Intrinsic value of ATS Automation Tooling Systems Inc. - ATA

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$12.38

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$12.38

 
Intrinsic value

$17.77

 
Up/down potential

+44%

 
Rating

buy

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

We calculate the intrinsic value of ATA 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 1.1

 

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, %
  11.11
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
Revenue, $m
  1,040
  1,155
  1,277
  1,404
  1,536
  1,674
  1,818
  1,968
  2,124
  2,286
  2,455
  2,629
  2,811
  3,000
  3,197
  3,401
  3,614
  3,836
  4,066
  4,307
  4,558
  4,819
  5,093
  5,378
  5,676
  5,987
  6,313
  6,653
  7,010
  7,382
  7,773
Variable operating expenses, $m
 
  1,040
  1,144
  1,254
  1,368
  1,487
  1,612
  1,741
  1,875
  2,015
  2,160
  2,268
  2,425
  2,588
  2,757
  2,933
  3,117
  3,308
  3,507
  3,715
  3,931
  4,157
  4,392
  4,638
  4,895
  5,164
  5,444
  5,738
  6,045
  6,367
  6,704
Fixed operating expenses, $m
 
  25
  25
  26
  26
  27
  28
  29
  29
  30
  31
  31
  32
  33
  34
  35
  36
  37
  37
  38
  39
  40
  41
  42
  43
  44
  46
  47
  48
  49
  50
Total operating expenses, $m
  963
  1,065
  1,169
  1,280
  1,394
  1,514
  1,640
  1,770
  1,904
  2,045
  2,191
  2,299
  2,457
  2,621
  2,791
  2,968
  3,153
  3,345
  3,544
  3,753
  3,970
  4,197
  4,433
  4,680
  4,938
  5,208
  5,490
  5,785
  6,093
  6,416
  6,754
Operating income, $m
  77
  91
  107
  124
  142
  160
  179
  199
  220
  241
  264
  330
  354
  380
  406
  433
  461
  491
  522
  554
  588
  623
  659
  697
  737
  779
  823
  868
  916
  966
  1,019
EBITDA, $m
  117
  151
  169
  188
  207
  228
  249
  271
  294
  318
  343
  369
  396
  424
  453
  483
  514
  547
  582
  617
  654
  693
  734
  776
  821
  867
  915
  966
  1,019
  1,075
  1,133
Interest expense (income), $m
  17
  17
  22
  26
  31
  36
  41
  47
  52
  58
  64
  71
  77
  84
  91
  98
  106
  114
  122
  131
  140
  149
  159
  170
  180
  191
  203
  215
  228
  241
  255
Earnings before tax, $m
  50
  74
  85
  98
  111
  124
  138
  152
  167
  183
  199
  260
  277
  296
  315
  335
  355
  377
  400
  423
  448
  473
  500
  528
  557
  588
  620
  653
  688
  725
  763
Tax expense, $m
  10
  20
  23
  26
  30
  33
  37
  41
  45
  49
  54
  70
  75
  80
  85
  90
  96
  102
  108
  114
  121
  128
  135
  143
  150
  159
  167
  176
  186
  196
  206
Net income, $m
  40
  54
  62
  71
  81
  90
  101
  111
  122
  134
  146
  190
  202
  216
  230
  244
  259
  275
  292
  309
  327
  345
  365
  385
  407
  429
  452
  477
  502
  529
  557

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  170
  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
  1,367
  1,330
  1,469
  1,615
  1,768
  1,927
  2,093
  2,265
  2,444
  2,631
  2,825
  3,026
  3,235
  3,453
  3,679
  3,914
  4,159
  4,414
  4,679
  4,956
  5,245
  5,546
  5,860
  6,188
  6,531
  6,890
  7,264
  7,656
  8,066
  8,495
  8,944
Adjusted assets (=assets-cash), $m
  1,197
  1,330
  1,469
  1,615
  1,768
  1,927
  2,093
  2,265
  2,444
  2,631
  2,825
  3,026
  3,235
  3,453
  3,679
  3,914
  4,159
  4,414
  4,679
  4,956
  5,245
  5,546
  5,860
  6,188
  6,531
  6,890
  7,264
  7,656
  8,066
  8,495
  8,944
Revenue / Adjusted assets
  0.869
  0.868
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
  0.869
Average production assets, $m
  258
  287
  317
  348
  381
  415
  451
  488
  527
  567
  609
  652
  697
  744
  793
  844
  896
  951
  1,008
  1,068
  1,130
  1,195
  1,263
  1,334
  1,408
  1,485
  1,566
  1,650
  1,738
  1,831
  1,928
Working capital, $m
  304
  157
  174
  191
  209
  228
  247
  268
  289
  311
  334
  358
  382
  408
  435
  463
  492
  522
  553
  586
  620
  655
  693
  731
  772
  814
  859
  905
  953
  1,004
  1,057
Total debt, $m
  324
  395
  478
  565
  655
  750
  848
  950
  1,057
  1,167
  1,282
  1,401
  1,525
  1,654
  1,788
  1,928
  2,073
  2,224
  2,382
  2,546
  2,717
  2,896
  3,082
  3,277
  3,480
  3,693
  3,915
  4,147
  4,390
  4,645
  4,911
Total liabilities, $m
  717
  788
  871
  958
  1,048
  1,143
  1,241
  1,343
  1,450
  1,560
  1,675
  1,794
  1,918
  2,047
  2,181
  2,321
  2,466
  2,617
  2,775
  2,939
  3,110
  3,289
  3,475
  3,670
  3,873
  4,086
  4,308
  4,540
  4,783
  5,038
  5,304
Total equity, $m
  650
  541
  598
  657
  719
  784
  852
  922
  995
  1,071
  1,150
  1,232
  1,317
  1,405
  1,497
  1,593
  1,693
  1,796
  1,904
  2,017
  2,135
  2,257
  2,385
  2,519
  2,658
  2,804
  2,957
  3,116
  3,283
  3,458
  3,640
Total liabilities and equity, $m
  1,367
  1,329
  1,469
  1,615
  1,767
  1,927
  2,093
  2,265
  2,445
  2,631
  2,825
  3,026
  3,235
  3,452
  3,678
  3,914
  4,159
  4,413
  4,679
  4,956
  5,245
  5,546
  5,860
  6,189
  6,531
  6,890
  7,265
  7,656
  8,066
  8,496
  8,944
Debt-to-equity ratio
  0.498
  0.730
  0.800
  0.860
  0.910
  0.960
  1.000
  1.030
  1.060
  1.090
  1.120
  1.140
  1.160
  1.180
  1.190
  1.210
  1.220
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.320
  1.330
  1.340
  1.340
  1.350
Adjusted equity ratio
  0.403
  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

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  40
  54
  62
  71
  81
  90
  101
  111
  122
  134
  146
  190
  202
  216
  230
  244
  259
  275
  292
  309
  327
  345
  365
  385
  407
  429
  452
  477
  502
  529
  557
Depreciation, amort., depletion, $m
  40
  60
  62
  64
  66
  68
  70
  72
  74
  77
  79
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  83
  88
  93
  98
  103
  108
  114
Funds from operations, $m
  5
  114
  124
  135
  146
  158
  171
  183
  197
  210
  225
  228
  244
  260
  277
  294
  312
  331
  351
  372
  394
  416
  440
  464
  490
  517
  545
  574
  605
  637
  671
Change in working capital, $m
  -31
  16
  16
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
Cash from operations, $m
  36
  88
  108
  118
  128
  139
  151
  163
  175
  188
  202
  204
  219
  234
  250
  266
  284
  301
  320
  339
  359
  380
  402
  425
  449
  474
  501
  528
  557
  587
  618
Maintenance CAPEX, $m
  0
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -79
  -83
  -88
  -93
  -98
  -103
  -108
New CAPEX, $m
  -16
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -97
Cash from investing activities, $m
  9
  -44
  -47
  -50
  -54
  -57
  -61
  -64
  -68
  -71
  -76
  -79
  -84
  -88
  -93
  -98
  -103
  -108
  -113
  -120
  -125
  -132
  -139
  -146
  -153
  -160
  -169
  -177
  -186
  -195
  -205
Free cash flow, $m
  45
  44
  61
  68
  75
  83
  91
  99
  108
  117
  127
  125
  135
  146
  157
  169
  181
  193
  206
  220
  234
  249
  264
  280
  297
  314
  332
  351
  371
  391
  413
Issuance/(repayment) of debt, $m
  13
  78
  83
  87
  90
  94
  98
  102
  106
  111
  115
  119
  124
  129
  134
  140
  145
  151
  157
  164
  171
  179
  186
  195
  203
  213
  222
  232
  243
  254
  266
Issuance/(repurchase) of shares, $m
  3
  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  
  16
  78
  83
  87
  90
  94
  98
  102
  106
  111
  115
  119
  124
  129
  134
  140
  145
  151
  157
  164
  171
  179
  186
  195
  203
  213
  222
  232
  243
  254
  266
Total cash flow (excl. dividends), $m
  64
  123
  144
  154
  165
  177
  189
  201
  214
  228
  242
  244
  259
  275
  291
  308
  326
  345
  364
  384
  405
  427
  450
  475
  500
  526
  554
  583
  614
  646
  679
Retained Cash Flow (-), $m
  -79
  -54
  -57
  -59
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -104
  -108
  -113
  -117
  -123
  -128
  -134
  -140
  -146
  -152
  -159
  -167
  -175
  -183
Prev. year cash balance distribution, $m
 
  163
  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
 
  232
  87
  95
  103
  112
  121
  131
  141
  152
  163
  162
  174
  186
  199
  213
  226
  241
  256
  271
  288
  305
  322
  341
  360
  381
  402
  424
  447
  471
  497
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  222
  79
  82
  84
  85
  86
  86
  86
  84
  82
  73
  70
  66
  62
  57
  53
  47
  42
  37
  32
  27
  23
  19
  15
  12
  9
  7
  5
  4
  3
Current shareholders' claim on cash, %
  100
  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

ATS Automation Tooling Systems Inc. provides factory automation solutions worldwide. It engages in planning, designing, building, commissioning, and servicing automated manufacturing and assembly systems, including automation products and test solutions. The company’s products comprise ATS Supertrak, a modular conveyor system; ATS850 clean room conveyor for applications requiring reliability, cleanliness, and non-contact queuing; ATS OmniTrak optimal solution; LogiTrack automated electrified monorail for transporting heavy workloads through assembly operations; and sortimat Birkman, a feeder technology for sorting, transporting, and separating parts. It also offers Sortimat Clearliner, a tray handler for clean room requirement; Sortimat Workliner tray handling technology; ATS Cortex system, a vision device that reduces integration time with standardized hardware and software; ATS SmartVision software, a PC-based vision system; and ATS Flexsys laser system, a laser solution for reproducible laser processing in automated assembly lines. In addition, the company provides pre and post automation solutions; and technical support, knowledge transfer and training, line moves, and modelling services. Further, it offers tube filling and cartoning machinery for the pharmaceutical and personal care industries. The company serves life sciences, chemicals, consumer products, electronics, food, beverage, transportation, energy, and oil and gas industries. ATS Automation Tooling Systems Inc. was founded in 1978 and is headquartered in Cambridge, Canada.

FINANCIAL RATIOS  of  ATS Automation Tooling Systems Inc. (ATA)

Valuation Ratios
P/E Ratio 28.6
Price to Sales 1.1
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 31.7
Price to Free Cash Flow 57.1
Growth Rates
Sales Growth Rate 11.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.1%
Cap. Spend. - 3 Yr. Gr. Rate 4.2%
Financial Strength
Quick Ratio 24
Current Ratio 0.7
LT Debt to Equity 48.8%
Total Debt to Equity 49.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8.6%
Return On Equity 6.6%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 24.9%
Gross Margin - 3 Yr. Avg. 25.9%
EBITDA Margin 10.3%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin 7.4%
Oper. Margin - 3 Yr. Avg. 7.8%
Pre-Tax Margin 4.8%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 3.8%
Net Profit Margin - 3 Yr. Avg. 6.3%
Effective Tax Rate 20%
Eff/ Tax Rate - 3 Yr. Avg. 21.5%
Payout Ratio 0%

ATA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATA stock intrinsic value calculation we used $1040 million for the last fiscal year's total revenue generated by ATS Automation Tooling Systems Inc.. The default revenue input number comes from 2016 income statement of ATS Automation Tooling Systems Inc.. 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 ATA stock valuation model: a) initial revenue growth rate of 11.1% 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 4.6%, whose default value for ATA is calculated based on our internal credit rating of ATS Automation Tooling Systems Inc., 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 ATS Automation Tooling Systems Inc..
    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 ATA stock the variable cost ratio is equal to 90.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $24 million in the base year in the intrinsic value calculation for ATA 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 5.5% for ATS Automation Tooling Systems Inc..

Corporate tax rate of 27% is the nominal tax rate for ATS Automation Tooling Systems Inc.. 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 ATA 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 ATA are equal to 24.8%.

Life of production assets of 16.9 years is the average useful life of capital assets used in ATS Automation Tooling Systems Inc. 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 ATA is equal to 13.6%. 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 - $650 million for ATS Automation Tooling Systems Inc. - 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 92.579 million for ATS Automation Tooling Systems Inc. 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 ATS Automation Tooling Systems Inc. at the current share price and the inputted number of shares is $1.1 billion.


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

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