Intrinsic value of Ritchie Bros. Auctioneers Incorporated - RBA

Previous Close

$44.81

  Intrinsic Value

$30.23

stock screener

  Rating & Target

sell

-33%

Previous close

$44.81

 
Intrinsic value

$30.23

 
Up/down potential

-33%

 
Rating

sell

We calculate the intrinsic value of RBA 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 4.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  840
  918
  1,000
  1,085
  1,173
  1,265
  1,361
  1,460
  1,563
  1,670
  1,782
  1,898
  2,018
  2,144
  2,275
  2,411
  2,553
  2,701
  2,855
  3,017
  3,185
  3,361
  3,545
  3,737
  3,939
  4,149
  4,370
  4,600
  4,842
  5,095
Variable operating expenses, $m
  554
  604
  657
  712
  768
  828
  889
  953
  1,019
  1,088
  1,147
  1,222
  1,299
  1,380
  1,464
  1,552
  1,643
  1,739
  1,838
  1,942
  2,050
  2,164
  2,282
  2,406
  2,535
  2,671
  2,813
  2,961
  3,117
  3,280
Fixed operating expenses, $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
Total operating expenses, $m
  554
  604
  657
  712
  768
  828
  889
  953
  1,019
  1,088
  1,147
  1,222
  1,299
  1,380
  1,464
  1,552
  1,643
  1,739
  1,838
  1,942
  2,050
  2,164
  2,282
  2,406
  2,535
  2,671
  2,813
  2,961
  3,117
  3,280
Operating income, $m
  286
  314
  343
  373
  405
  438
  472
  507
  544
  582
  635
  676
  719
  764
  810
  859
  909
  962
  1,017
  1,075
  1,135
  1,197
  1,263
  1,331
  1,403
  1,478
  1,557
  1,639
  1,725
  1,815
EBITDA, $m
  351
  384
  418
  454
  491
  529
  569
  610
  654
  698
  745
  794
  844
  896
  951
  1,008
  1,067
  1,129
  1,194
  1,261
  1,332
  1,405
  1,482
  1,563
  1,647
  1,735
  1,827
  1,923
  2,024
  2,130
Interest expense (income), $m
  8
  28
  32
  37
  41
  46
  51
  56
  61
  66
  72
  78
  84
  90
  97
  104
  111
  119
  126
  135
  143
  152
  161
  171
  181
  192
  203
  214
  226
  239
  252
Earnings before tax, $m
  258
  282
  306
  332
  359
  387
  416
  446
  477
  510
  557
  592
  629
  667
  706
  748
  791
  836
  883
  932
  983
  1,036
  1,092
  1,151
  1,212
  1,276
  1,343
  1,413
  1,486
  1,563
Tax expense, $m
  70
  76
  83
  90
  97
  104
  112
  120
  129
  138
  150
  160
  170
  180
  191
  202
  214
  226
  238
  252
  265
  280
  295
  311
  327
  344
  362
  381
  401
  422
Net income, $m
  188
  206
  224
  243
  262
  282
  304
  326
  348
  372
  407
  432
  459
  487
  516
  546
  577
  610
  644
  680
  717
  756
  797
  840
  885
  931
  980
  1,031
  1,085
  1,141

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  2,064
  2,256
  2,457
  2,665
  2,883
  3,109
  3,343
  3,587
  3,841
  4,104
  4,378
  4,663
  4,959
  5,268
  5,589
  5,924
  6,272
  6,636
  7,016
  7,412
  7,826
  8,258
  8,710
  9,183
  9,677
  10,195
  10,736
  11,303
  11,896
  12,518
Adjusted assets (=assets-cash), $m
  2,064
  2,256
  2,457
  2,665
  2,883
  3,109
  3,343
  3,587
  3,841
  4,104
  4,378
  4,663
  4,959
  5,268
  5,589
  5,924
  6,272
  6,636
  7,016
  7,412
  7,826
  8,258
  8,710
  9,183
  9,677
  10,195
  10,736
  11,303
  11,896
  12,518
Revenue / Adjusted assets
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
  0.407
Average production assets, $m
  863
  943
  1,027
  1,114
  1,205
  1,299
  1,397
  1,499
  1,605
  1,715
  1,830
  1,949
  2,073
  2,202
  2,336
  2,476
  2,622
  2,774
  2,933
  3,098
  3,271
  3,452
  3,641
  3,838
  4,045
  4,261
  4,487
  4,724
  4,972
  5,232
Working capital, $m
  -88
  -96
  -105
  -114
  -123
  -133
  -143
  -153
  -164
  -175
  -187
  -199
  -212
  -225
  -239
  -253
  -268
  -284
  -300
  -317
  -334
  -353
  -372
  -392
  -414
  -436
  -459
  -483
  -508
  -535
Total debt, $m
  923
  1,046
  1,174
  1,307
  1,446
  1,590
  1,740
  1,896
  2,058
  2,227
  2,402
  2,584
  2,773
  2,970
  3,175
  3,389
  3,612
  3,845
  4,087
  4,340
  4,605
  4,881
  5,170
  5,472
  5,788
  6,118
  6,464
  6,826
  7,206
  7,603
Total liabilities, $m
  1,319
  1,442
  1,570
  1,703
  1,842
  1,986
  2,136
  2,292
  2,454
  2,623
  2,798
  2,980
  3,169
  3,366
  3,571
  3,785
  4,008
  4,241
  4,483
  4,736
  5,001
  5,277
  5,566
  5,868
  6,184
  6,514
  6,860
  7,222
  7,602
  7,999
Total equity, $m
  745
  814
  887
  962
  1,041
  1,122
  1,207
  1,295
  1,386
  1,482
  1,580
  1,683
  1,790
  1,902
  2,018
  2,138
  2,264
  2,396
  2,533
  2,676
  2,825
  2,981
  3,144
  3,315
  3,494
  3,680
  3,876
  4,080
  4,295
  4,519
Total liabilities and equity, $m
  2,064
  2,256
  2,457
  2,665
  2,883
  3,108
  3,343
  3,587
  3,840
  4,105
  4,378
  4,663
  4,959
  5,268
  5,589
  5,923
  6,272
  6,637
  7,016
  7,412
  7,826
  8,258
  8,710
  9,183
  9,678
  10,194
  10,736
  11,302
  11,897
  12,518
Debt-to-equity ratio
  1.240
  1.280
  1.320
  1.360
  1.390
  1.420
  1.440
  1.460
  1.480
  1.500
  1.520
  1.530
  1.550
  1.560
  1.570
  1.580
  1.600
  1.600
  1.610
  1.620
  1.630
  1.640
  1.640
  1.650
  1.660
  1.660
  1.670
  1.670
  1.680
  1.680
Adjusted equity ratio
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  188
  206
  224
  243
  262
  282
  304
  326
  348
  372
  407
  432
  459
  487
  516
  546
  577
  610
  644
  680
  717
  756
  797
  840
  885
  931
  980
  1,031
  1,085
  1,141
Depreciation, amort., depletion, $m
  65
  70
  75
  80
  86
  91
  97
  104
  110
  117
  110
  117
  125
  133
  141
  149
  158
  167
  177
  187
  197
  208
  219
  231
  244
  257
  270
  285
  300
  315
Funds from operations, $m
  253
  276
  299
  323
  348
  374
  401
  429
  458
  489
  517
  550
  584
  619
  656
  695
  735
  777
  821
  867
  915
  964
  1,017
  1,071
  1,128
  1,188
  1,250
  1,316
  1,384
  1,456
Change in working capital, $m
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
Cash from operations, $m
  261
  284
  307
  332
  357
  384
  411
  440
  469
  500
  528
  562
  596
  633
  670
  709
  750
  793
  837
  884
  932
  983
  1,036
  1,091
  1,149
  1,210
  1,274
  1,340
  1,410
  1,483
Maintenance CAPEX, $m
  -47
  -52
  -57
  -62
  -67
  -73
  -78
  -84
  -90
  -97
  -103
  -110
  -117
  -125
  -133
  -141
  -149
  -158
  -167
  -177
  -187
  -197
  -208
  -219
  -231
  -244
  -257
  -270
  -285
  -300
New CAPEX, $m
  -77
  -80
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -110
  -114
  -119
  -124
  -129
  -134
  -140
  -146
  -152
  -159
  -166
  -173
  -181
  -189
  -198
  -207
  -216
  -226
  -237
  -248
  -260
Cash from investing activities, $m
  -124
  -132
  -141
  -149
  -158
  -167
  -176
  -186
  -196
  -207
  -217
  -229
  -241
  -254
  -267
  -281
  -295
  -310
  -326
  -343
  -360
  -378
  -397
  -417
  -438
  -460
  -483
  -507
  -533
  -560
Free cash flow, $m
  137
  151
  167
  183
  199
  217
  235
  253
  273
  293
  311
  332
  355
  379
  403
  429
  455
  483
  511
  541
  573
  605
  639
  674
  711
  750
  791
  833
  877
  923
Issuance/(repayment) of debt, $m
  118
  123
  128
  133
  139
  144
  150
  156
  162
  168
  175
  182
  189
  197
  205
  214
  223
  232
  243
  253
  264
  276
  289
  302
  316
  330
  346
  362
  379
  397
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  118
  123
  128
  133
  139
  144
  150
  156
  162
  168
  175
  182
  189
  197
  205
  214
  223
  232
  243
  253
  264
  276
  289
  302
  316
  330
  346
  362
  379
  397
Total cash flow (excl. dividends), $m
  255
  274
  295
  316
  338
  361
  385
  409
  435
  462
  486
  514
  545
  576
  608
  643
  678
  715
  754
  795
  837
  881
  928
  976
  1,027
  1,081
  1,136
  1,195
  1,256
  1,320
Retained Cash Flow (-), $m
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -88
  -92
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -131
  -137
  -143
  -149
  -156
  -163
  -171
  -178
  -187
  -195
  -205
  -214
  -224
Prev. year cash balance distribution, $m
  249
  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
  438
  205
  222
  241
  260
  279
  300
  321
  343
  366
  387
  412
  438
  464
  493
  522
  552
  584
  617
  652
  688
  725
  765
  806
  849
  894
  941
  990
  1,042
  1,096
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  415
  184
  187
  189
  189
  187
  184
  179
  172
  164
  153
  143
  131
  120
  107
  95
  83
  71
  61
  50
  41
  33
  26
  20
  15
  11
  8
  6
  4
  3
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Ritchie Bros Auctioneers Inc is a Canada-based holding company. The Company is an industrial auctioneer and used equipment distributor, selling used equipment and other assets. Its segments include Core Auction, which is a network of auction locations that conduct live, unreserved auctions with both on-site and online bidding, and Other, which includes its EquipmentOne and Mascus International Holding B.V. (Mascus) online services. EquipmentOne is an online marketplace that equipment sellers can navigate independently. EquipmentOne facilitates the completion of sales through a settlement process managed by EquipmentOne that protects both the seller and the buyer. Mascus is an online equipment listing service for used heavy machinery and trucks. It offers subscriptions to equipment dealers, brokers, exporters and equipment manufacturers to list equipment available for sale at a listed price. The Company, through Mascus, provides online advertising services, business tools and solutions.

FINANCIAL RATIOS  of  Ritchie Bros. Auctioneers Incorporated (RBA)

Valuation Ratios
P/E Ratio 38.6
Price to Sales 6.3
Price to Book 5.2
Price to Tangible Book
Price to Cash Flow 19.9
Price to Free Cash Flow 22.4
Growth Rates
Sales Growth Rate 9.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.3%
Cap. Spend. - 3 Yr. Gr. Rate -11.9%
Financial Strength
Quick Ratio 9
Current Ratio 0.2
LT Debt to Equity 86.7%
Total Debt to Equity 90.2%
Interest Coverage 23
Management Effectiveness
Return On Assets 7.1%
Ret/ On Assets - 3 Yr. Avg. 9.3%
Return On Total Capital 8.7%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 13.2%
Return On Equity - 3 Yr. Avg. 15.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 88.4%
Gross Margin - 3 Yr. Avg. 88.8%
EBITDA Margin 31.2%
EBITDA Margin - 3 Yr. Avg. 37.2%
Operating Margin 22.7%
Oper. Margin - 3 Yr. Avg. 27.7%
Pre-Tax Margin 23%
Pre-Tax Margin - 3 Yr. Avg. 28%
Net Profit Margin 16.2%
Net Profit Margin - 3 Yr. Avg. 20.5%
Effective Tax Rate 28.4%
Eff/ Tax Rate - 3 Yr. Avg. 26%
Payout Ratio 76.6%

RBA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RBA stock intrinsic value calculation we used $765 million for the last fiscal year's total revenue generated by Ritchie Bros. Auctioneers Incorporated. The default revenue input number comes from 2016 income statement of Ritchie Bros. Auctioneers Incorporated. 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 RBA stock valuation model: a) initial revenue growth rate of 9.8% 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 5.4%, whose default value for RBA is calculated based on our internal credit rating of Ritchie Bros. Auctioneers Incorporated, 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 Ritchie Bros. Auctioneers Incorporated.
    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 RBA stock the variable cost ratio is equal to 66.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for RBA 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 Ritchie Bros. Auctioneers Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Ritchie Bros. Auctioneers Incorporated. 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 RBA 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 RBA are equal to 102.7%.

Life of production assets of 16.6 years is the average useful life of capital assets used in Ritchie Bros. Auctioneers Incorporated 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 RBA is equal to -10.5%. 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 - $928 million for Ritchie Bros. Auctioneers Incorporated - 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 107.067 million for Ritchie Bros. Auctioneers Incorporated 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 Ritchie Bros. Auctioneers Incorporated at the current share price and the inputted number of shares is $4.8 billion.

RELATED COMPANIES Price Int.Val. Rating
TIH Toromont Indus 56.01 50.91  hold
FTT Finning Intern 32.80 2.65  str.sell
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

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

Copyright © X-FIN.com 2005-2018. All rigths reserved.