Intrinsic value of Stoneridge - SRI

Previous Close

$33.72

  Intrinsic Value

$56.84

stock screener

  Rating & Target

str. buy

+69%

Previous close

$33.72

 
Intrinsic value

$56.84

 
Up/down potential

+69%

 
Rating

str. buy

We calculate the intrinsic value of SRI 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, %
  7.91
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  696
  976
  1,144
  1,326
  1,523
  1,734
  1,959
  2,197
  2,449
  2,714
  2,992
  3,282
  3,585
  3,901
  4,230
  4,572
  4,928
  5,298
  5,682
  6,081
  6,496
  6,927
  7,376
  7,843
  8,329
  8,835
  9,363
  9,912
  10,486
  11,084
  11,709
Variable operating expenses, $m
 
  879
  1,027
  1,189
  1,364
  1,552
  1,751
  1,963
  2,187
  2,422
  2,669
  2,915
  3,184
  3,465
  3,757
  4,061
  4,377
  4,705
  5,046
  5,401
  5,770
  6,153
  6,551
  6,966
  7,398
  7,847
  8,315
  8,804
  9,313
  9,845
  10,399
Fixed operating expenses, $m
 
  26
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
Total operating expenses, $m
  652
  905
  1,053
  1,216
  1,391
  1,580
  1,779
  1,992
  2,217
  2,452
  2,700
  2,947
  3,216
  3,498
  3,791
  4,096
  4,412
  4,741
  5,083
  5,439
  5,809
  6,192
  6,591
  7,007
  7,440
  7,890
  8,359
  8,849
  9,359
  9,892
  10,447
Operating income, $m
  44
  72
  90
  110
  132
  155
  179
  205
  233
  262
  292
  335
  368
  403
  439
  477
  516
  556
  598
  642
  688
  735
  785
  836
  889
  945
  1,003
  1,064
  1,127
  1,193
  1,261
EBITDA, $m
  68
  105
  127
  150
  176
  204
  233
  264
  297
  332
  368
  406
  446
  487
  531
  575
  622
  671
  721
  774
  828
  885
  944
  1,005
  1,069
  1,136
  1,205
  1,278
  1,353
  1,432
  1,514
Interest expense (income), $m
  6
  7
  10
  14
  17
  21
  26
  30
  35
  40
  46
  52
  58
  64
  70
  77
  84
  92
  99
  107
  115
  124
  133
  142
  152
  162
  172
  183
  194
  206
  218
Earnings before tax, $m
  39
  65
  80
  97
  114
  133
  153
  175
  198
  221
  246
  284
  311
  339
  369
  400
  432
  465
  499
  535
  573
  611
  652
  694
  738
  783
  831
  881
  932
  987
  1,043
Tax expense, $m
  -37
  18
  22
  26
  31
  36
  41
  47
  53
  60
  66
  77
  84
  92
  100
  108
  117
  125
  135
  145
  155
  165
  176
  187
  199
  212
  224
  238
  252
  266
  282
Net income, $m
  77
  48
  59
  71
  83
  97
  112
  128
  144
  162
  180
  207
  227
  248
  269
  292
  315
  339
  364
  391
  418
  446
  476
  507
  539
  572
  607
  643
  681
  720
  761

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  50
  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
  395
  662
  776
  899
  1,033
  1,176
  1,328
  1,490
  1,661
  1,840
  2,028
  2,225
  2,431
  2,645
  2,868
  3,100
  3,341
  3,592
  3,852
  4,123
  4,404
  4,697
  5,001
  5,317
  5,647
  5,990
  6,347
  6,720
  7,109
  7,515
  7,938
Adjusted assets (=assets-cash), $m
  345
  662
  776
  899
  1,033
  1,176
  1,328
  1,490
  1,661
  1,840
  2,028
  2,225
  2,431
  2,645
  2,868
  3,100
  3,341
  3,592
  3,852
  4,123
  4,404
  4,697
  5,001
  5,317
  5,647
  5,990
  6,347
  6,720
  7,109
  7,515
  7,938
Revenue / Adjusted assets
  2.017
  1.474
  1.474
  1.475
  1.474
  1.474
  1.475
  1.474
  1.474
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
  1.475
Average production assets, $m
  120
  211
  247
  286
  329
  375
  423
  475
  529
  586
  646
  709
  774
  843
  914
  988
  1,064
  1,144
  1,227
  1,314
  1,403
  1,496
  1,593
  1,694
  1,799
  1,908
  2,022
  2,141
  2,265
  2,394
  2,529
Working capital, $m
  128
  -7
  -8
  -9
  -11
  -12
  -14
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -37
  -40
  -43
  -45
  -48
  -52
  -55
  -58
  -62
  -66
  -69
  -73
  -78
  -82
Total debt, $m
  84
  187
  251
  320
  395
  476
  562
  653
  749
  850
  956
  1,067
  1,182
  1,303
  1,429
  1,559
  1,695
  1,836
  1,983
  2,135
  2,294
  2,458
  2,629
  2,808
  2,993
  3,186
  3,388
  3,597
  3,816
  4,045
  4,283
Total liabilities, $m
  216
  373
  437
  506
  581
  662
  748
  839
  935
  1,036
  1,142
  1,253
  1,368
  1,489
  1,615
  1,745
  1,881
  2,022
  2,169
  2,321
  2,479
  2,644
  2,815
  2,994
  3,179
  3,372
  3,574
  3,783
  4,002
  4,231
  4,469
Total equity, $m
  178
  289
  339
  393
  451
  514
  580
  651
  726
  804
  886
  972
  1,062
  1,156
  1,253
  1,355
  1,460
  1,570
  1,683
  1,802
  1,925
  2,052
  2,185
  2,324
  2,468
  2,618
  2,774
  2,937
  3,107
  3,284
  3,469
Total liabilities and equity, $m
  394
  662
  776
  899
  1,032
  1,176
  1,328
  1,490
  1,661
  1,840
  2,028
  2,225
  2,430
  2,645
  2,868
  3,100
  3,341
  3,592
  3,852
  4,123
  4,404
  4,696
  5,000
  5,318
  5,647
  5,990
  6,348
  6,720
  7,109
  7,515
  7,938
Debt-to-equity ratio
  0.472
  0.650
  0.740
  0.810
  0.880
  0.930
  0.970
  1.000
  1.030
  1.060
  1.080
  1.100
  1.110
  1.130
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.190
  1.200
  1.200
  1.210
  1.210
  1.220
  1.220
  1.220
  1.230
  1.230
  1.230
Adjusted equity ratio
  0.371
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  77
  48
  59
  71
  83
  97
  112
  128
  144
  162
  180
  207
  227
  248
  269
  292
  315
  339
  364
  391
  418
  446
  476
  507
  539
  572
  607
  643
  681
  720
  761
Depreciation, amort., depletion, $m
  24
  32
  36
  40
  44
  49
  54
  59
  64
  70
  76
  71
  77
  84
  91
  99
  106
  114
  123
  131
  140
  150
  159
  169
  180
  191
  202
  214
  226
  239
  253
Funds from operations, $m
  66
  80
  95
  111
  128
  146
  166
  187
  208
  232
  256
  278
  304
  332
  361
  390
  421
  454
  487
  522
  558
  596
  635
  676
  718
  763
  809
  857
  907
  960
  1,014
Change in working capital, $m
  1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
Cash from operations, $m
  65
  81
  96
  112
  129
  148
  167
  188
  210
  233
  258
  280
  307
  334
  363
  393
  424
  456
  490
  525
  561
  599
  638
  679
  722
  766
  813
  861
  911
  964
  1,019
Maintenance CAPEX, $m
  0
  -18
  -21
  -25
  -29
  -33
  -37
  -42
  -47
  -53
  -59
  -65
  -71
  -77
  -84
  -91
  -99
  -106
  -114
  -123
  -131
  -140
  -150
  -159
  -169
  -180
  -191
  -202
  -214
  -226
  -239
New CAPEX, $m
  -24
  -33
  -36
  -39
  -43
  -46
  -49
  -52
  -54
  -57
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -124
  -129
  -135
Cash from investing activities, $m
  -24
  -51
  -57
  -64
  -72
  -79
  -86
  -94
  -101
  -110
  -119
  -128
  -136
  -145
  -155
  -165
  -176
  -186
  -197
  -209
  -221
  -233
  -247
  -260
  -274
  -289
  -305
  -321
  -338
  -355
  -374
Free cash flow, $m
  41
  30
  39
  48
  58
  69
  81
  94
  108
  123
  139
  153
  170
  188
  208
  228
  248
  270
  292
  316
  340
  365
  392
  419
  447
  477
  508
  540
  573
  608
  644
Issuance/(repayment) of debt, $m
  -43
  58
  64
  70
  75
  81
  86
  91
  96
  101
  106
  111
  116
  121
  126
  131
  136
  141
  147
  152
  158
  165
  171
  178
  186
  193
  201
  210
  219
  228
  238
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -43
  58
  64
  70
  75
  81
  86
  91
  96
  101
  106
  111
  116
  121
  126
  131
  136
  141
  147
  152
  158
  165
  171
  178
  186
  193
  201
  210
  219
  228
  238
Total cash flow (excl. dividends), $m
  -4
  88
  103
  117
  133
  150
  167
  185
  204
  224
  245
  264
  286
  309
  333
  358
  384
  411
  439
  468
  499
  530
  563
  597
  633
  670
  709
  750
  792
  836
  883
Retained Cash Flow (-), $m
  -85
  -45
  -50
  -54
  -58
  -63
  -67
  -71
  -75
  -78
  -82
  -86
  -90
  -94
  -97
  -101
  -105
  -110
  -114
  -118
  -123
  -128
  -133
  -138
  -144
  -150
  -156
  -163
  -170
  -177
  -185
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
 
  7
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  37
  39
  42
  45
  49
  52
  55
  59
  63
  67
  71
  75
  79
  84
  89
Cash available for distribution, $m
 
  43
  53
  63
  75
  87
  101
  115
  130
  146
  163
  177
  196
  215
  236
  257
  279
  302
  325
  350
  376
  402
  430
  459
  489
  520
  553
  587
  622
  659
  698
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
 
  41
  48
  55
  62
  68
  73
  78
  81
  84
  85
  84
  84
  82
  79
  75
  71
  66
  60
  54
  48
  42
  36
  30
  25
  20
  16
  13
  10
  7
  5
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Stoneridge, Inc. is a designer and manufacturer of engineered electrical and electronic components, modules and systems for the automotive, commercial, motorcycle, off-highway and agricultural vehicle markets. The Company operates through three segments: Control Devices, Electronics and PST. The Company's Control Devices segment designs and manufactures products that monitor, measure or activate specific functions within a vehicle and includes product lines, such as sensors, switches, valves, and actuators. The Company's Electronics segment designs and manufactures electronic instrument clusters, electronic control units and driver information systems. The PST segment is engaged in the design, manufacture and sale of in-vehicle audio and video devices, electronic vehicle security alarms, convenience accessories, vehicle tracking devices and monitoring services primarily for the automotive and motorcycle industry. It operated in 25 locations in 12 countries, as of December 31, 2016.

FINANCIAL RATIOS  of  Stoneridge (SRI)

Valuation Ratios
P/E Ratio 12.2
Price to Sales 1.3
Price to Book 5.3
Price to Tangible Book
Price to Cash Flow 14.4
Price to Free Cash Flow 22.9
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.2%
Cap. Spend. - 3 Yr. Gr. Rate -0.8%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 42.1%
Total Debt to Equity 47.2%
Interest Coverage 8
Management Effectiveness
Return On Assets 23.4%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 32.6%
Ret/ On T. Cap. - 3 Yr. Avg. 8.9%
Return On Equity 56.8%
Return On Equity - 3 Yr. Avg. 14.2%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 28.2%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 5.7%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. 1.7%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin 11.1%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate -94.9%
Eff/ Tax Rate - 3 Yr. Avg. -32%
Payout Ratio 0%

SRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRI stock intrinsic value calculation we used $824 million for the last fiscal year's total revenue generated by Stoneridge. The default revenue input number comes from 2016 income statement of Stoneridge. 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 SRI stock valuation model: a) initial revenue growth rate of 18.5% 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 SRI is calculated based on our internal credit rating of Stoneridge, 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 Stoneridge.
    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 SRI stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $25 million in the base year in the intrinsic value calculation for SRI 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 5.4% for Stoneridge.

Corporate tax rate of 27% is the nominal tax rate for Stoneridge. 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 SRI stock is equal to 0.8%.

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 SRI are equal to 21.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Stoneridge 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 SRI is equal to -0.7%. 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 - $244 million for Stoneridge - 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 28 million for Stoneridge 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 Stoneridge at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ Should You Buy Stoneridge Inc (NYSE:SRI)?   [Jun-21-18 03:39PM  Simply Wall St.]
▶ Stoneridge: 1Q Earnings Snapshot   [05:08AM  Associated Press]
▶ Stoneridge Reports Strong First-Quarter 2018 Results   [May-02-18 05:31PM  PR Newswire]
▶ Why MuleSoft, Square, and HealthEquity Jumped Today   [Mar-20-18 04:31PM  Motley Fool]
▶ New Strong Buy Stocks for March 2nd   [Mar-02-18 09:46AM  Zacks]
▶ Stoneridge, Inc. to Host Earnings Call   [07:30AM  ACCESSWIRE]
▶ Stoneridge posts 4Q profit   [05:01AM  Associated Press]
▶ Is Stoneridge Inc (NYSE:SRI) A Financially Sound Company?   [Jan-04-18 06:10PM  Simply Wall St.]
▶ New Strong Buy Stocks for December 29th   [Dec-29-17 09:20AM  Zacks]
▶ ETFs with exposure to Stoneridge, Inc. : December 8, 2017   [Dec-08-17 01:29PM  Capital Cube]
▶ Stoneridge tops Street 3Q forecasts   [Nov-02-17 05:50AM  Associated Press]
▶ Stoneridge Reports Strong Third-Quarter 2017 Results   [Nov-01-17 05:52PM  PR Newswire]
Financial statements of SRI
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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