Intrinsic value of Trans World Entertainment - TWMC

Previous Close

$1.06

  Intrinsic Value

$0.65

stock screener

  Rating & Target

sell

-38%

Previous close

$1.06

 
Intrinsic value

$0.65

 
Up/down potential

-38%

 
Rating

sell

We calculate the intrinsic value of TWMC 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 0.0

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  452
  462
  474
  487
  502
  518
  536
  555
  576
  598
  621
  647
  673
  702
  732
  764
  798
  834
  872
  912
  955
  999
  1,046
  1,096
  1,148
  1,203
  1,261
  1,321
  1,385
  1,453
Variable operating expenses, $m
  458
  468
  480
  493
  508
  524
  542
  561
  582
  604
  621
  646
  673
  702
  732
  764
  798
  834
  872
  912
  954
  999
  1,046
  1,095
  1,148
  1,202
  1,260
  1,321
  1,385
  1,452
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
  458
  468
  480
  493
  508
  524
  542
  561
  582
  604
  621
  646
  673
  702
  732
  764
  798
  834
  872
  912
  954
  999
  1,046
  1,095
  1,148
  1,202
  1,260
  1,321
  1,385
  1,452
Operating income, $m
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  -6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
EBITDA, $m
  10
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
Interest expense (income), $m
  1
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
Earnings before tax, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
Tax expense, $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
Net income, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10

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
  253
  259
  266
  273
  281
  290
  300
  311
  322
  335
  348
  362
  377
  393
  410
  428
  447
  467
  489
  511
  535
  560
  586
  614
  643
  674
  706
  740
  776
  814
Adjusted assets (=assets-cash), $m
  253
  259
  266
  273
  281
  290
  300
  311
  322
  335
  348
  362
  377
  393
  410
  428
  447
  467
  489
  511
  535
  560
  586
  614
  643
  674
  706
  740
  776
  814
Revenue / Adjusted assets
  1.787
  1.784
  1.782
  1.784
  1.786
  1.786
  1.787
  1.785
  1.789
  1.785
  1.784
  1.787
  1.785
  1.786
  1.785
  1.785
  1.785
  1.786
  1.783
  1.785
  1.785
  1.784
  1.785
  1.785
  1.785
  1.785
  1.786
  1.785
  1.785
  1.785
Average production assets, $m
  63
  65
  66
  68
  70
  73
  75
  78
  81
  84
  87
  91
  94
  98
  103
  107
  112
  117
  122
  128
  134
  140
  146
  153
  161
  168
  176
  185
  194
  203
Working capital, $m
  50
  51
  52
  54
  55
  57
  59
  61
  63
  66
  68
  71
  74
  77
  81
  84
  88
  92
  96
  100
  105
  110
  115
  121
  126
  132
  139
  145
  152
  160
Total debt, $m
  2
  4
  6
  9
  12
  15
  19
  23
  27
  31
  36
  41
  47
  53
  59
  65
  72
  80
  87
  96
  104
  113
  123
  133
  144
  155
  167
  179
  192
  206
Total liabilities, $m
  92
  94
  97
  99
  102
  106
  109
  113
  117
  122
  127
  132
  137
  143
  149
  156
  163
  170
  178
  186
  195
  204
  213
  223
  234
  245
  257
  269
  283
  296
Total equity, $m
  161
  165
  169
  174
  179
  185
  191
  198
  205
  213
  221
  230
  240
  250
  261
  272
  284
  297
  311
  325
  340
  356
  373
  390
  409
  429
  449
  471
  494
  518
Total liabilities and equity, $m
  253
  259
  266
  273
  281
  291
  300
  311
  322
  335
  348
  362
  377
  393
  410
  428
  447
  467
  489
  511
  535
  560
  586
  613
  643
  674
  706
  740
  777
  814
Debt-to-equity ratio
  0.010
  0.020
  0.040
  0.050
  0.070
  0.080
  0.100
  0.120
  0.130
  0.150
  0.160
  0.180
  0.200
  0.210
  0.230
  0.240
  0.250
  0.270
  0.280
  0.290
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
Adjusted equity ratio
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -7
  -8
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
Depreciation, amort., depletion, $m
  16
  16
  16
  16
  17
  17
  18
  18
  18
  19
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
Funds from operations, $m
  10
  10
  10
  10
  10
  10
  11
  11
  11
  11
  11
  12
  12
  12
  13
  13
  13
  14
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
Change in working capital, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
Cash from operations, $m
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  9
  10
  10
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  13
Maintenance CAPEX, $m
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
New CAPEX, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
Cash from investing activities, $m
  -10
  -10
  -12
  -12
  -12
  -12
  -13
  -14
  -15
  -15
  -15
  -17
  -18
  -18
  -19
  -19
  -21
  -22
  -22
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
Free cash flow, $m
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
Issuance/(repayment) of debt, $m
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
Issuance/(repurchase) of shares, $m
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  10
  11
  12
  13
  13
  14
  15
  16
  18
  19
  20
  21
  23
  24
  25
  27
  29
  30
  32
  34
Cash from financing (excl. dividends), $m  
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  15
  16
  17
  19
  19
  21
  22
  23
  26
  27
  29
  30
  33
  34
  36
  38
  41
  42
  45
  48
Total cash flow (excl. dividends), $m
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Retained Cash Flow (-), $m
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -29
  -30
  -32
  -34
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
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -12
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
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  92.2
  84.7
  77.5
  70.8
  64.4
  58.5
  53.1
  48.1
  43.4
  39.2
  36.7
  34.4
  32.0
  29.8
  27.7
  25.7
  23.8
  21.9
  20.2
  18.6
  17.1
  15.7
  14.4
  13.2
  12.1
  11.0
  10.1
  9.2
  8.4
  7.6

Trans World Entertainment Corporation is a specialty retailer of entertainment products, including trend, video, music, electronics and related products. The Company operates a chain of retail entertainment stores and e-commerce sites, www.fye.com and www.secondspin.com. It owns interest in Record Town, Inc., through which its principal operations are conducted. It operates over 270 mall-based stores under the For Your Entertainment (f.y.e.) brand, including f.y.e. stores and video only stores. The Company operates over 260 mall-based f.y.e. stores, which carry entertainment products, including video, music, trend, electronics, video games and related products. It operates over nine video-only stores under the Suncoast Motion Pictures brand, which specialize in the sale of video and related product. It operates approximately 30 freestanding stores under the f.y.e. brand, which carries entertainment products, including video, music, trend, electronics, video games and related products.

FINANCIAL RATIOS  of  Trans World Entertainment (TWMC)

Valuation Ratios
P/E Ratio 12.8
Price to Sales 0.1
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 9.6
Price to Free Cash Flow -1.8
Growth Rates
Sales Growth Rate 5.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19%
Cap. Spend. - 3 Yr. Gr. Rate 25.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage -3
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1.5%
Return On Equity 1.6%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 38.2%
Gross Margin - 3 Yr. Avg. 38.4%
EBITDA Margin 1.7%
EBITDA Margin - 3 Yr. Avg. 2.3%
Operating Margin -1.1%
Oper. Margin - 3 Yr. Avg. 0.4%
Pre-Tax Margin -1.1%
Pre-Tax Margin - 3 Yr. Avg. 0.1%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 175%
Eff/ Tax Rate - 3 Yr. Avg. 58.3%
Payout Ratio 0%

TWMC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TWMC stock intrinsic value calculation we used $442.856 million for the last fiscal year's total revenue generated by Trans World Entertainment. The default revenue input number comes from 0001 income statement of Trans World Entertainment. 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 TWMC stock valuation model: a) initial revenue growth rate of 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 TWMC is calculated based on our internal credit rating of Trans World Entertainment, 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 Trans World Entertainment.
    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 TWMC stock the variable cost ratio is equal to 101.4%.

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 TWMC 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 Trans World Entertainment.

Corporate tax rate of 27% is the nominal tax rate for Trans World Entertainment. 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 TWMC 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 TWMC are equal to 14%.

Life of production assets of 6.7 years is the average useful life of capital assets used in Trans World Entertainment 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 TWMC is equal to 11%. 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 - $157.758 million for Trans World Entertainment - 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 36.213 million for Trans World Entertainment 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 Trans World Entertainment at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ FYE owner accused of deceiving customers about membership program charges   [Nov-16-18 02:42PM  American City Business Journals]
▶ Trans World gets OK from creditor to close more FYE stores   [Nov-02-18 07:41AM  American City Business Journals]
▶ Trans World Entertainment: Fiscal 2Q Earnings Snapshot   [Aug-30-18 07:49AM  Associated Press]
▶ RAD Soap signs deal with Universal Studios to make Jurassic World-branded products   [Jun-26-18 02:55PM  American City Business Journals]
▶ Sales rise at FYE corporate parent, but not enough to turn a profit   [Mar-22-18 02:09PM  American City Business Journals]
▶ Trans World Entertainment posts 4Q loss   [08:52AM  Associated Press]
▶ Trans World Entertainment Announces Holiday Sales Results   [Jan-04-18 05:00PM  GlobeNewswire]
▶ Trans World Entertainment posts 3Q loss   [Nov-21-17 07:35AM  Associated Press]
▶ Trans World Entertainment posts 2Q loss   [Aug-22-17 10:51PM  Associated Press]
▶ Trans World Entertainment posts 1Q profit   [May-22-17 07:43AM  Associated Press]
▶ Why the CEO of FYE is optimistic even as store sales fall   [Mar-16-17 02:00PM  at bizjournals.com]
▶ Why the CEO of FYE is optimistic even as store sales fall   [02:00PM  American City Business Journals]
▶ Trans World Entertainment posts 4Q profit   [07:42AM  Associated Press]
▶ Bob Higgins, chairman of Trans World Entertainment in Albany, dies   [11:51AM  American City Business Journals]
▶ Trans World Entertainment Announces Holiday Sales Results   [Jan-05-17 05:00PM  GlobeNewswire]
▶ $75 million deal gives retailer FYE a digital marketplace partner   [Oct-18-16 08:32AM  at bizjournals.com]

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