Intrinsic value of ONEX Corporation Subordinate Voting Shar - ONEX

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$98.49

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$98.49

 
Intrinsic value

$220.81

 
Up/down potential

+124%

 
Rating

str. buy

 
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 ONEX 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 10.2

 

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, %
  14.44
  20.80
  19.22
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
Revenue, $m
  30,430
  36,759
  43,825
  51,625
  60,152
  69,395
  79,339
  89,968
  101,266
  113,216
  125,807
  139,029
  152,873
  167,339
  182,426
  198,141
  214,494
  231,499
  249,174
  267,542
  286,629
  306,466
  327,088
  348,532
  370,839
  394,054
  418,227
  443,408
  469,652
  497,018
  525,568
Variable operating expenses, $m
 
  32,642
  38,677
  45,341
  52,625
  60,521
  69,016
  78,096
  87,747
  97,956
  108,713
  118,768
  130,595
  142,952
  155,841
  169,266
  183,235
  197,762
  212,861
  228,552
  244,858
  261,804
  279,420
  297,739
  316,795
  336,628
  357,277
  378,789
  401,208
  424,586
  448,975
Fixed operating expenses, $m
 
  4,029
  4,130
  4,233
  4,339
  4,448
  4,559
  4,673
  4,790
  4,909
  5,032
  5,158
  5,287
  5,419
  5,554
  5,693
  5,836
  5,981
  6,131
  6,284
  6,441
  6,602
  6,767
  6,937
  7,110
  7,288
  7,470
  7,657
  7,848
  8,044
  8,246
Total operating expenses, $m
  31,063
  36,671
  42,807
  49,574
  56,964
  64,969
  73,575
  82,769
  92,537
  102,865
  113,745
  123,926
  135,882
  148,371
  161,395
  174,959
  189,071
  203,743
  218,992
  234,836
  251,299
  268,406
  286,187
  304,676
  323,905
  343,916
  364,747
  386,446
  409,056
  432,630
  457,221
Operating income, $m
  -632
  88
  1,017
  2,051
  3,188
  4,426
  5,764
  7,199
  8,729
  10,351
  12,063
  15,103
  16,992
  18,968
  21,031
  23,182
  25,423
  27,756
  30,182
  32,705
  35,330
  38,060
  40,900
  43,856
  46,933
  50,139
  53,479
  56,962
  60,595
  64,387
  68,347
EBITDA, $m
  1,067
  2,518
  3,675
  4,961
  6,374
  7,912
  9,572
  11,351
  13,247
  15,255
  17,375
  19,604
  21,941
  24,385
  26,937
  29,597
  32,368
  35,250
  38,249
  41,367
  44,609
  47,982
  51,489
  55,140
  58,939
  62,896
  67,019
  71,318
  75,800
  80,478
  85,362
Interest expense (income), $m
  1,302
  1,429
  1,487
  2,023
  2,614
  3,260
  3,961
  4,715
  5,521
  6,377
  7,283
  8,238
  9,240
  10,289
  11,386
  12,530
  13,721
  14,961
  16,250
  17,590
  18,982
  20,429
  21,933
  23,496
  25,122
  26,813
  28,572
  30,405
  32,314
  34,303
  36,378
Earnings before tax, $m
  -632
  -1,341
  -470
  28
  573
  1,166
  1,803
  2,484
  3,208
  3,973
  4,780
  6,866
  7,752
  8,678
  9,645
  10,653
  11,702
  12,795
  13,932
  15,116
  16,348
  17,631
  18,967
  20,360
  21,812
  23,326
  24,907
  26,557
  28,282
  30,084
  31,969
Tax expense, $m
  62
  0
  0
  8
  155
  315
  487
  671
  866
  1,073
  1,291
  1,854
  2,093
  2,343
  2,604
  2,876
  3,160
  3,455
  3,762
  4,081
  4,414
  4,760
  5,121
  5,497
  5,889
  6,298
  6,725
  7,170
  7,636
  8,123
  8,632
Net income, $m
  -176
  -1,341
  -470
  20
  419
  851
  1,316
  1,813
  2,342
  2,901
  3,489
  5,012
  5,659
  6,335
  7,041
  7,777
  8,543
  9,340
  10,170
  11,034
  11,934
  12,871
  13,846
  14,863
  15,923
  17,028
  18,182
  19,387
  20,646
  21,961
  23,337

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,411
  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
  57,979
  65,877
  78,539
  92,517
  107,799
  124,364
  142,185
  161,233
  181,479
  202,897
  225,461
  249,155
  273,967
  299,890
  326,929
  355,092
  384,398
  414,873
  446,548
  479,465
  513,672
  549,223
  586,179
  624,609
  664,586
  706,191
  749,511
  794,637
  841,670
  890,713
  941,878
Adjusted assets (=assets-cash), $m
  54,568
  65,877
  78,539
  92,517
  107,799
  124,364
  142,185
  161,233
  181,479
  202,897
  225,461
  249,155
  273,967
  299,890
  326,929
  355,092
  384,398
  414,873
  446,548
  479,465
  513,672
  549,223
  586,179
  624,609
  664,586
  706,191
  749,511
  794,637
  841,670
  890,713
  941,878
Revenue / Adjusted assets
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
Average production assets, $m
  15,777
  19,041
  22,701
  26,741
  31,159
  35,947
  41,098
  46,604
  52,456
  58,646
  65,168
  72,017
  79,188
  86,682
  94,497
  102,637
  111,108
  119,916
  129,072
  138,587
  148,474
  158,750
  169,432
  180,539
  192,095
  204,120
  216,642
  229,685
  243,280
  257,455
  272,244
Working capital, $m
  4,917
  2,536
  3,024
  3,562
  4,150
  4,788
  5,474
  6,208
  6,987
  7,812
  8,681
  9,593
  10,548
  11,546
  12,587
  13,672
  14,800
  15,973
  17,193
  18,460
  19,777
  21,146
  22,569
  24,049
  25,588
  27,190
  28,858
  30,595
  32,406
  34,294
  36,264
Total debt, $m
  30,994
  31,642
  43,038
  55,618
  69,372
  84,281
  100,320
  117,463
  135,685
  154,960
  175,268
  196,593
  218,923
  242,254
  266,589
  291,936
  318,311
  345,738
  374,246
  403,872
  434,658
  466,654
  499,914
  534,501
  570,480
  607,925
  646,912
  687,527
  729,856
  773,995
  820,043
Total liabilities, $m
  58,641
  59,289
  70,685
  83,265
  97,019
  111,928
  127,967
  145,110
  163,332
  182,607
  202,915
  224,240
  246,570
  269,901
  294,236
  319,583
  345,958
  373,385
  401,893
  431,519
  462,305
  494,301
  527,561
  562,148
  598,127
  635,572
  674,559
  715,174
  757,503
  801,642
  847,690
Total equity, $m
  -662
  6,588
  7,854
  9,252
  10,780
  12,436
  14,219
  16,123
  18,148
  20,290
  22,546
  24,916
  27,397
  29,989
  32,693
  35,509
  38,440
  41,487
  44,655
  47,947
  51,367
  54,922
  58,618
  62,461
  66,459
  70,619
  74,951
  79,464
  84,167
  89,071
  94,188
Total liabilities and equity, $m
  57,979
  65,877
  78,539
  92,517
  107,799
  124,364
  142,186
  161,233
  181,480
  202,897
  225,461
  249,156
  273,967
  299,890
  326,929
  355,092
  384,398
  414,872
  446,548
  479,466
  513,672
  549,223
  586,179
  624,609
  664,586
  706,191
  749,510
  794,638
  841,670
  890,713
  941,878
Debt-to-equity ratio
  -46.819
  4.800
  5.480
  6.010
  6.440
  6.780
  7.060
  7.290
  7.480
  7.640
  7.770
  7.890
  7.990
  8.080
  8.150
  8.220
  8.280
  8.330
  8.380
  8.420
  8.460
  8.500
  8.530
  8.560
  8.580
  8.610
  8.630
  8.650
  8.670
  8.690
  8.710
Adjusted equity ratio
  -0.075
  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
  -176
  -1,341
  -470
  20
  419
  851
  1,316
  1,813
  2,342
  2,901
  3,489
  5,012
  5,659
  6,335
  7,041
  7,777
  8,543
  9,340
  10,170
  11,034
  11,934
  12,871
  13,846
  14,863
  15,923
  17,028
  18,182
  19,387
  20,646
  21,961
  23,337
Depreciation, amort., depletion, $m
  1,699
  2,430
  2,658
  2,911
  3,187
  3,486
  3,808
  4,152
  4,518
  4,905
  5,313
  4,501
  4,949
  5,418
  5,906
  6,415
  6,944
  7,495
  8,067
  8,662
  9,280
  9,922
  10,589
  11,284
  12,006
  12,758
  13,540
  14,355
  15,205
  16,091
  17,015
Funds from operations, $m
  2,022
  1,089
  2,188
  2,931
  3,606
  4,337
  5,124
  5,966
  6,860
  7,805
  8,802
  9,513
  10,608
  11,753
  12,947
  14,191
  15,487
  16,835
  18,237
  19,696
  21,214
  22,792
  24,436
  26,146
  27,928
  29,786
  31,722
  33,742
  35,851
  38,052
  40,353
Change in working capital, $m
  -561
  437
  487
  538
  588
  638
  686
  733
  780
  825
  869
  912
  955
  998
  1,041
  1,084
  1,128
  1,173
  1,220
  1,267
  1,317
  1,369
  1,423
  1,480
  1,539
  1,602
  1,668
  1,737
  1,811
  1,888
  1,970
Cash from operations, $m
  2,583
  3,197
  1,701
  2,393
  3,017
  3,699
  4,438
  5,232
  6,080
  6,981
  7,933
  8,601
  9,653
  10,755
  11,906
  13,107
  14,359
  15,662
  17,018
  18,429
  19,897
  21,424
  23,013
  24,667
  26,389
  28,184
  30,054
  32,005
  34,040
  36,164
  38,383
Maintenance CAPEX, $m
  0
  -986
  -1,190
  -1,419
  -1,671
  -1,947
  -2,247
  -2,569
  -2,913
  -3,278
  -3,665
  -4,073
  -4,501
  -4,949
  -5,418
  -5,906
  -6,415
  -6,944
  -7,495
  -8,067
  -8,662
  -9,280
  -9,922
  -10,589
  -11,284
  -12,006
  -12,758
  -13,540
  -14,355
  -15,205
  -16,091
New CAPEX, $m
  -769
  -3,264
  -3,660
  -4,040
  -4,417
  -4,788
  -5,151
  -5,506
  -5,852
  -6,190
  -6,522
  -6,849
  -7,172
  -7,493
  -7,815
  -8,140
  -8,471
  -8,808
  -9,156
  -9,515
  -9,887
  -10,276
  -10,682
  -11,108
  -11,555
  -12,026
  -12,521
  -13,044
  -13,595
  -14,176
  -14,789
Cash from investing activities, $m
  -3,784
  -4,250
  -4,850
  -5,459
  -6,088
  -6,735
  -7,398
  -8,075
  -8,765
  -9,468
  -10,187
  -10,922
  -11,673
  -12,442
  -13,233
  -14,046
  -14,886
  -15,752
  -16,651
  -17,582
  -18,549
  -19,556
  -20,604
  -21,697
  -22,839
  -24,032
  -25,279
  -26,584
  -27,950
  -29,381
  -30,880
Free cash flow, $m
  -1,201
  -1,053
  -3,149
  -3,066
  -3,071
  -3,036
  -2,960
  -2,842
  -2,685
  -2,488
  -2,255
  -2,321
  -2,020
  -1,688
  -1,327
  -940
  -527
  -91
  367
  847
  1,348
  1,868
  2,409
  2,969
  3,550
  4,152
  4,775
  5,421
  6,090
  6,784
  7,503
Issuance/(repayment) of debt, $m
  1,706
  1,241
  11,395
  12,580
  13,754
  14,908
  16,039
  17,143
  18,222
  19,275
  20,308
  21,325
  22,330
  23,331
  24,335
  25,347
  26,375
  27,427
  28,508
  29,626
  30,786
  31,996
  33,261
  34,587
  35,979
  37,445
  38,988
  40,614
  42,329
  44,139
  46,048
Issuance/(repurchase) of shares, $m
  -315
  7,061
  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  
  1,175
  8,302
  11,395
  12,580
  13,754
  14,908
  16,039
  17,143
  18,222
  19,275
  20,308
  21,325
  22,330
  23,331
  24,335
  25,347
  26,375
  27,427
  28,508
  29,626
  30,786
  31,996
  33,261
  34,587
  35,979
  37,445
  38,988
  40,614
  42,329
  44,139
  46,048
Total cash flow (excl. dividends), $m
  -47
  188
  8,246
  9,514
  10,683
  11,872
  13,079
  14,301
  15,537
  16,787
  18,053
  19,004
  20,311
  21,644
  23,008
  24,408
  25,848
  27,336
  28,875
  30,473
  32,134
  33,864
  35,669
  37,556
  39,530
  41,597
  43,763
  46,035
  48,419
  50,922
  53,551
Retained Cash Flow (-), $m
  442
  -10,068
  -1,266
  -1,398
  -1,528
  -1,656
  -1,782
  -1,905
  -2,025
  -2,142
  -2,256
  -2,369
  -2,481
  -2,592
  -2,704
  -2,816
  -2,931
  -3,047
  -3,168
  -3,292
  -3,421
  -3,555
  -3,696
  -3,843
  -3,998
  -4,161
  -4,332
  -4,513
  -4,703
  -4,904
  -5,116
Prev. year cash balance distribution, $m
 
  2,818
  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
  6,980
  8,116
  9,154
  10,216
  11,297
  12,396
  13,512
  14,646
  15,797
  16,634
  17,829
  19,051
  20,304
  21,591
  22,918
  24,288
  25,708
  27,181
  28,713
  30,309
  31,974
  33,713
  35,532
  37,436
  39,431
  41,522
  43,716
  46,018
  48,435
Discount rate, %
 
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.71
  24.89
  26.14
  27.44
  28.81
  30.25
  31.77
  33.36
  35.02
  36.77
  38.61
  40.54
  42.57
  44.70
  46.93
  49.28
  51.75
  54.33
PV of cash for distribution, $m
 
  0
  5,384
  5,399
  5,183
  4,854
  4,439
  3,964
  3,458
  2,947
  2,452
  1,953
  1,550
  1,199
  904
  663
  473
  328
  221
  144
  91
  55
  33
  18
  10
  5
  3
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Onex Corporation is a private equity firm specializing in acquisitions and platform acquisitions. The firm makes investments in buyouts, large- middle market, large-cap, mid-cap, and small-cap market and distressed companies. It also invests in recapitalization, growth capital, corporate carve-outs of subsidiaries and mission-critical supply divisions from multinational corporations, operational restructurings of undervalued businesses, and builds up. The firm seeks to invest in technology, electronics manufacturing services, industrial, aerospace, healthcare, retail, restaurants, industrials products, customer care services, metal services, building products, entertainment, gaming, cabinetry products, commercial vehicles, commercial and investment banking, financial services, commercial and multi-unit residential real estate. It invests in global businesses headquartered in North America, including United States and Canada, or Europe. The firm seeks to invest between $125 million and $1 billion in companies that have minimum revenues of $300 million. It does not consider size if the company is in an industry in which the firm already has presence. The firm seeks to make direct as well as co-investments through managed private equity, real estate and credit funds. It seeks to acquire a control position in its portfolio companies. Onex Corporation was founded in 1984 and is based in Toronto, Canada with additional offices in New York, New York;Englewood Cliffs, New Jersey; and London, United Kingdom.

FINANCIAL RATIOS  of  ONEX Corporation Subordinate Voting Shar (ONEX)

Valuation Ratios
P/E Ratio -57.6
Price to Sales 0.3
Price to Book -15.3
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow 5.6
Growth Rates
Sales Growth Rate 14.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.1%
Cap. Spend. - 3 Yr. Gr. Rate 0.1%
Financial Strength
Quick Ratio 6
Current Ratio 0.1
LT Debt to Equity -4592.3%
Total Debt to Equity -4681.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital -0.6%
Ret/ On T. Cap. - 3 Yr. Avg. -1.7%
Return On Equity 39.9%
Return On Equity - 3 Yr. Avg. -50%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 30%
Gross Margin - 3 Yr. Avg. 29.5%
EBITDA Margin 7.8%
EBITDA Margin - 3 Yr. Avg. 5.7%
Operating Margin -2.1%
Oper. Margin - 3 Yr. Avg. -3.4%
Pre-Tax Margin -2.1%
Pre-Tax Margin - 3 Yr. Avg. -3.4%
Net Profit Margin -0.6%
Net Profit Margin - 3 Yr. Avg. -1.4%
Effective Tax Rate -9.8%
Eff/ Tax Rate - 3 Yr. Avg. -11.3%
Payout Ratio -15.3%

ONEX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ONEX stock intrinsic value calculation we used $30430 million for the last fiscal year's total revenue generated by ONEX Corporation Subordinate Voting Shar. The default revenue input number comes from 2016 income statement of ONEX Corporation Subordinate Voting Shar. 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 ONEX stock valuation model: a) initial revenue growth rate of 20.8% 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 13.2%, whose default value for ONEX is calculated based on our internal credit rating of ONEX Corporation Subordinate Voting Shar, 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 ONEX Corporation Subordinate Voting Shar.
    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 ONEX stock the variable cost ratio is equal to 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3931 million in the base year in the intrinsic value calculation for ONEX 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 4.7% for ONEX Corporation Subordinate Voting Shar.

Corporate tax rate of 27% is the nominal tax rate for ONEX Corporation Subordinate Voting Shar. 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 ONEX 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 ONEX are equal to 51.8%.

Life of production assets of 16 years is the average useful life of capital assets used in ONEX Corporation Subordinate Voting Shar 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 ONEX is equal to 6.9%. 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 - $-662 million for ONEX Corporation Subordinate Voting Shar - 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 103.556 million for ONEX Corporation Subordinate Voting Shar 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 ONEX Corporation Subordinate Voting Shar at the current share price and the inputted number of shares is $10.2 billion.


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Stock chart of ONEX Financial statements of ONEX
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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