Intrinsic value of Chubb - CB

Previous Close

$138.42

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$138.42

 
Intrinsic value

$8,096

 
Up/down potential

+999%

 
Rating

str. buy

 
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 64.1

 

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
  50,528
  78,066
  116,747
  169,395
  238,991
  328,558
  441,021
  579,088
  745,146
  941,179
  1,168,731
  1,428,886
  1,722,288
  2,049,183
  2,409,475
  2,802,798
  3,228,588
  3,686,158
  4,174,766
  4,693,676
  5,242,213
  5,819,802
  6,426,007
  7,060,550
  7,723,335
  8,414,453
  9,134,191
  9,883,033
  10,661,660
  11,470,940
Variable operating expenses, $m
 
  40,311
  61,445
  91,131
  131,535
  184,947
  253,685
  339,995
  445,954
  573,395
  723,842
  896,943
  1,096,599
  1,321,770
  1,572,646
  1,849,152
  2,151,008
  2,477,781
  2,828,943
  3,203,925
  3,602,163
  4,023,138
  4,466,409
  4,931,641
  5,418,621
  5,927,276
  6,457,674
  7,010,037
  7,584,737
  8,182,294
  8,803,376
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
  40,311
  61,445
  91,131
  131,535
  184,947
  253,685
  339,995
  445,954
  573,395
  723,842
  896,943
  1,096,599
  1,321,770
  1,572,646
  1,849,152
  2,151,008
  2,477,781
  2,828,943
  3,203,925
  3,602,163
  4,023,138
  4,466,409
  4,931,641
  5,418,621
  5,927,276
  6,457,674
  7,010,037
  7,584,737
  8,182,294
  8,803,376
Operating income, $m
  5,312
  10,217
  16,621
  25,616
  37,859
  54,044
  74,873
  101,026
  133,134
  171,750
  217,338
  271,788
  332,287
  400,518
  476,537
  560,323
  651,790
  750,807
  857,215
  970,841
  1,091,513
  1,219,075
  1,353,393
  1,494,366
  1,641,929
  1,796,059
  1,956,779
  2,124,154
  2,298,297
  2,479,366
  2,667,564
EBITDA, $m
  5,312
  12,362
  19,099
  28,562
  41,442
  58,469
  80,382
  107,896
  141,674
  182,300
  230,259
  285,930
  349,577
  421,357
  501,332
  589,477
  685,704
  789,873
  901,818
  1,021,355
  1,148,307
  1,282,506
  1,423,813
  1,572,121
  1,727,362
  1,889,512
  2,058,593
  2,234,677
  2,417,881
  2,608,372
  2,806,362
Interest expense (income), $m
  642
  751
  4,482
  9,918
  17,554
  27,948
  41,687
  59,369
  81,571
  108,827
  141,609
  180,309
  225,231
  276,589
  334,511
  399,044
  470,171
  547,819
  631,876
  722,207
  818,665
  921,105
  1,029,394
  1,143,418
  1,263,091
  1,388,359
  1,519,202
  1,655,639
  1,797,725
  1,945,557
  2,099,269
Earnings before tax, $m
  4,950
  9,466
  12,139
  15,698
  20,305
  26,096
  33,186
  41,657
  51,563
  62,923
  75,729
  91,479
  107,056
  123,929
  142,026
  161,278
  181,619
  202,989
  225,339
  248,634
  272,848
  297,970
  324,000
  350,948
  378,838
  407,700
  437,576
  468,515
  500,571
  533,809
  568,295
Tax expense, $m
  815
  2,556
  3,278
  4,239
  5,482
  7,046
  8,960
  11,247
  13,922
  16,989
  20,447
  24,699
  28,905
  33,461
  38,347
  43,545
  49,037
  54,807
  60,842
  67,131
  73,669
  80,452
  87,480
  94,756
  102,286
  110,079
  118,146
  126,499
  135,154
  144,128
  153,440
Net income, $m
  4,135
  6,910
  8,862
  11,460
  14,823
  19,050
  24,226
  30,410
  37,641
  45,934
  55,282
  66,780
  78,151
  90,468
  103,679
  117,733
  132,582
  148,182
  164,498
  181,503
  199,179
  217,518
  236,520
  256,192
  276,551
  297,621
  319,431
  342,016
  365,417
  389,680
  414,855

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
  255,192
  394,272
  589,633
  855,528
  1,207,026
  1,659,383
  2,227,377
  2,924,687
  3,763,361
  4,753,431
  5,902,683
  7,216,596
  8,698,424
  10,349,408
  12,169,065
  14,155,545
  16,306,000
  18,616,960
  21,084,676
  23,705,435
  26,475,822
  29,392,940
  32,454,579
  35,659,344
  39,006,742
  42,497,236
  46,132,278
  49,914,310
  53,846,765
  57,934,042
Adjusted assets (=assets-cash), $m
  159,786
  255,192
  394,272
  589,633
  855,528
  1,207,026
  1,659,383
  2,227,377
  2,924,687
  3,763,361
  4,753,431
  5,902,683
  7,216,596
  8,698,424
  10,349,408
  12,169,065
  14,155,545
  16,306,000
  18,616,960
  21,084,676
  23,705,435
  26,475,822
  29,392,940
  32,454,579
  35,659,344
  39,006,742
  42,497,236
  46,132,278
  49,914,310
  53,846,765
  57,934,042
Revenue / Adjusted assets
  0.000
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
Average production assets, $m
  3,825
  6,114
  9,446
  14,126
  20,497
  28,918
  39,755
  53,363
  70,070
  90,163
  113,883
  141,416
  172,895
  208,397
  247,951
  291,546
  339,139
  390,659
  446,025
  505,147
  567,935
  634,308
  704,196
  777,547
  854,327
  934,524
  1,018,149
  1,105,237
  1,195,847
  1,290,061
  1,387,984
Working capital, $m
  0
  808
  1,249
  1,868
  2,710
  3,824
  5,257
  7,056
  9,265
  11,922
  15,059
  18,700
  22,862
  27,557
  32,787
  38,552
  44,845
  51,657
  58,979
  66,796
  75,099
  83,875
  93,117
  102,816
  112,969
  123,573
  134,631
  146,147
  158,129
  170,587
  183,535
Total debt, $m
  13,418
  80,031
  177,109
  313,471
  499,066
  744,411
  1,060,156
  1,456,616
  1,943,338
  2,528,733
  3,219,802
  4,021,980
  4,939,091
  5,973,407
  7,125,794
  8,395,915
  9,782,477
  11,283,495
  12,896,545
  14,619,011
  16,448,301
  18,382,031
  20,418,179
  22,555,203
  24,792,129
  27,128,613
  29,564,978
  32,102,237
  34,742,096
  37,486,949
  40,339,868
Total liabilities, $m
  111,511
  178,124
  275,202
  411,564
  597,159
  842,504
  1,158,249
  1,554,709
  2,041,431
  2,626,826
  3,317,895
  4,120,073
  5,037,184
  6,071,500
  7,223,887
  8,494,008
  9,880,570
  11,381,588
  12,994,638
  14,717,104
  16,546,394
  18,480,124
  20,516,272
  22,653,296
  24,890,222
  27,226,706
  29,663,071
  32,200,330
  34,840,189
  37,585,042
  40,437,961
Total equity, $m
  48,275
  77,068
  119,070
  178,069
  258,369
  364,522
  501,134
  672,668
  883,255
  1,136,535
  1,435,536
  1,782,610
  2,179,412
  2,626,924
  3,125,521
  3,675,058
  4,274,975
  4,924,412
  5,622,322
  6,367,572
  7,159,041
  7,995,698
  8,876,668
  9,801,283
  10,769,122
  11,780,036
  12,834,165
  13,931,948
  15,074,122
  16,261,723
  17,496,081
Total liabilities and equity, $m
  159,786
  255,192
  394,272
  589,633
  855,528
  1,207,026
  1,659,383
  2,227,377
  2,924,686
  3,763,361
  4,753,431
  5,902,683
  7,216,596
  8,698,424
  10,349,408
  12,169,066
  14,155,545
  16,306,000
  18,616,960
  21,084,676
  23,705,435
  26,475,822
  29,392,940
  32,454,579
  35,659,344
  39,006,742
  42,497,236
  46,132,278
  49,914,311
  53,846,765
  57,934,042
Debt-to-equity ratio
  0.278
  1.040
  1.490
  1.760
  1.930
  2.040
  2.120
  2.170
  2.200
  2.220
  2.240
  2.260
  2.270
  2.270
  2.280
  2.280
  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
  2.310
  2.310
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
  6,910
  8,862
  11,460
  14,823
  19,050
  24,226
  30,410
  37,641
  45,934
  55,282
  66,780
  78,151
  90,468
  103,679
  117,733
  132,582
  148,182
  164,498
  181,503
  199,179
  217,518
  236,520
  256,192
  276,551
  297,621
  319,431
  342,016
  365,417
  389,680
  414,855
Depreciation, amort., depletion, $m
  0
  2,145
  2,478
  2,946
  3,583
  4,425
  5,509
  6,870
  8,540
  10,549
  12,921
  14,142
  17,290
  20,840
  24,795
  29,155
  33,914
  39,066
  44,603
  50,515
  56,793
  63,431
  70,420
  77,755
  85,433
  93,452
  101,815
  110,524
  119,585
  129,006
  138,798
Funds from operations, $m
  3,912
  9,055
  11,339
  14,406
  18,406
  23,475
  29,734
  37,279
  46,181
  56,483
  68,203
  80,921
  95,441
  111,307
  128,474
  146,888
  166,495
  187,248
  209,100
  232,018
  255,973
  280,949
  306,939
  333,947
  361,984
  391,073
  421,246
  452,539
  485,002
  518,686
  553,654
Change in working capital, $m
  -1,380
  303
  441
  619
  842
  1,114
  1,433
  1,799
  2,209
  2,657
  3,137
  3,641
  4,162
  4,694
  5,230
  5,765
  6,293
  6,813
  7,321
  7,818
  8,303
  8,777
  9,241
  9,699
  10,153
  10,605
  11,058
  11,516
  11,981
  12,458
  12,948
Cash from operations, $m
  5,292
  11,689
  10,899
  13,787
  17,563
  22,362
  28,301
  35,480
  43,972
  53,826
  65,067
  77,281
  91,278
  106,613
  123,244
  141,123
  160,202
  180,435
  201,779
  224,200
  247,670
  272,172
  297,698
  324,247
  351,831
  380,469
  410,188
  441,024
  473,020
  506,228
  540,705
Maintenance CAPEX, $m
  0
  -383
  -611
  -945
  -1,413
  -2,050
  -2,892
  -3,976
  -5,336
  -7,007
  -9,016
  -11,388
  -14,142
  -17,290
  -20,840
  -24,795
  -29,155
  -33,914
  -39,066
  -44,603
  -50,515
  -56,793
  -63,431
  -70,420
  -77,755
  -85,433
  -93,452
  -101,815
  -110,524
  -119,585
  -129,006
New CAPEX, $m
  0
  -2,289
  -3,332
  -4,680
  -6,370
  -8,421
  -10,838
  -13,608
  -16,706
  -20,093
  -23,720
  -27,534
  -31,479
  -35,502
  -39,554
  -43,595
  -47,592
  -51,521
  -55,366
  -59,122
  -62,788
  -66,373
  -69,888
  -73,351
  -76,780
  -80,197
  -83,625
  -87,088
  -90,610
  -94,214
  -97,923
Cash from investing activities, $m
  -5,315
  -2,672
  -3,943
  -5,625
  -7,783
  -10,471
  -13,730
  -17,584
  -22,042
  -27,100
  -32,736
  -38,922
  -45,621
  -52,792
  -60,394
  -68,390
  -76,747
  -85,435
  -94,432
  -103,725
  -113,303
  -123,166
  -133,319
  -143,771
  -154,535
  -165,630
  -177,077
  -188,903
  -201,134
  -213,799
  -226,929
Free cash flow, $m
  -23
  9,018
  6,955
  8,162
  9,780
  11,891
  14,572
  17,896
  21,930
  26,727
  32,331
  38,359
  45,658
  53,822
  62,850
  72,733
  83,456
  95,000
  107,347
  120,476
  134,367
  149,006
  164,379
  180,477
  197,297
  214,839
  233,110
  252,120
  271,887
  292,430
  313,776
Issuance/(repayment) of debt, $m
  -1
  66,613
  97,078
  136,362
  185,595
  245,346
  315,745
  396,460
  486,722
  585,395
  691,069
  802,178
  917,111
  1,034,316
  1,152,387
  1,270,121
  1,386,563
  1,501,018
  1,613,050
  1,722,466
  1,829,290
  1,933,730
  2,036,148
  2,137,024
  2,236,926
  2,336,484
  2,436,365
  2,537,259
  2,639,859
  2,744,854
  2,852,919
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
  66,613
  97,078
  136,362
  185,595
  245,346
  315,745
  396,460
  486,722
  585,395
  691,069
  802,178
  917,111
  1,034,316
  1,152,387
  1,270,121
  1,386,563
  1,501,018
  1,613,050
  1,722,466
  1,829,290
  1,933,730
  2,036,148
  2,137,024
  2,236,926
  2,336,484
  2,436,365
  2,537,259
  2,639,859
  2,744,854
  2,852,919
Total cash flow (excl. dividends), $m
  383
  75,631
  104,033
  144,524
  195,375
  257,237
  330,317
  414,356
  508,652
  612,121
  723,399
  840,536
  962,769
  1,088,138
  1,215,237
  1,342,853
  1,470,018
  1,596,018
  1,720,397
  1,842,942
  1,963,657
  2,082,736
  2,200,527
  2,317,501
  2,434,223
  2,551,323
  2,669,475
  2,789,379
  2,911,746
  3,037,283
  3,166,695
Retained Cash Flow (-), $m
  -19,140
  -28,793
  -42,002
  -58,999
  -80,300
  -106,152
  -136,612
  -171,534
  -210,588
  -253,280
  -299,001
  -347,074
  -396,802
  -447,512
  -498,597
  -549,537
  -599,917
  -649,438
  -697,910
  -745,250
  -791,469
  -836,657
  -880,970
  -924,615
  -967,839
  -1,010,914
  -1,054,129
  -1,097,783
  -1,142,174
  -1,187,601
  -1,234,358
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
 
  46,838
  62,031
  85,525
  115,075
  151,084
  193,705
  242,822
  298,064
  358,842
  424,398
  493,462
  565,967
  640,626
  716,639
  793,317
  870,102
  946,581
  1,022,487
  1,097,691
  1,172,188
  1,246,079
  1,319,557
  1,392,886
  1,466,384
  1,540,409
  1,615,346
  1,691,597
  1,769,572
  1,849,682
  1,932,338
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  44,778
  56,446
  73,729
  93,509
  115,101
  137,557
  159,748
  180,470
  198,562
  213,017
  222,882
  228,087
  228,282
  223,636
  214,594
  201,810
  186,087
  168,297
  149,317
  129,971
  110,988
  92,965
  76,360
  61,481
  48,499
  37,462
  28,313
  20,922
  15,102
  10,638
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 15.6
Price to Sales 2
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 12.2
Price to Free Cash Flow 12.2
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 $31580 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 4.6%, 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 5.6% 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 12.1%.

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 1.6%. 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 463.046 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 $64.1 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
ACGL Arch Capital G 97.82 238.20  str.buy
RNR RenaissanceRe 142.41 181.22  buy
AWH Allied World A 53.06 31.29  sell
AFG American Finan 98.38 379.97  str.buy

COMPANY NEWS

▶ 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]
▶ [$$] Chubb Operating Earnings Grow   [Jan-31-17 05:29PM  at The Wall Street Journal]
▶ [$$] Megamergers off the menu as insurers select next targets   [Jan-03-17 08:59AM  at Financial Times]
Stock chart of CB Financial statements 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.