Intrinsic value of Companhia Brasileira de Distribuicao Gru - CBD

Previous Close

$20.52

  Intrinsic Value

$48.85

stock screener

  Rating & Target

str. buy

+138%

Previous close

$20.52

 
Intrinsic value

$48.85

 
Up/down potential

+138%

 
Rating

str. buy

We calculate the intrinsic value of CBD stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.44
  35.10
  32.09
  29.38
  26.94
  24.75
  22.77
  21.00
  19.40
  17.96
  16.66
  15.50
  14.45
  13.50
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.96
  7.67
  7.40
  7.16
  6.94
  6.75
  6.58
  6.42
Revenue, $m
  13,107
  17,201
  22,721
  29,396
  37,316
  46,552
  57,153
  69,154
  82,567
  97,394
  113,621
  131,227
  150,183
  170,460
  192,024
  214,848
  238,906
  264,176
  290,646
  318,309
  347,167
  377,230
  408,516
  441,051
  474,869
  510,014
  546,536
  584,492
  623,947
  664,973
  707,649
Variable operating expenses, $m
 
  16,475
  21,743
  28,114
  35,673
  44,488
  54,606
  66,059
  78,860
  93,011
  108,498
  125,242
  143,334
  162,686
  183,268
  205,051
  228,011
  252,129
  277,392
  303,794
  331,336
  360,028
  389,887
  420,938
  453,214
  486,756
  521,612
  557,837
  595,493
  634,648
  675,378
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
  12,836
  16,475
  21,743
  28,114
  35,673
  44,488
  54,606
  66,059
  78,860
  93,011
  108,498
  125,242
  143,334
  162,686
  183,268
  205,051
  228,011
  252,129
  277,392
  303,794
  331,336
  360,028
  389,887
  420,938
  453,214
  486,756
  521,612
  557,837
  595,493
  634,648
  675,378
Operating income, $m
  271
  726
  978
  1,282
  1,643
  2,064
  2,548
  3,095
  3,707
  4,383
  5,123
  5,984
  6,849
  7,773
  8,757
  9,798
  10,895
  12,047
  13,254
  14,516
  15,832
  17,203
  18,629
  20,113
  21,655
  23,258
  24,923
  26,654
  28,454
  30,324
  32,271
EBITDA, $m
  615
  1,304
  1,722
  2,228
  2,829
  3,529
  4,332
  5,242
  6,259
  7,383
  8,613
  9,947
  11,384
  12,921
  14,556
  16,286
  18,110
  20,025
  22,032
  24,129
  26,316
  28,595
  30,967
  33,433
  35,996
  38,660
  41,429
  44,306
  47,297
  50,407
  53,642
Interest expense (income), $m
  0
  244
  711
  1,288
  1,986
  2,814
  3,780
  4,889
  6,144
  7,546
  9,097
  10,794
  12,635
  14,617
  16,737
  18,993
  21,379
  23,895
  26,538
  29,306
  32,198
  35,216
  38,360
  41,632
  45,034
  48,570
  52,246
  56,065
  60,034
  64,160
  68,450
Earnings before tax, $m
  -15
  481
  267
  -6
  -343
  -750
  -1,232
  -1,794
  -2,437
  -3,163
  -3,974
  -4,809
  -5,786
  -6,844
  -7,981
  -9,195
  -10,485
  -11,848
  -13,283
  -14,790
  -16,367
  -18,014
  -19,731
  -21,519
  -23,379
  -25,312
  -27,322
  -29,410
  -31,580
  -33,835
  -36,179
Tax expense, $m
  7
  130
  72
  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
Net income, $m
  -152
  351
  195
  -6
  -343
  -750
  -1,232
  -1,794
  -2,437
  -3,163
  -3,974
  -4,809
  -5,786
  -6,844
  -7,981
  -9,195
  -10,485
  -11,848
  -13,283
  -14,790
  -16,367
  -18,014
  -19,731
  -21,519
  -23,379
  -25,312
  -27,322
  -29,410
  -31,580
  -33,835
  -36,179

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,616
  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
  14,296
  18,758
  24,777
  32,057
  40,694
  50,765
  62,326
  75,413
  90,040
  106,209
  123,905
  143,104
  163,777
  185,888
  209,405
  234,295
  260,530
  288,087
  316,953
  347,120
  378,590
  411,374
  445,492
  480,971
  517,851
  556,177
  596,004
  637,395
  680,422
  725,161
  771,700
Adjusted assets (=assets-cash), $m
  12,680
  18,758
  24,777
  32,057
  40,694
  50,765
  62,326
  75,413
  90,040
  106,209
  123,905
  143,104
  163,777
  185,888
  209,405
  234,295
  260,530
  288,087
  316,953
  347,120
  378,590
  411,374
  445,492
  480,971
  517,851
  556,177
  596,004
  637,395
  680,422
  725,161
  771,700
Revenue / Adjusted assets
  1.034
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
  0.917
Average production assets, $m
  3,894
  5,195
  6,862
  8,878
  11,270
  14,059
  17,260
  20,884
  24,935
  29,413
  34,313
  39,630
  45,355
  51,479
  57,991
  64,884
  72,150
  79,781
  87,775
  96,129
  104,845
  113,924
  123,372
  133,197
  143,411
  154,024
  165,054
  176,516
  188,432
  200,822
  213,710
Working capital, $m
  1,286
  -1,256
  -1,659
  -2,146
  -2,724
  -3,398
  -4,172
  -5,048
  -6,027
  -7,110
  -8,294
  -9,580
  -10,963
  -12,444
  -14,018
  -15,684
  -17,440
  -19,285
  -21,217
  -23,237
  -25,343
  -27,538
  -29,822
  -32,197
  -34,665
  -37,231
  -39,897
  -42,668
  -45,548
  -48,543
  -51,658
Total debt, $m
  1,856
  5,344
  9,684
  14,933
  21,160
  28,422
  36,757
  46,192
  56,739
  68,397
  81,155
  94,998
  109,903
  125,845
  142,801
  160,746
  179,662
  199,531
  220,343
  242,094
  264,784
  288,421
  313,019
  338,600
  365,190
  392,824
  421,539
  451,382
  482,404
  514,661
  548,216
Total liabilities, $m
  11,179
  13,524
  17,864
  23,113
  29,340
  36,602
  44,937
  54,373
  64,919
  76,577
  89,335
  103,178
  118,083
  134,026
  150,981
  168,927
  187,842
  207,711
  228,523
  250,274
  272,964
  296,601
  321,200
  346,780
  373,371
  401,004
  429,719
  459,562
  490,584
  522,841
  556,396
Total equity, $m
  3,117
  5,233
  6,913
  8,944
  11,354
  14,164
  17,389
  21,040
  25,121
  29,632
  34,569
  39,926
  45,694
  51,863
  58,424
  65,368
  72,688
  80,376
  88,430
  96,847
  105,627
  114,773
  124,292
  134,191
  144,480
  155,173
  166,285
  177,833
  189,838
  202,320
  215,304
Total liabilities and equity, $m
  14,296
  18,757
  24,777
  32,057
  40,694
  50,766
  62,326
  75,413
  90,040
  106,209
  123,904
  143,104
  163,777
  185,889
  209,405
  234,295
  260,530
  288,087
  316,953
  347,121
  378,591
  411,374
  445,492
  480,971
  517,851
  556,177
  596,004
  637,395
  680,422
  725,161
  771,700
Debt-to-equity ratio
  0.595
  1.020
  1.400
  1.670
  1.860
  2.010
  2.110
  2.200
  2.260
  2.310
  2.350
  2.380
  2.410
  2.430
  2.440
  2.460
  2.470
  2.480
  2.490
  2.500
  2.510
  2.510
  2.520
  2.520
  2.530
  2.530
  2.540
  2.540
  2.540
  2.540
  2.550
Adjusted equity ratio
  0.118
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -152
  351
  195
  -6
  -343
  -750
  -1,232
  -1,794
  -2,437
  -3,163
  -3,974
  -4,809
  -5,786
  -6,844
  -7,981
  -9,195
  -10,485
  -11,848
  -13,283
  -14,790
  -16,367
  -18,014
  -19,731
  -21,519
  -23,379
  -25,312
  -27,322
  -29,410
  -31,580
  -33,835
  -36,179
Depreciation, amort., depletion, $m
  344
  578
  745
  946
  1,186
  1,464
  1,785
  2,147
  2,552
  3,000
  3,490
  3,963
  4,536
  5,148
  5,799
  6,488
  7,215
  7,978
  8,778
  9,613
  10,484
  11,392
  12,337
  13,320
  14,341
  15,402
  16,505
  17,652
  18,843
  20,082
  21,371
Funds from operations, $m
  -1,643
  929
  939
  940
  843
  714
  552
  353
  115
  -164
  -484
  -846
  -1,250
  -1,696
  -2,181
  -2,706
  -3,270
  -3,870
  -4,506
  -5,177
  -5,882
  -6,621
  -7,393
  -8,199
  -9,038
  -9,910
  -10,817
  -11,759
  -12,737
  -13,753
  -14,808
Change in working capital, $m
  -1,231
  -326
  -403
  -487
  -578
  -674
  -774
  -876
  -979
  -1,082
  -1,185
  -1,285
  -1,384
  -1,480
  -1,574
  -1,666
  -1,756
  -1,845
  -1,932
  -2,019
  -2,107
  -2,195
  -2,284
  -2,375
  -2,469
  -2,566
  -2,666
  -2,771
  -2,880
  -2,995
  -3,115
Cash from operations, $m
  -412
  1,256
  1,342
  1,428
  1,421
  1,389
  1,326
  1,229
  1,094
  919
  701
  439
  133
  -216
  -607
  -1,040
  -1,513
  -2,025
  -2,574
  -3,158
  -3,776
  -4,427
  -5,110
  -5,824
  -6,569
  -7,344
  -8,151
  -8,988
  -9,857
  -10,758
  -11,693
Maintenance CAPEX, $m
  0
  -385
  -519
  -686
  -888
  -1,127
  -1,406
  -1,726
  -2,088
  -2,494
  -2,941
  -3,431
  -3,963
  -4,536
  -5,148
  -5,799
  -6,488
  -7,215
  -7,978
  -8,778
  -9,613
  -10,484
  -11,392
  -12,337
  -13,320
  -14,341
  -15,402
  -16,505
  -17,652
  -18,843
  -20,082
New CAPEX, $m
  -488
  -1,349
  -1,667
  -2,016
  -2,392
  -2,789
  -3,202
  -3,624
  -4,051
  -4,478
  -4,901
  -5,317
  -5,725
  -6,123
  -6,513
  -6,893
  -7,265
  -7,632
  -7,994
  -8,354
  -8,715
  -9,079
  -9,448
  -9,826
  -10,213
  -10,614
  -11,029
  -11,463
  -11,915
  -12,390
  -12,888
Cash from investing activities, $m
  -639
  -1,734
  -2,186
  -2,702
  -3,280
  -3,916
  -4,608
  -5,350
  -6,139
  -6,972
  -7,842
  -8,748
  -9,688
  -10,659
  -11,661
  -12,692
  -13,753
  -14,847
  -15,972
  -17,132
  -18,328
  -19,563
  -20,840
  -22,163
  -23,533
  -24,955
  -26,431
  -27,968
  -29,567
  -31,233
  -32,970
Free cash flow, $m
  -1,051
  -478
  -844
  -1,275
  -1,859
  -2,527
  -3,281
  -4,121
  -5,045
  -6,052
  -7,141
  -8,309
  -9,555
  -10,875
  -12,268
  -13,732
  -15,267
  -16,872
  -18,546
  -20,289
  -22,104
  -23,990
  -25,950
  -27,986
  -30,102
  -32,299
  -34,583
  -36,956
  -39,424
  -41,991
  -44,663
Issuance/(repayment) of debt, $m
  491
  3,506
  4,340
  5,249
  6,227
  7,261
  8,336
  9,435
  10,547
  11,658
  12,759
  13,843
  14,905
  15,943
  16,956
  17,945
  18,915
  19,869
  20,812
  21,750
  22,690
  23,637
  24,599
  25,581
  26,590
  27,633
  28,715
  29,843
  31,022
  32,257
  33,555
Issuance/(repurchase) of shares, $m
  2
  1,013
  1,485
  2,037
  2,753
  3,560
  4,458
  5,445
  6,518
  7,675
  8,911
  10,166
  11,554
  13,013
  14,542
  16,139
  17,804
  19,537
  21,337
  23,207
  25,147
  27,160
  29,249
  31,417
  33,668
  36,005
  38,434
  40,959
  43,585
  46,318
  49,164
Cash from financing (excl. dividends), $m  
  467
  4,519
  5,825
  7,286
  8,980
  10,821
  12,794
  14,880
  17,065
  19,333
  21,670
  24,009
  26,459
  28,956
  31,498
  34,084
  36,719
  39,406
  42,149
  44,957
  47,837
  50,797
  53,848
  56,998
  60,258
  63,638
  67,149
  70,802
  74,607
  78,575
  82,719
Total cash flow (excl. dividends), $m
  -591
  4,041
  4,981
  6,011
  7,121
  8,294
  9,512
  10,759
  12,020
  13,280
  14,529
  15,699
  16,904
  18,081
  19,230
  20,352
  21,452
  22,534
  23,604
  24,668
  25,733
  26,807
  27,898
  29,012
  30,157
  31,339
  32,567
  33,846
  35,182
  36,584
  38,055
Retained Cash Flow (-), $m
  157
  -1,364
  -1,679
  -2,037
  -2,753
  -3,560
  -4,458
  -5,445
  -6,518
  -7,675
  -8,911
  -10,166
  -11,554
  -13,013
  -14,542
  -16,139
  -17,804
  -19,537
  -21,337
  -23,207
  -25,147
  -27,160
  -29,249
  -31,417
  -33,668
  -36,005
  -38,434
  -40,959
  -43,585
  -46,318
  -49,164
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
 
  13
  17
  23
  29
  37
  47
  57
  69
  83
  97
  114
  131
  150
  170
  192
  215
  239
  264
  291
  318
  347
  377
  409
  441
  475
  510
  547
  584
  624
  665
Cash available for distribution, $m
 
  2,677
  3,301
  3,974
  4,368
  4,734
  5,054
  5,314
  5,502
  5,605
  5,617
  5,533
  5,350
  5,068
  4,688
  4,213
  3,648
  2,997
  2,267
  1,461
  586
  -353
  -1,352
  -2,406
  -3,511
  -4,666
  -5,867
  -7,113
  -8,402
  -9,734
  -11,109
Discount rate, %
 
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
 
  2,528
  2,927
  3,290
  3,354
  3,348
  3,269
  3,120
  2,907
  2,642
  2,340
  2,017
  1,688
  1,368
  1,071
  803
  573
  382
  231
  117
  36
  -17
  -48
  -62
  -64
  -60
  -51
  -42
  -32
  -23
  -16
Current shareholders' claim on cash, %
  100
  84.3
  70.1
  58.0
  47.6
  38.9
  31.8
  26.0
  21.3
  17.5
  14.4
  11.9
  9.9
  8.2
  6.8
  5.7
  4.8
  4.0
  3.4
  2.9
  2.4
  2.0
  1.7
  1.5
  1.2
  1.1
  0.9
  0.8
  0.6
  0.6
  0.5

Companhia Brasileira de Distribuicao, directly or through its subsidiaries, is engaged in the retail of food, clothing, home appliances, electronics and other items through its chain of hypermarkets, supermarkets, specialized stores and department stores principally under the trade names Pao de Acucar, Minuto Pao de Acucar, Extra Hiper, Extra Super, Minimercado Extra, Assai an the neighborhood shopping mall brand Conviva. The Company's segments include Retail, and Cash and carry segment. The Company's Retail segment includes the banners Pao de Acucar, Minuto Pao de Acucar, Extra Hiper, Extra Supermercado, Minimercado Extra, Posto Extra, Drogaria Extra and GPA Malls & Properties. Its Cash & Carry segment includes the brand Assai. The Company is engaged in operations of retail stores located in approximately 20 states and the Federal District of Brazil.

FINANCIAL RATIOS  of  Companhia Brasileira de Distribuicao Gru (CBD)

Valuation Ratios
P/E Ratio -35.9
Price to Sales 0.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow -13.2
Price to Free Cash Flow -6.1
Growth Rates
Sales Growth Rate 11.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -22.3%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio 2
Current Ratio 0.7
LT Debt to Equity 29.5%
Total Debt to Equity 59.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -1%
Ret/ On Assets - 3 Yr. Avg. 0.8%
Return On Total Capital -2.8%
Ret/ On T. Cap. - 3 Yr. Avg. 1.6%
Return On Equity -4.8%
Return On Equity - 3 Yr. Avg. 3.3%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 23%
Gross Margin - 3 Yr. Avg. 24.3%
EBITDA Margin 2.5%
EBITDA Margin - 3 Yr. Avg. 4.2%
Operating Margin 2.1%
Oper. Margin - 3 Yr. Avg. 4.1%
Pre-Tax Margin -0.1%
Pre-Tax Margin - 3 Yr. Avg. 1.9%
Net Profit Margin -1.2%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate -46.7%
Eff/ Tax Rate - 3 Yr. Avg. 4.1%
Payout Ratio -0.7%

CBD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CBD stock intrinsic value calculation we used $12732 million for the last fiscal year's total revenue generated by Companhia Brasileira de Distribuicao Gru. The default revenue input number comes from 2016 income statement of Companhia Brasileira de Distribuicao Gru. 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 CBD stock valuation model: a) initial revenue growth rate of 35.1% 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 5.9%, whose default value for CBD is calculated based on our internal credit rating of Companhia Brasileira de Distribuicao Gru, 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 Companhia Brasileira de Distribuicao Gru.
    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 CBD stock the variable cost ratio is equal to 95.9%.

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 CBD 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 13.3% for Companhia Brasileira de Distribuicao Gru.

Corporate tax rate of 27% is the nominal tax rate for Companhia Brasileira de Distribuicao Gru. 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 CBD stock is equal to 0.1%.

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 CBD are equal to 30.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Companhia Brasileira de Distribuicao Gru 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 CBD is equal to -7.3%. 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 - $3869 million for Companhia Brasileira de Distribuicao Gru - 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 265 million for Companhia Brasileira de Distribuicao Gru 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 Companhia Brasileira de Distribuicao Gru at the current share price and the inputted number of shares is $5.4 billion.

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Financial statements of CBD
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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