Intrinsic value of Vera Bradley - VRA

Previous Close

$10.22

  Intrinsic Value

$5.48

stock screener

  Rating & Target

sell

-46%

Previous close

$10.22

 
Intrinsic value

$5.48

 
Up/down potential

-46%

 
Rating

sell

We calculate the intrinsic value of VRA 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, %
  2.00
  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
  464
  474
  487
  500
  515
  532
  550
  570
  591
  614
  638
  664
  691
  721
  752
  785
  820
  856
  895
  937
  980
  1,026
  1,074
  1,125
  1,178
  1,235
  1,294
  1,357
  1,422
  1,491
Variable operating expenses, $m
  279
  286
  293
  301
  310
  320
  331
  343
  356
  369
  384
  400
  416
  434
  453
  472
  493
  516
  539
  564
  590
  617
  647
  677
  709
  743
  779
  817
  856
  898
Fixed operating expenses, $m
  175
  179
  183
  187
  191
  195
  199
  204
  208
  213
  217
  222
  227
  232
  237
  242
  248
  253
  259
  264
  270
  276
  282
  288
  295
  301
  308
  315
  321
  328
Total operating expenses, $m
  454
  465
  476
  488
  501
  515
  530
  547
  564
  582
  601
  622
  643
  666
  690
  714
  741
  769
  798
  828
  860
  893
  929
  965
  1,004
  1,044
  1,087
  1,132
  1,177
  1,226
Operating income, $m
  10
  10
  11
  13
  14
  17
  20
  23
  27
  32
  37
  42
  48
  55
  62
  70
  79
  88
  98
  108
  120
  132
  145
  159
  174
  190
  207
  225
  245
  265
EBITDA, $m
  29
  30
  31
  33
  36
  39
  43
  47
  52
  57
  63
  70
  77
  85
  93
  103
  113
  123
  135
  147
  161
  175
  190
  206
  223
  241
  261
  282
  304
  327
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
Earnings before tax, $m
  10
  10
  11
  12
  14
  16
  19
  23
  26
  31
  35
  41
  47
  53
  60
  68
  76
  85
  95
  105
  116
  128
  141
  155
  169
  185
  201
  219
  238
  258
Tax expense, $m
  3
  3
  3
  3
  4
  4
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  21
  23
  26
  28
  31
  35
  38
  42
  46
  50
  54
  59
  64
  70
Net income, $m
  7
  7
  8
  9
  10
  12
  14
  16
  19
  22
  26
  30
  34
  39
  44
  49
  56
  62
  69
  77
  85
  94
  103
  113
  123
  135
  147
  160
  173
  188

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
  273
  280
  287
  295
  304
  314
  324
  336
  348
  362
  376
  391
  407
  425
  443
  462
  483
  505
  528
  552
  577
  604
  633
  663
  694
  728
  763
  799
  838
  879
Adjusted assets (=assets-cash), $m
  273
  280
  287
  295
  304
  314
  324
  336
  348
  362
  376
  391
  407
  425
  443
  462
  483
  505
  528
  552
  577
  604
  633
  663
  694
  728
  763
  799
  838
  879
Revenue / Adjusted assets
  1.700
  1.693
  1.697
  1.695
  1.694
  1.694
  1.698
  1.696
  1.698
  1.696
  1.697
  1.698
  1.698
  1.696
  1.698
  1.699
  1.698
  1.695
  1.695
  1.697
  1.698
  1.699
  1.697
  1.697
  1.697
  1.696
  1.696
  1.698
  1.697
  1.696
Average production assets, $m
  96
  98
  101
  104
  107
  110
  114
  118
  122
  127
  132
  137
  143
  149
  156
  162
  170
  177
  185
  194
  203
  212
  222
  233
  244
  256
  268
  281
  294
  309
Working capital, $m
  80
  82
  84
  87
  89
  92
  95
  99
  102
  106
  110
  115
  120
  125
  130
  136
  142
  148
  155
  162
  170
  177
  186
  195
  204
  214
  224
  235
  246
  258
Total debt, $m
  1
  3
  5
  7
  9
  11
  14
  17
  20
  23
  26
  30
  34
  38
  43
  47
  52
  58
  63
  69
  76
  82
  89
  96
  104
  112
  121
  130
  139
  149
Total liabilities, $m
  67
  68
  70
  72
  74
  77
  79
  82
  85
  88
  92
  95
  99
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  162
  169
  178
  186
  195
  204
  214
Total equity, $m
  207
  211
  217
  223
  230
  237
  245
  254
  263
  273
  284
  296
  308
  321
  335
  350
  365
  382
  399
  417
  437
  457
  478
  501
  525
  550
  577
  604
  634
  664
Total liabilities and equity, $m
  274
  279
  287
  295
  304
  314
  324
  336
  348
  361
  376
  391
  407
  425
  443
  463
  483
  505
  528
  552
  578
  604
  632
  663
  694
  728
  763
  799
  838
  878
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
Adjusted equity ratio
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756
  0.756

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  7
  8
  9
  10
  12
  14
  16
  19
  22
  26
  30
  34
  39
  44
  49
  56
  62
  69
  77
  85
  94
  103
  113
  123
  135
  147
  160
  173
  188
Depreciation, amort., depletion, $m
  19
  20
  20
  21
  21
  22
  23
  24
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
  41
  42
  44
  47
  49
  51
  54
  56
  59
  62
Funds from operations, $m
  26
  27
  28
  30
  32
  34
  37
  40
  44
  48
  52
  57
  63
  69
  75
  82
  89
  98
  106
  115
  125
  136
  147
  159
  172
  186
  201
  216
  232
  250
Change in working capital, $m
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Cash from operations, $m
  25
  25
  26
  27
  29
  31
  34
  37
  40
  44
  48
  53
  58
  64
  70
  76
  83
  91
  99
  108
  118
  128
  139
  151
  163
  176
  190
  205
  221
  238
Maintenance CAPEX, $m
  -19
  -19
  -20
  -20
  -21
  -21
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -42
  -44
  -47
  -49
  -51
  -54
  -56
  -59
New CAPEX, $m
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Cash from investing activities, $m
  -21
  -21
  -23
  -23
  -24
  -24
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -39
  -42
  -43
  -46
  -48
  -50
  -52
  -55
  -58
  -61
  -63
  -67
  -70
  -73
Free cash flow, $m
  4
  4
  4
  4
  5
  6
  8
  10
  12
  15
  18
  21
  25
  29
  33
  38
  44
  50
  56
  63
  70
  78
  87
  96
  105
  116
  127
  139
  151
  165
Issuance/(repayment) of debt, $m
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
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  
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
Total cash flow (excl. dividends), $m
  5
  5
  6
  6
  7
  9
  11
  13
  15
  18
  21
  25
  29
  33
  38
  43
  49
  55
  62
  69
  76
  85
  93
  103
  113
  124
  135
  148
  161
  175
Retained Cash Flow (-), $m
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -28
  -29
  -31
Prev. year cash balance distribution, $m
  83
  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
  84
  1
  0
  0
  1
  1
  2
  4
  6
  8
  10
  13
  16
  20
  24
  28
  33
  38
  44
  50
  57
  64
  72
  80
  89
  99
  109
  120
  131
  144
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
  81
  1
  0
  0
  0
  1
  2
  2
  3
  4
  5
  6
  6
  7
  7
  7
  7
  7
  7
  6
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
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

Vera Bradley, Inc. (Vera Bradley) is a designer of women's handbags, accessories, luggage and travel items, eyewear, and stationery and gifts. The Company's segments include Direct and Indirect. The Company offers various products, including bags, travel, home and accessories. Its accessories include fashion accessories, such as wallets, eyeglass cases, jewelry, and scarves and various technology accessories. The Direct business consists of sales of Vera Bradley products through factory outlet stores in the United States, verabradley.com, direct-to-consumer eBay sales and its annual outlet sale in Fort Wayne, Indiana. As of January 28, 2017, the Indirect business consisted of sales of Vera Bradley products to approximately 2,600 specialty retail locations, substantially all of which were located in the United States, as well as department stores, national accounts, third party e-commerce sites, the Company's wholesale customer in Japan, and third-party inventory liquidators.

FINANCIAL RATIOS  of  Vera Bradley (VRA)

Valuation Ratios
P/E Ratio 18.5
Price to Sales 0.8
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 8.4
Growth Rates
Sales Growth Rate -3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.2%
Cap. Spend. - 3 Yr. Gr. Rate -1.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 7.8%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 10.3%
Return On Equity 7%
Return On Equity - 3 Yr. Avg. 10.3%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 56.8%
Gross Margin - 3 Yr. Avg. 55.2%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 13%
Operating Margin 5.8%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin 5.8%
Pre-Tax Margin - 3 Yr. Avg. 9.2%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. 5.7%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 34.5%
Payout Ratio 0%

VRA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VRA stock intrinsic value calculation we used $454.648 million for the last fiscal year's total revenue generated by Vera Bradley. The default revenue input number comes from 0001 income statement of Vera Bradley. 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 VRA 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 VRA is calculated based on our internal credit rating of Vera Bradley, 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 Vera Bradley.
    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 VRA stock the variable cost ratio is equal to 60.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $171 million in the base year in the intrinsic value calculation for VRA 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 Vera Bradley.

Corporate tax rate of 27% is the nominal tax rate for Vera Bradley. 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 VRA 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 VRA are equal to 20.7%.

Life of production assets of 4.8 years is the average useful life of capital assets used in Vera Bradley 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 VRA is equal to 17.3%. 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 - $285.283 million for Vera Bradley - 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 35.637 million for Vera Bradley 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 Vera Bradley at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Does Vera Bradley Incs (NASDAQ:VRA) CEO Pay Matter?   [Nov-11-18 09:39AM  Simply Wall St.]
▶ Why Vera Bradley Stock Is a High-Risk Proposition   [Sep-13-18 10:00PM  Motley Fool]
▶ Adobe and Twitter fall while Vera Bradley jumps   [Sep-05-18 04:45PM  Associated Press]
▶ Tech Tumbles, Dow Edges Higher at Close   [04:04PM  TheStreet.com]
▶ Why Shares of Vera Bradley Jumped Today   [01:04PM  Motley Fool]
▶ Better Days Ahead For Vera Bradley   [Jun-06-18 01:00PM  TheStreet.com]
▶ Vera Bradley: Fiscal 1Q Earnings Snapshot   [08:13AM  Associated Press]
▶ Trade balance What you need to know in markets on Wednesday   [Jun-05-18 05:52PM  Yahoo Finance]
▶ Vera Bradley beats Street 4Q forecasts   [08:23AM  Associated Press]
▶ DaVita and AeroVironment jump while Fred's and Patterson dip   [Dec-06-17 04:33PM  Associated Press]
▶ Vera Bradley beats 3Q profit forecasts   [08:17AM  Associated Press]
▶ Vera Bradley tops Street 2Q forecasts   [Aug-31-17 08:04PM  Associated Press]
▶ A Gray Afternoon for 3 Stocks   [Aug-30-17 05:32PM  GuruFocus.com]
▶ What Happened in the Stock Market Today   [05:05PM  Motley Fool]
▶ Why Shares of Vera Bradley Slumped Today   [04:54PM  Motley Fool]
▶ Vera Bradley Jumps on Earnings Beat   [01:10PM  GuruFocus.com]

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