Intrinsic value of Delta Air Lines - DAL

Previous Close

$45.53

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$45.53

 
Intrinsic value

$130.12

 
Up/down potential

+186%

 
Rating

str. buy

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of DAL 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 33.9

 

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, %
  -2.62
  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
  39,639
  40,432
  41,362
  42,425
  43,618
  44,940
  46,391
  47,971
  49,682
  51,524
  53,501
  55,617
  57,874
  60,277
  62,832
  65,542
  68,414
  71,455
  74,670
  78,067
  81,654
  85,439
  89,431
  93,638
  98,071
  102,740
  107,655
  112,829
  118,274
  124,002
  130,027
Variable operating expenses, $m
 
  8,148
  8,313
  8,501
  8,713
  8,947
  9,204
  9,484
  9,788
  10,114
  10,465
  9,860
  10,261
  10,687
  11,140
  11,620
  12,129
  12,668
  13,238
  13,841
  14,477
  15,148
  15,855
  16,601
  17,387
  18,215
  19,086
  20,004
  20,969
  21,985
  23,053
Fixed operating expenses, $m
 
  25,935
  26,583
  27,247
  27,929
  28,627
  29,343
  30,076
  30,828
  31,599
  32,389
  33,198
  34,028
  34,879
  35,751
  36,645
  37,561
  38,500
  39,462
  40,449
  41,460
  42,497
  43,559
  44,648
  45,764
  46,908
  48,081
  49,283
  50,515
  51,778
  53,073
Total operating expenses, $m
  32,687
  34,083
  34,896
  35,748
  36,642
  37,574
  38,547
  39,560
  40,616
  41,713
  42,854
  43,058
  44,289
  45,566
  46,891
  48,265
  49,690
  51,168
  52,700
  54,290
  55,937
  57,645
  59,414
  61,249
  63,151
  65,123
  67,167
  69,287
  71,484
  73,763
  76,126
Operating income, $m
  6,952
  6,350
  6,466
  6,676
  6,977
  7,367
  7,845
  8,411
  9,066
  9,811
  10,648
  12,558
  13,585
  14,712
  15,941
  17,277
  18,724
  20,286
  21,969
  23,777
  25,717
  27,795
  30,016
  32,388
  34,919
  37,616
  40,488
  43,542
  46,790
  50,239
  53,902
EBITDA, $m
  8,854
  8,770
  8,920
  9,168
  9,511
  9,948
  10,478
  11,100
  11,816
  12,627
  13,534
  14,540
  15,648
  16,860
  18,181
  19,613
  21,163
  22,833
  24,631
  26,560
  28,628
  30,840
  33,204
  35,726
  38,415
  41,278
  44,325
  47,564
  51,005
  54,659
  58,536
Interest expense (income), $m
  385
  304
  340
  383
  433
  489
  550
  618
  692
  772
  858
  951
  1,049
  1,155
  1,267
  1,387
  1,513
  1,648
  1,790
  1,940
  2,099
  2,267
  2,443
  2,630
  2,827
  3,034
  3,252
  3,482
  3,724
  3,978
  4,246
Earnings before tax, $m
  6,636
  6,046
  6,127
  6,293
  6,544
  6,878
  7,294
  7,793
  8,374
  9,039
  9,790
  11,608
  12,536
  13,557
  14,674
  15,890
  17,211
  18,639
  20,179
  21,837
  23,618
  25,528
  27,573
  29,758
  32,093
  34,582
  37,236
  40,061
  43,066
  46,261
  49,656
Tax expense, $m
  2,263
  1,632
  1,654
  1,699
  1,767
  1,857
  1,969
  2,104
  2,261
  2,441
  2,643
  3,134
  3,385
  3,660
  3,962
  4,290
  4,647
  5,032
  5,448
  5,896
  6,377
  6,893
  7,445
  8,035
  8,665
  9,337
  10,054
  10,816
  11,628
  12,490
  13,407
Net income, $m
  4,373
  4,413
  4,473
  4,594
  4,777
  5,021
  5,325
  5,689
  6,113
  6,599
  7,147
  8,473
  9,151
  9,896
  10,712
  11,600
  12,564
  13,606
  14,731
  15,941
  17,241
  18,636
  20,128
  21,724
  23,428
  25,245
  27,182
  29,244
  31,438
  33,771
  36,249

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,249
  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
  51,261
  48,949
  50,075
  51,362
  52,806
  54,407
  56,164
  58,077
  60,147
  62,378
  64,772
  67,333
  70,065
  72,975
  76,067
  79,349
  82,826
  86,507
  90,399
  94,512
  98,855
  103,437
  108,269
  113,363
  118,730
  124,382
  130,333
  136,597
  143,189
  150,124
  157,418
Adjusted assets (=assets-cash), $m
  48,012
  48,949
  50,075
  51,362
  52,806
  54,407
  56,164
  58,077
  60,147
  62,378
  64,772
  67,333
  70,065
  72,975
  76,067
  79,349
  82,826
  86,507
  90,399
  94,512
  98,855
  103,437
  108,269
  113,363
  118,730
  124,382
  130,333
  136,597
  143,189
  150,124
  157,418
Revenue / Adjusted assets
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
  0.826
Average production assets, $m
  28,560
  29,111
  29,780
  30,546
  31,405
  32,357
  33,402
  34,539
  35,771
  37,097
  38,521
  40,044
  41,669
  43,400
  45,239
  47,190
  49,258
  51,447
  53,762
  56,208
  58,791
  61,516
  64,390
  67,419
  70,611
  73,973
  77,512
  81,237
  85,157
  89,282
  93,619
Working capital, $m
  -7,788
  -10,108
  -10,340
  -10,606
  -10,905
  -11,235
  -11,598
  -11,993
  -12,420
  -12,881
  -13,375
  -13,904
  -14,469
  -15,069
  -15,708
  -16,386
  -17,104
  -17,864
  -18,667
  -19,517
  -20,414
  -21,360
  -22,358
  -23,409
  -24,518
  -25,685
  -26,914
  -28,207
  -29,569
  -31,001
  -32,507
Total debt, $m
  7,332
  6,930
  7,817
  8,831
  9,969
  11,231
  12,615
  14,122
  15,754
  17,512
  19,398
  21,416
  23,570
  25,862
  28,299
  30,885
  33,625
  36,525
  39,593
  42,834
  46,256
  49,866
  53,674
  57,688
  61,917
  66,371
  71,061
  75,997
  81,191
  86,655
  92,403
Total liabilities, $m
  38,974
  38,572
  39,459
  40,473
  41,611
  42,873
  44,257
  45,764
  47,396
  49,154
  51,040
  53,058
  55,212
  57,504
  59,941
  62,527
  65,267
  68,167
  71,235
  74,476
  77,898
  81,508
  85,316
  89,330
  93,559
  98,013
  102,703
  107,639
  112,833
  118,297
  124,045
Total equity, $m
  12,287
  10,377
  10,616
  10,889
  11,195
  11,534
  11,907
  12,312
  12,751
  13,224
  13,732
  14,275
  14,854
  15,471
  16,126
  16,822
  17,559
  18,339
  19,165
  20,037
  20,957
  21,929
  22,953
  24,033
  25,171
  26,369
  27,631
  28,959
  30,356
  31,826
  33,373
Total liabilities and equity, $m
  51,261
  48,949
  50,075
  51,362
  52,806
  54,407
  56,164
  58,076
  60,147
  62,378
  64,772
  67,333
  70,066
  72,975
  76,067
  79,349
  82,826
  86,506
  90,400
  94,513
  98,855
  103,437
  108,269
  113,363
  118,730
  124,382
  130,334
  136,598
  143,189
  150,123
  157,418
Debt-to-equity ratio
  0.597
  0.670
  0.740
  0.810
  0.890
  0.970
  1.060
  1.150
  1.240
  1.320
  1.410
  1.500
  1.590
  1.670
  1.750
  1.840
  1.910
  1.990
  2.070
  2.140
  2.210
  2.270
  2.340
  2.400
  2.460
  2.520
  2.570
  2.620
  2.670
  2.720
  2.770
Adjusted equity ratio
  0.188
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,373
  4,413
  4,473
  4,594
  4,777
  5,021
  5,325
  5,689
  6,113
  6,599
  7,147
  8,473
  9,151
  9,896
  10,712
  11,600
  12,564
  13,606
  14,731
  15,941
  17,241
  18,636
  20,128
  21,724
  23,428
  25,245
  27,182
  29,244
  31,438
  33,771
  36,249
Depreciation, amort., depletion, $m
  1,902
  2,421
  2,454
  2,492
  2,534
  2,581
  2,633
  2,689
  2,750
  2,816
  2,886
  1,982
  2,063
  2,149
  2,240
  2,336
  2,439
  2,547
  2,662
  2,783
  2,910
  3,045
  3,188
  3,338
  3,496
  3,662
  3,837
  4,022
  4,216
  4,420
  4,635
Funds from operations, $m
  7,183
  6,834
  6,926
  7,086
  7,311
  7,602
  7,958
  8,378
  8,863
  9,415
  10,033
  10,456
  11,214
  12,045
  12,951
  13,936
  15,002
  16,153
  17,392
  18,724
  20,152
  21,681
  23,316
  25,061
  26,923
  28,907
  31,019
  33,266
  35,654
  38,190
  40,883
Change in working capital, $m
  -22
  -198
  -232
  -266
  -298
  -331
  -363
  -395
  -428
  -461
  -494
  -529
  -564
  -601
  -639
  -678
  -718
  -760
  -804
  -849
  -897
  -946
  -998
  -1,052
  -1,108
  -1,167
  -1,229
  -1,294
  -1,361
  -1,432
  -1,506
Cash from operations, $m
  7,205
  7,692
  7,159
  7,351
  7,610
  7,933
  8,321
  8,773
  9,291
  9,875
  10,527
  10,985
  11,778
  12,646
  13,590
  14,614
  15,720
  16,913
  18,196
  19,573
  21,049
  22,627
  24,313
  26,113
  28,031
  30,074
  32,248
  34,559
  37,015
  39,622
  42,389
Maintenance CAPEX, $m
  0
  -1,414
  -1,441
  -1,474
  -1,512
  -1,555
  -1,602
  -1,654
  -1,710
  -1,771
  -1,837
  -1,907
  -1,982
  -2,063
  -2,149
  -2,240
  -2,336
  -2,439
  -2,547
  -2,662
  -2,783
  -2,910
  -3,045
  -3,188
  -3,338
  -3,496
  -3,662
  -3,837
  -4,022
  -4,216
  -4,420
New CAPEX, $m
  -3,391
  -551
  -670
  -765
  -859
  -952
  -1,045
  -1,138
  -1,231
  -1,327
  -1,424
  -1,523
  -1,625
  -1,730
  -1,839
  -1,951
  -2,068
  -2,189
  -2,315
  -2,446
  -2,583
  -2,725
  -2,874
  -3,029
  -3,192
  -3,362
  -3,539
  -3,725
  -3,920
  -4,124
  -4,338
Cash from investing activities, $m
  -2,155
  -1,965
  -2,111
  -2,239
  -2,371
  -2,507
  -2,647
  -2,792
  -2,941
  -3,098
  -3,261
  -3,430
  -3,607
  -3,793
  -3,988
  -4,191
  -4,404
  -4,628
  -4,862
  -5,108
  -5,366
  -5,635
  -5,919
  -6,217
  -6,530
  -6,858
  -7,201
  -7,562
  -7,942
  -8,340
  -8,758
Free cash flow, $m
  5,050
  5,726
  5,048
  5,112
  5,238
  5,426
  5,674
  5,982
  6,350
  6,778
  7,267
  7,555
  8,171
  8,853
  9,602
  10,423
  11,316
  12,286
  13,334
  14,466
  15,683
  16,992
  18,394
  19,896
  21,502
  23,217
  25,047
  26,997
  29,073
  31,283
  33,632
Issuance/(repayment) of debt, $m
  -1,259
  729
  887
  1,014
  1,139
  1,262
  1,384
  1,507
  1,632
  1,758
  1,886
  2,018
  2,153
  2,293
  2,437
  2,586
  2,740
  2,901
  3,067
  3,241
  3,422
  3,611
  3,808
  4,014
  4,229
  4,454
  4,690
  4,936
  5,194
  5,464
  5,748
Issuance/(repurchase) of shares, $m
  -2,601
  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  
  -3,751
  729
  887
  1,014
  1,139
  1,262
  1,384
  1,507
  1,632
  1,758
  1,886
  2,018
  2,153
  2,293
  2,437
  2,586
  2,740
  2,901
  3,067
  3,241
  3,422
  3,611
  3,808
  4,014
  4,229
  4,454
  4,690
  4,936
  5,194
  5,464
  5,748
Total cash flow (excl. dividends), $m
  1,299
  6,455
  5,935
  6,126
  6,377
  6,688
  7,058
  7,489
  7,981
  8,535
  9,154
  9,573
  10,324
  11,145
  12,039
  13,008
  14,056
  15,186
  16,402
  17,707
  19,105
  20,602
  22,202
  23,910
  25,731
  27,671
  29,736
  31,933
  34,267
  36,747
  39,379
Retained Cash Flow (-), $m
  -1,437
  -208
  -239
  -273
  -306
  -339
  -372
  -406
  -439
  -473
  -508
  -543
  -579
  -617
  -656
  -696
  -737
  -780
  -825
  -872
  -921
  -971
  -1,024
  -1,080
  -1,138
  -1,198
  -1,262
  -1,328
  -1,397
  -1,470
  -1,546
Prev. year cash balance distribution, $m
 
  2,118
  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
 
  8,365
  5,696
  5,853
  6,070
  6,348
  6,686
  7,084
  7,542
  8,063
  8,646
  9,030
  9,745
  10,528
  11,384
  12,313
  13,319
  14,406
  15,576
  16,835
  18,185
  19,631
  21,178
  22,830
  24,593
  26,473
  28,475
  30,605
  32,870
  35,277
  37,833
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
 
  8,020
  5,215
  5,094
  4,998
  4,921
  4,852
  4,786
  4,714
  4,632
  4,533
  4,288
  4,158
  4,003
  3,822
  3,615
  3,385
  3,134
  2,869
  2,592
  2,311
  2,030
  1,757
  1,496
  1,253
  1,030
  831
  657
  509
  385
  285
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

Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo in the United States and internationally. The company operates through two segments, Airline and Refinery. Its route network is centered around a system of hubs, international gateways, and airports in Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Minneapolis-St. Paul, New York-LaGuardia, New York-JFK, Paris-Charles de Gaulle, Salt Lake City, Seattle, and Tokyo-Narita. The company sells its tickets through various distribution channels, including delta.com and mobile applications/Web, telephone reservations, online travel agencies, traditional brick and mortar, and other agencies. It also provides aircraft maintenance, repair, and overhaul services; staffing, and professional security and training services, as well as aviation solutions to third parties; vacation packages to third-party consumers; and aircraft charters, and aircraft management and programs. As of February 2, 2017, the company operated a fleet of approximately 800 aircraft. Delta Air Lines, Inc. was founded in 1924 and is headquartered in Atlanta, Georgia.

FINANCIAL RATIOS  of  Delta Air Lines (DAL)

Valuation Ratios
P/E Ratio 7.6
Price to Sales 0.8
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 4.6
Price to Free Cash Flow 8.7
Growth Rates
Sales Growth Rate -2.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.1%
Cap. Spend. - 3 Yr. Gr. Rate 5.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 50.5%
Total Debt to Equity 59.7%
Interest Coverage 18
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 22.5%
Ret/ On T. Cap. - 3 Yr. Avg. 16.6%
Return On Equity 37.8%
Return On Equity - 3 Yr. Avg. 30.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 60.9%
Gross Margin - 3 Yr. Avg. 53.1%
EBITDA Margin 22.5%
EBITDA Margin - 3 Yr. Avg. 18%
Operating Margin 17.5%
Oper. Margin - 3 Yr. Avg. 13.8%
Pre-Tax Margin 16.7%
Pre-Tax Margin - 3 Yr. Avg. 12.3%
Net Profit Margin 11%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 34.1%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 11.6%

DAL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DAL stock intrinsic value calculation we used $39639 million for the last fiscal year's total revenue generated by Delta Air Lines. The default revenue input number comes from 2016 income statement of Delta Air Lines. 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 DAL 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 4.3%, whose default value for DAL is calculated based on our internal credit rating of Delta Air Lines, 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 Delta Air Lines.
    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 DAL stock the variable cost ratio is equal to 20.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $25302 million in the base year in the intrinsic value calculation for DAL 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 4.9% for Delta Air Lines.

Corporate tax rate of 27% is the nominal tax rate for Delta Air Lines. 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 DAL 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 DAL are equal to 72%.

Life of production assets of 20.2 years is the average useful life of capital assets used in Delta Air Lines 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 DAL is equal to -25%. 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 - $12287 million for Delta Air Lines - 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 743.908 million for Delta Air Lines 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 Delta Air Lines at the current share price and the inputted number of shares is $33.9 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
ALK Alaska Air Gro 89.11 236.55  str.buy
HA Hawaiian Holdi 53.25 153.87  str.buy
AAL American Airli 45.15 74.73  str.buy
LUV Southwest Airl 55.63 74.74  buy
UAL United Contine 69.56 191.07  str.buy
SKYW Skywest 34.30 21.60  sell
CEA China Eastern 27.45 15.72  sell

COMPANY NEWS

▶ As RDU passenger traffic grows, parking plan kicks off   [02:45PM  American City Business Journals]
▶ American Airlines Valuation: Whats Priced In?   [07:36AM  Market Realist]
▶ Weekly Top Insider Buys Highlight for the Week of April 21   [Apr-22-17 06:31PM  GuruFocus.com]
▶ Sea-Tac Airport adds powered-up, Italian-designed seats (Photos)   [Apr-21-17 06:26PM  American City Business Journals]
▶ Time to buy airlines? 5 ways to trade it   [05:00PM  CNBC Videos]
▶ [$$] Airlines Bolster First Class, Skimp on Economy   [06:41AM  The Wall Street Journal]
▶ United Airlines, American and Southwest airlines plunge to botton in OAG star ratings   [Apr-20-17 03:55PM  American City Business Journals]
▶ Millennials boost American Airlines over Delta for brand of the year   [03:08PM  American City Business Journals]
▶ 'Insulting': American Airlines flight attendants lose pay raise dispute   [03:15PM  American City Business Journals]
▶ United Continental: In a Holding Pattern?   [02:18PM  Barrons.com]
▶ Which airlines fly highest in quality rankings? (SLIDESHOW)   [07:00AM  American City Business Journals]
▶ More turbulence ahead for United?   [Apr-18-17 05:16PM  CNBC Videos]
▶ 11 Cheapest Places To Fly Into Europe From US   [03:41PM  Insider Monkey]
▶ United changes policy, won't force boarded passengers to give up seats   [03:15PM  American City Business Journals]
▶ Debate it: Buy United on the dip?   [12:38PM  CNBC Videos]
▶ Which airlines fly highest in quality rankings? (Slideshow)   [08:45AM  American City Business Journals]
▶ United Sees Capacity Growth Topping Delta's After Beating Q1 Views   [Apr-17-17 05:02PM  Investor's Business Daily]
▶ Delta boosts payouts for bumped passengers to as much as $9,950   [08:35AM  American City Business Journals]
▶ [$$] United Airlines to Report Earnings Amid Uproar   [03:20PM  The Wall Street Journal]
▶ [$$] Time for Investors to Fly Delta   [12:10AM  Barrons.com]
▶ Delta OKs offers of up to $9,950 to flyers who give up seats   [Apr-14-17 07:04PM  Associated Press]
▶ How Buffett Lost Big on United Airlines   [08:25AM  Investopedia]
▶ Can Airlines Legally Kick Passengers Off Flights?   [Apr-12-17 09:03PM  MarketWatch]
▶ United's pain, rivals' gain?   [05:22PM  CNBC Videos]
▶ Delta Air Lines says last week's storm will cost it $125 million   [05:10PM  American City Business Journals]
▶ What Happened in the Stock Market Today   [05:00PM  Motley Fool]
▶ Stocks Drift To Weak Close; Dollar Drops On Trump Comments   [04:28PM  Investor's Business Daily]
▶ What you need to know on Wall Street today   [01:24PM  Business Insider]
Stock chart of DAL Financial statements of DAL
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.