Intrinsic value of Village Super Market, Inc. - VLGEA

Previous Close

$27.91

  Intrinsic Value

$16.89

stock screener

  Rating & Target

sell

-39%

Previous close

$27.91

 
Intrinsic value

$16.89

 
Up/down potential

-39%

 
Rating

sell

We calculate the intrinsic value of VLGEA 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 0.4

 

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, %
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  1,651
  1,695
  1,744
  1,798
  1,857
  1,921
  1,991
  2,066
  2,146
  2,231
  2,323
  2,420
  2,523
  2,633
  2,749
  2,871
  3,001
  3,138
  3,283
  3,435
  3,596
  3,766
  3,945
  4,133
  4,331
  4,539
  4,759
  4,989
  5,232
  5,487
Variable operating expenses, $m
  1,609
  1,652
  1,700
  1,753
  1,810
  1,873
  1,941
  2,014
  2,092
  2,175
  2,263
  2,358
  2,458
  2,565
  2,678
  2,797
  2,924
  3,057
  3,198
  3,347
  3,504
  3,669
  3,843
  4,026
  4,219
  4,422
  4,636
  4,861
  5,097
  5,346
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
  1,609
  1,652
  1,700
  1,753
  1,810
  1,873
  1,941
  2,014
  2,092
  2,175
  2,263
  2,358
  2,458
  2,565
  2,678
  2,797
  2,924
  3,057
  3,198
  3,347
  3,504
  3,669
  3,843
  4,026
  4,219
  4,422
  4,636
  4,861
  5,097
  5,346
Operating income, $m
  41
  42
  44
  45
  47
  48
  50
  52
  54
  56
  60
  62
  65
  68
  71
  74
  77
  81
  85
  88
  93
  97
  102
  106
  111
  117
  123
  128
  135
  141
EBITDA, $m
  67
  69
  71
  73
  76
  78
  81
  84
  88
  91
  95
  99
  103
  107
  112
  117
  122
  128
  134
  140
  147
  154
  161
  169
  177
  185
  194
  204
  213
  224
Interest expense (income), $m
  4
  5
  5
  6
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  36
  38
  40
  43
Earnings before tax, $m
  37
  37
  38
  39
  40
  41
  42
  43
  45
  46
  49
  50
  52
  53
  55
  57
  59
  61
  64
  66
  69
  71
  74
  77
  80
  83
  87
  90
  94
  98
Tax expense, $m
  10
  10
  10
  11
  11
  11
  11
  12
  12
  12
  13
  14
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  27
Net income, $m
  27
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72

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
  473
  486
  500
  516
  533
  551
  571
  592
  615
  640
  666
  694
  724
  755
  788
  823
  861
  900
  941
  985
  1,031
  1,080
  1,131
  1,185
  1,242
  1,302
  1,365
  1,431
  1,500
  1,574
Adjusted assets (=assets-cash), $m
  473
  486
  500
  516
  533
  551
  571
  592
  615
  640
  666
  694
  724
  755
  788
  823
  861
  900
  941
  985
  1,031
  1,080
  1,131
  1,185
  1,242
  1,302
  1,365
  1,431
  1,500
  1,574
Revenue / Adjusted assets
  3.490
  3.488
  3.488
  3.484
  3.484
  3.486
  3.487
  3.490
  3.489
  3.486
  3.488
  3.487
  3.485
  3.487
  3.489
  3.488
  3.485
  3.487
  3.489
  3.487
  3.488
  3.487
  3.488
  3.488
  3.487
  3.486
  3.486
  3.486
  3.488
  3.486
Average production assets, $m
  221
  227
  234
  241
  249
  257
  267
  277
  288
  299
  311
  324
  338
  353
  368
  385
  402
  421
  440
  460
  482
  505
  529
  554
  580
  608
  638
  669
  701
  735
Working capital, $m
  -31
  -32
  -33
  -34
  -35
  -37
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -62
  -65
  -68
  -72
  -75
  -79
  -82
  -86
  -90
  -95
  -99
  -104
Total debt, $m
  53
  58
  64
  69
  76
  83
  91
  99
  108
  117
  127
  138
  149
  161
  174
  188
  202
  217
  233
  250
  268
  286
  306
  327
  348
  371
  396
  421
  448
  476
Total liabilities, $m
  182
  187
  192
  198
  204
  212
  219
  227
  236
  246
  256
  266
  278
  290
  303
  316
  330
  346
  362
  378
  396
  415
  434
  455
  477
  500
  524
  549
  576
  604
Total equity, $m
  292
  299
  308
  318
  328
  339
  352
  365
  379
  394
  410
  428
  446
  465
  486
  507
  530
  554
  580
  607
  635
  665
  697
  730
  765
  802
  841
  881
  924
  969
Total liabilities and equity, $m
  474
  486
  500
  516
  532
  551
  571
  592
  615
  640
  666
  694
  724
  755
  789
  823
  860
  900
  942
  985
  1,031
  1,080
  1,131
  1,185
  1,242
  1,302
  1,365
  1,430
  1,500
  1,573
Debt-to-equity ratio
  0.180
  0.190
  0.210
  0.220
  0.230
  0.240
  0.260
  0.270
  0.280
  0.300
  0.310
  0.320
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.490
Adjusted equity ratio
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616
  0.616

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  27
  27
  28
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  63
  66
  69
  72
Depreciation, amort., depletion, $m
  26
  27
  27
  28
  29
  30
  31
  32
  34
  35
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  83
Funds from operations, $m
  53
  54
  55
  57
  58
  60
  62
  64
  66
  68
  70
  73
  76
  79
  82
  85
  88
  92
  96
  100
  104
  109
  113
  118
  124
  129
  135
  141
  148
  154
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
Cash from operations, $m
  53
  55
  56
  58
  59
  61
  63
  65
  68
  70
  72
  75
  78
  81
  84
  87
  91
  95
  99
  103
  107
  112
  117
  122
  127
  133
  139
  146
  152
  159
Maintenance CAPEX, $m
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
New CAPEX, $m
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
Cash from investing activities, $m
  -30
  -31
  -33
  -33
  -35
  -37
  -38
  -40
  -42
  -43
  -46
  -48
  -50
  -53
  -56
  -57
  -60
  -63
  -66
  -69
  -74
  -77
  -81
  -84
  -89
  -93
  -97
  -103
  -108
  -113
Free cash flow, $m
  24
  24
  24
  24
  24
  25
  25
  25
  26
  26
  26
  27
  27
  28
  29
  29
  30
  31
  32
  33
  34
  35
  36
  37
  39
  40
  41
  43
  45
  46
Issuance/(repayment) of debt, $m
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
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  
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
Total cash flow (excl. dividends), $m
  28
  29
  30
  30
  31
  32
  33
  34
  35
  36
  36
  38
  39
  40
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  68
  71
  74
Retained Cash Flow (-), $m
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
Prev. year cash balance distribution, $m
  18
  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
  39
  21
  21
  21
  20
  20
  20
  20
  20
  20
  20
  20
  21
  21
  21
  21
  22
  22
  22
  23
  23
  24
  24
  25
  26
  26
  27
  28
  28
  29
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
  38
  19
  18
  17
  16
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
  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
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Village Super Market, Inc. (Village) is engaged in retail sale of food and nonfood products. As of July 30, 2016, the Company operated a chain of 29 ShopRite supermarkets, 18 of which are located in northern New Jersey, eight in southern New Jersey, two in Maryland and one in northeastern Pennsylvania. The Company is a member of Wakefern Food Corporation (Wakefern), which is a retailer-owned food cooperative and owner of the ShopRite name. As of July 30, 2016, Wakefern operated 336 supermarkets and other retail formats, including 94 stores operated by Wakefern. The Company's stores include the Village Food Garden concept, featuring a restaurant style kitchen and several kiosks offering a variety of store prepared specialty foods for both take-home and in-store dining. The Company offers a range of products, including groceries, dairy and frozen, produce, meats, non-foods, deli and prepared food, pharmacy, seafood, bakery and liquor.

FINANCIAL RATIOS  of  Village Super Market, Inc. (VLGEA)

Valuation Ratios
P/E Ratio 17.5
Price to Sales 0.3
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 22.3
Growth Rates
Sales Growth Rate -1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 40%
Cap. Spend. - 3 Yr. Gr. Rate -10.9%
Financial Strength
Quick Ratio 87
Current Ratio 0.2
LT Debt to Equity 15%
Total Debt to Equity 15.3%
Interest Coverage 11
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.7%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 10.2%
Asset Turnover 3.5
Profitability Ratios
Gross Margin 27.2%
Gross Margin - 3 Yr. Avg. 27.3%
EBITDA Margin 4.2%
EBITDA Margin - 3 Yr. Avg. 4.3%
Operating Margin 2.6%
Oper. Margin - 3 Yr. Avg. 2.7%
Pre-Tax Margin 2.4%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 41%
Eff/ Tax Rate - 3 Yr. Avg. 35.3%
Payout Ratio 56.5%

VLGEA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VLGEA stock intrinsic value calculation we used $1612 million for the last fiscal year's total revenue generated by Village Super Market, Inc.. The default revenue input number comes from 0001 income statement of Village Super Market, 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 VLGEA stock valuation model: a) initial revenue growth rate of 2.4% 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 VLGEA is calculated based on our internal credit rating of Village Super Market, 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 Village Super Market, 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 VLGEA stock the variable cost ratio is equal to 97.5%.

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 VLGEA 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 9.6% for Village Super Market, Inc..

Corporate tax rate of 27% is the nominal tax rate for Village Super Market, 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 VLGEA 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 VLGEA are equal to 13.4%.

Life of production assets of 8.9 years is the average useful life of capital assets used in Village Super Market, 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 VLGEA is equal to -1.9%. 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 - $303.145 million for Village Super Market, 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 14.362 million for Village Super Market, 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 Village Super Market, Inc. at the current share price and the inputted number of shares is $0.4 billion.

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