Intrinsic value of BCE Inc. - BCE

Previous Close

$61.35

  Intrinsic Value

$33.24

stock screener

  Rating & Target

sell

-46%

  Value-price divergence*

+1%

Previous close

$61.35

 
Intrinsic value

$33.24

 
Up/down potential

-46%

 
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 55.4

 

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
  2.00
  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
  21,719
  22,153
  22,663
  23,245
  23,899
  24,624
  25,419
  26,284
  27,222
  28,231
  29,314
  30,474
  31,710
  33,027
  34,427
  35,912
  37,486
  39,151
  40,913
  42,775
  44,740
  46,814
  49,001
  51,306
  53,735
  56,293
  58,987
  61,822
  64,805
  67,943
  71,244
Variable operating expenses, $m
 
  17,372
  17,751
  18,185
  18,671
  19,210
  19,801
  20,445
  21,142
  21,893
  22,699
  22,665
  23,585
  24,564
  25,605
  26,710
  27,880
  29,119
  30,429
  31,814
  33,276
  34,818
  36,445
  38,159
  39,966
  41,868
  43,872
  45,980
  48,199
  50,533
  52,988
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
  17,372
  17,751
  18,185
  18,671
  19,210
  19,801
  20,445
  21,142
  21,893
  22,699
  22,665
  23,585
  24,564
  25,605
  26,710
  27,880
  29,119
  30,429
  31,814
  33,276
  34,818
  36,445
  38,159
  39,966
  41,868
  43,872
  45,980
  48,199
  50,533
  52,988
Operating income, $m
  5,125
  4,781
  4,911
  5,061
  5,228
  5,414
  5,618
  5,839
  6,080
  6,338
  6,616
  7,809
  8,126
  8,463
  8,822
  9,202
  9,605
  10,032
  10,484
  10,961
  11,464
  11,996
  12,556
  13,147
  13,769
  14,425
  15,115
  15,841
  16,606
  17,410
  18,256
EBITDA, $m
  8,633
  8,531
  8,727
  8,951
  9,203
  9,482
  9,788
  10,122
  10,482
  10,871
  11,288
  11,735
  12,211
  12,718
  13,257
  13,829
  14,435
  15,076
  15,755
  16,472
  17,228
  18,027
  18,869
  19,757
  20,692
  21,677
  22,714
  23,806
  24,955
  26,163
  27,435
Interest expense (income), $m
  882
  865
  892
  923
  959
  999
  1,044
  1,092
  1,146
  1,203
  1,265
  1,331
  1,402
  1,478
  1,559
  1,645
  1,736
  1,833
  1,935
  2,043
  2,157
  2,277
  2,405
  2,539
  2,680
  2,829
  2,986
  3,151
  3,325
  3,508
  3,701
Earnings before tax, $m
  4,197
  3,915
  4,019
  4,137
  4,269
  4,415
  4,574
  4,747
  4,934
  5,135
  5,351
  6,477
  6,723
  6,985
  7,263
  7,557
  7,869
  8,200
  8,549
  8,918
  9,307
  9,718
  10,152
  10,608
  11,089
  11,596
  12,129
  12,690
  13,281
  13,902
  14,555
Tax expense, $m
  1,110
  1,057
  1,085
  1,117
  1,153
  1,192
  1,235
  1,282
  1,332
  1,387
  1,445
  1,749
  1,815
  1,886
  1,961
  2,040
  2,125
  2,214
  2,308
  2,408
  2,513
  2,624
  2,741
  2,864
  2,994
  3,131
  3,275
  3,426
  3,586
  3,754
  3,930
Net income, $m
  3,031
  2,858
  2,934
  3,020
  3,116
  3,223
  3,339
  3,465
  3,602
  3,749
  3,906
  4,728
  4,908
  5,099
  5,302
  5,517
  5,745
  5,986
  6,241
  6,510
  6,794
  7,094
  7,411
  7,744
  8,095
  8,465
  8,854
  9,264
  9,695
  10,148
  10,625

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
  50,234
  51,390
  52,711
  54,193
  55,836
  57,639
  59,602
  61,727
  64,016
  66,473
  69,101
  71,906
  74,892
  78,065
  81,433
  85,001
  88,779
  92,774
  96,995
  101,451
  106,154
  111,113
  116,340
  121,848
  127,649
  133,756
  140,185
  146,950
  154,066
  161,552
Adjusted assets (=assets-cash), $m
  49,255
  50,234
  51,390
  52,711
  54,193
  55,836
  57,639
  59,602
  61,727
  64,016
  66,473
  69,101
  71,906
  74,892
  78,065
  81,433
  85,001
  88,779
  92,774
  96,995
  101,451
  106,154
  111,113
  116,340
  121,848
  127,649
  133,756
  140,185
  146,950
  154,066
  161,552
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
  34,249
  35,037
  35,937
  36,948
  38,068
  39,297
  40,636
  42,084
  43,645
  45,320
  47,112
  49,024
  51,060
  53,224
  55,520
  57,953
  60,528
  63,252
  66,129
  69,168
  72,374
  75,755
  79,319
  83,074
  87,029
  91,193
  95,576
  100,188
  105,040
  110,144
Working capital, $m
  -5,253
  -1,241
  -1,269
  -1,302
  -1,338
  -1,379
  -1,423
  -1,472
  -1,524
  -1,581
  -1,642
  -1,707
  -1,776
  -1,850
  -1,928
  -2,011
  -2,099
  -2,192
  -2,291
  -2,395
  -2,505
  -2,622
  -2,744
  -2,873
  -3,009
  -3,152
  -3,303
  -3,462
  -3,629
  -3,805
  -3,990
Total debt, $m
  21,459
  21,242
  21,986
  22,837
  23,791
  24,850
  26,010
  27,275
  28,643
  30,117
  31,699
  33,392
  35,198
  37,121
  39,165
  41,334
  43,632
  46,065
  48,637
  51,355
  54,226
  57,254
  60,448
  63,814
  67,361
  71,097
  75,030
  79,170
  83,527
  88,110
  92,930
Total liabilities, $m
  32,568
  32,351
  33,095
  33,946
  34,900
  35,959
  37,119
  38,384
  39,752
  41,226
  42,808
  44,501
  46,307
  48,230
  50,274
  52,443
  54,741
  57,174
  59,746
  62,464
  65,335
  68,363
  71,557
  74,923
  78,470
  82,206
  86,139
  90,279
  94,636
  99,219
  104,039
Total equity, $m
  17,540
  17,883
  18,295
  18,765
  19,293
  19,878
  20,519
  21,218
  21,975
  22,790
  23,664
  24,600
  25,598
  26,661
  27,791
  28,990
  30,260
  31,605
  33,027
  34,530
  36,117
  37,791
  39,556
  41,417
  43,378
  45,443
  47,617
  49,906
  52,314
  54,848
  57,512
Total liabilities and equity, $m
  50,108
  50,234
  51,390
  52,711
  54,193
  55,837
  57,638
  59,602
  61,727
  64,016
  66,472
  69,101
  71,905
  74,891
  78,065
  81,433
  85,001
  88,779
  92,773
  96,994
  101,452
  106,154
  111,113
  116,340
  121,848
  127,649
  133,756
  140,185
  146,950
  154,067
  161,551
Debt-to-equity ratio
  1.223
  1.190
  1.200
  1.220
  1.230
  1.250
  1.270
  1.290
  1.300
  1.320
  1.340
  1.360
  1.380
  1.390
  1.410
  1.430
  1.440
  1.460
  1.470
  1.490
  1.500
  1.520
  1.530
  1.540
  1.550
  1.560
  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
  2,858
  2,934
  3,020
  3,116
  3,223
  3,339
  3,465
  3,602
  3,749
  3,906
  4,728
  4,908
  5,099
  5,302
  5,517
  5,745
  5,986
  6,241
  6,510
  6,794
  7,094
  7,411
  7,744
  8,095
  8,465
  8,854
  9,264
  9,695
  10,148
  10,625
Depreciation, amort., depletion, $m
  3,508
  3,750
  3,816
  3,891
  3,975
  4,068
  4,171
  4,282
  4,403
  4,533
  4,672
  3,926
  4,085
  4,255
  4,435
  4,627
  4,829
  5,044
  5,271
  5,511
  5,764
  6,031
  6,313
  6,610
  6,923
  7,252
  7,599
  7,965
  8,349
  8,753
  9,179
Funds from operations, $m
  6,592
  6,608
  6,750
  6,911
  7,091
  7,291
  7,510
  7,747
  8,005
  8,282
  8,579
  8,654
  8,993
  9,354
  9,737
  10,143
  10,574
  11,030
  11,512
  12,021
  12,558
  13,126
  13,724
  14,354
  15,018
  15,717
  16,454
  17,229
  18,044
  18,902
  19,804
Change in working capital, $m
  -51
  -24
  -29
  -33
  -37
  -41
  -45
  -48
  -52
  -57
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -99
  -104
  -110
  -116
  -122
  -129
  -136
  -143
  -151
  -159
  -167
  -176
  -185
Cash from operations, $m
  6,643
  7,401
  6,778
  6,943
  7,128
  7,331
  7,554
  7,796
  8,057
  8,338
  8,639
  8,719
  9,063
  9,428
  9,815
  10,227
  10,662
  11,123
  11,610
  12,125
  12,669
  13,242
  13,846
  14,483
  15,154
  15,861
  16,604
  17,387
  18,211
  19,078
  19,989
Maintenance CAPEX, $m
  0
  -2,798
  -2,854
  -2,920
  -2,995
  -3,079
  -3,172
  -3,275
  -3,386
  -3,507
  -3,637
  -3,777
  -3,926
  -4,085
  -4,255
  -4,435
  -4,627
  -4,829
  -5,044
  -5,271
  -5,511
  -5,764
  -6,031
  -6,313
  -6,610
  -6,923
  -7,252
  -7,599
  -7,965
  -8,349
  -8,753
New CAPEX, $m
  -3,771
  -674
  -788
  -900
  -1,011
  -1,120
  -1,229
  -1,338
  -1,449
  -1,561
  -1,675
  -1,792
  -1,912
  -2,036
  -2,164
  -2,296
  -2,433
  -2,575
  -2,724
  -2,878
  -3,038
  -3,206
  -3,381
  -3,564
  -3,755
  -3,955
  -4,164
  -4,383
  -4,612
  -4,852
  -5,104
Cash from investing activities, $m
  -4,584
  -3,472
  -3,642
  -3,820
  -4,006
  -4,199
  -4,401
  -4,613
  -4,835
  -5,068
  -5,312
  -5,569
  -5,838
  -6,121
  -6,419
  -6,731
  -7,060
  -7,404
  -7,768
  -8,149
  -8,549
  -8,970
  -9,412
  -9,877
  -10,365
  -10,878
  -11,416
  -11,982
  -12,577
  -13,201
  -13,857
Free cash flow, $m
  2,059
  3,929
  3,136
  3,123
  3,122
  3,132
  3,153
  3,183
  3,222
  3,270
  3,327
  3,151
  3,224
  3,306
  3,397
  3,495
  3,603
  3,718
  3,843
  3,976
  4,119
  4,272
  4,434
  4,606
  4,789
  4,983
  5,188
  5,405
  5,634
  5,876
  6,132
Issuance/(repayment) of debt, $m
  719
  636
  744
  851
  955
  1,058
  1,161
  1,264
  1,368
  1,474
  1,582
  1,693
  1,806
  1,923
  2,044
  2,169
  2,298
  2,433
  2,573
  2,718
  2,870
  3,028
  3,194
  3,366
  3,547
  3,736
  3,933
  4,140
  4,356
  4,583
  4,821
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
  636
  744
  851
  955
  1,058
  1,161
  1,264
  1,368
  1,474
  1,582
  1,693
  1,806
  1,923
  2,044
  2,169
  2,298
  2,433
  2,573
  2,718
  2,870
  3,028
  3,194
  3,366
  3,547
  3,736
  3,933
  4,140
  4,356
  4,583
  4,821
Total cash flow (excl. dividends), $m
  2,671
  4,565
  3,880
  3,974
  4,077
  4,190
  4,314
  4,447
  4,591
  4,745
  4,909
  4,843
  5,031
  5,229
  5,440
  5,664
  5,901
  6,151
  6,415
  6,695
  6,989
  7,300
  7,627
  7,972
  8,336
  8,718
  9,121
  9,545
  9,991
  10,460
  10,953
Retained Cash Flow (-), $m
  -517
  -343
  -411
  -470
  -528
  -585
  -642
  -699
  -756
  -815
  -875
  -936
  -998
  -1,063
  -1,130
  -1,199
  -1,270
  -1,345
  -1,422
  -1,503
  -1,587
  -1,674
  -1,765
  -1,861
  -1,961
  -2,065
  -2,174
  -2,289
  -2,408
  -2,534
  -2,665
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
 
  4,222
  3,469
  3,504
  3,549
  3,605
  3,672
  3,748
  3,834
  3,930
  4,035
  3,908
  4,032
  4,166
  4,311
  4,465
  4,630
  4,806
  4,993
  5,192
  5,403
  5,626
  5,862
  6,112
  6,375
  6,653
  6,947
  7,256
  7,583
  7,926
  8,288
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  3,938
  2,999
  2,786
  2,577
  2,370
  2,167
  1,967
  1,772
  1,582
  1,399
  1,154
  1,001
  857
  725
  605
  497
  402
  319
  249
  191
  143
  105
  75
  53
  36
  24
  15
  10
  6
  3
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 17.6
Price to Sales 2.5
Price to Book 3
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 18.6
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% 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 7.2%, 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 903.378 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 $55.4 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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