Intrinsic value of Motorcar Parts of America - MPAA

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$29.77

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$29.77

 
Intrinsic value

$29.07

 
Up/down potential

-2%

 
Rating

hold

 
Value-price divergence* premium content

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*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 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 0.6

 

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, %
  22.19
  20.20
  18.68
  17.31
  16.08
  14.97
  13.98
  13.08
  12.27
  11.54
  10.89
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
  5.72
Revenue, $m
  369
  444
  526
  618
  717
  824
  939
  1,062
  1,193
  1,330
  1,475
  1,627
  1,786
  1,952
  2,125
  2,305
  2,492
  2,687
  2,890
  3,100
  3,319
  3,546
  3,782
  4,028
  4,284
  4,550
  4,827
  5,116
  5,417
  5,731
  6,058
Variable operating expenses, $m
 
  393
  466
  547
  635
  730
  832
  941
  1,056
  1,178
  1,306
  1,441
  1,581
  1,728
  1,881
  2,041
  2,207
  2,379
  2,559
  2,745
  2,939
  3,140
  3,349
  3,567
  3,793
  4,029
  4,274
  4,530
  4,796
  5,074
  5,364
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
  331
  393
  466
  547
  635
  730
  832
  941
  1,056
  1,178
  1,306
  1,441
  1,581
  1,728
  1,881
  2,041
  2,207
  2,379
  2,559
  2,745
  2,939
  3,140
  3,349
  3,567
  3,793
  4,029
  4,274
  4,530
  4,796
  5,074
  5,364
Operating income, $m
  38
  51
  60
  71
  82
  94
  107
  121
  136
  152
  169
  186
  205
  224
  243
  264
  285
  308
  331
  355
  380
  406
  433
  461
  491
  521
  553
  586
  620
  656
  694
EBITDA, $m
  41
  54
  64
  75
  87
  100
  114
  129
  144
  161
  179
  197
  216
  236
  257
  279
  302
  326
  350
  376
  402
  430
  458
  488
  519
  551
  585
  620
  656
  694
  734
Interest expense (income), $m
  10
  4
  11
  19
  27
  37
  47
  58
  70
  82
  95
  109
  124
  139
  154
  171
  188
  206
  225
  244
  264
  285
  306
  329
  352
  377
  402
  428
  456
  485
  514
Earnings before tax, $m
  22
  47
  49
  52
  55
  57
  60
  63
  67
  70
  74
  77
  81
  85
  89
  93
  97
  102
  106
  111
  116
  121
  127
  133
  138
  145
  151
  158
  165
  172
  179
Tax expense, $m
  11
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  44
  46
  48
Net income, $m
  11
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  101
  106
  110
  115
  120
  125
  131

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  24
  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
  413
  467
  555
  651
  755
  868
  990
  1,119
  1,257
  1,402
  1,554
  1,714
  1,882
  2,057
  2,239
  2,429
  2,626
  2,832
  3,045
  3,267
  3,497
  3,737
  3,985
  4,244
  4,514
  4,794
  5,086
  5,391
  5,708
  6,038
  6,384
Adjusted assets (=assets-cash), $m
  389
  467
  555
  651
  755
  868
  990
  1,119
  1,257
  1,402
  1,554
  1,714
  1,882
  2,057
  2,239
  2,429
  2,626
  2,832
  3,045
  3,267
  3,497
  3,737
  3,985
  4,244
  4,514
  4,794
  5,086
  5,391
  5,708
  6,038
  6,384
Revenue / Adjusted assets
  0.949
  0.951
  0.948
  0.949
  0.950
  0.949
  0.948
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
  0.949
Average production assets, $m
  12
  15
  17
  20
  24
  27
  31
  35
  39
  44
  49
  54
  59
  64
  70
  76
  82
  89
  95
  102
  110
  117
  125
  133
  141
  150
  159
  169
  179
  189
  200
Working capital, $m
  9
  -6
  -7
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -50
  -53
  -56
  -60
  -64
  -68
  -72
  -76
  -80
  -85
Total debt, $m
  30
  59
  102
  149
  201
  257
  317
  381
  449
  520
  596
  675
  758
  844
  934
  1,028
  1,125
  1,227
  1,332
  1,442
  1,556
  1,674
  1,797
  1,925
  2,058
  2,196
  2,341
  2,491
  2,648
  2,811
  2,982
Total liabilities, $m
  203
  231
  274
  321
  373
  429
  489
  553
  621
  692
  768
  847
  930
  1,016
  1,106
  1,200
  1,297
  1,399
  1,504
  1,614
  1,728
  1,846
  1,969
  2,097
  2,230
  2,368
  2,513
  2,663
  2,820
  2,983
  3,154
Total equity, $m
  211
  236
  281
  329
  382
  439
  501
  566
  636
  709
  786
  867
  952
  1,041
  1,133
  1,229
  1,329
  1,433
  1,541
  1,653
  1,769
  1,891
  2,017
  2,148
  2,284
  2,426
  2,574
  2,728
  2,888
  3,055
  3,230
Total liabilities and equity, $m
  414
  467
  555
  650
  755
  868
  990
  1,119
  1,257
  1,401
  1,554
  1,714
  1,882
  2,057
  2,239
  2,429
  2,626
  2,832
  3,045
  3,267
  3,497
  3,737
  3,986
  4,245
  4,514
  4,794
  5,087
  5,391
  5,708
  6,038
  6,384
Debt-to-equity ratio
  0.142
  0.250
  0.360
  0.450
  0.530
  0.580
  0.630
  0.670
  0.710
  0.730
  0.760
  0.780
  0.800
  0.810
  0.820
  0.840
  0.850
  0.860
  0.860
  0.870
  0.880
  0.890
  0.890
  0.900
  0.900
  0.910
  0.910
  0.910
  0.920
  0.920
  0.920
Adjusted equity ratio
  0.499
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  101
  106
  110
  115
  120
  125
  131
Depreciation, amort., depletion, $m
  3
  3
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
Funds from operations, $m
  -1
  37
  40
  42
  45
  48
  50
  54
  57
  60
  64
  67
  71
  75
  79
  83
  88
  92
  97
  102
  107
  112
  118
  123
  129
  136
  142
  149
  156
  163
  171
Change in working capital, $m
  -16
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
Cash from operations, $m
  15
  47
  41
  43
  46
  49
  52
  55
  59
  62
  66
  69
  73
  77
  81
  86
  90
  95
  100
  105
  110
  115
  121
  127
  133
  139
  146
  153
  160
  168
  176
Maintenance CAPEX, $m
  0
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
New CAPEX, $m
  -4
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
Cash from investing activities, $m
  -8
  -5
  -6
  -6
  -7
  -9
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -25
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
Free cash flow, $m
  7
  42
  35
  37
  39
  41
  43
  45
  47
  50
  52
  55
  57
  60
  63
  66
  69
  72
  75
  79
  82
  86
  90
  94
  98
  102
  107
  111
  116
  122
  127
Issuance/(repayment) of debt, $m
  -54
  39
  43
  47
  52
  56
  60
  64
  68
  72
  75
  79
  83
  86
  90
  94
  98
  101
  105
  110
  114
  118
  123
  128
  133
  139
  144
  150
  157
  163
  171
Issuance/(repurchase) of shares, $m
  5
  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  
  -47
  39
  43
  47
  52
  56
  60
  64
  68
  72
  75
  79
  83
  86
  90
  94
  98
  101
  105
  110
  114
  118
  123
  128
  133
  139
  144
  150
  157
  163
  171
Total cash flow (excl. dividends), $m
  -39
  81
  78
  84
  90
  97
  103
  109
  115
  121
  127
  134
  140
  146
  153
  159
  166
  173
  181
  188
  196
  204
  213
  222
  231
  241
  251
  262
  273
  285
  297
Retained Cash Flow (-), $m
  -21
  -39
  -44
  -49
  -53
  -57
  -61
  -65
  -69
  -73
  -77
  -81
  -85
  -88
  -92
  -96
  -100
  -104
  -108
  -112
  -117
  -121
  -126
  -131
  -136
  -142
  -148
  -154
  -160
  -167
  -175
Prev. year cash balance distribution, $m
 
  14
  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
 
  56
  34
  36
  38
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
  63
  66
  69
  73
  76
  79
  83
  87
  91
  95
  99
  103
  108
  113
  118
  123
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
 
  53
  31
  31
  31
  31
  30
  29
  29
  28
  26
  25
  24
  22
  20
  19
  17
  15
  13
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  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
  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. manufactures, remanufactures, and distributes aftermarket automotive parts. It offers rotating electrical products, such as alternators and starters; wheel hub assemblies and bearings; and brake master cylinders for import and domestic cars, light trucks, heavy duty, agricultural, and industrial applications. The company sells its products to automotive retail outlets; OES customers, professional installers, and automotive warehouse distributors; and automobile manufacturers for aftermarket programs and warranty replacement programs in North America. Motorcar Parts of America, Inc. was founded in 1968 and is headquartered in Torrance, California.

FINANCIAL RATIOS  of  Motorcar Parts of America (MPAA)

Valuation Ratios
P/E Ratio 50.1
Price to Sales 1.5
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 36.8
Price to Free Cash Flow 50.1
Growth Rates
Sales Growth Rate 22.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 2
Current Ratio 0.3
LT Debt to Equity 9.5%
Total Debt to Equity 14.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 13.8%
Return On Total Capital 4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 28%
Return On Equity 5.5%
Return On Equity - 3 Yr. Avg. 71.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 27.4%
Gross Margin - 3 Yr. Avg. 28.7%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin 10.3%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 16%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 51.6%
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 $369 million for the last fiscal year's total revenue generated by Motorcar Parts of America. The default revenue input number comes from 2016 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 20.2% 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 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 88.6%.

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 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 18.3% 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 3.3%.

Life of production assets of 4.3 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 -1.4%. 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 - $211 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 18.482 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 $0.6 billion.


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COMPANY NEWS

▶ 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]
Stock chart of MPAA Financial statements of MPAA Annual reports of MPAA
Valuation of Stocks

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