Sports Direct International Plc (SPD)

Comparison analysis | Discount cash flow analysis

5% margin of safety What's this?

Pound

Point

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Sell Overvalued by 28.1%

Dbbuynow

How does this work?

This is an interactive analyst report for Sports Direct International Plc, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

Values in £ millions

2009	2010	2011	2012	2013	2014	2015	2016

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

EBITDA Margin (%)

2009	2010	2011	2012

What will the profit margins be in the future?

EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation.

Values in £ millions

	2009	2010	2011	2012	Terminal

What will capital expenditure will be required in the future?

Capital investment beyond year three is driven by the terminal figure.

Values in £ millions

2009	2010	2011	2012

What will the depreciation be in the future?

Capital Expenditure is the cash that the company actually spends and Depreciation is the accounting treatment

	Figures (millions)
Enterprise value:	952
Equity value:	474
Net debt:	479
Value of equity:	474
Shares outstanding:	576,000,000
Valuation updated:	03 Jul 2009
Valuation views:	0

Valuation Assumptions What are these?





Discount Rate (%)	Terminal Growth (%)	Tax (%)

Pound

Point

Implied share price

Within margin of safety Undervalued by 1.2%

Dbbuynow

Valuation metric: What's this?

SPD	AMZN	EBAY	COST	SPLS

What is EV / Revenue?

Measures the value of each dollar of revenue (EV terms).

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

SPD	AMZN	EBAY	COST	SPLS

What is Market cap / Revenue?

Measures the value of each dollar of revenue (Market Cap terms).

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

SPD	AMZN	EBAY	COST	SPLS

What is EV / EBITDA?

Measures the value of each dollar of EBITDA (EV terms).

Higher means that the EBITDA is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

SPD	AMZN	EBAY	COST	SPLS

What is EV / EBIT?

Measures the value of each dollar of EBIT (EV terms).

Higher means that the EBIT is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

SPD	AMZN	EBAY	COST	SPLS

What is Market cap / EBITDA?

Measures the value of each dollar of EBITDA (Mkt Cap terms).

Higher means that the EBITDA is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

SPD	AMZN	EBAY	COST	SPLS

What is Market cap / EBIT?

Measures the value of each dollar of EBIT (Mkt Cap terms).

Higher means that the EBIT is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

SPD	AMZN	EBAY	COST	SPLS

What is Price / Earnings?

Measures the ratio of the current price per share and the earnings per share.

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

SPD	AMZN	EBAY	COST	SPLS

What is Return on Assets?

Measures the profitability of the company relative to the company's total assets.

Higher is better - but the key is comparaing against peer companies in the same industry.

SPD	AMZN	EBAY	COST	SPLS

What is Return on Equity?

Measures the profitability of the company relative to the company's shareholders equity.

Higher is better - but the key is comparaing against peer companies in the same industry.

	Sports Direct International Plc SPD	Amazon.com, Inc. AMZN	eBay Inc. EBAY	Costco Wholesale Corporation COST	Staples, Inc. SPLS
All amounts in millions Values from last financial year
Ratios
EV / revenue	0.76	1.61	2.18	0.26	0.72
Market cap / revenue	0.38	1.78	2.46	0.27	0.59
EV / EBITDA	6.47	26.07	6.54	7.05	7.89
EV / EBIT	8.69	36.6	8.72	9.39	10.69
Market cap / EBITDA	3.22	28.83	7.39	7.4	6.55
Market cap / EBIT	4.33	40.47	9.85	9.86	8.88
Price / earnings ratio	3.62	50.8	12.67	17.75	18.61
EV / total assets	0.98	3.71	1.19	0.89	1.27
Market cap / total assets	0.49	4.1	1.35	0.94	1.05
Market capitalisation:	474	34,079	21,022	19,413	13,720
Net Debt (LT Borrowings - Cash)	479	-3,259	-2,423	-928	2,808
Enterprise Value (EV)	952	30,820	18,599	18,484	16,528
Revenue (Last Financial year - LFY)	1,259	19,166	8,541	72,483	23,083
EBITDA (LFY)	147	1,182	2,844	2,622	2,094
Percent	11.7 %	6.2 %	33.3 %	3.6 %	9.1 %
EBIT	109	842	2,133	1,969	1,545
Percent	8.7 %	4.4 %	25.0 %	2.7 %	6.7 %
Balance sheet
Total assets	969	8,314	15,592	20,682	13,005
Total liabilities	844	5,642	4,508	11,490	7,441
Shareholders equity	125	2,672	11,083	9,192	5,564.207
Implied share price	£0.83	$41.49	$6.93	$128.81	$20.60

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Sensitivity matrix

		-1%	Discount Rate % 0%	1%
	-1%	£0.60	£0.59	£0.58
Terminal Growth%	0	£0.60	£0.59	£0.58
	+1%	£0.60	£0.59	£0.58

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

Valuecruncher created a new valuation of £0.59 (overvalued by 28.05%) - 10 minutes ago
GordonGekko created a new valuation of £0.60 (undervalued by 3.45%) - 4 months ago

Comments

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The boring details

All amounts in millions	Figures
Enterprise Value:	952
Net Debt (Long-term borrowings less cash):	479
Equity Value:	474
Number of Shares Outstanding:	576,000,000
Calculated value per share:	£0.59

Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Calcuation of EV

Where:

C1, C2, C3 - the cash flow in period 1, 2, 3, ...
r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.

Perpetuity

Where:

Cn - the cash flow in the final forecast period.
LTG - the long-term growth rate
r - the discount rate
g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.

CAPM model

Where:

rt - the risk free rate
t - the tax rate
B - the beta of the company
MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.