuation model: a) initial revenue growth rate of 4.4% 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 7.7%, whose default value for SFS is calculated based on our internal credit rating of Smart&Final Stores, 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 Smart&Final Stores.
    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 SFS stock the variable cost ratio is equal to 98.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SFS 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 Smart&Final Stores.

Corporate tax rate of 27% is the nominal tax rate for Smart&Final Stores. 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 SFS 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 SFS are equal to 19.7%.

Life of production assets of 13.5 years is the average useful life of capital assets used in Smart&Final Stores 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 SFS is equal to -0.1%. 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 - $403.046 million for Smart&Final Stores - 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 75.919 million for Smart&Final Stores 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 Smart&Final Stores at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Smart & Final's 200th Extra! Store Opens in Long Beach   [Oct-17-18 08:00AM  PR Newswire]
▶ [$$] Online Orders Force Supermarkets to Rethink Their Stores   [Oct-02-18 11:00PM  The Wall Street Journal]
▶ Shop and Donate to Feeding America Food Banks   [Sep-10-18 04:00AM  PR Newswire]
▶ Why Smart & Final Stores, Inc. Stock Popped Thursday   [Jul-26-18 03:55PM  Motley Fool]
▶ Smart & Final Stores: 2Q Earnings Snapshot   [Jul-25-18 05:46PM  Associated Press]
▶ When Should You Buy Smart & Final Stores Inc (NYSE:SFS)?   [Jun-26-18 12:35PM  Simply Wall St.]
▶ Smart & Final Stores: 1Q Earnings Snapshot   [May-02-18 07:24PM  Associated Press]
▶ Moving Average Crossover Alert: Smart (SFS)   [Apr-06-18 10:15AM  Zacks]
▶ Is Sfinks Polska SA. (WSE:SFS) A Financially Sound Company?   [Mar-18-18 07:30AM  Simply Wall St.]
▶ Smart & Final Stores reports 4Q loss   [Mar-14-18 05:13PM  Associated Press]
▶ Heres how Walmart is taking on Amazon in the e-commerce battle   [Feb-08-18 11:16AM  Yahoo Finance Video]
▶ 10 Losers That Will Be 2018s Best Stocks to Buy   [Dec-04-17 02:10PM  InvestorPlace]
▶ Smart & Final Stores misses 3Q profit forecasts   [Nov-15-17 04:32PM  Associated Press]

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