Intrinsic value of Asbury Automotive Group Inc - ABG

Previous Close

$92.56

  Intrinsic Value

$58.84

stock screener

  Rating & Target

sell

-36%

Previous close

$92.56

 
Intrinsic value

$58.84

 
Up/down potential

-36%

 
Rating

sell

We calculate the intrinsic value of ABG 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 0001), $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 1.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
Revenue, $m
  7,341
  7,827
  8,333
  8,859
  9,406
  9,977
  10,571
  11,191
  11,837
  12,511
  13,215
  13,951
  14,719
  15,523
  16,363
  17,241
  18,161
  19,123
  20,131
  21,187
  22,293
  23,451
  24,665
  25,938
  27,272
  28,671
  30,138
  31,676
  33,290
  34,982
Variable operating expenses, $m
  6,936
  7,393
  7,869
  8,365
  8,880
  9,417
  9,976
  10,560
  11,168
  11,803
  12,441
  13,133
  13,857
  14,613
  15,404
  16,231
  17,097
  18,003
  18,952
  19,945
  20,986
  22,077
  23,220
  24,418
  25,674
  26,991
  28,372
  29,820
  31,339
  32,933
Fixed operating expenses, $m
  67
  69
  70
  72
  74
  75
  77
  79
  80
  82
  84
  86
  88
  90
  91
  93
  96
  98
  100
  102
  104
  107
  109
  111
  114
  116
  119
  121
  124
  127
Total operating expenses, $m
  7,003
  7,462
  7,939
  8,437
  8,954
  9,492
  10,053
  10,639
  11,248
  11,885
  12,525
  13,219
  13,945
  14,703
  15,495
  16,324
  17,193
  18,101
  19,052
  20,047
  21,090
  22,184
  23,329
  24,529
  25,788
  27,107
  28,491
  29,941
  31,463
  33,060
Operating income, $m
  338
  365
  393
  422
  453
  485
  518
  552
  589
  626
  690
  732
  775
  820
  867
  917
  969
  1,023
  1,080
  1,139
  1,202
  1,268
  1,336
  1,409
  1,484
  1,564
  1,647
  1,735
  1,826
  1,923
EBITDA, $m
  397
  427
  457
  489
  522
  557
  593
  630
  669
  710
  753
  798
  845
  893
  945
  998
  1,055
  1,113
  1,175
  1,240
  1,307
  1,379
  1,453
  1,531
  1,613
  1,699
  1,790
  1,885
  1,984
  2,089
Interest expense (income), $m
  74
  101
  109
  118
  126
  136
  145
  155
  166
  176
  188
  199
  212
  224
  238
  252
  267
  282
  298
  315
  332
  351
  370
  390
  411
  434
  457
  481
  507
  534
  562
Earnings before tax, $m
  237
  256
  275
  296
  317
  339
  363
  387
  412
  439
  491
  520
  550
  582
  615
  650
  687
  725
  765
  807
  851
  897
  946
  997
  1,051
  1,107
  1,166
  1,228
  1,293
  1,361
Tax expense, $m
  64
  69
  74
  80
  86
  92
  98
  104
  111
  118
  133
  140
  149
  157
  166
  176
  185
  196
  207
  218
  230
  242
  255
  269
  284
  299
  315
  331
  349
  367
Net income, $m
  173
  187
  201
  216
  232
  248
  265
  282
  301
  320
  359
  380
  402
  425
  449
  475
  501
  529
  558
  589
  621
  655
  691
  728
  767
  808
  851
  896
  944
  994

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  2,879
  3,070
  3,268
  3,474
  3,689
  3,912
  4,146
  4,388
  4,642
  4,906
  5,182
  5,471
  5,772
  6,087
  6,417
  6,761
  7,122
  7,499
  7,895
  8,309
  8,742
  9,197
  9,673
  10,172
  10,695
  11,243
  11,819
  12,422
  13,055
  13,719
Adjusted assets (=assets-cash), $m
  2,879
  3,070
  3,268
  3,474
  3,689
  3,912
  4,146
  4,388
  4,642
  4,906
  5,182
  5,471
  5,772
  6,087
  6,417
  6,761
  7,122
  7,499
  7,895
  8,309
  8,742
  9,197
  9,673
  10,172
  10,695
  11,243
  11,819
  12,422
  13,055
  13,719
Revenue / Adjusted assets
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
  2.550
Average production assets, $m
  1,042
  1,111
  1,183
  1,258
  1,336
  1,417
  1,501
  1,589
  1,681
  1,777
  1,877
  1,981
  2,090
  2,204
  2,323
  2,448
  2,579
  2,716
  2,859
  3,009
  3,166
  3,330
  3,502
  3,683
  3,873
  4,071
  4,280
  4,498
  4,727
  4,968
Working capital, $m
  1,329
  1,417
  1,508
  1,603
  1,703
  1,806
  1,913
  2,026
  2,142
  2,265
  2,392
  2,525
  2,664
  2,810
  2,962
  3,121
  3,287
  3,461
  3,644
  3,835
  4,035
  4,245
  4,464
  4,695
  4,936
  5,189
  5,455
  5,733
  6,025
  6,332
Total debt, $m
  2,021
  2,179
  2,342
  2,512
  2,689
  2,873
  3,065
  3,265
  3,474
  3,692
  3,920
  4,157
  4,406
  4,665
  4,937
  5,221
  5,518
  5,829
  6,154
  6,495
  6,853
  7,227
  7,619
  8,031
  8,462
  8,914
  9,388
  9,885
  10,406
  10,953
Total liabilities, $m
  2,372
  2,529
  2,693
  2,863
  3,040
  3,224
  3,416
  3,616
  3,825
  4,043
  4,270
  4,508
  4,756
  5,016
  5,287
  5,571
  5,868
  6,180
  6,505
  6,846
  7,204
  7,578
  7,970
  8,381
  8,813
  9,265
  9,739
  10,236
  10,757
  11,304
Total equity, $m
  507
  540
  575
  611
  649
  689
  730
  772
  817
  864
  912
  963
  1,016
  1,071
  1,129
  1,190
  1,253
  1,320
  1,389
  1,462
  1,539
  1,619
  1,702
  1,790
  1,882
  1,979
  2,080
  2,186
  2,298
  2,414
Total liabilities and equity, $m
  2,879
  3,069
  3,268
  3,474
  3,689
  3,913
  4,146
  4,388
  4,642
  4,907
  5,182
  5,471
  5,772
  6,087
  6,416
  6,761
  7,121
  7,500
  7,894
  8,308
  8,743
  9,197
  9,672
  10,171
  10,695
  11,244
  11,819
  12,422
  13,055
  13,718
Debt-to-equity ratio
  3.990
  4.030
  4.070
  4.110
  4.140
  4.170
  4.200
  4.230
  4.250
  4.280
  4.300
  4.320
  4.340
  4.350
  4.370
  4.390
  4.400
  4.420
  4.430
  4.440
  4.450
  4.470
  4.480
  4.490
  4.500
  4.500
  4.510
  4.520
  4.530
  4.540
Adjusted equity ratio
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  173
  187
  201
  216
  232
  248
  265
  282
  301
  320
  359
  380
  402
  425
  449
  475
  501
  529
  558
  589
  621
  655
  691
  728
  767
  808
  851
  896
  944
  994
Depreciation, amort., depletion, $m
  59
  62
  64
  67
  69
  72
  75
  78
  81
  84
  63
  66
  70
  73
  77
  82
  86
  91
  95
  100
  106
  111
  117
  123
  129
  136
  143
  150
  158
  166
Funds from operations, $m
  232
  249
  265
  283
  301
  320
  339
  360
  382
  404
  421
  446
  471
  498
  527
  556
  587
  620
  654
  689
  727
  766
  807
  851
  896
  944
  994
  1,046
  1,101
  1,159
Change in working capital, $m
  85
  88
  91
  95
  99
  103
  108
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
  220
  230
  241
  253
  266
  278
  292
  306
Cash from operations, $m
  148
  161
  174
  187
  202
  217
  232
  248
  265
  282
  294
  313
  332
  353
  375
  397
  421
  445
  471
  498
  527
  556
  588
  620
  655
  690
  728
  768
  809
  853
Maintenance CAPEX, $m
  -32
  -35
  -37
  -39
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -77
  -82
  -86
  -91
  -95
  -100
  -106
  -111
  -117
  -123
  -129
  -136
  -143
  -150
  -158
New CAPEX, $m
  -68
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -104
  -109
  -114
  -119
  -125
  -131
  -137
  -143
  -150
  -157
  -165
  -172
  -181
  -189
  -199
  -208
  -218
  -229
  -240
Cash from investing activities, $m
  -100
  -104
  -109
  -114
  -120
  -126
  -131
  -138
  -145
  -152
  -159
  -167
  -175
  -184
  -192
  -202
  -213
  -223
  -234
  -245
  -257
  -271
  -283
  -298
  -312
  -328
  -344
  -361
  -379
  -398
Free cash flow, $m
  47
  57
  65
  73
  82
  91
  100
  110
  120
  130
  134
  146
  157
  169
  182
  195
  209
  223
  238
  253
  269
  286
  304
  323
  342
  363
  384
  407
  430
  455
Issuance/(repayment) of debt, $m
  150
  157
  163
  170
  177
  184
  192
  200
  209
  218
  228
  238
  248
  260
  271
  284
  297
  311
  326
  341
  357
  374
  392
  411
  431
  452
  474
  497
  521
  547
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  150
  157
  163
  170
  177
  184
  192
  200
  209
  218
  228
  238
  248
  260
  271
  284
  297
  311
  326
  341
  357
  374
  392
  411
  431
  452
  474
  497
  521
  547
Total cash flow (excl. dividends), $m
  197
  214
  228
  243
  259
  275
  292
  310
  329
  348
  362
  383
  406
  429
  453
  479
  506
  534
  563
  594
  627
  661
  697
  734
  773
  815
  858
  904
  952
  1,002
Retained Cash Flow (-), $m
  -34
  -34
  -35
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -61
  -63
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
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
  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
  164
  180
  193
  207
  221
  236
  251
  267
  284
  302
  313
  332
  352
  373
  395
  418
  442
  467
  494
  521
  550
  581
  613
  646
  681
  718
  757
  798
  840
  885
Discount rate, %
  12.90
  13.55
  14.22
  14.93
  15.68
  16.46
  17.29
  18.15
  19.06
  20.01
  21.01
  22.06
  23.17
  24.32
  25.54
  26.82
  28.16
  29.57
  31.05
  32.60
  34.23
  35.94
  37.74
  39.62
  41.60
  43.68
  45.87
  48.16
  50.57
  53.10
PV of cash for distribution, $m
  145
  140
  130
  119
  107
  95
  82
  70
  59
  49
  38
  30
  23
  18
  13
  9
  7
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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

Asbury Automotive Group, Inc. is an automotive retailer in the United States. As of December 31, 2016, the Company owned and operated 93 new vehicle franchises, representing 28 brands of automobiles at 77 dealership locations, and 23 collision centers in the United States. In addition, as of December 31, 2016, it owned and operated two standalone used vehicle stores in Florida. Its stores offer automotive products and services, including new and used vehicles; parts and service, including vehicle repair and maintenance services, replacement parts, and collision repair services; and finance and insurance products, including arranging vehicle financing through third parties and aftermarket products, such as extended service contracts, guaranteed asset protection (GAP) insurance, prepaid maintenance, and credit life and disability insurance. Its new vehicle revenues include new vehicle sales and lease transactions arranged by dealerships with third-party financial institutions.

FINANCIAL RATIOS  of  Asbury Automotive Group Inc (ABG)

Valuation Ratios
P/E Ratio 11.8
Price to Sales 0.3
Price to Book 7
Price to Tangible Book
Price to Cash Flow 13.9
Price to Free Cash Flow 65.6
Growth Rates
Sales Growth Rate -0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.8%
Cap. Spend. - 3 Yr. Gr. Rate 2.7%
Financial Strength
Quick Ratio 0
Current Ratio 0.3
LT Debt to Equity 325.7%
Total Debt to Equity 638.9%
Interest Coverage 5
Management Effectiveness
Return On Assets 9.2%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 56.1%
Return On Equity - 3 Yr. Avg. 41.5%
Asset Turnover 2.8
Profitability Ratios
Gross Margin 16.2%
Gross Margin - 3 Yr. Avg. 16.3%
EBITDA Margin 5.7%
EBITDA Margin - 3 Yr. Avg. 5.2%
Operating Margin 5.3%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 4.1%
Pre-Tax Margin - 3 Yr. Avg. 3.8%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 2.3%
Effective Tax Rate 37.7%
Eff/ Tax Rate - 3 Yr. Avg. 38.2%
Payout Ratio 0%

ABG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABG stock intrinsic value calculation we used $6874 million for the last fiscal year's total revenue generated by Asbury Automotive Group Inc. The default revenue input number comes from 0001 income statement of Asbury Automotive Group Inc. 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 ABG stock valuation model: a) initial revenue growth rate of 6.8% 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 12.9%, whose default value for ABG is calculated based on our internal credit rating of Asbury Automotive Group Inc, 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 Asbury Automotive Group Inc.
    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 ABG stock the variable cost ratio is equal to 94.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $66 million in the base year in the intrinsic value calculation for ABG 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 Asbury Automotive Group Inc.

Corporate tax rate of 27% is the nominal tax rate for Asbury Automotive Group Inc. 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 ABG 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 ABG are equal to 14.2%.

Life of production assets of 32.3 years is the average useful life of capital assets used in Asbury Automotive Group Inc 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 ABG is equal to 18.1%. 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 - $473.2 million for Asbury Automotive Group Inc - 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 19.476 million for Asbury Automotive Group Inc 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 Asbury Automotive Group Inc at the current share price and the inputted number of shares is $1.8 billion.

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