Intrinsic value of Brookfield Asset Management Cl A - BAM

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$39.14

  Intrinsic Value

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  Value-price divergence*

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$39.14

 
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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 38.0

 

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
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
Revenue, $m
  24,411
  21,586
  23,325
  25,134
  27,014
  28,967
  30,997
  33,107
  35,301
  37,582
  39,957
  42,428
  45,002
  47,684
  50,481
  53,397
  56,441
  59,619
  62,938
  66,406
  70,031
  73,822
  77,788
  81,938
  86,282
  90,830
  95,593
  100,583
  105,810
  111,289
  117,032
Variable operating expenses, $m
 
  13,880
  14,978
  16,120
  17,306
  18,539
  19,821
  21,152
  22,537
  23,977
  25,476
  26,782
  28,407
  30,100
  31,865
  33,706
  35,627
  37,633
  39,728
  41,917
  44,206
  46,599
  49,102
  51,722
  54,463
  57,334
  60,341
  63,491
  66,791
  70,249
  73,874
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
  13,880
  14,978
  16,120
  17,306
  18,539
  19,821
  21,152
  22,537
  23,977
  25,476
  26,782
  28,407
  30,100
  31,865
  33,706
  35,627
  37,633
  39,728
  41,917
  44,206
  46,599
  49,102
  51,722
  54,463
  57,334
  60,341
  63,491
  66,791
  70,249
  73,874
Operating income, $m
  2,993
  7,706
  8,347
  9,014
  9,708
  10,428
  11,177
  11,955
  12,764
  13,605
  14,481
  15,646
  16,595
  17,585
  18,616
  19,691
  20,814
  21,986
  23,210
  24,489
  25,825
  27,223
  28,686
  30,216
  31,818
  33,495
  35,252
  37,092
  39,020
  41,040
  43,158
EBITDA, $m
  5,013
  9,711
  10,494
  11,307
  12,153
  13,032
  13,945
  14,894
  15,881
  16,908
  17,976
  19,088
  20,246
  21,452
  22,710
  24,023
  25,392
  26,821
  28,315
  29,875
  31,506
  33,211
  34,995
  36,862
  38,817
  40,863
  43,005
  45,250
  47,602
  50,067
  52,651
Interest expense (income), $m
  3,062
  3,077
  3,549
  4,056
  4,584
  5,132
  5,702
  6,294
  6,909
  7,549
  8,215
  8,907
  9,628
  10,379
  11,161
  11,977
  12,828
  13,715
  14,642
  15,610
  16,622
  17,679
  18,785
  19,942
  21,152
  22,419
  23,746
  25,135
  26,590
  28,115
  29,713
Earnings before tax, $m
  2,993
  4,629
  4,799
  4,958
  5,124
  5,296
  5,475
  5,661
  5,854
  6,056
  6,266
  6,739
  6,967
  7,206
  7,455
  7,714
  7,986
  8,270
  8,567
  8,878
  9,204
  9,544
  9,901
  10,274
  10,666
  11,076
  11,506
  11,957
  12,429
  12,925
  13,445
Tax expense, $m
  -345
  1,250
  1,296
  1,339
  1,383
  1,430
  1,478
  1,528
  1,581
  1,635
  1,692
  1,820
  1,881
  1,946
  2,013
  2,083
  2,156
  2,233
  2,313
  2,397
  2,485
  2,577
  2,673
  2,774
  2,880
  2,991
  3,107
  3,228
  3,356
  3,490
  3,630
Net income, $m
  1,651
  3,379
  3,503
  3,619
  3,740
  3,866
  3,996
  4,132
  4,274
  4,421
  4,574
  4,919
  5,086
  5,260
  5,442
  5,632
  5,830
  6,037
  6,254
  6,481
  6,719
  6,967
  7,228
  7,500
  7,786
  8,086
  8,399
  8,728
  9,073
  9,435
  9,814

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
  147,847
  159,764
  172,152
  185,026
  198,405
  212,309
  226,760
  241,786
  257,414
  273,675
  290,604
  308,234
  326,606
  345,759
  365,736
  386,583
  408,348
  431,081
  454,835
  479,665
  505,632
  532,794
  561,218
  590,970
  622,121
  654,746
  688,921
  724,729
  762,255
  801,589
Adjusted assets (=assets-cash), $m
  155,527
  147,847
  159,764
  172,152
  185,026
  198,405
  212,309
  226,760
  241,786
  257,414
  273,675
  290,604
  308,234
  326,606
  345,759
  365,736
  386,583
  408,348
  431,081
  454,835
  479,665
  505,632
  532,794
  561,218
  590,970
  622,121
  654,746
  688,921
  724,729
  762,255
  801,589
Revenue / Adjusted assets
  0.157
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
Average production assets, $m
  46,931
  44,121
  47,677
  51,374
  55,216
  59,209
  63,358
  67,671
  72,155
  76,818
  81,671
  86,723
  91,985
  97,467
  103,183
  109,144
  115,366
  121,861
  128,645
  135,734
  143,144
  150,893
  158,999
  167,481
  176,360
  185,656
  195,392
  205,591
  216,277
  227,475
  239,213
Working capital, $m
  0
  -3,000
  -3,242
  -3,494
  -3,755
  -4,026
  -4,309
  -4,602
  -4,907
  -5,224
  -5,554
  -5,898
  -6,255
  -6,628
  -7,017
  -7,422
  -7,845
  -8,287
  -8,748
  -9,230
  -9,734
  -10,261
  -10,813
  -11,389
  -11,993
  -12,625
  -13,287
  -13,981
  -14,708
  -15,469
  -16,267
Total debt, $m
  67,017
  69,585
  79,536
  89,880
  100,630
  111,801
  123,411
  135,478
  148,024
  161,074
  174,652
  188,787
  203,509
  218,849
  234,842
  251,523
  268,930
  287,104
  306,085
  325,920
  346,654
  368,335
  391,016
  414,750
  439,593
  465,604
  492,846
  521,382
  551,282
  582,616
  615,460
Total liabilities, $m
  133,373
  123,452
  133,403
  143,747
  154,497
  165,668
  177,278
  189,345
  201,891
  214,941
  228,519
  242,654
  257,376
  272,716
  288,709
  305,390
  322,797
  340,971
  359,952
  379,787
  400,521
  422,202
  444,883
  468,617
  493,460
  519,471
  546,713
  575,249
  605,149
  636,483
  669,327
Total equity, $m
  26,453
  24,395
  26,361
  28,405
  30,529
  32,737
  35,031
  37,415
  39,895
  42,473
  45,156
  47,950
  50,859
  53,890
  57,050
  60,346
  63,786
  67,377
  71,128
  75,048
  79,145
  83,429
  87,911
  92,601
  97,510
  102,650
  108,033
  113,672
  119,580
  125,772
  132,262
Total liabilities and equity, $m
  159,826
  147,847
  159,764
  172,152
  185,026
  198,405
  212,309
  226,760
  241,786
  257,414
  273,675
  290,604
  308,235
  326,606
  345,759
  365,736
  386,583
  408,348
  431,080
  454,835
  479,666
  505,631
  532,794
  561,218
  590,970
  622,121
  654,746
  688,921
  724,729
  762,255
  801,589
Debt-to-equity ratio
  2.533
  2.850
  3.020
  3.160
  3.300
  3.420
  3.520
  3.620
  3.710
  3.790
  3.870
  3.940
  4.000
  4.060
  4.120
  4.170
  4.220
  4.260
  4.300
  4.340
  4.380
  4.410
  4.450
  4.480
  4.510
  4.540
  4.560
  4.590
  4.610
  4.630
  4.650
Adjusted equity ratio
  0.142
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,651
  3,379
  3,503
  3,619
  3,740
  3,866
  3,996
  4,132
  4,274
  4,421
  4,574
  4,919
  5,086
  5,260
  5,442
  5,632
  5,830
  6,037
  6,254
  6,481
  6,719
  6,967
  7,228
  7,500
  7,786
  8,086
  8,399
  8,728
  9,073
  9,435
  9,814
Depreciation, amort., depletion, $m
  2,020
  2,005
  2,146
  2,293
  2,445
  2,604
  2,769
  2,940
  3,118
  3,303
  3,495
  3,441
  3,650
  3,868
  4,095
  4,331
  4,578
  4,836
  5,105
  5,386
  5,680
  5,988
  6,309
  6,646
  6,998
  7,367
  7,754
  8,158
  8,582
  9,027
  9,493
Funds from operations, $m
  2,336
  5,384
  5,649
  5,912
  6,186
  6,470
  6,765
  7,072
  7,391
  7,723
  8,069
  8,361
  8,736
  9,128
  9,536
  9,963
  10,408
  10,873
  11,359
  11,867
  12,399
  12,955
  13,537
  14,146
  14,784
  15,453
  16,153
  16,887
  17,656
  18,462
  19,307
Change in working capital, $m
  -747
  -233
  -242
  -251
  -261
  -272
  -282
  -293
  -305
  -317
  -330
  -344
  -358
  -373
  -389
  -405
  -423
  -442
  -461
  -482
  -504
  -527
  -551
  -577
  -604
  -632
  -662
  -694
  -727
  -762
  -798
Cash from operations, $m
  3,083
  7,366
  5,891
  6,164
  6,447
  6,741
  7,047
  7,365
  7,696
  8,041
  8,399
  8,704
  9,094
  9,501
  9,925
  10,368
  10,831
  11,315
  11,820
  12,349
  12,903
  13,482
  14,088
  14,723
  15,388
  16,085
  16,815
  17,580
  18,382
  19,223
  20,105
Maintenance CAPEX, $m
  0
  -1,615
  -1,751
  -1,892
  -2,039
  -2,191
  -2,350
  -2,514
  -2,685
  -2,863
  -3,048
  -3,241
  -3,441
  -3,650
  -3,868
  -4,095
  -4,331
  -4,578
  -4,836
  -5,105
  -5,386
  -5,680
  -5,988
  -6,309
  -6,646
  -6,998
  -7,367
  -7,754
  -8,158
  -8,582
  -9,027
New CAPEX, $m
  -3,441
  -3,428
  -3,556
  -3,697
  -3,842
  -3,993
  -4,149
  -4,313
  -4,484
  -4,664
  -4,853
  -5,052
  -5,261
  -5,483
  -5,716
  -5,962
  -6,221
  -6,495
  -6,784
  -7,089
  -7,410
  -7,749
  -8,106
  -8,482
  -8,879
  -9,296
  -9,736
  -10,199
  -10,686
  -11,199
  -11,738
Cash from investing activities, $m
  -8,557
  -5,043
  -5,307
  -5,589
  -5,881
  -6,184
  -6,499
  -6,827
  -7,169
  -7,527
  -7,901
  -8,293
  -8,702
  -9,133
  -9,584
  -10,057
  -10,552
  -11,073
  -11,620
  -12,194
  -12,796
  -13,429
  -14,094
  -14,791
  -15,525
  -16,294
  -17,103
  -17,953
  -18,844
  -19,781
  -20,765
Free cash flow, $m
  -5,474
  2,323
  584
  575
  566
  558
  548
  538
  527
  513
  498
  412
  391
  368
  342
  312
  279
  242
  201
  156
  106
  53
  -5
  -69
  -137
  -210
  -288
  -372
  -462
  -558
  -660
Issuance/(repayment) of debt, $m
  3,742
  9,245
  9,950
  10,344
  10,750
  11,171
  11,609
  12,067
  12,546
  13,049
  13,578
  14,135
  14,722
  15,340
  15,993
  16,681
  17,407
  18,174
  18,982
  19,835
  20,734
  21,682
  22,681
  23,734
  24,843
  26,011
  27,242
  28,537
  29,900
  31,334
  32,843
Issuance/(repurchase) of shares, $m
  88
  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  
  7,626
  9,245
  9,950
  10,344
  10,750
  11,171
  11,609
  12,067
  12,546
  13,049
  13,578
  14,135
  14,722
  15,340
  15,993
  16,681
  17,407
  18,174
  18,982
  19,835
  20,734
  21,682
  22,681
  23,734
  24,843
  26,011
  27,242
  28,537
  29,900
  31,334
  32,843
Total cash flow (excl. dividends), $m
  2,158
  11,569
  10,534
  10,919
  11,317
  11,729
  12,158
  12,605
  13,073
  13,563
  14,076
  14,547
  15,113
  15,708
  16,334
  16,993
  17,686
  18,415
  19,183
  19,990
  20,840
  21,734
  22,675
  23,665
  24,706
  25,802
  26,953
  28,165
  29,438
  30,777
  32,184
Retained Cash Flow (-), $m
  -1,146
  -1,862
  -1,966
  -2,044
  -2,124
  -2,207
  -2,294
  -2,385
  -2,479
  -2,579
  -2,683
  -2,793
  -2,909
  -3,031
  -3,160
  -3,296
  -3,440
  -3,591
  -3,751
  -3,919
  -4,097
  -4,284
  -4,482
  -4,690
  -4,909
  -5,140
  -5,383
  -5,639
  -5,908
  -6,192
  -6,490
Prev. year cash balance distribution, $m
 
  2,774
  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
 
  12,481
  8,568
  8,875
  9,192
  9,521
  9,864
  10,221
  10,594
  10,984
  11,393
  11,754
  12,204
  12,677
  13,174
  13,697
  14,246
  14,824
  15,432
  16,071
  16,743
  17,450
  18,193
  18,975
  19,797
  20,662
  21,570
  22,526
  23,530
  24,585
  25,694
Discount rate, %
 
  11.10
  11.66
  12.24
  12.85
  13.49
  14.17
  14.88
  15.62
  16.40
  17.22
  18.08
  18.98
  19.93
  20.93
  21.98
  23.08
  24.23
  25.44
  26.71
  28.05
  29.45
  30.92
  32.47
  34.09
  35.80
  37.59
  39.47
  41.44
  43.51
  45.69
PV of cash for distribution, $m
 
  11,234
  6,873
  6,277
  5,668
  5,057
  4,455
  3,872
  3,318
  2,800
  2,326
  1,889
  1,516
  1,193
  921
  696
  514
  371
  261
  179
  119
  77
  48
  29
  17
  10
  5
  3
  1
  1
  0
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

Brookfield Asset Management Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm invests in the property, power, and infrastructure sectors. Its property business includes owning and managing office properties, developing master planned residential communities, and offering clients bridge and mezzanine lending, alternative assets funds, and financial and advisory services. Through its subsidiaries, the firm operates hydroelectric power facilities, interconnections and transmission facilities in Northeast North America, and development of wind power in Canada. Through its subsidiaries, it invests in specialty funds including private equity and makes direct investments in real estate, energy, and resource assets. The firm launches and manages equity and fixed income mutual funds. It also manages real estate and hedge funds. The firm invests in equity and fixed income markets across the globe. It was formerly known as Brascan Corp. Brookfield Asset Management is based in Toronto, Canada with additional offices in Bogota, Colombia, Botafogo, Brazil, Calgary, Canada, Dubai, United Arab Emirates, Gatineau, Canada, Hong Kong, Hong Kong, London, United Kingdom, Melbourne, Australia, Montreal, Canada, Mumbai, India, New York City, Perth, Australia, Shanghai, China, and Sydney, Australia.

FINANCIAL RATIOS  of  Brookfield Asset Management Cl A (BAM)

Valuation Ratios
P/E Ratio 22.7
Price to Sales 1.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow -104.8
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 $19913 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 8.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11.1%, 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 64.4%.

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 5.1% 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 204.4%.

Life of production assets of 25.2 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 -13.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $25307 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 969.997 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 $38.0 billion.


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Stock chart of BAM Financial statements of BAM Annual reports 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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