Intrinsic value of Element Fleet Management Corp. - EFN

Previous Close

$9.33

  Intrinsic Value

$2.17

stock screener

  Rating & Target

str. sell

-77%

Previous close

$9.33

 
Intrinsic value

$2.17

 
Up/down potential

-77%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of EFN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  100.12
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  1,621
  1,655
  1,695
  1,740
  1,790
  1,845
  1,906
  1,972
  2,043
  2,120
  2,202
  2,290
  2,383
  2,483
  2,589
  2,701
  2,820
  2,946
  3,079
  3,219
  3,368
  3,524
  3,689
  3,863
  4,046
  4,239
  4,442
  4,656
  4,881
  5,118
  5,367
Variable operating expenses, $m
 
  1,300
  1,328
  1,360
  1,395
  1,434
  1,477
  1,524
  1,574
  1,629
  1,687
  1,621
  1,687
  1,758
  1,832
  1,912
  1,996
  2,085
  2,179
  2,279
  2,384
  2,495
  2,611
  2,735
  2,864
  3,001
  3,145
  3,296
  3,455
  3,623
  3,799
Fixed operating expenses, $m
 
  164
  168
  172
  177
  181
  186
  190
  195
  200
  205
  210
  215
  221
  226
  232
  238
  243
  250
  256
  262
  269
  275
  282
  289
  297
  304
  312
  319
  327
  336
Total operating expenses, $m
  1,431
  1,464
  1,496
  1,532
  1,572
  1,615
  1,663
  1,714
  1,769
  1,829
  1,892
  1,831
  1,902
  1,979
  2,058
  2,144
  2,234
  2,328
  2,429
  2,535
  2,646
  2,764
  2,886
  3,017
  3,153
  3,298
  3,449
  3,608
  3,774
  3,950
  4,135
Operating income, $m
  190
  191
  199
  208
  218
  230
  243
  258
  274
  291
  310
  459
  481
  505
  530
  557
  586
  617
  650
  685
  722
  761
  802
  846
  893
  942
  994
  1,049
  1,107
  1,168
  1,232
EBITDA, $m
  603
  502
  514
  528
  544
  562
  582
  604
  628
  654
  682
  712
  745
  779
  816
  856
  898
  943
  990
  1,041
  1,094
  1,150
  1,210
  1,273
  1,340
  1,411
  1,485
  1,563
  1,646
  1,734
  1,826
Interest expense (income), $m
  297
  484
  495
  507
  521
  537
  554
  573
  594
  616
  640
  666
  693
  722
  753
  786
  821
  858
  898
  939
  983
  1,029
  1,078
  1,129
  1,184
  1,241
  1,301
  1,364
  1,431
  1,501
  1,575
Earnings before tax, $m
  190
  -293
  -296
  -300
  -303
  -307
  -311
  -316
  -320
  -325
  -330
  -207
  -212
  -217
  -223
  -229
  -235
  -241
  -248
  -254
  -261
  -268
  -276
  -283
  -291
  -299
  -307
  -316
  -324
  -333
  -343
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  413
  -293
  -296
  -300
  -303
  -307
  -311
  -316
  -320
  -325
  -330
  -207
  -212
  -217
  -223
  -229
  -235
  -241
  -248
  -254
  -261
  -268
  -276
  -283
  -291
  -299
  -307
  -316
  -324
  -333
  -343

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  18,421
  18,807
  19,257
  19,767
  20,338
  20,968
  21,657
  22,406
  23,216
  24,087
  25,020
  26,018
  27,082
  28,215
  29,417
  30,693
  32,045
  33,475
  34,986
  36,583
  38,269
  40,048
  41,923
  43,900
  45,982
  48,174
  50,483
  52,912
  55,469
  58,158
  60,987
Adjusted assets (=assets-cash), $m
  18,408
  18,807
  19,257
  19,767
  20,338
  20,968
  21,657
  22,406
  23,216
  24,087
  25,020
  26,018
  27,082
  28,215
  29,417
  30,693
  32,045
  33,475
  34,986
  36,583
  38,269
  40,048
  41,923
  43,900
  45,982
  48,174
  50,483
  52,912
  55,469
  58,158
  60,987
Revenue / Adjusted assets
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
  0.088
Average production assets, $m
  986
  1,006
  1,030
  1,058
  1,088
  1,122
  1,159
  1,199
  1,242
  1,289
  1,339
  1,392
  1,449
  1,510
  1,574
  1,642
  1,715
  1,791
  1,872
  1,957
  2,048
  2,143
  2,243
  2,349
  2,460
  2,578
  2,701
  2,831
  2,968
  3,112
  3,263
Working capital, $m
  0
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
Total debt, $m
  13,839
  14,144
  14,496
  14,897
  15,344
  15,838
  16,378
  16,965
  17,600
  18,283
  19,015
  19,797
  20,632
  21,519
  22,462
  23,462
  24,522
  25,643
  26,828
  28,080
  29,402
  30,797
  32,267
  33,816
  35,449
  37,168
  38,978
  40,882
  42,887
  44,995
  47,212
Total liabilities, $m
  14,439
  14,745
  15,097
  15,498
  15,945
  16,439
  16,979
  17,566
  18,201
  18,884
  19,616
  20,398
  21,233
  22,120
  23,063
  24,063
  25,123
  26,244
  27,429
  28,681
  30,003
  31,398
  32,868
  34,417
  36,050
  37,769
  39,579
  41,483
  43,488
  45,596
  47,813
Total equity, $m
  3,981
  4,062
  4,159
  4,270
  4,393
  4,529
  4,678
  4,840
  5,015
  5,203
  5,404
  5,620
  5,850
  6,094
  6,354
  6,630
  6,922
  7,231
  7,557
  7,902
  8,266
  8,650
  9,055
  9,482
  9,932
  10,406
  10,904
  11,429
  11,981
  12,562
  13,173
Total liabilities and equity, $m
  18,420
  18,807
  19,256
  19,768
  20,338
  20,968
  21,657
  22,406
  23,216
  24,087
  25,020
  26,018
  27,083
  28,214
  29,417
  30,693
  32,045
  33,475
  34,986
  36,583
  38,269
  40,048
  41,923
  43,899
  45,982
  48,175
  50,483
  52,912
  55,469
  58,158
  60,986
Debt-to-equity ratio
  3.476
  3.480
  3.490
  3.490
  3.490
  3.500
  3.500
  3.510
  3.510
  3.510
  3.520
  3.520
  3.530
  3.530
  3.540
  3.540
  3.540
  3.550
  3.550
  3.550
  3.560
  3.560
  3.560
  3.570
  3.570
  3.570
  3.570
  3.580
  3.580
  3.580
  3.580
Adjusted equity ratio
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216
  0.216

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  413
  -293
  -296
  -300
  -303
  -307
  -311
  -316
  -320
  -325
  -330
  -207
  -212
  -217
  -223
  -229
  -235
  -241
  -248
  -254
  -261
  -268
  -276
  -283
  -291
  -299
  -307
  -316
  -324
  -333
  -343
Depreciation, amort., depletion, $m
  413
  311
  316
  321
  326
  332
  339
  346
  354
  363
  372
  253
  263
  274
  286
  299
  312
  326
  340
  356
  372
  390
  408
  427
  447
  469
  491
  515
  540
  566
  593
Funds from operations, $m
  -74
  18
  19
  21
  23
  25
  28
  31
  34
  38
  42
  47
  52
  57
  63
  70
  77
  85
  93
  102
  111
  121
  132
  144
  156
  170
  184
  199
  215
  232
  251
Change in working capital, $m
  -466
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  392
  18
  20
  21
  23
  25
  28
  31
  35
  38
  43
  47
  52
  58
  64
  71
  78
  86
  94
  103
  112
  123
  134
  145
  158
  171
  186
  201
  217
  234
  253
Maintenance CAPEX, $m
  0
  -179
  -183
  -187
  -192
  -198
  -204
  -211
  -218
  -226
  -234
  -243
  -253
  -263
  -274
  -286
  -299
  -312
  -326
  -340
  -356
  -372
  -390
  -408
  -427
  -447
  -469
  -491
  -515
  -540
  -566
New CAPEX, $m
  -84
  -20
  -24
  -27
  -31
  -34
  -37
  -40
  -43
  -47
  -50
  -53
  -57
  -61
  -64
  -68
  -72
  -77
  -81
  -85
  -90
  -95
  -100
  -106
  -111
  -117
  -124
  -130
  -137
  -144
  -151
Cash from investing activities, $m
  -351
  -199
  -207
  -214
  -223
  -232
  -241
  -251
  -261
  -273
  -284
  -296
  -310
  -324
  -338
  -354
  -371
  -389
  -407
  -425
  -446
  -467
  -490
  -514
  -538
  -564
  -593
  -621
  -652
  -684
  -717
Free cash flow, $m
  41
  -181
  -187
  -193
  -200
  -206
  -213
  -220
  -227
  -234
  -242
  -250
  -258
  -266
  -275
  -284
  -293
  -303
  -313
  -323
  -334
  -345
  -356
  -368
  -380
  -393
  -406
  -420
  -434
  -449
  -464
Issuance/(repayment) of debt, $m
  -13
  305
  352
  400
  447
  494
  540
  587
  635
  683
  732
  782
  834
  888
  943
  1,000
  1,059
  1,121
  1,185
  1,252
  1,322
  1,394
  1,470
  1,550
  1,632
  1,719
  1,810
  1,905
  2,004
  2,108
  2,218
Issuance/(repurchase) of shares, $m
  3
  388
  393
  410
  427
  443
  460
  477
  495
  513
  531
  422
  442
  462
  483
  504
  527
  550
  574
  599
  625
  652
  681
  710
  741
  772
  806
  840
  876
  914
  953
Cash from financing (excl. dividends), $m  
  -10
  693
  745
  810
  874
  937
  1,000
  1,064
  1,130
  1,196
  1,263
  1,204
  1,276
  1,350
  1,426
  1,504
  1,586
  1,671
  1,759
  1,851
  1,947
  2,046
  2,151
  2,260
  2,373
  2,491
  2,616
  2,745
  2,880
  3,022
  3,171
Total cash flow (excl. dividends), $m
  30
  511
  558
  617
  674
  731
  788
  845
  903
  962
  1,022
  955
  1,018
  1,084
  1,151
  1,221
  1,293
  1,368
  1,447
  1,528
  1,613
  1,702
  1,795
  1,891
  1,992
  2,098
  2,209
  2,325
  2,446
  2,573
  2,707
Retained Cash Flow (-), $m
  1,736
  -388
  -393
  -410
  -427
  -443
  -460
  -477
  -495
  -513
  -531
  -422
  -442
  -462
  -483
  -504
  -527
  -550
  -574
  -599
  -625
  -652
  -681
  -710
  -741
  -772
  -806
  -840
  -876
  -914
  -953
Prev. year cash balance distribution, $m
 
  13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  137
  165
  207
  248
  288
  328
  368
  408
  449
  490
  533
  577
  622
  668
  716
  766
  818
  873
  929
  988
  1,050
  1,114
  1,181
  1,252
  1,326
  1,403
  1,485
  1,570
  1,659
  1,753
Discount rate, %
 
  12.20
  12.81
  13.45
  14.12
  14.83
  15.57
  16.35
  17.17
  18.02
  18.93
  19.87
  20.87
  21.91
  23.00
  24.16
  25.36
  26.63
  27.96
  29.36
  30.83
  32.37
  33.99
  35.69
  37.47
  39.35
  41.31
  43.38
  45.55
  47.83
  50.22
PV of cash for distribution, $m
 
  122
  130
  142
  146
  144
  138
  127
  115
  101
  87
  73
  59
  47
  37
  28
  21
  15
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  90.3
  81.6
  73.6
  66.3
  59.7
  53.7
  48.3
  43.4
  39.0
  35.1
  32.3
  29.7
  27.3
  25.1
  23.1
  21.3
  19.6
  18.0
  16.5
  15.2
  14.0
  12.9
  11.9
  10.9
  10.1
  9.3
  8.5
  7.9
  7.3
  6.7

Element Fleet Management Corp. is a Canada-based fleet management company that provides services and financing for commercial vehicle fleets. The Company’s offerings span the total fleet lifecycle, from acquisition and financing, to program management and remarketing. The Company provides both essential and fully outsourced fleet management, with services for cars and light duty vehicles, medium and heavy duty trucks and material handling equipment. Element operates across the United States, Canada, Mexico, Australia and New Zealand, and worldwide through its Element-Arval Global Alliance. _tck('aft');

FINANCIAL RATIOS  of  Element Fleet Management Corp. (EFN)

Valuation Ratios
P/E Ratio 8.7
Price to Sales 2.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 11.7
Growth Rates
Sales Growth Rate 100.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 236%
Cap. Spend. - 3 Yr. Gr. Rate -20.3%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 347.6%
Total Debt to Equity 347.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 2%
Ret/ On T. Cap. - 3 Yr. Avg. 1.2%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 78.5%
Gross Margin - 3 Yr. Avg. 76%
EBITDA Margin 55.5%
EBITDA Margin - 3 Yr. Avg. 37.2%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 11.7%
Pre-Tax Margin - 3 Yr. Avg. 8.6%
Net Profit Margin 25.5%
Net Profit Margin - 3 Yr. Avg. 19.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -91.8%
Payout Ratio 17.9%

EFN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EFN stock intrinsic value calculation we used $1621 million for the last fiscal year's total revenue generated by Element Fleet Management Corp.. The default revenue input number comes from 2016 income statement of Element Fleet Management Corp.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our EFN stock valuation model: a) initial revenue growth rate of 2.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 12.2%, whose default value for EFN is calculated based on our internal credit rating of Element Fleet Management Corp., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Element Fleet Management Corp..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of EFN stock the variable cost ratio is equal to 78.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $160 million in the base year in the intrinsic value calculation for EFN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Element Fleet Management Corp..

Corporate tax rate of 27% is the nominal tax rate for Element Fleet Management Corp.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the EFN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for EFN are equal to 60.8%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Element Fleet Management Corp. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for EFN is equal to -0.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3981 million for Element Fleet Management Corp. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 387.755 million for Element Fleet Management Corp. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Element Fleet Management Corp. at the current share price and the inputted number of shares is $3.6 billion.

RELATED COMPANIES Price Int.Val. Rating
RFC RIFCO Inc 1.45 0.39  str.sell
IOU IOU Financial 0.140 0.03  str.sell
Financial statements of EFN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.