Intrinsic value of Gaming Partners International - GPIC

Previous Close

$11.30

  Intrinsic Value

$14.10

stock screener

  Rating & Target

buy

+25%

  Value-price divergence*

+1425%

Previous close

$11.30

 
Intrinsic value

$14.10

 
Up/down potential

+25%

 
Rating

buy

 
Value-price divergence*

+1425%

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

We calculate the intrinsic value of GPIC 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, %
  5.13
  18.80
  17.42
  16.18
  15.06
  14.05
  13.15
  12.33
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  82
  97
  114
  133
  153
  174
  197
  222
  247
  274
  303
  333
  364
  396
  430
  465
  501
  539
  578
  619
  662
  706
  752
  800
  849
  901
  955
  1,012
  1,070
  1,131
  1,195
Variable operating expenses, $m
 
  84
  99
  114
  132
  150
  169
  190
  212
  235
  260
  284
  310
  338
  367
  397
  428
  460
  494
  529
  565
  603
  642
  683
  725
  769
  816
  864
  914
  966
  1,021
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
  75
  84
  99
  114
  132
  150
  169
  190
  212
  235
  260
  284
  310
  338
  367
  397
  428
  460
  494
  529
  565
  603
  642
  683
  725
  769
  816
  864
  914
  966
  1,021
Operating income, $m
  8
  13
  16
  18
  21
  24
  28
  31
  35
  39
  43
  49
  53
  58
  63
  68
  73
  79
  85
  91
  97
  103
  110
  117
  124
  132
  140
  148
  156
  165
  175
EBITDA, $m
  11
  17
  20
  23
  26
  30
  34
  38
  42
  47
  52
  57
  62
  68
  74
  80
  86
  92
  99
  106
  113
  121
  129
  137
  145
  154
  163
  173
  183
  194
  205
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
Earnings before tax, $m
  8
  13
  15
  18
  21
  24
  27
  30
  34
  37
  41
  46
  51
  55
  60
  65
  70
  75
  80
  86
  92
  98
  104
  111
  118
  125
  132
  140
  148
  156
  165
Tax expense, $m
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  13
  14
  15
  16
  17
  19
  20
  22
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  42
  45
Net income, $m
  5
  9
  11
  13
  15
  17
  20
  22
  25
  27
  30
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  71
  76
  81
  86
  91
  96
  102
  108
  114
  121

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11
  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
  80
  82
  96
  112
  129
  147
  166
  187
  208
  231
  255
  280
  306
  333
  362
  391
  422
  454
  487
  521
  557
  594
  633
  673
  715
  759
  804
  851
  901
  952
  1,006
Adjusted assets (=assets-cash), $m
  69
  82
  96
  112
  129
  147
  166
  187
  208
  231
  255
  280
  306
  333
  362
  391
  422
  454
  487
  521
  557
  594
  633
  673
  715
  759
  804
  851
  901
  952
  1,006
Revenue / Adjusted assets
  1.188
  1.183
  1.188
  1.188
  1.186
  1.184
  1.187
  1.187
  1.188
  1.186
  1.188
  1.189
  1.190
  1.189
  1.188
  1.189
  1.187
  1.187
  1.187
  1.188
  1.189
  1.189
  1.188
  1.189
  1.187
  1.187
  1.188
  1.189
  1.188
  1.188
  1.188
Average production assets, $m
  22
  26
  30
  35
  40
  46
  52
  58
  65
  72
  79
  87
  95
  104
  113
  122
  131
  141
  152
  162
  173
  185
  197
  210
  223
  236
  250
  265
  280
  296
  313
Working capital, $m
  24
  17
  20
  23
  26
  30
  34
  38
  42
  47
  52
  57
  62
  68
  73
  79
  86
  92
  99
  106
  113
  121
  129
  137
  145
  154
  163
  173
  183
  193
  204
Total debt, $m
  8
  11
  15
  20
  25
  31
  36
  43
  49
  56
  63
  71
  79
  87
  96
  105
  114
  124
  134
  144
  155
  167
  178
  191
  203
  217
  230
  245
  260
  276
  292
Total liabilities, $m
  22
  25
  29
  34
  39
  45
  50
  57
  63
  70
  77
  85
  93
  101
  110
  119
  128
  138
  148
  158
  169
  181
  192
  205
  217
  231
  244
  259
  274
  290
  306
Total equity, $m
  58
  57
  67
  78
  90
  102
  116
  130
  145
  161
  177
  195
  213
  232
  252
  272
  294
  316
  339
  363
  388
  414
  440
  468
  498
  528
  560
  593
  627
  663
  700
Total liabilities and equity, $m
  80
  82
  96
  112
  129
  147
  166
  187
  208
  231
  254
  280
  306
  333
  362
  391
  422
  454
  487
  521
  557
  595
  632
  673
  715
  759
  804
  852
  901
  953
  1,006
Debt-to-equity ratio
  0.138
  0.190
  0.230
  0.260
  0.280
  0.300
  0.320
  0.330
  0.340
  0.350
  0.360
  0.360
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
  0.400
  0.400
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.420
  0.420
Adjusted equity ratio
  0.681
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  9
  11
  13
  15
  17
  20
  22
  25
  27
  30
  34
  37
  40
  44
  47
  51
  55
  59
  63
  67
  71
  76
  81
  86
  91
  96
  102
  108
  114
  121
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  5
  5
  6
  7
  7
  8
  9
  8
  9
  10
  11
  12
  13
  13
  14
  15
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
Funds from operations, $m
  -2
  13
  15
  17
  20
  23
  25
  29
  32
  35
  39
  42
  46
  50
  54
  59
  63
  68
  73
  78
  83
  89
  95
  101
  107
  113
  120
  127
  135
  142
  150
Change in working capital, $m
  -6
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
Cash from operations, $m
  4
  10
  12
  14
  16
  19
  22
  24
  27
  31
  34
  37
  41
  45
  49
  53
  57
  62
  66
  71
  76
  81
  87
  93
  98
  105
  111
  118
  125
  132
  139
Maintenance CAPEX, $m
  0
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
New CAPEX, $m
  -12
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
Cash from investing activities, $m
  -8
  -6
  -6
  -8
  -8
  -10
  -10
  -11
  -13
  -13
  -14
  -16
  -16
  -17
  -19
  -20
  -22
  -23
  -23
  -25
  -26
  -29
  -30
  -32
  -33
  -35
  -36
  -39
  -40
  -43
  -45
Free cash flow, $m
  -4
  4
  5
  7
  8
  9
  11
  13
  15
  17
  20
  22
  24
  27
  30
  33
  36
  39
  42
  46
  50
  53
  57
  61
  65
  70
  74
  79
  84
  89
  94
Issuance/(repayment) of debt, $m
  -1
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
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  
  -1
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
Total cash flow (excl. dividends), $m
  -6
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  35
  38
  42
  45
  49
  53
  56
  60
  65
  69
  74
  78
  83
  88
  94
  99
  105
  111
Retained Cash Flow (-), $m
  -4
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
Prev. year cash balance distribution, $m
 
  10
  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
  0
  0
  1
  2
  4
  5
  7
  8
  10
  12
  14
  16
  19
  21
  24
  27
  30
  32
  36
  39
  42
  45
  49
  53
  57
  61
  65
  69
  73
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
 
  9
  0
  0
  1
  2
  3
  3
  4
  5
  5
  6
  6
  6
  6
  6
  6
  6
  5
  5
  5
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
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
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Gaming Partners International Corporation, together with its subsidiaries, manufactures and supplies casino table game equipment in the Americas, the Asia-Pacific, Europe, and Africa. It offers American-style casino currency, such as injection-molded currency, thermo-compression molded currency, laser cut-thermo-compression currency, and sublimation currency; European-style casino currency, including plaques and jetons; radio frequency identification (RFID) currency, readers, and antennas for use in cages, gaming tables, and chip vaults; and RFID solutions to authenticate casino currency, as well as provides related hardware support and maintenance services. The company also provides playing cards; table layouts; gaming furniture comprising tables, bases, and pit podiums; casino table game accessories consisting of table displays, roulette reader boards, foot rails, chip trays, drop boxes, shoes, cut cards, dice sticks, lammers, markers, buttons, and air rail system ventilation devices; and dices. In addition, it markets casino-specific themed products for customers to promote special events, such as sporting events, conventions, holidays, casino anniversaries, and premier entertainment events. The company offers its products under the Paulson, Bud Jones, Bourgogne et Grasset, Gemaco, and Blue Chip brand names. Gaming Partners International Corporation markets and sells its products through its sales force, as well as through sales agents or distributors. The company was founded in 1963 and is headquartered in North Las Vegas, Nevada.

FINANCIAL RATIOS  of  Gaming Partners International (GPIC)

Valuation Ratios
P/E Ratio 17.9
Price to Sales 1.1
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 22.4
Price to Free Cash Flow -11.2
Growth Rates
Sales Growth Rate 5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 200%
Cap. Spend. - 3 Yr. Gr. Rate 43.1%
Financial Strength
Quick Ratio 11
Current Ratio 0
LT Debt to Equity 12.1%
Total Debt to Equity 13.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 7%
Return On Total Capital 7.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.3%
Return On Equity 8.9%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 30.5%
Gross Margin - 3 Yr. Avg. 31.5%
EBITDA Margin 13.4%
EBITDA Margin - 3 Yr. Avg. 12.3%
Operating Margin 8.5%
Oper. Margin - 3 Yr. Avg. 8.2%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 8.6%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 6.7%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 5.8%
Payout Ratio 20%

GPIC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GPIC stock intrinsic value calculation we used $82 million for the last fiscal year's total revenue generated by Gaming Partners International. The default revenue input number comes from 2016 income statement of Gaming Partners International. 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 GPIC stock valuation model: a) initial revenue growth rate of 18.8% 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 GPIC is calculated based on our internal credit rating of Gaming Partners International, 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 Gaming Partners International.
    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 GPIC stock the variable cost ratio is equal to 86.6%.

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 GPIC 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 Gaming Partners International.

Corporate tax rate of 27% is the nominal tax rate for Gaming Partners International. 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 GPIC 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 GPIC are equal to 26.2%.

Life of production assets of 10.5 years is the average useful life of capital assets used in Gaming Partners International 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 GPIC is equal to 17.1%. 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 - $58 million for Gaming Partners International - 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 7.849 million for Gaming Partners International 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 Gaming Partners International at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ 10-Q for Gaming Partners International Corp.   [Aug-14  08:10PM  at Company Spotlight]
▶ 10-Q for Gaming Partners International Corp.   [May-15  08:09PM  at Company Spotlight]
▶ 10-K for Gaming Partners International Corp.   [May-02  08:09PM  at Company Spotlight]
▶ 10-Q for Gaming Partners International Corp.   [Nov-14  07:09PM  Company Spotlight]
▶ 3 Stocks Boosting The Consumer Durables Industry Higher   [Oct-16  04:33PM  at TheStreet]
▶ Gaming Partners receives $6.4M order from Macau casino   [May-23  03:57PM  at theflyonthewall.com]
▶ Gaming Partners reports Q1 EPS (14c), one estimate 7c   [09:04AM  at theflyonthewall.com]
Stock chart of GPIC Financial statements of GPIC
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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