Intrinsic value of AerCap Holdings - AER

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$45.64

  Intrinsic Value

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  Value-price divergence*

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$45.64

 
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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 9.1

 

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, %
  -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
  2,915
  2,982
  3,059
  3,145
  3,240
  3,345
  3,459
  3,582
  3,715
  3,857
  4,010
  4,173
  4,346
  4,530
  4,726
  4,933
  5,152
  5,384
  5,629
  5,887
  6,160
  6,448
  6,751
  7,071
  7,408
  7,762
  8,135
  8,528
  8,941
  9,375
Interest expense (income), $m
  1,339
  970
  990
  1,017
  1,048
  1,083
  1,122
  1,164
  1,210
  1,260
  1,313
  1,371
  1,433
  1,498
  1,569
  1,643
  1,722
  1,806
  1,894
  1,988
  2,087
  2,192
  2,302
  2,418
  2,541
  2,670
  2,806
  2,949
  3,100
  3,259
  3,426
Earnings before tax, $m
  1,200
  1,316
  1,348
  1,381
  1,418
  1,458
  1,501
  1,549
  1,599
  1,654
  1,712
  1,774
  1,840
  1,910
  1,984
  2,063
  2,146
  2,235
  2,328
  2,426
  2,530
  2,639
  2,755
  2,876
  3,004
  3,139
  3,281
  3,430
  3,587
  3,753
  3,926
Tax expense, $m
  173
  355
  364
  373
  383
  394
  405
  418
  432
  446
  462
  479
  497
  516
  536
  557
  580
  603
  628
  655
  683
  713
  744
  777
  811
  848
  886
  926
  969
  1,013
  1,060
Net income, $m
  1,047
  961
  984
  1,008
  1,035
  1,064
  1,096
  1,130
  1,167
  1,207
  1,249
  1,295
  1,343
  1,394
  1,448
  1,506
  1,567
  1,631
  1,699
  1,771
  1,847
  1,927
  2,011
  2,100
  2,193
  2,292
  2,395
  2,504
  2,619
  2,739
  2,866

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
  40,270
  41,196
  42,255
  43,443
  44,761
  46,206
  47,779
  49,483
  51,318
  53,287
  55,394
  57,642
  60,036
  62,580
  65,280
  68,140
  71,169
  74,371
  77,755
  81,327
  85,097
  89,073
  93,263
  97,678
  102,328
  107,224
  112,378
  117,801
  123,506
  129,506
Adjusted assets (=assets-cash), $m
  39,585
  40,270
  41,196
  42,255
  43,443
  44,761
  46,206
  47,779
  49,483
  51,318
  53,287
  55,394
  57,642
  60,036
  62,580
  65,280
  68,140
  71,169
  74,371
  77,755
  81,327
  85,097
  89,073
  93,263
  97,678
  102,328
  107,224
  112,378
  117,801
  123,506
  129,506
Revenue / Adjusted assets
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
  0.127
Average production assets, $m
  34,943
  3,145
  3,218
  3,300
  3,393
  3,496
  3,609
  3,732
  3,865
  4,008
  4,162
  4,327
  4,502
  4,689
  4,888
  5,099
  5,322
  5,559
  5,809
  6,073
  6,352
  6,647
  6,957
  7,284
  7,629
  7,992
  8,375
  8,777
  9,201
  9,646
  10,115
Working capital, $m
  0
  -2,076
  -2,124
  -2,179
  -2,240
  -2,308
  -2,382
  -2,464
  -2,551
  -2,646
  -2,748
  -2,856
  -2,972
  -3,096
  -3,227
  -3,366
  -3,513
  -3,670
  -3,835
  -4,009
  -4,193
  -4,388
  -4,593
  -4,809
  -5,036
  -5,276
  -5,529
  -5,794
  -6,074
  -6,368
  -6,678
Total debt, $m
  27,717
  28,291
  29,065
  29,950
  30,944
  32,045
  33,253
  34,568
  35,993
  37,527
  39,173
  40,935
  42,814
  44,815
  46,942
  49,199
  51,590
  54,122
  56,799
  59,628
  62,615
  65,766
  69,090
  72,593
  76,284
  80,172
  84,265
  88,573
  93,106
  97,876
  102,892
Total liabilities, $m
  33,096
  33,666
  34,440
  35,325
  36,319
  37,420
  38,628
  39,943
  41,368
  42,902
  44,548
  46,310
  48,189
  50,190
  52,317
  54,574
  56,965
  59,497
  62,174
  65,003
  67,990
  71,141
  74,465
  77,968
  81,659
  85,547
  89,640
  93,948
  98,481
  103,251
  108,267
Total equity, $m
  8,524
  6,604
  6,756
  6,930
  7,125
  7,341
  7,578
  7,836
  8,115
  8,416
  8,739
  9,085
  9,453
  9,846
  10,263
  10,706
  11,175
  11,672
  12,197
  12,752
  13,338
  13,956
  14,608
  15,295
  16,019
  16,782
  17,585
  18,430
  19,319
  20,255
  21,239
Total liabilities and equity, $m
  41,620
  40,270
  41,196
  42,255
  43,444
  44,761
  46,206
  47,779
  49,483
  51,318
  53,287
  55,395
  57,642
  60,036
  62,580
  65,280
  68,140
  71,169
  74,371
  77,755
  81,328
  85,097
  89,073
  93,263
  97,678
  102,329
  107,225
  112,378
  117,800
  123,506
  129,506
Debt-to-equity ratio
  3.252
  4.280
  4.300
  4.320
  4.340
  4.370
  4.390
  4.410
  4.440
  4.460
  4.480
  4.510
  4.530
  4.550
  4.570
  4.600
  4.620
  4.640
  4.660
  4.680
  4.690
  4.710
  4.730
  4.750
  4.760
  4.780
  4.790
  4.810
  4.820
  4.830
  4.840
Adjusted equity ratio
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164
  0.164

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,047
  961
  984
  1,008
  1,035
  1,064
  1,096
  1,130
  1,167
  1,207
  1,249
  1,295
  1,343
  1,394
  1,448
  1,506
  1,567
  1,631
  1,699
  1,771
  1,847
  1,927
  2,011
  2,100
  2,193
  2,292
  2,395
  2,504
  2,619
  2,739
  2,866
Depreciation, amort., depletion, $m
  1,811
  629
  644
  660
  679
  699
  722
  746
  773
  802
  832
  865
  900
  938
  978
  1,020
  1,064
  1,112
  1,162
  1,215
  1,270
  1,329
  1,391
  1,457
  1,526
  1,598
  1,675
  1,755
  1,840
  1,929
  2,023
Funds from operations, $m
  3,646
  1,590
  1,628
  1,669
  1,714
  1,764
  1,818
  1,877
  1,940
  2,009
  2,082
  2,160
  2,243
  2,332
  2,426
  2,526
  2,631
  2,743
  2,861
  2,986
  3,117
  3,256
  3,402
  3,557
  3,719
  3,890
  4,070
  4,260
  4,459
  4,669
  4,889
Change in working capital, $m
  265
  -41
  -48
  -55
  -61
  -68
  -75
  -81
  -88
  -95
  -102
  -109
  -116
  -123
  -131
  -139
  -148
  -156
  -165
  -174
  -184
  -194
  -205
  -216
  -228
  -240
  -252
  -266
  -280
  -294
  -309
Cash from operations, $m
  3,381
  1,113
  1,676
  1,723
  1,775
  1,831
  1,892
  1,958
  2,028
  2,103
  2,183
  2,269
  2,359
  2,455
  2,557
  2,665
  2,779
  2,899
  3,026
  3,160
  3,301
  3,450
  3,607
  3,773
  3,947
  4,130
  4,323
  4,525
  4,739
  4,963
  5,199
Maintenance CAPEX, $m
  0
  -617
  -629
  -644
  -660
  -679
  -699
  -722
  -746
  -773
  -802
  -832
  -865
  -900
  -938
  -978
  -1,020
  -1,064
  -1,112
  -1,162
  -1,215
  -1,270
  -1,329
  -1,391
  -1,457
  -1,526
  -1,598
  -1,675
  -1,755
  -1,840
  -1,929
New CAPEX, $m
  -3,840
  -63
  -72
  -83
  -93
  -103
  -113
  -123
  -133
  -143
  -154
  -165
  -176
  -187
  -199
  -211
  -223
  -237
  -250
  -264
  -279
  -294
  -311
  -327
  -345
  -363
  -382
  -403
  -424
  -446
  -469
Cash from investing activities, $m
  -1,331
  -680
  -701
  -727
  -753
  -782
  -812
  -845
  -879
  -916
  -956
  -997
  -1,041
  -1,087
  -1,137
  -1,189
  -1,243
  -1,301
  -1,362
  -1,426
  -1,494
  -1,564
  -1,640
  -1,718
  -1,802
  -1,889
  -1,980
  -2,078
  -2,179
  -2,286
  -2,398
Free cash flow, $m
  2,050
  434
  974
  997
  1,022
  1,050
  1,080
  1,113
  1,149
  1,187
  1,228
  1,272
  1,318
  1,368
  1,421
  1,476
  1,536
  1,598
  1,664
  1,734
  1,808
  1,886
  1,968
  2,054
  2,145
  2,241
  2,342
  2,448
  2,560
  2,677
  2,801
Issuance/(repayment) of debt, $m
  -1,572
  574
  774
  885
  994
  1,101
  1,208
  1,316
  1,424
  1,534
  1,646
  1,761
  1,880
  2,001
  2,127
  2,257
  2,392
  2,532
  2,677
  2,829
  2,987
  3,152
  3,324
  3,503
  3,691
  3,888
  4,093
  4,308
  4,534
  4,769
  5,017
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
  574
  774
  885
  994
  1,101
  1,208
  1,316
  1,424
  1,534
  1,646
  1,761
  1,880
  2,001
  2,127
  2,257
  2,392
  2,532
  2,677
  2,829
  2,987
  3,152
  3,324
  3,503
  3,691
  3,888
  4,093
  4,308
  4,534
  4,769
  5,017
Total cash flow (excl. dividends), $m
  -368
  1,007
  1,749
  1,882
  2,016
  2,151
  2,288
  2,429
  2,573
  2,721
  2,874
  3,033
  3,198
  3,369
  3,547
  3,733
  3,927
  4,130
  4,341
  4,563
  4,795
  5,037
  5,291
  5,557
  5,836
  6,128
  6,435
  6,756
  7,093
  7,447
  7,817
Retained Cash Flow (-), $m
  -175
  -115
  -152
  -174
  -195
  -216
  -237
  -258
  -279
  -301
  -323
  -346
  -369
  -393
  -417
  -443
  -469
  -497
  -525
  -555
  -586
  -618
  -652
  -687
  -724
  -763
  -803
  -845
  -889
  -936
  -984
Prev. year cash balance distribution, $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
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
 
  2,927
  1,597
  1,708
  1,821
  1,935
  2,051
  2,171
  2,293
  2,420
  2,551
  2,688
  2,829
  2,977
  3,130
  3,291
  3,458
  3,633
  3,816
  4,008
  4,209
  4,419
  4,639
  4,870
  5,112
  5,366
  5,632
  5,911
  6,204
  6,511
  6,833
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
 
  2,644
  1,290
  1,223
  1,141
  1,050
  952
  850
  747
  646
  549
  459
  377
  303
  239
  184
  139
  102
  74
  52
  35
  23
  15
  9
  6
  3
  2
  1
  1
  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 7.7
Price to Sales 1.6
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow -17.5
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 3.5% 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 61.5%.

Life of production assets of 1.7 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 -40.6%. 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 $9.1 billion.


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COMPANY NEWS

▶ 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 Annual reports 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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