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Category: Stock Market and CDKGlobal
Date: 1 October 2019 Stock Price: $48.09 We take a look at the 4th quarter earnings report of their 2019 fiscal year of CDK Global a company provider of integrated information technology solutions for the automotive retail industry.
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About CDK Global
With $2 billion in revenues, CDK Global (NASDAQ:CDK) is a leading global provider of integrated information technology solutions to the automotive retail and adjacent industries. Focused on enabling end-to-end automotive commerce, CDK Global provides solutions to dealers in more than 100 countries around the world, serving approximately 30,000 retail locations and most automotive manufacturers. CDK solutions automate and integrate all parts of the dealership and buying process, including the acquisition, sale, financing, insuring, parts supply, repair and maintenance of vehicles
Overview of CDK Global's latest earnings report
- Total revenues: $488.6 million (up from $454 million for the same quarter of the previous year
- Revenue increased by 7.6% over the last 12 months
- Total expenses: $456.7 million (up from $322.6 million for the same quarter of the previous year)
- total expenses increased by 41% over the last 12 months
- Net loss -$155 million (down from $99.4 million for the same quarter of the previous year)
- Diluted earnings per share: -$1.27 (up from $0.75 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 122.4 million (down from 132.4 million for the same quarter of the previous year)
- Cash and cash equivalents: $311.4 million
- Cash and cash equivalents per share: $2.54
- Cash and cash equivalents makes up 5.29% of CDK Global's market capital
- Cash and cash equivalents makes up 10.4% of CDK Global's total assets
- Accounts receivable: $412.3 million
- Accounts receivable makes up 13.74% of CDK Global's total assets
- Cash provided by operating activities for the full year: $483.1 million
- Cash provided by operating activities per share for the full year: $3.94
CDK Global's management commentary on the results and earnings guidance
HOFFMAN ESTATES, Ill., Aug. 13, 2019 (GLOBE NEWSWIRE) -- CDK Global, Inc. (NASDAQ:CDK) today announced financial results for its fourth quarter and fiscal year ended June 30, 2019.
“We achieved very positive results, with record DMS sales in the quarter and improved retention in North America. I’m pleased with the favorable momentum we’re seeing in our business metrics and product innovations, especially with our Drive Flex solution and Fortellis Open API platform,” said Brian Krzanich, president and chief executive officer. “We are excited about the long-term growth opportunities ahead for us as we focus now solely on our world-class software business and providing great experiences for our customers.”
“Company revenues were up, driven by the addition of our ELEAD business and gains from revenue per site growth in both North America and International,” according to Joseph Tautges, executive vice president and chief financial officer. “Auto sites in North America were at their highest levels since December 2017, and sites across all segments showed sequential progress in the quarter.”
Fiscal 2020 Guidance
The Company's fiscal year 2020 guidance is provided below. The fiscal 2020 guidance is provided on both a GAAP and a non-GAAP (adjusted) basis, in accordance with ASC 606. The image below shows the fiscal guidance for 2020 as provided by CDK
“We achieved very positive results, with record DMS sales in the quarter and improved retention in North America. I’m pleased with the favorable momentum we’re seeing in our business metrics and product innovations, especially with our Drive Flex solution and Fortellis Open API platform,” said Brian Krzanich, president and chief executive officer. “We are excited about the long-term growth opportunities ahead for us as we focus now solely on our world-class software business and providing great experiences for our customers.”
“Company revenues were up, driven by the addition of our ELEAD business and gains from revenue per site growth in both North America and International,” according to Joseph Tautges, executive vice president and chief financial officer. “Auto sites in North America were at their highest levels since December 2017, and sites across all segments showed sequential progress in the quarter.”
Fiscal 2020 Guidance
The Company's fiscal year 2020 guidance is provided below. The fiscal 2020 guidance is provided on both a GAAP and a non-GAAP (adjusted) basis, in accordance with ASC 606. The image below shows the fiscal guidance for 2020 as provided by CDK
Long-Term Growth Outlook
We expect long-term revenue to grow at mid-single digit rates. Over the next two to three years, we expect adjusted EBITDA to grow at low-single digit rates, with a longer term view of growth accelerating to high-single to low-double digit rates. For our long-term growth outlook of adjusted EBITDA, the information necessary to calculate such measure on a GAAP basis is unavailable or dependent on the timing of future events outside of our control. Therefore, because of the uncertainty and variability of the nature of the amount of future adjustments, which could be significant, no reconciliation is being provided at this time.
We expect long-term revenue to grow at mid-single digit rates. Over the next two to three years, we expect adjusted EBITDA to grow at low-single digit rates, with a longer term view of growth accelerating to high-single to low-double digit rates. For our long-term growth outlook of adjusted EBITDA, the information necessary to calculate such measure on a GAAP basis is unavailable or dependent on the timing of future events outside of our control. Therefore, because of the uncertainty and variability of the nature of the amount of future adjustments, which could be significant, no reconciliation is being provided at this time.
CDK Global (NASDAQ: CDK) stock price history
The image below, obtained from Google, shows the stock price history of CDK Global (NASDAQ: CDK) over the last 5 years. And it's been a good time for CDK Global stockholders. 5 years ago the stock was trading at around $30 and it is currently trading at $48.09 a stock. So over a 5 year period the stock of CDK Global turned 60.30% to stockholders. The stock is trading at closer to its 52 week low of $41.50 than it is to its 52 week high of $63.90, which to us is a indication that the short term sentiment and momentum of CDK Global stock is negative.
CDK Global (NASDAQ: CDK) latest stock valuation
So what is CDK Global (NASDAQ: CDK) stock worth based on the release of their latest earnings report? It is hard to value a loss making stock, but in the case of CDK Global they are cash generative which can be used in our valuation models to provide a target (full value) price for CDK Global. Based on the earnings report and their fiscal outlook for 2020 our valuation model provides a target price of $44.60. We therefore believe that the stock of CDK Global is overvalued.
We recommend long term fundamental or value investors look to buy into CDK Global at least 10% below target (full value) price, which in this case is $44.60. A good entry point into the stock of CDK Global would therefore be around $40.20.
We recommend long term fundamental or value investors look to buy into CDK Global at least 10% below target (full value) price, which in this case is $44.60. A good entry point into the stock of CDK Global would therefore be around $40.20.