HD Supply Holdings (HDS:NAS) Fundamental Valuation Report


Fundamental Valuation Report

HD Supply Holdings(HDS:NAS)

Industrials:Industrial Distribution

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$41.45 (USD) 19/03/2019

Weighted Valuation
$42.15 (USD)

Overall Rating
Fairly valued to slightly Undervalued by 1.7%

Valuation Models Analyst Consensus: $46.00 (USD)
(in order of importance) Discounted Cash Flow: $35.00 (USD)
Comparables: $44.88 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (HDS:NAS USD)

Price 41.45
Range 41.10 – 44.00
52 week 35.62 – 45.94
Open 43.49
Vol / Avg. 4.42M/1.57M
Mkt cap 7.08B
P/E 26.74
Div/yield 0.00/0.00
EPS 2.17
Shares 170.7M
Beta 1.25

Company Description

Through a combination of acquisitions and organic growth, HD Supply has become one of the largest industrial distributors in North America. It is the market leader in the two sectors in which it operates (facilities and home improvement maintenance, repair, and operations and specialty construction). Today, HD Supply offers 600,000 stock-keeping units and serves 500,000 customers through 220 branches across the United States and Canada.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for HDS:NAS

Using a discounted cash flow model we generated an intrinsic value of $35.00 (USD) for HDS:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

HDS:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $35.00 1% 5% 1% 5%
WACC (or Ke) 8.54 $48.38 $25.71
Terminal Growth Rate 3.00 $26.51 $47.23
Tax Rate 0.26 $40.19 $29.81
Cash Flow 1,071,511,057 $31.17 $38.84
Capital Expenditures 8,400,000 $35.03 $34.97
Long Term Debt 4,308,000,000 $36.26 $33.74

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $44.88 (USD) for HDS:NAS. We also generated a valuation of $41.03 (USD) using other metrics and comparables.
The comparable companies were Applied Industrial Tech (AIT:NYS), Anixter International (AXE:NYS), Fastenal (FAST:NAS), W.W. Grainger (GWW:NYS) and MSC Industrial Direct Co (MSM:NYS).

Company HDS:NAS End Date Value
Earnings/Share $2.17 (USD)
Book Value/Share $9.37 (USD)
Sales/Share $31.33 (USD)
Cash Flow/Share $3.04 (USD)
EBITDA/Share $4.19 (USD)
Price Based on Comps Adjustment Factor (%)
$37.67 (USD) 96.3
$44.68 (USD) 0.0
$47.25 (USD) -21.9
$39.18 (USD) -37.4
$48.75 (USD) 0.0
HDS:NAS Ratios Used Average Values AIT:NYS AXE:NYS FAST:NAS GWW:NYS MSM:NYS
27.75 PE Ratio 17.36 13.88 12.81 24.02 22.20 13.88
4.59 PB Ratio 4.77 2.53 1.25 7.82 8.83 3.39
1.37 PS Ratio 1.51 0.67 0.24 3.64 1.54 1.46
14.15 PCF Ratio 16.77 11.92 14.53 26.81 16.30 14.27
12.69 EV to EBITDA 11.64 9.86 8.51 16.12 13.08 10.62

Multiples

Using a multiples approach we generated a valuation of  $43.36 (USD) for HDS:NAS

Company HDS:NAS End Date Value
Earnings/Share $2.17 (USD)
Book Value/Share $9.37 (USD)
Sales/Share $31.33 (USD)
Cash Flow/Share $3.04 (USD)
EBITDA/Share $4.19 (USD)
Price Based on Comps Adjustment Factor
$38.29 (USD) 0
$56.51 (USD) 0
$29.10 (USD) 0
$46.50 (USD) 0
$46.38 (USD) 0
Ratios Ratio Average
PE Ratio 17.65
PB Ratio 6.03
PS Ratio 0.93
PCF Ratio 15.30
EV to EBITDA 11.07

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  HDS:NAS for the last 2 years was  5.97

We ran the Adjusted Book Value for  HDS:NAS and generated a book value of  $7.50 (USD)
By multiplying these we get an adjusted valuation of  $44.83 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for HDS:NAS. The 2 analysts have a concensus valuation for HDS:NAS for 2020 of $46.00 (USD).

HDS:NAS HD Supply Holdings

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 2 0 3.7500 Outperform 2019-3-18

Current Price: 41.45 USD

Analyst Consensus
USD Millions 2020
Mean EPS 3.48
# EPS Analysts 2
Mean Revenue 6,364.10
# Revenue Analysts 1
Mean Target Price 46.00
Mean Cash Flow 3.85
Mean EBITDA 914.00
Mean Net Income 641.60
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate 12.20
Mean Capital Expenditure 127.30

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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