Intrinsic value of Alexandria Real Estate Equities - ARE

Previous Close

$121.90

  Intrinsic Value

$13.91

stock screener

  Rating & Target

str. sell

-89%

  Value-price divergence*

+7%

Previous close

$121.90

 
Intrinsic value

$13.91

 
Up/down potential

-89%

 
Rating

str. sell

 
Value-price divergence*

+7%

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

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

We calculate the intrinsic value of ARE 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 10.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.37
  25.50
  23.45
  21.61
  19.94
  18.45
  17.11
  15.89
  14.81
  13.82
  12.94
  12.15
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
Revenue, $m
  922
  1,157
  1,428
  1,737
  2,084
  2,468
  2,890
  3,349
  3,845
  4,377
  4,943
  5,544
  6,178
  6,844
  7,543
  8,274
  9,037
  9,832
  10,660
  11,521
  12,416
  13,346
  14,313
  15,318
  16,362
  17,447
  18,576
  19,751
  20,974
  22,248
  23,575
Variable operating expenses, $m
 
  832
  1,027
  1,249
  1,498
  1,774
  2,078
  2,408
  2,765
  3,147
  3,554
  3,986
  4,442
  4,921
  5,424
  5,949
  6,498
  7,069
  7,664
  8,284
  8,927
  9,596
  10,291
  11,013
  11,764
  12,545
  13,356
  14,201
  15,081
  15,996
  16,951
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
  868
  832
  1,027
  1,249
  1,498
  1,774
  2,078
  2,408
  2,765
  3,147
  3,554
  3,986
  4,442
  4,921
  5,424
  5,949
  6,498
  7,069
  7,664
  8,284
  8,927
  9,596
  10,291
  11,013
  11,764
  12,545
  13,356
  14,201
  15,081
  15,996
  16,951
Operating income, $m
  54
  325
  401
  488
  585
  693
  812
  941
  1,081
  1,230
  1,389
  1,558
  1,736
  1,923
  2,120
  2,325
  2,539
  2,763
  2,995
  3,237
  3,489
  3,750
  4,022
  4,304
  4,598
  4,903
  5,220
  5,550
  5,894
  6,252
  6,625
EBITDA, $m
  367
  718
  886
  1,078
  1,293
  1,531
  1,793
  2,078
  2,386
  2,716
  3,067
  3,440
  3,833
  4,246
  4,680
  5,134
  5,607
  6,100
  6,614
  7,148
  7,703
  8,280
  8,880
  9,504
  10,151
  10,825
  11,525
  12,254
  13,013
  13,803
  14,627
Interest expense (income), $m
  85
  146
  195
  251
  315
  387
  467
  555
  650
  753
  864
  981
  1,106
  1,238
  1,376
  1,521
  1,673
  1,831
  1,996
  2,168
  2,347
  2,533
  2,726
  2,927
  3,136
  3,352
  3,578
  3,812
  4,056
  4,310
  4,575
Earnings before tax, $m
  -50
  179
  206
  237
  270
  306
  345
  386
  430
  477
  525
  577
  630
  686
  744
  804
  866
  931
  999
  1,069
  1,142
  1,217
  1,296
  1,377
  1,462
  1,550
  1,642
  1,738
  1,837
  1,941
  2,050
Tax expense, $m
  0
  48
  56
  64
  73
  83
  93
  104
  116
  129
  142
  156
  170
  185
  201
  217
  234
  251
  270
  289
  308
  329
  350
  372
  395
  419
  443
  469
  496
  524
  553
Net income, $m
  -66
  131
  151
  173
  197
  223
  252
  282
  314
  348
  384
  421
  460
  501
  543
  587
  633
  680
  729
  780
  833
  889
  946
  1,005
  1,067
  1,132
  1,199
  1,269
  1,341
  1,417
  1,496

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  125
  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
  10,355
  12,857
  15,872
  19,301
  23,150
  27,421
  32,112
  37,216
  42,726
  48,632
  54,927
  61,599
  68,642
  76,048
  83,813
  91,934
  100,411
  109,246
  118,443
  128,010
  137,955
  148,292
  159,032
  170,195
  181,797
  193,859
  206,405
  219,459
  233,048
  247,201
  261,948
Adjusted assets (=assets-cash), $m
  10,230
  12,857
  15,872
  19,301
  23,150
  27,421
  32,112
  37,216
  42,726
  48,632
  54,927
  61,599
  68,642
  76,048
  83,813
  91,934
  100,411
  109,246
  118,443
  128,010
  137,955
  148,292
  159,032
  170,195
  181,797
  193,859
  206,405
  219,459
  233,048
  247,201
  261,948
Revenue / Adjusted assets
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
  0.090
Average production assets, $m
  8,294
  10,408
  12,849
  15,625
  18,741
  22,199
  25,996
  30,128
  34,589
  39,370
  44,466
  49,867
  55,569
  61,565
  67,851
  74,425
  81,288
  88,440
  95,886
  103,631
  111,682
  120,049
  128,745
  137,781
  147,173
  156,939
  167,095
  177,663
  188,664
  200,122
  212,060
Working capital, $m
  0
  -116
  -143
  -174
  -208
  -247
  -289
  -335
  -385
  -438
  -494
  -554
  -618
  -684
  -754
  -827
  -904
  -983
  -1,066
  -1,152
  -1,242
  -1,335
  -1,431
  -1,532
  -1,636
  -1,745
  -1,858
  -1,975
  -2,097
  -2,225
  -2,358
Total debt, $m
  4,164
  5,571
  7,180
  9,012
  11,067
  13,348
  15,853
  18,578
  21,521
  24,675
  28,036
  31,599
  35,360
  39,315
  43,461
  47,798
  52,325
  57,042
  61,954
  67,062
  72,373
  77,893
  83,628
  89,589
  95,784
  102,226
  108,925
  115,896
  123,153
  130,710
  138,585
Total liabilities, $m
  5,459
  6,866
  8,475
  10,307
  12,362
  14,643
  17,148
  19,873
  22,816
  25,970
  29,331
  32,894
  36,655
  40,610
  44,756
  49,093
  53,620
  58,337
  63,249
  68,357
  73,668
  79,188
  84,923
  90,884
  97,079
  103,521
  110,220
  117,191
  124,448
  132,005
  139,880
Total equity, $m
  4,896
  5,991
  7,396
  8,994
  10,788
  12,778
  14,964
  17,343
  19,910
  22,663
  25,596
  28,705
  31,987
  35,438
  39,057
  42,841
  46,792
  50,909
  55,195
  59,653
  64,287
  69,104
  74,109
  79,311
  84,717
  90,338
  96,185
  102,268
  108,601
  115,196
  122,068
Total liabilities and equity, $m
  10,355
  12,857
  15,871
  19,301
  23,150
  27,421
  32,112
  37,216
  42,726
  48,633
  54,927
  61,599
  68,642
  76,048
  83,813
  91,934
  100,412
  109,246
  118,444
  128,010
  137,955
  148,292
  159,032
  170,195
  181,796
  193,859
  206,405
  219,459
  233,049
  247,201
  261,948
Debt-to-equity ratio
  0.850
  0.930
  0.970
  1.000
  1.030
  1.040
  1.060
  1.070
  1.080
  1.090
  1.100
  1.100
  1.110
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.120
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.140
Adjusted equity ratio
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466
  0.466

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -66
  131
  151
  173
  197
  223
  252
  282
  314
  348
  384
  421
  460
  501
  543
  587
  633
  680
  729
  780
  833
  889
  946
  1,005
  1,067
  1,132
  1,199
  1,269
  1,341
  1,417
  1,496
Depreciation, amort., depletion, $m
  313
  393
  485
  590
  707
  838
  981
  1,137
  1,305
  1,486
  1,678
  1,882
  2,097
  2,323
  2,560
  2,809
  3,067
  3,337
  3,618
  3,911
  4,214
  4,530
  4,858
  5,199
  5,554
  5,922
  6,305
  6,704
  7,119
  7,552
  8,002
Funds from operations, $m
  299
  524
  636
  762
  904
  1,061
  1,233
  1,419
  1,619
  1,834
  2,062
  2,303
  2,557
  2,824
  3,103
  3,395
  3,700
  4,017
  4,348
  4,691
  5,048
  5,419
  5,804
  6,205
  6,621
  7,054
  7,504
  7,973
  8,461
  8,969
  9,499
Change in working capital, $m
  -94
  -24
  -27
  -31
  -35
  -38
  -42
  -46
  -50
  -53
  -57
  -60
  -63
  -67
  -70
  -73
  -76
  -80
  -83
  -86
  -90
  -93
  -97
  -100
  -104
  -109
  -113
  -117
  -122
  -127
  -133
Cash from operations, $m
  393
  547
  663
  793
  939
  1,100
  1,275
  1,465
  1,669
  1,887
  2,118
  2,363
  2,620
  2,890
  3,173
  3,468
  3,776
  4,097
  4,430
  4,777
  5,137
  5,512
  5,901
  6,305
  6,725
  7,162
  7,617
  8,090
  8,583
  9,096
  9,631
Maintenance CAPEX, $m
  0
  -313
  -393
  -485
  -590
  -707
  -838
  -981
  -1,137
  -1,305
  -1,486
  -1,678
  -1,882
  -2,097
  -2,323
  -2,560
  -2,809
  -3,067
  -3,337
  -3,618
  -3,911
  -4,214
  -4,530
  -4,858
  -5,199
  -5,554
  -5,922
  -6,305
  -6,704
  -7,119
  -7,552
New CAPEX, $m
  -1,560
  -2,115
  -2,441
  -2,776
  -3,116
  -3,458
  -3,797
  -4,132
  -4,460
  -4,782
  -5,095
  -5,402
  -5,701
  -5,996
  -6,286
  -6,575
  -6,863
  -7,152
  -7,446
  -7,745
  -8,051
  -8,368
  -8,695
  -9,036
  -9,392
  -9,765
  -10,157
  -10,568
  -11,001
  -11,457
  -11,938
Cash from investing activities, $m
  -1,497
  -2,428
  -2,834
  -3,261
  -3,706
  -4,165
  -4,635
  -5,113
  -5,597
  -6,087
  -6,581
  -7,080
  -7,583
  -8,093
  -8,609
  -9,135
  -9,672
  -10,219
  -10,783
  -11,363
  -11,962
  -12,582
  -13,225
  -13,894
  -14,591
  -15,319
  -16,079
  -16,873
  -17,705
  -18,576
  -19,490
Free cash flow, $m
  -1,104
  -1,880
  -2,171
  -2,468
  -2,767
  -3,065
  -3,360
  -3,648
  -3,928
  -4,200
  -4,463
  -4,717
  -4,963
  -5,202
  -5,436
  -5,667
  -5,895
  -6,123
  -6,353
  -6,586
  -6,825
  -7,070
  -7,325
  -7,589
  -7,866
  -8,157
  -8,462
  -8,783
  -9,122
  -9,480
  -9,859
Issuance/(repayment) of debt, $m
  6
  1,407
  1,610
  1,831
  2,056
  2,281
  2,505
  2,726
  2,942
  3,154
  3,361
  3,563
  3,761
  3,955
  4,147
  4,337
  4,527
  4,718
  4,911
  5,109
  5,311
  5,519
  5,736
  5,961
  6,195
  6,441
  6,700
  6,971
  7,257
  7,558
  7,875
Issuance/(repurchase) of shares, $m
  1,225
  1,089
  1,254
  1,425
  1,597
  1,767
  1,934
  2,096
  2,253
  2,405
  2,549
  2,688
  2,822
  2,951
  3,076
  3,198
  3,318
  3,437
  3,557
  3,678
  3,801
  3,928
  4,059
  4,196
  4,339
  4,489
  4,648
  4,815
  4,991
  5,178
  5,376
Cash from financing (excl. dividends), $m  
  1,369
  2,496
  2,864
  3,256
  3,653
  4,048
  4,439
  4,822
  5,195
  5,559
  5,910
  6,251
  6,583
  6,906
  7,223
  7,535
  7,845
  8,155
  8,468
  8,787
  9,112
  9,447
  9,795
  10,157
  10,534
  10,930
  11,348
  11,786
  12,248
  12,736
  13,251
Total cash flow (excl. dividends), $m
  263
  615
  693
  789
  885
  982
  1,079
  1,174
  1,267
  1,359
  1,448
  1,535
  1,620
  1,703
  1,786
  1,868
  1,950
  2,032
  2,115
  2,200
  2,287
  2,377
  2,470
  2,567
  2,668
  2,774
  2,886
  3,002
  3,125
  3,255
  3,392
Retained Cash Flow (-), $m
  -921
  -1,220
  -1,405
  -1,598
  -1,794
  -1,990
  -2,186
  -2,378
  -2,568
  -2,753
  -2,933
  -3,109
  -3,282
  -3,451
  -3,619
  -3,785
  -3,950
  -4,117
  -4,286
  -4,458
  -4,635
  -4,817
  -5,005
  -5,202
  -5,407
  -5,621
  -5,846
  -6,083
  -6,333
  -6,595
  -6,872
Prev. year cash balance distribution, $m
 
  125
  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
 
  -480
  -712
  -809
  -908
  -1,008
  -1,107
  -1,205
  -1,300
  -1,394
  -1,485
  -1,575
  -1,662
  -1,748
  -1,833
  -1,917
  -2,001
  -2,085
  -2,171
  -2,258
  -2,347
  -2,439
  -2,535
  -2,634
  -2,738
  -2,847
  -2,961
  -3,081
  -3,207
  -3,340
  -3,480
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  -444
  -603
  -624
  -632
  -627
  -609
  -581
  -543
  -498
  -449
  -397
  -344
  -293
  -245
  -201
  -161
  -127
  -98
  -74
  -54
  -39
  -27
  -19
  -12
  -8
  -5
  -3
  -2
  -1
  -1
Current shareholders' claim on cash, %
  100
  90.6
  82.7
  76.0
  70.3
  65.4
  61.2
  57.5
  54.3
  51.4
  48.9
  46.7
  44.7
  42.9
  41.2
  39.8
  38.4
  37.2
  36.0
  34.9
  34.0
  33.0
  32.2
  31.4
  30.6
  29.9
  29.2
  28.5
  27.9
  27.3
  26.8

Alexandria Real Estate Equities, Inc., a real estate investment trust (REIT), engages in the ownership, operation, management, development, acquisition, and redevelopment of properties for the life sciences industry. Its properties consist of buildings containing scientific research and development laboratories, and other improvements. The company offers its properties for lease primarily to universities and independent not-for-profit institutions; and pharmaceutical, biotechnology, medical device, life science product, service, biodefense, and translational research entities, as well as governmental agencies. As of December 31, 2006, it had 159 properties, including 156 properties located in 9 states in the United States and 3 properties located in Canada. As a REIT, the company is not subject to federal income tax to the extent that it distributes 100% of its taxable income to its stockholders. The company was founded in 1993 and is based in Pasadena, California.

FINANCIAL RATIOS  of  Alexandria Real Estate Equities (ARE)

Valuation Ratios
P/E Ratio -161.9
Price to Sales 11.6
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 27.2
Price to Free Cash Flow -9.2
Growth Rates
Sales Growth Rate 9.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 91.9%
Cap. Spend. - 3 Yr. Gr. Rate 16.9%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 85%
Total Debt to Equity 85%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.2%
Ret/ On Assets - 3 Yr. Avg. 1.6%
Return On Total Capital -0.8%
Ret/ On T. Cap. - 3 Yr. Avg. 0.8%
Return On Equity -1.5%
Return On Equity - 3 Yr. Avg. 1.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 69.7%
Gross Margin - 3 Yr. Avg. 69.6%
EBITDA Margin 37.7%
EBITDA Margin - 3 Yr. Avg. 49.9%
Operating Margin 5.9%
Oper. Margin - 3 Yr. Avg. 19.5%
Pre-Tax Margin -5.4%
Pre-Tax Margin - 3 Yr. Avg. 8.5%
Net Profit Margin -7.2%
Net Profit Margin - 3 Yr. Avg. 7.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -398.5%

ARE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARE stock intrinsic value calculation we used $922 million for the last fiscal year's total revenue generated by Alexandria Real Estate Equities. The default revenue input number comes from 2016 income statement of Alexandria Real Estate Equities. 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 ARE stock valuation model: a) initial revenue growth rate of 25.5% 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 8.2%, whose default value for ARE is calculated based on our internal credit rating of Alexandria Real Estate Equities, 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 Alexandria Real Estate Equities.
    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 ARE stock the variable cost ratio is equal to 71.9%.

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 ARE 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 Alexandria Real Estate Equities.

Corporate tax rate of 27% is the nominal tax rate for Alexandria Real Estate Equities. 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 ARE 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 ARE are equal to 899.5%.

Life of production assets of 26.5 years is the average useful life of capital assets used in Alexandria Real Estate Equities 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 ARE is equal to -10%. 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 - $4896 million for Alexandria Real Estate Equities - 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 88.001 million for Alexandria Real Estate Equities 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 Alexandria Real Estate Equities at the current share price and the inputted number of shares is $10.7 billion.

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COMPANY NEWS

▶ Alexandria Real Estate Equities reports 2Q results   [Jul-31-17 09:41PM  Associated Press]
▶ Developer pushes agtech 'mega campus' forward in Research Triangle Park   [Jul-17-17 12:35PM  American City Business Journals]
▶ Beating the Benchmark   [Jul-13-17 04:04PM  GuruFocus.com]
▶ These 3 Stocks Just Raised Their Dividends   [Jun-15-17 09:40AM  Motley Fool]
▶ Today's Bell Ringer, May 22, 2017   [May-22-17 09:16AM  CNBC Videos]
▶ Alexandria Real Estate Equities reports 1Q results   [May-01-17 04:34PM  Associated Press]
▶ Hearing loss biotech Frequency Therapeutics dials up $32M round   [Apr-11-17 06:15AM  American City Business Journals]
▶ Google life sciences spinoff soaks up huge space (video)   [Mar-24-17 03:11PM  at bizjournals.com]
▶ Google life sciences spinoff soaks up huge space (video)   [03:11PM  American City Business Journals]
▶ Alexandria Real Estate joining S&P 500 Index   [01:25PM  at bizjournals.com]
▶ Alexandria Real Estate joining S&P 500 Index   [01:25PM  American City Business Journals]
▶ Not Big Enough: Three Stocks Will Be Booted From S&P 500   [Mar-13-17 11:37AM  The Wall Street Journal]
▶ Not Big Enough: Three Stocks Will Be Booted From S&P 500   [11:37AM  at The Wall Street Journal]
▶ [$$] Alexandria Real Estate Equities Picks Startups for Manhattan Complex   [Feb-28-17 05:16PM  at The Wall Street Journal]
▶ Applied Therapeutics Closes Series A Financing   [Feb-14-17 07:00AM  Accesswire]
Stock chart of ARE Financial statements of ARE
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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