Intrinsic value of Group 1 Automotive, Inc. - GPI

Previous Close

$77.91

  Intrinsic Value

$84.92

stock screener

  Rating & Target

hold

+9%

Previous close

$77.91

 
Intrinsic value

$84.92

 
Up/down potential

+9%

 
Rating

hold

We calculate the intrinsic value of GPI 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 1.4

 

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, %
  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
  11,833
  12,105
  12,416
  12,766
  13,153
  13,577
  14,040
  14,540
  15,079
  15,658
  16,277
  16,938
  17,641
  18,389
  19,182
  20,023
  20,912
  21,853
  22,848
  23,897
  25,005
  26,173
  27,405
  28,702
  30,068
  31,507
  33,021
  34,615
  36,291
  38,055
Variable operating expenses, $m
  11,464
  11,725
  12,023
  12,358
  12,728
  13,135
  13,579
  14,058
  14,575
  15,130
  15,601
  16,234
  16,908
  17,625
  18,385
  19,191
  20,043
  20,945
  21,898
  22,904
  23,966
  25,086
  26,266
  27,509
  28,819
  30,198
  31,649
  33,177
  34,783
  36,473
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
  11,464
  11,725
  12,023
  12,358
  12,728
  13,135
  13,579
  14,058
  14,575
  15,130
  15,601
  16,234
  16,908
  17,625
  18,385
  19,191
  20,043
  20,945
  21,898
  22,904
  23,966
  25,086
  26,266
  27,509
  28,819
  30,198
  31,649
  33,177
  34,783
  36,473
Operating income, $m
  369
  381
  394
  408
  424
  442
  461
  482
  504
  528
  676
  704
  733
  764
  797
  832
  869
  908
  949
  993
  1,039
  1,088
  1,139
  1,193
  1,249
  1,309
  1,372
  1,438
  1,508
  1,581
EBITDA, $m
  558
  570
  585
  601
  620
  640
  662
  685
  711
  738
  767
  798
  831
  866
  904
  943
  985
  1,030
  1,077
  1,126
  1,178
  1,233
  1,291
  1,352
  1,417
  1,485
  1,556
  1,631
  1,710
  1,793
Interest expense (income), $m
  109
  165
  169
  174
  180
  186
  193
  201
  209
  218
  228
  239
  250
  262
  275
  288
  303
  318
  334
  351
  369
  388
  408
  430
  452
  476
  500
  527
  554
  583
  614
Earnings before tax, $m
  205
  212
  220
  228
  238
  249
  260
  273
  286
  300
  438
  454
  471
  490
  509
  529
  551
  574
  598
  624
  651
  679
  709
  741
  774
  809
  845
  884
  925
  968
Tax expense, $m
  55
  57
  59
  62
  64
  67
  70
  74
  77
  81
  118
  123
  127
  132
  137
  143
  149
  155
  162
  168
  176
  183
  191
  200
  209
  218
  228
  239
  250
  261
Net income, $m
  149
  154
  160
  167
  174
  182
  190
  199
  209
  219
  320
  331
  344
  357
  371
  386
  402
  419
  437
  455
  475
  496
  518
  541
  565
  590
  617
  645
  675
  706

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
  5,100
  5,218
  5,352
  5,502
  5,669
  5,852
  6,052
  6,267
  6,500
  6,749
  7,016
  7,301
  7,604
  7,926
  8,268
  8,630
  9,014
  9,420
  9,848
  10,301
  10,778
  11,282
  11,812
  12,372
  12,961
  13,581
  14,233
  14,920
  15,643
  16,403
Adjusted assets (=assets-cash), $m
  5,100
  5,218
  5,352
  5,502
  5,669
  5,852
  6,052
  6,267
  6,500
  6,749
  7,016
  7,301
  7,604
  7,926
  8,268
  8,630
  9,014
  9,420
  9,848
  10,301
  10,778
  11,282
  11,812
  12,372
  12,961
  13,581
  14,233
  14,920
  15,643
  16,403
Revenue / Adjusted assets
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
  2.320
Average production assets, $m
  1,976
  2,022
  2,074
  2,132
  2,196
  2,267
  2,345
  2,428
  2,518
  2,615
  2,718
  2,829
  2,946
  3,071
  3,203
  3,344
  3,492
  3,650
  3,816
  3,991
  4,176
  4,371
  4,577
  4,793
  5,021
  5,262
  5,515
  5,781
  6,061
  6,355
Working capital, $m
  1,810
  1,852
  1,900
  1,953
  2,012
  2,077
  2,148
  2,225
  2,307
  2,396
  2,490
  2,591
  2,699
  2,813
  2,935
  3,063
  3,200
  3,344
  3,496
  3,656
  3,826
  4,005
  4,193
  4,391
  4,600
  4,821
  5,052
  5,296
  5,553
  5,822
Total debt, $m
  3,129
  3,221
  3,326
  3,443
  3,573
  3,716
  3,872
  4,040
  4,222
  4,417
  4,625
  4,848
  5,084
  5,336
  5,603
  5,886
  6,186
  6,502
  6,837
  7,190
  7,563
  7,957
  8,371
  8,808
  9,268
  9,752
  10,262
  10,798
  11,363
  11,956
Total liabilities, $m
  3,983
  4,075
  4,180
  4,297
  4,428
  4,571
  4,726
  4,895
  5,076
  5,271
  5,480
  5,702
  5,939
  6,190
  6,457
  6,740
  7,040
  7,357
  7,691
  8,045
  8,418
  8,811
  9,225
  9,662
  10,122
  10,606
  11,116
  11,653
  12,217
  12,811
Total equity, $m
  1,117
  1,143
  1,172
  1,205
  1,242
  1,282
  1,325
  1,373
  1,423
  1,478
  1,537
  1,599
  1,665
  1,736
  1,811
  1,890
  1,974
  2,063
  2,157
  2,256
  2,360
  2,471
  2,587
  2,709
  2,838
  2,974
  3,117
  3,268
  3,426
  3,592
Total liabilities and equity, $m
  5,100
  5,218
  5,352
  5,502
  5,670
  5,853
  6,051
  6,268
  6,499
  6,749
  7,017
  7,301
  7,604
  7,926
  8,268
  8,630
  9,014
  9,420
  9,848
  10,301
  10,778
  11,282
  11,812
  12,371
  12,960
  13,580
  14,233
  14,921
  15,643
  16,403
Debt-to-equity ratio
  2.800
  2.820
  2.840
  2.860
  2.880
  2.900
  2.920
  2.940
  2.970
  2.990
  3.010
  3.030
  3.050
  3.070
  3.090
  3.110
  3.130
  3.150
  3.170
  3.190
  3.200
  3.220
  3.240
  3.250
  3.270
  3.280
  3.290
  3.300
  3.320
  3.330
Adjusted equity ratio
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219
  0.219

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  149
  154
  160
  167
  174
  182
  190
  199
  209
  219
  320
  331
  344
  357
  371
  386
  402
  419
  437
  455
  475
  496
  518
  541
  565
  590
  617
  645
  675
  706
Depreciation, amort., depletion, $m
  188
  190
  192
  193
  196
  198
  201
  203
  206
  210
  91
  94
  98
  102
  107
  111
  116
  122
  127
  133
  139
  146
  153
  160
  167
  175
  184
  193
  202
  212
Funds from operations, $m
  338
  344
  352
  360
  369
  380
  391
  402
  415
  429
  410
  426
  442
  460
  478
  498
  519
  541
  564
  588
  614
  641
  670
  700
  732
  766
  801
  838
  877
  918
Change in working capital, $m
  35
  42
  48
  53
  59
  65
  71
  77
  83
  89
  95
  101
  108
  114
  121
  129
  136
  144
  152
  161
  169
  179
  188
  198
  209
  220
  232
  244
  256
  270
Cash from operations, $m
  302
  303
  304
  307
  310
  315
  320
  326
  333
  340
  315
  325
  335
  345
  357
  369
  383
  397
  412
  428
  445
  463
  482
  502
  523
  546
  569
  594
  621
  648
Maintenance CAPEX, $m
  -65
  -66
  -67
  -69
  -71
  -73
  -76
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -107
  -111
  -116
  -122
  -127
  -133
  -139
  -146
  -153
  -160
  -167
  -175
  -184
  -193
  -202
New CAPEX, $m
  -37
  -45
  -52
  -58
  -65
  -71
  -77
  -84
  -90
  -97
  -103
  -110
  -117
  -125
  -132
  -140
  -149
  -157
  -166
  -175
  -185
  -195
  -206
  -217
  -228
  -240
  -253
  -266
  -280
  -294
Cash from investing activities, $m
  -102
  -111
  -119
  -127
  -136
  -144
  -153
  -162
  -171
  -181
  -190
  -201
  -211
  -223
  -234
  -247
  -260
  -273
  -288
  -302
  -318
  -334
  -352
  -370
  -388
  -407
  -428
  -450
  -473
  -496
Free cash flow, $m
  200
  191
  185
  179
  175
  170
  167
  164
  162
  160
  125
  124
  123
  122
  122
  122
  122
  123
  124
  125
  127
  128
  130
  133
  135
  138
  141
  144
  148
  152
Issuance/(repayment) of debt, $m
  78
  92
  105
  118
  130
  143
  156
  168
  182
  195
  208
  222
  237
  252
  267
  283
  300
  317
  335
  353
  373
  393
  415
  437
  460
  484
  510
  536
  564
  594
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  
  78
  92
  105
  118
  130
  143
  156
  168
  182
  195
  208
  222
  237
  252
  267
  283
  300
  317
  335
  353
  373
  393
  415
  437
  460
  484
  510
  536
  564
  594
Total cash flow (excl. dividends), $m
  278
  283
  290
  297
  305
  313
  323
  333
  343
  354
  333
  346
  360
  374
  389
  405
  422
  440
  459
  479
  500
  522
  545
  569
  595
  622
  651
  681
  712
  746
Retained Cash Flow (-), $m
  -21
  -26
  -29
  -33
  -37
  -40
  -44
  -47
  -51
  -55
  -58
  -62
  -66
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -105
  -110
  -116
  -122
  -129
  -136
  -143
  -150
  -158
  -166
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
  257
  257
  260
  264
  268
  273
  279
  285
  292
  300
  275
  284
  293
  303
  314
  326
  338
  351
  365
  380
  395
  411
  429
  447
  466
  486
  508
  530
  554
  579
Discount rate, %
  11.10
  11.66
  12.24
  12.85
  13.49
  14.17
  14.88
  15.62
  16.40
  17.22
  18.08
  18.98
  19.93
  20.93
  21.98
  23.08
  24.23
  25.44
  26.71
  28.05
  29.45
  30.92
  32.47
  34.09
  35.80
  37.59
  39.47
  41.44
  43.51
  45.69
PV of cash for distribution, $m
  231
  206
  184
  163
  143
  123
  106
  89
  75
  61
  44
  35
  28
  21
  16
  12
  8
  6
  4
  3
  2
  1
  1
  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
  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

Group 1 Automotive, Inc. is an operator in the automotive retail industry. The Company, through its dealerships, sells new and used cars and light trucks; arranges related vehicle financing; sells service and insurance contracts; provides automotive maintenance and repair services, and sells vehicle parts. The Company operates through three segments: the U.S., which includes the activities of its corporate office, the United Kingdom and Brazil. The Company owned and operated 224 franchises, representing 32 brands of automobiles, at 171 dealership locations and 47 collision centers.

FINANCIAL RATIOS  of  Group 1 Automotive, Inc. (GPI)

Valuation Ratios
P/E Ratio 11.3
Price to Sales 0.2
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 4.3
Price to Free Cash Flow 7.3
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.8%
Cap. Spend. - 3 Yr. Gr. Rate 8.8%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 136.6%
Total Debt to Equity 299.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 3.9%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 15.9%
Return On Equity - 3 Yr. Avg. 11.7%
Asset Turnover 2.5
Profitability Ratios
Gross Margin 14.6%
Gross Margin - 3 Yr. Avg. 14.5%
EBITDA Margin 3.6%
EBITDA Margin - 3 Yr. Avg. 3.2%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 35.2%
Eff/ Tax Rate - 3 Yr. Avg. 42.3%
Payout Ratio 13.6%

GPI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GPI stock intrinsic value calculation we used $11601 million for the last fiscal year's total revenue generated by Group 1 Automotive, Inc.. The default revenue input number comes from 0001 income statement of Group 1 Automotive, 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 GPI 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 11.1%, whose default value for GPI is calculated based on our internal credit rating of Group 1 Automotive, 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 Group 1 Automotive, 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 GPI stock the variable cost ratio is equal to 96.9%.

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 GPI 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 Group 1 Automotive, Inc..

Corporate tax rate of 27% is the nominal tax rate for Group 1 Automotive, 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 GPI 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 GPI are equal to 16.7%.

Life of production assets of 37.9 years is the average useful life of capital assets used in Group 1 Automotive, 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 GPI is equal to 15.3%. 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 - $1095.694 million for Group 1 Automotive, 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 18.401 million for Group 1 Automotive, 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 Group 1 Automotive, Inc. at the current share price and the inputted number of shares is $1.4 billion.

RELATED COMPANIES Price Int.Val. Rating
LAD Lithia Motors, 129.63 120.88  buy
AN AutoNation, In 47.58 90.17  str.buy
ABG Asbury Automot 90.07 78.43  hold
RUSHA Rush Enterpris 37.28 18.37  str.sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.