Intrinsic value of The Simply Good Foods Company - SMPL

Previous Close

$20.38

  Intrinsic Value

$15.19

stock screener

  Rating & Target

sell

-25%

Previous close

$20.38

 
Intrinsic value

$15.19

 
Up/down potential

-25%

 
Rating

sell

Our model is not good at valuating stocks of financial companies, such as SMPL.

We calculate the intrinsic value of SMPL 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 1.7

 

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, %
  13.50
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.96
  7.67
  7.40
  7.16
  6.94
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
Revenue, $m
  489
  551
  617
  686
  758
  834
  913
  996
  1,083
  1,172
  1,266
  1,363
  1,464
  1,568
  1,677
  1,790
  1,908
  2,031
  2,158
  2,291
  2,429
  2,573
  2,723
  2,880
  3,043
  3,214
  3,393
  3,579
  3,774
  3,978
Variable operating expenses, $m
  426
  470
  517
  566
  617
  672
  728
  787
  848
  912
  900
  969
  1,041
  1,115
  1,193
  1,273
  1,357
  1,444
  1,535
  1,629
  1,727
  1,830
  1,936
  2,048
  2,164
  2,286
  2,412
  2,545
  2,684
  2,828
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
  426
  470
  517
  566
  617
  672
  728
  787
  848
  912
  900
  969
  1,041
  1,115
  1,193
  1,273
  1,357
  1,444
  1,535
  1,629
  1,727
  1,830
  1,936
  2,048
  2,164
  2,286
  2,412
  2,545
  2,684
  2,828
Operating income, $m
  63
  81
  100
  120
  141
  163
  185
  209
  234
  260
  366
  394
  423
  453
  485
  517
  551
  587
  623
  662
  702
  743
  787
  832
  879
  929
  980
  1,034
  1,090
  1,149
EBITDA, $m
  151
  170
  190
  212
  234
  257
  282
  307
  334
  362
  391
  421
  452
  484
  518
  553
  589
  627
  666
  707
  750
  794
  840
  889
  939
  992
  1,047
  1,105
  1,165
  1,228
Interest expense (income), $m
  25
  10
  13
  15
  17
  20
  23
  26
  29
  32
  35
  38
  42
  46
  49
  53
  57
  62
  66
  71
  76
  81
  86
  91
  97
  103
  109
  116
  122
  129
  137
Earnings before tax, $m
  53
  68
  85
  102
  121
  140
  160
  181
  203
  225
  327
  352
  377
  404
  431
  460
  490
  520
  553
  586
  621
  657
  695
  735
  776
  819
  865
  912
  961
  1,012
Tax expense, $m
  14
  18
  23
  28
  33
  38
  43
  49
  55
  61
  88
  95
  102
  109
  116
  124
  132
  141
  149
  158
  168
  178
  188
  198
  210
  221
  233
  246
  259
  273
Net income, $m
  38
  50
  62
  75
  88
  102
  117
  132
  148
  164
  239
  257
  275
  295
  315
  336
  357
  380
  403
  428
  453
  480
  508
  537
  567
  598
  631
  666
  701
  739

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
  1,013
  1,141
  1,277
  1,419
  1,570
  1,727
  1,891
  2,063
  2,241
  2,427
  2,620
  2,821
  3,030
  3,247
  3,473
  3,707
  3,951
  4,204
  4,468
  4,743
  5,029
  5,327
  5,638
  5,963
  6,301
  6,655
  7,024
  7,410
  7,813
  8,235
Adjusted assets (=assets-cash), $m
  1,013
  1,141
  1,277
  1,419
  1,570
  1,727
  1,891
  2,063
  2,241
  2,427
  2,620
  2,821
  3,030
  3,247
  3,473
  3,707
  3,951
  4,204
  4,468
  4,743
  5,029
  5,327
  5,638
  5,963
  6,301
  6,655
  7,024
  7,410
  7,813
  8,235
Revenue / Adjusted assets
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
Average production assets, $m
  290
  326
  365
  406
  449
  494
  541
  590
  641
  694
  749
  807
  866
  928
  993
  1,060
  1,130
  1,202
  1,278
  1,356
  1,438
  1,523
  1,612
  1,705
  1,802
  1,903
  2,008
  2,119
  2,234
  2,355
Working capital, $m
  50
  56
  63
  70
  77
  85
  93
  102
  110
  120
  129
  139
  149
  160
  171
  183
  195
  207
  220
  234
  248
  262
  278
  294
  310
  328
  346
  365
  385
  406
Total debt, $m
  233
  276
  322
  370
  421
  474
  529
  587
  648
  711
  776
  844
  914
  988
  1,064
  1,143
  1,226
  1,311
  1,400
  1,493
  1,590
  1,691
  1,796
  1,906
  2,020
  2,139
  2,264
  2,395
  2,531
  2,674
Total liabilities, $m
  342
  386
  431
  480
  531
  584
  639
  697
  758
  820
  886
  954
  1,024
  1,098
  1,174
  1,253
  1,335
  1,421
  1,510
  1,603
  1,700
  1,801
  1,906
  2,015
  2,130
  2,249
  2,374
  2,504
  2,641
  2,783
Total equity, $m
  670
  755
  845
  940
  1,039
  1,143
  1,252
  1,365
  1,484
  1,607
  1,735
  1,868
  2,006
  2,150
  2,299
  2,454
  2,615
  2,783
  2,958
  3,140
  3,329
  3,527
  3,732
  3,947
  4,171
  4,405
  4,650
  4,905
  5,172
  5,452
Total liabilities and equity, $m
  1,012
  1,141
  1,276
  1,420
  1,570
  1,727
  1,891
  2,062
  2,242
  2,427
  2,621
  2,822
  3,030
  3,248
  3,473
  3,707
  3,950
  4,204
  4,468
  4,743
  5,029
  5,328
  5,638
  5,962
  6,301
  6,654
  7,024
  7,409
  7,813
  8,235
Debt-to-equity ratio
  0.350
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.470
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.490
Adjusted equity ratio
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662
  0.662

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  50
  62
  75
  88
  102
  117
  132
  148
  164
  239
  257
  275
  295
  315
  336
  357
  380
  403
  428
  453
  480
  508
  537
  567
  598
  631
  666
  701
  739
Depreciation, amort., depletion, $m
  88
  89
  91
  92
  93
  95
  96
  98
  100
  102
  25
  27
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  54
  57
  60
  63
  67
  71
  74
  78
Funds from operations, $m
  126
  139
  152
  167
  181
  197
  213
  230
  248
  266
  264
  284
  304
  326
  348
  371
  395
  420
  446
  473
  501
  531
  561
  593
  627
  662
  698
  736
  776
  818
Change in working capital, $m
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
Cash from operations, $m
  121
  133
  146
  160
  174
  189
  205
  222
  239
  257
  254
  274
  294
  315
  337
  359
  383
  408
  433
  460
  487
  516
  546
  577
  610
  644
  680
  717
  756
  797
Maintenance CAPEX, $m
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -74
New CAPEX, $m
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -72
  -75
  -79
  -82
  -85
  -89
  -93
  -97
  -101
  -106
  -110
  -115
  -121
Cash from investing activities, $m
  -44
  -47
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -74
  -78
  -82
  -87
  -91
  -95
  -100
  -105
  -110
  -115
  -122
  -127
  -133
  -140
  -147
  -154
  -161
  -169
  -177
  -186
  -195
Free cash flow, $m
  77
  86
  96
  107
  118
  129
  142
  155
  168
  182
  176
  191
  207
  224
  241
  259
  278
  297
  318
  338
  360
  383
  406
  431
  456
  483
  511
  540
  570
  602
Issuance/(repayment) of debt, $m
  41
  43
  46
  48
  51
  53
  56
  58
  60
  63
  65
  68
  71
  73
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  114
  119
  125
  130
  136
  143
Issuance/(repurchase) of shares, $m
  41
  35
  28
  20
  11
  2
  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  
  82
  78
  74
  68
  62
  55
  56
  58
  60
  63
  65
  68
  71
  73
  76
  79
  82
  86
  89
  93
  97
  101
  105
  110
  114
  119
  125
  130
  136
  143
Total cash flow (excl. dividends), $m
  160
  165
  170
  175
  180
  184
  197
  213
  229
  245
  241
  259
  278
  297
  318
  339
  360
  383
  407
  431
  457
  484
  512
  541
  571
  603
  636
  670
  706
  744
Retained Cash Flow (-), $m
  -79
  -85
  -90
  -95
  -99
  -104
  -109
  -113
  -118
  -123
  -128
  -133
  -138
  -144
  -149
  -155
  -161
  -168
  -175
  -182
  -189
  -197
  -206
  -215
  -224
  -234
  -244
  -255
  -267
  -279
Prev. year cash balance distribution, $m
  81
  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
  161
  80
  80
  80
  80
  80
  88
  99
  110
  122
  113
  126
  140
  154
  168
  183
  199
  215
  232
  249
  268
  286
  306
  326
  347
  369
  391
  415
  439
  465
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
  155
  73
  70
  66
  62
  58
  60
  62
  63
  64
  54
  54
  53
  52
  49
  47
  43
  40
  36
  32
  28
  24
  20
  17
  13
  11
  8
  6
  5
  4
Current shareholders' claim on cash, %
  97.3
  95.3
  93.9
  93.0
  92.6
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5
  92.5

The Simply Good Foods Company is a holding company. The Company through its subsidiaries, is engaged in developing, marketing and selling of branded nutritional foods and snacking products. The Company offers a range of products such as nutrition bars, ready to drink (RTD) shakes, snacks and confectionery products. These all products marketed under the Atkins, SimplyProtein, Atkins Harvest Trail, Atkins Endulge, and Atkins Lift brand names. The Company offers three main types of nutrition bars including Atkins Harvest Trail Bars, Atkins Meal Bars And Atkins Snack Bars.The Company’s Atkins harvest trail bars contain eight grams of protein and 9 to 10 grams of fiber, and are available in a variety of flavors, including blueberry vanilla and almond, dark chocolate sea salt caramel and vanilla fruit and nut. With 2 to 4 grams of net carbs, Atkins meal bars contain 13 to 17 grams of protein, and are available in 13 different flavors.

FINANCIAL RATIOS  of  The Simply Good Foods Company (SMPL)

Valuation Ratios
P/E Ratio -719.7
Price to Sales 3.6
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow -287.9
Price to Free Cash Flow -239.9
Growth Rates
Sales Growth Rate -7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 32.1%
Total Debt to Equity 32.1%
Interest Coverage 1
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. 1.6%
Return On Total Capital -0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 0.4%
Return On Equity -0.7%
Return On Equity - 3 Yr. Avg. -5.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 45.5%
Gross Margin - 3 Yr. Avg. 42.4%
EBITDA Margin 9.6%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. 6.7%
Pre-Tax Margin 0.8%
Pre-Tax Margin - 3 Yr. Avg. 0.3%
Net Profit Margin -0.5%
Net Profit Margin - 3 Yr. Avg. -0%
Effective Tax Rate 166.7%
Eff/ Tax Rate - 3 Yr. Avg. 87%
Payout Ratio 0%

SMPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMPL stock intrinsic value calculation we used $431 million for the last fiscal year's total revenue generated by The Simply Good Foods Company. The default revenue input number comes from 0001 income statement of The Simply Good Foods Company. 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 SMPL stock valuation model: a) initial revenue growth rate of 13.5% 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 SMPL is calculated based on our internal credit rating of The Simply Good Foods Company, 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 The Simply Good Foods Company.
    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 SMPL stock the variable cost ratio is equal to 89.3%.

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 SMPL 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 The Simply Good Foods Company.

Corporate tax rate of 27% is the nominal tax rate for The Simply Good Foods Company. 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 SMPL 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 SMPL are equal to 59.2%.

Life of production assets of 66.2 years is the average useful life of capital assets used in The Simply Good Foods Company 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 SMPL is equal to 10.2%. 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 - $672.601 million for The Simply Good Foods Company - 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 82.016 million for The Simply Good Foods Company 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 The Simply Good Foods Company at the current share price and the inputted number of shares is $1.7 billion.

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