Stock Analysis on Net
Stock Analysis on Net

Williams-Sonoma Inc. (NYSE:WSM)

This company has been moved to the archive! The financial data has not been updated since May 24, 2024.

Present Value of Free Cash Flow to the Firm (FCFF)

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Williams-Sonoma Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 19.66%
01 FCFF0 1,492,439
1 FCFF1 1,951,138 = 1,492,439 × (1 + 30.73%) 1,630,577
2 FCFF2 2,453,240 = 1,951,138 × (1 + 25.73%) 1,713,352
3 FCFF3 2,961,863 = 2,453,240 × (1 + 20.73%) 1,728,721
4 FCFF4 3,427,812 = 2,961,863 × (1 + 15.73%) 1,671,977
5 FCFF5 3,795,636 = 3,427,812 × (1 + 10.73%) 1,547,217
5 Terminal value (TV5) 47,071,636 = 3,795,636 × (1 + 10.73%) ÷ (19.66% – 10.73%) 19,187,832
Intrinsic value of Williams-Sonoma Inc. capital 27,479,677
Less: Long-term debt (fair value) 0
Intrinsic value of Williams-Sonoma Inc. common stock 27,479,677
 
Intrinsic value of Williams-Sonoma Inc. common stock (per share) $427.31
Current share price $287.81

Based on: 10-K (reporting date: 2024-01-28).

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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.

Weighted Average Cost of Capital (WACC)

Williams-Sonoma Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 18,508,509 1.00 19.66%
Long-term debt (fair value) 0 0.00 0.00% = 0.00% × (1 – 23.48%)

Based on: 10-K (reporting date: 2024-01-28).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 64,308,083 × $287.81
= $18,508,509,368.23

   Long-term debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (25.40% + 24.80% + 22.40% + 23.90% + 22.10% + 22.30%) ÷ 6
= 23.48%

WACC = 19.66%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Williams-Sonoma Inc., PRAT model

Microsoft Excel
Average Jan 28, 2024 Jan 29, 2023 Jan 30, 2022 Jan 31, 2021 Feb 2, 2020 Feb 3, 2019
Selected Financial Data (US$ in thousands)
Interest income (expense), net (29,162) (2,260) 1,865 16,231 8,853 6,706
Net earnings 949,762 1,127,904 1,126,337 680,714 356,062 333,684
 
Effective income tax rate (EITR)1 25.40% 24.80% 22.40% 23.90% 22.10% 22.30%
 
Interest income (expense), net, after tax2 (21,755) (1,700) 1,447 12,352 6,896 5,211
Add: Dividends declared 236,821 216,329 199,395 163,316 156,103 144,609
Interest expense (after tax) and dividends 215,066 214,629 200,842 175,668 162,999 149,820
 
EBIT(1 – EITR)3 928,007 1,126,204 1,127,784 693,066 362,958 338,895
 
Current debt — — — 299,350 299,818 —
Long-term debt — — — — — 299,620
Stockholders’ equity 2,127,861 1,701,051 1,664,207 1,651,185 1,235,860 1,155,714
Total capital 2,127,861 1,701,051 1,664,207 1,950,535 1,535,678 1,455,334
Financial Ratios
Retention rate (RR)4 0.77 0.81 0.82 0.75 0.55 0.56
Return on invested capital (ROIC)5 43.61% 66.21% 67.77% 35.53% 23.64% 23.29%
Averages
RR 0.71
ROIC 43.34%
 
FCFF growth rate (g)6 30.73%

Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).

1 See details »

2024 Calculations

2 Interest income (expense), net, after tax = Interest income (expense), net × (1 – EITR)
= -29,162 × (1 – 25.40%)
= -21,755

3 EBIT(1 – EITR) = Net earnings + Interest income (expense), net, after tax
= 949,762 + -21,755
= 928,007

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [928,007 – 215,066] ÷ 928,007
= 0.77

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 928,007 ÷ 2,127,861
= 43.61%

6 g = RR × ROIC
= 0.71 × 43.34%
= 30.73%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (18,508,509 × 19.66% – 1,492,439) ÷ (18,508,509 + 1,492,439)
= 10.73%

where:

Total capital, fair value0 = current fair value of Williams-Sonoma Inc. debt and equity (US$ in thousands)
FCFF0 = the last year Williams-Sonoma Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Williams-Sonoma Inc. capital

FCFF growth rate (g) forecast

Williams-Sonoma Inc., H-model

Microsoft Excel
Year Value gt
1 g1 30.73%
2 g2 25.73%
3 g3 20.73%
4 g4 15.73%
5 and thereafter g5 10.73%

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)
= 30.73% + (10.73% – 30.73%) × (2 – 1) ÷ (5 – 1)
= 25.73%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 30.73% + (10.73% – 30.73%) × (3 – 1) ÷ (5 – 1)
= 20.73%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 30.73% + (10.73% – 30.73%) × (4 – 1) ÷ (5 – 1)
= 15.73%