BOOHOO (BOO) FAIR VALUE CALCULATION

March 25, 2021 0 By bullheadedbear

Welcome to the BooHoo Plc (#BOO) fair value calculation which I split into the below sections:

CURRENT PRICE VALUATIONS
10 YR FUTURE PRICE VALUATIONS
INTERNAL RATE OF RETURN

BULL HEADED BEAR BUY CONCLUSION

As mentioned in the February Portfolio Update I’m currently running more companies through my models to help me prioritise further analysis. I hope you find this post interesting and get value from it but please note this is not investment advice. These are models using financial data and forecasts as well as my personal assumptions. They do not consider company, market or economic events. Please ensure you read the full disclaimer and disclosure at the bottom of this post.

CURRENT PRICE VALUATION MODELS:

The below prices come from personally developed models using a combination of historical financials, analysts projections and my own assumptions. I also use Finbox financial models to help challenge or confirm my own assumptions and valuations but don’t count them in my weighted sum.

MODELFORECASTSPRICEWEIGHT
DCF – Discounted Cash FlowAnalysts£2.6950%
DCF – Discounted Cash FlowBull Headed Bear£2.1750%
FINBOX FAIR VALUE£2.610%
WEIGHTED AVERAGE PRICE£2.43

10YR FUTURE PRICE VALUATIONS MODELS:

The below prices come from personally developed models using a combination of historical financials, analysts projections and my own assumptions.

MODELFORECASTPRICEWEIGHT
EV\EBITDA MULTIPLEAnalysts£49.0325%
EV\EBITDA MULTIPLEBull Headed Bear£10.6125%
FCF GROWTHAnalysts£71.9725%
FCF GROWTHBull Headed Bear£30.7625%
WEIGHTED AVERAGE PRICE£42.59

You can see there is a substantial difference in price between the valuations using my forecasts and the valuation using the analysts forecasts. The reason for this is I have significantly reduced the analysts forecasts to project a much more conservative projection. Boohoo is growing very well and there are more and more people buying online which has been accelerated due to lock downs. However, competition is also growing rapidly and we still don’t know how buying habits will change once lock downs are fully lifted. Online will continue to grow, but I want to be cautious to how fast that is actually going to be for Boohoo.

INTERNAL RATE OF RETURN (IRR)

Here we use the current and future fair value calculations to understand the Internal Rate of Return. We will look at the return for the current price (29.03.21) and other potential support and resistance zones.

PRICE ZONEPRICEIRR
UPPER PRICE ZONE 1£3.8033.6%
UPER PRICE ZONE 2£3.5034.9%
CURRENT PRICE ZONE£3.4035.4%
LOWER PRICE ZONE 1£3.3035.9%
LOWER PRICE ZONE 2£3.1037%
LOWER PRICE ZONE 3£2.8738.3%
LOWER PRICE ZONE 4£2.6539.7%

As you can see the IRR is very strong for the current stock price. Even if the stock price increases to previous higher levels the long term return is still potentially strong.

BULL HEADED BEAR BUY CONCLUSION

The fair value calculation for Boohoo Group Plc. (#BOO) shows us that the forecasted growth is so strong that in 10 years time Boohoo could be worth considerably more than it is currently value.

I have been building a position in Boohoo since the October last year as first mentioned in October Investment Portfolio Update. Boohoo is now sitting at just over 5% of the portfolio excluding cash so I do no want to add too much more. However if the price does end up returning to £2.87 and especially the £2.65 range the return is too goo not to add a bit more.

DISCLAIMER:

All opinions and assumptions made are my own and should not be viewed as investment advice. All investments involve risk and investors can get back less than they invested. I am not a financial advisor and your investments are solely your own responsibility. It is critical you do your own research and come to your own conclusions. These models are based primarily on historical and forecasted financials available on 29.03.2021. Business, market & economic events and sentiment can change at any time. I also have the right to change my opinions and assumptions at any time.

DISCLOSURE:

Boohoo Group Plc (#BOO) is a current holding in the BULL HEADED BEAR portfolio. The first purchase was made in October 2020. Additional purchases have been made since with the latest being on 08.03.21. It is still on the watchlist and I may add to the position if target prices are met and the risk feels appropriate for the potential reward.