Intrinsic value of Cooper Tire&Rubber - CTB

Previous Close

$32.79

  Intrinsic Value

$61.21

stock screener

  Rating & Target

str. buy

+87%

Previous close

$32.79

 
Intrinsic value

$61.21

 
Up/down potential

+87%

 
Rating

str. buy

We calculate the intrinsic value of CTB 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 1.6

 

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, %
  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
  2,912
  2,979
  3,055
  3,141
  3,236
  3,341
  3,455
  3,578
  3,711
  3,853
  4,005
  4,168
  4,341
  4,525
  4,720
  4,927
  5,146
  5,377
  5,622
  5,880
  6,153
  6,440
  6,743
  7,063
  7,399
  7,753
  8,126
  8,518
  8,930
  9,364
Variable operating expenses, $m
  2,530
  2,588
  2,654
  2,728
  2,810
  2,900
  2,998
  3,104
  3,219
  3,342
  3,454
  3,594
  3,744
  3,902
  4,071
  4,249
  4,438
  4,638
  4,849
  5,071
  5,306
  5,554
  5,816
  6,091
  6,381
  6,686
  7,008
  7,346
  7,702
  8,076
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
  2,530
  2,588
  2,654
  2,728
  2,810
  2,900
  2,998
  3,104
  3,219
  3,342
  3,454
  3,594
  3,744
  3,902
  4,071
  4,249
  4,438
  4,638
  4,849
  5,071
  5,306
  5,554
  5,816
  6,091
  6,381
  6,686
  7,008
  7,346
  7,702
  8,076
Operating income, $m
  382
  391
  402
  413
  426
  441
  457
  473
  492
  511
  551
  573
  597
  623
  649
  678
  708
  740
  773
  809
  847
  886
  928
  972
  1,018
  1,067
  1,118
  1,172
  1,229
  1,288
EBITDA, $m
  531
  543
  557
  573
  590
  609
  630
  653
  677
  703
  731
  760
  792
  825
  861
  899
  939
  981
  1,025
  1,073
  1,122
  1,175
  1,230
  1,288
  1,350
  1,414
  1,482
  1,554
  1,629
  1,708
Interest expense (income), $m
  29
  33
  36
  39
  44
  48
  53
  59
  65
  72
  79
  86
  95
  103
  113
  123
  133
  144
  156
  168
  181
  195
  210
  225
  242
  259
  277
  296
  316
  337
  359
Earnings before tax, $m
  349
  355
  362
  370
  378
  388
  398
  408
  420
  433
  465
  479
  494
  510
  527
  545
  564
  584
  605
  628
  651
  676
  702
  730
  759
  790
  822
  856
  892
  929
Tax expense, $m
  94
  96
  98
  100
  102
  105
  107
  110
  113
  117
  125
  129
  133
  138
  142
  147
  152
  158
  163
  169
  176
  183
  190
  197
  205
  213
  222
  231
  241
  251
Net income, $m
  255
  259
  264
  270
  276
  283
  290
  298
  307
  316
  339
  350
  361
  372
  385
  398
  412
  426
  442
  458
  475
  494
  513
  533
  554
  576
  600
  625
  651
  678

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
  2,763
  2,826
  2,899
  2,980
  3,071
  3,170
  3,278
  3,395
  3,520
  3,656
  3,800
  3,954
  4,119
  4,293
  4,478
  4,675
  4,882
  5,102
  5,334
  5,579
  5,838
  6,110
  6,398
  6,701
  7,020
  7,356
  7,709
  8,081
  8,473
  8,884
Adjusted assets (=assets-cash), $m
  2,763
  2,826
  2,899
  2,980
  3,071
  3,170
  3,278
  3,395
  3,520
  3,656
  3,800
  3,954
  4,119
  4,293
  4,478
  4,675
  4,882
  5,102
  5,334
  5,579
  5,838
  6,110
  6,398
  6,701
  7,020
  7,356
  7,709
  8,081
  8,473
  8,884
Revenue / Adjusted assets
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
  1.054
Average production assets, $m
  1,031
  1,054
  1,082
  1,112
  1,146
  1,183
  1,223
  1,267
  1,314
  1,364
  1,418
  1,475
  1,537
  1,602
  1,671
  1,744
  1,822
  1,904
  1,990
  2,082
  2,178
  2,280
  2,387
  2,500
  2,619
  2,745
  2,876
  3,015
  3,161
  3,315
Working capital, $m
  550
  563
  577
  594
  612
  631
  653
  676
  701
  728
  757
  788
  820
  855
  892
  931
  973
  1,016
  1,063
  1,111
  1,163
  1,217
  1,275
  1,335
  1,398
  1,465
  1,536
  1,610
  1,688
  1,770
Total debt, $m
  369
  406
  449
  497
  549
  607
  670
  738
  812
  891
  975
  1,065
  1,161
  1,263
  1,371
  1,486
  1,607
  1,736
  1,871
  2,014
  2,165
  2,325
  2,492
  2,669
  2,856
  3,052
  3,258
  3,475
  3,704
  3,944
Total liabilities, $m
  1,613
  1,650
  1,693
  1,740
  1,793
  1,851
  1,914
  1,982
  2,056
  2,135
  2,219
  2,309
  2,405
  2,507
  2,615
  2,730
  2,851
  2,980
  3,115
  3,258
  3,409
  3,569
  3,736
  3,913
  4,100
  4,296
  4,502
  4,719
  4,948
  5,188
Total equity, $m
  1,149
  1,176
  1,206
  1,240
  1,277
  1,319
  1,364
  1,412
  1,465
  1,521
  1,581
  1,645
  1,713
  1,786
  1,863
  1,945
  2,031
  2,122
  2,219
  2,321
  2,429
  2,542
  2,662
  2,788
  2,920
  3,060
  3,207
  3,362
  3,525
  3,696
Total liabilities and equity, $m
  2,762
  2,826
  2,899
  2,980
  3,070
  3,170
  3,278
  3,394
  3,521
  3,656
  3,800
  3,954
  4,118
  4,293
  4,478
  4,675
  4,882
  5,102
  5,334
  5,579
  5,838
  6,111
  6,398
  6,701
  7,020
  7,356
  7,709
  8,081
  8,473
  8,884
Debt-to-equity ratio
  0.320
  0.350
  0.370
  0.400
  0.430
  0.460
  0.490
  0.520
  0.550
  0.590
  0.620
  0.650
  0.680
  0.710
  0.740
  0.760
  0.790
  0.820
  0.840
  0.870
  0.890
  0.910
  0.940
  0.960
  0.980
  1.000
  1.020
  1.030
  1.050
  1.070
Adjusted equity ratio
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  255
  259
  264
  270
  276
  283
  290
  298
  307
  316
  339
  350
  361
  372
  385
  398
  412
  426
  442
  458
  475
  494
  513
  533
  554
  576
  600
  625
  651
  678
Depreciation, amort., depletion, $m
  149
  152
  156
  160
  164
  168
  174
  179
  185
  191
  179
  187
  195
  203
  212
  221
  231
  241
  252
  264
  276
  289
  302
  316
  332
  347
  364
  382
  400
  420
Funds from operations, $m
  404
  412
  420
  430
  440
  451
  464
  477
  492
  507
  519
  536
  555
  575
  596
  619
  642
  667
  694
  722
  751
  782
  815
  849
  886
  924
  964
  1,006
  1,051
  1,098
Change in working capital, $m
  11
  13
  14
  16
  18
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
Cash from operations, $m
  393
  399
  406
  413
  422
  432
  442
  454
  467
  480
  490
  506
  522
  540
  559
  579
  601
  623
  647
  673
  700
  728
  758
  789
  822
  857
  894
  932
  973
  1,016
Maintenance CAPEX, $m
  -128
  -130
  -133
  -137
  -141
  -145
  -150
  -155
  -160
  -166
  -173
  -179
  -187
  -195
  -203
  -212
  -221
  -231
  -241
  -252
  -264
  -276
  -289
  -302
  -316
  -332
  -347
  -364
  -382
  -400
New CAPEX, $m
  -20
  -24
  -27
  -30
  -34
  -37
  -40
  -44
  -47
  -50
  -54
  -58
  -61
  -65
  -69
  -73
  -78
  -82
  -87
  -91
  -96
  -102
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -154
Cash from investing activities, $m
  -148
  -154
  -160
  -167
  -175
  -182
  -190
  -199
  -207
  -216
  -227
  -237
  -248
  -260
  -272
  -285
  -299
  -313
  -328
  -343
  -360
  -378
  -396
  -415
  -435
  -457
  -479
  -503
  -528
  -554
Free cash flow, $m
  245
  245
  245
  246
  248
  250
  252
  256
  259
  264
  263
  269
  274
  281
  287
  295
  303
  311
  320
  329
  340
  350
  362
  374
  387
  400
  414
  429
  445
  462
Issuance/(repayment) of debt, $m
  33
  37
  42
  48
  53
  58
  63
  68
  74
  79
  84
  90
  96
  102
  108
  115
  121
  128
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  229
  240
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  
  33
  37
  42
  48
  53
  58
  63
  68
  74
  79
  84
  90
  96
  102
  108
  115
  121
  128
  136
  143
  151
  159
  168
  177
  186
  196
  206
  217
  229
  240
Total cash flow (excl. dividends), $m
  278
  282
  287
  294
  300
  308
  315
  324
  333
  343
  348
  359
  370
  383
  396
  409
  424
  439
  455
  473
  491
  510
  530
  551
  573
  596
  621
  647
  674
  702
Retained Cash Flow (-), $m
  -22
  -26
  -30
  -34
  -38
  -41
  -45
  -49
  -52
  -56
  -60
  -64
  -68
  -73
  -77
  -82
  -86
  -91
  -97
  -102
  -108
  -113
  -120
  -126
  -133
  -140
  -147
  -155
  -163
  -171
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
  256
  255
  257
  260
  263
  266
  271
  275
  280
  286
  288
  294
  302
  310
  318
  328
  337
  348
  359
  371
  383
  396
  410
  425
  440
  457
  474
  492
  511
  531
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
  245
  234
  224
  214
  204
  193
  183
  172
  161
  150
  137
  126
  115
  104
  94
  83
  73
  64
  55
  47
  40
  33
  27
  22
  17
  13
  10
  8
  6
  4
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

Cooper Tire & Rubber Company is a manufacturer and marketer of replacement tires. The Company specializes in the design, manufacture, marketing and sales of passenger car, light truck, medium truck, motorcycle, and racing tires. The Company operates through four segments: North America, Latin America, Europe, and Asia. The North America segment comprises its operations in the United States and Canada. The Americas Tire Operations segment manufactures and markets passenger car and light truck tires, for sale in the United States replacement markets. The Latin America segment comprises its operations in Mexico, Central America, and South America. The European segment has operations in the United Kingdom and the Republic of Serbia. Its the United Kingdom entity manufactures and markets passenger car, light truck, motorcycle and racing tires and tire retread material. As of December 31, 2016, the Company operated nine manufacturing facilities and 20 distribution centers in 10 countries.

FINANCIAL RATIOS  of  Cooper Tire&Rubber (CTB)

Valuation Ratios
P/E Ratio 7
Price to Sales 0.6
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 5.6
Price to Free Cash Flow 12.9
Growth Rates
Sales Growth Rate -1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.4%
Cap. Spend. - 3 Yr. Gr. Rate -0.6%
Financial Strength
Quick Ratio 18
Current Ratio 0.1
LT Debt to Equity 27.7%
Total Debt to Equity 30.3%
Interest Coverage 14
Management Effectiveness
Return On Assets 10.6%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 18.4%
Ret/ On T. Cap. - 3 Yr. Avg. 17.4%
Return On Equity 24.1%
Return On Equity - 3 Yr. Avg. 23.6%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 22.3%
Gross Margin - 3 Yr. Avg. 19.9%
EBITDA Margin 18%
EBITDA Margin - 3 Yr. Avg. 16.5%
Operating Margin 13.2%
Oper. Margin - 3 Yr. Avg. 11.3%
Pre-Tax Margin 12.5%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 31.6%
Eff/ Tax Rate - 3 Yr. Avg. 33%
Payout Ratio 9.3%

CTB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTB stock intrinsic value calculation we used $2854.656 million for the last fiscal year's total revenue generated by Cooper Tire&Rubber. The default revenue input number comes from 0001 income statement of Cooper Tire&Rubber. 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 CTB 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 CTB is calculated based on our internal credit rating of Cooper Tire&Rubber, 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 Cooper Tire&Rubber.
    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 CTB stock the variable cost ratio is equal to 86.9%.

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 CTB 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 9.7% for Cooper Tire&Rubber.

Corporate tax rate of 27% is the nominal tax rate for Cooper Tire&Rubber. 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 CTB 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 CTB are equal to 35.4%.

Life of production assets of 7.9 years is the average useful life of capital assets used in Cooper Tire&Rubber 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 CTB is equal to 18.9%. 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 - $1127.096 million for Cooper Tire&Rubber - 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 50.06 million for Cooper Tire&Rubber 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 Cooper Tire&Rubber at the current share price and the inputted number of shares is $1.6 billion.

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COMPANY NEWS

▶ Company News For Oct 30, 2018   [09:38AM  Zacks]
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▶ Gabelli & Companys Annual Automotive Aftermarket Symposium   [May-23-18 07:30AM  Business Wire]
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