Intrinsic value of Tile Shop Holdings - TTS

Previous Close

$6.02

  Intrinsic Value

$4.52

stock screener

  Rating & Target

sell

-25%

Previous close

$6.02

 
Intrinsic value

$4.52

 
Up/down potential

-25%

 
Rating

sell

We calculate the intrinsic value of TTS 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, %
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  358
  372
  388
  404
  421
  440
  459
  480
  501
  524
  548
  574
  601
  629
  659
  690
  724
  758
  795
  834
  874
  917
  962
  1,009
  1,059
  1,111
  1,165
  1,223
  1,283
  1,347
Variable operating expenses, $m
  322
  335
  349
  363
  379
  395
  413
  431
  451
  471
  493
  516
  540
  566
  592
  621
  651
  682
  715
  749
  786
  824
  865
  907
  952
  998
  1,048
  1,099
  1,154
  1,211
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
  322
  335
  349
  363
  379
  395
  413
  431
  451
  471
  493
  516
  540
  566
  592
  621
  651
  682
  715
  749
  786
  824
  865
  907
  952
  998
  1,048
  1,099
  1,154
  1,211
Operating income, $m
  36
  38
  39
  41
  43
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
  93
  97
  102
  107
  112
  118
  124
  130
  136
EBITDA, $m
  63
  66
  69
  71
  74
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  122
  128
  134
  141
  147
  154
  162
  170
  178
  187
  196
  206
  216
  227
  238
Interest expense (income), $m
  0
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
Earnings before tax, $m
  34
  35
  37
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  66
  68
  71
  75
  78
  81
  85
  89
  93
  97
  102
  106
  111
Tax expense, $m
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Net income, $m
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81

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
  281
  292
  304
  317
  331
  345
  360
  376
  393
  411
  430
  450
  472
  494
  517
  542
  568
  595
  624
  654
  686
  720
  755
  792
  831
  872
  915
  960
  1,007
  1,057
Adjusted assets (=assets-cash), $m
  281
  292
  304
  317
  331
  345
  360
  376
  393
  411
  430
  450
  472
  494
  517
  542
  568
  595
  624
  654
  686
  720
  755
  792
  831
  872
  915
  960
  1,007
  1,057
Revenue / Adjusted assets
  1.274
  1.274
  1.276
  1.274
  1.272
  1.275
  1.275
  1.277
  1.275
  1.275
  1.274
  1.276
  1.273
  1.273
  1.275
  1.273
  1.275
  1.274
  1.274
  1.275
  1.274
  1.274
  1.274
  1.274
  1.274
  1.274
  1.273
  1.274
  1.274
  1.274
Average production assets, $m
  152
  158
  164
  171
  179
  186
  195
  203
  213
  222
  233
  243
  255
  267
  279
  293
  307
  322
  337
  353
  371
  389
  408
  428
  449
  471
  494
  518
  544
  571
Working capital, $m
  47
  48
  50
  53
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  103
  108
  114
  119
  125
  131
  138
  144
  151
  159
  167
  175
Total debt, $m
  33
  38
  43
  49
  56
  63
  70
  77
  85
  94
  103
  112
  122
  132
  143
  155
  167
  180
  193
  208
  223
  238
  255
  272
  290
  310
  330
  351
  373
  397
Total liabilities, $m
  132
  137
  143
  149
  155
  162
  169
  177
  185
  193
  202
  211
  221
  232
  243
  254
  266
  279
  293
  307
  322
  338
  354
  371
  390
  409
  429
  450
  472
  496
Total equity, $m
  149
  155
  162
  168
  176
  183
  191
  200
  209
  218
  229
  239
  250
  262
  275
  288
  302
  316
  331
  347
  364
  382
  401
  421
  441
  463
  486
  510
  535
  561
Total liabilities and equity, $m
  281
  292
  305
  317
  331
  345
  360
  377
  394
  411
  431
  450
  471
  494
  518
  542
  568
  595
  624
  654
  686
  720
  755
  792
  831
  872
  915
  960
  1,007
  1,057
Debt-to-equity ratio
  0.220
  0.240
  0.270
  0.290
  0.320
  0.340
  0.360
  0.390
  0.410
  0.430
  0.450
  0.470
  0.490
  0.500
  0.520
  0.540
  0.550
  0.570
  0.580
  0.600
  0.610
  0.620
  0.640
  0.650
  0.660
  0.670
  0.680
  0.690
  0.700
  0.710
Adjusted equity ratio
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  81
Depreciation, amort., depletion, $m
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  43
  45
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  93
  97
  102
Funds from operations, $m
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  126
  132
  139
  145
  152
  159
  167
  175
  183
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
  78
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  126
  132
  139
  145
  152
  159
  167
  175
Maintenance CAPEX, $m
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -93
  -97
New CAPEX, $m
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
Cash from investing activities, $m
  -32
  -33
  -34
  -36
  -38
  -40
  -41
  -44
  -45
  -48
  -50
  -53
  -54
  -57
  -61
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -93
  -97
  -102
  -107
  -112
  -119
  -124
Free cash flow, $m
  19
  19
  19
  20
  20
  21
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
Issuance/(repayment) of debt, $m
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
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  
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Total cash flow (excl. dividends), $m
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
Retained Cash Flow (-), $m
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
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
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  25
  26
  26
  27
  28
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
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
  18
  17
  16
  16
  15
  15
  14
  13
  13
  12
  11
  10
  9
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  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

Tile Shop Holdings, Inc. operates as a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the United States. It offers approximately 4,000 products, including ceramic, porcelain, glass, cement, wood look, and metal tiles; and marble, granite, quartz, sandstone, travertine, slate, and onyx tiles primarily under the Rush River and Fired Earth brand names. The company also manufactures setting and maintenance materials, such as thinset, grout, and sealers under the Superior brand name. As of February 24, 2017, it operated 124 stores in 31 states with an average size of 21,200 square feet. The company also sells its products through its Website, tileshop.com. Tile Shop Holdings, Inc. was founded in 1985 and is headquartered in Plymouth, Minnesota.

FINANCIAL RATIOS  of  Tile Shop Holdings (TTS)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

TTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TTS stock intrinsic value calculation we used $344.6 million for the last fiscal year's total revenue generated by Tile Shop Holdings. The default revenue input number comes from 0001 income statement of Tile Shop Holdings. 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 TTS stock valuation model: a) initial revenue growth rate of 3.9% 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 TTS is calculated based on our internal credit rating of Tile Shop Holdings, 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 Tile Shop Holdings.
    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 TTS stock the variable cost ratio is equal to 89.9%.

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 TTS 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 6.6% for Tile Shop Holdings.

Corporate tax rate of 27% is the nominal tax rate for Tile Shop Holdings. 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 TTS 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 TTS are equal to 42.4%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Tile Shop Holdings 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 TTS is equal to 13%. 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 - $143.874 million for Tile Shop Holdings - 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 52.705 million for Tile Shop Holdings 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 Tile Shop Holdings at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ Tariff talk torpedoes Tile Shop's earnings day   [08:12AM  American City Business Journals]
▶ 2 Stocks Fall Thursday   [05:18PM  GuruFocus.com]
▶ Tile Shop: 3Q Earnings Snapshot   [07:18AM  Associated Press]
▶ 5 Stocks With Falling Prices and Growing Yields   [Sep-25-18 04:50PM  GuruFocus.com]
▶ Tile Shop Holdings Gets Up Off the Floor   [Jul-23-18 09:20PM  Motley Fool]
▶ Tile Shop: 2Q Earnings Snapshot   [07:16AM  Associated Press]
▶ Tile Shop: 1Q Earnings Snapshot   [07:30AM  Associated Press]
▶ Why Tile Shop Holdings, Inc. Stock Fell 10% Today   [Feb-22-18 05:12PM  Motley Fool]
▶ Tile Shop reports 4Q loss   [07:51AM  Associated Press]
▶ 3 Stocks That Could Put Alibaba's Returns to Shame   [Dec-21-17 06:00AM  Motley Fool]
▶ 3 Worst Performing Stocks in October   [Nov-01-17 11:06AM  Motley Fool]
▶ Chris Homeister resigns as CEO of Tile Shop Holdings Inc.   [Oct-31-17 05:45PM  American City Business Journals]
▶ Top 3 Stocks for Retirees to Consider   [Oct-30-17 06:13PM  Motley Fool]
▶ The Tile Shop Announces CEO Leadership Change   [Oct-27-17 08:00AM  GlobeNewswire]

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