Discounted Cash Flow Calculation for DB:280 using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
DB:280 DCF 1st Stage: Next 10 year cash flow forecast
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Aritzia's share price is below the future cash flow value, but not at a moderate discount (< 20%).
Aritzia's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Aritzia's earnings available for a low price, and how does
this compare to other companies in the same industry?
Aritzia's earnings are expected to grow by 16.6% yearly, however this is not considered high growth (20% yearly).
Aritzia's revenue is expected to grow by 12.3% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Aritzia's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
6/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
Mr. Brian Hill is the Founder of Aritzia Inc. and serves as its Chairman and Chief Executive Officer. Mr. Hill is the Founder of the Aritzia LP and serves as its Chief Executive Officer. He has been an Non-Independent Director of Aritzia Inc. since 2005. As a third-generation retailer, Mr. Hill has led Aritzia Inc. since the Hill family opened the first Aritzia store in Vancouver in 1984. He is intimately involved in all aspects of Aritzia business. In recognition of his creative and business strength, Mr. Hill was awarded the Henry Singer Award for Retail Excellence presented by the University of Alberta (2013), Distinguished Retailer of the Year, presented by the Retail Council of Canada (2012), and was named Ernst & Young Entrepreneur Of The Year® for the Pacific Region (2008). Mr. Hill has a Bachelor of Arts (Honours) in Economics from Queen's University.
Insufficient data for Brian to compare compensation growth.
Brian's remuneration is lower than average for companies of similar size in Germany.
Management Team Tenure
Average tenure of the
management team in years:
The tenure for the Aritzia management team is about average.
Chief Financial Officer
Chief Information Officer
Executive Vice President of Retail
Senior Vice President of Digital
Senior Vice President of People
VP of Project Management Office
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The tenure for the Aritzia board of directors is about average.
Aritzia Inc., together with its subsidiaries, operates as a design house and fashion retailer of women’s apparel and accessories. The company designs and sells blouses, T-shirts, pants, dresses, sweaters, jackets and coats, skirts, shorts, denim, leggings, sweatshirts, bodysuits, puffers, jumpsuits, and intimates; and accessories, including hats, scarves, bags and pouches, socks and tights, belts, iPhone cases, and gloves. It sells apparel and accessories under the Aritzia banner. As of August 26, 2018, the company had 90 retail stores in Canada and the United States. In addition, it sells its products online at aritzia.com. The company was formerly known as Aritzia Capital Corporation and changed its name to Aritzia Inc. in August 2016. Aritzia Inc. was founded in 1984 and is headquartered in Vancouver, Canada.
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