Intrinsic value of Brookfield Asset Management Inc. Class A - BAM-A

Previous Close

$52.59

  Intrinsic Value

$416.34

stock screener

  Rating & Target

str. buy

+692%

Previous close

$52.59

 
Intrinsic value

$416.34

 
Up/down potential

+692%

 
Rating

str. buy

We calculate the intrinsic value of BAM-A 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 52.0

 

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, %
  22.59
  58.10
  52.79
  48.01
  43.71
  39.84
  36.36
  33.22
  30.40
  27.86
  25.57
  23.51
  21.66
  20.00
  18.50
  17.15
  15.93
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
Revenue, $m
  32,981
  52,143
  79,669
  117,919
  169,462
  236,973
  323,125
  430,465
  561,316
  717,687
  901,214
  1,113,133
  1,354,275
  1,625,089
  1,925,687
  2,255,896
  2,615,323
  3,003,425
  3,419,567
  3,863,086
  4,333,341
  4,829,756
  5,351,860
  5,899,309
  6,471,908
  7,069,628
  7,692,606
  8,341,157
  9,015,769
  9,717,104
  10,445,991
Variable operating expenses, $m
 
  39,123
  59,506
  87,831
  125,998
  175,991
  239,786
  319,272
  416,168
  531,961
  667,863
  824,279
  1,002,845
  1,203,384
  1,425,977
  1,670,498
  1,936,655
  2,224,046
  2,532,201
  2,860,628
  3,208,853
  3,576,450
  3,963,069
  4,368,457
  4,792,469
  5,235,082
  5,696,399
  6,176,653
  6,676,206
  7,195,546
  7,735,290
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
  28,937
  39,123
  59,506
  87,831
  125,998
  175,991
  239,786
  319,272
  416,168
  531,961
  667,863
  824,279
  1,002,845
  1,203,384
  1,425,977
  1,670,498
  1,936,655
  2,224,046
  2,532,201
  2,860,628
  3,208,853
  3,576,450
  3,963,069
  4,368,457
  4,792,469
  5,235,082
  5,696,399
  6,176,653
  6,676,206
  7,195,546
  7,735,290
Operating income, $m
  4,044
  13,020
  20,163
  30,089
  43,464
  60,983
  83,339
  111,193
  145,149
  185,726
  233,351
  288,854
  351,430
  421,705
  499,710
  585,398
  678,668
  779,379
  887,367
  1,002,459
  1,124,488
  1,253,306
  1,388,790
  1,530,852
  1,679,440
  1,834,546
  1,996,207
  2,164,504
  2,339,563
  2,521,557
  2,710,701
EBITDA, $m
  6,773
  17,574
  26,851
  39,743
  57,115
  79,869
  108,905
  145,083
  189,184
  241,887
  303,743
  375,167
  456,441
  547,715
  649,028
  760,321
  881,461
  1,012,266
  1,152,521
  1,302,003
  1,460,497
  1,627,807
  1,803,775
  1,988,286
  2,181,273
  2,382,727
  2,592,694
  2,811,280
  3,038,649
  3,275,025
  3,520,687
Interest expense (income), $m
  4,137
  4,067
  8,928
  15,913
  25,620
  38,699
  55,831
  77,692
  104,931
  138,135
  177,815
  224,387
  278,163
  339,355
  408,076
  484,355
  568,148
  659,356
  757,840
  863,439
  975,986
  1,095,316
  1,221,286
  1,353,774
  1,492,693
  1,637,995
  1,789,671
  1,947,757
  2,112,332
  2,283,520
  2,461,489
Earnings before tax, $m
  4,044
  8,952
  11,234
  14,175
  17,844
  22,284
  27,508
  33,501
  40,218
  47,591
  55,536
  64,468
  73,267
  82,351
  91,634
  101,043
  110,520
  120,023
  129,527
  139,019
  148,502
  157,990
  167,505
  177,078
  186,746
  196,551
  206,536
  216,747
  227,232
  238,037
  249,212
Tax expense, $m
  -466
  2,417
  3,033
  3,827
  4,818
  6,017
  7,427
  9,045
  10,859
  12,850
  14,995
  17,406
  19,782
  22,235
  24,741
  27,282
  29,840
  32,406
  34,972
  37,535
  40,096
  42,657
  45,226
  47,811
  50,422
  53,069
  55,765
  58,522
  61,353
  64,270
  67,287
Net income, $m
  2,231
  6,535
  8,201
  10,348
  13,026
  16,267
  20,081
  24,456
  29,359
  34,742
  40,541
  47,061
  53,485
  60,116
  66,893
  73,761
  80,680
  87,617
  94,555
  101,484
  108,407
  115,333
  122,279
  129,267
  136,325
  143,482
  150,771
  158,225
  165,879
  173,767
  181,925

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,808
  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
  215,938
  332,121
  507,447
  751,078
  1,079,373
  1,509,384
  2,058,121
  2,741,818
  3,575,264
  4,571,255
  5,740,217
  7,090,019
  8,625,954
  10,350,887
  12,265,522
  14,368,762
  16,658,111
  19,130,098
  21,780,684
  24,605,644
  27,600,895
  30,762,776
  34,088,278
  37,575,214
  41,222,347
  45,029,477
  48,997,492
  53,128,389
  57,425,281
  61,892,380
  66,534,975
Adjusted assets (=assets-cash), $m
  210,130
  332,121
  507,447
  751,078
  1,079,373
  1,509,384
  2,058,121
  2,741,818
  3,575,264
  4,571,255
  5,740,217
  7,090,019
  8,625,954
  10,350,887
  12,265,522
  14,368,762
  16,658,111
  19,130,098
  21,780,684
  24,605,644
  27,600,895
  30,762,776
  34,088,278
  37,575,214
  41,222,347
  45,029,477
  48,997,492
  53,128,389
  57,425,281
  61,892,380
  66,534,975
Revenue / Adjusted assets
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
Average production assets, $m
  63,408
  100,271
  153,204
  226,759
  325,875
  455,700
  621,369
  827,785
  1,079,412
  1,380,112
  1,733,035
  2,140,555
  2,604,270
  3,125,047
  3,703,096
  4,338,087
  5,029,267
  5,775,587
  6,575,828
  7,428,715
  8,333,014
  9,287,621
  10,291,626
  11,344,370
  12,445,480
  13,594,894
  14,792,882
  16,040,045
  17,337,324
  18,685,990
  20,087,641
Working capital, $m
  0
  9,907
  15,137
  22,405
  32,198
  45,025
  61,394
  81,788
  106,650
  136,361
  171,231
  211,495
  257,312
  308,767
  365,881
  428,620
  496,911
  570,651
  649,718
  733,986
  823,335
  917,654
  1,016,853
  1,120,869
  1,229,663
  1,343,229
  1,461,595
  1,584,820
  1,712,996
  1,846,250
  1,984,738
Total debt, $m
  90,545
  186,007
  331,528
  533,742
  806,227
  1,163,136
  1,618,587
  2,186,056
  2,877,816
  3,704,488
  4,674,727
  5,795,063
  7,069,889
  8,501,583
  10,090,730
  11,836,420
  13,736,579
  15,788,328
  17,988,315
  20,333,032
  22,819,090
  25,443,451
  28,203,618
  31,097,774
  34,124,895
  37,284,813
  40,578,265
  44,006,910
  47,573,330
  51,281,022
  55,134,377
Total liabilities, $m
  180,198
  275,660
  421,181
  623,395
  895,880
  1,252,789
  1,708,240
  2,275,709
  2,967,469
  3,794,141
  4,764,380
  5,884,716
  7,159,542
  8,591,236
  10,180,383
  11,926,073
  13,826,232
  15,877,981
  18,077,968
  20,422,685
  22,908,743
  25,533,104
  28,293,271
  31,187,427
  34,214,548
  37,374,466
  40,667,918
  44,096,563
  47,662,983
  51,370,675
  55,224,030
Total equity, $m
  35,740
  56,461
  86,266
  127,683
  183,493
  256,595
  349,880
  466,109
  607,795
  777,113
  975,837
  1,205,303
  1,466,412
  1,759,651
  2,085,139
  2,442,690
  2,831,879
  3,252,117
  3,702,716
  4,182,960
  4,692,152
  5,229,672
  5,795,007
  6,387,786
  7,007,799
  7,655,011
  8,329,574
  9,031,826
  9,762,298
  10,521,705
  11,310,946
Total liabilities and equity, $m
  215,938
  332,121
  507,447
  751,078
  1,079,373
  1,509,384
  2,058,120
  2,741,818
  3,575,264
  4,571,254
  5,740,217
  7,090,019
  8,625,954
  10,350,887
  12,265,522
  14,368,763
  16,658,111
  19,130,098
  21,780,684
  24,605,645
  27,600,895
  30,762,776
  34,088,278
  37,575,213
  41,222,347
  45,029,477
  48,997,492
  53,128,389
  57,425,281
  61,892,380
  66,534,976
Debt-to-equity ratio
  2.533
  3.290
  3.840
  4.180
  4.390
  4.530
  4.630
  4.690
  4.730
  4.770
  4.790
  4.810
  4.820
  4.830
  4.840
  4.850
  4.850
  4.850
  4.860
  4.860
  4.860
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
Adjusted equity ratio
  0.142
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,231
  6,535
  8,201
  10,348
  13,026
  16,267
  20,081
  24,456
  29,359
  34,742
  40,541
  47,061
  53,485
  60,116
  66,893
  73,761
  80,680
  87,617
  94,555
  101,484
  108,407
  115,333
  122,279
  129,267
  136,325
  143,482
  150,771
  158,225
  165,879
  173,767
  181,925
Depreciation, amort., depletion, $m
  2,729
  4,554
  6,689
  9,655
  13,651
  18,886
  25,566
  33,890
  44,036
  56,161
  70,392
  86,313
  105,011
  126,010
  149,318
  174,923
  202,793
  232,887
  265,154
  299,545
  336,009
  374,501
  414,985
  457,434
  501,834
  548,181
  596,487
  646,776
  699,086
  753,467
  809,986
Funds from operations, $m
  3,156
  11,090
  14,890
  20,002
  26,677
  35,153
  45,647
  58,345
  73,395
  90,902
  110,933
  133,374
  158,496
  186,126
  216,211
  248,684
  283,473
  320,504
  359,709
  401,029
  444,415
  489,833
  537,263
  586,701
  638,159
  691,663
  747,258
  805,001
  864,965
  927,235
  991,910
Change in working capital, $m
  -1,009
  3,641
  5,230
  7,267
  9,793
  12,827
  16,369
  20,395
  24,862
  29,710
  34,870
  40,265
  45,817
  51,455
  57,114
  62,740
  68,291
  73,739
  79,067
  84,269
  89,348
  94,319
  99,200
  104,015
  108,794
  113,567
  118,366
  123,225
  128,176
  133,254
  138,489
Cash from operations, $m
  4,165
  7,449
  9,660
  12,735
  16,884
  22,326
  29,279
  37,951
  48,533
  61,192
  76,062
  93,109
  112,679
  134,671
  159,097
  185,944
  215,181
  246,764
  280,642
  316,761
  355,067
  395,515
  438,064
  482,686
  529,365
  578,097
  628,892
  681,777
  736,788
  793,981
  853,422
Maintenance CAPEX, $m
  0
  -2,557
  -4,043
  -6,178
  -9,143
  -13,140
  -18,375
  -25,055
  -33,378
  -43,525
  -55,650
  -69,880
  -86,313
  -105,011
  -126,010
  -149,318
  -174,923
  -202,793
  -232,887
  -265,154
  -299,545
  -336,009
  -374,501
  -414,985
  -457,434
  -501,834
  -548,181
  -596,487
  -646,776
  -699,086
  -753,467
New CAPEX, $m
  -1,989
  -36,863
  -52,933
  -73,555
  -99,116
  -129,825
  -165,670
  -206,416
  -251,627
  -300,700
  -352,923
  -407,520
  -463,716
  -520,776
  -578,049
  -634,991
  -691,180
  -746,320
  -800,241
  -852,887
  -904,299
  -954,607
  -1,004,006
  -1,052,744
  -1,101,110
  -1,149,415
  -1,197,987
  -1,247,163
  -1,297,279
  -1,348,666
  -1,401,651
Cash from investing activities, $m
  -11,561
  -39,420
  -56,976
  -79,733
  -108,259
  -142,965
  -184,045
  -231,471
  -285,005
  -344,225
  -408,573
  -477,400
  -550,029
  -625,787
  -704,059
  -784,309
  -866,103
  -949,113
  -1,033,128
  -1,118,041
  -1,203,844
  -1,290,616
  -1,378,507
  -1,467,729
  -1,558,544
  -1,651,249
  -1,746,168
  -1,843,650
  -1,944,055
  -2,047,752
  -2,155,118
Free cash flow, $m
  -7,396
  -31,971
  -47,316
  -66,997
  -91,375
  -120,639
  -154,766
  -193,520
  -236,472
  -283,033
  -332,510
  -384,291
  -437,350
  -491,116
  -544,962
  -598,365
  -650,921
  -702,349
  -752,486
  -801,280
  -848,777
  -895,101
  -940,443
  -985,043
  -1,029,179
  -1,073,152
  -1,117,276
  -1,161,874
  -1,207,267
  -1,253,771
  -1,301,696
Issuance/(repayment) of debt, $m
  5,056
  101,270
  145,521
  202,213
  272,485
  356,909
  455,452
  567,469
  691,760
  826,672
  970,239
  1,120,336
  1,274,826
  1,431,694
  1,589,147
  1,745,689
  1,900,160
  2,051,749
  2,199,987
  2,344,717
  2,486,058
  2,624,362
  2,760,166
  2,894,156
  3,027,120
  3,159,918
  3,293,452
  3,428,645
  3,566,420
  3,707,692
  3,853,355
Issuance/(repurchase) of shares, $m
  119
  14,185
  21,604
  31,069
  42,784
  56,835
  73,204
  91,773
  112,327
  134,577
  158,183
  182,405
  207,624
  233,122
  258,595
  283,790
  308,510
  332,621
  356,045
  378,759
  400,786
  422,187
  443,057
  463,512
  483,688
  503,730
  523,791
  544,027
  564,593
  585,639
  607,316
Cash from financing (excl. dividends), $m  
  10,303
  115,455
  167,125
  233,282
  315,269
  413,744
  528,656
  659,242
  804,087
  961,249
  1,128,422
  1,302,741
  1,482,450
  1,664,816
  1,847,742
  2,029,479
  2,208,670
  2,384,370
  2,556,032
  2,723,476
  2,886,844
  3,046,549
  3,203,223
  3,357,668
  3,510,808
  3,663,648
  3,817,243
  3,972,672
  4,131,013
  4,293,331
  4,460,671
Total cash flow (excl. dividends), $m
  2,915
  83,484
  119,809
  166,285
  223,894
  293,104
  373,890
  465,721
  567,615
  678,216
  795,912
  918,450
  1,045,101
  1,173,701
  1,302,781
  1,431,113
  1,557,748
  1,682,021
  1,803,546
  1,922,196
  2,038,067
  2,151,448
  2,262,781
  2,372,625
  2,481,629
  2,590,496
  2,699,968
  2,810,798
  2,923,746
  3,039,561
  3,158,975
Retained Cash Flow (-), $m
  -1,548
  -20,721
  -29,806
  -41,417
  -55,810
  -73,102
  -93,285
  -116,229
  -141,686
  -169,318
  -198,724
  -229,466
  -261,109
  -293,239
  -325,488
  -357,551
  -389,189
  -420,238
  -450,600
  -480,243
  -509,193
  -537,520
  -565,335
  -592,779
  -620,013
  -647,212
  -674,563
  -702,253
  -730,472
  -759,407
  -789,241
Prev. year cash balance distribution, $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 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
 
  62,764
  90,004
  124,868
  168,084
  220,003
  280,604
  349,493
  425,929
  508,897
  597,188
  688,983
  783,992
  880,462
  977,293
  1,073,563
  1,168,559
  1,261,783
  1,352,946
  1,441,952
  1,528,874
  1,613,928
  1,697,445
  1,779,846
  1,861,616
  1,943,284
  2,025,405
  2,108,546
  2,193,275
  2,280,154
  2,369,733
Discount rate, %
 
  11.00
  11.55
  12.13
  12.73
  13.37
  14.04
  14.74
  15.48
  16.25
  17.06
  17.92
  18.81
  19.75
  20.74
  21.78
  22.87
  24.01
  25.21
  26.47
  27.80
  29.19
  30.65
  32.18
  33.79
  35.48
  37.25
  39.11
  41.07
  43.12
  45.28
PV of cash for distribution, $m
 
  56,544
  72,330
  88,576
  104,066
  117,470
  127,577
  133,477
  134,692
  131,228
  123,553
  112,418
  99,063
  84,512
  69,823
  55,876
  43,313
  32,518
  23,640
  16,634
  11,324
  7,453
  4,739
  2,909
  1,722
  982
  539
  284
  144
  70
  32
Current shareholders' claim on cash, %
  100
  78.6
  62.2
  49.9
  40.5
  33.4
  27.9
  23.7
  20.3
  17.6
  15.5
  13.7
  12.3
  11.1
  10.0
  9.2
  8.4
  7.8
  7.3
  6.8
  6.4
  6.0
  5.7
  5.4
  5.1
  4.9
  4.7
  4.5
  4.3
  4.1
  3.9

Brookfield Asset Management Inc. is an alternative asset manager. The Company operates in eight segments. The Asset Management segment manages its listed partnerships, private funds and public markets on behalf of its clients. The Property segment includes the ownership, operation and development of office, retail and other properties. The Renewable power segment operates and develops hydroelectric, wind power and other generating facilities. The Infrastructure segment includes the ownership, operation and development of utilities and agricultural operations, among others. The Residential development segment includes homebuilding, condominium development and land development. The Service activities segment includes construction management and contracting services and property services. The Private equity segment includes the investments and operations overseen by its private equity group. The Corporate activities segment includes the allocation of capital to its operating platforms.

FINANCIAL RATIOS  of  Brookfield Asset Management Inc. Class A (BAM-A)

Valuation Ratios
P/E Ratio 22.6
Price to Sales 1.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow 23.2
Growth Rates
Sales Growth Rate 22.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 32.2%
Cap. Spend. - 3 Yr. Gr. Rate -1.9%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 219.5%
Total Debt to Equity 253.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 48.8%
Gross Margin - 3 Yr. Avg. 49.2%
EBITDA Margin 33.1%
EBITDA Margin - 3 Yr. Avg. 46.2%
Operating Margin 12.3%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin 12.3%
Pre-Tax Margin - 3 Yr. Avg. 24.1%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 11.8%
Effective Tax Rate -11.5%
Eff/ Tax Rate - 3 Yr. Avg. 4.3%
Payout Ratio 38.3%

BAM-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAM-A stock intrinsic value calculation we used $32981 million for the last fiscal year's total revenue generated by Brookfield Asset Management Inc. Class A. The default revenue input number comes from 2016 income statement of Brookfield Asset Management Inc. Class A. 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 BAM-A stock valuation model: a) initial revenue growth rate of 58.1% 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 11%, whose default value for BAM-A is calculated based on our internal credit rating of Brookfield Asset Management Inc. Class A, 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 Brookfield Asset Management Inc. Class A.
    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 BAM-A stock the variable cost ratio is equal to 75.6%.

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 BAM-A 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 4.8% for Brookfield Asset Management Inc. Class A.

Corporate tax rate of 27% is the nominal tax rate for Brookfield Asset Management Inc. Class A. 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 BAM-A 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 BAM-A are equal to 192.3%.

Life of production assets of 24.8 years is the average useful life of capital assets used in Brookfield Asset Management Inc. Class A 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 BAM-A is equal to 19%. 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 - $35740 million for Brookfield Asset Management Inc. Class A - 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 989.102 million for Brookfield Asset Management Inc. Class A 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 Brookfield Asset Management Inc. Class A at the current share price and the inputted number of shares is $52.0 billion.

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Financial statements of BAM-A
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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