Intrinsic value of Stoneridge - SRI

Previous Close

$22.66

  Intrinsic Value

$66.28

stock screener

  Rating & Target

str. buy

+193%

Previous close

$22.66

 
Intrinsic value

$66.28

 
Up/down potential

+193%

 
Rating

str. buy

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

We calculate the intrinsic value of SRI 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 2016), $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 0.6

 

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, %
  7.91
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
Revenue, $m
  696
  778
  865
  956
  1,051
  1,150
  1,254
  1,362
  1,474
  1,591
  1,712
  1,839
  1,970
  2,106
  2,248
  2,395
  2,549
  2,708
  2,874
  3,047
  3,228
  3,416
  3,612
  3,817
  4,030
  4,254
  4,487
  4,731
  4,987
  5,254
  5,533
Variable operating expenses, $m
 
  535
  594
  656
  722
  790
  861
  936
  1,013
  1,093
  1,176
  1,263
  1,353
  1,447
  1,544
  1,646
  1,751
  1,860
  1,975
  2,093
  2,217
  2,347
  2,481
  2,622
  2,769
  2,922
  3,083
  3,250
  3,426
  3,609
  3,801
Fixed operating expenses, $m
 
  182
  187
  192
  196
  201
  206
  212
  217
  222
  228
  234
  239
  245
  252
  258
  264
  271
  278
  285
  292
  299
  306
  314
  322
  330
  338
  347
  355
  364
  373
Total operating expenses, $m
  652
  717
  781
  848
  918
  991
  1,067
  1,148
  1,230
  1,315
  1,404
  1,497
  1,592
  1,692
  1,796
  1,904
  2,015
  2,131
  2,253
  2,378
  2,509
  2,646
  2,787
  2,936
  3,091
  3,252
  3,421
  3,597
  3,781
  3,973
  4,174
Operating income, $m
  44
  61
  84
  107
  132
  159
  186
  215
  245
  276
  308
  342
  377
  414
  452
  492
  533
  577
  622
  669
  719
  770
  824
  880
  940
  1,001
  1,066
  1,134
  1,205
  1,280
  1,359
EBITDA, $m
  68
  88
  113
  140
  169
  198
  229
  261
  295
  330
  367
  405
  445
  486
  529
  574
  621
  670
  721
  774
  830
  888
  948
  1,012
  1,078
  1,148
  1,221
  1,297
  1,377
  1,461
  1,549
Interest expense (income), $m
  6
  4
  6
  7
  9
  11
  12
  14
  16
  18
  20
  22
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  76
  80
  85
Earnings before tax, $m
  39
  57
  78
  100
  123
  148
  174
  200
  228
  258
  288
  320
  353
  387
  423
  460
  499
  540
  582
  626
  673
  721
  772
  825
  880
  938
  999
  1,063
  1,130
  1,200
  1,274
Tax expense, $m
  -37
  15
  21
  27
  33
  40
  47
  54
  62
  70
  78
  86
  95
  104
  114
  124
  135
  146
  157
  169
  182
  195
  208
  223
  238
  253
  270
  287
  305
  324
  344
Net income, $m
  77
  41
  57
  73
  90
  108
  127
  146
  167
  188
  210
  233
  257
  282
  309
  336
  364
  394
  425
  457
  491
  526
  563
  602
  642
  685
  729
  776
  825
  876
  930

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  50
  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
  395
  386
  429
  474
  521
  570
  622
  675
  731
  789
  849
  912
  977
  1,044
  1,114
  1,188
  1,264
  1,343
  1,425
  1,511
  1,600
  1,693
  1,791
  1,892
  1,998
  2,109
  2,225
  2,346
  2,472
  2,605
  2,743
Adjusted assets (=assets-cash), $m
  345
  386
  429
  474
  521
  570
  622
  675
  731
  789
  849
  912
  977
  1,044
  1,114
  1,188
  1,264
  1,343
  1,425
  1,511
  1,600
  1,693
  1,791
  1,892
  1,998
  2,109
  2,225
  2,346
  2,472
  2,605
  2,743
Revenue / Adjusted assets
  2.017
  2.016
  2.016
  2.017
  2.017
  2.018
  2.016
  2.018
  2.016
  2.016
  2.016
  2.016
  2.016
  2.017
  2.018
  2.016
  2.017
  2.016
  2.017
  2.017
  2.018
  2.018
  2.017
  2.017
  2.017
  2.017
  2.017
  2.017
  2.017
  2.017
  2.017
Average production assets, $m
  120
  134
  149
  164
  181
  198
  216
  234
  254
  274
  295
  316
  339
  362
  387
  412
  438
  466
  494
  524
  555
  587
  621
  656
  693
  732
  772
  814
  858
  904
  952
Working capital, $m
  128
  97
  108
  119
  131
  144
  157
  170
  184
  199
  214
  230
  246
  263
  281
  299
  319
  339
  359
  381
  403
  427
  451
  477
  504
  532
  561
  591
  623
  657
  692
Total debt, $m
  84
  100
  125
  153
  181
  211
  242
  274
  308
  343
  379
  417
  456
  497
  539
  583
  629
  677
  726
  778
  832
  888
  947
  1,008
  1,072
  1,139
  1,209
  1,281
  1,358
  1,438
  1,521
Total liabilities, $m
  216
  233
  258
  286
  314
  344
  375
  407
  441
  476
  512
  550
  589
  630
  672
  716
  762
  810
  859
  911
  965
  1,021
  1,080
  1,141
  1,205
  1,272
  1,342
  1,414
  1,491
  1,571
  1,654
Total equity, $m
  178
  153
  170
  188
  207
  226
  247
  268
  290
  313
  337
  362
  388
  415
  442
  471
  502
  533
  566
  600
  635
  672
  711
  751
  793
  837
  883
  931
  982
  1,034
  1,089
Total liabilities and equity, $m
  394
  386
  428
  474
  521
  570
  622
  675
  731
  789
  849
  912
  977
  1,045
  1,114
  1,187
  1,264
  1,343
  1,425
  1,511
  1,600
  1,693
  1,791
  1,892
  1,998
  2,109
  2,225
  2,345
  2,473
  2,605
  2,743
Debt-to-equity ratio
  0.472
  0.650
  0.740
  0.810
  0.880
  0.930
  0.980
  1.020
  1.060
  1.090
  1.120
  1.150
  1.180
  1.200
  1.220
  1.240
  1.250
  1.270
  1.280
  1.300
  1.310
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.380
  1.390
  1.400
Adjusted equity ratio
  0.371
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  77
  41
  57
  73
  90
  108
  127
  146
  167
  188
  210
  233
  257
  282
  309
  336
  364
  394
  425
  457
  491
  526
  563
  602
  642
  685
  729
  776
  825
  876
  930
Depreciation, amort., depletion, $m
  24
  27
  30
  33
  36
  40
  43
  47
  51
  55
  59
  63
  68
  72
  77
  82
  88
  93
  99
  105
  111
  117
  124
  131
  139
  146
  154
  163
  172
  181
  190
Funds from operations, $m
  66
  68
  87
  106
  126
  148
  170
  193
  217
  243
  269
  297
  325
  355
  386
  418
  452
  487
  524
  562
  602
  644
  688
  733
  781
  831
  884
  939
  996
  1,057
  1,120
Change in working capital, $m
  1
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
Cash from operations, $m
  65
  58
  76
  95
  114
  135
  157
  180
  203
  228
  254
  281
  309
  338
  368
  400
  433
  467
  503
  540
  580
  620
  663
  708
  754
  803
  855
  908
  964
  1,023
  1,085
Maintenance CAPEX, $m
  0
  -24
  -27
  -30
  -33
  -36
  -40
  -43
  -47
  -51
  -55
  -59
  -63
  -68
  -72
  -77
  -82
  -88
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -139
  -146
  -154
  -163
  -172
  -181
New CAPEX, $m
  -24
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
Cash from investing activities, $m
  -24
  -38
  -42
  -46
  -49
  -53
  -58
  -62
  -66
  -71
  -76
  -81
  -86
  -91
  -96
  -102
  -108
  -115
  -122
  -129
  -136
  -143
  -151
  -159
  -168
  -177
  -186
  -196
  -207
  -218
  -229
Free cash flow, $m
  41
  20
  34
  49
  65
  82
  99
  118
  137
  157
  178
  200
  223
  247
  271
  297
  324
  352
  381
  412
  444
  477
  512
  548
  586
  626
  668
  712
  758
  806
  856
Issuance/(repayment) of debt, $m
  -43
  25
  26
  27
  28
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
Issuance/(repurchase) of shares, $m
  -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
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -43
  25
  26
  27
  28
  30
  31
  32
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
Total cash flow (excl. dividends), $m
  -4
  45
  60
  76
  94
  112
  130
  150
  171
  192
  215
  238
  262
  287
  314
  341
  370
  400
  431
  464
  498
  533
  570
  609
  650
  693
  738
  785
  834
  886
  940
Retained Cash Flow (-), $m
  -85
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
Prev. year cash balance distribution, $m
 
  41
  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
 
  70
  43
  58
  75
  92
  110
  129
  149
  169
  191
  213
  236
  261
  286
  312
  340
  368
  398
  429
  462
  496
  532
  569
  608
  649
  692
  737
  784
  833
  885
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
 
  67
  39
  51
  62
  71
  80
  87
  93
  97
  100
  101
  101
  99
  96
  92
  86
  80
  73
  66
  59
  51
  44
  37
  31
  25
  20
  16
  12
  9
  7
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

Stoneridge, Inc. is a designer and manufacturer of engineered electrical and electronic components, modules and systems for the automotive, commercial, motorcycle, off-highway and agricultural vehicle markets. The Company operates through three segments: Control Devices, Electronics and PST. The Company's Control Devices segment designs and manufactures products that monitor, measure or activate specific functions within a vehicle and includes product lines, such as sensors, switches, valves, and actuators. The Company's Electronics segment designs and manufactures electronic instrument clusters, electronic control units and driver information systems. The PST segment is engaged in the design, manufacture and sale of in-vehicle audio and video devices, electronic vehicle security alarms, convenience accessories, vehicle tracking devices and monitoring services primarily for the automotive and motorcycle industry. It operated in 25 locations in 12 countries, as of December 31, 2016.

FINANCIAL RATIOS  of  Stoneridge (SRI)

Valuation Ratios
P/E Ratio 8.2
Price to Sales 0.9
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 15.4
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.2%
Cap. Spend. - 3 Yr. Gr. Rate -0.8%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 42.1%
Total Debt to Equity 47.2%
Interest Coverage 8
Management Effectiveness
Return On Assets 23.4%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 32.6%
Ret/ On T. Cap. - 3 Yr. Avg. 8.9%
Return On Equity 56.8%
Return On Equity - 3 Yr. Avg. 14.2%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 28.2%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 5.7%
Operating Margin 6.3%
Oper. Margin - 3 Yr. Avg. 1.7%
Pre-Tax Margin 5.6%
Pre-Tax Margin - 3 Yr. Avg. 0.2%
Net Profit Margin 11.1%
Net Profit Margin - 3 Yr. Avg. 2.5%
Effective Tax Rate -94.9%
Eff/ Tax Rate - 3 Yr. Avg. -32%
Payout Ratio 0%

SRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SRI stock intrinsic value calculation we used $696 million for the last fiscal year's total revenue generated by Stoneridge. The default revenue input number comes from 2016 income statement of Stoneridge. 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 SRI stock valuation model: a) initial revenue growth rate of 11.8% 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 SRI is calculated based on our internal credit rating of Stoneridge, 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 Stoneridge.
    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 SRI stock the variable cost ratio is equal to 68.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $178 million in the base year in the intrinsic value calculation for SRI 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 5.9% for Stoneridge.

Corporate tax rate of 27% is the nominal tax rate for Stoneridge. 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 SRI 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 SRI are equal to 17.2%.

Life of production assets of 5 years is the average useful life of capital assets used in Stoneridge 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 SRI is equal to 12.5%. 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 - $178 million for Stoneridge - 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 28.169 million for Stoneridge 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 Stoneridge at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ ETFs with exposure to Stoneridge, Inc. : December 8, 2017   [Dec-08-17 01:29PM  Capital Cube]
▶ Stoneridge tops Street 3Q forecasts   [Nov-02-17 05:50AM  Associated Press]
▶ Stoneridge Reports Strong Third-Quarter 2017 Results   [Nov-01-17 05:52PM  PR Newswire]
▶ 5 Cheap Breakout Stocks Offering Strong Returns   [Aug-08-17 08:40AM  Zacks]
▶ Stoneridge beats Street 2Q forecasts   [Aug-03-17 10:24AM  Associated Press]
▶ ETFs with exposure to Stoneridge, Inc. : June 26, 2017   [Jun-26-17 04:57PM  Capital Cube]
▶ /C O R R E C T I O N -- Stoneridge, Inc./   [May-25-17 03:45PM  PR Newswire]
▶ Stoneridge beats 1Q profit forecasts   [May-04-17 05:03AM  Associated Press]
▶ Stoneridge beats 4Q profit forecasts   [07:47AM  Associated Press]
▶ Is Stoneridge, Inc. (NYSE:SRI) Worthy of Your Portfolio?   [Dec-08-16 01:34PM  at Insider Monkey]
Financial statements of SRI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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