Intrinsic value of GATX - GATX

Previous Close

$83.49

  Intrinsic Value

$15.97

stock screener

  Rating & Target

str. sell

-81%

Previous close

$83.49

 
Intrinsic value

$15.97

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of GATX 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 3.3

 

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, %
  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
  1,405
  1,437
  1,474
  1,515
  1,561
  1,612
  1,666
  1,726
  1,790
  1,859
  1,932
  2,010
  2,094
  2,183
  2,277
  2,377
  2,482
  2,594
  2,712
  2,837
  2,968
  3,107
  3,253
  3,407
  3,569
  3,740
  3,920
  4,109
  4,308
  4,517
Variable operating expenses, $m
  227
  232
  238
  244
  251
  258
  267
  276
  285
  296
  291
  303
  316
  329
  343
  358
  374
  391
  409
  428
  448
  469
  491
  514
  538
  564
  591
  620
  650
  681
Fixed operating expenses, $m
  871
  890
  909
  929
  950
  971
  992
  1,014
  1,036
  1,059
  1,082
  1,106
  1,131
  1,155
  1,181
  1,207
  1,233
  1,261
  1,288
  1,317
  1,346
  1,375
  1,405
  1,436
  1,468
  1,500
  1,533
  1,567
  1,601
  1,637
Total operating expenses, $m
  1,098
  1,122
  1,147
  1,173
  1,201
  1,229
  1,259
  1,290
  1,321
  1,355
  1,373
  1,409
  1,447
  1,484
  1,524
  1,565
  1,607
  1,652
  1,697
  1,745
  1,794
  1,844
  1,896
  1,950
  2,006
  2,064
  2,124
  2,187
  2,251
  2,318
Operating income, $m
  307
  315
  327
  342
  360
  382
  408
  436
  468
  504
  558
  601
  648
  698
  753
  811
  874
  942
  1,015
  1,092
  1,175
  1,263
  1,357
  1,457
  1,563
  1,676
  1,795
  1,922
  2,057
  2,199
EBITDA, $m
  1,080
  1,105
  1,137
  1,175
  1,218
  1,267
  1,322
  1,383
  1,449
  1,522
  1,601
  1,686
  1,777
  1,876
  1,981
  2,094
  2,214
  2,342
  2,478
  2,622
  2,776
  2,939
  3,112
  3,295
  3,488
  3,693
  3,910
  4,139
  4,381
  4,636
Interest expense (income), $m
  145
  214
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
  171
Earnings before tax, $m
  93
  144
  156
  171
  189
  211
  236
  265
  297
  333
  387
  430
  476
  527
  581
  640
  703
  771
  844
  921
  1,004
  1,092
  1,186
  1,286
  1,392
  1,504
  1,624
  1,751
  1,885
  2,028
Tax expense, $m
  25
  39
  42
  46
  51
  57
  64
  72
  80
  90
  105
  116
  129
  142
  157
  173
  190
  208
  228
  249
  271
  295
  320
  347
  376
  406
  438
  473
  509
  548
Net income, $m
  68
  105
  114
  125
  138
  154
  173
  193
  217
  243
  283
  314
  348
  385
  424
  467
  513
  563
  616
  672
  733
  797
  866
  938
  1,016
  1,098
  1,186
  1,278
  1,376
  1,480

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
  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
Adjusted assets (=assets-cash), $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
Revenue / Adjusted assets
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Average production assets, $m
  7,577
  7,752
  7,951
  8,175
  8,422
  8,694
  8,991
  9,311
  9,656
  10,027
  10,423
  10,846
  11,297
  11,776
  12,284
  12,822
  13,392
  13,994
  14,631
  15,303
  16,013
  16,761
  17,549
  18,380
  19,255
  20,176
  21,146
  22,166
  23,240
  24,369
Working capital, $m
  -5,656
  -5,786
  -5,935
  -6,102
  -6,287
  -6,490
  -6,711
  -6,950
  -7,208
  -7,484
  -7,780
  -8,096
  -8,432
  -8,790
  -9,169
  -9,571
  -9,996
  -10,446
  -10,921
  -11,423
  -11,952
  -12,511
  -13,099
  -13,719
  -14,372
  -15,060
  -15,784
  -16,546
  -17,347
  -18,190
Total debt, $m
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
  441
Total liabilities, $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 equity, $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 liabilities and equity, $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
Debt-to-equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  68
  105
  114
  125
  138
  154
  173
  193
  217
  243
  283
  314
  348
  385
  424
  467
  513
  563
  616
  672
  733
  797
  866
  938
  1,016
  1,098
  1,186
  1,278
  1,376
  1,480
Depreciation, amort., depletion, $m
  773
  791
  810
  833
  858
  885
  914
  947
  981
  1,018
  1,042
  1,085
  1,130
  1,178
  1,228
  1,282
  1,339
  1,399
  1,463
  1,530
  1,601
  1,676
  1,755
  1,838
  1,925
  2,018
  2,115
  2,217
  2,324
  2,437
Funds from operations, $m
  841
  896
  924
  957
  996
  1,039
  1,087
  1,140
  1,198
  1,261
  1,325
  1,398
  1,478
  1,562
  1,653
  1,750
  1,853
  1,962
  2,079
  2,203
  2,334
  2,473
  2,620
  2,776
  2,941
  3,116
  3,300
  3,495
  3,700
  3,917
Change in working capital, $m
  -111
  -130
  -149
  -167
  -185
  -203
  -221
  -239
  -258
  -277
  -296
  -316
  -336
  -357
  -379
  -402
  -425
  -450
  -475
  -502
  -529
  -558
  -589
  -620
  -653
  -688
  -724
  -762
  -801
  -843
Cash from operations, $m
  952
  1,026
  1,073
  1,124
  1,181
  1,242
  1,308
  1,379
  1,456
  1,538
  1,621
  1,714
  1,814
  1,920
  2,032
  2,151
  2,278
  2,412
  2,554
  2,704
  2,863
  3,031
  3,209
  3,397
  3,595
  3,804
  4,024
  4,256
  4,502
  4,760
Maintenance CAPEX, $m
  -743
  -758
  -775
  -795
  -817
  -842
  -869
  -899
  -931
  -966
  -1,003
  -1,042
  -1,085
  -1,130
  -1,178
  -1,228
  -1,282
  -1,339
  -1,399
  -1,463
  -1,530
  -1,601
  -1,676
  -1,755
  -1,838
  -1,925
  -2,018
  -2,115
  -2,217
  -2,324
New CAPEX, $m
  -149
  -174
  -199
  -224
  -248
  -272
  -296
  -321
  -345
  -371
  -396
  -423
  -450
  -479
  -508
  -538
  -570
  -603
  -637
  -672
  -709
  -748
  -789
  -831
  -875
  -921
  -970
  -1,020
  -1,074
  -1,129
Cash from investing activities, $m
  -892
  -932
  -974
  -1,019
  -1,065
  -1,114
  -1,165
  -1,220
  -1,276
  -1,337
  -1,399
  -1,465
  -1,535
  -1,609
  -1,686
  -1,766
  -1,852
  -1,942
  -2,036
  -2,135
  -2,239
  -2,349
  -2,465
  -2,586
  -2,713
  -2,846
  -2,988
  -3,135
  -3,291
  -3,453
Free cash flow, $m
  60
  94
  98
  106
  116
  128
  143
  160
  179
  201
  222
  249
  279
  311
  346
  385
  426
  470
  518
  569
  624
  682
  744
  811
  882
  957
  1,037
  1,121
  1,211
  1,307
Issuance/(repayment) of debt, $m
  -110
  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
Issuance/(repurchase) of shares, $m
  42
  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  
  -68
  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 cash flow (excl. dividends), $m
  -8
  94
  98
  106
  116
  128
  143
  160
  179
  201
  222
  249
  279
  311
  346
  385
  426
  470
  518
  569
  624
  682
  744
  811
  882
  957
  1,037
  1,121
  1,211
  1,307
Retained Cash Flow (-), $m
  -110
  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
Prev. year cash balance distribution, $m
  110
  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
  10
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Cash available for distribution, $m
  -8
  94
  98
  106
  116
  128
  143
  160
  179
  201
  222
  249
  279
  311
  346
  385
  426
  470
  518
  569
  624
  682
  744
  811
  882
  957
  1,037
  1,121
  1,211
  1,307
Discount rate, %
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
  -7
  82
  79
  78
  78
  78
  77
  77
  76
  74
  70
  66
  62
  57
  52
  46
  41
  35
  29
  24
  19
  15
  11
  9
  6
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

GATX Corporation is a global railcar lessor, owning fleets in North America, Europe, and Asia. In addition, the Company operates fleet of the United States-flagged vessels on the Great Lakes and jointly with Rolls-Royce plc, it owns aircraft spare engine lease portfolios in the world. It operates through four business segments: Rail North America, Rail International, American Steamship Company (ASC), and Portfolio Management. As of December 31, 2016, it owned fleet of approximately 146,300 railcars. It offers customers leasing, maintenance, asset, financial, and management expertise. It leases tank cars, freight cars, and locomotives in North America, tank cars and freight cars in Europe and freight cars in India and Russia. As of December 31, 2016, it also had an ownership interest in an affiliate investment that owned approximately 2,200 railcars, and it managed approximately 400 railcars for other third-party owners.

FINANCIAL RATIOS  of  GATX (GATX)

Valuation Ratios
P/E Ratio 12.8
Price to Sales 2.3
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 5.3
Price to Free Cash Flow -37.8
Growth Rates
Sales Growth Rate -2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 504.2%
Cap. Spend. - 3 Yr. Gr. Rate -2.4%
Financial Strength
Quick Ratio 77
Current Ratio NaN
LT Debt to Equity 316.9%
Total Debt to Equity 317.1%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 4.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4%
Return On Equity 19.6%
Return On Equity - 3 Yr. Avg. 16.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 67.5%
Gross Margin - 3 Yr. Avg. 65.8%
EBITDA Margin 53.6%
EBITDA Margin - 3 Yr. Avg. 49.5%
Operating Margin 25.9%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin 21.5%
Pre-Tax Margin - 3 Yr. Avg. 18.7%
Net Profit Margin 18.1%
Net Profit Margin - 3 Yr. Avg. 15.5%
Effective Tax Rate 31.1%
Eff/ Tax Rate - 3 Yr. Avg. 34.9%
Payout Ratio 26.1%

GATX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GATX stock intrinsic value calculation we used $1377 million for the last fiscal year's total revenue generated by GATX. The default revenue input number comes from 2017 income statement of GATX. 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 GATX 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 6.8%, whose default value for GATX is calculated based on our internal credit rating of GATX, 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 GATX.
    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 GATX stock the variable cost ratio is equal to 16.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $852 million in the base year in the intrinsic value calculation for GATX 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 38.8% for GATX.

Corporate tax rate of 27% is the nominal tax rate for GATX. 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 GATX stock is equal to 0.7%.

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 GATX are equal to 539.5%.

Life of production assets of 10 years is the average useful life of capital assets used in GATX 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 GATX is equal to -402.7%. 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 - $0 million for GATX - 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 39 million for GATX 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 GATX at the current share price and the inputted number of shares is $3.3 billion.

RELATED COMPANIES Price Int.Val. Rating
KSU Kansas City So 113.39 18.06  str.sell
ARII American Railc 46.52 8.65  str.sell
CAI CAI Internatio 24.02 7.11  str.sell
AYR Aircastle 20.68 6.17  str.sell
AL Air Lease 45.17 1,529.78  str.buy

COMPANY NEWS

▶ GATX Corporation Announces Senior Leadership Changes   [Aug-10-18 11:00AM  GlobeNewswire]
▶ GATX Corporation Announces Long-Term Railcar Order   [Aug-01-18 08:00AM  GlobeNewswire]
▶ Gatx: 2Q Earnings Snapshot   [Jul-19-18 08:40AM  Associated Press]
▶ Free Research Report as GATX's EPS Surged 38%   [May-04-18 07:40AM  ACCESSWIRE]
▶ GATX Corporation Announces Quarterly Dividend   [May-01-18 11:53AM  GlobeNewswire]
▶ GATX Corporation to Host Earnings Call   [09:00AM  ACCESSWIRE]
▶ Gatx: 1Q Earnings Snapshot   [08:42AM  Associated Press]
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.