Intrinsic value of REV Group - REVG

Previous Close

$11.36

  Intrinsic Value

$6.85

stock screener

  Rating & Target

sell

-40%

Previous close

$11.36

 
Intrinsic value

$6.85

 
Up/down potential

-40%

 
Rating

sell

We calculate the intrinsic value of REVG 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, %
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  2,533
  2,813
  3,106
  3,413
  3,733
  4,068
  4,416
  4,778
  5,155
  5,547
  5,954
  6,376
  6,816
  7,273
  7,748
  8,242
  8,757
  9,292
  9,850
  10,432
  11,039
  11,671
  12,332
  13,022
  13,742
  14,496
  15,283
  16,107
  16,969
  17,871
Variable operating expenses, $m
  2,436
  2,701
  2,980
  3,271
  3,576
  3,893
  4,224
  4,568
  4,926
  5,298
  5,654
  6,056
  6,473
  6,907
  7,358
  7,828
  8,316
  8,825
  9,355
  9,907
  10,484
  11,085
  11,712
  12,367
  13,052
  13,767
  14,515
  15,297
  16,116
  16,972
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
  2,436
  2,701
  2,980
  3,271
  3,576
  3,893
  4,224
  4,568
  4,926
  5,298
  5,654
  6,056
  6,473
  6,907
  7,358
  7,828
  8,316
  8,825
  9,355
  9,907
  10,484
  11,085
  11,712
  12,367
  13,052
  13,767
  14,515
  15,297
  16,116
  16,972
Operating income, $m
  97
  111
  126
  141
  158
  174
  192
  210
  229
  249
  299
  321
  343
  366
  390
  414
  440
  467
  495
  525
  555
  587
  620
  655
  691
  729
  768
  810
  853
  899
EBITDA, $m
  157
  175
  193
  212
  232
  253
  274
  297
  320
  344
  370
  396
  423
  452
  481
  512
  544
  577
  612
  648
  686
  725
  766
  809
  853
  900
  949
  1,000
  1,054
  1,110
Interest expense (income), $m
  27
  20
  26
  33
  41
  49
  57
  66
  75
  84
  93
  103
  114
  125
  136
  148
  160
  172
  186
  199
  213
  228
  244
  260
  277
  295
  313
  332
  352
  374
  396
Earnings before tax, $m
  78
  85
  93
  100
  109
  117
  126
  136
  145
  155
  196
  207
  218
  230
  242
  255
  268
  282
  296
  311
  327
  343
  360
  378
  396
  416
  436
  457
  480
  503
Tax expense, $m
  21
  23
  25
  27
  29
  32
  34
  37
  39
  42
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  93
  97
  102
  107
  112
  118
  123
  130
  136
Net income, $m
  57
  62
  68
  73
  79
  86
  92
  99
  106
  113
  143
  151
  159
  168
  177
  186
  196
  206
  216
  227
  238
  250
  263
  276
  289
  304
  318
  334
  350
  367

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
  1,401
  1,556
  1,718
  1,888
  2,065
  2,250
  2,442
  2,643
  2,851
  3,068
  3,293
  3,527
  3,770
  4,023
  4,285
  4,559
  4,843
  5,140
  5,448
  5,770
  6,105
  6,455
  6,821
  7,202
  7,601
  8,018
  8,453
  8,909
  9,385
  9,884
Adjusted assets (=assets-cash), $m
  1,401
  1,556
  1,718
  1,888
  2,065
  2,250
  2,442
  2,643
  2,851
  3,068
  3,293
  3,527
  3,770
  4,023
  4,285
  4,559
  4,843
  5,140
  5,448
  5,770
  6,105
  6,455
  6,821
  7,202
  7,601
  8,018
  8,453
  8,909
  9,385
  9,884
Revenue / Adjusted assets
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
  1.808
Average production assets, $m
  345
  383
  422
  464
  508
  553
  601
  650
  701
  754
  810
  867
  927
  989
  1,054
  1,121
  1,191
  1,264
  1,340
  1,419
  1,501
  1,587
  1,677
  1,771
  1,869
  1,971
  2,079
  2,191
  2,308
  2,430
Working capital, $m
  334
  371
  410
  450
  493
  537
  583
  631
  680
  732
  786
  842
  900
  960
  1,023
  1,088
  1,156
  1,227
  1,300
  1,377
  1,457
  1,541
  1,628
  1,719
  1,814
  1,913
  2,017
  2,126
  2,240
  2,359
Total debt, $m
  310
  394
  482
  575
  671
  772
  877
  986
  1,099
  1,217
  1,339
  1,466
  1,599
  1,736
  1,879
  2,028
  2,183
  2,344
  2,512
  2,687
  2,869
  3,060
  3,258
  3,466
  3,683
  3,909
  4,146
  4,394
  4,654
  4,925
Total liabilities, $m
  762
  846
  934
  1,027
  1,123
  1,224
  1,329
  1,438
  1,551
  1,669
  1,791
  1,919
  2,051
  2,188
  2,331
  2,480
  2,635
  2,796
  2,964
  3,139
  3,321
  3,512
  3,711
  3,918
  4,135
  4,362
  4,598
  4,846
  5,106
  5,377
Total equity, $m
  639
  709
  783
  861
  942
  1,026
  1,114
  1,205
  1,300
  1,399
  1,502
  1,608
  1,719
  1,834
  1,954
  2,079
  2,209
  2,344
  2,484
  2,631
  2,784
  2,944
  3,110
  3,284
  3,466
  3,656
  3,855
  4,062
  4,280
  4,507
Total liabilities and equity, $m
  1,401
  1,555
  1,717
  1,888
  2,065
  2,250
  2,443
  2,643
  2,851
  3,068
  3,293
  3,527
  3,770
  4,022
  4,285
  4,559
  4,844
  5,140
  5,448
  5,770
  6,105
  6,456
  6,821
  7,202
  7,601
  8,018
  8,453
  8,908
  9,386
  9,884
Debt-to-equity ratio
  0.490
  0.560
  0.620
  0.670
  0.710
  0.750
  0.790
  0.820
  0.850
  0.870
  0.890
  0.910
  0.930
  0.950
  0.960
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.060
  1.070
  1.080
  1.080
  1.090
  1.090
Adjusted equity ratio
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  57
  62
  68
  73
  79
  86
  92
  99
  106
  113
  143
  151
  159
  168
  177
  186
  196
  206
  216
  227
  238
  250
  263
  276
  289
  304
  318
  334
  350
  367
Depreciation, amort., depletion, $m
  60
  63
  67
  70
  74
  78
  82
  87
  91
  96
  70
  75
  81
  86
  92
  97
  104
  110
  116
  123
  131
  138
  146
  154
  163
  171
  181
  190
  201
  211
Funds from operations, $m
  117
  125
  134
  144
  154
  164
  175
  186
  197
  209
  213
  226
  240
  254
  268
  283
  299
  316
  333
  350
  369
  388
  409
  430
  452
  475
  499
  524
  551
  579
Change in working capital, $m
  35
  37
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  87
  91
  95
  99
  104
  109
  114
  119
Cash from operations, $m
  82
  89
  96
  103
  111
  120
  129
  138
  147
  157
  160
  171
  182
  193
  206
  218
  231
  245
  259
  274
  289
  305
  321
  339
  357
  376
  395
  416
  437
  459
Maintenance CAPEX, $m
  -27
  -30
  -33
  -37
  -40
  -44
  -48
  -52
  -57
  -61
  -66
  -70
  -75
  -81
  -86
  -92
  -97
  -104
  -110
  -116
  -123
  -131
  -138
  -146
  -154
  -163
  -171
  -181
  -190
  -201
New CAPEX, $m
  -35
  -38
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -90
  -94
  -98
  -102
  -107
  -112
  -117
  -123
Cash from investing activities, $m
  -62
  -68
  -73
  -79
  -84
  -89
  -95
  -101
  -108
  -114
  -121
  -128
  -135
  -143
  -151
  -159
  -167
  -177
  -186
  -195
  -205
  -217
  -228
  -240
  -252
  -265
  -278
  -293
  -307
  -324
Free cash flow, $m
  20
  21
  23
  25
  27
  30
  33
  36
  40
  43
  39
  43
  47
  51
  55
  59
  64
  68
  73
  78
  83
  88
  94
  99
  105
  111
  117
  123
  129
  136
Issuance/(repayment) of debt, $m
  80
  84
  88
  92
  96
  101
  105
  109
  113
  118
  122
  127
  132
  137
  143
  149
  155
  161
  168
  175
  183
  190
  199
  208
  217
  227
  237
  248
  259
  271
Issuance/(repurchase) of shares, $m
  10
  8
  6
  4
  1
  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  
  90
  92
  94
  96
  97
  101
  105
  109
  113
  118
  122
  127
  132
  137
  143
  149
  155
  161
  168
  175
  183
  190
  199
  208
  217
  227
  237
  248
  259
  271
Total cash flow (excl. dividends), $m
  109
  113
  117
  121
  125
  131
  138
  145
  153
  161
  161
  170
  179
  188
  198
  208
  219
  230
  241
  253
  266
  279
  292
  307
  322
  337
  354
  371
  389
  407
Retained Cash Flow (-), $m
  -66
  -70
  -74
  -77
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -141
  -147
  -153
  -160
  -167
  -174
  -182
  -190
  -199
  -208
  -217
  -227
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
  43
  43
  43
  44
  44
  46
  50
  54
  58
  62
  59
  63
  68
  73
  78
  83
  89
  94
  100
  106
  113
  119
  126
  133
  140
  147
  155
  163
  171
  180
Discount rate, %
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
  40
  37
  35
  33
  31
  29
  28
  27
  26
  25
  20
  19
  17
  15
  13
  12
  10
  8
  7
  6
  4
  3
  3
  2
  1
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  98.7
  97.7
  97.0
  96.6
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5
  96.5

REV Group, Inc. is a designer, manufacturer and distributor of specialty vehicles and related aftermarket parts and services. The Company operates through three segments: Fire & Emergency, Commercial and Recreation. The Company provides customized vehicle solutions for applications, including essential needs (ambulances, fire apparatus, school buses, mobility vans and municipal transit buses), industrial and commercial (terminal trucks, cut-away buses and street sweepers) and consumer leisure (recreational vehicles (RVs) and luxury buses). The Fire & Emergency segment manufactures a range of fire apparatus and ambulance products. The Commercial segment manufactures transit and shuttle buses, Type A school buses, mobility vans, and other specialty vehicles, including sweepers and terminal trucks distributed both through dealers and direct. The Recreation segment manufactures motorized RV products sold to brand-loyal, repeat customers who purchase through dealers.

FINANCIAL RATIOS  of  REV Group (REVG)

Valuation Ratios
P/E Ratio 23.5
Price to Sales 0.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 22.1
Price to Free Cash Flow -15.8
Growth Rates
Sales Growth Rate 17.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 43.6%
Cap. Spend. - 3 Yr. Gr. Rate 45.8%
Financial Strength
Quick Ratio 18
Current Ratio 0
LT Debt to Equity 40%
Total Debt to Equity 40.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 5.3%
Return On Equity 7.5%
Return On Equity - 3 Yr. Avg. 9.8%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 13%
Gross Margin - 3 Yr. Avg. 11.8%
EBITDA Margin 5.1%
EBITDA Margin - 3 Yr. Avg. 4.8%
Operating Margin 3.1%
Oper. Margin - 3 Yr. Avg. 3.5%
Pre-Tax Margin 2.2%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 38%
Eff/ Tax Rate - 3 Yr. Avg. 34.2%
Payout Ratio 19.4%

REVG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REVG stock intrinsic value calculation we used $2267.783 million for the last fiscal year's total revenue generated by REV Group. The default revenue input number comes from 0001 income statement of REV Group. 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 REVG stock valuation model: a) initial revenue growth rate of 11.7% 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 6.3%, whose default value for REVG is calculated based on our internal credit rating of REV Group, 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 REV Group.
    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 REVG stock the variable cost ratio is equal to 96.3%.

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 REVG 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 8.5% for REV Group.

Corporate tax rate of 27% is the nominal tax rate for REV Group. 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 REVG 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 REVG are equal to 13.6%.

Life of production assets of 11.5 years is the average useful life of capital assets used in REV Group 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 REVG 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 - $572.44 million for REV Group - 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 64.381 million for REV Group 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 REV Group at the current share price and the inputted number of shares is $0.7 billion.

RELATED COMPANIES Price Int.Val. Rating
REVG REV Group 11.36 8.55  str.sell
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THO Thor Industrie 68.44 176.91  str.buy
PCAR Paccar 60.56 623.62  str.buy
GM General Motors 35.55 58.76  str.buy
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COMPANY NEWS

▶ REV Group Inc (NYSE:REVG): The Best Of Both Worlds   [Oct-02-18 02:45PM  Simply Wall St.]
▶ REV Group, Inc. Reports Fiscal 2018 Third Quarter Results   [Sep-05-18 04:15PM  Business Wire]

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