Using the 2 Stage Free Cash Flow to Equity, Academy Sports and Outdoors fair value estimate is US$78.15
Academy Sports and Outdoors' US$54.64 share price signals that it might be 30% undervalued
Analyst price target for ASO is US$63.06 which is 19% below our fair value estimate
Does the August share price for Academy Sports and Outdoors, Inc. (NASDAQ:ASO) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by projecting its future cash flows and then discounting them to today's value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
The Model
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) forecast
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levered FCF ($, Millions)
US$346.5m
US$387.9m
US$404.6m
US$324.0m
US$323.3m
US$325.2m
US$329.0m
US$334.1m
US$340.3m
US$347.2m
Growth Rate Estimate Source
Analyst x7
Analyst x6
Analyst x3
Analyst x1
Est @ -0.23%
Est @ 0.59%
Est @ 1.16%
Est @ 1.57%
Est @ 1.85%
Est @ 2.04%
Present Value ($, Millions) Discounted @ 7.7%
US$322
US$334
US$324
US$241
US$223
US$208
US$196
US$185
US$175
US$165
("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = US$2.4b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. 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 (2.5%) 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 7.7%.
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$6.9b÷ ( 1 + 7.7%)10= US$3.3b
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$5.6b. 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$54.6, the company appears quite undervalued at a 30% 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.
Important 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 Academy Sports and Outdoors 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 7.7%, which is based on a levered beta of 1.261. 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 Academy Sports and Outdoors
Strength
Debt is not viewed as a risk.
Dividends are covered by earnings and cash flows.
Dividend information for ASO.
Weakness
Earnings declined over the past year.
Dividend is low compared to the top 25% of dividend payers in the Specialty Retail market.
Opportunity
Annual earnings are forecast to grow for the next 3 years.
Good value based on P/E ratio and estimated fair value.
Threat
Annual earnings are forecast to grow slower than the American market.
What else are analysts forecasting for ASO?
Moving On:
Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching 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. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Can we work out why the company is trading at a discount to intrinsic value? For Academy Sports and Outdoors, we've compiled three fundamental aspects you should consider:
Financial Health: Does ASO have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Future Earnings: How does ASO'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
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.
主要见解
使用两阶段自由现金流量对Academy Sports and Outdoors的公平值估计为78.15美元。
Academy Sports and Outdoors的54.64美元股价表明其可能被低估了30%。
ASO的分析师目标价为63.06美元,比我们的公平估值低19%。
Academy Sports and Outdoors, Inc.(纳斯达克:ASO)的8月份股价是否反映了它的真正价值?今天,我们将通过预测其未来现金流,然后以今天的价值折现来估算该股票的内在价值。 我们将应用折现现金流(DCF)模型来完成此操作。在您认为自己无法理解它之前,请继续阅读!实际上,它比您想象的要简单得多。
我们普遍认为一家公司的价值是其未来所产生的现金的现值总和。然而,DCF仅是众多估值指标之一,并且并不是不带缺陷。如果您想了解更多关于折现现金流的信息,可以在 Simply Wall St 分析模型中详细阅读其背后的理论。
上述计算非常依赖于两个假设。第一个是折现率,另一个是现金流。投资的一部分就是对公司未来表现的自我评估,因此请自行尝试计算并检查自己的假设。DCF还不考虑行业可能的周期性,或者公司未来的资本需求,因此它不能完全反映公司的潜在业绩。鉴于我们将Academy Sports and Outdoors作为潜在的股东,因此使用了权益成本作为折现率,而不是考虑债务的资本成本(或加权平均资本成本,WACC)。在此计算中,我们使用了7.7%,该值基于1.261的杠杆贝塔。贝塔是一种股票波动率的度量,与整个市场相比进行比较。我们从与全球可比公司的平均贝塔值获得我们的贝塔值,强制限制在0.8和2.0之间,这是一个稳定业务的合理范围。
Academy Sports and Outdoors的SWOT分析
优势
债务不被视为风险。
分红派息由收入和现金流决定。
ASO的股息信息。
弱点
过去一年的收益下降了。
与专业零售市场前25%支付股息股息低相比。
机会
预计未来3年的年度收益将增长。
基于市盈率和预估公平价值,出现良好的价值。
威胁
预计年度收益增长速度将慢于美国市场。
分析师对ASO还有什么其他预测?
接下来:
估值只是构建投资论点的一个方面,在研究公司时不应仅看重这一指标。DCF模型并不是一个完美的股票估值工具。最好应用不同情况和假设,看看它们如何影响公司的估值。如果公司以不同的速度增长,或者如果其权益成本或无风险利率急剧变化,则结果可能截然不同。我们能否推断出该公司为什么以内在价值低于折扣率在交易?对于Academy Sports and Outdoors,我们编制了三个基本方面,您应该考虑它们: