Intrinsic value of BorgWarner - BWA

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$42.28

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$42.28

 
Intrinsic value

$67.29

 
Up/down potential

+59%

 
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 BWA 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 9.0

 

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, %
  13.06
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  9,071
  9,652
  10,256
  10,885
  11,540
  12,223
  12,935
  13,678
  14,454
  15,264
  16,110
  16,994
  17,918
  18,885
  19,896
  20,955
  22,063
  23,223
  24,439
  25,712
  27,046
  28,445
  29,910
  31,447
  33,059
  34,748
  36,521
  38,380
  40,330
  42,376
  44,523
Variable operating expenses, $m
 
  8,511
  9,034
  9,577
  10,144
  10,734
  11,349
  11,992
  12,662
  13,362
  14,093
  14,687
  15,486
  16,321
  17,195
  18,110
  19,068
  20,071
  21,121
  22,221
  23,374
  24,583
  25,850
  27,178
  28,570
  30,031
  31,563
  33,169
  34,855
  36,623
  38,478
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
  8,845
  8,511
  9,034
  9,577
  10,144
  10,734
  11,349
  11,992
  12,662
  13,362
  14,093
  14,687
  15,486
  16,321
  17,195
  18,110
  19,068
  20,071
  21,121
  22,221
  23,374
  24,583
  25,850
  27,178
  28,570
  30,031
  31,563
  33,169
  34,855
  36,623
  38,478
Operating income, $m
  226
  1,140
  1,222
  1,308
  1,397
  1,489
  1,586
  1,687
  1,792
  1,902
  2,017
  2,307
  2,433
  2,564
  2,701
  2,845
  2,995
  3,153
  3,318
  3,491
  3,672
  3,862
  4,061
  4,269
  4,488
  4,718
  4,958
  5,211
  5,475
  5,753
  6,045
EBITDA, $m
  617
  1,568
  1,666
  1,768
  1,874
  1,985
  2,101
  2,222
  2,348
  2,479
  2,617
  2,760
  2,910
  3,067
  3,232
  3,404
  3,584
  3,772
  3,970
  4,176
  4,393
  4,620
  4,858
  5,108
  5,370
  5,644
  5,932
  6,234
  6,551
  6,883
  7,232
Interest expense (income), $m
  100
  86
  100
  116
  131
  148
  165
  183
  202
  221
  242
  263
  285
  308
  333
  358
  385
  413
  442
  473
  505
  538
  573
  610
  649
  690
  732
  777
  824
  873
  924
Earnings before tax, $m
  191
  1,054
  1,122
  1,192
  1,265
  1,341
  1,421
  1,504
  1,590
  1,681
  1,775
  2,044
  2,147
  2,255
  2,368
  2,487
  2,610
  2,740
  2,876
  3,018
  3,167
  3,323
  3,487
  3,659
  3,839
  4,028
  4,226
  4,434
  4,652
  4,880
  5,120
Tax expense, $m
  31
  285
  303
  322
  342
  362
  384
  406
  429
  454
  479
  552
  580
  609
  639
  671
  705
  740
  776
  815
  855
  897
  942
  988
  1,037
  1,088
  1,141
  1,197
  1,256
  1,318
  1,382
Net income, $m
  119
  770
  819
  870
  924
  979
  1,037
  1,098
  1,161
  1,227
  1,296
  1,492
  1,568
  1,646
  1,729
  1,815
  1,906
  2,000
  2,099
  2,203
  2,312
  2,426
  2,546
  2,671
  2,803
  2,940
  3,085
  3,237
  3,396
  3,563
  3,738

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  444
  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
  8,835
  8,928
  9,487
  10,069
  10,675
  11,307
  11,966
  12,653
  13,371
  14,120
  14,903
  15,720
  16,576
  17,470
  18,405
  19,385
  20,410
  21,483
  22,608
  23,785
  25,020
  26,313
  27,669
  29,091
  30,582
  32,145
  33,784
  35,504
  37,308
  39,201
  41,187
Adjusted assets (=assets-cash), $m
  8,391
  8,928
  9,487
  10,069
  10,675
  11,307
  11,966
  12,653
  13,371
  14,120
  14,903
  15,720
  16,576
  17,470
  18,405
  19,385
  20,410
  21,483
  22,608
  23,785
  25,020
  26,313
  27,669
  29,091
  30,582
  32,145
  33,784
  35,504
  37,308
  39,201
  41,187
Revenue / Adjusted assets
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
  1.081
Average production assets, $m
  2,828
  3,011
  3,200
  3,396
  3,601
  3,814
  4,036
  4,268
  4,510
  4,762
  5,026
  5,302
  5,590
  5,892
  6,208
  6,538
  6,884
  7,246
  7,625
  8,022
  8,438
  8,875
  9,332
  9,812
  10,314
  10,842
  11,394
  11,975
  12,583
  13,221
  13,891
Working capital, $m
  820
  589
  626
  664
  704
  746
  789
  834
  882
  931
  983
  1,037
  1,093
  1,152
  1,214
  1,278
  1,346
  1,417
  1,491
  1,568
  1,650
  1,735
  1,825
  1,918
  2,017
  2,120
  2,228
  2,341
  2,460
  2,585
  2,716
Total debt, $m
  2,220
  2,389
  2,751
  3,128
  3,521
  3,930
  4,357
  4,802
  5,267
  5,753
  6,260
  6,790
  7,344
  7,923
  8,530
  9,164
  9,829
  10,524
  11,253
  12,016
  12,816
  13,654
  14,533
  15,454
  16,420
  17,433
  18,495
  19,610
  20,779
  22,005
  23,292
Total liabilities, $m
  5,616
  5,786
  6,148
  6,525
  6,918
  7,327
  7,754
  8,199
  8,664
  9,150
  9,657
  10,187
  10,741
  11,320
  11,927
  12,561
  13,226
  13,921
  14,650
  15,413
  16,213
  17,051
  17,930
  18,851
  19,817
  20,830
  21,892
  23,007
  24,176
  25,402
  26,689
Total equity, $m
  3,218
  3,143
  3,340
  3,544
  3,758
  3,980
  4,212
  4,454
  4,707
  4,970
  5,246
  5,534
  5,835
  6,149
  6,479
  6,823
  7,184
  7,562
  7,958
  8,372
  8,807
  9,262
  9,740
  10,240
  10,765
  11,315
  11,892
  12,497
  13,132
  13,799
  14,498
Total liabilities and equity, $m
  8,834
  8,929
  9,488
  10,069
  10,676
  11,307
  11,966
  12,653
  13,371
  14,120
  14,903
  15,721
  16,576
  17,469
  18,406
  19,384
  20,410
  21,483
  22,608
  23,785
  25,020
  26,313
  27,670
  29,091
  30,582
  32,145
  33,784
  35,504
  37,308
  39,201
  41,187
Debt-to-equity ratio
  0.690
  0.760
  0.820
  0.880
  0.940
  0.990
  1.030
  1.080
  1.120
  1.160
  1.190
  1.230
  1.260
  1.290
  1.320
  1.340
  1.370
  1.390
  1.410
  1.440
  1.460
  1.470
  1.490
  1.510
  1.530
  1.540
  1.560
  1.570
  1.580
  1.590
  1.610
Adjusted equity ratio
  0.349
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  119
  770
  819
  870
  924
  979
  1,037
  1,098
  1,161
  1,227
  1,296
  1,492
  1,568
  1,646
  1,729
  1,815
  1,906
  2,000
  2,099
  2,203
  2,312
  2,426
  2,546
  2,671
  2,803
  2,940
  3,085
  3,237
  3,396
  3,563
  3,738
Depreciation, amort., depletion, $m
  391
  428
  444
  460
  478
  496
  515
  535
  556
  577
  600
  453
  478
  504
  531
  559
  588
  619
  652
  686
  721
  759
  798
  839
  882
  927
  974
  1,023
  1,075
  1,130
  1,187
Funds from operations, $m
  920
  1,197
  1,263
  1,331
  1,402
  1,475
  1,552
  1,633
  1,717
  1,804
  1,896
  1,945
  2,045
  2,150
  2,260
  2,374
  2,494
  2,620
  2,751
  2,889
  3,033
  3,185
  3,343
  3,510
  3,684
  3,867
  4,059
  4,260
  4,471
  4,693
  4,925
Change in working capital, $m
  -116
  35
  37
  38
  40
  42
  43
  45
  47
  49
  52
  54
  56
  59
  62
  65
  68
  71
  74
  78
  81
  85
  89
  94
  98
  103
  108
  113
  119
  125
  131
Cash from operations, $m
  1,036
  1,155
  1,226
  1,292
  1,362
  1,434
  1,509
  1,587
  1,669
  1,755
  1,844
  1,892
  1,989
  2,091
  2,198
  2,309
  2,426
  2,549
  2,677
  2,811
  2,952
  3,099
  3,254
  3,416
  3,586
  3,764
  3,951
  4,147
  4,352
  4,568
  4,794
Maintenance CAPEX, $m
  0
  -242
  -257
  -273
  -290
  -308
  -326
  -345
  -365
  -385
  -407
  -430
  -453
  -478
  -504
  -531
  -559
  -588
  -619
  -652
  -686
  -721
  -759
  -798
  -839
  -882
  -927
  -974
  -1,023
  -1,075
  -1,130
New CAPEX, $m
  -501
  -183
  -189
  -196
  -204
  -213
  -222
  -232
  -242
  -253
  -264
  -276
  -288
  -302
  -316
  -330
  -346
  -362
  -379
  -397
  -416
  -436
  -457
  -479
  -503
  -527
  -553
  -580
  -608
  -638
  -670
Cash from investing activities, $m
  -404
  -425
  -446
  -469
  -494
  -521
  -548
  -577
  -607
  -638
  -671
  -706
  -741
  -780
  -820
  -861
  -905
  -950
  -998
  -1,049
  -1,102
  -1,157
  -1,216
  -1,277
  -1,342
  -1,409
  -1,480
  -1,554
  -1,631
  -1,713
  -1,800
Free cash flow, $m
  632
  730
  780
  823
  867
  913
  961
  1,011
  1,063
  1,117
  1,173
  1,186
  1,248
  1,312
  1,379
  1,449
  1,522
  1,598
  1,678
  1,762
  1,850
  1,942
  2,038
  2,139
  2,244
  2,355
  2,471
  2,593
  2,720
  2,854
  2,994
Issuance/(repayment) of debt, $m
  -318
  345
  362
  377
  393
  409
  427
  445
  465
  485
  507
  530
  554
  580
  606
  635
  664
  696
  729
  763
  800
  838
  879
  921
  966
  1,013
  1,062
  1,114
  1,169
  1,226
  1,287
Issuance/(repurchase) of shares, $m
  -288
  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  
  -621
  345
  362
  377
  393
  409
  427
  445
  465
  485
  507
  530
  554
  580
  606
  635
  664
  696
  729
  763
  800
  838
  879
  921
  966
  1,013
  1,062
  1,114
  1,169
  1,226
  1,287
Total cash flow (excl. dividends), $m
  -21
  1,074
  1,142
  1,200
  1,260
  1,322
  1,388
  1,456
  1,527
  1,602
  1,680
  1,716
  1,802
  1,891
  1,985
  2,083
  2,186
  2,294
  2,407
  2,526
  2,650
  2,780
  2,917
  3,060
  3,210
  3,368
  3,534
  3,707
  3,889
  4,081
  4,281
Retained Cash Flow (-), $m
  336
  -193
  -197
  -205
  -213
  -222
  -232
  -242
  -253
  -264
  -275
  -288
  -301
  -315
  -329
  -345
  -361
  -378
  -396
  -415
  -434
  -455
  -477
  -500
  -525
  -550
  -577
  -605
  -635
  -666
  -699
Prev. year cash balance distribution, $m
 
  268
  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
 
  1,150
  945
  995
  1,046
  1,100
  1,156
  1,214
  1,275
  1,338
  1,405
  1,428
  1,501
  1,576
  1,656
  1,738
  1,825
  1,916
  2,011
  2,111
  2,215
  2,325
  2,439
  2,560
  2,686
  2,818
  2,956
  3,102
  3,254
  3,414
  3,582
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  1,101
  864
  863
  858
  848
  833
  813
  788
  759
  726
  667
  628
  587
  542
  497
  450
  403
  357
  312
  269
  229
  192
  158
  128
  102
  80
  61
  46
  34
  24
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

BorgWarner Inc. provides solutions for combustion, hybrid, and electric vehicles worldwide. The company operates through two segments, Engine and Drivetrain. The Engine segment develops and manufactures turbochargers; and timing systems, such as timing chains, variable cam timing products, crankshaft and camshaft sprockets, tensioners, guides and snubbers, HY-VO front-wheel drive transmission chains, and four-wheel drive chains for light vehicles. It also provides emissions systems, including electric air pumps and exhaust gas recirculation (EGR) modules, EGR coolers, EGR tubes, and EGR valves; thermal systems products comprising viscous fan drives, polymer fans, and coolant pumps; and glow plugs, diesel cold start systems, and other gasoline ignition technologies. The Drivetrain segment develops and manufactures friction and mechanical products, including dual and friction clutch modules, friction and steel plates, transmission bands, torque converter clutches, one-way clutches, and torsional vibration dampers. This segment also offers control products comprising electro-hydraulic solenoids, transmission solenoid modules, and dual clutch control modules; torque management products, such as rear-wheel drive/all-wheel drive (AWD) transfer case systems, front wheel drive-AWD coupling systems, and cross-axle coupling systems; and starter motors, alternators, and hybrid electric motors. The company sells its products to original equipment manufacturers of light vehicles consisting of passenger cars, sport-utility vehicles, vans, and light trucks; commercial vehicles, such as medium-duty and heavy duty trucks, and buses; and off-highway vehicles, including agricultural and construction machinery, and marine applications, as well as to tier one vehicle systems suppliers and the aftermarket for light, commercial, and off-highway vehicles. BorgWarner Inc. was founded in 1987 and is headquartered in Auburn Hills, Michigan.

FINANCIAL RATIOS  of  BorgWarner (BWA)

Valuation Ratios
P/E Ratio 75.4
Price to Sales 1
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 8.7
Price to Free Cash Flow 16.8
Growth Rates
Sales Growth Rate 13.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.2%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 63.5%
Total Debt to Equity 69%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.9%
Return On Equity 3.5%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 1
Profitability Ratios
Gross Margin 21.3%
Gross Margin - 3 Yr. Avg. 21.2%
EBITDA Margin 7.5%
EBITDA Margin - 3 Yr. Avg. 13.4%
Operating Margin 2.5%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. 8.5%
Net Profit Margin 1.3%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 16.2%
Eff/ Tax Rate - 3 Yr. Avg. 25.4%
Payout Ratio 95%

BWA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BWA stock intrinsic value calculation we used $9071 million for the last fiscal year's total revenue generated by BorgWarner. The default revenue input number comes from 2016 income statement of BorgWarner. 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 BWA stock valuation model: a) initial revenue growth rate of 6.4% 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 4.4%, whose default value for BWA is calculated based on our internal credit rating of BorgWarner, 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 BorgWarner.
    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 BWA stock the variable cost ratio is equal to 88.3%.

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 BWA 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 4.2% for BorgWarner.

Corporate tax rate of 27% is the nominal tax rate for BorgWarner. 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 BWA 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 BWA are equal to 31.2%.

Life of production assets of 11.7 years is the average useful life of capital assets used in BorgWarner 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 BWA is equal to 6.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3218 million for BorgWarner - 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 212.012 million for BorgWarner 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 BorgWarner at the current share price and the inputted number of shares is $9.0 billion.


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COMPANY NEWS

▶ BorgWarner beats Street 1Q forecasts   [06:38AM  Associated Press]
▶ BorgWarner Declares Quarterly Dividend   [06:30AM  PR Newswire]
▶ BorgWarner Invests $10M in Autotech Ventures   [Apr-05-17 12:54PM  Bloomberg]
▶ [$$] BorgWarner Invests $10 Million in a Silicon Valley Venture Fund   [Apr-03-17 03:06PM  The Wall Street Journal]
▶ Auto Stocks Hit Hard by Weak March Sales   [01:31PM  The Wall Street Journal]
▶ Auto Stocks Hit Hard by Weak March Sales   [01:31PM  at The Wall Street Journal]
▶ BorgWarner Outlines Expectations for 2017   [Feb-10-17 02:00PM  at Motley Fool]
▶ BorgWarner Declares Quarterly Dividend   [06:30AM  PR Newswire]
▶ BorgWarner Appoints Roger A. Krone to Board of Directors   [Feb-08-17 04:15PM  PR Newswire]
▶ What Investors Might Have Missed in the Markets This Week   [Dec-10-16 10:13AM  at Motley Fool]
▶ Are Hedge Funds Right About BorgWarner Inc. (BWA)?   [Dec-01-16 10:25PM  at Insider Monkey]
▶ Hedge Funds Are Selling CIT Group Inc. (CIT)   [Nov-26-16 05:34PM  at Insider Monkey]
Stock chart of BWA Financial statements of BWA
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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