Intrinsic value of ATS Automation Tooling Systems Inc. - ATA

Previous Close

$13.39

  Intrinsic Value

$21.24

stock screener

  Rating & Target

str. buy

+59%

  Value-price divergence*

-41%

Previous close

$13.39

 
Intrinsic value

$21.24

 
Up/down potential

+59%

 
Rating

str. buy

 
Value-price divergence*

-41%

*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 2017), $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 1.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -2.79
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  1,011
  1,089
  1,170
  1,254
  1,341
  1,432
  1,526
  1,625
  1,727
  1,833
  1,944
  2,060
  2,180
  2,306
  2,437
  2,574
  2,717
  2,866
  3,022
  3,186
  3,357
  3,535
  3,723
  3,919
  4,124
  4,339
  4,564
  4,801
  5,048
  5,308
  5,580
Variable operating expenses, $m
 
  898
  962
  1,028
  1,097
  1,168
  1,242
  1,320
  1,400
  1,484
  1,571
  1,619
  1,714
  1,813
  1,916
  2,023
  2,136
  2,253
  2,376
  2,504
  2,639
  2,779
  2,927
  3,081
  3,242
  3,411
  3,588
  3,774
  3,969
  4,173
  4,387
Fixed operating expenses, $m
 
  108
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
  181
  185
  190
  195
  200
  205
  210
  215
  220
Total operating expenses, $m
  939
  1,006
  1,072
  1,141
  1,213
  1,287
  1,364
  1,445
  1,528
  1,615
  1,705
  1,757
  1,855
  1,958
  2,064
  2,175
  2,292
  2,413
  2,540
  2,672
  2,811
  2,955
  3,108
  3,266
  3,432
  3,606
  3,788
  3,979
  4,179
  4,388
  4,607
Operating income, $m
  72
  83
  98
  113
  129
  145
  162
  180
  199
  219
  239
  303
  325
  348
  373
  398
  425
  453
  483
  513
  546
  580
  615
  653
  692
  733
  777
  822
  870
  920
  973
EBITDA, $m
  106
  137
  152
  169
  185
  203
  221
  240
  260
  281
  302
  325
  349
  373
  399
  426
  454
  484
  515
  548
  582
  618
  656
  695
  737
  780
  826
  874
  924
  978
  1,033
Interest expense (income), $m
  23
  23
  27
  30
  34
  39
  43
  47
  52
  57
  62
  67
  73
  78
  84
  91
  97
  104
  111
  118
  126
  134
  143
  152
  161
  171
  181
  192
  203
  215
  227
Earnings before tax, $m
  46
  60
  71
  82
  94
  107
  119
  133
  147
  162
  177
  235
  252
  270
  288
  308
  328
  349
  371
  395
  419
  445
  472
  501
  531
  562
  595
  630
  667
  705
  746
Tax expense, $m
  11
  16
  19
  22
  25
  29
  32
  36
  40
  44
  48
  64
  68
  73
  78
  83
  89
  94
  100
  107
  113
  120
  128
  135
  143
  152
  161
  170
  180
  190
  201
Net income, $m
  35
  44
  52
  60
  69
  78
  87
  97
  107
  118
  129
  172
  184
  197
  210
  225
  239
  255
  271
  288
  306
  325
  345
  366
  388
  410
  435
  460
  487
  515
  544

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  287
  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
  1,375
  1,172
  1,259
  1,350
  1,444
  1,541
  1,643
  1,749
  1,859
  1,973
  2,093
  2,217
  2,347
  2,482
  2,623
  2,770
  2,924
  3,085
  3,253
  3,429
  3,613
  3,806
  4,007
  4,218
  4,439
  4,671
  4,913
  5,168
  5,434
  5,713
  6,006
Adjusted assets (=assets-cash), $m
  1,088
  1,172
  1,259
  1,350
  1,444
  1,541
  1,643
  1,749
  1,859
  1,973
  2,093
  2,217
  2,347
  2,482
  2,623
  2,770
  2,924
  3,085
  3,253
  3,429
  3,613
  3,806
  4,007
  4,218
  4,439
  4,671
  4,913
  5,168
  5,434
  5,713
  6,006
Revenue / Adjusted assets
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
Average production assets, $m
  202
  218
  234
  251
  268
  286
  305
  325
  345
  367
  389
  412
  436
  461
  487
  515
  543
  573
  604
  637
  671
  707
  745
  784
  825
  868
  913
  960
  1,010
  1,062
  1,116
Working capital, $m
  365
  86
  92
  99
  106
  113
  121
  128
  136
  145
  154
  163
  172
  182
  193
  203
  215
  226
  239
  252
  265
  279
  294
  310
  326
  343
  361
  379
  399
  419
  441
Total debt, $m
  329
  380
  435
  492
  551
  613
  677
  744
  813
  885
  961
  1,039
  1,121
  1,206
  1,295
  1,388
  1,485
  1,587
  1,693
  1,804
  1,920
  2,041
  2,169
  2,302
  2,441
  2,587
  2,740
  2,901
  3,069
  3,245
  3,430
Total liabilities, $m
  689
  740
  795
  852
  911
  973
  1,037
  1,104
  1,173
  1,245
  1,321
  1,399
  1,481
  1,566
  1,655
  1,748
  1,845
  1,947
  2,053
  2,164
  2,280
  2,401
  2,529
  2,662
  2,801
  2,947
  3,100
  3,261
  3,429
  3,605
  3,790
Total equity, $m
  686
  432
  465
  498
  533
  569
  606
  645
  686
  728
  772
  818
  866
  916
  968
  1,022
  1,079
  1,138
  1,200
  1,265
  1,333
  1,404
  1,479
  1,557
  1,638
  1,723
  1,813
  1,907
  2,005
  2,108
  2,216
Total liabilities and equity, $m
  1,375
  1,172
  1,260
  1,350
  1,444
  1,542
  1,643
  1,749
  1,859
  1,973
  2,093
  2,217
  2,347
  2,482
  2,623
  2,770
  2,924
  3,085
  3,253
  3,429
  3,613
  3,805
  4,008
  4,219
  4,439
  4,670
  4,913
  5,168
  5,434
  5,713
  6,006
Debt-to-equity ratio
  0.480
  0.880
  0.940
  0.990
  1.030
  1.080
  1.120
  1.150
  1.190
  1.220
  1.240
  1.270
  1.290
  1.320
  1.340
  1.360
  1.380
  1.390
  1.410
  1.430
  1.440
  1.450
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.550
Adjusted equity ratio
  0.368
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369
  0.369

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  35
  44
  52
  60
  69
  78
  87
  97
  107
  118
  129
  172
  184
  197
  210
  225
  239
  255
  271
  288
  306
  325
  345
  366
  388
  410
  435
  460
  487
  515
  544
Depreciation, amort., depletion, $m
  34
  54
  55
  56
  57
  58
  59
  60
  61
  62
  63
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  45
  47
  49
  52
  55
  57
  60
Funds from operations, $m
  185
  98
  107
  116
  126
  136
  146
  157
  168
  180
  193
  194
  208
  222
  237
  252
  269
  286
  304
  323
  342
  363
  385
  408
  432
  457
  484
  512
  541
  572
  605
Change in working capital, $m
  57
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  20
  21
  21
Cash from operations, $m
  128
  92
  100
  109
  119
  128
  139
  149
  160
  172
  184
  185
  198
  212
  226
  242
  257
  274
  291
  310
  329
  349
  370
  393
  416
  440
  466
  493
  522
  552
  583
Maintenance CAPEX, $m
  0
  -11
  -12
  -13
  -14
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
  -57
New CAPEX, $m
  -18
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -54
Cash from investing activities, $m
  -18
  -27
  -28
  -30
  -31
  -32
  -34
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -53
  -57
  -59
  -62
  -66
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -96
  -102
  -107
  -111
Free cash flow, $m
  110
  65
  72
  80
  88
  96
  104
  113
  122
  132
  142
  141
  152
  163
  175
  188
  201
  215
  229
  244
  260
  277
  295
  313
  332
  353
  374
  397
  420
  445
  471
Issuance/(repayment) of debt, $m
  -5
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  185
Issuance/(repurchase) of shares, $m
  12
  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  
  7
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  185
Total cash flow (excl. dividends), $m
  117
  118
  127
  137
  147
  157
  168
  180
  192
  204
  217
  219
  234
  249
  264
  281
  298
  316
  335
  355
  376
  399
  422
  446
  472
  499
  527
  557
  589
  622
  656
Retained Cash Flow (-), $m
  -36
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -85
  -90
  -94
  -98
  -103
  -108
Prev. year cash balance distribution, $m
 
  285
  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
 
  371
  95
  104
  112
  121
  131
  141
  151
  162
  173
  173
  186
  199
  212
  226
  241
  257
  273
  291
  309
  328
  347
  368
  390
  413
  438
  463
  490
  518
  548
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  356
  87
  90
  92
  94
  95
  95
  94
  93
  91
  82
  79
  76
  71
  66
  61
  56
  50
  45
  39
  34
  29
  24
  20
  16
  13
  10
  8
  6
  4
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 35.4
Price to Sales 1.2
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 11.3
Growth Rates
Sales Growth Rate -2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12.5%
Cap. Spend. - 3 Yr. Gr. Rate 10.4%
Financial Strength
Quick Ratio 144
Current Ratio 0.5
LT Debt to Equity 47.7%
Total Debt to Equity 48%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 5.3%
Return On Equity 5.2%
Return On Equity - 3 Yr. Avg. 7.3%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 24.8%
Gross Margin - 3 Yr. Avg. 25.3%
EBITDA Margin 10.2%
EBITDA Margin - 3 Yr. Avg. 10.6%
Operating Margin 7.1%
Oper. Margin - 3 Yr. Avg. 7.2%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 5.1%
Net Profit Margin 3.5%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 23.9%
Eff/ Tax Rate - 3 Yr. Avg. 24.3%
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 $1011 million for the last fiscal year's total revenue generated by ATS Automation Tooling Systems Inc.. The default revenue input number comes from 2017 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 7.7% 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 4.3%, 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 82.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $105 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 7% 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 20%.

Life of production assets of 18.5 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 7.9%. 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 - $686 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 93.487 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 $1.3 billion.

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Stock chart of ATA Financial statements of ATA
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.

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