Intrinsic value of American Axle&Manufacturing Holdings - AXL

Previous Close

$16.80

  Intrinsic Value

$3,784

stock screener

  Rating & Target

str. buy

+999%

Previous close

$16.80

 
Intrinsic value

$3,784

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of AXL 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 1.9

 

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, %
  1.15
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  3,948
  6,317
  9,759
  14,595
  21,177
  29,878
  41,075
  55,135
  72,395
  93,155
  117,662
  146,110
  178,633
  215,313
  256,180
  301,223
  350,394
  403,625
  460,828
  521,912
  586,784
  655,360
  727,567
  803,353
  882,681
  965,539
  1,051,940
  1,141,918
  1,235,536
  1,332,876
  1,434,049
Variable operating expenses, $m
 
  2,941
  4,535
  6,774
  9,822
  13,852
  19,037
  25,548
  33,542
  43,155
  54,505
  67,663
  82,725
  99,711
  118,637
  139,496
  162,267
  186,918
  213,409
  241,697
  271,739
  303,497
  336,936
  372,032
  408,769
  447,140
  487,153
  528,822
  572,176
  617,254
  664,107
Fixed operating expenses, $m
 
  1,812
  1,858
  1,904
  1,952
  2,000
  2,050
  2,102
  2,154
  2,208
  2,263
  2,320
  2,378
  2,437
  2,498
  2,561
  2,625
  2,690
  2,757
  2,826
  2,897
  2,970
  3,044
  3,120
  3,198
  3,278
  3,360
  3,444
  3,530
  3,618
  3,708
Total operating expenses, $m
  3,567
  4,753
  6,393
  8,678
  11,774
  15,852
  21,087
  27,650
  35,696
  45,363
  56,768
  69,983
  85,103
  102,148
  121,135
  142,057
  164,892
  189,608
  216,166
  244,523
  274,636
  306,467
  339,980
  375,152
  411,967
  450,418
  490,513
  532,266
  575,706
  620,872
  667,815
Operating income, $m
  381
  1,564
  3,367
  5,917
  9,403
  14,026
  19,987
  27,485
  36,699
  47,792
  60,894
  76,127
  93,531
  113,165
  135,045
  159,166
  185,502
  214,016
  244,661
  277,388
  312,148
  348,894
  387,588
  428,201
  470,714
  515,121
  561,428
  609,653
  659,830
  712,004
  766,234
EBITDA, $m
  583
  1,751
  3,648
  6,329
  9,994
  14,854
  21,120
  29,000
  38,684
  50,341
  64,110
  80,101
  98,389
  119,021
  142,013
  167,359
  195,033
  224,995
  257,196
  291,584
  328,108
  366,719
  407,378
  450,052
  494,723
  541,384
  590,040
  640,713
  693,437
  748,258
  805,240
Interest expense (income), $m
  87
  88
  172
  317
  522
  800
  1,168
  1,641
  2,236
  2,966
  3,843
  4,880
  6,082
  7,458
  9,008
  10,736
  12,641
  14,720
  16,971
  19,389
  21,972
  24,715
  27,614
  30,668
  33,872
  37,226
  40,729
  44,383
  48,187
  52,145
  56,261
Earnings before tax, $m
  299
  1,476
  3,195
  5,600
  8,881
  13,226
  18,820
  25,843
  34,464
  44,826
  57,051
  71,247
  87,448
  105,707
  126,037
  148,430
  172,861
  199,296
  227,691
  257,999
  290,176
  324,179
  359,973
  397,533
  436,842
  477,895
  520,698
  565,271
  611,643
  659,859
  709,972
Tax expense, $m
  58
  398
  863
  1,512
  2,398
  3,571
  5,081
  6,978
  9,305
  12,103
  15,404
  19,237
  23,611
  28,541
  34,030
  40,076
  46,673
  53,810
  61,477
  69,660
  78,347
  87,528
  97,193
  107,334
  117,947
  129,032
  140,588
  152,623
  165,144
  178,162
  191,693
Net income, $m
  241
  1,077
  2,333
  4,088
  6,483
  9,655
  13,738
  18,866
  25,158
  32,723
  41,647
  52,010
  63,837
  77,166
  92,007
  108,354
  126,189
  145,486
  166,214
  188,339
  211,828
  236,650
  262,780
  290,199
  318,895
  348,863
  380,110
  412,647
  446,499
  481,697
  518,280

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  481
  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
  3,424
  4,711
  7,278
  10,884
  15,792
  22,280
  30,630
  41,115
  53,986
  69,467
  87,742
  108,956
  133,209
  160,562
  191,037
  224,625
  261,293
  300,988
  343,645
  389,196
  437,572
  488,710
  542,556
  599,070
  658,226
  720,014
  784,444
  851,542
  921,354
  993,942
  1,069,388
Adjusted assets (=assets-cash), $m
  2,943
  4,711
  7,278
  10,884
  15,792
  22,280
  30,630
  41,115
  53,986
  69,467
  87,742
  108,956
  133,209
  160,562
  191,037
  224,625
  261,293
  300,988
  343,645
  389,196
  437,572
  488,710
  542,556
  599,070
  658,226
  720,014
  784,444
  851,542
  921,354
  993,942
  1,069,388
Revenue / Adjusted assets
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
  1.341
Average production assets, $m
  538
  859
  1,327
  1,985
  2,880
  4,063
  5,586
  7,498
  9,846
  12,669
  16,002
  19,871
  24,294
  29,283
  34,841
  40,966
  47,654
  54,893
  62,673
  70,980
  79,803
  89,129
  98,949
  109,256
  120,045
  131,313
  143,064
  155,301
  168,033
  181,271
  195,031
Working capital, $m
  647
  272
  420
  628
  911
  1,285
  1,766
  2,371
  3,113
  4,006
  5,059
  6,283
  7,681
  9,258
  11,016
  12,953
  15,067
  17,356
  19,816
  22,442
  25,232
  28,180
  31,285
  34,544
  37,955
  41,518
  45,233
  49,102
  53,128
  57,314
  61,664
Total debt, $m
  1,404
  2,725
  5,036
  8,281
  12,699
  18,538
  26,053
  35,489
  47,073
  61,006
  77,454
  96,546
  118,374
  142,992
  170,419
  200,649
  233,650
  269,375
  307,767
  348,762
  392,301
  438,325
  486,786
  537,649
  590,889
  646,499
  704,486
  764,874
  827,705
  893,034
  960,935
Total liabilities, $m
  2,918
  4,239
  6,550
  9,795
  14,213
  20,052
  27,567
  37,003
  48,587
  62,520
  78,968
  98,060
  119,888
  144,506
  171,933
  202,163
  235,164
  270,889
  309,281
  350,276
  393,815
  439,839
  488,300
  539,163
  592,403
  648,013
  706,000
  766,388
  829,219
  894,548
  962,449
Total equity, $m
  506
  471
  728
  1,088
  1,579
  2,228
  3,063
  4,111
  5,399
  6,947
  8,774
  10,896
  13,321
  16,056
  19,104
  22,463
  26,129
  30,099
  34,365
  38,920
  43,757
  48,871
  54,256
  59,907
  65,823
  72,001
  78,444
  85,154
  92,135
  99,394
  106,939
Total liabilities and equity, $m
  3,424
  4,710
  7,278
  10,883
  15,792
  22,280
  30,630
  41,114
  53,986
  69,467
  87,742
  108,956
  133,209
  160,562
  191,037
  224,626
  261,293
  300,988
  343,646
  389,196
  437,572
  488,710
  542,556
  599,070
  658,226
  720,014
  784,444
  851,542
  921,354
  993,942
  1,069,388
Debt-to-equity ratio
  2.775
  5.790
  6.920
  7.610
  8.040
  8.320
  8.510
  8.630
  8.720
  8.780
  8.830
  8.860
  8.890
  8.910
  8.920
  8.930
  8.940
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
Adjusted equity ratio
  0.008
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  241
  1,077
  2,333
  4,088
  6,483
  9,655
  13,738
  18,866
  25,158
  32,723
  41,647
  52,010
  63,837
  77,166
  92,007
  108,354
  126,189
  145,486
  166,214
  188,339
  211,828
  236,650
  262,780
  290,199
  318,895
  348,863
  380,110
  412,647
  446,499
  481,697
  518,280
Depreciation, amort., depletion, $m
  202
  187
  281
  412
  591
  828
  1,133
  1,515
  1,985
  2,549
  3,216
  3,974
  4,859
  5,857
  6,968
  8,193
  9,531
  10,979
  12,535
  14,196
  15,961
  17,826
  19,790
  21,851
  24,009
  26,263
  28,613
  31,060
  33,607
  36,254
  39,006
Funds from operations, $m
  324
  1,264
  2,613
  4,500
  7,075
  10,483
  14,871
  20,381
  27,143
  35,272
  44,863
  55,985
  68,696
  83,023
  98,975
  116,547
  135,720
  156,465
  178,749
  202,535
  227,789
  254,476
  282,570
  312,050
  342,904
  375,126
  408,722
  443,708
  480,106
  517,951
  557,286
Change in working capital, $m
  -84
  102
  148
  208
  283
  374
  481
  605
  742
  893
  1,054
  1,223
  1,399
  1,577
  1,757
  1,937
  2,114
  2,289
  2,460
  2,627
  2,789
  2,949
  3,105
  3,259
  3,411
  3,563
  3,715
  3,869
  4,026
  4,186
  4,350
Cash from operations, $m
  408
  1,163
  2,465
  4,292
  6,792
  10,109
  14,389
  19,776
  26,401
  34,379
  43,809
  54,761
  67,298
  81,445
  97,218
  114,610
  133,605
  154,176
  176,289
  199,909
  224,999
  251,527
  279,465
  308,792
  339,493
  371,563
  405,007
  439,839
  476,080
  513,765
  552,936
Maintenance CAPEX, $m
  0
  -108
  -172
  -265
  -397
  -576
  -813
  -1,117
  -1,500
  -1,969
  -2,534
  -3,200
  -3,974
  -4,859
  -5,857
  -6,968
  -8,193
  -9,531
  -10,979
  -12,535
  -14,196
  -15,961
  -17,826
  -19,790
  -21,851
  -24,009
  -26,263
  -28,613
  -31,060
  -33,607
  -36,254
New CAPEX, $m
  -228
  -322
  -468
  -658
  -895
  -1,183
  -1,523
  -1,912
  -2,347
  -2,823
  -3,333
  -3,869
  -4,423
  -4,988
  -5,558
  -6,126
  -6,687
  -7,239
  -7,780
  -8,307
  -8,823
  -9,326
  -9,820
  -10,307
  -10,789
  -11,269
  -11,750
  -12,237
  -12,732
  -13,238
  -13,760
Cash from investing activities, $m
  -228
  -430
  -640
  -923
  -1,292
  -1,759
  -2,336
  -3,029
  -3,847
  -4,792
  -5,867
  -7,069
  -8,397
  -9,847
  -11,415
  -13,094
  -14,880
  -16,770
  -18,759
  -20,842
  -23,019
  -25,287
  -27,646
  -30,097
  -32,640
  -35,278
  -38,013
  -40,850
  -43,792
  -46,845
  -50,014
Free cash flow, $m
  180
  733
  1,825
  3,369
  5,500
  8,349
  12,054
  16,747
  22,554
  29,587
  37,942
  47,692
  58,900
  71,598
  85,803
  101,516
  118,725
  137,406
  157,531
  179,067
  201,981
  226,241
  251,819
  278,695
  306,853
  336,285
  366,994
  398,989
  432,288
  466,921
  502,922
Issuance/(repayment) of debt, $m
  23
  1,324
  2,311
  3,246
  4,417
  5,839
  7,515
  9,436
  11,584
  13,933
  16,448
  19,092
  21,828
  24,617
  27,428
  30,230
  33,001
  35,725
  38,392
  40,996
  43,538
  46,024
  48,462
  50,863
  53,240
  55,610
  57,987
  60,388
  62,830
  65,329
  67,901
Issuance/(repurchase) of shares, $m
  -5
  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  
  18
  1,324
  2,311
  3,246
  4,417
  5,839
  7,515
  9,436
  11,584
  13,933
  16,448
  19,092
  21,828
  24,617
  27,428
  30,230
  33,001
  35,725
  38,392
  40,996
  43,538
  46,024
  48,462
  50,863
  53,240
  55,610
  57,987
  60,388
  62,830
  65,329
  67,901
Total cash flow (excl. dividends), $m
  199
  2,058
  4,136
  6,615
  9,917
  14,189
  19,569
  26,183
  34,138
  43,520
  54,390
  66,784
  80,728
  96,216
  113,231
  131,746
  151,726
  173,131
  195,922
  220,063
  245,519
  272,265
  300,281
  329,558
  360,093
  391,895
  424,981
  459,377
  495,119
  532,250
  570,823
Retained Cash Flow (-), $m
  -204
  -443
  -257
  -361
  -491
  -649
  -835
  -1,048
  -1,287
  -1,548
  -1,828
  -2,121
  -2,425
  -2,735
  -3,048
  -3,359
  -3,667
  -3,969
  -4,266
  -4,555
  -4,838
  -5,114
  -5,385
  -5,651
  -5,916
  -6,179
  -6,443
  -6,710
  -6,981
  -7,259
  -7,545
Prev. year cash balance distribution, $m
 
  478
  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
 
  2,093
  3,879
  6,254
  9,426
  13,540
  18,734
  25,134
  32,851
  41,972
  52,563
  64,663
  78,303
  93,480
  110,183
  128,387
  148,059
  169,162
  191,657
  215,508
  240,681
  267,151
  294,896
  323,906
  354,177
  385,716
  418,538
  452,667
  488,138
  524,991
  563,278
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  1,982
  3,460
  5,225
  7,332
  9,741
  12,381
  15,145
  17,907
  20,523
  22,850
  24,753
  26,128
  26,897
  27,025
  26,518
  25,421
  23,814
  21,803
  19,508
  17,055
  14,566
  12,147
  9,888
  7,851
  6,076
  4,581
  3,361
  2,398
  1,662
  1,117
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 Axle & Manufacturing Holdings, Inc. (AAM) manufactures, engineers, designs and validates driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles, crossover vehicles, passenger cars and commercial vehicles. Its driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Its driveline, drivetrain and related products include axles, driveheads, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, transmission parts, electric drive systems and metal-formed products. The Company's subsidiary, e-AAM Driveline Systems AB (e-AAM), engineers and develops battery electric and hybrid driveline systems to be commercialized for crossover vehicles and passenger cars. As of April 6, 2017, it operated in 17 countries and had approximately 90 manufacturing, engineering and business office facilities around the world.

FINANCIAL RATIOS  of  American Axle&Manufacturing Holdings (AXL)

Valuation Ratios
P/E Ratio 5.3
Price to Sales 0.3
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 3.2
Price to Free Cash Flow 7.1
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.5%
Cap. Spend. - 3 Yr. Gr. Rate -2%
Financial Strength
Quick Ratio 160
Current Ratio 0
LT Debt to Equity 276.9%
Total Debt to Equity 277.5%
Interest Coverage 4
Management Effectiveness
Return On Assets 9.4%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 13.4%
Ret/ On T. Cap. - 3 Yr. Avg. 12.2%
Return On Equity 59.7%
Return On Equity - 3 Yr. Avg. 119.7%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 18.4%
Gross Margin - 3 Yr. Avg. 16.3%
EBITDA Margin 14.9%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 9.7%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 19.4%
Eff/ Tax Rate - 3 Yr. Avg. 17.4%
Payout Ratio 0%

AXL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AXL stock intrinsic value calculation we used $3948 million for the last fiscal year's total revenue generated by American Axle&Manufacturing Holdings. The default revenue input number comes from 2016 income statement of American Axle&Manufacturing Holdings. 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 AXL stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.6%, whose default value for AXL is calculated based on our internal credit rating of American Axle&Manufacturing Holdings, 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 Axle&Manufacturing Holdings.
    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 AXL stock the variable cost ratio is equal to 46.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1768 million in the base year in the intrinsic value calculation for AXL 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 6.3% for American Axle&Manufacturing Holdings.

Corporate tax rate of 27% is the nominal tax rate for American Axle&Manufacturing Holdings. 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 AXL 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 AXL are equal to 13.6%.

Life of production assets of 3.4 years is the average useful life of capital assets used in American Axle&Manufacturing Holdings 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 AXL is equal to 4.3%. 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 - $506 million for American Axle&Manufacturing Holdings - 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 111.23 million for American Axle&Manufacturing Holdings 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 Axle&Manufacturing Holdings at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ American Axle beats Street 3Q forecasts   [08:16AM  Associated Press]
▶ American Axle tops 2Q profit forecasts   [Jul-28-17 11:22PM  Associated Press]
▶ New Strong Sell Stocks for July 10th   [Jul-10-17 10:21AM  Zacks]
▶ AAM Recognizes Key Suppliers with Excellence Awards   [Jun-22-17 10:53AM  PR Newswire]
▶ AAM Names Tolga Oal Senior Vice President   [Jun-01-17 09:00AM  PR Newswire]
▶ American Axle tops 1Q profit forecasts   [May-05-17 08:11AM  Associated Press]
▶ Top Ranked Value Stocks to Buy for April 13th   [Apr-13-17 11:57AM  Zacks]
▶ Why is P/B Ratio a Great Valuation Metric?   [Apr-12-17 08:24AM  Zacks]
▶ Top Ranked Value Stocks to Buy for April 11th   [Apr-11-17 12:10PM  Zacks]
▶ AAM Completes Acquisition of MPG   [Apr-06-17 09:00AM  PR Newswire]
▶ Top Ranked Value Stocks to Buy for March 29th   [Mar-29-17 10:13AM  Zacks]
Financial statements of AXL
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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