Intrinsic value of Power Financial Corporation - PWF

Previous Close

$35.38

  Intrinsic Value

$115.27

stock screener

  Rating & Target

str. buy

+226%

Previous close

$35.38

 
Intrinsic value

$115.27

 
Up/down potential

+226%

 
Rating

str. buy

We calculate the intrinsic value of PWF 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 25.2

 

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, %
  34.54
  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
  50,104
  51,257
  52,574
  54,053
  55,692
  57,490
  59,448
  61,567
  63,850
  66,301
  68,922
  71,720
  74,698
  77,863
  81,222
  84,781
  88,549
  92,534
  96,744
  101,189
  105,879
  110,825
  116,039
  121,533
  127,319
  133,410
  139,822
  146,569
  153,668
  161,134
Variable operating expenses, $m
 
  43,723
  44,707
  45,832
  47,095
  48,495
  50,031
  51,703
  53,513
  55,463
  57,556
  58,868
  61,257
  63,801
  66,505
  69,373
  72,413
  75,632
  79,035
  82,631
  86,427
  90,433
  94,658
  99,112
  103,804
  108,745
  113,948
  119,425
  125,188
  131,251
  137,628
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
  44,645
  43,723
  44,707
  45,832
  47,095
  48,495
  50,031
  51,703
  53,513
  55,463
  57,556
  58,868
  61,257
  63,801
  66,505
  69,373
  72,413
  75,632
  79,035
  82,631
  86,427
  90,433
  94,658
  99,112
  103,804
  108,745
  113,948
  119,425
  125,188
  131,251
  137,628
Operating income, $m
  4,477
  6,382
  6,550
  6,742
  6,958
  7,197
  7,459
  7,745
  8,054
  8,387
  8,745
  10,054
  10,462
  10,897
  11,359
  11,849
  12,368
  12,917
  13,499
  14,113
  14,761
  15,446
  16,167
  16,928
  17,729
  18,573
  19,462
  20,397
  21,381
  22,417
  23,506
EBITDA, $m
  4,477
  8,031
  8,215
  8,427
  8,664
  8,926
  9,214
  9,528
  9,868
  10,234
  10,627
  11,047
  11,495
  11,973
  12,480
  13,018
  13,589
  14,193
  14,831
  15,506
  16,218
  16,970
  17,763
  18,599
  19,479
  20,407
  21,383
  22,411
  23,492
  24,630
  25,826
Interest expense (income), $m
  521
  554
  75
  386
  740
  1,139
  1,580
  2,064
  2,591
  3,162
  3,776
  4,436
  5,142
  5,895
  6,697
  7,549
  8,453
  9,412
  10,426
  11,499
  12,632
  13,829
  15,092
  16,423
  17,827
  19,306
  20,864
  22,504
  24,230
  26,047
  27,958
Earnings before tax, $m
  3,967
  5,827
  6,474
  6,356
  6,217
  6,058
  5,879
  5,681
  5,463
  5,226
  4,968
  5,618
  5,321
  5,002
  4,662
  4,300
  3,915
  3,506
  3,073
  2,614
  2,129
  1,617
  1,075
  504
  -98
  -733
  -1,402
  -2,107
  -2,849
  -3,630
  -4,452
Tax expense, $m
  581
  1,573
  1,748
  1,716
  1,679
  1,636
  1,587
  1,534
  1,475
  1,411
  1,341
  1,517
  1,437
  1,351
  1,259
  1,161
  1,057
  947
  830
  706
  575
  437
  290
  136
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  2,043
  4,254
  4,726
  4,640
  4,539
  4,423
  4,292
  4,147
  3,988
  3,815
  3,627
  4,101
  3,884
  3,651
  3,403
  3,139
  2,858
  2,559
  2,243
  1,908
  1,554
  1,180
  785
  368
  -98
  -733
  -1,402
  -2,107
  -2,849
  -3,630
  -4,452

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
  418,586
  428,243
  438,093
  449,352
  461,992
  475,998
  491,366
  508,100
  526,215
  545,730
  566,673
  589,079
  612,988
  638,443
  665,497
  694,204
  724,627
  756,830
  790,885
  826,868
  864,860
  904,949
  947,226
  991,789
  1,038,741
  1,088,192
  1,140,258
  1,195,061
  1,252,729
  1,313,399
  1,377,213
Adjusted assets (=assets-cash), $m
  418,586
  428,243
  438,093
  449,352
  461,992
  475,998
  491,366
  508,100
  526,215
  545,730
  566,673
  589,079
  612,988
  638,443
  665,497
  694,204
  724,627
  756,830
  790,885
  826,868
  864,860
  904,949
  947,226
  991,789
  1,038,741
  1,088,192
  1,140,258
  1,195,061
  1,252,729
  1,313,399
  1,377,213
Revenue / Adjusted assets
  0.000
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
  0.117
Average production assets, $m
  7,092
  7,215
  7,381
  7,571
  7,784
  8,020
  8,279
  8,560
  8,866
  9,194
  9,547
  9,925
  10,328
  10,756
  11,212
  11,696
  12,209
  12,751
  13,325
  13,931
  14,571
  15,247
  15,959
  16,710
  17,501
  18,334
  19,211
  20,134
  21,106
  22,128
  23,203
Working capital, $m
  0
  902
  923
  946
  973
  1,002
  1,035
  1,070
  1,108
  1,149
  1,193
  1,241
  1,291
  1,345
  1,402
  1,462
  1,526
  1,594
  1,666
  1,741
  1,821
  1,906
  1,995
  2,089
  2,188
  2,292
  2,401
  2,517
  2,638
  2,766
  2,900
Total debt, $m
  15,842
  2,156
  11,020
  21,153
  32,530
  45,135
  58,966
  74,027
  90,330
  107,894
  126,743
  146,909
  168,426
  191,336
  215,684
  241,521
  268,901
  297,884
  328,533
  360,918
  395,111
  431,191
  469,240
  509,347
  551,604
  596,110
  642,970
  692,292
  744,193
  798,796
  856,229
Total liabilities, $m
  399,105
  385,419
  394,283
  404,416
  415,793
  428,398
  442,229
  457,290
  473,593
  491,157
  510,006
  530,172
  551,689
  574,599
  598,947
  624,784
  652,164
  681,147
  711,796
  744,181
  778,374
  814,454
  852,503
  892,610
  934,867
  979,373
  1,026,233
  1,075,555
  1,127,456
  1,182,059
  1,239,492
Total equity, $m
  19,481
  42,824
  43,809
  44,935
  46,199
  47,600
  49,137
  50,810
  52,621
  54,573
  56,667
  58,908
  61,299
  63,844
  66,550
  69,420
  72,463
  75,683
  79,088
  82,687
  86,486
  90,495
  94,723
  99,179
  103,874
  108,819
  114,026
  119,506
  125,273
  131,340
  137,721
Total liabilities and equity, $m
  418,586
  428,243
  438,092
  449,351
  461,992
  475,998
  491,366
  508,100
  526,214
  545,730
  566,673
  589,080
  612,988
  638,443
  665,497
  694,204
  724,627
  756,830
  790,884
  826,868
  864,860
  904,949
  947,226
  991,789
  1,038,741
  1,088,192
  1,140,259
  1,195,061
  1,252,729
  1,313,399
  1,377,213
Debt-to-equity ratio
  0.813
  0.050
  0.250
  0.470
  0.700
  0.950
  1.200
  1.460
  1.720
  1.980
  2.240
  2.490
  2.750
  3.000
  3.240
  3.480
  3.710
  3.940
  4.150
  4.360
  4.570
  4.760
  4.950
  5.140
  5.310
  5.480
  5.640
  5.790
  5.940
  6.080
  6.220
Adjusted equity ratio
  0.047
  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
  2,043
  4,254
  4,726
  4,640
  4,539
  4,423
  4,292
  4,147
  3,988
  3,815
  3,627
  4,101
  3,884
  3,651
  3,403
  3,139
  2,858
  2,559
  2,243
  1,908
  1,554
  1,180
  785
  368
  -98
  -733
  -1,402
  -2,107
  -2,849
  -3,630
  -4,452
Depreciation, amort., depletion, $m
  0
  1,649
  1,665
  1,684
  1,706
  1,729
  1,755
  1,783
  1,814
  1,847
  1,882
  992
  1,033
  1,076
  1,121
  1,170
  1,221
  1,275
  1,332
  1,393
  1,457
  1,525
  1,596
  1,671
  1,750
  1,833
  1,921
  2,013
  2,111
  2,213
  2,320
Funds from operations, $m
  5,891
  5,903
  6,392
  6,325
  6,245
  6,152
  6,047
  5,931
  5,802
  5,661
  5,509
  5,094
  4,917
  4,727
  4,524
  4,308
  4,079
  3,834
  3,576
  3,301
  3,011
  2,705
  2,381
  2,039
  1,652
  1,100
  519
  -93
  -738
  -1,417
  -2,131
Change in working capital, $m
  -1,009
  18
  21
  24
  27
  29
  32
  35
  38
  41
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  115
  121
  128
  134
Cash from operations, $m
  6,900
  5,885
  6,371
  6,301
  6,218
  6,122
  6,015
  5,895
  5,764
  5,620
  5,465
  5,047
  4,866
  4,673
  4,467
  4,248
  4,014
  3,767
  3,504
  3,226
  2,931
  2,620
  2,292
  1,945
  1,553
  996
  409
  -209
  -860
  -1,545
  -2,266
Maintenance CAPEX, $m
  0
  -709
  -722
  -738
  -757
  -778
  -802
  -828
  -856
  -887
  -919
  -955
  -992
  -1,033
  -1,076
  -1,121
  -1,170
  -1,221
  -1,275
  -1,332
  -1,393
  -1,457
  -1,525
  -1,596
  -1,671
  -1,750
  -1,833
  -1,921
  -2,013
  -2,111
  -2,213
New CAPEX, $m
  0
  -124
  -166
  -190
  -213
  -236
  -259
  -282
  -305
  -329
  -353
  -377
  -403
  -429
  -456
  -484
  -513
  -543
  -574
  -606
  -640
  -675
  -712
  -751
  -791
  -833
  -877
  -923
  -972
  -1,022
  -1,075
Cash from investing activities, $m
  -5,479
  -833
  -888
  -928
  -970
  -1,014
  -1,061
  -1,110
  -1,161
  -1,216
  -1,272
  -1,332
  -1,395
  -1,462
  -1,532
  -1,605
  -1,683
  -1,764
  -1,849
  -1,938
  -2,033
  -2,132
  -2,237
  -2,347
  -2,462
  -2,583
  -2,710
  -2,844
  -2,985
  -3,133
  -3,288
Free cash flow, $m
  1,421
  5,052
  5,484
  5,373
  5,248
  5,108
  4,954
  4,786
  4,603
  4,405
  4,193
  3,714
  3,471
  3,212
  2,936
  2,643
  2,332
  2,003
  1,655
  1,287
  898
  488
  55
  -401
  -909
  -1,587
  -2,301
  -3,053
  -3,845
  -4,678
  -5,554
Issuance/(repayment) of debt, $m
  1,314
  -13,686
  8,865
  10,133
  11,376
  12,606
  13,831
  15,061
  16,303
  17,564
  18,849
  20,165
  21,517
  22,910
  24,348
  25,837
  27,380
  28,983
  30,649
  32,385
  34,193
  36,080
  38,049
  40,107
  42,257
  44,506
  46,859
  49,322
  51,901
  54,603
  57,433
Issuance/(repurchase) of shares, $m
  -388
  19,089
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  185
  661
  1,162
  1,690
  2,245
  2,829
  3,443
  4,088
  4,793
  5,678
  6,609
  7,587
  8,616
  9,697
  10,833
Cash from financing (excl. dividends), $m  
  216
  5,403
  8,865
  10,133
  11,376
  12,606
  13,831
  15,061
  16,303
  17,564
  18,849
  20,165
  21,517
  22,910
  24,348
  25,837
  27,565
  29,644
  31,811
  34,075
  36,438
  38,909
  41,492
  44,195
  47,050
  50,184
  53,468
  56,909
  60,517
  64,300
  68,266
Total cash flow (excl. dividends), $m
  1,439
  10,456
  14,348
  15,506
  16,624
  17,714
  18,785
  19,846
  20,905
  21,969
  23,042
  23,880
  24,989
  26,122
  27,284
  28,480
  29,897
  31,647
  33,467
  35,362
  37,336
  39,396
  41,547
  43,793
  46,142
  48,597
  51,167
  53,856
  56,672
  59,622
  62,712
Retained Cash Flow (-), $m
  69
  -23,343
  -985
  -1,126
  -1,264
  -1,401
  -1,537
  -1,673
  -1,811
  -1,952
  -2,094
  -2,241
  -2,391
  -2,546
  -2,705
  -2,871
  -3,042
  -3,220
  -3,405
  -3,598
  -3,799
  -4,009
  -4,228
  -4,456
  -4,793
  -5,678
  -6,609
  -7,587
  -8,616
  -9,697
  -10,833
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
 
  -12,888
  13,363
  14,380
  15,360
  16,313
  17,248
  18,173
  19,094
  20,017
  20,947
  21,639
  22,598
  23,576
  24,579
  25,609
  26,855
  28,427
  30,061
  31,763
  33,537
  35,387
  37,319
  39,337
  41,348
  42,919
  44,558
  46,269
  48,057
  49,925
  51,879
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  -12,204
  11,920
  12,015
  11,947
  11,737
  11,399
  10,951
  10,408
  9,788
  9,106
  8,284
  7,540
  6,784
  6,029
  5,289
  4,611
  4,002
  3,420
  2,875
  2,376
  1,929
  1,537
  1,201
  917
  676
  488
  344
  236
  158
  103
Current shareholders' claim on cash, %
  100
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.9
  56.8
  56.4
  55.8
  54.9
  53.7
  52.4
  50.9
  49.3
  47.5
  45.6
  43.5
  41.4
  39.2
  37.0
  34.8

Power Financial Corp is a Canada-based diversified management and holding company. It has operations in the financial services sector in Canada, the United States and Europe, through its controlling interests in Great- West Lifeco Inc (Lifeco) and IGM Financial Inc (IGM). It operates through three segments: Lifeco, IGM and Pargesa Holding SA (Pargesa). Lifeco offers life insurance, health insurance, retirement and investment management services, and is engaged in the asset management and reinsurance business primarily in Canada, the United States and Europe. IGM is a financial services company operating in Canada primarily within the advice segment of the financial services market. Pargesa is a holding company with diversified interests in Europe-based companies active in various sectors, such as minerals-based specialty solutions for industry; cement, aggregates and concrete; oil, gas and alternative energies, and electricity, natural gas, and energy and environmental services.

FINANCIAL RATIOS  of  Power Financial Corporation (PWF)

Valuation Ratios
P/E Ratio 12.4
Price to Sales 0.5
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 3.7
Price to Free Cash Flow 3.7
Growth Rates
Sales Growth Rate 34.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 76.8%
Total Debt to Equity 81.3%
Interest Coverage 9
Management Effectiveness
Return On Assets 0.6%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital 5.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.9%
Return On Equity 10.5%
Return On Equity - 3 Yr. Avg. 12.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 9.1%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 9.1%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin 8.1%
Pre-Tax Margin - 3 Yr. Avg. 10.2%
Net Profit Margin 4.2%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 14.6%
Eff/ Tax Rate - 3 Yr. Avg. 16.3%
Payout Ratio 60.3%

PWF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PWF stock intrinsic value calculation we used $49122 million for the last fiscal year's total revenue generated by Power Financial Corporation. The default revenue input number comes from 2016 income statement of Power 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 PWF 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 5.6%, whose default value for PWF is calculated based on our internal credit rating of Power 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 Power 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 PWF stock the variable cost ratio is equal to 87.3%.

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 PWF 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 3.5% for Power Financial Corporation.

Corporate tax rate of 27% is the nominal tax rate for Power 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 PWF 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 PWF are equal to 14.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Power 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 PWF is equal to 1.8%. 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 - $19481 million for Power 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 713.582 million for Power 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 Power Financial Corporation at the current share price and the inputted number of shares is $25.2 billion.

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Financial statements of PWF
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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