Intrinsic value of SPAR Group - SGRP

Previous Close

$1.05

  Intrinsic Value

$2.75

stock screener

  Rating & Target

str. buy

+162%

Previous close

$1.05

 
Intrinsic value

$2.75

 
Up/down potential

+162%

 
Rating

str. buy

We calculate the intrinsic value of SGRP 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 0.0

 

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, %
  12.61
  43.30
  39.47
  36.02
  32.92
  30.13
  27.62
  25.35
  23.32
  21.49
  19.84
  18.35
  17.02
  15.82
  14.74
  13.76
  12.89
  12.10
  11.39
  10.75
  10.17
  9.66
  9.19
  8.77
  8.39
  8.06
  7.75
  7.47
  7.23
  7.00
  6.80
Revenue, $m
  134
  192
  268
  364
  484
  630
  804
  1,008
  1,243
  1,510
  1,810
  2,142
  2,506
  2,903
  3,331
  3,789
  4,277
  4,795
  5,341
  5,915
  6,516
  7,146
  7,802
  8,487
  9,199
  9,940
  10,710
  11,511
  12,343
  13,207
  14,106
Variable operating expenses, $m
 
  188
  262
  356
  473
  615
  785
  985
  1,214
  1,475
  1,767
  2,092
  2,448
  2,835
  3,252
  3,700
  4,177
  4,682
  5,215
  5,776
  6,363
  6,978
  7,619
  8,287
  8,983
  9,706
  10,459
  11,240
  12,053
  12,897
  13,775
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
  132
  188
  262
  356
  473
  615
  785
  985
  1,214
  1,475
  1,767
  2,092
  2,448
  2,835
  3,252
  3,700
  4,177
  4,682
  5,215
  5,776
  6,363
  6,978
  7,619
  8,287
  8,983
  9,706
  10,459
  11,240
  12,053
  12,897
  13,775
Operating income, $m
  2
  4
  6
  8
  11
  15
  19
  23
  29
  35
  42
  50
  59
  68
  78
  89
  100
  113
  125
  139
  153
  168
  183
  199
  216
  234
  252
  270
  290
  310
  331
EBITDA, $m
  4
  5
  7
  10
  13
  17
  22
  28
  34
  41
  49
  58
  68
  79
  91
  103
  117
  131
  146
  161
  178
  195
  213
  232
  251
  271
  292
  314
  337
  360
  385
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  4
  5
  6
  8
  10
  12
  15
  17
  20
  23
  27
  30
  34
  38
  42
  47
  51
  56
  61
  66
  72
  77
  83
  89
  96
Earnings before tax, $m
  2
  4
  6
  7
  9
  12
  15
  18
  23
  27
  32
  38
  44
  51
  58
  66
  74
  82
  91
  101
  111
  121
  132
  143
  155
  167
  180
  193
  207
  221
  236
Tax expense, $m
  0
  1
  2
  2
  3
  3
  4
  5
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
Net income, $m
  0
  3
  4
  5
  7
  9
  11
  13
  16
  20
  23
  28
  32
  37
  42
  48
  54
  60
  67
  74
  81
  88
  96
  105
  113
  122
  131
  141
  151
  161
  172

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
  55
  69
  96
  130
  173
  226
  288
  361
  445
  541
  648
  767
  898
  1,040
  1,193
  1,357
  1,532
  1,717
  1,913
  2,118
  2,334
  2,559
  2,794
  3,040
  3,295
  3,560
  3,836
  4,123
  4,421
  4,730
  5,052
Adjusted assets (=assets-cash), $m
  48
  69
  96
  130
  173
  226
  288
  361
  445
  541
  648
  767
  898
  1,040
  1,193
  1,357
  1,532
  1,717
  1,913
  2,118
  2,334
  2,559
  2,794
  3,040
  3,295
  3,560
  3,836
  4,123
  4,421
  4,730
  5,052
Revenue / Adjusted assets
  2.792
  2.783
  2.792
  2.800
  2.798
  2.788
  2.792
  2.792
  2.793
  2.791
  2.793
  2.793
  2.791
  2.791
  2.792
  2.792
  2.792
  2.793
  2.792
  2.793
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
  2.792
Average production assets, $m
  3
  4
  5
  7
  9
  12
  15
  19
  24
  29
  34
  41
  48
  55
  63
  72
  81
  91
  101
  112
  124
  136
  148
  161
  175
  189
  203
  219
  235
  251
  268
Working capital, $m
  12
  22
  30
  41
  54
  71
  90
  113
  139
  169
  203
  240
  281
  325
  373
  424
  479
  537
  598
  662
  730
  800
  874
  951
  1,030
  1,113
  1,200
  1,289
  1,382
  1,479
  1,580
Total debt, $m
  10
  15
  31
  51
  76
  107
  143
  185
  235
  290
  353
  422
  498
  581
  670
  766
  868
  976
  1,090
  1,210
  1,336
  1,467
  1,604
  1,747
  1,896
  2,051
  2,211
  2,379
  2,552
  2,733
  2,920
Total liabilities, $m
  35
  40
  56
  76
  101
  132
  168
  210
  260
  315
  378
  447
  523
  606
  695
  791
  893
  1,001
  1,115
  1,235
  1,361
  1,492
  1,629
  1,772
  1,921
  2,076
  2,236
  2,404
  2,577
  2,758
  2,945
Total equity, $m
  20
  29
  40
  54
  72
  94
  120
  151
  186
  226
  270
  320
  374
  434
  497
  566
  639
  716
  798
  883
  973
  1,067
  1,165
  1,268
  1,374
  1,485
  1,600
  1,719
  1,843
  1,973
  2,107
Total liabilities and equity, $m
  55
  69
  96
  130
  173
  226
  288
  361
  446
  541
  648
  767
  897
  1,040
  1,192
  1,357
  1,532
  1,717
  1,913
  2,118
  2,334
  2,559
  2,794
  3,040
  3,295
  3,561
  3,836
  4,123
  4,420
  4,731
  5,052
Debt-to-equity ratio
  0.500
  0.530
  0.770
  0.940
  1.050
  1.130
  1.190
  1.230
  1.260
  1.290
  1.310
  1.320
  1.330
  1.340
  1.350
  1.350
  1.360
  1.360
  1.370
  1.370
  1.370
  1.370
  1.380
  1.380
  1.380
  1.380
  1.380
  1.380
  1.380
  1.390
  1.390
Adjusted equity ratio
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417
  0.417

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  3
  4
  5
  7
  9
  11
  13
  16
  20
  23
  28
  32
  37
  42
  48
  54
  60
  67
  74
  81
  88
  96
  105
  113
  122
  131
  141
  151
  161
  172
Depreciation, amort., depletion, $m
  2
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  44
  47
  50
  54
Funds from operations, $m
  -2
  4
  5
  7
  9
  11
  14
  18
  21
  26
  31
  36
  42
  48
  55
  62
  70
  78
  87
  96
  106
  116
  126
  137
  148
  160
  172
  185
  198
  211
  226
Change in working capital, $m
  -3
  6
  8
  11
  13
  16
  19
  23
  26
  30
  34
  37
  41
  44
  48
  51
  55
  58
  61
  64
  67
  70
  74
  77
  80
  83
  86
  90
  93
  97
  101
Cash from operations, $m
  1
  -2
  -3
  -4
  -5
  -5
  -5
  -5
  -5
  -4
  -3
  -1
  1
  4
  7
  11
  15
  20
  26
  32
  38
  45
  52
  60
  68
  77
  86
  95
  105
  115
  125
Maintenance CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -13
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -50
New CAPEX, $m
  -2
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
Cash from investing activities, $m
  -2
  -2
  -2
  -3
  -3
  -5
  -5
  -7
  -8
  -10
  -12
  -13
  -15
  -18
  -19
  -22
  -23
  -26
  -28
  -31
  -33
  -37
  -39
  -43
  -46
  -49
  -53
  -56
  -60
  -63
  -67
Free cash flow, $m
  -1
  -4
  -5
  -7
  -8
  -10
  -11
  -12
  -13
  -14
  -14
  -15
  -14
  -13
  -12
  -10
  -8
  -6
  -3
  1
  4
  8
  13
  18
  23
  28
  33
  39
  45
  51
  58
Issuance/(repayment) of debt, $m
  4
  12
  16
  20
  25
  30
  36
  43
  49
  56
  63
  69
  76
  83
  89
  96
  102
  108
  114
  120
  126
  131
  137
  143
  149
  155
  161
  167
  174
  181
  188
Issuance/(repurchase) of shares, $m
  0
  6
  7
  9
  11
  13
  15
  17
  19
  20
  21
  22
  22
  22
  22
  21
  19
  17
  15
  12
  9
  6
  2
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  3
  18
  23
  29
  36
  43
  51
  60
  68
  76
  84
  91
  98
  105
  111
  117
  121
  125
  129
  132
  135
  137
  139
  143
  149
  155
  161
  167
  174
  181
  188
Total cash flow (excl. dividends), $m
  2
  14
  18
  22
  28
  34
  40
  47
  54
  62
  69
  77
  84
  92
  99
  106
  113
  120
  126
  133
  139
  145
  152
  160
  171
  183
  194
  206
  219
  232
  245
Retained Cash Flow (-), $m
  -1
  -9
  -11
  -14
  -18
  -22
  -26
  -30
  -35
  -40
  -45
  -50
  -54
  -59
  -64
  -68
  -73
  -77
  -82
  -86
  -90
  -94
  -98
  -102
  -106
  -111
  -115
  -120
  -124
  -129
  -134
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
 
  5
  6
  8
  10
  12
  14
  17
  19
  22
  25
  27
  30
  32
  35
  37
  40
  42
  45
  47
  49
  51
  54
  58
  65
  72
  79
  87
  95
  103
  111
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
  6
  7
  8
  9
  10
  11
  12
  13
  13
  13
  13
  12
  12
  11
  10
  9
  8
  7
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  79.4
  64.3
  53.2
  44.8
  38.3
  33.4
  29.5
  26.5
  24.1
  22.2
  20.6
  19.4
  18.4
  17.6
  16.9
  16.4
  16.0
  15.7
  15.5
  15.3
  15.2
  15.2
  15.2
  15.2
  15.2
  15.2
  15.2
  15.2
  15.2
  15.2

Spar Group, Inc. is an international merchandising and marketing services company. The Company provides its merchandising and other marketing services to manufacturers, distributors and retailers across the world, primarily in mass merchandisers, office supply, grocery, drug store, independent, convenience, toy, home improvement and electronics stores. It operates through two segments: the Domestic Division and the International Division. The Domestic Division provides merchandising and marketing services, furniture and other product assembly services, audit services, and technology services to manufacturers, distributors and retailers in the United States. Those services are primarily performed in mass merchandisers, office supply, grocery, drug store, dollar and electronics stores. The International Division provides merchandising, marketing services and in-store event staffing through subsidiaries in Japan, Canada, South Africa, India, China, Australia, Mexico and Turkey.

FINANCIAL RATIOS  of  SPAR Group (SGRP)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.2
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow -21.7
Growth Rates
Sales Growth Rate 12.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 50%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 7.5%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 22.4%
Gross Margin - 3 Yr. Avg. 23.8%
EBITDA Margin 3%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 1.5%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

SGRP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SGRP stock intrinsic value calculation we used $134 million for the last fiscal year's total revenue generated by SPAR Group. The default revenue input number comes from 2016 income statement of SPAR Group. 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 SGRP stock valuation model: a) initial revenue growth rate of 43.3% 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 SGRP is calculated based on our internal credit rating of SPAR Group, 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 SPAR Group.
    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 SGRP stock the variable cost ratio is equal to 97.8%.

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 SGRP 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 3.5% for SPAR Group.

Corporate tax rate of 27% is the nominal tax rate for SPAR Group. 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 SGRP 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 SGRP are equal to 1.9%.

Life of production assets of 2.3 years is the average useful life of capital assets used in SPAR Group 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 SGRP is equal to 11.2%. 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 - $20 million for SPAR Group - 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 20.6 million for SPAR Group 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 SPAR Group at the current share price and the inputted number of shares is $0.0 billion.

RELATED COMPANIES Price Int.Val. Rating
ISIG Insignia Syste 1.27 2.98  str.buy

COMPANY NEWS

▶ SPAR Group Announces Appointment of New President and CEO   [Aug-30-17 08:45AM  GlobeNewswire]
▶ SPAR Group Announces Departure of CEO   [May-17-17 05:00PM  GlobeNewswire]
▶ SPAR Group Announces Departure of Chief Information Officer   [Apr-27-16 05:28PM  GlobeNewswire]
▶ SPAR Group, Inc. Q2 Earnings, 2015   [Aug-25  01:14PM  Capital Cube]
▶ 10-Q for SPAR Group, Inc.   [Aug-16  08:12PM  at Company Spotlight]
▶ 10-Q for SPAR Group, Inc.   [May-16  08:09PM  at Company Spotlight]
▶ 10-K for SPAR Group, Inc.   [Apr-23  08:10PM  at Company Spotlight]
▶ 10-Q for SPAR Group, Inc.   [Nov-16  07:08PM  Company Spotlight]
▶ Spar Group Inc Stock Downgraded (SGRP)   [Jun-10  11:11AM  at TheStreet]
▶ SPAR Group downgraded to Neutral from Buy at Sidoti   [May-21  09:37AM  at theflyonthewall.com]
Financial statements of SGRP
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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