Intrinsic value of ShawCor Ltd. - SCL

Previous Close

$24.56

  Intrinsic Value

$712.44

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

0%

Previous close

$24.56

 
Intrinsic value

$712.44

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of SCL 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 1.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -33.24
  50.60
  46.04
  41.94
  38.24
  34.92
  31.93
  29.23
  26.81
  24.63
  22.67
  20.90
  19.31
  17.88
  16.59
  15.43
  14.39
  13.45
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.95
  7.65
  7.39
  7.15
Revenue, $m
  1,209
  1,821
  2,659
  3,774
  5,217
  7,039
  9,287
  12,001
  15,219
  18,967
  23,267
  28,129
  33,561
  39,561
  46,125
  53,243
  60,904
  69,095
  77,805
  87,020
  96,731
  106,931
  117,613
  128,775
  140,418
  152,546
  165,167
  178,292
  191,934
  206,111
  220,844
Variable operating expenses, $m
 
  880
  1,269
  1,786
  2,456
  3,301
  4,344
  5,603
  7,096
  8,835
  10,830
  13,051
  15,571
  18,355
  21,401
  24,703
  28,257
  32,058
  36,099
  40,375
  44,880
  49,612
  54,568
  59,747
  65,149
  70,776
  76,632
  82,722
  89,051
  95,629
  102,464
Fixed operating expenses, $m
 
  807
  827
  848
  869
  890
  913
  935
  959
  983
  1,007
  1,033
  1,058
  1,085
  1,112
  1,140
  1,168
  1,198
  1,227
  1,258
  1,290
  1,322
  1,355
  1,389
  1,423
  1,459
  1,496
  1,533
  1,571
  1,611
  1,651
Total operating expenses, $m
  1,364
  1,687
  2,096
  2,634
  3,325
  4,191
  5,257
  6,538
  8,055
  9,818
  11,837
  14,084
  16,629
  19,440
  22,513
  25,843
  29,425
  33,256
  37,326
  41,633
  46,170
  50,934
  55,923
  61,136
  66,572
  72,235
  78,128
  84,255
  90,622
  97,240
  104,115
Operating income, $m
  -155
  134
  563
  1,140
  1,893
  2,848
  4,030
  5,463
  7,164
  9,149
  11,429
  14,046
  16,931
  20,121
  23,612
  27,400
  31,478
  35,840
  40,478
  45,387
  50,562
  55,996
  61,689
  67,639
  73,845
  80,311
  87,039
  94,037
  101,312
  108,872
  116,729
EBITDA, $m
  -75
  245
  710
  1,333
  2,146
  3,177
  4,453
  5,999
  7,835
  9,976
  12,436
  15,220
  18,333
  21,774
  25,539
  29,624
  34,022
  38,726
  43,728
  49,022
  54,602
  60,462
  66,601
  73,017
  79,710
  86,682
  93,938
  101,484
  109,328
  117,480
  125,952
Interest expense (income), $m
  18
  13
  30
  53
  85
  125
  176
  239
  316
  406
  511
  632
  769
  921
  1,090
  1,274
  1,474
  1,689
  1,919
  2,164
  2,422
  2,695
  2,981
  3,281
  3,595
  3,922
  4,262
  4,617
  4,985
  5,368
  5,767
Earnings before tax, $m
  -174
  122
  534
  1,087
  1,808
  2,723
  3,854
  5,223
  6,848
  8,743
  10,918
  13,414
  16,163
  19,200
  22,523
  26,126
  30,004
  34,151
  38,559
  43,224
  48,139
  53,301
  58,708
  64,357
  70,250
  76,389
  82,777
  89,420
  96,326
  103,503
  110,962
Tax expense, $m
  7
  33
  144
  294
  488
  735
  1,041
  1,410
  1,849
  2,361
  2,948
  3,622
  4,364
  5,184
  6,081
  7,054
  8,101
  9,221
  10,411
  11,670
  12,998
  14,391
  15,851
  17,376
  18,968
  20,625
  22,350
  24,144
  26,008
  27,946
  29,960
Net income, $m
  -181
  89
  389
  794
  1,320
  1,987
  2,813
  3,813
  4,999
  6,383
  7,970
  9,792
  11,799
  14,016
  16,442
  19,072
  21,903
  24,930
  28,148
  31,553
  35,142
  38,910
  42,857
  46,981
  51,283
  55,764
  60,427
  65,277
  70,318
  75,557
  81,002

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  197
  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
  1,778
  2,380
  3,476
  4,933
  6,820
  9,202
  12,139
  15,688
  19,894
  24,794
  30,414
  36,770
  43,871
  51,714
  60,294
  69,599
  79,613
  90,321
  101,705
  113,752
  126,446
  139,779
  153,742
  168,333
  183,553
  199,407
  215,905
  233,061
  250,894
  269,426
  288,685
Adjusted assets (=assets-cash), $m
  1,581
  2,380
  3,476
  4,933
  6,820
  9,202
  12,139
  15,688
  19,894
  24,794
  30,414
  36,770
  43,871
  51,714
  60,294
  69,599
  79,613
  90,321
  101,705
  113,752
  126,446
  139,779
  153,742
  168,333
  183,553
  199,407
  215,905
  233,061
  250,894
  269,426
  288,685
Revenue / Adjusted assets
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
  0.765
Average production assets, $m
  687
  1,034
  1,510
  2,144
  2,964
  3,998
  5,275
  6,817
  8,644
  10,774
  13,215
  15,977
  19,063
  22,471
  26,199
  30,242
  34,593
  39,246
  44,193
  49,427
  54,943
  60,737
  66,804
  73,144
  79,757
  86,646
  93,815
  101,270
  109,019
  117,071
  125,439
Working capital, $m
  280
  129
  189
  268
  370
  500
  659
  852
  1,081
  1,347
  1,652
  1,997
  2,383
  2,809
  3,275
  3,780
  4,324
  4,906
  5,524
  6,178
  6,868
  7,592
  8,350
  9,143
  9,970
  10,831
  11,727
  12,659
  13,627
  14,634
  15,680
Total debt, $m
  278
  648
  1,160
  1,841
  2,722
  3,834
  5,206
  6,863
  8,828
  11,116
  13,740
  16,709
  20,025
  23,688
  27,694
  32,040
  36,716
  41,717
  47,033
  52,659
  58,587
  64,814
  71,334
  78,148
  85,256
  92,660
  100,365
  108,377
  116,705
  125,359
  134,353
Total liabilities, $m
  741
  1,111
  1,623
  2,304
  3,185
  4,297
  5,669
  7,326
  9,291
  11,579
  14,203
  17,172
  20,488
  24,151
  28,157
  32,503
  37,179
  42,180
  47,496
  53,122
  59,050
  65,277
  71,797
  78,611
  85,719
  93,123
  100,828
  108,840
  117,168
  125,822
  134,816
Total equity, $m
  1,037
  1,269
  1,853
  2,630
  3,635
  4,904
  6,470
  8,362
  10,604
  13,215
  16,211
  19,599
  23,383
  27,564
  32,137
  37,096
  42,434
  48,141
  54,209
  60,630
  67,396
  74,502
  81,944
  89,721
  97,834
  106,284
  115,077
  124,222
  133,727
  143,604
  153,869
Total liabilities and equity, $m
  1,778
  2,380
  3,476
  4,934
  6,820
  9,201
  12,139
  15,688
  19,895
  24,794
  30,414
  36,771
  43,871
  51,715
  60,294
  69,599
  79,613
  90,321
  101,705
  113,752
  126,446
  139,779
  153,741
  168,332
  183,553
  199,407
  215,905
  233,062
  250,895
  269,426
  288,685
Debt-to-equity ratio
  0.268
  0.510
  0.630
  0.700
  0.750
  0.780
  0.800
  0.820
  0.830
  0.840
  0.850
  0.850
  0.860
  0.860
  0.860
  0.860
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
Adjusted equity ratio
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533
  0.533

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -181
  89
  389
  794
  1,320
  1,987
  2,813
  3,813
  4,999
  6,383
  7,970
  9,792
  11,799
  14,016
  16,442
  19,072
  21,903
  24,930
  28,148
  31,553
  35,142
  38,910
  42,857
  46,981
  51,283
  55,764
  60,427
  65,277
  70,318
  75,557
  81,002
Depreciation, amort., depletion, $m
  80
  111
  146
  193
  253
  329
  423
  536
  671
  827
  1,007
  1,175
  1,402
  1,652
  1,926
  2,224
  2,544
  2,886
  3,249
  3,634
  4,040
  4,466
  4,912
  5,378
  5,865
  6,371
  6,898
  7,446
  8,016
  8,608
  9,223
Funds from operations, $m
  227
  200
  536
  986
  1,573
  2,317
  3,236
  4,349
  5,670
  7,210
  8,977
  10,967
  13,201
  15,668
  18,368
  21,296
  24,447
  27,816
  31,398
  35,188
  39,182
  43,376
  47,769
  52,359
  57,147
  62,135
  67,325
  72,723
  78,334
  84,166
  90,226
Change in working capital, $m
  95
  43
  60
  79
  102
  129
  160
  193
  228
  266
  305
  345
  386
  426
  466
  505
  544
  582
  618
  654
  690
  724
  758
  793
  827
  861
  896
  932
  969
  1,007
  1,046
Cash from operations, $m
  132
  156
  476
  907
  1,471
  2,187
  3,077
  4,156
  5,441
  6,944
  8,672
  10,621
  12,815
  15,242
  17,902
  20,790
  23,903
  27,234
  30,779
  34,534
  38,492
  42,652
  47,010
  51,566
  56,320
  61,274
  66,429
  71,791
  77,366
  83,159
  89,180
Maintenance CAPEX, $m
  0
  -50
  -76
  -111
  -158
  -218
  -294
  -388
  -501
  -636
  -792
  -972
  -1,175
  -1,402
  -1,652
  -1,926
  -2,224
  -2,544
  -2,886
  -3,249
  -3,634
  -4,040
  -4,466
  -4,912
  -5,378
  -5,865
  -6,371
  -6,898
  -7,446
  -8,016
  -8,608
New CAPEX, $m
  -89
  -348
  -476
  -633
  -820
  -1,035
  -1,277
  -1,542
  -1,828
  -2,129
  -2,442
  -2,762
  -3,085
  -3,408
  -3,728
  -4,043
  -4,351
  -4,653
  -4,947
  -5,234
  -5,516
  -5,793
  -6,067
  -6,340
  -6,613
  -6,889
  -7,169
  -7,455
  -7,749
  -8,053
  -8,368
Cash from investing activities, $m
  -111
  -398
  -552
  -744
  -978
  -1,253
  -1,571
  -1,930
  -2,329
  -2,765
  -3,234
  -3,734
  -4,260
  -4,810
  -5,380
  -5,969
  -6,575
  -7,197
  -7,833
  -8,483
  -9,150
  -9,833
  -10,533
  -11,252
  -11,991
  -12,754
  -13,540
  -14,353
  -15,195
  -16,069
  -16,976
Free cash flow, $m
  21
  -242
  -76
  163
  493
  934
  1,506
  2,227
  3,113
  4,179
  5,437
  6,888
  8,555
  10,433
  12,522
  14,821
  17,328
  20,038
  22,947
  26,050
  29,342
  32,819
  36,477
  40,314
  44,329
  48,520
  52,890
  57,438
  62,171
  67,090
  72,204
Issuance/(repayment) of debt, $m
  -201
  373
  512
  681
  881
  1,112
  1,372
  1,657
  1,964
  2,288
  2,625
  2,968
  3,316
  3,663
  4,007
  4,345
  4,677
  5,001
  5,317
  5,626
  5,928
  6,226
  6,521
  6,814
  7,108
  7,404
  7,705
  8,012
  8,328
  8,655
  8,994
Issuance/(repurchase) of shares, $m
  168
  337
  195
  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  
  -34
  710
  707
  681
  881
  1,112
  1,372
  1,657
  1,964
  2,288
  2,625
  2,968
  3,316
  3,663
  4,007
  4,345
  4,677
  5,001
  5,317
  5,626
  5,928
  6,226
  6,521
  6,814
  7,108
  7,404
  7,705
  8,012
  8,328
  8,655
  8,994
Total cash flow (excl. dividends), $m
  -27
  469
  630
  843
  1,374
  2,047
  2,878
  3,884
  5,077
  6,467
  8,062
  9,856
  11,871
  14,095
  16,528
  19,166
  22,004
  25,038
  28,264
  31,675
  35,270
  39,045
  42,998
  47,128
  51,437
  55,924
  60,594
  65,450
  70,499
  75,745
  81,197
Retained Cash Flow (-), $m
  81
  -426
  -584
  -777
  -1,006
  -1,269
  -1,566
  -1,892
  -2,242
  -2,612
  -2,995
  -3,388
  -3,784
  -4,181
  -4,573
  -4,959
  -5,338
  -5,707
  -6,068
  -6,421
  -6,766
  -7,106
  -7,442
  -7,777
  -8,112
  -8,450
  -8,794
  -9,144
  -9,505
  -9,878
  -10,265
Prev. year cash balance distribution, $m
 
  194
  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
 
  237
  46
  66
  369
  777
  1,312
  1,992
  2,835
  3,856
  5,067
  6,468
  8,086
  9,915
  11,955
  14,207
  16,667
  19,331
  22,195
  25,255
  28,504
  31,939
  35,556
  39,351
  43,324
  47,474
  51,801
  56,306
  60,994
  65,867
  70,933
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
 
  227
  42
  58
  303
  603
  952
  1,346
  1,772
  2,215
  2,656
  3,072
  3,451
  3,770
  4,014
  4,171
  4,235
  4,206
  4,088
  3,888
  3,622
  3,304
  2,950
  2,579
  2,207
  1,847
  1,511
  1,208
  944
  719
  534
Current shareholders' claim on cash, %
  100
  80.6
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8
  73.8

Shawcor Ltd is a Canada-based energy services company. The Company is engaged in designing, engineering, marketing and selling products and services, such as pipe coating services; flexible composite pipe; onshore and offshore pipeline corrosion and thermal protection; ultrasonic and radiographic inspection services; tubular management services; heat-shrinkable polymer tubing, and control and instrumentation wire and cable. The Company operates through the following segments: Pipeline and Pipe Services, and Petrochemical and Industrial. The Pipeline and Pipe Services segment includes the Bredero Shaw, Canusa-CPS, Shaw Pipeline Services, Flexpipe Systems, Guardian, Desert NDT and Lake Superior Consulting divisions. The Petrochemical and Industrial segment consists of the Connection Systems division. The Company is an applicator of pipeline coatings for the oil and gas industry for both onshore and offshore pipelines.

FINANCIAL RATIOS  of  ShawCor Ltd. (SCL)

Valuation Ratios
P/E Ratio -9.5
Price to Sales 1.4
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 13
Price to Free Cash Flow 39.9
Growth Rates
Sales Growth Rate -33.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 45.9%
Cap. Spend. - 3 Yr. Gr. Rate 2.9%
Financial Strength
Quick Ratio 66
Current Ratio 0
LT Debt to Equity 26.5%
Total Debt to Equity 26.8%
Interest Coverage -9
Management Effectiveness
Return On Assets -8.3%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital -12.3%
Ret/ On T. Cap. - 3 Yr. Avg. 0.6%
Return On Equity -16.8%
Return On Equity - 3 Yr. Avg. 1.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 32.4%
Gross Margin - 3 Yr. Avg. 34.7%
EBITDA Margin -6.3%
EBITDA Margin - 3 Yr. Avg. 5.7%
Operating Margin -12.8%
Oper. Margin - 3 Yr. Avg. 1.1%
Pre-Tax Margin -14.4%
Pre-Tax Margin - 3 Yr. Avg. -0.4%
Net Profit Margin -15%
Net Profit Margin - 3 Yr. Avg. -1.5%
Effective Tax Rate -4%
Eff/ Tax Rate - 3 Yr. Avg. 12.6%
Payout Ratio -21.5%

SCL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCL stock intrinsic value calculation we used $1209 million for the last fiscal year's total revenue generated by ShawCor Ltd.. The default revenue input number comes from 2016 income statement of ShawCor Ltd.. 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 SCL stock valuation model: a) initial revenue growth rate of 50.6% 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 SCL is calculated based on our internal credit rating of ShawCor Ltd., 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 ShawCor Ltd..
    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 SCL stock the variable cost ratio is equal to 49.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $787 million in the base year in the intrinsic value calculation for SCL 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 4.6% for ShawCor Ltd..

Corporate tax rate of 27% is the nominal tax rate for ShawCor Ltd.. 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 SCL 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 SCL are equal to 56.8%.

Life of production assets of 13.6 years is the average useful life of capital assets used in ShawCor Ltd. 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 SCL is equal to 7.1%. 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 - $1037 million for ShawCor Ltd. - 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 70.093 million for ShawCor Ltd. 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 ShawCor Ltd. at the current share price and the inputted number of shares is $1.7 billion.

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Financial statements of SCL
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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