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

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$12.99

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$12.99

 
Intrinsic value

$36.67

 
Up/down potential

+182%

 
Rating

str. buy

 
Value-price divergence* premium content

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*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 3.5

 

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
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  14,677
  15,792
  16,952
  18,156
  19,408
  20,710
  22,063
  23,471
  24,936
  26,462
  28,052
  29,709
  31,437
  33,240
  35,121
  37,086
  39,139
  41,285
  43,528
  45,874
  48,329
  50,898
  53,588
  56,404
  59,355
  62,445
  65,684
  69,079
  72,637
  76,368
  80,280
Variable operating expenses, $m
 
  14,085
  15,116
  16,188
  17,302
  18,460
  19,665
  20,918
  22,222
  23,580
  24,994
  26,437
  27,975
  29,579
  31,254
  33,002
  34,829
  36,738
  38,735
  40,822
  43,007
  45,293
  47,687
  50,193
  52,818
  55,569
  58,451
  61,472
  64,638
  67,958
  71,439
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
  14,085
  15,116
  16,188
  17,302
  18,460
  19,665
  20,918
  22,222
  23,580
  24,994
  26,437
  27,975
  29,579
  31,254
  33,002
  34,829
  36,738
  38,735
  40,822
  43,007
  45,293
  47,687
  50,193
  52,818
  55,569
  58,451
  61,472
  64,638
  67,958
  71,439
Operating income, $m
  1,256
  1,708
  1,836
  1,968
  2,106
  2,249
  2,398
  2,554
  2,715
  2,883
  3,058
  3,272
  3,462
  3,660
  3,868
  4,084
  4,310
  4,546
  4,793
  5,052
  5,322
  5,605
  5,901
  6,211
  6,536
  6,876
  7,233
  7,607
  7,999
  8,410
  8,840
EBITDA, $m
  2,095
  2,606
  2,797
  2,996
  3,202
  3,417
  3,641
  3,873
  4,115
  4,367
  4,629
  4,902
  5,187
  5,485
  5,795
  6,120
  6,458
  6,812
  7,182
  7,570
  7,975
  8,399
  8,842
  9,307
  9,794
  10,304
  10,838
  11,399
  11,986
  12,601
  13,247
Interest expense (income), $m
  331
  301
  228
  272
  318
  366
  415
  467
  520
  576
  634
  694
  757
  822
  891
  962
  1,037
  1,115
  1,196
  1,281
  1,370
  1,464
  1,561
  1,663
  1,770
  1,882
  2,000
  2,123
  2,251
  2,387
  2,528
Earnings before tax, $m
  877
  1,406
  1,607
  1,696
  1,788
  1,884
  1,983
  2,087
  2,195
  2,307
  2,424
  2,578
  2,705
  2,838
  2,977
  3,122
  3,273
  3,431
  3,597
  3,770
  3,951
  4,141
  4,340
  4,548
  4,766
  4,994
  5,233
  5,484
  5,747
  6,023
  6,312
Tax expense, $m
  1
  380
  434
  458
  483
  509
  536
  563
  593
  623
  655
  696
  730
  766
  804
  843
  884
  926
  971
  1,018
  1,067
  1,118
  1,172
  1,228
  1,287
  1,348
  1,413
  1,481
  1,552
  1,626
  1,704
Net income, $m
  876
  1,027
  1,173
  1,238
  1,305
  1,375
  1,448
  1,524
  1,602
  1,684
  1,770
  1,882
  1,975
  2,072
  2,173
  2,279
  2,389
  2,505
  2,626
  2,752
  2,885
  3,023
  3,168
  3,320
  3,479
  3,646
  3,820
  4,004
  4,195
  4,397
  4,608

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
  13,062
  14,021
  15,018
  16,053
  17,130
  18,249
  19,414
  20,626
  21,888
  23,203
  24,573
  26,002
  27,493
  29,050
  30,675
  32,373
  34,148
  36,003
  37,944
  39,974
  42,099
  44,324
  46,654
  49,094
  51,650
  54,329
  57,137
  60,080
  63,166
  66,402
Adjusted assets (=assets-cash), $m
  12,135
  13,062
  14,021
  15,018
  16,053
  17,130
  18,249
  19,414
  20,626
  21,888
  23,203
  24,573
  26,002
  27,493
  29,050
  30,675
  32,373
  34,148
  36,003
  37,944
  39,974
  42,099
  44,324
  46,654
  49,094
  51,650
  54,329
  57,137
  60,080
  63,166
  66,402
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
  7,801
  8,374
  8,969
  9,588
  10,231
  10,899
  11,595
  12,319
  13,072
  13,858
  14,676
  15,530
  16,420
  17,350
  18,321
  19,335
  20,395
  21,503
  22,662
  23,874
  25,144
  26,472
  27,864
  29,321
  30,848
  32,448
  34,125
  35,883
  37,726
  39,658
Working capital, $m
  -77
  -2,527
  -2,712
  -2,905
  -3,105
  -3,314
  -3,530
  -3,755
  -3,990
  -4,234
  -4,488
  -4,753
  -5,030
  -5,318
  -5,619
  -5,934
  -6,262
  -6,606
  -6,964
  -7,340
  -7,733
  -8,144
  -8,574
  -9,025
  -9,497
  -9,991
  -10,509
  -11,053
  -11,622
  -12,219
  -12,845
Total debt, $m
  6,618
  4,479
  5,342
  6,239
  7,171
  8,140
  9,147
  10,195
  11,286
  12,422
  13,605
  14,839
  16,125
  17,467
  18,868
  20,331
  21,859
  23,456
  25,126
  26,872
  28,700
  30,612
  32,615
  34,711
  36,907
  39,208
  41,619
  44,146
  46,795
  49,572
  52,485
Total liabilities, $m
  13,895
  11,756
  12,619
  13,516
  14,448
  15,417
  16,424
  17,472
  18,563
  19,699
  20,882
  22,116
  23,402
  24,744
  26,145
  27,608
  29,136
  30,733
  32,403
  34,149
  35,977
  37,889
  39,892
  41,988
  44,184
  46,485
  48,896
  51,423
  54,072
  56,849
  59,762
Total equity, $m
  1,219
  1,306
  1,402
  1,502
  1,605
  1,713
  1,825
  1,941
  2,063
  2,189
  2,320
  2,457
  2,600
  2,749
  2,905
  3,068
  3,237
  3,415
  3,600
  3,794
  3,997
  4,210
  4,432
  4,665
  4,909
  5,165
  5,433
  5,714
  6,008
  6,317
  6,640
Total liabilities and equity, $m
  15,114
  13,062
  14,021
  15,018
  16,053
  17,130
  18,249
  19,413
  20,626
  21,888
  23,202
  24,573
  26,002
  27,493
  29,050
  30,676
  32,373
  34,148
  36,003
  37,943
  39,974
  42,099
  44,324
  46,653
  49,093
  51,650
  54,329
  57,137
  60,080
  63,166
  66,402
Debt-to-equity ratio
  5.429
  3.430
  3.810
  4.150
  4.470
  4.750
  5.010
  5.250
  5.470
  5.680
  5.860
  6.040
  6.200
  6.350
  6.490
  6.630
  6.750
  6.870
  6.980
  7.080
  7.180
  7.270
  7.360
  7.440
  7.520
  7.590
  7.660
  7.730
  7.790
  7.850
  7.900
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
  1,027
  1,173
  1,238
  1,305
  1,375
  1,448
  1,524
  1,602
  1,684
  1,770
  1,882
  1,975
  2,072
  2,173
  2,279
  2,389
  2,505
  2,626
  2,752
  2,885
  3,023
  3,168
  3,320
  3,479
  3,646
  3,820
  4,004
  4,195
  4,397
  4,608
Depreciation, amort., depletion, $m
  839
  898
  962
  1,028
  1,096
  1,168
  1,242
  1,319
  1,400
  1,484
  1,571
  1,631
  1,726
  1,824
  1,928
  2,036
  2,148
  2,266
  2,389
  2,518
  2,653
  2,794
  2,941
  3,096
  3,258
  3,428
  3,605
  3,792
  3,987
  4,192
  4,406
Funds from operations, $m
  2,634
  1,925
  2,135
  2,266
  2,402
  2,543
  2,690
  2,843
  3,002
  3,168
  3,341
  3,512
  3,700
  3,896
  4,101
  4,314
  4,538
  4,771
  5,015
  5,270
  5,537
  5,817
  6,109
  6,416
  6,737
  7,073
  7,426
  7,795
  8,182
  8,589
  9,014
Change in working capital, $m
  213
  -178
  -185
  -193
  -200
  -208
  -217
  -225
  -234
  -244
  -254
  -265
  -276
  -288
  -301
  -314
  -328
  -343
  -359
  -375
  -393
  -411
  -430
  -451
  -472
  -495
  -518
  -543
  -569
  -597
  -626
Cash from operations, $m
  2,421
  2,785
  2,320
  2,458
  2,602
  2,751
  2,907
  3,068
  3,237
  3,412
  3,595
  3,777
  3,977
  4,185
  4,402
  4,629
  4,866
  5,114
  5,374
  5,646
  5,930
  6,228
  6,540
  6,867
  7,209
  7,568
  7,944
  8,338
  8,752
  9,185
  9,640
Maintenance CAPEX, $m
  0
  -806
  -867
  -930
  -997
  -1,065
  -1,137
  -1,211
  -1,288
  -1,369
  -1,452
  -1,540
  -1,631
  -1,726
  -1,824
  -1,928
  -2,036
  -2,148
  -2,266
  -2,389
  -2,518
  -2,653
  -2,794
  -2,941
  -3,096
  -3,258
  -3,428
  -3,605
  -3,792
  -3,987
  -4,192
New CAPEX, $m
  -2,921
  -545
  -573
  -595
  -618
  -643
  -669
  -696
  -724
  -754
  -785
  -819
  -854
  -891
  -930
  -971
  -1,014
  -1,060
  -1,108
  -1,159
  -1,213
  -1,269
  -1,329
  -1,391
  -1,457
  -1,527
  -1,600
  -1,677
  -1,758
  -1,843
  -1,932
Cash from investing activities, $m
  -2,326
  -1,351
  -1,440
  -1,525
  -1,615
  -1,708
  -1,806
  -1,907
  -2,012
  -2,123
  -2,237
  -2,359
  -2,485
  -2,617
  -2,754
  -2,899
  -3,050
  -3,208
  -3,374
  -3,548
  -3,731
  -3,922
  -4,123
  -4,332
  -4,553
  -4,785
  -5,028
  -5,282
  -5,550
  -5,830
  -6,124
Free cash flow, $m
  95
  1,433
  881
  933
  987
  1,043
  1,101
  1,162
  1,224
  1,290
  1,357
  1,419
  1,492
  1,569
  1,648
  1,730
  1,816
  1,906
  2,000
  2,097
  2,199
  2,306
  2,417
  2,534
  2,656
  2,783
  2,916
  3,056
  3,202
  3,355
  3,516
Issuance/(repayment) of debt, $m
  263
  -1,432
  863
  897
  932
  969
  1,008
  1,048
  1,091
  1,136
  1,183
  1,233
  1,286
  1,342
  1,401
  1,463
  1,528
  1,597
  1,670
  1,747
  1,827
  1,913
  2,002
  2,097
  2,196
  2,301
  2,411
  2,527
  2,649
  2,777
  2,912
Issuance/(repurchase) of shares, $m
  -92
  86
  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
  -1,346
  863
  897
  932
  969
  1,008
  1,048
  1,091
  1,136
  1,183
  1,233
  1,286
  1,342
  1,401
  1,463
  1,528
  1,597
  1,670
  1,747
  1,827
  1,913
  2,002
  2,097
  2,196
  2,301
  2,411
  2,527
  2,649
  2,777
  2,912
Total cash flow (excl. dividends), $m
  215
  2
  1,744
  1,830
  1,919
  2,012
  2,109
  2,210
  2,315
  2,425
  2,541
  2,653
  2,779
  2,910
  3,049
  3,193
  3,345
  3,503
  3,670
  3,844
  4,027
  4,219
  4,420
  4,630
  4,852
  5,084
  5,327
  5,583
  5,851
  6,133
  6,428
Retained Cash Flow (-), $m
  -1,206
  -2,359
  -96
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -131
  -137
  -143
  -149
  -156
  -163
  -170
  -177
  -186
  -194
  -203
  -213
  -222
  -233
  -244
  -256
  -268
  -281
  -294
  -309
  -324
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
 
  0
  1,648
  1,730
  1,815
  1,904
  1,997
  2,093
  2,194
  2,299
  2,409
  2,516
  2,636
  2,761
  2,893
  3,031
  3,175
  3,326
  3,484
  3,650
  3,824
  4,006
  4,197
  4,398
  4,608
  4,828
  5,060
  5,302
  5,557
  5,824
  6,105
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
 
  0
  1,482
  1,463
  1,437
  1,402
  1,358
  1,306
  1,247
  1,181
  1,109
  1,029
  948
  865
  781
  697
  614
  535
  459
  388
  324
  265
  214
  169
  132
  100
  75
  54
  39
  27
  18
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 4.1
Price to Sales 0.2
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 1.5
Price to Free Cash Flow -7.1
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 7.6% 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 269.259 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 $3.5 billion.


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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.

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