Intrinsic value of General Finance - GFN

Previous Close

$13.85

  Intrinsic Value

$1.64

stock screener

  Rating & Target

str. sell

-88%

Previous close

$13.85

 
Intrinsic value

$1.64

 
Up/down potential

-88%

 
Rating

str. sell

We calculate the intrinsic value of GFN 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
(a)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -100.00
  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
  0
  283
  289
  296
  305
  314
  324
  335
  347
  360
  374
  389
  404
  421
  439
  458
  478
  499
  522
  546
  571
  597
  625
  654
  685
  718
  752
  788
  827
  867
  909
Variable operating expenses, $m
 
  268
  274
  281
  288
  297
  306
  316
  326
  338
  350
  350
  365
  380
  396
  413
  431
  450
  470
  492
  514
  538
  563
  590
  618
  647
  678
  711
  745
  781
  819
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
  0
  268
  274
  281
  288
  297
  306
  316
  326
  338
  350
  350
  365
  380
  396
  413
  431
  450
  470
  492
  514
  538
  563
  590
  618
  647
  678
  711
  745
  781
  819
Operating income, $m
  0
  14
  15
  16
  17
  17
  18
  20
  21
  22
  23
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  71
  74
  78
  81
  85
  89
EBITDA, $m
  0
  87
  89
  92
  94
  97
  100
  104
  107
  111
  116
  120
  125
  130
  136
  142
  148
  154
  161
  169
  176
  185
  193
  202
  212
  222
  233
  244
  255
  268
  281
Interest expense (income), $m
  0
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  84
Earnings before tax, $m
  0
  -6
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  8
  8
  8
  8
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  5
  5
  5
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
Net income, $m
  0
  -6
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  6
  6
  6
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  4
  4

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
  0
  689
  705
  723
  743
  766
  791
  818
  847
  878
  912
  948
  986
  1,027
  1,071
  1,117
  1,166
  1,218
  1,273
  1,331
  1,392
  1,456
  1,524
  1,596
  1,672
  1,751
  1,835
  1,923
  2,016
  2,114
  2,216
Adjusted assets (=assets-cash), $m
  0
  689
  705
  723
  743
  766
  791
  818
  847
  878
  912
  948
  986
  1,027
  1,071
  1,117
  1,166
  1,218
  1,273
  1,331
  1,392
  1,456
  1,524
  1,596
  1,672
  1,751
  1,835
  1,923
  2,016
  2,114
  2,216
Revenue / Adjusted assets
  0.000
  0.411
  0.410
  0.409
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
Average production assets, $m
  0
  595
  609
  625
  642
  662
  683
  706
  732
  759
  788
  819
  852
  888
  925
  965
  1,007
  1,052
  1,099
  1,149
  1,202
  1,258
  1,317
  1,379
  1,444
  1,513
  1,585
  1,661
  1,741
  1,826
  1,914
Working capital, $m
  0
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
Total debt, $m
  0
  367
  379
  394
  410
  428
  448
  469
  493
  518
  545
  574
  604
  637
  672
  709
  748
  790
  833
  880
  929
  980
  1,035
  1,092
  1,153
  1,216
  1,283
  1,354
  1,428
  1,506
  1,588
Total liabilities, $m
  0
  551
  564
  578
  595
  613
  633
  654
  677
  703
  730
  758
  789
  822
  857
  894
  933
  974
  1,018
  1,064
  1,113
  1,165
  1,219
  1,277
  1,337
  1,401
  1,468
  1,538
  1,613
  1,691
  1,773
Total equity, $m
  0
  138
  141
  145
  149
  153
  158
  164
  169
  176
  182
  190
  197
  205
  214
  223
  233
  244
  255
  266
  278
  291
  305
  319
  334
  350
  367
  385
  403
  423
  443
Total liabilities and equity, $m
  0
  689
  705
  723
  744
  766
  791
  818
  846
  879
  912
  948
  986
  1,027
  1,071
  1,117
  1,166
  1,218
  1,273
  1,330
  1,391
  1,456
  1,524
  1,596
  1,671
  1,751
  1,835
  1,923
  2,016
  2,114
  2,216
Debt-to-equity ratio
  0.000
  2.660
  2.690
  2.720
  2.760
  2.790
  2.830
  2.870
  2.910
  2.950
  2.990
  3.030
  3.060
  3.100
  3.140
  3.170
  3.210
  3.240
  3.270
  3.310
  3.340
  3.370
  3.390
  3.420
  3.450
  3.470
  3.500
  3.520
  3.540
  3.560
  3.580
Adjusted equity ratio
  0.000
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200
  0.200

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  -6
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  6
  6
  6
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  4
  4
  4
Depreciation, amort., depletion, $m
  0
  73
  74
  76
  78
  80
  82
  84
  87
  89
  92
  82
  85
  89
  93
  97
  101
  105
  110
  115
  120
  126
  132
  138
  144
  151
  159
  166
  174
  183
  191
Funds from operations, $m
  0
  67
  69
  70
  72
  74
  76
  79
  81
  84
  87
  88
  91
  94
  98
  102
  106
  110
  115
  120
  125
  131
  136
  143
  149
  156
  163
  170
  178
  186
  195
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  0
  68
  69
  71
  73
  75
  77
  79
  82
  84
  87
  88
  92
  95
  99
  103
  107
  111
  116
  121
  126
  132
  138
  144
  150
  157
  164
  172
  180
  188
  197
Maintenance CAPEX, $m
  0
  -58
  -60
  -61
  -62
  -64
  -66
  -68
  -71
  -73
  -76
  -79
  -82
  -85
  -89
  -93
  -97
  -101
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -144
  -151
  -159
  -166
  -174
  -183
New CAPEX, $m
  0
  -12
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
Cash from investing activities, $m
  0
  -70
  -74
  -77
  -80
  -83
  -87
  -91
  -96
  -100
  -105
  -110
  -115
  -120
  -127
  -133
  -139
  -146
  -152
  -160
  -168
  -176
  -185
  -194
  -203
  -213
  -223
  -235
  -246
  -258
  -272
Free cash flow, $m
  0
  -3
  -4
  -6
  -7
  -9
  -11
  -13
  -14
  -16
  -18
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
Issuance/(repayment) of debt, $m
  0
  11
  13
  14
  16
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
  67
  71
  74
  78
  82
Issuance/(repurchase) of shares, $m
  0
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  11
  12
  13
  15
  16
  17
Cash from financing (excl. dividends), $m  
  0
  19
  22
  23
  26
  28
  30
  33
  34
  37
  39
  31
  33
  36
  38
  41
  43
  46
  50
  52
  56
  60
  63
  67
  71
  75
  79
  84
  89
  94
  99
Total cash flow (excl. dividends), $m
  0
  17
  17
  18
  18
  19
  19
  20
  20
  21
  22
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  24
  25
Retained Cash Flow (-), $m
  0
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
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
 
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Cash available for distribution, $m
 
  8
  9
  9
  9
  9
  9
  9
  9
  9
  9
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Discount rate, %
 
  10.60
  11.13
  11.69
  12.27
  12.88
  13.53
  14.21
  14.92
  15.66
  16.44
  17.27
  18.13
  19.04
  19.99
  20.99
  22.04
  23.14
  24.30
  25.51
  26.79
  28.12
  29.53
  31.01
  32.56
  34.19
  35.90
  37.69
  39.57
  41.55
  43.63
PV of cash for distribution, $m
 
  8
  7
  6
  6
  5
  4
  4
  3
  2
  2
  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
  97.7
  95.5
  93.2
  91.0
  88.7
  86.5
  84.4
  82.2
  80.1
  78.1
  77.8
  77.5
  77.1
  76.6
  76.1
  75.6
  75.0
  74.3
  73.6
  72.9
  72.1
  71.3
  70.4
  69.6
  68.7
  67.8
  66.9
  65.9
  65.0
  64.0

FINANCIAL RATIOS  of  General Finance (GFN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

GFN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GFN stock intrinsic value calculation we used $277 million for the last fiscal year's total revenue generated by General Finance. The default revenue input number comes from income statement of General Finance. 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 GFN 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 10.6%, whose default value for GFN is calculated based on our internal credit rating of General Finance, 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 General Finance.
    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 GFN stock the variable cost ratio is equal to 95%.

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 GFN 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 5.6% for General Finance.

Corporate tax rate of 27% is the nominal tax rate for General Finance. 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 GFN stock is equal to 0.5%.

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 GFN are equal to 210.7%.

Life of production assets of 10 years is the average useful life of capital assets used in General Finance 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 GFN is equal to -4.7%. 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 - $135 million for General Finance - 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 26 million for General Finance 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 General Finance at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ General Finance: Fiscal 3Q Earnings Snapshot   [May-09-18 09:34AM  Associated Press]
▶ General Finance Corporation to Host Earnings Call   [Feb-06-18 09:15AM  ACCESSWIRE]
▶ General Finance posts 2Q profit   [08:43AM  Associated Press]
▶ General Finance Corporation to Host Earnings Call   [Nov-07-17 09:20AM  ACCESSWIRE]
▶ General Finance reports 1Q loss   [08:41AM  Associated Press]
▶ General Finance reports 4Q loss   [Sep-06-17 11:57PM  Associated Press]
▶ General Finance reports 3Q loss   [08:40AM  Associated Press]
▶ General Finance Corporation Promotes Theodore Mourouzis   [Apr-26-17 08:30AM  GlobeNewswire]
▶ General Finance posts 2Q profit   [08:37AM  Associated Press]
Financial statements of GFN
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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