Intrinsic value of Discovery, Inc. - DISCA

Previous Close

$26.67

  Intrinsic Value

$218.31

stock screener

  Rating & Target

str. buy

+719%

Previous close

$26.67

 
Intrinsic value

$218.31

 
Up/down potential

+719%

 
Rating

str. buy

We calculate the intrinsic value of DISCA 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  1.61
  50.70
  46.13
  42.02
  38.32
  34.98
  31.99
  29.29
  26.86
  24.67
  22.71
  20.93
  19.34
  17.91
  16.62
  15.45
  14.41
  13.47
  12.62
  11.86
  11.17
  10.56
  10.00
  9.50
  9.05
  8.65
  8.28
  7.95
  7.66
  7.39
  7.15
Revenue, $m
  6,497
  15,903
  23,240
  33,004
  45,650
  61,620
  81,329
  105,148
  133,389
  166,299
  204,057
  246,776
  294,505
  347,242
  404,941
  467,524
  534,890
  606,931
  683,534
  764,597
  850,028
  939,758
  1,033,738
  1,131,947
  1,234,393
  1,341,110
  1,452,164
  1,567,651
  1,687,693
  1,812,442
  1,942,077
Variable operating expenses, $m
 
  10,965
  15,986
  22,669
  31,324
  42,254
  55,743
  72,045
  91,374
  113,898
  139,741
  168,898
  201,565
  237,659
  277,150
  319,982
  366,089
  415,395
  467,824
  523,305
  581,776
  643,188
  707,510
  774,726
  844,842
  917,881
  993,889
  1,072,930
  1,155,089
  1,240,470
  1,329,195
Fixed operating expenses, $m
 
  1,461
  1,494
  1,526
  1,560
  1,594
  1,629
  1,665
  1,702
  1,739
  1,778
  1,817
  1,857
  1,898
  1,939
  1,982
  2,026
  2,070
  2,116
  2,162
  2,210
  2,258
  2,308
  2,359
  2,411
  2,464
  2,518
  2,573
  2,630
  2,688
  2,747
Total operating expenses, $m
  4,501
  12,426
  17,480
  24,195
  32,884
  43,848
  57,372
  73,710
  93,076
  115,637
  141,519
  170,715
  203,422
  239,557
  279,089
  321,964
  368,115
  417,465
  469,940
  525,467
  583,986
  645,446
  709,818
  777,085
  847,253
  920,345
  996,407
  1,075,503
  1,157,719
  1,243,158
  1,331,942
Operating income, $m
  1,996
  3,477
  5,760
  8,809
  12,766
  17,772
  23,956
  31,437
  40,313
  50,661
  62,539
  76,061
  91,083
  107,685
  125,852
  145,560
  166,775
  189,466
  213,595
  239,130
  266,043
  294,311
  323,920
  354,862
  387,140
  420,765
  455,757
  492,147
  529,973
  569,284
  610,135
EBITDA, $m
  4,091
  4,650
  7,437
  11,157
  15,983
  22,085
  29,624
  38,742
  49,557
  62,167
  76,639
  93,016
  111,317
  131,543
  153,674
  177,681
  203,525
  231,165
  260,557
  291,662
  324,444
  358,877
  394,943
  432,632
  471,949
  512,906
  555,528
  599,853
  645,926
  693,808
  743,566
Interest expense (income), $m
  343
  920
  1,582
  2,490
  3,697
  5,261
  7,236
  9,673
  12,619
  16,111
  20,181
  24,851
  30,134
  36,036
  42,558
  49,693
  57,433
  65,764
  74,673
  84,146
  94,171
  104,736
  115,832
  127,454
  139,600
  152,269
  165,466
  179,200
  193,482
  208,327
  223,754
Earnings before tax, $m
  1,671
  2,557
  4,178
  6,319
  9,069
  12,511
  16,721
  21,764
  27,694
  34,550
  42,358
  51,210
  60,950
  71,649
  83,294
  95,866
  109,343
  123,702
  138,922
  154,984
  171,872
  189,575
  208,087
  227,407
  247,540
  268,496
  290,291
  312,947
  336,492
  360,957
  386,381
Tax expense, $m
  453
  690
  1,128
  1,706
  2,449
  3,378
  4,515
  5,876
  7,477
  9,329
  11,437
  13,827
  16,456
  19,345
  22,490
  25,884
  29,523
  33,400
  37,509
  41,846
  46,405
  51,185
  56,184
  61,400
  66,836
  72,494
  78,379
  84,496
  90,853
  97,458
  104,323
Net income, $m
  1,194
  1,867
  3,050
  4,613
  6,620
  9,133
  12,206
  15,888
  20,217
  25,222
  30,921
  37,384
  44,493
  52,304
  60,805
  69,982
  79,820
  90,302
  101,413
  113,138
  125,467
  138,390
  151,904
  166,007
  180,704
  196,002
  211,912
  228,451
  245,639
  263,499
  282,058

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  300
  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
  15,672
  49,084
  71,727
  101,865
  140,895
  190,185
  251,016
  324,531
  411,694
  513,268
  629,807
  761,654
  908,967
  1,071,736
  1,249,819
  1,442,974
  1,650,896
  1,873,243
  2,109,674
  2,359,867
  2,623,545
  2,900,487
  3,190,549
  3,493,664
  3,809,853
  4,139,228
  4,481,989
  4,838,428
  5,208,928
  5,593,957
  5,994,066
Adjusted assets (=assets-cash), $m
  15,372
  49,084
  71,727
  101,865
  140,895
  190,185
  251,016
  324,531
  411,694
  513,268
  629,807
  761,654
  908,967
  1,071,736
  1,249,819
  1,442,974
  1,650,896
  1,873,243
  2,109,674
  2,359,867
  2,623,545
  2,900,487
  3,190,549
  3,493,664
  3,809,853
  4,139,228
  4,481,989
  4,838,428
  5,208,928
  5,593,957
  5,994,066
Revenue / Adjusted assets
  0.423
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
  0.324
Average production assets, $m
  3,925
  15,188
  22,194
  31,519
  43,596
  58,847
  77,669
  100,416
  127,386
  158,815
  194,875
  235,671
  281,252
  331,616
  386,719
  446,485
  510,820
  579,619
  652,775
  730,190
  811,777
  897,469
  987,220
  1,081,010
  1,178,845
  1,280,760
  1,386,817
  1,497,107
  1,611,747
  1,730,882
  1,854,684
Working capital, $m
  941
  1,670
  2,440
  3,465
  4,793
  6,470
  8,540
  11,041
  14,006
  17,461
  21,426
  25,911
  30,923
  36,460
  42,519
  49,090
  56,163
  63,728
  71,771
  80,283
  89,253
  98,675
  108,542
  118,854
  129,611
  140,817
  152,477
  164,603
  177,208
  190,306
  203,918
Total debt, $m
  7,923
  29,302
  46,103
  68,465
  97,425
  133,998
  179,135
  233,683
  298,358
  373,726
  460,197
  558,028
  667,334
  788,109
  920,246
  1,063,568
  1,217,846
  1,382,828
  1,558,259
  1,743,903
  1,939,551
  2,145,043
  2,360,268
  2,585,180
  2,819,792
  3,064,188
  3,318,517
  3,582,995
  3,857,906
  4,143,597
  4,440,478
Total liabilities, $m
  10,505
  36,421
  53,222
  75,584
  104,544
  141,117
  186,254
  240,802
  305,477
  380,845
  467,316
  565,147
  674,453
  795,228
  927,365
  1,070,687
  1,224,965
  1,389,947
  1,565,378
  1,751,022
  1,946,670
  2,152,162
  2,367,387
  2,592,299
  2,826,911
  3,071,307
  3,325,636
  3,590,114
  3,865,025
  4,150,716
  4,447,597
Total equity, $m
  5,167
  12,664
  18,506
  26,281
  36,351
  49,068
  64,762
  83,729
  106,217
  132,423
  162,490
  196,507
  234,513
  276,508
  322,453
  372,287
  425,931
  483,297
  544,296
  608,846
  676,875
  748,326
  823,162
  901,365
  982,942
  1,067,921
  1,156,353
  1,248,315
  1,343,904
  1,443,241
  1,546,469
Total liabilities and equity, $m
  15,672
  49,085
  71,728
  101,865
  140,895
  190,185
  251,016
  324,531
  411,694
  513,268
  629,806
  761,654
  908,966
  1,071,736
  1,249,818
  1,442,974
  1,650,896
  1,873,244
  2,109,674
  2,359,868
  2,623,545
  2,900,488
  3,190,549
  3,493,664
  3,809,853
  4,139,228
  4,481,989
  4,838,429
  5,208,929
  5,593,957
  5,994,066
Debt-to-equity ratio
  1.533
  2.310
  2.490
  2.610
  2.680
  2.730
  2.770
  2.790
  2.810
  2.820
  2.830
  2.840
  2.850
  2.850
  2.850
  2.860
  2.860
  2.860
  2.860
  2.860
  2.870
  2.870
  2.870
  2.870
  2.870
  2.870
  2.870
  2.870
  2.870
  2.870
  2.870
Adjusted equity ratio
  0.317
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258
  0.258

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,194
  1,867
  3,050
  4,613
  6,620
  9,133
  12,206
  15,888
  20,217
  25,222
  30,921
  37,384
  44,493
  52,304
  60,805
  69,982
  79,820
  90,302
  101,413
  113,138
  125,467
  138,390
  151,904
  166,007
  180,704
  196,002
  211,912
  228,451
  245,639
  263,499
  282,058
Depreciation, amort., depletion, $m
  2,095
  1,173
  1,677
  2,348
  3,216
  4,314
  5,668
  7,304
  9,244
  11,506
  14,100
  16,955
  20,234
  23,857
  27,822
  32,121
  36,750
  41,699
  46,962
  52,532
  58,401
  64,566
  71,023
  77,770
  84,809
  92,141
  99,771
  107,706
  115,953
  124,524
  133,430
Funds from operations, $m
  -705
  3,039
  4,727
  6,961
  9,837
  13,446
  17,874
  23,192
  29,461
  36,727
  45,021
  54,338
  64,727
  76,161
  88,626
  102,104
  116,570
  132,002
  148,375
  165,670
  183,868
  202,956
  222,927
  243,778
  265,513
  288,143
  311,683
  336,157
  361,592
  388,023
  415,489
Change in working capital, $m
  -2,078
  562
  770
  1,025
  1,328
  1,677
  2,069
  2,501
  2,965
  3,456
  3,965
  4,485
  5,012
  5,537
  6,058
  6,571
  7,073
  7,564
  8,043
  8,512
  8,970
  9,422
  9,868
  10,312
  10,757
  11,205
  11,661
  12,126
  12,604
  13,099
  13,612
Cash from operations, $m
  1,373
  2,477
  3,956
  5,935
  8,509
  11,770
  15,804
  20,691
  26,496
  33,272
  41,056
  49,853
  59,716
  70,624
  82,568
  95,532
  109,496
  124,437
  140,332
  157,158
  174,898
  193,535
  213,059
  233,466
  254,756
  276,938
  300,023
  324,031
  348,987
  374,924
  401,877
Maintenance CAPEX, $m
  0
  -725
  -1,093
  -1,597
  -2,268
  -3,136
  -4,234
  -5,588
  -7,224
  -9,164
  -11,426
  -14,020
  -16,955
  -20,234
  -23,857
  -27,822
  -32,121
  -36,750
  -41,699
  -46,962
  -52,532
  -58,401
  -64,566
  -71,023
  -77,770
  -84,809
  -92,141
  -99,771
  -107,706
  -115,953
  -124,524
New CAPEX, $m
  -88
  -5,107
  -7,006
  -9,325
  -12,077
  -15,251
  -18,822
  -22,747
  -26,970
  -31,429
  -36,059
  -40,796
  -45,581
  -50,364
  -55,102
  -59,766
  -64,335
  -68,799
  -73,156
  -77,415
  -81,587
  -85,692
  -89,751
  -93,790
  -97,835
  -101,915
  -106,057
  -110,290
  -114,640
  -119,135
  -123,802
Cash from investing activities, $m
  -256
  -5,832
  -8,099
  -10,922
  -14,345
  -18,387
  -23,056
  -28,335
  -34,194
  -40,593
  -47,485
  -54,816
  -62,536
  -70,598
  -78,959
  -87,588
  -96,456
  -105,549
  -114,855
  -124,377
  -134,119
  -144,093
  -154,317
  -164,813
  -175,605
  -186,724
  -198,198
  -210,061
  -222,346
  -235,088
  -248,326
Free cash flow, $m
  1,117
  -3,355
  -4,142
  -4,986
  -5,835
  -6,618
  -7,252
  -7,644
  -7,698
  -7,322
  -6,429
  -4,963
  -2,820
  26
  3,608
  7,945
  13,040
  18,889
  25,476
  32,781
  40,779
  49,442
  58,742
  68,653
  79,151
  90,214
  101,825
  113,970
  126,642
  139,835
  153,551
Issuance/(repayment) of debt, $m
  289
  12,257
  16,801
  22,362
  28,960
  36,573
  45,137
  54,548
  64,675
  75,368
  86,471
  97,831
  109,306
  120,775
  132,138
  143,321
  154,278
  164,982
  175,432
  185,643
  195,649
  205,492
  215,226
  224,911
  234,612
  244,396
  254,329
  264,478
  274,911
  285,691
  296,881
Issuance/(repurchase) of shares, $m
  -1,431
  2,411
  2,792
  3,162
  3,449
  3,584
  3,488
  3,079
  2,271
  985
  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  
  -1,177
  14,668
  19,593
  25,524
  32,409
  40,157
  48,625
  57,627
  66,946
  76,353
  86,471
  97,831
  109,306
  120,775
  132,138
  143,321
  154,278
  164,982
  175,432
  185,643
  195,649
  205,492
  215,226
  224,911
  234,612
  244,396
  254,329
  264,478
  274,911
  285,691
  296,881
Total cash flow (excl. dividends), $m
  -90
  11,313
  15,450
  20,538
  26,574
  33,539
  41,374
  49,983
  59,248
  69,031
  80,043
  92,868
  106,486
  120,801
  135,746
  151,266
  167,318
  183,871
  200,908
  218,425
  236,427
  254,933
  273,968
  293,564
  313,763
  334,609
  356,153
  378,449
  401,553
  425,526
  450,432
Retained Cash Flow (-), $m
  284
  -4,278
  -5,842
  -7,775
  -10,070
  -12,717
  -15,694
  -18,967
  -22,488
  -26,206
  -30,067
  -34,017
  -38,007
  -41,994
  -45,945
  -49,834
  -53,644
  -57,366
  -60,999
  -64,550
  -68,029
  -71,451
  -74,836
  -78,204
  -81,577
  -84,979
  -88,432
  -91,961
  -95,589
  -99,337
  -103,228
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
 
  7,035
  9,608
  12,763
  16,505
  20,822
  25,679
  31,016
  36,760
  42,825
  49,976
  58,851
  68,479
  78,806
  89,801
  101,432
  113,674
  126,505
  139,909
  153,875
  168,399
  183,482
  199,132
  215,361
  232,186
  249,631
  267,721
  286,487
  305,964
  326,189
  347,204
Discount rate, %
 
  9.20
  9.66
  10.14
  10.65
  11.18
  11.74
  12.33
  12.95
  13.59
  14.27
  14.99
  15.74
  16.52
  17.35
  18.22
  19.13
  20.08
  21.09
  22.14
  23.25
  24.41
  25.63
  26.91
  28.26
  29.67
  31.15
  32.71
  34.35
  36.07
  37.87
PV of cash for distribution, $m
 
  6,442
  7,990
  9,551
  11,010
  12,256
  13,191
  13,745
  13,881
  13,600
  13,163
  12,667
  11,857
  10,796
  9,564
  8,243
  6,911
  5,636
  4,468
  3,442
  2,575
  1,869
  1,315
  897
  591
  377
  232
  138
  79
  43
  23
Current shareholders' claim on cash, %
  100
  85.3
  75.3
  68.3
  63.3
  59.8
  57.3
  55.7
  54.9
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5
  54.5

Discovery Communications, Inc. (Discovery) is a global media company. The Company provides content across multiple distribution platforms, including pay-television (pay-TV), free-to-air (FTA) and broadcast television, Websites, digital distribution arrangements and content licensing agreements. Its segments include U.S. Networks, which consists principally of domestic television networks and digital content services; International Networks, consisting primarily of international television networks and digital content services, and Education and Other, which consists principally of curriculum-based product and service offerings, and production studios. The Company's portfolio of networks includes television brands, such as Discovery Channel, Animal Planet, ID, Velocity (known as Turbo outside of the United States) and Eurosport. It is also engaged in extending content distribution across various platforms, including brand-aligned Websites, Web-native networks and online streaming.

FINANCIAL RATIOS  of  Discovery, Inc. (DISCA)

Valuation Ratios
P/E Ratio 8.7
Price to Sales 1.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow 8.1
Growth Rates
Sales Growth Rate 1.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.6%
Cap. Spend. - 3 Yr. Gr. Rate -5.2%
Financial Strength
Quick Ratio 4
Current Ratio 0.2
LT Debt to Equity 151.8%
Total Debt to Equity 153.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 9.2%
Ret/ On Assets - 3 Yr. Avg. 8.6%
Return On Total Capital 9.1%
Ret/ On T. Cap. - 3 Yr. Avg. 8.7%
Return On Equity 22.5%
Return On Equity - 3 Yr. Avg. 20.2%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 62.6%
Gross Margin - 3 Yr. Avg. 64%
EBITDA Margin 63.2%
EBITDA Margin - 3 Yr. Avg. 62.5%
Operating Margin 30.7%
Oper. Margin - 3 Yr. Avg. 31.6%
Pre-Tax Margin 25.7%
Pre-Tax Margin - 3 Yr. Avg. 26%
Net Profit Margin 18.4%
Net Profit Margin - 3 Yr. Avg. 17.6%
Effective Tax Rate 27.1%
Eff/ Tax Rate - 3 Yr. Avg. 31.6%
Payout Ratio 0%

DISCA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DISCA stock intrinsic value calculation we used $10553 million for the last fiscal year's total revenue generated by Discovery, Inc.. The default revenue input number comes from 2016 income statement of Discovery, Inc.. 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 DISCA stock valuation model: a) initial revenue growth rate of 50.7% 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 9.2%, whose default value for DISCA is calculated based on our internal credit rating of Discovery, Inc., 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 Discovery, Inc..
    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 DISCA stock the variable cost ratio is equal to 69.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1430 million in the base year in the intrinsic value calculation for DISCA 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 5.4% for Discovery, Inc..

Corporate tax rate of 27% is the nominal tax rate for Discovery, Inc.. 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 DISCA 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 DISCA are equal to 95.5%.

Life of production assets of 13.9 years is the average useful life of capital assets used in Discovery, Inc. 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 DISCA is equal to 10.5%. 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 - $8386 million for Discovery, Inc. - 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 523.879 million for Discovery, Inc. 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 Discovery, Inc. at the current share price and the inputted number of shares is $14.0 billion.

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Financial statements of DISCA
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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