Intrinsic value of Pointer Telocation - PNTR

Previous Close

$14.00

  Intrinsic Value

$28.42

stock screener

  Rating & Target

str. buy

+103%

  Value-price divergence*

-98%

Previous close

$14.00

 
Intrinsic value

$28.42

 
Up/down potential

+103%

 
Rating

str. buy

 
Value-price divergence*

-98%

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

We calculate the intrinsic value of PNTR 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, %
  4.92
  26.70
  24.53
  22.58
  20.82
  19.24
  17.81
  16.53
  15.38
  14.34
  13.41
  12.57
  11.81
  11.13
  10.52
  9.96
  9.47
  9.02
  8.62
  8.26
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
Revenue, $m
  64
  81
  101
  124
  150
  178
  210
  245
  282
  323
  366
  412
  461
  512
  566
  623
  682
  743
  807
  874
  943
  1,015
  1,090
  1,168
  1,248
  1,332
  1,420
  1,511
  1,605
  1,704
  1,806
Variable operating expenses, $m
 
  72
  89
  109
  130
  155
  182
  211
  243
  277
  314
  349
  390
  434
  479
  527
  577
  629
  683
  740
  798
  859
  923
  989
  1,057
  1,128
  1,202
  1,279
  1,359
  1,443
  1,529
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
  58
  72
  89
  109
  130
  155
  182
  211
  243
  277
  314
  349
  390
  434
  479
  527
  577
  629
  683
  740
  798
  859
  923
  989
  1,057
  1,128
  1,202
  1,279
  1,359
  1,443
  1,529
Operating income, $m
  6
  9
  12
  15
  19
  24
  28
  34
  40
  46
  52
  63
  71
  79
  87
  95
  105
  114
  124
  134
  145
  156
  167
  179
  191
  204
  218
  232
  246
  261
  277
EBITDA, $m
  9
  13
  16
  19
  23
  28
  33
  38
  44
  50
  57
  64
  71
  79
  88
  96
  105
  115
  125
  135
  146
  157
  169
  181
  193
  206
  220
  234
  248
  264
  280
Interest expense (income), $m
  1
  1
  1
  2
  3
  3
  4
  5
  7
  8
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  53
Earnings before tax, $m
  5
  8
  10
  13
  17
  20
  24
  28
  33
  38
  43
  53
  59
  65
  72
  79
  86
  93
  101
  109
  118
  127
  136
  145
  155
  166
  176
  187
  199
  211
  224
Tax expense, $m
  2
  2
  3
  4
  4
  5
  6
  8
  9
  10
  12
  14
  16
  18
  19
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  60
Net income, $m
  3
  6
  8
  10
  12
  15
  18
  21
  24
  28
  32
  39
  43
  48
  52
  57
  63
  68
  74
  80
  86
  92
  99
  106
  113
  121
  129
  137
  145
  154
  163

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
  77
  90
  112
  137
  166
  198
  233
  272
  313
  358
  407
  458
  512
  569
  628
  691
  756
  825
  896
  970
  1,047
  1,127
  1,210
  1,296
  1,386
  1,479
  1,576
  1,677
  1,782
  1,891
  2,005
Adjusted assets (=assets-cash), $m
  71
  90
  112
  137
  166
  198
  233
  272
  313
  358
  407
  458
  512
  569
  628
  691
  756
  825
  896
  970
  1,047
  1,127
  1,210
  1,296
  1,386
  1,479
  1,576
  1,677
  1,782
  1,891
  2,005
Revenue / Adjusted assets
  0.901
  0.900
  0.902
  0.905
  0.904
  0.899
  0.901
  0.901
  0.901
  0.902
  0.899
  0.900
  0.900
  0.900
  0.901
  0.902
  0.902
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
  0.900
  0.901
  0.901
  0.901
  0.901
  0.901
  0.901
Average production assets, $m
  1
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
Working capital, $m
  5
  5
  6
  8
  9
  11
  13
  15
  18
  20
  23
  26
  29
  32
  36
  39
  43
  47
  51
  55
  59
  64
  69
  74
  79
  84
  89
  95
  101
  107
  114
Total debt, $m
  15
  18
  27
  37
  49
  62
  76
  92
  109
  127
  147
  168
  190
  213
  237
  263
  290
  317
  346
  377
  408
  441
  475
  510
  546
  584
  624
  665
  708
  753
  799
Total liabilities, $m
  34
  37
  46
  56
  68
  81
  95
  111
  128
  146
  166
  187
  209
  232
  256
  282
  309
  336
  365
  396
  427
  460
  494
  529
  565
  603
  643
  684
  727
  772
  818
Total equity, $m
  43
  53
  66
  81
  98
  117
  138
  161
  186
  212
  241
  271
  303
  337
  372
  409
  448
  488
  530
  574
  620
  667
  716
  767
  820
  876
  933
  993
  1,055
  1,120
  1,187
Total liabilities and equity, $m
  77
  90
  112
  137
  166
  198
  233
  272
  314
  358
  407
  458
  512
  569
  628
  691
  757
  824
  895
  970
  1,047
  1,127
  1,210
  1,296
  1,385
  1,479
  1,576
  1,677
  1,782
  1,892
  2,005
Debt-to-equity ratio
  0.349
  0.330
  0.400
  0.460
  0.500
  0.530
  0.550
  0.570
  0.590
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
  0.640
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
  0.670
Adjusted equity ratio
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592
  0.592

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3
  6
  8
  10
  12
  15
  18
  21
  24
  28
  32
  39
  43
  48
  52
  57
  63
  68
  74
  80
  86
  92
  99
  106
  113
  121
  129
  137
  145
  154
  163
Depreciation, amort., depletion, $m
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
Funds from operations, $m
  9
  10
  12
  14
  16
  19
  22
  25
  28
  32
  36
  39
  44
  48
  53
  58
  64
  69
  75
  81
  87
  94
  101
  108
  115
  123
  131
  139
  147
  156
  166
Change in working capital, $m
  0
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
Cash from operations, $m
  9
  9
  10
  12
  14
  17
  20
  23
  26
  29
  33
  36
  40
  45
  50
  55
  60
  65
  71
  77
  83
  89
  96
  103
  110
  117
  125
  133
  141
  150
  159
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
New CAPEX, $m
  -4
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
Cash from investing activities, $m
  -12
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Free cash flow, $m
  -3
  8
  10
  12
  14
  16
  19
  22
  25
  28
  32
  35
  39
  44
  48
  53
  58
  63
  69
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
  146
  155
Issuance/(repayment) of debt, $m
  2
  8
  9
  10
  12
  13
  14
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
Issuance/(repurchase) of shares, $m
  0
  5
  5
  5
  5
  4
  3
  2
  1
  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  
  0
  13
  14
  15
  17
  17
  17
  18
  18
  18
  20
  21
  22
  23
  24
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
Total cash flow (excl. dividends), $m
  -3
  21
  24
  27
  30
  33
  37
  40
  43
  47
  52
  56
  61
  67
  73
  79
  85
  91
  98
  105
  112
  120
  127
  135
  144
  152
  161
  171
  181
  191
  202
Retained Cash Flow (-), $m
  13
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -28
  -30
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
Prev. year cash balance distribution, $m
 
  1
  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
 
  11
  11
  12
  13
  15
  16
  17
  18
  20
  23
  26
  29
  33
  37
  42
  46
  51
  56
  61
  67
  72
  78
  84
  91
  97
  104
  111
  119
  126
  134
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
 
  11
  10
  11
  11
  11
  11
  11
  11
  12
  12
  12
  12
  13
  12
  12
  12
  11
  10
  9
  8
  7
  6
  6
  5
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  100
  95.2
  91.5
  88.8
  86.7
  85.3
  84.4
  83.9
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8

Pointer Telocation Ltd. provides mobile resource management (MRM) products and services for the automotive, insurance industries, and other mobile tracking markets worldwide. It operates in three segments: Cellocator, MRM, and Roadside Assistance (RSA). The Cellocator segment designs, develops, and manufactures MRM products comprising asset tracking; fleet management; and stolen vehicle retrieval (SVR) products consisting of remote monitoring and control solutions, such as installation in vehicles, command and control center products, and communication infrastructure products. The MRM segment offers asset tracking, fleet management, SVR, and car sharing services. The RSA segment provides roadside assistance services, such as towing services, temporary vehicle replacement services, and mobile automobile repair services, as well as vehicle body work and replacement parts installation services; and emergency home repair and other services, such as household plumbing repair services for insurance companies, including installation, water damage repair, and replacement of water heaters. The company was formerly known as Nexus Telocation Systems Ltd. and changed its name to Pointer Telocation Ltd. in January 2006. Pointer Telocation Ltd. was founded in 1991 and is headquartered in Rosh Haayin, Israel.

FINANCIAL RATIOS  of  Pointer Telocation (PNTR)

Valuation Ratios
P/E Ratio 36.7
Price to Sales 1.7
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow 22
Growth Rates
Sales Growth Rate 4.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -4.4%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 23.3%
Total Debt to Equity 34.9%
Interest Coverage 6
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 9.1%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 9.8%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 13.6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 48.2%
EBITDA Margin 14.1%
EBITDA Margin - 3 Yr. Avg. 16.7%
Operating Margin 9.4%
Oper. Margin - 3 Yr. Avg. 9.9%
Pre-Tax Margin 7.8%
Pre-Tax Margin - 3 Yr. Avg. 7.9%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate 40%
Eff/ Tax Rate - 3 Yr. Avg. -33.3%
Payout Ratio 0%

PNTR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PNTR stock intrinsic value calculation we used $64 million for the last fiscal year's total revenue generated by Pointer Telocation. The default revenue input number comes from 2016 income statement of Pointer Telocation. 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 PNTR stock valuation model: a) initial revenue growth rate of 26.7% 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 PNTR is calculated based on our internal credit rating of Pointer Telocation, 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 Pointer Telocation.
    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 PNTR stock the variable cost ratio is equal to 90.6%.

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 PNTR 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 7.1% for Pointer Telocation.

Corporate tax rate of 27% is the nominal tax rate for Pointer Telocation. 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 PNTR 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 PNTR are equal to 1.6%.

Life of production assets of 11.8 years is the average useful life of capital assets used in Pointer Telocation 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 PNTR is equal to 6.3%. 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 - $43 million for Pointer Telocation - 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 7.899 million for Pointer Telocation 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 Pointer Telocation at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Pointer Telocation to Present at Upcoming Conferences   [Aug-25-16 06:36AM  PR Newswire]
▶ Pointer Completes Spin-off of Shagrir   [Jun-29-16 10:26AM  PR Newswire]
▶ Pointer Telocation Announces Death of Director   [Dec-01  06:00AM  PR Newswire]
▶ Pointer Telocation Reports Q2 2015 Financial Results   [Aug-13  08:45AM  PR Newswire]
▶ Pointer Telocation Reports Q1 2015 Financial Results   [May-12  07:10AM  PR Newswire]
▶ Pointer Telocation Reports Q3 2014 Financial Results   [Nov-13  06:00AM  PR Newswire]
▶ Pointer Telocation Reports Q2 2014 Financial Results   [Aug-14  08:20AM  PR Newswire]
Stock chart of PNTR Financial statements of PNTR
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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