Intrinsic value of Fairfax Financial Holdings Limited Subor - FFH

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$557.78

  Intrinsic Value

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  Value-price divergence*

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$557.78

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

We calculate the intrinsic value of FFH 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 13.0

 

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, %
  3.82
  19.20
  17.78
  16.50
  15.35
  14.32
  13.38
  12.55
  11.79
  11.11
  10.50
  9.95
  9.46
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
Revenue, $m
  0
  15,147
  17,840
  20,784
  23,974
  27,407
  31,075
  34,974
  39,098
  43,443
  48,005
  52,782
  57,773
  62,979
  68,401
  74,043
  79,910
  86,008
  92,345
  98,931
  105,775
  112,890
  120,288
  127,985
  135,995
  144,335
  153,023
  162,078
  171,521
  181,371
  191,653
Variable operating expenses, $m
 
  14,165
  16,645
  19,355
  22,292
  25,452
  28,829
  32,419
  36,216
  40,216
  44,416
  48,593
  53,188
  57,980
  62,972
  68,166
  73,568
  79,182
  85,016
  91,079
  97,380
  103,930
  110,741
  117,827
  125,201
  132,879
  140,878
  149,214
  157,907
  166,976
  176,442
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
  12,985
  14,165
  16,645
  19,355
  22,292
  25,452
  28,829
  32,419
  36,216
  40,216
  44,416
  48,593
  53,188
  57,980
  62,972
  68,166
  73,568
  79,182
  85,016
  91,079
  97,380
  103,930
  110,741
  117,827
  125,201
  132,879
  140,878
  149,214
  157,907
  166,976
  176,442
Operating income, $m
  -279
  981
  1,195
  1,429
  1,682
  1,955
  2,246
  2,555
  2,882
  3,227
  3,589
  4,189
  4,585
  4,999
  5,429
  5,877
  6,342
  6,826
  7,329
  7,852
  8,395
  8,960
  9,547
  10,158
  10,794
  11,456
  12,145
  12,864
  13,613
  14,395
  15,211
EBITDA, $m
  -20
  1,378
  1,622
  1,890
  2,180
  2,492
  2,826
  3,181
  3,556
  3,951
  4,366
  4,800
  5,254
  5,728
  6,221
  6,734
  7,267
  7,822
  8,398
  8,997
  9,620
  10,267
  10,940
  11,640
  12,368
  13,126
  13,917
  14,740
  15,599
  16,495
  17,430
Interest expense (income), $m
  292
  341
  801
  1,310
  1,867
  2,470
  3,119
  3,812
  4,549
  5,329
  6,150
  7,013
  7,916
  8,859
  9,844
  10,869
  11,935
  13,044
  14,197
  15,395
  16,640
  17,934
  19,279
  20,677
  22,132
  23,647
  25,223
  26,866
  28,577
  30,362
  32,225
Earnings before tax, $m
  -749
  640
  394
  118
  -185
  -516
  -873
  -1,257
  -1,667
  -2,102
  -2,561
  -2,824
  -3,331
  -3,861
  -4,415
  -4,992
  -5,593
  -6,218
  -6,868
  -7,543
  -8,245
  -8,974
  -9,732
  -10,519
  -11,339
  -12,191
  -13,078
  -14,002
  -14,964
  -15,967
  -17,013
Tax expense, $m
  -216
  173
  106
  32
  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
  -692
  467
  288
  86
  -185
  -516
  -873
  -1,257
  -1,667
  -2,102
  -2,561
  -2,824
  -3,331
  -3,861
  -4,415
  -4,992
  -5,593
  -6,218
  -6,868
  -7,543
  -8,245
  -8,974
  -9,732
  -10,519
  -11,339
  -12,191
  -13,078
  -14,002
  -14,964
  -15,967
  -17,013

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  58,616
  69,801
  82,211
  95,778
  110,481
  126,299
  143,204
  161,170
  180,175
  200,198
  221,221
  243,235
  266,236
  290,225
  315,212
  341,212
  368,249
  396,351
  425,555
  455,902
  487,443
  520,230
  554,325
  589,792
  626,705
  665,138
  705,176
  746,904
  790,417
  835,812
  883,193
Adjusted assets (=assets-cash), $m
  58,616
  69,801
  82,211
  95,778
  110,481
  126,299
  143,204
  161,170
  180,175
  200,198
  221,221
  243,235
  266,236
  290,225
  315,212
  341,212
  368,249
  396,351
  425,555
  455,902
  487,443
  520,230
  554,325
  589,792
  626,705
  665,138
  705,176
  746,904
  790,417
  835,812
  883,193
Revenue / Adjusted assets
  0.000
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
Average production assets, $m
  2,703
  3,226
  3,800
  4,427
  5,107
  5,838
  6,619
  7,449
  8,328
  9,253
  10,225
  11,243
  12,306
  13,414
  14,569
  15,771
  17,021
  18,320
  19,670
  21,072
  22,530
  24,046
  25,621
  27,261
  28,967
  30,743
  32,594
  34,523
  36,534
  38,632
  40,822
Working capital, $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
  0
Total debt, $m
  6,441
  15,119
  24,724
  35,225
  46,606
  58,848
  71,933
  85,839
  100,549
  116,046
  132,318
  149,357
  167,160
  185,727
  205,067
  225,191
  246,118
  267,869
  290,472
  313,961
  338,374
  363,751
  390,140
  417,592
  446,162
  475,910
  506,899
  539,197
  572,876
  608,011
  644,684
Total liabilities, $m
  45,348
  54,026
  63,631
  74,132
  85,513
  97,755
  110,840
  124,746
  139,456
  154,953
  171,225
  188,264
  206,067
  224,634
  243,974
  264,098
  285,025
  306,776
  329,379
  352,868
  377,281
  402,658
  429,047
  456,499
  485,069
  514,817
  545,806
  578,104
  611,783
  646,918
  683,591
Total equity, $m
  13,268
  15,775
  18,580
  21,646
  24,969
  28,543
  32,364
  36,425
  40,720
  45,245
  49,996
  54,971
  60,169
  65,591
  71,238
  77,114
  83,224
  89,575
  96,175
  103,034
  110,162
  117,572
  125,277
  133,293
  141,635
  150,321
  159,370
  168,800
  178,634
  188,894
  199,602
Total liabilities and equity, $m
  58,616
  69,801
  82,211
  95,778
  110,482
  126,298
  143,204
  161,171
  180,176
  200,198
  221,221
  243,235
  266,236
  290,225
  315,212
  341,212
  368,249
  396,351
  425,554
  455,902
  487,443
  520,230
  554,324
  589,792
  626,704
  665,138
  705,176
  746,904
  790,417
  835,812
  883,193
Debt-to-equity ratio
  0.485
  0.960
  1.330
  1.630
  1.870
  2.060
  2.220
  2.360
  2.470
  2.560
  2.650
  2.720
  2.780
  2.830
  2.880
  2.920
  2.960
  2.990
  3.020
  3.050
  3.070
  3.090
  3.110
  3.130
  3.150
  3.170
  3.180
  3.190
  3.210
  3.220
  3.230
Adjusted equity ratio
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -692
  467
  288
  86
  -185
  -516
  -873
  -1,257
  -1,667
  -2,102
  -2,561
  -2,824
  -3,331
  -3,861
  -4,415
  -4,992
  -5,593
  -6,218
  -6,868
  -7,543
  -8,245
  -8,974
  -9,732
  -10,519
  -11,339
  -12,191
  -13,078
  -14,002
  -14,964
  -15,967
  -17,013
Depreciation, amort., depletion, $m
  259
  396
  427
  461
  498
  538
  580
  626
  673
  724
  776
  611
  669
  729
  792
  857
  925
  996
  1,069
  1,145
  1,224
  1,307
  1,392
  1,482
  1,574
  1,671
  1,771
  1,876
  1,986
  2,100
  2,219
Funds from operations, $m
  5,146
  863
  715
  548
  313
  22
  -293
  -632
  -994
  -1,378
  -1,785
  -2,213
  -2,662
  -3,132
  -3,623
  -4,135
  -4,668
  -5,222
  -5,799
  -6,398
  -7,020
  -7,667
  -8,339
  -9,038
  -9,764
  -10,520
  -11,307
  -12,126
  -12,979
  -13,868
  -14,795
Change in working capital, $m
  3,446
  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 operations, $m
  1,700
  1,152
  715
  548
  313
  22
  -293
  -632
  -994
  -1,378
  -1,785
  -2,213
  -2,662
  -3,132
  -3,623
  -4,135
  -4,668
  -5,222
  -5,799
  -6,398
  -7,020
  -7,667
  -8,339
  -9,038
  -9,764
  -10,520
  -11,307
  -12,126
  -12,979
  -13,868
  -14,795
Maintenance CAPEX, $m
  0
  -147
  -175
  -207
  -241
  -278
  -317
  -360
  -405
  -453
  -503
  -556
  -611
  -669
  -729
  -792
  -857
  -925
  -996
  -1,069
  -1,145
  -1,224
  -1,307
  -1,392
  -1,482
  -1,574
  -1,671
  -1,771
  -1,876
  -1,986
  -2,100
New CAPEX, $m
  -281
  -524
  -574
  -627
  -680
  -731
  -781
  -830
  -878
  -925
  -972
  -1,018
  -1,063
  -1,109
  -1,155
  -1,202
  -1,250
  -1,299
  -1,350
  -1,403
  -1,458
  -1,515
  -1,576
  -1,639
  -1,706
  -1,776
  -1,851
  -1,929
  -2,011
  -2,098
  -2,190
Cash from investing activities, $m
  -2,257
  -671
  -749
  -834
  -921
  -1,009
  -1,098
  -1,190
  -1,283
  -1,378
  -1,475
  -1,574
  -1,674
  -1,778
  -1,884
  -1,994
  -2,107
  -2,224
  -2,346
  -2,472
  -2,603
  -2,739
  -2,883
  -3,031
  -3,188
  -3,350
  -3,522
  -3,700
  -3,887
  -4,084
  -4,290
Free cash flow, $m
  -557
  481
  -34
  -286
  -607
  -986
  -1,391
  -1,822
  -2,277
  -2,756
  -3,259
  -3,786
  -4,336
  -4,909
  -5,507
  -6,128
  -6,775
  -7,446
  -8,144
  -8,870
  -9,623
  -10,407
  -11,222
  -12,070
  -12,952
  -13,871
  -14,828
  -15,826
  -16,866
  -17,951
  -19,084
Issuance/(repayment) of debt, $m
  1,821
  8,678
  9,606
  10,500
  11,381
  12,243
  13,084
  13,906
  14,710
  15,497
  16,272
  17,039
  17,802
  18,568
  19,340
  20,124
  20,926
  21,751
  22,604
  23,489
  24,412
  25,377
  26,389
  27,452
  28,570
  29,748
  30,989
  32,298
  33,679
  35,136
  36,673
Issuance/(repurchase) of shares, $m
  501
  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  
  2,452
  8,678
  9,606
  10,500
  11,381
  12,243
  13,084
  13,906
  14,710
  15,497
  16,272
  17,039
  17,802
  18,568
  19,340
  20,124
  20,926
  21,751
  22,604
  23,489
  24,412
  25,377
  26,389
  27,452
  28,570
  29,748
  30,989
  32,298
  33,679
  35,136
  36,673
Total cash flow (excl. dividends), $m
  1,844
  9,159
  9,572
  10,215
  10,774
  11,256
  11,693
  12,085
  12,433
  12,741
  13,013
  13,253
  13,467
  13,658
  13,833
  13,996
  14,152
  14,305
  14,460
  14,620
  14,789
  14,970
  15,167
  15,382
  15,618
  15,877
  16,161
  16,472
  16,813
  17,184
  17,588
Retained Cash Flow (-), $m
  631
  -2,507
  -2,805
  -3,066
  -3,323
  -3,575
  -3,821
  -4,061
  -4,295
  -4,525
  -4,751
  -4,975
  -5,198
  -5,422
  -5,647
  -5,876
  -6,110
  -6,351
  -6,600
  -6,859
  -7,128
  -7,410
  -7,705
  -8,016
  -8,342
  -8,686
  -9,048
  -9,431
  -9,834
  -10,259
  -10,708
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
 
  6,652
  6,767
  7,149
  7,451
  7,682
  7,872
  8,024
  8,138
  8,216
  8,262
  8,278
  8,268
  8,237
  8,186
  8,120
  8,041
  7,954
  7,859
  7,761
  7,661
  7,560
  7,462
  7,367
  7,276
  7,191
  7,112
  7,042
  6,979
  6,925
  6,880
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  6,148
  5,736
  5,514
  5,184
  4,777
  4,333
  3,868
  3,397
  2,935
  2,495
  2,084
  1,712
  1,381
  1,094
  850
  648
  484
  354
  253
  177
  121
  81
  52
  33
  20
  12
  7
  4
  2
  1
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

Fairfax Financial Holdings Limited, through its subsidiaries, provides property and casualty insurance and reinsurance, and investment management services in the United States, Canada, and internationally. It operates through Insurance and Reinsurance, Runoff, and Other segments. The company underwrites specialty insurance and reinsurance; and owns and operates a network of premium dining restaurants and holiday resorts. In addition, it is involved in the sale of animal nutrition; provision of pet medical insurance and database services, and specialized human resources services; retail of tableware and gifts, and home improvement goods, as well as sporting goods and sports apparel; and provision of integrated travel and travel-related financial services. The company was formerly known as Markel Financial Holdings Limited and changed its name to Fairfax Financial Holdings Limited in 1987. Fairfax Financial Holdings Limited was founded in 1951 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Fairfax Financial Holdings Limited Subor (FFH)

Valuation Ratios
P/E Ratio -19.3
Price to Sales 1
Price to Book 1
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.3%
Cap. Spend. - 3 Yr. Gr. Rate 34%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 48.5%
Total Debt to Equity 48.5%
Interest Coverage -2
Management Effectiveness
Return On Assets -0.8%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital -3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity -5.1%
Return On Equity - 3 Yr. Avg. 6.3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin -1.6%
EBITDA Margin - 3 Yr. Avg. 11.9%
Operating Margin -2.2%
Oper. Margin - 3 Yr. Avg. 9.5%
Pre-Tax Margin -5.9%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin -5.4%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 28.8%
Eff/ Tax Rate - 3 Yr. Avg. 18.3%
Payout Ratio -53%

FFH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FFH stock intrinsic value calculation we used $12707 million for the last fiscal year's total revenue generated by Fairfax Financial Holdings Limited Subor. The default revenue input number comes from 2016 income statement of Fairfax Financial Holdings Limited Subor. 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 FFH stock valuation model: a) initial revenue growth rate of 19.2% 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 8.2%, whose default value for FFH is calculated based on our internal credit rating of Fairfax Financial Holdings Limited Subor, 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 Fairfax Financial Holdings Limited Subor.
    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 FFH stock the variable cost ratio is equal to 93.8%.

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 FFH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.3% for Fairfax Financial Holdings Limited Subor.

Corporate tax rate of 27% is the nominal tax rate for Fairfax Financial Holdings Limited Subor. 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 FFH 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 FFH are equal to 21.3%.

Life of production assets of 18.4 years is the average useful life of capital assets used in Fairfax Financial Holdings Limited Subor 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 FFH is equal to 0%. 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 - $13268 million for Fairfax Financial Holdings Limited Subor - 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 23.241 million for Fairfax Financial Holdings Limited Subor 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 Fairfax Financial Holdings Limited Subor at the current share price and the inputted number of shares is $13.0 billion.


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Stock chart of FFH Financial statements of FFH
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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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