Intrinsic value of BCE Inc. - BCE

Previous Close

$58.17

  Intrinsic Value

$33.96

stock screener

  Rating & Target

sell

-42%

  Value-price divergence*

+1%

Previous close

$58.17

 
Intrinsic value

$33.96

 
Up/down potential

-42%

 
Rating

sell

 
Value-price divergence*

+1%

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

We calculate the intrinsic value of BCE 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 52.5

 

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, %
  0.95
  2.20
  2.48
  2.73
  2.96
  3.16
  3.35
  3.51
  3.66
  3.79
  3.92
  4.02
  4.12
  4.21
  4.29
  4.36
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
Revenue, $m
  21,719
  22,197
  22,747
  23,369
  24,060
  24,821
  25,652
  26,553
  27,525
  28,569
  29,688
  30,882
  32,155
  33,509
  34,946
  36,469
  38,082
  39,789
  41,592
  43,497
  45,508
  47,628
  49,863
  52,219
  54,700
  57,313
  60,064
  62,958
  66,004
  69,207
  72,576
Variable operating expenses, $m
 
  17,405
  17,814
  18,276
  18,791
  19,357
  19,975
  20,645
  21,367
  22,144
  22,976
  22,969
  23,916
  24,922
  25,991
  27,124
  28,324
  29,593
  30,935
  32,351
  33,846
  35,424
  37,086
  38,838
  40,684
  42,627
  44,673
  46,826
  49,091
  51,473
  53,979
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
  16,594
  17,405
  17,814
  18,276
  18,791
  19,357
  19,975
  20,645
  21,367
  22,144
  22,976
  22,969
  23,916
  24,922
  25,991
  27,124
  28,324
  29,593
  30,935
  32,351
  33,846
  35,424
  37,086
  38,838
  40,684
  42,627
  44,673
  46,826
  49,091
  51,473
  53,979
Operating income, $m
  5,125
  4,792
  4,933
  5,092
  5,270
  5,465
  5,677
  5,908
  6,157
  6,425
  6,712
  7,913
  8,240
  8,586
  8,955
  9,345
  9,758
  10,196
  10,658
  11,146
  11,661
  12,204
  12,777
  13,381
  14,017
  14,686
  15,391
  16,133
  16,913
  17,734
  18,597
EBITDA, $m
  8,633
  8,548
  8,759
  8,999
  9,265
  9,558
  9,878
  10,225
  10,599
  11,001
  11,432
  11,892
  12,382
  12,903
  13,457
  14,043
  14,665
  15,322
  16,016
  16,750
  17,524
  18,340
  19,201
  20,108
  21,064
  22,070
  23,129
  24,244
  25,417
  26,650
  27,948
Interest expense (income), $m
  882
  865
  895
  929
  967
  1,009
  1,056
  1,107
  1,162
  1,222
  1,286
  1,354
  1,428
  1,506
  1,589
  1,677
  1,770
  1,869
  1,974
  2,084
  2,201
  2,325
  2,455
  2,592
  2,736
  2,888
  3,049
  3,217
  3,395
  3,582
  3,778
Earnings before tax, $m
  4,197
  3,927
  4,038
  4,164
  4,303
  4,455
  4,622
  4,801
  4,995
  5,203
  5,426
  6,559
  6,812
  7,081
  7,366
  7,668
  7,988
  8,327
  8,684
  9,062
  9,460
  9,880
  10,323
  10,789
  11,281
  11,798
  12,342
  12,915
  13,518
  14,152
  14,819
Tax expense, $m
  1,110
  1,060
  1,090
  1,124
  1,162
  1,203
  1,248
  1,296
  1,349
  1,405
  1,465
  1,771
  1,839
  1,912
  1,989
  2,070
  2,157
  2,248
  2,345
  2,447
  2,554
  2,668
  2,787
  2,913
  3,046
  3,185
  3,332
  3,487
  3,650
  3,821
  4,001
Net income, $m
  3,031
  2,866
  2,948
  3,040
  3,141
  3,252
  3,374
  3,505
  3,647
  3,798
  3,961
  4,788
  4,973
  5,169
  5,377
  5,598
  5,831
  6,078
  6,339
  6,615
  6,906
  7,212
  7,536
  7,876
  8,235
  8,612
  9,010
  9,428
  9,868
  10,331
  10,818

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  853
  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
  50,108
  50,333
  51,581
  52,990
  54,558
  56,284
  58,168
  60,210
  62,414
  64,783
  67,319
  70,028
  72,914
  75,983
  79,242
  82,696
  86,354
  90,224
  94,314
  98,633
  103,192
  108,000
  113,069
  118,411
  124,037
  129,962
  136,199
  142,763
  149,668
  156,932
  164,572
Adjusted assets (=assets-cash), $m
  49,255
  50,333
  51,581
  52,990
  54,558
  56,284
  58,168
  60,210
  62,414
  64,783
  67,319
  70,028
  72,914
  75,983
  79,242
  82,696
  86,354
  90,224
  94,314
  98,633
  103,192
  108,000
  113,069
  118,411
  124,037
  129,962
  136,199
  142,763
  149,668
  156,932
  164,572
Revenue / Adjusted assets
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
Average production assets, $m
  33,575
  34,316
  35,167
  36,128
  37,197
  38,374
  39,658
  41,051
  42,553
  44,168
  45,897
  47,744
  49,712
  51,804
  54,026
  56,381
  58,875
  61,513
  64,302
  67,247
  70,355
  73,633
  77,089
  80,731
  84,567
  88,606
  92,859
  97,334
  102,042
  106,994
  112,203
Working capital, $m
  -5,253
  -1,243
  -1,274
  -1,309
  -1,347
  -1,390
  -1,437
  -1,487
  -1,541
  -1,600
  -1,663
  -1,729
  -1,801
  -1,876
  -1,957
  -2,042
  -2,133
  -2,228
  -2,329
  -2,436
  -2,548
  -2,667
  -2,792
  -2,924
  -3,063
  -3,210
  -3,364
  -3,526
  -3,696
  -3,876
  -4,064
Total debt, $m
  21,459
  21,305
  22,109
  23,017
  24,027
  25,138
  26,351
  27,666
  29,086
  30,611
  32,245
  33,989
  35,848
  37,824
  39,923
  42,147
  44,503
  46,995
  49,629
  52,411
  55,346
  58,443
  61,707
  65,147
  68,771
  72,587
  76,603
  80,830
  85,277
  89,955
  94,875
Total liabilities, $m
  32,568
  32,414
  33,218
  34,126
  35,136
  36,247
  37,460
  38,775
  40,195
  41,720
  43,354
  45,098
  46,957
  48,933
  51,032
  53,256
  55,612
  58,104
  60,738
  63,520
  66,455
  69,552
  72,816
  76,256
  79,880
  83,696
  87,712
  91,939
  96,386
  101,064
  105,984
Total equity, $m
  17,540
  17,919
  18,363
  18,865
  19,423
  20,037
  20,708
  21,435
  22,220
  23,063
  23,966
  24,930
  25,957
  27,050
  28,210
  29,440
  30,742
  32,120
  33,576
  35,113
  36,736
  38,448
  40,253
  42,154
  44,157
  46,267
  48,487
  50,824
  53,282
  55,868
  58,588
Total liabilities and equity, $m
  50,108
  50,333
  51,581
  52,991
  54,559
  56,284
  58,168
  60,210
  62,415
  64,783
  67,320
  70,028
  72,914
  75,983
  79,242
  82,696
  86,354
  90,224
  94,314
  98,633
  103,191
  108,000
  113,069
  118,410
  124,037
  129,963
  136,199
  142,763
  149,668
  156,932
  164,572
Debt-to-equity ratio
  1.223
  1.190
  1.200
  1.220
  1.240
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.360
  1.380
  1.400
  1.420
  1.430
  1.450
  1.460
  1.480
  1.490
  1.510
  1.520
  1.530
  1.550
  1.560
  1.570
  1.580
  1.590
  1.600
  1.610
  1.620
Adjusted equity ratio
  0.339
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356
  0.356

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,031
  2,866
  2,948
  3,040
  3,141
  3,252
  3,374
  3,505
  3,647
  3,798
  3,961
  4,788
  4,973
  5,169
  5,377
  5,598
  5,831
  6,078
  6,339
  6,615
  6,906
  7,212
  7,536
  7,876
  8,235
  8,612
  9,010
  9,428
  9,868
  10,331
  10,818
Depreciation, amort., depletion, $m
  3,508
  3,755
  3,826
  3,906
  3,996
  4,094
  4,201
  4,317
  4,442
  4,576
  4,721
  3,979
  4,143
  4,317
  4,502
  4,698
  4,906
  5,126
  5,358
  5,604
  5,863
  6,136
  6,424
  6,728
  7,047
  7,384
  7,738
  8,111
  8,503
  8,916
  9,350
Funds from operations, $m
  5,482
  6,622
  6,774
  6,946
  7,137
  7,346
  7,574
  7,822
  8,088
  8,375
  8,681
  8,767
  9,115
  9,486
  9,879
  10,296
  10,738
  11,204
  11,698
  12,219
  12,769
  13,348
  13,960
  14,604
  15,282
  15,996
  16,748
  17,539
  18,372
  19,247
  20,168
Change in working capital, $m
  -1,161
  -27
  -31
  -35
  -39
  -43
  -47
  -50
  -54
  -58
  -63
  -67
  -71
  -76
  -80
  -85
  -90
  -96
  -101
  -107
  -113
  -119
  -125
  -132
  -139
  -146
  -154
  -162
  -171
  -179
  -189
Cash from operations, $m
  6,643
  6,649
  6,805
  6,981
  7,175
  7,389
  7,621
  7,872
  8,143
  8,433
  8,744
  8,834
  9,187
  9,562
  9,960
  10,382
  10,828
  11,300
  11,799
  12,325
  12,881
  13,467
  14,085
  14,736
  15,421
  16,143
  16,902
  17,701
  18,542
  19,427
  20,357
Maintenance CAPEX, $m
  0
  -2,798
  -2,860
  -2,931
  -3,011
  -3,100
  -3,198
  -3,305
  -3,421
  -3,546
  -3,681
  -3,825
  -3,979
  -4,143
  -4,317
  -4,502
  -4,698
  -4,906
  -5,126
  -5,358
  -5,604
  -5,863
  -6,136
  -6,424
  -6,728
  -7,047
  -7,384
  -7,738
  -8,111
  -8,503
  -8,916
New CAPEX, $m
  -3,771
  -741
  -851
  -961
  -1,069
  -1,177
  -1,284
  -1,393
  -1,503
  -1,615
  -1,729
  -1,847
  -1,968
  -2,092
  -2,222
  -2,355
  -2,494
  -2,638
  -2,788
  -2,945
  -3,108
  -3,278
  -3,456
  -3,642
  -3,836
  -4,039
  -4,252
  -4,475
  -4,708
  -4,953
  -5,209
Cash from investing activities, $m
  -4,584
  -3,539
  -3,711
  -3,892
  -4,080
  -4,277
  -4,482
  -4,698
  -4,924
  -5,161
  -5,410
  -5,672
  -5,947
  -6,235
  -6,539
  -6,857
  -7,192
  -7,544
  -7,914
  -8,303
  -8,712
  -9,141
  -9,592
  -10,066
  -10,564
  -11,086
  -11,636
  -12,213
  -12,819
  -13,456
  -14,125
Free cash flow, $m
  2,059
  3,109
  3,094
  3,089
  3,096
  3,112
  3,139
  3,175
  3,219
  3,273
  3,334
  3,162
  3,240
  3,327
  3,421
  3,524
  3,636
  3,756
  3,884
  4,022
  4,169
  4,326
  4,493
  4,670
  4,857
  5,056
  5,266
  5,488
  5,723
  5,971
  6,232
Issuance/(repayment) of debt, $m
  719
  699
  804
  908
  1,010
  1,111
  1,213
  1,316
  1,419
  1,525
  1,633
  1,744
  1,859
  1,977
  2,098
  2,225
  2,356
  2,492
  2,634
  2,782
  2,936
  3,097
  3,265
  3,440
  3,624
  3,816
  4,017
  4,227
  4,447
  4,678
  4,920
Issuance/(repurchase) of shares, $m
  -7
  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 from financing (excl. dividends), $m  
  612
  699
  804
  908
  1,010
  1,111
  1,213
  1,316
  1,419
  1,525
  1,633
  1,744
  1,859
  1,977
  2,098
  2,225
  2,356
  2,492
  2,634
  2,782
  2,936
  3,097
  3,265
  3,440
  3,624
  3,816
  4,017
  4,227
  4,447
  4,678
  4,920
Total cash flow (excl. dividends), $m
  2,671
  3,809
  3,898
  3,997
  4,105
  4,224
  4,352
  4,490
  4,639
  4,798
  4,968
  4,907
  5,099
  5,303
  5,520
  5,749
  5,991
  6,248
  6,518
  6,804
  7,105
  7,423
  7,757
  8,110
  8,481
  8,872
  9,283
  9,715
  10,170
  10,649
  11,152
Retained Cash Flow (-), $m
  -517
  -379
  -444
  -502
  -558
  -614
  -671
  -727
  -785
  -843
  -903
  -964
  -1,027
  -1,093
  -1,160
  -1,230
  -1,302
  -1,378
  -1,456
  -1,538
  -1,623
  -1,712
  -1,805
  -1,902
  -2,003
  -2,109
  -2,220
  -2,337
  -2,458
  -2,586
  -2,720
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
 
  3,430
  3,454
  3,495
  3,547
  3,609
  3,681
  3,763
  3,854
  3,955
  4,065
  3,942
  4,072
  4,211
  4,360
  4,519
  4,689
  4,870
  5,062
  5,266
  5,482
  5,711
  5,953
  6,208
  6,478
  6,762
  7,062
  7,379
  7,712
  8,063
  8,432
Discount rate, %
 
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
 
  3,212
  3,009
  2,814
  2,620
  2,427
  2,234
  2,044
  1,855
  1,671
  1,491
  1,241
  1,087
  942
  805
  680
  565
  463
  373
  296
  230
  175
  131
  96
  68
  48
  32
  21
  14
  9
  5
Current shareholders' claim on cash, %
  100
  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
  100.0

BCE Inc. provides wireless, wireline, Internet, and television (TV) services to residential, business, and wholesale customers in Canada. The company operates through Bell Wireless, Bell Wireline, and Bell Media segments. The Bell Wireless segment provides integrated digital wireless voice and data communications products and services. The Bell Wireline segment offers data, including Internet access and Internet protocol TV, local telephone, long distance, as well as other communications services and products. This segment also provides competitive local exchange carrier services; business service solutions, such as hosting and cloud services, managed services, professional services, and infrastructure services; and Web and audio conferencing, and e-mail solutions. The Bell Media segment owns and operates approximately 30 conventional TV stations; and 38 specialty and pay TV channels; 106 radio stations; 30,500 advertising faces; and 200 Websites. This segment also offers out of home advertising services and digital media services, including CTV. In addition, the company investments in the Toronto Argonauts Football Club and mobile products distribution company. BCE Inc. offers its services through a network of corporate and dealer-owned retail stores, national retailers, and call center representatives, as well as Websites and door-to-door sales representatives. The company was formerly known as Bell Canada Enterprises Inc. BCE Inc. was incorporated in 1970 and is headquartered in Verdun, Canada.

FINANCIAL RATIOS  of  BCE Inc. (BCE)

Valuation Ratios
P/E Ratio 16.7
Price to Sales 2.3
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow 17.6
Growth Rates
Sales Growth Rate 1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4%
Cap. Spend. - 3 Yr. Gr. Rate 1.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 94.5%
Total Debt to Equity 122.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 17.5%
Return On Equity - 3 Yr. Avg. 17%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 69.1%
Gross Margin - 3 Yr. Avg. 69.6%
EBITDA Margin 39.5%
EBITDA Margin - 3 Yr. Avg. 38.2%
Operating Margin 23.6%
Oper. Margin - 3 Yr. Avg. 22.2%
Pre-Tax Margin 19.3%
Pre-Tax Margin - 3 Yr. Avg. 17.9%
Net Profit Margin 14%
Net Profit Margin - 3 Yr. Avg. 12.8%
Effective Tax Rate 26.4%
Eff/ Tax Rate - 3 Yr. Avg. 25.7%
Payout Ratio 80.2%

BCE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BCE stock intrinsic value calculation we used $21719 million for the last fiscal year's total revenue generated by BCE Inc.. The default revenue input number comes from 2016 income statement of BCE Inc.. 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 BCE stock valuation model: a) initial revenue growth rate of 2.2% 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 6.8%, whose default value for BCE is calculated based on our internal credit rating of BCE Inc., 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 BCE Inc..
    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 BCE stock the variable cost ratio is equal to 78.5%.

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 BCE 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 4.2% for BCE Inc..

Corporate tax rate of 27% is the nominal tax rate for BCE Inc.. 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 BCE 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 BCE are equal to 154.6%.

Life of production assets of 12 years is the average useful life of capital assets used in BCE Inc. 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 BCE is equal to -5.6%. 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 - $17540 million for BCE Inc. - 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 902.94 million for BCE Inc. 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 BCE Inc. at the current share price and the inputted number of shares is $52.5 billion.

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Stock chart of BCE Financial statements of BCE
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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