Intrinsic value of Sequential Brands Group, Inc. - SQBG

Previous Close

$1.15

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$1.15

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of SQBG 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 0.1

 

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, %
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  177
  185
  193
  201
  210
  220
  230
  240
  252
  263
  276
  289
  303
  317
  333
  349
  366
  383
  402
  422
  442
  464
  487
  511
  536
  563
  591
  620
  651
  683
Variable operating expenses, $m
  442
  457
  472
  489
  507
  525
  545
  566
  587
  610
  538
  564
  591
  619
  649
  680
  713
  748
  784
  823
  863
  905
  950
  997
  1,046
  1,098
  1,152
  1,209
  1,269
  1,332
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
  442
  457
  472
  489
  507
  525
  545
  566
  587
  610
  538
  564
  591
  619
  649
  680
  713
  748
  784
  823
  863
  905
  950
  997
  1,046
  1,098
  1,152
  1,209
  1,269
  1,332
Operating income, $m
  -265
  -272
  -280
  -288
  -296
  -305
  -315
  -325
  -336
  -347
  -262
  -275
  -288
  -302
  -316
  -331
  -347
  -364
  -382
  -401
  -421
  -441
  -463
  -486
  -510
  -535
  -561
  -589
  -618
  -649
EBITDA, $m
  -151
  -158
  -164
  -172
  -179
  -187
  -196
  -205
  -215
  -225
  -235
  -246
  -258
  -271
  -284
  -297
  -312
  -327
  -343
  -360
  -377
  -396
  -415
  -436
  -457
  -480
  -504
  -529
  -555
  -582
Interest expense (income), $m
  45
  61
  64
  68
  72
  76
  80
  84
  89
  94
  99
  105
  111
  117
  124
  130
  138
  145
  153
  162
  170
  180
  190
  200
  211
  222
  234
  246
  259
  273
  288
Earnings before tax, $m
  -326
  -336
  -348
  -359
  -372
  -385
  -399
  -414
  -430
  -446
  -367
  -386
  -405
  -425
  -447
  -469
  -493
  -518
  -544
  -571
  -600
  -631
  -663
  -696
  -732
  -769
  -808
  -849
  -892
  -937
Tax expense, $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
Net income, $m
  -326
  -336
  -348
  -359
  -372
  -385
  -399
  -414
  -430
  -446
  -367
  -386
  -405
  -425
  -447
  -469
  -493
  -518
  -544
  -571
  -600
  -631
  -663
  -696
  -732
  -769
  -808
  -849
  -892
  -937

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
  1,121
  1,169
  1,220
  1,274
  1,331
  1,391
  1,455
  1,522
  1,593
  1,668
  1,746
  1,829
  1,917
  2,008
  2,105
  2,207
  2,314
  2,427
  2,545
  2,670
  2,800
  2,938
  3,083
  3,235
  3,394
  3,562
  3,738
  3,923
  4,118
  4,322
Adjusted assets (=assets-cash), $m
  1,121
  1,169
  1,220
  1,274
  1,331
  1,391
  1,455
  1,522
  1,593
  1,668
  1,746
  1,829
  1,917
  2,008
  2,105
  2,207
  2,314
  2,427
  2,545
  2,670
  2,800
  2,938
  3,083
  3,235
  3,394
  3,562
  3,738
  3,923
  4,118
  4,322
Revenue / Adjusted assets
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
  0.158
Average production assets, $m
  519
  541
  565
  590
  616
  644
  673
  705
  737
  772
  808
  847
  887
  930
  975
  1,022
  1,071
  1,123
  1,178
  1,236
  1,296
  1,360
  1,427
  1,497
  1,571
  1,649
  1,731
  1,816
  1,906
  2,001
Working capital, $m
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  68
  72
  75
  79
  82
  86
  91
  95
  100
  105
  110
  115
  121
  127
  133
  140
  146
  154
  161
  169
Total debt, $m
  642
  678
  716
  756
  799
  844
  891
  941
  994
  1,050
  1,109
  1,171
  1,236
  1,304
  1,377
  1,452
  1,532
  1,616
  1,705
  1,798
  1,895
  1,998
  2,106
  2,219
  2,338
  2,463
  2,595
  2,733
  2,878
  3,030
Total liabilities, $m
  836
  872
  910
  950
  993
  1,038
  1,085
  1,135
  1,188
  1,244
  1,303
  1,365
  1,430
  1,498
  1,570
  1,646
  1,726
  1,810
  1,899
  1,992
  2,089
  2,192
  2,300
  2,413
  2,532
  2,657
  2,789
  2,927
  3,072
  3,224
Total equity, $m
  285
  297
  310
  324
  338
  353
  370
  387
  405
  424
  444
  465
  487
  510
  535
  561
  588
  616
  646
  678
  711
  746
  783
  822
  862
  905
  950
  997
  1,046
  1,098
Total liabilities and equity, $m
  1,121
  1,169
  1,220
  1,274
  1,331
  1,391
  1,455
  1,522
  1,593
  1,668
  1,747
  1,830
  1,917
  2,008
  2,105
  2,207
  2,314
  2,426
  2,545
  2,670
  2,800
  2,938
  3,083
  3,235
  3,394
  3,562
  3,739
  3,924
  4,118
  4,322
Debt-to-equity ratio
  2.260
  2.280
  2.310
  2.340
  2.360
  2.390
  2.410
  2.440
  2.460
  2.480
  2.500
  2.520
  2.540
  2.560
  2.570
  2.590
  2.610
  2.620
  2.640
  2.650
  2.660
  2.680
  2.690
  2.700
  2.710
  2.720
  2.730
  2.740
  2.750
  2.760
Adjusted equity ratio
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -326
  -336
  -348
  -359
  -372
  -385
  -399
  -414
  -430
  -446
  -367
  -386
  -405
  -425
  -447
  -469
  -493
  -518
  -544
  -571
  -600
  -631
  -663
  -696
  -732
  -769
  -808
  -849
  -892
  -937
Depreciation, amort., depletion, $m
  114
  115
  115
  116
  117
  118
  119
  120
  121
  122
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  52
  55
  58
  61
  64
  67
Funds from operations, $m
  -212
  -222
  -232
  -243
  -255
  -267
  -280
  -294
  -309
  -324
  -340
  -357
  -375
  -394
  -414
  -435
  -457
  -480
  -505
  -530
  -557
  -585
  -615
  -646
  -679
  -714
  -750
  -788
  -828
  -870
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  -214
  -224
  -234
  -245
  -257
  -270
  -283
  -297
  -312
  -327
  -343
  -361
  -379
  -398
  -418
  -439
  -461
  -485
  -509
  -535
  -562
  -591
  -621
  -652
  -685
  -720
  -757
  -795
  -836
  -878
Maintenance CAPEX, $m
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
  -61
  -64
New CAPEX, $m
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -95
Cash from investing activities, $m
  -38
  -39
  -42
  -44
  -46
  -49
  -50
  -53
  -56
  -60
  -62
  -65
  -68
  -73
  -76
  -79
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
Free cash flow, $m
  -251
  -263
  -276
  -289
  -303
  -318
  -334
  -350
  -368
  -386
  -406
  -426
  -447
  -470
  -494
  -519
  -545
  -572
  -601
  -632
  -664
  -698
  -733
  -770
  -809
  -850
  -893
  -939
  -986
  -1,036
Issuance/(repayment) of debt, $m
  32
  36
  38
  40
  43
  45
  47
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  93
  98
  103
  108
  113
  119
  125
  131
  138
  145
  152
Issuance/(repurchase) of shares, $m
  337
  348
  360
  373
  386
  401
  415
  431
  448
  465
  387
  407
  427
  449
  471
  495
  520
  546
  574
  603
  634
  666
  699
  735
  772
  811
  852
  896
  941
  989
Cash from financing (excl. dividends), $m  
  369
  384
  398
  413
  429
  446
  462
  481
  501
  521
  446
  469
  492
  518
  543
  571
  600
  630
  662
  696
  732
  769
  807
  848
  891
  936
  983
  1,034
  1,086
  1,141
Total cash flow (excl. dividends), $m
  117
  121
  123
  124
  126
  127
  129
  131
  133
  135
  40
  43
  45
  47
  50
  52
  55
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
Retained Cash Flow (-), $m
  -337
  -348
  -360
  -373
  -386
  -401
  -415
  -431
  -448
  -465
  -387
  -407
  -427
  -449
  -471
  -495
  -520
  -546
  -574
  -603
  -634
  -666
  -699
  -735
  -772
  -811
  -852
  -896
  -941
  -989
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
  -220
  -227
  -238
  -249
  -261
  -273
  -286
  -300
  -315
  -330
  -347
  -364
  -382
  -401
  -421
  -443
  -465
  -488
  -513
  -539
  -566
  -595
  -625
  -657
  -690
  -725
  -762
  -801
  -841
  -884
Discount rate, %
  10.80
  11.34
  11.91
  12.50
  13.13
  13.78
  14.47
  15.20
  15.96
  16.75
  17.59
  18.47
  19.40
  20.37
  21.38
  22.45
  23.58
  24.75
  25.99
  27.29
  28.66
  30.09
  31.59
  33.17
  34.83
  36.57
  38.40
  40.32
  42.34
  44.45
PV of cash for distribution, $m
  -198
  -183
  -170
  -155
  -141
  -126
  -111
  -97
  -83
  -70
  -58
  -48
  -38
  -30
  -23
  -17
  -13
  -9
  -6
  -4
  -3
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  36.3
  13.2
  4.8
  1.8
  0.7
  0.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Sequential Brands Group, Inc. owns a portfolio of consumer brands in the fashion, home, athletic and lifestyle categories. The Company's portfolio of consumer brands includes Martha Stewart, Emeril Lagasse, Jessica Simpson, Joe's Jeans, William Rast, Ellen Tracy, Revo, AND1 and Avia. The Company's brands are licensed for a range of product categories, including apparel, footwear, eyewear, fashion accessories and home goods. The Company licenses brands to both wholesale and direct-to-retail licensees. The Company licenses the Martha Stewart brand to various licensees, including retailers, such as Macy's, The Home Depot, PetSmart and Staples. The Jessica Simpson Collection is a signature lifestyle concept designed in collaboration with Jessica Simpson, which offers various product categories, including footwear, apparel, fragrance, fashion accessories, maternity apparel, girls clothing and a home line. The Avia brand offers running and activewear products.

FINANCIAL RATIOS  of  Sequential Brands Group, Inc. (SQBG)

Valuation Ratios
P/E Ratio -71.9
Price to Sales 0.5
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 1.7
Price to Free Cash Flow 1.8
Growth Rates
Sales Growth Rate 77.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 133.3%
Total Debt to Equity 139.3%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital -0.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.3%
Return On Equity -0.2%
Return On Equity - 3 Yr. Avg. -0.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 42.3%
EBITDA Margin - 3 Yr. Avg. 30.4%
Operating Margin 45.5%
Oper. Margin - 3 Yr. Avg. 35.7%
Pre-Tax Margin 10.3%
Pre-Tax Margin - 3 Yr. Avg. 5.4%
Net Profit Margin -0.6%
Net Profit Margin - 3 Yr. Avg. -2.1%
Effective Tax Rate 56.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.4%
Payout Ratio 0%

SQBG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SQBG stock intrinsic value calculation we used $170 million for the last fiscal year's total revenue generated by Sequential Brands Group, Inc.. The default revenue input number comes from 0001 income statement of Sequential Brands Group, Inc.. 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 SQBG stock valuation model: a) initial revenue growth rate of 4.2% 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 10.8%, whose default value for SQBG is calculated based on our internal credit rating of Sequential Brands Group, Inc., 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 Sequential Brands Group, Inc..
    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 SQBG stock the variable cost ratio is equal to 251.8%.

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 SQBG 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% for Sequential Brands Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Sequential Brands Group, Inc.. 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 SQBG 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 SQBG are equal to 293%.

Life of production assets of 293.5 years is the average useful life of capital assets used in Sequential Brands Group, Inc. 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 SQBG is equal to 24.8%. 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 - $273.918 million for Sequential Brands Group, Inc. - 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 64.286 million for Sequential Brands Group, Inc. 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 Sequential Brands Group, Inc. at the current share price and the inputted number of shares is $0.1 billion.

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