Intrinsic value of TrueCar, Inc. - TRUE

Previous Close

$5.34

  Intrinsic Value

$1.01

stock screener

  Rating & Target

str. sell

-81%

Previous close

$5.34

 
Intrinsic value

$1.01

 
Up/down potential

-81%

 
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 0.6

 

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, %
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  388
  423
  460
  499
  539
  580
  624
  669
  715
  764
  814
  867
  921
  978
  1,037
  1,099
  1,163
  1,230
  1,300
  1,373
  1,450
  1,530
  1,613
  1,700
  1,791
  1,887
  1,987
  2,092
  2,201
  2,316
Variable operating expenses, $m
  325
  353
  383
  415
  447
  481
  516
  552
  590
  630
  661
  703
  748
  794
  842
  892
  944
  999
  1,055
  1,115
  1,177
  1,241
  1,309
  1,380
  1,454
  1,531
  1,613
  1,697
  1,786
  1,880
Fixed operating expenses, $m
  89
  91
  93
  95
  97
  99
  101
  104
  106
  108
  111
  113
  115
  118
  121
  123
  126
  129
  132
  134
  137
  140
  144
  147
  150
  153
  157
  160
  164
  167
Total operating expenses, $m
  414
  444
  476
  510
  544
  580
  617
  656
  696
  738
  772
  816
  863
  912
  963
  1,015
  1,070
  1,128
  1,187
  1,249
  1,314
  1,381
  1,453
  1,527
  1,604
  1,684
  1,770
  1,857
  1,950
  2,047
Operating income, $m
  -26
  -21
  -16
  -11
  -5
  1
  6
  13
  19
  26
  43
  50
  58
  66
  75
  84
  93
  103
  113
  124
  136
  148
  160
  174
  188
  202
  218
  234
  251
  269
EBITDA, $m
  2
  8
  15
  22
  29
  37
  45
  53
  62
  71
  80
  90
  101
  111
  123
  134
  147
  160
  173
  188
  203
  218
  235
  252
  270
  289
  309
  330
  353
  376
Interest expense (income), $m
  2
  2
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  40
  42
Earnings before tax, $m
  -28
  -24
  -20
  -15
  -11
  -6
  -1
  5
  10
  16
  32
  38
  45
  52
  59
  67
  75
  83
  92
  102
  112
  122
  133
  144
  156
  169
  183
  197
  212
  227
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  1
  3
  4
  9
  10
  12
  14
  16
  18
  20
  23
  25
  27
  30
  33
  36
  39
  42
  46
  49
  53
  57
  61
Net income, $m
  -28
  -24
  -20
  -15
  -11
  -6
  -1
  3
  7
  12
  23
  28
  33
  38
  43
  49
  55
  61
  67
  74
  81
  89
  97
  105
  114
  124
  133
  144
  154
  166

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
  292
  319
  346
  375
  405
  437
  469
  503
  538
  575
  613
  652
  693
  736
  780
  827
  875
  926
  978
  1,033
  1,091
  1,151
  1,214
  1,279
  1,348
  1,420
  1,495
  1,574
  1,656
  1,743
Adjusted assets (=assets-cash), $m
  292
  319
  346
  375
  405
  437
  469
  503
  538
  575
  613
  652
  693
  736
  780
  827
  875
  926
  978
  1,033
  1,091
  1,151
  1,214
  1,279
  1,348
  1,420
  1,495
  1,574
  1,656
  1,743
Revenue / Adjusted assets
  1.329
  1.326
  1.329
  1.331
  1.331
  1.327
  1.330
  1.330
  1.329
  1.329
  1.328
  1.330
  1.329
  1.329
  1.329
  1.329
  1.329
  1.328
  1.329
  1.329
  1.329
  1.329
  1.329
  1.329
  1.329
  1.329
  1.329
  1.329
  1.329
  1.329
Average production assets, $m
  118
  129
  140
  152
  164
  176
  190
  203
  217
  232
  248
  263
  280
  297
  315
  334
  354
  374
  395
  418
  441
  465
  490
  517
  545
  574
  604
  636
  669
  704
Working capital, $m
  19
  21
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
  65
  69
  72
  76
  81
  85
  90
  94
  99
  105
  110
  116
Total debt, $m
  30
  37
  45
  53
  62
  70
  80
  89
  99
  109
  119
  131
  142
  154
  166
  179
  193
  207
  222
  237
  253
  270
  287
  306
  325
  345
  366
  388
  411
  435
Total liabilities, $m
  81
  89
  97
  105
  113
  122
  131
  140
  150
  160
  171
  182
  193
  205
  218
  231
  244
  258
  273
  288
  304
  321
  339
  357
  376
  396
  417
  439
  462
  486
Total equity, $m
  210
  230
  250
  271
  292
  315
  338
  363
  388
  414
  442
  470
  500
  531
  563
  596
  631
  667
  705
  745
  787
  830
  875
  922
  972
  1,024
  1,078
  1,135
  1,194
  1,256
Total liabilities and equity, $m
  291
  319
  347
  376
  405
  437
  469
  503
  538
  574
  613
  652
  693
  736
  781
  827
  875
  925
  978
  1,033
  1,091
  1,151
  1,214
  1,279
  1,348
  1,420
  1,495
  1,574
  1,656
  1,742
Debt-to-equity ratio
  0.140
  0.160
  0.180
  0.200
  0.210
  0.220
  0.230
  0.250
  0.250
  0.260
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.350
Adjusted equity ratio
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -28
  -24
  -20
  -15
  -11
  -6
  -1
  3
  7
  12
  23
  28
  33
  38
  43
  49
  55
  61
  67
  74
  81
  89
  97
  105
  114
  124
  133
  144
  154
  166
Depreciation, amort., depletion, $m
  28
  29
  31
  33
  35
  36
  38
  40
  43
  45
  38
  40
  42
  45
  48
  51
  54
  57
  60
  63
  67
  70
  74
  78
  83
  87
  92
  96
  101
  107
Funds from operations, $m
  0
  5
  11
  17
  24
  31
  38
  44
  50
  57
  61
  68
  75
  83
  91
  99
  108
  118
  127
  138
  148
  159
  171
  184
  197
  210
  225
  240
  256
  273
Change in working capital, $m
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
Cash from operations, $m
  -2
  4
  9
  16
  22
  29
  36
  42
  48
  54
  58
  65
  72
  80
  88
  96
  105
  114
  124
  134
  144
  155
  167
  179
  192
  206
  220
  235
  250
  267
Maintenance CAPEX, $m
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -83
  -87
  -92
  -96
  -101
New CAPEX, $m
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
Cash from investing activities, $m
  -26
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -50
  -54
  -57
  -59
  -63
  -67
  -71
  -74
  -78
  -82
  -86
  -91
  -95
  -101
  -106
  -112
  -117
  -124
  -129
  -136
Free cash flow, $m
  -29
  -25
  -21
  -17
  -13
  -9
  -4
  -1
  3
  6
  8
  12
  16
  20
  25
  30
  35
  40
  46
  52
  58
  64
  71
  79
  86
  94
  103
  111
  121
  131
Issuance/(repayment) of debt, $m
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $m
  46
  43
  40
  36
  32
  28
  24
  21
  18
  15
  4
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  53
  50
  48
  44
  40
  37
  33
  30
  28
  25
  15
  12
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  24
  25
  26
  27
  27
  28
  29
  30
  30
  31
  22
  23
  27
  32
  37
  43
  48
  54
  61
  67
  74
  81
  89
  97
  105
  114
  124
  133
  144
  155
Retained Cash Flow (-), $m
  -46
  -43
  -40
  -36
  -32
  -28
  -24
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
Prev. year cash balance distribution, $m
  155
  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
  133
  -18
  -14
  -9
  -5
  0
  5
  5
  5
  5
  -5
  -5
  -2
  1
  5
  9
  13
  18
  23
  27
  33
  38
  44
  50
  56
  62
  69
  77
  84
  92
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
  127
  -16
  -12
  -8
  -4
  0
  3
  3
  3
  3
  -2
  -2
  -1
  0
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  1
  1
  1
  1
Current shareholders' claim on cash, %
  87.0
  77.2
  69.8
  64.0
  59.6
  56.3
  53.7
  51.7
  50.2
  49.0
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7
  48.7

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, Inc. (TRUE)

Valuation Ratios
P/E Ratio -11
Price to Sales 1.7
Price to Book 2
Price to Tangible Book
Price to Cash Flow 153.4
Price to Free Cash Flow -32.9
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 $354 million for the last fiscal year's total revenue generated by TrueCar, Inc.. The default revenue input number comes from 0001 income statement of TrueCar, Inc.. 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 9.6% 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, Inc., 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, Inc..
    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 83.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $87 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 10.2% for TrueCar, Inc..

Corporate tax rate of 27% is the nominal tax rate for TrueCar, Inc.. 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 30.4%.

Life of production assets of 6.6 years is the average useful life of capital assets used in TrueCar, Inc. 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 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 - $346.553 million for TrueCar, Inc. - 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 104.883 million for TrueCar, Inc. 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, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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