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

Previous Close

$25.38

  Intrinsic Value

$42.39

stock screener

  Rating & Target

str. buy

+67%

Previous close

$25.38

 
Intrinsic value

$42.39

 
Up/down potential

+67%

 
Rating

str. buy

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 7.0

 

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
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  14,677
  16,086
  17,556
  19,088
  20,683
  22,341
  24,065
  25,857
  27,718
  29,653
  31,664
  33,755
  35,930
  38,194
  40,550
  43,004
  45,561
  48,228
  51,009
  53,912
  56,943
  60,108
  63,416
  66,874
  70,490
  74,274
  78,233
  82,377
  86,716
  91,261
  96,021
Variable operating expenses, $m
 
  14,346
  15,654
  17,017
  18,436
  19,912
  21,446
  23,040
  24,697
  26,419
  28,208
  30,038
  31,974
  33,988
  36,084
  38,268
  40,544
  42,917
  45,392
  47,975
  50,672
  53,489
  56,433
  59,510
  62,728
  66,095
  69,618
  73,306
  77,167
  81,211
  85,447
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
  14,346
  15,654
  17,017
  18,436
  19,912
  21,446
  23,040
  24,697
  26,419
  28,208
  30,038
  31,974
  33,988
  36,084
  38,268
  40,544
  42,917
  45,392
  47,975
  50,672
  53,489
  56,433
  59,510
  62,728
  66,095
  69,618
  73,306
  77,167
  81,211
  85,447
Operating income, $m
  1,256
  1,740
  1,902
  2,071
  2,246
  2,429
  2,619
  2,816
  3,021
  3,234
  3,456
  3,717
  3,957
  4,206
  4,465
  4,736
  5,017
  5,311
  5,617
  5,937
  6,270
  6,619
  6,983
  7,364
  7,762
  8,179
  8,615
  9,071
  9,549
  10,050
  10,574
EBITDA, $m
  2,095
  2,654
  2,897
  3,150
  3,413
  3,686
  3,971
  4,267
  4,574
  4,893
  5,225
  5,570
  5,929
  6,302
  6,691
  7,096
  7,518
  7,958
  8,417
  8,896
  9,396
  9,918
  10,464
  11,035
  11,631
  12,256
  12,909
  13,593
  14,309
  15,059
  15,844
Interest expense (income), $m
  331
  301
  240
  295
  354
  414
  477
  543
  611
  681
  755
  831
  910
  993
  1,079
  1,168
  1,262
  1,359
  1,460
  1,565
  1,676
  1,791
  1,911
  2,036
  2,168
  2,305
  2,449
  2,599
  2,756
  2,921
  3,094
Earnings before tax, $m
  877
  1,439
  1,663
  1,775
  1,893
  2,015
  2,142
  2,274
  2,411
  2,553
  2,701
  2,886
  3,046
  3,213
  3,386
  3,567
  3,756
  3,952
  4,157
  4,371
  4,595
  4,828
  5,072
  5,328
  5,595
  5,874
  6,166
  6,472
  6,793
  7,128
  7,480
Tax expense, $m
  1
  388
  449
  479
  511
  544
  578
  614
  651
  689
  729
  779
  822
  867
  914
  963
  1,014
  1,067
  1,122
  1,180
  1,241
  1,304
  1,370
  1,438
  1,511
  1,586
  1,665
  1,748
  1,834
  1,925
  2,020
Net income, $m
  876
  1,050
  1,214
  1,296
  1,382
  1,471
  1,564
  1,660
  1,760
  1,864
  1,972
  2,107
  2,224
  2,345
  2,472
  2,604
  2,742
  2,885
  3,035
  3,191
  3,354
  3,525
  3,703
  3,889
  4,084
  4,288
  4,501
  4,725
  4,959
  5,204
  5,461

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
  13,305
  14,521
  15,788
  17,107
  18,479
  19,905
  21,387
  22,927
  24,527
  26,190
  27,920
  29,719
  31,591
  33,540
  35,570
  37,685
  39,891
  42,191
  44,592
  47,099
  49,717
  52,453
  55,314
  58,305
  61,434
  64,709
  68,136
  71,725
  75,484
  79,422
Adjusted assets (=assets-cash), $m
  12,135
  13,305
  14,521
  15,788
  17,107
  18,479
  19,905
  21,387
  22,927
  24,527
  26,190
  27,920
  29,719
  31,591
  33,540
  35,570
  37,685
  39,891
  42,191
  44,592
  47,099
  49,717
  52,453
  55,314
  58,305
  61,434
  64,709
  68,136
  71,725
  75,484
  79,422
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
  7,946
  8,673
  9,430
  10,217
  11,036
  11,888
  12,773
  13,693
  14,649
  15,642
  16,675
  17,750
  18,868
  20,032
  21,244
  22,507
  23,825
  25,199
  26,632
  28,130
  29,693
  31,328
  33,036
  34,822
  36,691
  38,647
  40,694
  42,838
  45,083
  47,435
Working capital, $m
  -77
  -2,574
  -2,809
  -3,054
  -3,309
  -3,575
  -3,850
  -4,137
  -4,435
  -4,744
  -5,066
  -5,401
  -5,749
  -6,111
  -6,488
  -6,881
  -7,290
  -7,716
  -8,161
  -8,626
  -9,111
  -9,617
  -10,147
  -10,700
  -11,278
  -11,884
  -12,517
  -13,180
  -13,875
  -14,602
  -15,363
Total debt, $m
  6,618
  4,698
  5,792
  6,933
  8,120
  9,354
  10,637
  11,971
  13,357
  14,797
  16,294
  17,851
  19,470
  21,155
  22,909
  24,736
  26,640
  28,625
  30,695
  32,856
  35,112
  37,468
  39,931
  42,505
  45,197
  48,014
  50,961
  54,046
  57,276
  60,659
  64,203
Total liabilities, $m
  13,895
  11,975
  13,069
  14,210
  15,397
  16,631
  17,914
  19,248
  20,634
  22,074
  23,571
  25,128
  26,747
  28,432
  30,186
  32,013
  33,917
  35,902
  37,972
  40,133
  42,389
  44,745
  47,208
  49,782
  52,474
  55,291
  58,238
  61,323
  64,553
  67,936
  71,480
Total equity, $m
  1,219
  1,331
  1,452
  1,579
  1,711
  1,848
  1,990
  2,139
  2,293
  2,453
  2,619
  2,792
  2,972
  3,159
  3,354
  3,557
  3,769
  3,989
  4,219
  4,459
  4,710
  4,972
  5,245
  5,531
  5,830
  6,143
  6,471
  6,814
  7,173
  7,548
  7,942
Total liabilities and equity, $m
  15,114
  13,306
  14,521
  15,789
  17,108
  18,479
  19,904
  21,387
  22,927
  24,527
  26,190
  27,920
  29,719
  31,591
  33,540
  35,570
  37,686
  39,891
  42,191
  44,592
  47,099
  49,717
  52,453
  55,313
  58,304
  61,434
  64,709
  68,137
  71,726
  75,484
  79,422
Debt-to-equity ratio
  5.429
  3.530
  3.990
  4.390
  4.750
  5.060
  5.340
  5.600
  5.830
  6.030
  6.220
  6.390
  6.550
  6.700
  6.830
  6.950
  7.070
  7.180
  7.280
  7.370
  7.450
  7.540
  7.610
  7.680
  7.750
  7.820
  7.880
  7.930
  7.990
  8.040
  8.080
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
  1,050
  1,214
  1,296
  1,382
  1,471
  1,564
  1,660
  1,760
  1,864
  1,972
  2,107
  2,224
  2,345
  2,472
  2,604
  2,742
  2,885
  3,035
  3,191
  3,354
  3,525
  3,703
  3,889
  4,084
  4,288
  4,501
  4,725
  4,959
  5,204
  5,461
Depreciation, amort., depletion, $m
  839
  914
  995
  1,079
  1,166
  1,257
  1,352
  1,450
  1,553
  1,659
  1,769
  1,853
  1,972
  2,096
  2,226
  2,360
  2,501
  2,647
  2,800
  2,959
  3,126
  3,299
  3,481
  3,671
  3,869
  4,077
  4,294
  4,522
  4,760
  5,009
  5,271
Funds from operations, $m
  2,634
  1,964
  2,208
  2,375
  2,548
  2,728
  2,916
  3,110
  3,312
  3,522
  3,741
  3,960
  4,196
  4,442
  4,698
  4,964
  5,242
  5,532
  5,835
  6,150
  6,480
  6,824
  7,184
  7,560
  7,953
  8,365
  8,795
  9,246
  9,718
  10,213
  10,731
Change in working capital, $m
  213
  -225
  -235
  -245
  -255
  -265
  -276
  -287
  -298
  -310
  -322
  -335
  -348
  -362
  -377
  -393
  -409
  -427
  -445
  -464
  -485
  -506
  -529
  -553
  -579
  -605
  -633
  -663
  -694
  -727
  -762
Cash from operations, $m
  2,421
  2,190
  2,444
  2,620
  2,803
  2,994
  3,191
  3,397
  3,610
  3,832
  4,063
  4,294
  4,544
  4,804
  5,075
  5,357
  5,652
  5,959
  6,280
  6,615
  6,965
  7,330
  7,713
  8,113
  8,532
  8,970
  9,429
  9,909
  10,413
  10,940
  11,493
Maintenance CAPEX, $m
  0
  -806
  -883
  -964
  -1,048
  -1,135
  -1,226
  -1,321
  -1,419
  -1,521
  -1,628
  -1,738
  -1,853
  -1,972
  -2,096
  -2,226
  -2,360
  -2,501
  -2,647
  -2,800
  -2,959
  -3,126
  -3,299
  -3,481
  -3,671
  -3,869
  -4,077
  -4,294
  -4,522
  -4,760
  -5,009
New CAPEX, $m
  -2,921
  -690
  -726
  -757
  -788
  -819
  -852
  -885
  -920
  -956
  -993
  -1,033
  -1,074
  -1,118
  -1,164
  -1,212
  -1,263
  -1,317
  -1,374
  -1,434
  -1,497
  -1,564
  -1,634
  -1,708
  -1,786
  -1,869
  -1,956
  -2,047
  -2,144
  -2,245
  -2,352
Cash from investing activities, $m
  -2,326
  -1,496
  -1,609
  -1,721
  -1,836
  -1,954
  -2,078
  -2,206
  -2,339
  -2,477
  -2,621
  -2,771
  -2,927
  -3,090
  -3,260
  -3,438
  -3,623
  -3,818
  -4,021
  -4,234
  -4,456
  -4,690
  -4,933
  -5,189
  -5,457
  -5,738
  -6,033
  -6,341
  -6,666
  -7,005
  -7,361
Free cash flow, $m
  95
  693
  834
  900
  968
  1,039
  1,113
  1,191
  1,271
  1,355
  1,442
  1,523
  1,617
  1,714
  1,814
  1,919
  2,028
  2,141
  2,258
  2,381
  2,508
  2,641
  2,780
  2,924
  3,075
  3,232
  3,396
  3,568
  3,748
  3,935
  4,132
Issuance/(repayment) of debt, $m
  263
  -1,213
  1,094
  1,140
  1,187
  1,235
  1,283
  1,334
  1,386
  1,440
  1,497
  1,557
  1,619
  1,685
  1,754
  1,827
  1,904
  1,985
  2,071
  2,161
  2,256
  2,357
  2,462
  2,574
  2,692
  2,816
  2,947
  3,085
  3,230
  3,383
  3,544
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
  120
  1,094
  1,140
  1,187
  1,235
  1,283
  1,334
  1,386
  1,440
  1,497
  1,557
  1,619
  1,685
  1,754
  1,827
  1,904
  1,985
  2,071
  2,161
  2,256
  2,357
  2,462
  2,574
  2,692
  2,816
  2,947
  3,085
  3,230
  3,383
  3,544
Total cash flow (excl. dividends), $m
  215
  813
  1,929
  2,040
  2,155
  2,274
  2,397
  2,525
  2,657
  2,795
  2,939
  3,080
  3,236
  3,399
  3,568
  3,746
  3,932
  4,126
  4,329
  4,542
  4,764
  4,998
  5,242
  5,498
  5,767
  6,048
  6,343
  6,653
  6,978
  7,318
  7,676
Retained Cash Flow (-), $m
  -1,206
  -2,384
  -122
  -127
  -132
  -137
  -143
  -148
  -154
  -160
  -166
  -173
  -180
  -187
  -195
  -203
  -212
  -221
  -230
  -240
  -251
  -262
  -274
  -286
  -299
  -313
  -327
  -343
  -359
  -376
  -394
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
 
  701
  1,807
  1,913
  2,023
  2,137
  2,254
  2,376
  2,503
  2,635
  2,772
  2,907
  3,056
  3,211
  3,374
  3,543
  3,720
  3,905
  4,099
  4,302
  4,514
  4,736
  4,968
  5,212
  5,468
  5,735
  6,016
  6,310
  6,619
  6,942
  7,282
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
 
  667
  1,625
  1,619
  1,601
  1,573
  1,533
  1,483
  1,423
  1,354
  1,276
  1,189
  1,099
  1,006
  911
  815
  720
  628
  540
  458
  382
  314
  253
  201
  156
  119
  89
  65
  46
  32
  22
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 is a domestic, United States transborder and international airline company. The Company is a provider of scheduled passenger services in the Canadian market, the Canada-United States transborder market and in the international market to and from Canada. Its mainline operates a fleet of approximately 170 aircraft, including Airbus narrow-body aircraft, over 70 Boeing and Airbus wide-body aircraft, and approximately Embraer 190 regional jets. Air Canada rouge operates a fleet of approximately 50 aircraft comprising over 20 Airbus A319 aircraft, five Airbus A321 aircraft and approximately 20 Boeing 767-300 aircraft. Through the 28-member airline network, it offers flights to approximately 1,300 destinations in over 190 countries. Air Canada Altitude recognizes and rewards Aeroplan loyalty program members with a range of travel privileges and benefits corresponding to their travel activity, such as priority check-in, complimentary checked baggage and upgrades to business class.

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

Valuation Ratios
P/E Ratio 7.9
Price to Sales 0.5
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 2.9
Price to Free Cash Flow -13.9
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 47.5%
Gross Margin - 3 Yr. Avg. 48.9%
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 9.6% 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 274.006 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 $7.0 billion.

RELATED COMPANIES Price Int.Val. Rating
WJA WestJet Airlin 27.14 83.50  str.buy
EIF Exchange Incom 35.41 109.36  str.buy
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.