Intrinsic value of A-Mark Precious Metals - AMRK

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$14.84

  Intrinsic Value

$2.17

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  Rating & Target

str. sell

-85%

Previous close

$14.84

 
Intrinsic value

$2.17

 
Up/down potential

-85%

 
Rating

str. sell

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 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 0.1

 

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, %
  3.04
  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
  6,990
  7,130
  7,294
  7,481
  7,692
  7,925
  8,181
  8,459
  8,761
  9,086
  9,435
  9,808
  10,206
  10,629
  11,080
  11,558
  12,064
  12,600
  13,167
  13,766
  14,399
  15,066
  15,770
  16,512
  17,294
  18,117
  18,984
  19,897
  20,857
  21,867
  22,929
Variable operating expenses, $m
 
  7,116
  7,279
  7,466
  7,676
  7,909
  8,164
  8,442
  8,743
  9,067
  9,415
  9,787
  10,184
  10,607
  11,056
  11,533
  12,039
  12,574
  13,139
  13,737
  14,368
  15,034
  15,737
  16,477
  17,257
  18,079
  18,944
  19,854
  20,812
  21,820
  22,880
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
  6,979
  7,116
  7,279
  7,466
  7,676
  7,909
  8,164
  8,442
  8,743
  9,067
  9,415
  9,787
  10,184
  10,607
  11,056
  11,533
  12,039
  12,574
  13,139
  13,737
  14,368
  15,034
  15,737
  16,477
  17,257
  18,079
  18,944
  19,854
  20,812
  21,820
  22,880
Operating income, $m
  11
  14
  15
  15
  15
  16
  17
  17
  18
  18
  19
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
EBITDA, $m
  13
  16
  17
  17
  17
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  47
  50
  52
Interest expense (income), $m
  9
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
Earnings before tax, $m
  11
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
Tax expense, $m
  4
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Net income, $m
  7
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  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
  479
  475
  486
  499
  513
  528
  545
  564
  584
  606
  629
  654
  680
  709
  739
  771
  804
  840
  878
  918
  960
  1,004
  1,051
  1,101
  1,153
  1,208
  1,266
  1,326
  1,390
  1,458
  1,529
Adjusted assets (=assets-cash), $m
  466
  475
  486
  499
  513
  528
  545
  564
  584
  606
  629
  654
  680
  709
  739
  771
  804
  840
  878
  918
  960
  1,004
  1,051
  1,101
  1,153
  1,208
  1,266
  1,326
  1,390
  1,458
  1,529
Revenue / Adjusted assets
  15.000
  15.011
  15.008
  14.992
  14.994
  15.009
  15.011
  14.998
  15.002
  14.993
  15.000
  14.997
  15.009
  14.992
  14.993
  14.991
  15.005
  15.000
  14.997
  14.996
  14.999
  15.006
  15.005
  14.997
  14.999
  14.998
  14.995
  15.005
  15.005
  14.998
  14.996
Average production assets, $m
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
Working capital, $m
  43
  356
  365
  374
  385
  396
  409
  423
  438
  454
  472
  490
  510
  531
  554
  578
  603
  630
  658
  688
  720
  753
  789
  826
  865
  906
  949
  995
  1,043
  1,093
  1,146
Total debt, $m
  321
  316
  325
  336
  348
  361
  376
  391
  408
  427
  447
  468
  490
  514
  540
  567
  596
  626
  658
  692
  728
  766
  806
  848
  892
  939
  988
  1,039
  1,094
  1,151
  1,211
Total liabilities, $m
  409
  404
  413
  424
  436
  449
  464
  479
  496
  515
  535
  556
  578
  602
  628
  655
  684
  714
  746
  780
  816
  854
  894
  936
  980
  1,027
  1,076
  1,127
  1,182
  1,239
  1,299
Total equity, $m
  70
  71
  73
  75
  77
  79
  82
  85
  88
  91
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  209
  219
  229
Total liabilities and equity, $m
  479
  475
  486
  499
  513
  528
  546
  564
  584
  606
  629
  654
  680
  708
  739
  771
  805
  840
  878
  918
  960
  1,005
  1,052
  1,101
  1,153
  1,208
  1,266
  1,326
  1,391
  1,458
  1,528
Debt-to-equity ratio
  4.586
  4.430
  4.460
  4.490
  4.520
  4.560
  4.590
  4.630
  4.660
  4.700
  4.730
  4.770
  4.800
  4.840
  4.870
  4.910
  4.940
  4.970
  5.000
  5.030
  5.060
  5.080
  5.110
  5.130
  5.160
  5.180
  5.200
  5.220
  5.240
  5.260
  5.280
Adjusted equity ratio
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
Depreciation, amort., depletion, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
Funds from operations, $m
  -37
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  9
Change in working capital, $m
  -27
  7
  8
  9
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
Cash from operations, $m
  -10
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
New CAPEX, $m
  -2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from investing activities, $m
  -36
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Free cash flow, $m
  -46
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
Issuance/(repayment) of debt, $m
  44
  8
  9
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
Cash from financing (excl. dividends), $m  
  44
  8
  9
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  28
  30
  31
  33
  35
  38
  40
  42
  44
  47
  50
  52
  55
  58
  61
  64
Total cash flow (excl. dividends), $m
  -2
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
Retained Cash Flow (-), $m
  -7
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
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
 
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
Discount rate, %
 
  12.40
  13.02
  13.67
  14.35
  15.07
  15.83
  16.62
  17.45
  18.32
  19.24
  20.20
  21.21
  22.27
  23.38
  24.55
  25.78
  27.07
  28.42
  29.84
  31.33
  32.90
  34.55
  36.27
  38.09
  39.99
  41.99
  44.09
  46.29
  48.61
  51.04
PV of cash for distribution, $m
 
  3
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  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
  99.8
  99.5
  99.5
  99.4
  99.3
  99.0
  98.7
  98.2
  97.7
  97.0
  96.3
  95.6
  94.8
  93.9
  93.0
  92.0
  91.0
  89.9
  88.8
  87.7
  86.6
  85.4

A-Mark Precious Metals, Inc. is a precious metal trading company. The Company is a wholesaler of gold, silver, platinum and palladium bullion and related products, including bars, wafers, grain and coins. It distributes gold and silver coins and bars from sovereign and private mints; provides financing for the purchase of bullion and numismatics; offers storage for bullion, and offers complementary products, such as consignment, customized finance and liquidity programs, such as repurchase (Repo) accounts, and trade quotes in a variety of foreign currencies. It operates through various business units for accounting purposes, including Industrial, Coin and Bar, Trading, Finance, Collateral Finance Corporation, Transcontinental Depository Services and Logistics. It is an authorized distributor of gold and silver coins for sovereign mints and various private mints. The sovereign mints include the United States Mint, the Australian (Perth) Mint and the Austrian Mint, among others.

FINANCIAL RATIOS  of  A-Mark Precious Metals (AMRK)

Valuation Ratios
P/E Ratio 14.9
Price to Sales 0
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow -10.4
Price to Free Cash Flow -8.7
Growth Rates
Sales Growth Rate 3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 458.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 1.9%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 10.5%
Return On Equity - 3 Yr. Avg. 13%
Asset Turnover 15.3
Profitability Ratios
Gross Margin 0.4%
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 36.4%
Eff/ Tax Rate - 3 Yr. Avg. 34.1%
Payout Ratio 28.6%

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 $6990 million for the last fiscal year's total revenue generated by A-Mark Precious Metals. The default revenue input number comes from 2017 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 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 12.4%, 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 99.8%.

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 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 7 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 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 - $70 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 7.032 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 1Q profit   [Nov-16-17 05:12AM  Associated Press]
▶ New Strong Sell Stocks for October 3rd   [Oct-03-17 08:21AM  Zacks]
▶ New Strong Sell Stocks for September 27th   [Sep-27-17 07:24AM  Zacks]
▶ A-Mark posts 4Q profit   [Sep-12-17 09:31PM  Associated Press]
▶ A-Mark Precious Metals Renews $275 Million Credit Facility   [Aug-18-17 04:05PM  GlobeNewswire]
▶ A-Mark posts 3Q profit   [May-09-17 06:44PM  Associated Press]
▶ A-Mark posts 2Q profit   [Feb-07-17 06:21PM  Associated Press]
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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