Intrinsic value of Empire Company Limited Non-Voting Class - EMP-A

Previous Close

$21.43

  Intrinsic Value

$2.43

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  Rating & Target

str. sell

-89%

Previous close

$21.43

 
Intrinsic value

$2.43

 
Up/down potential

-89%

 
Rating

str. sell

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

We calculate the intrinsic value of EMP-A 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 2017), $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 5.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -3.34
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  23,911
  24,389
  24,950
  25,591
  26,311
  27,109
  27,984
  28,937
  29,969
  31,080
  32,273
  33,549
  34,911
  36,361
  37,901
  39,536
  41,269
  43,103
  45,042
  47,092
  49,255
  51,538
  53,946
  56,484
  59,158
  61,975
  64,940
  68,061
  71,345
  74,800
  78,435
Variable operating expenses, $m
 
  26,777
  27,391
  28,092
  28,880
  29,752
  30,710
  31,752
  32,880
  34,096
  35,401
  36,696
  38,186
  39,771
  41,457
  43,245
  45,140
  47,146
  49,268
  51,509
  53,876
  56,373
  59,007
  61,783
  64,708
  67,788
  71,031
  74,445
  78,038
  81,817
  85,792
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
  23,578
  26,777
  27,391
  28,092
  28,880
  29,752
  30,710
  31,752
  32,880
  34,096
  35,401
  36,696
  38,186
  39,771
  41,457
  43,245
  45,140
  47,146
  49,268
  51,509
  53,876
  56,373
  59,007
  61,783
  64,708
  67,788
  71,031
  74,445
  78,038
  81,817
  85,792
Operating income, $m
  333
  -2,388
  -2,441
  -2,501
  -2,568
  -2,643
  -2,725
  -2,815
  -2,912
  -3,016
  -3,128
  -3,147
  -3,275
  -3,411
  -3,555
  -3,709
  -3,871
  -4,043
  -4,225
  -4,417
  -4,620
  -4,835
  -5,060
  -5,299
  -5,549
  -5,814
  -6,092
  -6,384
  -6,693
  -7,017
  -7,358
EBITDA, $m
  778
  -1,964
  -2,009
  -2,061
  -2,118
  -2,183
  -2,253
  -2,330
  -2,413
  -2,502
  -2,598
  -2,701
  -2,811
  -2,928
  -3,052
  -3,183
  -3,323
  -3,470
  -3,627
  -3,792
  -3,966
  -4,150
  -4,344
  -4,548
  -4,763
  -4,990
  -5,229
  -5,480
  -5,744
  -6,023
  -6,315
Interest expense (income), $m
  87
  71
  75
  80
  85
  91
  98
  105
  113
  122
  131
  142
  152
  164
  176
  189
  203
  217
  233
  249
  266
  285
  304
  324
  346
  368
  392
  417
  443
  471
  500
Earnings before tax, $m
  215
  -2,459
  -2,516
  -2,581
  -2,654
  -2,735
  -2,823
  -2,920
  -3,025
  -3,138
  -3,259
  -3,289
  -3,427
  -3,575
  -3,731
  -3,898
  -4,074
  -4,261
  -4,458
  -4,667
  -4,887
  -5,119
  -5,364
  -5,623
  -5,895
  -6,182
  -6,484
  -6,801
  -7,136
  -7,487
  -7,858
Tax expense, $m
  42
  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
Net income, $m
  159
  -2,459
  -2,516
  -2,581
  -2,654
  -2,735
  -2,823
  -2,920
  -3,025
  -3,138
  -3,259
  -3,289
  -3,427
  -3,575
  -3,731
  -3,898
  -4,074
  -4,261
  -4,458
  -4,667
  -4,887
  -5,119
  -5,364
  -5,623
  -5,895
  -6,182
  -6,484
  -6,801
  -7,136
  -7,487
  -7,858

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  207
  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
  8,696
  8,658
  8,857
  9,085
  9,340
  9,623
  9,934
  10,272
  10,639
  11,033
  11,457
  11,910
  12,393
  12,908
  13,454
  14,035
  14,650
  15,301
  15,989
  16,717
  17,485
  18,296
  19,150
  20,051
  21,000
  22,000
  23,053
  24,161
  25,327
  26,553
  27,843
Adjusted assets (=assets-cash), $m
  8,489
  8,658
  8,857
  9,085
  9,340
  9,623
  9,934
  10,272
  10,639
  11,033
  11,457
  11,910
  12,393
  12,908
  13,454
  14,035
  14,650
  15,301
  15,989
  16,717
  17,485
  18,296
  19,150
  20,051
  21,000
  22,000
  23,053
  24,161
  25,327
  26,553
  27,843
Revenue / Adjusted assets
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
  2.817
Average production assets, $m
  2,413
  2,463
  2,520
  2,585
  2,657
  2,738
  2,826
  2,923
  3,027
  3,139
  3,260
  3,388
  3,526
  3,672
  3,828
  3,993
  4,168
  4,353
  4,549
  4,756
  4,975
  5,205
  5,449
  5,705
  5,975
  6,259
  6,559
  6,874
  7,206
  7,555
  7,922
Working capital, $m
  -324
  -415
  -424
  -435
  -447
  -461
  -476
  -492
  -509
  -528
  -549
  -570
  -593
  -618
  -644
  -672
  -702
  -733
  -766
  -801
  -837
  -876
  -917
  -960
  -1,006
  -1,054
  -1,104
  -1,157
  -1,213
  -1,272
  -1,333
Total debt, $m
  1,871
  1,832
  1,947
  2,079
  2,227
  2,391
  2,571
  2,767
  2,979
  3,207
  3,452
  3,715
  3,994
  4,292
  4,609
  4,945
  5,301
  5,678
  6,077
  6,498
  6,943
  7,412
  7,907
  8,429
  8,978
  9,557
  10,167
  10,808
  11,483
  12,193
  12,940
Total liabilities, $m
  5,051
  5,013
  5,128
  5,260
  5,408
  5,572
  5,752
  5,948
  6,160
  6,388
  6,633
  6,896
  7,175
  7,473
  7,790
  8,126
  8,482
  8,859
  9,258
  9,679
  10,124
  10,593
  11,088
  11,610
  12,159
  12,738
  13,348
  13,989
  14,664
  15,374
  16,121
Total equity, $m
  3,644
  3,645
  3,729
  3,825
  3,932
  4,051
  4,182
  4,325
  4,479
  4,645
  4,823
  5,014
  5,217
  5,434
  5,664
  5,909
  6,168
  6,442
  6,732
  7,038
  7,361
  7,702
  8,062
  8,442
  8,841
  9,262
  9,705
  10,172
  10,663
  11,179
  11,722
Total liabilities and equity, $m
  8,695
  8,658
  8,857
  9,085
  9,340
  9,623
  9,934
  10,273
  10,639
  11,033
  11,456
  11,910
  12,392
  12,907
  13,454
  14,035
  14,650
  15,301
  15,990
  16,717
  17,485
  18,295
  19,150
  20,052
  21,000
  22,000
  23,053
  24,161
  25,327
  26,553
  27,843
Debt-to-equity ratio
  0.513
  0.500
  0.520
  0.540
  0.570
  0.590
  0.610
  0.640
  0.670
  0.690
  0.720
  0.740
  0.770
  0.790
  0.810
  0.840
  0.860
  0.880
  0.900
  0.920
  0.940
  0.960
  0.980
  1.000
  1.020
  1.030
  1.050
  1.060
  1.080
  1.090
  1.100
Adjusted equity ratio
  0.405
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  159
  -2,459
  -2,516
  -2,581
  -2,654
  -2,735
  -2,823
  -2,920
  -3,025
  -3,138
  -3,259
  -3,289
  -3,427
  -3,575
  -3,731
  -3,898
  -4,074
  -4,261
  -4,458
  -4,667
  -4,887
  -5,119
  -5,364
  -5,623
  -5,895
  -6,182
  -6,484
  -6,801
  -7,136
  -7,487
  -7,858
Depreciation, amort., depletion, $m
  445
  424
  432
  440
  450
  461
  472
  485
  499
  513
  529
  446
  464
  483
  504
  525
  548
  573
  599
  626
  655
  685
  717
  751
  786
  824
  863
  904
  948
  994
  1,042
Funds from operations, $m
  611
  -2,035
  -2,084
  -2,140
  -2,204
  -2,274
  -2,351
  -2,435
  -2,526
  -2,625
  -2,730
  -2,843
  -2,963
  -3,091
  -3,228
  -3,372
  -3,526
  -3,688
  -3,859
  -4,041
  -4,232
  -4,434
  -4,647
  -4,872
  -5,109
  -5,358
  -5,621
  -5,897
  -6,188
  -6,493
  -6,815
Change in working capital, $m
  -98
  -8
  -10
  -11
  -12
  -14
  -15
  -16
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
Cash from operations, $m
  709
  -2,027
  -2,074
  -2,129
  -2,191
  -2,260
  -2,336
  -2,419
  -2,509
  -2,606
  -2,710
  -2,821
  -2,940
  -3,067
  -3,201
  -3,344
  -3,496
  -3,657
  -3,826
  -4,006
  -4,195
  -4,396
  -4,606
  -4,829
  -5,063
  -5,310
  -5,570
  -5,844
  -6,132
  -6,435
  -6,753
Maintenance CAPEX, $m
  0
  -318
  -324
  -332
  -340
  -350
  -360
  -372
  -385
  -398
  -413
  -429
  -446
  -464
  -483
  -504
  -525
  -548
  -573
  -599
  -626
  -655
  -685
  -717
  -751
  -786
  -824
  -863
  -904
  -948
  -994
New CAPEX, $m
  -515
  -50
  -57
  -65
  -73
  -81
  -88
  -96
  -104
  -112
  -120
  -129
  -138
  -146
  -156
  -165
  -175
  -185
  -196
  -207
  -219
  -231
  -243
  -256
  -270
  -284
  -299
  -315
  -332
  -349
  -367
Cash from investing activities, $m
  -36
  -368
  -381
  -397
  -413
  -431
  -448
  -468
  -489
  -510
  -533
  -558
  -584
  -610
  -639
  -669
  -700
  -733
  -769
  -806
  -845
  -886
  -928
  -973
  -1,021
  -1,070
  -1,123
  -1,178
  -1,236
  -1,297
  -1,361
Free cash flow, $m
  673
  -2,395
  -2,455
  -2,526
  -2,604
  -2,691
  -2,785
  -2,887
  -2,998
  -3,116
  -3,243
  -3,379
  -3,523
  -3,677
  -3,840
  -4,013
  -4,196
  -4,390
  -4,595
  -4,812
  -5,040
  -5,281
  -5,535
  -5,802
  -6,084
  -6,381
  -6,693
  -7,022
  -7,368
  -7,732
  -8,115
Issuance/(repayment) of debt, $m
  -507
  95
  115
  132
  148
  164
  180
  196
  212
  228
  245
  262
  280
  298
  317
  336
  356
  377
  399
  421
  445
  469
  495
  522
  550
  579
  609
  642
  675
  710
  747
Issuance/(repurchase) of shares, $m
  0
  2,533
  2,600
  2,677
  2,761
  2,854
  2,954
  3,063
  3,179
  3,304
  3,437
  3,479
  3,631
  3,791
  3,962
  4,142
  4,333
  4,535
  4,748
  4,973
  5,210
  5,460
  5,724
  6,002
  6,295
  6,603
  6,927
  7,268
  7,627
  8,004
  8,401
Cash from financing (excl. dividends), $m  
  -619
  2,628
  2,715
  2,809
  2,909
  3,018
  3,134
  3,259
  3,391
  3,532
  3,682
  3,741
  3,911
  4,089
  4,279
  4,478
  4,689
  4,912
  5,147
  5,394
  5,655
  5,929
  6,219
  6,524
  6,845
  7,182
  7,536
  7,910
  8,302
  8,714
  9,148
Total cash flow (excl. dividends), $m
  54
  234
  260
  283
  305
  327
  349
  371
  394
  416
  439
  363
  387
  412
  438
  465
  493
  521
  551
  583
  615
  649
  684
  721
  760
  801
  843
  887
  934
  982
  1,033
Retained Cash Flow (-), $m
  -23
  -2,533
  -2,600
  -2,677
  -2,761
  -2,854
  -2,954
  -3,063
  -3,179
  -3,304
  -3,437
  -3,479
  -3,631
  -3,791
  -3,962
  -4,142
  -4,333
  -4,535
  -4,748
  -4,973
  -5,210
  -5,460
  -5,724
  -6,002
  -6,295
  -6,603
  -6,927
  -7,268
  -7,627
  -8,004
  -8,401
Prev. year cash balance distribution, $m
 
  73
  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
 
  -2,227
  -2,340
  -2,394
  -2,456
  -2,527
  -2,605
  -2,691
  -2,786
  -2,888
  -2,998
  -3,117
  -3,244
  -3,379
  -3,524
  -3,677
  -3,840
  -4,013
  -4,197
  -4,390
  -4,595
  -4,811
  -5,040
  -5,281
  -5,534
  -5,802
  -6,084
  -6,380
  -6,693
  -7,022
  -7,368
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  -2,121
  -2,112
  -2,038
  -1,961
  -1,881
  -1,797
  -1,709
  -1,617
  -1,521
  -1,420
  -1,317
  -1,212
  -1,105
  -998
  -892
  -789
  -690
  -595
  -507
  -425
  -352
  -286
  -229
  -179
  -138
  -104
  -77
  -56
  -39
  -27
Current shareholders' claim on cash, %
  100
  69.2
  47.9
  33.0
  22.7
  15.6
  10.7
  7.4
  5.0
  3.4
  2.4
  1.6
  1.1
  0.8
  0.5
  0.4
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Empire Company Limited is engaged in the business of food retailing and related real estate. The Company's segments include Food Retailing, and Investments and Other Operations. The Food Retailing segment consists of its subsidiary, Sobeys Inc., which owns, affiliates or franchises over 1,500 stores in approximately 10 provinces under retail banners that include Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, and Lawton's Drug Stores, as well as more than 350 retail fuel locations. The Company's Investments and Other Operations segment includes equity accounted interest in Crombie REIT, which is an open-ended real estate investment trust owning a portfolio of over 260 retail and office properties across Canada, and equity accounted interests in Genstar Development Partnership, Genstar Development Partnership II, GDC Investments 4, L.P., GDC Investments 6, L.P., GDC Investments 7, L.P., GDC Investments 8, L.P. and The Fraipont Partnership (collectively, Genstar).

FINANCIAL RATIOS  of  Empire Company Limited Non-Voting Class (EMP-A)

Valuation Ratios
P/E Ratio 36.6
Price to Sales 0.2
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow 30
Growth Rates
Sales Growth Rate -3.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.4%
Cap. Spend. - 3 Yr. Gr. Rate -2.4%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 47.7%
Total Debt to Equity 51.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. -4.4%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. -7.4%
Return On Equity 4.4%
Return On Equity - 3 Yr. Avg. -10.9%
Asset Turnover 2.7
Profitability Ratios
Gross Margin 24.3%
Gross Margin - 3 Yr. Avg. 24.7%
EBITDA Margin 3.1%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 1.4%
Oper. Margin - 3 Yr. Avg. -1.8%
Pre-Tax Margin 0.9%
Pre-Tax Margin - 3 Yr. Avg. -2.3%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. -2.1%
Effective Tax Rate 19.5%
Eff/ Tax Rate - 3 Yr. Avg. 20.8%
Payout Ratio 69.8%

EMP-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EMP-A stock intrinsic value calculation we used $23911 million for the last fiscal year's total revenue generated by Empire Company Limited Non-Voting Class . The default revenue input number comes from 2017 income statement of Empire Company Limited Non-Voting Class . 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 EMP-A stock valuation model: a) initial revenue growth rate of 2% 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 5%, whose default value for EMP-A is calculated based on our internal credit rating of Empire Company Limited Non-Voting Class , 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 Empire Company Limited Non-Voting Class .
    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 EMP-A stock the variable cost ratio is equal to 109.8%.

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 EMP-A 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 Empire Company Limited Non-Voting Class .

Corporate tax rate of 27% is the nominal tax rate for Empire Company Limited Non-Voting Class . 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 EMP-A 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 EMP-A are equal to 10.1%.

Life of production assets of 7.6 years is the average useful life of capital assets used in Empire Company Limited Non-Voting Class 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 EMP-A is equal to -1.7%. 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 - $3644 million for Empire Company Limited Non-Voting Class - 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 271.582 million for Empire Company Limited Non-Voting Class 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 Empire Company Limited Non-Voting Class at the current share price and the inputted number of shares is $5.8 billion.

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Financial statements of EMP-A
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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