Intrinsic value of Gentherm - THRM

Previous Close

$41.06

  Intrinsic Value

$27.42

stock screener

  Rating & Target

sell

-33%

Previous close

$41.06

 
Intrinsic value

$27.42

 
Up/down potential

-33%

 
Rating

sell

We calculate the intrinsic value of THRM 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 1.5

 

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, %
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
Revenue, $m
  1,068
  1,155
  1,244
  1,337
  1,434
  1,534
  1,639
  1,747
  1,860
  1,978
  2,100
  2,228
  2,360
  2,499
  2,643
  2,794
  2,951
  3,115
  3,287
  3,467
  3,654
  3,850
  4,056
  4,271
  4,496
  4,732
  4,979
  5,238
  5,509
  5,793
Variable operating expenses, $m
  943
  1,018
  1,096
  1,177
  1,261
  1,348
  1,439
  1,533
  1,631
  1,733
  1,824
  1,935
  2,050
  2,170
  2,296
  2,426
  2,563
  2,706
  2,855
  3,011
  3,174
  3,344
  3,522
  3,709
  3,905
  4,109
  4,324
  4,549
  4,784
  5,031
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
  943
  1,018
  1,096
  1,177
  1,261
  1,348
  1,439
  1,533
  1,631
  1,733
  1,824
  1,935
  2,050
  2,170
  2,296
  2,426
  2,563
  2,706
  2,855
  3,011
  3,174
  3,344
  3,522
  3,709
  3,905
  4,109
  4,324
  4,549
  4,784
  5,031
Operating income, $m
  125
  137
  148
  161
  173
  186
  200
  215
  229
  245
  276
  293
  310
  329
  348
  367
  388
  410
  432
  456
  481
  506
  533
  562
  591
  622
  655
  689
  725
  762
EBITDA, $m
  179
  193
  208
  224
  240
  257
  274
  293
  311
  331
  352
  373
  395
  418
  443
  468
  494
  522
  550
  580
  612
  645
  679
  715
  753
  792
  834
  877
  922
  970
Interest expense (income), $m
  3
  8
  9
  11
  12
  14
  16
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  53
  56
  60
  63
  67
  71
  75
  80
  85
  89
Earnings before tax, $m
  117
  127
  137
  148
  159
  171
  183
  195
  208
  221
  250
  265
  280
  296
  313
  330
  348
  366
  386
  407
  428
  450
  474
  498
  524
  551
  579
  609
  640
  672
Tax expense, $m
  32
  34
  37
  40
  43
  46
  49
  53
  56
  60
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
  128
  135
  142
  149
  156
  164
  173
  182
Net income, $m
  86
  93
  100
  108
  116
  125
  133
  142
  152
  161
  183
  193
  205
  216
  228
  241
  254
  268
  282
  297
  312
  329
  346
  364
  383
  402
  423
  445
  467
  491

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
  957
  1,035
  1,115
  1,198
  1,285
  1,375
  1,468
  1,566
  1,667
  1,772
  1,882
  1,996
  2,115
  2,239
  2,368
  2,503
  2,644
  2,792
  2,945
  3,106
  3,274
  3,450
  3,634
  3,827
  4,029
  4,240
  4,461
  4,693
  4,936
  5,191
Adjusted assets (=assets-cash), $m
  957
  1,035
  1,115
  1,198
  1,285
  1,375
  1,468
  1,566
  1,667
  1,772
  1,882
  1,996
  2,115
  2,239
  2,368
  2,503
  2,644
  2,792
  2,945
  3,106
  3,274
  3,450
  3,634
  3,827
  4,029
  4,240
  4,461
  4,693
  4,936
  5,191
Revenue / Adjusted assets
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
  1.116
Average production assets, $m
  272
  294
  317
  341
  366
  391
  418
  446
  474
  504
  536
  568
  602
  637
  674
  712
  753
  794
  838
  884
  932
  982
  1,034
  1,089
  1,146
  1,207
  1,270
  1,336
  1,405
  1,477
Working capital, $m
  206
  223
  240
  258
  277
  296
  316
  337
  359
  382
  405
  430
  456
  482
  510
  539
  570
  601
  634
  669
  705
  743
  783
  824
  868
  913
  961
  1,011
  1,063
  1,118
Total debt, $m
  172
  201
  231
  262
  294
  328
  363
  399
  437
  476
  517
  560
  604
  650
  699
  749
  801
  856
  914
  974
  1,036
  1,102
  1,171
  1,243
  1,318
  1,397
  1,479
  1,566
  1,656
  1,751
Total liabilities, $m
  357
  386
  416
  447
  479
  513
  548
  584
  622
  661
  702
  745
  789
  835
  883
  934
  986
  1,041
  1,099
  1,159
  1,221
  1,287
  1,356
  1,427
  1,503
  1,582
  1,664
  1,751
  1,841
  1,936
Total equity, $m
  600
  649
  699
  751
  806
  862
  921
  982
  1,045
  1,111
  1,180
  1,252
  1,326
  1,404
  1,485
  1,570
  1,658
  1,750
  1,847
  1,948
  2,053
  2,163
  2,279
  2,400
  2,526
  2,658
  2,797
  2,943
  3,095
  3,255
Total liabilities and equity, $m
  957
  1,035
  1,115
  1,198
  1,285
  1,375
  1,469
  1,566
  1,667
  1,772
  1,882
  1,997
  2,115
  2,239
  2,368
  2,504
  2,644
  2,791
  2,946
  3,107
  3,274
  3,450
  3,635
  3,827
  4,029
  4,240
  4,461
  4,694
  4,936
  5,191
Debt-to-equity ratio
  0.290
  0.310
  0.330
  0.350
  0.370
  0.380
  0.390
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.490
  0.490
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
  0.530
  0.530
  0.530
  0.540
  0.540
Adjusted equity ratio
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627
  0.627

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  86
  93
  100
  108
  116
  125
  133
  142
  152
  161
  183
  193
  205
  216
  228
  241
  254
  268
  282
  297
  312
  329
  346
  364
  383
  402
  423
  445
  467
  491
Depreciation, amort., depletion, $m
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  75
  80
  85
  90
  95
  100
  106
  112
  118
  125
  131
  138
  146
  153
  161
  170
  179
  188
  198
  208
Funds from operations, $m
  139
  150
  160
  171
  183
  195
  207
  220
  234
  248
  258
  273
  289
  306
  323
  341
  360
  379
  400
  421
  444
  467
  492
  517
  544
  572
  602
  633
  665
  699
Change in working capital, $m
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
  43
  46
  48
  50
  52
  55
Cash from operations, $m
  123
  133
  143
  153
  164
  176
  187
  199
  212
  225
  235
  249
  264
  279
  295
  312
  329
  348
  367
  387
  407
  429
  452
  476
  501
  527
  554
  583
  613
  644
Maintenance CAPEX, $m
  -35
  -38
  -41
  -45
  -48
  -51
  -55
  -59
  -63
  -67
  -71
  -75
  -80
  -85
  -90
  -95
  -100
  -106
  -112
  -118
  -125
  -131
  -138
  -146
  -153
  -161
  -170
  -179
  -188
  -198
New CAPEX, $m
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
Cash from investing activities, $m
  -56
  -60
  -64
  -69
  -73
  -77
  -82
  -87
  -92
  -97
  -102
  -107
  -114
  -120
  -127
  -133
  -140
  -148
  -156
  -164
  -173
  -181
  -190
  -201
  -210
  -221
  -233
  -245
  -257
  -270
Free cash flow, $m
  67
  73
  79
  85
  92
  98
  106
  113
  120
  128
  132
  141
  150
  159
  169
  179
  189
  200
  211
  223
  235
  248
  261
  275
  290
  305
  321
  338
  355
  374
Issuance/(repayment) of debt, $m
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  86
  91
  95
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  
  28
  29
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  86
  91
  95
Total cash flow (excl. dividends), $m
  95
  101
  109
  116
  124
  132
  140
  149
  158
  168
  173
  184
  194
  205
  217
  229
  242
  255
  268
  283
  298
  314
  330
  347
  365
  384
  404
  424
  446
  469
Retained Cash Flow (-), $m
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -101
  -105
  -110
  -115
  -121
  -126
  -132
  -139
  -145
  -152
  -160
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
  48
  53
  58
  64
  70
  76
  82
  88
  95
  102
  105
  112
  120
  128
  136
  144
  153
  162
  172
  182
  192
  203
  215
  226
  239
  252
  265
  279
  294
  309
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
  46
  49
  51
  53
  54
  55
  55
  55
  54
  53
  50
  48
  45
  43
  40
  37
  33
  30
  26
  23
  20
  17
  14
  12
  9
  7
  6
  4
  3
  2
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
  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

Gentherm Incorporated (Gentherm) is a global technology company engaged in the design, development, and manufacturing of thermal management technologies. The Company has two segments: Automotive and Industrial. Its products provide solutions for automotive passenger comfort and convenience, battery thermal management, remote power generation, patient temperature management, environmental product testing and other consumer and industrial temperature control needs. Its automotive products can be found on the vehicles of all major automotive manufacturers operating in North America, Europe and Asia. The Automotive segment comprises the results from its global automotive businesses and individual convenience products. The Industrial segment represents the combined results from its remote power generation systems business, patient temperature management systems business, environmental testing equipment and services business, and advanced research and product development division.

FINANCIAL RATIOS  of  Gentherm (THRM)

Valuation Ratios
P/E Ratio 19.5
Price to Sales 1.6
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 13.9
Price to Free Cash Flow 35.7
Growth Rates
Sales Growth Rate 7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 20%
Cap. Spend. - 3 Yr. Gr. Rate 12.9%
Financial Strength
Quick Ratio 89
Current Ratio 0
LT Debt to Equity 37%
Total Debt to Equity 37.4%
Interest Coverage 38
Management Effectiveness
Return On Assets 10.6%
Ret/ On Assets - 3 Yr. Avg. 13.6%
Return On Total Capital 13.8%
Ret/ On T. Cap. - 3 Yr. Avg. 18.6%
Return On Equity 18.2%
Return On Equity - 3 Yr. Avg. 24.3%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 32.1%
Gross Margin - 3 Yr. Avg. 31.4%
EBITDA Margin 16.6%
EBITDA Margin - 3 Yr. Avg. 17.3%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 12.9%
Net Profit Margin 8.4%
Net Profit Margin - 3 Yr. Avg. 9.4%
Effective Tax Rate 30.6%
Eff/ Tax Rate - 3 Yr. Avg. 27.5%
Payout Ratio 0%

THRM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the THRM stock intrinsic value calculation we used $985.683 million for the last fiscal year's total revenue generated by Gentherm. The default revenue input number comes from 0001 income statement of Gentherm. 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 THRM stock valuation model: a) initial revenue growth rate of 8.4% 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 THRM is calculated based on our internal credit rating of Gentherm, 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 Gentherm.
    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 THRM stock the variable cost ratio is equal to 88.4%.

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 THRM 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 Gentherm.

Corporate tax rate of 27% is the nominal tax rate for Gentherm. 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 THRM 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 THRM are equal to 25.5%.

Life of production assets of 7.1 years is the average useful life of capital assets used in Gentherm 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 THRM is equal to 19.3%. 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 - $553.874 million for Gentherm - 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 36.463 million for Gentherm 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 Gentherm at the current share price and the inputted number of shares is $1.5 billion.

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COMPANY NEWS

▶ Gentherm: 3Q Earnings Snapshot   [08:41AM  Associated Press]
▶ Gentherm Reports 2018 Third Quarter Results   [06:00AM  GlobeNewswire]
▶ Does Gentherm Incorporated (NASDAQ:THRM) Fall With The Market?   [Aug-31-18 08:15AM  Simply Wall St.]
▶ Gentherm: 2Q Earnings Snapshot   [Jul-26-18 10:22AM  Associated Press]
▶ Gentherm Reports 2018 Second Quarter Results   [06:00AM  GlobeNewswire]
▶ Gentherm to Participate in the J.P. Morgan Auto Conference   [Jul-19-18 03:17PM  GlobeNewswire]
▶ Markets Look Confused After Latest Beating   [03:38AM  TheStreet.com]
▶ Gentherm: 1Q Earnings Snapshot   [Apr-26-18 09:31AM  Associated Press]
▶ Gentherm Reports 2018 First Quarter Results   [06:00AM  GlobeNewswire]
▶ Gentherm Announces Termination of Shareholder Rights Plan   [Mar-05-18 05:05PM  GlobeNewswire]
▶ Gentherm reports 4Q loss   [06:41AM  Associated Press]
▶ ETFs with exposure to Gentherm, Inc. : December 27, 2017   [Dec-27-17 11:55AM  Capital Cube]
▶ ETFs with exposure to Gentherm, Inc. : December 14, 2017   [Dec-14-17 02:12PM  Capital Cube]
▶ ETFs with exposure to Gentherm, Inc. : November 20, 2017   [Nov-20-17 01:24PM  Capital Cube]
▶ ETFs with exposure to Gentherm, Inc. : November 10, 2017   [Nov-10-17 12:53PM  Capital Cube]
▶ Gentherm misses 3Q profit forecasts   [Oct-26-17 06:37AM  Associated Press]
▶ Gentherm Selects Phillip Eyler as New President and CEO   [Oct-03-17 04:05PM  PR Newswire]
▶ ETFs with exposure to Gentherm, Inc. : August 15, 2017   [Aug-15-17 05:15PM  Capital Cube]

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