Intrinsic value of Zumiez Inc. - ZUMZ

Previous Close

$24.97

  Intrinsic Value

$17.31

stock screener

  Rating & Target

sell

-31%

Previous close

$24.97

 
Intrinsic value

$17.31

 
Up/down potential

-31%

 
Rating

sell

We calculate the intrinsic value of ZUMZ 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 0.6

 

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
  946
  967
  992
  1,020
  1,051
  1,085
  1,122
  1,162
  1,205
  1,251
  1,301
  1,353
  1,410
  1,469
  1,533
  1,600
  1,671
  1,746
  1,826
  1,910
  1,998
  2,091
  2,190
  2,293
  2,403
  2,518
  2,639
  2,766
  2,900
  3,041
Variable operating expenses, $m
  856
  875
  897
  922
  950
  980
  1,014
  1,049
  1,088
  1,130
  1,166
  1,213
  1,264
  1,317
  1,374
  1,434
  1,498
  1,565
  1,636
  1,712
  1,791
  1,875
  1,963
  2,056
  2,154
  2,257
  2,365
  2,479
  2,599
  2,726
Fixed operating expenses, $m
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
  71
  72
  74
  75
  77
  79
Total operating expenses, $m
  898
  918
  941
  967
  996
  1,027
  1,062
  1,098
  1,138
  1,181
  1,218
  1,266
  1,318
  1,373
  1,431
  1,492
  1,557
  1,626
  1,698
  1,775
  1,856
  1,941
  2,031
  2,125
  2,225
  2,329
  2,439
  2,554
  2,676
  2,805
Operating income, $m
  48
  49
  51
  53
  55
  58
  61
  64
  67
  71
  83
  87
  92
  97
  102
  108
  114
  120
  127
  135
  142
  151
  159
  169
  178
  189
  200
  211
  223
  236
EBITDA, $m
  79
  81
  83
  85
  88
  92
  95
  99
  104
  109
  114
  120
  126
  132
  139
  146
  154
  162
  171
  180
  190
  201
  212
  224
  236
  249
  263
  278
  293
  309
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
Earnings before tax, $m
  48
  49
  51
  52
  54
  57
  59
  62
  65
  68
  80
  84
  88
  93
  97
  103
  108
  114
  120
  127
  134
  142
  150
  158
  167
  176
  186
  197
  208
  220
Tax expense, $m
  13
  13
  14
  14
  15
  15
  16
  17
  18
  18
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
Net income, $m
  35
  36
  37
  38
  40
  41
  43
  45
  47
  50
  58
  61
  64
  68
  71
  75
  79
  83
  88
  93
  98
  103
  109
  115
  122
  129
  136
  144
  152
  161

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
  486
  498
  510
  525
  541
  558
  577
  598
  620
  644
  669
  696
  725
  756
  788
  823
  860
  898
  939
  982
  1,028
  1,076
  1,126
  1,180
  1,236
  1,295
  1,357
  1,423
  1,492
  1,564
Adjusted assets (=assets-cash), $m
  486
  498
  510
  525
  541
  558
  577
  598
  620
  644
  669
  696
  725
  756
  788
  823
  860
  898
  939
  982
  1,028
  1,076
  1,126
  1,180
  1,236
  1,295
  1,357
  1,423
  1,492
  1,564
Revenue / Adjusted assets
  1.947
  1.942
  1.945
  1.943
  1.943
  1.944
  1.945
  1.943
  1.944
  1.943
  1.945
  1.944
  1.945
  1.943
  1.945
  1.944
  1.943
  1.944
  1.945
  1.945
  1.944
  1.943
  1.945
  1.943
  1.944
  1.944
  1.945
  1.944
  1.944
  1.944
Average production assets, $m
  170
  174
  179
  184
  189
  195
  202
  209
  217
  225
  234
  244
  254
  264
  276
  288
  301
  314
  329
  344
  360
  376
  394
  413
  432
  453
  475
  498
  522
  547
Working capital, $m
  60
  61
  63
  64
  66
  68
  71
  73
  76
  79
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
  159
  166
  174
  183
  192
Total debt, $m
  3
  6
  10
  14
  19
  24
  30
  36
  43
  50
  58
  66
  75
  84
  94
  104
  115
  127
  139
  152
  166
  180
  195
  212
  228
  246
  265
  285
  305
  327
Total liabilities, $m
  146
  150
  154
  158
  163
  168
  174
  180
  187
  194
  201
  210
  218
  228
  237
  248
  259
  270
  283
  296
  309
  324
  339
  355
  372
  390
  409
  428
  449
  471
Total equity, $m
  340
  348
  357
  367
  378
  390
  403
  418
  433
  450
  468
  487
  507
  528
  551
  575
  601
  628
  656
  687
  718
  752
  787
  825
  864
  905
  949
  995
  1,043
  1,093
Total liabilities and equity, $m
  486
  498
  511
  525
  541
  558
  577
  598
  620
  644
  669
  697
  725
  756
  788
  823
  860
  898
  939
  983
  1,027
  1,076
  1,126
  1,180
  1,236
  1,295
  1,358
  1,423
  1,492
  1,564
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.060
  0.070
  0.090
  0.100
  0.110
  0.120
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.290
  0.290
  0.300
Adjusted equity ratio
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  35
  36
  37
  38
  40
  41
  43
  45
  47
  50
  58
  61
  64
  68
  71
  75
  79
  83
  88
  93
  98
  103
  109
  115
  122
  129
  136
  144
  152
  161
Depreciation, amort., depletion, $m
  31
  31
  32
  32
  33
  34
  35
  36
  37
  38
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  70
  73
Funds from operations, $m
  66
  67
  69
  71
  73
  75
  78
  81
  84
  88
  90
  94
  98
  103
  108
  113
  119
  125
  132
  139
  146
  154
  162
  170
  180
  189
  199
  210
  221
  233
Change in working capital, $m
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  65
  66
  67
  69
  71
  73
  76
  79
  82
  85
  86
  90
  95
  99
  104
  109
  115
  120
  127
  133
  140
  148
  156
  164
  173
  182
  192
  202
  213
  225
Maintenance CAPEX, $m
  -22
  -23
  -23
  -24
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -70
New CAPEX, $m
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
Cash from investing activities, $m
  -25
  -27
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -45
  -46
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -82
  -86
  -90
  -95
Free cash flow, $m
  39
  39
  40
  40
  41
  42
  43
  44
  46
  48
  48
  50
  52
  55
  57
  60
  63
  67
  70
  74
  79
  83
  88
  93
  98
  104
  110
  116
  123
  130
Issuance/(repayment) of debt, $m
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
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  
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Total cash flow (excl. dividends), $m
  41
  43
  43
  44
  46
  47
  49
  51
  53
  55
  55
  58
  61
  64
  67
  71
  74
  78
  83
  87
  92
  97
  103
  109
  115
  121
  128
  136
  143
  151
Retained Cash Flow (-), $m
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -44
  -46
  -48
  -51
Prev. year cash balance distribution, $m
  23
  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
  58
  35
  34
  34
  35
  35
  36
  36
  37
  38
  37
  39
  41
  42
  44
  46
  49
  51
  54
  57
  60
  64
  67
  71
  76
  80
  85
  90
  95
  101
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
  55
  32
  30
  28
  27
  25
  24
  23
  21
  20
  18
  17
  15
  14
  13
  12
  11
  9
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  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
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Zumiez Inc., including its subsidiaries, is a specialty retailer of apparel, footwear, accessories and hardgoods for young men and women through the fashion, music, art and culture of action sports, streetwear and other lifestyles. The Company operates under the names Zumiez, Blue Tomato and Fast Times. Additionally, it operates e-commerce Websites at www.zumiez.com, www.blue-tomato.com and www.fasttimes.com.au. It offers various categories of shoes, such as skate shoes, casual shoes, high tops, sandals, slip ons, runners, boots and shoe accessories, such as socks. It also offers flannels, baseball tees, hoodies, baseball hats, windbreakers, shirts, jackets, jerseys, sweaters and tanks, among others. For women, it offers t-shirts, tank tops, hoodies and sweatshirts, cardigans, jackets, skirts, jeans, joggers, leggings and dresses, among others. It provides various accessories, including watches, sunglasses, bracelets, earrings, rings, beanies, hats, belts, wallets and phone accessories

FINANCIAL RATIOS  of  Zumiez Inc. (ZUMZ)

Valuation Ratios
P/E Ratio 24
Price to Sales 0.7
Price to Book 2
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 22.3
Growth Rates
Sales Growth Rate 4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -42.9%
Cap. Spend. - 3 Yr. Gr. Rate -11.1%
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 6.2%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 8.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.9%
Return On Equity 8.6%
Return On Equity - 3 Yr. Avg. 9.9%
Asset Turnover 2
Profitability Ratios
Gross Margin 32.9%
Gross Margin - 3 Yr. Avg. 33.9%
EBITDA Margin 8.1%
EBITDA Margin - 3 Yr. Avg. 10%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 6.4%
Pre-Tax Margin 4.8%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 4%
Effective Tax Rate 35%
Eff/ Tax Rate - 3 Yr. Avg. 37.4%
Payout Ratio 0%

ZUMZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ZUMZ stock intrinsic value calculation we used $927 million for the last fiscal year's total revenue generated by Zumiez Inc.. The default revenue input number comes from 0001 income statement of Zumiez 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 ZUMZ 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 ZUMZ is calculated based on our internal credit rating of Zumiez 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 Zumiez 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 ZUMZ stock the variable cost ratio is equal to 90.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $41 million in the base year in the intrinsic value calculation for ZUMZ 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 Zumiez Inc..

Corporate tax rate of 27% is the nominal tax rate for Zumiez 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 ZUMZ 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 ZUMZ are equal to 18%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Zumiez 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 ZUMZ is equal to 6.3%. 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 - $355.915 million for Zumiez 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 25.531 million for Zumiez 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 Zumiez Inc. at the current share price and the inputted number of shares is $0.6 billion.

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