Intrinsic value of Interface, Inc. - TILE

Previous Close

$16.93

  Intrinsic Value

$37.85

stock screener

  Rating & Target

str. buy

+124%

Previous close

$16.93

 
Intrinsic value

$37.85

 
Up/down potential

+124%

 
Rating

str. buy

We calculate the intrinsic value of TILE 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 1.0

 

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, %
  26.60
  24.44
  22.50
  20.75
  19.17
  17.75
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
Revenue, $m
  1,494
  1,859
  2,277
  2,750
  3,277
  3,859
  4,494
  5,183
  5,925
  6,717
  7,558
  8,449
  9,386
  10,371
  11,402
  12,479
  13,603
  14,773
  15,990
  17,256
  18,572
  19,940
  21,361
  22,838
  24,374
  25,970
  27,631
  29,360
  31,160
  33,035
Variable operating expenses, $m
  1,319
  1,634
  1,995
  2,403
  2,858
  3,360
  3,909
  4,503
  5,143
  5,827
  6,524
  7,292
  8,102
  8,952
  9,842
  10,772
  11,741
  12,751
  13,802
  14,895
  16,031
  17,212
  18,438
  19,713
  21,038
  22,417
  23,850
  25,342
  26,896
  28,514
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
  1,319
  1,634
  1,995
  2,403
  2,858
  3,360
  3,909
  4,503
  5,143
  5,827
  6,524
  7,292
  8,102
  8,952
  9,842
  10,772
  11,741
  12,751
  13,802
  14,895
  16,031
  17,212
  18,438
  19,713
  21,038
  22,417
  23,850
  25,342
  26,896
  28,514
Operating income, $m
  175
  225
  282
  347
  419
  499
  586
  680
  781
  890
  1,034
  1,156
  1,284
  1,419
  1,560
  1,708
  1,861
  2,021
  2,188
  2,361
  2,541
  2,728
  2,923
  3,125
  3,335
  3,554
  3,781
  4,017
  4,264
  4,520
EBITDA, $m
  248
  309
  378
  457
  544
  641
  747
  861
  984
  1,116
  1,256
  1,404
  1,560
  1,723
  1,894
  2,073
  2,260
  2,455
  2,657
  2,867
  3,086
  3,313
  3,549
  3,795
  4,050
  4,315
  4,591
  4,878
  5,177
  5,489
Interest expense (income), $m
  6
  33
  47
  62
  80
  100
  123
  147
  174
  204
  235
  269
  305
  343
  382
  424
  468
  514
  562
  612
  663
  717
  773
  831
  892
  955
  1,020
  1,088
  1,159
  1,232
  1,309
Earnings before tax, $m
  142
  178
  220
  267
  319
  376
  438
  506
  578
  655
  765
  851
  942
  1,037
  1,136
  1,239
  1,347
  1,459
  1,576
  1,698
  1,824
  1,955
  2,091
  2,233
  2,380
  2,533
  2,693
  2,859
  3,031
  3,211
Tax expense, $m
  38
  48
  59
  72
  86
  102
  118
  137
  156
  177
  207
  230
  254
  280
  307
  335
  364
  394
  426
  458
  492
  528
  565
  603
  643
  684
  727
  772
  818
  867
Net income, $m
  103
  130
  161
  195
  233
  275
  320
  369
  422
  478
  559
  621
  687
  757
  829
  905
  983
  1,065
  1,151
  1,239
  1,331
  1,427
  1,527
  1,630
  1,738
  1,849
  1,966
  2,087
  2,213
  2,344

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
  1,626
  2,023
  2,478
  2,992
  3,566
  4,199
  4,891
  5,640
  6,447
  7,309
  8,224
  9,193
  10,214
  11,285
  12,407
  13,579
  14,802
  16,075
  17,400
  18,777
  20,209
  21,697
  23,244
  24,851
  26,522
  28,259
  30,066
  31,947
  33,906
  35,946
Adjusted assets (=assets-cash), $m
  1,626
  2,023
  2,478
  2,992
  3,566
  4,199
  4,891
  5,640
  6,447
  7,309
  8,224
  9,193
  10,214
  11,285
  12,407
  13,579
  14,802
  16,075
  17,400
  18,777
  20,209
  21,697
  23,244
  24,851
  26,522
  28,259
  30,066
  31,947
  33,906
  35,946
Revenue / Adjusted assets
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
  0.919
Average production assets, $m
  451
  561
  688
  830
  990
  1,165
  1,357
  1,565
  1,789
  2,028
  2,283
  2,551
  2,835
  3,132
  3,443
  3,769
  4,108
  4,461
  4,829
  5,211
  5,609
  6,022
  6,451
  6,897
  7,361
  7,843
  8,345
  8,867
  9,410
  9,976
Working capital, $m
  362
  450
  551
  665
  793
  934
  1,088
  1,254
  1,434
  1,625
  1,829
  2,045
  2,271
  2,510
  2,759
  3,020
  3,292
  3,575
  3,870
  4,176
  4,495
  4,825
  5,169
  5,527
  5,898
  6,285
  6,687
  7,105
  7,541
  7,994
Total debt, $m
  865
  1,153
  1,483
  1,855
  2,270
  2,728
  3,229
  3,772
  4,356
  4,980
  5,643
  6,344
  7,083
  7,859
  8,671
  9,520
  10,405
  11,327
  12,286
  13,283
  14,320
  15,398
  16,517
  17,681
  18,890
  20,148
  21,457
  22,819
  24,237
  25,714
Total liabilities, $m
  1,177
  1,465
  1,794
  2,166
  2,581
  3,040
  3,541
  4,084
  4,667
  5,291
  5,955
  6,656
  7,395
  8,170
  8,983
  9,831
  10,716
  11,638
  12,597
  13,595
  14,632
  15,709
  16,829
  17,992
  19,202
  20,460
  21,768
  23,130
  24,548
  26,025
Total equity, $m
  449
  558
  684
  826
  984
  1,159
  1,350
  1,557
  1,779
  2,017
  2,270
  2,537
  2,819
  3,115
  3,424
  3,748
  4,085
  4,437
  4,802
  5,183
  5,578
  5,989
  6,415
  6,859
  7,320
  7,800
  8,298
  8,818
  9,358
  9,921
Total liabilities and equity, $m
  1,626
  2,023
  2,478
  2,992
  3,565
  4,199
  4,891
  5,641
  6,446
  7,308
  8,225
  9,193
  10,214
  11,285
  12,407
  13,579
  14,801
  16,075
  17,399
  18,778
  20,210
  21,698
  23,244
  24,851
  26,522
  28,260
  30,066
  31,948
  33,906
  35,946
Debt-to-equity ratio
  1.930
  2.070
  2.170
  2.250
  2.310
  2.350
  2.390
  2.420
  2.450
  2.470
  2.490
  2.500
  2.510
  2.520
  2.530
  2.540
  2.550
  2.550
  2.560
  2.560
  2.570
  2.570
  2.570
  2.580
  2.580
  2.580
  2.590
  2.590
  2.590
  2.590
Adjusted equity ratio
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276
  0.276

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  103
  130
  161
  195
  233
  275
  320
  369
  422
  478
  559
  621
  687
  757
  829
  905
  983
  1,065
  1,151
  1,239
  1,331
  1,427
  1,527
  1,630
  1,738
  1,849
  1,966
  2,087
  2,213
  2,344
Depreciation, amort., depletion, $m
  73
  84
  96
  110
  125
  142
  161
  181
  203
  226
  222
  248
  275
  304
  334
  366
  399
  433
  469
  506
  545
  585
  626
  670
  715
  761
  810
  861
  914
  969
Funds from operations, $m
  177
  214
  257
  305
  358
  417
  481
  550
  625
  704
  780
  869
  963
  1,061
  1,163
  1,271
  1,382
  1,499
  1,620
  1,745
  1,876
  2,012
  2,153
  2,300
  2,452
  2,611
  2,776
  2,948
  3,127
  3,313
Change in working capital, $m
  76
  88
  101
  114
  128
  141
  154
  167
  179
  192
  204
  215
  227
  238
  250
  261
  272
  283
  295
  306
  318
  331
  344
  357
  372
  386
  402
  418
  436
  454
Cash from operations, $m
  101
  126
  155
  190
  231
  276
  327
  384
  445
  512
  577
  654
  736
  822
  914
  1,010
  1,110
  1,215
  1,325
  1,439
  1,558
  1,681
  1,809
  1,942
  2,081
  2,224
  2,374
  2,529
  2,691
  2,859
Maintenance CAPEX, $m
  -35
  -44
  -55
  -67
  -81
  -96
  -113
  -132
  -152
  -174
  -197
  -222
  -248
  -275
  -304
  -334
  -366
  -399
  -433
  -469
  -506
  -545
  -585
  -626
  -670
  -715
  -761
  -810
  -861
  -914
New CAPEX, $m
  -95
  -110
  -126
  -143
  -159
  -176
  -192
  -208
  -224
  -239
  -254
  -269
  -283
  -297
  -311
  -325
  -339
  -353
  -368
  -382
  -397
  -413
  -429
  -446
  -464
  -482
  -502
  -522
  -544
  -566
Cash from investing activities, $m
  -130
  -154
  -181
  -210
  -240
  -272
  -305
  -340
  -376
  -413
  -451
  -491
  -531
  -572
  -615
  -659
  -705
  -752
  -801
  -851
  -903
  -958
  -1,014
  -1,072
  -1,134
  -1,197
  -1,263
  -1,332
  -1,405
  -1,480
Free cash flow, $m
  -29
  -28
  -25
  -19
  -9
  4
  22
  44
  70
  99
  125
  163
  205
  250
  298
  350
  405
  463
  524
  588
  654
  723
  795
  870
  947
  1,028
  1,111
  1,197
  1,287
  1,379
Issuance/(repayment) of debt, $m
  247
  288
  329
  372
  415
  458
  501
  543
  584
  624
  663
  701
  739
  776
  812
  849
  885
  922
  959
  997
  1,037
  1,077
  1,120
  1,164
  1,210
  1,258
  1,309
  1,362
  1,418
  1,477
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  
  247
  288
  329
  372
  415
  458
  501
  543
  584
  624
  663
  701
  739
  776
  812
  849
  885
  922
  959
  997
  1,037
  1,077
  1,120
  1,164
  1,210
  1,258
  1,309
  1,362
  1,418
  1,477
Total cash flow (excl. dividends), $m
  218
  259
  304
  353
  406
  463
  523
  587
  653
  723
  789
  865
  944
  1,026
  1,111
  1,199
  1,290
  1,385
  1,483
  1,585
  1,691
  1,801
  1,915
  2,034
  2,157
  2,285
  2,419
  2,559
  2,705
  2,856
Retained Cash Flow (-), $m
  -94
  -110
  -126
  -142
  -158
  -175
  -191
  -207
  -223
  -238
  -253
  -267
  -282
  -296
  -310
  -324
  -337
  -351
  -366
  -380
  -395
  -411
  -427
  -444
  -461
  -480
  -499
  -519
  -541
  -563
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
  124
  150
  179
  211
  248
  288
  332
  380
  431
  486
  536
  597
  662
  730
  801
  875
  953
  1,034
  1,118
  1,205
  1,296
  1,390
  1,488
  1,590
  1,696
  1,806
  1,921
  2,040
  2,164
  2,293
Discount rate, %
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
  114
  126
  137
  146
  152
  156
  157
  155
  150
  143
  131
  119
  107
  93
  80
  67
  54
  43
  34
  26
  19
  14
  10
  6
  4
  3
  2
  1
  1
  0
Current shareholders' claim on cash, %
  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
  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

Interface Inc. is engaged in design, production and sale of modular carpet, also known as carpet tile. As of January 1, 2017, the Company marketed its modular carpets in over 110 countries under the brand names Interface and FLOR. The Company operates through three segments: Americas, Europe and Asia-Pacific. The Company distributes its products through two primary channels, including direct sales to end users and indirect sales through independent contractors or distributors. The Company sells an antimicrobial chemical compound under the trademark Intersept that the Company incorporates in all of its modular carpet products. It also sells its TacTiles carpet tile installation system, along with a range of traditional adhesives and products for carpet installation and maintenance that are manufactured by a third party. It also provides turnkey project management services for national accounts and other customers through its InterfaceSERVICES business.

FINANCIAL RATIOS  of  Interface, Inc. (TILE)

Valuation Ratios
P/E Ratio 20.1
Price to Sales 1.1
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 16.7
Growth Rates
Sales Growth Rate -4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.7%
Cap. Spend. - 3 Yr. Gr. Rate -21.2%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 74.8%
Total Debt to Equity 79.2%
Interest Coverage 14
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 9.3%
Ret/ On T. Cap. - 3 Yr. Avg. 8.8%
Return On Equity 15.8%
Return On Equity - 3 Yr. Avg. 15.2%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 38.5%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin 12.1%
EBITDA Margin - 3 Yr. Avg. 11.7%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 8.2%
Pre-Tax Margin - 3 Yr. Avg. 7.5%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 5.1%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.4%
Payout Ratio 25.9%

TILE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TILE stock intrinsic value calculation we used $1180 million for the last fiscal year's total revenue generated by Interface, Inc.. The default revenue input number comes from 0001 income statement of Interface, 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 TILE stock valuation model: a) initial revenue growth rate of 26.6% 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 8.4%, whose default value for TILE is calculated based on our internal credit rating of Interface, 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 Interface, 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 TILE stock the variable cost ratio is equal to 88.8%.

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 TILE 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 Interface, Inc..

Corporate tax rate of 27% is the nominal tax rate for Interface, 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 TILE 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 TILE are equal to 30.2%.

Life of production assets of 10.3 years is the average useful life of capital assets used in Interface, 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 TILE is equal to 24.2%. 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 - $354.663 million for Interface, 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 59.454 million for Interface, 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 Interface, Inc. at the current share price and the inputted number of shares is $1.0 billion.

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