Intrinsic value of U.S. Auto Parts Network - PRTS

Previous Close

$2.69

  Intrinsic Value

$1.55

stock screener

  Rating & Target

sell

-43%

  Value-price divergence*

-42%

Previous close

$2.69

 
Intrinsic value

$1.55

 
Up/down potential

-43%

 
Rating

sell

 
Value-price divergence*

-42%

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

We calculate the intrinsic value of PRTS 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, %
  4.47
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  304
  312
  321
  331
  341
  353
  366
  379
  394
  410
  426
  444
  463
  483
  504
  526
  550
  575
  602
  630
  659
  690
  723
  757
  793
  832
  872
  914
  958
  1,005
  1,054
Variable operating expenses, $m
 
  240
  247
  255
  263
  272
  282
  292
  303
  315
  328
  342
  356
  372
  388
  405
  424
  443
  463
  485
  507
  531
  556
  583
  611
  640
  671
  704
  738
  774
  812
Fixed operating expenses, $m
 
  73
  75
  76
  78
  80
  82
  84
  87
  89
  91
  93
  95
  98
  100
  103
  105
  108
  111
  114
  116
  119
  122
  125
  128
  132
  135
  138
  142
  145
  149
Total operating expenses, $m
  303
  313
  322
  331
  341
  352
  364
  376
  390
  404
  419
  435
  451
  470
  488
  508
  529
  551
  574
  599
  623
  650
  678
  708
  739
  772
  806
  842
  880
  919
  961
Operating income, $m
  0
  -1
  -1
  0
  0
  1
  2
  3
  4
  6
  7
  9
  11
  13
  16
  18
  21
  24
  28
  31
  35
  39
  44
  49
  54
  60
  66
  72
  79
  86
  94
EBITDA, $m
  8
  3
  3
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  19
  22
  24
  28
  31
  35
  39
  43
  48
  53
  58
  63
  69
  76
  83
  90
  98
  106
Interest expense (income), $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  -1
  -2
  -1
  -1
  -1
  0
  1
  2
  3
  4
  5
  7
  9
  11
  13
  15
  18
  21
  24
  27
  31
  35
  39
  43
  48
  53
  59
  65
  71
  77
  85
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  21
  23
Net income, $m
  1
  -2
  -1
  -1
  -1
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  20
  22
  25
  28
  32
  35
  39
  43
  47
  52
  57
  62

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7
  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
  82
  77
  79
  82
  84
  87
  90
  94
  97
  101
  105
  110
  114
  119
  124
  130
  136
  142
  148
  155
  163
  170
  178
  187
  196
  205
  215
  225
  236
  248
  260
Adjusted assets (=assets-cash), $m
  75
  77
  79
  82
  84
  87
  90
  94
  97
  101
  105
  110
  114
  119
  124
  130
  136
  142
  148
  155
  163
  170
  178
  187
  196
  205
  215
  225
  236
  248
  260
Revenue / Adjusted assets
  4.053
  4.052
  4.063
  4.037
  4.060
  4.057
  4.067
  4.032
  4.062
  4.059
  4.057
  4.036
  4.061
  4.059
  4.065
  4.046
  4.044
  4.049
  4.068
  4.065
  4.043
  4.059
  4.062
  4.048
  4.046
  4.059
  4.056
  4.062
  4.059
  4.052
  4.054
Average production assets, $m
  18
  18
  19
  20
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  51
  54
  57
  59
  62
Working capital, $m
  17
  11
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
Total debt, $m
  10
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  36
  39
  43
  47
  51
  56
  61
  66
  71
  77
  83
  89
  95
  102
  110
  117
  125
  134
  143
  152
Total liabilities, $m
  59
  59
  61
  63
  65
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  144
  151
  159
  166
  174
  183
  192
  201
Total equity, $m
  23
  17
  18
  19
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
  51
  54
  56
  59
Total liabilities and equity, $m
  82
  76
  79
  82
  84
  87
  90
  93
  97
  101
  105
  110
  114
  119
  124
  129
  136
  142
  149
  155
  163
  171
  178
  186
  195
  206
  215
  225
  237
  248
  260
Debt-to-equity ratio
  0.435
  0.600
  0.680
  0.760
  0.840
  0.930
  1.010
  1.100
  1.180
  1.270
  1.350
  1.430
  1.510
  1.590
  1.670
  1.740
  1.810
  1.880
  1.950
  2.020
  2.080
  2.140
  2.190
  2.250
  2.300
  2.350
  2.400
  2.450
  2.490
  2.530
  2.580
Adjusted equity ratio
  0.213
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227
  0.227

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1
  -2
  -1
  -1
  -1
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  20
  22
  25
  28
  32
  35
  39
  43
  47
  52
  57
  62
Depreciation, amort., depletion, $m
  8
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
Funds from operations, $m
  33
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  17
  20
  22
  24
  27
  30
  33
  37
  41
  44
  49
  53
  58
  63
  68
  74
Change in working capital, $m
  11
  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
  1
  2
  2
  2
  2
Cash from operations, $m
  22
  2
  2
  2
  3
  4
  4
  5
  6
  7
  8
  10
  11
  13
  15
  17
  19
  21
  24
  26
  29
  32
  36
  39
  43
  47
  52
  56
  61
  67
  72
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
New CAPEX, $m
  -6
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
Cash from investing activities, $m
  -6
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -14
  -14
  -15
Free cash flow, $m
  16
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  2
  2
  4
  5
  6
  8
  9
  11
  13
  15
  17
  20
  23
  26
  29
  32
  36
  39
  44
  48
  53
  58
Issuance/(repayment) of debt, $m
  -12
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Issuance/(repurchase) of shares, $m
  0
  2
  2
  2
  1
  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
Cash from financing (excl. dividends), $m  
  -14
  3
  4
  4
  3
  3
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Total cash flow (excl. dividends), $m
  1
  1
  1
  2
  2
  2
  2
  3
  3
  5
  6
  7
  8
  10
  12
  14
  16
  18
  20
  23
  26
  29
  32
  35
  39
  43
  47
  52
  56
  62
  67
Retained Cash Flow (-), $m
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
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
 
  5
  -1
  0
  0
  1
  1
  2
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  19
  21
  24
  27
  30
  33
  37
  41
  45
  49
  54
  59
  64
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
 
  5
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  4
  4
  3
  3
  3
  3
  2
  2
  2
  2
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  97.3
  94.8
  92.8
  91.3
  90.4
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
  90.1
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U.S. Auto Parts Network, Inc. is an online provider of automotive aftermarket parts and repair information. The Company is an online provider of aftermarket auto parts, including collision parts, engine parts, and performance parts and accessories. The Company operates through two segments: Base USAP, which is an auto parts business, and AutoMD, an online automotive repair source. The Company's Websites provide customers with a range of stock keeping units (SKUs) with detailed product descriptions, attributes and photographs. The Company's product database maps its SKUs to product applications based on vehicle makes, models and years. The Company primarily sells its products to individual consumers through its network of Websites and online marketplaces. The Company classifies its products into various categories, including collision parts serving the body repair segment, engine parts to serve the replacement/wear parts market, and performance parts and accessories.

FINANCIAL RATIOS  of  U.S. Auto Parts Network (PRTS)

Valuation Ratios
P/E Ratio 93.1
Price to Sales 0.3
Price to Book 4
Price to Tangible Book
Price to Cash Flow 4.2
Price to Free Cash Flow 5.8
Growth Rates
Sales Growth Rate 4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
Financial Strength
Quick Ratio 7
Current Ratio 0.1
LT Debt to Equity 39.1%
Total Debt to Equity 43.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. -2%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. -5.9%
Return On Equity 4.7%
Return On Equity - 3 Yr. Avg. -11.8%
Asset Turnover 3.7
Profitability Ratios
Gross Margin 30.3%
Gross Margin - 3 Yr. Avg. 28.8%
EBITDA Margin 2.6%
EBITDA Margin - 3 Yr. Avg. 1.9%
Operating Margin 0.3%
Oper. Margin - 3 Yr. Avg. -0.7%
Pre-Tax Margin -0.3%
Pre-Tax Margin - 3 Yr. Avg. -1.3%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. -0.8%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 11.1%
Payout Ratio 0%

PRTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PRTS stock intrinsic value calculation we used $304 million for the last fiscal year's total revenue generated by U.S. Auto Parts Network. The default revenue input number comes from 2016 income statement of U.S. Auto Parts Network. 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 PRTS stock valuation model: a) initial revenue growth rate of 2.6% 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 PRTS is calculated based on our internal credit rating of U.S. Auto Parts Network, 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 U.S. Auto Parts Network.
    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 PRTS stock the variable cost ratio is equal to 77%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $71 million in the base year in the intrinsic value calculation for PRTS 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 6.3% for U.S. Auto Parts Network.

Corporate tax rate of 27% is the nominal tax rate for U.S. Auto Parts Network. 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 PRTS 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 PRTS are equal to 5.9%.

Life of production assets of 2.3 years is the average useful life of capital assets used in U.S. Auto Parts Network 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 PRTS is equal to 3.6%. 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 - $23 million for U.S. Auto Parts Network - 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 37.444 million for U.S. Auto Parts Network 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 U.S. Auto Parts Network at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
AAP Advance Auto P 87.81 116.90  buy
AZO AutoZone 606.31 112.24  str.sell
ORLY O'Reilly A 212.99 243.22  buy
GPC Genuine Parts 98.04 93.52  hold
LKQ LKQ 37.54 26.15  sell
EBAY eBay 37.97 39.07  hold
HZO MarineMax 16.65 4.32  str.sell

COMPANY NEWS

▶ What Is US Auto Parts Network Incs (PRTS) Share Price Doing?   [Sep-13-17 05:49PM  Simply Wall St.]
▶ U.S. Auto Parts posts 2Q profit   [Aug-10-17 07:37PM  Associated Press]
▶ U.S. Auto Parts Initiates New Stock Repurchase Program   [May-17-17 04:15PM  PR Newswire]
▶ U.S. Auto Parts posts 1Q profit   [May-10-17 05:06PM  Associated Press]
▶ U.S. Auto Parts reports 4Q loss   [Mar-06-17 04:47PM  Associated Press]
Financial statements of PRTS
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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