Intrinsic value of Brookfield Asset Management Cl A - BAM

Previous Close

$40.43

  Intrinsic Value

$333.75

stock screener

  Rating & Target

str. buy

+725%

Previous close

$40.43

 
Intrinsic value

$333.75

 
Up/down potential

+725%

 
Rating

str. buy

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

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  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
  24,411
  39,058
  60,344
  90,244
  130,940
  184,738
  253,972
  340,904
  447,629
  575,989
  727,522
  903,417
  1,104,513
  1,331,310
  1,583,996
  1,862,498
  2,166,533
  2,495,664
  2,849,361
  3,227,049
  3,628,161
  4,052,174
  4,498,644
  4,967,234
  5,457,729
  5,970,055
  6,504,281
  7,060,631
  7,639,478
  8,241,348
  8,866,913
Variable operating expenses, $m
 
  29,301
  45,063
  67,205
  97,340
  137,177
  188,445
  252,819
  331,849
  426,900
  539,110
  668,983
  817,895
  985,839
  1,172,954
  1,379,185
  1,604,324
  1,848,046
  2,109,960
  2,389,639
  2,686,664
  3,000,647
  3,331,259
  3,678,251
  4,041,464
  4,420,843
  4,816,439
  5,228,418
  5,657,056
  6,102,742
  6,565,975
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
  29,301
  45,063
  67,205
  97,340
  137,177
  188,445
  252,819
  331,849
  426,900
  539,110
  668,983
  817,895
  985,839
  1,172,954
  1,379,185
  1,604,324
  1,848,046
  2,109,960
  2,389,639
  2,686,664
  3,000,647
  3,331,259
  3,678,251
  4,041,464
  4,420,843
  4,816,439
  5,228,418
  5,657,056
  6,102,742
  6,565,975
Operating income, $m
  2,993
  9,757
  15,281
  23,040
  33,600
  47,561
  65,527
  88,085
  115,780
  149,089
  188,411
  234,434
  286,618
  345,471
  411,042
  483,313
  562,209
  647,618
  739,401
  837,410
  941,497
  1,051,527
  1,167,385
  1,288,983
  1,416,265
  1,549,212
  1,687,842
  1,832,213
  1,982,423
  2,138,606
  2,300,938
EBITDA, $m
  5,013
  13,164
  20,338
  30,416
  44,132
  62,263
  85,598
  114,897
  150,868
  194,130
  245,202
  304,485
  372,262
  448,701
  533,866
  627,732
  730,203
  841,132
  960,341
  1,087,636
  1,222,826
  1,365,734
  1,516,212
  1,674,144
  1,839,459
  2,012,132
  2,192,186
  2,379,697
  2,574,790
  2,777,643
  2,988,482
Interest expense (income), $m
  3,062
  3,012
  6,728
  12,129
  19,717
  30,044
  43,695
  61,264
  83,324
  110,406
  142,979
  181,431
  226,066
  277,096
  334,647
  398,768
  469,440
  546,592
  630,111
  719,865
  815,706
  917,491
  1,025,088
  1,138,383
  1,257,292
  1,381,759
  1,511,766
  1,647,330
  1,788,508
  1,935,395
  2,088,124
Earnings before tax, $m
  2,993
  6,745
  8,553
  10,910
  13,883
  17,517
  21,831
  26,821
  32,456
  38,683
  45,433
  53,003
  60,552
  68,375
  76,395
  84,545
  92,769
  101,026
  109,290
  117,545
  125,791
  134,036
  142,297
  150,599
  158,973
  167,453
  176,077
  184,884
  193,915
  203,211
  212,814
Tax expense, $m
  -345
  1,821
  2,309
  2,946
  3,749
  4,730
  5,894
  7,242
  8,763
  10,444
  12,267
  14,311
  16,349
  18,461
  20,627
  22,827
  25,048
  27,277
  29,508
  31,737
  33,964
  36,190
  38,420
  40,662
  42,923
  45,212
  47,541
  49,919
  52,357
  54,867
  57,460
Net income, $m
  1,651
  4,924
  6,244
  7,965
  10,135
  12,787
  15,937
  19,580
  23,693
  28,239
  33,166
  38,692
  44,203
  49,914
  55,769
  61,718
  67,721
  73,749
  79,781
  85,808
  91,828
  97,846
  103,877
  109,938
  116,050
  122,241
  128,536
  134,965
  141,558
  148,344
  155,354

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
  248,775
  384,357
  574,805
  834,014
  1,176,673
  1,617,654
  2,171,364
  2,851,139
  3,668,723
  4,633,895
  5,754,246
  7,035,117
  8,479,682
  10,089,148
  11,863,046
  13,799,571
  15,895,948
  18,148,793
  20,554,453
  23,109,307
  25,810,026
  28,653,786
  31,638,433
  34,762,607
  38,025,826
  41,428,544
  44,972,174
  48,659,098
  52,492,663
  56,477,155
Adjusted assets (=assets-cash), $m
  155,527
  248,775
  384,357
  574,805
  834,014
  1,176,673
  1,617,654
  2,171,364
  2,851,139
  3,668,723
  4,633,895
  5,754,246
  7,035,117
  8,479,682
  10,089,148
  11,863,046
  13,799,571
  15,895,948
  18,148,793
  20,554,453
  23,109,307
  25,810,026
  28,653,786
  31,638,433
  34,762,607
  38,025,826
  41,428,544
  44,972,174
  48,659,098
  52,492,663
  56,477,155
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
  75,108
  116,041
  173,540
  251,798
  355,250
  488,387
  655,559
  860,790
  1,107,628
  1,399,024
  1,737,270
  2,123,979
  2,560,109
  3,046,025
  3,581,584
  4,166,242
  4,799,162
  5,479,320
  6,205,615
  6,976,954
  7,792,331
  8,650,893
  9,551,991
  10,495,213
  11,480,415
  12,507,733
  13,577,594
  14,690,717
  15,848,112
  17,051,074
Working capital, $m
  0
  7,460
  11,526
  17,237
  25,010
  35,285
  48,509
  65,113
  85,497
  110,014
  138,957
  172,553
  210,962
  254,280
  302,543
  355,737
  413,808
  476,672
  544,228
  616,366
  692,979
  773,965
  859,241
  948,742
  1,042,426
  1,140,280
  1,242,318
  1,348,581
  1,459,140
  1,574,097
  1,693,580
Total debt, $m
  67,053
  140,163
  252,696
  410,768
  625,911
  910,318
  1,276,332
  1,735,912
  2,300,125
  2,978,720
  3,779,813
  4,709,704
  5,772,828
  6,971,816
  8,307,673
  9,780,008
  11,387,324
  13,127,317
  14,997,178
  16,993,876
  19,114,404
  21,356,001
  23,716,322
  26,193,579
  28,786,643
  31,495,116
  34,319,371
  37,260,584
  40,320,732
  43,502,590
  46,809,719
Total liabilities, $m
  133,373
  206,483
  319,016
  477,088
  692,231
  976,638
  1,342,652
  1,802,232
  2,366,445
  3,045,040
  3,846,133
  4,776,024
  5,839,148
  7,038,136
  8,373,993
  9,846,328
  11,453,644
  13,193,637
  15,063,498
  17,060,196
  19,180,724
  21,422,321
  23,782,642
  26,259,899
  28,852,963
  31,561,436
  34,385,691
  37,326,904
  40,387,052
  43,568,910
  46,876,039
Total equity, $m
  26,453
  42,292
  65,341
  97,717
  141,782
  200,034
  275,001
  369,132
  484,694
  623,683
  787,762
  978,222
  1,195,970
  1,441,546
  1,715,155
  2,016,718
  2,345,927
  2,702,311
  3,085,295
  3,494,257
  3,928,582
  4,387,704
  4,871,144
  5,378,534
  5,909,643
  6,464,390
  7,042,852
  7,645,270
  8,272,047
  8,923,753
  9,601,116
Total liabilities and equity, $m
  159,826
  248,775
  384,357
  574,805
  834,013
  1,176,672
  1,617,653
  2,171,364
  2,851,139
  3,668,723
  4,633,895
  5,754,246
  7,035,118
  8,479,682
  10,089,148
  11,863,046
  13,799,571
  15,895,948
  18,148,793
  20,554,453
  23,109,306
  25,810,025
  28,653,786
  31,638,433
  34,762,606
  38,025,826
  41,428,543
  44,972,174
  48,659,099
  52,492,663
  56,477,155
Debt-to-equity ratio
  2.535
  3.310
  3.870
  4.200
  4.410
  4.550
  4.640
  4.700
  4.750
  4.780
  4.800
  4.810
  4.830
  4.840
  4.840
  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
  4.880
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
  4,924
  6,244
  7,965
  10,135
  12,787
  15,937
  19,580
  23,693
  28,239
  33,166
  38,692
  44,203
  49,914
  55,769
  61,718
  67,721
  73,749
  79,781
  85,808
  91,828
  97,846
  103,877
  109,938
  116,050
  122,241
  128,536
  134,965
  141,558
  148,344
  155,354
Depreciation, amort., depletion, $m
  2,020
  3,407
  5,057
  7,376
  10,531
  14,703
  20,071
  26,812
  35,088
  45,041
  56,791
  70,051
  85,644
  103,230
  122,824
  144,419
  167,994
  193,515
  220,940
  250,226
  281,329
  314,207
  348,826
  385,161
  423,194
  462,920
  504,344
  547,484
  592,368
  639,037
  687,543
Funds from operations, $m
  2,336
  8,331
  11,301
  15,341
  20,666
  27,490
  36,008
  46,392
  58,781
  73,280
  89,957
  108,743
  129,847
  153,144
  178,592
  206,136
  235,715
  267,264
  300,722
  336,035
  373,156
  412,053
  452,703
  495,098
  539,244
  585,161
  632,880
  682,449
  733,925
  787,381
  842,898
Change in working capital, $m
  -747
  2,798
  4,066
  5,711
  7,773
  10,275
  13,224
  16,604
  20,384
  24,517
  28,943
  33,596
  38,409
  43,318
  48,263
  53,194
  58,071
  62,864
  67,556
  72,139
  76,612
  80,986
  85,276
  89,501
  93,685
  97,854
  102,037
  106,263
  110,560
  114,957
  119,483
Cash from operations, $m
  3,083
  5,533
  7,235
  9,630
  12,893
  17,215
  22,785
  29,788
  38,396
  48,763
  61,014
  75,147
  91,438
  109,826
  130,329
  152,942
  177,644
  204,400
  233,166
  263,896
  296,544
  331,067
  367,427
  405,598
  445,560
  487,307
  530,843
  576,186
  623,365
  672,424
  723,415
Maintenance CAPEX, $m
  0
  -1,892
  -3,029
  -4,679
  -6,998
  -10,153
  -14,325
  -19,693
  -26,434
  -34,709
  -44,662
  -56,412
  -70,051
  -85,644
  -103,230
  -122,824
  -144,419
  -167,994
  -193,515
  -220,940
  -250,226
  -281,329
  -314,207
  -348,826
  -385,161
  -423,194
  -462,920
  -504,344
  -547,484
  -592,368
  -639,037
New CAPEX, $m
  -3,441
  -28,177
  -40,934
  -57,499
  -78,258
  -103,452
  -133,137
  -167,171
  -205,231
  -246,838
  -291,396
  -338,246
  -386,709
  -436,130
  -485,915
  -535,559
  -584,658
  -632,919
  -680,159
  -726,295
  -771,338
  -815,377
  -858,562
  -901,098
  -943,222
  -985,202
  -1,027,318
  -1,069,861
  -1,113,123
  -1,157,395
  -1,202,962
Cash from investing activities, $m
  -8,557
  -30,069
  -43,963
  -62,178
  -85,256
  -113,605
  -147,462
  -186,864
  -231,665
  -281,547
  -336,058
  -394,658
  -456,760
  -521,774
  -589,145
  -658,383
  -729,077
  -800,913
  -873,674
  -947,235
  -1,021,564
  -1,096,706
  -1,172,769
  -1,249,924
  -1,328,383
  -1,408,396
  -1,490,238
  -1,574,205
  -1,660,607
  -1,749,763
  -1,841,999
Free cash flow, $m
  -5,474
  -24,536
  -36,727
  -52,548
  -72,362
  -96,391
  -124,677
  -157,077
  -193,269
  -232,784
  -275,045
  -319,511
  -365,322
  -411,948
  -458,817
  -505,440
  -551,433
  -596,513
  -640,508
  -683,339
  -725,021
  -765,639
  -805,342
  -844,326
  -882,823
  -921,089
  -959,395
  -998,019
  -1,037,241
  -1,077,339
  -1,118,584
Issuance/(repayment) of debt, $m
  3,742
  77,409
  112,533
  158,072
  215,143
  284,407
  366,014
  459,580
  564,213
  678,595
  801,093
  929,892
  1,063,123
  1,198,989
  1,335,857
  1,472,335
  1,607,316
  1,739,993
  1,869,862
  1,996,698
  2,120,529
  2,241,597
  2,360,321
  2,477,257
  2,593,064
  2,708,472
  2,824,256
  2,941,213
  3,060,148
  3,181,858
  3,307,129
Issuance/(repurchase) of shares, $m
  88
  10,915
  16,805
  24,412
  33,931
  45,465
  59,030
  74,551
  91,869
  110,750
  130,913
  151,768
  173,545
  195,662
  217,841
  239,845
  261,488
  282,635
  303,202
  323,154
  342,497
  361,276
  379,562
  397,452
  415,059
  432,507
  449,926
  467,452
  485,220
  503,362
  522,009
Cash from financing (excl. dividends), $m  
  7,626
  88,324
  129,338
  182,484
  249,074
  329,872
  425,044
  534,131
  656,082
  789,345
  932,006
  1,081,660
  1,236,668
  1,394,651
  1,553,698
  1,712,180
  1,868,804
  2,022,628
  2,173,064
  2,319,852
  2,463,026
  2,602,873
  2,739,883
  2,874,709
  3,008,123
  3,140,979
  3,274,182
  3,408,665
  3,545,368
  3,685,220
  3,829,138
Total cash flow (excl. dividends), $m
  2,158
  63,788
  92,612
  129,936
  176,712
  233,481
  300,367
  377,054
  462,812
  556,561
  656,962
  762,148
  871,346
  982,702
  1,094,881
  1,206,740
  1,317,371
  1,426,115
  1,532,556
  1,636,512
  1,738,005
  1,837,234
  1,934,541
  2,030,383
  2,125,300
  2,219,889
  2,314,787
  2,410,646
  2,508,126
  2,607,881
  2,710,554
Retained Cash Flow (-), $m
  -1,146
  -15,839
  -23,049
  -32,376
  -44,065
  -58,252
  -74,967
  -94,131
  -115,562
  -138,989
  -164,079
  -190,460
  -217,748
  -245,576
  -273,609
  -301,563
  -329,209
  -356,384
  -382,984
  -408,962
  -434,325
  -459,122
  -483,439
  -507,390
  -531,110
  -554,747
  -578,462
  -602,417
  -626,777
  -651,706
  -677,364
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
 
  47,949
  69,563
  97,560
  132,646
  175,229
  225,400
  282,924
  347,251
  417,572
  492,882
  571,688
  653,598
  737,126
  821,272
  905,177
  988,162
  1,069,731
  1,149,572
  1,227,550
  1,303,680
  1,378,112
  1,451,102
  1,522,993
  1,594,190
  1,665,142
  1,736,325
  1,808,229
  1,881,349
  1,956,175
  2,033,190
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
 
  43,197
  55,903
  69,204
  82,125
  93,563
  102,478
  108,053
  109,811
  107,678
  101,973
  93,279
  82,587
  70,754
  58,676
  47,112
  36,627
  27,569
  20,086
  14,161
  9,656
  6,364
  4,051
  2,489
  1,474
  841
  462
  243
  123
  60
  28
Current shareholders' claim on cash, %
  100
  78.6
  62.3
  49.9
  40.6
  33.5
  28.1
  23.8
  20.4
  17.8
  15.6
  13.8
  12.4
  11.2
  10.2
  9.3
  8.6
  7.9
  7.4
  6.9
  6.5
  6.1
  5.8
  5.5
  5.2
  5.0
  4.8
  4.6
  4.4
  4.2
  4.1

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 23.5
Price to Sales 1.6
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 12.6
Price to Free Cash Flow -108.2
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 219.6%
Total Debt to Equity 253.5%
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 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 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 19.1%. 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 991.043 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 $40.1 billion.

RELATED COMPANIES Price Int.Val. Rating
BPY Brookfield Pro 20.74 36.36  str.buy
GGP GGP 21.52 2.28  str.sell

COMPANY NEWS

▶ Brookfield Asset Management posts 4Q profit   [09:51AM  Associated Press]
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▶ Brookfield in takeover talks with Stapleton developer Forest City (Video)   [Feb-06-18 01:10PM  American City Business Journals]
▶ Brookfield Said to Be in Talks to Acquire Forest City Realty   [Jan-31-18 12:47PM  Bloomberg Video]
▶ Analysts Recommendations on Carlyle, Pre-4Q17 Results   [Jan-25-18 09:00AM  Market Realist]
▶ Whats behind Carlyles Higher Valuation   [07:31AM  Market Realist]
▶ 1 Top Renewable Energy Stock to Buy Now   [Jan-24-18 07:36PM  Motley Fool]
▶ Carlyle Wraps Up the Sale of Companeo   [09:01AM  Market Realist]
▶ Whats Happening in Carlyles Real Assets Division   [Jan-23-18 02:50PM  Market Realist]
▶ [$$] Brookfield-Backed GrafTech Files for IPO   [Jan-19-18 12:52PM  The Wall Street Journal]
▶ Brookfield, Onex Plan $3.7 Billion Bid for IWG   [Jan-16-18 02:35PM  Bloomberg]
▶ Toshiba gains after $4.6bn deal to sell Westinghouse   [Jan-05-18 06:45AM  Reuters Videos]
▶ 3 Energy Stocks to Buy for 2018   [Jan-02-18 03:35PM  Motley Fool]
▶ Will 2018 Be TerraForm Power, Inc's Best Year Yet?   [Dec-30-17 08:18AM  Motley Fool]
▶ Brookfield Closes Acquisition of TerraForm Global   [Dec-28-17 04:45PM  GlobeNewswire]
▶ Comparing Blackstones Valuations to Its Peers   [07:30AM  Market Realist]
▶ [$$] IWG Gets Indicative Offer From Brookfield Asset Management, Onex   [Dec-27-17 11:22AM  The Wall Street Journal]
▶ Brookfield Asset Management Trying to be More Careful   [Dec-11-17 05:38PM  Bloomberg Video]
▶ 3 Top Dividend Stocks to Buy Now   [Dec-03-17 08:15AM  Motley Fool]
▶ What to Expect From TerraForm Power, Inc. in 2018   [Nov-20-17 08:18AM  Motley Fool]
▶ [$$] A Global Real-Estate Giant Whispers Were Number One   [Nov-17-17 11:06PM  The Wall Street Journal]
▶ [$$] A Global Real-Estate Giant Whispers 'We're Number One'   [12:00PM  The Wall Street Journal]
▶ 1 Stock I'm Never Selling   [06:02AM  Motley Fool]
▶ Brookfield offers $14.8 billion to purchase remainder of GGP   [01:35PM  American City Business Journals]
▶ Vision Capital CEO on Brookfield-GGP Takeover Talks   [Nov-09-17 03:23PM  Bloomberg Video]
▶ Brookfield Asset Management posts 3Q profit   [01:41PM  Associated Press]
▶ The Hottest Sales at the Mall? The Malls Themselves   [Nov-08-17 09:51AM  Barrons.com]
▶ The Hot Stock: GGP Jumps 16.8%   [04:29PM  Barrons.com]
▶ Report: Macy's has buyer for Chicago flagship   [Oct-26-17 07:16AM  American City Business Journals]
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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