CDK Global (CDK:NAS) Fundamental Valuation Report

Fundamental Valuation Report

CDK Global(CDK:NAS)

Technology:Software-Application

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$50.24 (USD) 18/01/2019

Weighted Valuation
$73.50 (USD)

Overall Rating
Undervalued by 46.3%

Valuation Models Analyst Consensus: $73.50 (USD)
(in order of importance)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (CDK:NAS USD)

Price 50.24
Range 49.78 – 50.60
52 week 45.00 – 74.33
Open 50.30
Vol / Avg. 878608/970651
Mkt cap 6.47B
P/E 20.68
Div/yield 0.59/0.01
EPS 2.78
Shares 128.77M
Beta 0.00

Company Description

CDK Global Inc provides integrated information technology and digital marketing solutions to the automotive retail and adjacent industries. The firm’s solutions integrate clients’ buying processes, from targeted advertising and marketing campaigns to the sale, financing, and maintenance of vehicles. CDK has three segments – Retail Solutions North America, which provides automotive website platforms to manage the buying process of vehicles; Advertising North America, which provides advertising and marketing solutions across multiple channels; and CDK International, which provides technology-based retail solutions outside the United States and Canada. A large majority of the firm’s revenue is generated in the United States, but CDK has a presence in countries across the world.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for CDK:NAS

Using a discounted cash flow model we generated an intrinsic value of $83.80 (USD) for CDK:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

CDK:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $83.80 1% 5% 1% 5%
WACC (or Ke) 6.15 $107.13 $68.18
Terminal Growth Rate 1.10 $69.59 $105.02
Tax Rate 0.24 $90.16 $77.43
Cash Flow 866,490,062 $78.97 $88.62
Capital Expenditures 860,000 $83.80 $83.79
Long Term Debt 1,210,900,000 $84.27 $83.33

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $98.51 (USD) for CDK:NAS. We also generated a valuation of $102.22 (USD) using other metrics and comparables.
The comparable companies were LogMeIn (LOGM:NAS), Nuance Communications (NUAN:NAS), RealPage (RP:NAS), Trade Desk (TTD:NAS) and Tyler Technologies (TYL:NYS).

Company CDK:NAS End Date Value
Earnings/Share $2.90 (USD)
Book Value/Share ($2.44) (USD)
Sales/Share $16.87 (USD)
Cash Flow/Share $3.53 (USD)
EBITDA/Share $5.12 (USD)
Price Based on Comps Adjustment Factor (%)
$146.79 (USD) -45.9
$0.00 (USD) 0.0
$105.99 (USD) 1.6
$94.88 (USD) -41.4
$171.53 (USD) -7.9
CDK:NAS Ratios Used Average Values LOGM:NAS NUAN:NAS RP:NAS TTD:NAS TYL:NYS
16.51 PE Ratio 258.71 29.77 0.00 883.01 80.04 42.04
0.00 PB Ratio 5.55 1.39 2.21 4.21 14.89 5.07
2.84 PS Ratio 6.28 3.70 1.88 5.15 12.51 8.17
13.55 PCF Ratio 32.37 11.89 8.67 25.69 83.64 31.98
12.14 EV to EBITDA 33.47 11.42 42.32 30.51 50.95 32.15

Multiples

Using a multiples approach we generated a valuation of  $88.37 (USD) for CDK:NAS

Company CDK:NAS End Date Value
Earnings/Share $2.90 (USD)
Book Value/Share ($2.44) (USD)
Sales/Share $16.87 (USD)
Cash Flow/Share $3.53 (USD)
EBITDA/Share $5.12 (USD)
Price Based on Comps Adjustment Factor
$100.14 (USD) 0
$0.00 (USD) 0
$68.04 (USD) 0
$88.74 (USD) 0
$96.57 (USD) 0
Ratios Ratio Average
PE Ratio 34.53
PB Ratio 13.08
PS Ratio 4.03
PCF Ratio 25.11
EV to EBITDA 18.84

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  CDK:NAS for the last 3 years was  13.08

We ran the Adjusted Book Value for  CDK:NAS and generated a book value of  ($2.42) (USD)
By multiplying these we get an adjusted valuation of  ($31.64) (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for CDK:NAS. The 2 analysts have a concensus valuation for CDK:NAS for 2019 of $73.50 (USD).

CDK:NAS CDK Global

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
2 0 0 5.0000 Buy 2019-1-17

Current Price: 50.24 USD

Analyst Consensus
USD Millions 2019 2020
Mean EPS 3.90 4.19
# EPS Analysts 2 2
Mean Revenue 2,329.50 2,434.90
# Revenue Analysts 2 2
Mean Target Price 73.50
Mean Cash Flow
Mean EBITDA
Mean Net Income 469.70 514.60
Mean Debt Outstanding
Mean Tax Rate 26.85 26.00
Mean Growth Rate
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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