Intrinsic value of Spartan Motors - SPAR

Previous Close

$16.10

  Intrinsic Value

$18.12

stock screener

  Rating & Target

hold

+13%

Previous close

$16.10

 
Intrinsic value

$18.12

 
Up/down potential

+13%

 
Rating

hold

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

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, %
  7.45
  4.30
  4.37
  4.43
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.89
  4.91
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
Revenue, $m
  591
  616
  643
  672
  702
  734
  768
  803
  841
  880
  922
  966
  1,012
  1,060
  1,111
  1,165
  1,222
  1,281
  1,344
  1,410
  1,479
  1,551
  1,628
  1,708
  1,792
  1,881
  1,974
  2,072
  2,175
  2,283
  2,396
Variable operating expenses, $m
 
  286
  298
  312
  325
  340
  356
  372
  389
  408
  427
  445
  467
  489
  513
  537
  564
  591
  620
  650
  682
  716
  751
  788
  827
  868
  911
  956
  1,003
  1,053
  1,105
Fixed operating expenses, $m
 
  324
  332
  340
  349
  358
  366
  376
  385
  395
  405
  415
  425
  436
  446
  458
  469
  481
  493
  505
  518
  531
  544
  558
  572
  586
  600
  616
  631
  647
  663
Total operating expenses, $m
  582
  610
  630
  652
  674
  698
  722
  748
  774
  803
  832
  860
  892
  925
  959
  995
  1,033
  1,072
  1,113
  1,155
  1,200
  1,247
  1,295
  1,346
  1,399
  1,454
  1,511
  1,572
  1,634
  1,700
  1,768
Operating income, $m
  9
  7
  13
  20
  28
  36
  45
  55
  66
  78
  90
  106
  120
  136
  152
  170
  189
  209
  231
  254
  279
  305
  333
  363
  394
  427
  463
  501
  541
  583
  628
EBITDA, $m
  17
  14
  20
  28
  36
  45
  54
  64
  76
  88
  100
  114
  129
  145
  162
  181
  200
  221
  243
  267
  292
  319
  348
  378
  410
  445
  481
  520
  561
  604
  650
Interest expense (income), $m
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
Earnings before tax, $m
  9
  7
  13
  20
  27
  36
  45
  54
  65
  77
  89
  104
  118
  133
  150
  167
  186
  206
  227
  250
  274
  300
  328
  357
  388
  421
  456
  493
  533
  575
  619
Tax expense, $m
  0
  2
  3
  5
  7
  10
  12
  15
  18
  21
  24
  28
  32
  36
  40
  45
  50
  56
  61
  68
  74
  81
  89
  96
  105
  114
  123
  133
  144
  155
  167
Net income, $m
  9
  5
  9
  14
  20
  26
  33
  40
  48
  56
  65
  76
  86
  97
  109
  122
  136
  150
  166
  183
  200
  219
  239
  261
  283
  307
  333
  360
  389
  419
  452

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
  220
  230
  240
  251
  262
  274
  287
  300
  314
  329
  345
  361
  379
  397
  416
  436
  457
  480
  503
  528
  554
  581
  610
  640
  672
  705
  740
  776
  815
  855
Adjusted assets (=assets-cash), $m
  211
  220
  230
  240
  251
  262
  274
  287
  300
  314
  329
  345
  361
  379
  397
  416
  436
  457
  480
  503
  528
  554
  581
  610
  640
  672
  705
  740
  776
  815
  855
Revenue / Adjusted assets
  2.801
  2.800
  2.796
  2.800
  2.797
  2.802
  2.803
  2.798
  2.803
  2.803
  2.802
  2.800
  2.803
  2.797
  2.798
  2.800
  2.803
  2.803
  2.800
  2.803
  2.801
  2.800
  2.802
  2.800
  2.800
  2.799
  2.800
  2.800
  2.803
  2.801
  2.802
Average production assets, $m
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  83
  87
  91
  96
  100
  105
  111
  116
  122
  128
  134
Working capital, $m
  74
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  116
  121
  127
  134
  140
  147
  154
  162
  170
Total debt, $m
  0
  4
  8
  12
  17
  22
  27
  32
  38
  44
  50
  56
  63
  71
  78
  87
  95
  104
  113
  123
  134
  145
  156
  168
  181
  194
  208
  223
  239
  255
  272
Total liabilities, $m
  90
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  145
  152
  160
  167
  176
  184
  193
  202
  212
  223
  234
  245
  257
  270
  283
  297
  312
  328
  344
  361
Total equity, $m
  154
  127
  133
  139
  145
  151
  158
  166
  173
  182
  190
  199
  209
  219
  229
  240
  252
  264
  277
  291
  305
  320
  336
  352
  370
  388
  407
  428
  449
  471
  494
Total liabilities and equity, $m
  244
  220
  230
  240
  251
  262
  274
  287
  300
  315
  329
  344
  361
  379
  396
  416
  436
  457
  479
  503
  528
  554
  581
  609
  640
  671
  704
  740
  777
  815
  855
Debt-to-equity ratio
  0.000
  0.030
  0.060
  0.090
  0.120
  0.140
  0.170
  0.190
  0.220
  0.240
  0.260
  0.280
  0.300
  0.320
  0.340
  0.360
  0.380
  0.390
  0.410
  0.420
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
Adjusted equity ratio
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578
  0.578

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  5
  9
  14
  20
  26
  33
  40
  48
  56
  65
  76
  86
  97
  109
  122
  136
  150
  166
  183
  200
  219
  239
  261
  283
  307
  333
  360
  389
  419
  452
Depreciation, amort., depletion, $m
  8
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Funds from operations, $m
  31
  12
  17
  22
  28
  34
  41
  49
  57
  66
  75
  85
  95
  107
  120
  133
  147
  162
  178
  196
  214
  233
  254
  276
  300
  325
  351
  379
  409
  440
  474
Change in working capital, $m
  8
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
Cash from operations, $m
  23
  10
  15
  20
  26
  32
  39
  46
  54
  63
  72
  81
  92
  104
  116
  129
  143
  158
  174
  191
  209
  228
  249
  271
  294
  318
  345
  372
  402
  433
  466
Maintenance CAPEX, $m
  0
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
New CAPEX, $m
  -13
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
Cash from investing activities, $m
  -13
  -7
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -14
  -16
  -16
  -17
  -18
  -18
  -19
  -21
  -21
  -22
  -23
  -25
  -26
  -27
Free cash flow, $m
  10
  3
  8
  13
  18
  24
  30
  37
  45
  53
  62
  71
  81
  92
  103
  116
  129
  143
  159
  175
  192
  211
  230
  251
  273
  297
  322
  349
  377
  407
  439
Issuance/(repayment) of debt, $m
  -5
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
Issuance/(repurchase) of shares, $m
  -2
  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  
  -8
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
Total cash flow (excl. dividends), $m
  2
  8
  12
  17
  23
  29
  35
  43
  50
  59
  68
  77
  88
  99
  111
  124
  138
  152
  168
  185
  203
  222
  242
  263
  286
  310
  336
  363
  392
  423
  456
Retained Cash Flow (-), $m
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Prev. year cash balance distribution, $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
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
 
  34
  6
  11
  16
  22
  28
  35
  43
  51
  59
  68
  78
  89
  100
  113
  126
  140
  155
  171
  188
  207
  226
  247
  269
  292
  317
  343
  371
  401
  432
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
 
  33
  6
  10
  13
  17
  21
  24
  27
  29
  31
  32
  33
  34
  34
  33
  32
  30
  29
  26
  24
  21
  19
  16
  14
  11
  9
  7
  6
  4
  3
Current shareholders' claim on cash, %
  100
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
  99.9
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  99.9
  99.9
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  99.9
  99.9
  99.9

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 61.5
Price to Sales 0.9
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 24.1
Price to Free Cash Flow 55.4
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 $591 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 4.3% 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 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 46.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $316 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 3.5% 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%.

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 5.6%.

Life of production assets of 6.1 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 7.1%. 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 - $154 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 35.094 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 $0.6 billion.

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COMPANY NEWS

▶ 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]
▶ Spartan Motors beats Street 2Q forecasts   [07:51AM  Associated Press]
▶ ETFs with exposure to Spartan Motors, Inc. : July 6, 2017   [Jul-06-17 02:11PM  Capital Cube]
▶ Spartan Motors Announces Dividend   [May-04-17 04:15PM  PR Newswire]
▶ Spartan Motors reports 1Q loss   [07:59AM  Associated Press]
▶ Spartan Motors beats Street 4Q forecasts   [08:19AM  Associated Press]
▶ Is Spartan Motors Inc (SPAR) A Good Stock To Buy?   [Dec-13-16 05:19PM  at Insider Monkey]
▶ Malibu Boats Inc (MBUU): Are Hedge Funds Right About This Stock?   [Dec-05-16 01:41PM  at Insider Monkey]
▶ Spartan Motors Announces Dividend   [Nov-07-16 08:30AM  PR Newswire]
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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