Intrinsic value of Chubb - CB

Previous Close

$145.55

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$145.55

 
Intrinsic value premium content
 
Up/down potential premium content
 
Rating premium content
 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying
Our model is not good at valuating stocks of financial companies, such as CB.

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

We calculate the intrinsic value of CB 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 68.0

 

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, %
  65.01
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  0
  50,350
  77,791
  116,337
  168,799
  238,151
  327,403
  439,470
  577,053
  742,526
  937,871
  1,164,623
  1,423,864
  1,716,234
  2,041,980
  2,401,006
  2,792,946
  3,217,240
  3,673,202
  4,160,092
  4,677,178
  5,223,787
  5,799,346
  6,403,420
  7,035,733
  7,696,188
  8,384,877
  9,102,085
  9,848,296
  10,624,185
  11,430,621
Variable operating expenses, $m
 
  41,086
  63,478
  94,931
  137,740
  194,331
  267,161
  358,608
  470,875
  605,902
  765,303
  950,333
  1,161,873
  1,400,447
  1,666,256
  1,959,221
  2,279,044
  2,625,268
  2,997,333
  3,394,635
  3,816,578
  4,262,610
  4,732,266
  5,225,191
  5,741,158
  6,280,090
  6,842,060
  7,427,302
  8,036,209
  8,669,335
  9,327,387
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
  26,268
  41,086
  63,478
  94,931
  137,740
  194,331
  267,161
  358,608
  470,875
  605,902
  765,303
  950,333
  1,161,873
  1,400,447
  1,666,256
  1,959,221
  2,279,044
  2,625,268
  2,997,333
  3,394,635
  3,816,578
  4,262,610
  4,732,266
  5,225,191
  5,741,158
  6,280,090
  6,842,060
  7,427,302
  8,036,209
  8,669,335
  9,327,387
Operating income, $m
  5,312
  9,264
  14,314
  21,406
  31,059
  43,820
  60,242
  80,863
  106,178
  136,625
  172,568
  214,291
  261,991
  315,787
  375,724
  441,785
  513,902
  591,972
  675,869
  765,457
  860,601
  961,177
  1,067,080
  1,178,229
  1,294,575
  1,416,099
  1,542,817
  1,674,784
  1,812,086
  1,954,850
  2,103,234
EBITDA, $m
  5,312
  11,102
  17,153
  25,652
  37,220
  52,512
  72,192
  96,903
  127,240
  163,727
  206,801
  256,799
  313,962
  378,430
  450,257
  529,422
  615,845
  709,401
  809,941
  917,300
  1,031,318
  1,151,845
  1,278,756
  1,411,954
  1,551,379
  1,697,010
  1,848,865
  2,007,010
  2,171,549
  2,342,633
  2,520,452
Interest expense (income), $m
  642
  0
  3,545
  8,698
  15,936
  25,788
  38,812
  55,572
  76,617
  102,453
  133,527
  170,210
  212,791
  261,473
  316,376
  377,547
  444,967
  518,568
  598,245
  683,869
  775,300
  872,402
  975,048
  1,083,131
  1,196,568
  1,315,308
  1,439,332
  1,568,659
  1,703,341
  1,843,470
  1,989,172
Earnings before tax, $m
  4,950
  9,264
  10,769
  12,708
  15,123
  18,032
  21,431
  25,291
  29,561
  34,172
  39,042
  44,081
  49,200
  54,314
  59,348
  64,238
  68,935
  73,404
  77,624
  81,588
  85,301
  88,775
  92,032
  95,099
  98,007
  100,791
  103,485
  106,125
  108,745
  111,380
  114,063
Tax expense, $m
  815
  2,501
  2,908
  3,431
  4,083
  4,869
  5,786
  6,828
  7,981
  9,226
  10,541
  11,902
  13,284
  14,665
  16,024
  17,344
  18,612
  19,819
  20,958
  22,029
  23,031
  23,969
  24,849
  25,677
  26,462
  27,214
  27,941
  28,654
  29,361
  30,073
  30,797
Net income, $m
  4,135
  6,763
  7,861
  9,277
  11,039
  13,163
  15,644
  18,462
  21,580
  24,946
  28,500
  32,179
  35,916
  39,650
  43,324
  46,894
  50,323
  53,585
  56,666
  59,559
  62,269
  64,805
  67,183
  69,422
  71,545
  73,577
  75,544
  77,471
  79,384
  81,308
  83,266

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  159,786
  255,586
  394,880
  590,543
  856,849
  1,208,889
  1,661,944
  2,230,815
  2,929,201
  3,769,170
  4,760,768
  5,911,793
  7,227,734
  8,711,850
  10,365,381
  12,187,847
  14,177,393
  16,331,167
  18,645,694
  21,117,219
  23,742,022
  26,516,685
  29,438,305
  32,504,670
  35,714,381
  39,066,945
  42,562,827
  46,203,479
  49,991,349
  53,929,873
  58,023,459
Adjusted assets (=assets-cash), $m
  159,786
  255,586
  394,880
  590,543
  856,849
  1,208,889
  1,661,944
  2,230,815
  2,929,201
  3,769,170
  4,760,768
  5,911,793
  7,227,734
  8,711,850
  10,365,381
  12,187,847
  14,177,393
  16,331,167
  18,645,694
  21,117,219
  23,742,022
  26,516,685
  29,438,305
  32,504,670
  35,714,381
  39,066,945
  42,562,827
  46,203,479
  49,991,349
  53,929,873
  58,023,459
Revenue / Adjusted assets
  0.000
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
Average production assets, $m
  3,825
  18,378
  28,394
  42,463
  61,612
  86,925
  119,502
  160,407
  210,624
  271,022
  342,323
  425,087
  519,710
  626,426
  745,323
  876,367
  1,019,425
  1,174,293
  1,340,719
  1,518,434
  1,707,170
  1,906,682
  2,116,761
  2,337,248
  2,568,043
  2,809,109
  3,060,480
  3,322,261
  3,594,628
  3,877,828
  4,172,177
Working capital, $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
Total debt, $m
  13,418
  66,888
  164,115
  300,688
  486,569
  732,294
  1,048,526
  1,445,598
  1,933,071
  2,519,369
  3,211,505
  4,014,921
  4,933,447
  5,969,360
  7,123,525
  8,395,606
  9,784,309
  11,287,644
  12,903,183
  14,628,308
  16,460,421
  18,397,135
  20,436,426
  22,576,749
  24,817,127
  27,157,217
  29,597,342
  32,138,517
  34,782,451
  37,531,541
  40,388,863
Total liabilities, $m
  111,511
  178,399
  275,626
  412,199
  598,080
  843,805
  1,160,037
  1,557,109
  2,044,582
  2,630,880
  3,323,016
  4,126,432
  5,044,958
  6,080,871
  7,235,036
  8,507,117
  9,895,820
  11,399,155
  13,014,694
  14,739,819
  16,571,932
  18,508,646
  20,547,937
  22,688,260
  24,928,638
  27,268,728
  29,708,853
  32,250,028
  34,893,962
  37,643,052
  40,500,374
Total equity, $m
  48,275
  77,187
  119,254
  178,344
  258,768
  365,084
  501,907
  673,706
  884,619
  1,138,289
  1,437,752
  1,785,362
  2,182,776
  2,630,979
  3,130,345
  3,680,730
  4,281,573
  4,932,013
  5,631,000
  6,377,400
  7,170,091
  8,008,039
  8,890,368
  9,816,410
  10,785,743
  11,798,217
  12,853,974
  13,953,451
  15,097,387
  16,286,822
  17,523,085
Total liabilities and equity, $m
  159,786
  255,586
  394,880
  590,543
  856,848
  1,208,889
  1,661,944
  2,230,815
  2,929,201
  3,769,169
  4,760,768
  5,911,794
  7,227,734
  8,711,850
  10,365,381
  12,187,847
  14,177,393
  16,331,168
  18,645,694
  21,117,219
  23,742,023
  26,516,685
  29,438,305
  32,504,670
  35,714,381
  39,066,945
  42,562,827
  46,203,479
  49,991,349
  53,929,874
  58,023,459
Debt-to-equity ratio
  0.278
  0.870
  1.380
  1.690
  1.880
  2.010
  2.090
  2.150
  2.190
  2.210
  2.230
  2.250
  2.260
  2.270
  2.280
  2.280
  2.290
  2.290
  2.290
  2.290
  2.300
  2.300
  2.300
  2.300
  2.300
  2.300
  2.300
  2.300
  2.300
  2.300
  2.300
Adjusted equity ratio
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,135
  6,763
  7,861
  9,277
  11,039
  13,163
  15,644
  18,462
  21,580
  24,946
  28,500
  32,179
  35,916
  39,650
  43,324
  46,894
  50,323
  53,585
  56,666
  59,559
  62,269
  64,805
  67,183
  69,422
  71,545
  73,577
  75,544
  77,471
  79,384
  81,308
  83,266
Depreciation, amort., depletion, $m
  0
  1,838
  2,839
  4,246
  6,161
  8,693
  11,950
  16,041
  21,062
  27,102
  34,232
  42,509
  51,971
  62,643
  74,532
  87,637
  101,943
  117,429
  134,072
  151,843
  170,717
  190,668
  211,676
  233,725
  256,804
  280,911
  306,048
  332,226
  359,463
  387,783
  417,218
Funds from operations, $m
  3,912
  8,601
  10,700
  13,523
  17,201
  21,856
  27,595
  34,503
  42,642
  52,048
  62,733
  74,688
  87,887
  102,292
  117,857
  134,531
  152,265
  171,014
  190,737
  211,403
  232,986
  255,474
  278,859
  303,147
  328,350
  354,488
  381,592
  409,697
  438,847
  469,090
  500,483
Change in working capital, $m
  -1,380
  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 operations, $m
  5,292
  19,205
  10,700
  13,523
  17,201
  21,856
  27,595
  34,503
  42,642
  52,048
  62,733
  74,688
  87,887
  102,292
  117,857
  134,531
  152,265
  171,014
  190,737
  211,403
  232,986
  255,474
  278,859
  303,147
  328,350
  354,488
  381,592
  409,697
  438,847
  469,090
  500,483
Maintenance CAPEX, $m
  0
  -1,149
  -1,838
  -2,839
  -4,246
  -6,161
  -8,693
  -11,950
  -16,041
  -21,062
  -27,102
  -34,232
  -42,509
  -51,971
  -62,643
  -74,532
  -87,637
  -101,943
  -117,429
  -134,072
  -151,843
  -170,717
  -190,668
  -211,676
  -233,725
  -256,804
  -280,911
  -306,048
  -332,226
  -359,463
  -387,783
New CAPEX, $m
  0
  -6,887
  -10,016
  -14,069
  -19,149
  -25,313
  -32,577
  -40,905
  -50,217
  -60,398
  -71,301
  -82,765
  -94,623
  -106,715
  -118,897
  -131,044
  -143,058
  -154,867
  -166,426
  -177,715
  -188,737
  -199,512
  -210,079
  -220,487
  -230,794
  -241,066
  -251,371
  -261,781
  -272,367
  -283,200
  -294,349
Cash from investing activities, $m
  -5,315
  -8,036
  -11,854
  -16,908
  -23,395
  -31,474
  -41,270
  -52,855
  -66,258
  -81,460
  -98,403
  -116,997
  -137,132
  -158,686
  -181,540
  -205,576
  -230,695
  -256,810
  -283,855
  -311,787
  -340,580
  -370,229
  -400,747
  -432,163
  -464,519
  -497,870
  -532,282
  -567,829
  -604,593
  -642,663
  -682,132
Free cash flow, $m
  -23
  11,169
  -1,153
  -3,385
  -6,194
  -9,619
  -13,675
  -18,352
  -23,616
  -29,413
  -35,670
  -42,309
  -49,244
  -56,394
  -63,683
  -71,046
  -78,430
  -85,796
  -93,118
  -100,384
  -107,593
  -114,756
  -121,888
  -129,016
  -136,170
  -143,382
  -150,690
  -158,132
  -165,746
  -173,572
  -181,649
Issuance/(repayment) of debt, $m
  -1
  66,888
  97,227
  136,573
  185,881
  245,724
  316,232
  397,072
  487,474
  586,298
  692,135
  803,416
  918,526
  1,035,913
  1,154,165
  1,272,081
  1,388,703
  1,503,335
  1,615,540
  1,725,124
  1,832,113
  1,936,715
  2,039,291
  2,140,322
  2,240,379
  2,340,090
  2,440,125
  2,541,175
  2,643,933
  2,749,090
  2,857,322
Issuance/(repurchase) of shares, $m
  167
  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  
  431
  66,888
  97,227
  136,573
  185,881
  245,724
  316,232
  397,072
  487,474
  586,298
  692,135
  803,416
  918,526
  1,035,913
  1,154,165
  1,272,081
  1,388,703
  1,503,335
  1,615,540
  1,725,124
  1,832,113
  1,936,715
  2,039,291
  2,140,322
  2,240,379
  2,340,090
  2,440,125
  2,541,175
  2,643,933
  2,749,090
  2,857,322
Total cash flow (excl. dividends), $m
  383
  78,057
  96,074
  133,187
  179,687
  236,105
  302,557
  378,720
  463,857
  556,886
  656,465
  761,107
  869,282
  979,518
  1,090,482
  1,201,035
  1,310,273
  1,417,539
  1,522,422
  1,624,740
  1,724,519
  1,821,959
  1,917,403
  2,011,306
  2,104,209
  2,196,708
  2,289,435
  2,383,043
  2,478,187
  2,575,518
  2,675,674
Retained Cash Flow (-), $m
  -19,140
  -28,912
  -42,067
  -59,090
  -80,424
  -106,316
  -136,823
  -171,799
  -210,913
  -253,671
  -299,463
  -347,610
  -397,414
  -448,203
  -499,367
  -550,385
  -600,843
  -650,440
  -698,987
  -746,401
  -792,691
  -837,948
  -882,329
  -926,042
  -969,333
  -1,012,474
  -1,055,756
  -1,099,477
  -1,143,937
  -1,189,434
  -1,236,263
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
 
  49,145
  54,007
  74,097
  99,263
  129,789
  165,735
  206,921
  252,945
  303,215
  357,002
  413,497
  471,868
  531,316
  591,115
  650,650
  709,430
  767,099
  823,435
  878,340
  931,829
  984,011
  1,035,073
  1,085,264
  1,134,876
  1,184,233
  1,233,679
  1,283,566
  1,334,250
  1,386,084
  1,439,411
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  47,119
  49,442
  64,484
  81,733
  100,602
  120,280
  139,793
  158,097
  174,181
  187,163
  196,364
  201,363
  202,016
  198,448
  191,020
  180,281
  166,908
  151,644
  135,239
  118,407
  101,779
  85,884
  71,129
  57,801
  46,068
  35,993
  27,549
  20,643
  15,130
  10,838
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

Chubb Limited, through its subsidiaries, property and casualty insurance and reinsurance products worldwide. The company’s North America Commercial P&C Insurance segment offers commercial property, marine, general casualty, workers’ compensation, package policies, and risk management; and specialty categories, such as professional lines, marine and construction risk, environmental and cyber risk, and excess casualty, as well as group accident and health insurance to large, middle market, and small commercial businesses in the United States, Bermuda, and Canada. Its North America Personal P&C Insurance segment offers affluent and high net worth individuals and families with homeowners, automobile, valuables, umbrella, and recreational marine insurance and services in the United States and Canada. The company’s North America Agricultural Insurance segment provides comprehensive multiple peril crop and crop-hail insurance; and coverage for farm and ranch property, as well as commercial agriculture products. Its Overseas General Insurance segment offers coverage for traditional commercial property and casualty, and specialty categories, such as financial lines, marine, energy, aviation, political risk, and construction risk, as well as group accident and health, and traditional and specialty personal lines. The company’s Global Reinsurance segment markets reinsurance products; and provides solutions for small to mid-sized clients and multinational ceding companies. Its Life Insurance segment offers protection and savings products comprising whole life, endowment plans, individual term life, group term life, group medical, personal accident, credit life, universal life, and unit linked contracts. The company was formerly known as ACE Limited and changed its name to Chubb Limited in January 2016 as a result of its acquisition of The Chubb Corporation. Chubb Limited was founded in 1985 and is headquartered in Zurich, Switzerland.

FINANCIAL RATIOS  of  Chubb (CB)

Valuation Ratios
P/E Ratio 16.4
Price to Sales 2.1
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 12.8
Growth Rates
Sales Growth Rate 65%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 26.8%
Total Debt to Equity 27.8%
Interest Coverage 9
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 8.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 17.7%
EBITDA Margin - 3 Yr. Avg. 18.6%
Operating Margin 16.8%
Oper. Margin - 3 Yr. Avg. 17.9%
Pre-Tax Margin 15.7%
Pre-Tax Margin - 3 Yr. Avg. 17%
Net Profit Margin 13.1%
Net Profit Margin - 3 Yr. Avg. 14.2%
Effective Tax Rate 16.5%
Eff/ Tax Rate - 3 Yr. Avg. 16.2%
Payout Ratio 28.4%

CB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CB stock intrinsic value calculation we used $31469 million for the last fiscal year's total revenue generated by Chubb. The default revenue input number comes from 2016 income statement of Chubb. 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 CB stock valuation model: a) initial revenue growth rate of 60% 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 4.3%, whose default value for CB is calculated based on our internal credit rating of Chubb, 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 Chubb.
    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 CB stock the variable cost ratio is equal to 81.6%.

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 CB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.3% for Chubb.

Corporate tax rate of 27% is the nominal tax rate for Chubb. 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 CB 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 CB are equal to 36.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Chubb 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 CB is equal to 0%. 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 - $48275 million for Chubb - 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 467.232 million for Chubb 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 Chubb at the current share price and the inputted number of shares is $68.0 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
ACGL Arch Capital G 93.04 prem.  prem.
RNR RenaissanceRe 139.85 prem.  prem.
AWH Allied World A 52.16 prem.  prem.
AFG American Finan 99.05 prem.  prem.

COMPANY NEWS

▶ ETFs with exposure to Chubb Ltd. : June 19, 2017   [Jun-19-17 03:03PM  Capital Cube]
▶ ETFs with exposure to Chubb Ltd. : June 9, 2017   [Jun-09-17 01:20PM  Capital Cube]
▶ 5 Companies Reach Yearly Highs   [Jun-06-17 01:47PM  GuruFocus.com]
▶ [$$] Adair Turner to chair Chubb's European operations   [May-17-17 02:06PM  Financial Times]
▶ AIG Stock Upgraded: What You Need to Know   [May-16-17 01:01PM  Motley Fool]
▶ Cramer: These Sectors Look Bullish (Part II)   [May-09-17 07:00AM  TheStreet.com]
▶ Chubb tops Street 1Q forecasts   [Apr-25-17 05:00PM  Associated Press]
▶ Greenberg Rails Against Trump's America-First Policy   [Apr-06-17 03:25PM  Bloomberg]
▶ Chubb Ltd Stock Trades Ex-Dividend Wednesday   [Mar-28-17 11:31AM  Investopedia]
▶ Combined Insurance Donates $30,000 to Luke's Wings   [Feb-17-17 11:07AM  PR Newswire]
Stock chart of CB Financial statements of CB Annual reports of CB
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.