Cavalier Corporation ($CAV.NZ) is a New Zealand listed carpet company. $CAV.NZ closed toda

y at their 52-week low. How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher valuation model of $CAV.NZ with interactive assumptions

Valuecruncher produces a valuation of NZ$2.35 for $CAV.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 30.6% above the current share price of NZ$1.80.

Assumptions

• Revenue: Reuters aggregates four analysts covering $CAV.NZ and the mean estimates of 2009 and 2010 revenues are NZ$297.2 million and NZ$311.3 million respectively. For our analysis we have used NZ$295.0 million in 2009, NZ$305.0 million in 2010 and NZ$315.0 million in 2011.
• Profitability: We have used an EBITDA margin of 14.0% to 2011. Reuters has $CAV.NZ‘s EBITD margin at 16.0% last year and an average of 16.3% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$10.0 million per annum moving forward.
• Discount Rate: 10.5%. The PwC New Zealand cost of capital report lists $CAV.NZ at 9.4% with the wider market at 9.5%. We have used a higher rate of 10.5%.
• Terminal Growth Rate: 1.0%. The New Zealand economy has grown at an average rate of 2.6% over the last five-years. We have $CAV.NZ growing more slowly moving forward.

Our analysis incorporates the cash and debt on the $CAV.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None