Intrinsic value of Brookfield Business Partners L.P. - BBU-UN

Previous Close

$37.01

  Intrinsic Value

$477.60

stock screener

  Rating & Target

str. buy

+999%

Previous close

$37.01

 
Intrinsic value

$477.60

 
Up/down potential

+999%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BBU-UN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.88
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  10,755
  17,208
  26,586
  39,760
  57,690
  81,392
  111,895
  150,196
  197,216
  253,769
  320,531
  398,027
  486,627
  586,549
  697,877
  820,580
  954,531
  1,099,540
  1,255,371
  1,421,774
  1,598,495
  1,785,307
  1,982,013
  2,188,464
  2,404,567
  2,630,287
  2,865,657
  3,110,773
  3,365,802
  3,630,974
  3,906,585
Variable operating expenses, $m
 
  16,323
  25,134
  37,511
  54,357
  76,626
  105,284
  141,269
  185,447
  238,580
  301,305
  373,960
  457,201
  551,081
  655,678
  770,961
  896,813
  1,033,053
  1,179,462
  1,335,802
  1,501,838
  1,677,354
  1,862,165
  2,056,133
  2,259,168
  2,471,240
  2,692,377
  2,922,672
  3,162,280
  3,411,417
  3,670,363
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  11,005
  16,323
  25,134
  37,511
  54,357
  76,626
  105,284
  141,269
  185,447
  238,580
  301,305
  373,960
  457,201
  551,081
  655,678
  770,961
  896,813
  1,033,053
  1,179,462
  1,335,802
  1,501,838
  1,677,354
  1,862,165
  2,056,133
  2,259,168
  2,471,240
  2,692,377
  2,922,672
  3,162,280
  3,411,417
  3,670,363
Operating income, $m
  -250
  885
  1,452
  2,249
  3,333
  4,766
  6,610
  8,926
  11,770
  15,189
  19,226
  24,068
  29,425
  35,467
  42,199
  49,619
  57,718
  66,487
  75,909
  85,971
  96,657
  107,953
  119,848
  132,331
  145,399
  159,047
  173,280
  188,101
  203,522
  219,557
  236,222
EBITDA, $m
  136
  1,472
  2,274
  3,401
  4,935
  6,963
  9,572
  12,848
  16,871
  21,708
  27,419
  34,049
  41,628
  50,175
  59,699
  70,195
  81,654
  94,058
  107,389
  121,623
  136,741
  152,721
  169,548
  187,209
  205,695
  225,004
  245,138
  266,106
  287,922
  310,606
  334,183
Interest expense (income), $m
  100
  63
  239
  494
  853
  1,341
  1,986
  2,816
  3,858
  5,138
  6,677
  8,494
  10,604
  13,015
  15,734
  18,764
  22,104
  25,750
  29,696
  33,937
  38,466
  43,276
  48,360
  53,714
  59,333
  65,214
  71,358
  77,764
  84,435
  91,376
  98,593
Earnings before tax, $m
  -295
  822
  1,213
  1,754
  2,480
  3,425
  4,625
  6,110
  7,911
  10,051
  12,549
  15,573
  18,822
  22,452
  26,465
  30,854
  35,614
  40,737
  46,213
  52,034
  58,191
  64,677
  71,487
  78,617
  86,066
  93,833
  101,922
  110,338
  119,087
  128,181
  137,629
Tax expense, $m
  -22
  222
  328
  474
  670
  925
  1,249
  1,650
  2,136
  2,714
  3,388
  4,205
  5,082
  6,062
  7,145
  8,331
  9,616
  10,999
  12,478
  14,049
  15,712
  17,463
  19,302
  21,227
  23,238
  25,335
  27,519
  29,791
  32,154
  34,609
  37,160
Net income, $m
  -43
  600
  886
  1,281
  1,810
  2,500
  3,376
  4,461
  5,775
  7,337
  9,161
  11,369
  13,740
  16,390
  19,319
  22,524
  25,999
  29,738
  33,736
  37,985
  42,479
  47,215
  52,186
  57,391
  62,828
  68,498
  74,403
  80,547
  86,934
  93,572
  100,469

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,871
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  11,069
  14,720
  22,743
  34,012
  49,350
  69,625
  95,718
  128,482
  168,705
  217,083
  274,193
  340,485
  416,276
  501,753
  596,986
  701,950
  816,536
  940,581
  1,073,885
  1,216,231
  1,367,404
  1,527,209
  1,695,477
  1,872,082
  2,056,943
  2,250,032
  2,451,374
  2,661,055
  2,879,215
  3,106,051
  3,341,818
Adjusted assets (=assets-cash), $m
  9,198
  14,720
  22,743
  34,012
  49,350
  69,625
  95,718
  128,482
  168,705
  217,083
  274,193
  340,485
  416,276
  501,753
  596,986
  701,950
  816,536
  940,581
  1,073,885
  1,216,231
  1,367,404
  1,527,209
  1,695,477
  1,872,082
  2,056,943
  2,250,032
  2,451,374
  2,661,055
  2,879,215
  3,106,051
  3,341,818
Revenue / Adjusted assets
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
  1.169
Average production assets, $m
  3,564
  5,696
  8,800
  13,161
  19,095
  26,941
  37,037
  49,715
  65,279
  83,998
  106,096
  131,747
  161,073
  194,148
  230,997
  271,612
  315,950
  363,948
  415,528
  470,607
  529,102
  590,937
  656,046
  724,382
  795,912
  870,625
  948,532
  1,029,666
  1,114,080
  1,201,852
  1,293,080
Working capital, $m
  2,054
  1,187
  1,834
  2,743
  3,981
  5,616
  7,721
  10,363
  13,608
  17,510
  22,117
  27,464
  33,577
  40,472
  48,154
  56,620
  65,863
  75,868
  86,621
  98,102
  110,296
  123,186
  136,759
  151,004
  165,915
  181,490
  197,730
  214,643
  232,240
  250,537
  269,554
Total debt, $m
  2,096
  5,829
  12,054
  20,799
  32,701
  48,435
  68,683
  94,108
  125,321
  162,862
  207,180
  258,623
  317,436
  383,766
  457,667
  539,119
  628,038
  724,297
  827,741
  938,201
  1,055,512
  1,179,520
  1,310,096
  1,447,142
  1,590,594
  1,740,431
  1,896,673
  2,059,385
  2,228,677
  2,404,702
  2,587,657
Total liabilities, $m
  7,690
  11,423
  17,648
  26,393
  38,295
  54,029
  74,277
  99,702
  130,915
  168,456
  212,774
  264,217
  323,030
  389,360
  463,261
  544,713
  633,632
  729,891
  833,335
  943,795
  1,061,106
  1,185,114
  1,315,690
  1,452,736
  1,596,188
  1,746,025
  1,902,267
  2,064,979
  2,234,271
  2,410,296
  2,593,251
Total equity, $m
  3,379
  3,297
  5,094
  7,619
  11,054
  15,596
  21,441
  28,780
  37,790
  48,626
  61,419
  76,269
  93,246
  112,393
  133,725
  157,237
  182,904
  210,690
  240,550
  272,436
  306,299
  342,095
  379,787
  419,346
  460,755
  504,007
  549,108
  596,076
  644,944
  695,755
  748,567
Total liabilities and equity, $m
  11,069
  14,720
  22,742
  34,012
  49,349
  69,625
  95,718
  128,482
  168,705
  217,082
  274,193
  340,486
  416,276
  501,753
  596,986
  701,950
  816,536
  940,581
  1,073,885
  1,216,231
  1,367,405
  1,527,209
  1,695,477
  1,872,082
  2,056,943
  2,250,032
  2,451,375
  2,661,055
  2,879,215
  3,106,051
  3,341,818
Debt-to-equity ratio
  0.620
  1.770
  2.370
  2.730
  2.960
  3.110
  3.200
  3.270
  3.320
  3.350
  3.370
  3.390
  3.400
  3.410
  3.420
  3.430
  3.430
  3.440
  3.440
  3.440
  3.450
  3.450
  3.450
  3.450
  3.450
  3.450
  3.450
  3.450
  3.460
  3.460
  3.460
Adjusted equity ratio
  0.164
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224
  0.224

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -43
  600
  886
  1,281
  1,810
  2,500
  3,376
  4,461
  5,775
  7,337
  9,161
  11,369
  13,740
  16,390
  19,319
  22,524
  25,999
  29,738
  33,736
  37,985
  42,479
  47,215
  52,186
  57,391
  62,828
  68,498
  74,403
  80,547
  86,934
  93,572
  100,469
Depreciation, amort., depletion, $m
  386
  587
  822
  1,153
  1,602
  2,197
  2,961
  3,922
  5,101
  6,519
  8,193
  9,981
  12,203
  14,708
  17,500
  20,577
  23,936
  27,572
  31,479
  35,652
  40,083
  44,768
  49,700
  54,877
  60,296
  65,956
  71,859
  78,005
  84,400
  91,049
  97,961
Funds from operations, $m
  321
  1,187
  1,708
  2,433
  3,413
  4,697
  6,337
  8,382
  10,876
  13,856
  17,354
  21,349
  25,942
  31,098
  36,819
  43,100
  49,934
  57,310
  65,215
  73,637
  82,563
  91,982
  101,886
  112,268
  123,124
  134,455
  146,262
  158,552
  171,334
  184,621
  198,430
Change in working capital, $m
  12
  445
  647
  909
  1,237
  1,635
  2,105
  2,643
  3,244
  3,902
  4,607
  5,347
  6,113
  6,895
  7,682
  8,466
  9,243
  10,006
  10,752
  11,482
  12,194
  12,890
  13,573
  14,245
  14,911
  15,575
  16,241
  16,913
  17,597
  18,297
  19,017
Cash from operations, $m
  309
  742
  1,061
  1,524
  2,175
  3,062
  4,233
  5,740
  7,632
  9,954
  12,747
  16,002
  19,829
  24,204
  29,137
  34,634
  40,691
  47,304
  54,463
  62,155
  70,369
  79,092
  88,314
  98,023
  108,213
  118,880
  130,021
  141,638
  153,737
  166,325
  179,413
Maintenance CAPEX, $m
  0
  -270
  -432
  -667
  -997
  -1,447
  -2,041
  -2,806
  -3,766
  -4,945
  -6,363
  -8,038
  -9,981
  -12,203
  -14,708
  -17,500
  -20,577
  -23,936
  -27,572
  -31,479
  -35,652
  -40,083
  -44,768
  -49,700
  -54,877
  -60,296
  -65,956
  -71,859
  -78,005
  -84,400
  -91,049
New CAPEX, $m
  -195
  -2,132
  -3,104
  -4,360
  -5,935
  -7,845
  -10,097
  -12,678
  -15,564
  -18,719
  -22,098
  -25,651
  -29,326
  -33,074
  -36,850
  -40,614
  -44,338
  -47,998
  -51,580
  -55,079
  -58,495
  -61,835
  -65,110
  -68,335
  -71,530
  -74,713
  -77,907
  -81,134
  -84,414
  -87,772
  -91,227
Cash from investing activities, $m
  -130
  -2,402
  -3,536
  -5,027
  -6,932
  -9,292
  -12,138
  -15,484
  -19,330
  -23,664
  -28,461
  -33,689
  -39,307
  -45,277
  -51,558
  -58,114
  -64,915
  -71,934
  -79,152
  -86,558
  -94,147
  -101,918
  -109,878
  -118,035
  -126,407
  -135,009
  -143,863
  -152,993
  -162,419
  -172,172
  -182,276
Free cash flow, $m
  179
  -1,660
  -2,475
  -3,503
  -4,756
  -6,230
  -7,905
  -9,744
  -11,698
  -13,710
  -15,714
  -17,686
  -19,478
  -21,073
  -22,421
  -23,481
  -24,223
  -24,629
  -24,689
  -24,403
  -23,778
  -22,826
  -21,564
  -20,013
  -18,194
  -16,130
  -13,843
  -11,354
  -8,683
  -5,847
  -2,864
Issuance/(repayment) of debt, $m
  -721
  4,288
  6,225
  8,745
  11,902
  15,734
  20,248
  25,425
  31,213
  37,541
  44,318
  51,443
  58,814
  66,330
  73,902
  81,452
  88,919
  96,259
  103,443
  110,460
  117,311
  124,008
  130,576
  137,045
  143,452
  149,837
  156,242
  162,712
  169,292
  176,025
  182,955
Issuance/(repurchase) of shares, $m
  742
  634
  912
  1,244
  1,625
  2,041
  2,469
  2,879
  3,235
  3,499
  3,632
  3,481
  3,237
  2,757
  2,013
  988
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  807
  4,922
  7,137
  9,989
  13,527
  17,775
  22,717
  28,304
  34,448
  41,040
  47,950
  54,924
  62,051
  69,087
  75,915
  82,440
  88,919
  96,259
  103,443
  110,460
  117,311
  124,008
  130,576
  137,045
  143,452
  149,837
  156,242
  162,712
  169,292
  176,025
  182,955
Total cash flow (excl. dividends), $m
  955
  3,262
  4,662
  6,486
  8,771
  11,545
  14,813
  18,559
  22,749
  27,330
  32,235
  37,237
  42,573
  48,013
  53,494
  58,959
  64,696
  71,630
  78,754
  86,057
  93,533
  101,183
  109,012
  117,033
  125,258
  133,707
  142,399
  151,359
  160,609
  170,178
  180,091
Retained Cash Flow (-), $m
  -965
  -1,234
  -1,797
  -2,524
  -3,436
  -4,542
  -5,845
  -7,339
  -9,010
  -10,837
  -12,793
  -14,850
  -16,977
  -19,147
  -21,332
  -23,512
  -25,667
  -27,786
  -29,860
  -31,885
  -33,863
  -35,796
  -37,692
  -39,560
  -41,409
  -43,252
  -45,101
  -46,968
  -48,868
  -50,811
  -52,812
Prev. year cash balance distribution, $m
 
  1,316
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,344
  2,865
  3,961
  5,335
  7,003
  8,968
  11,220
  13,739
  16,493
  19,443
  22,388
  25,596
  28,867
  32,162
  35,448
  39,029
  43,844
  48,894
  54,171
  59,670
  65,386
  71,320
  77,473
  83,849
  90,455
  97,298
  104,390
  111,742
  119,366
  127,279
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  3,206
  2,623
  3,447
  4,393
  5,428
  6,508
  7,580
  8,588
  9,475
  10,193
  10,632
  10,923
  10,976
  10,797
  10,407
  9,918
  9,540
  9,004
  8,341
  7,582
  6,763
  5,918
  5,078
  4,271
  3,519
  2,839
  2,241
  1,729
  1,303
  958
Current shareholders' claim on cash, %
  100
  69.5
  49.8
  36.9
  28.3
  22.4
  18.3
  15.3
  13.2
  11.7
  10.5
  9.7
  9.2
  8.8
  8.6
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5
  8.5

Brookfield Business Partners L.P. is a provider of business services, including construction services, residential real estate services and facilities management. The Company operates through five segments: Construction services, Other business services, Energy operations, Other industrial operations, and Corporate and other. The Construction services segment includes construction management and contracting services. Other business services include commercial and residential real estate services, facilities management, logistics and financial services. The Energy operations include oil and gas production, and related businesses. The industrial operations include select manufacturing and mining operations. The Company's operations are primarily located in Australia, Canada, the United Kingdom, the United States and the Middle East.

FINANCIAL RATIOS  of  Brookfield Business Partners L.P. (BBU-UN)

Valuation Ratios
P/E Ratio -44.6
Price to Sales 0.2
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow 16.8
Growth Rates
Sales Growth Rate 17.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.7%
Cap. Spend. - 3 Yr. Gr. Rate -12.7%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 45.6%
Total Debt to Equity 62%
Interest Coverage -2
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital -0.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3.3%
Return On Equity -1.5%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 7.4%
Gross Margin - 3 Yr. Avg. 9.5%
EBITDA Margin 1.8%
EBITDA Margin - 3 Yr. Avg. 6%
Operating Margin -2.3%
Oper. Margin - 3 Yr. Avg. 1.9%
Pre-Tax Margin -2.7%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. 1.6%
Effective Tax Rate 7.5%
Eff/ Tax Rate - 3 Yr. Avg. 11.7%
Payout Ratio -34.9%

BBU-UN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BBU-UN stock intrinsic value calculation we used $10755 million for the last fiscal year's total revenue generated by Brookfield Business Partners L.P.. The default revenue input number comes from 2016 income statement of Brookfield Business Partners L.P.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BBU-UN stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BBU-UN is calculated based on our internal credit rating of Brookfield Business Partners L.P., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Brookfield Business Partners L.P..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BBU-UN stock the variable cost ratio is equal to 95.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BBU-UN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.1% for Brookfield Business Partners L.P..

Corporate tax rate of 27% is the nominal tax rate for Brookfield Business Partners L.P.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BBU-UN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BBU-UN are equal to 33.1%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Brookfield Business Partners L.P. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BBU-UN is equal to 6.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3379 million for Brookfield Business Partners L.P. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 51.608 million for Brookfield Business Partners L.P. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Brookfield Business Partners L.P. at the current share price and the inputted number of shares is $1.9 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of BBU-UN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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