Intrinsic value of Spartan Motors - SPAR

Previous Close

$15.30

  Intrinsic Value

$10.04

stock screener

  Rating & Target

sell

-34%

Previous close

$15.30

 
Intrinsic value

$10.04

 
Up/down potential

-34%

 
Rating

sell

We calculate the intrinsic value of SPAR 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  7.45
  19.70
  18.23
  16.91
  15.72
  14.64
  13.68
  12.81
  12.03
  11.33
  10.70
  10.13
  9.61
  9.15
  8.74
  8.36
  8.03
  7.72
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
  5.95
  5.85
  5.77
  5.69
Revenue, $m
  591
  846
  1,001
  1,170
  1,354
  1,552
  1,764
  1,990
  2,230
  2,482
  2,748
  3,026
  3,317
  3,620
  3,936
  4,266
  4,608
  4,964
  5,334
  5,718
  6,118
  6,533
  6,965
  7,414
  7,881
  8,367
  8,874
  9,402
  9,952
  10,527
  11,126
Variable operating expenses, $m
 
  791
  934
  1,091
  1,262
  1,446
  1,644
  1,854
  2,077
  2,311
  2,558
  2,813
  3,084
  3,366
  3,660
  3,966
  4,284
  4,615
  4,959
  5,317
  5,688
  6,074
  6,475
  6,893
  7,327
  7,780
  8,251
  8,742
  9,253
  9,787
  10,344
Fixed operating expenses, $m
 
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  60
Total operating expenses, $m
  582
  823
  966
  1,124
  1,296
  1,481
  1,679
  1,890
  2,114
  2,349
  2,597
  2,852
  3,124
  3,407
  3,702
  4,009
  4,328
  4,660
  5,005
  5,364
  5,736
  6,123
  6,525
  6,944
  7,379
  7,833
  8,306
  8,798
  9,310
  9,845
  10,404
Operating income, $m
  9
  24
  34
  45
  58
  71
  85
  100
  116
  133
  151
  173
  193
  213
  234
  257
  280
  304
  329
  355
  382
  410
  439
  470
  501
  534
  569
  605
  642
  681
  722
EBITDA, $m
  17
  38
  50
  63
  77
  93
  109
  127
  146
  166
  187
  209
  232
  256
  281
  307
  334
  362
  392
  422
  454
  487
  521
  557
  594
  633
  673
  715
  759
  805
  853
Interest expense (income), $m
  0
  2
  4
  7
  10
  13
  17
  21
  25
  29
  33
  38
  43
  48
  54
  59
  65
  71
  78
  84
  91
  98
  106
  113
  121
  130
  138
  147
  157
  167
  177
Earnings before tax, $m
  9
  22
  30
  38
  48
  58
  68
  79
  91
  104
  117
  135
  150
  165
  181
  197
  215
  232
  251
  271
  291
  312
  333
  356
  380
  405
  430
  457
  485
  514
  545
Tax expense, $m
  0
  6
  8
  10
  13
  16
  18
  21
  25
  28
  32
  36
  40
  45
  49
  53
  58
  63
  68
  73
  78
  84
  90
  96
  103
  109
  116
  123
  131
  139
  147
Net income, $m
  9
  16
  22
  28
  35
  42
  50
  58
  67
  76
  86
  99
  109
  120
  132
  144
  157
  170
  183
  197
  212
  228
  243
  260
  277
  295
  314
  334
  354
  376
  398

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  32
  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
  243
  360
  426
  498
  576
  661
  751
  848
  950
  1,057
  1,170
  1,289
  1,413
  1,542
  1,676
  1,817
  1,963
  2,114
  2,272
  2,435
  2,605
  2,782
  2,966
  3,157
  3,356
  3,564
  3,779
  4,004
  4,239
  4,483
  4,738
Adjusted assets (=assets-cash), $m
  211
  360
  426
  498
  576
  661
  751
  848
  950
  1,057
  1,170
  1,289
  1,413
  1,542
  1,676
  1,817
  1,963
  2,114
  2,272
  2,435
  2,605
  2,782
  2,966
  3,157
  3,356
  3,564
  3,779
  4,004
  4,239
  4,483
  4,738
Revenue / Adjusted assets
  2.801
  2.350
  2.350
  2.349
  2.351
  2.348
  2.349
  2.347
  2.347
  2.348
  2.349
  2.348
  2.347
  2.348
  2.348
  2.348
  2.347
  2.348
  2.348
  2.348
  2.349
  2.348
  2.348
  2.348
  2.348
  2.348
  2.348
  2.348
  2.348
  2.348
  2.348
Average production assets, $m
  33
  100
  118
  138
  160
  183
  208
  235
  263
  293
  324
  357
  391
  427
  464
  503
  544
  586
  629
  675
  722
  771
  822
  875
  930
  987
  1,047
  1,109
  1,174
  1,242
  1,313
Working capital, $m
  74
  44
  52
  61
  70
  81
  92
  103
  116
  129
  143
  157
  172
  188
  205
  222
  240
  258
  277
  297
  318
  340
  362
  386
  410
  435
  461
  489
  518
  547
  579
Total debt, $m
  0
  44
  73
  105
  139
  176
  216
  259
  304
  351
  401
  453
  508
  565
  624
  686
  750
  817
  887
  959
  1,034
  1,112
  1,193
  1,277
  1,365
  1,456
  1,552
  1,651
  1,754
  1,862
  1,974
Total liabilities, $m
  90
  159
  188
  220
  254
  291
  331
  374
  419
  466
  516
  568
  623
  680
  739
  801
  865
  932
  1,002
  1,074
  1,149
  1,227
  1,308
  1,392
  1,480
  1,572
  1,667
  1,766
  1,869
  1,977
  2,090
Total equity, $m
  154
  201
  238
  278
  322
  369
  420
  474
  531
  591
  654
  720
  790
  862
  937
  1,016
  1,097
  1,182
  1,270
  1,361
  1,456
  1,555
  1,658
  1,765
  1,876
  1,992
  2,113
  2,238
  2,369
  2,506
  2,649
Total liabilities and equity, $m
  244
  360
  426
  498
  576
  660
  751
  848
  950
  1,057
  1,170
  1,288
  1,413
  1,542
  1,676
  1,817
  1,962
  2,114
  2,272
  2,435
  2,605
  2,782
  2,966
  3,157
  3,356
  3,564
  3,780
  4,004
  4,238
  4,483
  4,739
Debt-to-equity ratio
  0.000
  0.220
  0.310
  0.380
  0.430
  0.480
  0.510
  0.550
  0.570
  0.590
  0.610
  0.630
  0.640
  0.660
  0.670
  0.680
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
  0.720
  0.730
  0.730
  0.730
  0.740
  0.740
  0.740
  0.750
Adjusted equity ratio
  0.578
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  16
  22
  28
  35
  42
  50
  58
  67
  76
  86
  99
  109
  120
  132
  144
  157
  170
  183
  197
  212
  228
  243
  260
  277
  295
  314
  334
  354
  376
  398
Depreciation, amort., depletion, $m
  8
  14
  16
  18
  20
  22
  25
  27
  30
  33
  36
  36
  39
  43
  46
  50
  54
  59
  63
  67
  72
  77
  82
  87
  93
  99
  105
  111
  117
  124
  131
Funds from operations, $m
  31
  30
  37
  46
  54
  64
  74
  85
  97
  109
  122
  134
  148
  163
  178
  194
  211
  228
  246
  265
  284
  305
  326
  348
  370
  394
  419
  445
  472
  500
  529
Change in working capital, $m
  8
  7
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  29
  30
  31
Cash from operations, $m
  23
  23
  29
  37
  45
  54
  63
  73
  84
  96
  108
  120
  133
  147
  162
  177
  193
  210
  227
  245
  264
  283
  303
  324
  346
  369
  392
  417
  443
  470
  498
Maintenance CAPEX, $m
  0
  -8
  -10
  -12
  -14
  -16
  -18
  -21
  -23
  -26
  -29
  -32
  -36
  -39
  -43
  -46
  -50
  -54
  -59
  -63
  -67
  -72
  -77
  -82
  -87
  -93
  -99
  -105
  -111
  -117
  -124
New CAPEX, $m
  -13
  -16
  -18
  -20
  -22
  -23
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
Cash from investing activities, $m
  -13
  -24
  -28
  -32
  -36
  -39
  -43
  -48
  -51
  -56
  -60
  -65
  -70
  -75
  -80
  -85
  -90
  -96
  -103
  -108
  -114
  -121
  -128
  -135
  -142
  -150
  -159
  -167
  -176
  -185
  -195
Free cash flow, $m
  10
  -2
  1
  5
  9
  14
  20
  26
  33
  40
  47
  55
  63
  72
  82
  92
  102
  113
  125
  137
  149
  162
  175
  189
  203
  218
  234
  250
  267
  285
  303
Issuance/(repayment) of debt, $m
  -5
  26
  29
  32
  35
  37
  40
  42
  45
  47
  50
  52
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  113
Issuance/(repurchase) of shares, $m
  -2
  17
  15
  12
  9
  5
  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
Cash from financing (excl. dividends), $m  
  -8
  43
  44
  44
  44
  42
  41
  42
  45
  47
  50
  52
  55
  57
  59
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  113
Total cash flow (excl. dividends), $m
  2
  41
  45
  49
  53
  57
  61
  68
  78
  87
  97
  107
  118
  129
  141
  154
  167
  180
  194
  209
  224
  240
  256
  273
  291
  310
  329
  349
  370
  393
  416
Retained Cash Flow (-), $m
  -5
  -33
  -37
  -40
  -44
  -47
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -88
  -92
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -131
  -137
  -143
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
 
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
  53
Cash available for distribution, $m
 
  8
  8
  9
  9
  10
  10
  15
  21
  27
  34
  41
  49
  57
  66
  75
  85
  96
  106
  117
  129
  141
  153
  166
  180
  194
  209
  224
  239
  256
  273
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
 
  7
  8
  8
  8
  7
  7
  10
  13
  16
  18
  19
  21
  22
  22
  22
  22
  21
  20
  18
  16
  15
  13
  11
  9
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  96.9
  94.7
  93.2
  92.3
  91.8
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7
  91.7

Spartan Motors, Inc. is an engineer and manufacturer in the heavy-duty, custom vehicles marketplace. The Company operates through three segments: Emergency Response Vehicles, Delivery and Service Vehicles, and Specialty Chassis and Vehicles. The Company's Emergency Response Vehicles segment engineers and manufactures emergency response chassis, emergency response bodies and aerial equipment. The Delivery and Service Vehicles segment manufactures delivery and service vehicles through the Company's subsidiary, Utilimaster Corporation (Utilimaster). The Company's Specialty Chassis and Vehicles segment consists of the operations of Spartan Motors Chassis, Inc. (Spartan Chassis) that engineer and manufacture motor home chassis, defense vehicles and other specialty chassis, and distribute related aftermarket parts and assemblies. The Company markets its products under brands, such as Spartan ERV, Aeromaster, Trademaster, Metromaster and Utilivan.

FINANCIAL RATIOS  of  Spartan Motors (SPAR)

Valuation Ratios
P/E Ratio 58.4
Price to Sales 0.9
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 22.9
Price to Free Cash Flow 52.6
Growth Rates
Sales Growth Rate 7.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 160%
Cap. Spend. - 3 Yr. Gr. Rate 26.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. -1%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. -1.3%
Return On Equity 5.9%
Return On Equity - 3 Yr. Avg. -1.4%
Asset Turnover 2.5
Profitability Ratios
Gross Margin 12.4%
Gross Margin - 3 Yr. Avg. 10.7%
EBITDA Margin 2.9%
EBITDA Margin - 3 Yr. Avg. 1.1%
Operating Margin 1.5%
Oper. Margin - 3 Yr. Avg. -0.3%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. -0.3%
Net Profit Margin 1.5%
Net Profit Margin - 3 Yr. Avg. -0.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 56.4%
Payout Ratio 33.3%

SPAR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPAR stock intrinsic value calculation we used $707 million for the last fiscal year's total revenue generated by Spartan Motors. The default revenue input number comes from 2016 income statement of Spartan Motors. 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 SPAR stock valuation model: a) initial revenue growth rate of 19.7% 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 SPAR is calculated based on our internal credit rating of Spartan Motors, 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 Spartan Motors.
    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 SPAR stock the variable cost ratio is equal to 93.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $31 million in the base year in the intrinsic value calculation for SPAR 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 9.5% for Spartan Motors.

Corporate tax rate of 27% is the nominal tax rate for Spartan Motors. 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 SPAR stock is equal to 0.5%.

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 SPAR are equal to 11.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Spartan Motors 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 SPAR is equal to 5.2%. 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 - $168 million for Spartan Motors - 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 35 million for Spartan Motors 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 Spartan Motors at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Spartan Motors Announces Senior Leadership Appointments   [May-15-18 04:30PM  PR Newswire]
▶ Spartan Motors Announces Semi-Annual Dividend   [May-04-18 08:30AM  PR Newswire]
▶ Spartan Motors: 1Q Earnings Snapshot   [May-03-18 07:58AM  Associated Press]
▶ /C O R R E C T I O N -- Spartan Motors, Inc./   [Apr-13-18 04:30PM  PR Newswire]
▶ U.S. Auto Sales Rev Up in March: 5 Solid Picks   [Apr-04-18 09:23AM  Zacks]
▶ Modine Awarded Spartan Motors' Diamond Award   [Mar-22-18 11:24AM  PR Newswire]
▶ Spartan Motors tops Street 4Q forecasts   [08:51AM  Associated Press]
▶ At $14.55, Is It Time To Sell Spartan Motors Inc (SPAR)?   [Nov-10-17 10:15AM  Simply Wall St.]
▶ Spartan Motors Announces Dividend   [Nov-02-17 07:30AM  PR Newswire]
▶ Spartan Motors misses 3Q profit forecasts   [07:43AM  Associated Press]
▶ Spartan Motors Names Dominic Romeo to Board of Directors   [Oct-25-17 08:30AM  PR Newswire]
▶ Is Spartan Motors (SPAR) a Great Growth Stock?   [Sep-05-17 08:51AM  Zacks]
▶ Spartan Motors beats Street 2Q forecasts   [Aug-03-17 12:16AM  Associated Press]
Financial statements of SPAR
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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