Intrinsic value of Motorcar Parts of America - MPAA

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$21.78

  Intrinsic Value

$32.10

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  Rating & Target

buy

+47%

Previous close

$21.78

 
Intrinsic value

$32.10

 
Up/down potential

+47%

 
Rating

buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Motorcar Parts of America (MPAA) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.09
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  421
  433
  446
  460
  476
  493
  511
  531
  552
  574
  598
  623
  650
  678
  708
  740
  774
  809
  847
  886
  928
  972
  1,018
  1,067
  1,118
  1,172
  1,229
  1,289
  1,352
  1,418
  1,487
Variable operating expenses, $m
 
  183
  189
  195
  201
  208
  216
  224
  233
  243
  253
  263
  274
  286
  299
  313
  327
  342
  358
  374
  392
  411
  430
  451
  472
  495
  519
  544
  571
  599
  628
Fixed operating expenses, $m
 
  183
  188
  193
  198
  203
  208
  213
  218
  224
  229
  235
  241
  247
  253
  259
  266
  272
  279
  286
  293
  301
  308
  316
  324
  332
  340
  349
  357
  366
  375
Total operating expenses, $m
  353
  366
  377
  388
  399
  411
  424
  437
  451
  467
  482
  498
  515
  533
  552
  572
  593
  614
  637
  660
  685
  712
  738
  767
  796
  827
  859
  893
  928
  965
  1,003
Operating income, $m
  68
  66
  69
  73
  77
  82
  87
  93
  100
  108
  116
  125
  135
  145
  156
  168
  181
  195
  210
  226
  243
  261
  280
  301
  322
  345
  370
  396
  423
  453
  484
EBITDA, $m
  72
  70
  73
  77
  81
  86
  92
  98
  105
  113
  121
  130
  140
  151
  162
  175
  188
  202
  217
  234
  251
  269
  289
  310
  332
  355
  380
  407
  435
  465
  496
Interest expense (income), $m
  12
  8
  10
  12
  14
  17
  20
  23
  26
  29
  33
  37
  41
  45
  50
  55
  60
  66
  72
  78
  84
  91
  98
  106
  114
  122
  131
  140
  150
  161
  171
Earnings before tax, $m
  55
  58
  59
  61
  63
  65
  68
  71
  74
  78
  83
  88
  94
  100
  106
  113
  121
  130
  139
  148
  159
  170
  182
  195
  208
  223
  239
  255
  273
  292
  312
Tax expense, $m
  17
  16
  16
  16
  17
  18
  18
  19
  20
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  40
  43
  46
  49
  53
  56
  60
  64
  69
  74
  79
  84
Net income, $m
  38
  43
  43
  44
  46
  47
  49
  52
  54
  57
  61
  64
  68
  73
  78
  83
  88
  95
  101
  108
  116
  124
  133
  142
  152
  163
  174
  186
  199
  213
  228

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11
  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
  436
  437
  450
  464
  480
  497
  516
  535
  557
  579
  603
  629
  656
  684
  715
  747
  781
  817
  855
  895
  937
  981
  1,028
  1,077
  1,129
  1,183
  1,240
  1,301
  1,364
  1,430
  1,501
Adjusted assets (=assets-cash), $m
  425
  437
  450
  464
  480
  497
  516
  535
  557
  579
  603
  629
  656
  684
  715
  747
  781
  817
  855
  895
  937
  981
  1,028
  1,077
  1,129
  1,183
  1,240
  1,301
  1,364
  1,430
  1,501
Revenue / Adjusted assets
  0.991
  0.991
  0.991
  0.991
  0.992
  0.992
  0.990
  0.993
  0.991
  0.991
  0.992
  0.990
  0.991
  0.991
  0.990
  0.991
  0.991
  0.990
  0.991
  0.990
  0.990
  0.991
  0.990
  0.991
  0.990
  0.991
  0.991
  0.991
  0.991
  0.992
  0.991
Average production assets, $m
  22
  22
  23
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
  66
  69
  72
  76
Working capital, $m
  -21
  -19
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
Total debt, $m
  31
  25
  30
  36
  43
  50
  57
  66
  74
  84
  94
  104
  115
  127
  140
  153
  167
  182
  198
  214
  232
  250
  269
  290
  311
  334
  357
  382
  409
  436
  465
Total liabilities, $m
  187
  181
  186
  192
  199
  206
  213
  222
  230
  240
  250
  260
  271
  283
  296
  309
  323
  338
  354
  370
  388
  406
  425
  446
  467
  490
  513
  538
  565
  592
  621
Total equity, $m
  249
  256
  264
  272
  281
  291
  302
  314
  326
  339
  353
  368
  384
  401
  419
  438
  458
  479
  501
  524
  549
  575
  602
  631
  661
  693
  727
  762
  799
  838
  879
Total liabilities and equity, $m
  436
  437
  450
  464
  480
  497
  515
  536
  556
  579
  603
  628
  655
  684
  715
  747
  781
  817
  855
  894
  937
  981
  1,027
  1,077
  1,128
  1,183
  1,240
  1,300
  1,364
  1,430
  1,500
Debt-to-equity ratio
  0.124
  0.100
  0.110
  0.130
  0.150
  0.170
  0.190
  0.210
  0.230
  0.250
  0.270
  0.280
  0.300
  0.320
  0.330
  0.350
  0.370
  0.380
  0.390
  0.410
  0.420
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
Adjusted equity ratio
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  38
  43
  43
  44
  46
  47
  49
  52
  54
  57
  61
  64
  68
  73
  78
  83
  88
  95
  101
  108
  116
  124
  133
  142
  152
  163
  174
  186
  199
  213
  228
Depreciation, amort., depletion, $m
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  13
Funds from operations, $m
  -64
  47
  48
  49
  50
  52
  54
  57
  59
  62
  66
  70
  74
  79
  84
  89
  95
  101
  108
  116
  124
  132
  141
  151
  162
  173
  185
  197
  211
  225
  241
Change in working capital, $m
  -59
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
Cash from operations, $m
  -5
  47
  48
  49
  51
  53
  55
  57
  60
  63
  67
  71
  75
  80
  85
  90
  96
  103
  110
  117
  126
  134
  143
  153
  164
  175
  187
  200
  214
  228
  244
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
New CAPEX, $m
  -5
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
Cash from investing activities, $m
  -6
  -5
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -13
  -13
  -13
  -14
  -14
  -16
Free cash flow, $m
  -11
  43
  44
  45
  46
  48
  50
  52
  55
  58
  61
  64
  68
  73
  78
  83
  88
  95
  101
  108
  116
  124
  133
  142
  152
  163
  174
  186
  199
  213
  228
Issuance/(repayment) of debt, $m
  0
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
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
  0
Cash from financing (excl. dividends), $m  
  -2
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
Total cash flow (excl. dividends), $m
  -13
  48
  49
  51
  53
  55
  57
  60
  63
  67
  71
  75
  80
  85
  90
  96
  103
  109
  117
  125
  133
  142
  152
  163
  174
  185
  198
  211
  226
  241
  257
Retained Cash Flow (-), $m
  -38
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
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
 
  41
  41
  42
  43
  45
  47
  49
  51
  54
  57
  60
  64
  68
  72
  77
  83
  88
  95
  101
  109
  116
  125
  134
  143
  154
  164
  176
  189
  202
  216
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
 
  39
  38
  37
  36
  35
  34
  33
  32
  31
  30
  29
  27
  26
  24
  23
  21
  19
  17
  16
  14
  12
  10
  9
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100
  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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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 10.7
Price to Sales 1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow -81.2
Price to Free Cash Flow -40.6
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 $421 million for the last fiscal year's total revenue generated by Motorcar Parts of America. The default revenue input number comes from 2017 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 2.8% 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 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 42.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $179 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 39.3% 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 5.1%.

Life of production assets of 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 -4.3%. 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 - $249 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 19.39 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 $0.4 billion.

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COMPANY NEWS

▶ 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]
▶ Motorcar Parts beats Street 3Q forecasts   [Feb-09-17 08:35AM  Associated Press]
Financial statements of MPAA
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