Intrinsic value of Loblaw Companies Limited - L

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$74.75

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$74.75

 
Intrinsic value

$42.60

 
Up/down potential

-43%

 
Rating

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 L 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 29.7

 

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, %
  2.18
  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
  46,385
  47,405
  48,581
  49,908
  51,385
  53,010
  54,784
  56,708
  58,784
  61,015
  63,404
  65,955
  68,673
  71,564
  74,633
  77,886
  81,332
  84,976
  88,828
  92,896
  97,190
  101,718
  106,493
  111,524
  116,823
  122,403
  128,278
  134,459
  140,963
  147,805
  155,000
Variable operating expenses, $m
 
  23,931
  24,515
  25,174
  25,907
  26,715
  27,596
  28,551
  29,582
  30,690
  31,876
  32,753
  34,103
  35,539
  37,063
  38,679
  40,390
  42,199
  44,112
  46,133
  48,265
  50,514
  52,885
  55,383
  58,015
  60,786
  63,703
  66,773
  70,003
  73,400
  76,974
Fixed operating expenses, $m
 
  21,947
  22,496
  23,058
  23,635
  24,226
  24,831
  25,452
  26,088
  26,741
  27,409
  28,094
  28,797
  29,517
  30,255
  31,011
  31,786
  32,581
  33,395
  34,230
  35,086
  35,963
  36,862
  37,784
  38,728
  39,697
  40,689
  41,706
  42,749
  43,818
  44,913
Total operating expenses, $m
  44,293
  45,878
  47,011
  48,232
  49,542
  50,941
  52,427
  54,003
  55,670
  57,431
  59,285
  60,847
  62,900
  65,056
  67,318
  69,690
  72,176
  74,780
  77,507
  80,363
  83,351
  86,477
  89,747
  93,167
  96,743
  100,483
  104,392
  108,479
  112,752
  117,218
  121,887
Operating income, $m
  2,092
  1,527
  1,570
  1,676
  1,843
  2,070
  2,357
  2,705
  3,114
  3,585
  4,119
  5,107
  5,773
  6,508
  7,315
  8,197
  9,156
  10,196
  11,320
  12,533
  13,839
  15,242
  16,746
  18,357
  20,080
  21,921
  23,885
  25,980
  28,212
  30,587
  33,114
EBITDA, $m
  3,635
  3,235
  3,311
  3,454
  3,661
  3,934
  4,271
  4,672
  5,138
  5,671
  6,272
  6,942
  7,683
  8,499
  9,391
  10,363
  11,418
  12,559
  13,791
  15,117
  16,542
  18,071
  19,708
  21,459
  23,329
  25,325
  27,453
  29,720
  32,132
  34,698
  37,425
Interest expense (income), $m
  474
  429
  447
  468
  492
  519
  548
  579
  614
  651
  691
  734
  779
  828
  880
  935
  993
  1,055
  1,120
  1,189
  1,262
  1,338
  1,420
  1,505
  1,595
  1,690
  1,790
  1,895
  2,006
  2,122
  2,244
Earnings before tax, $m
  1,439
  1,098
  1,123
  1,207
  1,351
  1,551
  1,810
  2,126
  2,500
  2,934
  3,428
  4,373
  4,994
  5,680
  6,436
  7,262
  8,163
  9,141
  10,201
  11,345
  12,577
  13,903
  15,326
  16,852
  18,485
  20,231
  22,096
  24,085
  26,206
  28,465
  30,869
Tax expense, $m
  449
  296
  303
  326
  365
  419
  489
  574
  675
  792
  925
  1,181
  1,348
  1,534
  1,738
  1,961
  2,204
  2,468
  2,754
  3,063
  3,396
  3,754
  4,138
  4,550
  4,991
  5,462
  5,966
  6,503
  7,076
  7,686
  8,335
Net income, $m
  983
  801
  820
  881
  986
  1,133
  1,321
  1,552
  1,825
  2,142
  2,502
  3,193
  3,645
  4,147
  4,698
  5,301
  5,959
  6,673
  7,446
  8,282
  9,181
  10,149
  11,188
  12,302
  13,494
  14,769
  16,130
  17,582
  19,130
  20,779
  22,534

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,555
  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
  34,436
  33,597
  34,430
  35,371
  36,417
  37,569
  38,827
  40,190
  41,661
  43,242
  44,935
  46,744
  48,670
  50,719
  52,894
  55,199
  57,641
  60,224
  62,954
  65,837
  68,880
  72,090
  75,473
  79,039
  82,795
  86,749
  90,912
  95,294
  99,903
  104,752
  109,851
Adjusted assets (=assets-cash), $m
  32,881
  33,597
  34,430
  35,371
  36,417
  37,569
  38,827
  40,190
  41,661
  43,242
  44,935
  46,744
  48,670
  50,719
  52,894
  55,199
  57,641
  60,224
  62,954
  65,837
  68,880
  72,090
  75,473
  79,039
  82,795
  86,749
  90,912
  95,294
  99,903
  104,752
  109,851
Revenue / Adjusted assets
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
  1.411
Average production assets, $m
  19,474
  19,910
  20,404
  20,962
  21,582
  22,264
  23,009
  23,818
  24,689
  25,626
  26,630
  27,701
  28,843
  30,057
  31,346
  32,712
  34,159
  35,690
  37,308
  39,016
  40,820
  42,722
  44,727
  46,840
  49,066
  51,409
  53,877
  56,473
  59,205
  62,078
  65,100
Working capital, $m
  3,262
  2,939
  3,012
  3,094
  3,186
  3,287
  3,397
  3,516
  3,645
  3,783
  3,931
  4,089
  4,258
  4,437
  4,627
  4,829
  5,043
  5,269
  5,507
  5,760
  6,026
  6,307
  6,603
  6,914
  7,243
  7,589
  7,953
  8,336
  8,740
  9,164
  9,610
Total debt, $m
  11,650
  10,912
  11,425
  12,004
  12,649
  13,359
  14,133
  14,973
  15,879
  16,853
  17,896
  19,010
  20,197
  21,459
  22,798
  24,219
  25,723
  27,314
  28,996
  30,772
  32,646
  34,623
  36,708
  38,904
  41,217
  43,654
  46,218
  48,917
  51,756
  54,743
  57,884
Total liabilities, $m
  21,434
  20,696
  21,209
  21,788
  22,433
  23,143
  23,917
  24,757
  25,663
  26,637
  27,680
  28,794
  29,981
  31,243
  32,582
  34,003
  35,507
  37,098
  38,780
  40,556
  42,430
  44,407
  46,492
  48,688
  51,001
  53,438
  56,002
  58,701
  61,540
  64,527
  67,668
Total equity, $m
  13,002
  12,901
  13,221
  13,582
  13,984
  14,427
  14,909
  15,433
  15,998
  16,605
  17,255
  17,950
  18,689
  19,476
  20,311
  21,197
  22,134
  23,126
  24,174
  25,282
  26,450
  27,682
  28,982
  30,351
  31,793
  33,312
  34,910
  36,593
  38,363
  40,225
  42,183
Total liabilities and equity, $m
  34,436
  33,597
  34,430
  35,370
  36,417
  37,570
  38,826
  40,190
  41,661
  43,242
  44,935
  46,744
  48,670
  50,719
  52,893
  55,200
  57,641
  60,224
  62,954
  65,838
  68,880
  72,089
  75,474
  79,039
  82,794
  86,750
  90,912
  95,294
  99,903
  104,752
  109,851
Debt-to-equity ratio
  0.896
  0.850
  0.860
  0.880
  0.900
  0.930
  0.950
  0.970
  0.990
  1.010
  1.040
  1.060
  1.080
  1.100
  1.120
  1.140
  1.160
  1.180
  1.200
  1.220
  1.230
  1.250
  1.270
  1.280
  1.300
  1.310
  1.320
  1.340
  1.350
  1.360
  1.370
Adjusted equity ratio
  0.372
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  983
  801
  820
  881
  986
  1,133
  1,321
  1,552
  1,825
  2,142
  2,502
  3,193
  3,645
  4,147
  4,698
  5,301
  5,959
  6,673
  7,446
  8,282
  9,181
  10,149
  11,188
  12,302
  13,494
  14,769
  16,130
  17,582
  19,130
  20,779
  22,534
Depreciation, amort., depletion, $m
  1,543
  1,708
  1,741
  1,778
  1,819
  1,864
  1,913
  1,967
  2,025
  2,087
  2,153
  1,835
  1,910
  1,991
  2,076
  2,166
  2,262
  2,364
  2,471
  2,584
  2,703
  2,829
  2,962
  3,102
  3,249
  3,405
  3,568
  3,740
  3,921
  4,111
  4,311
Funds from operations, $m
  3,264
  2,509
  2,560
  2,659
  2,805
  2,996
  3,234
  3,519
  3,850
  4,228
  4,655
  5,027
  5,556
  6,137
  6,774
  7,468
  8,221
  9,037
  9,917
  10,865
  11,885
  12,979
  14,150
  15,404
  16,743
  18,173
  19,698
  21,322
  23,051
  24,891
  26,846
Change in working capital, $m
  -255
  63
  73
  82
  92
  101
  110
  119
  129
  138
  148
  158
  169
  179
  190
  202
  214
  226
  239
  252
  266
  281
  296
  312
  329
  346
  364
  383
  403
  424
  446
Cash from operations, $m
  3,519
  2,276
  2,487
  2,577
  2,713
  2,896
  3,124
  3,399
  3,721
  4,090
  4,507
  4,869
  5,387
  5,958
  6,584
  7,266
  8,008
  8,811
  9,678
  10,613
  11,619
  12,698
  13,854
  15,092
  16,415
  17,827
  19,334
  20,939
  22,648
  24,466
  26,400
Maintenance CAPEX, $m
  0
  -1,290
  -1,319
  -1,351
  -1,388
  -1,429
  -1,474
  -1,524
  -1,577
  -1,635
  -1,697
  -1,764
  -1,835
  -1,910
  -1,991
  -2,076
  -2,166
  -2,262
  -2,364
  -2,471
  -2,584
  -2,703
  -2,829
  -2,962
  -3,102
  -3,249
  -3,405
  -3,568
  -3,740
  -3,921
  -4,111
New CAPEX, $m
  -1,224
  -436
  -494
  -557
  -620
  -683
  -745
  -808
  -872
  -937
  -1,003
  -1,071
  -1,142
  -1,214
  -1,289
  -1,367
  -1,447
  -1,531
  -1,618
  -1,709
  -1,803
  -1,902
  -2,005
  -2,113
  -2,226
  -2,344
  -2,467
  -2,596
  -2,732
  -2,873
  -3,022
Cash from investing activities, $m
  -1,437
  -1,726
  -1,813
  -1,908
  -2,008
  -2,112
  -2,219
  -2,332
  -2,449
  -2,572
  -2,700
  -2,835
  -2,977
  -3,124
  -3,280
  -3,443
  -3,613
  -3,793
  -3,982
  -4,180
  -4,387
  -4,605
  -4,834
  -5,075
  -5,328
  -5,593
  -5,872
  -6,164
  -6,472
  -6,794
  -7,133
Free cash flow, $m
  2,082
  550
  675
  668
  705
  784
  905
  1,067
  1,272
  1,518
  1,807
  2,034
  2,411
  2,834
  3,304
  3,824
  4,394
  5,018
  5,697
  6,434
  7,231
  8,092
  9,020
  10,017
  11,087
  12,234
  13,462
  14,775
  16,176
  17,672
  19,266
Issuance/(repayment) of debt, $m
  -147
  442
  513
  579
  645
  710
  775
  840
  906
  974
  1,043
  1,114
  1,187
  1,262
  1,340
  1,420
  1,504
  1,591
  1,682
  1,776
  1,874
  1,977
  2,084
  2,196
  2,314
  2,436
  2,564
  2,699
  2,839
  2,987
  3,141
Issuance/(repurchase) of shares, $m
  -756
  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  
  -1,357
  442
  513
  579
  645
  710
  775
  840
  906
  974
  1,043
  1,114
  1,187
  1,262
  1,340
  1,420
  1,504
  1,591
  1,682
  1,776
  1,874
  1,977
  2,084
  2,196
  2,314
  2,436
  2,564
  2,699
  2,839
  2,987
  3,141
Total cash flow (excl. dividends), $m
  721
  992
  1,188
  1,248
  1,349
  1,493
  1,679
  1,907
  2,178
  2,492
  2,850
  3,148
  3,598
  4,096
  4,644
  5,244
  5,898
  6,609
  7,379
  8,210
  9,106
  10,069
  11,104
  12,213
  13,401
  14,670
  16,026
  17,473
  19,016
  20,659
  22,408
Retained Cash Flow (-), $m
  109
  -274
  -320
  -361
  -402
  -442
  -483
  -524
  -565
  -607
  -650
  -694
  -740
  -787
  -835
  -885
  -938
  -992
  -1,048
  -1,107
  -1,168
  -1,232
  -1,299
  -1,369
  -1,442
  -1,519
  -1,599
  -1,682
  -1,770
  -1,862
  -1,958
Prev. year cash balance distribution, $m
 
  375
  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
 
  1,093
  868
  886
  948
  1,051
  1,197
  1,384
  1,613
  1,885
  2,200
  2,453
  2,858
  3,309
  3,809
  4,359
  4,961
  5,617
  6,330
  7,103
  7,937
  8,837
  9,805
  10,844
  11,958
  13,152
  14,428
  15,791
  17,246
  18,797
  20,450
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  1,030
  767
  729
  721
  735
  763
  798
  835
  867
  891
  865
  869
  857
  829
  788
  734
  671
  600
  526
  451
  379
  310
  248
  194
  148
  109
  79
  55
  37
  25
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

Loblaw Companies Limited, a food and pharmacy company, provides grocery, pharmacy, health and beauty, apparel, general merchandise, financial, and wireless mobile products and services in Canada and the United States. It operates through three segments: Retail, Financial Services, and Choice Properties. The Retail segment operates retail food and associate-owned drug stores, including in-store pharmacies and other health and beauty products, gas bars, apparel, and other general merchandise stores. The Financial Services segment provides credit card services, loyalty programs, personal banking services, deposit taking services, and telecommunication services, as well as auto, home, travel, and pet insurance services. The Choice Properties segment owns, leases, and manages commercial properties. The company was founded in 1956 and is headquartered in Brampton, Canada.

FINANCIAL RATIOS  of  Loblaw Companies Limited (L)

Valuation Ratios
P/E Ratio 30.5
Price to Sales 0.6
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 13.1
Growth Rates
Sales Growth Rate 2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.4%
Cap. Spend. - 3 Yr. Gr. Rate 6.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 80.5%
Total Debt to Equity 89.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 2.6%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 7.5%
Return On Equity - 3 Yr. Avg. 4.2%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 28.4%
Gross Margin - 3 Yr. Avg. 26.9%
EBITDA Margin 7.5%
EBITDA Margin - 3 Yr. Avg. 6.3%
Operating Margin 4.5%
Oper. Margin - 3 Yr. Avg. 3.2%
Pre-Tax Margin 3.1%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 1.2%
Effective Tax Rate 31.2%
Eff/ Tax Rate - 3 Yr. Avg. 33.9%
Payout Ratio 43.2%

L stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the L stock intrinsic value calculation we used $46385 million for the last fiscal year's total revenue generated by Loblaw Companies Limited. The default revenue input number comes from 2016 income statement of Loblaw Companies Limited. 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 L 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 6.1%, whose default value for L is calculated based on our internal credit rating of Loblaw Companies Limited, 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 Loblaw Companies Limited.
    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 L stock the variable cost ratio is equal to 50.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $21412 million in the base year in the intrinsic value calculation for L 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 4.1% for Loblaw Companies Limited.

Corporate tax rate of 27% is the nominal tax rate for Loblaw Companies Limited. 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 L 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 L are equal to 42%.

Life of production assets of 15.1 years is the average useful life of capital assets used in Loblaw Companies Limited 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 L is equal to 6.2%. 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 - $13002 million for Loblaw Companies Limited - 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 397.849 million for Loblaw Companies Limited 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 Loblaw Companies Limited at the current share price and the inputted number of shares is $29.7 billion.


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Stock chart of L Financial statements of L
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