Intrinsic value of Finning International Inc. - FTT

Previous Close

$30.37

  Intrinsic Value

$2.66

stock screener

  Rating & Target

str. sell

-91%

Previous close

$30.37

 
Intrinsic value

$2.66

 
Up/down potential

-91%

 
Rating

str. sell

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

We calculate the intrinsic value of FTT 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 5.1

 

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, %
  -10.31
  20.70
  19.13
  17.72
  16.45
  15.30
  14.27
  13.34
  12.51
  11.76
  11.08
  10.47
  9.93
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
  6.91
  6.72
  6.55
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
Revenue, $m
  5,628
  6,793
  8,092
  9,526
  11,093
  12,790
  14,615
  16,566
  18,638
  20,829
  23,138
  25,561
  28,099
  30,750
  33,514
  36,394
  39,390
  42,505
  45,743
  49,108
  52,605
  56,240
  60,018
  63,947
  68,034
  72,288
  76,717
  81,331
  86,140
  91,154
  96,386
Variable operating expenses, $m
 
  6,906
  8,225
  9,680
  11,270
  12,993
  14,845
  16,824
  18,927
  21,152
  23,494
  25,942
  28,517
  31,208
  34,014
  36,936
  39,977
  43,139
  46,425
  49,840
  53,389
  57,078
  60,912
  64,900
  69,048
  73,365
  77,860
  82,543
  87,423
  92,513
  97,823
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
  5,463
  6,906
  8,225
  9,680
  11,270
  12,993
  14,845
  16,824
  18,927
  21,152
  23,494
  25,942
  28,517
  31,208
  34,014
  36,936
  39,977
  43,139
  46,425
  49,840
  53,389
  57,078
  60,912
  64,900
  69,048
  73,365
  77,860
  82,543
  87,423
  92,513
  97,823
Operating income, $m
  165
  -113
  -132
  -154
  -177
  -202
  -230
  -259
  -290
  -322
  -357
  -381
  -419
  -458
  -499
  -542
  -587
  -633
  -682
  -732
  -784
  -838
  -894
  -953
  -1,014
  -1,077
  -1,143
  -1,212
  -1,284
  -1,359
  -1,436
EBITDA, $m
  357
  107
  127
  150
  174
  201
  230
  260
  293
  327
  364
  402
  442
  483
  527
  572
  619
  668
  719
  772
  827
  884
  944
  1,005
  1,070
  1,136
  1,206
  1,279
  1,354
  1,433
  1,515
Interest expense (income), $m
  77
  73
  103
  137
  175
  216
  261
  308
  359
  414
  471
  532
  595
  661
  731
  803
  879
  957
  1,039
  1,124
  1,212
  1,303
  1,398
  1,497
  1,600
  1,707
  1,819
  1,935
  2,056
  2,182
  2,313
Earnings before tax, $m
  80
  -186
  -236
  -291
  -352
  -418
  -490
  -567
  -649
  -736
  -828
  -912
  -1,014
  -1,120
  -1,230
  -1,346
  -1,466
  -1,591
  -1,720
  -1,855
  -1,996
  -2,141
  -2,293
  -2,450
  -2,614
  -2,785
  -2,962
  -3,147
  -3,339
  -3,540
  -3,749
Tax expense, $m
  15
  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
  65
  -186
  -236
  -291
  -352
  -418
  -490
  -567
  -649
  -736
  -828
  -912
  -1,014
  -1,120
  -1,230
  -1,346
  -1,466
  -1,591
  -1,720
  -1,855
  -1,996
  -2,141
  -2,293
  -2,450
  -2,614
  -2,785
  -2,962
  -3,147
  -3,339
  -3,540
  -3,749

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  593
  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
  4,910
  5,209
  6,206
  7,305
  8,507
  9,808
  11,208
  12,704
  14,293
  15,973
  17,744
  19,602
  21,548
  23,581
  25,701
  27,909
  30,207
  32,596
  35,079
  37,660
  40,342
  43,129
  46,026
  49,039
  52,173
  55,435
  58,832
  62,370
  66,058
  69,904
  73,916
Adjusted assets (=assets-cash), $m
  4,317
  5,209
  6,206
  7,305
  8,507
  9,808
  11,208
  12,704
  14,293
  15,973
  17,744
  19,602
  21,548
  23,581
  25,701
  27,909
  30,207
  32,596
  35,079
  37,660
  40,342
  43,129
  46,026
  49,039
  52,173
  55,435
  58,832
  62,370
  66,058
  69,904
  73,916
Revenue / Adjusted assets
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
  1.304
Average production assets, $m
  1,104
  1,331
  1,586
  1,867
  2,174
  2,507
  2,865
  3,247
  3,653
  4,083
  4,535
  5,010
  5,507
  6,027
  6,569
  7,133
  7,720
  8,331
  8,966
  9,625
  10,311
  11,023
  11,763
  12,534
  13,335
  14,168
  15,036
  15,941
  16,883
  17,866
  18,892
Working capital, $m
  2,145
  1,875
  2,234
  2,629
  3,062
  3,530
  4,034
  4,572
  5,144
  5,749
  6,386
  7,055
  7,755
  8,487
  9,250
  10,045
  10,872
  11,731
  12,625
  13,554
  14,519
  15,522
  16,565
  17,649
  18,777
  19,951
  21,174
  22,447
  23,775
  25,159
  26,603
Total debt, $m
  1,489
  2,111
  2,806
  3,572
  4,409
  5,316
  6,292
  7,334
  8,442
  9,613
  10,847
  12,143
  13,499
  14,916
  16,394
  17,933
  19,534
  21,199
  22,930
  24,729
  26,598
  28,541
  30,560
  32,660
  34,845
  37,118
  39,486
  41,952
  44,522
  47,203
  49,999
Total liabilities, $m
  3,009
  3,631
  4,326
  5,092
  5,929
  6,836
  7,812
  8,854
  9,962
  11,133
  12,367
  13,663
  15,019
  16,436
  17,914
  19,453
  21,054
  22,719
  24,450
  26,249
  28,118
  30,061
  32,080
  34,180
  36,365
  38,638
  41,006
  43,472
  46,042
  48,723
  51,519
Total equity, $m
  1,901
  1,578
  1,880
  2,214
  2,578
  2,972
  3,396
  3,849
  4,331
  4,840
  5,376
  5,939
  6,529
  7,145
  7,787
  8,456
  9,153
  9,877
  10,629
  11,411
  12,223
  13,068
  13,946
  14,859
  15,808
  16,797
  17,826
  18,898
  20,016
  21,181
  22,397
Total liabilities and equity, $m
  4,910
  5,209
  6,206
  7,306
  8,507
  9,808
  11,208
  12,703
  14,293
  15,973
  17,743
  19,602
  21,548
  23,581
  25,701
  27,909
  30,207
  32,596
  35,079
  37,660
  40,341
  43,129
  46,026
  49,039
  52,173
  55,435
  58,832
  62,370
  66,058
  69,904
  73,916
Debt-to-equity ratio
  0.783
  1.340
  1.490
  1.610
  1.710
  1.790
  1.850
  1.910
  1.950
  1.990
  2.020
  2.040
  2.070
  2.090
  2.110
  2.120
  2.130
  2.150
  2.160
  2.170
  2.180
  2.180
  2.190
  2.200
  2.200
  2.210
  2.220
  2.220
  2.220
  2.230
  2.230
Adjusted equity ratio
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303
  0.303

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  65
  -186
  -236
  -291
  -352
  -418
  -490
  -567
  -649
  -736
  -828
  -912
  -1,014
  -1,120
  -1,230
  -1,346
  -1,466
  -1,591
  -1,720
  -1,855
  -1,996
  -2,141
  -2,293
  -2,450
  -2,614
  -2,785
  -2,962
  -3,147
  -3,339
  -3,540
  -3,749
Depreciation, amort., depletion, $m
  192
  220
  260
  304
  352
  403
  459
  519
  583
  650
  720
  783
  861
  942
  1,026
  1,115
  1,206
  1,302
  1,401
  1,504
  1,611
  1,722
  1,838
  1,958
  2,084
  2,214
  2,349
  2,491
  2,638
  2,792
  2,952
Funds from operations, $m
  332
  34
  24
  12
  -1
  -15
  -31
  -48
  -66
  -86
  -107
  -130
  -153
  -178
  -204
  -231
  -259
  -289
  -320
  -352
  -385
  -419
  -455
  -492
  -531
  -571
  -613
  -656
  -701
  -749
  -798
Change in working capital, $m
  -108
  322
  359
  396
  432
  468
  504
  538
  572
  605
  637
  669
  700
  732
  763
  795
  827
  860
  894
  929
  965
  1,003
  1,043
  1,084
  1,128
  1,174
  1,222
  1,273
  1,327
  1,384
  1,444
Cash from operations, $m
  440
  -288
  -335
  -383
  -433
  -483
  -534
  -586
  -638
  -691
  -744
  -799
  -854
  -910
  -967
  -1,026
  -1,086
  -1,149
  -1,213
  -1,280
  -1,350
  -1,422
  -1,498
  -1,576
  -1,659
  -1,745
  -1,835
  -1,930
  -2,029
  -2,133
  -2,242
Maintenance CAPEX, $m
  0
  -172
  -208
  -248
  -292
  -340
  -392
  -448
  -507
  -571
  -638
  -709
  -783
  -861
  -942
  -1,026
  -1,115
  -1,206
  -1,302
  -1,401
  -1,504
  -1,611
  -1,722
  -1,838
  -1,958
  -2,084
  -2,214
  -2,349
  -2,491
  -2,638
  -2,792
New CAPEX, $m
  -92
  -228
  -255
  -281
  -307
  -333
  -358
  -382
  -406
  -430
  -452
  -475
  -497
  -520
  -542
  -564
  -587
  -611
  -635
  -660
  -685
  -712
  -741
  -770
  -801
  -834
  -868
  -904
  -943
  -983
  -1,025
Cash from investing activities, $m
  -40
  -400
  -463
  -529
  -599
  -673
  -750
  -830
  -913
  -1,001
  -1,090
  -1,184
  -1,280
  -1,381
  -1,484
  -1,590
  -1,702
  -1,817
  -1,937
  -2,061
  -2,189
  -2,323
  -2,463
  -2,608
  -2,759
  -2,918
  -3,082
  -3,253
  -3,434
  -3,621
  -3,817
Free cash flow, $m
  400
  -688
  -798
  -912
  -1,032
  -1,156
  -1,284
  -1,416
  -1,552
  -1,691
  -1,835
  -1,982
  -2,134
  -2,290
  -2,451
  -2,617
  -2,788
  -2,966
  -3,150
  -3,341
  -3,539
  -3,746
  -3,961
  -4,185
  -4,418
  -4,662
  -4,917
  -5,183
  -5,462
  -5,753
  -6,059
Issuance/(repayment) of debt, $m
  -132
  624
  695
  766
  837
  907
  976
  1,042
  1,108
  1,171
  1,234
  1,295
  1,356
  1,417
  1,478
  1,539
  1,601
  1,665
  1,731
  1,799
  1,869
  1,943
  2,019
  2,100
  2,185
  2,274
  2,367
  2,466
  2,570
  2,680
  2,796
Issuance/(repurchase) of shares, $m
  0
  454
  538
  624
  716
  813
  914
  1,020
  1,130
  1,245
  1,364
  1,476
  1,603
  1,736
  1,873
  2,015
  2,162
  2,315
  2,473
  2,637
  2,808
  2,986
  3,171
  3,363
  3,564
  3,773
  3,991
  4,219
  4,457
  4,705
  4,965
Cash from financing (excl. dividends), $m  
  -132
  1,078
  1,233
  1,390
  1,553
  1,720
  1,890
  2,062
  2,238
  2,416
  2,598
  2,771
  2,959
  3,153
  3,351
  3,554
  3,763
  3,980
  4,204
  4,436
  4,677
  4,929
  5,190
  5,463
  5,749
  6,047
  6,358
  6,685
  7,027
  7,385
  7,761
Total cash flow (excl. dividends), $m
  241
  390
  435
  478
  522
  564
  606
  647
  686
  725
  763
  789
  826
  863
  900
  937
  975
  1,014
  1,054
  1,095
  1,138
  1,183
  1,230
  1,279
  1,330
  1,385
  1,442
  1,502
  1,565
  1,632
  1,703
Retained Cash Flow (-), $m
  149
  -454
  -538
  -624
  -716
  -813
  -914
  -1,020
  -1,130
  -1,245
  -1,364
  -1,476
  -1,603
  -1,736
  -1,873
  -2,015
  -2,162
  -2,315
  -2,473
  -2,637
  -2,808
  -2,986
  -3,171
  -3,363
  -3,564
  -3,773
  -3,991
  -4,219
  -4,457
  -4,705
  -4,965
Prev. year cash balance distribution, $m
 
  591
  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
 
  527
  -103
  -146
  -194
  -249
  -308
  -374
  -444
  -520
  -601
  -687
  -777
  -873
  -973
  -1,078
  -1,187
  -1,300
  -1,419
  -1,542
  -1,670
  -1,803
  -1,941
  -2,085
  -2,234
  -2,389
  -2,550
  -2,717
  -2,892
  -3,073
  -3,262
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  505
  -94
  -127
  -159
  -192
  -222
  -250
  -275
  -295
  -310
  -321
  -325
  -325
  -319
  -308
  -293
  -274
  -252
  -228
  -203
  -177
  -152
  -129
  -107
  -87
  -69
  -54
  -41
  -30
  -22
Current shareholders' claim on cash, %
  100
  88.6
  78.6
  69.9
  62.4
  55.8
  50.1
  45.0
  40.6
  36.7
  33.2
  30.1
  27.4
  24.9
  22.7
  20.7
  18.9
  17.3
  15.8
  14.4
  13.2
  12.1
  11.1
  10.2
  9.4
  8.6
  7.9
  7.3
  6.7
  6.1
  5.6

Finning International Inc. is engaged in the selling, servicing and renting of heavy equipment, engines, and related products in various markets worldwide. Its segments include its Canadian operations, which include British Columbia, Alberta, Saskatchewan, Yukon, the Northwest Territories, and a portion of Nunavut; South American operations, which include Chile, Argentina, Bolivia, and Uruguay, the United Kingdom and Ireland operations, which include England, Scotland, Wales, Northern Ireland and the Republic of Ireland. It offers products and services through four lines of business: product support, new equipment sales, used equipment sales and equipment rental. It provides replacement parts, and maintenance and repair services for the products it sells. It distributes Caterpillar Inc.'s products, such as tractors, off-highway trucks and drills. It buys and sells used equipment domestically and internationally. It owns fleets of equipment for short-term rental and medium-term rental.

FINANCIAL RATIOS  of  Finning International Inc. (FTT)

Valuation Ratios
P/E Ratio 78.6
Price to Sales 0.9
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 14.7
Growth Rates
Sales Growth Rate -10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 21.1%
Cap. Spend. - 3 Yr. Gr. Rate -1.5%
Financial Strength
Quick Ratio 297
Current Ratio 0.1
LT Debt to Equity 78.2%
Total Debt to Equity 78.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 2.6%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 3.3%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 26.2%
Gross Margin - 3 Yr. Avg. 27.4%
EBITDA Margin 6.2%
EBITDA Margin - 3 Yr. Avg. 6.1%
Operating Margin 2.9%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 1.4%
Pre-Tax Margin - 3 Yr. Avg. 1.5%
Net Profit Margin 1.2%
Net Profit Margin - 3 Yr. Avg. 1.1%
Effective Tax Rate 18.8%
Eff/ Tax Rate - 3 Yr. Avg. 19.4%
Payout Ratio 189.2%

FTT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FTT stock intrinsic value calculation we used $5628 million for the last fiscal year's total revenue generated by Finning International Inc.. The default revenue input number comes from 2016 income statement of Finning International Inc.. 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 FTT stock valuation model: a) initial revenue growth rate of 20.7% 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 4.4%, whose default value for FTT is calculated based on our internal credit rating of Finning International Inc., 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 Finning International Inc..
    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 FTT stock the variable cost ratio is equal to 101.7%.

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 FTT 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 4.9% for Finning International Inc..

Corporate tax rate of 27% is the nominal tax rate for Finning International Inc.. 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 FTT 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 FTT are equal to 19.6%.

Life of production assets of 6.4 years is the average useful life of capital assets used in Finning International Inc. 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 FTT is equal to 27.6%. 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 - $1901 million for Finning International Inc. - 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 167.919 million for Finning International Inc. 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 Finning International Inc. at the current share price and the inputted number of shares is $5.1 billion.

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Financial statements of FTT
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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