Intrinsic value of Wingstop Inc. - WING

Previous Close

$97.27

  Intrinsic Value

$2.30

stock screener

  Rating & Target

str. sell

-98%

Previous close

$97.27

 
Intrinsic value

$2.30

 
Up/down potential

-98%

 
Rating

str. sell

We calculate the intrinsic value of WING 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 2.9

 

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, %
  15.10
  14.09
  13.18
  12.36
  11.63
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.11
  5.99
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
Revenue, $m
  176
  201
  227
  256
  285
  316
  349
  384
  420
  457
  496
  536
  578
  622
  668
  715
  764
  815
  868
  924
  981
  1,041
  1,103
  1,168
  1,236
  1,307
  1,381
  1,458
  1,539
  1,623
Variable operating expenses, $m
  130
  147
  165
  184
  204
  225
  248
  271
  296
  321
  338
  366
  394
  424
  455
  487
  521
  556
  592
  630
  669
  710
  752
  796
  843
  891
  941
  994
  1,049
  1,106
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
  130
  147
  165
  184
  204
  225
  248
  271
  296
  321
  338
  366
  394
  424
  455
  487
  521
  556
  592
  630
  669
  710
  752
  796
  843
  891
  941
  994
  1,049
  1,106
Operating income, $m
  46
  54
  63
  72
  81
  91
  102
  112
  124
  136
  158
  171
  184
  198
  213
  228
  243
  260
  276
  294
  312
  331
  351
  372
  394
  416
  440
  464
  490
  517
EBITDA, $m
  59
  67
  76
  85
  95
  106
  116
  128
  140
  152
  165
  179
  193
  208
  223
  238
  255
  272
  290
  308
  327
  347
  368
  390
  412
  436
  461
  486
  513
  541
Interest expense (income), $m
  5
  17
  5
  6
  7
  8
  10
  11
  13
  14
  16
  17
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  65
Earnings before tax, $m
  30
  49
  57
  64
  73
  81
  90
  100
  110
  120
  140
  152
  163
  175
  188
  201
  214
  228
  243
  258
  274
  291
  308
  326
  345
  364
  385
  406
  428
  451
Tax expense, $m
  8
  13
  15
  17
  20
  22
  24
  27
  30
  32
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  74
  79
  83
  88
  93
  98
  104
  110
  116
  122
Net income, $m
  22
  36
  41
  47
  53
  59
  66
  73
  80
  88
  103
  111
  119
  128
  137
  147
  157
  167
  177
  189
  200
  212
  225
  238
  252
  266
  281
  296
  312
  329

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
  161
  183
  208
  233
  260
  289
  319
  350
  383
  417
  453
  490
  528
  568
  610
  653
  698
  744
  793
  843
  896
  951
  1,008
  1,067
  1,129
  1,194
  1,261
  1,332
  1,405
  1,482
Adjusted assets (=assets-cash), $m
  161
  183
  208
  233
  260
  289
  319
  350
  383
  417
  453
  490
  528
  568
  610
  653
  698
  744
  793
  843
  896
  951
  1,008
  1,067
  1,129
  1,194
  1,261
  1,332
  1,405
  1,482
Revenue / Adjusted assets
  1.093
  1.098
  1.091
  1.099
  1.096
  1.093
  1.094
  1.097
  1.097
  1.096
  1.095
  1.094
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.096
  1.095
  1.095
  1.094
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
  1.095
Average production assets, $m
  63
  72
  82
  92
  102
  114
  125
  138
  151
  164
  178
  193
  208
  223
  240
  257
  274
  293
  312
  332
  352
  374
  396
  419
  444
  469
  496
  523
  552
  583
Working capital, $m
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -28
  -31
  -33
  -36
  -39
  -42
  -45
  -49
  -52
  -56
  -60
  -63
  -67
  -72
  -76
  -81
  -85
  -90
  -95
  -101
  -106
  -112
  -118
Total debt, $m
  92
  112
  134
  157
  182
  207
  234
  263
  292
  323
  355
  388
  423
  459
  496
  535
  575
  617
  661
  706
  754
  803
  854
  908
  963
  1,021
  1,082
  1,146
  1,212
  1,281
Total liabilities, $m
  145
  165
  187
  210
  234
  260
  287
  315
  345
  376
  408
  441
  475
  511
  549
  588
  628
  670
  714
  759
  806
  856
  907
  960
  1,016
  1,074
  1,135
  1,198
  1,265
  1,334
Total equity, $m
  16
  18
  21
  23
  26
  29
  32
  35
  38
  42
  45
  49
  53
  57
  61
  65
  70
  74
  79
  84
  90
  95
  101
  107
  113
  119
  126
  133
  141
  148
Total liabilities and equity, $m
  161
  183
  208
  233
  260
  289
  319
  350
  383
  418
  453
  490
  528
  568
  610
  653
  698
  744
  793
  843
  896
  951
  1,008
  1,067
  1,129
  1,193
  1,261
  1,331
  1,406
  1,482
Debt-to-equity ratio
  5.720
  6.120
  6.460
  6.740
  6.970
  7.170
  7.340
  7.490
  7.620
  7.730
  7.830
  7.920
  8.000
  8.070
  8.130
  8.190
  8.240
  8.290
  8.330
  8.370
  8.410
  8.440
  8.480
  8.510
  8.530
  8.560
  8.580
  8.600
  8.620
  8.640
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  22
  36
  41
  47
  53
  59
  66
  73
  80
  88
  103
  111
  119
  128
  137
  147
  157
  167
  177
  189
  200
  212
  225
  238
  252
  266
  281
  296
  312
  329
Depreciation, amort., depletion, $m
  12
  13
  13
  14
  14
  14
  15
  15
  16
  17
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Funds from operations, $m
  34
  49
  54
  61
  67
  74
  81
  88
  96
  104
  110
  119
  128
  137
  147
  157
  168
  179
  191
  203
  215
  228
  241
  256
  270
  286
  302
  318
  336
  354
Change in working capital, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Cash from operations, $m
  36
  51
  56
  63
  69
  76
  83
  91
  99
  107
  113
  122
  131
  141
  151
  161
  172
  183
  194
  207
  219
  232
  246
  260
  275
  291
  307
  324
  342
  360
Maintenance CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
New CAPEX, $m
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
Cash from investing activities, $m
  -10
  -12
  -13
  -13
  -15
  -15
  -17
  -17
  -19
  -19
  -21
  -22
  -23
  -25
  -25
  -27
  -29
  -30
  -31
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -47
  -49
  -51
  -53
Free cash flow, $m
  25
  39
  44
  49
  55
  61
  67
  73
  80
  87
  92
  100
  108
  116
  125
  134
  143
  153
  163
  174
  185
  196
  208
  220
  233
  247
  261
  275
  291
  307
Issuance/(repayment) of debt, $m
  -220
  20
  22
  23
  24
  26
  27
  28
  29
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
Issuance/(repurchase) of shares, $m
  219
  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
  20
  22
  23
  24
  26
  27
  28
  29
  31
  32
  33
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
Total cash flow (excl. dividends), $m
  25
  59
  66
  72
  79
  86
  94
  101
  110
  118
  124
  133
  142
  152
  162
  173
  184
  195
  207
  219
  232
  245
  259
  274
  289
  305
  321
  339
  357
  376
Retained Cash Flow (-), $m
  -241
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
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
  -216
  57
  63
  70
  76
  83
  91
  98
  106
  114
  120
  129
  139
  148
  158
  168
  179
  190
  202
  214
  227
  240
  254
  268
  283
  298
  315
  332
  350
  368
Discount rate, %
  13.90
  14.60
  15.32
  16.09
  16.90
  17.74
  18.63
  19.56
  20.54
  21.56
  22.64
  23.77
  24.96
  26.21
  27.52
  28.90
  30.34
  31.86
  33.45
  35.12
  36.88
  38.72
  40.66
  42.69
  44.83
  47.07
  49.42
  51.90
  54.49
  57.21
PV of cash for distribution, $m
  -190
  43
  41
  38
  35
  31
  27
  24
  20
  16
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Wingstop Inc. is franchisor and operator of restaurants that specializes in cooked-to-order, hand-sauced and tossed chicken wings. The Company operates through two segments: Franchise and Company. As of December 31, 2016, the Company offers its guests 11 flavors on bone-in and boneless chicken wings paired with hand-cut, seasoned fries and sides. It is a casual chicken wings-focused restaurant chain with various concepts, which include wings as add-on menu items or focus on wings in a bar or sports-centric setting. The flavors include Atomic, Mango Habanero, Cajun, Original Hot, Louisiana Rub, Mild, Hickory Smoked BBQ, Lemon Pepper, Garlic Parmesan, Hawaiian and Teriyaki. It offers various order options, including eat-in, to go, individual, combo meals and family packs. The Company maintains Website hosting, and manages the development and maintenance of the mobile Wingstop application. It markets Wingstop products, services and restaurants through the Website, www.wingstop.com.

FINANCIAL RATIOS  of  Wingstop Inc. (WING)

Valuation Ratios
P/E Ratio 186.4
Price to Sales 30.7
Price to Book -37.3
Price to Tangible Book
Price to Cash Flow 127.1
Price to Free Cash Flow 139.8
Growth Rates
Sales Growth Rate 16.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity -196%
Total Debt to Equity -201.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 15.5%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital 18.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.7%
Return On Equity -35.3%
Return On Equity - 3 Yr. Avg. -67.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 72.5%
Gross Margin - 3 Yr. Avg. 71.5%
EBITDA Margin 36.3%
EBITDA Margin - 3 Yr. Avg. 31.4%
Operating Margin 31.9%
Oper. Margin - 3 Yr. Avg. 28.1%
Pre-Tax Margin 27.5%
Pre-Tax Margin - 3 Yr. Avg. 23%
Net Profit Margin 16.5%
Net Profit Margin - 3 Yr. Avg. 14.2%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. 37.7%
Payout Ratio 553.3%

WING stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WING stock intrinsic value calculation we used $153 million for the last fiscal year's total revenue generated by Wingstop Inc.. The default revenue input number comes from 0001 income statement of Wingstop 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 WING stock valuation model: a) initial revenue growth rate of 15.1% 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 13.9%, whose default value for WING is calculated based on our internal credit rating of Wingstop 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 Wingstop 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 WING stock the variable cost ratio is equal to 74.5%.

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 WING 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 Wingstop Inc..

Corporate tax rate of 27% is the nominal tax rate for Wingstop 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 WING 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 WING are equal to 35.9%.

Life of production assets of 23.8 years is the average useful life of capital assets used in Wingstop 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 WING is equal to -7.3%. 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 - $-224.83 million for Wingstop 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 29.353 million for Wingstop 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 Wingstop Inc. at the current share price and the inputted number of shares is $2.9 billion.

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