Intrinsic value of TrueCar - TRUE

Previous Close

$10.62

  Intrinsic Value

$0.60

stock screener

  Rating & Target

str. sell

-94%

Previous close

$10.62

 
Intrinsic value

$0.60

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of TRUE 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 1.1

 

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, %
  7.40
  7.16
  6.94
  6.75
  6.57
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  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
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
Revenue, $m
  347
  372
  398
  425
  452
  482
  512
  543
  576
  610
  646
  683
  722
  762
  804
  849
  895
  943
  994
  1,047
  1,102
  1,160
  1,221
  1,284
  1,351
  1,421
  1,494
  1,571
  1,652
  1,736
Variable operating expenses, $m
  308
  330
  352
  375
  400
  425
  451
  478
  507
  536
  560
  592
  626
  661
  698
  736
  776
  818
  862
  908
  956
  1,006
  1,059
  1,114
  1,172
  1,233
  1,296
  1,363
  1,433
  1,506
Fixed operating expenses, $m
  74
  75
  77
  79
  80
  82
  84
  86
  88
  90
  91
  93
  96
  98
  100
  102
  104
  107
  109
  111
  114
  116
  119
  121
  124
  127
  130
  132
  135
  138
Total operating expenses, $m
  382
  405
  429
  454
  480
  507
  535
  564
  595
  626
  651
  685
  722
  759
  798
  838
  880
  925
  971
  1,019
  1,070
  1,122
  1,178
  1,235
  1,296
  1,360
  1,426
  1,495
  1,568
  1,644
Operating income, $m
  -35
  -33
  -31
  -29
  -27
  -25
  -23
  -21
  -18
  -16
  -6
  -3
  0
  3
  7
  10
  14
  18
  23
  27
  32
  37
  43
  49
  55
  61
  68
  76
  83
  92
EBITDA, $m
  -10
  -7
  -3
  0
  3
  7
  11
  15
  19
  23
  28
  33
  38
  43
  49
  55
  61
  68
  74
  82
  90
  98
  106
  116
  125
  135
  146
  157
  169
  182
Interest expense (income), $m
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
  29
Earnings before tax, $m
  -37
  -36
  -35
  -33
  -32
  -30
  -29
  -27
  -25
  -23
  -14
  -12
  -10
  -7
  -5
  -2
  1
  4
  8
  11
  15
  19
  23
  28
  33
  38
  44
  50
  56
  62
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  2
  3
  4
  5
  6
  8
  9
  10
  12
  13
  15
  17
Net income, $m
  -37
  -36
  -35
  -33
  -32
  -30
  -29
  -27
  -25
  -23
  -14
  -12
  -10
  -7
  -5
  -2
  1
  3
  6
  8
  11
  14
  17
  21
  24
  28
  32
  36
  41
  46

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
  242
  259
  277
  296
  315
  336
  357
  379
  401
  425
  450
  476
  503
  531
  561
  591
  624
  657
  693
  729
  768
  808
  851
  895
  942
  990
  1,041
  1,095
  1,151
  1,210
Adjusted assets (=assets-cash), $m
  242
  259
  277
  296
  315
  336
  357
  379
  401
  425
  450
  476
  503
  531
  561
  591
  624
  657
  693
  729
  768
  808
  851
  895
  942
  990
  1,041
  1,095
  1,151
  1,210
Revenue / Adjusted assets
  1.434
  1.436
  1.437
  1.436
  1.435
  1.435
  1.434
  1.433
  1.436
  1.435
  1.436
  1.435
  1.435
  1.435
  1.433
  1.437
  1.434
  1.435
  1.434
  1.436
  1.435
  1.436
  1.435
  1.435
  1.434
  1.435
  1.435
  1.435
  1.435
  1.435
Average production assets, $m
  112
  120
  128
  137
  146
  156
  165
  175
  186
  197
  209
  221
  233
  246
  260
  274
  289
  305
  321
  338
  356
  375
  394
  415
  436
  459
  483
  507
  533
  561
Working capital, $m
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
Total debt, $m
  35
  40
  46
  52
  58
  64
  71
  78
  85
  93
  101
  109
  118
  127
  136
  146
  156
  167
  178
  190
  202
  215
  229
  243
  258
  273
  290
  307
  325
  343
Total liabilities, $m
  77
  83
  88
  94
  101
  107
  114
  121
  128
  136
  144
  152
  160
  169
  179
  189
  199
  210
  221
  233
  245
  258
  271
  286
  300
  316
  332
  349
  367
  386
Total equity, $m
  165
  176
  189
  201
  215
  229
  243
  258
  273
  290
  306
  324
  342
  362
  382
  403
  425
  448
  472
  497
  523
  551
  579
  610
  641
  674
  709
  746
  784
  824
Total liabilities and equity, $m
  242
  259
  277
  295
  316
  336
  357
  379
  401
  426
  450
  476
  502
  531
  561
  592
  624
  658
  693
  730
  768
  809
  850
  896
  941
  990
  1,041
  1,095
  1,151
  1,210
Debt-to-equity ratio
  0.210
  0.230
  0.240
  0.260
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.410
  0.410
  0.410
  0.410
  0.420
Adjusted equity ratio
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681
  0.681

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -37
  -36
  -35
  -33
  -32
  -30
  -29
  -27
  -25
  -23
  -14
  -12
  -10
  -7
  -5
  -2
  1
  3
  6
  8
  11
  14
  17
  21
  24
  28
  32
  36
  41
  46
Depreciation, amort., depletion, $m
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  57
  60
  64
  67
  70
  74
  78
  82
  86
  90
Funds from operations, $m
  -12
  -10
  -7
  -4
  -1
  2
  5
  8
  12
  15
  19
  23
  28
  32
  37
  42
  47
  52
  57
  63
  68
  74
  81
  87
  94
  102
  110
  118
  127
  136
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  -13
  -10
  -8
  -5
  -2
  1
  4
  7
  11
  15
  18
  23
  27
  31
  36
  41
  46
  51
  56
  61
  67
  73
  79
  86
  93
  100
  108
  116
  125
  134
Maintenance CAPEX, $m
  -17
  -18
  -19
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -57
  -60
  -64
  -67
  -70
  -74
  -78
  -82
  -86
New CAPEX, $m
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
Cash from investing activities, $m
  -25
  -26
  -27
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -56
  -59
  -63
  -65
  -69
  -73
  -76
  -80
  -85
  -89
  -93
  -98
  -103
  -108
  -113
Free cash flow, $m
  -37
  -36
  -35
  -34
  -33
  -32
  -31
  -29
  -28
  -26
  -25
  -23
  -21
  -19
  -17
  -15
  -13
  -11
  -9
  -7
  -5
  -3
  -1
  2
  4
  7
  10
  14
  17
  21
Issuance/(repayment) of debt, $m
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
Issuance/(repurchase) of shares, $m
  49
  48
  47
  46
  45
  44
  43
  42
  41
  40
  31
  30
  28
  27
  25
  23
  21
  20
  18
  17
  15
  14
  12
  10
  8
  5
  3
  0
  0
  0
Cash from financing (excl. dividends), $m  
  54
  54
  53
  52
  51
  50
  50
  49
  48
  48
  39
  38
  37
  36
  34
  33
  31
  31
  29
  29
  27
  27
  26
  24
  23
  21
  19
  17
  18
  19
Total cash flow (excl. dividends), $m
  16
  17
  17
  18
  18
  19
  19
  20
  20
  21
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  35
  39
Retained Cash Flow (-), $m
  -49
  -48
  -47
  -46
  -45
  -44
  -43
  -42
  -41
  -40
  -31
  -30
  -28
  -27
  -25
  -23
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
Prev. year cash balance distribution, $m
  160
  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
  128
  -31
  -30
  -28
  -27
  -26
  -24
  -22
  -21
  -19
  -17
  -15
  -13
  -10
  -8
  -5
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -3
  -1
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
  123
  -28
  -26
  -23
  -21
  -19
  -16
  -14
  -12
  -10
  -8
  -6
  -5
  -3
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  91.5
  84.4
  78.3
  73.1
  68.6
  64.7
  61.3
  58.4
  55.8
  53.5
  51.9
  50.5
  49.2
  48.1
  47.2
  46.4
  45.7
  45.0
  44.5
  44.1
  43.7
  43.3
  43.1
  42.9
  42.7
  42.6
  42.5
  42.5
  42.5
  42.5

TrueCar, Inc. is an Internet-based information, technology, and communication services company. The Company has a data-driven online platform, which features market data and analytics. The Company-branded platform is available on its TrueCar Website and mobile applications. It customizes and operates its platform on a co-branded basis for its affinity group marketing partners, including financial institutions, membership-based organizations, and employee buying programs for a range of enterprises. The Company enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar Certified Dealers. Its network of over 13,000 TrueCar Certified Dealers consists primarily of new car franchises, as well as independent dealers selling used vehicles. Its subsidiary, ALG, Inc., provides forecasts and consulting services regarding determination of the residual value of an automobile at given future points in time.

FINANCIAL RATIOS  of  TrueCar (TRUE)

Valuation Ratios
P/E Ratio -21.8
Price to Sales 3.3
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 305
Price to Free Cash Flow -65.4
Growth Rates
Sales Growth Rate 6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.3%
Cap. Spend. - 3 Yr. Gr. Rate 16.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 12.9%
Total Debt to Equity 12.9%
Interest Coverage -20
Management Effectiveness
Return On Assets -13.4%
Ret/ On Assets - 3 Yr. Avg. -18.4%
Return On Total Capital -16.3%
Ret/ On T. Cap. - 3 Yr. Avg. -21.8%
Return On Equity -18.3%
Return On Equity - 3 Yr. Avg. -23.3%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 90.6%
Gross Margin - 3 Yr. Avg. 90.9%
EBITDA Margin -5.8%
EBITDA Margin - 3 Yr. Avg. -13.5%
Operating Margin -13.7%
Oper. Margin - 3 Yr. Avg. -20.3%
Pre-Tax Margin -14.7%
Pre-Tax Margin - 3 Yr. Avg. -20.9%
Net Profit Margin -15.1%
Net Profit Margin - 3 Yr. Avg. -21.1%
Effective Tax Rate -2.4%
Eff/ Tax Rate - 3 Yr. Avg. -1.3%
Payout Ratio 0%

TRUE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRUE stock intrinsic value calculation we used $323.149 million for the last fiscal year's total revenue generated by TrueCar. The default revenue input number comes from 0001 income statement of TrueCar. 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 TRUE stock valuation model: a) initial revenue growth rate of 7.4% 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 TRUE is calculated based on our internal credit rating of TrueCar, 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 TrueCar.
    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 TRUE stock the variable cost ratio is equal to 88.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $72 million in the base year in the intrinsic value calculation for TRUE 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% for TrueCar.

Corporate tax rate of 27% is the nominal tax rate for TrueCar. 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 TRUE 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 TRUE are equal to 32.3%.

Life of production assets of 6.2 years is the average useful life of capital assets used in TrueCar 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 TRUE is equal to 2.4%. 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 - $313.118 million for TrueCar - 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 100.932 million for TrueCar 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 TrueCar at the current share price and the inputted number of shares is $1.1 billion.

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COMPANY NEWS

▶ TrueCar to Participate in Upcoming Conference   [Nov-09-18 04:30PM  GlobeNewswire]
▶ Why Shares of TrueCar Are Down Over 16% Today   [Nov-07-18 12:14PM  Motley Fool]
▶ TrueCar: 3Q Earnings Snapshot   [06:47PM  Associated Press]
▶ TrueCar Q3 Earnings Preview   [09:26AM  Benzinga]
▶ TrueCar Appoints Phil McKoy to its Board of Directors   [Oct-29-18 04:05PM  GlobeNewswire]
▶ Tiger Legatus Capitals Returns, AUM, and Holdings   [Oct-01-18 09:15AM  Insider Monkey]
▶ Why TrueCar's Shares Are Up 17% Today   [Aug-10-18 12:42PM  Motley Fool]
▶ TrueCar (TRUE) Matches Q2 Earnings Estimates   [Aug-09-18 06:25PM  Zacks]
▶ TrueCar: 2Q Earnings Snapshot   [05:20PM  Associated Press]
▶ A Look At The Fair Value Of TrueCar Inc (NASDAQ:TRUE)   [Jun-22-18 11:44AM  Simply Wall St.]
▶ TrueCar to Participate in Upcoming Conferences   [May-11-18 06:46PM  GlobeNewswire]
▶ TrueCar Loss Widens as Sales Miss Guidance   [May-09-18 04:54PM  Motley Fool]
▶ TrueCar: 1Q Earnings Snapshot   [05:21AM  Associated Press]

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