Intrinsic value of Ritchie Bros. Auctioneers Incorporated - RBA

Previous Close

$41.96

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$41.96

 
Intrinsic value

$20.27

 
Up/down potential

-52%

 
Rating

str. sell

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

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 4.5

 

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, %
  9.76
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  765
  780
  798
  819
  842
  867
  895
  926
  959
  994
  1,033
  1,073
  1,117
  1,163
  1,213
  1,265
  1,320
  1,379
  1,441
  1,507
  1,576
  1,649
  1,726
  1,807
  1,893
  1,983
  2,078
  2,178
  2,283
  2,393
  2,509
Variable operating expenses, $m
 
  534
  546
  560
  575
  592
  611
  631
  653
  677
  703
  717
  746
  777
  810
  845
  882
  921
  962
  1,006
  1,052
  1,101
  1,152
  1,207
  1,264
  1,324
  1,387
  1,454
  1,524
  1,598
  1,676
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
  591
  534
  546
  560
  575
  592
  611
  631
  653
  677
  703
  717
  746
  777
  810
  845
  882
  921
  962
  1,006
  1,052
  1,101
  1,152
  1,207
  1,264
  1,324
  1,387
  1,454
  1,524
  1,598
  1,676
Operating income, $m
  174
  246
  252
  259
  266
  275
  284
  294
  305
  317
  330
  357
  371
  387
  403
  420
  439
  458
  479
  501
  524
  548
  573
  600
  629
  659
  690
  723
  758
  795
  834
EBITDA, $m
  229
  308
  315
  323
  332
  342
  353
  365
  378
  392
  407
  423
  440
  458
  478
  499
  520
  544
  568
  594
  621
  650
  680
  712
  746
  781
  819
  858
  900
  943
  989
Interest expense (income), $m
  8
  28
  29
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  73
  77
  81
  85
  90
  95
  100
  106
  112
  118
Earnings before tax, $m
  176
  218
  223
  229
  235
  243
  250
  259
  268
  278
  289
  314
  326
  339
  353
  367
  383
  399
  417
  435
  455
  475
  497
  519
  543
  569
  595
  623
  653
  684
  716
Tax expense, $m
  50
  59
  60
  62
  64
  65
  68
  70
  72
  75
  78
  85
  88
  92
  95
  99
  103
  108
  113
  118
  123
  128
  134
  140
  147
  154
  161
  168
  176
  185
  193
Net income, $m
  124
  159
  163
  167
  172
  177
  183
  189
  196
  203
  211
  229
  238
  247
  258
  268
  280
  292
  304
  318
  332
  347
  363
  379
  397
  415
  435
  455
  476
  499
  523

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  281
  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
  2,161
  1,917
  1,961
  2,012
  2,068
  2,131
  2,200
  2,275
  2,356
  2,443
  2,537
  2,637
  2,744
  2,858
  2,979
  3,108
  3,244
  3,388
  3,541
  3,702
  3,872
  4,051
  4,241
  4,440
  4,650
  4,872
  5,105
  5,350
  5,608
  5,880
  6,166
Adjusted assets (=assets-cash), $m
  1,880
  1,917
  1,961
  2,012
  2,068
  2,131
  2,200
  2,275
  2,356
  2,443
  2,537
  2,637
  2,744
  2,858
  2,979
  3,108
  3,244
  3,388
  3,541
  3,702
  3,872
  4,051
  4,241
  4,440
  4,650
  4,872
  5,105
  5,350
  5,608
  5,880
  6,166
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
  0.407
Average production assets, $m
  786
  801
  820
  841
  865
  891
  919
  951
  985
  1,021
  1,060
  1,102
  1,147
  1,195
  1,245
  1,299
  1,356
  1,416
  1,480
  1,547
  1,618
  1,693
  1,773
  1,856
  1,944
  2,036
  2,134
  2,236
  2,344
  2,458
  2,577
Working capital, $m
  169
  -82
  -84
  -86
  -88
  -91
  -94
  -97
  -101
  -104
  -108
  -113
  -117
  -122
  -127
  -133
  -139
  -145
  -151
  -158
  -165
  -173
  -181
  -190
  -199
  -208
  -218
  -229
  -240
  -251
  -263
Total debt, $m
  837
  829
  857
  889
  926
  966
  1,010
  1,058
  1,109
  1,165
  1,225
  1,289
  1,358
  1,430
  1,508
  1,590
  1,677
  1,769
  1,867
  1,969
  2,078
  2,193
  2,314
  2,441
  2,576
  2,717
  2,866
  3,023
  3,188
  3,361
  3,544
Total liabilities, $m
  1,233
  1,225
  1,253
  1,285
  1,322
  1,362
  1,406
  1,454
  1,505
  1,561
  1,621
  1,685
  1,754
  1,826
  1,904
  1,986
  2,073
  2,165
  2,263
  2,365
  2,474
  2,589
  2,710
  2,837
  2,972
  3,113
  3,262
  3,419
  3,584
  3,757
  3,940
Total equity, $m
  928
  692
  708
  726
  747
  769
  794
  821
  850
  882
  916
  952
  991
  1,032
  1,076
  1,122
  1,171
  1,223
  1,278
  1,336
  1,398
  1,463
  1,531
  1,603
  1,679
  1,759
  1,843
  1,931
  2,025
  2,123
  2,226
Total liabilities and equity, $m
  2,161
  1,917
  1,961
  2,011
  2,069
  2,131
  2,200
  2,275
  2,355
  2,443
  2,537
  2,637
  2,745
  2,858
  2,980
  3,108
  3,244
  3,388
  3,541
  3,701
  3,872
  4,052
  4,241
  4,440
  4,651
  4,872
  5,105
  5,350
  5,609
  5,880
  6,166
Debt-to-equity ratio
  0.902
  1.200
  1.210
  1.220
  1.240
  1.260
  1.270
  1.290
  1.300
  1.320
  1.340
  1.350
  1.370
  1.390
  1.400
  1.420
  1.430
  1.450
  1.460
  1.470
  1.490
  1.500
  1.510
  1.520
  1.530
  1.540
  1.560
  1.570
  1.570
  1.580
  1.590
Adjusted equity ratio
  0.344
  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
  124
  159
  163
  167
  172
  177
  183
  189
  196
  203
  211
  229
  238
  247
  258
  268
  280
  292
  304
  318
  332
  347
  363
  379
  397
  415
  435
  455
  476
  499
  523
Depreciation, amort., depletion, $m
  55
  61
  63
  64
  65
  67
  69
  70
  73
  75
  77
  66
  69
  72
  75
  78
  82
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  135
  141
  148
  155
Funds from operations, $m
  254
  221
  225
  231
  237
  244
  251
  260
  268
  278
  288
  295
  307
  319
  333
  347
  361
  377
  393
  411
  429
  449
  469
  491
  514
  538
  563
  590
  618
  647
  678
Change in working capital, $m
  14
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
Cash from operations, $m
  240
  231
  227
  233
  240
  247
  254
  263
  272
  282
  292
  300
  312
  324
  338
  352
  367
  383
  400
  418
  437
  457
  477
  500
  523
  547
  573
  600
  629
  659
  690
Maintenance CAPEX, $m
  0
  -47
  -48
  -49
  -51
  -52
  -54
  -55
  -57
  -59
  -62
  -64
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
New CAPEX, $m
  -26
  -16
  -18
  -21
  -24
  -26
  -29
  -31
  -34
  -37
  -39
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -88
  -93
  -97
  -103
  -108
  -114
  -119
Cash from investing activities, $m
  -158
  -63
  -66
  -70
  -75
  -78
  -83
  -86
  -91
  -96
  -101
  -106
  -111
  -117
  -123
  -129
  -135
  -142
  -149
  -156
  -164
  -172
  -181
  -190
  -200
  -210
  -220
  -232
  -243
  -255
  -267
Free cash flow, $m
  82
  167
  161
  163
  165
  168
  172
  176
  181
  186
  191
  194
  200
  208
  215
  223
  232
  241
  251
  261
  272
  284
  296
  309
  323
  338
  353
  369
  386
  404
  423
Issuance/(repayment) of debt, $m
  685
  24
  28
  32
  36
  40
  44
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
  127
  134
  141
  149
  157
  165
  174
  183
Issuance/(repurchase) of shares, $m
  -17
  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  
  641
  24
  28
  32
  36
  40
  44
  48
  52
  56
  60
  64
  68
  73
  77
  82
  87
  92
  97
  103
  109
  115
  121
  127
  134
  141
  149
  157
  165
  174
  183
Total cash flow (excl. dividends), $m
  723
  192
  189
  195
  201
  208
  216
  224
  233
  242
  251
  258
  269
  280
  293
  305
  319
  333
  348
  364
  381
  399
  417
  437
  457
  479
  502
  526
  551
  577
  605
Retained Cash Flow (-), $m
  22
  -13
  -16
  -18
  -20
  -23
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -65
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
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
 
  427
  173
  177
  181
  186
  191
  197
  203
  210
  217
  222
  230
  239
  249
  259
  270
  281
  293
  306
  320
  334
  349
  365
  382
  399
  418
  437
  458
  479
  502
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
 
  406
  155
  148
  142
  135
  128
  121
  113
  105
  97
  88
  80
  72
  64
  56
  49
  42
  36
  30
  25
  20
  16
  13
  10
  7
  5
  4
  3
  2
  1
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

Ritchie Bros. Auctioneers Incorporated, together with its subsidiaries, sells industrial equipment and other assets for the construction, agricultural, transportation, energy, mining, forestry, material handling, marine, and real estate industries through its unreserved auctions and online marketplaces. The company operates through two segments, Core Auction and EquipmentOne. The Core Auction segment operates a network of auction locations that conduct live and unreserved auctions with on-site and online bidding. The EquipmentOne segment operates a secure online marketplace that facilitates private equipment transactions. It also provides technology services, including software and technology solutions to auction companies to conduct live and online bidding; and value added services. The company primarily sells equipment to its customers through unreserved auctions at approximately 44 auction sites in North America, Central America, Europe, the Middle East, Australia, New Zealand, and Asia. Ritchie Bros. Auctioneers Incorporated was founded in 1958 and is headquartered in Burnaby, Canada.

FINANCIAL RATIOS  of  Ritchie Bros. Auctioneers Incorporated (RBA)

Valuation Ratios
P/E Ratio 36.1
Price to Sales 5.9
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 18.7
Price to Free Cash Flow 20.9
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. 88.5%
EBITDA Margin 31.2%
EBITDA Margin - 3 Yr. Avg. 37.2%
Operating Margin 22.7%
Oper. Margin - 3 Yr. Avg. 26.6%
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 2% 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 68.5%.

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 107.261 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 $4.5 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
TIH Toromont Indus 45.22 prem.  prem.
FTT Finning Intern 25.82 prem.  prem.
Stock chart of RBA Financial statements of RBA
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.