Intrinsic value of Air Canada Voting and Variable Voting Sh - AC

Previous Close

$22.45

  Intrinsic Value

$40.84

stock screener

  Rating & Target

str. buy

+82%

  Value-price divergence*

+32%

Previous close

$22.45

 
Intrinsic value

$40.84

 
Up/down potential

+82%

 
Rating

str. buy

 
Value-price divergence*

+32%

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

We calculate the intrinsic value of AC 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 6.1

 

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, %
  5.83
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
Revenue, $m
  14,677
  15,983
  17,343
  18,758
  20,230
  21,759
  23,348
  24,999
  26,715
  28,500
  30,355
  32,286
  34,295
  36,388
  38,568
  40,840
  43,210
  45,683
  48,265
  50,960
  53,777
  56,721
  59,799
  63,018
  66,387
  69,913
  73,604
  77,470
  81,519
  85,761
  90,207
Variable operating expenses, $m
 
  14,254
  15,465
  16,724
  18,033
  19,394
  20,808
  22,277
  23,805
  25,392
  27,044
  28,731
  30,519
  32,381
  34,321
  36,343
  38,452
  40,653
  42,950
  45,349
  47,855
  50,475
  53,214
  56,079
  59,077
  62,214
  65,499
  68,939
  72,542
  76,317
  80,274
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
  13,421
  14,254
  15,465
  16,724
  18,033
  19,394
  20,808
  22,277
  23,805
  25,392
  27,044
  28,731
  30,519
  32,381
  34,321
  36,343
  38,452
  40,653
  42,950
  45,349
  47,855
  50,475
  53,214
  56,079
  59,077
  62,214
  65,499
  68,939
  72,542
  76,317
  80,274
Operating income, $m
  1,256
  1,729
  1,879
  2,035
  2,197
  2,365
  2,540
  2,722
  2,911
  3,107
  3,312
  3,555
  3,777
  4,007
  4,247
  4,497
  4,758
  5,031
  5,315
  5,612
  5,922
  6,246
  6,585
  6,940
  7,310
  7,699
  8,105
  8,531
  8,977
  9,444
  9,934
EBITDA, $m
  2,095
  2,637
  2,862
  3,095
  3,338
  3,590
  3,853
  4,125
  4,408
  4,703
  5,009
  5,327
  5,659
  6,004
  6,364
  6,739
  7,130
  7,538
  7,964
  8,409
  8,874
  9,359
  9,867
  10,399
  10,954
  11,536
  12,145
  12,783
  13,451
  14,151
  14,885
Interest expense (income), $m
  331
  301
  236
  287
  341
  397
  455
  515
  578
  643
  711
  781
  855
  931
  1,010
  1,093
  1,179
  1,269
  1,363
  1,461
  1,564
  1,671
  1,782
  1,899
  2,021
  2,149
  2,283
  2,423
  2,570
  2,724
  2,885
Earnings before tax, $m
  877
  1,427
  1,643
  1,747
  1,856
  1,968
  2,085
  2,207
  2,333
  2,464
  2,601
  2,774
  2,922
  3,076
  3,237
  3,404
  3,579
  3,761
  3,952
  4,150
  4,358
  4,575
  4,803
  5,040
  5,289
  5,549
  5,822
  6,108
  6,407
  6,720
  7,049
Tax expense, $m
  1
  385
  444
  472
  501
  531
  563
  596
  630
  665
  702
  749
  789
  831
  874
  919
  966
  1,016
  1,067
  1,121
  1,177
  1,235
  1,297
  1,361
  1,428
  1,498
  1,572
  1,649
  1,730
  1,814
  1,903
Net income, $m
  876
  1,042
  1,199
  1,275
  1,355
  1,437
  1,522
  1,611
  1,703
  1,799
  1,899
  2,025
  2,133
  2,246
  2,363
  2,485
  2,613
  2,746
  2,885
  3,030
  3,182
  3,340
  3,506
  3,679
  3,861
  4,051
  4,250
  4,459
  4,677
  4,906
  5,146

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,979
  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
  15,114
  13,220
  14,345
  15,516
  16,733
  17,997
  19,312
  20,678
  22,097
  23,573
  25,108
  26,705
  28,367
  30,097
  31,901
  33,780
  35,741
  37,786
  39,921
  42,151
  44,480
  46,915
  49,461
  52,124
  54,911
  57,827
  60,880
  64,078
  67,427
  70,936
  74,613
Adjusted assets (=assets-cash), $m
  12,135
  13,220
  14,345
  15,516
  16,733
  17,997
  19,312
  20,678
  22,097
  23,573
  25,108
  26,705
  28,367
  30,097
  31,901
  33,780
  35,741
  37,786
  39,921
  42,151
  44,480
  46,915
  49,461
  52,124
  54,911
  57,827
  60,880
  64,078
  67,427
  70,936
  74,613
Revenue / Adjusted assets
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
  1.209
Average production assets, $m
  7,256
  7,896
  8,568
  9,267
  9,993
  10,749
  11,534
  12,350
  13,197
  14,079
  14,996
  15,949
  16,942
  17,976
  19,053
  20,175
  21,346
  22,568
  23,843
  25,174
  26,566
  28,020
  29,541
  31,131
  32,795
  34,537
  36,360
  38,270
  40,270
  42,366
  44,562
Working capital, $m
  -77
  -2,557
  -2,775
  -3,001
  -3,237
  -3,481
  -3,736
  -4,000
  -4,274
  -4,560
  -4,857
  -5,166
  -5,487
  -5,822
  -6,171
  -6,534
  -6,914
  -7,309
  -7,722
  -8,154
  -8,604
  -9,075
  -9,568
  -10,083
  -10,622
  -11,186
  -11,777
  -12,395
  -13,043
  -13,722
  -14,433
Total debt, $m
  6,618
  4,621
  5,634
  6,687
  7,782
  8,921
  10,104
  11,333
  12,610
  13,939
  15,320
  16,757
  18,253
  19,811
  21,434
  23,125
  24,890
  26,730
  28,652
  30,659
  32,755
  34,947
  37,238
  39,635
  42,143
  44,767
  47,515
  50,393
  53,407
  56,565
  59,875
Total liabilities, $m
  13,895
  11,898
  12,911
  13,964
  15,059
  16,198
  17,381
  18,610
  19,887
  21,216
  22,597
  24,034
  25,530
  27,088
  28,711
  30,402
  32,167
  34,007
  35,929
  37,936
  40,032
  42,224
  44,515
  46,912
  49,420
  52,044
  54,792
  57,670
  60,684
  63,842
  67,152
Total equity, $m
  1,219
  1,322
  1,435
  1,552
  1,673
  1,800
  1,931
  2,068
  2,210
  2,357
  2,511
  2,670
  2,837
  3,010
  3,190
  3,378
  3,574
  3,779
  3,992
  4,215
  4,448
  4,692
  4,946
  5,212
  5,491
  5,783
  6,088
  6,408
  6,743
  7,094
  7,461
Total liabilities and equity, $m
  15,114
  13,220
  14,346
  15,516
  16,732
  17,998
  19,312
  20,678
  22,097
  23,573
  25,108
  26,704
  28,367
  30,098
  31,901
  33,780
  35,741
  37,786
  39,921
  42,151
  44,480
  46,916
  49,461
  52,124
  54,911
  57,827
  60,880
  64,078
  67,427
  70,936
  74,613
Debt-to-equity ratio
  5.429
  3.500
  3.930
  4.310
  4.650
  4.960
  5.230
  5.480
  5.710
  5.910
  6.100
  6.280
  6.430
  6.580
  6.720
  6.850
  6.960
  7.070
  7.180
  7.270
  7.360
  7.450
  7.530
  7.600
  7.670
  7.740
  7.800
  7.860
  7.920
  7.970
  8.020
Adjusted equity ratio
  -0.145
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  876
  1,042
  1,199
  1,275
  1,355
  1,437
  1,522
  1,611
  1,703
  1,799
  1,899
  2,025
  2,133
  2,246
  2,363
  2,485
  2,613
  2,746
  2,885
  3,030
  3,182
  3,340
  3,506
  3,679
  3,861
  4,051
  4,250
  4,459
  4,677
  4,906
  5,146
Depreciation, amort., depletion, $m
  839
  908
  983
  1,061
  1,141
  1,225
  1,313
  1,403
  1,497
  1,595
  1,697
  1,772
  1,882
  1,997
  2,117
  2,242
  2,372
  2,508
  2,649
  2,797
  2,952
  3,113
  3,282
  3,459
  3,644
  3,837
  4,040
  4,252
  4,474
  4,707
  4,951
Funds from operations, $m
  2,634
  1,950
  2,182
  2,336
  2,496
  2,662
  2,835
  3,014
  3,200
  3,394
  3,596
  3,797
  4,015
  4,243
  4,480
  4,727
  4,984
  5,253
  5,534
  5,827
  6,133
  6,453
  6,788
  7,138
  7,505
  7,889
  8,290
  8,711
  9,151
  9,613
  10,097
Change in working capital, $m
  213
  -209
  -218
  -226
  -235
  -245
  -254
  -264
  -275
  -285
  -297
  -309
  -322
  -335
  -349
  -364
  -379
  -396
  -413
  -431
  -451
  -471
  -492
  -515
  -539
  -564
  -591
  -619
  -648
  -679
  -711
Cash from operations, $m
  2,421
  2,159
  2,400
  2,563
  2,731
  2,907
  3,089
  3,278
  3,475
  3,680
  3,893
  4,106
  4,337
  4,578
  4,829
  5,090
  5,364
  5,649
  5,947
  6,258
  6,584
  6,924
  7,281
  7,654
  8,044
  8,453
  8,881
  9,329
  9,799
  10,292
  10,808
Maintenance CAPEX, $m
  0
  -806
  -877
  -952
  -1,030
  -1,110
  -1,194
  -1,282
  -1,372
  -1,466
  -1,564
  -1,666
  -1,772
  -1,882
  -1,997
  -2,117
  -2,242
  -2,372
  -2,508
  -2,649
  -2,797
  -2,952
  -3,113
  -3,282
  -3,459
  -3,644
  -3,837
  -4,040
  -4,252
  -4,474
  -4,707
New CAPEX, $m
  -2,921
  -640
  -672
  -699
  -727
  -755
  -785
  -816
  -848
  -881
  -917
  -954
  -993
  -1,034
  -1,077
  -1,123
  -1,171
  -1,222
  -1,275
  -1,332
  -1,391
  -1,454
  -1,521
  -1,590
  -1,664
  -1,742
  -1,824
  -1,910
  -2,000
  -2,096
  -2,196
Cash from investing activities, $m
  -2,326
  -1,446
  -1,549
  -1,651
  -1,757
  -1,865
  -1,979
  -2,098
  -2,220
  -2,347
  -2,481
  -2,620
  -2,765
  -2,916
  -3,074
  -3,240
  -3,413
  -3,594
  -3,783
  -3,981
  -4,188
  -4,406
  -4,634
  -4,872
  -5,123
  -5,386
  -5,661
  -5,950
  -6,252
  -6,570
  -6,903
Free cash flow, $m
  95
  714
  851
  912
  975
  1,041
  1,110
  1,181
  1,255
  1,332
  1,412
  1,486
  1,572
  1,661
  1,754
  1,851
  1,951
  2,056
  2,164
  2,277
  2,395
  2,518
  2,647
  2,781
  2,921
  3,067
  3,220
  3,380
  3,547
  3,722
  3,905
Issuance/(repayment) of debt, $m
  263
  -1,290
  1,013
  1,053
  1,095
  1,138
  1,183
  1,229
  1,278
  1,328
  1,381
  1,437
  1,496
  1,558
  1,623
  1,692
  1,764
  1,841
  1,922
  2,007
  2,097
  2,191
  2,291
  2,397
  2,508
  2,625
  2,748
  2,878
  3,014
  3,158
  3,309
Issuance/(repurchase) of shares, $m
  -92
  1,333
  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  
  137
  43
  1,013
  1,053
  1,095
  1,138
  1,183
  1,229
  1,278
  1,328
  1,381
  1,437
  1,496
  1,558
  1,623
  1,692
  1,764
  1,841
  1,922
  2,007
  2,097
  2,191
  2,291
  2,397
  2,508
  2,625
  2,748
  2,878
  3,014
  3,158
  3,309
Total cash flow (excl. dividends), $m
  215
  757
  1,863
  1,965
  2,070
  2,179
  2,293
  2,410
  2,533
  2,660
  2,793
  2,923
  3,068
  3,219
  3,377
  3,542
  3,715
  3,896
  4,086
  4,284
  4,492
  4,710
  4,938
  5,178
  5,429
  5,692
  5,968
  6,257
  6,561
  6,880
  7,214
Retained Cash Flow (-), $m
  -1,206
  -2,375
  -113
  -117
  -122
  -126
  -131
  -137
  -142
  -148
  -153
  -160
  -166
  -173
  -180
  -188
  -196
  -205
  -214
  -223
  -233
  -243
  -255
  -266
  -279
  -292
  -305
  -320
  -335
  -351
  -368
Prev. year cash balance distribution, $m
 
  2,272
  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
 
  654
  1,751
  1,848
  1,949
  2,053
  2,161
  2,274
  2,391
  2,513
  2,640
  2,764
  2,902
  3,046
  3,197
  3,355
  3,519
  3,692
  3,872
  4,061
  4,259
  4,466
  4,684
  4,911
  5,150
  5,400
  5,662
  5,938
  6,226
  6,529
  6,846
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  621
  1,574
  1,563
  1,542
  1,511
  1,470
  1,419
  1,359
  1,291
  1,215
  1,130
  1,044
  954
  863
  771
  681
  594
  510
  432
  361
  296
  239
  189
  147
  112
  83
  61
  43
  30
  20
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Air Canada operates as a full-service airline company. The company offers scheduled passenger services offered on domestic and Canada-U.S. transborder routes operated under the brand name Air Canada Express, as well as through capacity purchase agreements on other regional carriers. It also provides air cargo services on domestic and the U.S. transborder routes, as well as on international routes between Canada and other markets in Europe, Asia, South America, and Australia. In addition, the company develops, markets, and distributes vacation packages, as well as offers cruises, tours, and excursions in the Caribbean, Mexico, Central and South America, Asia, Europe, and the United States. The company was founded in 1937 and is headquartered in Saint-Laurent, Canada.

FINANCIAL RATIOS  of  Air Canada Voting and Variable Voting Sh (AC)

Valuation Ratios
P/E Ratio 7
Price to Sales 0.4
Price to Book 5
Price to Tangible Book
Price to Cash Flow 2.5
Price to Free Cash Flow -12.3
Growth Rates
Sales Growth Rate 5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 60.9%
Cap. Spend. - 3 Yr. Gr. Rate 24.9%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 484.9%
Total Debt to Equity 542.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 8.5%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 12.3%
Ret/ On T. Cap. - 3 Yr. Avg. 7%
Return On Equity 142.2%
Return On Equity - 3 Yr. Avg. 27.9%
Asset Turnover 1
Profitability Ratios
Gross Margin 53.1%
Gross Margin - 3 Yr. Avg. 53.7%
EBITDA Margin 13.9%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 8.6%
Oper. Margin - 3 Yr. Avg. 8.5%
Pre-Tax Margin 6%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. 3%
Effective Tax Rate 0.1%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

AC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AC stock intrinsic value calculation we used $14677 million for the last fiscal year's total revenue generated by Air Canada Voting and Variable Voting Sh. The default revenue input number comes from 2016 income statement of Air Canada Voting and Variable Voting Sh. 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 AC stock valuation model: a) initial revenue growth rate of 8.9% 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 5.2%, whose default value for AC is calculated based on our internal credit rating of Air Canada Voting and Variable Voting Sh, 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 Air Canada Voting and Variable Voting Sh.
    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 AC stock the variable cost ratio is equal to 89.2%.

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 AC 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 5.1% for Air Canada Voting and Variable Voting Sh.

Corporate tax rate of 27% is the nominal tax rate for Air Canada Voting and Variable Voting Sh. 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 AC 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 AC are equal to 49.4%.

Life of production assets of 9 years is the average useful life of capital assets used in Air Canada Voting and Variable Voting Sh 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 AC is equal to -16%. 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 - $1219 million for Air Canada Voting and Variable Voting Sh - 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 271.313 million for Air Canada Voting and Variable Voting Sh 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 Air Canada Voting and Variable Voting Sh at the current share price and the inputted number of shares is $6.1 billion.

RELATED COMPANIES Price Int.Val. Rating
WJA WestJet Airlin 25.96 82.87  str.buy
AIM Aimia Inc. 2.04 8.08  str.buy
EIF Exchange Incom 29.87 25.88  sell
Stock chart of AC Financial statements of AC
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.