Intrinsic value of Loblaw Companies Limited - L

Previous Close

$68.95

  Intrinsic Value

$63.67

stock screener

  Rating & Target

hold

-8%

  Value-price divergence*

0%

Previous close

$68.95

 
Intrinsic value

$63.67

 
Up/down potential

-8%

 
Rating

hold

 
Value-price divergence*

0%

*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 27.3

 

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
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  46,385
  47,869
  49,487
  51,240
  53,130
  55,159
  57,330
  59,649
  62,117
  64,742
  67,528
  70,480
  73,606
  76,912
  80,406
  84,095
  87,988
  92,094
  96,422
  100,983
  105,787
  110,844
  116,168
  121,771
  127,665
  133,865
  140,385
  147,241
  154,449
  162,026
  169,990
Variable operating expenses, $m
 
  24,162
  24,965
  25,836
  26,774
  27,782
  28,860
  30,011
  31,237
  32,541
  33,924
  35,001
  36,553
  38,195
  39,930
  41,762
  43,695
  45,734
  47,884
  50,148
  52,534
  55,046
  57,690
  60,472
  63,399
  66,478
  69,716
  73,121
  76,700
  80,463
  84,418
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
  46,109
  47,461
  48,894
  50,409
  52,008
  53,691
  55,463
  57,325
  59,282
  61,333
  63,095
  65,350
  67,712
  70,185
  72,773
  75,481
  78,315
  81,279
  84,378
  87,620
  91,009
  94,552
  98,256
  102,127
  106,175
  110,405
  114,827
  119,449
  124,281
  129,331
Operating income, $m
  2,092
  1,760
  2,026
  2,346
  2,721
  3,152
  3,639
  4,185
  4,792
  5,461
  6,195
  7,385
  8,256
  9,201
  10,222
  11,322
  12,507
  13,779
  15,143
  16,604
  18,167
  19,836
  21,617
  23,515
  25,538
  27,691
  29,981
  32,415
  35,000
  37,746
  40,660
EBITDA, $m
  3,635
  3,481
  3,792
  4,161
  4,588
  5,075
  5,623
  6,234
  6,909
  7,651
  8,462
  9,346
  10,304
  11,340
  12,458
  13,661
  14,954
  16,341
  17,825
  19,413
  21,109
  22,919
  24,848
  26,902
  29,089
  31,414
  33,885
  36,510
  39,296
  42,253
  45,388
Interest expense (income), $m
  474
  429
  456
  485
  516
  550
  586
  625
  667
  711
  758
  808
  860
  916
  976
  1,038
  1,104
  1,174
  1,247
  1,325
  1,406
  1,492
  1,583
  1,678
  1,778
  1,884
  1,995
  2,112
  2,234
  2,363
  2,499
Earnings before tax, $m
  1,439
  1,331
  1,571
  1,862
  2,205
  2,602
  3,053
  3,560
  4,125
  4,750
  5,437
  6,578
  7,396
  8,284
  9,246
  10,284
  11,403
  12,605
  13,896
  15,280
  16,760
  18,343
  20,034
  21,837
  23,759
  25,807
  27,986
  30,303
  32,766
  35,383
  38,160
Tax expense, $m
  449
  359
  424
  503
  595
  702
  824
  961
  1,114
  1,283
  1,468
  1,776
  1,997
  2,237
  2,496
  2,777
  3,079
  3,403
  3,752
  4,125
  4,525
  4,953
  5,409
  5,896
  6,415
  6,968
  7,556
  8,182
  8,847
  9,553
  10,303
Net income, $m
  983
  972
  1,147
  1,359
  1,610
  1,899
  2,229
  2,599
  3,011
  3,468
  3,969
  4,802
  5,399
  6,048
  6,750
  7,507
  8,324
  9,202
  10,144
  11,154
  12,235
  13,391
  14,625
  15,941
  17,344
  18,839
  20,429
  22,121
  23,919
  25,829
  27,857

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
  33,926
  35,073
  36,315
  37,654
  39,092
  40,631
  42,274
  44,024
  45,884
  47,858
  49,951
  52,166
  54,509
  56,985
  59,600
  62,359
  65,269
  68,336
  71,568
  74,973
  78,557
  82,331
  86,301
  90,479
  94,873
  99,494
  104,353
  109,461
  114,831
  120,475
Adjusted assets (=assets-cash), $m
  32,881
  33,926
  35,073
  36,315
  37,654
  39,092
  40,631
  42,274
  44,024
  45,884
  47,858
  49,951
  52,166
  54,509
  56,985
  59,600
  62,359
  65,269
  68,336
  71,568
  74,973
  78,557
  82,331
  86,301
  90,479
  94,873
  99,494
  104,353
  109,461
  114,831
  120,475
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
  20,105
  20,785
  21,521
  22,315
  23,167
  24,079
  25,052
  26,089
  27,192
  28,362
  29,602
  30,915
  32,303
  33,770
  35,320
  36,955
  38,680
  40,497
  42,413
  44,430
  46,555
  48,791
  51,144
  53,619
  56,223
  58,962
  61,841
  64,869
  68,051
  71,396
Working capital, $m
  3,262
  2,968
  3,068
  3,177
  3,294
  3,420
  3,554
  3,698
  3,851
  4,014
  4,187
  4,370
  4,564
  4,769
  4,985
  5,214
  5,455
  5,710
  5,978
  6,261
  6,559
  6,872
  7,202
  7,550
  7,915
  8,300
  8,704
  9,129
  9,576
  10,046
  10,539
Total debt, $m
  11,650
  11,114
  11,821
  12,586
  13,411
  14,297
  15,245
  16,257
  17,335
  18,480
  19,697
  20,986
  22,350
  23,794
  25,319
  26,929
  28,629
  30,422
  32,311
  34,302
  36,399
  38,607
  40,932
  43,377
  45,951
  48,657
  51,504
  54,497
  57,644
  60,952
  64,429
Total liabilities, $m
  21,434
  20,898
  21,605
  22,370
  23,195
  24,081
  25,029
  26,041
  27,119
  28,264
  29,481
  30,770
  32,134
  33,578
  35,103
  36,713
  38,413
  40,206
  42,095
  44,086
  46,183
  48,391
  50,716
  53,161
  55,735
  58,441
  61,288
  64,281
  67,428
  70,736
  74,213
Total equity, $m
  13,002
  13,028
  13,468
  13,945
  14,459
  15,011
  15,602
  16,233
  16,905
  17,619
  18,377
  19,181
  20,032
  20,931
  21,882
  22,886
  23,946
  25,063
  26,241
  27,482
  28,790
  30,166
  31,615
  33,140
  34,744
  36,431
  38,206
  40,071
  42,033
  44,095
  46,262
Total liabilities and equity, $m
  34,436
  33,926
  35,073
  36,315
  37,654
  39,092
  40,631
  42,274
  44,024
  45,883
  47,858
  49,951
  52,166
  54,509
  56,985
  59,599
  62,359
  65,269
  68,336
  71,568
  74,973
  78,557
  82,331
  86,301
  90,479
  94,872
  99,494
  104,352
  109,461
  114,831
  120,475
Debt-to-equity ratio
  0.896
  0.850
  0.880
  0.900
  0.930
  0.950
  0.980
  1.000
  1.030
  1.050
  1.070
  1.090
  1.120
  1.140
  1.160
  1.180
  1.200
  1.210
  1.230
  1.250
  1.260
  1.280
  1.290
  1.310
  1.320
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
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
  972
  1,147
  1,359
  1,610
  1,899
  2,229
  2,599
  3,011
  3,468
  3,969
  4,802
  5,399
  6,048
  6,750
  7,507
  8,324
  9,202
  10,144
  11,154
  12,235
  13,391
  14,625
  15,941
  17,344
  18,839
  20,429
  22,121
  23,919
  25,829
  27,857
Depreciation, amort., depletion, $m
  1,543
  1,721
  1,766
  1,815
  1,867
  1,924
  1,984
  2,049
  2,117
  2,190
  2,268
  1,960
  2,047
  2,139
  2,236
  2,339
  2,447
  2,562
  2,682
  2,809
  2,942
  3,083
  3,231
  3,387
  3,551
  3,723
  3,905
  4,095
  4,296
  4,507
  4,728
Funds from operations, $m
  3,264
  2,693
  2,913
  3,174
  3,477
  3,823
  4,213
  4,648
  5,129
  5,658
  6,237
  6,762
  7,446
  8,187
  8,986
  9,847
  10,771
  11,763
  12,826
  13,963
  15,177
  16,474
  17,856
  19,328
  20,895
  22,562
  24,334
  26,217
  28,215
  30,336
  32,585
Change in working capital, $m
  -255
  92
  100
  109
  117
  126
  135
  144
  153
  163
  173
  183
  194
  205
  217
  229
  241
  255
  268
  283
  298
  314
  330
  347
  365
  384
  404
  425
  447
  470
  494
Cash from operations, $m
  3,519
  2,601
  2,812
  3,065
  3,360
  3,697
  4,078
  4,504
  4,976
  5,495
  6,064
  6,579
  7,253
  7,982
  8,769
  9,618
  10,530
  11,509
  12,558
  13,680
  14,880
  16,160
  17,526
  18,981
  20,530
  22,178
  23,930
  25,792
  27,768
  29,866
  32,092
Maintenance CAPEX, $m
  0
  -1,290
  -1,331
  -1,376
  -1,425
  -1,478
  -1,534
  -1,595
  -1,659
  -1,728
  -1,801
  -1,878
  -1,960
  -2,047
  -2,139
  -2,236
  -2,339
  -2,447
  -2,562
  -2,682
  -2,809
  -2,942
  -3,083
  -3,231
  -3,387
  -3,551
  -3,723
  -3,905
  -4,095
  -4,296
  -4,507
New CAPEX, $m
  -1,224
  -631
  -680
  -736
  -794
  -852
  -912
  -974
  -1,037
  -1,102
  -1,170
  -1,240
  -1,313
  -1,389
  -1,467
  -1,549
  -1,635
  -1,724
  -1,818
  -1,915
  -2,018
  -2,124
  -2,236
  -2,353
  -2,476
  -2,604
  -2,739
  -2,880
  -3,027
  -3,182
  -3,345
Cash from investing activities, $m
  -1,437
  -1,921
  -2,011
  -2,112
  -2,219
  -2,330
  -2,446
  -2,569
  -2,696
  -2,830
  -2,971
  -3,118
  -3,273
  -3,436
  -3,606
  -3,785
  -3,974
  -4,171
  -4,380
  -4,597
  -4,827
  -5,066
  -5,319
  -5,584
  -5,863
  -6,155
  -6,462
  -6,785
  -7,122
  -7,478
  -7,852
Free cash flow, $m
  2,082
  680
  801
  952
  1,141
  1,367
  1,632
  1,936
  2,280
  2,665
  3,093
  3,461
  3,979
  4,546
  5,163
  5,832
  6,556
  7,337
  8,178
  9,083
  10,053
  11,093
  12,207
  13,396
  14,667
  16,023
  17,468
  19,007
  20,645
  22,388
  24,240
Issuance/(repayment) of debt, $m
  -147
  644
  706
  765
  825
  886
  948
  1,012
  1,078
  1,146
  1,216
  1,289
  1,365
  1,443
  1,525
  1,611
  1,700
  1,793
  1,890
  1,991
  2,097
  2,208
  2,324
  2,446
  2,573
  2,707
  2,847
  2,993
  3,147
  3,308
  3,477
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
  644
  706
  765
  825
  886
  948
  1,012
  1,078
  1,146
  1,216
  1,289
  1,365
  1,443
  1,525
  1,611
  1,700
  1,793
  1,890
  1,991
  2,097
  2,208
  2,324
  2,446
  2,573
  2,707
  2,847
  2,993
  3,147
  3,308
  3,477
Total cash flow (excl. dividends), $m
  721
  1,324
  1,508
  1,718
  1,966
  2,253
  2,580
  2,948
  3,357
  3,811
  4,309
  4,750
  5,344
  5,989
  6,688
  7,442
  8,255
  9,130
  10,068
  11,074
  12,150
  13,301
  14,531
  15,842
  17,241
  18,730
  20,315
  22,000
  23,792
  25,696
  27,717
Retained Cash Flow (-), $m
  109
  -401
  -440
  -477
  -514
  -552
  -591
  -631
  -672
  -714
  -758
  -804
  -851
  -900
  -951
  -1,004
  -1,059
  -1,117
  -1,178
  -1,241
  -1,307
  -1,376
  -1,449
  -1,525
  -1,604
  -1,687
  -1,774
  -1,866
  -1,962
  -2,062
  -2,167
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
 
  1,299
  1,067
  1,241
  1,452
  1,701
  1,989
  2,317
  2,686
  3,097
  3,551
  3,946
  4,493
  5,090
  5,737
  6,438
  7,196
  8,012
  8,890
  9,833
  10,843
  11,925
  13,082
  14,318
  15,636
  17,042
  18,540
  20,135
  21,831
  23,634
  25,549
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
 
  1,224
  943
  1,021
  1,105
  1,189
  1,268
  1,337
  1,390
  1,424
  1,438
  1,392
  1,366
  1,318
  1,249
  1,164
  1,065
  957
  843
  728
  617
  511
  414
  328
  254
  191
  141
  100
  70
  47
  31
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 is a Canada-based holding company. The Company operates through three segments: Retail, Financial Services and Choice Properties. The Company's Retail segment consists of corporate and franchise-owned retail food and Associate-owned drug stores, and includes in-store pharmacies and other health and beauty products, gas bars, apparel and other general merchandise. The Company's Financial Services segment provides credit card services, loyalty programs, insurance brokerage services, personal banking services, gift cards and telecommunication services. Choice Properties segment owns, develops and manages income-producing commercial properties across Canada. The Company has developed a line of control brand products and services that are sold or made available throughout its store network and are available to certain independent grocery customers. It markets control brand products under brand names, President's Choice, PC, no name, PC Organics and Blue Menu.

FINANCIAL RATIOS  of  Loblaw Companies Limited (L)

Valuation Ratios
P/E Ratio 28.1
Price to Sales 0.6
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 12
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 3.2% 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 395.338 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 $27.3 billion.

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Financial statements of L
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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