Intrinsic value of Aegon ADR - AEG

Previous Close

$5.39

  Intrinsic Value

$92.42

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

-32%

Previous close

$5.39

 
Intrinsic value

$92.42

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

-32%

Our model is not good at valuating stocks of financial companies, such as AEG.

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

We calculate the intrinsic value of AEG 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 11.1

 

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, %
  41.81
  40.70
  37.13
  33.92
  31.03
  28.42
  26.08
  23.97
  22.08
  20.37
  18.83
  17.45
  16.20
  15.08
  14.07
  13.17
  12.35
  11.62
  10.95
  10.36
  9.82
  9.34
  8.91
  8.52
  8.16
  7.85
  7.56
  7.31
  7.08
  6.87
  6.68
Revenue, $m
  0
  78,879
  108,167
  144,854
  189,796
  243,741
  307,309
  380,979
  465,081
  559,807
  665,224
  781,291
  907,884
  1,044,818
  1,191,870
  1,348,804
  1,515,385
  1,691,402
  1,876,674
  2,071,067
  2,274,498
  2,486,942
  2,708,436
  2,939,076
  3,179,025
  3,428,504
  3,687,798
  3,957,251
  4,237,264
  4,528,294
  4,830,853
Variable operating expenses, $m
 
  71,610
  98,187
  131,478
  172,260
  221,213
  278,898
  345,749
  422,067
  508,026
  603,687
  708,980
  823,857
  948,117
  1,081,559
  1,223,968
  1,375,132
  1,534,857
  1,702,982
  1,879,383
  2,063,986
  2,256,769
  2,457,762
  2,667,056
  2,884,797
  3,111,186
  3,346,481
  3,590,996
  3,845,092
  4,109,187
  4,383,743
Fixed operating expenses, $m
 
  4,703
  4,820
  4,941
  5,064
  5,191
  5,321
  5,454
  5,590
  5,730
  5,873
  6,020
  6,170
  6,325
  6,483
  6,645
  6,811
  6,981
  7,156
  7,335
  7,518
  7,706
  7,899
  8,096
  8,298
  8,506
  8,719
  8,937
  9,160
  9,389
  9,624
Total operating expenses, $m
  55,359
  76,313
  103,007
  136,419
  177,324
  226,404
  284,219
  351,203
  427,657
  513,756
  609,560
  715,000
  830,027
  954,442
  1,088,042
  1,230,613
  1,381,943
  1,541,838
  1,710,138
  1,886,718
  2,071,504
  2,264,475
  2,465,661
  2,675,152
  2,893,095
  3,119,692
  3,355,200
  3,599,933
  3,854,252
  4,118,576
  4,393,367
Operating income, $m
  703
  2,567
  5,160
  8,435
  12,471
  17,337
  23,091
  29,776
  37,424
  46,051
  55,664
  66,291
  77,857
  90,376
  103,828
  118,191
  133,442
  149,563
  166,536
  184,349
  202,994
  222,468
  242,775
  263,924
  285,930
  308,812
  332,598
  357,319
  383,011
  409,718
  437,486
EBITDA, $m
  1,978
  2,913
  5,624
  9,045
  13,261
  18,343
  24,351
  31,331
  39,315
  48,321
  58,356
  69,416
  81,489
  94,556
  108,596
  123,586
  139,504
  156,329
  174,043
  192,633
  212,092
  232,416
  253,609
  275,680
  298,646
  322,526
  347,349
  373,148
  399,960
  427,831
  456,809
Interest expense (income), $m
  317
  525
  5,581
  12,962
  22,207
  33,532
  47,126
  63,146
  81,710
  102,904
  126,775
  153,340
  182,589
  214,490
  248,998
  286,055
  325,602
  367,581
  411,937
  458,625
  507,612
  558,877
  612,413
  668,229
  726,351
  786,818
  849,687
  915,029
  982,931
  1,053,494
  1,126,834
Earnings before tax, $m
  850
  2,042
  -421
  -4,527
  -9,736
  -16,195
  -24,036
  -33,370
  -44,287
  -56,853
  -71,111
  -87,049
  -104,732
  -124,114
  -145,169
  -167,864
  -192,160
  -218,018
  -245,401
  -274,277
  -304,619
  -336,409
  -369,638
  -404,305
  -440,421
  -478,006
  -517,089
  -557,710
  -599,919
  -643,776
  -689,348
Tax expense, $m
  232
  551
  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
Net income, $m
  618
  1,491
  -421
  -4,527
  -9,736
  -16,195
  -24,036
  -33,370
  -44,287
  -56,853
  -71,111
  -87,049
  -104,732
  -124,114
  -145,169
  -167,864
  -192,160
  -218,018
  -245,401
  -274,277
  -304,619
  -336,409
  -369,638
  -404,305
  -440,421
  -478,006
  -517,089
  -557,710
  -599,919
  -643,776
  -689,348

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
  449,541
  631,034
  865,337
  1,158,833
  1,518,364
  1,949,926
  2,458,476
  3,047,833
  3,720,648
  4,478,457
  5,321,792
  6,250,328
  7,263,071
  8,358,541
  9,534,961
  10,790,431
  12,123,083
  13,531,213
  15,013,389
  16,568,532
  18,195,983
  19,895,540
  21,667,488
  23,512,612
  25,432,197
  27,428,030
  29,502,384
  31,658,007
  33,898,110
  36,226,351
  38,646,821
Adjusted assets (=assets-cash), $m
  449,541
  631,034
  865,337
  1,158,833
  1,518,364
  1,949,926
  2,458,476
  3,047,833
  3,720,648
  4,478,457
  5,321,792
  6,250,328
  7,263,071
  8,358,541
  9,534,961
  10,790,431
  12,123,083
  13,531,213
  15,013,389
  16,568,532
  18,195,983
  19,895,540
  21,667,488
  23,512,612
  25,432,197
  27,428,030
  29,502,384
  31,658,007
  33,898,110
  36,226,351
  38,646,821
Revenue / Adjusted assets
  0.000
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
Average production assets, $m
  2,257
  3,155
  4,327
  5,794
  7,592
  9,750
  12,292
  15,239
  18,603
  22,392
  26,609
  31,252
  36,315
  41,793
  47,675
  53,952
  60,615
  67,656
  75,067
  82,843
  90,980
  99,478
  108,337
  117,563
  127,161
  137,140
  147,512
  158,290
  169,491
  181,132
  193,234
Working capital, $m
  0
  2,997
  4,110
  5,504
  7,212
  9,262
  11,678
  14,477
  17,673
  21,273
  25,279
  29,689
  34,500
  39,703
  45,291
  51,255
  57,585
  64,273
  71,314
  78,701
  86,431
  94,504
  102,921
  111,685
  120,803
  130,283
  140,136
  150,376
  161,016
  172,075
  183,572
Total debt, $m
  14,992
  159,462
  370,335
  634,482
  958,060
  1,346,465
  1,804,160
  2,334,581
  2,940,115
  3,622,144
  4,381,145
  5,216,828
  6,128,296
  7,114,219
  8,172,997
  9,302,920
  10,502,306
  11,769,624
  13,103,582
  14,503,211
  15,967,917
  17,497,518
  19,092,271
  20,752,882
  22,480,510
  24,276,759
  26,143,677
  28,083,738
  30,099,831
  32,195,248
  34,373,671
Total liabilities, $m
  423,461
  567,930
  778,803
  1,042,950
  1,366,528
  1,754,933
  2,212,628
  2,743,049
  3,348,583
  4,030,612
  4,789,613
  5,625,296
  6,536,764
  7,522,687
  8,581,465
  9,711,388
  10,910,774
  12,178,092
  13,512,050
  14,911,679
  16,376,385
  17,905,986
  19,500,739
  21,161,350
  22,888,978
  24,685,227
  26,552,145
  28,492,206
  30,508,299
  32,603,716
  34,782,139
Total equity, $m
  26,081
  63,103
  86,534
  115,883
  151,836
  194,993
  245,848
  304,783
  372,065
  447,846
  532,179
  625,033
  726,307
  835,854
  953,496
  1,079,043
  1,212,308
  1,353,121
  1,501,339
  1,656,853
  1,819,598
  1,989,554
  2,166,749
  2,351,261
  2,543,220
  2,742,803
  2,950,238
  3,165,801
  3,389,811
  3,622,635
  3,864,682
Total liabilities and equity, $m
  449,542
  631,033
  865,337
  1,158,833
  1,518,364
  1,949,926
  2,458,476
  3,047,832
  3,720,648
  4,478,458
  5,321,792
  6,250,329
  7,263,071
  8,358,541
  9,534,961
  10,790,431
  12,123,082
  13,531,213
  15,013,389
  16,568,532
  18,195,983
  19,895,540
  21,667,488
  23,512,611
  25,432,198
  27,428,030
  29,502,383
  31,658,007
  33,898,110
  36,226,351
  38,646,821
Debt-to-equity ratio
  0.575
  2.530
  4.280
  5.480
  6.310
  6.910
  7.340
  7.660
  7.900
  8.090
  8.230
  8.350
  8.440
  8.510
  8.570
  8.620
  8.660
  8.700
  8.730
  8.750
  8.780
  8.790
  8.810
  8.830
  8.840
  8.850
  8.860
  8.870
  8.880
  8.890
  8.890
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
  618
  1,491
  -421
  -4,527
  -9,736
  -16,195
  -24,036
  -33,370
  -44,287
  -56,853
  -71,111
  -87,049
  -104,732
  -124,114
  -145,169
  -167,864
  -192,160
  -218,018
  -245,401
  -274,277
  -304,619
  -336,409
  -369,638
  -404,305
  -440,421
  -478,006
  -517,089
  -557,710
  -599,919
  -643,776
  -689,348
Depreciation, amort., depletion, $m
  1,275
  347
  464
  610
  790
  1,006
  1,260
  1,555
  1,891
  2,270
  2,692
  3,125
  3,632
  4,179
  4,767
  5,395
  6,062
  6,766
  7,507
  8,284
  9,098
  9,948
  10,834
  11,756
  12,716
  13,714
  14,751
  15,829
  16,949
  18,113
  19,323
Funds from operations, $m
  -1,119
  1,837
  42
  -3,916
  -8,946
  -15,189
  -22,775
  -31,815
  -42,395
  -54,583
  -68,419
  -83,924
  -101,100
  -119,935
  -140,402
  -162,469
  -186,098
  -211,252
  -237,894
  -265,992
  -295,521
  -326,461
  -358,804
  -392,549
  -427,705
  -464,292
  -502,337
  -541,881
  -582,970
  -625,663
  -670,024
Change in working capital, $m
  -4,622
  867
  1,113
  1,394
  1,708
  2,050
  2,416
  2,799
  3,196
  3,600
  4,006
  4,411
  4,811
  5,203
  5,588
  5,963
  6,330
  6,689
  7,040
  7,387
  7,730
  8,073
  8,417
  8,764
  9,118
  9,480
  9,853
  10,239
  10,640
  11,059
  11,497
Cash from operations, $m
  3,503
  970
  -1,071
  -5,311
  -10,654
  -17,239
  -25,191
  -34,614
  -45,591
  -58,182
  -72,425
  -88,334
  -105,911
  -125,138
  -145,990
  -168,432
  -192,428
  -217,941
  -244,934
  -273,379
  -303,251
  -334,534
  -367,221
  -401,313
  -436,823
  -473,772
  -512,190
  -552,120
  -593,611
  -636,722
  -681,521
Maintenance CAPEX, $m
  0
  -226
  -316
  -433
  -579
  -759
  -975
  -1,229
  -1,524
  -1,860
  -2,239
  -2,661
  -3,125
  -3,632
  -4,179
  -4,767
  -5,395
  -6,062
  -6,766
  -7,507
  -8,284
  -9,098
  -9,948
  -10,834
  -11,756
  -12,716
  -13,714
  -14,751
  -15,829
  -16,949
  -18,113
New CAPEX, $m
  -73
  -899
  -1,172
  -1,467
  -1,798
  -2,158
  -2,543
  -2,947
  -3,364
  -3,789
  -4,217
  -4,643
  -5,064
  -5,477
  -5,882
  -6,277
  -6,663
  -7,041
  -7,411
  -7,776
  -8,137
  -8,498
  -8,860
  -9,226
  -9,598
  -9,979
  -10,372
  -10,778
  -11,201
  -11,641
  -12,102
Cash from investing activities, $m
  -1,138
  -1,125
  -1,488
  -1,900
  -2,377
  -2,917
  -3,518
  -4,176
  -4,888
  -5,649
  -6,456
  -7,304
  -8,189
  -9,109
  -10,061
  -11,044
  -12,058
  -13,103
  -14,177
  -15,283
  -16,421
  -17,596
  -18,808
  -20,060
  -21,354
  -22,695
  -24,086
  -25,529
  -27,030
  -28,590
  -30,215
Free cash flow, $m
  2,365
  -154
  -2,558
  -7,211
  -13,031
  -20,156
  -28,709
  -38,790
  -50,479
  -63,832
  -78,880
  -95,638
  -114,100
  -134,247
  -156,051
  -179,477
  -204,487
  -231,043
  -259,111
  -288,662
  -319,673
  -352,130
  -386,028
  -421,373
  -458,177
  -496,467
  -536,276
  -577,649
  -620,640
  -665,312
  -711,737
Issuance/(repayment) of debt, $m
  677
  144,470
  210,873
  264,147
  323,578
  388,405
  457,695
  530,421
  605,534
  682,029
  759,001
  835,683
  911,469
  985,923
  1,058,778
  1,129,923
  1,199,387
  1,267,317
  1,333,958
  1,399,629
  1,464,706
  1,529,601
  1,594,753
  1,660,611
  1,727,627
  1,796,250
  1,866,918
  1,940,061
  2,016,093
  2,095,417
  2,178,422
Issuance/(repurchase) of shares, $m
  -658
  35,532
  23,852
  33,876
  45,689
  59,351
  74,891
  92,305
  111,568
  132,634
  155,444
  179,903
  206,006
  233,661
  262,811
  293,411
  325,425
  358,831
  393,618
  429,791
  467,364
  506,365
  546,833
  588,818
  632,380
  677,589
  724,524
  773,272
  823,930
  876,600
  931,395
Cash from financing (excl. dividends), $m  
  -168
  180,002
  234,725
  298,023
  369,267
  447,756
  532,586
  622,726
  717,102
  814,663
  914,445
  1,015,586
  1,117,475
  1,219,584
  1,321,589
  1,423,334
  1,524,812
  1,626,148
  1,727,576
  1,829,420
  1,932,070
  2,035,966
  2,141,586
  2,249,429
  2,360,007
  2,473,839
  2,591,442
  2,713,333
  2,840,023
  2,972,017
  3,109,817
Total cash flow (excl. dividends), $m
  2,173
  179,848
  232,167
  290,812
  356,237
  427,600
  503,877
  583,936
  666,623
  750,831
  835,565
  919,948
  1,003,375
  1,085,337
  1,165,538
  1,243,857
  1,320,325
  1,395,105
  1,468,466
  1,540,759
  1,612,397
  1,683,836
  1,755,558
  1,828,056
  1,901,830
  1,977,371
  2,055,166
  2,135,683
  2,219,382
  2,306,705
  2,398,080
Retained Cash Flow (-), $m
  1,872
  -37,022
  -23,852
  -33,876
  -45,689
  -59,351
  -74,891
  -92,305
  -111,568
  -132,634
  -155,444
  -179,903
  -206,006
  -233,661
  -262,811
  -293,411
  -325,425
  -358,831
  -393,618
  -429,791
  -467,364
  -506,365
  -546,833
  -588,818
  -632,380
  -677,589
  -724,524
  -773,272
  -823,930
  -876,600
  -931,395
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
 
  142,826
  208,315
  256,936
  310,548
  368,249
  428,987
  491,631
  555,054
  618,197
  680,120
  740,045
  797,369
  851,676
  902,726
  950,446
  994,900
  1,036,274
  1,074,847
  1,110,968
  1,145,033
  1,177,471
  1,208,725
  1,239,239
  1,269,450
  1,299,783
  1,330,642
  1,362,411
  1,395,453
  1,430,105
  1,466,686
Discount rate, %
 
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
 
  136,024
  188,051
  218,732
  247,959
  274,173
  295,971
  312,230
  322,190
  325,500
  322,215
  312,759
  297,865
  278,486
  255,708
  230,665
  204,462
  178,107
  152,475
  128,269
  106,016
  86,064
  68,597
  53,656
  41,163
  30,951
  22,794
  16,426
  11,573
  7,963
  5,346
Current shareholders' claim on cash, %
  100
  33.9
  22.0
  14.1
  9.0
  5.8
  3.7
  2.4
  1.6
  1.1
  0.7
  0.5
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  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

Aegon N.V. provides life insurance, pensions, and asset management services. It offers life and protection products, such as traditional and universal life insurance products, as well as employer, endowment, term, and whole life insurance products; and supplemental health, accidental death and dismemberment insurance, critical illness, cancer treatment, credit/disability, income protection, travel, and long-term care insurance products. The company also provides investments and retirement products and services, such as variable and fixed annuities, retirement plans, mutual funds, and stable value solutions; individual and group pensions sponsored by or obtained through an employer; and mortgages, as well as banking products, including saving deposits. In addition, it offers general insurance products consisting of automotive, liability, disability, household insurance, and fire protection. The company markets its products through various sales and distribution channels, including affinity groups, banks, benefit consulting firms, direct to consumer, independent and career agents, independent marketing organizations, institutional partners, registered representatives of regional and independent broker-dealers, registered investment advisers, third party administrators, wirehouses, worksites, the Internet, and financial planners. It has operations in the United States, Mexico, and Brazil; the Netherlands; the United Kingdom; the Czech Republic, Hungary, Poland, Romania, Slovakia, Turkey, Ukraine, Spain, Portugal, and France; and Asia. Aegon N.V. was founded in 1983 and is headquartered in The Hague, the Netherlands.

FINANCIAL RATIOS  of  Aegon ADR (AEG)

Valuation Ratios
P/E Ratio 17.8
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 3.1
Price to Free Cash Flow 3.2
Growth Rates
Sales Growth Rate 41.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -23.2%
Cap. Spend. - 3 Yr. Gr. Rate 0.8%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 49.3%
Total Debt to Equity 57.5%
Interest Coverage 4
Management Effectiveness
Return On Assets 0.2%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 2.3%
Return On Equity - 3 Yr. Avg. 1.7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 4.4%
EBITDA Margin - 3 Yr. Avg. 4.5%
Operating Margin 1.3%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 1%
Net Profit Margin 1.1%
Net Profit Margin - 3 Yr. Avg. 0.8%
Effective Tax Rate 27.3%
Eff/ Tax Rate - 3 Yr. Avg. 21.3%
Payout Ratio 52.3%

AEG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AEG stock intrinsic value calculation we used $56062 million for the last fiscal year's total revenue generated by Aegon ADR. The default revenue input number comes from 2016 income statement of Aegon ADR. 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 AEG stock valuation model: a) initial revenue growth rate of 40.7% 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%, whose default value for AEG is calculated based on our internal credit rating of Aegon ADR, 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 Aegon ADR.
    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 AEG stock the variable cost ratio is equal to 90.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4588 million in the base year in the intrinsic value calculation for AEG 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 Aegon ADR.

Corporate tax rate of 27% is the nominal tax rate for Aegon ADR. 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 AEG 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 AEG are equal to 4%.

Life of production assets of 10 years is the average useful life of capital assets used in Aegon ADR 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 AEG is equal to 3.8%. 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 - $26081 million for Aegon ADR - 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 2062.04 million for Aegon ADR 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 Aegon ADR at the current share price and the inputted number of shares is $11.1 billion.

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COMPANY NEWS

▶ ETFs with exposure to AEGON NV : July 10, 2017   [Jul-10-17 01:52PM  Capital Cube]
▶ ETFs with exposure to AEGON NV : June 27, 2017   [Jun-27-17 02:49PM  Capital Cube]
▶ Aegon Announces Stock Fraction Final Dividend 2016   [Jun-20-17 11:45AM  PR Newswire]
▶ ETFs with exposure to AEGON NV : June 12, 2017   [Jun-12-17 01:46PM  Capital Cube]
▶ ETFs with exposure to AEGON NV : June 1, 2017   [Jun-01-17 01:36PM  Capital Cube]
▶ Aegon sells some U.S. operations to boost solvency   [May-22-17 02:22AM  Reuters]
▶ Annual Meeting of Shareholders Adopts All Resolutions   [May-19-17 09:10AM  PR Newswire]
▶ ETFs with exposure to AEGON NV : April 17, 2017   [Apr-17-17 12:45PM  Capital Cube]
▶ Aegon Publishes Agenda for 2017 Annual General Meeting   [Apr-07-17 02:00AM  PR Newswire]
▶ ETFs with exposure to AEGON NV : April 5, 2017   [Apr-05-17 04:14PM  Capital Cube]
▶ Aegon Publishes 2016 Annual Report and Review   [Mar-24-17 03:00AM  PR Newswire]
▶ Ackman's winners and losers   [Mar-14-17 12:05PM  CNBC Videos]
▶ Aegon Responds to Inaccurate Information   [Feb-17-17 08:56AM  PR Newswire]
▶ Aegon Announces Management Changes   [Dec-15-16 07:33AM  PR Newswire]
▶ Should You Buy AEGON N.V. (ADR) (AEG)?   [Dec-13-16 03:06AM  Insider Monkey]
▶ Aegon to Appoint Matthew Rider as CFO   [Nov-28-16 11:00AM  PR Newswire]
▶ Aegon Completes Share Buyback Program   [Nov-11-16 01:19PM  PR Newswire]
▶ CFO Darryl Button to Leave Aegon   [Sep-06-16 02:00AM  PR Newswire]
▶ Aegon Completes Share Buyback Program   [Aug-15-16 02:00AM  PR Newswire]
▶ Aegon Provides Update on UK Annuity Book Divestments   [Jul-12-16 02:00AM  PR Newswire]
▶ Aegon Completes Share Buyback Program of EUR 400 Million   [May-19-16 01:37PM  PR Newswire]
▶ Aegon's Q1 2016 Results Impacted by Volatile Markets   [May-12-16 01:30AM  PR Newswire]
▶ A.M. Best Affirms Ratings of Aegon N.V.s U.S. Subsidiaries   [Apr-15-16 11:33AM  Business Wire]
▶ Aegon Publishes Agenda for 2016 Annual General Meeting   [Apr-08-16 02:00AM  PR Newswire]
▶ The Changing Role of the Supervisory Board   [Mar-25-16 12:11PM  at noodls]
▶ Stronger going forward   [12:11PM  at noodls]
▶ Why Are Investors Diving Headlong Into These 4 Stocks Today?   [Jan-13-16 11:20AM  at Insider Monkey]
Stock chart of AEG Financial statements of AEG Annual reports of AEG
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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