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Chefs' Warehouse

Nasdaq:CHEF
Snowflake Description

Acceptable track record with limited growth.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
CHEF
Nasdaq
$612M
Market Cap
  1. Home
  2. US
  3. Consumer Retailing
2018/02/24
Company description

The Chefs' Warehouse, Inc., together with its subsidiaries, distributes specialty food products in the United States and Canada. More info.


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3 Month History
CHEF
Industry
5yr Volatility vs Market

Value

 Is Chefs' Warehouse undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Chefs' Warehouse to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

Current Discount
Amount off the current price Chefs' Warehouse is available for.
Intrinsic value
36%
Share price is $22.45 vs Future cash flow value of $34.95
Current Discount Checks
For Chefs' Warehouse to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
  • Chefs' Warehouse's share price is below the future cash flow value, and at a moderate discount (> 20%).
  • Chefs' Warehouse'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 Chefs' Warehouse's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Chefs' Warehouse's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Chefs' Warehouse is overvalued based on earnings compared to the US Consumer Retailing industry average.
  • Chefs' Warehouse is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Chefs' Warehouse's expected growth come at a high price?
  • Chefs' Warehouse is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Chefs' Warehouse's assets?
  • Chefs' Warehouse is overvalued based on assets compared to the US Consumer Retailing industry average.
X
Value checks
We assess Chefs' Warehouse's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Consumer Retailing industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Consumer Retailing industry average (and greater than 0)? (1 check)
  5. Chefs' Warehouse has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (33.17%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Chefs' Warehouse is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$205

Terminal Value

Terminal Value = FCF2022 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $70 × (1 + 2.47%) ÷ (8.49% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$1,188

Present value of terminal value:
$790

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$995 = $205 + $790

Value = Total value / Shares Outstanding ($995 / 28)

Discount to Share Price

Value per share:
$34.95

Current discount (share price of $22.45): 35.77%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.49% = 2.47% + (0.8 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($611,930,355).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.7 = 0.533 (1 + (1- 40%) (51.94%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Chefs' Warehouse expected to perform in the next 1 to 3 years based on estimates from 5 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
18.6%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Chefs' Warehouse expected to grow at an attractive rate?
  • Chefs' Warehouse's earnings growth is expected to exceed the low risk savings rate of 4.5%.
Growth vs Market Checks
  • Chefs' Warehouse's earnings growth is expected to exceed the US market average.
  • Chefs' Warehouse's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Chefs' Warehouse's earnings are expected to grow by 18.6% yearly, however this is not considered high growth (20% yearly).
  • Chefs' Warehouse's revenue is expected to grow by 5.7% 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.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Chefs' Warehouse is not expected to efficiently use shareholders’ funds in the future (Return on Equity less than 20%).
X
Future performance checks
We assess Chefs' Warehouse's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Chefs' Warehouse has a total score of 2/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Chefs' Warehouse performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Chefs' Warehouse's growth in the last year to its industry (Consumer Retailing).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Chefs' Warehouse's year on year earnings growth rate has been positive over the past 5 years.
  • Chefs' Warehouse's 1-year earnings growth exceeds its 5-year average (379.2% vs 11.6%)
  • Chefs' Warehouse's earnings growth has exceeded the US Consumer Retailing industry average in the past year (379.2% vs 13.6%).
Earnings and Revenue History
Chefs' Warehouse's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Chefs' Warehouse has not efficiently used shareholders’ funds last year (Return on Equity less than 20%).
  • Chefs' Warehouse used its assets less efficiently than the US Consumer Retailing industry average last year based on Return on Assets.
  • Chefs' Warehouse's use of capital has not improved over the past 3 years (Return on Capital Employed).
X
Past performance checks
We assess Chefs' Warehouse's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Consumer Retailing industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. 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.
Chefs' Warehouse has a total score of 3/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Chefs' Warehouse's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Chefs' Warehouse's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Chefs' Warehouse is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Chefs' Warehouse's long term commitments exceed its cash and other short term assets.
Balance sheet
This treemap shows a more detailed breakdown of Chefs' Warehouse's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • High level of physical assets or inventory.
  • Debt is not covered by short term assets, assets are 0.9x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Chefs' Warehouse's level of debt (127.8%) compared to net worth is high (greater than 40%).
  • The level of debt compared to net worth has been reduced over the past 5 years (317% vs 127.8% today).
  • Debt is not well covered by operating cash flow (9.9%, less than 20% of total debt).
  • Interest payments on debt are not well covered by earnings (EBIT is 1.8x annual interest expense, ideally 3x coverage).
X
Financial health checks
We assess Chefs' Warehouse's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Chefs' Warehouse has a total score of 2/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Chefs' Warehouse's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0%
Current annual income from Chefs' Warehouse dividends.
If you bought $2,000 of Chefs' Warehouse shares you are expected to receive $0 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Unable to evaluate Chefs' Warehouse's dividend against the low risk savings benchmark as the company has not reported any payouts.
  • Unable to evaluate Chefs' Warehouse's dividend against the market benchmark as the company has not reported any payouts.
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Unable to perform a dividend volatility check as Chefs' Warehouse has not reported any payouts.
  • Unable to verify if Chefs' Warehouse's dividend has been increasing as the company has not reported any payouts.
Current Payout to shareholders
What portion of Chefs' Warehouse's earnings are paid to the shareholders as a dividend.
  • Unable to calculate sustainability of dividends as Chefs' Warehouse has not reported any payouts.
Future Payout to shareholders
  • Insufficient estimate data to determine if a dividend will be paid in 3 years and that it will be sustainable.
X
Income/ dividend checks
We assess Chefs' Warehouse's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Chefs' Warehouse afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Chefs' Warehouse has a total score of 0/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Chefs' Warehouse's salary, the management and board of directors tenure and is there insider trading?

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.
CEO
Chris Pappas, image provided by Google.
Chris Pappas
COMPENSATION $2,135,204
AGE 57
TENURE AS CEO 33.1 years
CEO Bio

Mr. Christopher Pappas, also known as Chris, serves as Chairman, Chief Executive Officer and President at Qzina Specialty Foods, Inc. Mr. Pappas Founded The Chefs' Warehouse, Inc., an affiliate of DAIRYLAND Inc. in 1985 and has been its Chairman, President and Chief executive officer since March 1, 2011, April 11, 2009 and 1985 respectively. Mr. Pappas oversees all of business activities, with a focus on product procurement, sales, marketing, strategy development, business development and operations. He served as the President of Chefs' Warehouse Holdings LLC from its formation to January 1, 2007. He serves as a Director at F.A.B., Inc. Mr. Pappas played basketball professionally in Europe for several years following his graduation from Adelphi University in 1981 with a Bachelor of Arts degree in Business Administration.

CEO Compensation
  • Chris's compensation has been consistent with company performance over the past year.
  • Chris's compensation is higher than average for a company of this size and profit level.
Management Team Tenure

Average tenure and age of the Chefs' Warehouse management team in years:

10.8
Average Tenure
52
Average Age
  • The average tenure for the Chefs' Warehouse management team is over 5 years, this suggests they are a seasoned and experienced team.
Management Team

Chris Pappas

TITLE
Founder
COMPENSATION
$2M
AGE
57
TENURE
33.1 yrs

John Pappas

TITLE
Founder and Vice Chairman
COMPENSATION
$1M
AGE
53
TENURE
33.1 yrs

Alexandros Aldous

TITLE
General Counsel
COMPENSATION
$726K
AGE
36
TENURE
6.9 yrs

Patricia Lecouras

TITLE
Chief Human Resources Officer
COMPENSATION
$600K
AGE
61
TENURE
11.1 yrs

John Austin

TITLE
Consultant
COMPENSATION
$845K
AGE
55
TENURE
0.3 yrs

Jim Leddy

TITLE
CFO, Executive VP of Finance & Assistant Secretary
AGE
54
TENURE
0.3 yrs

Tim McCauley

TITLE
Chief Accounting Officer

Jonathan Steckler

TITLE
Executive Vice President of Supply Chain and Business Intelligence
AGE
48
TENURE
5.4 yrs

Alex Holian

TITLE
Executive Vice President of Business Intelligence
TENURE
1.7 yrs

Ed Kauffeld

TITLE
Regional Vice President of Eastern Region
TENURE
5.4 yrs
Board of Directors Tenure

Average tenure and age of the Chefs' Warehouse board of directors in years:

4.9
Average Tenure
60.5
Average Age
  • The tenure for the Chefs' Warehouse board of directors is about average.
Board of Directors

John Pappas

TITLE
Founder and Vice Chairman
COMPENSATION
$1M
AGE
53
TENURE
6.9 yrs

John Couri

TITLE
Lead Director
COMPENSATION
$100K
AGE
75

Chris Pappas

TITLE
Founder
COMPENSATION
$2M
AGE
57
TENURE
6.9 yrs

Dominick Cerbone

TITLE
Director
COMPENSATION
$110K
AGE
72
TENURE
5.8 yrs

Alan Guarino

TITLE
Director
COMPENSATION
$103K
AGE
57
TENURE
5.3 yrs

Stephen Hanson

TITLE
Director
COMPENSATION
$96K
AGE
67
TENURE
6.6 yrs

Joe Cugine

TITLE
Director
COMPENSATION
$97K
AGE
56
TENURE
5.4 yrs

John DeBenedetti

TITLE
Director
AGE
43
TENURE
2.8 yrs

Katherine Oliver

TITLE
Director
COMPENSATION
$88K
AGE
54
TENURE
2.3 yrs

Steve Goldstone

TITLE
Director
COMPENSATION
$80K
AGE
71
TENURE
1.9 yrs
Recent Insider Trading
  • No 3 month insider trading information.
Who owns this company?
X
Management checks
We assess Chefs' Warehouse's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Chefs' Warehouse has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

External News
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Simply Wall St News

Why The Chefs' Warehouse Inc's (NASDAQ:CHEF) ROE Of 6.86% Does Not Tell The Whole Story

See our latest analysis for Chefs' Warehouse Peeling the layers of ROE – trisecting a company’s profitability Return on Equity (ROE) is a measure of Chefs' Warehouse’s profit relative to its shareholders’ equity. … Return on Equity = Net Profit ÷ Shareholders Equity ROE is measured against cost of equity in order to determine the efficiency of Chefs' Warehouse’s equity capital deployed. … Since Chefs' Warehouse’s return does not cover its cost, with a difference of -1.64%, this means its current use of equity is not efficient and not sustainable.

Simply Wall St -

Investors Are Undervaluing The Chefs' Warehouse Inc (NASDAQ:CHEF) By 27.16%, Here Is My Intrinsic Value Calculation

The sum of these cash flows is then discounted to today's value. … 5-year cash flow estimate 2017 2018 2019 2020 2021 Levered FCF ($, Millions) $-2.20 $36.10 $45.70 $53.00 $59.10 Source Analyst x1 Analyst x1 Analyst x1 Analyst x1 Analyst x1 Present Value Discounted @ 8.49% $-2.03 $30.67 $35.78 $38.25 $39.32 Present Value of 5-year Cash Flow (PVCF)= $142 We now need to calculate the Terminal Value, which accounts for all the future cash flows after the five years. … Terminal Value (TV) = FCF2021 × (1 + g) ÷ (r – g) = $59 × (1 + 2.5%) ÷ (8.5% – 2.5%) = $1,005 Present Value of Terminal Value (PVTV) = TV / (1 + r)5 = $1,005 / ( 1 + 8.5%)5 = $669 The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is $811.

Simply Wall St -

What Should We Expect From The Chefs' Warehouse Inc's (CHEF) Earnings Over The Next Year?

In September 2017, The Chefs' Warehouse Inc (NASDAQ:CHEF) announced its latest earnings update. … To understand the overall trajectory of CHEF's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope. … NasdaqGS:CHEF Future Profit Nov 30th 17 By 2020, CHEF's earnings should reach $5M, from current levels of $3M, resulting in an annual growth rate of 23.84%.

Simply Wall St -

What Are Analysts Saying About The Future Of The Chefs' Warehouse Inc's (CHEF) Business?

The Chefs' Warehouse Inc (NASDAQ:CHEF)’s impressive earnings growth per share is expected to be a big double-digit 56.94% over the next three years. … This indicates a relatively solid earnings per share growth rate of 56.94% over the next few years, which is an optimistic outlook in the near term. … CHEF’s earnings growth the past couple of years was 95.04% which indicates that the company's past performance is quite revealing of future outcome.

Simply Wall St -

Company Info

Map
Description

The Chefs' Warehouse, Inc., together with its subsidiaries, distributes specialty food products in the United States and Canada. Its product portfolio includes approximately 43,000 stock-keeping units comprising specialty food products, such as artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate, and pastry products. The company also offers a line of center-of-the-plate products, including custom cut beef, seafood, and hormone-free poultry, as well as food products, such as cooking oils, butter, eggs, milk, and flour. It serves menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos, and specialty food stores. The Chefs' Warehouse, Inc. markets its center-of-the-plate products directly to consumers through a mail and e-commerce platform. The company was founded in 1985 and is headquartered in Ridgefield, Connecticut.

Details
Name: The Chefs' Warehouse, Inc.
CHEF
Exchange: NasdaqGS
Founded: 1985
$611,930,355
28,461,877
Website: http://www.chefswarehouse.com
Address: The Chefs' Warehouse, Inc.
100 East Ridge Road,
Ridgefield,
Connecticut, 06877,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NasdaqGS CHEF Common Shares Nasdaq Global Select US USD 28. Jul 2011
DB 2CF Common Shares Deutsche Boerse AG DE EUR 28. Jul 2011
Number of employees
Current staff
Staff numbers
1,948
Chefs' Warehouse employees.
Industry
Food Distributors
Consumer Retailing
Company Analysis and Financial Data Status
Area Date
Company Analysis updated: 2018/02/24
Last estimates confirmation: 2018/02/21
Last earnings update: 2017/12/29
Last annual earnings update: 2017/12/29


All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.

Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.