Intrinsic value of Air Products&Chemicals - APD

Previous Close

$148.08

  Intrinsic Value

$68.08

stock screener

  Rating & Target

str. sell

-54%

  Value-price divergence*

+74%

Previous close

$148.08

 
Intrinsic value

$68.08

 
Up/down potential

-54%

 
Rating

str. sell

 
Value-price divergence*

+74%

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

We calculate the intrinsic value of APD 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 32.5

 

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, %
  -3.75
  11.40
  10.76
  10.18
  9.67
  9.20
  8.78
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  9,524
  10,610
  11,751
  12,948
  14,200
  15,506
  16,867
  18,284
  19,758
  21,290
  22,883
  24,537
  26,257
  28,045
  29,903
  31,836
  33,847
  35,941
  38,122
  40,394
  42,763
  45,234
  47,812
  50,504
  53,316
  56,254
  59,325
  62,537
  65,896
  69,412
  73,092
Variable operating expenses, $m
 
  8,786
  9,722
  10,704
  11,730
  12,801
  13,918
  15,080
  16,289
  17,545
  18,851
  20,124
  21,534
  23,000
  24,524
  26,110
  27,759
  29,476
  31,265
  33,128
  35,071
  37,098
  39,212
  41,420
  43,726
  46,135
  48,654
  51,288
  54,043
  56,927
  59,945
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
  7,425
  8,786
  9,722
  10,704
  11,730
  12,801
  13,918
  15,080
  16,289
  17,545
  18,851
  20,124
  21,534
  23,000
  24,524
  26,110
  27,759
  29,476
  31,265
  33,128
  35,071
  37,098
  39,212
  41,420
  43,726
  46,135
  48,654
  51,288
  54,043
  56,927
  59,945
Operating income, $m
  2,099
  1,824
  2,029
  2,245
  2,470
  2,705
  2,949
  3,204
  3,469
  3,745
  4,031
  4,414
  4,723
  5,044
  5,379
  5,726
  6,088
  6,465
  6,857
  7,266
  7,692
  8,136
  8,600
  9,084
  9,590
  10,119
  10,671
  11,249
  11,853
  12,485
  13,147
EBITDA, $m
  3,025
  2,840
  3,146
  3,467
  3,802
  4,151
  4,516
  4,895
  5,290
  5,700
  6,126
  6,569
  7,030
  7,508
  8,006
  8,523
  9,062
  9,622
  10,206
  10,814
  11,449
  12,110
  12,800
  13,521
  14,274
  15,060
  15,883
  16,743
  17,642
  18,583
  19,568
Interest expense (income), $m
  121
  137
  176
  216
  259
  303
  350
  398
  448
  500
  555
  611
  670
  731
  795
  860
  929
  1,000
  1,075
  1,152
  1,233
  1,317
  1,405
  1,496
  1,592
  1,691
  1,796
  1,905
  2,019
  2,138
  2,263
Earnings before tax, $m
  2,132
  1,687
  1,854
  2,028
  2,211
  2,401
  2,600
  2,806
  3,021
  3,245
  3,477
  3,802
  4,053
  4,313
  4,584
  4,866
  5,159
  5,464
  5,782
  6,114
  6,459
  6,819
  7,196
  7,588
  7,998
  8,427
  8,875
  9,344
  9,834
  10,347
  10,884
Tax expense, $m
  586
  455
  500
  548
  597
  648
  702
  758
  816
  876
  939
  1,027
  1,094
  1,165
  1,238
  1,314
  1,393
  1,475
  1,561
  1,651
  1,744
  1,841
  1,943
  2,049
  2,160
  2,275
  2,396
  2,523
  2,655
  2,794
  2,939
Net income, $m
  631
  1,231
  1,353
  1,481
  1,614
  1,753
  1,898
  2,049
  2,206
  2,369
  2,538
  2,776
  2,959
  3,149
  3,346
  3,552
  3,766
  3,989
  4,221
  4,463
  4,715
  4,978
  5,253
  5,539
  5,839
  6,152
  6,479
  6,821
  7,179
  7,554
  7,946

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,293
  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
  18,029
  18,646
  20,653
  22,756
  24,955
  27,251
  29,643
  32,134
  34,724
  37,417
  40,216
  43,124
  46,146
  49,288
  52,554
  55,951
  59,486
  63,165
  66,998
  70,991
  75,155
  79,497
  84,029
  88,760
  93,701
  98,865
  104,262
  109,906
  115,811
  121,989
  128,456
Adjusted assets (=assets-cash), $m
  16,736
  18,646
  20,653
  22,756
  24,955
  27,251
  29,643
  32,134
  34,724
  37,417
  40,216
  43,124
  46,146
  49,288
  52,554
  55,951
  59,486
  63,165
  66,998
  70,991
  75,155
  79,497
  84,029
  88,760
  93,701
  98,865
  104,262
  109,906
  115,811
  121,989
  128,456
Revenue / Adjusted assets
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
  0.569
Average production assets, $m
  8,950
  9,973
  11,046
  12,171
  13,348
  14,575
  15,855
  17,187
  18,573
  20,013
  21,510
  23,065
  24,682
  26,362
  28,109
  29,926
  31,817
  33,785
  35,835
  37,970
  40,197
  42,520
  44,944
  47,474
  50,117
  52,879
  55,766
  58,785
  61,943
  65,247
  68,706
Working capital, $m
  1,034
  1,156
  1,281
  1,411
  1,548
  1,690
  1,839
  1,993
  2,154
  2,321
  2,494
  2,675
  2,862
  3,057
  3,259
  3,470
  3,689
  3,918
  4,155
  4,403
  4,661
  4,930
  5,212
  5,505
  5,811
  6,132
  6,466
  6,817
  7,183
  7,566
  7,967
Total debt, $m
  5,211
  5,021
  6,179
  7,392
  8,661
  9,986
  11,366
  12,803
  14,298
  15,852
  17,466
  19,144
  20,888
  22,701
  24,586
  26,546
  28,585
  30,708
  32,920
  35,224
  37,626
  40,132
  42,747
  45,476
  48,328
  51,307
  54,421
  57,678
  61,085
  64,650
  68,381
Total liabilities, $m
  10,949
  10,759
  11,917
  13,130
  14,399
  15,724
  17,104
  18,541
  20,036
  21,590
  23,204
  24,882
  26,626
  28,439
  30,324
  32,284
  34,323
  36,446
  38,658
  40,962
  43,364
  45,870
  48,485
  51,214
  54,066
  57,045
  60,159
  63,416
  66,823
  70,388
  74,119
Total equity, $m
  7,080
  7,887
  8,736
  9,626
  10,556
  11,527
  12,539
  13,593
  14,688
  15,827
  17,011
  18,241
  19,520
  20,849
  22,230
  23,667
  25,162
  26,719
  28,340
  30,029
  31,790
  33,627
  35,544
  37,545
  39,636
  41,820
  44,103
  46,490
  48,988
  51,601
  54,337
Total liabilities and equity, $m
  18,029
  18,646
  20,653
  22,756
  24,955
  27,251
  29,643
  32,134
  34,724
  37,417
  40,215
  43,123
  46,146
  49,288
  52,554
  55,951
  59,485
  63,165
  66,998
  70,991
  75,154
  79,497
  84,029
  88,759
  93,702
  98,865
  104,262
  109,906
  115,811
  121,989
  128,456
Debt-to-equity ratio
  0.736
  0.640
  0.710
  0.770
  0.820
  0.870
  0.910
  0.940
  0.970
  1.000
  1.030
  1.050
  1.070
  1.090
  1.110
  1.120
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.230
  1.240
  1.250
  1.250
  1.260
Adjusted equity ratio
  0.402
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423
  0.423

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  631
  1,231
  1,353
  1,481
  1,614
  1,753
  1,898
  2,049
  2,206
  2,369
  2,538
  2,776
  2,959
  3,149
  3,346
  3,552
  3,766
  3,989
  4,221
  4,463
  4,715
  4,978
  5,253
  5,539
  5,839
  6,152
  6,479
  6,821
  7,179
  7,554
  7,946
Depreciation, amort., depletion, $m
  926
  1,017
  1,117
  1,222
  1,332
  1,447
  1,566
  1,691
  1,820
  1,955
  2,095
  2,156
  2,307
  2,464
  2,627
  2,797
  2,974
  3,157
  3,349
  3,549
  3,757
  3,974
  4,200
  4,437
  4,684
  4,942
  5,212
  5,494
  5,789
  6,098
  6,421
Funds from operations, $m
  2,608
  2,248
  2,470
  2,703
  2,946
  3,200
  3,464
  3,740
  4,026
  4,323
  4,633
  4,931
  5,265
  5,612
  5,973
  6,349
  6,740
  7,146
  7,570
  8,012
  8,472
  8,952
  9,453
  9,976
  10,523
  11,094
  11,691
  12,315
  12,968
  13,651
  14,367
Change in working capital, $m
  -20
  118
  124
  130
  136
  142
  148
  154
  161
  167
  174
  180
  187
  195
  203
  211
  219
  228
  238
  248
  258
  269
  281
  293
  306
  320
  335
  350
  366
  383
  401
Cash from operations, $m
  2,628
  2,130
  2,345
  2,572
  2,809
  3,057
  3,316
  3,585
  3,865
  4,156
  4,459
  4,751
  5,078
  5,418
  5,771
  6,138
  6,520
  6,918
  7,332
  7,764
  8,214
  8,683
  9,172
  9,683
  10,216
  10,773
  11,356
  11,965
  12,602
  13,268
  13,966
Maintenance CAPEX, $m
  0
  -836
  -932
  -1,032
  -1,137
  -1,247
  -1,362
  -1,482
  -1,606
  -1,736
  -1,870
  -2,010
  -2,156
  -2,307
  -2,464
  -2,627
  -2,797
  -2,974
  -3,157
  -3,349
  -3,549
  -3,757
  -3,974
  -4,200
  -4,437
  -4,684
  -4,942
  -5,212
  -5,494
  -5,789
  -6,098
New CAPEX, $m
  -1,056
  -1,023
  -1,073
  -1,125
  -1,176
  -1,228
  -1,280
  -1,332
  -1,385
  -1,440
  -1,497
  -1,555
  -1,617
  -1,680
  -1,747
  -1,817
  -1,891
  -1,968
  -2,050
  -2,136
  -2,227
  -2,323
  -2,424
  -2,530
  -2,643
  -2,762
  -2,887
  -3,019
  -3,158
  -3,305
  -3,459
Cash from investing activities, $m
  -1,069
  -1,859
  -2,005
  -2,157
  -2,313
  -2,475
  -2,642
  -2,814
  -2,991
  -3,176
  -3,367
  -3,565
  -3,773
  -3,987
  -4,211
  -4,444
  -4,688
  -4,942
  -5,207
  -5,485
  -5,776
  -6,080
  -6,398
  -6,730
  -7,080
  -7,446
  -7,829
  -8,231
  -8,652
  -9,094
  -9,557
Free cash flow, $m
  1,559
  270
  340
  415
  496
  582
  674
  771
  873
  980
  1,092
  1,185
  1,306
  1,431
  1,560
  1,694
  1,833
  1,977
  2,125
  2,279
  2,438
  2,603
  2,774
  2,952
  3,136
  3,328
  3,527
  3,734
  3,950
  4,175
  4,409
Issuance/(repayment) of debt, $m
  331
  1,103
  1,158
  1,214
  1,269
  1,325
  1,380
  1,437
  1,495
  1,554
  1,615
  1,678
  1,744
  1,813
  1,885
  1,960
  2,040
  2,123
  2,211
  2,304
  2,402
  2,506
  2,615
  2,730
  2,851
  2,979
  3,114
  3,257
  3,407
  3,565
  3,732
Issuance/(repurchase) of shares, $m
  141
  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  
  450
  1,103
  1,158
  1,214
  1,269
  1,325
  1,380
  1,437
  1,495
  1,554
  1,615
  1,678
  1,744
  1,813
  1,885
  1,960
  2,040
  2,123
  2,211
  2,304
  2,402
  2,506
  2,615
  2,730
  2,851
  2,979
  3,114
  3,257
  3,407
  3,565
  3,732
Total cash flow (excl. dividends), $m
  2,016
  1,373
  1,498
  1,628
  1,765
  1,907
  2,054
  2,208
  2,368
  2,534
  2,707
  2,863
  3,050
  3,243
  3,445
  3,654
  3,873
  4,100
  4,336
  4,583
  4,840
  5,109
  5,389
  5,682
  5,988
  6,307
  6,641
  6,991
  7,357
  7,740
  8,140
Retained Cash Flow (-), $m
  169
  -807
  -849
  -890
  -930
  -971
  -1,012
  -1,053
  -1,096
  -1,139
  -1,184
  -1,230
  -1,278
  -1,329
  -1,382
  -1,437
  -1,495
  -1,557
  -1,621
  -1,689
  -1,761
  -1,837
  -1,917
  -2,001
  -2,090
  -2,184
  -2,283
  -2,388
  -2,498
  -2,613
  -2,736
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
 
  565
  649
  739
  834
  936
  1,042
  1,155
  1,272
  1,395
  1,523
  1,633
  1,771
  1,915
  2,063
  2,217
  2,377
  2,543
  2,715
  2,894
  3,079
  3,272
  3,472
  3,681
  3,897
  4,123
  4,358
  4,603
  4,859
  5,126
  5,405
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
 
  542
  594
  643
  687
  725
  757
  780
  795
  801
  798
  776
  756
  728
  693
  651
  604
  553
  500
  446
  391
  338
  288
  241
  199
  160
  127
  99
  75
  56
  41
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

Air Products and Chemicals, Inc. provides atmospheric gases, process and specialty gases, electronics and performance materials, equipment, and services worldwide. The company produces atmospheric gases, including oxygen, nitrogen, argon, and rare gases; process gases, such as hydrogen, helium, carbon dioxide, carbon monoxide, syngas, and specialty gases; and equipment for the production or processing of gases comprising air separation units and non-cryogenic generators for customers in various industries, including metals, glass, chemical processing, electronics, energy production and refining, food processing, metallurgical, medical, and general manufacturing. It also designs and manufactures equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and liquid helium and liquid hydrogen transport and storage. Air Products and Chemicals, Inc. was founded in 1940 and is headquartered in Allentown, Pennsylvania.

FINANCIAL RATIOS  of  Air Products&Chemicals (APD)

Valuation Ratios
P/E Ratio 51
Price to Sales 3.4
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow 20.5
Growth Rates
Sales Growth Rate -3.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.6%
Cap. Spend. - 3 Yr. Gr. Rate -7.1%
Financial Strength
Quick Ratio 1
Current Ratio 0.3
LT Debt to Equity 55.2%
Total Debt to Equity 73.6%
Interest Coverage 19
Management Effectiveness
Return On Assets 4.1%
Ret/ On Assets - 3 Yr. Avg. 6%
Return On Total Capital 5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.3%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 13.4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 32.8%
Gross Margin - 3 Yr. Avg. 29.9%
EBITDA Margin 33.4%
EBITDA Margin - 3 Yr. Avg. 28.3%
Operating Margin 22%
Oper. Margin - 3 Yr. Avg. 17.3%
Pre-Tax Margin 22.4%
Pre-Tax Margin - 3 Yr. Avg. 17.7%
Net Profit Margin 6.6%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 27.5%
Eff/ Tax Rate - 3 Yr. Avg. 26.2%
Payout Ratio 114.3%

APD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APD stock intrinsic value calculation we used $9524 million for the last fiscal year's total revenue generated by Air Products&Chemicals. The default revenue input number comes from 2016 income statement of Air Products&Chemicals. 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 APD stock valuation model: a) initial revenue growth rate of 11.4% 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 APD is calculated based on our internal credit rating of Air Products&Chemicals, 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 Air Products&Chemicals.
    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 APD stock the variable cost ratio is equal to 82.9%.

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 APD 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 Air Products&Chemicals.

Corporate tax rate of 27% is the nominal tax rate for Air Products&Chemicals. 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 APD 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 APD are equal to 94%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Air Products&Chemicals 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 APD is equal to 10.9%. 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 - $7080 million for Air Products&Chemicals - 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 219.292 million for Air Products&Chemicals 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 Air Products&Chemicals at the current share price and the inputted number of shares is $32.5 billion.

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COMPANY NEWS

▶ Air Products and Chemicals Strengthens Its Gas Supply   [Aug-14-17 05:05PM  Market Realist]
▶ Air Products & Chemicals: Analysts Recommendations   [Aug-07-17 10:37AM  Market Realist]
▶ APDs Industrial Gases-EMEAs Segment Fell in 3Q17   [Aug-04-17 02:05PM  Market Realist]
▶ Air Products & Chemicals Stock Price Rose   [10:49AM  Market Realist]
▶ Top Ranked Income Stocks to Buy for August 2nd   [Aug-02-17 09:59AM  Zacks]
▶ Air Products and Chemicals posts 3Q profit   [Aug-01-17 10:58PM  Associated Press]
▶ How Analysts View APDs Fiscal 3Q17 Adjusted Earnings   [Jul-27-17 10:39AM  Market Realist]
▶ Air Products Declares Quarterly Dividend   [Jul-20-17 01:08PM  PR Newswire]
▶ Air Products Publishes Sustainability Report   [Jul-10-17 12:00PM  PR Newswire]
▶ Why APDs Latest Valuations Matter   [Jun-22-17 09:06AM  Market Realist]
▶ Whats the Latest Street View of APD?   [07:36AM  Market Realist]
▶ How Consistent Is APDs Dividend?   [Jun-21-17 10:38AM  Market Realist]
▶ APD to Pay Its Third Dividend This Year   [09:09AM  Market Realist]
▶ Air Products and Linde North America Form Joint Venture   [Jun-19-17 11:35AM  Market Realist]
▶ 2 Top Helium Stocks to Buy in 2017   [May-30-17 12:07PM  Motley Fool]
▶ Air Products Declares Quarterly Dividend   [May-18-17 11:30AM  PR Newswire]
▶ Bill Ackman Comments on Air Products and Chemicals   [May-12-17 03:52PM  GuruFocus.com]
▶ Bill Ackman's 1st Quarter Shareholder Letter   [01:32PM  GuruFocus.com]
Stock chart of APD Financial statements of APD
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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