Fortune Industries, Earnings Power Value (EPV) Historical Data
The historical data trend for Fortune Industries,'s Earnings Power Value (EPV) can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Fortune Industries, Earnings Power Value (EPV) Chart
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Fortune Industries, Annual Data
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Fortune Industries, Quarterly Data
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Competitive Comparison of Fortune Industries,'s Earnings Power Value (EPV)
For the Staffing & Employment Services subindustry, Fortune Industries,'s Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Fortune Industries,'s Earnings Power Value (EPV) Distribution in the Business Services Industry
For the Business Services industry and Industrials sector, Fortune Industries,'s Earnings Power Value (EPV) distribution charts can be found below:
* The bar in red indicates where Fortune Industries,'s Earnings Power Value (EPV) falls into.
Fortune Industries, Earnings Power Value (EPV) Calculation
Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.
The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.
Fortune Industries,'s "Earning Power" Calculation:
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Average of Last 20 Quarters
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Last Quarter
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| Revenue |
54.10
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| DDA |
0.73
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| Operating Margin % |
-0.87
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| SGA * 25% |
2.46
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| Tax Rate % |
-0.10
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| Maintenance Capex |
0.13
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| Cash and Cash Equivalents | |
6.02
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| Short-Term Debt | |
0.00
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| Long-Term Debt | |
0.00
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| Shares Outstanding (Diluted) | |
14.59 |
1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.
2. Look at average margins over a business/Industry cycle: Average Operating Margin = -0.87%
To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.
3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:
To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = €54.10 Mil, Average Operating Margin = -0.87%, Average Adjusted SGA = 2.46,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 54.10 * -0.87% +2.46 = €1.992832104 Mil.
4. Multiply by one minus Average Tax Rate (NOPAT):
Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = -0.10%, and "Normalized" EBIT = €1.992832104 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = 1.992832104 * ( 1 - -0.10% ) = €1.994824936104 Mil.
5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:
Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 0.73 * 0.5 * -0.10% = €-0.0003665 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = 1.994824936104 + -0.0003665 = €1.994458436104 Mil.
6. Adjusted for Maintenance Capital Expenditure:
First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
Fortune Industries,'s Average Maintenance CAPEX = €0.13 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.
7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%
8. Fortune Industries,'s current cash and cash equivalent = €6.02 Mil.
Fortune Industries,'s current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 0.00 + 0.00 = €0 Mil.
Fortune Industries,'s current Shares Outstanding (Diluted Average) = 14.59 Mil.
Fortune Industries,'s Earnings Power Value (EPV) for Mar13 is calculated as:
| Margin of Safety (EPV) | = | ( Earnings Power Value (EPV) | - | Current Price ) | / | Earnings Power Value (EPV) |
| = | ( 1.8352089937367 | - | 0.29 ) | / | 1.8352089937367 |
| = |
84.2%
|
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.
Fortune Industries, (FRA:FD9A) Business Description
Traded in Other Exchanges
N/A
Address
Fortune Industries Inc Fortune Industries, Inc. was incorporated in the state of Delaware in 1988, restructured in 2000 and redomesticated to the state of Indiana in May 2005. The Company provides full service human resources outsourcing services through co-employment relationships with their clients. Effective November 30, 2008, the Company approved the sale of all of the remaining operating subsidiaries within four of the five segments, as Wireless Infrastructure, Transportation Infrastructure, Ultraviolet Technologies, and Electronics Integration, to a related party. Consequently, as of the effective date of the transaction, the Business Solutions segment is the Company's remaining operating segment. The Business Solutions segment is comprised of Professional Employer Organizations (PEOs) which provide full-service human resources outsourcing services through co-employment relationships with their clients. Companies operating in the Business Solutions Segment include Professional Staff Management, Inc. and subsidiaries (PSM); CSM, Inc. and subsidiaries and related entities (CSM); Precision Employee Management, LLC (PEM); and Employer Solutions Group, Inc. and related entities (ESG). The Companies in the Business Solutions segment bill their clients under Professional Services Agreements as licensed PEOs. The billing includes amounts for the client's gross wages, payroll taxes, employee benefits, workers' compensation insurance and an administration fee. The administration fee charged by the companies in this segment is typically a percentage of the gross payroll and is sufficient to allow the companies in this segment to provide payroll administration services, human resources consulting services, worksite safety training, and employment regulatory compliance for no additional fees. The Companies in the Business Solutions segment compete with other PEOs, third-party payroll processing and human resources consulting companies, and in-house human resources divisions. The Company's Business Solutions segment is subject to various federal, state and local laws and regulations pertaining to various employee benefit plans, employee retirement plans, Section 125 cafeteria plans, group health plans, welfare benefit plans and health care flexible spending accounts.
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