Intrinsic value of Embotelladora Andina S.A. (Series A) ADR - AKO-A

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$22.35

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of AKO-A 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 3.8

 

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, %
  -5.33
  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
  2,680
  1,914,942
  1,958,986
  2,009,331
  2,065,854
  2,128,484
  2,197,203
  2,272,033
  2,353,033
  2,440,298
  2,533,950
  2,634,142
  2,741,050
  2,854,878
  2,975,852
  3,104,221
  3,240,258
  3,384,258
  3,536,539
  3,697,442
  3,867,330
  4,046,591
  4,235,637
  4,434,905
  4,644,859
  4,865,987
  5,098,806
  5,343,863
  5,601,734
  5,873,026
  6,158,378
Variable operating expenses, $m
 
  1,503,038
  1,537,387
  1,576,652
  1,620,733
  1,669,579
  1,723,172
  1,781,531
  1,844,703
  1,912,760
  1,985,799
  2,054,355
  2,137,732
  2,226,506
  2,320,853
  2,420,967
  2,527,062
  2,639,367
  2,758,130
  2,883,617
  3,016,112
  3,155,917
  3,303,353
  3,458,762
  3,622,503
  3,794,960
  3,976,535
  4,167,654
  4,368,766
  4,580,345
  4,802,890
Fixed operating expenses, $m
 
  227,012
  232,687
  238,504
  244,467
  250,579
  256,843
  263,264
  269,846
  276,592
  283,507
  290,594
  297,859
  305,306
  312,938
  320,762
  328,781
  337,000
  345,425
  354,061
  362,913
  371,985
  381,285
  390,817
  400,588
  410,602
  420,867
  431,389
  442,174
  453,228
  464,559
Total operating expenses, $m
  2,395
  1,730,050
  1,770,074
  1,815,156
  1,865,200
  1,920,158
  1,980,015
  2,044,795
  2,114,549
  2,189,352
  2,269,306
  2,344,949
  2,435,591
  2,531,812
  2,633,791
  2,741,729
  2,855,843
  2,976,367
  3,103,555
  3,237,678
  3,379,025
  3,527,902
  3,684,638
  3,849,579
  4,023,091
  4,205,562
  4,397,402
  4,599,043
  4,810,940
  5,033,573
  5,267,449
Operating income, $m
  285
  184,892
  188,911
  194,175
  200,654
  208,327
  217,188
  227,237
  238,484
  250,946
  264,644
  289,193
  305,459
  323,066
  342,061
  362,492
  384,415
  407,891
  432,984
  459,763
  488,305
  518,688
  550,999
  585,327
  621,768
  660,424
  701,404
  744,821
  790,794
  839,453
  890,929
EBITDA, $m
  285
  334,650
  341,893
  350,842
  361,458
  373,716
  387,607
  403,134
  420,310
  439,159
  459,713
  482,012
  506,104
  532,043
  559,893
  589,721
  621,602
  655,619
  691,858
  730,416
  771,393
  814,899
  861,047
  909,962
  961,772
  1,016,615
  1,074,637
  1,135,991
  1,200,841
  1,269,358
  1,341,723
Interest expense (income), $m
  -75
  26,786
  27,728
  28,810
  30,046
  31,435
  32,973
  34,660
  36,498
  38,488
  40,631
  42,931
  45,391
  48,017
  50,813
  53,784
  56,936
  60,277
  63,814
  67,554
  71,505
  75,678
  80,080
  84,723
  89,617
  94,773
  100,204
  105,922
  111,941
  118,274
  124,937
Earnings before tax, $m
  212
  158,107
  161,183
  165,366
  170,607
  176,893
  184,215
  192,577
  201,986
  212,458
  224,013
  246,262
  260,067
  275,049
  291,248
  308,708
  327,479
  347,614
  369,170
  392,210
  416,800
  443,011
  470,918
  500,603
  532,151
  565,651
  601,200
  638,898
  678,854
  721,179
  765,993
Tax expense, $m
  73
  42,689
  43,519
  44,649
  46,064
  47,761
  49,738
  51,996
  54,536
  57,364
  60,484
  66,491
  70,218
  74,263
  78,637
  83,351
  88,419
  93,856
  99,676
  105,897
  112,536
  119,613
  127,148
  135,163
  143,681
  152,726
  162,324
  172,503
  183,291
  194,718
  206,818
Net income, $m
  136
  115,418
  117,664
  120,717
  124,543
  129,132
  134,477
  140,581
  147,450
  155,094
  163,530
  179,771
  189,849
  200,786
  212,611
  225,357
  239,060
  253,758
  269,494
  286,313
  304,264
  323,398
  343,770
  365,440
  388,470
  412,925
  438,876
  466,396
  495,563
  526,461
  559,175

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  297
  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
  3,316
  2,032,847
  2,079,602
  2,133,048
  2,193,051
  2,259,538
  2,332,487
  2,411,924
  2,497,912
  2,590,550
  2,689,968
  2,796,329
  2,909,820
  3,030,656
  3,159,078
  3,295,351
  3,439,764
  3,592,631
  3,754,288
  3,925,097
  4,105,445
  4,295,744
  4,496,430
  4,707,968
  4,930,848
  5,165,591
  5,412,745
  5,672,891
  5,946,639
  6,234,635
  6,537,557
Adjusted assets (=assets-cash), $m
  3,019
  2,032,847
  2,079,602
  2,133,048
  2,193,051
  2,259,538
  2,332,487
  2,411,924
  2,497,912
  2,590,550
  2,689,968
  2,796,329
  2,909,820
  3,030,656
  3,159,078
  3,295,351
  3,439,764
  3,592,631
  3,754,288
  3,925,097
  4,105,445
  4,295,744
  4,496,430
  4,707,968
  4,930,848
  5,165,591
  5,412,745
  5,672,891
  5,946,639
  6,234,635
  6,537,557
Revenue / Adjusted assets
  0.888
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
  0.942
Average production assets, $m
  2,001
  1,401,737
  1,433,977
  1,470,831
  1,512,205
  1,558,051
  1,608,353
  1,663,128
  1,722,420
  1,786,298
  1,854,851
  1,928,192
  2,006,449
  2,089,771
  2,178,323
  2,272,290
  2,371,869
  2,477,277
  2,588,747
  2,706,527
  2,830,885
  2,962,104
  3,100,486
  3,246,351
  3,400,037
  3,561,902
  3,732,326
  3,911,708
  4,100,469
  4,299,055
  4,507,933
Working capital, $m
  200
  13,405
  13,713
  14,065
  14,461
  14,899
  15,380
  15,904
  16,471
  17,082
  17,738
  18,439
  19,187
  19,984
  20,831
  21,730
  22,682
  23,690
  24,756
  25,882
  27,071
  28,326
  29,649
  31,044
  32,514
  34,062
  35,692
  37,407
  39,212
  41,111
  43,109
Total debt, $m
  1,184
  792,235
  823,140
  858,468
  898,130
  942,077
  990,297
  1,042,805
  1,099,643
  1,160,876
  1,226,592
  1,296,896
  1,371,914
  1,451,787
  1,536,674
  1,626,750
  1,722,207
  1,823,252
  1,930,107
  2,043,012
  2,162,222
  2,288,010
  2,420,663
  2,560,490
  2,707,814
  2,862,979
  3,026,348
  3,198,304
  3,379,252
  3,569,617
  3,769,848
Total liabilities, $m
  2,078
  1,343,712
  1,374,617
  1,409,945
  1,449,607
  1,493,554
  1,541,774
  1,594,282
  1,651,120
  1,712,353
  1,778,069
  1,848,373
  1,923,391
  2,003,264
  2,088,151
  2,178,227
  2,273,684
  2,374,729
  2,481,584
  2,594,489
  2,713,699
  2,839,487
  2,972,140
  3,111,967
  3,259,291
  3,414,456
  3,577,825
  3,749,781
  3,930,729
  4,121,094
  4,321,325
Total equity, $m
  1,237
  689,135
  704,985
  723,103
  743,444
  765,983
  790,713
  817,642
  846,792
  878,196
  911,899
  947,955
  986,429
  1,027,392
  1,070,928
  1,117,124
  1,166,080
  1,217,902
  1,272,704
  1,330,608
  1,391,746
  1,456,257
  1,524,290
  1,596,001
  1,671,557
  1,751,135
  1,834,921
  1,923,110
  2,015,911
  2,113,541
  2,216,232
Total liabilities and equity, $m
  3,315
  2,032,847
  2,079,602
  2,133,048
  2,193,051
  2,259,537
  2,332,487
  2,411,924
  2,497,912
  2,590,549
  2,689,968
  2,796,328
  2,909,820
  3,030,656
  3,159,079
  3,295,351
  3,439,764
  3,592,631
  3,754,288
  3,925,097
  4,105,445
  4,295,744
  4,496,430
  4,707,968
  4,930,848
  5,165,591
  5,412,746
  5,672,891
  5,946,640
  6,234,635
  6,537,557
Debt-to-equity ratio
  0.957
  1.150
  1.170
  1.190
  1.210
  1.230
  1.250
  1.280
  1.300
  1.320
  1.350
  1.370
  1.390
  1.410
  1.430
  1.460
  1.480
  1.500
  1.520
  1.540
  1.550
  1.570
  1.590
  1.600
  1.620
  1.630
  1.650
  1.660
  1.680
  1.690
  1.700
Adjusted equity ratio
  0.318
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339
  0.339

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  136
  115,418
  117,664
  120,717
  124,543
  129,132
  134,477
  140,581
  147,450
  155,094
  163,530
  179,771
  189,849
  200,786
  212,611
  225,357
  239,060
  253,758
  269,494
  286,313
  304,264
  323,398
  343,770
  365,440
  388,470
  412,925
  438,876
  466,396
  495,563
  526,461
  559,175
Depreciation, amort., depletion, $m
  0
  149,757
  152,981
  156,667
  160,804
  165,389
  170,419
  175,896
  181,826
  188,213
  195,069
  192,819
  200,645
  208,977
  217,832
  227,229
  237,187
  247,728
  258,875
  270,653
  283,089
  296,210
  310,049
  324,635
  340,004
  356,190
  373,233
  391,171
  410,047
  429,905
  450,793
Funds from operations, $m
  -404
  265,175
  270,645
  277,383
  285,347
  294,520
  304,896
  316,478
  329,276
  343,308
  358,599
  372,590
  390,494
  409,763
  430,443
  452,586
  476,247
  501,486
  528,369
  556,966
  587,352
  619,608
  653,819
  690,076
  728,474
  769,115
  812,108
  857,567
  905,610
  956,366
  1,009,968
Change in working capital, $m
  -741
  263
  308
  352
  396
  438
  481
  524
  567
  611
  656
  701
  748
  797
  847
  899
  952
  1,008
  1,066
  1,126
  1,189
  1,255
  1,323
  1,395
  1,470
  1,548
  1,630
  1,715
  1,805
  1,899
  1,997
Cash from operations, $m
  337
  197,382
  270,337
  277,031
  284,952
  294,082
  304,415
  315,954
  328,709
  342,697
  357,943
  371,889
  389,746
  408,966
  429,597
  451,687
  475,294
  500,478
  527,303
  555,839
  586,163
  618,353
  652,496
  688,681
  727,004
  767,568
  810,479
  855,851
  903,805
  954,467
  1,007,971
Maintenance CAPEX, $m
  0
  -137,373
  -140,174
  -143,398
  -147,083
  -151,221
  -155,805
  -160,835
  -166,313
  -172,242
  -178,630
  -185,485
  -192,819
  -200,645
  -208,977
  -217,832
  -227,229
  -237,187
  -247,728
  -258,875
  -270,653
  -283,089
  -296,210
  -310,049
  -324,635
  -340,004
  -356,190
  -373,233
  -391,171
  -410,047
  -429,905
New CAPEX, $m
  -193
  -28,011
  -32,240
  -36,853
  -41,374
  -45,846
  -50,302
  -54,775
  -59,292
  -63,878
  -68,553
  -73,340
  -78,257
  -83,322
  -88,553
  -93,966
  -99,579
  -105,408
  -111,470
  -117,781
  -124,358
  -131,219
  -138,382
  -145,865
  -153,686
  -161,866
  -170,424
  -179,382
  -188,761
  -198,586
  -208,878
Cash from investing activities, $m
  -172
  -165,384
  -172,414
  -180,251
  -188,457
  -197,067
  -206,107
  -215,610
  -225,605
  -236,120
  -247,183
  -258,825
  -271,076
  -283,967
  -297,530
  -311,798
  -326,808
  -342,595
  -359,198
  -376,656
  -395,011
  -414,308
  -434,592
  -455,914
  -478,321
  -501,870
  -526,614
  -552,615
  -579,932
  -608,633
  -638,783
Free cash flow, $m
  165
  31,998
  97,923
  96,780
  96,494
  97,016
  98,308
  100,343
  103,103
  106,577
  110,760
  113,064
  118,670
  124,999
  132,067
  139,889
  148,486
  157,883
  168,105
  179,184
  191,152
  204,046
  217,903
  232,767
  248,683
  265,698
  283,865
  303,237
  323,873
  345,835
  369,187
Issuance/(repayment) of debt, $m
  -29
  26,935
  30,905
  35,328
  39,662
  43,948
  48,220
  52,508
  56,838
  61,233
  65,716
  70,304
  75,017
  79,873
  84,887
  90,076
  95,457
  101,045
  106,855
  112,905
  119,210
  125,787
  132,654
  139,826
  147,324
  155,165
  163,369
  171,956
  180,948
  190,365
  200,231
Issuance/(repurchase) of shares, $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 financing (excl. dividends), $m  
  -46
  26,935
  30,905
  35,328
  39,662
  43,948
  48,220
  52,508
  56,838
  61,233
  65,716
  70,304
  75,017
  79,873
  84,887
  90,076
  95,457
  101,045
  106,855
  112,905
  119,210
  125,787
  132,654
  139,826
  147,324
  155,165
  163,369
  171,956
  180,948
  190,365
  200,231
Total cash flow (excl. dividends), $m
  120
  58,933
  128,828
  132,108
  136,156
  140,964
  146,528
  152,851
  159,941
  167,811
  176,475
  183,368
  193,687
  204,872
  216,954
  229,965
  243,943
  258,927
  274,961
  292,089
  310,362
  329,833
  350,557
  372,594
  396,007
  420,863
  447,234
  475,193
  504,820
  536,200
  569,419
Retained Cash Flow (-), $m
  15
  -13,204
  -15,850
  -18,118
  -20,341
  -22,539
  -24,730
  -26,929
  -29,150
  -31,404
  -33,703
  -36,056
  -38,473
  -40,964
  -43,535
  -46,197
  -48,956
  -51,822
  -54,802
  -57,904
  -61,138
  -64,511
  -68,033
  -71,711
  -75,556
  -79,578
  -83,785
  -88,189
  -92,801
  -97,630
  -102,691
Prev. year cash balance distribution, $m
 
  154,543
  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
 
  200,272
  112,978
  113,990
  115,815
  118,425
  121,798
  125,922
  130,791
  136,407
  142,772
  147,312
  155,214
  163,909
  173,419
  183,769
  194,987
  207,106
  220,159
  234,185
  249,224
  265,322
  282,524
  300,883
  320,451
  341,286
  363,448
  387,004
  412,020
  438,569
  466,728
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  192,015
  103,428
  99,202
  95,362
  91,794
  88,394
  85,071
  81,748
  78,358
  74,850
  69,956
  66,235
  62,321
  58,220
  53,951
  49,550
  45,063
  40,544
  36,058
  31,669
  27,443
  23,442
  19,720
  16,321
  13,276
  10,604
  8,306
  6,375
  4,787
  3,514
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

Embotelladora Andina S.A., together with its subsidiaries, produces, markets, and distributes Coca-Cola soft drinks in Chile, Brazil, Argentina, and Paraguay. It also offers fruit juices, ready-to-drink tea, other fruit-flavored beverages, and mineral and purified water; and flavored waters and other carbonated beverages. In addition, the company distributes non-carbonated beverages, such as fruit juices, energy and sport drinks, and waters; beer under the Amstel, Bavaria, Birra Moretti, Dos Equis (XX), Edelweiss, Heineken, Kaiser, Murphy’s, Sol, and Xingú brands; and spirits. Further, it manufactures glass and polyethylene terephthalate bottles, cases, and plastic caps. The company offers its products primarily through small retailers, restaurants and bars, supermarkets, and third party distributors. Embotelladora Andina S.A. was founded in 1946 and is headquartered in Santiago, Chile.

FINANCIAL RATIOS  of  Embotelladora Andina S.A. (Series A) ADR (AKO-A)

Valuation Ratios
P/E Ratio 155.6
Price to Sales 7.9
Price to Book 17.1
Price to Tangible Book
Price to Cash Flow 62.8
Price to Free Cash Flow 146.9
Growth Rates
Sales Growth Rate -5.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 14.2%
Cap. Spend. - 3 Yr. Gr. Rate -7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 88%
Total Debt to Equity 95.7%
Interest Coverage -2
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 5.5%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 10.9%
Return On Equity - 3 Yr. Avg. 9.9%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 41.8%
Gross Margin - 3 Yr. Avg. 40.9%
EBITDA Margin 5.1%
EBITDA Margin - 3 Yr. Avg. 3.6%
Operating Margin 10.6%
Oper. Margin - 3 Yr. Avg. 10%
Pre-Tax Margin 7.9%
Pre-Tax Margin - 3 Yr. Avg. 6.8%
Net Profit Margin 5.1%
Net Profit Margin - 3 Yr. Avg. 4.6%
Effective Tax Rate 34.4%
Eff/ Tax Rate - 3 Yr. Avg. 29.7%
Payout Ratio 75%

AKO-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AKO-A stock intrinsic value calculation we used $1877394 million for the last fiscal year's total revenue generated by Embotelladora Andina S.A. (Series A) ADR. The default revenue input number comes from 2016 income statement of Embotelladora Andina S.A. (Series A) ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AKO-A 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 4.3%, whose default value for AKO-A is calculated based on our internal credit rating of Embotelladora Andina S.A. (Series A) ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Embotelladora Andina S.A. (Series A) ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AKO-A stock the variable cost ratio is equal to 78.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $221475 million in the base year in the intrinsic value calculation for AKO-A 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 Embotelladora Andina S.A. (Series A) ADR.

Corporate tax rate of 27% is the nominal tax rate for Embotelladora Andina S.A. (Series A) ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AKO-A 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 AKO-A are equal to 73.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Embotelladora Andina S.A. (Series A) ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AKO-A is equal to 0.7%. 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 - $830474 million for Embotelladora Andina S.A. (Series A) ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 170.791 million for Embotelladora Andina S.A. (Series A) ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Embotelladora Andina S.A. (Series A) ADR at the current share price and the inputted number of shares is $3.8 billion.


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Stock chart of AKO-A Financial statements of AKO-A
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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