Intrinsic value of George Weston Limited - WN

Previous Close

$109.99

  Intrinsic Value

$191.94

stock screener

  Rating & Target

str. buy

+75%

Previous close

$109.99

 
Intrinsic value

$191.94

 
Up/down potential

+75%

 
Rating

str. buy

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

We calculate the intrinsic value of WN 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 14.1

 

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, %
  2.36
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
Revenue, $m
  47,999
  49,583
  51,303
  53,162
  55,161
  57,304
  59,594
  62,036
  64,633
  67,392
  70,317
  73,416
  76,696
  80,162
  83,824
  87,689
  91,767
  96,066
  100,597
  105,370
  110,396
  115,688
  121,257
  127,117
  133,281
  139,765
  146,582
  153,751
  161,286
  169,207
  177,532
Variable operating expenses, $m
 
  34,942
  36,139
  37,432
  38,824
  40,315
  41,909
  43,607
  45,415
  47,335
  49,371
  51,091
  53,373
  55,785
  58,334
  61,024
  63,861
  66,853
  70,006
  73,328
  76,826
  80,508
  84,384
  88,462
  92,752
  97,263
  102,008
  106,996
  112,240
  117,752
  123,546
Fixed operating expenses, $m
 
  12,509
  12,822
  13,142
  13,471
  13,808
  14,153
  14,507
  14,869
  15,241
  15,622
  16,013
  16,413
  16,823
  17,244
  17,675
  18,117
  18,570
  19,034
  19,510
  19,998
  20,498
  21,010
  21,535
  22,074
  22,626
  23,191
  23,771
  24,365
  24,974
  25,599
Total operating expenses, $m
  45,744
  47,451
  48,961
  50,574
  52,295
  54,123
  56,062
  58,114
  60,284
  62,576
  64,993
  67,104
  69,786
  72,608
  75,578
  78,699
  81,978
  85,423
  89,040
  92,838
  96,824
  101,006
  105,394
  109,997
  114,826
  119,889
  125,199
  130,767
  136,605
  142,726
  149,145
Operating income, $m
  2,255
  2,132
  2,343
  2,587
  2,867
  3,182
  3,533
  3,921
  4,349
  4,816
  5,324
  6,313
  6,909
  7,553
  8,246
  8,990
  9,789
  10,643
  11,557
  12,532
  13,573
  14,682
  15,863
  17,120
  18,456
  19,876
  21,383
  22,983
  24,681
  26,480
  28,387
EBITDA, $m
  3,909
  3,983
  4,243
  4,541
  4,877
  5,253
  5,670
  6,128
  6,629
  7,175
  7,767
  8,407
  9,098
  9,841
  10,638
  11,493
  12,407
  13,384
  14,427
  15,539
  16,723
  17,983
  19,323
  20,747
  22,259
  23,864
  25,566
  27,370
  29,283
  31,308
  33,453
Interest expense (income), $m
  570
  490
  530
  574
  622
  673
  727
  786
  848
  914
  984
  1,059
  1,138
  1,221
  1,310
  1,403
  1,501
  1,605
  1,715
  1,830
  1,952
  2,080
  2,215
  2,356
  2,506
  2,663
  2,828
  3,002
  3,184
  3,376
  3,578
Earnings before tax, $m
  1,555
  1,643
  1,812
  2,013
  2,245
  2,509
  2,806
  3,136
  3,501
  3,902
  4,340
  5,254
  5,772
  6,332
  6,937
  7,588
  8,287
  9,038
  9,842
  10,702
  11,621
  12,602
  13,649
  14,763
  15,950
  17,213
  18,555
  19,982
  21,496
  23,104
  24,809
Tax expense, $m
  465
  444
  489
  544
  606
  677
  758
  847
  945
  1,053
  1,172
  1,419
  1,558
  1,710
  1,873
  2,049
  2,238
  2,440
  2,657
  2,890
  3,138
  3,403
  3,685
  3,986
  4,307
  4,648
  5,010
  5,395
  5,804
  6,238
  6,698
Net income, $m
  550
  1,199
  1,323
  1,470
  1,639
  1,832
  2,048
  2,289
  2,556
  2,848
  3,168
  3,835
  4,213
  4,622
  5,064
  5,539
  6,050
  6,598
  7,185
  7,813
  8,484
  9,200
  9,964
  10,777
  11,644
  12,565
  13,545
  14,587
  15,692
  16,866
  18,111

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,571
  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
  37,946
  36,539
  37,807
  39,176
  40,650
  42,229
  43,916
  45,715
  47,629
  49,662
  51,818
  54,102
  56,518
  59,073
  61,771
  64,620
  67,625
  70,793
  74,132
  77,649
  81,353
  85,253
  89,357
  93,675
  98,218
  102,995
  108,020
  113,302
  118,855
  124,692
  130,827
Adjusted assets (=assets-cash), $m
  35,375
  36,539
  37,807
  39,176
  40,650
  42,229
  43,916
  45,715
  47,629
  49,662
  51,818
  54,102
  56,518
  59,073
  61,771
  64,620
  67,625
  70,793
  74,132
  77,649
  81,353
  85,253
  89,357
  93,675
  98,218
  102,995
  108,020
  113,302
  118,855
  124,692
  130,827
Revenue / Adjusted assets
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
  1.357
Average production assets, $m
  20,527
  21,222
  21,958
  22,753
  23,609
  24,526
  25,506
  26,551
  27,663
  28,844
  30,096
  31,422
  32,826
  34,309
  35,877
  37,531
  39,276
  41,116
  43,055
  45,098
  47,250
  49,514
  51,898
  54,406
  57,044
  59,819
  62,737
  65,805
  69,030
  72,421
  75,984
Working capital, $m
  3,750
  3,025
  3,130
  3,243
  3,365
  3,496
  3,635
  3,784
  3,943
  4,111
  4,289
  4,478
  4,678
  4,890
  5,113
  5,349
  5,598
  5,860
  6,136
  6,428
  6,734
  7,057
  7,397
  7,754
  8,130
  8,526
  8,942
  9,379
  9,838
  10,322
  10,829
Total debt, $m
  13,141
  12,336
  13,355
  14,457
  15,641
  16,911
  18,268
  19,714
  21,253
  22,887
  24,621
  26,457
  28,400
  30,454
  32,623
  34,913
  37,329
  39,876
  42,561
  45,389
  48,367
  51,502
  54,802
  58,274
  61,926
  65,767
  69,807
  74,054
  78,518
  83,211
  88,144
Total liabilities, $m
  30,182
  29,377
  30,396
  31,498
  32,682
  33,952
  35,309
  36,755
  38,294
  39,928
  41,662
  43,498
  45,441
  47,495
  49,664
  51,954
  54,370
  56,917
  59,602
  62,430
  65,408
  68,543
  71,843
  75,315
  78,967
  82,808
  86,848
  91,095
  95,559
  100,252
  105,185
Total equity, $m
  7,764
  7,162
  7,410
  7,679
  7,967
  8,277
  8,608
  8,960
  9,335
  9,734
  10,156
  10,604
  11,078
  11,578
  12,107
  12,665
  13,254
  13,875
  14,530
  15,219
  15,945
  16,710
  17,514
  18,360
  19,251
  20,187
  21,172
  22,207
  23,296
  24,440
  25,642
Total liabilities and equity, $m
  37,946
  36,539
  37,806
  39,177
  40,649
  42,229
  43,917
  45,715
  47,629
  49,662
  51,818
  54,102
  56,519
  59,073
  61,771
  64,619
  67,624
  70,792
  74,132
  77,649
  81,353
  85,253
  89,357
  93,675
  98,218
  102,995
  108,020
  113,302
  118,855
  124,692
  130,827
Debt-to-equity ratio
  1.693
  1.720
  1.800
  1.880
  1.960
  2.040
  2.120
  2.200
  2.280
  2.350
  2.420
  2.500
  2.560
  2.630
  2.690
  2.760
  2.820
  2.870
  2.930
  2.980
  3.030
  3.080
  3.130
  3.170
  3.220
  3.260
  3.300
  3.330
  3.370
  3.400
  3.440
Adjusted equity ratio
  0.185
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196
  0.196

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  550
  1,199
  1,323
  1,470
  1,639
  1,832
  2,048
  2,289
  2,556
  2,848
  3,168
  3,835
  4,213
  4,622
  5,064
  5,539
  6,050
  6,598
  7,185
  7,813
  8,484
  9,200
  9,964
  10,777
  11,644
  12,565
  13,545
  14,587
  15,692
  16,866
  18,111
Depreciation, amort., depletion, $m
  1,654
  1,851
  1,900
  1,953
  2,010
  2,071
  2,137
  2,206
  2,281
  2,359
  2,443
  2,095
  2,188
  2,287
  2,392
  2,502
  2,618
  2,741
  2,870
  3,007
  3,150
  3,301
  3,460
  3,627
  3,803
  3,988
  4,182
  4,387
  4,602
  4,828
  5,066
Funds from operations, $m
  3,467
  3,050
  3,223
  3,423
  3,649
  3,903
  4,185
  4,496
  4,836
  5,208
  5,611
  5,930
  6,402
  6,910
  7,456
  8,041
  8,668
  9,339
  10,055
  10,819
  11,633
  12,501
  13,423
  14,404
  15,447
  16,553
  17,728
  18,974
  20,294
  21,694
  23,176
Change in working capital, $m
  -293
  97
  105
  113
  122
  131
  140
  149
  158
  168
  178
  189
  200
  211
  223
  236
  249
  262
  276
  291
  307
  323
  340
  357
  376
  395
  416
  437
  460
  483
  508
Cash from operations, $m
  3,760
  2,954
  3,118
  3,310
  3,527
  3,772
  4,045
  4,347
  4,678
  5,039
  5,433
  5,741
  6,202
  6,698
  7,232
  7,805
  8,419
  9,076
  9,779
  10,528
  11,327
  12,178
  13,084
  14,047
  15,071
  16,158
  17,312
  18,536
  19,835
  21,211
  22,668
Maintenance CAPEX, $m
  0
  -1,368
  -1,415
  -1,464
  -1,517
  -1,574
  -1,635
  -1,700
  -1,770
  -1,844
  -1,923
  -2,006
  -2,095
  -2,188
  -2,287
  -2,392
  -2,502
  -2,618
  -2,741
  -2,870
  -3,007
  -3,150
  -3,301
  -3,460
  -3,627
  -3,803
  -3,988
  -4,182
  -4,387
  -4,602
  -4,828
New CAPEX, $m
  -1,465
  -695
  -736
  -796
  -856
  -917
  -980
  -1,045
  -1,112
  -1,181
  -1,252
  -1,326
  -1,403
  -1,484
  -1,567
  -1,654
  -1,745
  -1,840
  -1,939
  -2,043
  -2,151
  -2,265
  -2,384
  -2,508
  -2,638
  -2,775
  -2,918
  -3,068
  -3,225
  -3,390
  -3,563
Cash from investing activities, $m
  -1,324
  -2,063
  -2,151
  -2,260
  -2,373
  -2,491
  -2,615
  -2,745
  -2,882
  -3,025
  -3,175
  -3,332
  -3,498
  -3,672
  -3,854
  -4,046
  -4,247
  -4,458
  -4,680
  -4,913
  -5,158
  -5,415
  -5,685
  -5,968
  -6,265
  -6,578
  -6,906
  -7,250
  -7,612
  -7,992
  -8,391
Free cash flow, $m
  2,436
  890
  967
  1,050
  1,155
  1,281
  1,430
  1,601
  1,796
  2,014
  2,258
  2,408
  2,703
  3,026
  3,378
  3,759
  4,172
  4,618
  5,098
  5,615
  6,169
  6,763
  7,399
  8,079
  8,805
  9,580
  10,406
  11,286
  12,222
  13,219
  14,277
Issuance/(repayment) of debt, $m
  -457
  951
  1,019
  1,101
  1,185
  1,270
  1,357
  1,446
  1,539
  1,634
  1,733
  1,836
  1,943
  2,054
  2,170
  2,290
  2,416
  2,547
  2,685
  2,828
  2,978
  3,135
  3,300
  3,472
  3,652
  3,841
  4,039
  4,247
  4,465
  4,693
  4,932
Issuance/(repurchase) of shares, $m
  -771
  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 financing (excl. dividends), $m  
  -2,010
  951
  1,019
  1,101
  1,185
  1,270
  1,357
  1,446
  1,539
  1,634
  1,733
  1,836
  1,943
  2,054
  2,170
  2,290
  2,416
  2,547
  2,685
  2,828
  2,978
  3,135
  3,300
  3,472
  3,652
  3,841
  4,039
  4,247
  4,465
  4,693
  4,932
Total cash flow (excl. dividends), $m
  412
  1,841
  1,987
  2,151
  2,339
  2,551
  2,787
  3,048
  3,335
  3,649
  3,991
  4,244
  4,646
  5,080
  5,547
  6,049
  6,588
  7,165
  7,783
  8,443
  9,147
  9,898
  10,699
  11,551
  12,458
  13,421
  14,445
  15,533
  16,687
  17,911
  19,210
Retained Cash Flow (-), $m
  -83
  -213
  -249
  -268
  -289
  -310
  -331
  -353
  -375
  -398
  -423
  -448
  -474
  -501
  -529
  -558
  -589
  -621
  -654
  -689
  -726
  -764
  -804
  -846
  -890
  -936
  -985
  -1,035
  -1,088
  -1,144
  -1,202
Prev. year cash balance distribution, $m
 
  815
  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
 
  2,444
  1,738
  1,883
  2,051
  2,241
  2,456
  2,695
  2,960
  3,250
  3,568
  3,797
  4,173
  4,579
  5,018
  5,491
  5,999
  6,544
  7,128
  7,753
  8,421
  9,134
  9,894
  10,705
  11,567
  12,485
  13,461
  14,498
  15,599
  16,767
  18,007
Discount rate, %
 
  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
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
 
  2,290
  1,517
  1,520
  1,521
  1,515
  1,501
  1,476
  1,440
  1,390
  1,327
  1,215
  1,135
  1,046
  949
  848
  745
  643
  545
  453
  369
  294
  229
  175
  130
  94
  66
  45
  30
  19
  12
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

George Weston Limited is a holding company engaged in food processing and distribution business. The Company, through its two operating segments, Weston Foods and Loblaw, holds cash, short-term investments and a direct investment in Choice Properties Real Estate Investment Trust (Choice Properties). The Weston Foods operating segment includes a fresh bakery business in Canada, and frozen, artisan style bakery and biscuit businesses throughout North America. The Loblaw segment, which is operated by Loblaw Companies Limited, is a food and pharmacy retailer, and the majority unitholder of Choice Properties. Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise, retail banking, credit card services, insurance and wireless mobile products and services. Choice Properties owns, develops and manages income-producing retail and commercial properties.

FINANCIAL RATIOS  of  George Weston Limited (WN)

Valuation Ratios
P/E Ratio 25.6
Price to Sales 0.3
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 3.7
Price to Free Cash Flow 6.1
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.3%
Cap. Spend. - 3 Yr. Gr. Rate 8.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 146.6%
Total Debt to Equity 169.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 2.6%
Ret/ On T. Cap. - 3 Yr. Avg. 1.9%
Return On Equity 7.1%
Return On Equity - 3 Yr. Avg. 5.3%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 28.9%
Gross Margin - 3 Yr. Avg. 27.4%
EBITDA Margin 7.9%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 4.7%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 3.2%
Pre-Tax Margin - 3 Yr. Avg. 2.1%
Net Profit Margin 1.1%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 29.9%
Eff/ Tax Rate - 3 Yr. Avg. 26.2%
Payout Ratio 48.2%

WN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WN stock intrinsic value calculation we used $47999 million for the last fiscal year's total revenue generated by George Weston Limited. The default revenue input number comes from 2016 income statement of George Weston Limited. 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 WN stock valuation model: a) initial revenue growth rate of 3.3% 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 6.7%, whose default value for WN is calculated based on our internal credit rating of George Weston Limited, 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 George Weston Limited.
    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 WN stock the variable cost ratio is equal to 70.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12204 million in the base year in the intrinsic value calculation for WN 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 4.3% for George Weston Limited.

Corporate tax rate of 27% is the nominal tax rate for George Weston Limited. 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 WN 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 WN are equal to 42.8%.

Life of production assets of 15 years is the average useful life of capital assets used in George Weston Limited 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 WN is equal to 6.1%. 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 - $7764 million for George Weston Limited - 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 127.934 million for George Weston Limited 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 George Weston Limited at the current share price and the inputted number of shares is $14.1 billion.

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Financial statements of WN
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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