Intrinsic value of Anheuser-Busch InBev ADR - BUD

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$112.23

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$112.23

 
Intrinsic value

$205.40

 
Up/down potential

+83%

 
Rating

str. buy

 
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 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

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 189.3

 

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
  14.50
  13.55
  12.70
  11.93
  11.23
  10.61
  10.05
  9.54
  9.09
  8.68
  8.31
  7.98
  7.68
  7.41
  7.17
  6.96
  6.76
  6.58
  6.43
  6.28
  6.15
  6.04
  5.94
  5.84
  5.76
  5.68
  5.61
  5.55
  5.50
  5.45
Revenue, $m
  45,517
  52,117
  59,179
  66,692
  74,645
  83,030
  91,839
  101,067
  110,713
  120,776
  131,260
  142,171
  153,518
  165,313
  177,571
  190,308
  203,546
  217,307
  231,615
  246,498
  261,987
  278,112
  294,908
  312,413
  330,664
  349,703
  369,573
  390,320
  411,992
  434,640
  458,317
Variable operating expenses, $m
 
  33,512
  36,203
  39,065
  42,096
  45,291
  48,648
  52,164
  55,839
  59,674
  63,669
  54,173
  58,497
  62,991
  67,661
  72,515
  77,559
  82,802
  88,254
  93,926
  99,827
  105,972
  112,372
  119,042
  125,996
  133,251
  140,822
  148,727
  156,985
  165,615
  174,637
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
  33,512
  36,203
  39,065
  42,096
  45,291
  48,648
  52,164
  55,839
  59,674
  63,669
  54,173
  58,497
  62,991
  67,661
  72,515
  77,559
  82,802
  88,254
  93,926
  99,827
  105,972
  112,372
  119,042
  125,996
  133,251
  140,822
  148,727
  156,985
  165,615
  174,637
Operating income, $m
  12,882
  18,605
  22,976
  27,626
  32,549
  37,739
  43,191
  48,903
  54,874
  61,102
  67,592
  87,998
  95,022
  102,322
  109,909
  117,793
  125,987
  134,504
  143,360
  152,573
  162,159
  172,140
  182,537
  193,371
  204,668
  216,452
  228,751
  241,593
  255,007
  269,025
  283,680
EBITDA, $m
  16,359
  34,562
  39,245
  44,227
  49,502
  55,062
  60,904
  67,024
  73,421
  80,094
  87,047
  94,282
  101,807
  109,629
  117,758
  126,205
  134,984
  144,109
  153,598
  163,468
  173,739
  184,433
  195,571
  207,180
  219,283
  231,909
  245,086
  258,845
  273,217
  288,236
  303,938
Interest expense (income), $m
  3,279
  4,330
  5,329
  6,383
  7,503
  8,689
  9,940
  11,253
  12,630
  14,068
  15,569
  17,133
  18,760
  20,452
  22,211
  24,040
  25,939
  27,913
  29,966
  32,100
  34,319
  36,629
  39,034
  41,539
  44,150
  46,872
  49,711
  52,675
  55,769
  59,001
  62,379
Earnings before tax, $m
  4,334
  14,275
  17,647
  21,244
  25,046
  29,050
  33,252
  37,650
  42,244
  47,034
  52,022
  70,866
  76,262
  81,870
  87,698
  93,754
  100,048
  106,591
  113,395
  120,473
  127,840
  135,511
  143,502
  151,832
  160,518
  169,580
  179,040
  188,918
  199,238
  210,024
  221,301
Tax expense, $m
  1,613
  3,854
  4,765
  5,736
  6,762
  7,843
  8,978
  10,165
  11,406
  12,699
  14,046
  19,134
  20,591
  22,105
  23,678
  25,314
  27,013
  28,780
  30,617
  32,528
  34,517
  36,588
  38,746
  40,995
  43,340
  45,787
  48,341
  51,008
  53,794
  56,706
  59,751
Net income, $m
  1,241
  10,421
  12,882
  15,508
  18,284
  21,206
  24,274
  27,484
  30,838
  34,335
  37,976
  51,732
  55,671
  59,765
  64,019
  68,440
  73,035
  77,811
  82,778
  87,945
  93,323
  98,923
  104,757
  110,837
  117,178
  123,794
  130,699
  137,910
  145,444
  153,317
  161,550

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
  280,199
  318,166
  358,557
  401,316
  446,396
  493,757
  543,373
  595,232
  649,335
  705,701
  764,362
  825,367
  888,781
  954,682
  1,023,164
  1,094,335
  1,168,316
  1,245,242
  1,325,259
  1,408,530
  1,495,224
  1,585,528
  1,679,638
  1,777,762
  1,880,121
  1,986,950
  2,098,493
  2,215,011
  2,336,774
  2,464,069
Adjusted assets (=assets-cash), $m
  244,143
  280,199
  318,166
  358,557
  401,316
  446,396
  493,757
  543,373
  595,232
  649,335
  705,701
  764,362
  825,367
  888,781
  954,682
  1,023,164
  1,094,335
  1,168,316
  1,245,242
  1,325,259
  1,408,530
  1,495,224
  1,585,528
  1,679,638
  1,777,762
  1,880,121
  1,986,950
  2,098,493
  2,215,011
  2,336,774
  2,464,069
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
  69,107
  78,471
  88,433
  98,979
  110,097
  121,778
  134,015
  146,806
  160,149
  174,051
  188,519
  203,565
  219,205
  235,459
  252,349
  269,902
  288,149
  307,121
  326,857
  347,394
  368,776
  391,048
  414,259
  438,460
  463,706
  490,053
  517,564
  546,301
  576,333
  607,728
Working capital, $m
  2,945
  -2,866
  -3,255
  -3,668
  -4,105
  -4,567
  -5,051
  -5,559
  -6,089
  -6,643
  -7,219
  -7,819
  -8,444
  -9,092
  -9,766
  -10,467
  -11,195
  -11,952
  -12,739
  -13,557
  -14,409
  -15,296
  -16,220
  -17,183
  -18,187
  -19,234
  -20,326
  -21,468
  -22,660
  -23,905
  -25,207
Total debt, $m
  122,743
  140,246
  167,962
  197,447
  228,662
  261,570
  296,144
  332,364
  370,220
  409,716
  450,863
  493,685
  538,219
  584,511
  632,619
  682,611
  734,565
  788,571
  844,727
  903,140
  963,928
  1,027,215
  1,093,137
  1,161,836
  1,233,467
  1,308,190
  1,386,174
  1,467,601
  1,552,659
  1,641,546
  1,734,471
Total liabilities, $m
  187,042
  204,545
  232,261
  261,746
  292,961
  325,869
  360,443
  396,663
  434,519
  474,015
  515,162
  557,984
  602,518
  648,810
  696,918
  746,910
  798,864
  852,870
  909,026
  967,439
  1,028,227
  1,091,514
  1,157,436
  1,226,135
  1,297,766
  1,372,489
  1,450,473
  1,531,900
  1,616,958
  1,705,845
  1,798,770
Total equity, $m
  71,339
  75,654
  85,905
  96,810
  108,355
  120,527
  133,314
  146,711
  160,713
  175,321
  190,539
  206,378
  222,849
  239,971
  257,764
  276,254
  295,470
  315,445
  336,215
  357,820
  380,303
  403,711
  428,093
  453,502
  479,996
  507,633
  536,476
  566,593
  598,053
  630,929
  665,299
Total liabilities and equity, $m
  258,381
  280,199
  318,166
  358,556
  401,316
  446,396
  493,757
  543,374
  595,232
  649,336
  705,701
  764,362
  825,367
  888,781
  954,682
  1,023,164
  1,094,334
  1,168,315
  1,245,241
  1,325,259
  1,408,530
  1,495,225
  1,585,529
  1,679,637
  1,777,762
  1,880,122
  1,986,949
  2,098,493
  2,215,011
  2,336,774
  2,464,069
Debt-to-equity ratio
  1.721
  1.850
  1.960
  2.040
  2.110
  2.170
  2.220
  2.270
  2.300
  2.340
  2.370
  2.390
  2.420
  2.440
  2.450
  2.470
  2.490
  2.500
  2.510
  2.520
  2.530
  2.540
  2.550
  2.560
  2.570
  2.580
  2.580
  2.590
  2.600
  2.600
  2.610
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
  10,421
  12,882
  15,508
  18,284
  21,206
  24,274
  27,484
  30,838
  34,335
  37,976
  51,732
  55,671
  59,765
  64,019
  68,440
  73,035
  77,811
  82,778
  87,945
  93,323
  98,923
  104,757
  110,837
  117,178
  123,794
  130,699
  137,910
  145,444
  153,317
  161,550
Depreciation, amort., depletion, $m
  3,477
  15,957
  16,269
  16,601
  16,953
  17,323
  17,713
  18,120
  18,547
  18,992
  19,455
  6,284
  6,786
  7,307
  7,849
  8,412
  8,997
  9,605
  10,237
  10,895
  11,580
  12,293
  13,035
  13,809
  14,615
  15,457
  16,335
  17,252
  18,210
  19,211
  20,258
Funds from operations, $m
  3,879
  26,378
  29,151
  32,109
  35,236
  38,529
  41,986
  45,605
  49,385
  53,327
  57,431
  58,016
  62,457
  67,072
  71,868
  76,852
  82,032
  87,416
  93,016
  98,841
  104,903
  111,216
  117,792
  124,646
  131,793
  139,250
  147,034
  155,162
  163,654
  172,529
  181,807
Change in working capital, $m
  -6,231
  -363
  -388
  -413
  -437
  -461
  -485
  -508
  -531
  -553
  -577
  -600
  -624
  -649
  -674
  -701
  -728
  -757
  -787
  -819
  -852
  -887
  -924
  -963
  -1,004
  -1,047
  -1,093
  -1,141
  -1,192
  -1,246
  -1,302
Cash from operations, $m
  10,110
  38,471
  29,539
  32,522
  35,674
  38,991
  42,471
  46,113
  49,915
  53,880
  58,008
  58,616
  63,081
  67,721
  72,542
  77,553
  82,760
  88,173
  93,803
  99,659
  105,755
  112,102
  118,715
  125,609
  132,797
  140,298
  148,127
  156,303
  164,846
  173,774
  183,110
Maintenance CAPEX, $m
  0
  -2,012
  -2,304
  -2,616
  -2,948
  -3,299
  -3,670
  -4,059
  -4,467
  -4,894
  -5,338
  -5,802
  -6,284
  -6,786
  -7,307
  -7,849
  -8,412
  -8,997
  -9,605
  -10,237
  -10,895
  -11,580
  -12,293
  -13,035
  -13,809
  -14,615
  -15,457
  -16,335
  -17,252
  -18,210
  -19,211
New CAPEX, $m
  -4,979
  -8,748
  -9,364
  -9,962
  -10,546
  -11,118
  -11,681
  -12,237
  -12,790
  -13,344
  -13,902
  -14,468
  -15,046
  -15,640
  -16,254
  -16,890
  -17,553
  -18,246
  -18,973
  -19,735
  -20,537
  -21,382
  -22,272
  -23,211
  -24,201
  -25,246
  -26,348
  -27,511
  -28,737
  -30,031
  -31,395
Cash from investing activities, $m
  -60,077
  -10,760
  -11,668
  -12,578
  -13,494
  -14,417
  -15,351
  -16,296
  -17,257
  -18,238
  -19,240
  -20,270
  -21,330
  -22,426
  -23,561
  -24,739
  -25,965
  -27,243
  -28,578
  -29,972
  -31,432
  -32,962
  -34,565
  -36,246
  -38,010
  -39,861
  -41,805
  -43,846
  -45,989
  -48,241
  -50,606
Free cash flow, $m
  -49,967
  27,712
  17,872
  19,944
  22,180
  24,573
  27,120
  29,816
  32,658
  35,643
  38,768
  38,346
  41,751
  45,295
  48,982
  52,814
  56,795
  60,930
  65,225
  69,686
  74,322
  79,141
  84,151
  89,363
  94,788
  100,437
  106,322
  112,458
  118,856
  125,533
  132,503
Issuance/(repayment) of debt, $m
  62,675
  26,305
  27,716
  29,486
  31,215
  32,908
  34,574
  36,220
  37,857
  39,495
  41,147
  42,823
  44,534
  46,292
  48,108
  49,992
  51,955
  54,006
  56,156
  58,413
  60,787
  63,287
  65,922
  68,700
  71,631
  74,723
  77,985
  81,427
  85,058
  88,887
  92,925
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  59,181
  26,305
  27,716
  29,486
  31,215
  32,908
  34,574
  36,220
  37,857
  39,495
  41,147
  42,823
  44,534
  46,292
  48,108
  49,992
  51,955
  54,006
  56,156
  58,413
  60,787
  63,287
  65,922
  68,700
  71,631
  74,723
  77,985
  81,427
  85,058
  88,887
  92,925
Total cash flow (excl. dividends), $m
  9,935
  54,017
  45,588
  49,430
  53,394
  57,481
  61,694
  66,036
  70,515
  75,138
  79,915
  81,169
  86,284
  91,587
  97,090
  102,806
  108,750
  114,936
  121,381
  128,100
  135,109
  142,428
  150,073
  158,063
  166,418
  175,159
  184,307
  193,884
  203,914
  214,420
  225,428
Retained Cash Flow (-), $m
  -29,202
  -9,751
  -10,251
  -10,906
  -11,545
  -12,172
  -12,787
  -13,396
  -14,002
  -14,608
  -15,219
  -15,838
  -16,471
  -17,122
  -17,793
  -18,490
  -19,216
  -19,975
  -20,770
  -21,605
  -22,483
  -23,408
  -24,382
  -25,410
  -26,494
  -27,637
  -28,844
  -30,117
  -31,460
  -32,876
  -34,370
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
 
  49,702
  35,337
  38,524
  41,849
  45,310
  48,906
  52,640
  56,513
  60,530
  64,696
  65,330
  69,813
  74,465
  79,296
  84,316
  89,533
  94,961
  100,611
  106,495
  112,626
  119,020
  125,691
  132,653
  139,925
  147,522
  155,463
  163,768
  172,454
  181,544
  191,059
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
 
  45,640
  29,555
  29,093
  28,271
  27,111
  25,646
  23,921
  21,989
  19,911
  17,750
  14,736
  12,750
  10,835
  9,036
  7,389
  5,920
  4,643
  3,560
  2,666
  1,948
  1,387
  962
  648
  424
  269
  165
  98
  56
  31
  16
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

Anheuser-Busch InBev SA/NV, a brewing company, engages in the production, distribution, and sale of beer, alcoholic beverages, and soft drinks worldwide. It offers a portfolio of approximately 200 beer brands, including Budweiser, Corona, Stella Artois, Beck’s, Leffe, Hoegaarden, Bud Light, Skol, Brahma, Antarctica, Quilmes, Victoria, Modelo Especial, Michelob Ultra, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske, Cass, and Jupiler. The company was founded in 1366 and is headquartered in Leuven, Belgium.

FINANCIAL RATIOS  of  Anheuser-Busch InBev ADR (BUD)

Valuation Ratios
P/E Ratio 174.9
Price to Sales 4.8
Price to Book 3
Price to Tangible Book
Price to Cash Flow 21.5
Price to Free Cash Flow 42.3
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 14.5% 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 1686.68 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 $189.3 billion.


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Stock chart of BUD 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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