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OPENLANE, Inc. (KAR) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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OPENLANE, Inc. (KAR)

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Intrinsic Value (DCF)

Current$31.30
→
Intrinsic$38.43
+23%
$25.89$38.43$62.27
Market implies 3% growth for 5 years
KAR shows 23% potential upside using 8% growth — reasonable if fundamentals hold.
At $31, the market prices in only 3% growth — below historical 8%, suggesting low expectations.
Range: Bear $26 → Bull $62. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →4%6%8%10%
8%$46$50$55$60
10%$32$35$38$42
12%$25$27$29$32
14%$20$22$24$26

Bull Case

  • Bull case ($62) offers 99% upside at 10% growth, 9% discount
  • 19% margin of safety vs. base case estimate
  • Market-implied growth (3%) ≤ historical CAGR (8%)

Bear Case

  • Bear case ($26) implies 17% downside at 6% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$257.47M
Year 2$278.07M
Year 3$300.32M
Year 4$324.34M
Year 5$350.29M
Terminal$5.15B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$238.40MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is KAR stock undervalued or overvalued?
🟢 UNDERVALUED

KAR trades at $31.30 vs. our DCF-derived intrinsic value of $38.43, implying +22% upside. At a 10.0% WACC and 8.0% projected FCF growth, the market appears to be underpricing the present value of KAR's future cash flows. The bear case ($27.49) still suggests upside, providing margin of safety.

What is KAR's intrinsic value?

Using a 5-year DCF model: Base FCF of $238M, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $140M net debt and dividing by 0.11B shares: Bear $27.49 | Base $38.43 | Bull $53.07. Current price $31.30 implies +22% to base case.

How is KAR's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($4.33B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 18.2x.