Intrinsic value of SNC-Lavalin Group Inc. - SNC

Previous Close

$56.58

  Intrinsic Value

$291.47

stock screener

  Rating & Target

str. buy

+415%

Previous close

$56.58

 
Intrinsic value

$291.47

 
Up/down potential

+415%

 
Rating

str. buy

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

We calculate the intrinsic value of SNC 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 9.9

 

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, %
  -11.64
  21.40
  19.76
  18.28
  16.96
  15.76
  14.68
  13.72
  12.84
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
Revenue, $m
  8,471
  10,284
  12,316
  14,568
  17,038
  19,723
  22,619
  25,721
  29,025
  32,525
  36,218
  40,100
  44,169
  48,423
  52,863
  57,489
  62,305
  67,314
  72,521
  77,932
  83,555
  89,398
  95,473
  101,788
  108,357
  115,192
  122,308
  129,720
  137,443
  145,495
  153,893
Variable operating expenses, $m
 
  8,281
  9,852
  11,594
  13,504
  15,581
  17,821
  20,220
  22,775
  25,483
  28,339
  31,014
  34,161
  37,452
  40,885
  44,464
  48,188
  52,062
  56,089
  60,274
  64,623
  69,143
  73,841
  78,725
  83,806
  89,092
  94,596
  100,328
  106,301
  112,529
  119,024
Fixed operating expenses, $m
 
  1,347
  1,381
  1,415
  1,450
  1,487
  1,524
  1,562
  1,601
  1,641
  1,682
  1,724
  1,767
  1,811
  1,857
  1,903
  1,951
  1,999
  2,049
  2,101
  2,153
  2,207
  2,262
  2,319
  2,377
  2,436
  2,497
  2,559
  2,623
  2,689
  2,756
Total operating expenses, $m
  8,159
  9,628
  11,233
  13,009
  14,954
  17,068
  19,345
  21,782
  24,376
  27,124
  30,021
  32,738
  35,928
  39,263
  42,742
  46,367
  50,139
  54,061
  58,138
  62,375
  66,776
  71,350
  76,103
  81,044
  86,183
  91,528
  97,093
  102,887
  108,924
  115,218
  121,780
Operating income, $m
  312
  656
  1,083
  1,559
  2,083
  2,655
  3,274
  3,939
  4,649
  5,402
  6,197
  7,362
  8,241
  9,160
  10,121
  11,123
  12,166
  13,252
  14,382
  15,557
  16,779
  18,049
  19,370
  20,744
  22,175
  23,664
  25,215
  26,832
  28,518
  30,277
  32,113
EBITDA, $m
  455
  1,007
  1,438
  1,919
  2,449
  3,027
  3,652
  4,324
  5,041
  5,802
  6,606
  7,453
  8,341
  9,270
  10,241
  11,253
  12,308
  13,405
  14,547
  15,734
  16,968
  18,252
  19,586
  20,975
  22,420
  23,925
  25,493
  27,126
  28,830
  30,607
  32,462
Interest expense (income), $m
  60
  58
  139
  229
  330
  440
  560
  690
  828
  976
  1,132
  1,297
  1,471
  1,652
  1,842
  2,041
  2,247
  2,462
  2,686
  2,919
  3,160
  3,412
  3,673
  3,944
  4,226
  4,519
  4,825
  5,143
  5,474
  5,819
  6,178
Earnings before tax, $m
  270
  599
  945
  1,329
  1,753
  2,215
  2,714
  3,250
  3,820
  4,426
  5,065
  6,065
  6,770
  7,508
  8,279
  9,082
  9,919
  10,790
  11,696
  12,638
  13,618
  14,637
  15,697
  16,800
  17,949
  19,145
  20,391
  21,690
  23,044
  24,458
  25,934
Tax expense, $m
  13
  162
  255
  359
  473
  598
  733
  877
  1,032
  1,195
  1,368
  1,637
  1,828
  2,027
  2,235
  2,452
  2,678
  2,913
  3,158
  3,412
  3,677
  3,952
  4,238
  4,536
  4,846
  5,169
  5,505
  5,856
  6,222
  6,604
  7,002
Net income, $m
  256
  437
  690
  971
  1,280
  1,617
  1,981
  2,372
  2,789
  3,231
  3,698
  4,427
  4,942
  5,481
  6,043
  6,630
  7,241
  7,877
  8,538
  9,226
  9,941
  10,685
  11,459
  12,264
  13,103
  13,976
  14,885
  15,833
  16,822
  17,855
  18,932

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,055
  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
  9,298
  10,004
  11,980
  14,171
  16,574
  19,186
  22,003
  25,021
  28,234
  31,639
  35,232
  39,008
  42,966
  47,104
  51,423
  55,924
  60,608
  65,480
  70,545
  75,809
  81,279
  86,963
  92,872
  99,016
  105,406
  112,055
  118,977
  126,186
  133,699
  141,532
  149,702
Adjusted assets (=assets-cash), $m
  8,243
  10,004
  11,980
  14,171
  16,574
  19,186
  22,003
  25,021
  28,234
  31,639
  35,232
  39,008
  42,966
  47,104
  51,423
  55,924
  60,608
  65,480
  70,545
  75,809
  81,279
  86,963
  92,872
  99,016
  105,406
  112,055
  118,977
  126,186
  133,699
  141,532
  149,702
Revenue / Adjusted assets
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
  1.028
Average production assets, $m
  515
  627
  751
  889
  1,039
  1,203
  1,380
  1,569
  1,771
  1,984
  2,209
  2,446
  2,694
  2,954
  3,225
  3,507
  3,801
  4,106
  4,424
  4,754
  5,097
  5,453
  5,824
  6,209
  6,610
  7,027
  7,461
  7,913
  8,384
  8,875
  9,387
Working capital, $m
  228
  -977
  -1,170
  -1,384
  -1,619
  -1,874
  -2,149
  -2,444
  -2,757
  -3,090
  -3,441
  -3,810
  -4,196
  -4,600
  -5,022
  -5,461
  -5,919
  -6,395
  -6,889
  -7,404
  -7,938
  -8,493
  -9,070
  -9,670
  -10,294
  -10,943
  -11,619
  -12,323
  -13,057
  -13,822
  -14,620
Total debt, $m
  843
  1,980
  3,277
  4,714
  6,290
  8,004
  9,852
  11,832
  13,940
  16,173
  18,530
  21,007
  23,604
  26,318
  29,152
  32,104
  35,177
  38,373
  41,696
  45,149
  48,737
  52,466
  56,342
  60,372
  64,564
  68,926
  73,467
  78,196
  83,125
  88,263
  93,622
Total liabilities, $m
  5,425
  6,562
  7,859
  9,296
  10,872
  12,586
  14,434
  16,414
  18,522
  20,755
  23,112
  25,589
  28,186
  30,900
  33,734
  36,686
  39,759
  42,955
  46,278
  49,731
  53,319
  57,048
  60,924
  64,954
  69,146
  73,508
  78,049
  82,778
  87,707
  92,845
  98,204
Total equity, $m
  3,873
  3,441
  4,121
  4,875
  5,701
  6,600
  7,569
  8,607
  9,713
  10,884
  12,120
  13,419
  14,780
  16,204
  17,690
  19,238
  20,849
  22,525
  24,268
  26,078
  27,960
  29,915
  31,948
  34,061
  36,260
  38,547
  40,928
  43,408
  45,993
  48,687
  51,497
Total liabilities and equity, $m
  9,298
  10,003
  11,980
  14,171
  16,573
  19,186
  22,003
  25,021
  28,235
  31,639
  35,232
  39,008
  42,966
  47,104
  51,424
  55,924
  60,608
  65,480
  70,546
  75,809
  81,279
  86,963
  92,872
  99,015
  105,406
  112,055
  118,977
  126,186
  133,700
  141,532
  149,701
Debt-to-equity ratio
  0.218
  0.580
  0.800
  0.970
  1.100
  1.210
  1.300
  1.370
  1.440
  1.490
  1.530
  1.570
  1.600
  1.620
  1.650
  1.670
  1.690
  1.700
  1.720
  1.730
  1.740
  1.750
  1.760
  1.770
  1.780
  1.790
  1.800
  1.800
  1.810
  1.810
  1.820
Adjusted equity ratio
  0.342
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344
  0.344

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  256
  437
  690
  971
  1,280
  1,617
  1,981
  2,372
  2,789
  3,231
  3,698
  4,427
  4,942
  5,481
  6,043
  6,630
  7,241
  7,877
  8,538
  9,226
  9,941
  10,685
  11,459
  12,264
  13,103
  13,976
  14,885
  15,833
  16,822
  17,855
  18,932
Depreciation, amort., depletion, $m
  143
  350
  355
  360
  365
  372
  378
  385
  393
  401
  409
  91
  100
  110
  120
  130
  141
  153
  164
  177
  189
  203
  216
  231
  246
  261
  277
  294
  312
  330
  349
Funds from operations, $m
  94
  787
  1,044
  1,330
  1,645
  1,988
  2,359
  2,757
  3,182
  3,632
  4,107
  4,518
  5,042
  5,591
  6,163
  6,760
  7,382
  8,029
  8,703
  9,403
  10,131
  10,888
  11,676
  12,495
  13,348
  14,237
  15,163
  16,128
  17,134
  18,184
  19,281
Change in working capital, $m
  -12
  -172
  -193
  -214
  -235
  -255
  -275
  -295
  -314
  -333
  -351
  -369
  -387
  -404
  -422
  -440
  -457
  -476
  -495
  -514
  -534
  -555
  -577
  -600
  -624
  -649
  -676
  -704
  -734
  -765
  -798
Cash from operations, $m
  106
  960
  1,237
  1,544
  1,880
  2,244
  2,635
  3,052
  3,495
  3,964
  4,457
  4,887
  5,429
  5,995
  6,585
  7,200
  7,840
  8,505
  9,197
  9,917
  10,665
  11,443
  12,253
  13,095
  13,972
  14,886
  15,839
  16,832
  17,868
  18,949
  20,079
Maintenance CAPEX, $m
  0
  -19
  -23
  -28
  -33
  -39
  -45
  -51
  -58
  -66
  -74
  -82
  -91
  -100
  -110
  -120
  -130
  -141
  -153
  -164
  -177
  -189
  -203
  -216
  -231
  -246
  -261
  -277
  -294
  -312
  -330
New CAPEX, $m
  -151
  -112
  -124
  -137
  -151
  -164
  -177
  -189
  -202
  -214
  -225
  -237
  -248
  -260
  -271
  -282
  -294
  -306
  -318
  -330
  -343
  -356
  -371
  -385
  -401
  -417
  -434
  -452
  -471
  -491
  -512
Cash from investing activities, $m
  -87
  -131
  -147
  -165
  -184
  -203
  -222
  -240
  -260
  -280
  -299
  -319
  -339
  -360
  -381
  -402
  -424
  -447
  -471
  -494
  -520
  -545
  -574
  -601
  -632
  -663
  -695
  -729
  -765
  -803
  -842
Free cash flow, $m
  19
  828
  1,090
  1,379
  1,696
  2,041
  2,413
  2,811
  3,236
  3,685
  4,158
  4,568
  5,090
  5,635
  6,204
  6,798
  7,416
  8,058
  8,727
  9,422
  10,145
  10,897
  11,679
  12,493
  13,341
  14,223
  15,143
  16,102
  17,103
  18,147
  19,237
Issuance/(repayment) of debt, $m
  -456
  1,158
  1,297
  1,437
  1,576
  1,713
  1,848
  1,980
  2,108
  2,234
  2,357
  2,477
  2,596
  2,715
  2,833
  2,952
  3,073
  3,196
  3,323
  3,453
  3,588
  3,729
  3,876
  4,030
  4,192
  4,362
  4,541
  4,729
  4,928
  5,138
  5,359
Issuance/(repurchase) of shares, $m
  23
  165
  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 financing (excl. dividends), $m  
  -382
  1,323
  1,297
  1,437
  1,576
  1,713
  1,848
  1,980
  2,108
  2,234
  2,357
  2,477
  2,596
  2,715
  2,833
  2,952
  3,073
  3,196
  3,323
  3,453
  3,588
  3,729
  3,876
  4,030
  4,192
  4,362
  4,541
  4,729
  4,928
  5,138
  5,359
Total cash flow (excl. dividends), $m
  -370
  2,152
  2,387
  2,816
  3,272
  3,755
  4,261
  4,791
  5,344
  5,918
  6,515
  7,045
  7,686
  8,350
  9,038
  9,750
  10,489
  11,255
  12,050
  12,875
  13,733
  14,626
  15,555
  16,523
  17,533
  18,585
  19,684
  20,832
  22,031
  23,285
  24,596
Retained Cash Flow (-), $m
  -5
  -602
  -680
  -754
  -827
  -899
  -969
  -1,038
  -1,106
  -1,171
  -1,236
  -1,299
  -1,362
  -1,424
  -1,486
  -1,548
  -1,611
  -1,676
  -1,742
  -1,811
  -1,882
  -1,955
  -2,033
  -2,113
  -2,198
  -2,287
  -2,381
  -2,480
  -2,584
  -2,694
  -2,810
Prev. year cash balance distribution, $m
 
  1,034
  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
 
  2,583
  1,707
  2,062
  2,446
  2,856
  3,292
  3,753
  4,238
  4,747
  5,279
  5,746
  6,325
  6,926
  7,552
  8,202
  8,877
  9,579
  10,307
  11,065
  11,852
  12,671
  13,523
  14,410
  15,334
  16,298
  17,303
  18,352
  19,447
  20,590
  21,786
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
 
  2,477
  1,562
  1,795
  2,014
  2,214
  2,389
  2,536
  2,649
  2,727
  2,768
  2,729
  2,699
  2,634
  2,535
  2,408
  2,256
  2,084
  1,898
  1,704
  1,506
  1,311
  1,122
  944
  781
  634
  505
  394
  301
  225
  164
Current shareholders' claim on cash, %
  100
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8
  97.8

SNC-Lavalin Group Inc. is a Canada-based engineering and construction company. The Company's segments include Mining & Metallurgy, which provides solutions for a range of projects in the aluminum, gold, copper, iron ore, nickel, fertilizers and sulfur product sectors, among others; Oil & Gas, which includes projects in the upstream, midstream and downstream (supporting infrastructure) sectors for oil and gas and resources companies, supporting these clients operating across the asset lifecycle from front end evaluation through decommissioning (capital expenditures and operational expenditures); Power, which includes projects and services in hydro, nuclear and thermal power generation, renewable power generation, energy from waste, and electrical transmission and distribution systems; Infrastructure, which is divided into the Infrastructure & Construction and Operations & Maintenance sub-segments, and Capital segment is the investment and asset management arm of the Company.

FINANCIAL RATIOS  of  SNC-Lavalin Group Inc. (SNC)

Valuation Ratios
P/E Ratio 33.2
Price to Sales 1
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 80.3
Price to Free Cash Flow -189.1
Growth Rates
Sales Growth Rate -11.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.2%
Cap. Spend. - 3 Yr. Gr. Rate -37.6%
Financial Strength
Quick Ratio 50
Current Ratio 0.1
LT Debt to Equity 21.2%
Total Debt to Equity 21.8%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 7.1%
Return On Total Capital 5.4%
Ret/ On T. Cap. - 3 Yr. Avg. 13.4%
Return On Equity 6.6%
Return On Equity - 3 Yr. Avg. 22.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 14.2%
Gross Margin - 3 Yr. Avg. 15.2%
EBITDA Margin 5.6%
EBITDA Margin - 3 Yr. Avg. 12.7%
Operating Margin 3.7%
Oper. Margin - 3 Yr. Avg. 10.6%
Pre-Tax Margin 3.2%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 7.8%
Effective Tax Rate 4.8%
Eff/ Tax Rate - 3 Yr. Avg. 13.4%
Payout Ratio 60.9%

SNC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SNC stock intrinsic value calculation we used $8471 million for the last fiscal year's total revenue generated by SNC-Lavalin Group Inc.. The default revenue input number comes from 2016 income statement of SNC-Lavalin Group 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 SNC stock valuation model: a) initial revenue growth rate of 21.4% 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 SNC is calculated based on our internal credit rating of SNC-Lavalin Group 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 SNC-Lavalin Group 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 SNC stock the variable cost ratio is equal to 81.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1314 million in the base year in the intrinsic value calculation for SNC 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 7% for SNC-Lavalin Group Inc..

Corporate tax rate of 27% is the nominal tax rate for SNC-Lavalin Group 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 SNC 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 SNC are equal to 6.1%.

Life of production assets of 26.9 years is the average useful life of capital assets used in SNC-Lavalin Group 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 SNC is equal to -9.5%. 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 - $3873 million for SNC-Lavalin Group 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 175.483 million for SNC-Lavalin Group 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 SNC-Lavalin Group Inc. at the current share price and the inputted number of shares is $9.9 billion.

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Financial statements of SNC
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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