Intrinsic value of Motorcar Parts of America - MPAA

Previous Close

$25.44

  Intrinsic Value

$12.74

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  Rating & Target

sell

-50%

Previous close

$25.44

 
Intrinsic value

$12.74

 
Up/down potential

-50%

 
Rating

sell

We calculate the intrinsic value of MPAA 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 0.5

 

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
  437
  447
  458
  471
  485
  501
  518
  537
  556
  578
  601
  625
  651
  679
  708
  739
  772
  806
  843
  882
  923
  966
  1,011
  1,059
  1,110
  1,163
  1,218
  1,277
  1,339
  1,404
Variable operating expenses, $m
  366
  375
  384
  395
  407
  420
  435
  450
  467
  485
  503
  523
  545
  568
  593
  619
  646
  675
  706
  739
  773
  809
  847
  887
  929
  974
  1,021
  1,070
  1,122
  1,176
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
  366
  375
  384
  395
  407
  420
  435
  450
  467
  485
  503
  523
  545
  568
  593
  619
  646
  675
  706
  739
  773
  809
  847
  887
  929
  974
  1,021
  1,070
  1,122
  1,176
Operating income, $m
  70
  72
  74
  76
  78
  81
  84
  87
  90
  93
  98
  102
  106
  110
  115
  120
  125
  131
  137
  143
  150
  157
  164
  172
  180
  189
  198
  208
  218
  228
EBITDA, $m
  75
  77
  79
  81
  83
  86
  89
  92
  96
  99
  103
  107
  112
  117
  122
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  209
  220
  230
  241
Interest expense (income), $m
  12
  22
  23
  25
  27
  30
  32
  35
  38
  42
  46
  50
  54
  58
  63
  68
  74
  80
  86
  92
  99
  107
  114
  122
  131
  140
  149
  159
  170
  181
  192
Earnings before tax, $m
  49
  49
  49
  49
  49
  49
  48
  48
  48
  48
  48
  48
  47
  47
  47
  46
  46
  45
  44
  44
  43
  43
  42
  41
  40
  40
  39
  38
  37
  36
Tax expense, $m
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  13
  12
  12
  12
  12
  12
  12
  12
  11
  11
  11
  11
  10
  10
  10
  10
Net income, $m
  36
  36
  36
  36
  36
  35
  35
  35
  35
  35
  35
  35
  35
  34
  34
  34
  33
  33
  32
  32
  32
  31
  31
  30
  29
  29
  28
  28
  27
  26

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
  552
  565
  579
  596
  614
  633
  655
  678
  703
  730
  759
  790
  823
  858
  895
  934
  976
  1,019
  1,066
  1,115
  1,166
  1,221
  1,278
  1,339
  1,403
  1,470
  1,540
  1,615
  1,693
  1,775
Adjusted assets (=assets-cash), $m
  552
  565
  579
  596
  614
  633
  655
  678
  703
  730
  759
  790
  823
  858
  895
  934
  976
  1,019
  1,066
  1,115
  1,166
  1,221
  1,278
  1,339
  1,403
  1,470
  1,540
  1,615
  1,693
  1,775
Revenue / Adjusted assets
  0.792
  0.791
  0.791
  0.790
  0.790
  0.791
  0.791
  0.792
  0.791
  0.792
  0.792
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.792
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
Average production assets, $m
  27
  28
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
Working capital, $m
  129
  132
  136
  139
  144
  148
  153
  159
  165
  171
  178
  185
  193
  201
  210
  219
  228
  239
  250
  261
  273
  286
  299
  313
  328
  344
  361
  378
  396
  416
Total debt, $m
  76
  82
  89
  97
  106
  116
  127
  138
  150
  164
  178
  193
  209
  226
  244
  263
  284
  305
  328
  352
  377
  404
  432
  462
  493
  526
  560
  597
  635
  676
Total liabilities, $m
  270
  277
  284
  292
  301
  310
  321
  332
  345
  358
  372
  387
  403
  420
  438
  458
  478
  500
  522
  546
  572
  598
  626
  656
  687
  720
  755
  791
  830
  870
Total equity, $m
  282
  288
  295
  304
  313
  323
  334
  346
  359
  373
  387
  403
  420
  437
  456
  476
  498
  520
  544
  569
  595
  623
  652
  683
  715
  750
  786
  824
  863
  905
Total liabilities and equity, $m
  552
  565
  579
  596
  614
  633
  655
  678
  704
  731
  759
  790
  823
  857
  894
  934
  976
  1,020
  1,066
  1,115
  1,167
  1,221
  1,278
  1,339
  1,402
  1,470
  1,541
  1,615
  1,693
  1,775
Debt-to-equity ratio
  0.270
  0.290
  0.300
  0.320
  0.340
  0.360
  0.380
  0.400
  0.420
  0.440
  0.460
  0.480
  0.500
  0.520
  0.530
  0.550
  0.570
  0.590
  0.600
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.710
  0.720
  0.740
  0.750
Adjusted equity ratio
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  36
  36
  36
  36
  36
  35
  35
  35
  35
  35
  35
  35
  35
  34
  34
  34
  33
  33
  32
  32
  32
  31
  31
  30
  29
  29
  28
  28
  27
  26
Depreciation, amort., depletion, $m
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  13
  13
Funds from operations, $m
  40
  40
  41
  41
  41
  41
  41
  41
  41
  41
  41
  41
  41
  41
  41
  41
  41
  40
  40
  40
  40
  40
  40
  40
  40
  40
  40
  40
  39
  39
Change in working capital, $m
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
Cash from operations, $m
  38
  38
  37
  37
  37
  36
  36
  35
  35
  35
  34
  33
  33
  32
  32
  31
  31
  30
  30
  29
  28
  27
  27
  26
  25
  24
  23
  22
  21
  20
Maintenance CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
New CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Cash from investing activities, $m
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -6
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -17
Free cash flow, $m
  33
  33
  32
  32
  31
  31
  30
  29
  29
  28
  27
  26
  26
  25
  24
  23
  22
  21
  20
  19
  17
  16
  15
  13
  12
  10
  9
  7
  5
  3
Issuance/(repayment) of debt, $m
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
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
  1
  3
  5
  8
  10
  13
  16
Cash from financing (excl. dividends), $m  
  5
  6
  7
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  31
  34
  38
  43
  46
  51
  56
Total cash flow (excl. dividends), $m
  39
  39
  39
  40
  40
  40
  41
  41
  41
  41
  41
  41
  42
  42
  42
  42
  42
  42
  42
  43
  43
  43
  43
  44
  46
  49
  51
  54
  57
  60
Retained Cash Flow (-), $m
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
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
  33
  33
  32
  31
  31
  30
  30
  29
  28
  27
  27
  26
  25
  24
  23
  22
  21
  20
  19
  18
  16
  15
  14
  13
  14
  14
  15
  16
  17
  18
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  31
  28
  26
  23
  21
  19
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  0
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.7
  99.2
  98.7
  97.9
  97.0
  96.0

Motorcar Parts of America, Inc. is a manufacturer, remanufacturer and distributor of automotive aftermarket parts, including alternators, starters, wheel hub assembly, brake master cylinders, brake power boosters and turbochargers utilized in imported and domestic passenger vehicles, light trucks and heavy-duty applications. The Company sells its products in North America to auto parts retail and traditional warehouse chains and to automobile manufacturers for both their aftermarket programs and their warranty replacement programs (OES). It recycles materials, including metal from the used cores and corrugated packaging. The Company carries over 13,000 stock keeping units (SKUs) for automotive parts that are sold under its customers' recognized private label brand names and its Quality-Built, Pure Energy, Xtreme, Reliance and other brand names. It sells its products to automotive retail outlets and the professional repair market throughout the United States and Canada.

FINANCIAL RATIOS  of  Motorcar Parts of America (MPAA)

Valuation Ratios
P/E Ratio 12.5
Price to Sales 1.1
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow -94.9
Price to Free Cash Flow -47.4
Growth Rates
Sales Growth Rate 14.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 6.8%
Total Debt to Equity 12.4%
Interest Coverage 6
Management Effectiveness
Return On Assets 10.9%
Ret/ On Assets - 3 Yr. Avg. 6.4%
Return On Total Capital 14.6%
Ret/ On T. Cap. - 3 Yr. Avg. 7.8%
Return On Equity 16.5%
Return On Equity - 3 Yr. Avg. 9.8%
Asset Turnover 1
Profitability Ratios
Gross Margin 27.3%
Gross Margin - 3 Yr. Avg. 27.3%
EBITDA Margin 16.9%
EBITDA Margin - 3 Yr. Avg. 12.6%
Operating Margin 16.2%
Oper. Margin - 3 Yr. Avg. 12.6%
Pre-Tax Margin 13.1%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 5.2%
Effective Tax Rate 30.9%
Eff/ Tax Rate - 3 Yr. Avg. 42.8%
Payout Ratio 0%

MPAA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MPAA stock intrinsic value calculation we used $428.072 million for the last fiscal year's total revenue generated by Motorcar Parts of America. The default revenue input number comes from 0001 income statement of Motorcar Parts of America. 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 MPAA 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 6.6%, whose default value for MPAA is calculated based on our internal credit rating of Motorcar Parts of America, 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 Motorcar Parts of America.
    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 MPAA stock the variable cost ratio is equal to 83.9%.

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 MPAA 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 30.3% for Motorcar Parts of America.

Corporate tax rate of 27% is the nominal tax rate for Motorcar Parts of America. 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 MPAA 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 MPAA are equal to 6.2%.

Life of production assets of 6.6 years is the average useful life of capital assets used in Motorcar Parts of America 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 MPAA is equal to 29.6%. 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 - $275.718 million for Motorcar Parts of America - 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 18.916 million for Motorcar Parts of America 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 Motorcar Parts of America at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Motorcar Parts of America, Inc. to Host Earnings Call   [Aug-09-18 11:00AM  ACCESSWIRE]
▶ Motorcar Parts: Fiscal 1Q Earnings Snapshot   [08:22AM  Associated Press]
▶ Motorcar Parts: Fiscal 4Q Earnings Snapshot   [08:48AM  Associated Press]
▶ Gabelli & Companys Annual Automotive Aftermarket Symposium   [May-23-18 07:30AM  Business Wire]
▶ New Strong Sell Stocks for February 16th   [Feb-16-18 06:35AM  Zacks]
▶ Motorcar Parts reports 3Q loss   [Feb-09-18 08:15AM  Associated Press]
▶ Motorcar Parts of America, Inc. to Host Earnings Call   [Nov-09-17 10:00AM  ACCESSWIRE]
▶ Motorcar Parts misses Street 2Q forecasts   [09:05AM  Associated Press]
▶ Pres Trump set to unveil new tax plan   [Sep-27-17 09:11AM  Yahoo Finance]
▶ Yahoo Finance Live: Market Movers - Sep 27th, 2017   [07:20AM  Yahoo Finance Video]
▶ Motorcar Parts posts 1Q profit   [Aug-09-17 11:00PM  Associated Press]
▶ New Strong Sell Stocks for June 30th   [Jun-30-17 09:26AM  Zacks]
▶ Motorcar Parts posts 4Q profit   [08:32AM  Associated Press]
▶ The One Auto Stock to Buy This Spring   [Mar-21-17 10:16AM  TheStreet.com]

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