Intrinsic value of Gentherm - THRM

Previous Close

$31.65

  Intrinsic Value

$42.13

stock screener

  Rating & Target

buy

+33%

Previous close

$31.65

 
Intrinsic value

$42.13

 
Up/down potential

+33%

 
Rating

buy

We calculate the intrinsic value of THRM 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, %
  7.24
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  918
  936
  958
  983
  1,010
  1,041
  1,074
  1,111
  1,151
  1,193
  1,239
  1,288
  1,340
  1,396
  1,455
  1,518
  1,584
  1,655
  1,729
  1,808
  1,891
  1,979
  2,071
  2,169
  2,271
  2,379
  2,493
  2,613
  2,739
  2,872
  3,011
Variable operating expenses, $m
 
  793
  811
  832
  855
  881
  909
  940
  973
  1,009
  1,048
  1,084
  1,128
  1,174
  1,224
  1,277
  1,333
  1,392
  1,455
  1,521
  1,591
  1,665
  1,743
  1,824
  1,911
  2,002
  2,098
  2,198
  2,305
  2,416
  2,534
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
  811
  793
  811
  832
  855
  881
  909
  940
  973
  1,009
  1,048
  1,084
  1,128
  1,174
  1,224
  1,277
  1,333
  1,392
  1,455
  1,521
  1,591
  1,665
  1,743
  1,824
  1,911
  2,002
  2,098
  2,198
  2,305
  2,416
  2,534
Operating income, $m
  106
  143
  147
  151
  155
  160
  165
  171
  177
  184
  191
  204
  213
  221
  231
  241
  251
  263
  274
  287
  300
  314
  329
  344
  360
  378
  396
  415
  435
  456
  478
EBITDA, $m
  144
  172
  176
  180
  185
  191
  197
  204
  211
  219
  227
  236
  246
  256
  267
  278
  290
  303
  317
  331
  347
  363
  380
  397
  416
  436
  457
  479
  502
  526
  552
Interest expense (income), $m
  3
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  26
  27
  29
  31
  32
  34
Earnings before tax, $m
  111
  137
  141
  144
  148
  153
  158
  163
  169
  175
  181
  194
  201
  209
  218
  227
  237
  247
  258
  269
  281
  294
  307
  321
  336
  352
  368
  386
  404
  423
  443
Tax expense, $m
  34
  37
  38
  39
  40
  41
  43
  44
  46
  47
  49
  52
  54
  57
  59
  61
  64
  67
  70
  73
  76
  79
  83
  87
  91
  95
  99
  104
  109
  114
  120
Net income, $m
  77
  100
  103
  105
  108
  111
  115
  119
  123
  128
  132
  141
  147
  153
  159
  166
  173
  180
  188
  196
  205
  215
  224
  235
  245
  257
  269
  282
  295
  309
  324

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  177
  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
  843
  680
  695
  713
  733
  755
  780
  806
  835
  866
  899
  935
  973
  1,013
  1,056
  1,102
  1,150
  1,201
  1,255
  1,312
  1,372
  1,436
  1,503
  1,574
  1,648
  1,727
  1,809
  1,896
  1,988
  2,084
  2,185
Adjusted assets (=assets-cash), $m
  666
  680
  695
  713
  733
  755
  780
  806
  835
  866
  899
  935
  973
  1,013
  1,056
  1,102
  1,150
  1,201
  1,255
  1,312
  1,372
  1,436
  1,503
  1,574
  1,648
  1,727
  1,809
  1,896
  1,988
  2,084
  2,185
Revenue / Adjusted assets
  1.378
  1.376
  1.378
  1.379
  1.378
  1.379
  1.377
  1.378
  1.378
  1.378
  1.378
  1.378
  1.377
  1.378
  1.378
  1.377
  1.377
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
  1.378
Average production assets, $m
  113
  115
  118
  121
  124
  128
  132
  137
  142
  147
  152
  158
  165
  172
  179
  187
  195
  204
  213
  222
  233
  243
  255
  267
  279
  293
  307
  321
  337
  353
  370
Working capital, $m
  290
  117
  120
  123
  126
  130
  134
  139
  144
  149
  155
  161
  168
  174
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  284
  297
  312
  327
  342
  359
  376
Total debt, $m
  172
  178
  187
  197
  208
  221
  235
  250
  267
  284
  303
  324
  345
  368
  393
  419
  447
  476
  507
  539
  574
  610
  649
  689
  732
  777
  824
  874
  926
  981
  1,039
Total liabilities, $m
  383
  389
  398
  408
  419
  432
  446
  461
  478
  495
  514
  535
  556
  579
  604
  630
  658
  687
  718
  750
  785
  821
  860
  900
  943
  988
  1,035
  1,085
  1,137
  1,192
  1,250
Total equity, $m
  460
  291
  298
  305
  314
  323
  334
  345
  357
  371
  385
  400
  416
  434
  452
  471
  492
  514
  537
  562
  587
  615
  643
  674
  705
  739
  774
  812
  851
  892
  935
Total liabilities and equity, $m
  843
  680
  696
  713
  733
  755
  780
  806
  835
  866
  899
  935
  972
  1,013
  1,056
  1,101
  1,150
  1,201
  1,255
  1,312
  1,372
  1,436
  1,503
  1,574
  1,648
  1,727
  1,809
  1,897
  1,988
  2,084
  2,185
Debt-to-equity ratio
  0.374
  0.610
  0.630
  0.650
  0.660
  0.680
  0.700
  0.720
  0.750
  0.770
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.910
  0.930
  0.940
  0.960
  0.980
  0.990
  1.010
  1.020
  1.040
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
Adjusted equity ratio
  0.425
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  77
  100
  103
  105
  108
  111
  115
  119
  123
  128
  132
  141
  147
  153
  159
  166
  173
  180
  188
  196
  205
  215
  224
  235
  245
  257
  269
  282
  295
  309
  324
Depreciation, amort., depletion, $m
  38
  28
  29
  29
  30
  31
  32
  33
  34
  35
  36
  32
  33
  34
  36
  37
  39
  41
  43
  44
  47
  49
  51
  53
  56
  59
  61
  64
  67
  71
  74
Funds from operations, $m
  101
  129
  131
  135
  138
  142
  147
  151
  157
  162
  168
  173
  180
  187
  195
  203
  212
  221
  231
  241
  252
  263
  275
  288
  301
  315
  330
  346
  362
  380
  398
Change in working capital, $m
  -7
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
Cash from operations, $m
  108
  126
  129
  132
  135
  138
  142
  147
  152
  157
  162
  167
  173
  180
  188
  195
  203
  212
  221
  231
  241
  252
  264
  276
  288
  302
  316
  331
  347
  363
  380
Maintenance CAPEX, $m
  0
  -23
  -23
  -24
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -44
  -47
  -49
  -51
  -53
  -56
  -59
  -61
  -64
  -67
  -71
New CAPEX, $m
  -66
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
Cash from investing activities, $m
  -144
  -26
  -26
  -27
  -27
  -29
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -44
  -45
  -48
  -50
  -53
  -54
  -58
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -83
  -88
Free cash flow, $m
  -36
  101
  103
  105
  107
  110
  113
  116
  119
  123
  127
  130
  135
  140
  146
  152
  158
  165
  172
  179
  187
  195
  204
  213
  223
  233
  243
  255
  267
  279
  293
Issuance/(repayment) of debt, $m
  73
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
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  
  80
  8
  9
  10
  11
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  47
  50
  52
  55
  58
Total cash flow (excl. dividends), $m
  33
  109
  112
  115
  119
  123
  127
  131
  136
  141
  146
  151
  157
  164
  170
  178
  186
  194
  202
  212
  221
  231
  242
  253
  265
  278
  291
  305
  319
  334
  350
Retained Cash Flow (-), $m
  -76
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
Prev. year cash balance distribution, $m
 
  175
  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
 
  278
  105
  108
  110
  113
  116
  120
  124
  128
  132
  136
  141
  146
  152
  158
  165
  172
  179
  187
  195
  204
  213
  223
  233
  244
  255
  267
  280
  293
  307
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
 
  266
  96
  94
  91
  88
  84
  81
  77
  73
  69
  64
  60
  56
  51
  46
  42
  37
  33
  29
  25
  21
  18
  15
  12
  9
  7
  6
  4
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
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Gentherm Incorporated (Gentherm) is a global technology company engaged in the design, development, and manufacturing of thermal management technologies. The Company has two segments: Automotive and Industrial. Its products provide solutions for automotive passenger comfort and convenience, battery thermal management, remote power generation, patient temperature management, environmental product testing and other consumer and industrial temperature control needs. Its automotive products can be found on the vehicles of all major automotive manufacturers operating in North America, Europe and Asia. The Automotive segment comprises the results from its global automotive businesses and individual convenience products. The Industrial segment represents the combined results from its remote power generation systems business, patient temperature management systems business, environmental testing equipment and services business, and advanced research and product development division.

FINANCIAL RATIOS  of  Gentherm (THRM)

Valuation Ratios
P/E Ratio 15
Price to Sales 1.3
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 10.7
Price to Free Cash Flow 27.5
Growth Rates
Sales Growth Rate 7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate 12.9%
Financial Strength
Quick Ratio 89
Current Ratio 0
LT Debt to Equity 37%
Total Debt to Equity 37.4%
Interest Coverage 38
Management Effectiveness
Return On Assets 10.6%
Ret/ On Assets - 3 Yr. Avg. 13.6%
Return On Total Capital 13.8%
Ret/ On T. Cap. - 3 Yr. Avg. 18.6%
Return On Equity 18.2%
Return On Equity - 3 Yr. Avg. 24.3%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 32.1%
Gross Margin - 3 Yr. Avg. 31.4%
EBITDA Margin 16.6%
EBITDA Margin - 3 Yr. Avg. 17.3%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 12.9%
Net Profit Margin 8.4%
Net Profit Margin - 3 Yr. Avg. 9.4%
Effective Tax Rate 30.6%
Eff/ Tax Rate - 3 Yr. Avg. 27.5%
Payout Ratio 0%

THRM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the THRM stock intrinsic value calculation we used $918 million for the last fiscal year's total revenue generated by Gentherm. The default revenue input number comes from 2016 income statement of Gentherm. 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 THRM stock valuation model: a) initial revenue growth rate of 2% 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 THRM is calculated based on our internal credit rating of Gentherm, 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 Gentherm.
    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 THRM stock the variable cost ratio is equal to 84.7%.

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 THRM 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 Gentherm.

Corporate tax rate of 27% is the nominal tax rate for Gentherm. 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 THRM 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 THRM are equal to 12.3%.

Life of production assets of 4 years is the average useful life of capital assets used in Gentherm 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 THRM is equal to 12.5%. 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 - $460 million for Gentherm - 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 37.165 million for Gentherm 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 Gentherm at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ ETFs with exposure to Gentherm, Inc. : December 27, 2017   [Dec-27-17 11:55AM  Capital Cube]
▶ ETFs with exposure to Gentherm, Inc. : December 14, 2017   [Dec-14-17 02:12PM  Capital Cube]
▶ ETFs with exposure to Gentherm, Inc. : November 20, 2017   [Nov-20-17 01:24PM  Capital Cube]
▶ ETFs with exposure to Gentherm, Inc. : November 10, 2017   [Nov-10-17 12:53PM  Capital Cube]
▶ Gentherm misses 3Q profit forecasts   [Oct-26-17 06:37AM  Associated Press]
▶ Gentherm Selects Phillip Eyler as New President and CEO   [Oct-03-17 04:05PM  PR Newswire]
▶ ETFs with exposure to Gentherm, Inc. : August 15, 2017   [Aug-15-17 05:15PM  Capital Cube]
▶ Gentherm misses Street 2Q forecasts   [Jul-27-17 04:04PM  Associated Press]
▶ ETFs with exposure to Gentherm, Inc. : July 25, 2017   [Jul-25-17 01:36PM  Capital Cube]
▶ ETFs with exposure to Gentherm, Inc. : July 14, 2017   [Jul-14-17 05:08PM  Capital Cube]
▶ Gentherm President And CEO Announces Retirement Plans   [Jun-28-17 04:05PM  PR Newswire]
▶ ETFs with exposure to Gentherm, Inc. : June 26, 2017   [Jun-26-17 05:03PM  Capital Cube]
▶ 8 Undervalued Stocks With Growing Book Values   [May-03-17 03:23PM  GuruFocus.com]
▶ Gentherm, Inc. Value Analysis (NASDAQ:THRM) : May 1, 2017   [May-01-17 05:24PM  Capital Cube]
▶ Gentherm tops Street 1Q forecasts   [Apr-27-17 08:26AM  Associated Press]
▶ Gentherm tops 4Q profit forecasts   [06:30AM  Associated Press]
▶ Is Gentherm Inc (THRM) A Good Stock to Buy?   [Dec-13-16 04:07AM  Insider Monkey]
▶ Mairs & Power Comments on Gentherm   [Nov-23-16 03:21PM  GuruFocus.com]
Financial statements of THRM
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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