Intrinsic value of Interface - TILE

Previous Close

$23.70

  Intrinsic Value

$32.08

stock screener

  Rating & Target

buy

+35%

Previous close

$23.70

 
Intrinsic value

$32.08

 
Up/down potential

+35%

 
Rating

buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Interface (TILE) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.29
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  959
  994
  1,031
  1,071
  1,113
  1,159
  1,207
  1,258
  1,313
  1,370
  1,432
  1,496
  1,564
  1,636
  1,712
  1,793
  1,877
  1,966
  2,060
  2,158
  2,262
  2,371
  2,486
  2,607
  2,734
  2,868
  3,009
  3,156
  3,312
  3,475
  3,646
Variable operating expenses, $m
 
  323
  335
  347
  361
  375
  391
  407
  424
  443
  462
  477
  498
  521
  546
  571
  598
  626
  656
  688
  721
  756
  792
  831
  871
  914
  959
  1,006
  1,055
  1,107
  1,162
Fixed operating expenses, $m
 
  590
  605
  620
  636
  652
  668
  685
  702
  719
  737
  756
  775
  794
  814
  834
  855
  876
  898
  921
  944
  967
  992
  1,016
  1,042
  1,068
  1,095
  1,122
  1,150
  1,179
  1,208
Total operating expenses, $m
  874
  913
  940
  967
  997
  1,027
  1,059
  1,092
  1,126
  1,162
  1,199
  1,233
  1,273
  1,315
  1,360
  1,405
  1,453
  1,502
  1,554
  1,609
  1,665
  1,723
  1,784
  1,847
  1,913
  1,982
  2,054
  2,128
  2,205
  2,286
  2,370
Operating income, $m
  85
  80
  91
  103
  117
  132
  148
  167
  187
  208
  232
  264
  291
  321
  353
  387
  424
  463
  505
  550
  598
  648
  703
  760
  821
  886
  955
  1,029
  1,106
  1,189
  1,276
EBITDA, $m
  116
  107
  118
  131
  145
  161
  179
  198
  219
  242
  267
  294
  323
  354
  388
  424
  462
  503
  547
  594
  644
  697
  753
  813
  877
  945
  1,017
  1,093
  1,174
  1,260
  1,350
Interest expense (income), $m
  6
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
Earnings before tax, $m
  79
  72
  81
  93
  106
  120
  136
  153
  172
  193
  216
  246
  273
  301
  332
  365
  400
  438
  479
  522
  568
  617
  669
  724
  784
  846
  913
  984
  1,059
  1,139
  1,223
Tax expense, $m
  25
  19
  22
  25
  29
  32
  37
  41
  47
  52
  58
  67
  74
  81
  90
  99
  108
  118
  129
  141
  153
  167
  181
  196
  212
  229
  247
  266
  286
  307
  330
Net income, $m
  54
  52
  59
  68
  77
  88
  99
  112
  126
  141
  158
  180
  199
  220
  242
  266
  292
  320
  349
  381
  414
  450
  488
  529
  572
  618
  667
  718
  773
  831
  893

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  166
  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
  835
  693
  719
  747
  777
  808
  842
  878
  916
  956
  999
  1,044
  1,092
  1,142
  1,195
  1,251
  1,310
  1,372
  1,437
  1,506
  1,579
  1,655
  1,735
  1,819
  1,908
  2,001
  2,100
  2,203
  2,311
  2,425
  2,544
Adjusted assets (=assets-cash), $m
  669
  693
  719
  747
  777
  808
  842
  878
  916
  956
  999
  1,044
  1,092
  1,142
  1,195
  1,251
  1,310
  1,372
  1,437
  1,506
  1,579
  1,655
  1,735
  1,819
  1,908
  2,001
  2,100
  2,203
  2,311
  2,425
  2,544
Revenue / Adjusted assets
  1.433
  1.434
  1.434
  1.434
  1.432
  1.434
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
  1.432
  1.433
  1.433
  1.433
  1.433
  1.433
  1.434
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
  1.433
Average production assets, $m
  106
  109
  113
  118
  122
  127
  133
  138
  144
  151
  157
  165
  172
  180
  188
  197
  206
  216
  227
  237
  249
  261
  274
  287
  301
  315
  331
  347
  364
  382
  401
Working capital, $m
  312
  167
  173
  180
  187
  195
  203
  211
  221
  230
  241
  251
  263
  275
  288
  301
  315
  330
  346
  363
  380
  398
  418
  438
  459
  482
  505
  530
  556
  584
  613
Total debt, $m
  270
  272
  291
  311
  332
  355
  379
  405
  432
  461
  491
  524
  558
  594
  632
  672
  714
  758
  805
  854
  906
  961
  1,018
  1,079
  1,142
  1,209
  1,279
  1,353
  1,431
  1,512
  1,598
Total liabilities, $m
  495
  496
  515
  535
  556
  579
  603
  629
  656
  685
  715
  748
  782
  818
  856
  896
  938
  982
  1,029
  1,078
  1,130
  1,185
  1,242
  1,303
  1,366
  1,433
  1,503
  1,577
  1,655
  1,736
  1,822
Total equity, $m
  341
  197
  204
  212
  221
  230
  239
  249
  260
  272
  284
  297
  310
  324
  339
  355
  372
  390
  408
  428
  448
  470
  493
  517
  542
  568
  596
  626
  656
  689
  723
Total liabilities and equity, $m
  836
  693
  719
  747
  777
  809
  842
  878
  916
  957
  999
  1,045
  1,092
  1,142
  1,195
  1,251
  1,310
  1,372
  1,437
  1,506
  1,578
  1,655
  1,735
  1,820
  1,908
  2,001
  2,099
  2,203
  2,311
  2,425
  2,545
Debt-to-equity ratio
  0.792
  1.380
  1.420
  1.470
  1.510
  1.550
  1.580
  1.620
  1.660
  1.700
  1.730
  1.770
  1.800
  1.830
  1.860
  1.890
  1.920
  1.950
  1.970
  2.000
  2.020
  2.040
  2.070
  2.090
  2.110
  2.130
  2.150
  2.160
  2.180
  2.200
  2.210
Adjusted equity ratio
  0.262
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284
  0.284

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  54
  52
  59
  68
  77
  88
  99
  112
  126
  141
  158
  180
  199
  220
  242
  266
  292
  320
  349
  381
  414
  450
  488
  529
  572
  618
  667
  718
  773
  831
  893
Depreciation, amort., depletion, $m
  31
  26
  27
  28
  29
  30
  31
  32
  33
  34
  35
  30
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  71
  74
Funds from operations, $m
  95
  79
  87
  96
  106
  117
  130
  144
  159
  175
  193
  210
  231
  253
  277
  303
  330
  360
  391
  425
  460
  498
  539
  582
  628
  676
  728
  783
  841
  902
  967
Change in working capital, $m
  2
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  24
  25
  26
  27
  29
Cash from operations, $m
  93
  73
  80
  89
  99
  110
  122
  135
  150
  165
  183
  200
  220
  241
  265
  290
  316
  345
  376
  408
  443
  480
  520
  562
  606
  654
  704
  758
  814
  875
  938
Maintenance CAPEX, $m
  0
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -71
New CAPEX, $m
  -28
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
Cash from investing activities, $m
  -26
  -24
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -71
  -73
  -77
  -81
  -85
  -90
Free cash flow, $m
  67
  49
  56
  64
  72
  82
  93
  105
  118
  132
  148
  163
  182
  202
  223
  246
  271
  297
  325
  355
  388
  422
  459
  498
  539
  583
  630
  680
  733
  789
  849
Issuance/(repayment) of debt, $m
  57
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  57
  60
  64
  67
  70
  74
  78
  82
  86
Issuance/(repurchase) of shares, $m
  -19
  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  
  39
  17
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  57
  60
  64
  67
  70
  74
  78
  82
  86
Total cash flow (excl. dividends), $m
  104
  67
  75
  84
  94
  105
  117
  130
  145
  161
  178
  196
  216
  238
  261
  286
  313
  341
  372
  405
  440
  477
  516
  558
  603
  650
  701
  754
  811
  871
  934
Retained Cash Flow (-), $m
  1
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
Prev. year cash balance distribution, $m
 
  151
  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
 
  211
  67
  76
  85
  96
  107
  120
  134
  150
  166
  183
  202
  223
  246
  270
  296
  324
  353
  385
  419
  455
  493
  534
  578
  624
  673
  725
  780
  838
  900
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
 
  202
  62
  66
  70
  74
  78
  81
  84
  86
  87
  87
  86
  85
  83
  79
  75
  70
  65
  59
  53
  47
  41
  35
  29
  24
  20
  16
  12
  9
  7
Current shareholders' claim on cash, %
  100
  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 (TILE)

Valuation Ratios
P/E Ratio 28.2
Price to Sales 1.6
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 16.4
Price to Free Cash Flow 23.4
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 $959 million for the last fiscal year's total revenue generated by Interface. The default revenue input number comes from 2017 income statement of Interface. 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 3.6% 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 4.3%, whose default value for TILE is calculated based on our internal credit rating of Interface, 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.
    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 32.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $576 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 3.5% for Interface.

Corporate tax rate of 27% is the nominal tax rate for Interface. 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 11%.

Life of production assets of 5.4 years is the average useful life of capital assets used in Interface 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 16.8%. 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 - $341 million for Interface - 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 58.847 million for Interface 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 at the current share price and the inputted number of shares is $1.4 billion.

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COMPANY NEWS

▶ ETFs with exposure to Interface, Inc. : December 29, 2017   [Dec-29-17 12:34PM  Capital Cube]
▶ Interface Works on a Turnaround, One Tile at a Time   [Oct-25-17 07:40PM  Motley Fool]
▶ Interface beats Street 3Q forecasts   [05:43PM  Associated Press]
▶ Interface Lauds California Carpet Recycling Bill   [Oct-17-17 10:29AM  PR Newswire]
▶ ETFs with exposure to Interface, Inc. : October 16, 2017   [Oct-16-17 10:00AM  Capital Cube]
▶ ETFs with exposure to Interface, Inc. : October 3, 2017   [Oct-03-17 11:39AM  Capital Cube]
▶ Interface Earnings: Slowly Turning the Corner   [Jul-27-17 10:50AM  Motley Fool]
▶ Interface beats 2Q profit forecasts   [12:23AM  Associated Press]
▶ Interface Declares Increased Regular Quarterly Dividend   [Jul-26-17 04:02PM  PR Newswire]
▶ ETFs with exposure to Interface, Inc. : July 4, 2017   [Jul-04-17 03:34PM  Capital Cube]
▶ ETFs with exposure to Interface, Inc. : June 22, 2017   [Jun-22-17 04:31PM  Capital Cube]
▶ Interface Earnings: It's Time to Floor It   [Apr-27-17 04:21PM  Motley Fool]
▶ Interface misses Street 1Q forecasts   [Apr-26-17 05:38PM  Associated Press]
▶ [$$] Dominus Reaps Five Times Its Money on Bentley Mills Sale to Lone Star   [Feb-09-17 01:55PM  at The Wall Street Journal]
▶ Interface Announces Restructuring Plan   [04:15PM  PR Newswire]
Financial statements of TILE
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