Intrinsic value of Standard Motor Products - SMP

Previous Close

$45.61

  Intrinsic Value

$40.66

stock screener

  Rating & Target

hold

-11%

Previous close

$45.61

 
Intrinsic value

$40.66

 
Up/down potential

-11%

 
Rating

hold

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

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

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
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.85
  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
  1,058
  1,079
  1,104
  1,132
  1,164
  1,200
  1,238
  1,280
  1,326
  1,375
  1,428
  1,484
  1,545
  1,609
  1,677
  1,749
  1,826
  1,907
  1,993
  2,084
  2,179
  2,280
  2,387
  2,499
  2,618
  2,742
  2,873
  3,012
  3,157
  3,310
  3,471
Variable operating expenses, $m
 
  803
  821
  842
  865
  892
  920
  951
  985
  1,021
  1,060
  1,095
  1,139
  1,187
  1,237
  1,290
  1,347
  1,407
  1,470
  1,537
  1,608
  1,682
  1,761
  1,844
  1,931
  2,023
  2,120
  2,221
  2,329
  2,441
  2,560
Fixed operating expenses, $m
 
  181
  186
  191
  195
  200
  205
  210
  216
  221
  227
  232
  238
  244
  250
  256
  263
  269
  276
  283
  290
  297
  305
  312
  320
  328
  336
  345
  353
  362
  371
Total operating expenses, $m
  960
  984
  1,007
  1,033
  1,060
  1,092
  1,125
  1,161
  1,201
  1,242
  1,287
  1,327
  1,377
  1,431
  1,487
  1,546
  1,610
  1,676
  1,746
  1,820
  1,898
  1,979
  2,066
  2,156
  2,251
  2,351
  2,456
  2,566
  2,682
  2,803
  2,931
Operating income, $m
  98
  95
  97
  100
  103
  108
  113
  119
  126
  133
  141
  157
  167
  178
  190
  203
  216
  231
  247
  264
  282
  301
  321
  343
  367
  391
  417
  445
  475
  506
  539
EBITDA, $m
  118
  115
  117
  121
  124
  129
  135
  141
  149
  157
  166
  176
  186
  198
  211
  224
  239
  255
  272
  290
  309
  329
  351
  374
  399
  425
  453
  483
  514
  547
  582
Interest expense (income), $m
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  24
Earnings before tax, $m
  99
  94
  96
  98
  101
  105
  110
  116
  122
  129
  137
  152
  162
  172
  183
  195
  208
  222
  237
  253
  270
  288
  308
  329
  351
  374
  399
  426
  454
  483
  515
Tax expense, $m
  37
  25
  26
  26
  27
  28
  30
  31
  33
  35
  37
  41
  44
  46
  49
  53
  56
  60
  64
  68
  73
  78
  83
  89
  95
  101
  108
  115
  122
  131
  139
Net income, $m
  60
  68
  70
  72
  74
  77
  80
  84
  89
  94
  100
  111
  118
  125
  134
  142
  152
  162
  173
  185
  197
  210
  225
  240
  256
  273
  291
  311
  331
  353
  376

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  20
  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
  769
  764
  781
  801
  824
  849
  876
  906
  938
  973
  1,011
  1,051
  1,093
  1,139
  1,187
  1,238
  1,292
  1,350
  1,410
  1,475
  1,542
  1,614
  1,689
  1,769
  1,853
  1,941
  2,034
  2,131
  2,234
  2,342
  2,456
Adjusted assets (=assets-cash), $m
  749
  764
  781
  801
  824
  849
  876
  906
  938
  973
  1,011
  1,051
  1,093
  1,139
  1,187
  1,238
  1,292
  1,350
  1,410
  1,475
  1,542
  1,614
  1,689
  1,769
  1,853
  1,941
  2,034
  2,131
  2,234
  2,342
  2,456
Revenue / Adjusted assets
  1.413
  1.412
  1.414
  1.413
  1.413
  1.413
  1.413
  1.413
  1.414
  1.413
  1.412
  1.412
  1.414
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.413
  1.412
  1.413
  1.413
  1.413
  1.413
Average production assets, $m
  120
  122
  125
  128
  132
  136
  140
  145
  150
  155
  161
  168
  175
  182
  190
  198
  206
  216
  225
  235
  246
  258
  270
  282
  296
  310
  325
  340
  357
  374
  392
Working capital, $m
  190
  230
  235
  241
  248
  255
  264
  273
  282
  293
  304
  316
  329
  343
  357
  373
  389
  406
  425
  444
  464
  486
  508
  532
  558
  584
  612
  641
  672
  705
  739
Total debt, $m
  55
  41
  48
  56
  66
  76
  87
  99
  113
  127
  142
  159
  176
  195
  215
  236
  258
  282
  307
  333
  361
  390
  421
  454
  488
  525
  563
  603
  645
  690
  736
Total liabilities, $m
  328
  314
  321
  329
  339
  349
  360
  372
  386
  400
  415
  432
  449
  468
  488
  509
  531
  555
  580
  606
  634
  663
  694
  727
  761
  798
  836
  876
  918
  963
  1,009
Total equity, $m
  441
  450
  460
  472
  485
  500
  516
  534
  553
  573
  595
  619
  644
  671
  699
  729
  761
  795
  831
  869
  908
  951
  995
  1,042
  1,091
  1,143
  1,198
  1,255
  1,316
  1,380
  1,447
Total liabilities and equity, $m
  769
  764
  781
  801
  824
  849
  876
  906
  939
  973
  1,010
  1,051
  1,093
  1,139
  1,187
  1,238
  1,292
  1,350
  1,411
  1,475
  1,542
  1,614
  1,689
  1,769
  1,852
  1,941
  2,034
  2,131
  2,234
  2,343
  2,456
Debt-to-equity ratio
  0.125
  0.090
  0.100
  0.120
  0.140
  0.150
  0.170
  0.190
  0.200
  0.220
  0.240
  0.260
  0.270
  0.290
  0.310
  0.320
  0.340
  0.350
  0.370
  0.380
  0.400
  0.410
  0.420
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
Adjusted equity ratio
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589
  0.589

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  60
  68
  70
  72
  74
  77
  80
  84
  89
  94
  100
  111
  118
  125
  134
  142
  152
  162
  173
  185
  197
  210
  225
  240
  256
  273
  291
  311
  331
  353
  376
Depreciation, amort., depletion, $m
  20
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
Funds from operations, $m
  103
  89
  90
  92
  95
  99
  103
  107
  112
  118
  124
  130
  137
  145
  154
  164
  175
  186
  198
  211
  224
  239
  254
  271
  288
  307
  327
  348
  370
  394
  419
Change in working capital, $m
  5
  5
  5
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  29
  31
  33
  34
Cash from operations, $m
  98
  84
  85
  86
  88
  91
  94
  98
  103
  108
  113
  118
  124
  132
  140
  149
  158
  168
  179
  191
  204
  217
  232
  247
  263
  281
  299
  319
  339
  361
  385
Maintenance CAPEX, $m
  0
  -13
  -13
  -14
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
New CAPEX, $m
  -21
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
Cash from investing activities, $m
  -88
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -43
  -44
  -47
  -49
  -52
  -53
  -56
  -59
Free cash flow, $m
  10
  69
  69
  69
  71
  73
  75
  78
  81
  86
  90
  93
  99
  105
  112
  120
  128
  137
  146
  156
  167
  179
  191
  205
  219
  234
  250
  267
  286
  305
  326
Issuance/(repayment) of debt, $m
  7
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
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  
  7
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
Total cash flow (excl. dividends), $m
  16
  75
  76
  78
  80
  83
  86
  90
  95
  100
  105
  110
  117
  124
  132
  141
  150
  160
  171
  183
  195
  208
  222
  237
  253
  270
  288
  308
  328
  349
  372
Retained Cash Flow (-), $m
  -49
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -19
  -20
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
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
 
  66
  66
  66
  67
  68
  70
  73
  76
  79
  83
  86
  92
  97
  104
  111
  118
  126
  135
  145
  155
  166
  178
  190
  204
  218
  234
  250
  267
  286
  305
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
 
  63
  60
  57
  55
  53
  51
  49
  47
  46
  44
  41
  39
  37
  35
  32
  30
  27
  25
  22
  20
  17
  15
  12
  10
  8
  7
  5
  4
  3
  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
  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

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 17.4
Price to Sales 1
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 13.5
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 $1058 million for the last fiscal year's total revenue generated by Standard Motor Products. The default revenue input number comes from 2016 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 74.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $177 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 3.5% 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 11.3%.

Life of production assets of 9.1 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 21.3%. 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 - $441 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 22.712 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 $1.0 billion.

RELATED COMPANIES Price Int.Val. Rating
DLPH Delphi Technol 57.26 95.38  str.buy
DORM Dorman Product 72.44 60.76  hold
GM General Motors 43.86 66.81  str.buy
GPC Genuine Parts 102.93 89.07  hold
BWA BorgWarner 57.11 75.31  buy

COMPANY NEWS

▶ 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]
▶ Standard Motor Products posts 2Q profit   [Jul-31-17 11:02PM  Associated Press]
▶ Profit From The Aging Population Of Cars   [Jul-11-17 07:53PM  Forbes]
▶ BWD Automotive Releases 109 New Part Numbers   [Jun-29-17 08:30AM  PR Newswire]
▶ BWD Automotive Releases 87 New Part Numbers   [Jun-05-17 08:29AM  PR Newswire]
▶ BWD Automotive Releases 237 New Part Numbers   [May-08-17 09:41AM  PR Newswire]
▶ Standard Motor Products posts 1Q profit   [May-03-17 08:43AM  Associated Press]
▶ BWD Automotive Releases 100 New Diesel Part Numbers   [Apr-05-17 09:14AM  PR Newswire]
▶ BWD Automotive Releases 242 New Part Numbers   [Feb-06-17 08:00AM  PR Newswire]
Financial statements of SMP
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.