Intrinsic value of Getty Realty - GTY

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$23.53

  Intrinsic Value

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  Value-price divergence*

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$23.53

 
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Our model is not good at valuating stocks of financial companies, such as GTY.

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

We calculate the intrinsic value of GTY 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 0.8

 

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, %
  3.60
  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
  115
  117
  120
  123
  127
  130
  135
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  207
  217
  226
  237
  248
  259
  272
  285
  298
  312
  327
  343
  360
  377
Variable operating expenses, $m
 
  81
  82
  85
  87
  90
  92
  96
  99
  103
  107
  111
  115
  120
  125
  131
  136
  142
  149
  156
  163
  170
  178
  187
  195
  205
  215
  225
  236
  247
  259
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
  65
  81
  82
  85
  87
  90
  92
  96
  99
  103
  107
  111
  115
  120
  125
  131
  136
  142
  149
  156
  163
  170
  178
  187
  195
  205
  215
  225
  236
  247
  259
Operating income, $m
  50
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  98
  102
  107
  113
  118
EBITDA, $m
  69
  59
  61
  62
  64
  66
  68
  71
  73
  76
  79
  82
  85
  89
  92
  96
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
Interest expense (income), $m
  16
  16
  16
  17
  17
  18
  19
  20
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  62
  65
Earnings before tax, $m
  42
  21
  22
  22
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  29
  30
  31
  32
  34
  35
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
Tax expense, $m
  0
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
Net income, $m
  38
  15
  16
  16
  16
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  24
  25
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13
  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
  877
  882
  902
  925
  951
  980
  1,012
  1,046
  1,084
  1,124
  1,167
  1,213
  1,262
  1,315
  1,371
  1,430
  1,492
  1,559
  1,629
  1,703
  1,781
  1,864
  1,951
  2,043
  2,139
  2,241
  2,348
  2,461
  2,580
  2,705
  2,836
Adjusted assets (=assets-cash), $m
  864
  882
  902
  925
  951
  980
  1,012
  1,046
  1,084
  1,124
  1,167
  1,213
  1,262
  1,315
  1,371
  1,430
  1,492
  1,559
  1,629
  1,703
  1,781
  1,864
  1,951
  2,043
  2,139
  2,241
  2,348
  2,461
  2,580
  2,705
  2,836
Revenue / Adjusted assets
  0.133
  0.133
  0.133
  0.133
  0.134
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
Average production assets, $m
  668
  681
  697
  715
  735
  757
  782
  808
  837
  868
  902
  937
  975
  1,016
  1,059
  1,105
  1,153
  1,204
  1,258
  1,316
  1,376
  1,440
  1,507
  1,578
  1,653
  1,731
  1,814
  1,902
  1,993
  2,090
  2,191
Working capital, $m
  0
  -12
  -12
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
Total debt, $m
  299
  308
  319
  331
  344
  359
  375
  393
  412
  433
  455
  479
  504
  531
  560
  591
  623
  657
  693
  732
  772
  815
  860
  907
  957
  1,009
  1,065
  1,123
  1,184
  1,249
  1,317
Total liabilities, $m
  446
  455
  466
  478
  491
  506
  522
  540
  559
  580
  602
  626
  651
  678
  707
  738
  770
  804
  840
  879
  919
  962
  1,007
  1,054
  1,104
  1,156
  1,212
  1,270
  1,331
  1,396
  1,464
Total equity, $m
  431
  427
  437
  448
  461
  474
  490
  506
  525
  544
  565
  587
  611
  636
  663
  692
  722
  754
  788
  824
  862
  902
  944
  989
  1,035
  1,085
  1,137
  1,191
  1,249
  1,309
  1,373
Total liabilities and equity, $m
  877
  882
  903
  926
  952
  980
  1,012
  1,046
  1,084
  1,124
  1,167
  1,213
  1,262
  1,314
  1,370
  1,430
  1,492
  1,558
  1,628
  1,703
  1,781
  1,864
  1,951
  2,043
  2,139
  2,241
  2,349
  2,461
  2,580
  2,705
  2,837
Debt-to-equity ratio
  0.694
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.900
  0.910
  0.920
  0.920
  0.930
  0.940
  0.940
  0.950
  0.950
  0.960
Adjusted equity ratio
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484
  0.484

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  15
  16
  16
  16
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  23
  24
  25
  25
  26
  27
  28
  29
  31
  32
  33
  34
  36
  37
  39
Depreciation, amort., depletion, $m
  19
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  60
  63
  66
  70
  73
Funds from operations, $m
  9
  38
  39
  40
  41
  42
  43
  45
  46
  47
  49
  51
  53
  55
  57
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  89
  94
  98
  102
  107
  112
Change in working capital, $m
  -28
  0
  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
Cash from operations, $m
  37
  38
  39
  40
  41
  42
  44
  45
  46
  48
  50
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  80
  83
  87
  91
  95
  99
  104
  109
  114
Maintenance CAPEX, $m
  0
  -22
  -23
  -23
  -24
  -25
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -60
  -63
  -66
  -70
New CAPEX, $m
  -8
  -13
  -16
  -18
  -20
  -22
  -24
  -27
  -29
  -31
  -33
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
  -97
  -102
Cash from investing activities, $m
  13
  -35
  -39
  -41
  -44
  -47
  -49
  -53
  -56
  -59
  -62
  -66
  -69
  -74
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -110
  -115
  -121
  -128
  -134
  -141
  -147
  -155
  -163
  -172
Free cash flow, $m
  50
  3
  1
  -1
  -3
  -4
  -6
  -8
  -9
  -11
  -13
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -40
  -43
  -46
  -48
  -51
  -54
  -58
Issuance/(repayment) of debt, $m
  -20
  9
  10
  12
  13
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  31
  32
  34
  36
  38
  40
  43
  45
  47
  50
  53
  55
  58
  61
  64
  68
Issuance/(repurchase) of shares, $m
  15
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
Cash from financing (excl. dividends), $m  
  -5
  9
  10
  12
  13
  15
  16
  18
  19
  22
  24
  27
  29
  32
  34
  37
  39
  42
  45
  48
  52
  56
  59
  62
  66
  71
  74
  78
  83
  87
  93
Total cash flow (excl. dividends), $m
  45
  12
  11
  11
  11
  10
  10
  10
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
Retained Cash Flow (-), $m
  -24
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -57
  -60
  -64
Prev. year cash balance distribution, $m
 
  13
  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
 
  16
  1
  0
  -2
  -4
  -5
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  15
  1
  0
  -1
  -2
  -3
  -4
  -4
  -4
  -3
  -3
  -3
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.7
  99.5
  99.1
  98.7
  98.3
  97.7
  97.2
  96.6
  95.9
  95.2
  94.5
  93.8
  93.0
  92.2
  91.4
  90.5
  89.7
  88.8
  88.0
  87.1
  86.2

Getty Realty Corp. operates as a real estate investment trust (REIT) in the United States. The company engages in the ownership and leasing of retail motor fuel and convenience store properties, and petroleum distribution terminals. The company’s properties are leased or sublet to distributors and retailers engaged in the sale of gasoline and various motor fuel products, convenience store products, and automotive repair services. As of December 31, 2006, the company owned 836 properties and leased 216 additional properties in 13 states located principally in the northeast United States. Getty Realty Corp. elected to qualify as a REIT. As a REIT, the company would not be subject to federal income tax, provided it distributes at least 90% of its REIT taxable income to its shareholders. The company was founded in 1955 and is headquartered in Jericho, New York.

FINANCIAL RATIOS  of  Getty Realty (GTY)

Valuation Ratios
P/E Ratio 21.3
Price to Sales 7
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 21.9
Price to Free Cash Flow 27.9
Growth Rates
Sales Growth Rate 3.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -96.4%
Cap. Spend. - 3 Yr. Gr. Rate -34.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 69.4%
Total Debt to Equity 69.4%
Interest Coverage 4
Management Effectiveness
Return On Assets 6.1%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 78.3%
Gross Margin - 3 Yr. Avg. 74.4%
EBITDA Margin 67%
EBITDA Margin - 3 Yr. Avg. 56.7%
Operating Margin 43.5%
Oper. Margin - 3 Yr. Avg. 34.7%
Pre-Tax Margin 36.5%
Pre-Tax Margin - 3 Yr. Avg. 30.9%
Net Profit Margin 33%
Net Profit Margin - 3 Yr. Avg. 29.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 94.7%

GTY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GTY stock intrinsic value calculation we used $115 million for the last fiscal year's total revenue generated by Getty Realty. The default revenue input number comes from 2016 income statement of Getty Realty. 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 GTY 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 6.9%, whose default value for GTY is calculated based on our internal credit rating of Getty Realty, 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 Getty Realty.
    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 GTY stock the variable cost ratio is equal to 68.7%.

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 GTY 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 5.2% for Getty Realty.

Corporate tax rate of 27% is the nominal tax rate for Getty Realty. 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 GTY 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 GTY are equal to 580.9%.

Life of production assets of 35.2 years is the average useful life of capital assets used in Getty Realty 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 GTY is equal to -10%. 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 - $431 million for Getty Realty - 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 33.634 million for Getty Realty 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 Getty Realty at the current share price and the inputted number of shares is $0.8 billion.


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COMPANY NEWS

▶ ETFs with exposure to Getty Realty Corp. : May 23, 2017   [May-23-17 12:46PM  Capital Cube]
▶ Getty Realty reports 1Q results   [May-04-17 07:17PM  Associated Press]
▶ New Strong Buy Stocks for May 3rd   [May-03-17 09:31AM  Zacks]
▶ New Strong Buy Stocks for April 18th   [Apr-18-17 10:35AM  Zacks]
▶ 4 Eclectic Names Where I Combine Dividends With Value   [Mar-29-17 11:00AM  TheStreet.com]
▶ Getty Realty reports 4Q results   [Mar-01-17 05:32PM  Associated Press]
▶ Getty Realty Corp. Announces 2016 Dividend Tax Treatment   [Jan-19-17 04:17PM  Business Wire]
▶ Is Getty Realty Corp. (GTY) A Good Stock to Buy?   [Dec-14-16 08:25PM  at Insider Monkey]
▶ Getty Realty Corp. Announces Second Quarter 2016 Results   [Aug-04-16 05:06PM  Business Wire]
▶ Getty Realty Stock Trades Ex-Dividend Tuesday (GTY)   [Jun-21-16 10:55AM  at Investopedia]
▶ New Chief Financial Officer   [Feb-01-16 04:33PM  at noodls]
Stock chart of GTY Financial statements of GTY Annual reports of GTY
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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