Intrinsic value of TravelCenters of America LLC - TA

Previous Close

$13.11

  Intrinsic Value

$43.14

stock screener

  Rating & Target

str. buy

+229%

Previous close

$13.11

 
Intrinsic value

$43.14

 
Up/down potential

+229%

 
Rating

str. buy

We calculate the intrinsic value of TA 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 0.5

 

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, %
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
Revenue, $m
  6,823
  7,440
  8,084
  8,753
  9,449
  10,173
  10,925
  11,706
  12,518
  13,362
  14,240
  15,153
  16,103
  17,093
  18,123
  19,197
  20,317
  21,485
  22,705
  23,978
  25,308
  26,698
  28,151
  29,671
  31,261
  32,925
  34,667
  36,491
  38,402
  40,403
Variable operating expenses, $m
  6,393
  6,971
  7,573
  8,200
  8,851
  9,529
  10,233
  10,964
  11,724
  12,515
  13,332
  14,187
  15,076
  16,003
  16,967
  17,973
  19,021
  20,115
  21,257
  22,449
  23,694
  24,996
  26,356
  27,779
  29,268
  30,826
  32,457
  34,164
  35,953
  37,827
Fixed operating expenses, $m
  382
  391
  399
  408
  417
  426
  436
  445
  455
  465
  475
  486
  496
  507
  518
  530
  541
  553
  566
  578
  591
  604
  617
  631
  644
  659
  673
  688
  703
  718
Total operating expenses, $m
  6,775
  7,362
  7,972
  8,608
  9,268
  9,955
  10,669
  11,409
  12,179
  12,980
  13,807
  14,673
  15,572
  16,510
  17,485
  18,503
  19,562
  20,668
  21,823
  23,027
  24,285
  25,600
  26,973
  28,410
  29,912
  31,485
  33,130
  34,852
  36,656
  38,545
Operating income, $m
  48
  79
  111
  145
  181
  218
  256
  297
  339
  382
  433
  481
  531
  583
  637
  694
  754
  817
  882
  951
  1,023
  1,099
  1,178
  1,262
  1,349
  1,441
  1,538
  1,639
  1,746
  1,858
EBITDA, $m
  140
  179
  220
  263
  307
  353
  401
  452
  504
  559
  616
  675
  737
  802
  870
  941
  1,015
  1,093
  1,174
  1,259
  1,348
  1,442
  1,540
  1,643
  1,751
  1,864
  1,983
  2,108
  2,239
  2,377
Interest expense (income), $m
  30
  29
  38
  47
  56
  66
  76
  86
  97
  109
  120
  133
  145
  159
  172
  187
  202
  217
  233
  250
  268
  286
  306
  326
  347
  369
  392
  416
  442
  468
  496
Earnings before tax, $m
  19
  41
  65
  89
  115
  142
  170
  199
  230
  262
  300
  335
  372
  410
  451
  493
  537
  583
  632
  683
  737
  793
  852
  915
  980
  1,049
  1,121
  1,198
  1,278
  1,362
Tax expense, $m
  5
  11
  17
  24
  31
  38
  46
  54
  62
  71
  81
  91
  100
  111
  122
  133
  145
  158
  171
  184
  199
  214
  230
  247
  265
  283
  303
  323
  345
  368
Net income, $m
  14
  30
  47
  65
  84
  104
  124
  146
  168
  191
  219
  245
  272
  300
  329
  360
  392
  426
  461
  499
  538
  579
  622
  668
  715
  766
  819
  874
  933
  995

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
  1,551
  1,691
  1,838
  1,990
  2,148
  2,312
  2,483
  2,661
  2,846
  3,038
  3,237
  3,445
  3,661
  3,886
  4,120
  4,364
  4,619
  4,884
  5,161
  5,451
  5,753
  6,069
  6,399
  6,745
  7,106
  7,485
  7,881
  8,295
  8,730
  9,185
Adjusted assets (=assets-cash), $m
  1,551
  1,691
  1,838
  1,990
  2,148
  2,312
  2,483
  2,661
  2,846
  3,038
  3,237
  3,445
  3,661
  3,886
  4,120
  4,364
  4,619
  4,884
  5,161
  5,451
  5,753
  6,069
  6,399
  6,745
  7,106
  7,485
  7,881
  8,295
  8,730
  9,185
Revenue / Adjusted assets
  4.399
  4.400
  4.398
  4.398
  4.399
  4.400
  4.400
  4.399
  4.398
  4.398
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
  4.399
Average production assets, $m
  710
  774
  841
  910
  983
  1,058
  1,136
  1,217
  1,302
  1,390
  1,481
  1,576
  1,675
  1,778
  1,885
  1,997
  2,113
  2,234
  2,361
  2,494
  2,632
  2,777
  2,928
  3,086
  3,251
  3,424
  3,605
  3,795
  3,994
  4,202
Working capital, $m
  48
  52
  57
  61
  66
  71
  76
  82
  88
  94
  100
  106
  113
  120
  127
  134
  142
  150
  159
  168
  177
  187
  197
  208
  219
  230
  243
  255
  269
  283
Total debt, $m
  415
  513
  615
  722
  833
  948
  1,068
  1,193
  1,322
  1,457
  1,596
  1,742
  1,893
  2,051
  2,215
  2,386
  2,565
  2,751
  2,945
  3,148
  3,360
  3,582
  3,813
  4,056
  4,309
  4,574
  4,852
  5,142
  5,447
  5,766
Total liabilities, $m
  1,087
  1,186
  1,288
  1,395
  1,506
  1,621
  1,741
  1,865
  1,995
  2,129
  2,269
  2,415
  2,566
  2,724
  2,888
  3,059
  3,238
  3,424
  3,618
  3,821
  4,033
  4,254
  4,486
  4,728
  4,982
  5,247
  5,524
  5,815
  6,120
  6,438
Total equity, $m
  464
  506
  549
  595
  642
  691
  743
  796
  851
  908
  968
  1,030
  1,095
  1,162
  1,232
  1,305
  1,381
  1,460
  1,543
  1,630
  1,720
  1,815
  1,913
  2,017
  2,125
  2,238
  2,356
  2,480
  2,610
  2,746
Total liabilities and equity, $m
  1,551
  1,692
  1,837
  1,990
  2,148
  2,312
  2,484
  2,661
  2,846
  3,037
  3,237
  3,445
  3,661
  3,886
  4,120
  4,364
  4,619
  4,884
  5,161
  5,451
  5,753
  6,069
  6,399
  6,745
  7,107
  7,485
  7,880
  8,295
  8,730
  9,184
Debt-to-equity ratio
  0.890
  1.010
  1.120
  1.210
  1.300
  1.370
  1.440
  1.500
  1.550
  1.600
  1.650
  1.690
  1.730
  1.770
  1.800
  1.830
  1.860
  1.880
  1.910
  1.930
  1.950
  1.970
  1.990
  2.010
  2.030
  2.040
  2.060
  2.070
  2.090
  2.100
Adjusted equity ratio
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299
  0.299

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  30
  47
  65
  84
  104
  124
  146
  168
  191
  219
  245
  272
  300
  329
  360
  392
  426
  461
  499
  538
  579
  622
  668
  715
  766
  819
  874
  933
  995
Depreciation, amort., depletion, $m
  92
  100
  109
  117
  126
  135
  145
  155
  166
  176
  183
  195
  207
  219
  233
  246
  261
  276
  292
  308
  325
  343
  361
  381
  401
  423
  445
  469
  493
  519
Funds from operations, $m
  106
  130
  156
  182
  210
  239
  269
  301
  333
  368
  402
  439
  478
  519
  562
  606
  653
  702
  753
  807
  863
  922
  984
  1,049
  1,117
  1,189
  1,264
  1,343
  1,426
  1,513
Change in working capital, $m
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  102
  126
  151
  178
  205
  234
  264
  295
  328
  362
  396
  433
  472
  512
  554
  599
  645
  694
  744
  798
  853
  912
  973
  1,038
  1,106
  1,177
  1,252
  1,330
  1,413
  1,499
Maintenance CAPEX, $m
  -80
  -88
  -96
  -104
  -112
  -121
  -131
  -140
  -150
  -161
  -172
  -183
  -195
  -207
  -219
  -233
  -246
  -261
  -276
  -292
  -308
  -325
  -343
  -361
  -381
  -401
  -423
  -445
  -469
  -493
New CAPEX, $m
  -64
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -107
  -112
  -116
  -122
  -127
  -132
  -138
  -145
  -151
  -158
  -165
  -173
  -181
  -190
  -199
  -208
Cash from investing activities, $m
  -144
  -152
  -163
  -174
  -184
  -196
  -209
  -221
  -234
  -249
  -263
  -278
  -294
  -310
  -326
  -345
  -362
  -383
  -403
  -424
  -446
  -470
  -494
  -519
  -546
  -574
  -604
  -635
  -668
  -701
Free cash flow, $m
  -42
  -26
  -11
  4
  20
  37
  55
  74
  93
  113
  133
  155
  178
  203
  228
  254
  282
  311
  342
  374
  407
  443
  480
  518
  559
  602
  648
  695
  745
  798
Issuance/(repayment) of debt, $m
  94
  98
  103
  107
  111
  115
  120
  125
  129
  135
  140
  146
  151
  158
  164
  171
  178
  186
  194
  203
  212
  222
  232
  242
  253
  265
  278
  291
  304
  319
Issuance/(repurchase) of shares, $m
  27
  12
  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  
  121
  110
  103
  107
  111
  115
  120
  125
  129
  135
  140
  146
  151
  158
  164
  171
  178
  186
  194
  203
  212
  222
  232
  242
  253
  265
  278
  291
  304
  319
Total cash flow (excl. dividends), $m
  79
  85
  91
  111
  131
  153
  175
  198
  222
  248
  273
  301
  330
  360
  392
  426
  461
  497
  536
  577
  619
  664
  711
  761
  813
  868
  925
  986
  1,050
  1,117
Retained Cash Flow (-), $m
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -90
  -94
  -99
  -103
  -108
  -113
  -118
  -124
  -130
  -136
Prev. year cash balance distribution, $m
  26
  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
  64
  43
  48
  65
  84
  104
  124
  145
  167
  190
  213
  239
  265
  293
  322
  353
  384
  418
  453
  490
  529
  570
  612
  657
  705
  754
  807
  862
  920
  981
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
  62
  39
  42
  54
  65
  75
  84
  91
  96
  100
  101
  102
  101
  98
  95
  90
  84
  77
  70
  62
  55
  47
  40
  33
  27
  22
  17
  13
  10
  7
Current shareholders' claim on cash, %
  94.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9
  92.9

TravelCenters of America LLC (TravelCenters) operates and franchises travel centers and convenience store and restaurant locations. The Company's segments include travel centers, convenience stores, and corporate and other. The Company offers a range of products and services, including diesel fuel and gasoline, as well as nonfuel products and services, such as truck repair and maintenance services, full service restaurants, quick service restaurants (QSRs), travel/convenience stores and various customer amenities. Its customers include trucking fleets and their drivers, independent truck drivers, highway and local motorists, and casual diners. As of December 31, 2016, the Company's business included 255 travel centers in 43 states in the United States primarily along the United States interstate highway system, and the province of Ontario, Canada. As of December 31, 2016, the Company's business included 233 convenience stores in 11 states in the United States.

FINANCIAL RATIOS  of  TravelCenters of America LLC (TA)

Valuation Ratios
P/E Ratio -259.1
Price to Sales 0.1
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow -2.4
Growth Rates
Sales Growth Rate -5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.9%
Cap. Spend. - 3 Yr. Gr. Rate 15%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 61.6%
Total Debt to Equity 61.6%
Interest Coverage 1
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -0.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity -0.4%
Return On Equity - 3 Yr. Avg. 5.8%
Asset Turnover 3.4
Profitability Ratios
Gross Margin 26.8%
Gross Margin - 3 Yr. Avg. 22.5%
EBITDA Margin 2.1%
EBITDA Margin - 3 Yr. Avg. 2.3%
Operating Margin 0.3%
Oper. Margin - 3 Yr. Avg. 1%
Pre-Tax Margin -0.1%
Pre-Tax Margin - 3 Yr. Avg. 0.7%
Net Profit Margin -0%
Net Profit Margin - 3 Yr. Avg. 0.4%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 41.6%
Payout Ratio 0%

TA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TA stock intrinsic value calculation we used $6231 million for the last fiscal year's total revenue generated by TravelCenters of America LLC. The default revenue input number comes from 0001 income statement of TravelCenters of America LLC. 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 TA stock valuation model: a) initial revenue growth rate of 9.5% 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 TA is calculated based on our internal credit rating of TravelCenters of America LLC, 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 TravelCenters of America LLC.
    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 TA stock the variable cost ratio is equal to 93.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $374 million in the base year in the intrinsic value calculation for TA 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 9.1% for TravelCenters of America LLC.

Corporate tax rate of 27% is the nominal tax rate for TravelCenters of America LLC. 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 TA 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 TA are equal to 10.4%.

Life of production assets of 8.1 years is the average useful life of capital assets used in TravelCenters of America LLC 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 TA is equal to 0.7%. 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 - $448.897 million for TravelCenters of America LLC - 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 40.398 million for TravelCenters of America LLC 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 TravelCenters of America LLC at the current share price and the inputted number of shares is $0.5 billion.

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