Intrinsic value of Carlyle Group - CG

Previous Close

$24.35

  Intrinsic Value

$149.82

stock screener

  Rating & Target

str. buy

+515%

  Value-price divergence*

-121%

Previous close

$24.35

 
Intrinsic value

$149.82

 
Up/down potential

+515%

 
Rating

str. buy

 
Value-price divergence*

-121%

Our model is not good at valuating stocks of financial companies, such as CG.

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

We calculate the intrinsic value of CG 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 8.1

 

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, %
  -40.92
  54.30
  49.37
  44.93
  40.94
  37.35
  34.11
  31.20
  28.58
  26.22
  24.10
  22.19
  20.47
  18.92
  17.53
  16.28
  15.15
  14.14
  13.22
  12.40
  11.66
  10.99
  10.39
  9.85
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
Revenue, $m
  2,287
  3,529
  5,271
  7,639
  10,767
  14,788
  19,832
  26,020
  33,457
  42,230
  52,407
  64,036
  77,145
  91,744
  107,828
  125,380
  144,376
  164,784
  186,571
  209,705
  234,156
  259,899
  286,914
  315,189
  344,720
  375,512
  407,578
  440,940
  475,627
  511,680
  549,146
Variable operating expenses, $m
 
  2,731
  4,078
  5,911
  8,330
  11,440
  15,343
  20,129
  25,882
  32,668
  40,541
  49,536
  59,676
  70,969
  83,411
  96,989
  111,684
  127,471
  144,324
  162,220
  181,135
  201,048
  221,946
  243,818
  266,663
  290,482
  315,287
  341,095
  367,928
  395,817
  424,799
Fixed operating expenses, $m
 
  496
  509
  521
  534
  548
  561
  575
  590
  604
  620
  635
  651
  667
  684
  701
  719
  736
  755
  774
  793
  813
  833
  854
  875
  897
  920
  943
  966
  990
  1,015
Total operating expenses, $m
  2,242
  3,227
  4,587
  6,432
  8,864
  11,988
  15,904
  20,704
  26,472
  33,272
  41,161
  50,171
  60,327
  71,636
  84,095
  97,690
  112,403
  128,207
  145,079
  162,994
  181,928
  201,861
  222,779
  244,672
  267,538
  291,379
  316,207
  342,038
  368,894
  396,807
  425,814
Operating income, $m
  45
  302
  684
  1,208
  1,903
  2,800
  3,929
  5,316
  6,985
  8,957
  11,246
  13,865
  16,818
  20,107
  23,732
  27,690
  31,974
  36,577
  41,492
  46,711
  52,229
  58,038
  64,135
  70,516
  77,182
  84,133
  91,371
  98,902
  106,733
  114,873
  123,332
EBITDA, $m
  117
  323
  715
  1,251
  1,964
  2,884
  4,041
  5,462
  7,174
  9,194
  11,541
  14,224
  17,250
  20,621
  24,336
  28,392
  32,782
  37,499
  42,537
  47,886
  53,540
  59,493
  65,741
  72,281
  79,112
  86,236
  93,654
  101,372
  109,397
  117,738
  126,407
Interest expense (income), $m
  59
  182
  259
  464
  742
  1,110
  1,582
  2,175
  2,902
  3,777
  4,808
  6,004
  7,371
  8,912
  10,627
  12,518
  14,581
  16,814
  19,212
  21,773
  24,492
  27,366
  30,392
  33,567
  36,891
  40,362
  43,981
  47,750
  51,671
  55,748
  59,986
Earnings before tax, $m
  45
  120
  425
  744
  1,161
  1,690
  2,346
  3,140
  4,083
  5,180
  6,439
  7,861
  9,447
  11,195
  13,105
  15,172
  17,393
  19,763
  22,279
  24,938
  27,736
  30,672
  33,743
  36,949
  40,292
  43,771
  47,390
  51,153
  55,062
  59,125
  63,346
Tax expense, $m
  30
  32
  115
  201
  313
  456
  633
  848
  1,102
  1,399
  1,738
  2,123
  2,551
  3,023
  3,538
  4,096
  4,696
  5,336
  6,015
  6,733
  7,489
  8,281
  9,111
  9,976
  10,879
  11,818
  12,795
  13,811
  14,867
  15,964
  17,103
Net income, $m
  6
  87
  310
  543
  847
  1,234
  1,713
  2,293
  2,980
  3,782
  4,700
  5,739
  6,896
  8,173
  9,567
  11,075
  12,697
  14,427
  16,264
  18,205
  20,248
  22,390
  24,632
  26,973
  29,413
  31,953
  34,595
  37,341
  40,196
  43,161
  46,243

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,432
  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
  9,973
  13,167
  19,668
  28,505
  40,176
  55,179
  74,002
  97,090
  124,839
  157,574
  195,549
  238,941
  287,854
  342,327
  402,342
  467,836
  538,715
  614,864
  696,161
  782,483
  873,718
  969,772
  1,070,573
  1,176,078
  1,286,269
  1,401,165
  1,520,814
  1,645,297
  1,774,729
  1,909,256
  2,049,053
Adjusted assets (=assets-cash), $m
  8,541
  13,167
  19,668
  28,505
  40,176
  55,179
  74,002
  97,090
  124,839
  157,574
  195,549
  238,941
  287,854
  342,327
  402,342
  467,836
  538,715
  614,864
  696,161
  782,483
  873,718
  969,772
  1,070,573
  1,176,078
  1,286,269
  1,401,165
  1,520,814
  1,645,297
  1,774,729
  1,909,256
  2,049,053
Revenue / Adjusted assets
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
  0.268
Average production assets, $m
  65
  99
  148
  214
  301
  414
  555
  729
  937
  1,182
  1,467
  1,793
  2,160
  2,569
  3,019
  3,511
  4,043
  4,614
  5,224
  5,872
  6,556
  7,277
  8,034
  8,825
  9,652
  10,514
  11,412
  12,346
  13,318
  14,327
  15,376
Working capital, $m
  0
  -2,209
  -3,300
  -4,782
  -6,740
  -9,257
  -12,415
  -16,289
  -20,944
  -26,436
  -32,807
  -40,087
  -48,293
  -57,432
  -67,500
  -78,488
  -90,379
  -103,155
  -116,794
  -131,276
  -146,582
  -162,697
  -179,608
  -197,308
  -215,795
  -235,071
  -255,144
  -276,028
  -297,743
  -320,312
  -343,766
Total debt, $m
  5,211
  7,397
  13,247
  21,201
  31,704
  45,207
  62,147
  82,927
  107,901
  137,362
  171,540
  210,593
  254,615
  303,640
  357,653
  416,598
  480,390
  548,924
  622,091
  699,780
  781,892
  868,341
  959,062
  1,054,016
  1,153,188
  1,256,595
  1,364,279
  1,476,314
  1,592,802
  1,713,876
  1,839,694
Total liabilities, $m
  9,665
  11,851
  17,701
  25,655
  36,158
  49,661
  66,601
  87,381
  112,355
  141,816
  175,994
  215,047
  259,069
  308,094
  362,107
  421,052
  484,844
  553,378
  626,545
  704,234
  786,346
  872,795
  963,516
  1,058,470
  1,157,642
  1,261,049
  1,368,733
  1,480,768
  1,597,256
  1,718,330
  1,844,148
Total equity, $m
  308
  1,317
  1,967
  2,851
  4,018
  5,518
  7,400
  9,709
  12,484
  15,757
  19,555
  23,894
  28,785
  34,233
  40,234
  46,784
  53,872
  61,486
  69,616
  78,248
  87,372
  96,977
  107,057
  117,608
  128,627
  140,117
  152,081
  164,530
  177,473
  190,926
  204,905
Total liabilities and equity, $m
  9,973
  13,168
  19,668
  28,506
  40,176
  55,179
  74,001
  97,090
  124,839
  157,573
  195,549
  238,941
  287,854
  342,327
  402,341
  467,836
  538,716
  614,864
  696,161
  782,482
  873,718
  969,772
  1,070,573
  1,176,078
  1,286,269
  1,401,166
  1,520,814
  1,645,298
  1,774,729
  1,909,256
  2,049,053
Debt-to-equity ratio
  16.919
  5.620
  6.740
  7.440
  7.890
  8.190
  8.400
  8.540
  8.640
  8.720
  8.770
  8.810
  8.850
  8.870
  8.890
  8.900
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
Adjusted equity ratio
  -0.132
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  87
  310
  543
  847
  1,234
  1,713
  2,293
  2,980
  3,782
  4,700
  5,739
  6,896
  8,173
  9,567
  11,075
  12,697
  14,427
  16,264
  18,205
  20,248
  22,390
  24,632
  26,973
  29,413
  31,953
  34,595
  37,341
  40,196
  43,161
  46,243
Depreciation, amort., depletion, $m
  72
  21
  31
  44
  61
  84
  112
  147
  188
  237
  294
  359
  432
  514
  604
  702
  809
  923
  1,045
  1,174
  1,311
  1,455
  1,607
  1,765
  1,930
  2,103
  2,282
  2,469
  2,664
  2,865
  3,075
Funds from operations, $m
  485
  108
  341
  587
  909
  1,318
  1,825
  2,439
  3,169
  4,019
  4,995
  6,097
  7,328
  8,686
  10,170
  11,778
  13,505
  15,350
  17,309
  19,379
  21,559
  23,846
  26,239
  28,738
  31,343
  34,056
  36,877
  39,811
  42,859
  46,027
  49,318
Change in working capital, $m
  786
  -777
  -1,091
  -1,483
  -1,958
  -2,517
  -3,158
  -3,874
  -4,655
  -5,492
  -6,371
  -7,280
  -8,206
  -9,139
  -10,069
  -10,988
  -11,891
  -12,775
  -13,639
  -14,482
  -15,306
  -16,115
  -16,911
  -17,700
  -18,487
  -19,276
  -20,073
  -20,884
  -21,715
  -22,569
  -23,454
Cash from operations, $m
  -301
  885
  1,432
  2,070
  2,867
  3,835
  4,983
  6,313
  7,824
  9,511
  11,366
  13,377
  15,534
  17,825
  20,239
  22,765
  25,396
  28,125
  30,948
  33,861
  36,865
  39,961
  43,150
  46,438
  49,830
  53,332
  56,951
  60,695
  64,574
  68,596
  72,772
Maintenance CAPEX, $m
  0
  -13
  -20
  -30
  -43
  -60
  -83
  -111
  -146
  -187
  -236
  -293
  -359
  -432
  -514
  -604
  -702
  -809
  -923
  -1,045
  -1,174
  -1,311
  -1,455
  -1,607
  -1,765
  -1,930
  -2,103
  -2,282
  -2,469
  -2,664
  -2,865
New CAPEX, $m
  -25
  -34
  -49
  -66
  -88
  -113
  -141
  -173
  -208
  -246
  -285
  -326
  -367
  -409
  -450
  -491
  -532
  -571
  -610
  -648
  -685
  -721
  -756
  -792
  -827
  -862
  -898
  -934
  -971
  -1,009
  -1,049
Cash from investing activities, $m
  -20
  -47
  -69
  -96
  -131
  -173
  -224
  -284
  -354
  -433
  -521
  -619
  -726
  -841
  -964
  -1,095
  -1,234
  -1,380
  -1,533
  -1,693
  -1,859
  -2,032
  -2,211
  -2,399
  -2,592
  -2,792
  -3,001
  -3,216
  -3,440
  -3,673
  -3,914
Free cash flow, $m
  -321
  838
  1,363
  1,974
  2,736
  3,662
  4,759
  6,028
  7,470
  9,078
  10,844
  12,758
  14,809
  16,984
  19,275
  21,670
  24,162
  26,745
  29,415
  32,169
  35,006
  37,928
  40,938
  44,040
  47,238
  50,539
  53,950
  57,478
  61,133
  64,923
  68,857
Issuance/(repayment) of debt, $m
  568
  2,186
  5,851
  7,954
  10,503
  13,503
  16,940
  20,780
  24,974
  29,462
  34,178
  39,053
  44,022
  49,026
  54,013
  58,945
  63,791
  68,535
  73,167
  77,689
  82,112
  86,449
  90,721
  94,954
  99,173
  103,406
  107,684
  112,035
  116,489
  121,074
  125,818
Issuance/(repurchase) of shares, $m
  -59
  2,353
  340
  341
  320
  266
  169
  16
  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  
  156
  4,539
  6,191
  8,295
  10,823
  13,769
  17,109
  20,796
  24,974
  29,462
  34,178
  39,053
  44,022
  49,026
  54,013
  58,945
  63,791
  68,535
  73,167
  77,689
  82,112
  86,449
  90,721
  94,954
  99,173
  103,406
  107,684
  112,035
  116,489
  121,074
  125,818
Total cash flow (excl. dividends), $m
  -180
  5,377
  7,553
  10,268
  13,559
  17,432
  21,868
  26,824
  32,444
  38,540
  45,022
  51,811
  58,831
  66,010
  73,288
  80,615
  87,954
  95,280
  102,582
  109,858
  117,118
  124,377
  131,660
  138,994
  146,411
  153,945
  161,634
  169,514
  177,622
  185,997
  194,675
Retained Cash Flow (-), $m
  209
  -2,441
  -650
  -884
  -1,167
  -1,500
  -1,882
  -2,309
  -2,775
  -3,274
  -3,798
  -4,339
  -4,891
  -5,447
  -6,001
  -6,549
  -7,088
  -7,615
  -8,130
  -8,632
  -9,124
  -9,605
  -10,080
  -10,550
  -11,019
  -11,490
  -11,965
  -12,448
  -12,943
  -13,453
  -13,980
Prev. year cash balance distribution, $m
 
  1,432
  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
 
  4,369
  6,903
  9,384
  12,392
  15,932
  19,986
  24,516
  29,669
  35,266
  41,224
  47,472
  53,939
  60,563
  67,287
  74,065
  80,866
  87,665
  94,452
  101,226
  107,994
  114,772
  121,580
  128,443
  135,391
  142,456
  149,669
  157,065
  164,679
  172,544
  180,695
Discount rate, %
 
  11.90
  12.50
  13.12
  13.78
  14.46
  15.19
  15.95
  16.74
  17.58
  18.46
  19.38
  20.35
  21.37
  22.44
  23.56
  24.74
  25.98
  27.28
  28.64
  30.07
  31.57
  33.15
  34.81
  36.55
  38.38
  40.30
  42.31
  44.43
  46.65
  48.98
PV of cash for distribution, $m
 
  3,904
  5,455
  6,483
  7,395
  8,108
  8,556
  8,702
  8,598
  8,209
  7,575
  6,761
  5,840
  4,883
  3,954
  3,100
  2,354
  1,730
  1,230
  846
  562
  361
  223
  133
  77
  42
  22
  11
  6
  3
  1
Current shareholders' claim on cash, %
  100
  50.0
  48.7
  47.9
  47.4
  47.1
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9
  46.9

The Carlyle Group L.P. is a diversified multi-product global alternative asset management firm. The Company operates in four segments: Corporate Private Equity (CPE), Real Assets, Global Market Strategies (GMS) and Investment Solutions. Corporate Private Equity advises its buyout and growth capital funds, which pursue various corporate investments of different sizes and growth potentials. As of December 31, 2016, the Real Assets segment advised its 26 active carry funds focused on real estate, infrastructure and energy and natural resources (including power). As of December 31, 2016, the Global Market Strategies segment advised a group of 57 active funds that pursue investment strategies, including leveraged loans and structured credit, energy mezzanine opportunities, middle market lending and distressed debt. Its Investment Solutions segment provides investment opportunities and resources for its investors and clients.

FINANCIAL RATIOS  of  Carlyle Group (CG)

Valuation Ratios
P/E Ratio 343.4
Price to Sales 0.9
Price to Book 6.7
Price to Tangible Book
Price to Cash Flow -6.8
Price to Free Cash Flow -6.3
Growth Rates
Sales Growth Rate -40.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -59.7%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 1691.9%
Total Debt to Equity 1691.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 0.1%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0.1%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. 3.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 76.3%
Gross Margin - 3 Yr. Avg. 64.5%
EBITDA Margin 7.7%
EBITDA Margin - 3 Yr. Avg. 17.9%
Operating Margin 2%
Oper. Margin - 3 Yr. Avg. 11.1%
Pre-Tax Margin 2%
Pre-Tax Margin - 3 Yr. Avg. 11.1%
Net Profit Margin 0.3%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 66.7%
Eff/ Tax Rate - 3 Yr. Avg. 25%
Payout Ratio 2350%

CG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CG stock intrinsic value calculation we used $2287 million for the last fiscal year's total revenue generated by Carlyle Group. The default revenue input number comes from 2016 income statement of Carlyle Group. 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 CG stock valuation model: a) initial revenue growth rate of 54.3% 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 11.9%, whose default value for CG is calculated based on our internal credit rating of Carlyle Group, 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 Carlyle Group.
    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 CG stock the variable cost ratio is equal to 77.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $484 million in the base year in the intrinsic value calculation for CG 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 Carlyle Group.

Corporate tax rate of 27% is the nominal tax rate for Carlyle Group. 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 CG 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 CG are equal to 2.8%.

Life of production assets of 1.2 years is the average useful life of capital assets used in Carlyle Group 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 CG is equal to -62.6%. 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 - $308 million for Carlyle Group - 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 331.415 million for Carlyle Group 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 Carlyle Group at the current share price and the inputted number of shares is $8.1 billion.

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Financial statements of CG
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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