Intrinsic value of Ituran Location and Control Ltd. - ITRN

Previous Close

$31.50

  Intrinsic Value

$55.61

stock screener

  Rating & Target

str. buy

+77%

Previous close

$31.50

 
Intrinsic value

$55.61

 
Up/down potential

+77%

 
Rating

str. 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
  322
  370
  423
  479
  539
  602
  668
  738
  811
  887
  966
  1,049
  1,135
  1,224
  1,317
  1,414
  1,514
  1,619
  1,727
  1,840
  1,957
  2,079
  2,206
  2,339
  2,477
  2,621
  2,771
  2,928
  3,092
Variable operating expenses, $m
  206
  239
  275
  314
  355
  398
  445
  493
  544
  598
  649
  708
  768
  831
  897
  965
  1,035
  1,109
  1,185
  1,265
  1,347
  1,433
  1,523
  1,616
  1,713
  1,814
  1,920
  2,030
  2,145
  2,265
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
  209
  242
  278
  317
  358
  401
  448
  497
  548
  602
  653
  712
  772
  835
  901
  969
  1,039
  1,113
  1,190
  1,270
  1,352
  1,438
  1,528
  1,621
  1,718
  1,819
  1,925
  2,036
  2,151
  2,271
Operating income, $m
  67
  79
  92
  106
  121
  137
  154
  171
  190
  209
  233
  255
  277
  300
  323
  348
  374
  401
  429
  458
  488
  519
  551
  585
  621
  658
  696
  736
  778
  822
EBITDA, $m
  80
  94
  108
  124
  141
  159
  178
  197
  218
  240
  263
  287
  312
  337
  364
  392
  421
  451
  483
  515
  549
  584
  621
  659
  699
  740
  784
  829
  876
  925
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
  67
  78
  90
  103
  117
  132
  147
  164
  181
  199
  222
  241
  262
  283
  305
  328
  352
  377
  402
  429
  457
  486
  516
  548
  580
  614
  650
  687
  726
  766
Tax expense, $m
  18
  21
  24
  28
  32
  36
  40
  44
  49
  54
  60
  65
  71
  76
  82
  89
  95
  102
  109
  116
  123
  131
  139
  148
  157
  166
  175
  186
  196
  207
Net income, $m
  49
  57
  66
  75
  85
  96
  108
  120
  132
  145
  162
  176
  191
  207
  223
  239
  257
  275
  294
  313
  334
  355
  377
  400
  424
  449
  474
  502
  530
  559

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
  439
  493
  551
  612
  675
  742
  812
  885
  960
  1,039
  1,121
  1,206
  1,295
  1,387
  1,482
  1,582
  1,685
  1,792
  1,904
  2,021
  2,142
  2,268
  2,400
  2,538
  2,682
  2,832
Adjusted assets (=assets-cash), $m
  253
  294
  339
  387
  439
  493
  551
  612
  675
  742
  812
  885
  960
  1,039
  1,121
  1,206
  1,295
  1,387
  1,482
  1,582
  1,685
  1,792
  1,904
  2,021
  2,142
  2,268
  2,400
  2,538
  2,682
  2,832
Revenue / Adjusted assets
  1.091
  1.095
  1.091
  1.093
  1.091
  1.093
  1.093
  1.092
  1.093
  1.093
  1.092
  1.092
  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
Average production assets, $m
  46
  54
  62
  71
  80
  90
  100
  112
  123
  135
  148
  161
  175
  190
  204
  220
  236
  253
  270
  288
  307
  327
  347
  368
  391
  414
  438
  463
  489
  516
Working capital, $m
  36
  42
  49
  56
  63
  71
  79
  88
  97
  107
  117
  128
  138
  150
  162
  174
  187
  200
  214
  228
  243
  258
  274
  291
  309
  327
  346
  366
  387
  408
Total debt, $m
  16
  33
  51
  71
  93
  115
  139
  165
  191
  219
  248
  278
  309
  342
  376
  411
  448
  486
  526
  567
  610
  654
  701
  749
  800
  852
  907
  964
  1,024
  1,086
Total liabilities, $m
  105
  122
  141
  161
  182
  205
  229
  254
  280
  308
  337
  367
  399
  431
  465
  501
  537
  575
  615
  656
  699
  744
  790
  839
  889
  941
  996
  1,053
  1,113
  1,175
Total equity, $m
  148
  172
  198
  227
  257
  289
  322
  358
  395
  434
  475
  518
  562
  608
  656
  706
  757
  811
  867
  925
  986
  1,048
  1,114
  1,182
  1,253
  1,327
  1,404
  1,485
  1,569
  1,656
Total liabilities and equity, $m
  253
  294
  339
  388
  439
  494
  551
  612
  675
  742
  812
  885
  961
  1,039
  1,121
  1,207
  1,294
  1,386
  1,482
  1,581
  1,685
  1,792
  1,904
  2,021
  2,142
  2,268
  2,400
  2,538
  2,682
  2,831
Debt-to-equity ratio
  0.110
  0.190
  0.260
  0.320
  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
  49
  57
  66
  75
  85
  96
  108
  120
  132
  145
  162
  176
  191
  207
  223
  239
  257
  275
  294
  313
  334
  355
  377
  400
  424
  449
  474
  502
  530
  559
Depreciation, amort., depletion, $m
  13
  15
  16
  18
  20
  22
  24
  26
  29
  31
  30
  32
  35
  38
  41
  44
  47
  51
  54
  58
  61
  65
  69
  74
  78
  83
  88
  93
  98
  103
Funds from operations, $m
  62
  72
  82
  93
  105
  118
  132
  146
  161
  176
  191
  208
  226
  244
  264
  283
  304
  325
  348
  371
  395
  420
  446
  473
  502
  531
  562
  594
  628
  663
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
  57
  66
  76
  86
  98
  110
  123
  137
  151
  167
  181
  198
  215
  233
  252
  271
  291
  312
  334
  357
  380
  405
  430
  457
  484
  513
  543
  574
  607
  641
Maintenance CAPEX, $m
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -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
  -68
  -72
  -77
  -81
  -85
  -90
  -96
  -101
  -107
  -113
  -119
  -125
Free cash flow, $m
  42
  49
  57
  65
  74
  84
  95
  106
  118
  130
  142
  155
  169
  184
  199
  215
  231
  248
  266
  284
  304
  324
  344
  366
  388
  412
  436
  462
  488
  516
Issuance/(repayment) of debt, $m
  16
  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  
  16
  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
  57
  66
  75
  85
  96
  107
  119
  131
  144
  157
  171
  185
  200
  216
  233
  250
  268
  286
  306
  326
  346
  368
  391
  414
  439
  464
  491
  519
  548
  578
Retained Cash Flow (-), $m
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -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
  35
  42
  49
  57
  66
  75
  85
  95
  107
  118
  130
  143
  156
  170
  185
  200
  216
  233
  250
  268
  286
  305
  325
  346
  368
  390
  414
  438
  464
  490
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
  34
  38
  43
  47
  51
  54
  57
  60
  61
  62
  62
  61
  59
  57
  54
  51
  47
  43
  38
  34
  30
  25
  21
  18
  14
  11
  9
  7
  5
  4
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

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 and Control Ltd. (ITRN)

Valuation Ratios
P/E Ratio 23.1
Price to Sales 3.7
Price to Book 7.3
Price to Tangible Book
Price to Cash Flow 18
Price to Free Cash Flow 27.4
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 $235 million for the last fiscal year's total revenue generated by Ituran Location and Control Ltd.. The default revenue input number comes from 0001 income statement of Ituran Location and Control Ltd.. 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 and Control Ltd., 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 and Control Ltd..
    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 and Control Ltd..

Corporate tax rate of 27% is the nominal tax rate for Ituran Location and Control Ltd.. 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 and Control Ltd. 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 and Control Ltd. - 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 20.969 million for Ituran Location and Control Ltd. 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 and Control Ltd. at the current share price and the inputted number of shares is $0.7 billion.

RELATED COMPANIES Price Int.Val. Rating
PNTR Pointer Teloca 14.86 47.40  str.buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

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