Intrinsic value of Teck Resources Limited Class B Subordina - TECK-B

Previous Close

$29.90

  Intrinsic Value

$7.06

stock screener

  Rating & Target

str. sell

-76%

Previous close

$29.90

 
Intrinsic value

$7.06

 
Up/down potential

-76%

 
Rating

str. sell

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

We calculate the intrinsic value of TECK-B 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 17.3

 

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, %
  12.60
  35.70
  32.63
  29.87
  27.38
  25.14
  23.13
  21.32
  19.68
  18.22
  16.89
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.79
  6.61
  6.45
Revenue, $m
  9,300
  12,620
  16,738
  21,737
  27,689
  34,651
  42,664
  51,759
  61,947
  73,230
  85,602
  99,045
  113,539
  129,061
  145,585
  163,089
  181,552
  200,958
  221,294
  242,556
  264,743
  287,861
  311,924
  336,951
  362,966
  390,003
  418,099
  447,297
  477,647
  509,203
  542,027
Variable operating expenses, $m
 
  17,035
  22,557
  29,261
  37,243
  46,578
  57,325
  69,521
  83,183
  98,315
  114,905
  132,821
  152,258
  173,073
  195,233
  218,706
  243,465
  269,489
  296,761
  325,273
  355,026
  386,028
  418,297
  451,858
  486,746
  523,003
  560,679
  599,835
  640,535
  682,853
  726,870
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
  7,413
  17,035
  22,557
  29,261
  37,243
  46,578
  57,325
  69,521
  83,183
  98,315
  114,905
  132,821
  152,258
  173,073
  195,233
  218,706
  243,465
  269,489
  296,761
  325,273
  355,026
  386,028
  418,297
  451,858
  486,746
  523,003
  560,679
  599,835
  640,535
  682,853
  726,870
Operating income, $m
  1,887
  -4,415
  -5,819
  -7,524
  -9,554
  -11,928
  -14,661
  -17,762
  -21,237
  -25,085
  -29,303
  -33,776
  -38,719
  -44,012
  -49,648
  -55,617
  -61,913
  -68,531
  -75,466
  -82,717
  -90,283
  -98,167
  -106,373
  -114,907
  -123,779
  -132,999
  -142,581
  -152,538
  -162,888
  -173,649
  -184,843
EBITDA, $m
  3,272
  -2,499
  -3,314
  -4,304
  -5,482
  -6,861
  -8,447
  -10,248
  -12,265
  -14,499
  -16,949
  -19,611
  -22,480
  -25,554
  -28,825
  -32,291
  -35,947
  -39,789
  -43,816
  -48,025
  -52,418
  -56,996
  -61,760
  -66,715
  -71,866
  -77,219
  -82,782
  -88,563
  -94,573
  -100,821
  -107,320
Interest expense (income), $m
  571
  528
  941
  1,453
  2,076
  2,816
  3,683
  4,680
  5,812
  7,081
  8,485
  10,025
  11,698
  13,502
  15,434
  17,491
  19,670
  21,968
  24,383
  26,915
  29,561
  32,323
  35,200
  38,195
  41,310
  44,549
  47,914
  51,411
  55,045
  58,823
  62,751
Earnings before tax, $m
  1,628
  -4,943
  -6,760
  -8,978
  -11,630
  -14,744
  -18,344
  -22,443
  -27,049
  -32,165
  -37,788
  -43,801
  -50,417
  -57,515
  -65,082
  -73,108
  -81,583
  -90,499
  -99,849
  -109,631
  -119,844
  -130,490
  -141,573
  -153,103
  -165,090
  -177,548
  -190,495
  -203,949
  -217,933
  -232,472
  -247,594
Tax expense, $m
  587
  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
  1,040
  -4,943
  -6,760
  -8,978
  -11,630
  -14,744
  -18,344
  -22,443
  -27,049
  -32,165
  -37,788
  -43,801
  -50,417
  -57,515
  -65,082
  -73,108
  -81,583
  -90,499
  -99,849
  -109,631
  -119,844
  -130,490
  -141,573
  -153,103
  -165,090
  -177,548
  -190,495
  -203,949
  -217,933
  -232,472
  -247,594

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,407
  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
  35,629
  46,397
  61,537
  79,916
  101,797
  127,392
  156,855
  190,289
  227,745
  269,229
  314,712
  364,136
  417,423
  474,488
  535,239
  599,592
  667,471
  738,815
  813,582
  891,750
  973,320
  1,058,314
  1,146,780
  1,238,789
  1,334,435
  1,433,835
  1,537,128
  1,644,474
  1,756,055
  1,872,072
  1,992,745
Adjusted assets (=assets-cash), $m
  34,222
  46,397
  61,537
  79,916
  101,797
  127,392
  156,855
  190,289
  227,745
  269,229
  314,712
  364,136
  417,423
  474,488
  535,239
  599,592
  667,471
  738,815
  813,582
  891,750
  973,320
  1,058,314
  1,146,780
  1,238,789
  1,334,435
  1,433,835
  1,537,128
  1,644,474
  1,756,055
  1,872,072
  1,992,745
Revenue / Adjusted assets
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
  0.272
Average production assets, $m
  27,270
  37,002
  49,076
  63,733
  81,184
  101,595
  125,092
  151,756
  181,627
  214,711
  250,984
  290,400
  332,897
  378,406
  426,855
  478,177
  532,310
  589,208
  648,835
  711,175
  776,226
  844,010
  914,562
  987,939
  1,064,217
  1,143,489
  1,225,866
  1,311,475
  1,400,461
  1,492,985
  1,589,222
Working capital, $m
  2,562
  1,704
  2,260
  2,935
  3,738
  4,678
  5,760
  6,987
  8,363
  9,886
  11,556
  13,371
  15,328
  17,423
  19,654
  22,017
  24,510
  27,129
  29,875
  32,745
  35,740
  38,861
  42,110
  45,488
  49,000
  52,650
  56,443
  60,385
  64,482
  68,742
  73,174
Total debt, $m
  8,343
  14,700
  22,709
  32,432
  44,007
  57,546
  73,132
  90,819
  110,633
  132,578
  156,639
  182,784
  210,973
  241,160
  273,297
  307,340
  343,248
  380,989
  420,541
  461,892
  505,042
  550,004
  596,803
  645,476
  696,072
  748,655
  803,297
  860,083
  919,109
  980,482
  1,044,318
Total liabilities, $m
  18,187
  24,544
  32,553
  42,276
  53,851
  67,390
  82,976
  100,663
  120,477
  142,422
  166,483
  192,628
  220,817
  251,004
  283,141
  317,184
  353,092
  390,833
  430,385
  471,736
  514,886
  559,848
  606,647
  655,320
  705,916
  758,499
  813,141
  869,927
  928,953
  990,326
  1,054,162
Total equity, $m
  17,442
  21,853
  28,984
  37,640
  47,947
  60,001
  73,879
  89,626
  107,268
  126,807
  148,229
  171,508
  196,606
  223,484
  252,098
  282,408
  314,379
  347,982
  383,197
  420,014
  458,434
  498,466
  540,134
  583,470
  628,519
  675,336
  723,987
  774,547
  827,102
  881,746
  938,583
Total liabilities and equity, $m
  35,629
  46,397
  61,537
  79,916
  101,798
  127,391
  156,855
  190,289
  227,745
  269,229
  314,712
  364,136
  417,423
  474,488
  535,239
  599,592
  667,471
  738,815
  813,582
  891,750
  973,320
  1,058,314
  1,146,781
  1,238,790
  1,334,435
  1,433,835
  1,537,128
  1,644,474
  1,756,055
  1,872,072
  1,992,745
Debt-to-equity ratio
  0.478
  0.670
  0.780
  0.860
  0.920
  0.960
  0.990
  1.010
  1.030
  1.050
  1.060
  1.070
  1.070
  1.080
  1.080
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
Adjusted equity ratio
  0.469
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,040
  -4,943
  -6,760
  -8,978
  -11,630
  -14,744
  -18,344
  -22,443
  -27,049
  -32,165
  -37,788
  -43,801
  -50,417
  -57,515
  -65,082
  -73,108
  -81,583
  -90,499
  -99,849
  -109,631
  -119,844
  -130,490
  -141,573
  -153,103
  -165,090
  -177,548
  -190,495
  -203,949
  -217,933
  -232,472
  -247,594
Depreciation, amort., depletion, $m
  1,385
  1,916
  2,505
  3,220
  4,072
  5,067
  6,213
  7,514
  8,971
  10,585
  12,355
  14,166
  16,239
  18,459
  20,822
  23,326
  25,966
  28,742
  31,650
  34,691
  37,865
  41,171
  44,613
  48,192
  51,913
  55,780
  59,798
  63,974
  68,315
  72,829
  77,523
Funds from operations, $m
  2,696
  -3,026
  -4,255
  -5,757
  -7,558
  -9,677
  -12,130
  -14,929
  -18,078
  -21,580
  -25,434
  -29,635
  -34,179
  -39,056
  -44,260
  -49,782
  -55,617
  -61,757
  -68,199
  -74,940
  -81,979
  -89,318
  -96,960
  -104,911
  -113,177
  -121,768
  -130,696
  -139,974
  -149,618
  -159,644
  -170,071
Change in working capital, $m
  -360
  448
  556
  675
  803
  940
  1,082
  1,228
  1,375
  1,523
  1,670
  1,815
  1,957
  2,095
  2,231
  2,363
  2,493
  2,620
  2,745
  2,870
  2,995
  3,121
  3,248
  3,379
  3,512
  3,650
  3,793
  3,942
  4,097
  4,260
  4,431
Cash from operations, $m
  3,056
  -3,475
  -4,811
  -6,432
  -8,361
  -10,617
  -13,212
  -16,156
  -19,453
  -23,103
  -27,104
  -31,450
  -36,135
  -41,151
  -46,490
  -52,145
  -58,109
  -64,377
  -70,944
  -77,810
  -84,975
  -92,439
  -100,209
  -108,289
  -116,689
  -125,418
  -134,489
  -143,916
  -153,715
  -163,904
  -174,502
Maintenance CAPEX, $m
  0
  -1,330
  -1,805
  -2,394
  -3,109
  -3,960
  -4,956
  -6,102
  -7,403
  -8,860
  -10,474
  -12,243
  -14,166
  -16,239
  -18,459
  -20,822
  -23,326
  -25,966
  -28,742
  -31,650
  -34,691
  -37,865
  -41,171
  -44,613
  -48,192
  -51,913
  -55,780
  -59,798
  -63,974
  -68,315
  -72,829
New CAPEX, $m
  -1,416
  -9,733
  -12,074
  -14,658
  -17,450
  -20,411
  -23,497
  -26,664
  -29,871
  -33,084
  -36,273
  -39,416
  -42,497
  -45,509
  -48,449
  -51,322
  -54,134
  -56,897
  -59,627
  -62,339
  -65,052
  -67,783
  -70,552
  -73,378
  -76,278
  -79,272
  -82,376
  -85,609
  -88,986
  -92,524
  -96,238
Cash from investing activities, $m
  -1,837
  -11,063
  -13,879
  -17,052
  -20,559
  -24,371
  -28,453
  -32,766
  -37,274
  -41,944
  -46,747
  -51,659
  -56,663
  -61,748
  -66,908
  -72,144
  -77,460
  -82,863
  -88,369
  -93,989
  -99,743
  -105,648
  -111,723
  -117,991
  -124,470
  -131,185
  -138,156
  -145,407
  -152,960
  -160,839
  -169,067
Free cash flow, $m
  1,219
  -14,537
  -18,690
  -23,484
  -28,921
  -34,989
  -41,665
  -48,922
  -56,727
  -65,047
  -73,851
  -83,109
  -92,798
  -102,899
  -113,399
  -124,289
  -135,568
  -147,240
  -159,313
  -171,800
  -184,718
  -198,087
  -211,932
  -226,280
  -241,159
  -256,603
  -272,645
  -289,324
  -306,676
  -324,743
  -343,568
Issuance/(repayment) of debt, $m
  -993
  6,456
  8,009
  9,723
  11,575
  13,539
  15,586
  17,687
  19,814
  21,945
  24,061
  26,145
  28,189
  30,187
  32,137
  34,043
  35,908
  37,741
  39,552
  41,351
  43,150
  44,962
  46,799
  48,673
  50,597
  52,583
  54,642
  56,786
  59,026
  61,373
  63,836
Issuance/(repurchase) of shares, $m
  8
  10,662
  13,891
  17,634
  21,936
  26,799
  32,221
  38,190
  44,691
  51,704
  59,211
  67,080
  75,516
  84,392
  93,696
  103,418
  113,554
  124,102
  135,065
  146,449
  158,263
  170,522
  183,241
  196,439
  210,139
  224,365
  239,145
  254,509
  270,488
  287,116
  304,431
Cash from financing (excl. dividends), $m  
  -1,577
  17,118
  21,900
  27,357
  33,511
  40,338
  47,807
  55,877
  64,505
  73,649
  83,272
  93,225
  103,705
  114,579
  125,833
  137,461
  149,462
  161,843
  174,617
  187,800
  201,413
  215,484
  230,040
  245,112
  260,736
  276,948
  293,787
  311,295
  329,514
  348,489
  368,267
Total cash flow (excl. dividends), $m
  -422
  2,581
  3,210
  3,873
  4,590
  5,350
  6,142
  6,955
  7,778
  8,602
  9,421
  10,116
  10,907
  11,680
  12,434
  13,172
  13,893
  14,603
  15,303
  15,999
  16,696
  17,397
  18,107
  18,832
  19,577
  20,345
  21,142
  21,971
  22,838
  23,746
  24,699
Retained Cash Flow (-), $m
  -1,035
  -10,662
  -13,891
  -17,634
  -21,936
  -26,799
  -32,221
  -38,190
  -44,691
  -51,704
  -59,211
  -67,080
  -75,516
  -84,392
  -93,696
  -103,418
  -113,554
  -124,102
  -135,065
  -146,449
  -158,263
  -170,522
  -183,241
  -196,439
  -210,139
  -224,365
  -239,145
  -254,509
  -270,488
  -287,116
  -304,431
Prev. year cash balance distribution, $m
 
  1,308
  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
 
  -6,773
  -10,681
  -13,761
  -17,346
  -21,449
  -26,079
  -31,235
  -36,913
  -43,102
  -49,790
  -56,964
  -64,609
  -72,712
  -81,261
  -90,246
  -99,660
  -109,499
  -119,762
  -130,449
  -141,568
  -153,125
  -165,134
  -177,607
  -190,562
  -204,020
  -218,004
  -232,537
  -247,649
  -263,370
  -279,732
Discount rate, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
 
  -6,463
  -9,680
  -11,789
  -13,972
  -16,154
  -18,254
  -20,190
  -21,883
  -23,264
  -24,279
  -24,887
  -25,067
  -24,818
  -24,158
  -23,121
  -21,756
  -20,125
  -18,297
  -16,345
  -14,341
  -12,352
  -10,439
  -8,650
  -7,024
  -5,584
  -4,343
  -3,302
  -2,451
  -1,775
  -1,252
Current shareholders' claim on cash, %
  100
  60.0
  36.6
  22.7
  14.3
  9.1
  5.9
  3.9
  2.6
  1.7
  1.2
  0.8
  0.6
  0.4
  0.3
  0.2
  0.1
  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
  0.0

Teck Resources Ltd is engaged in the business of exploring for, acquiring, developing and producing natural resources. The Company's activities are organized into business units that are focused on steelmaking coal, copper, zinc and energy. It operates in five segments: steelmaking coal, copper, zinc, energy and corporate. The corporate segment includes all of its activities in commodities other than copper, coal, zinc and energy. Through its interests in mining and processing operations in Canada, the United States, Chile and Peru, the Company is a seaborne exporter of steelmaking coal, and producer of copper and mined zinc. It also produces lead, molybdenum, silver, and various specialty and other metals, chemicals and fertilizers. In addition, the Company owns interest in the Fort Hills oil sands project and interests in other assets in the Athabasca region of Alberta. It is engaged in advancing porphyry copper projects in Canada, Chile, Peru, the United States and Turkey.

FINANCIAL RATIOS  of  Teck Resources Limited Class B Subordina (TECK-B)

Valuation Ratios
P/E Ratio 16.9
Price to Sales 1.9
Price to Book 1
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 10.7
Growth Rates
Sales Growth Rate 12.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.4%
Cap. Spend. - 3 Yr. Gr. Rate -5.3%
Financial Strength
Quick Ratio 14
Current Ratio 0
LT Debt to Equity 47.3%
Total Debt to Equity 47.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. -0.1%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -1.3%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. -2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 25.8%
Gross Margin - 3 Yr. Avg. 19.7%
EBITDA Margin 38.5%
EBITDA Margin - 3 Yr. Avg. 16.3%
Operating Margin 20.3%
Oper. Margin - 3 Yr. Avg. -1%
Pre-Tax Margin 17.5%
Pre-Tax Margin - 3 Yr. Avg. -4.8%
Net Profit Margin 11.2%
Net Profit Margin - 3 Yr. Avg. -4.9%
Effective Tax Rate 36.1%
Eff/ Tax Rate - 3 Yr. Avg. 36.2%
Payout Ratio 5.6%

TECK-B stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TECK-B stock intrinsic value calculation we used $9300 million for the last fiscal year's total revenue generated by Teck Resources Limited Class B Subordina. The default revenue input number comes from 2016 income statement of Teck Resources Limited Class B Subordina. 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 TECK-B stock valuation model: a) initial revenue growth rate of 35.7% 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 4.8%, whose default value for TECK-B is calculated based on our internal credit rating of Teck Resources Limited Class B Subordina, 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 Teck Resources Limited Class B Subordina.
    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 TECK-B stock the variable cost ratio is equal to 135.3%.

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 TECK-B 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 6.4% for Teck Resources Limited Class B Subordina.

Corporate tax rate of 27% is the nominal tax rate for Teck Resources Limited Class B Subordina. 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 TECK-B 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 TECK-B are equal to 293.2%.

Life of production assets of 20.5 years is the average useful life of capital assets used in Teck Resources Limited Class B Subordina 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 TECK-B is equal to 13.5%. 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 - $17442 million for Teck Resources Limited Class B Subordina - 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 578.413 million for Teck Resources Limited Class B Subordina 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 Teck Resources Limited Class B Subordina at the current share price and the inputted number of shares is $17.3 billion.

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Financial statements of TECK-B
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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