Intrinsic value of Aegon ADR - AEG

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$5.19

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$5.19

 
Intrinsic value

$21.75

 
Up/down potential

+319%

 
Rating

str. buy

 
Value-price divergence* premium content

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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 10.5

 

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
  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
  57,183
  58,498
  60,002
  61,690
  63,560
  65,612
  67,847
  70,265
  72,871
  75,668
  78,660
  81,852
  85,251
  88,864
  92,697
  96,759
  101,059
  105,607
  110,412
  115,485
  120,838
  126,483
  132,433
  138,703
  145,306
  152,259
  159,576
  167,277
  175,378
  183,899
Variable operating expenses, $m
 
  51,922
  53,115
  54,480
  56,011
  57,708
  59,570
  61,598
  63,793
  66,158
  68,696
  71,380
  74,276
  77,361
  80,639
  84,118
  87,804
  91,706
  95,833
  100,193
  104,796
  109,654
  114,777
  120,176
  125,866
  131,858
  138,167
  144,807
  151,795
  159,146
  166,879
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
  56,625
  57,935
  59,421
  61,075
  62,899
  64,891
  67,052
  69,383
  71,888
  74,569
  77,400
  80,446
  83,686
  87,122
  90,763
  94,615
  98,687
  102,989
  107,528
  112,314
  117,360
  122,676
  128,272
  134,164
  140,364
  146,886
  153,744
  160,955
  168,535
  176,503
Operating income, $m
  703
  559
  563
  582
  614
  661
  721
  795
  882
  984
  1,099
  1,260
  1,405
  1,566
  1,742
  1,935
  2,144
  2,372
  2,619
  2,884
  3,170
  3,478
  3,808
  4,161
  4,539
  4,943
  5,373
  5,833
  6,322
  6,843
  7,397
EBITDA, $m
  1,978
  1,047
  1,062
  1,093
  1,139
  1,200
  1,277
  1,368
  1,475
  1,598
  1,736
  1,890
  2,060
  2,248
  2,453
  2,676
  2,919
  3,181
  3,463
  3,768
  4,094
  4,445
  4,820
  5,221
  5,649
  6,105
  6,592
  7,109
  7,660
  8,246
  8,868
Interest expense (income), $m
  317
  525
  114
  445
  824
  1,249
  1,721
  2,238
  2,801
  3,410
  4,067
  4,772
  5,526
  6,330
  7,187
  8,097
  9,063
  10,087
  11,171
  12,317
  13,527
  14,806
  16,155
  17,577
  19,077
  20,657
  22,321
  24,073
  25,917
  27,857
  29,899
Earnings before tax, $m
  850
  34
  449
  136
  -210
  -589
  -1,000
  -1,443
  -1,919
  -2,427
  -2,968
  -3,512
  -4,121
  -4,765
  -5,445
  -6,163
  -6,919
  -7,715
  -8,552
  -9,432
  -10,357
  -11,328
  -12,347
  -13,416
  -14,538
  -15,714
  -16,947
  -18,240
  -19,595
  -21,015
  -22,502
Tax expense, $m
  232
  9
  121
  37
  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
  25
  328
  100
  -210
  -589
  -1,000
  -1,443
  -1,919
  -2,427
  -2,968
  -3,512
  -4,121
  -4,765
  -5,445
  -6,163
  -6,919
  -7,715
  -8,552
  -9,432
  -10,357
  -11,328
  -12,347
  -13,416
  -14,538
  -15,714
  -16,947
  -18,240
  -19,595
  -21,015
  -22,502

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
  457,466
  467,988
  480,015
  493,518
  508,480
  524,896
  542,772
  562,123
  582,970
  605,343
  629,278
  654,817
  682,010
  710,910
  741,576
  774,074
  808,475
  844,854
  883,292
  923,877
  966,702
  1,011,863
  1,059,467
  1,109,624
  1,162,449
  1,218,068
  1,276,611
  1,338,214
  1,403,024
  1,471,193
Adjusted assets (=assets-cash), $m
  449,541
  457,466
  467,988
  480,015
  493,518
  508,480
  524,896
  542,772
  562,123
  582,970
  605,343
  629,278
  654,817
  682,010
  710,910
  741,576
  774,074
  808,475
  844,854
  883,292
  923,877
  966,702
  1,011,863
  1,059,467
  1,109,624
  1,162,449
  1,218,068
  1,276,611
  1,338,214
  1,403,024
  1,471,193
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
  2,287
  2,340
  2,400
  2,468
  2,542
  2,624
  2,714
  2,811
  2,915
  3,027
  3,146
  3,274
  3,410
  3,555
  3,708
  3,870
  4,042
  4,224
  4,416
  4,619
  4,834
  5,059
  5,297
  5,548
  5,812
  6,090
  6,383
  6,691
  7,015
  7,356
Working capital, $m
  0
  2,173
  2,223
  2,280
  2,344
  2,415
  2,493
  2,578
  2,670
  2,769
  2,875
  2,989
  3,110
  3,240
  3,377
  3,522
  3,677
  3,840
  4,013
  4,196
  4,388
  4,592
  4,806
  5,032
  5,271
  5,522
  5,786
  6,064
  6,357
  6,664
  6,988
Total debt, $m
  14,992
  3,251
  12,721
  23,545
  35,698
  49,164
  63,939
  80,027
  97,443
  116,205
  136,340
  157,882
  180,868
  205,341
  231,351
  258,951
  288,199
  319,160
  351,900
  386,495
  423,022
  461,563
  502,209
  545,052
  590,193
  637,736
  687,793
  740,482
  795,925
  854,254
  915,605
Total liabilities, $m
  423,461
  411,719
  421,189
  432,013
  444,166
  457,632
  472,407
  488,495
  505,911
  524,673
  544,808
  566,350
  589,336
  613,809
  639,819
  667,419
  696,667
  727,628
  760,368
  794,963
  831,490
  870,031
  910,677
  953,520
  998,661
  1,046,204
  1,096,261
  1,148,950
  1,204,393
  1,262,722
  1,324,073
Total equity, $m
  26,081
  45,747
  46,799
  48,001
  49,352
  50,848
  52,490
  54,277
  56,212
  58,297
  60,534
  62,928
  65,482
  68,201
  71,091
  74,158
  77,407
  80,848
  84,485
  88,329
  92,388
  96,670
  101,186
  105,947
  110,962
  116,245
  121,807
  127,661
  133,821
  140,302
  147,119
Total liabilities and equity, $m
  449,542
  457,466
  467,988
  480,014
  493,518
  508,480
  524,897
  542,772
  562,123
  582,970
  605,342
  629,278
  654,818
  682,010
  710,910
  741,577
  774,074
  808,476
  844,853
  883,292
  923,878
  966,701
  1,011,863
  1,059,467
  1,109,623
  1,162,449
  1,218,068
  1,276,611
  1,338,214
  1,403,024
  1,471,192
Debt-to-equity ratio
  0.575
  0.070
  0.270
  0.490
  0.720
  0.970
  1.220
  1.470
  1.730
  1.990
  2.250
  2.510
  2.760
  3.010
  3.250
  3.490
  3.720
  3.950
  4.170
  4.380
  4.580
  4.770
  4.960
  5.140
  5.320
  5.490
  5.650
  5.800
  5.950
  6.090
  6.220
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
  25
  328
  100
  -210
  -589
  -1,000
  -1,443
  -1,919
  -2,427
  -2,968
  -3,512
  -4,121
  -4,765
  -5,445
  -6,163
  -6,919
  -7,715
  -8,552
  -9,432
  -10,357
  -11,328
  -12,347
  -13,416
  -14,538
  -15,714
  -16,947
  -18,240
  -19,595
  -21,015
  -22,502
Depreciation, amort., depletion, $m
  1,275
  488
  499
  511
  525
  539
  556
  574
  593
  614
  636
  629
  655
  682
  711
  742
  774
  808
  845
  883
  924
  967
  1,012
  1,059
  1,110
  1,162
  1,218
  1,277
  1,338
  1,403
  1,471
Funds from operations, $m
  -1,119
  513
  827
  611
  315
  -49
  -444
  -869
  -1,326
  -1,813
  -2,332
  -2,882
  -3,466
  -4,083
  -4,734
  -5,421
  -6,145
  -6,906
  -7,707
  -8,549
  -9,433
  -10,361
  -11,335
  -12,357
  -13,428
  -14,552
  -15,729
  -16,963
  -18,257
  -19,612
  -21,031
Change in working capital, $m
  -4,622
  43
  50
  57
  64
  71
  78
  85
  92
  99
  106
  114
  121
  129
  137
  146
  154
  163
  173
  183
  193
  203
  215
  226
  238
  251
  264
  278
  293
  308
  324
Cash from operations, $m
  3,503
  429
  777
  553
  251
  -120
  -522
  -954
  -1,418
  -1,912
  -2,438
  -2,996
  -3,587
  -4,212
  -4,871
  -5,567
  -6,299
  -7,070
  -7,880
  -8,731
  -9,626
  -10,565
  -11,550
  -12,583
  -13,667
  -14,803
  -15,993
  -17,241
  -18,549
  -19,919
  -21,355
Maintenance CAPEX, $m
  0
  -451
  -457
  -468
  -480
  -494
  -508
  -525
  -543
  -562
  -583
  -605
  -629
  -655
  -682
  -711
  -742
  -774
  -808
  -845
  -883
  -924
  -967
  -1,012
  -1,059
  -1,110
  -1,162
  -1,218
  -1,277
  -1,338
  -1,403
New CAPEX, $m
  -73
  -31
  -53
  -60
  -68
  -75
  -82
  -89
  -97
  -104
  -112
  -120
  -128
  -136
  -144
  -153
  -162
  -172
  -182
  -192
  -203
  -214
  -226
  -238
  -251
  -264
  -278
  -293
  -308
  -324
  -341
Cash from investing activities, $m
  -1,138
  -482
  -510
  -528
  -548
  -569
  -590
  -614
  -640
  -666
  -695
  -725
  -757
  -791
  -826
  -864
  -904
  -946
  -990
  -1,037
  -1,086
  -1,138
  -1,193
  -1,250
  -1,310
  -1,374
  -1,440
  -1,511
  -1,585
  -1,662
  -1,744
Free cash flow, $m
  2,365
  -53
  267
  25
  -297
  -689
  -1,112
  -1,569
  -2,057
  -2,578
  -3,133
  -3,721
  -4,344
  -5,003
  -5,698
  -6,431
  -7,203
  -8,016
  -8,870
  -9,769
  -10,712
  -11,703
  -12,742
  -13,833
  -14,977
  -16,176
  -17,434
  -18,752
  -20,134
  -21,582
  -23,099
Issuance/(repayment) of debt, $m
  677
  -11,741
  9,470
  10,825
  12,153
  13,466
  14,775
  16,089
  17,415
  18,762
  20,136
  21,542
  22,986
  24,473
  26,010
  27,600
  29,248
  30,961
  32,741
  34,595
  36,527
  38,542
  40,646
  42,843
  45,141
  47,543
  50,057
  52,688
  55,443
  58,329
  61,352
Issuance/(repurchase) of shares, $m
  -658
  31,459
  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  
  -168
  19,718
  9,470
  10,825
  12,153
  13,466
  14,775
  16,089
  17,415
  18,762
  20,136
  21,542
  22,986
  24,473
  26,010
  27,600
  29,248
  30,961
  32,741
  34,595
  36,527
  38,542
  40,646
  42,843
  45,141
  47,543
  50,057
  52,688
  55,443
  58,329
  61,352
Total cash flow (excl. dividends), $m
  2,173
  -11,794
  9,736
  10,850
  11,856
  12,777
  13,662
  14,520
  15,358
  16,184
  17,003
  17,821
  18,642
  19,471
  20,312
  21,169
  22,045
  22,945
  23,871
  24,826
  25,815
  26,839
  27,904
  29,011
  30,164
  31,367
  32,623
  33,936
  35,309
  36,747
  38,253
Retained Cash Flow (-), $m
  1,872
  -19,666
  -1,052
  -1,203
  -1,350
  -1,496
  -1,642
  -1,788
  -1,935
  -2,085
  -2,237
  -2,394
  -2,554
  -2,719
  -2,890
  -3,067
  -3,250
  -3,440
  -3,638
  -3,844
  -4,059
  -4,282
  -4,516
  -4,760
  -5,016
  -5,283
  -5,562
  -5,854
  -6,160
  -6,481
  -6,817
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  8,684
  9,647
  10,505
  11,281
  12,021
  12,732
  13,423
  14,099
  14,766
  15,427
  16,088
  16,751
  17,422
  18,102
  18,795
  19,505
  20,233
  20,982
  21,756
  22,557
  23,387
  24,250
  25,148
  26,084
  27,061
  28,082
  29,149
  30,266
  31,436
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
 
  0
  7,839
  8,213
  8,388
  8,399
  8,293
  8,086
  7,792
  7,424
  6,995
  6,520
  6,010
  5,477
  4,935
  4,393
  3,863
  3,352
  2,870
  2,423
  2,014
  1,649
  1,327
  1,050
  815
  621
  464
  339
  242
  169
  115
Current shareholders' claim on cash, %
  100
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7
  36.7

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 17.1
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 3
Price to Free Cash Flow 3.1
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 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%, 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 2 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 2031.19 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 $10.5 billion.


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COMPANY NEWS

▶ 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]
▶ Aegon Reports Third Quarter 2015 Results   [01:30AM  PR Newswire]
Stock chart of AEG Financial statements 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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