Intrinsic value of Brookfield Asset Management Cl A - BAM

Previous Close

$42.63

  Intrinsic Value

$338.95

stock screener

  Rating & Target

str. buy

+695%

  Value-price divergence*

+61%

Previous close

$42.63

 
Intrinsic value

$338.95

 
Up/down potential

+695%

 
Rating

str. buy

 
Value-price divergence*

+61%

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

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

We calculate the intrinsic value of BAM 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 42.4

 

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, %
  22.59
  58.10
  52.79
  48.01
  43.71
  39.84
  36.36
  33.22
  30.40
  27.86
  25.57
  23.51
  21.66
  20.00
  18.50
  17.15
  15.93
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
Revenue, $m
  24,411
  38,594
  58,967
  87,278
  125,428
  175,397
  239,162
  318,610
  415,460
  531,198
  667,037
  823,889
  1,002,371
  1,202,815
  1,425,304
  1,669,709
  1,935,741
  2,222,996
  2,531,005
  2,859,276
  3,207,337
  3,574,760
  3,961,197
  4,366,393
  4,790,205
  5,232,609
  5,693,709
  6,173,736
  6,673,052
  7,192,147
  7,731,636
Variable operating expenses, $m
 
  28,957
  44,044
  65,008
  93,258
  130,260
  177,478
  236,310
  308,028
  393,732
  494,321
  610,092
  742,259
  890,688
  1,055,442
  1,236,424
  1,433,421
  1,646,135
  1,874,216
  2,117,302
  2,375,042
  2,647,120
  2,933,278
  3,233,327
  3,547,161
  3,874,762
  4,216,208
  4,571,669
  4,941,415
  5,325,806
  5,725,299
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
  21,418
  28,957
  44,044
  65,008
  93,258
  130,260
  177,478
  236,310
  308,028
  393,732
  494,321
  610,092
  742,259
  890,688
  1,055,442
  1,236,424
  1,433,421
  1,646,135
  1,874,216
  2,117,302
  2,375,042
  2,647,120
  2,933,278
  3,233,327
  3,547,161
  3,874,762
  4,216,208
  4,571,669
  4,941,415
  5,325,806
  5,725,299
Operating income, $m
  2,993
  9,637
  14,924
  22,270
  32,170
  45,137
  61,684
  82,300
  107,432
  137,466
  172,716
  213,797
  260,112
  312,127
  369,862
  433,285
  502,319
  576,861
  656,788
  741,974
  832,295
  927,640
  1,027,919
  1,133,066
  1,243,044
  1,357,847
  1,477,501
  1,602,067
  1,731,638
  1,866,341
  2,006,337
EBITDA, $m
  5,013
  13,008
  19,874
  29,416
  42,274
  59,115
  80,607
  107,384
  140,026
  179,034
  224,816
  277,681
  337,837
  405,394
  480,381
  562,754
  652,417
  749,233
  853,043
  963,683
  1,080,993
  1,204,828
  1,335,072
  1,471,638
  1,614,478
  1,763,585
  1,918,993
  2,080,780
  2,249,068
  2,424,023
  2,605,851
Interest expense (income), $m
  3,062
  3,010
  6,608
  11,778
  18,962
  28,643
  41,323
  57,504
  77,665
  102,241
  131,611
  166,081
  205,883
  251,175
  302,039
  358,497
  420,517
  488,024
  560,918
  639,077
  722,379
  810,702
  903,939
  1,002,000
  1,104,822
  1,212,368
  1,324,631
  1,441,639
  1,563,450
  1,690,155
  1,821,880
Earnings before tax, $m
  2,993
  6,626
  8,315
  10,492
  13,207
  16,493
  20,360
  24,796
  29,768
  35,225
  41,105
  47,716
  54,229
  60,953
  67,823
  74,788
  81,802
  88,836
  95,871
  102,897
  109,916
  116,938
  123,980
  131,066
  138,222
  145,479
  152,870
  160,428
  168,188
  176,186
  184,458
Tax expense, $m
  -345
  1,789
  2,245
  2,833
  3,566
  4,453
  5,497
  6,695
  8,037
  9,511
  11,098
  12,883
  14,642
  16,457
  18,312
  20,193
  22,087
  23,986
  25,885
  27,782
  29,677
  31,573
  33,475
  35,388
  37,320
  39,279
  41,275
  43,316
  45,411
  47,570
  49,804
Net income, $m
  1,651
  4,837
  6,070
  7,659
  9,641
  12,040
  14,863
  18,101
  21,730
  25,714
  30,007
  34,833
  39,587
  44,495
  49,511
  54,595
  59,716
  64,851
  69,986
  75,114
  80,238
  85,365
  90,506
  95,678
  100,902
  106,200
  111,595
  117,112
  122,777
  128,616
  134,654

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,299
  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
  159,826
  245,820
  375,589
  555,913
  798,902
  1,117,176
  1,523,325
  2,029,366
  2,646,244
  3,383,430
  4,248,641
  5,247,702
  6,384,529
  7,661,244
  9,078,368
  10,635,088
  12,329,558
  14,159,207
  16,121,048
  18,211,952
  20,428,897
  22,769,174
  25,230,556
  27,811,423
  30,510,861
  33,328,721
  36,265,661
  39,323,159
  42,503,518
  45,809,856
  49,246,090
Adjusted assets (=assets-cash), $m
  155,527
  245,820
  375,589
  555,913
  798,902
  1,117,176
  1,523,325
  2,029,366
  2,646,244
  3,383,430
  4,248,641
  5,247,702
  6,384,529
  7,661,244
  9,078,368
  10,635,088
  12,329,558
  14,159,207
  16,121,048
  18,211,952
  20,428,897
  22,769,174
  25,230,556
  27,811,423
  30,510,861
  33,328,721
  36,265,661
  39,323,159
  42,503,518
  45,809,856
  49,246,090
Revenue / Adjusted assets
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
Average production assets, $m
  46,931
  74,216
  113,394
  167,836
  241,197
  337,288
  459,909
  612,688
  798,930
  1,021,495
  1,282,712
  1,584,339
  1,927,560
  2,313,014
  2,740,859
  3,210,850
  3,722,429
  4,274,820
  4,867,122
  5,498,389
  6,167,709
  6,874,264
  7,617,382
  8,396,574
  9,211,564
  10,062,308
  10,949,002
  11,872,094
  12,832,280
  13,830,500
  14,867,936
Working capital, $m
  0
  7,333
  11,204
  16,583
  23,831
  33,325
  45,441
  60,536
  78,937
  100,928
  126,737
  156,539
  190,451
  228,535
  270,808
  317,245
  367,791
  422,369
  480,891
  543,263
  609,394
  679,204
  752,627
  829,615
  910,139
  994,196
  1,081,805
  1,173,010
  1,267,880
  1,366,508
  1,469,011
Total debt, $m
  67,017
  137,675
  245,383
  395,052
  596,732
  860,900
  1,198,004
  1,618,018
  2,130,027
  2,741,891
  3,460,016
  4,289,237
  5,232,803
  6,292,477
  7,468,690
  8,760,767
  10,167,177
  11,685,786
  13,314,114
  15,049,564
  16,889,628
  18,832,059
  20,875,005
  23,017,125
  25,257,658
  27,596,483
  30,034,143
  32,571,866
  35,211,564
  37,955,825
  40,807,898
Total liabilities, $m
  133,373
  204,031
  311,739
  461,408
  663,088
  927,256
  1,264,360
  1,684,374
  2,196,383
  2,808,247
  3,526,372
  4,355,593
  5,299,159
  6,358,833
  7,535,046
  8,827,123
  10,233,533
  11,752,142
  13,380,470
  15,115,920
  16,955,984
  18,898,415
  20,941,361
  23,083,481
  25,324,014
  27,662,839
  30,100,499
  32,638,222
  35,277,920
  38,022,181
  40,874,254
Total equity, $m
  26,453
  41,789
  63,850
  94,505
  135,813
  189,920
  258,965
  344,992
  449,861
  575,183
  722,269
  892,109
  1,085,370
  1,302,412
  1,543,323
  1,807,965
  2,096,025
  2,407,065
  2,740,578
  3,096,032
  3,472,912
  3,870,760
  4,289,194
  4,727,942
  5,186,846
  5,665,883
  6,165,162
  6,684,937
  7,225,598
  7,787,676
  8,371,835
Total liabilities and equity, $m
  159,826
  245,820
  375,589
  555,913
  798,901
  1,117,176
  1,523,325
  2,029,366
  2,646,244
  3,383,430
  4,248,641
  5,247,702
  6,384,529
  7,661,245
  9,078,369
  10,635,088
  12,329,558
  14,159,207
  16,121,048
  18,211,952
  20,428,896
  22,769,175
  25,230,555
  27,811,423
  30,510,860
  33,328,722
  36,265,661
  39,323,159
  42,503,518
  45,809,857
  49,246,089
Debt-to-equity ratio
  2.533
  3.290
  3.840
  4.180
  4.390
  4.530
  4.630
  4.690
  4.730
  4.770
  4.790
  4.810
  4.820
  4.830
  4.840
  4.850
  4.850
  4.850
  4.860
  4.860
  4.860
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
Adjusted equity ratio
  0.142
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,651
  4,837
  6,070
  7,659
  9,641
  12,040
  14,863
  18,101
  21,730
  25,714
  30,007
  34,833
  39,587
  44,495
  49,511
  54,595
  59,716
  64,851
  69,986
  75,114
  80,238
  85,365
  90,506
  95,678
  100,902
  106,200
  111,595
  117,112
  122,777
  128,616
  134,654
Depreciation, amort., depletion, $m
  2,020
  3,371
  4,951
  7,146
  10,104
  13,979
  18,923
  25,083
  32,593
  41,568
  52,101
  63,885
  77,724
  93,267
  110,519
  129,470
  150,098
  172,372
  196,255
  221,709
  248,698
  277,188
  307,153
  338,572
  371,434
  405,738
  441,492
  478,713
  517,431
  557,681
  599,514
Funds from operations, $m
  2,336
  8,208
  11,021
  14,805
  19,745
  26,019
  33,786
  43,185
  54,324
  67,282
  82,107
  98,717
  117,311
  137,762
  160,030
  184,065
  209,814
  237,222
  266,240
  296,824
  328,936
  362,553
  397,658
  434,250
  472,336
  511,938
  553,087
  595,826
  640,208
  686,298
  734,168
Change in working capital, $m
  -747
  2,695
  3,871
  5,379
  7,248
  9,494
  12,115
  15,095
  18,401
  21,990
  25,809
  29,802
  33,912
  38,084
  42,273
  46,437
  50,546
  54,578
  58,522
  62,372
  66,131
  69,810
  73,423
  76,987
  80,524
  84,057
  87,609
  91,205
  94,870
  98,628
  102,503
Cash from operations, $m
  3,083
  5,513
  7,150
  9,426
  12,497
  16,525
  21,671
  28,089
  35,922
  45,292
  56,298
  68,915
  83,400
  99,678
  117,757
  137,628
  159,268
  182,644
  207,719
  234,452
  262,805
  292,742
  324,235
  357,263
  391,812
  427,881
  465,478
  504,621
  545,338
  587,669
  631,665
Maintenance CAPEX, $m
  0
  -1,892
  -2,993
  -4,572
  -6,768
  -9,726
  -13,600
  -18,545
  -24,705
  -32,215
  -41,189
  -51,722
  -63,885
  -77,724
  -93,267
  -110,519
  -129,470
  -150,098
  -172,372
  -196,255
  -221,709
  -248,698
  -277,188
  -307,153
  -338,572
  -371,434
  -405,738
  -441,492
  -478,713
  -517,431
  -557,681
New CAPEX, $m
  -3,441
  -27,285
  -39,179
  -54,442
  -73,361
  -96,090
  -122,621
  -152,779
  -186,242
  -222,564
  -261,217
  -301,627
  -343,221
  -385,454
  -427,845
  -469,991
  -511,579
  -552,391
  -592,301
  -631,267
  -669,320
  -706,555
  -743,118
  -779,192
  -814,990
  -850,743
  -886,694
  -923,092
  -960,185
  -998,220
  -1,037,437
Cash from investing activities, $m
  -8,557
  -29,177
  -42,172
  -59,014
  -80,129
  -105,816
  -136,221
  -171,324
  -210,947
  -254,779
  -302,406
  -353,349
  -407,106
  -463,178
  -521,112
  -580,510
  -641,049
  -702,489
  -764,673
  -827,522
  -891,029
  -955,253
  -1,020,306
  -1,086,345
  -1,153,562
  -1,222,177
  -1,292,432
  -1,364,584
  -1,438,898
  -1,515,651
  -1,595,118
Free cash flow, $m
  -5,474
  -23,664
  -35,021
  -49,588
  -67,632
  -89,291
  -114,551
  -143,235
  -175,025
  -209,488
  -246,108
  -284,434
  -323,706
  -363,501
  -403,355
  -442,882
  -481,781
  -519,845
  -556,954
  -593,070
  -628,224
  -662,511
  -696,071
  -729,082
  -761,749
  -794,296
  -826,955
  -859,964
  -893,561
  -927,981
  -963,453
Issuance/(repayment) of debt, $m
  3,742
  74,957
  107,708
  149,669
  201,681
  264,167
  337,104
  420,014
  512,009
  611,864
  718,126
  829,220
  943,567
  1,059,673
  1,176,213
  1,292,078
  1,406,410
  1,518,609
  1,628,328
  1,735,450
  1,840,064
  1,942,430
  2,042,947
  2,142,120
  2,240,533
  2,338,824
  2,437,660
  2,537,723
  2,639,698
  2,744,261
  2,852,074
Issuance/(repurchase) of shares, $m
  88
  10,499
  15,991
  22,996
  31,667
  42,066
  54,182
  67,926
  83,139
  99,607
  117,079
  135,008
  153,673
  172,546
  191,400
  210,048
  228,344
  246,190
  263,527
  280,339
  296,642
  312,483
  327,929
  343,069
  358,002
  372,836
  387,685
  402,662
  417,884
  433,461
  449,506
Cash from financing (excl. dividends), $m  
  7,626
  85,456
  123,699
  172,665
  233,348
  306,233
  391,286
  487,940
  595,148
  711,471
  835,205
  964,228
  1,097,240
  1,232,219
  1,367,613
  1,502,126
  1,634,754
  1,764,799
  1,891,855
  2,015,789
  2,136,706
  2,254,913
  2,370,876
  2,485,189
  2,598,535
  2,711,660
  2,825,345
  2,940,385
  3,057,582
  3,177,722
  3,301,580
Total cash flow (excl. dividends), $m
  2,158
  61,792
  88,677
  123,077
  165,716
  216,942
  276,736
  344,705
  420,122
  501,984
  589,097
  679,794
  773,535
  868,719
  964,258
  1,059,244
  1,152,973
  1,244,953
  1,334,901
  1,422,720
  1,508,482
  1,592,402
  1,674,805
  1,756,107
  1,836,786
  1,917,365
  1,998,390
  2,080,422
  2,164,021
  2,249,741
  2,338,126
Retained Cash Flow (-), $m
  -1,146
  -15,336
  -22,061
  -30,655
  -41,308
  -54,107
  -69,045
  -86,027
  -104,869
  -125,322
  -147,086
  -169,840
  -193,261
  -217,042
  -240,911
  -264,642
  -288,060
  -311,040
  -333,513
  -355,454
  -376,881
  -397,847
  -418,435
  -438,747
  -458,904
  -479,036
  -499,280
  -519,775
  -540,661
  -562,078
  -584,160
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
 
  46,456
  66,616
  92,422
  124,408
  162,836
  207,690
  258,678
  315,253
  376,662
  442,011
  509,953
  580,274
  651,677
  723,347
  794,601
  864,913
  933,913
  1,001,388
  1,067,266
  1,131,602
  1,194,554
  1,256,370
  1,317,359
  1,377,882
  1,438,329
  1,499,110
  1,560,647
  1,623,360
  1,687,664
  1,753,966
Discount rate, %
 
  11.00
  11.55
  12.13
  12.73
  13.37
  14.04
  14.74
  15.48
  16.25
  17.06
  17.92
  18.81
  19.75
  20.74
  21.78
  22.87
  24.01
  25.21
  26.47
  27.80
  29.19
  30.65
  32.18
  33.79
  35.48
  37.25
  39.11
  41.07
  43.12
  45.28
PV of cash for distribution, $m
 
  41,852
  53,536
  65,560
  77,025
  86,946
  94,426
  98,793
  99,692
  97,129
  91,448
  83,206
  73,322
  62,552
  51,680
  41,357
  32,058
  24,068
  17,497
  12,312
  8,381
  5,516
  3,508
  2,153
  1,274
  727
  399
  210
  106
  52
  24
Current shareholders' claim on cash, %
  100
  80.1
  64.7
  52.8
  43.7
  36.6
  31.1
  26.7
  23.2
  20.4
  18.1
  16.2
  14.6
  13.3
  12.2
  11.2
  10.4
  9.7
  9.1
  8.5
  8.1
  7.6
  7.2
  6.9
  6.6
  6.3
  6.0
  5.8
  5.6
  5.4
  5.2

Brookfield Asset Management Inc. is an alternative asset manager. The Company operates in eight segments. The Asset Management segment manages its listed partnerships, private funds and public markets on behalf of its clients. The Property segment includes the ownership, operation and development of office, retail and other properties. The Renewable power segment operates and develops hydroelectric, wind power and other generating facilities. The Infrastructure segment includes the ownership, operation and development of utilities and agricultural operations, among others. The Residential development segment includes homebuilding, condominium development and land development. The Service activities segment includes construction management and contracting services and property services. The Private equity segment includes the investments and operations overseen by its private equity group. The Corporate activities segment includes the allocation of capital to its operating platforms.

FINANCIAL RATIOS  of  Brookfield Asset Management Cl A (BAM)

Valuation Ratios
P/E Ratio 24.7
Price to Sales 1.7
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 13.2
Price to Free Cash Flow -114.1
Growth Rates
Sales Growth Rate 22.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.7%
Cap. Spend. - 3 Yr. Gr. Rate -11.4%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 219.5%
Total Debt to Equity 253.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 48.8%
Gross Margin - 3 Yr. Avg. 49.2%
EBITDA Margin 33.1%
EBITDA Margin - 3 Yr. Avg. 46.2%
Operating Margin 12.3%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin 12.3%
Pre-Tax Margin - 3 Yr. Avg. 24.1%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 11.8%
Effective Tax Rate -11.5%
Eff/ Tax Rate - 3 Yr. Avg. 4.3%
Payout Ratio 38.3%

BAM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAM stock intrinsic value calculation we used $24411 million for the last fiscal year's total revenue generated by Brookfield Asset Management Cl A. The default revenue input number comes from 2016 income statement of Brookfield Asset Management Cl A. 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 BAM stock valuation model: a) initial revenue growth rate of 58.1% 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 11%, whose default value for BAM is calculated based on our internal credit rating of Brookfield Asset Management Cl A, 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 Brookfield Asset Management Cl A.
    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 BAM stock the variable cost ratio is equal to 75.6%.

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 BAM 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 4.8% for Brookfield Asset Management Cl A.

Corporate tax rate of 27% is the nominal tax rate for Brookfield Asset Management Cl A. 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 BAM 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 BAM are equal to 192.3%.

Life of production assets of 24.8 years is the average useful life of capital assets used in Brookfield Asset Management Cl A 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 BAM is equal to 19%. 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 - $26453 million for Brookfield Asset Management Cl A - 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 994.18 million for Brookfield Asset Management Cl A 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 Brookfield Asset Management Cl A at the current share price and the inputted number of shares is $42.4 billion.

RELATED COMPANIES Price Int.Val. Rating
BPY Brookfield Pro 24.26 75.61  str.buy
GGP GGP 21.45 2.42  str.sell

COMPANY NEWS

▶ Brookfield to buy Houston-based investment firm focused on energy infrastructure   [Oct-10-17 09:45AM  American City Business Journals]
▶ 3 Stocks to Buy for a Better Tomorrow   [Sep-27-17 08:14PM  Motley Fool]
▶ Brookfield CEO Flatt on Challenges and Opportunities   [Sep-20-17 12:20PM  Bloomberg Video]
▶ Is TerraForm Power, Inc. a Buy?   [Sep-18-17 06:09PM  Motley Fool]
▶ IIROC Trade Halt - Brookfield Asset Management Inc.   [Sep-13-17 07:53AM  Newsfile]
▶ Why I Love TerraForm Power, Inc.   [Sep-07-17 04:18PM  Motley Fool]
▶ [$$] Lehman Sells Subsidiary Interests to Brookfield   [01:49PM  The Wall Street Journal]
▶ Macy's Earnings: Not as Bad as Investors Seem to Think   [Aug-15-17 08:20AM  Motley Fool]
▶ Brookfield Asset Management posts 2Q profit   [Aug-10-17 11:54PM  Associated Press]
▶ [$$] Brookfield's Toll Road to Riches   [Aug-09-17 07:16PM  The Wall Street Journal]
▶ 3 Solar Stocks for Heading Into the Third Quarter   [Aug-01-17 06:10PM  Motley Fool]
▶ Teekay Was the NYSEs Biggest Gainer Last Week   [08:26AM  Market Realist]
▶ TerraForm Power Inc. in 3 Charts   [08:28AM  Motley Fool]
▶ TerraForm Global's Most Brilliant Move in 2017 So Far   [Jun-30-17 08:11AM  Motley Fool]
▶ TerraForm Power Inc.'s Worst Move of 2017 So Far   [Jun-20-17 08:11AM  Motley Fool]
▶ Macy's Real Estate Remains Dramatically Undervalued   [Jun-14-17 06:50PM  Motley Fool]
▶ [$$] A Compelling Case for Alternative Assets   [May-27-17 12:20AM  Barrons.com]
▶ Blackstone: A Super-Sized Infrastructure Fund   [May-22-17 11:40AM  Barrons.com]
▶ Brookfield Asset Management posts 1Q loss   [07:36AM  Associated Press]
▶ 3 Things You Didn't Know About TerraForm Power, Inc.   [May-04-17 09:03AM  Motley Fool]
Financial statements of BAM
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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