Intrinsic value of A-Mark Precious Metals - AMRK

Previous Close

$17.30

  Intrinsic Value

$29.18

stock screener

  Rating & Target

str. buy

+69%

  Value-price divergence*

-22%

Previous close

$17.30

 
Intrinsic value

$29.18

 
Up/down potential

+69%

 
Rating

str. buy

 
Value-price divergence*

-22%

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

We calculate the intrinsic value of AMRK 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 0.1

 

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, %
  11.76
  14.40
  13.46
  12.61
  11.85
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.65
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.67
  5.61
  5.55
  5.49
  5.44
Revenue, $m
  6,784
  7,761
  8,806
  9,916
  11,092
  12,330
  13,631
  14,994
  16,417
  17,903
  19,450
  21,060
  22,734
  24,474
  26,283
  28,162
  30,115
  32,145
  34,257
  36,453
  38,738
  41,118
  43,597
  46,180
  48,874
  51,684
  54,617
  57,679
  60,879
  64,222
  67,718
Variable operating expenses, $m
 
  7,683
  8,717
  9,817
  10,980
  12,206
  13,494
  14,843
  16,253
  17,723
  19,254
  20,848
  22,505
  24,228
  26,018
  27,878
  29,812
  31,822
  33,911
  36,085
  38,348
  40,704
  43,157
  45,715
  48,381
  51,163
  54,067
  57,098
  60,265
  63,575
  67,035
Fixed operating expenses, $m
 
  53
  55
  56
  57
  59
  60
  62
  63
  65
  67
  68
  70
  72
  73
  75
  77
  79
  81
  83
  85
  87
  90
  92
  94
  96
  99
  101
  104
  106
  109
Total operating expenses, $m
  6,768
  7,736
  8,772
  9,873
  11,037
  12,265
  13,554
  14,905
  16,316
  17,788
  19,321
  20,916
  22,575
  24,300
  26,091
  27,953
  29,889
  31,901
  33,992
  36,168
  38,433
  40,791
  43,247
  45,807
  48,475
  51,259
  54,166
  57,199
  60,369
  63,681
  67,144
Operating income, $m
  16
  24
  34
  43
  54
  65
  77
  89
  102
  115
  129
  144
  159
  175
  191
  208
  226
  245
  264
  284
  305
  327
  350
  373
  398
  424
  451
  480
  509
  541
  573
EBITDA, $m
  17
  26
  35
  45
  55
  67
  78
  91
  104
  117
  131
  146
  161
  177
  194
  211
  229
  248
  267
  288
  309
  331
  354
  378
  403
  429
  457
  486
  516
  547
  580
Interest expense (income), $m
  6
  10
  12
  14
  16
  18
  20
  23
  26
  28
  31
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  71
  76
  81
  86
  91
  96
  102
  108
  114
  121
Earnings before tax, $m
  16
  15
  22
  30
  38
  47
  56
  66
  76
  87
  98
  110
  122
  134
  147
  161
  175
  190
  205
  221
  238
  256
  274
  293
  313
  333
  355
  378
  402
  426
  453
Tax expense, $m
  7
  4
  6
  8
  10
  13
  15
  18
  21
  23
  26
  30
  33
  36
  40
  43
  47
  51
  55
  60
  64
  69
  74
  79
  84
  90
  96
  102
  108
  115
  122
Net income, $m
  9
  11
  16
  22
  28
  34
  41
  48
  55
  63
  71
  80
  89
  98
  108
  118
  128
  139
  150
  162
  174
  187
  200
  214
  228
  243
  259
  276
  293
  311
  330

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  437
  500
  567
  639
  714
  794
  878
  966
  1,058
  1,153
  1,253
  1,357
  1,464
  1,577
  1,693
  1,814
  1,940
  2,071
  2,207
  2,348
  2,495
  2,649
  2,808
  2,975
  3,148
  3,329
  3,518
  3,715
  3,922
  4,137
  4,362
Adjusted assets (=assets-cash), $m
  420
  500
  567
  639
  714
  794
  878
  966
  1,058
  1,153
  1,253
  1,357
  1,464
  1,577
  1,693
  1,814
  1,940
  2,071
  2,207
  2,348
  2,495
  2,649
  2,808
  2,975
  3,148
  3,329
  3,518
  3,715
  3,922
  4,137
  4,362
Revenue / Adjusted assets
  16.152
  15.522
  15.531
  15.518
  15.535
  15.529
  15.525
  15.522
  15.517
  15.527
  15.523
  15.520
  15.529
  15.519
  15.525
  15.525
  15.523
  15.521
  15.522
  15.525
  15.526
  15.522
  15.526
  15.523
  15.525
  15.525
  15.525
  15.526
  15.522
  15.524
  15.525
Average production assets, $m
  5
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
Working capital, $m
  51
  357
  405
  456
  510
  567
  627
  690
  755
  824
  895
  969
  1,046
  1,126
  1,209
  1,295
  1,385
  1,479
  1,576
  1,677
  1,782
  1,891
  2,005
  2,124
  2,248
  2,377
  2,512
  2,653
  2,800
  2,954
  3,115
Total debt, $m
  276
  330
  388
  449
  514
  582
  654
  729
  807
  889
  974
  1,063
  1,156
  1,252
  1,351
  1,455
  1,563
  1,675
  1,791
  1,912
  2,038
  2,169
  2,306
  2,448
  2,597
  2,752
  2,914
  3,082
  3,259
  3,443
  3,636
Total liabilities, $m
  374
  428
  486
  547
  612
  680
  752
  827
  905
  987
  1,072
  1,161
  1,254
  1,350
  1,449
  1,553
  1,661
  1,773
  1,889
  2,010
  2,136
  2,267
  2,404
  2,546
  2,695
  2,850
  3,012
  3,180
  3,357
  3,541
  3,734
Total equity, $m
  63
  72
  82
  92
  103
  114
  126
  139
  152
  166
  180
  195
  211
  227
  244
  261
  279
  298
  318
  338
  359
  381
  404
  428
  453
  479
  507
  535
  565
  596
  628
Total liabilities and equity, $m
  437
  500
  568
  639
  715
  794
  878
  966
  1,057
  1,153
  1,252
  1,356
  1,465
  1,577
  1,693
  1,814
  1,940
  2,071
  2,207
  2,348
  2,495
  2,648
  2,808
  2,974
  3,148
  3,329
  3,519
  3,715
  3,922
  4,137
  4,362
Debt-to-equity ratio
  4.381
  4.580
  4.740
  4.880
  4.990
  5.090
  5.170
  5.240
  5.300
  5.350
  5.400
  5.440
  5.480
  5.510
  5.540
  5.570
  5.590
  5.620
  5.640
  5.650
  5.670
  5.690
  5.700
  5.720
  5.730
  5.740
  5.750
  5.760
  5.770
  5.780
  5.790
Adjusted equity ratio
  0.150
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144
  0.144

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  11
  16
  22
  28
  34
  41
  48
  55
  63
  71
  80
  89
  98
  108
  118
  128
  139
  150
  162
  174
  187
  200
  214
  228
  243
  259
  276
  293
  311
  330
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
Funds from operations, $m
  -133
  12
  17
  23
  29
  36
  43
  50
  58
  66
  74
  82
  91
  101
  110
  120
  131
  142
  153
  165
  178
  191
  204
  218
  233
  249
  265
  282
  299
  318
  337
Change in working capital, $m
  -77
  45
  48
  51
  54
  57
  60
  63
  65
  68
  71
  74
  77
  80
  83
  86
  90
  93
  97
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  154
  161
Cash from operations, $m
  -56
  -33
  -31
  -28
  -25
  -21
  -17
  -13
  -8
  -3
  3
  8
  14
  21
  27
  34
  41
  49
  56
  64
  73
  81
  90
  99
  109
  119
  130
  141
  152
  164
  176
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
New CAPEX, $m
  -1
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  -30
  -4
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
Free cash flow, $m
  -86
  -36
  -32
  -30
  -27
  -23
  -20
  -15
  -11
  -6
  -1
  5
  10
  17
  23
  29
  36
  43
  51
  59
  67
  75
  84
  93
  102
  112
  122
  132
  143
  155
  166
Issuance/(repayment) of debt, $m
  85
  54
  58
  61
  65
  68
  72
  75
  79
  82
  85
  89
  92
  96
  100
  104
  108
  112
  116
  121
  126
  131
  137
  142
  149
  155
  162
  169
  176
  184
  193
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
  0
Cash from financing (excl. dividends), $m  
  85
  54
  58
  61
  65
  68
  72
  75
  79
  82
  85
  89
  92
  96
  100
  104
  108
  112
  116
  121
  126
  131
  137
  142
  149
  155
  162
  169
  176
  184
  193
Total cash flow (excl. dividends), $m
  -2
  18
  25
  31
  38
  45
  52
  60
  68
  76
  85
  93
  103
  112
  123
  133
  144
  155
  167
  180
  193
  206
  220
  235
  250
  267
  283
  301
  320
  339
  359
Retained Cash Flow (-), $m
  -7
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
Prev. year cash balance distribution, $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 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
 
  9
  15
  21
  27
  33
  40
  47
  55
  62
  70
  78
  87
  96
  106
  116
  126
  137
  148
  159
  171
  184
  197
  211
  225
  240
  256
  273
  290
  308
  327
Discount rate, %
 
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.31
  19.22
  20.18
  21.19
  22.25
  23.36
  24.53
  25.76
  27.05
  28.40
  29.82
  31.31
  32.87
  34.52
  36.24
  38.06
  39.96
  41.96
  44.05
  46.26
  48.57
PV of cash for distribution, $m
 
  8
  12
  15
  16
  17
  17
  17
  16
  15
  13
  11
  10
  8
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
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

A-Mark Precious Metals, Inc. operates as a precious metals trading company worldwide. The company offers gold, silver, platinum, and palladium in the form of bars, plates, powder, wafers, grains, ingots, and coins, as well as distributes gold and silver coins and bars from sovereign and private mints. It also provides loans on precious metals, and rare coins and other collectibles collateral to coin dealers, collectors, and investors; storage solutions for precious metals and numismatic coins for financial institutions, dealers, investors, and collectors; and a range of logistics services, including storage, shipping, handling, receiving, processing, and inventorying of precious metals and custom coins. In addition, the company offers various services comprising consignment and hedging, as well as customized finance and various liquidity programs, such as repurchase accounts and trade quotes in a range of foreign currencies. It serves mints, manufacturers and fabricators, refiners, coin and bullion dealers, e-commerce retailers, banks and other financial institutions, commodity brokerage houses, industrial users of precious metals, investors, and collectors. The company was founded in 1965 and is headquartered in Santa Monica, California.

FINANCIAL RATIOS  of  A-Mark Precious Metals (AMRK)

Valuation Ratios
P/E Ratio 13.5
Price to Sales 0
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow -2.2
Price to Free Cash Flow -2.1
Growth Rates
Sales Growth Rate 11.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 438.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity 15.1%
Return On Equity - 3 Yr. Avg. 14.7%
Asset Turnover 17.8
Profitability Ratios
Gross Margin 0.5%
Gross Margin - 3 Yr. Avg. 0.5%
EBITDA Margin 0.3%
EBITDA Margin - 3 Yr. Avg. 0.3%
Operating Margin 0.2%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin 0.2%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin 0.1%
Net Profit Margin - 3 Yr. Avg. 0.1%
Effective Tax Rate 43.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.3%
Payout Ratio 22.2%

AMRK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMRK stock intrinsic value calculation we used $6784 million for the last fiscal year's total revenue generated by A-Mark Precious Metals. The default revenue input number comes from 2016 income statement of A-Mark Precious Metals. 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 AMRK stock valuation model: a) initial revenue growth rate of 14.4% 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 11.8%, whose default value for AMRK is calculated based on our internal credit rating of A-Mark Precious Metals, 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 A-Mark Precious Metals.
    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 AMRK stock the variable cost ratio is equal to 99%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $52 million in the base year in the intrinsic value calculation for AMRK 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 A-Mark Precious Metals.

Corporate tax rate of 27% is the nominal tax rate for A-Mark Precious Metals. 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 AMRK 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 AMRK are equal to 0.1%.

Life of production assets of 10 years is the average useful life of capital assets used in A-Mark Precious Metals 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 AMRK is equal to 4.6%. 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 - $63 million for A-Mark Precious Metals - 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 6.802 million for A-Mark Precious Metals 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 A-Mark Precious Metals at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ A-Mark posts 3Q profit   [May-09-17 06:44PM  Associated Press]
▶ A-Mark posts 2Q profit   [Feb-07-17 06:21PM  Associated Press]
Stock chart of AMRK Financial statements of AMRK
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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