Intrinsic value of Dorman Products - DORM

Previous Close

$73.60

  Intrinsic Value

$60.76

stock screener

  Rating & Target

hold

-17%

Previous close

$73.60

 
Intrinsic value

$60.76

 
Up/down potential

-17%

 
Rating

hold

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

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

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, %
  7.10
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
Revenue, $m
  860
  908
  958
  1,011
  1,066
  1,124
  1,184
  1,247
  1,313
  1,382
  1,454
  1,530
  1,609
  1,692
  1,779
  1,871
  1,967
  2,067
  2,173
  2,283
  2,399
  2,521
  2,648
  2,782
  2,923
  3,071
  3,225
  3,388
  3,559
  3,738
  3,926
Variable operating expenses, $m
 
  542
  572
  604
  636
  671
  707
  744
  784
  825
  868
  913
  961
  1,010
  1,062
  1,117
  1,174
  1,234
  1,297
  1,363
  1,432
  1,505
  1,581
  1,661
  1,745
  1,833
  1,926
  2,023
  2,124
  2,231
  2,344
Fixed operating expenses, $m
 
  187
  191
  196
  201
  206
  211
  216
  222
  227
  233
  239
  245
  251
  257
  264
  270
  277
  284
  291
  298
  306
  313
  321
  329
  337
  346
  354
  363
  372
  382
Total operating expenses, $m
  691
  729
  763
  800
  837
  877
  918
  960
  1,006
  1,052
  1,101
  1,152
  1,206
  1,261
  1,319
  1,381
  1,444
  1,511
  1,581
  1,654
  1,730
  1,811
  1,894
  1,982
  2,074
  2,170
  2,272
  2,377
  2,487
  2,603
  2,726
Operating income, $m
  169
  179
  195
  211
  229
  247
  266
  286
  307
  329
  353
  378
  404
  431
  460
  490
  522
  556
  592
  629
  669
  710
  754
  800
  849
  900
  954
  1,011
  1,071
  1,134
  1,200
EBITDA, $m
  188
  200
  216
  234
  252
  272
  292
  314
  336
  360
  385
  411
  439
  468
  499
  532
  566
  602
  640
  680
  722
  766
  813
  862
  913
  968
  1,025
  1,086
  1,149
  1,216
  1,287
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
Earnings before tax, $m
  168
  179
  195
  211
  228
  246
  265
  285
  305
  327
  351
  375
  401
  428
  456
  486
  518
  551
  586
  623
  662
  703
  747
  792
  840
  891
  944
  1,000
  1,059
  1,122
  1,187
Tax expense, $m
  62
  48
  53
  57
  62
  66
  71
  77
  82
  88
  95
  101
  108
  115
  123
  131
  140
  149
  158
  168
  179
  190
  202
  214
  227
  241
  255
  270
  286
  303
  321
Net income, $m
  106
  131
  142
  154
  166
  180
  193
  208
  223
  239
  256
  274
  292
  312
  333
  355
  378
  402
  428
  455
  483
  513
  545
  578
  613
  650
  689
  730
  773
  819
  867

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  149
  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
  712
  594
  627
  662
  698
  735
  775
  816
  859
  904
  951
  1,001
  1,053
  1,107
  1,164
  1,224
  1,287
  1,353
  1,422
  1,494
  1,570
  1,650
  1,733
  1,821
  1,913
  2,010
  2,111
  2,217
  2,329
  2,446
  2,569
Adjusted assets (=assets-cash), $m
  563
  594
  627
  662
  698
  735
  775
  816
  859
  904
  951
  1,001
  1,053
  1,107
  1,164
  1,224
  1,287
  1,353
  1,422
  1,494
  1,570
  1,650
  1,733
  1,821
  1,913
  2,010
  2,111
  2,217
  2,329
  2,446
  2,569
Revenue / Adjusted assets
  1.528
  1.529
  1.528
  1.527
  1.527
  1.529
  1.528
  1.528
  1.529
  1.529
  1.529
  1.528
  1.528
  1.528
  1.528
  1.529
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
  1.528
Average production assets, $m
  118
  124
  131
  139
  146
  154
  162
  171
  180
  189
  199
  210
  220
  232
  244
  256
  269
  283
  298
  313
  329
  345
  363
  381
  400
  421
  442
  464
  488
  512
  538
Working capital, $m
  448
  316
  334
  352
  371
  391
  412
  434
  457
  481
  506
  532
  560
  589
  619
  651
  684
  719
  756
  795
  835
  877
  922
  968
  1,017
  1,069
  1,122
  1,179
  1,238
  1,301
  1,366
Total debt, $m
  0
  6
  12
  19
  26
  33
  41
  49
  58
  66
  76
  85
  95
  106
  117
  129
  141
  154
  167
  181
  196
  212
  228
  245
  263
  282
  302
  322
  344
  367
  391
Total liabilities, $m
  110
  116
  122
  129
  136
  143
  151
  159
  168
  176
  186
  195
  205
  216
  227
  239
  251
  264
  277
  291
  306
  322
  338
  355
  373
  392
  412
  432
  454
  477
  501
Total equity, $m
  602
  478
  505
  533
  562
  592
  624
  657
  691
  728
  766
  806
  848
  891
  937
  986
  1,036
  1,089
  1,145
  1,203
  1,264
  1,328
  1,395
  1,466
  1,540
  1,618
  1,699
  1,785
  1,875
  1,969
  2,068
Total liabilities and equity, $m
  712
  594
  627
  662
  698
  735
  775
  816
  859
  904
  952
  1,001
  1,053
  1,107
  1,164
  1,225
  1,287
  1,353
  1,422
  1,494
  1,570
  1,650
  1,733
  1,821
  1,913
  2,010
  2,111
  2,217
  2,329
  2,446
  2,569
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.100
  0.110
  0.110
  0.120
  0.120
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.190
  0.190
Adjusted equity ratio
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805
  0.805

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  106
  131
  142
  154
  166
  180
  193
  208
  223
  239
  256
  274
  292
  312
  333
  355
  378
  402
  428
  455
  483
  513
  545
  578
  613
  650
  689
  730
  773
  819
  867
Depreciation, amort., depletion, $m
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
  56
  59
  61
  65
  68
  71
  75
  79
  83
  87
Funds from operations, $m
  120
  151
  163
  176
  190
  204
  219
  235
  252
  270
  288
  308
  328
  350
  372
  396
  421
  448
  476
  505
  536
  569
  604
  640
  678
  718
  761
  805
  852
  901
  954
Change in working capital, $m
  -2
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  38
  40
  42
  44
  47
  49
  51
  54
  57
  59
  62
  65
Cash from operations, $m
  122
  134
  146
  158
  171
  184
  199
  213
  229
  246
  263
  281
  300
  321
  342
  364
  388
  413
  439
  467
  496
  527
  559
  593
  629
  667
  707
  749
  793
  839
  888
Maintenance CAPEX, $m
  0
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -56
  -59
  -61
  -65
  -68
  -71
  -75
  -79
  -83
New CAPEX, $m
  -20
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
Cash from investing activities, $m
  -26
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -38
  -41
  -42
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -80
  -85
  -89
  -93
  -98
  -104
  -109
Free cash flow, $m
  96
  108
  119
  130
  141
  153
  165
  179
  192
  207
  222
  239
  256
  274
  293
  313
  334
  356
  379
  404
  430
  457
  486
  516
  548
  582
  618
  655
  694
  736
  780
Issuance/(repayment) of debt, $m
  0
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $m
  -25
  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  
  -25
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  70
  114
  125
  136
  148
  160
  173
  187
  201
  216
  232
  248
  266
  284
  304
  324
  346
  369
  393
  418
  445
  473
  502
  533
  566
  601
  637
  676
  716
  759
  804
Retained Cash Flow (-), $m
  -84
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -86
  -90
  -94
  -99
Prev. year cash balance distribution, $m
 
  149
  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
 
  238
  99
  109
  119
  130
  141
  153
  166
  180
  194
  208
  224
  241
  258
  276
  295
  316
  337
  360
  383
  409
  435
  463
  492
  523
  556
  590
  626
  665
  705
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
 
  228
  91
  95
  98
  101
  103
  104
  104
  103
  102
  99
  96
  91
  87
  81
  75
  69
  62
  55
  49
  42
  36
  30
  25
  20
  16
  13
  10
  7
  5
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

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 24
Price to Sales 3
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 20.8
Price to Free Cash Flow 24.9
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 $860 million for the last fiscal year's total revenue generated by Dorman Products. The default revenue input number comes from 2016 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 5.6% 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 59.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $182 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 3.5% 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 13.7%.

Life of production assets of 6.2 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 34.8%. 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 - $602 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 34.675 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 $2.6 billion.

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COMPANY NEWS

▶ 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]
▶ Do Hedge Funds Love Dorman Products Inc. (DORM)?   [Nov-24-16 12:28PM  at Insider Monkey]
▶ Dorman Products Looks Forward to a Brighter Future   [Oct-25-16 09:06PM  at Motley Fool]
Financial statements of DORM
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