Intrinsic value of Fairfax Financial Holdings Limited Subor - FFH

Previous Close

$655.10

  Intrinsic Value

$4,424

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  Rating & Target

str. buy

+575%

Previous close

$655.10

 
Intrinsic value

$4,424

 
Up/down potential

+575%

 
Rating

str. buy

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

We calculate the intrinsic value of FFH 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Fairfax Financial Holdings Limited Subor (FFH) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  3.82
  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
  0
  20,331
  31,412
  46,976
  68,160
  96,164
  132,203
  177,456
  233,010
  299,828
  378,707
  470,268
  574,948
  693,006
  824,540
  969,512
  1,127,776
  1,299,103
  1,483,218
  1,679,821
  1,888,618
  2,109,335
  2,341,742
  2,585,664
  2,840,988
  3,107,676
  3,385,765
  3,675,369
  3,976,685
  4,289,984
  4,615,619
Variable operating expenses, $m
 
  18,938
  29,139
  43,468
  62,971
  88,752
  121,931
  163,592
  214,738
  276,252
  348,870
  432,944
  529,315
  638,003
  759,097
  892,564
  1,038,266
  1,195,995
  1,365,497
  1,546,496
  1,738,721
  1,941,920
  2,155,882
  2,380,444
  2,615,504
  2,861,025
  3,117,042
  3,383,661
  3,661,062
  3,949,495
  4,249,285
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
  12,985
  18,938
  29,139
  43,468
  62,971
  88,752
  121,931
  163,592
  214,738
  276,252
  348,870
  432,944
  529,315
  638,003
  759,097
  892,564
  1,038,266
  1,195,995
  1,365,497
  1,546,496
  1,738,721
  1,941,920
  2,155,882
  2,380,444
  2,615,504
  2,861,025
  3,117,042
  3,383,661
  3,661,062
  3,949,495
  4,249,285
Operating income, $m
  -279
  1,393
  2,272
  3,508
  5,189
  7,412
  10,272
  13,864
  18,273
  23,576
  29,837
  37,324
  45,633
  55,003
  65,442
  76,949
  89,510
  103,108
  117,721
  133,325
  149,897
  167,414
  185,860
  205,220
  225,485
  246,651
  268,723
  291,708
  315,623
  340,489
  366,334
EBITDA, $m
  -20
  1,849
  2,857
  4,272
  6,199
  8,746
  12,023
  16,139
  21,191
  27,268
  34,441
  42,768
  52,288
  63,025
  74,987
  88,172
  102,565
  118,146
  134,890
  152,770
  171,759
  191,832
  212,969
  235,152
  258,372
  282,626
  307,917
  334,255
  361,657
  390,150
  419,765
Interest expense (income), $m
  292
  341
  1,781
  3,876
  6,818
  10,823
  16,117
  22,930
  31,484
  41,987
  54,618
  69,529
  86,838
  106,627
  128,945
  153,810
  181,216
  211,134
  243,522
  278,328
  315,494
  354,965
  396,690
  440,624
  486,736
  535,003
  585,418
  637,988
  692,735
  749,696
  808,923
Earnings before tax, $m
  -749
  1,052
  491
  -368
  -1,629
  -3,411
  -5,845
  -9,066
  -13,211
  -18,410
  -24,781
  -32,205
  -41,205
  -51,624
  -63,502
  -76,862
  -91,706
  -108,027
  -125,802
  -145,003
  -165,597
  -187,550
  -210,829
  -235,404
  -261,251
  -288,351
  -316,695
  -346,280
  -377,112
  -409,207
  -442,589
Tax expense, $m
  -216
  284
  133
  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
  -692
  768
  358
  -368
  -1,629
  -3,411
  -5,845
  -9,066
  -13,211
  -18,410
  -24,781
  -32,205
  -41,205
  -51,624
  -63,502
  -76,862
  -91,706
  -108,027
  -125,802
  -145,003
  -165,597
  -187,550
  -210,829
  -235,404
  -261,251
  -288,351
  -316,695
  -346,280
  -377,112
  -409,207
  -442,589

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  58,616
  93,692
  144,754
  216,480
  314,102
  443,152
  609,232
  817,768
  1,073,781
  1,381,695
  1,745,193
  2,167,134
  2,649,529
  3,193,574
  3,799,722
  4,467,799
  5,197,123
  5,986,649
  6,835,104
  7,741,111
  8,703,307
  9,720,438
  10,791,440
  11,915,502
  13,092,112
  14,321,089
  15,602,603
  16,937,186
  18,325,736
  19,769,513
  21,270,132
Adjusted assets (=assets-cash), $m
  58,616
  93,692
  144,754
  216,480
  314,102
  443,152
  609,232
  817,768
  1,073,781
  1,381,695
  1,745,193
  2,167,134
  2,649,529
  3,193,574
  3,799,722
  4,467,799
  5,197,123
  5,986,649
  6,835,104
  7,741,111
  8,703,307
  9,720,438
  10,791,440
  11,915,502
  13,092,112
  14,321,089
  15,602,603
  16,937,186
  18,325,736
  19,769,513
  21,270,132
Revenue / Adjusted assets
  0.000
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
Average production assets, $m
  2,703
  4,331
  6,691
  10,006
  14,518
  20,483
  28,159
  37,798
  49,631
  63,863
  80,665
  100,167
  122,464
  147,610
  175,627
  206,506
  240,216
  276,709
  315,925
  357,802
  402,276
  449,288
  498,791
  550,746
  605,131
  661,935
  721,168
  782,854
  847,034
  913,767
  983,127
Working capital, $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
  0
Total debt, $m
  6,441
  33,611
  73,133
  128,649
  204,208
  304,093
  432,639
  594,045
  792,200
  1,030,525
  1,311,873
  1,638,455
  2,011,829
  2,432,919
  2,902,078
  3,419,169
  3,983,666
  4,594,759
  5,251,464
  5,952,713
  6,697,452
  7,484,712
  8,313,667
  9,183,691
  10,094,388
  11,045,616
  12,037,507
  13,070,475
  14,145,213
  15,262,696
  16,424,175
Total liabilities, $m
  45,348
  72,518
  112,040
  167,556
  243,115
  343,000
  471,546
  632,952
  831,107
  1,069,432
  1,350,780
  1,677,362
  2,050,736
  2,471,826
  2,940,985
  3,458,076
  4,022,573
  4,633,666
  5,290,371
  5,991,620
  6,736,359
  7,523,619
  8,352,574
  9,222,598
  10,133,295
  11,084,523
  12,076,414
  13,109,382
  14,184,120
  15,301,603
  16,463,082
Total equity, $m
  13,268
  21,174
  32,714
  48,925
  70,987
  100,152
  137,686
  184,816
  242,675
  312,263
  394,414
  489,772
  598,794
  721,748
  858,737
  1,009,722
  1,174,550
  1,352,983
  1,544,734
  1,749,491
  1,966,947
  2,196,819
  2,438,865
  2,692,903
  2,958,817
  3,236,566
  3,526,188
  3,827,804
  4,141,616
  4,467,910
  4,807,050
Total liabilities and equity, $m
  58,616
  93,692
  144,754
  216,481
  314,102
  443,152
  609,232
  817,768
  1,073,782
  1,381,695
  1,745,194
  2,167,134
  2,649,530
  3,193,574
  3,799,722
  4,467,798
  5,197,123
  5,986,649
  6,835,105
  7,741,111
  8,703,306
  9,720,438
  10,791,439
  11,915,501
  13,092,112
  14,321,089
  15,602,602
  16,937,186
  18,325,736
  19,769,513
  21,270,132
Debt-to-equity ratio
  0.485
  1.590
  2.240
  2.630
  2.880
  3.040
  3.140
  3.210
  3.260
  3.300
  3.330
  3.350
  3.360
  3.370
  3.380
  3.390
  3.390
  3.400
  3.400
  3.400
  3.400
  3.410
  3.410
  3.410
  3.410
  3.410
  3.410
  3.410
  3.420
  3.420
  3.420
Adjusted equity ratio
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -692
  768
  358
  -368
  -1,629
  -3,411
  -5,845
  -9,066
  -13,211
  -18,410
  -24,781
  -32,205
  -41,205
  -51,624
  -63,502
  -76,862
  -91,706
  -108,027
  -125,802
  -145,003
  -165,597
  -187,550
  -210,829
  -235,404
  -261,251
  -288,351
  -316,695
  -346,280
  -377,112
  -409,207
  -442,589
Depreciation, amort., depletion, $m
  259
  456
  584
  765
  1,010
  1,334
  1,751
  2,275
  2,918
  3,692
  4,605
  5,444
  6,656
  8,022
  9,545
  11,223
  13,055
  15,039
  17,170
  19,446
  21,863
  24,418
  27,108
  29,932
  32,888
  35,975
  39,194
  42,546
  46,034
  49,661
  53,431
Funds from operations, $m
  5,146
  1,224
  943
  396
  -620
  -2,077
  -4,094
  -6,791
  -10,293
  -14,719
  -20,177
  -26,761
  -34,550
  -43,602
  -53,957
  -65,638
  -78,651
  -92,988
  -108,632
  -125,557
  -143,734
  -163,133
  -183,721
  -205,473
  -228,363
  -252,377
  -277,501
  -303,733
  -331,078
  -359,546
  -389,158
Change in working capital, $m
  3,446
  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 from operations, $m
  1,700
  1,224
  943
  396
  -620
  -2,077
  -4,094
  -6,791
  -10,293
  -14,719
  -20,177
  -26,761
  -34,550
  -43,602
  -53,957
  -65,638
  -78,651
  -92,988
  -108,632
  -125,557
  -143,734
  -163,133
  -183,721
  -205,473
  -228,363
  -252,377
  -277,501
  -303,733
  -331,078
  -359,546
  -389,158
Maintenance CAPEX, $m
  0
  -147
  -235
  -364
  -544
  -789
  -1,113
  -1,530
  -2,054
  -2,697
  -3,471
  -4,384
  -5,444
  -6,656
  -8,022
  -9,545
  -11,223
  -13,055
  -15,039
  -17,170
  -19,446
  -21,863
  -24,418
  -27,108
  -29,932
  -32,888
  -35,975
  -39,194
  -42,546
  -46,034
  -49,661
New CAPEX, $m
  -281
  -1,628
  -2,360
  -3,315
  -4,512
  -5,965
  -7,676
  -9,639
  -11,833
  -14,232
  -16,801
  -19,503
  -22,297
  -25,146
  -28,017
  -30,879
  -33,710
  -36,493
  -39,216
  -41,877
  -44,474
  -47,013
  -49,503
  -51,955
  -54,384
  -56,805
  -59,233
  -61,686
  -64,180
  -66,733
  -69,360
Cash from investing activities, $m
  -2,257
  -1,775
  -2,595
  -3,679
  -5,056
  -6,754
  -8,789
  -11,169
  -13,887
  -16,929
  -20,272
  -23,887
  -27,741
  -31,802
  -36,039
  -40,424
  -44,933
  -49,548
  -54,255
  -59,047
  -63,920
  -68,876
  -73,921
  -79,063
  -84,316
  -89,693
  -95,208
  -100,880
  -106,726
  -112,767
  -119,021
Free cash flow, $m
  -557
  -551
  -1,653
  -3,283
  -5,676
  -8,831
  -12,883
  -17,960
  -24,181
  -31,648
  -40,449
  -50,647
  -62,290
  -75,404
  -89,996
  -106,062
  -123,584
  -142,536
  -162,887
  -184,604
  -207,654
  -232,008
  -257,642
  -284,536
  -312,679
  -342,069
  -372,709
  -404,613
  -437,804
  -472,313
  -508,179
Issuance/(repayment) of debt, $m
  1,821
  27,170
  39,522
  55,516
  75,559
  99,885
  128,546
  161,407
  198,154
  238,326
  281,348
  326,582
  373,374
  421,090
  469,159
  517,091
  564,497
  611,094
  656,704
  701,249
  744,739
  787,259
  828,956
  870,024
  910,696
  951,228
  991,892
  1,032,968
  1,074,738
  1,117,483
  1,161,479
Issuance/(repurchase) of shares, $m
  501
  7,139
  11,182
  16,578
  23,692
  32,577
  43,379
  56,195
  71,070
  87,999
  106,932
  127,563
  150,227
  174,578
  200,492
  227,847
  256,533
  286,460
  317,552
  349,760
  383,053
  417,422
  452,876
  489,442
  527,165
  566,100
  606,317
  647,896
  690,925
  735,501
  781,729
Cash from financing (excl. dividends), $m  
  2,452
  34,309
  50,704
  72,094
  99,251
  132,462
  171,925
  217,602
  269,224
  326,325
  388,280
  454,145
  523,601
  595,668
  669,651
  744,938
  821,030
  897,554
  974,256
  1,051,009
  1,127,792
  1,204,681
  1,281,832
  1,359,466
  1,437,861
  1,517,328
  1,598,209
  1,680,864
  1,765,663
  1,852,984
  1,943,208
Total cash flow (excl. dividends), $m
  1,844
  33,757
  49,051
  68,811
  93,575
  123,630
  159,041
  199,641
  245,044
  294,676
  347,831
  403,498
  461,310
  520,265
  579,655
  638,875
  697,446
  755,017
  811,370
  866,406
  920,139
  972,673
  1,024,190
  1,074,931
  1,125,182
  1,175,259
  1,225,500
  1,276,250
  1,327,858
  1,380,671
  1,435,028
Retained Cash Flow (-), $m
  631
  -7,906
  -11,540
  -16,578
  -23,692
  -32,577
  -43,379
  -56,195
  -71,070
  -87,999
  -106,932
  -127,563
  -150,227
  -174,578
  -200,492
  -227,847
  -256,533
  -286,460
  -317,552
  -349,760
  -383,053
  -417,422
  -452,876
  -489,442
  -527,165
  -566,100
  -606,317
  -647,896
  -690,925
  -735,501
  -781,729
Prev. year cash balance distribution, $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 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
 
  25,851
  37,511
  52,233
  69,884
  91,054
  115,663
  143,446
  173,973
  206,677
  240,899
  275,935
  311,083
  345,687
  379,163
  411,028
  440,913
  468,558
  493,817
  516,646
  537,086
  555,251
  571,314
  585,488
  598,017
  609,159
  619,183
  628,355
  636,934
  645,170
  653,300
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  23,892
  31,799
  40,289
  48,623
  56,622
  63,655
  69,141
  72,626
  73,844
  72,743
  69,483
  64,400
  57,953
  50,660
  43,032
  35,528
  28,514
  22,245
  16,867
  12,428
  8,894
  6,180
  4,167
  2,725
  1,726
  1,059
  628
  360
  199
  106
Current shareholders' claim on cash, %
  100
  72.1
  52.3
  38.3
  28.4
  21.4
  16.3
  12.6
  9.9
  7.8
  6.3
  5.1
  4.2
  3.4
  2.9
  2.4
  2.0
  1.7
  1.5
  1.3
  1.1
  1.0
  0.8
  0.7
  0.6
  0.6
  0.5
  0.4
  0.4
  0.3
  0.3

Fairfax Financial Holdings Limited is a holding company. The Company, through its subsidiaries, is engaged in property and casualty insurance, and reinsurance and investment management. The Company's segments include Insurance and Reinsurance, Runoff, Other, and Corporate and Other. The Insurance and Reinsurance segment includes Northbridge Financial Corporation (Northbridge), Odyssey Re Holdings Corp. (OdysseyRe) and Crum & Forster Holdings Corp (Crum & Forster). The Runoff segment principally includes RiverStone Insurance (UK) Limited (RiverStone (UK)), Syndicate 3500. The Other segment consists of the Company's non-insurance operations, including Cara Operations Limited (Cara). Corporate and Other segment includes the parent entity (Fairfax Financial Holdings Limited) and its subsidiary intermediate holding companies. The Company owns a majority stake in Grivalia Properties REIC.

FINANCIAL RATIOS  of  Fairfax Financial Holdings Limited Subor (FFH)

Valuation Ratios
P/E Ratio -22.6
Price to Sales 1.2
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 11
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.3%
Cap. Spend. - 3 Yr. Gr. Rate 34%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 48.5%
Total Debt to Equity 48.5%
Interest Coverage -2
Management Effectiveness
Return On Assets -0.8%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital -3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity -5.1%
Return On Equity - 3 Yr. Avg. 6.3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -1.6%
EBITDA Margin - 3 Yr. Avg. 11.9%
Operating Margin -2.2%
Oper. Margin - 3 Yr. Avg. 9.5%
Pre-Tax Margin -5.9%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin -5.4%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 28.8%
Eff/ Tax Rate - 3 Yr. Avg. 18.3%
Payout Ratio -53%

FFH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FFH stock intrinsic value calculation we used $12707 million for the last fiscal year's total revenue generated by Fairfax Financial Holdings Limited Subor. The default revenue input number comes from 2016 income statement of Fairfax Financial Holdings Limited Subor. 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 FFH 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 8.2%, whose default value for FFH is calculated based on our internal credit rating of Fairfax Financial Holdings Limited Subor, 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 Fairfax Financial Holdings Limited Subor.
    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 FFH stock the variable cost ratio is equal to 93.8%.

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 FFH 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 5.3% for Fairfax Financial Holdings Limited Subor.

Corporate tax rate of 27% is the nominal tax rate for Fairfax Financial Holdings Limited Subor. 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 FFH 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 FFH are equal to 21.3%.

Life of production assets of 18.4 years is the average useful life of capital assets used in Fairfax Financial Holdings Limited Subor 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 FFH is equal to 0%. 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 - $13268 million for Fairfax Financial Holdings Limited Subor - 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 28.162 million for Fairfax Financial Holdings Limited Subor 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 Fairfax Financial Holdings Limited Subor at the current share price and the inputted number of shares is $18.4 billion.

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Financial statements of FFH
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