Intrinsic value of General Finance Corporation - GFN

Previous Close

$7.47

  Intrinsic Value

$13.48

stock screener

  Rating & Target

str. buy

+80%

Previous close

$7.47

 
Intrinsic value

$13.48

 
Up/down potential

+80%

 
Rating

str. buy

We calculate the intrinsic value of GFN 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 0.2

 

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, %
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  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
Revenue, $m
  369
  392
  416
  441
  468
  495
  523
  553
  584
  616
  650
  685
  722
  761
  802
  844
  888
  935
  984
  1,035
  1,088
  1,144
  1,203
  1,265
  1,329
  1,397
  1,468
  1,543
  1,621
  1,703
Variable operating expenses, $m
  239
  251
  263
  276
  290
  304
  319
  335
  351
  368
  340
  359
  378
  399
  420
  442
  465
  490
  515
  542
  570
  599
  630
  662
  696
  732
  769
  808
  849
  892
Fixed operating expenses, $m
  81
  83
  84
  86
  88
  90
  92
  94
  96
  98
  100
  103
  105
  107
  109
  112
  114
  117
  119
  122
  125
  128
  130
  133
  136
  139
  142
  145
  148
  152
Total operating expenses, $m
  320
  334
  347
  362
  378
  394
  411
  429
  447
  466
  440
  462
  483
  506
  529
  554
  579
  607
  634
  664
  695
  727
  760
  795
  832
  871
  911
  953
  997
  1,044
Operating income, $m
  50
  59
  69
  79
  89
  100
  112
  124
  137
  150
  209
  224
  239
  255
  272
  290
  309
  328
  349
  371
  393
  417
  443
  469
  497
  526
  557
  589
  624
  659
EBITDA, $m
  133
  145
  157
  170
  183
  197
  211
  226
  242
  259
  276
  294
  314
  334
  355
  377
  400
  425
  450
  477
  506
  535
  567
  599
  634
  670
  708
  748
  791
  835
Interest expense (income), $m
  0
  37
  40
  43
  47
  50
  54
  57
  61
  65
  70
  74
  79
  84
  89
  94
  100
  106
  112
  118
  125
  132
  139
  147
  155
  163
  172
  182
  191
  202
  212
Earnings before tax, $m
  13
  19
  25
  32
  39
  47
  55
  63
  71
  80
  135
  145
  156
  167
  178
  190
  203
  217
  231
  246
  262
  278
  296
  314
  334
  354
  376
  398
  422
  447
Tax expense, $m
  3
  5
  7
  9
  11
  13
  15
  17
  19
  22
  36
  39
  42
  45
  48
  51
  55
  59
  62
  66
  71
  75
  80
  85
  90
  96
  101
  107
  114
  121
Net income, $m
  9
  14
  19
  23
  29
  34
  40
  46
  52
  59
  99
  106
  114
  122
  130
  139
  148
  158
  169
  180
  191
  203
  216
  229
  244
  258
  274
  291
  308
  326

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
  734
  780
  828
  878
  930
  984
  1,040
  1,099
  1,161
  1,225
  1,292
  1,363
  1,436
  1,513
  1,594
  1,678
  1,766
  1,859
  1,955
  2,057
  2,163
  2,275
  2,392
  2,514
  2,643
  2,777
  2,919
  3,067
  3,223
  3,386
Adjusted assets (=assets-cash), $m
  734
  780
  828
  878
  930
  984
  1,040
  1,099
  1,161
  1,225
  1,292
  1,363
  1,436
  1,513
  1,594
  1,678
  1,766
  1,859
  1,955
  2,057
  2,163
  2,275
  2,392
  2,514
  2,643
  2,777
  2,919
  3,067
  3,223
  3,386
Revenue / Adjusted assets
  0.503
  0.503
  0.502
  0.502
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
Average production assets, $m
  552
  586
  622
  660
  699
  739
  782
  826
  872
  921
  971
  1,024
  1,079
  1,137
  1,198
  1,261
  1,327
  1,397
  1,469
  1,546
  1,626
  1,709
  1,797
  1,889
  1,986
  2,087
  2,193
  2,305
  2,422
  2,545
Working capital, $m
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  59
  63
  66
  69
  73
  76
  80
  84
  89
Total debt, $m
  462
  499
  537
  577
  618
  661
  706
  753
  802
  853
  906
  962
  1,021
  1,082
  1,146
  1,213
  1,283
  1,356
  1,433
  1,514
  1,599
  1,687
  1,780
  1,878
  1,980
  2,087
  2,199
  2,317
  2,441
  2,571
Total liabilities, $m
  584
  620
  658
  698
  739
  782
  827
  874
  923
  974
  1,027
  1,083
  1,142
  1,203
  1,267
  1,334
  1,404
  1,478
  1,555
  1,635
  1,720
  1,808
  1,901
  1,999
  2,101
  2,208
  2,320
  2,438
  2,562
  2,692
Total equity, $m
  150
  160
  170
  180
  191
  202
  213
  225
  238
  251
  265
  279
  294
  310
  327
  344
  362
  381
  401
  422
  443
  466
  490
  515
  542
  569
  598
  629
  661
  694
Total liabilities and equity, $m
  734
  780
  828
  878
  930
  984
  1,040
  1,099
  1,161
  1,225
  1,292
  1,362
  1,436
  1,513
  1,594
  1,678
  1,766
  1,859
  1,956
  2,057
  2,163
  2,274
  2,391
  2,514
  2,643
  2,777
  2,918
  3,067
  3,223
  3,386
Debt-to-equity ratio
  3.070
  3.120
  3.160
  3.200
  3.240
  3.280
  3.310
  3.340
  3.370
  3.400
  3.420
  3.440
  3.470
  3.490
  3.510
  3.530
  3.540
  3.560
  3.580
  3.590
  3.600
  3.620
  3.630
  3.640
  3.650
  3.670
  3.680
  3.690
  3.690
  3.700
Adjusted equity ratio
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205
  0.205

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  9
  14
  19
  23
  29
  34
  40
  46
  52
  59
  99
  106
  114
  122
  130
  139
  148
  158
  169
  180
  191
  203
  216
  229
  244
  258
  274
  291
  308
  326
Depreciation, amort., depletion, $m
  83
  86
  88
  91
  93
  96
  99
  102
  105
  109
  67
  71
  74
  78
  83
  87
  92
  96
  101
  107
  112
  118
  124
  130
  137
  144
  151
  159
  167
  175
Funds from operations, $m
  93
  99
  107
  114
  122
  130
  139
  148
  157
  167
  166
  176
  188
  200
  213
  226
  240
  255
  270
  286
  303
  321
  340
  360
  380
  402
  425
  450
  475
  502
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Cash from operations, $m
  91
  98
  105
  113
  121
  129
  137
  146
  156
  166
  164
  175
  186
  198
  211
  224
  238
  252
  267
  284
  300
  318
  337
  356
  377
  399
  422
  446
  471
  498
Maintenance CAPEX, $m
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -71
  -74
  -78
  -83
  -87
  -92
  -96
  -101
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -167
New CAPEX, $m
  -33
  -35
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -101
  -106
  -111
  -117
  -123
Cash from investing activities, $m
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -114
  -120
  -126
  -132
  -138
  -146
  -153
  -161
  -169
  -177
  -187
  -196
  -206
  -216
  -227
  -238
  -250
  -262
  -276
  -290
Free cash flow, $m
  22
  26
  29
  32
  36
  40
  44
  48
  53
  57
  50
  55
  60
  66
  72
  78
  84
  91
  98
  106
  114
  122
  131
  140
  150
  161
  172
  183
  195
  208
Issuance/(repayment) of debt, $m
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  124
  130
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  
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
  53
  56
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
  93
  97
  102
  107
  112
  118
  124
  130
Total cash flow (excl. dividends), $m
  58
  62
  67
  72
  77
  83
  89
  95
  102
  108
  103
  111
  119
  127
  136
  145
  154
  165
  175
  187
  198
  211
  224
  238
  252
  268
  284
  301
  319
  338
Retained Cash Flow (-), $m
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
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
  48
  53
  57
  62
  67
  72
  77
  83
  89
  95
  89
  96
  104
  111
  119
  128
  136
  146
  155
  166
  177
  188
  200
  213
  226
  240
  255
  270
  287
  304
Discount rate, %
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.30
  19.22
  20.18
  21.19
  22.24
  23.36
  24.52
  25.75
  27.04
  28.39
  29.81
  31.30
  32.87
  34.51
  36.23
  38.05
  39.95
  41.95
  44.04
PV of cash for distribution, $m
  44
  43
  41
  39
  36
  33
  30
  27
  24
  20
  15
  13
  11
  8
  7
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
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
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  100.0
  100.0
  100.0
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FINANCIAL RATIOS  of  General Finance Corporation (GFN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

GFN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GFN stock intrinsic value calculation we used $347 million for the last fiscal year's total revenue generated by General Finance Corporation. The default revenue input number comes from 0001 income statement of General Finance Corporation. 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 GFN stock valuation model: a) initial revenue growth rate of 6.4% 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 10.7%, whose default value for GFN is calculated based on our internal credit rating of General Finance Corporation, 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 General Finance Corporation.
    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 GFN stock the variable cost ratio is equal to 65.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $79 million in the base year in the intrinsic value calculation for GFN 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 8.7% for General Finance Corporation.

Corporate tax rate of 27% is the nominal tax rate for General Finance Corporation. 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 GFN 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 GFN are equal to 149.4%.

Life of production assets of 14.5 years is the average useful life of capital assets used in General Finance Corporation 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 GFN is equal to 5.2%. 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 - $141.281 million for General Finance Corporation - 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 30.310 million for General Finance Corporation 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 General Finance Corporation at the current share price and the inputted number of shares is $0.2 billion.

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