Intrinsic value of American Tower REIT - AMT

Previous Close

$139.59

  Intrinsic Value

$35.02

stock screener

  Rating & Target

str. sell

-75%

  Value-price divergence*

0%

Previous close

$139.59

 
Intrinsic value

$35.02

 
Up/down potential

-75%

 
Rating

str. sell

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of AMT 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 59.9

 

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, %
  21.25
  15.30
  14.27
  13.34
  12.51
  11.76
  11.08
  10.47
  9.93
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
  6.91
  6.72
  6.55
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  5,786
  6,671
  7,623
  8,640
  9,721
  10,864
  12,068
  13,332
  14,656
  16,038
  17,480
  18,982
  20,545
  22,169
  23,858
  25,613
  27,437
  29,333
  31,303
  33,352
  35,484
  37,703
  40,013
  42,419
  44,927
  47,543
  50,271
  53,120
  56,094
  59,201
  62,448
Variable operating expenses, $m
 
  4,452
  5,015
  5,617
  6,256
  6,932
  7,644
  8,391
  9,174
  9,991
  10,844
  11,225
  12,149
  13,110
  14,109
  15,147
  16,225
  17,346
  18,511
  19,723
  20,984
  22,296
  23,662
  25,085
  26,568
  28,115
  29,728
  31,413
  33,171
  35,009
  36,929
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
  3,931
  4,452
  5,015
  5,617
  6,256
  6,932
  7,644
  8,391
  9,174
  9,991
  10,844
  11,225
  12,149
  13,110
  14,109
  15,147
  16,225
  17,346
  18,511
  19,723
  20,984
  22,296
  23,662
  25,085
  26,568
  28,115
  29,728
  31,413
  33,171
  35,009
  36,929
Operating income, $m
  1,854
  2,219
  2,608
  3,024
  3,465
  3,932
  4,424
  4,941
  5,482
  6,047
  6,636
  7,757
  8,395
  9,059
  9,750
  10,467
  11,212
  11,987
  12,792
  13,629
  14,500
  15,407
  16,351
  17,334
  18,359
  19,428
  20,543
  21,707
  22,922
  24,192
  25,519
EBITDA, $m
  3,380
  4,167
  4,762
  5,397
  6,073
  6,787
  7,539
  8,328
  9,155
  10,019
  10,919
  11,857
  12,833
  13,848
  14,903
  16,000
  17,139
  18,323
  19,554
  20,834
  22,166
  23,552
  24,995
  26,498
  28,065
  29,698
  31,403
  33,182
  35,040
  36,981
  39,009
Interest expense (income), $m
  645
  659
  792
  934
  1,085
  1,246
  1,416
  1,596
  1,784
  1,981
  2,187
  2,401
  2,625
  2,858
  3,100
  3,351
  3,612
  3,884
  4,166
  4,459
  4,764
  5,082
  5,412
  5,756
  6,114
  6,488
  6,877
  7,283
  7,707
  8,150
  8,613
Earnings before tax, $m
  1,126
  1,560
  1,816
  2,090
  2,380
  2,686
  3,008
  3,345
  3,698
  4,066
  4,449
  5,355
  5,770
  6,202
  6,650
  7,116
  7,600
  8,103
  8,626
  9,170
  9,736
  10,325
  10,939
  11,578
  12,245
  12,940
  13,666
  14,424
  15,215
  16,042
  16,906
Tax expense, $m
  156
  421
  490
  564
  643
  725
  812
  903
  998
  1,098
  1,201
  1,446
  1,558
  1,674
  1,795
  1,921
  2,052
  2,188
  2,329
  2,476
  2,629
  2,788
  2,953
  3,126
  3,306
  3,494
  3,690
  3,894
  4,108
  4,331
  4,565
Net income, $m
  956
  1,139
  1,326
  1,526
  1,737
  1,961
  2,196
  2,442
  2,699
  2,968
  3,248
  3,909
  4,212
  4,527
  4,854
  5,195
  5,548
  5,915
  6,297
  6,694
  7,107
  7,537
  7,985
  8,452
  8,939
  9,447
  9,976
  10,529
  11,107
  11,711
  12,342

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  791
  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
  30,879
  34,746
  39,704
  45,002
  50,631
  56,585
  62,855
  69,439
  76,331
  83,532
  91,042
  98,864
  107,003
  115,466
  124,262
  133,403
  142,902
  152,775
  163,038
  173,710
  184,813
  196,368
  208,399
  220,933
  233,996
  247,619
  261,831
  276,665
  292,155
  308,338
  325,250
Adjusted assets (=assets-cash), $m
  30,088
  34,746
  39,704
  45,002
  50,631
  56,585
  62,855
  69,439
  76,331
  83,532
  91,042
  98,864
  107,003
  115,466
  124,262
  133,403
  142,902
  152,775
  163,038
  173,710
  184,813
  196,368
  208,399
  220,933
  233,996
  247,619
  261,831
  276,665
  292,155
  308,338
  325,250
Revenue / Adjusted assets
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
Average production assets, $m
  20,748
  23,923
  27,337
  30,985
  34,860
  38,959
  43,277
  47,809
  52,555
  57,513
  62,684
  68,069
  73,673
  79,499
  85,556
  91,850
  98,390
  105,187
  112,254
  119,602
  127,246
  135,202
  143,485
  152,115
  161,109
  170,488
  180,274
  190,487
  201,152
  212,294
  223,939
Working capital, $m
  59
  -567
  -648
  -734
  -826
  -923
  -1,026
  -1,133
  -1,246
  -1,363
  -1,486
  -1,613
  -1,746
  -1,884
  -2,028
  -2,177
  -2,332
  -2,493
  -2,661
  -2,835
  -3,016
  -3,205
  -3,401
  -3,606
  -3,819
  -4,041
  -4,273
  -4,515
  -4,768
  -5,032
  -5,308
Total debt, $m
  18,533
  22,006
  25,943
  30,150
  34,619
  39,346
  44,325
  49,552
  55,025
  60,743
  66,706
  72,916
  79,378
  86,098
  93,082
  100,340
  107,882
  115,721
  123,870
  132,344
  141,159
  150,334
  159,887
  169,839
  180,211
  191,027
  202,312
  214,090
  226,389
  239,238
  252,667
Total liabilities, $m
  24,115
  27,588
  31,525
  35,732
  40,201
  44,928
  49,907
  55,134
  60,607
  66,325
  72,288
  78,498
  84,960
  91,680
  98,664
  105,922
  113,464
  121,303
  129,452
  137,926
  146,741
  155,916
  165,469
  175,421
  185,793
  196,609
  207,894
  219,672
  231,971
  244,820
  258,249
Total equity, $m
  6,764
  7,158
  8,179
  9,270
  10,430
  11,656
  12,948
  14,304
  15,724
  17,208
  18,755
  20,366
  22,043
  23,786
  25,598
  27,481
  29,438
  31,472
  33,586
  35,784
  38,071
  40,452
  42,930
  45,512
  48,203
  51,009
  53,937
  56,993
  60,184
  63,518
  67,002
Total liabilities and equity, $m
  30,879
  34,746
  39,704
  45,002
  50,631
  56,584
  62,855
  69,438
  76,331
  83,533
  91,043
  98,864
  107,003
  115,466
  124,262
  133,403
  142,902
  152,775
  163,038
  173,710
  184,812
  196,368
  208,399
  220,933
  233,996
  247,618
  261,831
  276,665
  292,155
  308,338
  325,251
Debt-to-equity ratio
  2.740
  3.070
  3.170
  3.250
  3.320
  3.380
  3.420
  3.460
  3.500
  3.530
  3.560
  3.580
  3.600
  3.620
  3.640
  3.650
  3.660
  3.680
  3.690
  3.700
  3.710
  3.720
  3.720
  3.730
  3.740
  3.740
  3.750
  3.760
  3.760
  3.770
  3.770
Adjusted equity ratio
  0.199
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  956
  1,139
  1,326
  1,526
  1,737
  1,961
  2,196
  2,442
  2,699
  2,968
  3,248
  3,909
  4,212
  4,527
  4,854
  5,195
  5,548
  5,915
  6,297
  6,694
  7,107
  7,537
  7,985
  8,452
  8,939
  9,447
  9,976
  10,529
  11,107
  11,711
  12,342
Depreciation, amort., depletion, $m
  1,526
  1,948
  2,154
  2,374
  2,607
  2,854
  3,114
  3,387
  3,673
  3,972
  4,283
  4,101
  4,438
  4,789
  5,154
  5,533
  5,927
  6,337
  6,762
  7,205
  7,665
  8,145
  8,644
  9,164
  9,705
  10,270
  10,860
  11,475
  12,118
  12,789
  13,490
Funds from operations, $m
  2,600
  3,087
  3,479
  3,899
  4,345
  4,815
  5,310
  5,829
  6,373
  6,940
  7,531
  8,010
  8,651
  9,316
  10,008
  10,728
  11,475
  12,252
  13,059
  13,899
  14,773
  15,682
  16,629
  17,616
  18,644
  19,717
  20,836
  22,004
  23,225
  24,499
  25,832
Change in working capital, $m
  -104
  -75
  -81
  -86
  -92
  -97
  -102
  -107
  -112
  -118
  -123
  -128
  -133
  -138
  -144
  -149
  -155
  -161
  -167
  -174
  -181
  -189
  -196
  -205
  -213
  -222
  -232
  -242
  -253
  -264
  -276
Cash from operations, $m
  2,704
  3,163
  3,560
  3,986
  4,436
  4,912
  5,412
  5,937
  6,485
  7,057
  7,654
  8,138
  8,783
  9,455
  10,152
  10,877
  11,630
  12,413
  13,227
  14,073
  14,954
  15,871
  16,825
  17,820
  18,857
  19,939
  21,068
  22,247
  23,477
  24,764
  26,108
Maintenance CAPEX, $m
  0
  -1,250
  -1,441
  -1,647
  -1,867
  -2,100
  -2,347
  -2,607
  -2,880
  -3,166
  -3,465
  -3,776
  -4,101
  -4,438
  -4,789
  -5,154
  -5,533
  -5,927
  -6,337
  -6,762
  -7,205
  -7,665
  -8,145
  -8,644
  -9,164
  -9,705
  -10,270
  -10,860
  -11,475
  -12,118
  -12,789
New CAPEX, $m
  -683
  -3,175
  -3,414
  -3,648
  -3,876
  -4,099
  -4,317
  -4,533
  -4,746
  -4,958
  -5,171
  -5,385
  -5,604
  -5,827
  -6,056
  -6,294
  -6,540
  -6,797
  -7,066
  -7,348
  -7,644
  -7,956
  -8,284
  -8,630
  -8,994
  -9,379
  -9,785
  -10,213
  -10,665
  -11,142
  -11,645
Cash from investing activities, $m
  -2,107
  -4,425
  -4,855
  -5,295
  -5,743
  -6,199
  -6,664
  -7,140
  -7,626
  -8,124
  -8,636
  -9,161
  -9,705
  -10,265
  -10,845
  -11,448
  -12,073
  -12,724
  -13,403
  -14,110
  -14,849
  -15,621
  -16,429
  -17,274
  -18,158
  -19,084
  -20,055
  -21,073
  -22,140
  -23,260
  -24,434
Free cash flow, $m
  597
  -1,262
  -1,295
  -1,309
  -1,306
  -1,287
  -1,252
  -1,203
  -1,141
  -1,067
  -982
  -1,024
  -921
  -810
  -693
  -571
  -443
  -312
  -176
  -37
  105
  249
  397
  547
  700
  855
  1,013
  1,173
  1,337
  1,504
  1,675
Issuance/(repayment) of debt, $m
  589
  3,712
  3,937
  4,206
  4,470
  4,727
  4,979
  5,227
  5,473
  5,718
  5,963
  6,211
  6,462
  6,720
  6,984
  7,258
  7,542
  7,839
  8,149
  8,474
  8,815
  9,175
  9,553
  9,952
  10,372
  10,816
  11,284
  11,778
  12,299
  12,849
  13,429
Issuance/(repurchase) of shares, $m
  -15
  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  
  787
  3,712
  3,937
  4,206
  4,470
  4,727
  4,979
  5,227
  5,473
  5,718
  5,963
  6,211
  6,462
  6,720
  6,984
  7,258
  7,542
  7,839
  8,149
  8,474
  8,815
  9,175
  9,553
  9,952
  10,372
  10,816
  11,284
  11,778
  12,299
  12,849
  13,429
Total cash flow (excl. dividends), $m
  1,352
  2,450
  2,642
  2,898
  3,164
  3,440
  3,727
  4,024
  4,332
  4,651
  4,981
  5,187
  5,541
  5,909
  6,291
  6,687
  7,099
  7,527
  7,973
  8,437
  8,920
  9,424
  9,950
  10,499
  11,072
  11,671
  12,297
  12,951
  13,636
  14,353
  15,103
Retained Cash Flow (-), $m
  -112
  -946
  -1,021
  -1,091
  -1,160
  -1,226
  -1,292
  -1,356
  -1,420
  -1,483
  -1,547
  -1,611
  -1,677
  -1,743
  -1,812
  -1,883
  -1,957
  -2,034
  -2,114
  -2,199
  -2,287
  -2,380
  -2,478
  -2,582
  -2,691
  -2,806
  -2,928
  -3,056
  -3,191
  -3,334
  -3,484
Prev. year cash balance distribution, $m
 
  552
  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
 
  2,056
  1,621
  1,806
  2,004
  2,214
  2,435
  2,668
  2,912
  3,168
  3,434
  3,575
  3,865
  4,166
  4,479
  4,804
  5,142
  5,493
  5,859
  6,238
  6,633
  7,044
  7,471
  7,917
  8,381
  8,865
  9,369
  9,896
  10,445
  11,019
  11,619
Discount rate, %
 
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
 
  1,864
  1,320
  1,308
  1,277
  1,227
  1,161
  1,079
  986
  885
  780
  649
  551
  459
  373
  297
  231
  175
  129
  93
  65
  44
  29
  19
  11
  7
  4
  2
  1
  1
  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

American Tower Corporation (ATC) is a holding company. The Company operates as a real estate investment trust (REIT), which owns, operates and develops multitenant communications real estate. ATC's segments include U.S. property, Asia property, EMEA property, Latin America property, Services and Other. Its primary business is property operations, which include the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities, and tenants in various other industries. Its U.S. property segment includes operations in the United States. Its Asia property segment includes operations in India. The EMEA property segment includes operations in Germany, Ghana, Nigeria, South Africa and Uganda. The Latin America property segment includes operations in Brazil, Chile, Colombia, Costa Rica, Mexico and Peru. Its services segment offers tower-related services in the United States.

FINANCIAL RATIOS  of  American Tower REIT (AMT)

Valuation Ratios
P/E Ratio 62.4
Price to Sales 10.3
Price to Book 8.8
Price to Tangible Book
Price to Cash Flow 22
Price to Free Cash Flow 29.5
Growth Rates
Sales Growth Rate 21.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.3%
Cap. Spend. - 3 Yr. Gr. Rate -1.2%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 270.5%
Total Debt to Equity 274%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity 14.3%
Return On Equity - 3 Yr. Avg. 16.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 69%
Gross Margin - 3 Yr. Avg. 71.6%
EBITDA Margin 57%
EBITDA Margin - 3 Yr. Avg. 57.5%
Operating Margin 32.1%
Oper. Margin - 3 Yr. Avg. 33.5%
Pre-Tax Margin 19.5%
Pre-Tax Margin - 3 Yr. Avg. 19.3%
Net Profit Margin 16.5%
Net Profit Margin - 3 Yr. Avg. 17%
Effective Tax Rate 13.9%
Eff/ Tax Rate - 3 Yr. Avg. 13.4%
Payout Ratio 92.7%

AMT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMT stock intrinsic value calculation we used $5786 million for the last fiscal year's total revenue generated by American Tower REIT. The default revenue input number comes from 2016 income statement of American Tower REIT. 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 AMT stock valuation model: a) initial revenue growth rate of 15.3% 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 10.3%, whose default value for AMT is calculated based on our internal credit rating of American Tower REIT, 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 American Tower REIT.
    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 AMT stock the variable cost ratio is equal to 67.9%.

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 AMT 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 3.6% for American Tower REIT.

Corporate tax rate of 27% is the nominal tax rate for American Tower REIT. 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 AMT 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 AMT are equal to 358.6%.

Life of production assets of 16.6 years is the average useful life of capital assets used in American Tower REIT 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 AMT is equal to -8.5%. 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 - $6764 million for American Tower REIT - 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 429.146 million for American Tower REIT 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 American Tower REIT at the current share price and the inputted number of shares is $59.9 billion.

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Financial statements of AMT
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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