An Intrinsic Calculation For Abercrombie & Fitch Co. (NYSE:ANF) Suggests It's 29% Undervalued
An Intrinsic Calculation For Abercrombie & Fitch Co. (NYSE:ANF) Suggests It's 29% Undervalued
Key Insights
- Using the 2 Stage Free Cash Flow to Equity, Abercrombie & Fitch fair value estimate is US$155
- Abercrombie & Fitch's US$110 share price signals that it might be 29% undervalued
- Our fair value estimate is 13% higher than Abercrombie & Fitch's analyst price target of US$137
In this article we are going to estimate the intrinsic value of Abercrombie & Fitch Co. (NYSE:ANF) by estimating the company's future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Believe it or not, it's not too difficult to follow, as you'll see from our example!
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
Step By Step Through The Calculation
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$358.9m | US$370.1m | US$407.4m | US$468.0m | US$467.0m | US$469.6m | US$474.6m | US$481.4m | US$489.5m | US$498.6m |
Growth Rate Estimate Source | Analyst x3 | Analyst x4 | Analyst x4 | Analyst x1 | Est @ -0.21% | Est @ 0.54% | Est @ 1.07% | Est @ 1.43% | Est @ 1.69% | Est @ 1.87% |
Present Value ($, Millions) Discounted @ 7.4% | US$334 | US$321 | US$329 | US$352 | US$327 | US$306 | US$288 | US$272 | US$258 | US$244 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$3.0b
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 7.4%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$499m× (1 + 2.3%) ÷ (7.4%– 2.3%) = US$10.0b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$10.0b÷ ( 1 + 7.4%)10= US$4.9b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$7.9b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$110, the company appears a touch undervalued at a 29% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
The Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Abercrombie & Fitch as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.4%, which is based on a levered beta of 1.109. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Abercrombie & Fitch
- Earnings growth over the past year exceeded the industry.
- Debt is not viewed as a risk.
- Balance sheet summary for ANF.
- Shareholders have been diluted in the past year.
- Annual earnings are forecast to grow for the next 3 years.
- Good value based on P/E ratio and estimated fair value.
- Annual earnings are forecast to grow slower than the American market.
- What else are analysts forecasting for ANF?
Looking Ahead:
Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. What is the reason for the share price sitting below the intrinsic value? For Abercrombie & Fitch, there are three further aspects you should further examine:
- Risks: Case in point, we've spotted 2 warning signs for Abercrombie & Fitch you should be aware of.
- Future Earnings: How does ANF's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
關鍵見解
使用兩階段的自由現金流股權,Abercrombie & Fitch的公允價值估計爲155美元
Abercrombie & Fitch的110美元股價表明其估值可能被低估了29%
我們的公允價值估計比Abercrombie & Fitch分析師設定的137美元的目標股價高出13%
在本文中,我們將估算Abercrombie & Fitch Co.的內在價值。(紐約證券交易所代碼:ANF)通過估算公司未來的現金流並將其折現爲現值。折扣現金流(DCF)模型是我們將應用的工具。信不信由你,這並不難理解,正如你將從我們的例子中看到的那樣!
我們普遍認爲,公司的價值是其未來將產生的所有現金的現值。但是,差價合約只是衆多估值指標中的一個,而且並非沒有缺陷。任何有興趣進一步了解內在價值的人都應該讀一讀 Simply Wall St 分析模型。
逐步進行計算
我們使用的是兩階段增長模型,這只是意味着我們考慮了公司增長的兩個階段。在初始階段,公司的增長率可能更高,而第二階段通常被認爲具有穩定的增長率。首先,我們需要估計未來十年的現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
差價合約完全是關於未來一美元的價值低於今天一美元的想法,因此我們需要對這些未來現金流的總和進行折現才能得出現值估計:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$358.9m | US$370.1m | US$407.4m | US$468.0m | US$467.0m | US$469.6m | US$474.6m | US$481.4m | US$489.5m | US$498.6m |
Growth Rate Estimate Source | Analyst x3 | Analyst x4 | Analyst x4 | Analyst x1 | Est @ -0.21% | Est @ 0.54% | Est @ 1.07% | Est @ 1.43% | Est @ 1.69% | Est @ 1.87% |
Present Value ($, Millions) Discounted @ 7.4% | US$334 | US$321 | US$329 | US$352 | US$327 | US$306 | US$288 | US$272 | US$258 | US$244 |
(“Est” = Simply Wall St估計的FCF增長率)
十年期現金流(PVCF)的現值 = 30億美元
在計算了最初10年期內未來現金流的現值之後,我們需要計算終值,該終值涵蓋了第一階段以後的所有未來現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長率。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們使用7.4%的股本成本將未來的現金流折現爲今天的價值。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 4.99億美元× (1 + 2.3%) ÷ (7.4% — 2.3%) = 100億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 100億美元÷ (1 + 7.4%)10= 49 億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲79億美元。爲了得出每股內在價值,我們將其除以已發行股票總數。與目前的110美元股價相比,該公司的估值似乎略有低估,比目前的股價折扣了29%。但請記住,這只是一個近似的估值,就像任何複雜的公式一樣,垃圾進出。
紐約證券交易所:ANF 貼現現金流 2024 年 4 月 20 日
假設
上面的計算在很大程度上取決於兩個假設。第一個是貼現率,另一個是現金流。投資的一部分是自己對公司未來業績的評估,因此請自己嘗試計算並檢查自己的假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將Abercrombie & Fitch視爲潛在股東,因此使用股本成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了7.4%,這是基於1.109的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
Abercrombie & Fitch 的 SWOT 分析
力量
過去一年的收益增長超過了該行業。
債務不被視爲風險。
ANF 的資產負債表摘要。
弱點
在過去的一年中,股東被稀釋了。
機會
預計未來三年的年收入將增長。
根據市盈率和估計的公允價值,物有所值。
威脅
預計年收益的增長速度將低於美國市場。
分析師對ANF還有什麼預測?
展望未來:
雖然重要,但DCF的計算只是公司需要評估的衆多因素之一。DCF模型不是完美的股票估值工具。最好你運用不同的案例和假設,看看它們將如何影響公司的估值。例如,公司權益成本或無風險利率的變化會對估值產生重大影響。股價低於內在價值的原因是什麼?對於Abercrombie & Fitch而言,您還需要進一步研究三個方面:
風險:舉個例子,我們發現了兩個你應該注意的Abercrombie & Fitch警告信號。
未來收益:與同行和整個市場相比,ANF的增長率如何?通過與我們的免費分析師增長預期圖表互動,深入了解未來幾年的分析師共識數字。
其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
PS。Simply Wall St每天都會更新每隻美國股票的差價合約計算結果,因此,如果您想找到任何其他股票的內在價值,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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