Gas Station Valuation

The financial performance of convenience stores that offer gasoline has been negatively impacted during recent periods of high gas prices. Reduced gasoline due to high prices is not only impacting the volume of gas sold at retailers. But is also reducing the amount of customers that come in to buy food and beverages when they fill up their tank. Food and beverage sales offer higher than gasoline sales and the loss of these sales has had a negative impact. Credit card fees continue to be a significant and growing expense for convenience stores. The total industry credit card fees have grown at a rate of 27% over the past 5 years. And are the second largest expense at the store level in US. This really impacts the Gas station Valuation.

Methods of Gas Station Valuation

There are many type of methods to know the valuation of Gas station.

Asset-based valuation.

The basic formula to use for this method is: The fair value of a company’s assets less the fair market value of its liabilities = the fair market value of a company’s equity. This is approach also sometimes referred to as a cost based approach where the value of the business is equal to the cost of acquiring its assets with the same utility. This approach is seldom used for a gas and convenience store because the value of a convenience store is more closely related to its earnings and cash flow.

Income approach to value.

This method is most the accurate for gas and convenience stores that have a constant growth of earnings and have a long history of operations. This method is equal to the cash flow projection for one year divided by the capitalization rate. The value of equity utilizing this method is equal to the present value of free cash flows available to equity holders over the life of the business. This method works well for both established convenience stores with low growth rates as well as newly opened stores with higher rates of growth.

approach to value

This method utilizes indications of value such as publicly traded comparable company stock as well as acquisitions of privately held gas and convenience stores.

Public and Trade and Purchase
Gas Station Valuation

The financial performance of convenience stores that offer gasoline has been negatively impacted during recent periods of high gas prices. Reduced gasoline consumption due to high prices is not only impacting the volume of gas sold at retailers. But is also reducing the amount of customers that come in to buy food and beverages when they fill up their tank. Food and beverage sales offer higher than gasoline sales. And the loss of these sales has had a negative impact. Credit card fees continue to be a significant and growing expense for convenience stores. The total industry credit card fees have grown at a rate of 27% over the past 5 years and are the second largest expense at the store level in US. This really impacts the Gas station Valuation.

Methods of Gas Station Valuation

There are many type of methods to know the valuation of Gas station.

Asset-based valuation.

The basic formula to use for this method is: The fair value of a company’s assets less the fair market value of its liabilities = the fair market value of a company’s equity. This is approach also sometimes refer to as a cost based approach where the value of the business is equal to the cost of acquiring its assets with the same utility. This approach is seldom use for a gas and convenience store because the value of a convenience store is more closely related to its earnings and cash flow.

Income approach to value.

This method is most the accurate for gas and convenience stores that have a constant growth of earnings and have a long history of operations. This method is equal to the cash flow projection for one year divided by the capitalization rate. The value of equity utilizing this method is equal to the present value of free cash flows available to equity holders over the life of the business. This method works well for both established convenience stores with low growth rates. As well as newly opened stores with higher rates of growth.

approach to value

This method utilizes indications of value such as publicly traded comparable company stock. As well as acquisitions of privately held gas and convenience stores.

Public and Trade and Purchase

Many of the top convenience store retailers are publicly trade. However, most of these public companies are primarily oil companies. But are not good comparisons to a convenience store with or without gas.

Stores that sell gasoline typically have a higher multiple than stores that do not. This range of multiples is too variant to be useful without further analysis.

A proper value for the company that is being assess should be based on the performance of the subject enterprise. Compared to the performance of others in the same industry. Industry economic conditions also vary at different times, which obviously affect convenient stores as investment opportunities. Specific factors that are unique for each store or business must be consider.