Intrinsic value of World Acceptance - WRLD

Previous Close

$51.96

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$51.96

 
Intrinsic value

$132.83

 
Up/down potential

+156%

 
Rating

str. buy

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying
Our model is not good at valuating stocks of financial companies, such as WRLD.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of WRLD 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 2017), $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 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.49
  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
  532
  568
  581
  596
  613
  631
  652
  674
  698
  724
  752
  782
  813
  847
  883
  921
  961
  1,004
  1,049
  1,097
  1,147
  1,201
  1,257
  1,316
  1,378
  1,444
  1,513
  1,585
  1,662
  1,742
  1,827
Variable operating expenses, $m
 
  150
  153
  157
  162
  167
  172
  178
  184
  191
  198
  205
  214
  223
  232
  242
  253
  264
  276
  288
  302
  316
  330
  346
  362
  380
  398
  417
  437
  458
  480
Fixed operating expenses, $m
 
  287
  294
  302
  309
  317
  325
  333
  341
  350
  358
  367
  377
  386
  396
  406
  416
  426
  437
  448
  459
  470
  482
  494
  506
  519
  532
  545
  559
  573
  587
Total operating expenses, $m
  418
  437
  447
  459
  471
  484
  497
  511
  525
  541
  556
  572
  591
  609
  628
  648
  669
  690
  713
  736
  761
  786
  812
  840
  868
  899
  930
  962
  996
  1,031
  1,067
Operating income, $m
  114
  131
  134
  137
  142
  148
  155
  163
  173
  183
  195
  209
  223
  238
  255
  273
  293
  314
  337
  361
  387
  415
  444
  476
  509
  545
  583
  623
  666
  711
  759
EBITDA, $m
  122
  138
  140
  144
  149
  155
  162
  171
  181
  191
  203
  217
  231
  247
  264
  283
  303
  324
  347
  372
  399
  427
  457
  489
  523
  560
  598
  639
  683
  729
  778
Interest expense (income), $m
  24
  21
  21
  22
  22
  23
  24
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
Earnings before tax, $m
  114
  111
  113
  116
  120
  125
  132
  139
  147
  157
  168
  180
  193
  207
  223
  239
  257
  277
  298
  320
  344
  370
  397
  427
  458
  491
  526
  564
  603
  646
  690
Tax expense, $m
  40
  30
  30
  31
  32
  34
  36
  38
  40
  42
  45
  49
  52
  56
  60
  65
  70
  75
  80
  86
  93
  100
  107
  115
  124
  133
  142
  152
  163
  174
  186
Net income, $m
  74
  81
  82
  84
  88
  91
  96
  101
  108
  115
  122
  131
  141
  151
  163
  175
  188
  202
  217
  234
  251
  270
  290
  311
  334
  358
  384
  411
  440
  471
  504

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  15
  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
  801
  809
  828
  849
  873
  900
  929
  960
  994
  1,031
  1,071
  1,113
  1,158
  1,207
  1,258
  1,312
  1,369
  1,430
  1,495
  1,563
  1,634
  1,710
  1,790
  1,874
  1,963
  2,057
  2,155
  2,258
  2,367
  2,482
  2,603
Adjusted assets (=assets-cash), $m
  786
  809
  828
  849
  873
  900
  929
  960
  994
  1,031
  1,071
  1,113
  1,158
  1,207
  1,258
  1,312
  1,369
  1,430
  1,495
  1,563
  1,634
  1,710
  1,790
  1,874
  1,963
  2,057
  2,155
  2,258
  2,367
  2,482
  2,603
Revenue / Adjusted assets
  0.677
  0.702
  0.702
  0.702
  0.702
  0.701
  0.702
  0.702
  0.702
  0.702
  0.702
  0.703
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
Average production assets, $m
  18
  29
  30
  30
  31
  32
  33
  34
  36
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
  74
  77
  81
  85
  89
  93
Working capital, $m
  0
  -12
  -13
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
Total debt, $m
  295
  383
  392
  403
  416
  430
  445
  461
  479
  498
  519
  541
  565
  590
  616
  645
  674
  706
  740
  775
  813
  852
  894
  938
  984
  1,032
  1,084
  1,138
  1,194
  1,254
  1,317
Total liabilities, $m
  340
  422
  431
  442
  455
  469
  484
  500
  518
  537
  558
  580
  604
  629
  655
  684
  713
  745
  779
  814
  852
  891
  933
  977
  1,023
  1,071
  1,123
  1,177
  1,233
  1,293
  1,356
Total equity, $m
  461
  388
  397
  407
  418
  431
  445
  460
  476
  494
  513
  533
  555
  578
  602
  628
  656
  685
  716
  749
  783
  819
  857
  898
  940
  985
  1,032
  1,082
  1,134
  1,189
  1,247
Total liabilities and equity, $m
  801
  810
  828
  849
  873
  900
  929
  960
  994
  1,031
  1,071
  1,113
  1,159
  1,207
  1,257
  1,312
  1,369
  1,430
  1,495
  1,563
  1,635
  1,710
  1,790
  1,875
  1,963
  2,056
  2,155
  2,259
  2,367
  2,482
  2,603
Debt-to-equity ratio
  0.640
  0.990
  0.990
  0.990
  0.990
  1.000
  1.000
  1.000
  1.010
  1.010
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.030
  1.040
  1.040
  1.040
  1.040
  1.040
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.060
Adjusted equity ratio
  0.567
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479
  0.479

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  74
  81
  82
  84
  88
  91
  96
  101
  108
  115
  122
  131
  141
  151
  163
  175
  188
  202
  217
  234
  251
  270
  290
  311
  334
  358
  384
  411
  440
  471
  504
Depreciation, amort., depletion, $m
  8
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
Funds from operations, $m
  198
  87
  89
  91
  94
  98
  103
  109
  115
  123
  131
  139
  149
  160
  172
  184
  198
  212
  228
  245
  263
  282
  303
  325
  348
  373
  400
  428
  457
  489
  523
Change in working capital, $m
  -8
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  206
  87
  89
  91
  95
  99
  104
  109
  116
  123
  131
  140
  150
  161
  172
  185
  199
  213
  229
  246
  264
  283
  304
  326
  350
  375
  401
  429
  459
  491
  525
Maintenance CAPEX, $m
  0
  -6
  -6
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
New CAPEX, $m
  -9
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -102
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -8
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -19
  -19
  -20
  -21
  -22
Free cash flow, $m
  104
  81
  83
  85
  88
  92
  96
  102
  108
  115
  122
  131
  140
  151
  162
  174
  187
  201
  217
  233
  250
  269
  289
  310
  333
  357
  383
  410
  439
  470
  502
Issuance/(repayment) of debt, $m
  -126
  8
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
Issuance/(repurchase) of shares, $m
  3
  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  
  -129
  8
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
Total cash flow (excl. dividends), $m
  -26
  88
  92
  96
  100
  105
  111
  118
  126
  134
  143
  153
  164
  176
  189
  202
  217
  233
  250
  268
  288
  309
  331
  354
  379
  406
  434
  464
  496
  530
  565
Retained Cash Flow (-), $m
  -69
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -52
  -55
  -58
Prev. year cash balance distribution, $m
 
  12
  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
 
  93
  83
  86
  89
  93
  97
  103
  109
  116
  124
  133
  142
  153
  164
  176
  190
  204
  219
  236
  253
  272
  292
  314
  337
  361
  387
  414
  444
  475
  507
Discount rate, %
 
  5.30
  5.57
  5.84
  6.14
  6.44
  6.76
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.52
  9.99
  10.49
  11.02
  11.57
  12.15
  12.76
  13.39
  14.06
  14.77
  15.50
  16.28
  17.09
  17.95
  18.85
  19.79
  20.78
  21.82
PV of cash for distribution, $m
 
  88
  75
  72
  70
  68
  66
  64
  61
  59
  56
  53
  50
  47
  43
  39
  36
  32
  28
  24
  21
  17
  14
  11
  9
  7
  5
  4
  3
  2
  1
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

World Acceptance Corporation engages in small-loan consumer finance business in the United States and Mexico. The company offers short-term small and medium-term larger installment loans, as well as related credit insurance and ancillary products and services to individuals. It also provides automobile club memberships to its borrowers; income tax return preparation and electronic filing services; and electronic products and appliances to its borrowers. In addition, the company markets and sells credit life, credit accident and health, credit property, and unemployment insurance in connection with its loans; and develops and markets software products to financial services companies. It serves individuals with limited access to other sources of consumer credit, such as banks, credit unions, other consumer finance businesses, and credit card lenders. As of March 31, 2016, the company operated 1,339 branches in Alabama, Georgia, Idaho, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, South Carolina, Texas, Tennessee, and Wisconsin, as well as in Mexico. World Acceptance Corporation was founded in 1962 and is headquartered in Greenville, South Carolina.

FINANCIAL RATIOS  of  World Acceptance (WRLD)

Valuation Ratios
P/E Ratio 6.2
Price to Sales 0.9
Price to Book 1
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 2.3
Growth Rates
Sales Growth Rate -4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 2.4%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 64%
Total Debt to Equity 64%
Interest Coverage 6
Management Effectiveness
Return On Assets 11.1%
Ret/ On Assets - 3 Yr. Avg. 12.6%
Return On Total Capital 9.7%
Ret/ On T. Cap. - 3 Yr. Avg. 11.4%
Return On Equity 17.4%
Return On Equity - 3 Yr. Avg. 25.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 95.9%
Gross Margin - 3 Yr. Avg. 95.8%
EBITDA Margin 27.4%
EBITDA Margin - 3 Yr. Avg. 30.4%
Operating Margin 21.4%
Oper. Margin - 3 Yr. Avg. 25%
Pre-Tax Margin 21.4%
Pre-Tax Margin - 3 Yr. Avg. 25%
Net Profit Margin 13.9%
Net Profit Margin - 3 Yr. Avg. 15.9%
Effective Tax Rate 35.1%
Eff/ Tax Rate - 3 Yr. Avg. 36.3%
Payout Ratio 0%

WRLD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WRLD stock intrinsic value calculation we used $557 million for the last fiscal year's total revenue generated by World Acceptance. The default revenue input number comes from 2017 income statement of World Acceptance. 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 WRLD 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 5.3%, whose default value for WRLD is calculated based on our internal credit rating of World Acceptance, 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 World Acceptance.
    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 WRLD stock the variable cost ratio is equal to 26.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $280 million in the base year in the intrinsic value calculation for WRLD 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 5.5% for World Acceptance.

Corporate tax rate of 27% is the nominal tax rate for World Acceptance. 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 WRLD 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 WRLD are equal to 5.1%.

Life of production assets of 4.3 years is the average useful life of capital assets used in World Acceptance 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 WRLD is equal to -2.2%. 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 - $392 million for World Acceptance - 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 8.496 million for World Acceptance 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 World Acceptance at the current share price and the inputted number of shares is $0.4 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
FCFS FirstCash 44.05 prem.  prem.
RM Regional Manag 19.97 prem.  prem.
OMF OneMain Holdin 27.55 prem.  prem.
ENVA Enova Internat 13.50 prem.  prem.
CBZ CBIZ Inc 13.65 prem.  prem.
LC LendingClub 5.05 prem.  prem.
HRB H&R Block 20.97 prem.  prem.

COMPANY NEWS

▶ World Acceptance posts 4Q profit   [08:07AM  Associated Press]
▶ Why World Acceptance Corp. Stock Jumped 11% on Monday   [May-08-17 12:34PM  Motley Fool]
▶ Why World Acceptance Corp. Shares Fell Today   [12:58PM  at Motley Fool]
▶ World Acceptance misses 3Q profit forecasts   [08:03AM  Associated Press]
▶ Is Zoes Kitchen Inc (ZOES) A Good Stock To Buy?   [Dec-20-16 02:00PM  at Insider Monkey]
▶ Hedge Funds Are Betting On World Acceptance Corp. (WRLD)   [Dec-12-16 01:03PM  at Insider Monkey]
▶ [$$] Hayashi's Take: Payday Lenders' Changing Fortunes Send Stocks Soaring   [Nov-23-16 07:26AM  at The Wall Street Journal]
Stock chart of WRLD Financial statements of WRLD Annual reports of WRLD
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.