Intrinsic value of BCE - BCE

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$43.42

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$43.42

 
Intrinsic value

$34.52

 
Up/down potential

-21%

 
Rating

sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of BCE 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 37.0

 

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, %
  0.95
  2.20
  2.48
  2.73
  2.96
  3.16
  3.35
  3.51
  3.66
  3.79
  3.92
  4.02
  4.12
  4.21
  4.29
  4.36
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
Revenue, $m
  16,075
  21,987
  22,533
  23,148
  23,833
  24,587
  25,410
  26,302
  27,265
  28,300
  29,408
  30,591
  31,852
  33,192
  34,616
  36,125
  37,723
  39,413
  41,200
  43,087
  45,078
  47,178
  49,393
  51,726
  54,184
  56,772
  59,497
  62,364
  65,381
  68,554
  71,891
Variable operating expenses, $m
 
  16,516
  16,905
  17,344
  17,832
  18,370
  18,956
  19,593
  20,279
  21,017
  21,807
  21,813
  22,712
  23,668
  24,683
  25,759
  26,899
  28,104
  29,378
  30,723
  32,143
  33,641
  35,220
  36,884
  38,637
  40,482
  42,425
  44,469
  46,621
  48,883
  51,263
Fixed operating expenses, $m
 
  751
  770
  789
  809
  829
  850
  871
  893
  915
  938
  962
  986
  1,010
  1,036
  1,062
  1,088
  1,115
  1,143
  1,172
  1,201
  1,231
  1,262
  1,293
  1,326
  1,359
  1,393
  1,428
  1,463
  1,500
  1,538
Total operating expenses, $m
  12,282
  17,267
  17,675
  18,133
  18,641
  19,199
  19,806
  20,464
  21,172
  21,932
  22,745
  22,775
  23,698
  24,678
  25,719
  26,821
  27,987
  29,219
  30,521
  31,895
  33,344
  34,872
  36,482
  38,177
  39,963
  41,841
  43,818
  45,897
  48,084
  50,383
  52,801
Operating income, $m
  3,793
  4,720
  4,858
  5,015
  5,192
  5,388
  5,603
  5,838
  6,093
  6,367
  6,662
  7,816
  8,154
  8,514
  8,897
  9,304
  9,736
  10,194
  10,679
  11,191
  11,733
  12,306
  12,911
  13,549
  14,222
  14,931
  15,679
  16,467
  17,297
  18,171
  19,091
EBITDA, $m
  6,389
  8,322
  8,528
  8,763
  9,026
  9,317
  9,635
  9,982
  10,358
  10,762
  11,197
  11,662
  12,158
  12,686
  13,249
  13,845
  14,478
  15,149
  15,858
  16,608
  17,400
  18,237
  19,120
  20,051
  21,033
  22,068
  23,159
  24,307
  25,516
  26,789
  28,129
Interest expense (income), $m
  653
  885
  916
  951
  990
  1,033
  1,081
  1,134
  1,190
  1,251
  1,317
  1,388
  1,463
  1,543
  1,628
  1,718
  1,814
  1,916
  2,023
  2,137
  2,257
  2,383
  2,517
  2,657
  2,806
  2,962
  3,126
  3,299
  3,481
  3,673
  3,875
Earnings before tax, $m
  3,106
  3,835
  3,941
  4,064
  4,202
  4,354
  4,522
  4,704
  4,902
  5,116
  5,345
  6,428
  6,691
  6,971
  7,269
  7,585
  7,922
  8,278
  8,655
  9,055
  9,477
  9,923
  10,394
  10,891
  11,416
  11,969
  12,553
  13,168
  13,815
  14,498
  15,216
Tax expense, $m
  821
  1,035
  1,064
  1,097
  1,135
  1,176
  1,221
  1,270
  1,324
  1,381
  1,443
  1,736
  1,807
  1,882
  1,963
  2,048
  2,139
  2,235
  2,337
  2,445
  2,559
  2,679
  2,806
  2,941
  3,082
  3,232
  3,389
  3,555
  3,730
  3,914
  4,108
Net income, $m
  2,243
  2,799
  2,877
  2,967
  3,067
  3,179
  3,301
  3,434
  3,579
  3,734
  3,902
  4,693
  4,884
  5,089
  5,306
  5,537
  5,783
  6,043
  6,318
  6,610
  6,918
  7,244
  7,588
  7,951
  8,334
  8,738
  9,164
  9,612
  10,085
  10,583
  11,108

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  631
  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
  37,087
  48,430
  49,631
  50,987
  52,496
  54,156
  55,969
  57,934
  60,055
  62,334
  64,774
  67,381
  70,158
  73,111
  76,246
  79,570
  83,090
  86,813
  90,748
  94,904
  99,291
  103,917
  108,795
  113,934
  119,348
  125,049
  131,050
  137,366
  144,010
  151,000
  158,351
Adjusted assets (=assets-cash), $m
  36,456
  48,430
  49,631
  50,987
  52,496
  54,156
  55,969
  57,934
  60,055
  62,334
  64,774
  67,381
  70,158
  73,111
  76,246
  79,570
  83,090
  86,813
  90,748
  94,904
  99,291
  103,917
  108,795
  113,934
  119,348
  125,049
  131,050
  137,366
  144,010
  151,000
  158,351
Revenue / Adjusted assets
  0.441
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
  0.454
Average production assets, $m
  24,850
  32,893
  33,709
  34,630
  35,654
  36,782
  38,013
  39,348
  40,788
  42,336
  43,994
  45,764
  47,650
  49,656
  51,785
  54,043
  56,433
  58,962
  61,635
  64,458
  67,437
  70,579
  73,892
  77,382
  81,060
  84,931
  89,007
  93,297
  97,810
  102,557
  107,549
Working capital, $m
  -3,888
  -923
  -946
  -972
  -1,001
  -1,033
  -1,067
  -1,105
  -1,145
  -1,189
  -1,235
  -1,285
  -1,338
  -1,394
  -1,454
  -1,517
  -1,584
  -1,655
  -1,730
  -1,810
  -1,893
  -1,981
  -2,074
  -2,173
  -2,276
  -2,384
  -2,499
  -2,619
  -2,746
  -2,879
  -3,019
Total debt, $m
  15,883
  20,359
  21,129
  21,998
  22,965
  24,029
  25,191
  26,451
  27,810
  29,271
  30,835
  32,506
  34,286
  36,179
  38,189
  40,319
  42,576
  44,962
  47,485
  50,149
  52,960
  55,926
  59,052
  62,347
  65,817
  69,472
  73,318
  77,366
  81,626
  86,106
  90,818
Total liabilities, $m
  24,105
  31,044
  31,814
  32,683
  33,650
  34,714
  35,876
  37,136
  38,495
  39,956
  41,520
  43,191
  44,971
  46,864
  48,874
  51,004
  53,261
  55,647
  58,170
  60,834
  63,645
  66,611
  69,737
  73,032
  76,502
  80,157
  84,003
  88,051
  92,311
  96,791
  101,503
Total equity, $m
  12,982
  17,386
  17,818
  18,304
  18,846
  19,442
  20,093
  20,798
  21,560
  22,378
  23,254
  24,190
  25,187
  26,247
  27,372
  28,566
  29,829
  31,166
  32,579
  34,071
  35,645
  37,306
  39,057
  40,902
  42,846
  44,893
  47,047
  49,314
  51,700
  54,209
  56,848
Total liabilities and equity, $m
  37,087
  48,430
  49,632
  50,987
  52,496
  54,156
  55,969
  57,934
  60,055
  62,334
  64,774
  67,381
  70,158
  73,111
  76,246
  79,570
  83,090
  86,813
  90,749
  94,905
  99,290
  103,917
  108,794
  113,934
  119,348
  125,050
  131,050
  137,365
  144,011
  151,000
  158,351
Debt-to-equity ratio
  1.223
  1.170
  1.190
  1.200
  1.220
  1.240
  1.250
  1.270
  1.290
  1.310
  1.330
  1.340
  1.360
  1.380
  1.400
  1.410
  1.430
  1.440
  1.460
  1.470
  1.490
  1.500
  1.510
  1.520
  1.540
  1.550
  1.560
  1.570
  1.580
  1.590
  1.600
Adjusted equity ratio
  0.339
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359
  0.359

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,243
  2,799
  2,877
  2,967
  3,067
  3,179
  3,301
  3,434
  3,579
  3,734
  3,902
  4,693
  4,884
  5,089
  5,306
  5,537
  5,783
  6,043
  6,318
  6,610
  6,918
  7,244
  7,588
  7,951
  8,334
  8,738
  9,164
  9,612
  10,085
  10,583
  11,108
Depreciation, amort., depletion, $m
  2,596
  3,602
  3,670
  3,748
  3,834
  3,929
  4,032
  4,144
  4,265
  4,395
  4,535
  3,846
  4,004
  4,173
  4,352
  4,541
  4,742
  4,955
  5,179
  5,417
  5,667
  5,931
  6,209
  6,503
  6,812
  7,137
  7,480
  7,840
  8,219
  8,618
  9,038
Funds from operations, $m
  4,058
  6,401
  6,548
  6,715
  6,901
  7,107
  7,333
  7,579
  7,844
  8,130
  8,436
  8,538
  8,889
  9,261
  9,658
  10,079
  10,525
  10,998
  11,498
  12,026
  12,585
  13,175
  13,797
  14,453
  15,145
  15,875
  16,643
  17,452
  18,304
  19,201
  20,145
Change in working capital, $m
  -859
  -20
  -23
  -26
  -29
  -32
  -35
  -37
  -40
  -43
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -71
  -75
  -79
  -84
  -88
  -93
  -98
  -103
  -109
  -114
  -120
  -127
  -133
  -140
Cash from operations, $m
  4,917
  7,049
  6,571
  6,741
  6,930
  7,139
  7,368
  7,616
  7,884
  8,173
  8,483
  8,588
  8,941
  9,318
  9,718
  10,142
  10,592
  11,069
  11,573
  12,106
  12,669
  13,263
  13,890
  14,551
  15,249
  15,983
  16,758
  17,573
  18,431
  19,335
  20,286
Maintenance CAPEX, $m
  0
  -2,704
  -2,764
  -2,833
  -2,910
  -2,996
  -3,091
  -3,194
  -3,307
  -3,428
  -3,558
  -3,697
  -3,846
  -4,004
  -4,173
  -4,352
  -4,541
  -4,742
  -4,955
  -5,179
  -5,417
  -5,667
  -5,931
  -6,209
  -6,503
  -6,812
  -7,137
  -7,480
  -7,840
  -8,219
  -8,618
New CAPEX, $m
  -2,791
  -715
  -816
  -921
  -1,025
  -1,128
  -1,231
  -1,335
  -1,440
  -1,548
  -1,658
  -1,770
  -1,886
  -2,006
  -2,129
  -2,258
  -2,391
  -2,529
  -2,673
  -2,823
  -2,979
  -3,142
  -3,313
  -3,491
  -3,677
  -3,872
  -4,076
  -4,289
  -4,513
  -4,747
  -4,993
Cash from investing activities, $m
  -3,393
  -3,419
  -3,580
  -3,754
  -3,935
  -4,124
  -4,322
  -4,529
  -4,747
  -4,976
  -5,216
  -5,467
  -5,732
  -6,010
  -6,302
  -6,610
  -6,932
  -7,271
  -7,628
  -8,002
  -8,396
  -8,809
  -9,244
  -9,700
  -10,180
  -10,684
  -11,213
  -11,769
  -12,353
  -12,966
  -13,611
Free cash flow, $m
  1,524
  3,630
  2,991
  2,987
  2,995
  3,015
  3,046
  3,087
  3,137
  3,198
  3,268
  3,121
  3,210
  3,308
  3,416
  3,533
  3,660
  3,797
  3,945
  4,104
  4,273
  4,454
  4,646
  4,851
  5,069
  5,300
  5,545
  5,804
  6,078
  6,368
  6,675
Issuance/(repayment) of debt, $m
  532
  687
  770
  869
  967
  1,064
  1,162
  1,260
  1,359
  1,461
  1,564
  1,671
  1,780
  1,893
  2,010
  2,131
  2,256
  2,387
  2,523
  2,664
  2,812
  2,966
  3,126
  3,295
  3,470
  3,654
  3,847
  4,048
  4,259
  4,480
  4,712
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  
  453
  687
  770
  869
  967
  1,064
  1,162
  1,260
  1,359
  1,461
  1,564
  1,671
  1,780
  1,893
  2,010
  2,131
  2,256
  2,387
  2,523
  2,664
  2,812
  2,966
  3,126
  3,295
  3,470
  3,654
  3,847
  4,048
  4,259
  4,480
  4,712
Total cash flow (excl. dividends), $m
  1,977
  4,317
  3,761
  3,856
  3,962
  4,079
  4,208
  4,347
  4,497
  4,659
  4,832
  4,792
  4,990
  5,201
  5,425
  5,664
  5,916
  6,184
  6,468
  6,768
  7,085
  7,419
  7,773
  8,146
  8,539
  8,954
  9,391
  9,852
  10,337
  10,849
  11,387
Retained Cash Flow (-), $m
  -382
  -363
  -431
  -487
  -542
  -596
  -651
  -706
  -761
  -818
  -876
  -936
  -997
  -1,060
  -1,126
  -1,193
  -1,264
  -1,337
  -1,413
  -1,492
  -1,575
  -1,661
  -1,751
  -1,845
  -1,944
  -2,047
  -2,154
  -2,267
  -2,385
  -2,509
  -2,639
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
 
  3,953
  3,329
  3,369
  3,421
  3,483
  3,557
  3,641
  3,735
  3,840
  3,956
  3,856
  3,993
  4,141
  4,300
  4,470
  4,653
  4,847
  5,055
  5,276
  5,510
  5,758
  6,022
  6,301
  6,596
  6,907
  7,237
  7,585
  7,952
  8,339
  8,748
Discount rate, %
 
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
 
  3,691
  2,883
  2,687
  2,494
  2,303
  2,114
  1,927
  1,744
  1,565
  1,391
  1,157
  1,009
  870
  740
  622
  514
  419
  335
  263
  203
  154
  114
  82
  58
  40
  27
  17
  11
  7
  4
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

BCE Inc. provides wireless, wireline, Internet, and television (TV) services to residential, business, and wholesale customers in Canada. The company operates through Bell Wireless, Bell Wireline, and Bell Media segments. The Bell Wireless segment provides integrated digital wireless voice and data communications products and services. The Bell Wireline segment offers data, including Internet access and Internet protocol TV, local telephone, long distance, as well as other communications services and products. This segment also provides competitive local exchange carrier services; business service solutions, such as hosting and cloud services, managed services, professional services, and infrastructure services; and Web and audio conferencing, and e-mail solutions. The Bell Media segment owns and operates approximately 30 conventional TV stations; and 38 specialty and pay TV channels; 106 radio stations; 30,500 advertising faces; and 200 Websites. This segment also offers out of home advertising services and digital media services, including CTV. In addition, the company investments in the Toronto Argonauts Football Club and mobile products distribution company. BCE Inc. offers its services through a network of corporate and dealer-owned retail stores, national retailers, and call center representatives, as well as Websites and door-to-door sales representatives. The company was formerly known as Bell Canada Enterprises Inc. BCE Inc. was incorporated in 1970 and is headquartered in Verdun, Canada.

FINANCIAL RATIOS  of  BCE (BCE)

Valuation Ratios
P/E Ratio 16.9
Price to Sales 2.4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 17.8
Growth Rates
Sales Growth Rate 0.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4%
Cap. Spend. - 3 Yr. Gr. Rate 1.1%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 94.5%
Total Debt to Equity 122.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 7.5%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 7.5%
Return On Equity 17.5%
Return On Equity - 3 Yr. Avg. 17%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 69.1%
Gross Margin - 3 Yr. Avg. 69.6%
EBITDA Margin 39.5%
EBITDA Margin - 3 Yr. Avg. 38.2%
Operating Margin 23.6%
Oper. Margin - 3 Yr. Avg. 22.1%
Pre-Tax Margin 19.3%
Pre-Tax Margin - 3 Yr. Avg. 17.9%
Net Profit Margin 14%
Net Profit Margin - 3 Yr. Avg. 12.8%
Effective Tax Rate 26.4%
Eff/ Tax Rate - 3 Yr. Avg. 25.7%
Payout Ratio 80.2%

BCE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BCE stock intrinsic value calculation we used $21514 million for the last fiscal year's total revenue generated by BCE. The default revenue input number comes from 2016 income statement of BCE. 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 BCE stock valuation model: a) initial revenue growth rate of 2.2% 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 7.1%, whose default value for BCE is calculated based on our internal credit rating of BCE, 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 BCE.
    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 BCE stock the variable cost ratio is equal to 75.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $733 million in the base year in the intrinsic value calculation for BCE 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 4.5% for BCE.

Corporate tax rate of 27% is the nominal tax rate for BCE. 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 BCE 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 BCE are equal to 149.6%.

Life of production assets of 11.9 years is the average useful life of capital assets used in BCE 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 BCE is equal to -4.2%. 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 - $17023 million for BCE - 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 853.158 million for BCE 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 BCE at the current share price and the inputted number of shares is $37.0 billion.


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COMPANY NEWS

▶ New Strong Sell Stocks for May 23rd   [May-23-17 10:05AM  Zacks]
▶ ETFs with exposure to BCE, Inc. : May 12, 2017   [May-12-17 03:42PM  Capital Cube]
▶ ETFs with exposure to BCE, Inc. : April 28, 2017   [Apr-28-17 03:44PM  Capital Cube]
▶ BCE announces election of Directors   [Apr-26-17 12:57PM  PR Newswire]
▶ BCE beats 1Q profit forecasts   [08:04AM  Associated Press]
▶ If You're Retired, Consider Buying These 3 Stocks   [Apr-18-17 01:48PM  Motley Fool]
▶ Stocks That Are Changing Direction   [Apr-17-17 02:00PM  TheStreet.com]
▶ BCE Q1 2017 results to be announced April 26, 2017   [Apr-13-17 09:20AM  CNW Group]
▶ BCE files 2016 annual report on Form 40-F   [Mar-08-17 09:52AM  PR Newswire]
▶ Bell announces offering of MTN Debentures   [06:22PM  PR Newswire]
▶ BCE's Manitoba Telecom Takeover Approved With Conditions   [Feb-15-17 06:22PM  at Bloomberg]
▶ Bell Let's Talk Day 2017 is January 25!   [09:00AM  PR Newswire]
▶ Is Phillips 66 (PSX) Going to Burn These Hedge Funds?   [Dec-01-16 08:53AM  at Insider Monkey]
▶ Hedge Funds Are Betting On Kinder Morgan Inc (KMI)   [Nov-30-16 03:07PM  at Insider Monkey]
▶ Moody's Affirms the CTL Rating of MLML 2000-BMCC   [Nov-17-16 10:47AM  at Moody's]
Stock chart of BCE Financial statements of BCE
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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