Intrinsic value of Assured Guaranty - AGO

Previous Close

$42.67

  Intrinsic Value

$289.48

stock screener

  Rating & Target

str. buy

+578%

  Value-price divergence*

0%

Previous close

$42.67

 
Intrinsic value

$289.48

 
Up/down potential

+578%

 
Rating

str. buy

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of AGO 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 5.2

 

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, %
  -23.34
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  0
  2,765
  4,272
  6,388
  9,269
  13,077
  17,978
  24,132
  31,687
  40,773
  51,500
  63,951
  78,186
  94,240
  112,128
  131,842
  153,364
  176,662
  201,700
  228,436
  256,829
  286,844
  318,449
  351,619
  386,340
  422,607
  460,424
  499,806
  540,782
  583,387
  627,669
Variable operating expenses, $m
 
  594
  918
  1,373
  1,993
  2,812
  3,865
  5,188
  6,813
  8,766
  11,072
  13,749
  16,810
  20,262
  24,107
  28,346
  32,973
  37,982
  43,365
  49,114
  55,218
  61,672
  68,467
  75,598
  83,063
  90,860
  98,991
  107,458
  116,268
  125,428
  134,949
Fixed operating expenses, $m
 
  250
  256
  263
  269
  276
  283
  290
  297
  305
  312
  320
  328
  336
  345
  353
  362
  371
  381
  390
  400
  410
  420
  431
  441
  452
  464
  475
  487
  499
  512
Total operating expenses, $m
  609
  844
  1,174
  1,636
  2,262
  3,088
  4,148
  5,478
  7,110
  9,071
  11,384
  14,069
  17,138
  20,598
  24,452
  28,699
  33,335
  38,353
  43,746
  49,504
  55,618
  62,082
  68,887
  76,029
  83,504
  91,312
  99,455
  107,933
  116,755
  125,927
  135,461
Operating income, $m
  1,119
  1,920
  3,097
  4,752
  7,007
  9,990
  13,830
  18,653
  24,577
  31,702
  40,115
  49,881
  61,048
  73,642
  87,675
  103,143
  120,029
  138,309
  157,954
  178,932
  201,211
  224,763
  249,562
  275,591
  302,836
  331,294
  360,969
  391,873
  424,026
  457,459
  492,208
EBITDA, $m
  1,119
  1,920
  3,097
  4,752
  7,007
  9,990
  13,830
  18,653
  24,577
  31,702
  40,115
  49,881
  61,048
  73,642
  87,675
  103,143
  120,029
  138,309
  157,954
  178,932
  201,211
  224,763
  249,562
  275,591
  302,836
  331,294
  360,969
  391,873
  424,026
  457,459
  492,208
Interest expense (income), $m
  95
  95
  430
  917
  1,601
  2,532
  3,763
  5,346
  7,334
  9,776
  12,711
  16,177
  20,201
  24,800
  29,988
  35,767
  42,137
  49,091
  56,619
  64,709
  73,348
  82,522
  92,221
  102,433
  113,151
  124,369
  136,088
  148,307
  161,032
  174,272
  188,038
Earnings before tax, $m
  1,017
  1,825
  2,666
  3,835
  5,406
  7,457
  10,067
  13,307
  17,242
  21,927
  27,403
  33,704
  40,847
  48,842
  57,688
  67,375
  77,891
  89,217
  101,334
  114,223
  127,863
  142,240
  157,342
  173,158
  189,685
  206,925
  224,881
  243,566
  262,994
  283,188
  304,170
Tax expense, $m
  136
  493
  720
  1,035
  1,460
  2,014
  2,718
  3,593
  4,655
  5,920
  7,399
  9,100
  11,029
  13,187
  15,576
  18,191
  21,031
  24,089
  27,360
  30,840
  34,523
  38,405
  42,482
  46,753
  51,215
  55,870
  60,718
  65,763
  71,009
  76,461
  82,126
Net income, $m
  881
  1,332
  1,946
  2,799
  3,946
  5,444
  7,349
  9,714
  12,587
  16,006
  20,004
  24,604
  29,819
  35,655
  42,112
  49,184
  56,861
  65,129
  73,974
  83,382
  93,340
  103,836
  114,859
  126,405
  138,470
  151,055
  164,163
  177,803
  191,986
  206,727
  222,044

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
  14,151
  22,662
  35,013
  52,362
  75,975
  107,190
  147,361
  197,802
  259,727
  334,205
  422,128
  524,187
  640,869
  772,463
  919,078
  1,080,673
  1,257,082
  1,448,053
  1,653,277
  1,872,423
  2,105,159
  2,351,183
  2,610,237
  2,882,126
  3,166,725
  3,463,990
  3,773,963
  4,096,773
  4,432,636
  4,781,857
  5,144,827
Adjusted assets (=assets-cash), $m
  14,151
  22,662
  35,013
  52,362
  75,975
  107,190
  147,361
  197,802
  259,727
  334,205
  422,128
  524,187
  640,869
  772,463
  919,078
  1,080,673
  1,257,082
  1,448,053
  1,653,277
  1,872,423
  2,105,159
  2,351,183
  2,610,237
  2,882,126
  3,166,725
  3,463,990
  3,773,963
  4,096,773
  4,432,636
  4,781,857
  5,144,827
Revenue / Adjusted assets
  0.000
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
  0.122
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
  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 debt, $m
  1,306
  5,897
  12,566
  21,935
  34,686
  51,542
  73,234
  100,472
  133,911
  174,130
  221,608
  276,720
  339,728
  410,789
  489,961
  577,222
  672,483
  775,608
  886,429
  1,004,767
  1,130,445
  1,263,298
  1,403,187
  1,550,007
  1,703,690
  1,864,214
  2,031,599
  2,205,916
  2,387,282
  2,575,862
  2,771,866
Total liabilities, $m
  7,647
  12,238
  18,907
  28,276
  41,027
  57,883
  79,575
  106,813
  140,252
  180,471
  227,949
  283,061
  346,069
  417,130
  496,302
  583,563
  678,824
  781,949
  892,770
  1,011,108
  1,136,786
  1,269,639
  1,409,528
  1,556,348
  1,710,031
  1,870,555
  2,037,940
  2,212,257
  2,393,623
  2,582,203
  2,778,207
Total equity, $m
  6,504
  10,425
  16,106
  24,087
  34,949
  49,307
  67,786
  90,989
  119,474
  153,734
  194,179
  241,126
  294,800
  355,333
  422,776
  497,109
  578,258
  666,104
  760,508
  861,314
  968,373
  1,081,544
  1,200,709
  1,325,778
  1,456,693
  1,593,435
  1,736,023
  1,884,515
  2,039,012
  2,199,654
  2,366,621
Total liabilities and equity, $m
  14,151
  22,663
  35,013
  52,363
  75,976
  107,190
  147,361
  197,802
  259,726
  334,205
  422,128
  524,187
  640,869
  772,463
  919,078
  1,080,672
  1,257,082
  1,448,053
  1,653,278
  1,872,422
  2,105,159
  2,351,183
  2,610,237
  2,882,126
  3,166,724
  3,463,990
  3,773,963
  4,096,772
  4,432,635
  4,781,857
  5,144,828
Debt-to-equity ratio
  0.201
  0.570
  0.780
  0.910
  0.990
  1.050
  1.080
  1.100
  1.120
  1.130
  1.140
  1.150
  1.150
  1.160
  1.160
  1.160
  1.160
  1.160
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
  1.170
Adjusted equity ratio
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460
  0.460

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  881
  1,332
  1,946
  2,799
  3,946
  5,444
  7,349
  9,714
  12,587
  16,006
  20,004
  24,604
  29,819
  35,655
  42,112
  49,184
  56,861
  65,129
  73,974
  83,382
  93,340
  103,836
  114,859
  126,405
  138,470
  151,055
  164,163
  177,803
  191,986
  206,727
  222,044
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
  -928
  1,332
  1,946
  2,799
  3,946
  5,444
  7,349
  9,714
  12,587
  16,006
  20,004
  24,604
  29,819
  35,655
  42,112
  49,184
  56,861
  65,129
  73,974
  83,382
  93,340
  103,836
  114,859
  126,405
  138,470
  151,055
  164,163
  177,803
  191,986
  206,727
  222,044
Change in working capital, $m
  -787
  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 operations, $m
  -141
  1,332
  1,946
  2,799
  3,946
  5,444
  7,349
  9,714
  12,587
  16,006
  20,004
  24,604
  29,819
  35,655
  42,112
  49,184
  56,861
  65,129
  73,974
  83,382
  93,340
  103,836
  114,859
  126,405
  138,470
  151,055
  164,163
  177,803
  191,986
  206,727
  222,044
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
  1,076
  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
  935
  1,332
  1,946
  2,799
  3,946
  5,444
  7,349
  9,714
  12,587
  16,006
  20,004
  24,604
  29,819
  35,655
  42,112
  49,184
  56,861
  65,129
  73,974
  83,382
  93,340
  103,836
  114,859
  126,405
  138,470
  151,055
  164,163
  177,803
  191,986
  206,727
  222,044
Issuance/(repayment) of debt, $m
  -2
  4,591
  6,670
  9,368
  12,751
  16,856
  21,693
  27,238
  33,439
  40,218
  47,478
  55,112
  63,008
  71,061
  79,172
  87,261
  95,261
  103,124
  110,821
  118,338
  125,678
  132,853
  139,889
  146,820
  153,683
  160,523
  167,385
  174,317
  181,366
  188,580
  196,004
Issuance/(repurchase) of shares, $m
  -306
  2,588
  3,735
  5,181
  6,916
  8,915
  11,130
  13,488
  15,898
  18,254
  20,440
  22,343
  23,855
  24,878
  25,331
  25,149
  24,288
  22,718
  20,429
  17,424
  13,719
  9,335
  4,306
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -909
  7,179
  10,405
  14,549
  19,667
  25,771
  32,823
  40,726
  49,337
  58,472
  67,918
  77,455
  86,863
  95,939
  104,503
  112,410
  119,549
  125,842
  131,250
  135,762
  139,397
  142,188
  144,195
  146,820
  153,683
  160,523
  167,385
  174,317
  181,366
  188,580
  196,004
Total cash flow (excl. dividends), $m
  21
  8,511
  12,351
  17,349
  23,613
  31,215
  40,171
  50,441
  61,925
  74,478
  87,923
  102,059
  116,682
  131,594
  146,615
  161,595
  176,409
  190,971
  205,225
  219,145
  232,736
  246,024
  259,054
  273,225
  292,154
  311,578
  331,549
  352,120
  373,352
  395,306
  418,048
Retained Cash Flow (-), $m
  -441
  -3,921
  -5,681
  -7,981
  -10,862
  -14,359
  -18,479
  -23,203
  -28,485
  -34,260
  -40,445
  -46,947
  -53,674
  -60,533
  -67,443
  -74,333
  -81,148
  -87,847
  -94,403
  -100,807
  -107,059
  -113,171
  -119,165
  -125,069
  -130,915
  -136,742
  -142,588
  -148,492
  -154,497
  -160,642
  -166,966
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
 
  4,591
  6,670
  9,368
  12,751
  16,856
  21,693
  27,238
  33,439
  40,218
  47,478
  55,112
  63,008
  71,061
  79,172
  87,261
  95,261
  103,124
  110,821
  118,338
  125,678
  132,853
  139,889
  148,156
  161,238
  174,836
  188,961
  203,628
  218,855
  234,665
  251,082
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  4,397
  6,093
  8,127
  10,453
  12,990
  15,629
  18,239
  20,680
  22,816
  24,532
  25,738
  26,379
  26,440
  25,939
  24,927
  23,481
  21,690
  19,657
  17,482
  15,259
  13,072
  10,990
  9,148
  7,695
  6,337
  5,106
  4,022
  3,095
  2,324
  1,703
Current shareholders' claim on cash, %
  100
  66.9
  46.3
  33.1
  24.4
  18.5
  14.5
  11.6
  9.5
  8.0
  6.9
  6.0
  5.4
  4.8
  4.5
  4.1
  3.9
  3.7
  3.6
  3.5
  3.4
  3.4
  3.4
  3.4
  3.4
  3.4
  3.4
  3.4
  3.4
  3.4
  3.4

Assured Guaranty Ltd., through its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. It offers financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. The company insures various debt obligations, including bonds issued by the United States state or municipal governmental authorities; and notes issued to finance infrastructure projects. It also insures and reinsures various types of the United States public finance obligations, such as general obligation, tax-backed, municipal utility, transportation, healthcare, higher education, housing revenue, infrastructure, investor-owned utility, and other public finance bonds; and various types of non-United States public finance obligations comprising infrastructure finance, regulated utilities, pooled infrastructure, and other public finance obligations. In addition, the company insures and reinsures various types of the United States and non-United States structured finance obligations, including pooled corporate obligations, residential mortgage-backed securities, financial products, consumer receivables securities, commercial mortgage-backed securities, commercial receivables securities, insurance securitization obligations, and other structured finance securities. Assured Guaranty Ltd. markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. The company was founded in 2003 and is based in Hamilton, Bermuda.

FINANCIAL RATIOS  of  Assured Guaranty (AGO)

Valuation Ratios
P/E Ratio 6.2
Price to Sales 3.2
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow -38.7
Price to Free Cash Flow -38.7
Growth Rates
Sales Growth Rate -23.3%
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 NaN
Current Ratio NaN
LT Debt to Equity 20.1%
Total Debt to Equity 20.1%
Interest Coverage 12
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 11.6%
Ret/ On T. Cap. - 3 Yr. Avg. 14.3%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 17.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 64.4%
EBITDA Margin - 3 Yr. Avg. 70.1%
Operating Margin 64.8%
Oper. Margin - 3 Yr. Avg. 70.4%
Pre-Tax Margin 58.9%
Pre-Tax Margin - 3 Yr. Avg. 65.4%
Net Profit Margin 51%
Net Profit Margin - 3 Yr. Avg. 50.1%
Effective Tax Rate 13.4%
Eff/ Tax Rate - 3 Yr. Avg. 22.8%
Payout Ratio 7.8%

AGO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AGO stock intrinsic value calculation we used $1728 million for the last fiscal year's total revenue generated by Assured Guaranty. The default revenue input number comes from 2016 income statement of Assured Guaranty. 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 AGO stock valuation model: a) initial revenue growth rate of 60% 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 4.4%, whose default value for AGO is calculated based on our internal credit rating of Assured Guaranty, 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 Assured Guaranty.
    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 AGO stock the variable cost ratio is equal to 21.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $244 million in the base year in the intrinsic value calculation for AGO 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 7.3% for Assured Guaranty.

Corporate tax rate of 27% is the nominal tax rate for Assured Guaranty. 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 AGO 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 AGO are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Assured Guaranty 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 AGO is equal to 0%. 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 - $6504 million for Assured Guaranty - 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 122.689 million for Assured Guaranty 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 Assured Guaranty at the current share price and the inputted number of shares is $5.2 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Assured Guaranty posts 2Q profit   [Aug-02-17 10:54PM  Associated Press]
▶ [$$] Investors Raise Bets Against Bond Insurers   [Aug-01-17 06:58PM  The Wall Street Journal]
▶ [$$] Puerto Rico's New Opportunities   [Jul-15-17 12:01AM  Barrons.com]
▶ Newmont Mining: Ready to Shine?   [Jun-15-17 03:59PM  Barrons.com]
▶ Assured Guaranty posts 1Q profit   [May-05-17 05:02AM  Associated Press]
▶ [$$] Puerto Rico Bankruptcy Is 'Beginning of the Story' for Investors   [May-04-17 07:14PM  The Wall Street Journal]
▶ [$$] Insurers Win Market Approval for New Prepa Deal   [Apr-07-17 03:54PM  The Wall Street Journal]
▶ [$$] Puerto Rico Creditors Unite Against Federal Board's Plan   [Mar-27-17 09:41PM  The Wall Street Journal]
▶ Assured Guaranty posts 4Q profit   [05:29PM  Associated Press]
▶ Assured Guaranty boosts dividend by nearly 10%   [Feb-22-17 07:29AM  at MarketWatch]
▶ Why Ambac Financial Group Stock Is Getting Crushed Today   [Dec-19-16 12:51PM  at Motley Fool]
Stock chart of AGO Financial statements of AGO
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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