Intrinsic value of Tractor Supply Company - TSCO

Previous Close

$106.14

  Intrinsic Value

$71.28

stock screener

  Rating & Target

sell

-33%

Previous close

$106.14

 
Intrinsic value

$71.28

 
Up/down potential

-33%

 
Rating

sell

We calculate the intrinsic value of TSCO 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 12.9

 

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, %
  9.20
  8.78
  8.40
  8.06
  7.76
  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
  5.34
  5.30
  5.27
  5.24
  5.22
  5.20
Revenue, $m
  8,639
  9,397
  10,187
  11,008
  11,862
  12,749
  13,671
  14,629
  15,625
  16,661
  17,738
  18,859
  20,025
  21,240
  22,506
  23,826
  25,203
  26,640
  28,140
  29,706
  31,343
  33,054
  34,844
  36,716
  38,674
  40,725
  42,872
  45,120
  47,475
  49,943
Variable operating expenses, $m
  7,817
  8,502
  9,216
  9,957
  10,729
  11,530
  12,363
  13,229
  14,129
  15,064
  16,025
  17,037
  18,091
  19,189
  20,333
  21,525
  22,769
  24,067
  25,422
  26,838
  28,316
  29,862
  31,479
  33,170
  34,940
  36,792
  38,732
  40,763
  42,890
  45,120
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
  7,817
  8,502
  9,216
  9,957
  10,729
  11,530
  12,363
  13,229
  14,129
  15,064
  16,025
  17,037
  18,091
  19,189
  20,333
  21,525
  22,769
  24,067
  25,422
  26,838
  28,316
  29,862
  31,479
  33,170
  34,940
  36,792
  38,732
  40,763
  42,890
  45,120
Operating income, $m
  822
  895
  971
  1,051
  1,133
  1,219
  1,308
  1,400
  1,496
  1,596
  1,713
  1,821
  1,934
  2,051
  2,173
  2,301
  2,434
  2,573
  2,717
  2,869
  3,027
  3,192
  3,365
  3,546
  3,735
  3,933
  4,140
  4,357
  4,585
  4,823
EBITDA, $m
  1,020
  1,109
  1,202
  1,299
  1,400
  1,505
  1,614
  1,727
  1,844
  1,967
  2,094
  2,226
  2,364
  2,507
  2,657
  2,812
  2,975
  3,144
  3,322
  3,506
  3,700
  3,902
  4,113
  4,334
  4,565
  4,807
  5,060
  5,326
  5,604
  5,895
Interest expense (income), $m
  6
  24
  31
  39
  47
  56
  65
  74
  84
  94
  104
  115
  126
  138
  150
  162
  176
  189
  204
  219
  234
  251
  268
  285
  304
  324
  344
  365
  388
  411
  435
Earnings before tax, $m
  798
  864
  932
  1,003
  1,077
  1,154
  1,234
  1,317
  1,403
  1,492
  1,598
  1,695
  1,796
  1,901
  2,011
  2,125
  2,244
  2,369
  2,499
  2,634
  2,776
  2,924
  3,079
  3,242
  3,411
  3,589
  3,775
  3,970
  4,174
  4,387
Tax expense, $m
  215
  233
  252
  271
  291
  312
  333
  355
  379
  403
  431
  458
  485
  513
  543
  574
  606
  640
  675
  711
  750
  790
  831
  875
  921
  969
  1,019
  1,072
  1,127
  1,185
Net income, $m
  583
  630
  680
  732
  786
  842
  901
  961
  1,024
  1,089
  1,167
  1,237
  1,311
  1,388
  1,468
  1,551
  1,638
  1,729
  1,824
  1,923
  2,027
  2,135
  2,248
  2,366
  2,490
  2,620
  2,756
  2,898
  3,047
  3,203

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
  3,369
  3,665
  3,973
  4,293
  4,626
  4,972
  5,332
  5,706
  6,094
  6,498
  6,918
  7,355
  7,810
  8,284
  8,778
  9,293
  9,830
  10,390
  10,975
  11,586
  12,224
  12,892
  13,590
  14,320
  15,084
  15,883
  16,721
  17,597
  18,516
  19,478
Adjusted assets (=assets-cash), $m
  3,369
  3,665
  3,973
  4,293
  4,626
  4,972
  5,332
  5,706
  6,094
  6,498
  6,918
  7,355
  7,810
  8,284
  8,778
  9,293
  9,830
  10,390
  10,975
  11,586
  12,224
  12,892
  13,590
  14,320
  15,084
  15,883
  16,721
  17,597
  18,516
  19,478
Revenue / Adjusted assets
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
  2.564
Average production assets, $m
  1,261
  1,372
  1,487
  1,607
  1,732
  1,861
  1,996
  2,136
  2,281
  2,432
  2,590
  2,753
  2,924
  3,101
  3,286
  3,479
  3,680
  3,889
  4,108
  4,337
  4,576
  4,826
  5,087
  5,360
  5,646
  5,946
  6,259
  6,588
  6,931
  7,292
Working capital, $m
  873
  949
  1,029
  1,112
  1,198
  1,288
  1,381
  1,478
  1,578
  1,683
  1,792
  1,905
  2,023
  2,145
  2,273
  2,406
  2,545
  2,691
  2,842
  3,000
  3,166
  3,338
  3,519
  3,708
  3,906
  4,113
  4,330
  4,557
  4,795
  5,044
Total debt, $m
  581
  727
  880
  1,038
  1,202
  1,373
  1,551
  1,735
  1,927
  2,127
  2,334
  2,550
  2,775
  3,009
  3,253
  3,507
  3,773
  4,049
  4,338
  4,640
  4,956
  5,285
  5,630
  5,991
  6,368
  6,763
  7,177
  7,610
  8,064
  8,539
Total liabilities, $m
  1,664
  1,811
  1,963
  2,121
  2,285
  2,456
  2,634
  2,819
  3,010
  3,210
  3,418
  3,633
  3,858
  4,092
  4,336
  4,591
  4,856
  5,133
  5,422
  5,723
  6,039
  6,369
  6,713
  7,074
  7,451
  7,846
  8,260
  8,693
  9,147
  9,622
Total equity, $m
  1,705
  1,855
  2,010
  2,172
  2,341
  2,516
  2,698
  2,887
  3,084
  3,288
  3,501
  3,722
  3,952
  4,192
  4,442
  4,702
  4,974
  5,257
  5,553
  5,862
  6,186
  6,523
  6,876
  7,246
  7,632
  8,037
  8,461
  8,904
  9,369
  9,856
Total liabilities and equity, $m
  3,369
  3,666
  3,973
  4,293
  4,626
  4,972
  5,332
  5,706
  6,094
  6,498
  6,919
  7,355
  7,810
  8,284
  8,778
  9,293
  9,830
  10,390
  10,975
  11,585
  12,225
  12,892
  13,589
  14,320
  15,083
  15,883
  16,721
  17,597
  18,516
  19,478
Debt-to-equity ratio
  0.340
  0.390
  0.440
  0.480
  0.510
  0.550
  0.570
  0.600
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
  0.730
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.850
  0.850
  0.860
  0.870
Adjusted equity ratio
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  583
  630
  680
  732
  786
  842
  901
  961
  1,024
  1,089
  1,167
  1,237
  1,311
  1,388
  1,468
  1,551
  1,638
  1,729
  1,824
  1,923
  2,027
  2,135
  2,248
  2,366
  2,490
  2,620
  2,756
  2,898
  3,047
  3,203
Depreciation, amort., depletion, $m
  198
  214
  231
  249
  267
  286
  306
  327
  348
  370
  381
  405
  430
  456
  483
  512
  541
  572
  604
  638
  673
  710
  748
  788
  830
  874
  920
  969
  1,019
  1,072
Funds from operations, $m
  780
  845
  912
  981
  1,053
  1,128
  1,206
  1,288
  1,372
  1,460
  1,547
  1,642
  1,741
  1,844
  1,951
  2,063
  2,180
  2,301
  2,428
  2,561
  2,700
  2,844
  2,996
  3,155
  3,321
  3,494
  3,676
  3,867
  4,066
  4,275
Change in working capital, $m
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  109
  113
  118
  123
  128
  133
  139
  145
  151
  158
  165
  173
  181
  189
  198
  207
  217
  227
  238
  249
Cash from operations, $m
  707
  768
  832
  898
  967
  1,039
  1,113
  1,191
  1,271
  1,355
  1,439
  1,529
  1,623
  1,721
  1,823
  1,930
  2,040
  2,156
  2,277
  2,403
  2,534
  2,672
  2,815
  2,966
  3,123
  3,287
  3,459
  3,639
  3,828
  4,026
Maintenance CAPEX, $m
  -169
  -185
  -202
  -219
  -236
  -255
  -274
  -294
  -314
  -335
  -358
  -381
  -405
  -430
  -456
  -483
  -512
  -541
  -572
  -604
  -638
  -673
  -710
  -748
  -788
  -830
  -874
  -920
  -969
  -1,019
New CAPEX, $m
  -110
  -111
  -115
  -120
  -125
  -130
  -135
  -140
  -145
  -151
  -157
  -164
  -170
  -177
  -185
  -193
  -201
  -210
  -219
  -229
  -239
  -250
  -261
  -273
  -286
  -299
  -313
  -328
  -344
  -360
Cash from investing activities, $m
  -279
  -296
  -317
  -339
  -361
  -385
  -409
  -434
  -459
  -486
  -515
  -545
  -575
  -607
  -641
  -676
  -713
  -751
  -791
  -833
  -877
  -923
  -971
  -1,021
  -1,074
  -1,129
  -1,187
  -1,248
  -1,313
  -1,379
Free cash flow, $m
  428
  472
  515
  559
  606
  655
  705
  757
  812
  868
  924
  985
  1,048
  1,114
  1,182
  1,254
  1,328
  1,405
  1,486
  1,570
  1,657
  1,749
  1,844
  1,944
  2,048
  2,157
  2,271
  2,391
  2,516
  2,646
Issuance/(repayment) of debt, $m
  141
  146
  152
  158
  164
  171
  178
  185
  192
  200
  208
  216
  225
  234
  244
  254
  265
  277
  289
  302
  315
  330
  345
  361
  377
  395
  414
  433
  454
  475
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  
  141
  146
  152
  158
  164
  171
  178
  185
  192
  200
  208
  216
  225
  234
  244
  254
  265
  277
  289
  302
  315
  330
  345
  361
  377
  395
  414
  433
  454
  475
Total cash flow (excl. dividends), $m
  569
  618
  667
  718
  771
  826
  883
  942
  1,004
  1,068
  1,131
  1,201
  1,273
  1,348
  1,426
  1,508
  1,593
  1,682
  1,775
  1,872
  1,973
  2,079
  2,189
  2,305
  2,426
  2,552
  2,685
  2,824
  2,969
  3,122
Retained Cash Flow (-), $m
  -143
  -150
  -156
  -162
  -168
  -175
  -182
  -189
  -197
  -204
  -213
  -221
  -230
  -240
  -250
  -260
  -272
  -284
  -296
  -309
  -323
  -338
  -353
  -369
  -387
  -405
  -424
  -444
  -465
  -487
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
  426
  468
  511
  556
  602
  650
  701
  753
  807
  863
  919
  979
  1,043
  1,108
  1,176
  1,248
  1,321
  1,398
  1,479
  1,562
  1,650
  1,741
  1,836
  1,935
  2,039
  2,148
  2,261
  2,380
  2,505
  2,635
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
  408
  429
  445
  458
  467
  472
  473
  471
  464
  453
  436
  418
  396
  372
  345
  317
  288
  258
  228
  199
  171
  144
  120
  99
  79
  63
  49
  37
  27
  20
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

Tractor Supply Company is an operator of rural lifestyle retail stores in the United States. The Company is focused on supplying the needs of recreational farmers and ranchers and others, as well as tradesmen and small businesses. It is engaged in the retail sale of products that support the rural lifestyle. The Company operates retail stores under the names Tractor Supply Company, Del's Feed & Farm Supply and Petsense, and operates Websites under the names TractorSupply.com and Petsense.com. The Company's selection of merchandise consists of various product categories, including equine, livestock, pet and small animal products; hardware, truck, towing and tool products; seasonal products, including heating, lawn and garden items, power equipment, gifts and toys; work/recreational clothing and footwear, and maintenance products for agricultural and rural use. Its brands include 4health, JobSmart, Bit & Bridle, Paws & Claws, Blue Mountain, Redstone, Dumor, Equistages and Royal Wing.

FINANCIAL RATIOS  of  Tractor Supply Company (TSCO)

Valuation Ratios
P/E Ratio 31.8
Price to Sales 2
Price to Book 9.6
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 33.6
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.6%
Cap. Spend. - 3 Yr. Gr. Rate 0.7%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 20%
Total Debt to Equity 20.7%
Interest Coverage 116
Management Effectiveness
Return On Assets 17.5%
Ret/ On Assets - 3 Yr. Avg. 18.3%
Return On Total Capital 26.4%
Ret/ On T. Cap. - 3 Yr. Avg. 28.1%
Return On Equity 30.7%
Return On Equity - 3 Yr. Avg. 30.1%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 34.3%
Gross Margin - 3 Yr. Avg. 34.3%
EBITDA Margin 12.3%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin 10.2%
Oper. Margin - 3 Yr. Avg. 10.3%
Pre-Tax Margin 10.1%
Pre-Tax Margin - 3 Yr. Avg. 10.3%
Net Profit Margin 6.4%
Net Profit Margin - 3 Yr. Avg. 6.5%
Effective Tax Rate 36.5%
Eff/ Tax Rate - 3 Yr. Avg. 36.7%
Payout Ratio 27.9%

TSCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TSCO stock intrinsic value calculation we used $7911 million for the last fiscal year's total revenue generated by Tractor Supply Company. The default revenue input number comes from 0001 income statement of Tractor Supply Company. 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 TSCO stock valuation model: a) initial revenue growth rate of 9.2% 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 4.3%, whose default value for TSCO is calculated based on our internal credit rating of Tractor Supply Company, 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 Tractor Supply Company.
    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 TSCO stock the variable cost ratio is equal to 90.5%.

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 TSCO 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 Tractor Supply Company.

Corporate tax rate of 27% is the nominal tax rate for Tractor Supply Company. 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 TSCO 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 TSCO are equal to 14.6%.

Life of production assets of 6.8 years is the average useful life of capital assets used in Tractor Supply Company 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 TSCO is equal to 10.1%. 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 - $1561.82 million for Tractor Supply Company - 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 121.283 million for Tractor Supply Company 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 Tractor Supply Company at the current share price and the inputted number of shares is $12.9 billion.

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