Intrinsic value of Great-West Lifeco Inc. - GWO

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$33.83

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$33.83

 
Intrinsic value

$91.79

 
Up/down potential

+171%

 
Rating

str. buy

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

We calculate the intrinsic value of GWO 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 33.2

 

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, %
  37.14
  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
  0
  47,309
  48,397
  49,641
  51,037
  52,584
  54,282
  56,131
  58,132
  60,288
  62,601
  65,076
  67,718
  70,530
  73,518
  76,690
  80,051
  83,608
  87,370
  91,345
  95,542
  99,971
  104,641
  109,564
  114,751
  120,214
  125,966
  132,020
  138,391
  145,093
  152,143
Variable operating expenses, $m
 
  42,424
  43,386
  44,486
  45,720
  47,088
  48,589
  50,223
  51,993
  53,899
  55,944
  57,535
  59,870
  62,356
  64,999
  67,802
  70,774
  73,919
  77,245
  80,760
  84,470
  88,386
  92,515
  96,867
  101,453
  106,283
  111,368
  116,721
  122,353
  128,279
  134,511
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
  43,002
  42,424
  43,386
  44,486
  45,720
  47,088
  48,589
  50,223
  51,993
  53,899
  55,944
  57,535
  59,870
  62,356
  64,999
  67,802
  70,774
  73,919
  77,245
  80,760
  84,470
  88,386
  92,515
  96,867
  101,453
  106,283
  111,368
  116,721
  122,353
  128,279
  134,511
Operating income, $m
  3,379
  4,885
  5,011
  5,155
  5,317
  5,496
  5,693
  5,907
  6,139
  6,389
  6,657
  7,541
  7,848
  8,173
  8,520
  8,887
  9,277
  9,689
  10,125
  10,586
  11,072
  11,585
  12,127
  12,697
  13,298
  13,931
  14,598
  15,299
  16,038
  16,814
  17,631
EBITDA, $m
  3,379
  5,889
  6,025
  6,180
  6,353
  6,546
  6,757
  6,988
  7,237
  7,505
  7,793
  8,101
  8,430
  8,780
  9,152
  9,547
  9,965
  10,408
  10,876
  11,371
  11,894
  12,445
  13,026
  13,639
  14,285
  14,965
  15,681
  16,435
  17,228
  18,062
  18,940
Interest expense (income), $m
  294
  307
  -236
  186
  669
  1,210
  1,811
  2,469
  3,186
  3,963
  4,799
  5,697
  6,657
  7,681
  8,772
  9,932
  11,162
  12,466
  13,846
  15,305
  16,847
  18,475
  20,193
  22,005
  23,915
  25,927
  28,046
  30,278
  32,626
  35,098
  37,698
Earnings before tax, $m
  3,352
  4,578
  5,247
  4,969
  4,648
  4,286
  3,882
  3,438
  2,953
  2,426
  1,858
  1,845
  1,191
  492
  -252
  -1,044
  -1,885
  -2,777
  -3,721
  -4,719
  -5,775
  -6,890
  -8,067
  -9,308
  -10,617
  -11,996
  -13,449
  -14,978
  -16,589
  -18,283
  -20,066
Tax expense, $m
  396
  1,236
  1,417
  1,342
  1,255
  1,157
  1,048
  928
  797
  655
  502
  498
  322
  133
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  2,764
  3,342
  3,830
  3,627
  3,393
  3,129
  2,834
  2,510
  2,155
  1,771
  1,356
  1,347
  869
  359
  -252
  -1,044
  -1,885
  -2,777
  -3,721
  -4,719
  -5,775
  -6,890
  -8,067
  -9,308
  -10,617
  -11,996
  -13,449
  -14,978
  -16,589
  -18,283
  -20,066

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
  399,912
  407,833
  417,213
  427,935
  439,973
  453,312
  467,947
  483,884
  501,135
  519,720
  539,666
  561,004
  583,773
  608,015
  633,779
  661,119
  690,091
  720,759
  753,191
  787,459
  823,641
  861,819
  902,081
  944,520
  989,234
  1,036,329
  1,085,913
  1,138,104
  1,193,024
  1,250,802
  1,311,575
Adjusted assets (=assets-cash), $m
  399,912
  407,833
  417,213
  427,935
  439,973
  453,312
  467,947
  483,884
  501,135
  519,720
  539,666
  561,004
  583,773
  608,015
  633,779
  661,119
  690,091
  720,759
  753,191
  787,459
  823,641
  861,819
  902,081
  944,520
  989,234
  1,036,329
  1,085,913
  1,138,104
  1,193,024
  1,250,802
  1,311,575
Revenue / Adjusted assets
  0.000
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
  0.116
Average production assets, $m
  4,004
  4,069
  4,162
  4,269
  4,389
  4,522
  4,668
  4,827
  4,999
  5,185
  5,384
  5,597
  5,824
  6,066
  6,323
  6,595
  6,884
  7,190
  7,514
  7,856
  8,217
  8,598
  8,999
  9,423
  9,869
  10,338
  10,833
  11,354
  11,902
  12,478
  13,084
Working capital, $m
  0
  426
  436
  447
  459
  473
  489
  505
  523
  543
  563
  586
  609
  635
  662
  690
  720
  752
  786
  822
  860
  900
  942
  986
  1,033
  1,082
  1,134
  1,188
  1,246
  1,306
  1,369
Total debt, $m
  6,141
  -4,719
  3,723
  13,373
  24,207
  36,212
  49,384
  63,727
  79,253
  95,979
  113,930
  133,134
  153,626
  175,444
  198,632
  223,238
  249,313
  276,914
  306,103
  336,944
  369,508
  403,868
  440,104
  478,299
  518,542
  560,927
  605,553
  652,525
  701,953
  753,953
  808,648
Total liabilities, $m
  377,910
  367,050
  375,492
  385,142
  395,976
  407,981
  421,153
  435,496
  451,022
  467,748
  485,699
  504,903
  525,395
  547,213
  570,401
  595,007
  621,082
  648,683
  677,872
  708,713
  741,277
  775,637
  811,873
  850,068
  890,311
  932,696
  977,322
  1,024,294
  1,073,722
  1,125,722
  1,180,417
Total equity, $m
  22,002
  40,783
  41,721
  42,794
  43,997
  45,331
  46,795
  48,388
  50,114
  51,972
  53,967
  56,100
  58,377
  60,801
  63,378
  66,112
  69,009
  72,076
  75,319
  78,746
  82,364
  86,182
  90,208
  94,452
  98,923
  103,633
  108,591
  113,810
  119,302
  125,080
  131,157
Total liabilities and equity, $m
  399,912
  407,833
  417,213
  427,936
  439,973
  453,312
  467,948
  483,884
  501,136
  519,720
  539,666
  561,003
  583,772
  608,014
  633,779
  661,119
  690,091
  720,759
  753,191
  787,459
  823,641
  861,819
  902,081
  944,520
  989,234
  1,036,329
  1,085,913
  1,138,104
  1,193,024
  1,250,802
  1,311,574
Debt-to-equity ratio
  0.279
  -0.120
  0.090
  0.310
  0.550
  0.800
  1.060
  1.320
  1.580
  1.850
  2.110
  2.370
  2.630
  2.890
  3.130
  3.380
  3.610
  3.840
  4.060
  4.280
  4.490
  4.690
  4.880
  5.060
  5.240
  5.410
  5.580
  5.730
  5.880
  6.030
  6.170
Adjusted equity ratio
  0.055
  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
  2,764
  3,342
  3,830
  3,627
  3,393
  3,129
  2,834
  2,510
  2,155
  1,771
  1,356
  1,347
  869
  359
  -252
  -1,044
  -1,885
  -2,777
  -3,721
  -4,719
  -5,775
  -6,890
  -8,067
  -9,308
  -10,617
  -11,996
  -13,449
  -14,978
  -16,589
  -18,283
  -20,066
Depreciation, amort., depletion, $m
  0
  1,005
  1,014
  1,025
  1,037
  1,050
  1,065
  1,080
  1,098
  1,116
  1,136
  560
  582
  607
  632
  660
  688
  719
  751
  786
  822
  860
  900
  942
  987
  1,034
  1,083
  1,135
  1,190
  1,248
  1,308
Funds from operations, $m
  9,156
  4,346
  4,844
  4,652
  4,430
  4,179
  3,899
  3,590
  3,253
  2,887
  2,492
  1,907
  1,452
  966
  380
  -385
  -1,197
  -2,058
  -2,969
  -3,934
  -4,953
  -6,030
  -7,167
  -8,366
  -9,630
  -10,962
  -12,365
  -13,843
  -15,398
  -17,035
  -18,758
Change in working capital, $m
  2,902
  8
  10
  11
  13
  14
  15
  17
  18
  19
  21
  22
  24
  25
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
Cash from operations, $m
  6,254
  4,306
  4,834
  4,641
  4,417
  4,165
  3,883
  3,573
  3,235
  2,868
  2,472
  1,884
  1,428
  941
  353
  -413
  -1,227
  -2,090
  -3,003
  -3,970
  -4,991
  -6,070
  -7,209
  -8,410
  -9,677
  -11,011
  -12,417
  -13,897
  -15,456
  -17,096
  -18,821
Maintenance CAPEX, $m
  0
  -400
  -407
  -416
  -427
  -439
  -452
  -467
  -483
  -500
  -518
  -538
  -560
  -582
  -607
  -632
  -660
  -688
  -719
  -751
  -786
  -822
  -860
  -900
  -942
  -987
  -1,034
  -1,083
  -1,135
  -1,190
  -1,248
New CAPEX, $m
  0
  -65
  -94
  -107
  -120
  -133
  -146
  -159
  -172
  -185
  -199
  -213
  -227
  -242
  -257
  -273
  -289
  -306
  -324
  -342
  -361
  -381
  -402
  -423
  -446
  -470
  -495
  -521
  -548
  -576
  -606
Cash from investing activities, $m
  -4,565
  -465
  -501
  -523
  -547
  -572
  -598
  -626
  -655
  -685
  -717
  -751
  -787
  -824
  -864
  -905
  -949
  -994
  -1,043
  -1,093
  -1,147
  -1,203
  -1,262
  -1,323
  -1,388
  -1,457
  -1,529
  -1,604
  -1,683
  -1,766
  -1,854
Free cash flow, $m
  1,689
  3,841
  4,334
  4,117
  3,870
  3,593
  3,285
  2,948
  2,580
  2,183
  1,754
  1,133
  641
  116
  -511
  -1,318
  -2,175
  -3,084
  -4,046
  -5,063
  -6,138
  -7,273
  -8,470
  -9,733
  -11,065
  -12,468
  -13,946
  -15,501
  -17,139
  -18,862
  -20,675
Issuance/(repayment) of debt, $m
  683
  -10,860
  8,442
  9,650
  10,834
  12,005
  13,172
  14,343
  15,526
  16,727
  17,951
  19,204
  20,492
  21,818
  23,188
  24,605
  26,075
  27,601
  29,189
  30,841
  32,564
  34,360
  36,236
  38,195
  40,243
  42,385
  44,626
  46,972
  49,428
  52,000
  54,695
Issuance/(repurchase) of shares, $m
  31
  25,801
  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  
  447
  14,941
  8,442
  9,650
  10,834
  12,005
  13,172
  14,343
  15,526
  16,727
  17,951
  19,204
  20,492
  21,818
  23,188
  24,605
  26,075
  27,601
  29,189
  30,841
  32,564
  34,360
  36,236
  38,195
  40,243
  42,385
  44,626
  46,972
  49,428
  52,000
  54,695
Total cash flow (excl. dividends), $m
  1,938
  -7,019
  12,776
  13,768
  14,704
  15,597
  16,457
  17,291
  18,106
  18,909
  19,705
  20,337
  21,133
  21,934
  22,677
  23,287
  23,900
  24,518
  25,143
  25,778
  26,426
  27,087
  27,765
  28,462
  29,178
  29,917
  30,681
  31,470
  32,289
  33,138
  34,020
Retained Cash Flow (-), $m
  437
  -18,781
  -938
  -1,072
  -1,204
  -1,334
  -1,464
  -1,594
  -1,725
  -1,859
  -1,995
  -2,134
  -2,277
  -2,424
  -2,576
  -2,734
  -2,897
  -3,067
  -3,243
  -3,427
  -3,618
  -3,818
  -4,026
  -4,244
  -4,471
  -4,709
  -4,958
  -5,219
  -5,492
  -5,778
  -6,077
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
 
  0
  11,838
  12,695
  13,500
  14,264
  14,993
  15,697
  16,381
  17,051
  17,711
  18,204
  18,856
  19,510
  20,101
  20,553
  21,002
  21,451
  21,900
  22,352
  22,808
  23,270
  23,739
  24,218
  24,707
  25,208
  25,722
  26,251
  26,797
  27,360
  27,943
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  0
  10,816
  11,014
  11,067
  10,992
  10,803
  10,511
  10,131
  9,673
  9,151
  8,501
  7,894
  7,259
  6,586
  5,871
  5,177
  4,512
  3,885
  3,302
  2,769
  2,290
  1,865
  1,495
  1,179
  914
  695
  518
  379
  271
  189
Current shareholders' claim on cash, %
  100
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3
  56.3

Great-West Lifeco Inc., a financial services holding company, engages in life and health insurance, asset management, investment and retirement savings, and reinsurance businesses in Canada, the United States, Europe, and Asia. The company offers a portfolio of financial and benefit plan solutions for individuals, families, businesses, and organizations; life, disability, critical illness, health, and creditor insurance products; and accumulation and annuity products. It also provides employer-sponsored retirement savings plans, individual retirement accounts, enrollment services, communication materials, investment options, and education services; and fund management, investment, and advisory services. In addition, the company offers private-label recordkeeping and administrative services; executive benefits products; and investment products, including equity, fixed income, absolute return, and alternative strategies. Further, it provides protection and wealth management products; life, annuity, and property and casualty reinsurance and retrocession products; and pension products. The company offers its products under the Great-West Life, London Life, Canada Life, Freedom 55 Financial, Irish Life, Great-West Financial, Empower Retirement, and Putnam Investments and PanAgora brands. It distributes its products through a network of advisors, brokers, managing general agencies, financial institutions, consultants, third-party administrators, wholesale and retail sales force, financial planners, employee benefit consultants, banks, and multi-tied agents. The company was founded in 1891 and is based in Winnipeg, Canada. Great-West Lifeco Inc. operates as a subsidiary of Power Financial Corporation.

FINANCIAL RATIOS  of  Great-West Lifeco Inc. (GWO)

Valuation Ratios
P/E Ratio 12.1
Price to Sales 0.7
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 5.3
Price to Free Cash Flow 5.3
Growth Rates
Sales Growth Rate 37.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 26%
Total Debt to Equity 27.9%
Interest Coverage 12
Management Effectiveness
Return On Assets 0.8%
Ret/ On Assets - 3 Yr. Avg. 0.8%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 13.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 7.9%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 7.3%
Oper. Margin - 3 Yr. Avg. 8.8%
Pre-Tax Margin 7.2%
Pre-Tax Margin - 3 Yr. Avg. 8.7%
Net Profit Margin 6%
Net Profit Margin - 3 Yr. Avg. 7.1%
Effective Tax Rate 11.8%
Eff/ Tax Rate - 3 Yr. Avg. 14.5%
Payout Ratio 54%

GWO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GWO stock intrinsic value calculation we used $46381 million for the last fiscal year's total revenue generated by Great-West Lifeco Inc.. The default revenue input number comes from 2016 income statement of Great-West Lifeco 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 GWO 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 4.4%, whose default value for GWO is calculated based on our internal credit rating of Great-West Lifeco 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 Great-West Lifeco 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 GWO stock the variable cost ratio is equal to 89.7%.

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 GWO 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% for Great-West Lifeco Inc..

Corporate tax rate of 27% is the nominal tax rate for Great-West Lifeco 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 GWO 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 GWO are equal to 8.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Great-West Lifeco 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 GWO is equal to 0.9%. 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 - $22002 million for Great-West Lifeco 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 981.178 million for Great-West Lifeco 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 Great-West Lifeco Inc. at the current share price and the inputted number of shares is $33.2 billion.


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Stock chart of GWO Financial statements of GWO
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