Intrinsic value of Universal Technical Institute - UTI

Previous Close

$2.65

  Intrinsic Value

$1.16

stock screener

  Rating & Target

str. sell

-56%

Previous close

$2.65

 
Intrinsic value

$1.16

 
Up/down potential

-56%

 
Rating

str. sell

We calculate the intrinsic value of UTI 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 0.1

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  331
  338
  347
  357
  368
  380
  392
  406
  421
  438
  455
  473
  493
  514
  536
  560
  585
  611
  639
  668
  699
  732
  766
  802
  840
  881
  923
  968
  1,014
  1,064
Variable operating expenses, $m
  348
  356
  365
  375
  387
  399
  413
  427
  443
  460
  477
  497
  517
  539
  563
  587
  613
  641
  670
  701
  733
  768
  804
  842
  882
  924
  968
  1,015
  1,064
  1,116
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
  348
  356
  365
  375
  387
  399
  413
  427
  443
  460
  477
  497
  517
  539
  563
  587
  613
  641
  670
  701
  733
  768
  804
  842
  882
  924
  968
  1,015
  1,064
  1,116
Operating income, $m
  -17
  -18
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -22
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -48
  -50
  -52
EBITDA, $m
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
Interest expense (income), $m
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  25
  26
  28
Earnings before tax, $m
  -21
  -21
  -22
  -23
  -24
  -24
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
Tax expense, $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
Net income, $m
  -21
  -21
  -22
  -23
  -24
  -24
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80

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
  252
  258
  264
  272
  280
  289
  299
  309
  321
  333
  346
  360
  375
  391
  408
  426
  445
  465
  486
  508
  532
  557
  583
  611
  640
  670
  702
  736
  772
  809
Adjusted assets (=assets-cash), $m
  252
  258
  264
  272
  280
  289
  299
  309
  321
  333
  346
  360
  375
  391
  408
  426
  445
  465
  486
  508
  532
  557
  583
  611
  640
  670
  702
  736
  772
  809
Revenue / Adjusted assets
  1.313
  1.310
  1.314
  1.313
  1.314
  1.315
  1.311
  1.314
  1.312
  1.315
  1.315
  1.314
  1.315
  1.315
  1.314
  1.315
  1.315
  1.314
  1.315
  1.315
  1.314
  1.314
  1.314
  1.313
  1.313
  1.315
  1.315
  1.315
  1.313
  1.315
Average production assets, $m
  117
  120
  123
  126
  130
  134
  139
  144
  149
  155
  161
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  284
  298
  312
  327
  343
  359
  377
Working capital, $m
  -52
  -53
  -55
  -56
  -58
  -60
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -97
  -101
  -106
  -110
  -116
  -121
  -127
  -133
  -139
  -146
  -153
  -160
  -168
Total debt, $m
  46
  50
  54
  58
  63
  68
  74
  81
  87
  95
  103
  111
  120
  129
  140
  150
  161
  173
  186
  199
  213
  228
  244
  260
  278
  296
  315
  336
  357
  379
Total liabilities, $m
  150
  154
  158
  162
  167
  172
  178
  185
  191
  199
  207
  215
  224
  234
  244
  254
  266
  278
  290
  303
  318
  332
  348
  364
  382
  400
  419
  440
  461
  483
Total equity, $m
  101
  104
  106
  109
  113
  116
  120
  125
  129
  134
  140
  145
  151
  158
  164
  172
  179
  187
  196
  205
  214
  224
  235
  246
  258
  270
  283
  297
  311
  326
Total liabilities and equity, $m
  251
  258
  264
  271
  280
  288
  298
  310
  320
  333
  347
  360
  375
  392
  408
  426
  445
  465
  486
  508
  532
  556
  583
  610
  640
  670
  702
  737
  772
  809
Debt-to-equity ratio
  0.460
  0.480
  0.500
  0.530
  0.560
  0.590
  0.620
  0.650
  0.680
  0.710
  0.740
  0.760
  0.790
  0.820
  0.850
  0.880
  0.900
  0.930
  0.950
  0.970
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.110
  1.130
  1.150
  1.160
Adjusted equity ratio
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -21
  -21
  -22
  -23
  -24
  -24
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
Depreciation, amort., depletion, $m
  15
  15
  16
  16
  16
  17
  17
  18
  19
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  41
  43
  45
Funds from operations, $m
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -25
  -26
  -28
  -30
  -31
  -33
  -35
Change in working capital, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
Cash from operations, $m
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -28
Maintenance CAPEX, $m
  -14
  -14
  -14
  -15
  -15
  -15
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
New CAPEX, $m
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
Cash from investing activities, $m
  -16
  -17
  -17
  -18
  -19
  -19
  -21
  -22
  -22
  -24
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -48
  -49
  -52
  -55
  -58
  -60
Free cash flow, $m
  -21
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -88
Issuance/(repayment) of debt, $m
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $m
  23
  23
  25
  26
  27
  28
  30
  31
  33
  34
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
  63
  66
  70
  73
  77
  82
  86
  90
  95
Cash from financing (excl. dividends), $m  
  26
  26
  29
  30
  32
  33
  36
  37
  40
  41
  43
  45
  48
  50
  53
  57
  59
  63
  66
  69
  73
  78
  82
  86
  90
  95
  101
  106
  111
  117
Total cash flow (excl. dividends), $m
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
Retained Cash Flow (-), $m
  -23
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -77
  -82
  -86
  -90
  -95
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
  9
  -18
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
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
  8
  -16
  -16
  -15
  -15
  -15
  -14
  -13
  -13
  -12
  -12
  -11
  -10
  -10
  -9
  -8
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -2
  -1
  -1
  -1
  0
Current shareholders' claim on cash, %
  75.5
  56.7
  42.4
  31.6
  23.4
  17.2
  12.6
  9.2
  6.7
  4.9
  3.6
  2.6
  1.9
  1.3
  1.0
  0.7
  0.5
  0.4
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Universal Technical Institute, Inc. is a provider of postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians as measured by total average undergraduate full-time enrollment and graduates. The Company offers undergraduate degree or diploma programs at approximately 12 campuses across the United States under the banner of various brands, including Universal Technical Institute (UTI), Motorcycle Mechanics Institute and Marine Mechanics Institute (collectively, MMI) and NASCAR Technical Institute (NASCAR Tech). The Company also offers manufacturer specific advanced training (MSAT) programs, including student-paid electives, at its campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers. UTI offers automotive, diesel and industrial, and collision repair and refinishing programs.

FINANCIAL RATIOS  of  Universal Technical Institute (UTI)

Valuation Ratios
P/E Ratio -8.3
Price to Sales 0.2
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow -6.6
Price to Free Cash Flow -3.5
Growth Rates
Sales Growth Rate -6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12.5%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
Financial Strength
Quick Ratio 98
Current Ratio 0.2
LT Debt to Equity 33.3%
Total Debt to Equity 34.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -5.7%
Return On Total Capital -4.6%
Ret/ On T. Cap. - 3 Yr. Avg. -12.8%
Return On Equity -6.1%
Return On Equity - 3 Yr. Avg. -17.3%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 74.7%
Gross Margin - 3 Yr. Avg. 74.8%
EBITDA Margin 4.3%
EBITDA Margin - 3 Yr. Avg. 1.8%
Operating Margin -0.6%
Oper. Margin - 3 Yr. Avg. -2.9%
Pre-Tax Margin -0.9%
Pre-Tax Margin - 3 Yr. Avg. -3.4%
Net Profit Margin -2.5%
Net Profit Margin - 3 Yr. Avg. -6.3%
Effective Tax Rate -166.7%
Eff/ Tax Rate - 3 Yr. Avg. -88.9%
Payout Ratio -62.5%

UTI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UTI stock intrinsic value calculation we used $324.263 million for the last fiscal year's total revenue generated by Universal Technical Institute. The default revenue input number comes from 0001 income statement of Universal Technical Institute. 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 UTI stock valuation model: a) initial revenue growth rate of 2% 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 UTI is calculated based on our internal credit rating of Universal Technical Institute, 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 Universal Technical Institute.
    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 UTI stock the variable cost ratio is equal to 105.2%.

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 UTI 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 7.8% for Universal Technical Institute.

Corporate tax rate of 27% is the nominal tax rate for Universal Technical Institute. 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 UTI 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 UTI are equal to 35.4%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Universal Technical Institute 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 UTI is equal to -15.8%. 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 - $125.776 million for Universal Technical Institute - 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 25.187 million for Universal Technical Institute 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 Universal Technical Institute at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ How a Scottsdale training school's CEO plans to stop bleeding red ink   [Aug-13-18 07:44PM  American City Business Journals]
▶ Universal Technical Institute triples Q3 losses, revenue drops   [05:44PM  American City Business Journals]
▶ Universal Technical: Fiscal 3Q Earnings Snapshot   [05:10PM  Associated Press]
▶ Universal Technical: Fiscal 2Q Earnings Snapshot   [May-03-18 06:11PM  Associated Press]
▶ Universal Technical Institute to offer free summer program to high school students   [Feb-23-18 03:25PM  American City Business Journals]
▶ Universal Technical reports 1Q loss   [Feb-08-18 05:21PM  Associated Press]
▶ Universal Technical reports 4Q loss   [Nov-30-17 04:44PM  Associated Press]
▶ Universal Technical reports 2Q loss   [May-04-17 06:27PM  Associated Press]
▶ [$$] For-Profit School Shares Lifted as Trump Delays New Rules   [Mar-12-17 11:00AM  at The Wall Street Journal]

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