Intrinsic value of Dorman Products - DORM

Previous Close

$76.81

  Intrinsic Value

$48.74

stock screener

  Rating & Target

sell

-37%

Previous close

$76.81

 
Intrinsic value

$48.74

 
Up/down potential

-37%

 
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 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 2.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  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
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.00
Revenue, $m
  949
  997
  1,048
  1,101
  1,157
  1,216
  1,277
  1,341
  1,409
  1,480
  1,555
  1,633
  1,715
  1,801
  1,892
  1,986
  2,086
  2,191
  2,301
  2,416
  2,537
  2,664
  2,798
  2,938
  3,085
  3,239
  3,402
  3,572
  3,751
  3,938
Variable operating expenses, $m
  763
  801
  841
  883
  928
  974
  1,023
  1,074
  1,128
  1,184
  1,235
  1,297
  1,362
  1,430
  1,502
  1,578
  1,657
  1,740
  1,827
  1,919
  2,015
  2,116
  2,222
  2,333
  2,450
  2,573
  2,702
  2,837
  2,979
  3,128
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
  763
  801
  841
  883
  928
  974
  1,023
  1,074
  1,128
  1,184
  1,235
  1,297
  1,362
  1,430
  1,502
  1,578
  1,657
  1,740
  1,827
  1,919
  2,015
  2,116
  2,222
  2,333
  2,450
  2,573
  2,702
  2,837
  2,979
  3,128
Operating income, $m
  186
  196
  207
  218
  229
  241
  254
  267
  281
  296
  320
  336
  353
  371
  389
  409
  429
  451
  473
  497
  522
  548
  576
  604
  635
  667
  700
  735
  772
  810
EBITDA, $m
  211
  222
  233
  245
  257
  270
  284
  298
  313
  329
  346
  363
  381
  400
  421
  442
  464
  487
  512
  537
  564
  592
  622
  653
  686
  720
  756
  794
  834
  876
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  2
  3
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
Earnings before tax, $m
  186
  196
  206
  217
  228
  239
  251
  264
  278
  292
  315
  331
  347
  364
  382
  401
  421
  441
  463
  486
  510
  535
  562
  590
  619
  649
  682
  715
  751
  788
Tax expense, $m
  50
  53
  56
  58
  61
  65
  68
  71
  75
  79
  85
  89
  94
  98
  103
  108
  114
  119
  125
  131
  138
  145
  152
  159
  167
  175
  184
  193
  203
  213
Net income, $m
  136
  143
  150
  158
  166
  175
  184
  193
  203
  213
  230
  242
  253
  266
  279
  293
  307
  322
  338
  355
  372
  391
  410
  430
  452
  474
  498
  522
  548
  575

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
  805
  846
  889
  934
  981
  1,031
  1,083
  1,138
  1,195
  1,255
  1,319
  1,385
  1,455
  1,528
  1,604
  1,685
  1,769
  1,858
  1,951
  2,049
  2,152
  2,260
  2,373
  2,492
  2,617
  2,748
  2,885
  3,030
  3,181
  3,341
Adjusted assets (=assets-cash), $m
  805
  846
  889
  934
  981
  1,031
  1,083
  1,138
  1,195
  1,255
  1,319
  1,385
  1,455
  1,528
  1,604
  1,685
  1,769
  1,858
  1,951
  2,049
  2,152
  2,260
  2,373
  2,492
  2,617
  2,748
  2,885
  3,030
  3,181
  3,341
Revenue / Adjusted assets
  1.179
  1.178
  1.179
  1.179
  1.179
  1.179
  1.179
  1.178
  1.179
  1.179
  1.179
  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
Average production assets, $m
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
  258
  271
  285
  299
  314
  330
  346
  364
  382
  401
  421
  442
  464
  488
  512
  538
  565
  593
  623
  654
Working capital, $m
  139
  146
  153
  161
  169
  177
  186
  196
  206
  216
  227
  238
  250
  263
  276
  290
  305
  320
  336
  353
  370
  389
  408
  429
  450
  473
  497
  522
  548
  575
Total debt, $m
  7
  14
  21
  29
  37
  45
  54
  64
  73
  84
  95
  106
  118
  130
  143
  157
  172
  187
  203
  219
  237
  255
  275
  295
  317
  339
  362
  387
  413
  440
Total liabilities, $m
  138
  145
  152
  160
  168
  176
  185
  195
  204
  215
  225
  237
  249
  261
  274
  288
  303
  318
  334
  350
  368
  386
  406
  426
  447
  470
  493
  518
  544
  571
Total equity, $m
  667
  701
  737
  774
  814
  855
  898
  943
  991
  1,041
  1,093
  1,148
  1,206
  1,266
  1,330
  1,397
  1,467
  1,540
  1,618
  1,699
  1,784
  1,873
  1,967
  2,066
  2,169
  2,278
  2,392
  2,512
  2,637
  2,769
Total liabilities and equity, $m
  805
  846
  889
  934
  982
  1,031
  1,083
  1,138
  1,195
  1,256
  1,318
  1,385
  1,455
  1,527
  1,604
  1,685
  1,770
  1,858
  1,952
  2,049
  2,152
  2,259
  2,373
  2,492
  2,616
  2,748
  2,885
  3,030
  3,181
  3,340
Debt-to-equity ratio
  0.010
  0.020
  0.030
  0.040
  0.050
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.090
  0.100
  0.100
  0.110
  0.110
  0.120
  0.120
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
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
  136
  143
  150
  158
  166
  175
  184
  193
  203
  213
  230
  242
  253
  266
  279
  293
  307
  322
  338
  355
  372
  391
  410
  430
  452
  474
  498
  522
  548
  575
Depreciation, amort., depletion, $m
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  26
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  65
Funds from operations, $m
  161
  168
  177
  185
  194
  204
  214
  224
  235
  246
  256
  269
  282
  296
  310
  326
  342
  359
  376
  395
  415
  435
  457
  479
  503
  528
  554
  581
  610
  641
Change in working capital, $m
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  23
  24
  25
  26
  27
Cash from operations, $m
  154
  161
  169
  177
  186
  195
  205
  215
  225
  236
  245
  257
  270
  283
  297
  312
  327
  343
  360
  378
  397
  416
  437
  459
  481
  505
  530
  557
  584
  613
Maintenance CAPEX, $m
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -62
New CAPEX, $m
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
Cash from investing activities, $m
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -42
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -73
  -77
  -81
  -84
  -89
  -93
Free cash flow, $m
  131
  138
  144
  151
  159
  166
  174
  183
  192
  201
  208
  218
  229
  240
  252
  265
  278
  291
  306
  321
  337
  353
  371
  389
  408
  428
  450
  472
  495
  520
Issuance/(repayment) of debt, $m
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  22
  24
  25
  26
  27
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  
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  22
  24
  25
  26
  27
Total cash flow (excl. dividends), $m
  138
  145
  152
  159
  167
  175
  183
  192
  201
  211
  219
  230
  241
  253
  265
  278
  292
  307
  322
  338
  354
  372
  390
  409
  430
  451
  473
  497
  521
  547
Retained Cash Flow (-), $m
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -94
  -99
  -103
  -109
  -114
  -120
  -126
  -132
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
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
Cash available for distribution, $m
  105
  111
  116
  122
  127
  134
  140
  147
  154
  161
  167
  175
  183
  192
  202
  212
  222
  233
  244
  256
  269
  282
  296
  311
  326
  342
  359
  377
  395
  415
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
  101
  101
  100
  99
  97
  95
  92
  88
  84
  79
  75
  70
  65
  59
  54
  48
  43
  38
  33
  28
  23
  19
  16
  13
  10
  8
  6
  4
  3
Current shareholders' claim on cash, %
  100.0
  100.0
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  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
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  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 25
Price to Sales 3.1
Price to Book 4.4
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 26
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 million for the last fiscal year's total revenue generated by Dorman Products. The default revenue input number comes from 2017 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 5.1% 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 0.4%.

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 16.6%.

Life of production assets of 10 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 14.6%. 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 - $635 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 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 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]
▶ Do Hedge Funds Love Dorman Products Inc. (DORM)?   [Nov-24-16 12:28PM  at Insider Monkey]
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