Intrinsic value of Carrols Restaurant Group, Inc. - TAST

Previous Close

$7.58

  Intrinsic Value

$9.58

stock screener

  Rating & Target

buy

+26%

Previous close

$7.58

 
Intrinsic value

$9.58

 
Up/down potential

+26%

 
Rating

buy

We calculate the intrinsic value of TAST 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 0.3

 

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, %
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
Revenue, $m
  1,278
  1,381
  1,488
  1,599
  1,715
  1,835
  1,960
  2,090
  2,225
  2,366
  2,512
  2,664
  2,823
  2,989
  3,162
  3,342
  3,530
  3,726
  3,932
  4,146
  4,371
  4,606
  4,851
  5,109
  5,378
  5,660
  5,955
  6,265
  6,589
  6,929
Variable operating expenses, $m
  1,223
  1,319
  1,420
  1,524
  1,632
  1,744
  1,861
  1,982
  2,108
  2,240
  2,347
  2,490
  2,638
  2,793
  2,954
  3,123
  3,298
  3,482
  3,674
  3,874
  4,084
  4,304
  4,533
  4,773
  5,025
  5,289
  5,565
  5,854
  6,157
  6,475
Fixed operating expenses, $m
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
Total operating expenses, $m
  1,238
  1,335
  1,436
  1,540
  1,649
  1,761
  1,878
  2,000
  2,126
  2,259
  2,366
  2,509
  2,658
  2,813
  2,975
  3,144
  3,320
  3,504
  3,697
  3,897
  4,108
  4,328
  4,558
  4,798
  5,051
  5,315
  5,592
  5,882
  6,185
  6,504
Operating income, $m
  40
  46
  53
  60
  67
  74
  82
  90
  99
  108
  146
  155
  165
  176
  187
  198
  210
  222
  235
  249
  263
  278
  293
  310
  327
  345
  364
  383
  404
  426
EBITDA, $m
  118
  128
  139
  150
  162
  174
  187
  200
  213
  228
  242
  258
  274
  291
  308
  327
  346
  366
  387
  408
  431
  455
  480
  507
  534
  563
  593
  625
  658
  693
Interest expense (income), $m
  17
  24
  26
  29
  33
  36
  39
  43
  47
  50
  54
  59
  63
  67
  72
  77
  82
  87
  93
  99
  105
  111
  118
  125
  132
  140
  148
  156
  165
  174
  183
Earnings before tax, $m
  16
  19
  23
  27
  31
  35
  39
  44
  48
  53
  87
  92
  98
  104
  110
  116
  122
  129
  136
  144
  152
  160
  169
  178
  187
  197
  208
  219
  230
  242
Tax expense, $m
  4
  5
  6
  7
  8
  9
  11
  12
  13
  14
  24
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  62
  65
Net income, $m
  12
  14
  17
  20
  23
  25
  29
  32
  35
  39
  64
  67
  71
  76
  80
  85
  89
  94
  100
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177

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
  651
  703
  758
  814
  873
  934
  998
  1,064
  1,133
  1,205
  1,279
  1,357
  1,438
  1,522
  1,610
  1,701
  1,797
  1,897
  2,002
  2,111
  2,225
  2,345
  2,470
  2,601
  2,738
  2,882
  3,032
  3,190
  3,355
  3,528
Adjusted assets (=assets-cash), $m
  651
  703
  758
  814
  873
  934
  998
  1,064
  1,133
  1,205
  1,279
  1,357
  1,438
  1,522
  1,610
  1,701
  1,797
  1,897
  2,002
  2,111
  2,225
  2,345
  2,470
  2,601
  2,738
  2,882
  3,032
  3,190
  3,355
  3,528
Revenue / Adjusted assets
  1.963
  1.964
  1.963
  1.964
  1.964
  1.965
  1.964
  1.964
  1.964
  1.963
  1.964
  1.963
  1.963
  1.964
  1.964
  1.965
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
  1.964
Average production assets, $m
  428
  463
  499
  536
  575
  615
  657
  700
  745
  793
  842
  893
  946
  1,001
  1,059
  1,119
  1,183
  1,248
  1,317
  1,389
  1,464
  1,543
  1,625
  1,711
  1,802
  1,896
  1,995
  2,099
  2,207
  2,321
Working capital, $m
  -54
  -58
  -63
  -67
  -72
  -77
  -82
  -88
  -93
  -99
  -106
  -112
  -119
  -126
  -133
  -140
  -148
  -157
  -165
  -174
  -184
  -193
  -204
  -215
  -226
  -238
  -250
  -263
  -277
  -291
Total debt, $m
  315
  351
  389
  428
  469
  511
  555
  601
  648
  698
  749
  803
  859
  917
  978
  1,041
  1,107
  1,176
  1,249
  1,324
  1,403
  1,486
  1,572
  1,663
  1,757
  1,857
  1,961
  2,069
  2,184
  2,303
Total liabilities, $m
  450
  486
  524
  563
  603
  646
  690
  735
  783
  832
  884
  937
  993
  1,052
  1,112
  1,176
  1,242
  1,311
  1,383
  1,459
  1,538
  1,620
  1,707
  1,797
  1,892
  1,991
  2,095
  2,204
  2,318
  2,438
Total equity, $m
  201
  217
  234
  252
  270
  289
  308
  329
  350
  372
  395
  419
  444
  470
  497
  526
  555
  586
  619
  652
  688
  725
  763
  804
  846
  890
  937
  986
  1,037
  1,090
Total liabilities and equity, $m
  651
  703
  758
  815
  873
  935
  998
  1,064
  1,133
  1,204
  1,279
  1,356
  1,437
  1,522
  1,609
  1,702
  1,797
  1,897
  2,002
  2,111
  2,226
  2,345
  2,470
  2,601
  2,738
  2,881
  3,032
  3,190
  3,355
  3,528
Debt-to-equity ratio
  1.570
  1.620
  1.660
  1.700
  1.740
  1.770
  1.800
  1.830
  1.850
  1.870
  1.900
  1.910
  1.930
  1.950
  1.970
  1.980
  1.990
  2.010
  2.020
  2.030
  2.040
  2.050
  2.060
  2.070
  2.080
  2.080
  2.090
  2.100
  2.110
  2.110
Adjusted equity ratio
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  14
  17
  20
  23
  25
  29
  32
  35
  39
  64
  67
  71
  76
  80
  85
  89
  94
  100
  105
  111
  117
  123
  130
  137
  144
  152
  160
  168
  177
Depreciation, amort., depletion, $m
  78
  82
  86
  91
  95
  100
  104
  109
  115
  120
  97
  103
  109
  115
  122
  129
  136
  143
  151
  160
  168
  177
  187
  197
  207
  218
  229
  241
  254
  267
Funds from operations, $m
  90
  96
  103
  110
  118
  125
  133
  141
  150
  159
  160
  170
  180
  191
  202
  213
  225
  238
  251
  265
  279
  294
  310
  326
  344
  362
  381
  401
  422
  444
Change in working capital, $m
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from operations, $m
  94
  101
  108
  115
  122
  130
  138
  147
  156
  165
  166
  176
  187
  198
  209
  221
  233
  246
  260
  274
  289
  304
  320
  337
  355
  374
  393
  414
  435
  458
Maintenance CAPEX, $m
  -45
  -49
  -53
  -57
  -62
  -66
  -71
  -75
  -80
  -86
  -91
  -97
  -103
  -109
  -115
  -122
  -129
  -136
  -143
  -151
  -160
  -168
  -177
  -187
  -197
  -207
  -218
  -229
  -241
  -254
New CAPEX, $m
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -99
  -104
  -109
  -114
Cash from investing activities, $m
  -78
  -84
  -89
  -94
  -101
  -106
  -113
  -119
  -125
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -192
  -202
  -212
  -223
  -235
  -247
  -259
  -273
  -287
  -301
  -317
  -333
  -350
  -368
Free cash flow, $m
  15
  17
  19
  20
  22
  24
  26
  28
  30
  32
  26
  29
  31
  33
  36
  39
  41
  44
  47
  50
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
Issuance/(repayment) of debt, $m
  35
  36
  38
  39
  41
  42
  44
  46
  48
  49
  51
  54
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
  104
  109
  114
  120
Issuance/(repurchase) of shares, $m
  4
  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
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  39
  38
  38
  39
  41
  42
  44
  46
  48
  49
  51
  54
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  86
  90
  95
  99
  104
  109
  114
  120
Total cash flow (excl. dividends), $m
  54
  55
  56
  59
  63
  66
  70
  73
  77
  81
  78
  82
  87
  92
  97
  102
  108
  113
  120
  126
  133
  140
  147
  155
  163
  171
  180
  190
  200
  210
Retained Cash Flow (-), $m
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
  -51
  -53
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
  38
  39
  39
  42
  45
  47
  50
  53
  56
  59
  55
  58
  62
  66
  70
  74
  78
  83
  87
  92
  97
  103
  108
  114
  121
  127
  134
  141
  149
  156
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
  36
  33
  31
  30
  28
  27
  25
  23
  21
  19
  15
  13
  11
  10
  8
  7
  6
  4
  3
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  98.6
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0

Carrols Restaurant Group, Inc. is a holding company and conducts all of its operations through its subsidiary, Carrols Corporation (Carrols) and Carrols' subsidiary, Carrols LLC. The Company is a restaurant company and Burger King franchisee in the United States. As of January 1, 2017, the Company had owned and operated 753 Burger King restaurants under the name Burger King in 16 Northeastern, Midwestern and Southeastern states. Burger King restaurants feature the flame-broiled Whopper sandwich, as well as a range of hamburgers, chicken and other specialty sandwiches, French fries, salads, breakfast items, hot dogs, snacks, smoothies, frappes and other offerings. The Company's Burger King restaurants are located in various states, such as Illinois, Indiana, Kentucky, Maine, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Vermont, Virginia and West Virginia.

FINANCIAL RATIOS  of  Carrols Restaurant Group, Inc. (TAST)

Valuation Ratios
P/E Ratio 5.9
Price to Sales 0.3
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 4.3
Price to Free Cash Flow -8.4
Growth Rates
Sales Growth Rate 9.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 64.9%
Cap. Spend. - 3 Yr. Gr. Rate 13.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 140.6%
Total Debt to Equity 141.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 19.6%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 13.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.7%
Return On Equity 34.2%
Return On Equity - 3 Yr. Avg. -2.4%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 35.1%
Gross Margin - 3 Yr. Avg. 33.4%
EBITDA Margin 8.6%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 1.7%
Pre-Tax Margin 1.8%
Pre-Tax Margin - 3 Yr. Avg. -0.7%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. -0.2%
Effective Tax Rate -164.7%
Eff/ Tax Rate - 3 Yr. Avg. -70.3%
Payout Ratio 0%

TAST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TAST stock intrinsic value calculation we used $1179 million for the last fiscal year's total revenue generated by Carrols Restaurant Group, Inc.. The default revenue input number comes from 0001 income statement of Carrols Restaurant 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 TAST stock valuation model: a) initial revenue growth rate of 8.4% 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 TAST is calculated based on our internal credit rating of Carrols Restaurant 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 Carrols Restaurant 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 TAST stock the variable cost ratio is equal to 95.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15 million in the base year in the intrinsic value calculation for TAST 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 8.4% for Carrols Restaurant Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Carrols Restaurant 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 TAST 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 TAST are equal to 33.5%.

Life of production assets of 8.7 years is the average useful life of capital assets used in Carrols Restaurant 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 TAST is equal to -4.2%. 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 - $185.54 million for Carrols Restaurant 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 37.004 million for Carrols Restaurant 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 Carrols Restaurant Group, Inc. at the current share price and the inputted number of shares is $0.3 billion.

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