Intrinsic value of CSX - CSX

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$52.65

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of CSX 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 48.6

 

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, %
  -6.28
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  11,069
  11,290
  11,550
  11,847
  12,180
  12,549
  12,955
  13,396
  13,873
  14,388
  14,940
  15,531
  16,161
  16,832
  17,545
  18,302
  19,104
  19,953
  20,851
  21,800
  22,802
  23,858
  24,973
  26,148
  27,386
  28,690
  30,062
  31,507
  33,027
  34,627
  36,309
Variable operating expenses, $m
 
  6,571
  6,722
  6,895
  7,089
  7,304
  7,540
  7,796
  8,074
  8,374
  8,695
  9,039
  9,406
  9,796
  10,211
  10,652
  11,119
  11,613
  12,135
  12,688
  13,270
  13,886
  14,534
  15,218
  15,939
  16,697
  17,496
  18,337
  19,222
  20,153
  21,132
Fixed operating expenses, $m
 
  1,420
  1,455
  1,491
  1,529
  1,567
  1,606
  1,646
  1,687
  1,730
  1,773
  1,817
  1,863
  1,909
  1,957
  2,006
  2,056
  2,107
  2,160
  2,214
  2,269
  2,326
  2,384
  2,444
  2,505
  2,568
  2,632
  2,698
  2,765
  2,834
  2,905
Total operating expenses, $m
  7,795
  7,991
  8,177
  8,386
  8,618
  8,871
  9,146
  9,442
  9,761
  10,104
  10,468
  10,856
  11,269
  11,705
  12,168
  12,658
  13,175
  13,720
  14,295
  14,902
  15,539
  16,212
  16,918
  17,662
  18,444
  19,265
  20,128
  21,035
  21,987
  22,987
  24,037
Operating income, $m
  3,274
  3,300
  3,373
  3,461
  3,563
  3,679
  3,809
  3,953
  4,112
  4,284
  4,472
  4,675
  4,893
  5,127
  5,377
  5,644
  5,930
  6,233
  6,556
  6,898
  7,262
  7,647
  8,054
  8,486
  8,942
  9,425
  9,934
  10,472
  11,040
  11,640
  12,272
EBITDA, $m
  4,575
  4,625
  4,728
  4,851
  4,992
  5,152
  5,329
  5,525
  5,740
  5,973
  6,226
  6,497
  6,790
  7,102
  7,436
  7,793
  8,172
  8,575
  9,003
  9,457
  9,938
  10,447
  10,986
  11,555
  12,157
  12,792
  13,463
  14,170
  14,917
  15,704
  16,534
Interest expense (income), $m
  606
  614
  638
  669
  704
  744
  787
  835
  887
  944
  1,005
  1,070
  1,140
  1,214
  1,294
  1,378
  1,468
  1,563
  1,663
  1,769
  1,881
  2,000
  2,125
  2,257
  2,396
  2,542
  2,696
  2,858
  3,029
  3,209
  3,398
Earnings before tax, $m
  2,741
  2,686
  2,734
  2,791
  2,858
  2,935
  3,021
  3,118
  3,224
  3,341
  3,467
  3,605
  3,753
  3,912
  4,083
  4,266
  4,462
  4,671
  4,893
  5,129
  5,380
  5,647
  5,930
  6,229
  6,547
  6,883
  7,238
  7,614
  8,011
  8,431
  8,874
Tax expense, $m
  1,027
  725
  738
  754
  772
  792
  816
  842
  871
  902
  936
  973
  1,013
  1,056
  1,102
  1,152
  1,205
  1,261
  1,321
  1,385
  1,453
  1,525
  1,601
  1,682
  1,768
  1,858
  1,954
  2,056
  2,163
  2,276
  2,396
Net income, $m
  1,714
  1,961
  1,996
  2,038
  2,087
  2,143
  2,206
  2,276
  2,354
  2,439
  2,531
  2,631
  2,739
  2,856
  2,981
  3,114
  3,257
  3,409
  3,572
  3,744
  3,928
  4,122
  4,329
  4,547
  4,779
  5,024
  5,284
  5,558
  5,848
  6,154
  6,478

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,020
  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
  35,414
  35,063
  35,870
  36,792
  37,827
  38,973
  40,232
  41,602
  43,085
  44,683
  46,398
  48,232
  50,190
  52,274
  54,489
  56,839
  59,330
  61,967
  64,755
  67,702
  70,812
  74,095
  77,556
  81,205
  85,049
  89,098
  93,361
  97,848
  102,570
  107,537
  112,762
Adjusted assets (=assets-cash), $m
  34,394
  35,063
  35,870
  36,792
  37,827
  38,973
  40,232
  41,602
  43,085
  44,683
  46,398
  48,232
  50,190
  52,274
  54,489
  56,839
  59,330
  61,967
  64,755
  67,702
  70,812
  74,095
  77,556
  81,205
  85,049
  89,098
  93,361
  97,848
  102,570
  107,537
  112,762
Revenue / Adjusted assets
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
Average production assets, $m
  30,662
  31,274
  31,994
  32,816
  33,739
  34,762
  35,884
  37,106
  38,429
  39,854
  41,384
  43,020
  44,766
  46,625
  48,601
  50,697
  52,919
  55,271
  57,758
  60,386
  63,160
  66,088
  69,175
  72,430
  75,859
  79,470
  83,272
  87,275
  91,486
  95,917
  100,577
Working capital, $m
  447
  -248
  -254
  -261
  -268
  -276
  -285
  -295
  -305
  -317
  -329
  -342
  -356
  -370
  -386
  -403
  -420
  -439
  -459
  -480
  -502
  -525
  -549
  -575
  -602
  -631
  -661
  -693
  -727
  -762
  -799
Total debt, $m
  11,293
  11,401
  11,949
  12,576
  13,280
  14,060
  14,915
  15,847
  16,856
  17,942
  19,108
  20,356
  21,687
  23,104
  24,610
  26,209
  27,903
  29,696
  31,592
  33,595
  35,710
  37,942
  40,296
  42,777
  45,391
  48,145
  51,043
  54,095
  57,305
  60,683
  64,236
Total liabilities, $m
  23,735
  23,843
  24,391
  25,018
  25,722
  26,502
  27,357
  28,289
  29,298
  30,384
  31,550
  32,798
  34,129
  35,546
  37,052
  38,651
  40,345
  42,138
  44,034
  46,037
  48,152
  50,384
  52,738
  55,219
  57,833
  60,587
  63,485
  66,537
  69,747
  73,125
  76,678
Total equity, $m
  11,679
  11,220
  11,478
  11,773
  12,104
  12,471
  12,874
  13,313
  13,787
  14,298
  14,847
  15,434
  16,061
  16,728
  17,436
  18,189
  18,986
  19,829
  20,722
  21,664
  22,660
  23,710
  24,818
  25,986
  27,216
  28,511
  29,876
  31,311
  32,822
  34,412
  36,084
Total liabilities and equity, $m
  35,414
  35,063
  35,869
  36,791
  37,826
  38,973
  40,231
  41,602
  43,085
  44,682
  46,397
  48,232
  50,190
  52,274
  54,488
  56,840
  59,331
  61,967
  64,756
  67,701
  70,812
  74,094
  77,556
  81,205
  85,049
  89,098
  93,361
  97,848
  102,569
  107,537
  112,762
Debt-to-equity ratio
  0.967
  1.020
  1.040
  1.070
  1.100
  1.130
  1.160
  1.190
  1.220
  1.250
  1.290
  1.320
  1.350
  1.380
  1.410
  1.440
  1.470
  1.500
  1.520
  1.550
  1.580
  1.600
  1.620
  1.650
  1.670
  1.690
  1.710
  1.730
  1.750
  1.760
  1.780
Adjusted equity ratio
  0.310
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320
  0.320

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,714
  1,961
  1,996
  2,038
  2,087
  2,143
  2,206
  2,276
  2,354
  2,439
  2,531
  2,631
  2,739
  2,856
  2,981
  3,114
  3,257
  3,409
  3,572
  3,744
  3,928
  4,122
  4,329
  4,547
  4,779
  5,024
  5,284
  5,558
  5,848
  6,154
  6,478
Depreciation, amort., depletion, $m
  1,301
  1,325
  1,356
  1,391
  1,430
  1,473
  1,521
  1,572
  1,628
  1,689
  1,754
  1,823
  1,897
  1,976
  2,059
  2,148
  2,242
  2,342
  2,447
  2,559
  2,676
  2,800
  2,931
  3,069
  3,214
  3,367
  3,528
  3,698
  3,877
  4,064
  4,262
Funds from operations, $m
  3,040
  3,286
  3,352
  3,428
  3,516
  3,615
  3,726
  3,848
  3,982
  4,127
  4,285
  4,454
  4,636
  4,832
  5,040
  5,263
  5,500
  5,751
  6,019
  6,303
  6,604
  6,923
  7,260
  7,616
  7,993
  8,392
  8,812
  9,256
  9,725
  10,219
  10,740
Change in working capital, $m
  -1
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
Cash from operations, $m
  3,041
  3,779
  3,357
  3,435
  3,523
  3,624
  3,735
  3,858
  3,992
  4,139
  4,297
  4,467
  4,650
  4,846
  5,056
  5,279
  5,517
  5,770
  6,039
  6,324
  6,626
  6,946
  7,284
  7,642
  8,021
  8,420
  8,842
  9,288
  9,758
  10,254
  10,777
Maintenance CAPEX, $m
  0
  -1,299
  -1,325
  -1,356
  -1,391
  -1,430
  -1,473
  -1,521
  -1,572
  -1,628
  -1,689
  -1,754
  -1,823
  -1,897
  -1,976
  -2,059
  -2,148
  -2,242
  -2,342
  -2,447
  -2,559
  -2,676
  -2,800
  -2,931
  -3,069
  -3,214
  -3,367
  -3,528
  -3,698
  -3,877
  -4,064
New CAPEX, $m
  -2,398
  -612
  -719
  -822
  -923
  -1,023
  -1,122
  -1,222
  -1,323
  -1,425
  -1,530
  -1,636
  -1,746
  -1,859
  -1,976
  -2,096
  -2,222
  -2,352
  -2,487
  -2,628
  -2,775
  -2,928
  -3,087
  -3,254
  -3,429
  -3,611
  -3,802
  -4,002
  -4,211
  -4,431
  -4,660
Cash from investing activities, $m
  -1,798
  -1,911
  -2,044
  -2,178
  -2,314
  -2,453
  -2,595
  -2,743
  -2,895
  -3,053
  -3,219
  -3,390
  -3,569
  -3,756
  -3,952
  -4,155
  -4,370
  -4,594
  -4,829
  -5,075
  -5,334
  -5,604
  -5,887
  -6,185
  -6,498
  -6,825
  -7,169
  -7,530
  -7,909
  -8,308
  -8,724
Free cash flow, $m
  1,243
  1,867
  1,313
  1,257
  1,210
  1,171
  1,140
  1,115
  1,097
  1,085
  1,079
  1,077
  1,081
  1,090
  1,104
  1,123
  1,147
  1,176
  1,210
  1,249
  1,293
  1,342
  1,396
  1,457
  1,523
  1,595
  1,673
  1,757
  1,848
  1,947
  2,052
Issuance/(repayment) of debt, $m
  781
  439
  548
  627
  704
  780
  856
  932
  1,009
  1,087
  1,166
  1,247
  1,331
  1,417
  1,506
  1,598
  1,694
  1,793
  1,896
  2,003
  2,115
  2,232
  2,354
  2,481
  2,614
  2,753
  2,899
  3,051
  3,211
  3,378
  3,553
Issuance/(repurchase) of shares, $m
  -1,056
  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  
  -588
  439
  548
  627
  704
  780
  856
  932
  1,009
  1,087
  1,166
  1,247
  1,331
  1,417
  1,506
  1,598
  1,694
  1,793
  1,896
  2,003
  2,115
  2,232
  2,354
  2,481
  2,614
  2,753
  2,899
  3,051
  3,211
  3,378
  3,553
Total cash flow (excl. dividends), $m
  655
  2,306
  1,861
  1,884
  1,914
  1,951
  1,995
  2,047
  2,106
  2,172
  2,245
  2,325
  2,412
  2,508
  2,611
  2,722
  2,841
  2,969
  3,106
  3,252
  3,408
  3,574
  3,750
  3,938
  4,137
  4,348
  4,572
  4,808
  5,059
  5,325
  5,605
Retained Cash Flow (-), $m
  -27
  -230
  -258
  -295
  -331
  -367
  -403
  -438
  -475
  -511
  -549
  -587
  -626
  -667
  -709
  -752
  -797
  -844
  -892
  -943
  -995
  -1,050
  -1,108
  -1,168
  -1,230
  -1,296
  -1,364
  -1,436
  -1,511
  -1,590
  -1,672
Prev. year cash balance distribution, $m
 
  689
  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
 
  2,765
  1,603
  1,589
  1,582
  1,584
  1,593
  1,609
  1,631
  1,660
  1,696
  1,738
  1,786
  1,841
  1,902
  1,970
  2,044
  2,125
  2,214
  2,309
  2,412
  2,523
  2,643
  2,770
  2,907
  3,052
  3,207
  3,373
  3,548
  3,735
  3,933
Discount rate, %
 
  6.90
  7.25
  7.61
  7.99
  8.39
  8.81
  9.25
  9.71
  10.19
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.61
  17.44
  18.31
  19.22
  20.18
  21.19
  22.25
  23.37
  24.53
  25.76
  27.05
  28.40
PV of cash for distribution, $m
 
  2,586
  1,394
  1,275
  1,164
  1,059
  960
  866
  777
  693
  613
  538
  468
  403
  343
  289
  239
  196
  158
  125
  97
  74
  55
  40
  29
  20
  14
  9
  6
  4
  2
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

CSX Corporation, together with its subsidiaries, provides rail-based transportation services in the United States and Canada. The company offers rail services, as well as transports intermodal containers and trailers. It transports agricultural and food products, fertilizers, chemicals, automotive, metals and equipment, minerals, and forest products; and coal, coke, and iron ore to electricity-generating power plants, steel manufacturers, and industrial plants. The company also exports coal to deep-water port facilities. In addition, it offers intermodal transportation services through a network of approximately 50 terminals transporting manufactured consumer goods in containers in the eastern United States; drayage services, including the pickup and delivery of intermodal shipments; and trucking dispatch services. Further, the company serves the automotive industry with distribution centers and storage locations, as well as connects non-rail served customers through transferring products from rail to trucks, which includes plastics and ethanol. Additionally, it acquires, develops, sells, leases, and manages real estate properties. The company operates approximately 21,000 route mile rail network, which serves various population centers in 23 states east of the Mississippi River, the District of Columbia, and the Canadian provinces of Ontario and Quebec, as well as owns and leases approximately 4,400 locomotives. It also serves production and distribution facilities through track connections. CSX Corporation was founded in 1978 and is based in Jacksonville, Florida.

FINANCIAL RATIOS  of  CSX (CSX)

Valuation Ratios
P/E Ratio 28.5
Price to Sales 4.4
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 16.1
Price to Free Cash Flow 76
Growth Rates
Sales Growth Rate -6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.4%
Cap. Spend. - 3 Yr. Gr. Rate 0.7%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 93.9%
Total Debt to Equity 96.7%
Interest Coverage 6
Management Effectiveness
Return On Assets 6%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 7.6%
Ret/ On T. Cap. - 3 Yr. Avg. 8.7%
Return On Equity 14.7%
Return On Equity - 3 Yr. Avg. 16.6%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 74.9%
Gross Margin - 3 Yr. Avg. 71.5%
EBITDA Margin 42%
EBITDA Margin - 3 Yr. Avg. 40.4%
Operating Margin 29.6%
Oper. Margin - 3 Yr. Avg. 29.5%
Pre-Tax Margin 24.8%
Pre-Tax Margin - 3 Yr. Avg. 25.1%
Net Profit Margin 15.5%
Net Profit Margin - 3 Yr. Avg. 15.8%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.1%
Payout Ratio 39.7%

CSX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSX stock intrinsic value calculation we used $11069 million for the last fiscal year's total revenue generated by CSX. The default revenue input number comes from 2016 income statement of CSX. 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 CSX stock valuation model: a) initial revenue growth rate of 2% 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 6.9%, whose default value for CSX is calculated based on our internal credit rating of CSX, 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 CSX.
    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 CSX stock the variable cost ratio is equal to 58.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1385 million in the base year in the intrinsic value calculation for CSX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for CSX.

Corporate tax rate of 27% is the nominal tax rate for CSX. 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 CSX 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 CSX are equal to 277%.

Life of production assets of 23.6 years is the average useful life of capital assets used in CSX 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 CSX is equal to -2.2%. 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 - $11679 million for CSX - 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 923.593 million for CSX 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 CSX at the current share price and the inputted number of shares is $48.6 billion.


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Stock chart of CSX Financial statements of CSX Annual reports of CSX
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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