Intrinsic value of Standard Motor Products - SMP

Previous Close

$49.94

  Intrinsic Value

$40.15

stock screener

  Rating & Target

hold

-20%

Previous close

$49.94

 
Intrinsic value

$40.15

 
Up/down potential

-20%

 
Rating

hold

We calculate the intrinsic value of SMP 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 1.1

 

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
  1,138
  1,165
  1,195
  1,228
  1,265
  1,306
  1,351
  1,399
  1,451
  1,506
  1,566
  1,630
  1,697
  1,769
  1,846
  1,926
  2,012
  2,103
  2,198
  2,299
  2,406
  2,518
  2,637
  2,761
  2,893
  3,031
  3,177
  3,330
  3,492
  3,661
Variable operating expenses, $m
  1,035
  1,058
  1,085
  1,115
  1,149
  1,185
  1,225
  1,268
  1,315
  1,365
  1,406
  1,463
  1,524
  1,589
  1,657
  1,730
  1,807
  1,888
  1,974
  2,064
  2,160
  2,261
  2,367
  2,480
  2,598
  2,722
  2,853
  2,990
  3,135
  3,288
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
  1,035
  1,058
  1,085
  1,115
  1,149
  1,185
  1,225
  1,268
  1,315
  1,365
  1,406
  1,463
  1,524
  1,589
  1,657
  1,730
  1,807
  1,888
  1,974
  2,064
  2,160
  2,261
  2,367
  2,480
  2,598
  2,722
  2,853
  2,990
  3,135
  3,288
Operating income, $m
  104
  107
  110
  113
  117
  121
  126
  130
  136
  141
  160
  166
  173
  181
  188
  197
  205
  215
  224
  235
  246
  257
  269
  282
  295
  309
  324
  340
  356
  374
EBITDA, $m
  133
  136
  140
  144
  148
  153
  158
  164
  170
  176
  183
  191
  199
  207
  216
  226
  236
  246
  257
  269
  282
  295
  309
  323
  339
  355
  372
  390
  409
  429
Interest expense (income), $m
  1
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
Earnings before tax, $m
  101
  103
  105
  108
  112
  115
  119
  123
  128
  133
  150
  156
  162
  168
  174
  182
  189
  197
  205
  214
  223
  233
  243
  254
  265
  277
  290
  303
  317
  332
Tax expense, $m
  27
  28
  28
  29
  30
  31
  32
  33
  35
  36
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
Net income, $m
  73
  75
  77
  79
  82
  84
  87
  90
  93
  97
  110
  114
  118
  123
  127
  133
  138
  144
  150
  156
  163
  170
  178
  185
  194
  202
  212
  221
  232
  242

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
  803
  822
  843
  867
  893
  922
  953
  987
  1,024
  1,063
  1,105
  1,150
  1,198
  1,249
  1,302
  1,359
  1,420
  1,484
  1,551
  1,623
  1,698
  1,777
  1,861
  1,949
  2,042
  2,139
  2,242
  2,350
  2,464
  2,584
Adjusted assets (=assets-cash), $m
  803
  822
  843
  867
  893
  922
  953
  987
  1,024
  1,063
  1,105
  1,150
  1,198
  1,249
  1,302
  1,359
  1,420
  1,484
  1,551
  1,623
  1,698
  1,777
  1,861
  1,949
  2,042
  2,139
  2,242
  2,350
  2,464
  2,584
Revenue / Adjusted assets
  1.417
  1.417
  1.418
  1.416
  1.417
  1.416
  1.418
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.416
  1.418
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
  1.417
Average production assets, $m
  150
  154
  158
  162
  167
  172
  178
  185
  192
  199
  207
  215
  224
  234
  244
  254
  266
  278
  290
  303
  318
  332
  348
  365
  382
  400
  419
  440
  461
  483
Working capital, $m
  260
  266
  272
  280
  289
  298
  308
  319
  331
  343
  357
  372
  387
  403
  421
  439
  459
  479
  501
  524
  549
  574
  601
  630
  660
  691
  724
  759
  796
  835
Total debt, $m
  69
  76
  85
  95
  107
  119
  132
  146
  162
  179
  196
  215
  236
  257
  280
  304
  330
  357
  386
  416
  448
  481
  517
  554
  593
  635
  679
  724
  773
  823
Total liabilities, $m
  341
  348
  357
  368
  379
  391
  404
  419
  434
  451
  469
  488
  508
  529
  552
  576
  602
  629
  658
  688
  720
  753
  789
  826
  866
  907
  951
  997
  1,045
  1,096
Total equity, $m
  463
  473
  486
  499
  514
  531
  549
  569
  590
  612
  637
  662
  690
  719
  750
  783
  818
  855
  894
  935
  978
  1,024
  1,072
  1,123
  1,176
  1,232
  1,291
  1,354
  1,419
  1,488
Total liabilities and equity, $m
  804
  821
  843
  867
  893
  922
  953
  988
  1,024
  1,063
  1,106
  1,150
  1,198
  1,248
  1,302
  1,359
  1,420
  1,484
  1,552
  1,623
  1,698
  1,777
  1,861
  1,949
  2,042
  2,139
  2,242
  2,351
  2,464
  2,584
Debt-to-equity ratio
  0.150
  0.160
  0.180
  0.190
  0.210
  0.220
  0.240
  0.260
  0.270
  0.290
  0.310
  0.330
  0.340
  0.360
  0.370
  0.390
  0.400
  0.420
  0.430
  0.440
  0.460
  0.470
  0.480
  0.490
  0.500
  0.520
  0.530
  0.540
  0.540
  0.550
Adjusted equity ratio
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576
  0.576

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  73
  75
  77
  79
  82
  84
  87
  90
  93
  97
  110
  114
  118
  123
  127
  133
  138
  144
  150
  156
  163
  170
  178
  185
  194
  202
  212
  221
  232
  242
Depreciation, amort., depletion, $m
  29
  30
  30
  31
  31
  32
  33
  33
  34
  35
  23
  24
  25
  27
  28
  29
  30
  32
  33
  34
  36
  38
  40
  41
  43
  45
  48
  50
  52
  55
Funds from operations, $m
  103
  105
  107
  110
  113
  116
  120
  123
  127
  132
  133
  138
  143
  149
  155
  161
  168
  175
  183
  191
  199
  208
  217
  227
  237
  248
  259
  271
  284
  297
Change in working capital, $m
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
Cash from operations, $m
  98
  99
  100
  102
  104
  107
  109
  112
  116
  119
  120
  124
  128
  133
  138
  143
  149
  155
  161
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  259
Maintenance CAPEX, $m
  -17
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -50
  -52
New CAPEX, $m
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from investing activities, $m
  -20
  -20
  -21
  -22
  -23
  -24
  -26
  -26
  -28
  -29
  -31
  -31
  -33
  -34
  -37
  -39
  -40
  -42
  -45
  -46
  -48
  -51
  -54
  -56
  -58
  -61
  -64
  -68
  -71
  -74
Free cash flow, $m
  78
  78
  79
  80
  81
  82
  84
  86
  88
  90
  89
  92
  95
  98
  101
  105
  108
  112
  117
  121
  126
  131
  137
  142
  148
  155
  161
  169
  176
  184
Issuance/(repayment) of debt, $m
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
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  
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
Total cash flow (excl. dividends), $m
  85
  86
  88
  90
  92
  95
  97
  100
  103
  107
  107
  111
  115
  119
  124
  129
  134
  140
  145
  152
  158
  165
  172
  180
  188
  196
  205
  214
  224
  235
Retained Cash Flow (-), $m
  -9
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
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
  76
  76
  76
  76
  77
  78
  79
  81
  82
  84
  83
  85
  87
  90
  93
  96
  99
  103
  106
  110
  115
  119
  124
  129
  134
  140
  146
  152
  159
  166
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
  73
  69
  66
  63
  60
  57
  54
  50
  47
  44
  39
  36
  33
  30
  27
  24
  22
  19
  16
  14
  12
  10
  8
  7
  5
  4
  3
  2
  2
  1
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
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Standard Motor Products, Inc. is an independent manufacturer and distributor of replacement parts for motor vehicles in the automotive aftermarket industry with a complementary focus on heavy duty, industrial equipment and the original equipment service market. The Company's segments include Engine Management Segment and Temperature Control Segment. The Engine Management Segment manufactures and remanufactures ignition and emission parts, ignition wires, battery cables, fuel system parts and sensors for vehicle systems. The Temperature Control Segment manufactures and remanufactures air conditioning compressors, air conditioning and heating parts, engine cooling system parts, power window accessories and windshield washer system parts. The Company sells its products primarily to warehouse distributors, large retail chains, original equipment manufacturers and original equipment service part operations in the United States, Canada, Latin America and Europe.

FINANCIAL RATIOS  of  Standard Motor Products (SMP)

Valuation Ratios
P/E Ratio 19
Price to Sales 1.1
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 14.8
Growth Rates
Sales Growth Rate 8.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate 13.8%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 12.5%
Interest Coverage 100
Management Effectiveness
Return On Assets 8.4%
Ret/ On Assets - 3 Yr. Avg. 7.3%
Return On Total Capital 12.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.4%
Return On Equity 14.4%
Return On Equity - 3 Yr. Avg. 12.8%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 30.4%
Gross Margin - 3 Yr. Avg. 29.6%
EBITDA Margin 11.3%
EBITDA Margin - 3 Yr. Avg. 10.4%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 9.4%
Pre-Tax Margin - 3 Yr. Avg. 8.4%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 4.9%
Effective Tax Rate 37.4%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 25%

SMP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SMP stock intrinsic value calculation we used $1116.143 million for the last fiscal year's total revenue generated by Standard Motor Products. The default revenue input number comes from 0001 income statement of Standard Motor Products. 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 SMP 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 4.3%, whose default value for SMP is calculated based on our internal credit rating of Standard Motor Products, 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 Standard Motor Products.
    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 SMP stock the variable cost ratio is equal to 90.9%.

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 SMP 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 Standard Motor Products.

Corporate tax rate of 27% is the nominal tax rate for Standard Motor Products. 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 SMP 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 SMP are equal to 13.2%.

Life of production assets of 8.8 years is the average useful life of capital assets used in Standard Motor Products 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 SMP is equal to 22.8%. 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 - $453.654 million for Standard Motor Products - 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 22.428 million for Standard Motor Products 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 Standard Motor Products at the current share price and the inputted number of shares is $1.1 billion.

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DORM Dorman Product 82.94 45.01  sell
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GPC Genuine Parts 99.11 159.45  str.buy
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COMPANY NEWS

▶ Standard Motor Products: 3Q Earnings Snapshot   [08:40AM  Associated Press]
▶ G.research 42nd Annual Automotive Aftermarket Symposium   [Oct-18-18 07:30AM  Business Wire]
▶ G.research 42nd Annual Automotive Aftermarket Symposium   [Oct-03-18 07:30AM  Business Wire]
▶ G.research 42nd Annual Automotive Aftermarket Symposium   [Sep-12-18 07:30AM  Business Wire]
▶ Should You Buy Standard Motor Products Inc (NYSE:SMP) Now?   [Aug-29-18 08:21AM  Simply Wall St.]
▶ Standard Motor Products: 2Q Earnings Snapshot   [Jul-26-18 08:44AM  Associated Press]
▶ Standard Motor Products: 1Q Earnings Snapshot   [May-03-18 08:50AM  Associated Press]
▶ /C O R R E C T I O N -- Standard Motor Products, Inc./   [May-02-18 10:09AM  PR Newswire]
▶ Standard Motor Products posts 4Q loss   [08:55AM  Associated Press]
▶ BWD Automotive Releases 324 New Part Numbers   [Dec-21-17 08:30AM  PR Newswire]
▶ New Strong Sell Stocks for November 7th   [Nov-07-17 08:38AM  Zacks]
▶ Standard Motor Products posts 3Q profit   [Oct-26-17 09:11AM  Associated Press]
▶ Pres Trump set to unveil new tax plan   [09:11AM  Yahoo Finance]
▶ Yahoo Finance Live: Market Movers - Sep 27th, 2017   [07:20AM  Yahoo Finance Video]
▶ BWD Automotive Releases 332 New Part Numbers   [Aug-24-17 08:30AM  PR Newswire]

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