Stock Analysis on Net
Stock Analysis on Net

Dollar Tree Inc. (NASDAQ:DLTR)

This company has been moved to the archive! The financial data has not been updated since November 22, 2022.

Present Value of Free Cash Flow to Equity (FCFE) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Dollar Tree Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 11.95%
01 FCFE0 548,400
1 FCFE1 646,292 = 548,400 × (1 + 17.85%) 577,316
2 FCFE2 749,225 = 646,292 × (1 + 15.93%) 597,835
3 FCFE3 854,138 = 749,225 × (1 + 14.00%) 608,810
4 FCFE4 957,310 = 854,138 × (1 + 12.08%) 609,524
5 FCFE5 1,054,528 = 957,310 × (1 + 10.16%) 599,765
5 Terminal value (TV5) 64,805,950 = 1,054,528 × (1 + 10.16%) ÷ (11.95% – 10.16%) 36,858,495
Intrinsic value of Dollar Tree Inc. common stock 39,851,745
 
Intrinsic value of Dollar Tree Inc. common stock (per share) $180.17
Current share price $152.37

Based on: 10-K (reporting date: 2022-01-29).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.67%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Dollar Tree Inc. common stock βDLTR 0.80
 
Required rate of return on Dollar Tree Inc. common stock3 rDLTR 11.95%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rDLTR = RF + βDLTR [E(RM) – RF]
= 4.67% + 0.80 [13.79% – 4.67%]
= 11.95%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Dollar Tree Inc., PRAT model

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Average Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Feb 2, 2019 Feb 3, 2018 Jan 28, 2017
Selected Financial Data (US$ in thousands)
Net income (loss) 1,327,900 1,341,900 827,000 (1,590,800) 1,714,300 896,200
Net sales 26,309,800 25,508,400 23,610,800 22,823,300 22,245,500 20,719,200
Total assets 21,721,800 20,696,000 19,574,600 13,501,200 16,332,800 15,701,600
Shareholders’ equity 7,718,500 7,285,300 6,254,800 5,642,900 7,182,300 5,389,500
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00 1.00
Profit margin2 5.05% 5.26% 3.50% -6.97% 7.71% 4.33%
Asset turnover3 1.21 1.23 1.21 1.69 1.36 1.32
Financial leverage4 2.81 2.84 3.13 2.39 2.27 2.91
Averages
Retention rate 1.00
Profit margin 5.17%
Asset turnover 1.27
Financial leverage 2.73
 
FCFE growth rate (g)5 17.85%

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

2022 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × 1,327,900 ÷ 26,309,800
= 5.05%

3 Asset turnover = Net sales ÷ Total assets
= 26,309,800 ÷ 21,721,800
= 1.21

4 Financial leverage = Total assets ÷ Shareholders’ equity
= 21,721,800 ÷ 7,718,500
= 2.81

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 5.17% × 1.27 × 2.73
= 17.85%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (33,701,879 × 11.95% – 548,400) ÷ (33,701,879 + 548,400)
= 10.16%

where:
Equity market value0 = current market value of Dollar Tree Inc. common stock (US$ in thousands)
FCFE0 = the last year Dollar Tree Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on Dollar Tree Inc. common stock

FCFE growth rate (g) forecast

Dollar Tree Inc., H-model

Microsoft Excel
Year Value gt
1 g1 17.85%
2 g2 15.93%
3 g3 14.00%
4 g4 12.08%
5 and thereafter g5 10.16%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 17.85% + (10.16% – 17.85%) × (2 – 1) ÷ (5 – 1)
= 15.93%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 17.85% + (10.16% – 17.85%) × (3 – 1) ÷ (5 – 1)
= 14.00%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 17.85% + (10.16% – 17.85%) × (4 – 1) ÷ (5 – 1)
= 12.08%