Intrinsic value of Ituran Location&Control - ITRN

Previous Close

$34.27

  Intrinsic Value

$51.03

stock screener

  Rating & Target

buy

+49%

Previous close

$34.27

 
Intrinsic value

$51.03

 
Up/down potential

+49%

 
Rating

buy

We calculate the intrinsic value of ITRN 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 0.7

 

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, %
  17.60
  16.34
  15.21
  14.19
  13.27
  12.44
  11.70
  11.03
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.90
  5.81
  5.73
  5.66
  5.59
Revenue, $m
  276
  321
  370
  422
  478
  538
  601
  667
  736
  809
  885
  965
  1,047
  1,133
  1,222
  1,315
  1,412
  1,512
  1,616
  1,724
  1,837
  1,954
  2,076
  2,203
  2,335
  2,473
  2,617
  2,767
  2,924
  3,087
Variable operating expenses, $m
  207
  240
  277
  316
  358
  402
  449
  499
  551
  605
  662
  721
  783
  847
  914
  983
  1,055
  1,130
  1,208
  1,289
  1,373
  1,460
  1,552
  1,647
  1,745
  1,848
  1,956
  2,068
  2,185
  2,307
Fixed operating expenses, $m
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
Total operating expenses, $m
  210
  243
  280
  319
  361
  405
  452
  503
  555
  609
  666
  725
  787
  851
  918
  987
  1,059
  1,134
  1,213
  1,294
  1,378
  1,465
  1,557
  1,652
  1,750
  1,853
  1,961
  2,074
  2,191
  2,313
Operating income, $m
  66
  78
  90
  103
  117
  132
  148
  165
  182
  200
  220
  240
  261
  282
  305
  328
  352
  377
  404
  431
  459
  489
  520
  551
  585
  620
  656
  694
  733
  774
EBITDA, $m
  76
  89
  103
  118
  133
  150
  168
  187
  207
  228
  249
  272
  296
  320
  345
  372
  399
  428
  458
  489
  521
  554
  589
  625
  663
  702
  743
  786
  831
  877
Interest expense (income), $m
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
  26
  28
  31
  33
  35
  38
  40
  43
  46
  49
  52
  55
Earnings before tax, $m
  66
  77
  88
  100
  113
  127
  142
  157
  173
  190
  208
  226
  246
  265
  286
  308
  330
  353
  378
  403
  429
  456
  484
  514
  544
  576
  610
  645
  681
  719
Tax expense, $m
  18
  21
  24
  27
  31
  34
  38
  42
  47
  51
  56
  61
  66
  72
  77
  83
  89
  95
  102
  109
  116
  123
  131
  139
  147
  156
  165
  174
  184
  194
Net income, $m
  48
  56
  64
  73
  83
  93
  103
  115
  126
  139
  152
  165
  179
  194
  209
  225
  241
  258
  276
  294
  313
  333
  353
  375
  397
  421
  445
  471
  497
  525

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
  253
  294
  339
  387
  438
  493
  550
  611
  674
  741
  811
  883
  959
  1,038
  1,119
  1,204
  1,293
  1,384
  1,480
  1,579
  1,682
  1,790
  1,901
  2,017
  2,139
  2,265
  2,397
  2,534
  2,677
  2,827
Adjusted assets (=assets-cash), $m
  253
  294
  339
  387
  438
  493
  550
  611
  674
  741
  811
  883
  959
  1,038
  1,119
  1,204
  1,293
  1,384
  1,480
  1,579
  1,682
  1,790
  1,901
  2,017
  2,139
  2,265
  2,397
  2,534
  2,677
  2,827
Revenue / Adjusted assets
  1.091
  1.092
  1.091
  1.090
  1.091
  1.091
  1.093
  1.092
  1.092
  1.092
  1.091
  1.093
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
  1.092
Average production assets, $m
  46
  54
  62
  71
  80
  90
  100
  111
  123
  135
  148
  161
  175
  189
  204
  220
  236
  252
  270
  288
  307
  326
  347
  368
  390
  413
  437
  462
  488
  516
Working capital, $m
  36
  42
  49
  56
  63
  71
  79
  88
  97
  107
  117
  127
  138
  150
  161
  174
  186
  200
  213
  228
  242
  258
  274
  291
  308
  326
  345
  365
  386
  408
Total debt, $m
  16
  33
  51
  71
  92
  115
  139
  164
  191
  218
  247
  277
  309
  341
  375
  410
  447
  485
  525
  566
  609
  653
  700
  748
  798
  851
  905
  962
  1,022
  1,084
Total liabilities, $m
  105
  122
  141
  160
  182
  204
  228
  253
  280
  308
  336
  367
  398
  431
  465
  500
  536
  575
  614
  655
  698
  743
  789
  837
  888
  940
  995
  1,052
  1,111
  1,173
Total equity, $m
  148
  172
  198
  226
  256
  288
  322
  357
  395
  434
  474
  517
  561
  607
  655
  705
  756
  810
  866
  924
  984
  1,047
  1,112
  1,180
  1,251
  1,325
  1,402
  1,482
  1,566
  1,654
Total liabilities and equity, $m
  253
  294
  339
  386
  438
  492
  550
  610
  675
  742
  810
  884
  959
  1,038
  1,120
  1,205
  1,292
  1,385
  1,480
  1,579
  1,682
  1,790
  1,901
  2,017
  2,139
  2,265
  2,397
  2,534
  2,677
  2,827
Debt-to-equity ratio
  0.110
  0.190
  0.260
  0.310
  0.360
  0.400
  0.430
  0.460
  0.480
  0.500
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.620
  0.630
  0.630
  0.640
  0.640
  0.650
  0.650
  0.650
  0.660
Adjusted equity ratio
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  48
  56
  64
  73
  83
  93
  103
  115
  126
  139
  152
  165
  179
  194
  209
  225
  241
  258
  276
  294
  313
  333
  353
  375
  397
  421
  445
  471
  497
  525
Depreciation, amort., depletion, $m
  10
  11
  13
  14
  16
  18
  20
  23
  25
  27
  30
  32
  35
  38
  41
  44
  47
  50
  54
  58
  61
  65
  69
  74
  78
  83
  87
  92
  98
  103
Funds from operations, $m
  58
  67
  77
  88
  99
  111
  124
  137
  151
  166
  181
  198
  214
  232
  250
  269
  288
  308
  330
  352
  374
  398
  423
  449
  475
  503
  533
  563
  595
  628
Change in working capital, $m
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
Cash from operations, $m
  53
  61
  71
  81
  92
  103
  116
  129
  142
  157
  171
  187
  203
  220
  238
  256
  275
  295
  316
  337
  359
  383
  407
  432
  458
  485
  514
  543
  574
  606
Maintenance CAPEX, $m
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -50
  -54
  -58
  -61
  -65
  -69
  -74
  -78
  -83
  -87
  -92
  -98
New CAPEX, $m
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
Cash from investing activities, $m
  -15
  -17
  -19
  -21
  -23
  -26
  -29
  -31
  -34
  -37
  -40
  -43
  -46
  -49
  -53
  -57
  -60
  -64
  -67
  -72
  -77
  -81
  -85
  -90
  -96
  -101
  -107
  -112
  -118
  -125
Free cash flow, $m
  38
  44
  52
  60
  68
  77
  87
  97
  108
  120
  132
  144
  157
  171
  185
  200
  215
  231
  248
  265
  283
  302
  321
  341
  362
  384
  407
  431
  456
  481
Issuance/(repayment) of debt, $m
  15
  17
  19
  20
  21
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  60
  62
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  
  15
  17
  19
  20
  21
  23
  24
  25
  26
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  55
  57
  60
  62
Total cash flow (excl. dividends), $m
  53
  62
  70
  80
  89
  100
  111
  123
  135
  147
  161
  174
  189
  204
  219
  235
  252
  269
  288
  306
  326
  346
  367
  390
  413
  437
  462
  488
  515
  544
Retained Cash Flow (-), $m
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -88
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
  31
  37
  44
  51
  59
  68
  77
  87
  98
  108
  120
  132
  144
  158
  171
  186
  200
  216
  232
  248
  266
  283
  302
  322
  342
  363
  385
  407
  431
  456
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
  30
  34
  38
  42
  46
  49
  52
  54
  56
  57
  57
  56
  55
  53
  50
  47
  44
  40
  36
  32
  27
  24
  20
  16
  13
  11
  8
  6
  5
  3
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
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Ituran Location and Control Ltd. is a provider of location-based services, consisting of stolen vehicle recovery (SVR), fleet management services and other tracking services. The Company also provides wireless communication products used in connection with its location-based services and various other applications. Its operations consist of two segments: location-based services and wireless communications products. Its location-based services segment consists of its SVR and tracking services, fleet management and value-added services consisted of personal locater services and concierge services. Its wireless communications products segment consists of short and medium range two-way machine-to-machine wireless communications products that are used for various applications, including automatic vehicle location (AVL) and automatic vehicle identification. It primarily provides its services, as well as sells and leases its products in Israel, Brazil, Argentina and the United States.

FINANCIAL RATIOS  of  Ituran Location&Control (ITRN)

Valuation Ratios
P/E Ratio 25.1
Price to Sales 4
Price to Book 7.9
Price to Tangible Book
Price to Cash Flow 19.6
Price to Free Cash Flow 29.8
Growth Rates
Sales Growth Rate 13.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.3%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 20%
Ret/ On Assets - 3 Yr. Avg. 18.7%
Return On Total Capital 34.4%
Ret/ On T. Cap. - 3 Yr. Avg. 32%
Return On Equity 34.4%
Return On Equity - 3 Yr. Avg. 32%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 51%
Gross Margin - 3 Yr. Avg. 51.8%
EBITDA Margin 31%
EBITDA Margin - 3 Yr. Avg. 31.5%
Operating Margin 24.5%
Oper. Margin - 3 Yr. Avg. 24.4%
Pre-Tax Margin 25%
Pre-Tax Margin - 3 Yr. Avg. 25.1%
Net Profit Margin 16%
Net Profit Margin - 3 Yr. Avg. 15.6%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 30.7%
Payout Ratio 53.1%

ITRN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ITRN stock intrinsic value calculation we used $234.636 million for the last fiscal year's total revenue generated by Ituran Location&Control. The default revenue input number comes from 0001 income statement of Ituran Location&Control. 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 ITRN stock valuation model: a) initial revenue growth rate of 17.6% 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 ITRN is calculated based on our internal credit rating of Ituran Location&Control, 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 Ituran Location&Control.
    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 ITRN stock the variable cost ratio is equal to 74.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3 million in the base year in the intrinsic value calculation for ITRN 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 Ituran Location&Control.

Corporate tax rate of 27% is the nominal tax rate for Ituran Location&Control. 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 ITRN 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 ITRN are equal to 16.7%.

Life of production assets of 3 years is the average useful life of capital assets used in Ituran Location&Control 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 ITRN is equal to 13.2%. 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 - $125.79 million for Ituran Location&Control - 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 20.968 million for Ituran Location&Control 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 Ituran Location&Control at the current share price and the inputted number of shares is $0.7 billion.

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COMPANY NEWS

▶ Ituran Closes Acquisition of Road Track Holdings   [Sep-14-18 08:08AM  PR Newswire]
▶ Ituran: 2Q Earnings Snapshot   [07:03AM  Associated Press]
▶ Ituran: 1Q Earnings Snapshot   [06:45AM  Associated Press]
▶ Five Low-Debt Stock Buys   [May-07-18 10:06AM  Forbes]
▶ Ituran posts 4Q profit   [Feb-27-18 09:41AM  Associated Press]
▶ Top NYSE Stocks   [Feb-08-18 06:02AM  Simply Wall St.]
▶ Why Pfizer And Four More GARP Stocks Look Good   [Nov-30-17 05:49PM  GuruFocus.com]
▶ Ituran posts 3Q profit   [06:09AM  Associated Press]
▶ Composite Rating For Ituran Location & Control Jumps To 96   [Sep-07-17 03:00AM  Investor's Business Daily]
▶ Ituran posts 2Q profit   [Aug-16-17 09:12PM  Associated Press]
▶ Ituran to Expand Into the Indian Market   [Aug-14-17 10:00AM  PR Newswire]
▶ 5 Top Stocks with Stellar Net Profit Margin   [Aug-02-17 10:23AM  Zacks]
▶ Can This Smart Home Technology IPO Secure A New Breakout?   [May-24-17 11:16AM  Investor's Business Daily]
▶ Ituran posts 1Q profit   [06:04AM  Associated Press]

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