Intrinsic value of Dorman Products - DORM

Previous Close

$68.00

  Intrinsic Value

$45.01

stock screener

  Rating & Target

sell

-34%

Previous close

$68.00

 
Intrinsic value

$45.01

 
Up/down potential

-34%

 
Rating

sell

We calculate the intrinsic value of DORM 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 2.3

 

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, %
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  938
  976
  1,016
  1,059
  1,104
  1,152
  1,203
  1,257
  1,314
  1,374
  1,437
  1,504
  1,575
  1,649
  1,727
  1,810
  1,897
  1,988
  2,084
  2,185
  2,292
  2,403
  2,521
  2,645
  2,774
  2,911
  3,054
  3,205
  3,364
  3,530
Variable operating expenses, $m
  754
  784
  816
  850
  886
  924
  964
  1,007
  1,052
  1,100
  1,142
  1,195
  1,251
  1,310
  1,372
  1,437
  1,506
  1,579
  1,655
  1,736
  1,820
  1,909
  2,002
  2,100
  2,204
  2,312
  2,426
  2,546
  2,671
  2,804
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
  754
  784
  816
  850
  886
  924
  964
  1,007
  1,052
  1,100
  1,142
  1,195
  1,251
  1,310
  1,372
  1,437
  1,506
  1,579
  1,655
  1,736
  1,820
  1,909
  2,002
  2,100
  2,204
  2,312
  2,426
  2,546
  2,671
  2,804
Operating income, $m
  184
  192
  200
  209
  218
  228
  239
  250
  262
  274
  296
  310
  324
  339
  355
  372
  390
  409
  429
  450
  472
  495
  519
  544
  571
  599
  628
  659
  692
  726
EBITDA, $m
  212
  220
  229
  239
  249
  260
  271
  284
  296
  310
  324
  339
  355
  372
  390
  408
  428
  449
  470
  493
  517
  542
  569
  597
  626
  657
  689
  723
  759
  796
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
Earnings before tax, $m
  184
  192
  200
  208
  217
  227
  237
  247
  259
  271
  292
  305
  319
  334
  350
  366
  383
  401
  420
  440
  461
  484
  507
  531
  557
  584
  613
  643
  674
  707
Tax expense, $m
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  79
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
  131
  137
  143
  150
  158
  165
  174
  182
  191
Net income, $m
  135
  140
  146
  152
  159
  165
  173
  181
  189
  198
  213
  223
  233
  244
  255
  267
  280
  293
  307
  321
  337
  353
  370
  388
  407
  427
  447
  469
  492
  516

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
  796
  828
  862
  898
  937
  977
  1,020
  1,066
  1,114
  1,165
  1,219
  1,276
  1,336
  1,399
  1,465
  1,535
  1,609
  1,686
  1,768
  1,853
  1,944
  2,038
  2,138
  2,243
  2,353
  2,469
  2,591
  2,719
  2,853
  2,994
Adjusted assets (=assets-cash), $m
  796
  828
  862
  898
  937
  977
  1,020
  1,066
  1,114
  1,165
  1,219
  1,276
  1,336
  1,399
  1,465
  1,535
  1,609
  1,686
  1,768
  1,853
  1,944
  2,038
  2,138
  2,243
  2,353
  2,469
  2,591
  2,719
  2,853
  2,994
Revenue / Adjusted assets
  1.178
  1.179
  1.179
  1.179
  1.178
  1.179
  1.179
  1.179
  1.180
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
  1.179
Average production assets, $m
  125
  130
  135
  141
  147
  153
  160
  167
  175
  183
  191
  200
  209
  219
  230
  241
  252
  264
  277
  291
  305
  320
  335
  352
  369
  387
  406
  426
  447
  469
Working capital, $m
  364
  379
  394
  411
  428
  447
  467
  488
  510
  533
  558
  584
  611
  640
  670
  702
  736
  771
  809
  848
  889
  932
  978
  1,026
  1,076
  1,129
  1,185
  1,244
  1,305
  1,370
Total debt, $m
  5
  10
  16
  22
  29
  36
  43
  51
  59
  68
  77
  87
  97
  108
  119
  131
  144
  157
  171
  186
  201
  217
  235
  252
  271
  291
  312
  334
  357
  381
Total liabilities, $m
  136
  142
  147
  154
  160
  167
  174
  182
  191
  199
  208
  218
  228
  239
  251
  262
  275
  288
  302
  317
  332
  349
  366
  384
  402
  422
  443
  465
  488
  512
Total equity, $m
  660
  686
  715
  745
  776
  810
  846
  884
  924
  966
  1,011
  1,058
  1,107
  1,160
  1,215
  1,273
  1,334
  1,398
  1,465
  1,536
  1,611
  1,690
  1,773
  1,859
  1,951
  2,047
  2,148
  2,254
  2,365
  2,482
Total liabilities and equity, $m
  796
  828
  862
  899
  936
  977
  1,020
  1,066
  1,115
  1,165
  1,219
  1,276
  1,335
  1,399
  1,466
  1,535
  1,609
  1,686
  1,767
  1,853
  1,943
  2,039
  2,139
  2,243
  2,353
  2,469
  2,591
  2,719
  2,853
  2,994
Debt-to-equity ratio
  0.010
  0.020
  0.020
  0.030
  0.040
  0.040
  0.050
  0.060
  0.060
  0.070
  0.080
  0.080
  0.090
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
Adjusted equity ratio
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829
  0.829

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  135
  140
  146
  152
  159
  165
  173
  181
  189
  198
  213
  223
  233
  244
  255
  267
  280
  293
  307
  321
  337
  353
  370
  388
  407
  427
  447
  469
  492
  516
Depreciation, amort., depletion, $m
  27
  28
  29
  30
  31
  32
  33
  34
  35
  36
  29
  30
  31
  33
  34
  36
  38
  39
  41
  43
  45
  48
  50
  52
  55
  58
  61
  64
  67
  70
Funds from operations, $m
  162
  168
  175
  182
  189
  197
  206
  214
  224
  234
  242
  253
  264
  277
  289
  303
  317
  332
  348
  365
  382
  401
  420
  440
  462
  484
  508
  533
  559
  586
Change in working capital, $m
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  43
  46
  48
  50
  53
  56
  58
  61
  65
Cash from operations, $m
  148
  154
  159
  165
  172
  179
  186
  194
  202
  210
  217
  227
  237
  248
  259
  271
  284
  297
  311
  326
  341
  357
  375
  393
  411
  431
  452
  474
  497
  522
Maintenance CAPEX, $m
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
  -61
  -64
  -67
New CAPEX, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -23
  -24
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -35
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -54
  -57
  -60
  -64
  -66
  -69
  -73
  -77
  -81
  -85
  -89
Free cash flow, $m
  126
  130
  135
  139
  145
  150
  156
  162
  169
  176
  181
  189
  198
  207
  216
  226
  236
  247
  259
  271
  284
  297
  311
  326
  342
  358
  375
  394
  413
  433
Issuance/(repayment) of debt, $m
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
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  
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  131
  135
  140
  146
  151
  157
  164
  170
  177
  185
  191
  199
  208
  217
  227
  238
  249
  260
  273
  285
  299
  313
  328
  344
  361
  378
  396
  415
  436
  457
Retained Cash Flow (-), $m
  -25
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -91
  -96
  -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
  106
  109
  112
  116
  119
  123
  128
  132
  137
  143
  146
  152
  158
  165
  172
  180
  188
  196
  205
  214
  224
  235
  246
  257
  269
  282
  295
  309
  324
  340
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
  101
  100
  98
  95
  93
  90
  86
  83
  79
  75
  69
  65
  60
  55
  51
  46
  41
  36
  32
  27
  23
  19
  16
  13
  10
  8
  6
  5
  4
  3
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
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Dorman Products, Inc. is a supplier of replacement parts and fasteners for passenger cars, light trucks and heavy duty trucks in the automotive aftermarket. As of December 31, 2016, the Company distributed and marketed approximately 155,000 different stock keeping units (SKU's) of automotive replacement parts and fasteners. As of December 31, 2016, approximately 83% of its products were sold under brands that it owned and the remainder of its products were sold for resale under customers' private labels, other brands or in bulk. Its products are sold in the United States through automotive aftermarket retailers, national, regional and local warehouse distributors, and specialty markets, and salvage yards. It also distributes automotive replacement parts outside the United States, with sales primarily into Canada, Mexico, Europe, the Middle East, and Australia. Its parts are marketed under the OE Solutions, TECHoice, AutoGrade, Conduct-Tite, FirstStop and HD Solutions brand names.

FINANCIAL RATIOS  of  Dorman Products (DORM)

Valuation Ratios
P/E Ratio 22.1
Price to Sales 2.7
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 19.2
Price to Free Cash Flow 23
Growth Rates
Sales Growth Rate 7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.1%
Cap. Spend. - 3 Yr. Gr. Rate -4.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 15.9%
Ret/ On Assets - 3 Yr. Avg. 16%
Return On Total Capital 18.9%
Ret/ On T. Cap. - 3 Yr. Avg. 19.4%
Return On Equity 18.9%
Return On Equity - 3 Yr. Avg. 19.4%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 39.3%
Gross Margin - 3 Yr. Avg. 38.6%
EBITDA Margin 21.7%
EBITDA Margin - 3 Yr. Avg. 20.8%
Operating Margin 19.7%
Oper. Margin - 3 Yr. Avg. 18.8%
Pre-Tax Margin 19.5%
Pre-Tax Margin - 3 Yr. Avg. 18.8%
Net Profit Margin 12.3%
Net Profit Margin - 3 Yr. Avg. 11.9%
Effective Tax Rate 36.9%
Eff/ Tax Rate - 3 Yr. Avg. 36.7%
Payout Ratio 0%

DORM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DORM stock intrinsic value calculation we used $903.221 million for the last fiscal year's total revenue generated by Dorman Products. The default revenue input number comes from 0001 income statement of Dorman Products. 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 DORM stock valuation model: a) initial revenue growth rate of 3.9% 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 DORM is calculated based on our internal credit rating of Dorman Products, 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 Dorman Products.
    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 DORM stock the variable cost ratio is equal to 80.4%.

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 DORM 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 Dorman Products.

Corporate tax rate of 27% is the nominal tax rate for Dorman Products. 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 DORM 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 DORM are equal to 13.3%.

Life of production assets of 6.7 years is the average useful life of capital assets used in Dorman Products 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 DORM is equal to 38.8%. 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 - $634.807 million for Dorman Products - 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 33.186 million for Dorman Products 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 Dorman Products at the current share price and the inputted number of shares is $2.3 billion.

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COMPANY NEWS

▶ Should You Buy Dorman Products Inc (NASDAQ:DORM) At US$79.20?   [Aug-24-18 01:24PM  Simply Wall St.]
▶ Dorman Products, Inc. Announces CEO Succession Plan   [Aug-09-18 07:00AM  GlobeNewswire]
▶ Dorman Products: 2Q Earnings Snapshot   [08:05AM  Associated Press]
▶ Dorman Sees Weakness From a Surprising Corner   [May-02-18 01:34PM  Motley Fool]
▶ Dorman Products: 1Q Earnings Snapshot   [May-01-18 10:00AM  Associated Press]
▶ Estimating The Fair Value Of Dorman Products Inc (NASDAQ:DORM)   [Feb-26-18 10:33AM  Simply Wall St.]
▶ Dorman Sees a Stronger 2018 Ahead   [09:33AM  Motley Fool]
▶ Dorman Products beats 4Q profit forecasts   [07:27AM  Associated Press]
▶ Dorman Disappoints as Growth Rates Slow   [Oct-27-17 02:24PM  Motley Fool]
▶ Dorman Products misses Street 3Q forecasts   [07:13AM  Associated Press]
▶ Dorman Products Churns Out Steady Growth   [Aug-02-17 11:34AM  Motley Fool]
▶ Dorman Products misses 2Q profit forecasts   [Aug-01-17 10:58PM  Associated Press]
▶ Dorman Products, Inc. Announces Organizational Changes   [Jun-08-17 05:00PM  Marketwired]
▶ Dorman Products Gets a Lift on New Parts   [May-02-17 10:36AM  Motley Fool]
▶ Dorman Products tops 1Q profit forecasts   [07:35AM  Associated Press]
▶ Dorman Products Finishes 2016 Strong   [09:23AM  Motley Fool]
▶ Dorman Products Finishes 2016 Strong   [09:23AM  at Motley Fool]
▶ Dorman Products tops Street 4Q forecasts   [07:33AM  Associated Press]

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