Intrinsic value of Dorman Products, Inc. - DORM

Previous Close

$86.46

  Intrinsic Value

$44.02

stock screener

  Rating & Target

sell

-49%

Previous close

$86.46

 
Intrinsic value

$44.02

 
Up/down potential

-49%

 
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 2.9

 

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, %
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
Revenue, $m
  1,113
  1,262
  1,420
  1,588
  1,764
  1,949
  2,143
  2,345
  2,556
  2,776
  3,005
  3,243
  3,490
  3,747
  4,014
  4,292
  4,581
  4,881
  5,193
  5,518
  5,856
  6,208
  6,576
  6,959
  7,358
  7,775
  8,211
  8,666
  9,141
  9,638
Variable operating expenses, $m
  895
  1,013
  1,139
  1,272
  1,412
  1,559
  1,713
  1,874
  2,042
  2,217
  2,389
  2,578
  2,774
  2,979
  3,191
  3,411
  3,641
  3,879
  4,127
  4,386
  4,655
  4,935
  5,227
  5,531
  5,849
  6,180
  6,526
  6,888
  7,266
  7,661
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
  895
  1,013
  1,139
  1,272
  1,412
  1,559
  1,713
  1,874
  2,042
  2,217
  2,389
  2,578
  2,774
  2,979
  3,191
  3,411
  3,641
  3,879
  4,127
  4,386
  4,655
  4,935
  5,227
  5,531
  5,849
  6,180
  6,526
  6,888
  7,266
  7,661
Operating income, $m
  219
  249
  281
  316
  352
  390
  430
  471
  515
  560
  617
  665
  716
  769
  824
  881
  940
  1,001
  1,065
  1,132
  1,201
  1,274
  1,349
  1,428
  1,510
  1,595
  1,685
  1,778
  1,875
  1,977
EBITDA, $m
  253
  287
  323
  361
  401
  443
  487
  533
  581
  631
  683
  737
  793
  852
  912
  976
  1,041
  1,109
  1,180
  1,254
  1,331
  1,411
  1,495
  1,582
  1,672
  1,767
  1,866
  1,970
  2,078
  2,191
Interest expense (income), $m
  0
  0
  1
  3
  4
  5
  7
  9
  10
  12
  14
  16
  18
  20
  22
  25
  27
  29
  32
  35
  37
  40
  43
  46
  50
  53
  57
  60
  64
  68
  72
Earnings before tax, $m
  219
  248
  279
  312
  347
  383
  421
  461
  502
  546
  601
  647
  696
  747
  799
  854
  910
  969
  1,031
  1,095
  1,161
  1,230
  1,303
  1,378
  1,457
  1,539
  1,624
  1,714
  1,807
  1,905
Tax expense, $m
  59
  67
  75
  84
  94
  103
  114
  124
  136
  147
  162
  175
  188
  202
  216
  230
  246
  262
  278
  296
  314
  332
  352
  372
  393
  415
  439
  463
  488
  514
Net income, $m
  160
  181
  204
  228
  253
  280
  307
  336
  367
  398
  438
  473
  508
  545
  583
  623
  665
  708
  752
  799
  848
  898
  951
  1,006
  1,063
  1,123
  1,186
  1,251
  1,319
  1,391

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
  1,015
  1,151
  1,295
  1,447
  1,608
  1,777
  1,953
  2,138
  2,330
  2,531
  2,739
  2,956
  3,182
  3,416
  3,659
  3,913
  4,176
  4,449
  4,734
  5,030
  5,338
  5,659
  5,994
  6,343
  6,708
  7,088
  7,485
  7,899
  8,333
  8,786
Adjusted assets (=assets-cash), $m
  1,015
  1,151
  1,295
  1,447
  1,608
  1,777
  1,953
  2,138
  2,330
  2,531
  2,739
  2,956
  3,182
  3,416
  3,659
  3,913
  4,176
  4,449
  4,734
  5,030
  5,338
  5,659
  5,994
  6,343
  6,708
  7,088
  7,485
  7,899
  8,333
  8,786
Revenue / Adjusted assets
  1.097
  1.096
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
  1.097
Average production assets, $m
  163
  184
  207
  232
  258
  285
  313
  342
  373
  405
  439
  473
  510
  547
  586
  627
  669
  713
  758
  806
  855
  906
  960
  1,016
  1,074
  1,135
  1,199
  1,265
  1,335
  1,407
Working capital, $m
  509
  577
  649
  726
  806
  891
  979
  1,072
  1,168
  1,269
  1,373
  1,482
  1,595
  1,713
  1,835
  1,961
  2,093
  2,230
  2,373
  2,522
  2,676
  2,837
  3,005
  3,180
  3,363
  3,553
  3,752
  3,960
  4,177
  4,405
Total debt, $m
  23
  47
  73
  101
  129
  160
  192
  225
  260
  296
  333
  372
  413
  455
  499
  544
  592
  641
  692
  745
  801
  859
  919
  982
  1,047
  1,116
  1,187
  1,262
  1,340
  1,422
Total liabilities, $m
  183
  207
  233
  261
  289
  320
  352
  385
  419
  456
  493
  532
  573
  615
  659
  704
  752
  801
  852
  905
  961
  1,019
  1,079
  1,142
  1,207
  1,276
  1,347
  1,422
  1,500
  1,581
Total equity, $m
  832
  943
  1,062
  1,187
  1,318
  1,457
  1,602
  1,753
  1,911
  2,075
  2,246
  2,424
  2,609
  2,801
  3,001
  3,208
  3,424
  3,648
  3,882
  4,124
  4,377
  4,641
  4,915
  5,202
  5,500
  5,812
  6,137
  6,478
  6,833
  7,204
Total liabilities and equity, $m
  1,015
  1,150
  1,295
  1,448
  1,607
  1,777
  1,954
  2,138
  2,330
  2,531
  2,739
  2,956
  3,182
  3,416
  3,660
  3,912
  4,176
  4,449
  4,734
  5,029
  5,338
  5,660
  5,994
  6,344
  6,707
  7,088
  7,484
  7,900
  8,333
  8,785
Debt-to-equity ratio
  0.030
  0.050
  0.070
  0.080
  0.100
  0.110
  0.120
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.180
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.200
  0.200
Adjusted equity ratio
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  160
  181
  204
  228
  253
  280
  307
  336
  367
  398
  438
  473
  508
  545
  583
  623
  665
  708
  752
  799
  848
  898
  951
  1,006
  1,063
  1,123
  1,186
  1,251
  1,319
  1,391
Depreciation, amort., depletion, $m
  35
  38
  41
  45
  49
  53
  57
  62
  66
  71
  66
  72
  77
  83
  89
  95
  101
  108
  115
  122
  130
  137
  145
  154
  163
  172
  182
  192
  202
  213
Funds from operations, $m
  194
  219
  245
  273
  302
  333
  365
  398
  433
  470
  505
  544
  585
  628
  672
  718
  766
  816
  867
  921
  977
  1,036
  1,096
  1,160
  1,226
  1,295
  1,367
  1,443
  1,522
  1,604
Change in working capital, $m
  64
  68
  72
  76
  81
  85
  89
  93
  96
  101
  105
  109
  113
  117
  122
  127
  132
  137
  143
  148
  155
  161
  168
  175
  183
  191
  199
  208
  217
  227
Cash from operations, $m
  130
  151
  173
  196
  221
  248
  276
  306
  337
  369
  400
  436
  472
  510
  550
  591
  634
  678
  725
  773
  823
  875
  929
  985
  1,044
  1,105
  1,168
  1,235
  1,304
  1,377
Maintenance CAPEX, $m
  -22
  -25
  -28
  -31
  -35
  -39
  -43
  -47
  -52
  -57
  -61
  -66
  -72
  -77
  -83
  -89
  -95
  -101
  -108
  -115
  -122
  -130
  -137
  -145
  -154
  -163
  -172
  -182
  -192
  -202
New CAPEX, $m
  -20
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -66
  -69
  -73
Cash from investing activities, $m
  -42
  -47
  -51
  -55
  -61
  -66
  -71
  -77
  -83
  -89
  -94
  -101
  -108
  -115
  -122
  -130
  -137
  -145
  -154
  -162
  -171
  -181
  -191
  -201
  -212
  -224
  -236
  -248
  -261
  -275
Free cash flow, $m
  88
  104
  122
  140
  161
  182
  205
  229
  254
  280
  305
  334
  364
  396
  428
  462
  497
  533
  571
  610
  651
  694
  738
  783
  831
  881
  933
  987
  1,043
  1,102
Issuance/(repayment) of debt, $m
  23
  24
  26
  27
  29
  30
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
  68
  71
  75
  78
  82
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  
  23
  24
  26
  27
  29
  30
  32
  33
  35
  36
  38
  39
  41
  42
  44
  46
  47
  49
  51
  53
  56
  58
  60
  63
  66
  68
  71
  75
  78
  82
Total cash flow (excl. dividends), $m
  111
  129
  148
  168
  189
  212
  237
  262
  289
  317
  343
  373
  405
  438
  472
  507
  544
  583
  622
  664
  707
  751
  798
  846
  897
  949
  1,004
  1,061
  1,121
  1,184
Retained Cash Flow (-), $m
  -105
  -111
  -118
  -125
  -132
  -138
  -145
  -151
  -158
  -164
  -171
  -178
  -185
  -192
  -200
  -207
  -216
  -224
  -233
  -243
  -253
  -263
  -275
  -286
  -299
  -312
  -326
  -340
  -355
  -372
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
  7
  18
  29
  43
  58
  74
  92
  111
  131
  152
  172
  196
  220
  246
  272
  300
  329
  358
  389
  421
  454
  488
  523
  560
  598
  638
  679
  721
  766
  812
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
  6
  16
  26
  35
  45
  54
  62
  69
  75
  80
  82
  83
  84
  82
  80
  76
  71
  66
  60
  53
  47
  40
  34
  29
  23
  19
  15
  11
  8
  6
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

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, Inc. (DORM)

Valuation Ratios
P/E Ratio 28.2
Price to Sales 3.5
Price to Book 5
Price to Tangible Book
Price to Cash Flow 24.5
Price to Free Cash Flow 29.3
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 $974 million for the last fiscal year's total revenue generated by Dorman Products, Inc.. The default revenue input number comes from 0001 income statement of Dorman Products, 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 DORM stock valuation model: a) initial revenue growth rate of 14.3% 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, 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 Dorman Products, 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 DORM stock the variable cost ratio is equal to 80.5%.

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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Dorman Products, 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 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 14.6%.

Life of production assets of 6.6 years is the average useful life of capital assets used in Dorman Products, 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 DORM is equal to 45.7%. 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 - $727.623 million for Dorman Products, 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 32.966 million for Dorman Products, 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 Dorman Products, Inc. at the current share price and the inputted number of shares is $2.9 billion.

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