Intrinsic value of CNH Industrial - CNHI

Previous Close

$11.43

  Intrinsic Value

$21.62

stock screener

  Rating & Target

str. buy

+89%

  Value-price divergence*

-115%

Previous close

$11.43

 
Intrinsic value

$21.62

 
Up/down potential

+89%

 
Rating

str. buy

 
Value-price divergence*

-115%

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

We calculate the intrinsic value of CNHI 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 15.5

 

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, %
  -4.01
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
Revenue, $m
  24,872
  26,315
  27,820
  29,391
  31,032
  32,746
  34,538
  36,412
  38,372
  40,423
  42,569
  44,817
  47,170
  49,635
  52,218
  54,924
  57,761
  60,734
  63,852
  67,122
  70,550
  74,146
  77,918
  81,876
  86,028
  90,384
  94,955
  99,752
  104,786
  110,069
  115,614
Variable operating expenses, $m
 
  9,038
  9,541
  10,066
  10,614
  11,187
  11,786
  12,412
  13,067
  13,752
  14,470
  14,976
  15,762
  16,586
  17,449
  18,353
  19,301
  20,295
  21,336
  22,429
  23,575
  24,776
  26,037
  27,359
  28,746
  30,202
  31,730
  33,332
  35,015
  36,780
  38,633
Fixed operating expenses, $m
 
  15,438
  15,823
  16,219
  16,625
  17,040
  17,466
  17,903
  18,350
  18,809
  19,279
  19,761
  20,255
  20,762
  21,281
  21,813
  22,358
  22,917
  23,490
  24,077
  24,679
  25,296
  25,929
  26,577
  27,241
  27,922
  28,620
  29,336
  30,069
  30,821
  31,591
Total operating expenses, $m
  23,256
  24,476
  25,364
  26,285
  27,239
  28,227
  29,252
  30,315
  31,417
  32,561
  33,749
  34,737
  36,017
  37,348
  38,730
  40,166
  41,659
  43,212
  44,826
  46,506
  48,254
  50,072
  51,966
  53,936
  55,987
  58,124
  60,350
  62,668
  65,084
  67,601
  70,224
Operating income, $m
  1,616
  1,839
  2,455
  3,106
  3,793
  4,519
  5,286
  6,097
  6,955
  7,861
  8,820
  10,080
  11,153
  12,288
  13,488
  14,758
  16,102
  17,523
  19,026
  20,615
  22,296
  24,074
  25,953
  27,940
  30,040
  32,260
  34,605
  37,084
  39,702
  42,468
  45,390
EBITDA, $m
  2,877
  3,047
  3,718
  4,427
  5,174
  5,963
  6,795
  7,675
  8,604
  9,586
  10,623
  11,720
  12,879
  14,104
  15,399
  16,768
  18,216
  19,746
  21,363
  23,072
  24,878
  26,788
  28,805
  30,937
  33,189
  35,568
  38,080
  40,735
  43,537
  46,497
  49,621
Interest expense (income), $m
  930
  910
  992
  1,081
  1,174
  1,272
  1,373
  1,480
  1,591
  1,707
  1,829
  1,956
  2,090
  2,229
  2,376
  2,529
  2,689
  2,858
  3,034
  3,219
  3,413
  3,617
  3,830
  4,054
  4,289
  4,535
  4,794
  5,065
  5,350
  5,648
  5,962
Earnings before tax, $m
  -9
  929
  1,464
  2,025
  2,619
  3,247
  3,913
  4,618
  5,364
  6,154
  6,991
  8,123
  9,063
  10,058
  11,113
  12,229
  13,412
  14,665
  15,992
  17,396
  18,883
  20,457
  22,123
  23,886
  25,751
  27,724
  29,811
  32,019
  34,352
  36,820
  39,428
Tax expense, $m
  298
  251
  395
  547
  707
  877
  1,056
  1,247
  1,448
  1,662
  1,888
  2,193
  2,447
  2,716
  3,000
  3,302
  3,621
  3,960
  4,318
  4,697
  5,098
  5,523
  5,973
  6,449
  6,953
  7,486
  8,049
  8,645
  9,275
  9,941
  10,646
Net income, $m
  -252
  678
  1,068
  1,478
  1,912
  2,371
  2,856
  3,371
  3,916
  4,493
  5,104
  5,930
  6,616
  7,342
  8,112
  8,927
  9,791
  10,705
  11,674
  12,699
  13,785
  14,934
  16,150
  17,437
  18,798
  20,239
  21,762
  23,374
  25,077
  26,878
  28,782

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,017
  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
  45,547
  48,195
  50,952
  53,830
  56,835
  59,975
  63,257
  66,689
  70,279
  74,035
  77,966
  82,082
  86,392
  90,907
  95,637
  100,594
  105,789
  111,235
  116,945
  122,933
  129,213
  135,799
  142,708
  149,956
  157,560
  165,538
  173,910
  182,696
  191,915
  201,592
  211,747
Adjusted assets (=assets-cash), $m
  40,530
  48,195
  50,952
  53,830
  56,835
  59,975
  63,257
  66,689
  70,279
  74,035
  77,966
  82,082
  86,392
  90,907
  95,637
  100,594
  105,789
  111,235
  116,945
  122,933
  129,213
  135,799
  142,708
  149,956
  157,560
  165,538
  173,910
  182,696
  191,915
  201,592
  211,747
Revenue / Adjusted assets
  0.614
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
Average production assets, $m
  9,109
  9,631
  10,182
  10,757
  11,358
  11,985
  12,641
  13,327
  14,044
  14,795
  15,580
  16,403
  17,264
  18,166
  19,112
  20,102
  21,140
  22,229
  23,370
  24,566
  25,821
  27,138
  28,518
  29,967
  31,486
  33,081
  34,754
  36,509
  38,352
  40,285
  42,315
Working capital, $m
  0
  -2,631
  -2,782
  -2,939
  -3,103
  -3,275
  -3,454
  -3,641
  -3,837
  -4,042
  -4,257
  -4,482
  -4,717
  -4,964
  -5,222
  -5,492
  -5,776
  -6,073
  -6,385
  -6,712
  -7,055
  -7,415
  -7,792
  -8,188
  -8,603
  -9,038
  -9,496
  -9,975
  -10,479
  -11,007
  -11,561
Total debt, $m
  25,276
  27,549
  30,030
  32,620
  35,325
  38,151
  41,105
  44,193
  47,424
  50,804
  54,342
  58,046
  61,926
  65,989
  70,246
  74,707
  79,383
  84,285
  89,424
  94,813
  100,464
  106,392
  112,610
  119,133
  125,977
  133,157
  140,692
  148,599
  156,897
  165,605
  174,745
Total liabilities, $m
  41,103
  43,376
  45,857
  48,447
  51,152
  53,978
  56,932
  60,020
  63,251
  66,631
  70,169
  73,873
  77,753
  81,816
  86,073
  90,534
  95,210
  100,112
  105,251
  110,640
  116,291
  122,219
  128,437
  134,960
  141,804
  148,984
  156,519
  164,426
  172,724
  181,432
  190,572
Total equity, $m
  4,444
  4,820
  5,095
  5,383
  5,684
  5,998
  6,326
  6,669
  7,028
  7,403
  7,797
  8,208
  8,639
  9,091
  9,564
  10,059
  10,579
  11,124
  11,695
  12,293
  12,921
  13,580
  14,271
  14,996
  15,756
  16,554
  17,391
  18,270
  19,192
  20,159
  21,175
Total liabilities and equity, $m
  45,547
  48,196
  50,952
  53,830
  56,836
  59,976
  63,258
  66,689
  70,279
  74,034
  77,966
  82,081
  86,392
  90,907
  95,637
  100,593
  105,789
  111,236
  116,946
  122,933
  129,212
  135,799
  142,708
  149,956
  157,560
  165,538
  173,910
  182,696
  191,916
  201,591
  211,747
Debt-to-equity ratio
  5.688
  5.720
  5.890
  6.060
  6.220
  6.360
  6.500
  6.630
  6.750
  6.860
  6.970
  7.070
  7.170
  7.260
  7.350
  7.430
  7.500
  7.580
  7.650
  7.710
  7.780
  7.830
  7.890
  7.940
  8.000
  8.040
  8.090
  8.130
  8.180
  8.210
  8.250
Adjusted equity ratio
  -0.014
  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
  -252
  678
  1,068
  1,478
  1,912
  2,371
  2,856
  3,371
  3,916
  4,493
  5,104
  5,930
  6,616
  7,342
  8,112
  8,927
  9,791
  10,705
  11,674
  12,699
  13,785
  14,934
  16,150
  17,437
  18,798
  20,239
  21,762
  23,374
  25,077
  26,878
  28,782
Depreciation, amort., depletion, $m
  1,261
  1,208
  1,263
  1,321
  1,381
  1,443
  1,509
  1,578
  1,649
  1,724
  1,803
  1,640
  1,726
  1,817
  1,911
  2,010
  2,114
  2,223
  2,337
  2,457
  2,582
  2,714
  2,852
  2,997
  3,149
  3,308
  3,475
  3,651
  3,835
  4,029
  4,231
Funds from operations, $m
  2,875
  1,886
  2,332
  2,799
  3,292
  3,814
  4,365
  4,948
  5,565
  6,217
  6,907
  7,570
  8,342
  9,159
  10,023
  10,938
  11,905
  12,928
  14,011
  15,156
  16,367
  17,647
  19,002
  20,433
  21,947
  23,547
  25,238
  27,025
  28,912
  30,907
  33,014
Change in working capital, $m
  767
  -144
  -151
  -157
  -164
  -171
  -179
  -187
  -196
  -205
  -215
  -225
  -235
  -247
  -258
  -271
  -284
  -297
  -312
  -327
  -343
  -360
  -377
  -396
  -415
  -436
  -457
  -480
  -503
  -528
  -554
Cash from operations, $m
  2,108
  2,031
  2,482
  2,956
  3,456
  3,985
  4,545
  5,136
  5,761
  6,422
  7,121
  7,795
  8,578
  9,406
  10,282
  11,208
  12,189
  13,226
  14,323
  15,483
  16,710
  18,007
  19,379
  20,829
  22,362
  23,982
  25,695
  27,504
  29,416
  31,435
  33,568
Maintenance CAPEX, $m
  0
  -911
  -963
  -1,018
  -1,076
  -1,136
  -1,199
  -1,264
  -1,333
  -1,404
  -1,479
  -1,558
  -1,640
  -1,726
  -1,817
  -1,911
  -2,010
  -2,114
  -2,223
  -2,337
  -2,457
  -2,582
  -2,714
  -2,852
  -2,997
  -3,149
  -3,308
  -3,475
  -3,651
  -3,835
  -4,029
New CAPEX, $m
  -2,134
  -523
  -551
  -575
  -601
  -627
  -656
  -686
  -717
  -751
  -786
  -822
  -861
  -902
  -945
  -991
  -1,038
  -1,088
  -1,141
  -1,197
  -1,255
  -1,316
  -1,381
  -1,448
  -1,520
  -1,594
  -1,673
  -1,756
  -1,842
  -1,934
  -2,029
Cash from investing activities, $m
  -921
  -1,434
  -1,514
  -1,593
  -1,677
  -1,763
  -1,855
  -1,950
  -2,050
  -2,155
  -2,265
  -2,380
  -2,501
  -2,628
  -2,762
  -2,902
  -3,048
  -3,202
  -3,364
  -3,534
  -3,712
  -3,898
  -4,095
  -4,300
  -4,517
  -4,743
  -4,981
  -5,231
  -5,493
  -5,769
  -6,058
Free cash flow, $m
  1,187
  597
  968
  1,363
  1,780
  2,222
  2,690
  3,186
  3,711
  4,267
  4,856
  5,415
  6,076
  6,777
  7,520
  8,307
  9,140
  10,023
  10,959
  11,949
  12,998
  14,109
  15,284
  16,529
  17,846
  19,239
  20,714
  22,273
  23,923
  25,667
  27,510
Issuance/(repayment) of debt, $m
  -1,141
  2,273
  2,481
  2,590
  2,705
  2,826
  2,954
  3,089
  3,231
  3,380
  3,538
  3,704
  3,879
  4,063
  4,257
  4,461
  4,676
  4,902
  5,139
  5,389
  5,652
  5,928
  6,218
  6,523
  6,844
  7,181
  7,535
  7,907
  8,298
  8,709
  9,140
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -1,331
  2,273
  2,481
  2,590
  2,705
  2,826
  2,954
  3,089
  3,231
  3,380
  3,538
  3,704
  3,879
  4,063
  4,257
  4,461
  4,676
  4,902
  5,139
  5,389
  5,652
  5,928
  6,218
  6,523
  6,844
  7,181
  7,535
  7,907
  8,298
  8,709
  9,140
Total cash flow (excl. dividends), $m
  -160
  2,870
  3,449
  3,953
  4,485
  5,048
  5,644
  6,274
  6,942
  7,647
  8,394
  9,119
  9,955
  10,840
  11,777
  12,768
  13,816
  14,925
  16,098
  17,338
  18,650
  20,036
  21,502
  23,052
  24,690
  26,420
  28,249
  30,180
  32,220
  34,375
  36,650
Retained Cash Flow (-), $m
  358
  -376
  -276
  -288
  -301
  -314
  -328
  -343
  -359
  -376
  -393
  -412
  -431
  -451
  -473
  -496
  -520
  -545
  -571
  -599
  -628
  -659
  -691
  -725
  -760
  -798
  -837
  -879
  -922
  -968
  -1,016
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
 
  2,494
  3,173
  3,665
  4,185
  4,734
  5,316
  5,931
  6,583
  7,272
  8,001
  8,707
  9,524
  10,389
  11,304
  12,272
  13,296
  14,380
  15,527
  16,739
  18,022
  19,378
  20,812
  22,327
  23,929
  25,622
  27,411
  29,302
  31,298
  33,407
  35,635
Discount rate, %
 
  11.10
  11.66
  12.24
  12.85
  13.49
  14.17
  14.88
  15.62
  16.40
  17.22
  18.08
  18.98
  19.93
  20.93
  21.98
  23.08
  24.23
  25.44
  26.71
  28.05
  29.45
  30.92
  32.47
  34.09
  35.80
  37.59
  39.47
  41.44
  43.51
  45.69
PV of cash for distribution, $m
 
  2,245
  2,545
  2,592
  2,580
  2,514
  2,401
  2,247
  2,061
  1,854
  1,634
  1,399
  1,183
  978
  790
  623
  480
  360
  263
  186
  128
  86
  55
  35
  21
  12
  7
  4
  2
  1
  0
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

CNH Industrial N.V. designs, produces, markets, sells, and finances agricultural and construction equipment, trucks, commercial vehicles, buses, and specialty vehicles, engines, transmissions, and axles worldwide. The Agricultural Equipment segment provides farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors, combines, cotton pickers, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements, and material handling equipment. This segment offers its products under the New Holland Agriculture, Case IH Agriculture, Steyr, and Miller brand names. The Construction Equipment segment offers excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders, compact track loaders, and telehandlers, under the New Holland Construction and Case Construction brand names. The Commercial Vehicles segment provides light, medium, and heavy vehicles for the transportation and distribution of goods under the Iveco brand name; commuter buses and touring coaches under the Iveco Bus and Heuliez Bus brand names; quarry and mining equipment under the Iveco Astra name; and firefighting vehicles under the Magirus brand name, as well as vehicles for civil defense and peace-keeping missions under the Iveco Defence Vehicles brand name. The Powertrain segment offers propulsion and transmission systems and axles for on-and off-road applications, as well as engines for marine application and power generation through the FPT Industrial brand. The Financial Services segment provides and administers retail financing to customers for the purchase or lease of new and used industrial equipment or vehicles, and other equipment; and wholesale financing, which consists primarily of floor plan financing to CNH Industrial dealers. CNH Industrial N.V. is based in London, the United Kingdom.

FINANCIAL RATIOS  of  CNH Industrial (CNHI)

Valuation Ratios
P/E Ratio -61.8
Price to Sales 0.6
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow -598.6
Growth Rates
Sales Growth Rate -4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.9%
Cap. Spend. - 3 Yr. Gr. Rate -4.4%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 568.8%
Total Debt to Equity 568.8%
Interest Coverage 1
Management Effectiveness
Return On Assets 68.2%
Ret/ On Assets - 3 Yr. Avg. 23.9%
Return On Total Capital -0.8%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity -5.5%
Return On Equity - 3 Yr. Avg. 4.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 21.4%
Gross Margin - 3 Yr. Avg. 21.5%
EBITDA Margin 8.8%
EBITDA Margin - 3 Yr. Avg. 9.6%
Operating Margin 6.5%
Oper. Margin - 3 Yr. Avg. 8%
Pre-Tax Margin -0%
Pre-Tax Margin - 3 Yr. Avg. 1.8%
Net Profit Margin -1%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate -3311.1%
Eff/ Tax Rate - 3 Yr. Avg. -1068.2%
Payout Ratio -82.1%

CNHI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CNHI stock intrinsic value calculation we used $24872 million for the last fiscal year's total revenue generated by CNH Industrial. The default revenue input number comes from 2016 income statement of CNH Industrial. 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 CNHI stock valuation model: a) initial revenue growth rate of 5.8% 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 11.1%, whose default value for CNHI is calculated based on our internal credit rating of CNH Industrial, 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 CNH Industrial.
    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 CNHI stock the variable cost ratio is equal to 34.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15061 million in the base year in the intrinsic value calculation for CNHI 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 3.6% for CNH Industrial.

Corporate tax rate of 27% is the nominal tax rate for CNH Industrial. 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 CNHI 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 CNHI are equal to 36.6%.

Life of production assets of 10 years is the average useful life of capital assets used in CNH Industrial 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 CNHI is equal to -10%. 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 - $4444 million for CNH Industrial - 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 1354.74 million for CNH Industrial 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 CNH Industrial at the current share price and the inputted number of shares is $15.5 billion.

RELATED COMPANIES Price Int.Val. Rating
CAT Caterpillar 114.12 22.60  str.sell
CMI Cummins 154.38 129.21  sell
DE Deere 126.63 44.06  str.sell
PCAR Paccar 64.43 26.24  str.sell
AGCO AGCO 69.50 54.99  sell

COMPANY NEWS

▶ ETFs with exposure to CNH Industrial NV : August 1, 2017   [Aug-01-17 04:26PM  Capital Cube]
▶ CNH tops Street 2Q forecasts   [Jul-26-17 09:56PM  Associated Press]
▶ 4 Auto Stocks On Track to Beat in Q2   [Jul-21-17 01:08PM  Zacks]
▶ ETFs with exposure to CNH Industrial NV : July 3, 2017   [Jul-03-17 03:02PM  Capital Cube]
▶ CNH Industrial announces senior appointment   [Jun-30-17 10:05AM  PR Newswire]
▶ ETFs with exposure to CNH Industrial NV : June 22, 2017   [Jun-22-17 03:32PM  Capital Cube]
▶ Deere Puts a $15 Billion Rival in the Headlights   [Jun-06-17 10:09AM  Bloomberg]
▶ Behind the Wheel: Remanufacturing   [May-10-17 06:15AM  PR Newswire]
▶ CNH beats Street 1Q forecasts   [Apr-27-17 08:52AM  Associated Press]
▶ New Holland Agriculture sets new world record   [Apr-26-17 10:23AM  PR Newswire]
▶ ETFs with exposure to CNH Industrial NV : April 25, 2017   [Apr-25-17 03:28PM  Capital Cube]
▶ Longleaf Partners Comments on CNH Industrial   [Apr-14-17 06:11PM  GuruFocus.com]
▶ Longleaf Partners 1st Quarter Commentary   [05:50PM  GuruFocus.com]
▶ Pricing of CNH Industrial Capital LLC $500 million notes   [Apr-05-17 05:40PM  PR Newswire]
▶ Here's Why Deere & Company's Management is Doing a Good Job   [Mar-06-17 09:11AM  at Motley Fool]
▶ CNH Industrial publishes its 2017 Corporate Calendar   [Jan-31-17 01:00PM  PR Newswire]
Stock chart of CNHI Financial statements of CNHI
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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