L Brands (LB:NYS) Fundamental Valuation Report

Fundamental Valuation Report

L Brands(LB:NYS)

Consumer Cyclical:Apparel Retail

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

Close Price/Date
$28.00 (USD) 09/11/2020

Weighted Valuation
$32.00 (USD)

Overall Rating
Undervalued by 14.3%

Valuation Models Multiples: $32.89 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $32.00 this stock is Undervalued

Company Overview (LB:NYS USD)

Price 28.00
Range 27.54 – 28.30
52 week 9.17 – 31.54
Open 28.05
Vol / Avg. 3.44M/5.76M
Mkt cap 7.78B
P/E 9.00
Div/yield 1.20/0.03
EPS -1.33
Shares 277.89M
Beta 1.64

Company Description

L Brands is a women’s intimate, personal-care, and beauty retailer operating under the Victoria’s Secret, Pink, and Bath & Body Works brands. The company generates the majority of its business in North America, with about 5% of sales coming from international markets in fiscal 2019. Distribution channels include more than 2,700 stores and online, which represented about 20% of total sales in 2019. The company still plans to break Bath & Body Works into a stand-alone business, but the timing and process of such a transaction has yet to be offered.

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 LB:NYS

Using a discounted cash flow model we generated an intrinsic value of $58.21 (USD) for LB:NYS

Sensitivity Analysis

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

LB:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $58.21 1% 5% 1% 5%
WACC (or Ke) 8.91 $74.48 $46.65
Terminal Growth Rate 3.00 $47.87 $72.76
Tax Rate 0.27 $63.50 $52.92
Cash Flow 1,930,529,000 $54.35 $62.07
Capital Expenditures 0 $58.21 $58.21
Long Term Debt 5,719,000,000 $59.24 $57.18

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

Comparables Model

Using similar companies and price based ratios we generated a valuation of $54.74 (USD) for LB:NYS. We also generated a valuation of $68.42 (USD) using other metrics and comparables.
The comparable companies were Urban Outfitters (URBN:NAS), Ross Stores (ROST:NAS), Lululemon Athletica (LULU:NAS), Gap (GPS:NYS) and Carter’s (CRI:NYS).

Company LB:NYS End Date Value
Earnings/Share ($2.86) (USD)
Book Value/Share ($6.87) (USD)
Sales/Share $41.08 (USD)
Cash Flow/Share $4.92 (USD)
EBITDA/Share $2.84 (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) -24.9
$0.00 (USD) 0.0
$48.36 (USD) 16.2
$25.70 (USD) -15.5
$85.71 (USD) 10.8
LB:NYS Ratios Used Average Values URBN:NAS ROST:NAS LULU:NAS GPS:NYS CRI:NYS
0.00 PE Ratio 56.54 0.00 60.15 76.07 0.00 33.40
0.00 PB Ratio 8.19 1.64 11.20 20.41 2.76 4.95
0.68 PS Ratio 3.06 0.63 2.51 10.60 0.44 1.13
5.69 PCF Ratio 21.59 6.79 25.43 60.35 8.41 6.97
80.96 EV to EBITDA 30.19 28.00 32.40 43.78 0.00 16.58

Multiples

Using a multiples approach we generated a valuation of  $32.89 (USD) for LB:NYS

Company LB:NYS End Date Value
Earnings/Share ($2.86) (USD)
Book Value/Share ($6.87) (USD)
Sales/Share $41.08 (USD)
Cash Flow/Share $4.92 (USD)
EBITDA/Share $2.84 (USD)
Price Based on Comps Adjustment Factor
$0.00 (USD) 0
$0.00 (USD) 0
$38.97 (USD) 0
$37.45 (USD) 0
$22.24 (USD) 0
Ratios Ratio Average
PE Ratio 13.57
PB Ratio 0.00
PS Ratio 0.95
PCF Ratio 7.61
EV to EBITDA 7.83

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  LB:NYS for the last 10 years was  1467.99

We ran the Adjusted Book Value for  LB:NYS and generated a book value of  ($6.89) (USD)
By multiplying these we get an adjusted valuation of  ($10,111.61) (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for LB:NYS. The 3 analysts have a concensus valuation for LB:NYS for 2021 of $32.00 (USD).

LB:NYS L Brands

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 7 0 3.0000 Hold 2020-9-10

Current Price: 28 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 1.04 2.21 2.50
# EPS Analysts 5 5 1
Mean Revenue 11,352.70 11,875.50 11,356.60
# Revenue Analysts 3 3 1
Mean Target Price 32.00
Mean Cash Flow 2.70 4.33 4.83
Mean EBITDA 1,399.80 1,656.80 1,874.30
Mean Net Income 313.40 570.30 698.00
Mean Debt Outstanding 3,556.50 3,149.80 2,288.20
Mean Tax Rate
Mean Growth Rate -0.13
Mean Capital Expenditure 258.20 475.00 511.00

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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