Intrinsic value of Motorcar Parts of America - MPAA

Previous Close

$27.05

  Intrinsic Value

$97.21

stock screener

  Rating & Target

str. buy

+259%

  Value-price divergence*

+282%

Previous close

$27.05

 
Intrinsic value

$97.21

 
Up/down potential

+259%

 
Rating

str. buy

 
Value-price divergence*

+282%

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

We calculate the intrinsic value of MPAA 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 0.5

 

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, %
  14.09
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
Revenue, $m
  421
  471
  523
  578
  636
  696
  758
  824
  892
  962
  1,036
  1,112
  1,192
  1,274
  1,360
  1,449
  1,542
  1,638
  1,739
  1,843
  1,952
  2,066
  2,185
  2,309
  2,438
  2,573
  2,714
  2,862
  3,016
  3,178
  3,347
Variable operating expenses, $m
 
  199
  221
  244
  269
  294
  321
  348
  377
  407
  438
  470
  503
  538
  574
  612
  651
  692
  734
  778
  824
  872
  923
  975
  1,030
  1,087
  1,146
  1,209
  1,274
  1,342
  1,413
Fixed operating expenses, $m
 
  183
  188
  193
  198
  203
  208
  213
  218
  224
  229
  235
  241
  247
  253
  259
  266
  272
  279
  286
  293
  301
  308
  316
  324
  332
  340
  349
  357
  366
  375
Total operating expenses, $m
  353
  382
  409
  437
  467
  497
  529
  561
  595
  631
  667
  705
  744
  785
  827
  871
  917
  964
  1,013
  1,064
  1,117
  1,173
  1,231
  1,291
  1,354
  1,419
  1,486
  1,558
  1,631
  1,708
  1,788
Operating income, $m
  68
  88
  114
  141
  169
  199
  230
  263
  297
  332
  369
  408
  448
  489
  533
  578
  625
  674
  725
  779
  835
  893
  954
  1,018
  1,085
  1,155
  1,228
  1,305
  1,385
  1,470
  1,558
EBITDA, $m
  72
  92
  119
  146
  175
  205
  237
  270
  305
  341
  378
  417
  458
  500
  544
  590
  638
  688
  740
  794
  851
  911
  973
  1,037
  1,105
  1,177
  1,251
  1,329
  1,411
  1,497
  1,587
Interest expense (income), $m
  12
  8
  16
  25
  34
  43
  53
  63
  74
  85
  97
  109
  121
  134
  148
  162
  177
  192
  208
  224
  241
  259
  278
  297
  318
  339
  361
  384
  409
  434
  460
Earnings before tax, $m
  55
  80
  98
  116
  136
  156
  177
  200
  223
  247
  272
  299
  326
  355
  385
  416
  448
  482
  518
  555
  593
  634
  676
  720
  767
  816
  867
  920
  977
  1,036
  1,098
Tax expense, $m
  17
  22
  26
  31
  37
  42
  48
  54
  60
  67
  74
  81
  88
  96
  104
  112
  121
  130
  140
  150
  160
  171
  183
  195
  207
  220
  234
  249
  264
  280
  296
Net income, $m
  38
  59
  71
  85
  99
  114
  129
  146
  163
  180
  199
  218
  238
  259
  281
  304
  327
  352
  378
  405
  433
  463
  494
  526
  560
  595
  633
  672
  713
  756
  801

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
  436
  475
  528
  583
  641
  702
  765
  831
  900
  971
  1,045
  1,122
  1,202
  1,286
  1,372
  1,462
  1,556
  1,653
  1,754
  1,860
  1,970
  2,085
  2,205
  2,330
  2,460
  2,596
  2,739
  2,888
  3,044
  3,207
  3,377
Adjusted assets (=assets-cash), $m
  425
  475
  528
  583
  641
  702
  765
  831
  900
  971
  1,045
  1,122
  1,202
  1,286
  1,372
  1,462
  1,556
  1,653
  1,754
  1,860
  1,970
  2,085
  2,205
  2,330
  2,460
  2,596
  2,739
  2,888
  3,044
  3,207
  3,377
Revenue / Adjusted assets
  0.991
  0.992
  0.991
  0.991
  0.992
  0.991
  0.991
  0.992
  0.991
  0.991
  0.991
  0.991
  0.992
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
  0.991
Average production assets, $m
  22
  24
  27
  29
  32
  35
  39
  42
  45
  49
  53
  57
  61
  65
  69
  74
  79
  84
  89
  94
  100
  105
  111
  118
  124
  131
  138
  146
  154
  162
  171
Working capital, $m
  -21
  -20
  -22
  -25
  -27
  -30
  -33
  -35
  -38
  -41
  -45
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -75
  -79
  -84
  -89
  -94
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -144
Total debt, $m
  31
  41
  62
  85
  109
  135
  161
  188
  217
  246
  277
  309
  342
  376
  412
  449
  488
  528
  570
  614
  660
  707
  757
  808
  862
  919
  978
  1,040
  1,104
  1,172
  1,242
Total liabilities, $m
  187
  197
  218
  241
  265
  291
  317
  344
  373
  402
  433
  465
  498
  532
  568
  605
  644
  684
  726
  770
  816
  863
  913
  964
  1,018
  1,075
  1,134
  1,196
  1,260
  1,328
  1,398
Total equity, $m
  249
  278
  309
  342
  376
  411
  448
  487
  527
  569
  613
  658
  705
  753
  804
  857
  912
  969
  1,028
  1,090
  1,154
  1,222
  1,292
  1,365
  1,442
  1,522
  1,605
  1,692
  1,784
  1,879
  1,979
Total liabilities and equity, $m
  436
  475
  527
  583
  641
  702
  765
  831
  900
  971
  1,046
  1,123
  1,203
  1,285
  1,372
  1,462
  1,556
  1,653
  1,754
  1,860
  1,970
  2,085
  2,205
  2,329
  2,460
  2,597
  2,739
  2,888
  3,044
  3,207
  3,377
Debt-to-equity ratio
  0.124
  0.150
  0.200
  0.250
  0.290
  0.330
  0.360
  0.390
  0.410
  0.430
  0.450
  0.470
  0.490
  0.500
  0.510
  0.520
  0.540
  0.550
  0.550
  0.560
  0.570
  0.580
  0.590
  0.590
  0.600
  0.600
  0.610
  0.610
  0.620
  0.620
  0.630
Adjusted equity ratio
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  59
  71
  85
  99
  114
  129
  146
  163
  180
  199
  218
  238
  259
  281
  304
  327
  352
  378
  405
  433
  463
  494
  526
  560
  595
  633
  672
  713
  756
  801
Depreciation, amort., depletion, $m
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
Funds from operations, $m
  -64
  63
  76
  90
  105
  120
  136
  153
  171
  189
  208
  228
  248
  270
  292
  316
  340
  366
  393
  420
  450
  480
  512
  546
  581
  617
  656
  696
  739
  783
  830
Change in working capital, $m
  -59
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
Cash from operations, $m
  -5
  65
  78
  92
  107
  123
  139
  156
  173
  192
  211
  231
  252
  273
  296
  320
  344
  370
  397
  425
  454
  485
  517
  551
  586
  623
  662
  703
  745
  790
  837
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
New CAPEX, $m
  -5
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
Cash from investing activities, $m
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -12
  -12
  -13
  -13
  -14
  -15
  -17
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
Free cash flow, $m
  -11
  59
  72
  85
  99
  114
  130
  146
  163
  181
  199
  218
  238
  259
  281
  304
  327
  352
  378
  405
  433
  463
  494
  526
  560
  596
  633
  672
  713
  756
  801
Issuance/(repayment) of debt, $m
  0
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  65
  67
  71
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  
  -2
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  65
  67
  71
Total cash flow (excl. dividends), $m
  -13
  80
  94
  108
  123
  139
  156
  173
  191
  210
  230
  250
  271
  294
  317
  341
  366
  392
  420
  449
  479
  510
  543
  578
  614
  652
  692
  734
  778
  824
  872
Retained Cash Flow (-), $m
  -38
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -67
  -70
  -73
  -76
  -80
  -84
  -87
  -91
  -96
  -100
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
 
  50
  63
  76
  89
  104
  119
  135
  151
  168
  186
  205
  224
  245
  266
  288
  311
  335
  360
  387
  414
  443
  473
  505
  537
  572
  608
  646
  686
  728
  772
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
 
  48
  57
  66
  74
  80
  86
  91
  94
  97
  98
  97
  96
  93
  89
  85
  79
  73
  66
  60
  53
  46
  39
  33
  27
  22
  18
  14
  11
  8
  6
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

Motorcar Parts of America, Inc. is a manufacturer, remanufacturer and distributor of automotive aftermarket parts, including alternators, starters, wheel hub assembly, brake master cylinders, brake power boosters and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy-duty applications. The Company sells its products in North America to auto parts retail and traditional warehouse chains and to automobile manufacturers for both their aftermarket programs and their warranty replacement programs (OES). It recycles materials, including metal from the used cores and corrugated packaging. The Company carries over 13,000 stock keeping units (SKUs) for automotive parts that are sold under its customers' recognized private label brand names and its Quality-Built, Pure Energy, Xtreme, Reliance and other brand names. It sells its products to automotive retail outlets and the professional repair market throughout the United States and Canada.

FINANCIAL RATIOS  of  Motorcar Parts of America (MPAA)

Valuation Ratios
P/E Ratio 13.3
Price to Sales 1.2
Price to Book 2
Price to Tangible Book
Price to Cash Flow -100.9
Price to Free Cash Flow -50.4
Growth Rates
Sales Growth Rate 14.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 6.8%
Total Debt to Equity 12.4%
Interest Coverage 6
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 6.4%
Return On Total Capital 14.6%
Ret/ On T. Cap. - 3 Yr. Avg. 7.8%
Return On Equity 16.5%
Return On Equity - 3 Yr. Avg. 9.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 27.3%
Gross Margin - 3 Yr. Avg. 27.3%
EBITDA Margin 16.9%
EBITDA Margin - 3 Yr. Avg. 12.6%
Operating Margin 16.2%
Oper. Margin - 3 Yr. Avg. 12.6%
Pre-Tax Margin 13.1%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 5.2%
Effective Tax Rate 30.9%
Eff/ Tax Rate - 3 Yr. Avg. 42.8%
Payout Ratio 0%

MPAA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MPAA stock intrinsic value calculation we used $421 million for the last fiscal year's total revenue generated by Motorcar Parts of America. The default revenue input number comes from 2017 income statement of Motorcar Parts of America. 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 MPAA stock valuation model: a) initial revenue growth rate of 11.8% 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 MPAA is calculated based on our internal credit rating of Motorcar Parts of America, 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 Motorcar Parts of America.
    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 MPAA stock the variable cost ratio is equal to 42.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $179 million in the base year in the intrinsic value calculation for MPAA 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 39.3% for Motorcar Parts of America.

Corporate tax rate of 27% is the nominal tax rate for Motorcar Parts of America. 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 MPAA 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 MPAA are equal to 5.1%.

Life of production assets of 6 years is the average useful life of capital assets used in Motorcar Parts of America 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 MPAA is equal to -4.3%. 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 - $249 million for Motorcar Parts of America - 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 18.707 million for Motorcar Parts of America 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 Motorcar Parts of America at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Motorcar Parts posts 1Q profit   [Aug-09-17 11:00PM  Associated Press]
▶ New Strong Sell Stocks for June 30th   [Jun-30-17 09:26AM  Zacks]
▶ Motorcar Parts posts 4Q profit   [08:32AM  Associated Press]
▶ The One Auto Stock to Buy This Spring   [Mar-21-17 10:16AM  TheStreet.com]
▶ Motorcar Parts beats Street 3Q forecasts   [Feb-09-17 08:35AM  Associated Press]
Financial statements of MPAA
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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