Intrinsic value of Manulife Financial Corporation - MFC

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$23.58

  Intrinsic Value

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  Value-price divergence*

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$23.58

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

We calculate the intrinsic value of MFC 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 46.9

 

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, %
  54.91
  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
  54,404
  55,655
  57,085
  58,691
  60,471
  62,423
  64,549
  66,850
  69,329
  71,990
  74,836
  77,874
  81,107
  84,544
  88,191
  92,056
  96,147
  100,474
  105,045
  109,871
  114,964
  120,335
  125,996
  131,961
  138,243
  144,858
  151,820
  159,146
  166,853
  174,960
Variable operating expenses, $m
 
  48,516
  49,619
  50,879
  52,293
  53,861
  55,581
  57,454
  59,481
  61,665
  64,009
  65,928
  68,604
  71,453
  74,481
  77,694
  81,099
  84,703
  88,514
  92,541
  96,793
  101,280
  106,011
  110,999
  116,253
  121,788
  127,615
  133,748
  140,203
  146,993
  154,134
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
  48,995
  48,516
  49,619
  50,879
  52,293
  53,861
  55,581
  57,454
  59,481
  61,665
  64,009
  65,928
  68,604
  71,453
  74,481
  77,694
  81,099
  84,703
  88,514
  92,541
  96,793
  101,280
  106,011
  110,999
  116,253
  121,788
  127,615
  133,748
  140,203
  146,993
  154,134
Operating income, $m
  4,342
  5,887
  6,036
  6,207
  6,398
  6,610
  6,842
  7,095
  7,369
  7,664
  7,981
  8,908
  9,269
  9,654
  10,063
  10,498
  10,958
  11,445
  11,960
  12,504
  13,078
  13,684
  14,324
  14,998
  15,708
  16,455
  17,243
  18,071
  18,943
  19,861
  20,826
EBITDA, $m
  5,035
  6,761
  6,917
  7,095
  7,294
  7,515
  7,758
  8,022
  8,308
  8,616
  8,947
  9,301
  9,678
  10,080
  10,507
  10,960
  11,441
  11,949
  12,487
  13,055
  13,655
  14,288
  14,955
  15,659
  16,400
  17,181
  18,003
  18,868
  19,779
  20,737
  21,744
Interest expense (income), $m
  983
  1,133
  -357
  982
  2,513
  4,232
  6,136
  8,225
  10,501
  12,964
  15,617
  18,465
  21,511
  24,762
  28,223
  31,901
  35,805
  39,941
  44,320
  48,950
  53,843
  59,008
  64,459
  70,207
  76,266
  82,650
  89,374
  96,453
  103,904
  111,745
  119,994
Earnings before tax, $m
  3,329
  4,754
  6,393
  5,224
  3,885
  2,378
  706
  -1,131
  -3,132
  -5,300
  -7,636
  -9,557
  -12,242
  -15,108
  -18,160
  -21,404
  -24,847
  -28,497
  -32,360
  -36,446
  -40,764
  -45,324
  -50,135
  -55,210
  -60,559
  -66,195
  -72,131
  -78,382
  -84,961
  -91,885
  -99,169
Tax expense, $m
  196
  1,284
  1,726
  1,411
  1,049
  642
  191
  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
  2,990
  3,471
  4,667
  3,814
  2,836
  1,736
  515
  -1,131
  -3,132
  -5,300
  -7,636
  -9,557
  -12,242
  -15,108
  -18,160
  -21,404
  -24,847
  -28,497
  -32,360
  -36,446
  -40,764
  -45,324
  -50,135
  -55,210
  -60,559
  -66,195
  -72,131
  -78,382
  -84,961
  -91,885
  -99,169

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
  720,681
  735,186
  752,095
  771,424
  793,124
  817,169
  843,552
  872,280
  903,378
  936,881
  972,836
  1,011,301
  1,052,346
  1,096,047
  1,142,491
  1,191,774
  1,244,002
  1,299,286
  1,357,750
  1,419,524
  1,484,748
  1,553,570
  1,626,148
  1,702,652
  1,783,257
  1,868,153
  1,957,537
  2,051,619
  2,150,621
  2,254,776
  2,364,328
Adjusted assets (=assets-cash), $m
  720,681
  735,186
  752,095
  771,424
  793,124
  817,169
  843,552
  872,280
  903,378
  936,881
  972,836
  1,011,301
  1,052,346
  1,096,047
  1,142,491
  1,191,774
  1,244,002
  1,299,286
  1,357,750
  1,419,524
  1,484,748
  1,553,570
  1,626,148
  1,702,652
  1,783,257
  1,868,153
  1,957,537
  2,051,619
  2,150,621
  2,254,776
  2,364,328
Revenue / Adjusted assets
  0.000
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
  0.074
Average production assets, $m
  3,961
  4,026
  4,118
  4,224
  4,343
  4,475
  4,619
  4,777
  4,947
  5,130
  5,327
  5,538
  5,763
  6,002
  6,256
  6,526
  6,812
  7,115
  7,435
  7,773
  8,130
  8,507
  8,905
  9,324
  9,765
  10,230
  10,719
  11,235
  11,777
  12,347
  12,947
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
  12,876
  -4,058
  11,160
  28,556
  48,087
  69,727
  93,471
  119,327
  147,315
  177,468
  209,827
  244,446
  281,386
  320,717
  362,517
  406,872
  453,877
  503,633
  556,250
  611,847
  670,548
  732,488
  797,809
  866,661
  939,206
  1,015,612
  1,096,058
  1,180,732
  1,269,834
  1,363,573
  1,462,171
Total liabilities, $m
  678,601
  661,667
  676,885
  694,281
  713,812
  735,452
  759,196
  785,052
  813,040
  843,193
  875,552
  910,171
  947,111
  986,442
  1,028,242
  1,072,597
  1,119,602
  1,169,358
  1,221,975
  1,277,572
  1,336,273
  1,398,213
  1,463,534
  1,532,386
  1,604,931
  1,681,337
  1,761,783
  1,846,457
  1,935,559
  2,029,298
  2,127,896
Total equity, $m
  42,080
  73,519
  75,209
  77,142
  79,312
  81,717
  84,355
  87,228
  90,338
  93,688
  97,284
  101,130
  105,235
  109,605
  114,249
  119,177
  124,400
  129,929
  135,775
  141,952
  148,475
  155,357
  162,615
  170,265
  178,326
  186,815
  195,754
  205,162
  215,062
  225,478
  236,433
Total liabilities and equity, $m
  720,681
  735,186
  752,094
  771,423
  793,124
  817,169
  843,551
  872,280
  903,378
  936,881
  972,836
  1,011,301
  1,052,346
  1,096,047
  1,142,491
  1,191,774
  1,244,002
  1,299,287
  1,357,750
  1,419,524
  1,484,748
  1,553,570
  1,626,149
  1,702,651
  1,783,257
  1,868,152
  1,957,537
  2,051,619
  2,150,621
  2,254,776
  2,364,329
Debt-to-equity ratio
  0.306
  -0.060
  0.150
  0.370
  0.610
  0.850
  1.110
  1.370
  1.630
  1.890
  2.160
  2.420
  2.670
  2.930
  3.170
  3.410
  3.650
  3.880
  4.100
  4.310
  4.520
  4.710
  4.910
  5.090
  5.270
  5.440
  5.600
  5.760
  5.900
  6.050
  6.180
Adjusted equity ratio
  0.058
  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
  2,990
  3,471
  4,667
  3,814
  2,836
  1,736
  515
  -1,131
  -3,132
  -5,300
  -7,636
  -9,557
  -12,242
  -15,108
  -18,160
  -21,404
  -24,847
  -28,497
  -32,360
  -36,446
  -40,764
  -45,324
  -50,135
  -55,210
  -60,559
  -66,195
  -72,131
  -78,382
  -84,961
  -91,885
  -99,169
Depreciation, amort., depletion, $m
  693
  874
  880
  888
  896
  906
  916
  927
  939
  952
  966
  393
  409
  426
  444
  463
  483
  505
  527
  551
  577
  603
  632
  661
  693
  726
  760
  797
  835
  876
  918
Funds from operations, $m
  15,174
  4,345
  5,548
  4,702
  3,732
  2,642
  1,431
  -203
  -2,193
  -4,348
  -6,670
  -9,164
  -11,833
  -14,682
  -17,716
  -20,941
  -24,364
  -27,992
  -31,833
  -35,895
  -40,188
  -44,720
  -49,504
  -54,548
  -59,866
  -65,469
  -71,371
  -77,585
  -84,126
  -91,009
  -98,250
Change in working capital, $m
  -1,862
  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
  17,036
  4,607
  5,548
  4,702
  3,732
  2,642
  1,431
  -203
  -2,193
  -4,348
  -6,670
  -9,164
  -11,833
  -14,682
  -17,716
  -20,941
  -24,364
  -27,992
  -31,833
  -35,895
  -40,188
  -44,720
  -49,504
  -54,548
  -59,866
  -65,469
  -71,371
  -77,585
  -84,126
  -91,009
  -98,250
Maintenance CAPEX, $m
  0
  -281
  -286
  -292
  -300
  -308
  -317
  -328
  -339
  -351
  -364
  -378
  -393
  -409
  -426
  -444
  -463
  -483
  -505
  -527
  -551
  -577
  -603
  -632
  -661
  -693
  -726
  -760
  -797
  -835
  -876
New CAPEX, $m
  0
  -65
  -93
  -106
  -119
  -132
  -144
  -157
  -170
  -183
  -197
  -211
  -225
  -239
  -254
  -270
  -286
  -303
  -320
  -338
  -357
  -377
  -397
  -419
  -441
  -465
  -489
  -515
  -542
  -570
  -600
Cash from investing activities, $m
  -22,739
  -346
  -379
  -398
  -419
  -440
  -461
  -485
  -509
  -534
  -561
  -589
  -618
  -648
  -680
  -714
  -749
  -786
  -825
  -865
  -908
  -954
  -1,000
  -1,051
  -1,102
  -1,158
  -1,215
  -1,275
  -1,339
  -1,405
  -1,476
Free cash flow, $m
  -5,703
  4,261
  5,170
  4,304
  3,314
  2,202
  969
  -688
  -2,702
  -4,882
  -7,231
  -9,753
  -12,451
  -15,330
  -18,396
  -21,655
  -25,113
  -28,778
  -32,658
  -36,761
  -41,096
  -45,674
  -50,504
  -55,599
  -60,969
  -66,627
  -72,586
  -78,860
  -85,465
  -92,414
  -99,726
Issuance/(repayment) of debt, $m
  20
  -16,934
  15,218
  17,396
  19,530
  21,641
  23,744
  25,856
  27,988
  30,152
  32,360
  34,619
  36,940
  39,331
  41,800
  44,355
  47,005
  49,756
  52,617
  55,596
  58,701
  61,940
  65,321
  68,853
  72,545
  76,406
  80,446
  84,674
  89,102
  93,739
  98,597
Issuance/(repurchase) of shares, $m
  950
  44,112
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1,079
  3,594
  6,263
  9,091
  12,084
Cash from financing (excl. dividends), $m  
  4,879
  27,178
  15,218
  17,396
  19,530
  21,641
  23,744
  25,856
  27,988
  30,152
  32,360
  34,619
  36,940
  39,331
  41,800
  44,355
  47,005
  49,756
  52,617
  55,596
  58,701
  61,940
  65,321
  68,853
  72,545
  76,406
  81,525
  88,268
  95,365
  102,830
  110,681
Total cash flow (excl. dividends), $m
  -1,171
  -12,673
  20,388
  21,700
  22,844
  23,843
  24,714
  25,167
  25,286
  25,271
  25,129
  24,866
  24,489
  24,001
  23,404
  22,701
  21,892
  20,978
  19,960
  18,836
  17,605
  16,266
  14,816
  13,254
  11,576
  9,779
  7,860
  5,814
  3,637
  1,325
  -1,129
Retained Cash Flow (-), $m
  -734
  -31,439
  -1,691
  -1,933
  -2,170
  -2,405
  -2,638
  -2,873
  -3,110
  -3,350
  -3,596
  -3,847
  -4,104
  -4,370
  -4,644
  -4,928
  -5,223
  -5,528
  -5,846
  -6,177
  -6,522
  -6,882
  -7,258
  -7,650
  -8,061
  -8,490
  -8,938
  -9,408
  -9,900
  -10,415
  -10,955
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
  18,697
  19,767
  20,674
  21,438
  22,076
  22,295
  22,176
  21,920
  21,533
  21,020
  20,385
  19,631
  18,760
  17,772
  16,669
  15,450
  14,113
  12,658
  11,083
  9,384
  7,559
  5,604
  3,516
  1,290
  0
  0
  0
  0
  0
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  0
  17,116
  17,203
  17,023
  16,617
  16,021
  15,062
  13,861
  12,592
  11,289
  9,982
  8,699
  7,464
  6,298
  5,218
  4,236
  3,362
  2,599
  1,949
  1,408
  971
  627
  367
  179
  50
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.5
  51.3
  50.4
  49.1
  47.3
  45.1

Manulife Financial Corporation, together with its subsidiaries, provides financial advice, insurance, and wealth and asset management solutions for individuals, groups, and institutions in Asia, Canada, and the United States. It offers various health and individual life, and individual and group long-term care insurance through insurance agents, brokers, banks, financial planners, and direct marketing. The company also provides pension contracts and mutual fund products and services; various retirement products to group benefit plans; and annuities, single premium, and banking products, such as deposit and credit products to Canadian customers, as well as non-guaranteed, partially guaranteed, and fully guaranteed investment options through general and separate account products. It distributes wealth and asset management products through insurance agents and brokers affiliated with the company, securities brokerage firms, financial planners, pension plan sponsors, pension plan consultants, and banks. In addition, the company is involved in the property and casualty reinsurance business; and run-off reinsurance operations, including variable annuities, and accident and health. Further, it provides planning software platform that enables financial advisors and institutions to help clients make financial planning decisions; manages timberland and agricultural portfolios; insurance agency, investment counseling, portfolio and mutual fund management, mutual fund dealer, financial reinsurance, and mutual funds marketing businesses, as well as investment management, advisory, and dealer activities. Additionally, the company holds and manages oil and gas properties; holds oil and gas royalties and European equities; and develops and operates hydro-electric power projects. Manulife Financial Corporation was founded in 1887 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Manulife Financial Corporation (MFC)

Valuation Ratios
P/E Ratio 15.6
Price to Sales 0.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 2.7
Price to Free Cash Flow 2.7
Growth Rates
Sales Growth Rate 54.9%
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 NaN
Current Ratio NaN
LT Debt to Equity 30.6%
Total Debt to Equity 30.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital 5.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 7.2%
Return On Equity - 3 Yr. Avg. 8.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 9.4%
EBITDA Margin - 3 Yr. Avg. 10.8%
Operating Margin 8.1%
Oper. Margin - 3 Yr. Avg. 9.6%
Pre-Tax Margin 6.2%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 6.2%
Effective Tax Rate 5.9%
Eff/ Tax Rate - 3 Yr. Avg. 11.4%
Payout Ratio 53.3%

MFC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MFC stock intrinsic value calculation we used $53337 million for the last fiscal year's total revenue generated by Manulife Financial Corporation. The default revenue input number comes from 2016 income statement of Manulife Financial Corporation. 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 MFC 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 4.3%, whose default value for MFC is calculated based on our internal credit rating of Manulife Financial Corporation, 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 Manulife Financial Corporation.
    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 MFC stock the variable cost ratio is equal to 89.2%.

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 MFC 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 8.8% for Manulife Financial Corporation.

Corporate tax rate of 27% is the nominal tax rate for Manulife Financial Corporation. 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 MFC 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 MFC are equal to 7.4%.

Life of production assets of 14.1 years is the average useful life of capital assets used in Manulife Financial Corporation 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 MFC 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 - $42080 million for Manulife Financial Corporation - 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 1989.45 million for Manulife Financial Corporation 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 Manulife Financial Corporation at the current share price and the inputted number of shares is $46.9 billion.


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Stock chart of MFC Financial statements of MFC
Valuation of Stocks

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