Intrinsic value of America's Car-Mart - CRMT

Previous Close

$39.40

  Intrinsic Value

$7.33

stock screener

  Rating & Target

str. sell

-81%

  Value-price divergence*

-57%

Previous close

$39.40

 
Intrinsic value

$7.33

 
Up/down potential

-81%

 
Rating

str. sell

 
Value-price divergence*

-57%

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

We calculate the intrinsic value of CRMT 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 0.3

 

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, %
  7.19
  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
  507
  517
  529
  543
  558
  575
  593
  614
  635
  659
  684
  711
  740
  771
  804
  838
  875
  914
  955
  999
  1,044
  1,093
  1,144
  1,198
  1,254
  1,314
  1,377
  1,443
  1,513
  1,586
  1,663
Variable operating expenses, $m
 
  525
  537
  551
  567
  584
  603
  623
  646
  670
  695
  723
  752
  783
  817
  852
  889
  929
  970
  1,014
  1,061
  1,110
  1,162
  1,217
  1,274
  1,335
  1,399
  1,466
  1,537
  1,611
  1,690
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
  546
  525
  537
  551
  567
  584
  603
  623
  646
  670
  695
  723
  752
  783
  817
  852
  889
  929
  970
  1,014
  1,061
  1,110
  1,162
  1,217
  1,274
  1,335
  1,399
  1,466
  1,537
  1,611
  1,690
Operating income, $m
  -39
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
EBITDA, $m
  -35
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
Interest expense (income), $m
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
Earnings before tax, $m
  19
  -12
  -13
  -13
  -14
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
Tax expense, $m
  7
  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
Net income, $m
  12
  -12
  -13
  -13
  -14
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1
  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
  406
  413
  423
  433
  446
  459
  474
  490
  508
  526
  547
  568
  591
  616
  642
  670
  699
  730
  763
  798
  834
  873
  914
  957
  1,002
  1,050
  1,100
  1,153
  1,208
  1,267
  1,328
Adjusted assets (=assets-cash), $m
  405
  413
  423
  433
  446
  459
  474
  490
  508
  526
  547
  568
  591
  616
  642
  670
  699
  730
  763
  798
  834
  873
  914
  957
  1,002
  1,050
  1,100
  1,153
  1,208
  1,267
  1,328
Revenue / Adjusted assets
  1.252
  1.252
  1.251
  1.254
  1.251
  1.253
  1.251
  1.253
  1.250
  1.253
  1.250
  1.252
  1.252
  1.252
  1.252
  1.251
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.252
  1.251
  1.251
  1.252
  1.252
  1.252
  1.252
  1.252
Average production assets, $m
  35
  35
  36
  37
  38
  39
  40
  42
  43
  45
  47
  48
  50
  52
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  94
  98
  103
  108
  113
Working capital, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Total debt, $m
  108
  112
  116
  120
  126
  132
  138
  145
  153
  161
  170
  179
  189
  200
  212
  224
  236
  250
  264
  280
  296
  312
  330
  349
  369
  390
  412
  435
  459
  485
  511
Total liabilities, $m
  177
  181
  185
  189
  195
  201
  207
  214
  222
  230
  239
  248
  258
  269
  281
  293
  305
  319
  333
  349
  365
  381
  399
  418
  438
  459
  481
  504
  528
  554
  580
Total equity, $m
  229
  233
  238
  244
  251
  258
  267
  276
  286
  296
  308
  320
  333
  347
  361
  377
  393
  411
  429
  449
  470
  491
  514
  539
  564
  591
  619
  649
  680
  713
  748
Total liabilities and equity, $m
  406
  414
  423
  433
  446
  459
  474
  490
  508
  526
  547
  568
  591
  616
  642
  670
  698
  730
  762
  798
  835
  872
  913
  957
  1,002
  1,050
  1,100
  1,153
  1,208
  1,267
  1,328
Debt-to-equity ratio
  0.472
  0.480
  0.490
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.640
  0.650
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.680
Adjusted equity ratio
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563
  0.563

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12
  -12
  -13
  -13
  -14
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
Depreciation, amort., depletion, $m
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
Funds from operations, $m
  -147
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -34
Change in working capital, $m
  -161
  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 operations, $m
  14
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
Maintenance CAPEX, $m
  0
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
New CAPEX, $m
  -5
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
Cash from investing activities, $m
  -5
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Free cash flow, $m
  9
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -50
Issuance/(repayment) of debt, $m
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
Issuance/(repurchase) of shares, $m
  -14
  17
  18
  19
  20
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
  80
Cash from financing (excl. dividends), $m  
  -10
  21
  22
  24
  25
  28
  29
  31
  34
  35
  37
  39
  42
  44
  46
  49
  52
  55
  57
  61
  64
  67
  71
  75
  79
  83
  87
  91
  96
  102
  107
Total cash flow (excl. dividends), $m
  0
  7
  9
  10
  11
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
Retained Cash Flow (-), $m
  0
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -76
  -80
Prev. year cash balance distribution, $m
 
  1
  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
 
  -8
  -9
  -9
  -9
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
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
 
  -8
  -8
  -8
  -7
  -7
  -7
  -6
  -6
  -5
  -5
  -5
  -4
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  94.8
  89.6
  84.5
  79.6
  74.8
  70.2
  65.8
  61.5
  57.5
  53.7
  50.0
  46.6
  43.4
  40.3
  37.5
  34.8
  32.3
  29.9
  27.8
  25.7
  23.8
  22.0
  20.4
  18.9
  17.4
  16.1
  14.9
  13.8
  12.7
  11.7

America’s Car-Mart, Inc., through its subsidiaries, operates as an automotive retailer in the United States. It primarily sells older model used vehicles and provides financing for its customers. As of April 30, 2016, the company operated 143 dealerships in the South-Central United States. America’s Car-Mart, Inc. was founded in 1981 and is headquartered in Bentonville, Arkansas.

FINANCIAL RATIOS  of  America's Car-Mart (CRMT)

Valuation Ratios
P/E Ratio 26.5
Price to Sales 0.6
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 22.7
Price to Free Cash Flow 35.3
Growth Rates
Sales Growth Rate 7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 47.2%
Total Debt to Equity 47.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.5%
Return On Equity 5.2%
Return On Equity - 3 Yr. Avg. 9.5%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 39.8%
Gross Margin - 3 Yr. Avg. 41.4%
EBITDA Margin 5.3%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin -7.7%
Oper. Margin - 3 Yr. Avg. -4.4%
Pre-Tax Margin 3.7%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.8%
Payout Ratio 0%

CRMT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRMT stock intrinsic value calculation we used $507 million for the last fiscal year's total revenue generated by America's Car-Mart. The default revenue input number comes from 2016 income statement of America's Car-Mart. 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 CRMT 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 4.3%, whose default value for CRMT is calculated based on our internal credit rating of America's Car-Mart, 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 America's Car-Mart.
    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 CRMT stock the variable cost ratio is equal to 101.6%.

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 CRMT 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 3.8% for America's Car-Mart.

Corporate tax rate of 27% is the nominal tax rate for America's Car-Mart. 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 CRMT 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 CRMT are equal to 6.8%.

Life of production assets of 10 years is the average useful life of capital assets used in America's Car-Mart 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 CRMT is equal to -0.2%. 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 - $229 million for America's Car-Mart - 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 7.815 million for America's Car-Mart 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 America's Car-Mart at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ America's Car-Mart meets 1Q profit forecasts   [Aug-17-17 10:06PM  Associated Press]
▶ LD Micro Index Reconstitution as of August 1, 2017   [Aug-01-17 09:40AM  ACCESSWIRE]
▶ America's Car-Mart Announces Board Nomination   [Jun-05-17 08:00AM  GlobeNewswire]
▶ America's Car-Mart beats 4Q profit forecasts   [May-22-17 05:43PM  Associated Press]
▶ New Strong Sell Stocks for March 16th   [Mar-16-17 09:57AM  Zacks]
▶ America's Car-Mart misses 3Q profit forecasts   [07:35AM  Associated Press]
Stock chart of CRMT Financial statements of CRMT
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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