Intrinsic value of Companhia Brasileira de Distribuicao Gru - CBD

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$19.48

  Intrinsic Value

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  Value-price divergence*

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$19.48

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

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

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 6.9

 

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
  11.40
  10.76
  10.18
  9.67
  9.20
  8.78
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
Revenue, $m
  13,107
  46,180
  51,149
  56,358
  61,805
  67,490
  73,416
  79,583
  85,999
  92,668
  99,599
  106,801
  114,286
  122,067
  130,156
  138,569
  147,323
  156,437
  165,928
  175,819
  186,130
  196,884
  208,107
  219,824
  232,062
  244,850
  258,218
  272,196
  286,819
  302,121
  318,138
Variable operating expenses, $m
 
  44,181
  48,923
  53,895
  59,093
  64,519
  70,173
  76,059
  82,182
  88,546
  95,161
  101,924
  109,067
  116,492
  124,211
  132,241
  140,595
  149,292
  158,350
  167,789
  177,629
  187,893
  198,603
  209,785
  221,464
  233,668
  246,425
  259,765
  273,720
  288,323
  303,608
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
  44,181
  48,923
  53,895
  59,093
  64,519
  70,173
  76,059
  82,182
  88,546
  95,161
  101,924
  109,067
  116,492
  124,211
  132,241
  140,595
  149,292
  158,350
  167,789
  177,629
  187,893
  198,603
  209,785
  221,464
  233,668
  246,425
  259,765
  273,720
  288,323
  303,608
Operating income, $m
  271
  1,998
  2,225
  2,463
  2,712
  2,972
  3,242
  3,524
  3,817
  4,121
  4,438
  4,878
  5,220
  5,575
  5,944
  6,329
  6,728
  7,145
  7,578
  8,030
  8,501
  8,992
  9,504
  10,039
  10,598
  11,182
  11,793
  12,431
  13,099
  13,798
  14,529
EBITDA, $m
  615
  3,172
  3,514
  3,871
  4,246
  4,636
  5,043
  5,467
  5,908
  6,366
  6,842
  7,337
  7,851
  8,385
  8,941
  9,519
  10,120
  10,746
  11,398
  12,078
  12,786
  13,525
  14,296
  15,101
  15,941
  16,820
  17,738
  18,698
  19,703
  20,754
  21,854
Interest expense (income), $m
  0
  102
  231
  367
  509
  658
  814
  976
  1,145
  1,320
  1,502
  1,692
  1,889
  2,094
  2,306
  2,528
  2,758
  2,997
  3,246
  3,506
  3,777
  4,059
  4,353
  4,660
  4,980
  5,315
  5,665
  6,030
  6,413
  6,812
  7,231
Earnings before tax, $m
  -15
  1,896
  1,994
  2,096
  2,203
  2,313
  2,428
  2,548
  2,672
  2,801
  2,936
  3,186
  3,331
  3,481
  3,638
  3,801
  3,971
  4,147
  4,332
  4,524
  4,724
  4,933
  5,152
  5,380
  5,618
  5,868
  6,128
  6,401
  6,687
  6,986
  7,299
Tax expense, $m
  7
  512
  538
  566
  595
  625
  656
  688
  722
  756
  793
  860
  899
  940
  982
  1,026
  1,072
  1,120
  1,170
  1,221
  1,275
  1,332
  1,391
  1,453
  1,517
  1,584
  1,655
  1,728
  1,805
  1,886
  1,971
Net income, $m
  -152
  1,384
  1,456
  1,530
  1,608
  1,689
  1,773
  1,860
  1,951
  2,045
  2,143
  2,326
  2,431
  2,541
  2,656
  2,775
  2,898
  3,028
  3,162
  3,302
  3,449
  3,601
  3,761
  3,927
  4,101
  4,283
  4,474
  4,673
  4,881
  5,099
  5,328

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
  44,661
  49,467
  54,505
  59,773
  65,271
  71,001
  76,966
  83,171
  89,621
  96,324
  103,290
  110,529
  118,053
  125,876
  134,013
  142,479
  151,293
  160,472
  170,037
  180,009
  190,410
  201,264
  212,596
  224,432
  236,799
  249,727
  263,246
  277,388
  292,187
  307,677
Adjusted assets (=assets-cash), $m
  12,680
  44,661
  49,467
  54,505
  59,773
  65,271
  71,001
  76,966
  83,171
  89,621
  96,324
  103,290
  110,529
  118,053
  125,876
  134,013
  142,479
  151,293
  160,472
  170,037
  180,009
  190,410
  201,264
  212,596
  224,432
  236,799
  249,727
  263,246
  277,388
  292,187
  307,677
Revenue / Adjusted assets
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
  1.034
Average production assets, $m
  3,894
  13,715
  15,191
  16,738
  18,356
  20,045
  21,804
  23,636
  25,542
  27,522
  29,581
  31,720
  33,943
  36,254
  38,656
  41,155
  43,755
  46,462
  49,281
  52,218
  55,281
  58,475
  61,808
  65,288
  68,923
  72,721
  76,691
  80,842
  85,185
  89,730
  94,487
Working capital, $m
  1,286
  2,124
  2,353
  2,592
  2,843
  3,105
  3,377
  3,661
  3,956
  4,263
  4,582
  4,913
  5,257
  5,615
  5,987
  6,374
  6,777
  7,196
  7,633
  8,088
  8,562
  9,057
  9,573
  10,112
  10,675
  11,263
  11,878
  12,521
  13,194
  13,898
  14,634
Total debt, $m
  1,856
  6,598
  10,481
  14,552
  18,808
  23,251
  27,881
  32,701
  37,714
  42,926
  48,342
  53,970
  59,819
  65,899
  72,220
  78,794
  85,635
  92,757
  100,174
  107,902
  115,960
  124,364
  133,134
  142,290
  151,853
  161,846
  172,291
  183,215
  194,642
  206,599
  219,115
Total liabilities, $m
  11,179
  36,086
  39,969
  44,040
  48,296
  52,739
  57,369
  62,189
  67,202
  72,414
  77,830
  83,458
  89,307
  95,387
  101,708
  108,282
  115,123
  122,245
  129,662
  137,390
  145,448
  153,852
  162,622
  171,778
  181,341
  191,334
  201,779
  212,703
  224,130
  236,087
  248,603
Total equity, $m
  3,117
  8,575
  9,498
  10,465
  11,476
  12,532
  13,632
  14,778
  15,969
  17,207
  18,494
  19,832
  21,221
  22,666
  24,168
  25,730
  27,356
  29,048
  30,811
  32,647
  34,562
  36,559
  38,643
  40,818
  43,091
  45,465
  47,948
  50,543
  53,259
  56,100
  59,074
Total liabilities and equity, $m
  14,296
  44,661
  49,467
  54,505
  59,772
  65,271
  71,001
  76,967
  83,171
  89,621
  96,324
  103,290
  110,528
  118,053
  125,876
  134,012
  142,479
  151,293
  160,473
  170,037
  180,010
  190,411
  201,265
  212,596
  224,432
  236,799
  249,727
  263,246
  277,389
  292,187
  307,677
Debt-to-equity ratio
  0.595
  0.770
  1.100
  1.390
  1.640
  1.860
  2.050
  2.210
  2.360
  2.490
  2.610
  2.720
  2.820
  2.910
  2.990
  3.060
  3.130
  3.190
  3.250
  3.310
  3.360
  3.400
  3.450
  3.490
  3.520
  3.560
  3.590
  3.620
  3.650
  3.680
  3.710
Adjusted equity ratio
  0.118
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192
  0.192

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -152
  1,384
  1,456
  1,530
  1,608
  1,689
  1,773
  1,860
  1,951
  2,045
  2,143
  2,326
  2,431
  2,541
  2,656
  2,775
  2,898
  3,028
  3,162
  3,302
  3,449
  3,601
  3,761
  3,927
  4,101
  4,283
  4,474
  4,673
  4,881
  5,099
  5,328
Depreciation, amort., depletion, $m
  344
  1,174
  1,288
  1,408
  1,534
  1,665
  1,801
  1,943
  2,091
  2,244
  2,404
  2,459
  2,631
  2,810
  2,997
  3,190
  3,392
  3,602
  3,820
  4,048
  4,285
  4,533
  4,791
  5,061
  5,343
  5,637
  5,945
  6,267
  6,604
  6,956
  7,325
Funds from operations, $m
  -1,643
  2,558
  2,744
  2,939
  3,142
  3,353
  3,574
  3,803
  4,041
  4,289
  4,547
  4,784
  5,063
  5,352
  5,652
  5,965
  6,290
  6,629
  6,982
  7,350
  7,734
  8,134
  8,552
  8,988
  9,444
  9,921
  10,419
  10,940
  11,485
  12,055
  12,652
Change in working capital, $m
  -1,231
  217
  229
  240
  251
  262
  273
  284
  295
  307
  319
  331
  344
  358
  372
  387
  403
  419
  437
  455
  474
  495
  516
  539
  563
  588
  615
  643
  673
  704
  737
Cash from operations, $m
  -412
  8
  2,516
  2,699
  2,891
  3,092
  3,301
  3,519
  3,746
  3,983
  4,228
  4,453
  4,718
  4,994
  5,280
  5,578
  5,888
  6,210
  6,546
  6,895
  7,260
  7,639
  8,036
  8,449
  8,881
  9,332
  9,804
  10,297
  10,812
  11,351
  11,916
Maintenance CAPEX, $m
  0
  -955
  -1,063
  -1,178
  -1,298
  -1,423
  -1,554
  -1,690
  -1,832
  -1,980
  -2,134
  -2,293
  -2,459
  -2,631
  -2,810
  -2,997
  -3,190
  -3,392
  -3,602
  -3,820
  -4,048
  -4,285
  -4,533
  -4,791
  -5,061
  -5,343
  -5,637
  -5,945
  -6,267
  -6,604
  -6,956
New CAPEX, $m
  -488
  -1,400
  -1,476
  -1,547
  -1,618
  -1,689
  -1,760
  -1,832
  -1,905
  -1,981
  -2,059
  -2,139
  -2,223
  -2,311
  -2,402
  -2,499
  -2,600
  -2,707
  -2,819
  -2,937
  -3,062
  -3,194
  -3,333
  -3,480
  -3,635
  -3,798
  -3,970
  -4,152
  -4,343
  -4,545
  -4,757
Cash from investing activities, $m
  -639
  -2,355
  -2,539
  -2,725
  -2,916
  -3,112
  -3,314
  -3,522
  -3,737
  -3,961
  -4,193
  -4,432
  -4,682
  -4,942
  -5,212
  -5,496
  -5,790
  -6,099
  -6,421
  -6,757
  -7,110
  -7,479
  -7,866
  -8,271
  -8,696
  -9,141
  -9,607
  -10,097
  -10,610
  -11,149
  -11,713
Free cash flow, $m
  -1,051
  -2,346
  -23
  -26
  -24
  -20
  -12
  -3
  9
  22
  36
  21
  36
  52
  67
  83
  97
  111
  125
  138
  149
  160
  170
  178
  185
  192
  196
  200
  202
  203
  203
Issuance/(repayment) of debt, $m
  491
  3,686
  3,883
  4,070
  4,257
  4,443
  4,630
  4,820
  5,013
  5,212
  5,416
  5,628
  5,849
  6,080
  6,321
  6,575
  6,841
  7,121
  7,417
  7,729
  8,057
  8,404
  8,770
  9,156
  9,563
  9,993
  10,446
  10,923
  11,427
  11,957
  12,516
Issuance/(repurchase) of shares, $m
  2
  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  
  467
  3,686
  3,883
  4,070
  4,257
  4,443
  4,630
  4,820
  5,013
  5,212
  5,416
  5,628
  5,849
  6,080
  6,321
  6,575
  6,841
  7,121
  7,417
  7,729
  8,057
  8,404
  8,770
  9,156
  9,563
  9,993
  10,446
  10,923
  11,427
  11,957
  12,516
Total cash flow (excl. dividends), $m
  -591
  1,340
  3,860
  4,045
  4,232
  4,423
  4,618
  4,817
  5,022
  5,233
  5,452
  5,649
  5,885
  6,131
  6,388
  6,657
  6,938
  7,233
  7,542
  7,866
  8,207
  8,564
  8,940
  9,334
  9,749
  10,184
  10,642
  11,123
  11,629
  12,160
  12,719
Retained Cash Flow (-), $m
  157
  -870
  -923
  -967
  -1,011
  -1,056
  -1,100
  -1,145
  -1,191
  -1,238
  -1,287
  -1,337
  -1,390
  -1,445
  -1,502
  -1,562
  -1,626
  -1,692
  -1,762
  -1,837
  -1,915
  -1,997
  -2,084
  -2,176
  -2,272
  -2,375
  -2,482
  -2,596
  -2,715
  -2,841
  -2,974
Prev. year cash balance distribution, $m
 
  2,155
  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
 
  2,625
  2,937
  3,077
  3,221
  3,367
  3,517
  3,672
  3,831
  3,995
  4,165
  4,312
  4,495
  4,687
  4,886
  5,095
  5,313
  5,541
  5,779
  6,030
  6,292
  6,567
  6,856
  7,158
  7,476
  7,810
  8,160
  8,528
  8,914
  9,319
  9,745
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
 
  2,517
  2,689
  2,678
  2,652
  2,610
  2,553
  2,481
  2,394
  2,295
  2,184
  2,048
  1,918
  1,782
  1,640
  1,496
  1,350
  1,206
  1,064
  928
  800
  679
  569
  469
  381
  304
  238
  183
  138
  102
  73
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

Companhia Brasileira de Distribuição engages in the retail of food, clothing, home appliances, electronics, and other products through its chain of hypermarkets, supermarkets, specialized stores, and department stores primarily in Brazil. The company operates through four segments: Food Retail, Cash and Carry, Home Appliances, and E-Commerce. It sells non-perishable food products, beverages, fruits, vegetables, meat, bread, cold cuts, dairy products, cleaning products, disposable products, and personal care products; non-food products, which include clothing items, baby items, shoes and accessories, household articles, books, magazines, CDs and DVDs, stationery, handcraft, toys, sports and camping gear, furniture, mattresses, pet products, and gardening products; and electronic products, such as personal computers, software, computer accessories, and sound and image systems. The company also provides medications and cosmetics at its drugstores; and non-food products at gas stations. In addition, it is involved in e-commerce operations through the Websites, including Extra.com.br, PontoFrio.com.br, CasasBahia.com.br, Barateiro.com.br, PartiuViagens.com.br, and Cdiscount.com primarily in France; wholesale activities, such as B2B; E-Hub operations; and the rental of commercial spaces. The company operates its stores primarily under the Pão de Açúcar, Barateiro, Extra Supermercado, Minuto Pão de Açúcar, Pontofrio, Extra Hiper, Extra Super, Minimercado Extra, Assaí, Ponto Frio, Casas Bahia, and Conviva names. As of December 31, 2015, it operated 1,941 stores, 83 gas stations, and 157 drugstores in 20 Brazilian states and the Federal District. Companhia Brasileira de Distribuição was founded in 1948 and is headquartered in São Paulo, Brazil.

FINANCIAL RATIOS  of  Companhia Brasileira de Distribuicao Gru (CBD)

Valuation Ratios
P/E Ratio -34.1
Price to Sales 0.4
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow -12.6
Price to Free Cash Flow -5.8
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 $41454 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 11.4% 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 4.3%, 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 95.7%.

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 3.5% 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%.

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 29.7%.

Life of production assets of 12.9 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 4.6%. 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 - $9860 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 355.185 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 $6.9 billion.


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