Intrinsic value of Anheuser-Busch InBev ADR - BUD

Previous Close

$105.06

  Intrinsic Value

$467.01

stock screener

  Rating & Target

str. buy

+345%

Previous close

$105.06

 
Intrinsic value

$467.01

 
Up/down potential

+345%

 
Rating

str. buy

We calculate the intrinsic value of BUD 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, %
  4.39
  32.70
  29.93
  27.44
  25.19
  23.17
  21.36
  19.72
  18.25
  16.92
  15.73
  14.66
  13.69
  12.82
  12.04
  11.34
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
Revenue, $m
  45,517
  60,401
  78,479
  100,011
  125,208
  154,223
  187,160
  224,070
  264,960
  309,801
  358,538
  411,094
  467,383
  527,317
  590,811
  657,790
  728,195
  801,982
  879,129
  959,636
  1,043,526
  1,130,845
  1,221,662
  1,316,070
  1,414,184
  1,516,140
  1,622,096
  1,732,232
  1,846,746
  1,965,855
  2,089,796
Variable operating expenses, $m
 
  36,668
  43,557
  51,762
  61,362
  72,418
  84,969
  99,033
  114,613
  131,700
  150,270
  156,643
  178,091
  200,929
  225,122
  250,644
  277,471
  305,587
  334,983
  365,659
  397,625
  430,897
  465,502
  501,475
  538,860
  577,709
  618,083
  660,049
  703,683
  749,068
  796,295
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
  32,635
  36,668
  43,557
  51,762
  61,362
  72,418
  84,969
  99,033
  114,613
  131,700
  150,270
  156,643
  178,091
  200,929
  225,122
  250,644
  277,471
  305,587
  334,983
  365,659
  397,625
  430,897
  465,502
  501,475
  538,860
  577,709
  618,083
  660,049
  703,683
  749,068
  796,295
Operating income, $m
  12,882
  23,733
  34,922
  48,250
  63,845
  81,805
  102,191
  125,037
  150,346
  178,101
  208,267
  254,451
  289,292
  326,388
  365,689
  407,146
  450,724
  496,395
  544,146
  593,977
  645,902
  699,949
  756,161
  814,595
  875,324
  938,431
  1,004,014
  1,072,183
  1,143,063
  1,216,786
  1,293,501
EBITDA, $m
  16,359
  40,056
  52,044
  66,324
  83,033
  102,275
  124,117
  148,594
  175,711
  205,448
  237,768
  272,621
  309,950
  349,696
  391,802
  436,221
  482,910
  531,843
  583,004
  636,393
  692,025
  749,932
  810,158
  872,766
  937,831
  1,005,444
  1,075,710
  1,148,748
  1,224,689
  1,303,677
  1,385,870
Interest expense (income), $m
  3,279
  4,330
  6,565
  9,261
  12,472
  16,230
  20,557
  25,470
  30,974
  37,073
  43,760
  51,029
  58,867
  67,262
  76,201
  85,670
  95,659
  106,159
  117,164
  128,670
  140,677
  153,188
  166,211
  179,755
  193,835
  208,468
  223,673
  239,476
  255,901
  272,980
  290,744
Earnings before tax, $m
  4,334
  19,403
  28,357
  38,989
  51,373
  65,575
  81,634
  99,567
  119,372
  141,029
  164,507
  203,422
  230,424
  259,126
  289,488
  321,476
  355,064
  390,236
  426,982
  465,307
  505,225
  546,761
  589,950
  634,840
  681,489
  729,963
  780,340
  832,707
  887,161
  943,806
  1,002,757
Tax expense, $m
  1,613
  5,239
  7,656
  10,527
  13,871
  17,705
  22,041
  26,883
  32,230
  38,078
  44,417
  54,924
  62,215
  69,964
  78,162
  86,799
  95,867
  105,364
  115,285
  125,633
  136,411
  147,625
  159,287
  171,407
  184,002
  197,090
  210,692
  224,831
  239,534
  254,828
  270,744
Net income, $m
  1,241
  14,164
  20,701
  28,462
  37,502
  47,870
  59,593
  72,684
  87,141
  102,951
  120,090
  148,498
  168,210
  189,162
  211,326
  234,678
  259,197
  284,872
  311,697
  339,674
  368,814
  399,135
  430,664
  463,433
  497,487
  532,873
  569,648
  607,876
  647,628
  688,979
  732,013

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  14,238
  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
  258,381
  324,737
  421,931
  537,696
  673,159
  829,157
  1,006,236
  1,204,675
  1,424,514
  1,665,598
  1,927,622
  2,210,181
  2,512,811
  2,835,036
  3,176,402
  3,536,507
  3,915,026
  4,311,730
  4,726,500
  5,159,335
  5,610,357
  6,079,814
  6,568,078
  7,075,647
  7,603,139
  8,151,289
  8,720,948
  9,313,076
  9,928,740
  10,569,111
  11,235,463
Adjusted assets (=assets-cash), $m
  244,143
  324,737
  421,931
  537,696
  673,159
  829,157
  1,006,236
  1,204,675
  1,424,514
  1,665,598
  1,927,622
  2,210,181
  2,512,811
  2,835,036
  3,176,402
  3,536,507
  3,915,026
  4,311,730
  4,726,500
  5,159,335
  5,610,357
  6,079,814
  6,568,078
  7,075,647
  7,603,139
  8,151,289
  8,720,948
  9,313,076
  9,928,740
  10,569,111
  11,235,463
Revenue / Adjusted assets
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
  0.186
Average production assets, $m
  60,360
  80,092
  104,063
  132,615
  166,025
  204,500
  248,174
  297,116
  351,336
  410,796
  475,421
  545,110
  619,750
  699,222
  783,415
  872,230
  965,586
  1,063,428
  1,165,725
  1,272,478
  1,383,716
  1,499,501
  1,619,924
  1,745,109
  1,875,208
  2,010,401
  2,150,900
  2,296,940
  2,448,785
  2,606,723
  2,771,070
Working capital, $m
  2,945
  -3,322
  -4,316
  -5,501
  -6,886
  -8,482
  -10,294
  -12,324
  -14,573
  -17,039
  -19,720
  -22,610
  -25,706
  -29,002
  -32,495
  -36,178
  -40,051
  -44,109
  -48,352
  -52,780
  -57,394
  -62,196
  -67,191
  -72,384
  -77,780
  -83,388
  -89,215
  -95,273
  -101,571
  -108,122
  -114,939
Total debt, $m
  122,743
  172,759
  243,710
  328,219
  427,107
  540,985
  670,253
  815,114
  975,596
  1,151,588
  1,342,865
  1,549,133
  1,770,053
  2,005,278
  2,254,475
  2,517,351
  2,793,670
  3,083,264
  3,386,046
  3,702,016
  4,031,262
  4,373,965
  4,730,398
  5,100,923
  5,485,992
  5,886,142
  6,301,993
  6,734,247
  7,183,681
  7,651,152
  8,137,589
Total liabilities, $m
  187,042
  237,058
  308,009
  392,518
  491,406
  605,284
  734,552
  879,413
  1,039,895
  1,215,887
  1,407,164
  1,613,432
  1,834,352
  2,069,577
  2,318,774
  2,581,650
  2,857,969
  3,147,563
  3,450,345
  3,766,315
  4,095,561
  4,438,264
  4,794,697
  5,165,222
  5,550,291
  5,950,441
  6,366,292
  6,798,546
  7,247,980
  7,715,451
  8,201,888
Total equity, $m
  71,339
  87,679
  113,921
  145,178
  181,753
  223,872
  271,684
  325,262
  384,619
  449,711
  520,458
  596,749
  678,459
  765,460
  857,629
  954,857
  1,057,057
  1,164,167
  1,276,155
  1,393,021
  1,514,796
  1,641,550
  1,773,381
  1,910,425
  2,052,847
  2,200,848
  2,354,656
  2,514,531
  2,680,760
  2,853,660
  3,033,575
Total liabilities and equity, $m
  258,381
  324,737
  421,930
  537,696
  673,159
  829,156
  1,006,236
  1,204,675
  1,424,514
  1,665,598
  1,927,622
  2,210,181
  2,512,811
  2,835,037
  3,176,403
  3,536,507
  3,915,026
  4,311,730
  4,726,500
  5,159,336
  5,610,357
  6,079,814
  6,568,078
  7,075,647
  7,603,138
  8,151,289
  8,720,948
  9,313,077
  9,928,740
  10,569,111
  11,235,463
Debt-to-equity ratio
  1.721
  1.970
  2.140
  2.260
  2.350
  2.420
  2.470
  2.510
  2.540
  2.560
  2.580
  2.600
  2.610
  2.620
  2.630
  2.640
  2.640
  2.650
  2.650
  2.660
  2.660
  2.660
  2.670
  2.670
  2.670
  2.670
  2.680
  2.680
  2.680
  2.680
  2.680
Adjusted equity ratio
  0.243
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,241
  14,164
  20,701
  28,462
  37,502
  47,870
  59,593
  72,684
  87,141
  102,951
  120,090
  148,498
  168,210
  189,162
  211,326
  234,678
  259,197
  284,872
  311,697
  339,674
  368,814
  399,135
  430,664
  463,433
  497,487
  532,873
  569,648
  607,876
  647,628
  688,979
  732,013
Depreciation, amort., depletion, $m
  3,477
  16,323
  17,122
  18,074
  19,187
  20,470
  21,926
  23,557
  25,365
  27,347
  29,501
  18,170
  20,658
  23,307
  26,114
  29,074
  32,186
  35,448
  38,858
  42,416
  46,124
  49,983
  53,997
  58,170
  62,507
  67,013
  71,697
  76,565
  81,626
  86,891
  92,369
Funds from operations, $m
  3,879
  30,487
  37,823
  46,536
  56,690
  68,339
  81,518
  96,241
  112,506
  130,298
  149,591
  166,668
  188,868
  212,470
  237,440
  263,752
  291,383
  320,320
  350,554
  382,090
  414,938
  449,119
  484,661
  521,604
  559,994
  599,886
  641,345
  684,441
  729,254
  775,869
  824,382
Change in working capital, $m
  -6,231
  -819
  -994
  -1,184
  -1,386
  -1,596
  -1,812
  -2,030
  -2,249
  -2,466
  -2,681
  -2,891
  -3,096
  -3,296
  -3,492
  -3,684
  -3,872
  -4,058
  -4,243
  -4,428
  -4,614
  -4,803
  -4,995
  -5,192
  -5,396
  -5,608
  -5,828
  -6,057
  -6,298
  -6,551
  -6,817
Cash from operations, $m
  10,110
  31,306
  38,817
  47,720
  58,075
  69,935
  83,330
  98,271
  114,755
  132,764
  152,271
  169,559
  191,964
  215,766
  240,932
  267,436
  295,256
  324,378
  354,798
  386,518
  419,552
  453,921
  489,656
  526,796
  565,390
  605,494
  647,173
  690,499
  735,552
  782,420
  831,199
Maintenance CAPEX, $m
  0
  -2,012
  -2,670
  -3,469
  -4,421
  -5,534
  -6,817
  -8,272
  -9,904
  -11,711
  -13,693
  -15,847
  -18,170
  -20,658
  -23,307
  -26,114
  -29,074
  -32,186
  -35,448
  -38,858
  -42,416
  -46,124
  -49,983
  -53,997
  -58,170
  -62,507
  -67,013
  -71,697
  -76,565
  -81,626
  -86,891
New CAPEX, $m
  -4,979
  -19,732
  -23,971
  -28,552
  -33,410
  -38,475
  -43,674
  -48,942
  -54,220
  -59,460
  -64,625
  -69,689
  -74,640
  -79,472
  -84,193
  -88,815
  -93,356
  -97,842
  -102,297
  -106,753
  -111,238
  -115,785
  -120,424
  -125,185
  -130,098
  -135,194
  -140,498
  -146,040
  -151,845
  -157,939
  -164,346
Cash from investing activities, $m
  -60,077
  -21,744
  -26,641
  -32,021
  -37,831
  -44,009
  -50,491
  -57,214
  -64,124
  -71,171
  -78,318
  -85,536
  -92,810
  -100,130
  -107,500
  -114,929
  -122,430
  -130,028
  -137,745
  -145,611
  -153,654
  -161,909
  -170,407
  -179,182
  -188,268
  -197,701
  -207,511
  -217,737
  -228,410
  -239,565
  -251,237
Free cash flow, $m
  -49,967
  9,561
  12,176
  15,699
  20,245
  25,927
  32,839
  41,057
  50,631
  61,593
  73,953
  84,022
  99,154
  115,635
  133,432
  152,507
  172,825
  194,350
  217,053
  240,908
  265,898
  292,012
  319,249
  347,614
  377,121
  407,793
  439,661
  472,762
  507,142
  542,856
  579,962
Issuance/(repayment) of debt, $m
  62,675
  58,818
  70,951
  84,509
  98,888
  113,878
  129,268
  144,860
  160,483
  175,991
  191,278
  206,268
  220,920
  235,224
  249,197
  262,876
  276,319
  289,594
  302,782
  315,970
  329,246
  342,703
  356,433
  370,525
  385,069
  400,150
  415,851
  432,253
  449,435
  467,471
  486,436
Issuance/(repurchase) of shares, $m
  0
  7,612
  5,541
  2,795
  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  
  59,181
  66,430
  76,492
  87,304
  98,888
  113,878
  129,268
  144,860
  160,483
  175,991
  191,278
  206,268
  220,920
  235,224
  249,197
  262,876
  276,319
  289,594
  302,782
  315,970
  329,246
  342,703
  356,433
  370,525
  385,069
  400,150
  415,851
  432,253
  449,435
  467,471
  486,436
Total cash flow (excl. dividends), $m
  9,935
  75,991
  88,669
  103,003
  119,133
  139,805
  162,107
  185,917
  211,113
  237,584
  265,231
  290,290
  320,074
  350,860
  382,629
  415,384
  449,144
  483,944
  519,835
  556,877
  595,144
  634,716
  675,682
  718,139
  762,190
  807,943
  855,512
  905,015
  956,577
  1,010,327
  1,066,398
Retained Cash Flow (-), $m
  -29,202
  -21,776
  -26,242
  -31,257
  -36,575
  -42,119
  -47,811
  -53,579
  -59,357
  -65,093
  -70,747
  -76,291
  -81,710
  -87,001
  -92,169
  -97,228
  -102,200
  -107,110
  -111,988
  -116,865
  -121,776
  -126,753
  -131,831
  -137,044
  -142,423
  -148,001
  -153,808
  -159,875
  -166,229
  -172,900
  -179,915
Prev. year cash balance distribution, $m
 
  5,436
  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
 
  59,651
  62,427
  71,746
  82,558
  97,685
  114,296
  132,339
  151,757
  172,491
  194,485
  213,999
  238,364
  263,859
  290,460
  318,155
  346,943
  376,834
  407,847
  440,012
  473,368
  507,962
  543,851
  581,096
  619,767
  659,943
  701,704
  745,141
  790,348
  837,427
  886,483
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  54,776
  52,212
  54,181
  55,771
  58,449
  59,935
  60,138
  59,049
  56,741
  53,358
  48,269
  43,533
  38,392
  33,099
  27,883
  22,941
  18,423
  14,431
  11,016
  8,188
  5,921
  4,160
  2,838
  1,877
  1,202
  744
  445
  257
  142
  76
Current shareholders' claim on cash, %
  100
  95.5
  93.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2
  92.2

Anheuser Busch Inbev NV (AB InBev) is a Belgium-based company engaged in the brewers industry. The Company owns a portfolio of over 200 beer brands. The Company's brand portfolio includes global brands, such as Budweiser, Corona and Stella Artois; international brands, including Beck's, Leffe and Hoegaarden, and local champions, such as Bud Light, Skol, Brahma, Antarctica, Quilmes, Victoria, Modelo Especial, Michelob Ultra, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske, Cass and Jupiler. The Company's soft drinks business consists of both own production and agreements with PepsiCo related to bottling and distribution arrangements between its various subsidiaries and PepsiCo. Ambev, which is a subsidiary of the Company, is a PepsiCo bottler. Brands that are distributed under these agreements are Pepsi, 7UP and Gatorade.

FINANCIAL RATIOS  of  Anheuser-Busch InBev ADR (BUD)

Valuation Ratios
P/E Ratio 27.6
Price to Sales 0.8
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 3.4
Price to Free Cash Flow 6.7
Growth Rates
Sales Growth Rate 4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.8%
Cap. Spend. - 3 Yr. Gr. Rate 5.2%
Financial Strength
Quick Ratio 2
Current Ratio 0.4
LT Debt to Equity 159.7%
Total Debt to Equity 172.1%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.7%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 0.9%
Ret/ On T. Cap. - 3 Yr. Avg. 6.2%
Return On Equity 2.2%
Return On Equity - 3 Yr. Avg. 12.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 60.9%
Gross Margin - 3 Yr. Avg. 60.6%
EBITDA Margin 24.4%
EBITDA Margin - 3 Yr. Avg. 35.4%
Operating Margin 28.3%
Oper. Margin - 3 Yr. Avg. 31.1%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 22.5%
Net Profit Margin 2.7%
Net Profit Margin - 3 Yr. Avg. 13.8%
Effective Tax Rate 37.2%
Eff/ Tax Rate - 3 Yr. Avg. 25.4%
Payout Ratio 680.9%

BUD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BUD stock intrinsic value calculation we used $45517 million for the last fiscal year's total revenue generated by Anheuser-Busch InBev ADR. The default revenue input number comes from 2016 income statement of Anheuser-Busch InBev ADR. 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 BUD stock valuation model: a) initial revenue growth rate of 32.7% 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 8.9%, whose default value for BUD is calculated based on our internal credit rating of Anheuser-Busch InBev ADR, 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 Anheuser-Busch InBev ADR.
    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 BUD stock the variable cost ratio is equal to 68.1%.

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 BUD 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 3.8% for Anheuser-Busch InBev ADR.

Corporate tax rate of 27% is the nominal tax rate for Anheuser-Busch InBev ADR. 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 BUD 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 BUD are equal to 132.6%.

Life of production assets of 46.3 years is the average useful life of capital assets used in Anheuser-Busch InBev ADR 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 BUD is equal to -5.5%. 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 - $71339 million for Anheuser-Busch InBev ADR - 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 1680.98 million for Anheuser-Busch InBev ADR 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 Anheuser-Busch InBev ADR at the current share price and the inputted number of shares is $176.6 billion.

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Financial statements of BUD
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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