Intrinsic value of Stoneridge - SRI

Previous Close

$27.07

  Intrinsic Value

$24.06

stock screener

  Rating & Target

hold

-11%

Previous close

$27.07

 
Intrinsic value

$24.06

 
Up/down potential

-11%

 
Rating

hold

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 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 0.8

 

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, %
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
Revenue, $m
  870
  917
  967
  1,019
  1,073
  1,130
  1,189
  1,252
  1,317
  1,385
  1,457
  1,532
  1,611
  1,693
  1,780
  1,871
  1,966
  2,066
  2,171
  2,281
  2,396
  2,517
  2,644
  2,778
  2,918
  3,065
  3,219
  3,381
  3,551
  3,729
Variable operating expenses, $m
  787
  829
  873
  919
  968
  1,018
  1,071
  1,127
  1,185
  1,246
  1,298
  1,365
  1,436
  1,509
  1,586
  1,667
  1,752
  1,841
  1,935
  2,033
  2,136
  2,243
  2,357
  2,476
  2,600
  2,731
  2,869
  3,013
  3,165
  3,324
Fixed operating expenses, $m
  22
  23
  23
  24
  25
  25
  26
  26
  27
  27
  28
  29
  29
  30
  30
  31
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  40
  41
  42
Total operating expenses, $m
  809
  852
  896
  943
  993
  1,043
  1,097
  1,153
  1,212
  1,273
  1,326
  1,394
  1,465
  1,539
  1,616
  1,698
  1,784
  1,874
  1,968
  2,067
  2,171
  2,279
  2,393
  2,513
  2,638
  2,770
  2,909
  3,053
  3,206
  3,366
Operating income, $m
  61
  65
  70
  75
  81
  86
  92
  99
  105
  112
  131
  138
  146
  154
  163
  172
  182
  192
  203
  214
  226
  238
  251
  265
  280
  295
  311
  327
  345
  363
EBITDA, $m
  90
  95
  101
  108
  114
  121
  128
  135
  143
  152
  160
  169
  179
  189
  199
  210
  222
  234
  247
  261
  275
  290
  305
  322
  339
  357
  376
  396
  417
  439
Interest expense (income), $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  42
  45
  47
  50
  53
  56
  60
  63
Earnings before tax, $m
  54
  58
  61
  66
  70
  74
  79
  84
  89
  95
  112
  118
  124
  131
  138
  146
  153
  162
  170
  179
  189
  199
  210
  221
  232
  245
  257
  271
  285
  300
Tax expense, $m
  15
  16
  17
  18
  19
  20
  21
  23
  24
  26
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
Net income, $m
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  82
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  208
  219

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
  590
  622
  656
  691
  728
  766
  807
  849
  893
  940
  988
  1,039
  1,093
  1,149
  1,208
  1,269
  1,334
  1,402
  1,473
  1,547
  1,626
  1,708
  1,794
  1,885
  1,980
  2,079
  2,184
  2,294
  2,409
  2,530
Adjusted assets (=assets-cash), $m
  590
  622
  656
  691
  728
  766
  807
  849
  893
  940
  988
  1,039
  1,093
  1,149
  1,208
  1,269
  1,334
  1,402
  1,473
  1,547
  1,626
  1,708
  1,794
  1,885
  1,980
  2,079
  2,184
  2,294
  2,409
  2,530
Revenue / Adjusted assets
  1.475
  1.474
  1.474
  1.475
  1.474
  1.475
  1.473
  1.475
  1.475
  1.473
  1.475
  1.474
  1.474
  1.473
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
  1.474
Average production assets, $m
  147
  155
  163
  172
  181
  191
  201
  212
  223
  234
  246
  259
  272
  286
  301
  316
  332
  349
  367
  385
  405
  425
  447
  469
  493
  518
  544
  571
  600
  630
Working capital, $m
  111
  117
  124
  130
  137
  145
  152
  160
  169
  177
  186
  196
  206
  217
  228
  239
  252
  264
  278
  292
  307
  322
  338
  356
  373
  392
  412
  433
  455
  477
Total debt, $m
  146
  164
  183
  203
  224
  246
  268
  292
  317
  343
  371
  399
  429
  461
  494
  529
  565
  603
  643
  685
  729
  776
  824
  875
  929
  985
  1,044
  1,105
  1,170
  1,238
Total liabilities, $m
  332
  350
  369
  389
  410
  431
  454
  478
  503
  529
  556
  585
  615
  647
  680
  715
  751
  789
  829
  871
  915
  962
  1,010
  1,061
  1,114
  1,171
  1,230
  1,291
  1,356
  1,424
Total equity, $m
  258
  272
  287
  302
  318
  335
  353
  371
  390
  411
  432
  454
  478
  502
  528
  555
  583
  612
  644
  676
  710
  746
  784
  824
  865
  909
  954
  1,002
  1,053
  1,106
Total liabilities and equity, $m
  590
  622
  656
  691
  728
  766
  807
  849
  893
  940
  988
  1,039
  1,093
  1,149
  1,208
  1,270
  1,334
  1,401
  1,473
  1,547
  1,625
  1,708
  1,794
  1,885
  1,979
  2,080
  2,184
  2,293
  2,409
  2,530
Debt-to-equity ratio
  0.570
  0.600
  0.640
  0.670
  0.700
  0.730
  0.760
  0.790
  0.810
  0.840
  0.860
  0.880
  0.900
  0.920
  0.940
  0.950
  0.970
  0.980
  1.000
  1.010
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
Adjusted equity ratio
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437
  0.437

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  39
  42
  45
  48
  51
  54
  58
  61
  65
  69
  82
  86
  91
  96
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
  170
  179
  188
  198
  208
  219
Depreciation, amort., depletion, $m
  29
  30
  31
  32
  33
  34
  36
  37
  38
  40
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  59
  62
  66
  69
  72
  76
Funds from operations, $m
  68
  72
  76
  80
  84
  89
  93
  98
  103
  109
  111
  117
  124
  130
  137
  144
  152
  160
  169
  177
  187
  196
  207
  218
  229
  241
  253
  267
  281
  295
Change in working capital, $m
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
Cash from operations, $m
  63
  66
  70
  73
  77
  81
  86
  90
  95
  100
  102
  108
  114
  120
  126
  133
  140
  147
  155
  163
  172
  181
  191
  201
  211
  222
  234
  246
  259
  272
Maintenance CAPEX, $m
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -59
  -62
  -66
  -69
  -72
New CAPEX, $m
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
Cash from investing activities, $m
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -39
  -40
  -43
  -44
  -47
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -77
  -81
  -84
  -88
  -93
  -98
  -102
Free cash flow, $m
  38
  40
  43
  45
  47
  50
  53
  56
  59
  62
  62
  65
  69
  73
  77
  81
  86
  90
  95
  101
  106
  112
  118
  124
  131
  138
  145
  153
  161
  170
Issuance/(repayment) of debt, $m
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  49
  51
  53
  56
  59
  62
  65
  68
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  
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  49
  51
  53
  56
  59
  62
  65
  68
Total cash flow (excl. dividends), $m
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
  89
  94
  99
  104
  110
  116
  122
  129
  135
  143
  150
  158
  166
  175
  184
  194
  204
  215
  226
  238
Retained Cash Flow (-), $m
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
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
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
  129
  136
  143
  150
  158
  167
  176
  185
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
  40
  41
  41
  41
  40
  40
  39
  38
  37
  35
  32
  31
  29
  27
  25
  23
  20
  18
  16
  14
  12
  10
  8
  7
  6
  4
  3
  3
  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
  100.0
  100.0
  100.0
  100.0
  100.0
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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 9.8
Price to Sales 1.1
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 18.4
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 $824.444 million for the last fiscal year's total revenue generated by Stoneridge. The default revenue input number comes from 0001 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 5.5% 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 90.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $22 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 5.4% 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 16.9%.

Life of production assets of 8.3 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 12.8%. 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 - $244.072 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 28.483 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 $0.8 billion.

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COMPANY NEWS

▶ Stoneridge: 3Q Earnings Snapshot   [05:11PM  Associated Press]
▶ Does Stoneridge Incs (NYSE:SRI) PE Ratio Warrant A Buy?   [Oct-10-18 08:38AM  Simply Wall St.]
▶ G.research 42nd Annual Automotive Aftermarket Symposium   [Sep-12-18 07:30AM  Business Wire]
▶ What is Behind Stoneridge Incs (NYSE:SRI) Superior ROE?   [Sep-10-18 11:29AM  Simply Wall St.]
▶ Stoneridge Launches New Corporate Website   [07:00AM  PR Newswire]
▶ Stoneridge Inc (NYSE:SRI): Is Auto An Attractive Sector Play?   [Aug-16-18 12:07PM  Simply Wall St.]
▶ Stoneridge: 2Q Earnings Snapshot   [05:05AM  Associated Press]
▶ Stoneridge Reports Strong Second-Quarter 2018 Results   [Aug-01-18 05:52PM  PR Newswire]
▶ Should You Buy Stoneridge Inc (NYSE:SRI)?   [Jun-21-18 03:39PM  Simply Wall St.]
▶ Stoneridge: 1Q Earnings Snapshot   [05:08AM  Associated Press]
▶ Stoneridge Reports Strong First-Quarter 2018 Results   [May-02-18 05:31PM  PR Newswire]
▶ Why MuleSoft, Square, and HealthEquity Jumped Today   [Mar-20-18 04:31PM  Motley Fool]
▶ New Strong Buy Stocks for March 2nd   [Mar-02-18 09:46AM  Zacks]
▶ Stoneridge, Inc. to Host Earnings Call   [07:30AM  ACCESSWIRE]
▶ Stoneridge posts 4Q profit   [05:01AM  Associated Press]
▶ Is Stoneridge Inc (NYSE:SRI) A Financially Sound Company?   [Jan-04-18 06:10PM  Simply Wall St.]
▶ New Strong Buy Stocks for December 29th   [Dec-29-17 09:20AM  Zacks]
▶ ETFs with exposure to Stoneridge, Inc. : December 8, 2017   [Dec-08-17 01:29PM  Capital Cube]

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