Intrinsic value of America's Car-Mart - CRMT

Previous Close

$45.15

  Intrinsic Value

$68.14

stock screener

  Rating & Target

str. buy

+51%

Previous close

$45.15

 
Intrinsic value

$68.14

 
Up/down potential

+51%

 
Rating

str. buy

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 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 0.3

 

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, %
  3.52
  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
  588
  600
  614
  629
  647
  667
  688
  712
  737
  764
  794
  825
  858
  894
  932
  972
  1,015
  1,060
  1,108
  1,158
  1,211
  1,267
  1,327
  1,389
  1,455
  1,524
  1,597
  1,674
  1,754
  1,839
  1,929
Variable operating expenses, $m
 
  121
  123
  126
  130
  134
  138
  143
  148
  154
  160
  166
  173
  180
  187
  195
  204
  213
  223
  233
  243
  255
  267
  279
  292
  306
  321
  336
  353
  370
  388
Fixed operating expenses, $m
 
  454
  465
  477
  489
  501
  514
  527
  540
  553
  567
  581
  596
  611
  626
  642
  658
  674
  691
  708
  726
  744
  763
  782
  801
  821
  842
  863
  884
  907
  929
Total operating expenses, $m
  550
  575
  588
  603
  619
  635
  652
  670
  688
  707
  727
  747
  769
  791
  813
  837
  862
  887
  914
  941
  969
  999
  1,030
  1,061
  1,093
  1,127
  1,163
  1,199
  1,237
  1,277
  1,317
Operating income, $m
  38
  25
  25
  26
  28
  31
  36
  42
  49
  57
  67
  78
  90
  104
  119
  135
  153
  173
  194
  217
  242
  269
  297
  328
  361
  396
  434
  474
  517
  563
  612
EBITDA, $m
  42
  29
  29
  30
  32
  36
  41
  47
  54
  63
  72
  84
  96
  110
  125
  142
  160
  180
  202
  225
  250
  277
  306
  338
  371
  407
  445
  486
  529
  576
  625
Interest expense (income), $m
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
Earnings before tax, $m
  32
  21
  21
  21
  23
  27
  31
  37
  44
  52
  61
  71
  83
  97
  111
  127
  145
  164
  185
  207
  231
  257
  285
  316
  348
  382
  419
  459
  501
  546
  594
Tax expense, $m
  12
  6
  6
  6
  6
  7
  8
  10
  12
  14
  16
  19
  22
  26
  30
  34
  39
  44
  50
  56
  62
  69
  77
  85
  94
  103
  113
  124
  135
  147
  160
Net income, $m
  20
  15
  15
  16
  17
  19
  23
  27
  32
  38
  44
  52
  61
  70
  81
  93
  106
  120
  135
  151
  169
  188
  208
  230
  254
  279
  306
  335
  366
  398
  433

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  424
  432
  442
  454
  466
  481
  496
  513
  531
  551
  572
  595
  619
  645
  672
  701
  732
  764
  799
  835
  873
  914
  956
  1,001
  1,049
  1,099
  1,151
  1,207
  1,265
  1,326
  1,391
Adjusted assets (=assets-cash), $m
  424
  432
  442
  454
  466
  481
  496
  513
  531
  551
  572
  595
  619
  645
  672
  701
  732
  764
  799
  835
  873
  914
  956
  1,001
  1,049
  1,099
  1,151
  1,207
  1,265
  1,326
  1,391
Revenue / Adjusted assets
  1.387
  1.389
  1.389
  1.385
  1.388
  1.387
  1.387
  1.388
  1.388
  1.387
  1.388
  1.387
  1.386
  1.386
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.386
  1.388
  1.388
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
  1.387
Average production assets, $m
  33
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
Working capital, $m
  0
  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
  3
  3
  4
  4
  4
Total debt, $m
  119
  123
  127
  132
  138
  144
  151
  159
  167
  176
  185
  196
  207
  218
  230
  243
  257
  272
  287
  304
  321
  339
  358
  379
  400
  422
  446
  471
  497
  525
  554
Total liabilities, $m
  191
  195
  199
  204
  210
  216
  223
  231
  239
  248
  257
  268
  279
  290
  302
  315
  329
  344
  359
  376
  393
  411
  430
  451
  472
  494
  518
  543
  569
  597
  626
Total equity, $m
  233
  238
  243
  250
  257
  264
  273
  282
  292
  303
  315
  327
  340
  355
  370
  386
  402
  420
  439
  459
  480
  503
  526
  551
  577
  604
  633
  664
  696
  729
  765
Total liabilities and equity, $m
  424
  433
  442
  454
  467
  480
  496
  513
  531
  551
  572
  595
  619
  645
  672
  701
  731
  764
  798
  835
  873
  914
  956
  1,002
  1,049
  1,098
  1,151
  1,207
  1,265
  1,326
  1,391
Debt-to-equity ratio
  0.511
  0.520
  0.520
  0.530
  0.540
  0.550
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.650
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.720
Adjusted equity ratio
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  15
  15
  16
  17
  19
  23
  27
  32
  38
  44
  52
  61
  70
  81
  93
  106
  120
  135
  151
  169
  188
  208
  230
  254
  279
  306
  335
  366
  398
  433
Depreciation, amort., depletion, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
Funds from operations, $m
  -178
  19
  19
  20
  21
  24
  27
  32
  37
  43
  50
  58
  67
  77
  87
  99
  113
  127
  142
  159
  177
  196
  217
  240
  264
  290
  317
  346
  378
  411
  446
Change in working capital, $m
  -185
  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
  7
  19
  19
  20
  21
  24
  27
  32
  37
  43
  50
  58
  67
  76
  87
  99
  112
  127
  142
  159
  177
  196
  217
  240
  264
  289
  317
  346
  377
  411
  446
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
New CAPEX, $m
  -2
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
Cash from investing activities, $m
  -1
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -17
  -17
Free cash flow, $m
  6
  15
  14
  15
  16
  18
  22
  26
  31
  36
  43
  51
  59
  69
  79
  91
  103
  117
  132
  149
  166
  185
  205
  227
  251
  276
  302
  331
  362
  394
  429
Issuance/(repayment) of debt, $m
  11
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
Issuance/(repurchase) of shares, $m
  -18
  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
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
Total cash flow (excl. dividends), $m
  0
  18
  19
  20
  22
  25
  29
  33
  39
  45
  52
  61
  70
  80
  92
  104
  117
  132
  148
  165
  183
  203
  225
  247
  272
  298
  326
  356
  388
  422
  458
Retained Cash Flow (-), $m
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
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
 
  14
  13
  14
  15
  17
  20
  24
  29
  34
  41
  48
  57
  66
  76
  88
  100
  114
  129
  145
  162
  181
  201
  223
  246
  271
  297
  326
  356
  388
  422
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
 
  13
  12
  12
  12
  13
  15
  16
  18
  20
  21
  23
  24
  25
  26
  26
  26
  25
  24
  22
  21
  19
  17
  15
  13
  11
  9
  7
  6
  4
  3
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
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America's Car-Mart, Inc. is an automotive retailer focused on the integrated auto sales and finance segment of the used car market. The Company conducts its operations through its two operating subsidiaries, America's Car Mart, Inc. (Car-Mart of Arkansas) and Colonial Auto Finance, Inc. (Colonial) (Collectively, Car-Mart of Arkansas and Colonial are referred to as Car-Mart). It primarily sells older model used vehicles and provides financing for all of its customers. As of April 30, 2016, the Company operated 143 dealerships located primarily in small cities throughout the South-Central United States. Dealerships are operated on a decentralized basis. Each dealership is responsible for buying (with the assistance of a corporate office buyer) and selling vehicles, making credit decisions, and servicing and collecting the installment contracts it originates. Dealerships also maintain their own records and make daily deposits. The Company has both regular and satellite dealerships.

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

Valuation Ratios
P/E Ratio 17.2
Price to Sales 0.6
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 49.1
Price to Free Cash Flow 68.7
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60%
Cap. Spend. - 3 Yr. Gr. Rate -22.2%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 50.6%
Total Debt to Equity 51.1%
Interest Coverage 9
Management Effectiveness
Return On Assets 5.4%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. 9%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 48.1%
Gross Margin - 3 Yr. Avg. 47.7%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 7.2%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 6.6%
Pre-Tax Margin 5.4%
Pre-Tax Margin - 3 Yr. Avg. 5.9%
Net Profit Margin 3.4%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.5%
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 $588 million for the last fiscal year's total revenue generated by America's Car-Mart. The default revenue input number comes from 2017 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 20.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $443 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 3.5% 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 5.5%.

Life of production assets of 8.1 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 - $233 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 7.366 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, Inc. to Host Earnings Call   [Nov-17-17 08:00AM  ACCESSWIRE]
▶ America's Car-Mart meets 2Q profit forecasts   [Nov-16-17 05:10PM  Associated Press]
▶ 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]
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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