Intrinsic value of Del Taco Restaurants, Inc. - TACO

Previous Close

$10.09

  Intrinsic Value

$5.39

stock screener

  Rating & Target

sell

-47%

Previous close

$10.09

 
Intrinsic value

$5.39

 
Up/down potential

-47%

 
Rating

sell

We calculate the intrinsic value of TACO 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 0.4

 

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, %
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
  5.57
  5.52
  5.46
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
Revenue, $m
  500
  531
  562
  595
  630
  666
  703
  742
  783
  826
  871
  918
  967
  1,018
  1,072
  1,128
  1,187
  1,249
  1,313
  1,381
  1,452
  1,527
  1,605
  1,687
  1,773
  1,863
  1,958
  2,057
  2,161
  2,270
Variable operating expenses, $m
  451
  478
  505
  534
  564
  595
  628
  662
  698
  735
  759
  799
  842
  887
  933
  982
  1,034
  1,087
  1,144
  1,203
  1,265
  1,330
  1,398
  1,469
  1,544
  1,622
  1,705
  1,791
  1,882
  1,977
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
  451
  478
  505
  534
  564
  595
  628
  662
  698
  735
  759
  799
  842
  887
  933
  982
  1,034
  1,087
  1,144
  1,203
  1,265
  1,330
  1,398
  1,469
  1,544
  1,622
  1,705
  1,791
  1,882
  1,977
Operating income, $m
  49
  53
  57
  61
  66
  70
  75
  80
  86
  91
  112
  119
  125
  131
  138
  146
  153
  161
  170
  178
  188
  197
  207
  218
  229
  241
  253
  266
  279
  293
EBITDA, $m
  80
  85
  90
  95
  100
  106
  112
  118
  125
  132
  139
  146
  154
  162
  171
  180
  189
  199
  209
  220
  232
  244
  256
  269
  283
  297
  312
  328
  345
  362
Interest expense (income), $m
  6
  9
  10
  12
  13
  14
  15
  17
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  65
  69
  72
Earnings before tax, $m
  40
  43
  45
  49
  52
  55
  59
  62
  66
  70
  90
  94
  99
  104
  109
  114
  119
  125
  131
  138
  144
  151
  158
  166
  174
  183
  191
  201
  210
  221
Tax expense, $m
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  24
  25
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
Net income, $m
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
  116
  121
  127
  133
  140
  147
  154
  161

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
  789
  837
  887
  939
  993
  1,050
  1,109
  1,171
  1,236
  1,303
  1,374
  1,448
  1,525
  1,606
  1,691
  1,779
  1,872
  1,970
  2,072
  2,179
  2,291
  2,408
  2,531
  2,661
  2,796
  2,939
  3,088
  3,244
  3,409
  3,581
Adjusted assets (=assets-cash), $m
  789
  837
  887
  939
  993
  1,050
  1,109
  1,171
  1,236
  1,303
  1,374
  1,448
  1,525
  1,606
  1,691
  1,779
  1,872
  1,970
  2,072
  2,179
  2,291
  2,408
  2,531
  2,661
  2,796
  2,939
  3,088
  3,244
  3,409
  3,581
Revenue / Adjusted assets
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.633
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
  0.634
Average production assets, $m
  456
  483
  512
  542
  574
  606
  641
  676
  714
  753
  793
  836
  881
  928
  976
  1,028
  1,081
  1,138
  1,197
  1,258
  1,323
  1,391
  1,462
  1,537
  1,615
  1,697
  1,783
  1,874
  1,969
  2,068
Working capital, $m
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131
  -138
  -145
  -152
  -160
  -168
  -177
  -186
  -195
Total debt, $m
  192
  213
  235
  258
  282
  307
  333
  360
  388
  418
  449
  482
  515
  551
  588
  627
  668
  711
  755
  802
  852
  903
  957
  1,014
  1,074
  1,136
  1,202
  1,270
  1,342
  1,418
Total liabilities, $m
  346
  367
  389
  412
  436
  461
  487
  514
  542
  572
  603
  636
  669
  705
  742
  781
  822
  865
  909
  956
  1,006
  1,057
  1,111
  1,168
  1,228
  1,290
  1,356
  1,424
  1,496
  1,572
Total equity, $m
  443
  470
  498
  527
  557
  589
  622
  657
  693
  731
  771
  812
  856
  901
  948
  998
  1,050
  1,105
  1,162
  1,222
  1,285
  1,351
  1,420
  1,493
  1,569
  1,649
  1,732
  1,820
  1,912
  2,009
Total liabilities and equity, $m
  789
  837
  887
  939
  993
  1,050
  1,109
  1,171
  1,235
  1,303
  1,374
  1,448
  1,525
  1,606
  1,690
  1,779
  1,872
  1,970
  2,071
  2,178
  2,291
  2,408
  2,531
  2,661
  2,797
  2,939
  3,088
  3,244
  3,408
  3,581
Debt-to-equity ratio
  0.430
  0.450
  0.470
  0.490
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
Adjusted equity ratio
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  29
  31
  33
  35
  38
  40
  43
  45
  48
  51
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
  116
  121
  127
  133
  140
  147
  154
  161
Depreciation, amort., depletion, $m
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  59
  62
  66
  69
Funds from operations, $m
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
  92
  97
  102
  107
  112
  117
  123
  129
  136
  142
  149
  157
  164
  172
  181
  190
  199
  209
  219
  230
Change in working capital, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
Cash from operations, $m
  62
  65
  69
  72
  75
  79
  83
  87
  91
  96
  96
  101
  106
  111
  116
  122
  128
  135
  141
  148
  155
  163
  171
  180
  188
  198
  207
  218
  228
  239
Maintenance CAPEX, $m
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -59
  -62
  -66
New CAPEX, $m
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -95
  -100
Cash from investing activities, $m
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -117
  -124
  -129
  -136
  -143
  -149
  -157
  -166
Free cash flow, $m
  21
  22
  24
  25
  26
  27
  29
  30
  31
  33
  30
  32
  33
  35
  37
  38
  40
  42
  44
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
Issuance/(repayment) of debt, $m
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  66
  69
  72
  76
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  
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  36
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  62
  66
  69
  72
  76
Total cash flow (excl. dividends), $m
  42
  44
  46
  48
  50
  52
  55
  57
  60
  62
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
Retained Cash Flow (-), $m
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
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
  15
  17
  18
  18
  19
  20
  21
  22
  23
  25
  21
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  40
  42
  44
  46
  49
  51
  53
Discount rate, %
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
  15
  15
  15
  15
  14
  14
  13
  13
  12
  11
  9
  8
  7
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
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  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
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  100.0
  100.0

Del Taco Restaurants, Inc. is an operator and franchisor of restaurants featuring made-to-order cuisine, including both Mexican inspired and American classic dishes. As of January 3, 2017, the Company operated 551 Del Taco restaurants. The Company's menu offers a combination of Mexican-inspired food, such as tacos and burritos, and American classics, such as Double Del cheeseburgers, crinkle-cut fries and milkshakes. The Company's menu features items, such as its Platos plated meals, Epic Burritos, Handcrafted Ensaladas and Fresca Bowls, as well as items on its Buck & Under Menu. As of January 3, 2017, the Company had 310 Company-operated and 241 franchise-operated restaurants. The Platos menu offering consists of individually plated meals complete with an entree, two sides, and chips and salsa. The Company's menu also includes quesadillas, bowls and handcrafted ensaladas, as well as burgers and fries.

FINANCIAL RATIOS  of  Del Taco Restaurants, Inc. (TACO)

Valuation Ratios
P/E Ratio 18.8
Price to Sales 0.9
Price to Book 1
Price to Tangible Book
Price to Cash Flow 6.8
Price to Free Cash Flow 35.9
Growth Rates
Sales Growth Rate 6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 34.3%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 45.9%
Total Debt to Equity 46.4%
Interest Coverage 7
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 1.3%
Return On Equity 5.6%
Return On Equity - 3 Yr. Avg. 2.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 73.5%
Gross Margin - 3 Yr. Avg. 48.6%
EBITDA Margin 14.4%
EBITDA Margin - 3 Yr. Avg. 8.2%
Operating Margin 9.5%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 3.1%
Net Profit Margin 4.6%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 41.7%
Eff/ Tax Rate - 3 Yr. Avg. 19.4%
Payout Ratio 0%

TACO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TACO stock intrinsic value calculation we used $471 million for the last fiscal year's total revenue generated by Del Taco Restaurants, Inc.. The default revenue input number comes from 0001 income statement of Del Taco Restaurants, 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 TACO stock valuation model: a) initial revenue growth rate of 6.2% 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 5.2%, whose default value for TACO is calculated based on our internal credit rating of Del Taco Restaurants, 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 Del Taco Restaurants, 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 TACO stock the variable cost ratio is equal to 90.4%.

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 TACO 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 Del Taco Restaurants, Inc..

Corporate tax rate of 27% is the nominal tax rate for Del Taco Restaurants, 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 TACO 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 TACO are equal to 91.1%.

Life of production assets of 30.4 years is the average useful life of capital assets used in Del Taco Restaurants, 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 TACO is equal to -8.6%. 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 - $416.249 million for Del Taco Restaurants, 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 37.765 million for Del Taco Restaurants, 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 Del Taco Restaurants, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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