Intrinsic value of AerCap Holdings - AER

Previous Close

$48.98

  Intrinsic Value

$25.01

stock screener

  Rating & Target

sell

-49%

  Value-price divergence*

-34%

Previous close

$48.98

 
Intrinsic value

$25.01

 
Up/down potential

-49%

 
Rating

sell

 
Value-price divergence*

-34%

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

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

We calculate the intrinsic value of AER 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 9.7

 

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, %
  -1.76
  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
  5,014
  5,114
  5,232
  5,366
  5,517
  5,685
  5,868
  6,068
  6,284
  6,517
  6,767
  7,035
  7,321
  7,625
  7,948
  8,291
  8,654
  9,038
  9,445
  9,875
  10,329
  10,807
  11,312
  11,844
  12,405
  12,996
  13,618
  14,272
  14,961
  15,685
  16,447
Variable operating expenses, $m
 
  2,828
  2,893
  2,968
  3,051
  3,144
  3,245
  3,356
  3,475
  3,604
  3,742
  3,890
  4,048
  4,216
  4,395
  4,585
  4,786
  4,998
  5,223
  5,461
  5,712
  5,976
  6,256
  6,550
  6,860
  7,187
  7,530
  7,892
  8,273
  8,674
  9,095
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
  2,860
  2,828
  2,893
  2,968
  3,051
  3,144
  3,245
  3,356
  3,475
  3,604
  3,742
  3,890
  4,048
  4,216
  4,395
  4,585
  4,786
  4,998
  5,223
  5,461
  5,712
  5,976
  6,256
  6,550
  6,860
  7,187
  7,530
  7,892
  8,273
  8,674
  9,095
Operating income, $m
  2,154
  2,286
  2,339
  2,399
  2,466
  2,541
  2,623
  2,712
  2,809
  2,913
  3,025
  3,145
  3,272
  3,408
  3,553
  3,706
  3,868
  4,040
  4,222
  4,414
  4,617
  4,831
  5,057
  5,294
  5,545
  5,809
  6,087
  6,380
  6,687
  7,011
  7,352
EBITDA, $m
  3,965
  4,133
  4,228
  4,336
  4,458
  4,594
  4,742
  4,903
  5,078
  5,267
  5,469
  5,685
  5,916
  6,161
  6,422
  6,699
  6,993
  7,304
  7,632
  7,980
  8,346
  8,733
  9,141
  9,571
  10,024
  10,502
  11,004
  11,533
  12,090
  12,675
  13,291
Interest expense (income), $m
  1,339
  1,303
  1,337
  1,374
  1,416
  1,463
  1,515
  1,572
  1,634
  1,701
  1,774
  1,852
  1,935
  2,024
  2,118
  2,219
  2,325
  2,438
  2,558
  2,684
  2,818
  2,959
  3,108
  3,265
  3,430
  3,605
  3,788
  3,982
  4,185
  4,399
  4,625
Earnings before tax, $m
  1,200
  983
  1,001
  1,025
  1,050
  1,078
  1,108
  1,140
  1,175
  1,212
  1,251
  1,293
  1,338
  1,385
  1,435
  1,487
  1,543
  1,602
  1,664
  1,730
  1,799
  1,872
  1,949
  2,030
  2,115
  2,204
  2,299
  2,398
  2,502
  2,612
  2,727
Tax expense, $m
  173
  266
  270
  277
  284
  291
  299
  308
  317
  327
  338
  349
  361
  374
  387
  402
  417
  433
  449
  467
  486
  505
  526
  548
  571
  595
  621
  647
  676
  705
  736
Net income, $m
  1,047
  718
  731
  748
  767
  787
  809
  833
  858
  885
  913
  944
  976
  1,011
  1,047
  1,086
  1,126
  1,170
  1,215
  1,263
  1,313
  1,367
  1,423
  1,482
  1,544
  1,609
  1,678
  1,751
  1,827
  1,907
  1,991

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,035
  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
  41,620
  40,914
  41,855
  42,931
  44,139
  45,477
  46,945
  48,544
  50,274
  52,139
  54,140
  56,281
  58,565
  60,997
  63,581
  66,324
  69,231
  72,307
  75,561
  78,999
  82,629
  86,459
  90,498
  94,755
  99,241
  103,966
  108,940
  114,176
  119,685
  125,482
  131,579
Adjusted assets (=assets-cash), $m
  39,585
  40,914
  41,855
  42,931
  44,139
  45,477
  46,945
  48,544
  50,274
  52,139
  54,140
  56,281
  58,565
  60,997
  63,581
  66,324
  69,231
  72,307
  75,561
  78,999
  82,629
  86,459
  90,498
  94,755
  99,241
  103,966
  108,940
  114,176
  119,685
  125,482
  131,579
Revenue / Adjusted assets
  0.127
  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
  34,943
  35,641
  36,461
  37,398
  38,450
  39,616
  40,895
  42,288
  43,795
  45,419
  47,163
  49,027
  51,017
  53,136
  55,387
  57,777
  60,309
  62,989
  65,823
  68,818
  71,980
  75,316
  78,835
  82,544
  86,451
  90,567
  94,900
  99,461
  104,261
  109,310
  114,621
Working capital, $m
  0
  -511
  -523
  -537
  -552
  -568
  -587
  -607
  -628
  -652
  -677
  -704
  -732
  -762
  -795
  -829
  -865
  -904
  -945
  -987
  -1,033
  -1,081
  -1,131
  -1,184
  -1,241
  -1,300
  -1,362
  -1,427
  -1,496
  -1,569
  -1,645
Total debt, $m
  27,717
  28,457
  29,235
  30,125
  31,124
  32,230
  33,444
  34,767
  36,198
  37,740
  39,395
  41,165
  43,054
  45,065
  47,203
  49,471
  51,875
  54,419
  57,110
  59,953
  62,955
  66,122
  69,463
  72,984
  76,693
  80,601
  84,714
  89,044
  93,601
  98,394
  103,437
Total liabilities, $m
  33,096
  33,836
  34,614
  35,504
  36,503
  37,609
  38,823
  40,146
  41,577
  43,119
  44,774
  46,544
  48,433
  50,444
  52,582
  54,850
  57,254
  59,798
  62,489
  65,332
  68,334
  71,501
  74,842
  78,363
  82,072
  85,980
  90,093
  94,423
  98,980
  103,773
  108,816
Total equity, $m
  8,524
  7,078
  7,241
  7,427
  7,636
  7,867
  8,121
  8,398
  8,697
  9,020
  9,366
  9,737
  10,132
  10,552
  11,000
  11,474
  11,977
  12,509
  13,072
  13,667
  14,295
  14,957
  15,656
  16,393
  17,169
  17,986
  18,847
  19,752
  20,706
  21,708
  22,763
Total liabilities and equity, $m
  41,620
  40,914
  41,855
  42,931
  44,139
  45,476
  46,944
  48,544
  50,274
  52,139
  54,140
  56,281
  58,565
  60,996
  63,582
  66,324
  69,231
  72,307
  75,561
  78,999
  82,629
  86,458
  90,498
  94,756
  99,241
  103,966
  108,940
  114,175
  119,686
  125,481
  131,579
Debt-to-equity ratio
  3.252
  4.020
  4.040
  4.060
  4.080
  4.100
  4.120
  4.140
  4.160
  4.180
  4.210
  4.230
  4.250
  4.270
  4.290
  4.310
  4.330
  4.350
  4.370
  4.390
  4.400
  4.420
  4.440
  4.450
  4.470
  4.480
  4.490
  4.510
  4.520
  4.530
  4.540
Adjusted equity ratio
  0.164
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173
  0.173

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,047
  718
  731
  748
  767
  787
  809
  833
  858
  885
  913
  944
  976
  1,011
  1,047
  1,086
  1,126
  1,170
  1,215
  1,263
  1,313
  1,367
  1,423
  1,482
  1,544
  1,609
  1,678
  1,751
  1,827
  1,907
  1,991
Depreciation, amort., depletion, $m
  1,811
  1,847
  1,889
  1,938
  1,992
  2,053
  2,119
  2,191
  2,269
  2,353
  2,444
  2,540
  2,643
  2,753
  2,870
  2,994
  3,125
  3,264
  3,411
  3,566
  3,730
  3,902
  4,085
  4,277
  4,479
  4,693
  4,917
  5,153
  5,402
  5,664
  5,939
Funds from operations, $m
  3,646
  2,565
  2,620
  2,686
  2,759
  2,840
  2,928
  3,024
  3,127
  3,238
  3,357
  3,484
  3,620
  3,764
  3,917
  4,079
  4,251
  4,433
  4,625
  4,829
  5,043
  5,269
  5,507
  5,759
  6,023
  6,302
  6,595
  6,904
  7,229
  7,571
  7,930
Change in working capital, $m
  265
  -10
  -12
  -13
  -15
  -17
  -18
  -20
  -22
  -23
  -25
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
Cash from operations, $m
  3,381
  2,575
  2,632
  2,699
  2,774
  2,856
  2,946
  3,044
  3,149
  3,261
  3,382
  3,511
  3,648
  3,794
  3,949
  4,114
  4,288
  4,472
  4,666
  4,871
  5,088
  5,317
  5,558
  5,812
  6,079
  6,361
  6,657
  6,969
  7,298
  7,643
  8,006
Maintenance CAPEX, $m
  0
  -1,811
  -1,847
  -1,889
  -1,938
  -1,992
  -2,053
  -2,119
  -2,191
  -2,269
  -2,353
  -2,444
  -2,540
  -2,643
  -2,753
  -2,870
  -2,994
  -3,125
  -3,264
  -3,411
  -3,566
  -3,730
  -3,902
  -4,085
  -4,277
  -4,479
  -4,693
  -4,917
  -5,153
  -5,402
  -5,664
New CAPEX, $m
  -3,840
  -698
  -820
  -937
  -1,052
  -1,166
  -1,279
  -1,393
  -1,508
  -1,624
  -1,743
  -1,865
  -1,990
  -2,119
  -2,252
  -2,389
  -2,532
  -2,680
  -2,834
  -2,995
  -3,162
  -3,336
  -3,519
  -3,709
  -3,908
  -4,116
  -4,333
  -4,561
  -4,800
  -5,049
  -5,311
Cash from investing activities, $m
  -1,331
  -2,509
  -2,667
  -2,826
  -2,990
  -3,158
  -3,332
  -3,512
  -3,699
  -3,893
  -4,096
  -4,309
  -4,530
  -4,762
  -5,005
  -5,259
  -5,526
  -5,805
  -6,098
  -6,406
  -6,728
  -7,066
  -7,421
  -7,794
  -8,185
  -8,595
  -9,026
  -9,478
  -9,953
  -10,451
  -10,975
Free cash flow, $m
  2,050
  66
  -35
  -127
  -216
  -301
  -385
  -468
  -550
  -632
  -714
  -797
  -882
  -968
  -1,055
  -1,145
  -1,238
  -1,333
  -1,432
  -1,534
  -1,639
  -1,749
  -1,863
  -1,982
  -2,105
  -2,234
  -2,368
  -2,509
  -2,655
  -2,808
  -2,969
Issuance/(repayment) of debt, $m
  -1,572
  740
  778
  890
  999
  1,107
  1,214
  1,322
  1,431
  1,542
  1,655
  1,770
  1,889
  2,011
  2,138
  2,268
  2,404
  2,544
  2,691
  2,843
  3,002
  3,167
  3,340
  3,521
  3,710
  3,907
  4,114
  4,330
  4,556
  4,794
  5,042
Issuance/(repurchase) of shares, $m
  -1,021
  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 from financing (excl. dividends), $m  
  -2,417
  740
  778
  890
  999
  1,107
  1,214
  1,322
  1,431
  1,542
  1,655
  1,770
  1,889
  2,011
  2,138
  2,268
  2,404
  2,544
  2,691
  2,843
  3,002
  3,167
  3,340
  3,521
  3,710
  3,907
  4,114
  4,330
  4,556
  4,794
  5,042
Total cash flow (excl. dividends), $m
  -368
  805
  744
  763
  783
  805
  829
  854
  881
  910
  940
  973
  1,007
  1,044
  1,082
  1,123
  1,166
  1,211
  1,259
  1,309
  1,362
  1,418
  1,477
  1,539
  1,604
  1,673
  1,745
  1,821
  1,901
  1,985
  2,073
Retained Cash Flow (-), $m
  -175
  -149
  -163
  -186
  -209
  -231
  -254
  -277
  -299
  -323
  -346
  -370
  -395
  -421
  -447
  -474
  -503
  -532
  -563
  -595
  -628
  -663
  -699
  -737
  -776
  -817
  -861
  -906
  -953
  -1,003
  -1,055
Prev. year cash balance distribution, $m
 
  1,595
  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
 
  2,252
  581
  576
  574
  574
  575
  578
  582
  587
  594
  603
  612
  623
  635
  648
  663
  679
  696
  715
  734
  756
  778
  803
  828
  856
  885
  915
  948
  982
  1,019
Discount rate, %
 
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.30
  19.22
  20.18
  21.19
  22.24
  23.36
  24.52
  25.75
  27.04
  28.39
  29.81
  31.30
  32.87
  34.51
  36.23
  38.05
  39.95
  41.95
  44.04
PV of cash for distribution, $m
 
  2,034
  469
  413
  360
  311
  267
  226
  189
  157
  128
  103
  81
  63
  48
  36
  27
  19
  13
  9
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  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
  100.0

AerCap Holdings N.V., an independent aircraft leasing company, engages in the leasing, financing, sale, and management of commercial aircraft and engines in China, the Netherlands, the United States, and internationally. The company provides aircraft asset management services, including remarketing aircraft; collecting rental and maintenance payments, monitoring aircraft maintenance, monitoring and enforcing contract compliance, and accepting delivery and redelivery of aircraft; and conducting ongoing lessee financial performance reviews. Its aircraft asset management services also comprise periodically inspecting the leased aircraft; coordinating technical modifications to aircraft to meet new lessee requirements; conducting restructurings negotiations in connection with lease defaults; repossessing aircraft; arranging and monitoring insurance coverage; registering and de-registering aircraft; arranging for aircraft and aircraft engine valuations; and providing market research services. In addition, the company offers cash management services, including treasury services, such as the financing, refinancing, hedging, and ongoing cash management of vehicles; and administrative services comprising accounting and secretarial services consisting of the preparation of budgets and financial statements, and liaising with, in the case of vehicles. Further, it provides engine leasing; certified aircraft engines, airframes, and engine parts; and supply chain solutions. Additionally, the company sells airframe parts to airlines, maintenance, repair, and overhaul service providers, as well as aircraft parts distributors. As of December 31, 2015, it owned a fleet of 1,109 aircraft. AerCap Holdings N.V. was founded in 1995 and is headquartered in Dublin, Ireland.

FINANCIAL RATIOS  of  AerCap Holdings (AER)

Valuation Ratios
P/E Ratio 8.2
Price to Sales 1.7
Price to Book 1
Price to Tangible Book
Price to Cash Flow 2.6
Price to Free Cash Flow -18.8
Growth Rates
Sales Growth Rate -1.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.7%
Cap. Spend. - 3 Yr. Gr. Rate 14%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 325.2%
Total Debt to Equity 325.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3.1%
Return On Equity 12.4%
Return On Equity - 3 Yr. Avg. 14.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 52.7%
Gross Margin - 3 Yr. Avg. 55.4%
EBITDA Margin 86.8%
EBITDA Margin - 3 Yr. Avg. 90.4%
Operating Margin 43%
Oper. Margin - 3 Yr. Avg. 44.8%
Pre-Tax Margin 23.9%
Pre-Tax Margin - 3 Yr. Avg. 25.5%
Net Profit Margin 20.9%
Net Profit Margin - 3 Yr. Avg. 22.3%
Effective Tax Rate 14.4%
Eff/ Tax Rate - 3 Yr. Avg. 14.4%
Payout Ratio 0%

AER stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AER stock intrinsic value calculation we used $5014 million for the last fiscal year's total revenue generated by AerCap Holdings. The default revenue input number comes from 2016 income statement of AerCap Holdings. 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 AER 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 10.7%, whose default value for AER is calculated based on our internal credit rating of AerCap Holdings, 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 AerCap Holdings.
    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 AER stock the variable cost ratio is equal to 55.3%.

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 AER stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.7% for AerCap Holdings.

Corporate tax rate of 27% is the nominal tax rate for AerCap Holdings. 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 AER 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 AER are equal to 696.9%.

Life of production assets of 19.3 years is the average useful life of capital assets used in AerCap Holdings 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 AER is equal to -10%. 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 - $8524 million for AerCap Holdings - 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 198.742 million for AerCap Holdings 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 AerCap Holdings at the current share price and the inputted number of shares is $9.7 billion.

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WLFC Willis Lease F 24.27 8.40  str.sell
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COMPANY NEWS

▶ 4 Stocks Flaunting Low Price-to-Cash-Flow Ratio   [Aug-17-17 09:02AM  Zacks]
▶ AerCap beats Street 2Q forecasts   [Aug-04-17 02:28AM  Associated Press]
▶ AerCap Delivers Its First A321neo to SriLankan Airlines   [Jul-03-17 07:27AM  Business Wire]
▶ AerCap orders 30 Boeing 787-9 jets   [10:47AM  Reuters]
▶ ETFs with exposure to AerCap Holdings NV : June 15, 2017   [Jun-15-17 12:55PM  Capital Cube]
▶ ETFs with exposure to AerCap Holdings NV : May 31, 2017   [May-31-17 12:18PM  Capital Cube]
▶ AerCap Delivers 767 to Atlas Air Worldwide   [May-18-17 08:00AM  Business Wire]
▶ AerCap Delivers 787 Dreamliner to Hainan Airlines   [May-10-17 07:59AM  Business Wire]
▶ AerCap misses 1Q profit forecasts   [06:48AM  Associated Press]
▶ Which Stocks Benefit As Air Carriers Trend Toward Lease Vs. Own?   [Apr-27-17 05:16PM  Investor's Business Daily]
▶ ETFs with exposure to AerCap Holdings NV : April 7, 2017   [Apr-07-17 03:42PM  Capital Cube]
▶ AerCap Holdings N.V. Announces 20-F Filing   [Mar-20-17 03:18PM  Business Wire]
▶ AerCap beats Street 4Q forecasts   [06:55AM  Associated Press]
▶ AerCap Leased, Purchased and Sold 458 Aircraft in 2016   [Jan-16-17 06:16AM  Business Wire]
▶ AerCap CFO Keith Helming to leave company   [Dec-19-16 09:07AM  at MarketWatch]
▶ Is Nordstrom, Inc. (JWN) A Good Stock To Buy?   [Nov-26-16 06:05AM  at Insider Monkey]
Stock chart of AER Financial statements of AER
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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