Intrinsic value of Federal Agricultural Mortgage Cl C - AGM

Previous Close

$66.81

  Intrinsic Value

$187.74

stock screener

  Rating & Target

str. buy

+181%

  Value-price divergence*

0%

Previous close

$66.81

 
Intrinsic value

$187.74

 
Up/down potential

+181%

 
Rating

str. buy

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of AGM 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 0.7

 

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, %
  17.74
  23.00
  21.20
  19.58
  18.12
  16.81
  15.63
  14.57
  13.61
  12.75
  11.97
  11.28
  10.65
  10.08
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
  5.85
Revenue, $m
  312
  384
  465
  556
  657
  767
  887
  1,017
  1,155
  1,302
  1,458
  1,623
  1,795
  1,976
  2,166
  2,363
  2,569
  2,783
  3,006
  3,237
  3,478
  3,728
  3,987
  4,257
  4,538
  4,830
  5,134
  5,451
  5,780
  6,124
  6,482
Variable operating expenses, $m
 
  234
  283
  339
  400
  467
  540
  619
  703
  793
  888
  988
  1,093
  1,204
  1,319
  1,439
  1,564
  1,695
  1,830
  1,971
  2,118
  2,270
  2,428
  2,593
  2,764
  2,942
  3,127
  3,319
  3,520
  3,729
  3,947
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
  196
  234
  283
  339
  400
  467
  540
  619
  703
  793
  888
  988
  1,093
  1,204
  1,319
  1,439
  1,564
  1,695
  1,830
  1,971
  2,118
  2,270
  2,428
  2,593
  2,764
  2,942
  3,127
  3,319
  3,520
  3,729
  3,947
Operating income, $m
  116
  150
  182
  217
  257
  300
  347
  397
  452
  509
  570
  634
  702
  773
  847
  924
  1,004
  1,088
  1,175
  1,266
  1,360
  1,457
  1,559
  1,665
  1,774
  1,889
  2,007
  2,131
  2,260
  2,394
  2,534
EBITDA, $m
  116
  150
  182
  217
  257
  300
  347
  397
  452
  509
  570
  634
  702
  773
  847
  924
  1,004
  1,088
  1,175
  1,266
  1,360
  1,457
  1,559
  1,665
  1,774
  1,889
  2,007
  2,131
  2,260
  2,394
  2,534
Interest expense (income), $m
  111
  518
  599
  727
  870
  1,029
  1,203
  1,392
  1,596
  1,814
  2,045
  2,291
  2,550
  2,822
  3,107
  3,405
  3,716
  4,040
  4,378
  4,728
  5,093
  5,472
  5,865
  6,275
  6,700
  7,142
  7,602
  8,081
  8,579
  9,098
  9,639
Earnings before tax, $m
  119
  -368
  -417
  -510
  -614
  -729
  -856
  -995
  -1,144
  -1,304
  -1,475
  -1,657
  -1,848
  -2,049
  -2,261
  -2,481
  -2,712
  -2,952
  -3,202
  -3,463
  -3,733
  -4,014
  -4,306
  -4,610
  -4,926
  -5,254
  -5,595
  -5,950
  -6,319
  -6,704
  -7,105
Tax expense, $m
  42
  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
Net income, $m
  77
  -368
  -417
  -510
  -614
  -729
  -856
  -995
  -1,144
  -1,304
  -1,475
  -1,657
  -1,848
  -2,049
  -2,261
  -2,481
  -2,712
  -2,952
  -3,202
  -3,463
  -3,733
  -4,014
  -4,306
  -4,610
  -4,926
  -5,254
  -5,595
  -5,950
  -6,319
  -6,704
  -7,105

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  265
  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
  15,606
  19,188
  23,256
  27,809
  32,849
  38,371
  44,368
  50,830
  57,748
  65,110
  72,906
  81,127
  89,766
  98,818
  108,280
  118,152
  128,439
  139,145
  150,279
  161,853
  173,881
  186,380
  199,370
  212,873
  226,912
  241,516
  256,713
  272,534
  289,013
  306,186
  324,092
Adjusted assets (=assets-cash), $m
  15,341
  19,188
  23,256
  27,809
  32,849
  38,371
  44,368
  50,830
  57,748
  65,110
  72,906
  81,127
  89,766
  98,818
  108,280
  118,152
  128,439
  139,145
  150,279
  161,853
  173,881
  186,380
  199,370
  212,873
  226,912
  241,516
  256,713
  272,534
  289,013
  306,186
  324,092
Revenue / Adjusted assets
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
  0.020
Average production assets, $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
Working capital, $m
  0
  192
  233
  278
  328
  384
  444
  508
  577
  651
  729
  811
  898
  988
  1,083
  1,182
  1,284
  1,391
  1,503
  1,619
  1,739
  1,864
  1,994
  2,129
  2,269
  2,415
  2,567
  2,725
  2,890
  3,062
  3,241
Total debt, $m
  14,806
  17,112
  20,773
  24,871
  29,407
  34,377
  39,774
  45,590
  51,816
  58,442
  65,458
  72,857
  80,632
  88,779
  97,295
  106,180
  115,438
  125,073
  135,094
  145,511
  156,336
  167,585
  179,276
  191,428
  204,064
  217,207
  230,884
  245,124
  259,955
  275,411
  291,526
Total liabilities, $m
  14,963
  17,269
  20,930
  25,028
  29,564
  34,534
  39,931
  45,747
  51,973
  58,599
  65,615
  73,014
  80,789
  88,936
  97,452
  106,337
  115,595
  125,230
  135,251
  145,668
  156,493
  167,742
  179,433
  191,585
  204,221
  217,364
  231,041
  245,281
  260,112
  275,568
  291,683
Total equity, $m
  643
  1,919
  2,326
  2,781
  3,285
  3,837
  4,437
  5,083
  5,775
  6,511
  7,291
  8,113
  8,977
  9,882
  10,828
  11,815
  12,844
  13,914
  15,028
  16,185
  17,388
  18,638
  19,937
  21,287
  22,691
  24,152
  25,671
  27,253
  28,901
  30,619
  32,409
Total liabilities and equity, $m
  15,606
  19,188
  23,256
  27,809
  32,849
  38,371
  44,368
  50,830
  57,748
  65,110
  72,906
  81,127
  89,766
  98,818
  108,280
  118,152
  128,439
  139,144
  150,279
  161,853
  173,881
  186,380
  199,370
  212,872
  226,912
  241,516
  256,712
  272,534
  289,013
  306,187
  324,092
Debt-to-equity ratio
  23.026
  8.920
  8.930
  8.940
  8.950
  8.960
  8.960
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  9.000
Adjusted equity ratio
  0.025
  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
  77
  -368
  -417
  -510
  -614
  -729
  -856
  -995
  -1,144
  -1,304
  -1,475
  -1,657
  -1,848
  -2,049
  -2,261
  -2,481
  -2,712
  -2,952
  -3,202
  -3,463
  -3,733
  -4,014
  -4,306
  -4,610
  -4,926
  -5,254
  -5,595
  -5,950
  -6,319
  -6,704
  -7,105
Depreciation, amort., depletion, $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
Funds from operations, $m
  241
  -368
  -417
  -510
  -614
  -729
  -856
  -995
  -1,144
  -1,304
  -1,475
  -1,657
  -1,848
  -2,049
  -2,261
  -2,481
  -2,712
  -2,952
  -3,202
  -3,463
  -3,733
  -4,014
  -4,306
  -4,610
  -4,926
  -5,254
  -5,595
  -5,950
  -6,319
  -6,704
  -7,105
Change in working capital, $m
  32
  36
  41
  46
  50
  55
  60
  65
  69
  74
  78
  82
  86
  91
  95
  99
  103
  107
  111
  116
  120
  125
  130
  135
  140
  146
  152
  158
  165
  172
  179
Cash from operations, $m
  209
  -404
  -458
  -555
  -664
  -784
  -916
  -1,059
  -1,213
  -1,378
  -1,553
  -1,739
  -1,934
  -2,140
  -2,355
  -2,580
  -2,815
  -3,059
  -3,314
  -3,578
  -3,853
  -4,139
  -4,436
  -4,745
  -5,066
  -5,400
  -5,747
  -6,108
  -6,484
  -6,876
  -7,284
Maintenance CAPEX, $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
New CAPEX, $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
Cash from investing activities, $m
  -593
  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
Free cash flow, $m
  -384
  -404
  -458
  -555
  -664
  -784
  -916
  -1,059
  -1,213
  -1,378
  -1,553
  -1,739
  -1,934
  -2,140
  -2,355
  -2,580
  -2,815
  -3,059
  -3,314
  -3,578
  -3,853
  -4,139
  -4,436
  -4,745
  -5,066
  -5,400
  -5,747
  -6,108
  -6,484
  -6,876
  -7,284
Issuance/(repayment) of debt, $m
  -529
  2,306
  3,661
  4,098
  4,536
  4,970
  5,397
  5,816
  6,226
  6,626
  7,016
  7,399
  7,775
  8,147
  8,516
  8,885
  9,258
  9,635
  10,021
  10,417
  10,825
  11,249
  11,691
  12,152
  12,636
  13,143
  13,677
  14,239
  14,831
  15,456
  16,115
Issuance/(repurchase) of shares, $m
  -9
  1,644
  824
  965
  1,118
  1,281
  1,456
  1,641
  1,836
  2,041
  2,255
  2,479
  2,712
  2,955
  3,207
  3,469
  3,741
  4,023
  4,316
  4,620
  4,936
  5,264
  5,605
  5,960
  6,330
  6,714
  7,114
  7,532
  7,967
  8,421
  8,896
Cash from financing (excl. dividends), $m  
  -536
  3,950
  4,485
  5,063
  5,654
  6,251
  6,853
  7,457
  8,062
  8,667
  9,271
  9,878
  10,487
  11,102
  11,723
  12,354
  12,999
  13,658
  14,337
  15,037
  15,761
  16,513
  17,296
  18,112
  18,966
  19,857
  20,791
  21,771
  22,798
  23,877
  25,011
Total cash flow (excl. dividends), $m
  -921
  3,546
  4,027
  4,508
  4,989
  5,467
  5,937
  6,398
  6,848
  7,288
  7,718
  8,139
  8,552
  8,961
  9,368
  9,774
  10,184
  10,599
  11,023
  11,458
  11,908
  12,374
  12,860
  13,367
  13,899
  14,458
  15,045
  15,663
  16,315
  17,002
  17,726
Retained Cash Flow (-), $m
  -89
  -1,644
  -824
  -965
  -1,118
  -1,281
  -1,456
  -1,641
  -1,836
  -2,041
  -2,255
  -2,479
  -2,712
  -2,955
  -3,207
  -3,469
  -3,741
  -4,023
  -4,316
  -4,620
  -4,936
  -5,264
  -5,605
  -5,960
  -6,330
  -6,714
  -7,114
  -7,532
  -7,967
  -8,421
  -8,896
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
 
  1,902
  3,203
  3,543
  3,872
  4,185
  4,481
  4,757
  5,013
  5,248
  5,463
  5,660
  5,841
  6,007
  6,161
  6,305
  6,443
  6,576
  6,707
  6,838
  6,972
  7,110
  7,255
  7,407
  7,570
  7,744
  7,930
  8,131
  8,347
  8,580
  8,831
Discount rate, %
 
  15.10
  15.86
  16.65
  17.48
  18.35
  19.27
  20.24
  21.25
  22.31
  23.43
  24.60
  25.83
  27.12
  28.47
  29.90
  31.39
  32.96
  34.61
  36.34
  38.16
  40.06
  42.07
  44.17
  46.38
  48.70
  51.13
  53.69
  56.38
  59.19
  62.15
PV of cash for distribution, $m
 
  1,653
  2,387
  2,232
  2,033
  1,802
  1,556
  1,310
  1,073
  857
  666
  504
  371
  265
  185
  125
  82
  52
  32
  19
  11
  6
  3
  2
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  29.4
  21.0
  15.1
  11.0
  8.0
  5.9
  4.4
  3.3
  2.5
  1.9
  1.4
  1.1
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Federal Agricultural Mortgage Corporation provides a secondary market for various loans made to borrowers primarily in the United States. It operates through four segments: Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. The Farm & Ranch segment purchases and retains eligible mortgage loans that are secured by first liens on agricultural real estate; securitizes eligible mortgage loans, and guarantees the timely payment of principal and interest on securities representing interests in or obligations secured by pools of eligible mortgage loans; and offers long-term standby purchase commitments on designated eligible mortgage loans. The USDA Guarantees segment purchases portions of certain agricultural, rural development, business and industry, and community facilities loans guaranteed by the United States Department of Agriculture (USDA). The Rural Utilities segment purchases and guarantees securities that are backed by eligible rural electric and telephone loans. The Institutional Credit segment purchases or guarantees general obligations of lenders that are secured by pools of the types of loans eligible for purchase under Farm & Ranch, USDA Guarantees, or Rural Utilities lines of business. This segment also provides advances against eligible loans by purchasing obligations secured by those loans. Federal Agricultural Mortgage Corporation was founded in 1987 and is headquartered in Washington, District of Columbia.

FINANCIAL RATIOS  of  Federal Agricultural Mortgage Cl C (AGM)

Valuation Ratios
P/E Ratio 9.1
Price to Sales 2.3
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 3.4
Price to Free Cash Flow 3.4
Growth Rates
Sales Growth Rate 17.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 990%
Total Debt to Equity 2302.6%
Interest Coverage 2
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 1.2%
Return On Total Capital 0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 0.4%
Return On Equity 12.9%
Return On Equity - 3 Yr. Avg. 12.1%
Asset Turnover 0
Profitability Ratios
Gross Margin 44.9%
Gross Margin - 3 Yr. Avg. 40.5%
EBITDA Margin 73.7%
EBITDA Margin - 3 Yr. Avg. 85.6%
Operating Margin 37.2%
Oper. Margin - 3 Yr. Avg. 33.2%
Pre-Tax Margin 38.1%
Pre-Tax Margin - 3 Yr. Avg. 36.4%
Net Profit Margin 24.7%
Net Profit Margin - 3 Yr. Avg. 23.5%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 23.6%
Payout Ratio 31.2%

AGM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AGM stock intrinsic value calculation we used $312 million for the last fiscal year's total revenue generated by Federal Agricultural Mortgage Cl C. The default revenue input number comes from 2016 income statement of Federal Agricultural Mortgage Cl C. 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 AGM stock valuation model: a) initial revenue growth rate of 23% 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 15.1%, whose default value for AGM is calculated based on our internal credit rating of Federal Agricultural Mortgage Cl C, 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 Federal Agricultural Mortgage Cl C.
    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 AGM stock the variable cost ratio is equal to 60.9%.

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 AGM 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 Federal Agricultural Mortgage Cl C.

Corporate tax rate of 27% is the nominal tax rate for Federal Agricultural Mortgage Cl C. 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 AGM 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 AGM are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Federal Agricultural Mortgage Cl C 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 AGM is equal to 50%. 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 - $643 million for Federal Agricultural Mortgage Cl C - 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 10.269 million for Federal Agricultural Mortgage Cl C 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 Federal Agricultural Mortgage Cl C at the current share price and the inputted number of shares is $0.7 billion.

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Stock chart of AGM Financial statements of AGM
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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