Intrinsic value of Delta Air Lines - DAL

Previous Close

$53.27

  Intrinsic Value

$236.01

stock screener

  Rating & Target

str. buy

+343%

Previous close

$53.27

 
Intrinsic value

$236.01

 
Up/down potential

+343%

 
Rating

str. buy

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 38.0

 

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
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
Revenue, $m
  39,639
  41,819
  44,098
  46,482
  48,975
  51,585
  54,316
  57,176
  60,172
  63,310
  66,598
  70,044
  73,656
  77,443
  81,414
  85,578
  89,945
  94,525
  99,330
  104,371
  109,660
  115,210
  121,034
  127,145
  133,558
  140,290
  147,354
  154,770
  162,553
  170,723
  179,300
Variable operating expenses, $m
 
  8,394
  8,798
  9,220
  9,662
  10,125
  10,609
  11,116
  11,647
  12,204
  12,787
  12,418
  13,059
  13,730
  14,434
  15,172
  15,946
  16,759
  17,610
  18,504
  19,442
  20,426
  21,458
  22,542
  23,679
  24,872
  26,125
  27,439
  28,819
  30,268
  31,788
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
  34,329
  35,381
  36,467
  37,591
  38,752
  39,952
  41,192
  42,475
  43,803
  45,176
  45,616
  47,087
  48,609
  50,185
  51,817
  53,507
  55,259
  57,072
  58,953
  60,902
  62,923
  65,017
  67,190
  69,443
  71,780
  74,206
  76,722
  79,334
  82,046
  84,861
Operating income, $m
  6,952
  7,491
  8,718
  10,014
  11,384
  12,833
  14,364
  15,984
  17,697
  19,508
  21,423
  24,428
  26,569
  28,834
  31,229
  33,761
  36,437
  39,267
  42,257
  45,418
  48,758
  52,287
  56,016
  59,955
  64,115
  68,509
  73,148
  78,047
  83,219
  88,677
  94,439
EBITDA, $m
  8,854
  9,961
  11,269
  12,650
  14,109
  15,651
  17,280
  19,001
  20,821
  22,744
  24,776
  26,924
  29,195
  31,594
  34,131
  36,811
  39,643
  42,636
  45,798
  49,138
  52,667
  56,394
  60,330
  64,487
  68,876
  73,509
  78,401
  83,564
  89,013
  94,763
  100,830
Interest expense (income), $m
  385
  304
  404
  511
  622
  739
  861
  989
  1,122
  1,262
  1,409
  1,563
  1,724
  1,893
  2,070
  2,255
  2,450
  2,654
  2,868
  3,093
  3,328
  3,576
  3,835
  4,107
  4,393
  4,693
  5,007
  5,338
  5,684
  6,048
  6,430
Earnings before tax, $m
  6,636
  7,187
  8,313
  9,503
  10,762
  12,094
  13,504
  14,995
  16,574
  18,245
  20,014
  22,865
  24,845
  26,941
  29,159
  31,505
  33,987
  36,613
  39,389
  42,325
  45,430
  48,712
  52,181
  55,848
  59,722
  63,816
  68,141
  72,709
  77,534
  82,629
  88,009
Tax expense, $m
  2,263
  1,941
  2,245
  2,566
  2,906
  3,265
  3,646
  4,049
  4,475
  4,926
  5,404
  6,174
  6,708
  7,274
  7,873
  8,506
  9,177
  9,885
  10,635
  11,428
  12,266
  13,152
  14,089
  15,079
  16,125
  17,230
  18,398
  19,632
  20,934
  22,310
  23,762
Net income, $m
  4,373
  5,247
  6,069
  6,937
  7,856
  8,829
  9,858
  10,947
  12,099
  13,319
  14,610
  16,691
  18,137
  19,667
  21,286
  22,999
  24,811
  26,727
  28,754
  30,897
  33,164
  35,560
  38,092
  40,769
  43,597
  46,586
  49,743
  53,078
  56,600
  60,319
  64,246

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
  50,629
  53,388
  56,273
  59,292
  62,451
  65,758
  69,221
  72,847
  76,647
  80,627
  84,799
  89,172
  93,757
  98,564
  103,605
  108,892
  114,437
  120,255
  126,357
  132,761
  139,479
  146,530
  153,928
  161,693
  169,842
  178,395
  187,373
  196,796
  206,687
  217,070
Adjusted assets (=assets-cash), $m
  48,012
  50,629
  53,388
  56,273
  59,292
  62,451
  65,758
  69,221
  72,847
  76,647
  80,627
  84,799
  89,172
  93,757
  98,564
  103,605
  108,892
  114,437
  120,255
  126,357
  132,761
  139,479
  146,530
  153,928
  161,693
  169,842
  178,395
  187,373
  196,796
  206,687
  217,070
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
  30,110
  31,751
  33,467
  35,262
  37,141
  39,108
  41,167
  43,324
  45,583
  47,951
  50,432
  53,033
  55,759
  58,618
  61,616
  64,760
  68,058
  71,518
  75,147
  78,955
  82,951
  87,144
  91,544
  96,162
  101,009
  106,095
  111,434
  117,038
  122,921
  129,096
Working capital, $m
  -7,788
  -10,455
  -11,025
  -11,620
  -12,244
  -12,896
  -13,579
  -14,294
  -15,043
  -15,828
  -16,650
  -17,511
  -18,414
  -19,361
  -20,353
  -21,394
  -22,486
  -23,631
  -24,833
  -26,093
  -27,415
  -28,803
  -30,258
  -31,786
  -33,390
  -35,072
  -36,839
  -38,692
  -40,638
  -42,681
  -44,825
Total debt, $m
  7,332
  8,253
  10,428
  12,701
  15,080
  17,570
  20,175
  22,904
  25,762
  28,756
  31,892
  35,180
  38,626
  42,238
  46,026
  49,999
  54,165
  58,535
  63,119
  67,928
  72,973
  78,268
  83,823
  89,654
  95,772
  102,194
  108,933
  116,008
  123,433
  131,227
  139,409
Total liabilities, $m
  38,974
  39,895
  42,070
  44,343
  46,722
  49,212
  51,817
  54,546
  57,404
  60,398
  63,534
  66,822
  70,268
  73,880
  77,668
  81,641
  85,807
  90,177
  94,761
  99,570
  104,615
  109,910
  115,465
  121,296
  127,414
  133,836
  140,575
  147,650
  155,075
  162,869
  171,051
Total equity, $m
  12,287
  10,733
  11,318
  11,930
  12,570
  13,240
  13,941
  14,675
  15,444
  16,249
  17,093
  17,977
  18,905
  19,876
  20,896
  21,964
  23,085
  24,261
  25,494
  26,788
  28,145
  29,570
  31,064
  32,633
  34,279
  36,007
  37,820
  39,723
  41,721
  43,818
  46,019
Total liabilities and equity, $m
  51,261
  50,628
  53,388
  56,273
  59,292
  62,452
  65,758
  69,221
  72,848
  76,647
  80,627
  84,799
  89,173
  93,756
  98,564
  103,605
  108,892
  114,438
  120,255
  126,358
  132,760
  139,480
  146,529
  153,929
  161,693
  169,843
  178,395
  187,373
  196,796
  206,687
  217,070
Debt-to-equity ratio
  0.597
  0.770
  0.920
  1.060
  1.200
  1.330
  1.450
  1.560
  1.670
  1.770
  1.870
  1.960
  2.040
  2.130
  2.200
  2.280
  2.350
  2.410
  2.480
  2.540
  2.590
  2.650
  2.700
  2.750
  2.790
  2.840
  2.880
  2.920
  2.960
  2.990
  3.030
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
  5,247
  6,069
  6,937
  7,856
  8,829
  9,858
  10,947
  12,099
  13,319
  14,610
  16,691
  18,137
  19,667
  21,286
  22,999
  24,811
  26,727
  28,754
  30,897
  33,164
  35,560
  38,092
  40,769
  43,597
  46,586
  49,743
  53,078
  56,600
  60,319
  64,246
Depreciation, amort., depletion, $m
  1,902
  2,470
  2,551
  2,636
  2,725
  2,818
  2,915
  3,017
  3,124
  3,236
  3,353
  2,497
  2,625
  2,760
  2,902
  3,050
  3,206
  3,369
  3,540
  3,720
  3,909
  4,106
  4,314
  4,532
  4,760
  5,000
  5,252
  5,517
  5,794
  6,085
  6,391
Funds from operations, $m
  7,183
  7,717
  8,620
  9,573
  10,581
  11,647
  12,773
  13,964
  15,223
  16,555
  17,963
  19,188
  20,763
  22,428
  24,188
  26,049
  28,017
  30,096
  32,295
  34,618
  37,072
  39,666
  42,406
  45,301
  48,358
  51,586
  54,995
  58,594
  62,394
  66,404
  70,637
Change in working capital, $m
  -22
  -545
  -570
  -596
  -623
  -652
  -683
  -715
  -749
  -785
  -822
  -862
  -903
  -947
  -993
  -1,041
  -1,092
  -1,145
  -1,201
  -1,260
  -1,322
  -1,387
  -1,456
  -1,528
  -1,603
  -1,683
  -1,766
  -1,854
  -1,946
  -2,043
  -2,144
Cash from operations, $m
  7,205
  8,262
  9,190
  10,169
  11,205
  12,299
  13,456
  14,679
  15,972
  17,340
  18,785
  20,049
  21,666
  23,374
  25,181
  27,090
  29,108
  31,242
  33,496
  35,878
  38,395
  41,053
  43,862
  46,828
  49,961
  53,269
  56,761
  60,448
  64,340
  68,447
  72,781
Maintenance CAPEX, $m
  0
  -1,414
  -1,491
  -1,572
  -1,657
  -1,746
  -1,839
  -1,936
  -2,038
  -2,145
  -2,257
  -2,374
  -2,497
  -2,625
  -2,760
  -2,902
  -3,050
  -3,206
  -3,369
  -3,540
  -3,720
  -3,909
  -4,106
  -4,314
  -4,532
  -4,760
  -5,000
  -5,252
  -5,517
  -5,794
  -6,085
New CAPEX, $m
  -3,391
  -1,550
  -1,641
  -1,716
  -1,795
  -1,879
  -1,967
  -2,059
  -2,157
  -2,259
  -2,367
  -2,481
  -2,601
  -2,727
  -2,859
  -2,998
  -3,144
  -3,298
  -3,460
  -3,630
  -3,808
  -3,996
  -4,193
  -4,400
  -4,618
  -4,846
  -5,087
  -5,339
  -5,604
  -5,883
  -6,175
Cash from investing activities, $m
  -2,155
  -2,964
  -3,132
  -3,288
  -3,452
  -3,625
  -3,806
  -3,995
  -4,195
  -4,404
  -4,624
  -4,855
  -5,098
  -5,352
  -5,619
  -5,900
  -6,194
  -6,504
  -6,829
  -7,170
  -7,528
  -7,905
  -8,299
  -8,714
  -9,150
  -9,606
  -10,087
  -10,591
  -11,121
  -11,677
  -12,260
Free cash flow, $m
  5,050
  5,298
  6,058
  6,881
  7,753
  8,675
  9,651
  10,684
  11,777
  12,935
  14,161
  15,195
  16,568
  18,022
  19,561
  21,190
  22,914
  24,738
  26,667
  28,708
  30,866
  33,149
  35,563
  38,114
  40,811
  43,662
  46,674
  49,857
  53,219
  56,770
  60,521
Issuance/(repayment) of debt, $m
  -1,259
  2,052
  2,174
  2,274
  2,379
  2,489
  2,606
  2,729
  2,858
  2,994
  3,137
  3,287
  3,446
  3,613
  3,788
  3,972
  4,166
  4,370
  4,584
  4,809
  5,046
  5,294
  5,556
  5,830
  6,119
  6,422
  6,740
  7,074
  7,425
  7,794
  8,182
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
  2,052
  2,174
  2,274
  2,379
  2,489
  2,606
  2,729
  2,858
  2,994
  3,137
  3,287
  3,446
  3,613
  3,788
  3,972
  4,166
  4,370
  4,584
  4,809
  5,046
  5,294
  5,556
  5,830
  6,119
  6,422
  6,740
  7,074
  7,425
  7,794
  8,182
Total cash flow (excl. dividends), $m
  1,299
  7,350
  8,232
  9,155
  10,131
  11,164
  12,256
  13,412
  14,635
  15,929
  17,298
  18,482
  20,014
  21,635
  23,349
  25,163
  27,080
  29,107
  31,251
  33,517
  35,912
  38,443
  41,118
  43,944
  46,930
  50,084
  53,414
  56,931
  60,645
  64,565
  68,703
Retained Cash Flow (-), $m
  -1,437
  -564
  -585
  -612
  -640
  -670
  -701
  -734
  -769
  -805
  -844
  -884
  -927
  -972
  -1,019
  -1,069
  -1,121
  -1,176
  -1,233
  -1,294
  -1,357
  -1,424
  -1,495
  -1,569
  -1,646
  -1,728
  -1,813
  -1,903
  -1,998
  -2,097
  -2,201
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
 
  8,904
  7,647
  8,543
  9,491
  10,494
  11,555
  12,678
  13,866
  15,124
  16,454
  17,598
  19,087
  20,663
  22,330
  24,094
  25,959
  27,932
  30,018
  32,223
  34,555
  37,019
  39,624
  42,376
  45,284
  48,356
  51,601
  55,028
  58,647
  62,468
  66,502
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
 
  8,536
  7,001
  7,435
  7,815
  8,134
  8,386
  8,565
  8,667
  8,688
  8,626
  8,357
  8,145
  7,856
  7,497
  7,074
  6,597
  6,077
  5,528
  4,961
  4,391
  3,829
  3,288
  2,777
  2,306
  1,881
  1,505
  1,181
  907
  682
  501
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 throughout the United States and across the world. The Company's segments include Airline and Refinery. The Company's route network is centered around a system of hub, international gateway and airports that the Company operates in Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Minneapolis-St. Paul, New York-LaGuardia, New York- John F Kennedy International Airport, Paris-Charles de Gaulle, Salt Lake City, Seattle and Tokyo-Narita. Each of these operations includes flights that gather and distribute traffic from markets in the geographic region surrounding the hub or gateway to domestic and international cities and to other hubs or gateways. The Company's route network includes its international joint ventures, its alliances with other foreign airlines, its membership in SkyTeam and agreements with multiple domestic regional carriers that operate as Delta Connection.

FINANCIAL RATIOS  of  Delta Air Lines (DAL)

Valuation Ratios
P/E Ratio 8.9
Price to Sales 1
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 10.2
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 56.1%
Gross Margin - 3 Yr. Avg. 48.6%
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 5.5% 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 712.972 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 $38.0 billion.

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COMPANY NEWS

▶ Delta hiring 1,000 flight attendants, launching mini-series   [10:50AM  American City Business Journals]
▶ Cost Creep Remains American Airlines' Achilles Heel   [Oct-21-17 10:50AM  Motley Fool]
▶ [$$] United We Don't Stand   [12:01AM  Barrons.com]
▶ Delta Air Lines gets big accolade in OAG's on-time star ratings report   [04:39PM  American City Business Journals]
▶ Delta beats Charlotte Douglas' largest airline in on-time flights   [07:40AM  American City Business Journals]
▶ [$$] Delta Expects to Buy U.S.-Built CSeries Jets   [12:02AM  The Wall Street Journal]
▶ Delta CEO Bastian: Amazon would be 'well served' coming to Atlanta   [Oct-18-17 09:05PM  American City Business Journals]
▶ 7 things you need to know about Delta Air Lines' new Airbus-350   [06:53PM  American City Business Journals]
▶ [$$] Delta Expects to Buy U.S.-Built CSeries Jets   [12:33PM  The Wall Street Journal]
▶ This Is How Boeing Could Get Squeezed By Airbus, Bombardier   [04:28PM  Investor's Business Daily]
▶ Delta beats Southwest, American Airlines in on-time flights   [03:45PM  American City Business Journals]
▶ These U.S. airlines have the best on-time rates   [03:05PM  American City Business Journals]
▶ Delta Lands a Q3 Earnings Beat   [12:15AM  Motley Fool]
▶ Delta president: Our opportunities are at airports like RDU   [02:30PM  American City Business Journals]
▶ Say Aloha To Another Airfare Price War   [04:21PM  Investor's Business Daily]
▶ Delta: Can This Airline Stock Still Fly?   [10:58AM  Barrons.com]
▶ Company News For Oct 12, 2017   [09:59AM  Zacks]
▶ PRESS DIGEST-Canada-Oct 12   [07:01AM  Reuters]
▶ [$$] Delta Will Take Delivery of Bombardier Jets   [12:18AM  The Wall Street Journal]
▶ [$$] Delta Will Take Bombardier Jets   [04:56PM  The Wall Street Journal]
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.

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