Intrinsic value of SPAR Group, Inc. - SGRP

Previous Close

$0.72

  Intrinsic Value

$6.03

stock screener

  Rating & Target

str. buy

+737%

Previous close

$0.72

 
Intrinsic value

$6.03

 
Up/down potential

+737%

 
Rating

str. buy

We calculate the intrinsic value of SGRP 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 0.0

 

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, %
  19.80
  18.32
  16.99
  15.79
  14.71
  13.74
  12.87
  12.08
  11.37
  10.73
  10.16
  9.64
  9.18
  8.76
  8.39
  8.05
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
Revenue, $m
  217
  257
  300
  348
  399
  453
  512
  574
  639
  707
  779
  854
  933
  1,015
  1,100
  1,188
  1,280
  1,376
  1,475
  1,578
  1,686
  1,797
  1,913
  2,034
  2,160
  2,291
  2,427
  2,569
  2,718
  2,873
Variable operating expenses, $m
  210
  248
  290
  336
  385
  438
  494
  554
  617
  683
  752
  825
  901
  979
  1,062
  1,147
  1,236
  1,328
  1,424
  1,524
  1,627
  1,735
  1,847
  1,964
  2,085
  2,211
  2,343
  2,480
  2,624
  2,773
Fixed operating expenses, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Total operating expenses, $m
  212
  250
  292
  338
  387
  440
  496
  556
  619
  685
  755
  828
  904
  982
  1,065
  1,150
  1,239
  1,331
  1,427
  1,527
  1,630
  1,738
  1,850
  1,967
  2,088
  2,215
  2,347
  2,484
  2,628
  2,777
Operating income, $m
  5
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  30
  32
  35
  38
  41
  45
  48
  52
  55
  59
  63
  67
  71
  76
  81
  85
  90
  96
EBITDA, $m
  7
  8
  10
  12
  14
  16
  18
  20
  23
  26
  28
  31
  34
  38
  41
  44
  48
  52
  55
  60
  64
  68
  73
  77
  82
  87
  93
  98
  104
  110
Interest expense (income), $m
  0
  0
  1
  1
  2
  2
  3
  3
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  29
Earnings before tax, $m
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  23
  25
  27
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  59
  63
  66
Tax expense, $m
  1
  2
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
Net income, $m
  4
  4
  5
  6
  7
  7
  8
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  39
  41
  43
  46
  48

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
  69
  82
  96
  111
  128
  145
  164
  184
  205
  227
  250
  274
  299
  325
  352
  381
  410
  441
  473
  506
  540
  576
  613
  652
  692
  734
  778
  823
  871
  920
Adjusted assets (=assets-cash), $m
  69
  82
  96
  111
  128
  145
  164
  184
  205
  227
  250
  274
  299
  325
  352
  381
  410
  441
  473
  506
  540
  576
  613
  652
  692
  734
  778
  823
  871
  920
Revenue / Adjusted assets
  3.145
  3.134
  3.125
  3.135
  3.117
  3.124
  3.122
  3.120
  3.117
  3.115
  3.116
  3.117
  3.120
  3.123
  3.125
  3.118
  3.122
  3.120
  3.118
  3.119
  3.122
  3.120
  3.121
  3.120
  3.121
  3.121
  3.120
  3.122
  3.121
  3.123
Average production assets, $m
  5
  6
  8
  9
  10
  11
  13
  14
  16
  18
  19
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
Working capital, $m
  15
  18
  21
  24
  28
  31
  35
  40
  44
  49
  54
  59
  64
  70
  76
  82
  88
  95
  102
  109
  116
  124
  132
  140
  149
  158
  167
  177
  188
  198
Total debt, $m
  15
  23
  32
  42
  53
  65
  77
  90
  104
  118
  134
  150
  166
  183
  202
  220
  240
  260
  281
  303
  326
  349
  374
  399
  426
  454
  483
  513
  544
  577
Total liabilities, $m
  46
  54
  64
  74
  84
  96
  108
  121
  135
  150
  165
  181
  198
  215
  233
  252
  271
  291
  312
  334
  357
  381
  405
  431
  457
  485
  514
  544
  576
  608
Total equity, $m
  24
  28
  33
  38
  43
  49
  56
  62
  69
  77
  85
  93
  101
  110
  119
  129
  139
  149
  160
  171
  183
  195
  208
  221
  235
  249
  264
  279
  295
  312
Total liabilities and equity, $m
  70
  82
  97
  112
  127
  145
  164
  183
  204
  227
  250
  274
  299
  325
  352
  381
  410
  440
  472
  505
  540
  576
  613
  652
  692
  734
  778
  823
  871
  920
Debt-to-equity ratio
  0.620
  0.820
  0.990
  1.120
  1.220
  1.310
  1.390
  1.450
  1.500
  1.540
  1.580
  1.610
  1.640
  1.660
  1.690
  1.710
  1.720
  1.740
  1.750
  1.770
  1.780
  1.790
  1.800
  1.810
  1.820
  1.820
  1.830
  1.840
  1.840
  1.850
Adjusted equity ratio
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  4
  5
  6
  7
  7
  8
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  39
  41
  43
  46
  48
Depreciation, amort., depletion, $m
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  14
  14
Funds from operations, $m
  5
  6
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  63
Change in working capital, $m
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
Cash from operations, $m
  2
  3
  4
  4
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  18
  20
  22
  23
  25
  27
  29
  32
  34
  36
  39
  41
  44
  46
  49
  52
Maintenance CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
Cash from investing activities, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -16
  -17
  -18
Free cash flow, $m
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
Issuance/(repayment) of debt, $m
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
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  
  8
  8
  9
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
Total cash flow (excl. dividends), $m
  9
  9
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  46
  49
  52
  55
  58
  61
  64
  67
Retained Cash Flow (-), $m
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
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
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  51
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
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  7
  6
  6
  6
  5
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  97.4
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6
  96.6

Spar Group, Inc. is an international merchandising and marketing services company. The Company provides its merchandising and other marketing services to manufacturers, distributors and retailers across the world, primarily in mass merchandisers, office supply, grocery, drug store, independent, convenience, toy, home improvement and electronics stores. It operates through two segments: the Domestic Division and the International Division. The Domestic Division provides merchandising and marketing services, furniture and other product assembly services, audit services, and technology services to manufacturers, distributors and retailers in the United States. Those services are primarily performed in mass merchandisers, office supply, grocery, drug store, dollar and electronics stores. The International Division provides merchandising, marketing services and in-store event staffing through subsidiaries in Japan, Canada, South Africa, India, China, Australia, Mexico and Turkey.

FINANCIAL RATIOS  of  SPAR Group, Inc. (SGRP)

Valuation Ratios
P/E Ratio 0
Price to Sales 0.1
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 14.9
Price to Free Cash Flow -14.9
Growth Rates
Sales Growth Rate 12.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 50%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 7.5%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 22.4%
Gross Margin - 3 Yr. Avg. 23.8%
EBITDA Margin 3%
EBITDA Margin - 3 Yr. Avg. 3.8%
Operating Margin 1.5%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 2.2%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

SGRP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SGRP stock intrinsic value calculation we used $181 million for the last fiscal year's total revenue generated by SPAR Group, Inc.. The default revenue input number comes from 0001 income statement of SPAR Group, Inc.. 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 SGRP stock valuation model: a) initial revenue growth rate of 19.8% 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 SGRP is calculated based on our internal credit rating of SPAR Group, Inc., 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 SPAR Group, Inc..
    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 SGRP stock the variable cost ratio is equal to 96.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2 million in the base year in the intrinsic value calculation for SGRP 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 SPAR Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for SPAR Group, Inc.. 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 SGRP 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 SGRP are equal to 2.5%.

Life of production assets of 3 years is the average useful life of capital assets used in SPAR Group, Inc. 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 SGRP is equal to 6.9%. 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 - $19.65 million for SPAR Group, Inc. - 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 20.651 million for SPAR Group, Inc. 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 SPAR Group, Inc. at the current share price and the inputted number of shares is $0.0 billion.

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