Intrinsic value of Bombardier Inc. Class B Subordinate Voti - BBD-B

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$2.06

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$2.06

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
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 BBD-B 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 4.7

 

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, %
  -10.09
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  22,075
  22,517
  23,034
  23,626
  24,291
  25,027
  25,835
  26,715
  27,668
  28,694
  29,795
  30,973
  32,230
  33,569
  34,991
  36,500
  38,100
  39,793
  41,584
  43,476
  45,473
  47,581
  49,804
  52,147
  54,616
  57,216
  59,953
  62,835
  65,867
  69,057
  72,412
Variable operating expenses, $m
 
  28,523
  29,174
  29,917
  30,752
  31,676
  32,691
  33,796
  34,992
  36,280
  37,663
  38,891
  40,470
  42,150
  43,936
  45,832
  47,840
  49,966
  52,215
  54,590
  57,098
  59,745
  62,536
  65,478
  68,578
  71,843
  75,280
  78,898
  82,706
  86,711
  90,924
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
  22,316
  28,523
  29,174
  29,917
  30,752
  31,676
  32,691
  33,796
  34,992
  36,280
  37,663
  38,891
  40,470
  42,150
  43,936
  45,832
  47,840
  49,966
  52,215
  54,590
  57,098
  59,745
  62,536
  65,478
  68,578
  71,843
  75,280
  78,898
  82,706
  86,711
  90,924
Operating income, $m
  -240
  -6,007
  -6,139
  -6,291
  -6,461
  -6,649
  -6,855
  -7,080
  -7,324
  -7,586
  -7,868
  -7,918
  -8,240
  -8,582
  -8,945
  -9,331
  -9,740
  -10,173
  -10,631
  -11,114
  -11,625
  -12,164
  -12,732
  -13,331
  -13,962
  -14,627
  -15,327
  -16,064
  -16,839
  -17,654
  -18,512
EBITDA, $m
  261
  -5,360
  -5,483
  -5,624
  -5,782
  -5,958
  -6,150
  -6,360
  -6,586
  -6,831
  -7,093
  -7,373
  -7,672
  -7,991
  -8,330
  -8,689
  -9,070
  -9,473
  -9,899
  -10,349
  -10,825
  -11,327
  -11,856
  -12,414
  -13,001
  -13,620
  -14,272
  -14,958
  -15,680
  -16,439
  -17,238
Interest expense (income), $m
  763
  756
  -152
  -117
  -77
  -32
  17
  72
  131
  195
  264
  338
  418
  502
  593
  688
  790
  898
  1,012
  1,133
  1,260
  1,395
  1,537
  1,686
  1,844
  2,011
  2,186
  2,370
  2,564
  2,768
  2,983
Earnings before tax, $m
  -1,090
  -6,762
  -5,987
  -6,174
  -6,383
  -6,616
  -6,873
  -7,152
  -7,455
  -7,781
  -8,132
  -8,257
  -8,657
  -9,084
  -9,538
  -10,020
  -10,530
  -11,071
  -11,643
  -12,247
  -12,885
  -13,559
  -14,269
  -15,018
  -15,807
  -16,638
  -17,513
  -18,434
  -19,403
  -20,423
  -21,495
Tax expense, $m
  235
  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
Net income, $m
  -1,381
  -6,762
  -5,987
  -6,174
  -6,383
  -6,616
  -6,873
  -7,152
  -7,455
  -7,781
  -8,132
  -8,257
  -8,657
  -9,084
  -9,538
  -10,020
  -10,530
  -11,071
  -11,643
  -12,247
  -12,885
  -13,559
  -14,269
  -15,018
  -15,807
  -16,638
  -17,513
  -18,434
  -19,403
  -20,423
  -21,495

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,026
  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
  30,840
  26,335
  26,941
  27,633
  28,410
  29,272
  30,217
  31,246
  32,360
  33,560
  34,848
  36,226
  37,696
  39,261
  40,925
  42,691
  44,561
  46,542
  48,636
  50,849
  53,185
  55,650
  58,250
  60,991
  63,878
  66,919
  70,121
  73,491
  77,037
  80,768
  84,693
Adjusted assets (=assets-cash), $m
  25,814
  26,335
  26,941
  27,633
  28,410
  29,272
  30,217
  31,246
  32,360
  33,560
  34,848
  36,226
  37,696
  39,261
  40,925
  42,691
  44,561
  46,542
  48,636
  50,849
  53,185
  55,650
  58,250
  60,991
  63,878
  66,919
  70,121
  73,491
  77,037
  80,768
  84,693
Revenue / Adjusted assets
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
  0.855
Average production assets, $m
  8,889
  9,074
  9,283
  9,521
  9,789
  10,086
  10,412
  10,766
  11,150
  11,564
  12,007
  12,482
  12,989
  13,528
  14,101
  14,710
  15,354
  16,037
  16,758
  17,521
  18,326
  19,175
  20,071
  21,015
  22,010
  23,058
  24,161
  25,322
  26,544
  27,830
  29,182
Working capital, $m
  1,842
  -3,197
  -3,271
  -3,355
  -3,449
  -3,554
  -3,669
  -3,794
  -3,929
  -4,075
  -4,231
  -4,398
  -4,577
  -4,767
  -4,969
  -5,183
  -5,410
  -5,651
  -5,905
  -6,174
  -6,457
  -6,757
  -7,072
  -7,405
  -7,755
  -8,125
  -8,513
  -8,923
  -9,353
  -9,806
  -10,283
Total debt, $m
  11,848
  -2,374
  -1,829
  -1,206
  -507
  269
  1,119
  2,045
  3,048
  4,128
  5,287
  6,527
  7,850
  9,259
  10,757
  12,345
  14,029
  15,812
  17,696
  19,688
  21,791
  24,009
  26,349
  28,816
  31,414
  34,151
  37,033
  40,066
  43,258
  46,615
  50,147
Total liabilities, $m
  37,923
  23,702
  24,247
  24,870
  25,569
  26,345
  27,195
  28,121
  29,124
  30,204
  31,363
  32,603
  33,926
  35,335
  36,833
  38,421
  40,105
  41,888
  43,772
  45,764
  47,867
  50,085
  52,425
  54,892
  57,490
  60,227
  63,109
  66,142
  69,334
  72,691
  76,223
Total equity, $m
  -7,084
  2,634
  2,694
  2,763
  2,841
  2,927
  3,022
  3,125
  3,236
  3,356
  3,485
  3,623
  3,770
  3,926
  4,093
  4,269
  4,456
  4,654
  4,864
  5,085
  5,319
  5,565
  5,825
  6,099
  6,388
  6,692
  7,012
  7,349
  7,704
  8,077
  8,469
Total liabilities and equity, $m
  30,839
  26,336
  26,941
  27,633
  28,410
  29,272
  30,217
  31,246
  32,360
  33,560
  34,848
  36,226
  37,696
  39,261
  40,926
  42,690
  44,561
  46,542
  48,636
  50,849
  53,186
  55,650
  58,250
  60,991
  63,878
  66,919
  70,121
  73,491
  77,038
  80,768
  84,692
Debt-to-equity ratio
  -1.673
  -0.900
  -0.680
  -0.440
  -0.180
  0.090
  0.370
  0.650
  0.940
  1.230
  1.520
  1.800
  2.080
  2.360
  2.630
  2.890
  3.150
  3.400
  3.640
  3.870
  4.100
  4.310
  4.520
  4.720
  4.920
  5.100
  5.280
  5.450
  5.620
  5.770
  5.920
Adjusted equity ratio
  -0.469
  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
  -1,381
  -6,762
  -5,987
  -6,174
  -6,383
  -6,616
  -6,873
  -7,152
  -7,455
  -7,781
  -8,132
  -8,257
  -8,657
  -9,084
  -9,538
  -10,020
  -10,530
  -11,071
  -11,643
  -12,247
  -12,885
  -13,559
  -14,269
  -15,018
  -15,807
  -16,638
  -17,513
  -18,434
  -19,403
  -20,423
  -21,495
Depreciation, amort., depletion, $m
  501
  647
  656
  666
  678
  691
  705
  721
  738
  756
  775
  545
  567
  591
  616
  642
  670
  700
  732
  765
  800
  837
  876
  918
  961
  1,007
  1,055
  1,106
  1,159
  1,215
  1,274
Funds from operations, $m
  825
  -6,116
  -5,331
  -5,507
  -5,705
  -5,925
  -6,167
  -6,431
  -6,717
  -7,026
  -7,357
  -7,712
  -8,090
  -8,493
  -8,922
  -9,377
  -9,860
  -10,371
  -10,911
  -11,482
  -12,085
  -12,721
  -13,392
  -14,100
  -14,845
  -15,631
  -16,458
  -17,328
  -18,244
  -19,207
  -20,221
Change in working capital, $m
  640
  -63
  -74
  -84
  -94
  -105
  -115
  -125
  -135
  -146
  -156
  -167
  -179
  -190
  -202
  -214
  -227
  -240
  -254
  -269
  -284
  -299
  -316
  -333
  -351
  -369
  -389
  -409
  -431
  -453
  -476
Cash from operations, $m
  185
  -5,319
  -5,258
  -5,423
  -5,611
  -5,821
  -6,053
  -6,306
  -6,582
  -6,880
  -7,201
  -7,544
  -7,912
  -8,303
  -8,720
  -9,163
  -9,633
  -10,130
  -10,657
  -11,213
  -11,801
  -12,422
  -13,077
  -13,767
  -14,495
  -15,262
  -16,069
  -16,919
  -17,813
  -18,754
  -19,745
Maintenance CAPEX, $m
  0
  -388
  -396
  -405
  -416
  -427
  -440
  -455
  -470
  -487
  -505
  -524
  -545
  -567
  -591
  -616
  -642
  -670
  -700
  -732
  -765
  -800
  -837
  -876
  -918
  -961
  -1,007
  -1,055
  -1,106
  -1,159
  -1,215
New CAPEX, $m
  -1,696
  -185
  -209
  -239
  -268
  -297
  -326
  -355
  -384
  -414
  -444
  -475
  -507
  -539
  -573
  -608
  -645
  -682
  -722
  -762
  -805
  -849
  -896
  -944
  -995
  -1,048
  -1,103
  -1,161
  -1,222
  -1,286
  -1,352
Cash from investing activities, $m
  -1,615
  -573
  -605
  -644
  -684
  -724
  -766
  -810
  -854
  -901
  -949
  -999
  -1,052
  -1,106
  -1,164
  -1,224
  -1,287
  -1,352
  -1,422
  -1,494
  -1,570
  -1,649
  -1,733
  -1,820
  -1,913
  -2,009
  -2,110
  -2,216
  -2,328
  -2,445
  -2,567
Free cash flow, $m
  -1,430
  -5,892
  -5,863
  -6,067
  -6,295
  -6,545
  -6,819
  -7,115
  -7,436
  -7,780
  -8,149
  -8,543
  -8,963
  -9,410
  -9,884
  -10,387
  -10,920
  -11,483
  -12,079
  -12,708
  -13,371
  -14,072
  -14,810
  -15,588
  -16,407
  -17,270
  -18,179
  -19,135
  -20,141
  -21,199
  -22,312
Issuance/(repayment) of debt, $m
  -269
  -14,180
  545
  623
  700
  775
  851
  926
  1,003
  1,080
  1,159
  1,240
  1,323
  1,409
  1,497
  1,589
  1,684
  1,782
  1,885
  1,992
  2,103
  2,219
  2,340
  2,466
  2,599
  2,737
  2,882
  3,033
  3,192
  3,358
  3,532
Issuance/(repurchase) of shares, $m
  -58
  29,790
  5,378
  5,513
  5,673
  5,856
  6,063
  6,292
  6,545
  6,820
  7,119
  7,441
  7,787
  8,158
  8,553
  8,975
  9,423
  9,899
  10,403
  10,937
  11,502
  12,099
  12,730
  13,396
  14,098
  14,838
  15,617
  16,439
  17,304
  18,214
  19,173
Cash from financing (excl. dividends), $m  
  2,690
  15,610
  5,923
  6,136
  6,373
  6,631
  6,914
  7,218
  7,548
  7,900
  8,278
  8,681
  9,110
  9,567
  10,050
  10,564
  11,107
  11,681
  12,288
  12,929
  13,605
  14,318
  15,070
  15,862
  16,697
  17,575
  18,499
  19,472
  20,496
  21,572
  22,705
Total cash flow (excl. dividends), $m
  920
  -20,073
  -5,318
  -5,444
  -5,595
  -5,770
  -5,968
  -6,189
  -6,433
  -6,700
  -6,990
  -7,303
  -7,640
  -8,001
  -8,387
  -8,798
  -9,236
  -9,701
  -10,194
  -10,716
  -11,269
  -11,853
  -12,470
  -13,122
  -13,809
  -14,534
  -15,297
  -16,102
  -16,949
  -17,841
  -18,780
Retained Cash Flow (-), $m
  1,589
  -14,702
  -61
  -69
  -78
  -86
  -95
  -103
  -111
  -120
  -129
  -138
  -147
  -157
  -166
  -177
  -187
  -198
  -209
  -221
  -234
  -247
  -260
  -274
  -289
  -304
  -320
  -337
  -355
  -373
  -392
Prev. year cash balance distribution, $m
 
  4,984
  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
  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
Discount rate, %
 
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.65
  23.79
  24.98
  26.23
  27.54
  28.91
  30.36
  31.88
  33.47
  35.14
  36.90
  38.75
  40.68
  42.72
  44.85
  47.10
  49.45
  51.92
  54.52
  57.25
  60.11
  63.11
  66.27
PV of cash for 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
Current shareholders' claim on cash, %
  100
  50.0
  16.4
  5.4
  1.8
  0.6
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Bombardier Inc., together with its subsidiaries, manufactures and sells transportation equipment worldwide. The company operates in four segments: Business Aircraft, Commercial Aircraft, Aerostructures and Engineering Services, and Transportation. The Business Aircraft segment designs, manufactures, and provides aftermarket support for Learjet, Challenger, and Global business jets. The Commercial Aircraft segment designs and manufactures a portfolio of commercial aircraft in the 60- to 150-seat categories, including Q400 turboprops; the CRJ700, 900, and 1000 regional jets; and CS100 and CS300 mainline jets, as well as provides aftermarket support services. The Aerostructures and Engineering Services segment designs and manufactures aircraft structural components, such as engine nacelles, fuselages, and wings; and provides aftermarket component repair, overhaul, and other engineering services. The Transportation segment offers a range of products and services in the rail industry, including rolling stock; system and signaling systems; supply chain, spare parts inventory management, obsolescence management, and technical support services; fleet and operations management services; and asset life management, component re-engineering, and overhaul services. The company was formerly known as Bombardier Limited. Bombardier Inc. was incorporated in 1902 and is based in Montréal, Canada.

FINANCIAL RATIOS  of  Bombardier Inc. Class B Subordinate Voti (BBD-B)

Valuation Ratios
P/E Ratio -3.3
Price to Sales 0.2
Price to Book -0.6
Price to Tangible Book
Price to Cash Flow 24.4
Price to Free Cash Flow -3
Growth Rates
Sales Growth Rate -10.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.2%
Cap. Spend. - 3 Yr. Gr. Rate -11.8%
Financial Strength
Quick Ratio 120
Current Ratio 0
LT Debt to Equity -166.7%
Total Debt to Equity -167.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.5%
Ret/ On Assets - 3 Yr. Avg. -7.7%
Return On Total Capital -24.2%
Ret/ On T. Cap. - 3 Yr. Avg. -41.1%
Return On Equity 22%
Return On Equity - 3 Yr. Avg. 61.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 10.5%
Gross Margin - 3 Yr. Avg. 11.4%
EBITDA Margin 0.8%
EBITDA Margin - 3 Yr. Avg. -7.6%
Operating Margin -1.1%
Oper. Margin - 3 Yr. Avg. -10.3%
Pre-Tax Margin -4.9%
Pre-Tax Margin - 3 Yr. Avg. -12.4%
Net Profit Margin -6.3%
Net Profit Margin - 3 Yr. Avg. -14%
Effective Tax Rate -21.6%
Eff/ Tax Rate - 3 Yr. Avg. -30.9%
Payout Ratio -1.7%

BBD-B stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BBD-B stock intrinsic value calculation we used $22075 million for the last fiscal year's total revenue generated by Bombardier Inc. Class B Subordinate Voti. The default revenue input number comes from 2016 income statement of Bombardier Inc. Class B Subordinate Voti. 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 BBD-B stock valuation model: a) initial revenue growth rate of 2% 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 16.1%, whose default value for BBD-B is calculated based on our internal credit rating of Bombardier Inc. Class B Subordinate Voti, 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 Bombardier Inc. Class B Subordinate Voti.
    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 BBD-B stock the variable cost ratio is equal to 126.7%.

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 BBD-B 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 6.4% for Bombardier Inc. Class B Subordinate Voti.

Corporate tax rate of 27% is the nominal tax rate for Bombardier Inc. Class B Subordinate Voti. 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 BBD-B 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 BBD-B are equal to 40.3%.

Life of production assets of 22.9 years is the average useful life of capital assets used in Bombardier Inc. Class B Subordinate Voti 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 BBD-B is equal to -14.2%. 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 - $-7084 million for Bombardier Inc. Class B Subordinate Voti - 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 2286.41 million for Bombardier Inc. Class B Subordinate Voti 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 Bombardier Inc. Class B Subordinate Voti at the current share price and the inputted number of shares is $4.7 billion.


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Stock chart of BBD-B Financial statements of BBD-B
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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