Intrinsic value of GP Strategies - GPX

Previous Close

$29.75

  Intrinsic Value

$41.15

stock screener

  Rating & Target

buy

+38%

Previous close

$29.75

 
Intrinsic value

$41.15

 
Up/down potential

+38%

 
Rating

buy

We calculate the intrinsic value of GPX 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 2013), $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 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2013(a)
   2014
   2015
   2016
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.71
  16.80
  15.62
  14.56
  13.60
  12.74
  11.97
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
Revenue, $m
  437
  510
  590
  676
  768
  866
  970
  1,079
  1,194
  1,314
  1,440
  1,571
  1,708
  1,850
  1,998
  2,152
  2,312
  2,478
  2,650
  2,830
  3,016
  3,210
  3,412
  3,623
  3,842
  4,070
  4,308
  4,556
  4,815
  5,086
  5,368
Variable operating expenses, $m
 
  463
  534
  609
  691
  777
  869
  966
  1,067
  1,173
  1,285
  1,389
  1,510
  1,636
  1,767
  1,903
  2,044
  2,191
  2,343
  2,502
  2,667
  2,839
  3,017
  3,203
  3,397
  3,599
  3,809
  4,029
  4,258
  4,497
  4,747
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
  398
  463
  534
  609
  691
  777
  869
  966
  1,067
  1,173
  1,285
  1,389
  1,510
  1,636
  1,767
  1,903
  2,044
  2,191
  2,343
  2,502
  2,667
  2,839
  3,017
  3,203
  3,397
  3,599
  3,809
  4,029
  4,258
  4,497
  4,747
Operating income, $m
  38
  47
  57
  67
  77
  89
  101
  113
  126
  140
  155
  182
  198
  214
  231
  249
  268
  287
  307
  328
  349
  372
  395
  419
  445
  471
  499
  527
  557
  589
  622
EBITDA, $m
  47
  61
  70
  81
  92
  103
  116
  129
  143
  157
  172
  188
  204
  221
  239
  257
  276
  296
  317
  338
  360
  383
  408
  433
  459
  486
  514
  544
  575
  607
  641
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
Earnings before tax, $m
  38
  47
  56
  65
  76
  86
  98
  109
  122
  135
  149
  175
  190
  205
  221
  238
  256
  274
  293
  312
  333
  354
  376
  399
  423
  447
  473
  500
  529
  558
  589
Tax expense, $m
  14
  13
  15
  18
  20
  23
  26
  30
  33
  36
  40
  47
  51
  55
  60
  64
  69
  74
  79
  84
  90
  95
  101
  108
  114
  121
  128
  135
  143
  151
  159
Net income, $m
  24
  35
  41
  48
  55
  63
  71
  80
  89
  99
  109
  128
  139
  150
  162
  174
  187
  200
  214
  228
  243
  258
  274
  291
  308
  327
  346
  365
  386
  408
  430

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6
  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
  280
  320
  370
  424
  482
  543
  608
  676
  748
  824
  903
  985
  1,071
  1,160
  1,253
  1,349
  1,449
  1,553
  1,662
  1,774
  1,891
  2,013
  2,139
  2,271
  2,409
  2,552
  2,701
  2,857
  3,019
  3,189
  3,366
Adjusted assets (=assets-cash), $m
  274
  320
  370
  424
  482
  543
  608
  676
  748
  824
  903
  985
  1,071
  1,160
  1,253
  1,349
  1,449
  1,553
  1,662
  1,774
  1,891
  2,013
  2,139
  2,271
  2,409
  2,552
  2,701
  2,857
  3,019
  3,189
  3,366
Revenue / Adjusted assets
  1.595
  1.594
  1.595
  1.594
  1.593
  1.595
  1.595
  1.596
  1.596
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.596
  1.596
  1.594
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
  1.595
Average production assets, $m
  24
  28
  32
  37
  41
  47
  52
  58
  64
  71
  78
  85
  92
  100
  108
  116
  125
  134
  143
  153
  163
  173
  184
  196
  207
  220
  233
  246
  260
  275
  290
Working capital, $m
  59
  62
  71
  82
  93
  105
  117
  131
  144
  159
  174
  190
  207
  224
  242
  260
  280
  300
  321
  342
  365
  388
  413
  438
  465
  492
  521
  551
  583
  615
  650
Total debt, $m
  0
  15
  31
  48
  66
  86
  106
  128
  151
  175
  200
  226
  253
  282
  311
  342
  374
  407
  441
  477
  514
  553
  593
  635
  679
  724
  772
  821
  873
  927
  983
Total liabilities, $m
  87
  102
  118
  135
  153
  173
  193
  215
  238
  262
  287
  313
  340
  369
  398
  429
  461
  494
  528
  564
  601
  640
  680
  722
  766
  811
  859
  908
  960
  1,014
  1,070
Total equity, $m
  193
  218
  252
  289
  328
  370
  415
  461
  510
  562
  616
  672
  730
  791
  854
  920
  988
  1,059
  1,133
  1,210
  1,290
  1,373
  1,459
  1,549
  1,643
  1,740
  1,842
  1,948
  2,059
  2,175
  2,295
Total liabilities and equity, $m
  280
  320
  370
  424
  481
  543
  608
  676
  748
  824
  903
  985
  1,070
  1,160
  1,252
  1,349
  1,449
  1,553
  1,661
  1,774
  1,891
  2,013
  2,139
  2,271
  2,409
  2,551
  2,701
  2,856
  3,019
  3,189
  3,365
Debt-to-equity ratio
  0.000
  0.070
  0.120
  0.170
  0.200
  0.230
  0.260
  0.280
  0.300
  0.310
  0.320
  0.340
  0.350
  0.360
  0.360
  0.370
  0.380
  0.380
  0.390
  0.390
  0.400
  0.400
  0.410
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
  0.430
  0.430
Adjusted equity ratio
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682
  0.682

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24
  35
  41
  48
  55
  63
  71
  80
  89
  99
  109
  128
  139
  150
  162
  174
  187
  200
  214
  228
  243
  258
  274
  291
  308
  327
  346
  365
  386
  408
  430
Depreciation, amort., depletion, $m
  9
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
Funds from operations, $m
  -1
  48
  55
  62
  70
  78
  86
  96
  105
  115
  126
  133
  145
  157
  169
  182
  195
  209
  223
  238
  254
  270
  287
  304
  322
  341
  361
  382
  404
  426
  450
Change in working capital, $m
  -17
  9
  10
  10
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  27
  28
  29
  30
  31
  33
  34
Cash from operations, $m
  16
  39
  45
  52
  59
  66
  74
  82
  91
  101
  110
  118
  128
  139
  151
  163
  176
  189
  202
  216
  231
  246
  262
  279
  296
  314
  332
  352
  372
  393
  415
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
New CAPEX, $m
  -7
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
Cash from investing activities, $m
  -20
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -10
  -12
  -12
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -20
  -20
  -21
  -23
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
Free cash flow, $m
  -4
  34
  39
  45
  51
  58
  65
  73
  81
  90
  99
  105
  115
  125
  136
  148
  159
  171
  184
  197
  211
  225
  240
  255
  271
  288
  305
  323
  342
  361
  382
Issuance/(repayment) of debt, $m
  0
  15
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  47
  49
  52
  54
  56
Issuance/(repurchase) of shares, $m
  -2
  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  
  3
  15
  16
  17
  18
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  47
  49
  52
  54
  56
Total cash flow (excl. dividends), $m
  -2
  48
  55
  62
  69
  77
  86
  95
  104
  114
  124
  131
  142
  154
  166
  178
  191
  205
  218
  233
  248
  264
  280
  297
  315
  333
  352
  372
  393
  415
  438
Retained Cash Flow (-), $m
  -26
  -31
  -34
  -37
  -39
  -42
  -44
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -106
  -111
  -116
  -121
Prev. year cash balance distribution, $m
 
  6
  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
 
  23
  21
  25
  30
  36
  42
  48
  55
  62
  70
  75
  84
  93
  103
  112
  123
  133
  145
  156
  168
  181
  194
  207
  221
  235
  250
  266
  282
  299
  317
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
 
  22
  19
  22
  25
  28
  30
  32
  34
  36
  37
  36
  36
  35
  34
  33
  31
  29
  27
  24
  21
  19
  16
  14
  11
  9
  7
  6
  4
  3
  2
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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

GP Strategies Corporation is a global performance improvement solutions provider of training, e-Learning solutions, management consulting and engineering services. The Company operates through four business segments: Learning Solutions, Professional & Technical Services, Sandy Training & Marketing, and Performance Readiness Solutions. The Learning Solutions segment delivers training, curriculum design and development, e-Learning services, system hosting, training business process outsourcing and consulting services globally. The Professional & Technical Services segment provides training, consulting, engineering and technical services, including lean consulting, emergency preparedness, safety and regulatory compliance, chemical demilitarization and environmental services. The Sandy Training & Marketing segment provides custom product sales training. The Performance Readiness Solutions segment provides performance consulting and technology consulting services. _tck('aft');

FINANCIAL RATIOS  of  GP Strategies (GPX)

Valuation Ratios
P/E Ratio 23.7
Price to Sales 1.3
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 35.6
Price to Free Cash Flow 63.2
Growth Rates
Sales Growth Rate 8.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 133.3%
Cap. Spend. - 3 Yr. Gr. Rate 28.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 9.2%
Ret/ On Assets - 3 Yr. Avg. 9.5%
Return On Total Capital 13.3%
Ret/ On T. Cap. - 3 Yr. Avg. 13.9%
Return On Equity 13.3%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 17.4%
Gross Margin - 3 Yr. Avg. 17.5%
EBITDA Margin 10.8%
EBITDA Margin - 3 Yr. Avg. 10.6%
Operating Margin 8.9%
Oper. Margin - 3 Yr. Avg. 8.8%
Pre-Tax Margin 8.7%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 5.5%
Net Profit Margin - 3 Yr. Avg. 5.5%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 36.2%
Payout Ratio 0%

GPX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GPX stock intrinsic value calculation we used $437 million for the last fiscal year's total revenue generated by GP Strategies. The default revenue input number comes from 2013 income statement of GP Strategies. 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 GPX stock valuation model: a) initial revenue growth rate of 16.8% 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 GPX is calculated based on our internal credit rating of GP Strategies, 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 GP Strategies.
    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 GPX stock the variable cost ratio is equal to 91.1%.

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 GPX 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 GP Strategies.

Corporate tax rate of 27% is the nominal tax rate for GP Strategies. 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 GPX 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 GPX are equal to 5.4%.

Life of production assets of 14.8 years is the average useful life of capital assets used in GP Strategies 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 GPX is equal to 12.1%. 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 - $193 million for GP Strategies - 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 16.726 million for GP Strategies 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 GP Strategies at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ 5 Stocks With Exciting Interest Coverage Ratio   [Sep-18-17 10:14AM  Zacks]
▶ GP Strategies Acquires YouTrain   [Sep-05-17 06:45AM  PR Newswire]
▶ Top Ranked Value Stocks to Buy for August 29th   [Aug-29-17 10:12AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for August 23rd   [Aug-23-17 10:31AM  Zacks]
▶ GP Strategies Releases New eBook on Micro-learning   [Aug-08-17 07:00AM  PR Newswire]
▶ GP Strategies beats 2Q profit forecasts   [Jul-27-17 09:15PM  Associated Press]
▶ New Strong Sell Stocks for June 15th   [Jun-15-17 08:35AM  Zacks]
▶ ETFs with exposure to GP Strategies Corp. : May 4, 2017   [May-04-17 04:00PM  Capital Cube]
▶ GP Strategies meets 1Q profit forecasts   [May-02-17 06:57AM  Associated Press]
▶ GP Strategies Acquires Emantras   [Apr-04-17 06:45AM  PR Newswire]
▶ GP Strategies to Present at 29th Annual ROTH Conference   [Mar-07-17 12:09PM  PR Newswire]
▶ GP Strategies tops Street 4Q forecasts   [07:13AM  Associated Press]
▶ GP Strategies Acquires McKinney Rogers   [Feb-02-17 06:45AM  PR Newswire]
▶ GP Strategies Corp (GPX): Are Hedge Funds Right About This Stock?   [Dec-07-16 06:57AM  at Insider Monkey]
▶ GP Strategies to Acquire Maverick Solutions   [Sep-19-16 06:45AM  PR Newswire]
Financial statements of GPX
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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