Intrinsic value of Discovery Communications Series A - DISCA

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$26.05

  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 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

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 9.9

 

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, %
  1.61
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
Revenue, $m
  6,497
  6,711
  6,944
  7,196
  7,466
  7,757
  8,067
  8,397
  8,749
  9,122
  9,518
  9,937
  10,381
  10,851
  11,346
  11,869
  12,421
  13,003
  13,616
  14,263
  14,943
  15,659
  16,413
  17,206
  18,041
  18,918
  19,841
  20,811
  21,831
  22,903
  24,030
Variable operating expenses, $m
 
  4,604
  4,736
  4,879
  5,032
  5,196
  5,372
  5,559
  5,758
  5,969
  6,194
  5,627
  5,878
  6,144
  6,425
  6,721
  7,034
  7,363
  7,710
  8,076
  8,461
  8,867
  9,294
  9,743
  10,215
  10,712
  11,235
  11,784
  12,362
  12,969
  13,607
Fixed operating expenses, $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
Total operating expenses, $m
  4,501
  4,604
  4,736
  4,879
  5,032
  5,196
  5,372
  5,559
  5,758
  5,969
  6,194
  5,627
  5,878
  6,144
  6,425
  6,721
  7,034
  7,363
  7,710
  8,076
  8,461
  8,867
  9,294
  9,743
  10,215
  10,712
  11,235
  11,784
  12,362
  12,969
  13,607
Operating income, $m
  1,996
  2,107
  2,208
  2,317
  2,435
  2,560
  2,695
  2,838
  2,991
  3,153
  3,324
  4,310
  4,503
  4,706
  4,921
  5,148
  5,388
  5,640
  5,906
  6,186
  6,481
  6,792
  7,119
  7,463
  7,825
  8,206
  8,606
  9,027
  9,469
  9,934
  10,423
EBITDA, $m
  4,091
  3,341
  3,457
  3,582
  3,717
  3,862
  4,016
  4,180
  4,355
  4,541
  4,739
  4,947
  5,168
  5,402
  5,649
  5,909
  6,184
  6,474
  6,779
  7,101
  7,439
  7,796
  8,171
  8,566
  8,981
  9,418
  9,878
  10,361
  10,869
  11,402
  11,963
Interest expense (income), $m
  343
  345
  361
  377
  395
  415
  435
  457
  481
  506
  532
  561
  591
  622
  656
  691
  728
  767
  809
  853
  899
  947
  998
  1,052
  1,108
  1,168
  1,230
  1,296
  1,365
  1,438
  1,514
Earnings before tax, $m
  1,671
  1,762
  1,847
  1,940
  2,039
  2,146
  2,260
  2,381
  2,510
  2,647
  2,792
  3,750
  3,912
  4,084
  4,266
  4,457
  4,660
  4,873
  5,097
  5,334
  5,583
  5,845
  6,121
  6,411
  6,717
  7,038
  7,376
  7,731
  8,104
  8,496
  8,909
Tax expense, $m
  453
  476
  499
  524
  551
  579
  610
  643
  678
  715
  754
  1,012
  1,056
  1,103
  1,152
  1,204
  1,258
  1,316
  1,376
  1,440
  1,507
  1,578
  1,653
  1,731
  1,814
  1,900
  1,991
  2,087
  2,188
  2,294
  2,405
Net income, $m
  1,194
  1,286
  1,349
  1,416
  1,489
  1,566
  1,650
  1,738
  1,832
  1,932
  2,038
  2,737
  2,856
  2,982
  3,114
  3,254
  3,401
  3,557
  3,721
  3,894
  4,075
  4,267
  4,468
  4,680
  4,903
  5,138
  5,384
  5,643
  5,916
  6,202
  6,503

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
  15,758
  15,980
  16,534
  17,133
  17,777
  18,468
  19,206
  19,993
  20,830
  21,719
  22,662
  23,661
  24,717
  25,835
  27,015
  28,260
  29,574
  30,960
  32,420
  33,958
  35,578
  37,284
  39,079
  40,967
  42,954
  45,043
  47,240
  49,551
  51,979
  54,532
  57,215
Adjusted assets (=assets-cash), $m
  15,458
  15,980
  16,534
  17,133
  17,777
  18,468
  19,206
  19,993
  20,830
  21,719
  22,662
  23,661
  24,717
  25,835
  27,015
  28,260
  29,574
  30,960
  32,420
  33,958
  35,578
  37,284
  39,079
  40,967
  42,954
  45,043
  47,240
  49,551
  51,979
  54,532
  57,215
Revenue / Adjusted assets
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
Average production assets, $m
  4,166
  4,302
  4,451
  4,613
  4,786
  4,972
  5,171
  5,382
  5,608
  5,847
  6,101
  6,370
  6,654
  6,955
  7,273
  7,608
  7,962
  8,335
  8,728
  9,142
  9,578
  10,038
  10,521
  11,029
  11,564
  12,127
  12,718
  13,340
  13,994
  14,681
  15,403
Working capital, $m
  1,038
  846
  875
  907
  941
  977
  1,016
  1,058
  1,102
  1,149
  1,199
  1,252
  1,308
  1,367
  1,430
  1,496
  1,565
  1,638
  1,716
  1,797
  1,883
  1,973
  2,068
  2,168
  2,273
  2,384
  2,500
  2,622
  2,751
  2,886
  3,028
Total debt, $m
  7,923
  8,198
  8,575
  8,982
  9,421
  9,890
  10,392
  10,927
  11,496
  12,101
  12,742
  13,421
  14,140
  14,899
  15,702
  16,549
  17,443
  18,385
  19,378
  20,424
  21,525
  22,685
  23,905
  25,190
  26,541
  27,961
  29,455
  31,026
  32,678
  34,414
  36,238
Total liabilities, $m
  10,591
  10,866
  11,243
  11,650
  12,089
  12,558
  13,060
  13,595
  14,164
  14,769
  15,410
  16,089
  16,808
  17,567
  18,370
  19,217
  20,111
  21,053
  22,046
  23,092
  24,193
  25,353
  26,573
  27,858
  29,209
  30,629
  32,123
  33,694
  35,346
  37,082
  38,906
Total equity, $m
  5,167
  5,113
  5,291
  5,483
  5,689
  5,910
  6,146
  6,398
  6,666
  6,950
  7,252
  7,571
  7,910
  8,267
  8,645
  9,043
  9,464
  9,907
  10,374
  10,867
  11,385
  11,931
  12,505
  13,109
  13,745
  14,414
  15,117
  15,856
  16,633
  17,450
  18,309
Total liabilities and equity, $m
  15,758
  15,979
  16,534
  17,133
  17,778
  18,468
  19,206
  19,993
  20,830
  21,719
  22,662
  23,660
  24,718
  25,834
  27,015
  28,260
  29,575
  30,960
  32,420
  33,959
  35,578
  37,284
  39,078
  40,967
  42,954
  45,043
  47,240
  49,550
  51,979
  54,532
  57,215
Debt-to-equity ratio
  1.533
  1.600
  1.620
  1.640
  1.660
  1.670
  1.690
  1.710
  1.720
  1.740
  1.760
  1.770
  1.790
  1.800
  1.820
  1.830
  1.840
  1.860
  1.870
  1.880
  1.890
  1.900
  1.910
  1.920
  1.930
  1.940
  1.950
  1.960
  1.960
  1.970
  1.980
Adjusted equity ratio
  0.315
  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
  1,194
  1,286
  1,349
  1,416
  1,489
  1,566
  1,650
  1,738
  1,832
  1,932
  2,038
  2,737
  2,856
  2,982
  3,114
  3,254
  3,401
  3,557
  3,721
  3,894
  4,075
  4,267
  4,468
  4,680
  4,903
  5,138
  5,384
  5,643
  5,916
  6,202
  6,503
Depreciation, amort., depletion, $m
  2,095
  1,234
  1,249
  1,265
  1,283
  1,301
  1,321
  1,342
  1,365
  1,389
  1,414
  637
  665
  696
  727
  761
  796
  834
  873
  914
  958
  1,004
  1,052
  1,103
  1,156
  1,213
  1,272
  1,334
  1,399
  1,468
  1,540
Funds from operations, $m
  -705
  2,521
  2,598
  2,681
  2,771
  2,868
  2,971
  3,080
  3,197
  3,321
  3,452
  3,374
  3,521
  3,677
  3,841
  4,015
  4,198
  4,391
  4,594
  4,808
  5,033
  5,271
  5,520
  5,783
  6,060
  6,350
  6,656
  6,977
  7,315
  7,671
  8,044
Change in working capital, $m
  -2,078
  27
  29
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  70
  73
  77
  81
  86
  90
  95
  100
  105
  111
  116
  122
  129
  135
  142
Cash from operations, $m
  1,373
  2,493
  2,568
  2,650
  2,737
  2,831
  2,932
  3,039
  3,153
  3,274
  3,402
  3,321
  3,466
  3,618
  3,779
  3,949
  4,128
  4,317
  4,517
  4,726
  4,948
  5,180
  5,425
  5,683
  5,954
  6,240
  6,540
  6,855
  7,187
  7,535
  7,902
Maintenance CAPEX, $m
  0
  -417
  -430
  -445
  -461
  -479
  -497
  -517
  -538
  -561
  -585
  -610
  -637
  -665
  -696
  -727
  -761
  -796
  -834
  -873
  -914
  -958
  -1,004
  -1,052
  -1,103
  -1,156
  -1,213
  -1,272
  -1,334
  -1,399
  -1,468
New CAPEX, $m
  -88
  -137
  -149
  -161
  -173
  -186
  -199
  -212
  -225
  -239
  -254
  -269
  -285
  -301
  -318
  -335
  -354
  -373
  -393
  -414
  -436
  -459
  -483
  -508
  -535
  -563
  -592
  -622
  -654
  -687
  -722
Cash from investing activities, $m
  -256
  -554
  -579
  -606
  -634
  -665
  -696
  -729
  -763
  -800
  -839
  -879
  -922
  -966
  -1,014
  -1,062
  -1,115
  -1,169
  -1,227
  -1,287
  -1,350
  -1,417
  -1,487
  -1,560
  -1,638
  -1,719
  -1,805
  -1,894
  -1,988
  -2,086
  -2,190
Free cash flow, $m
  1,117
  1,940
  1,989
  2,043
  2,103
  2,167
  2,236
  2,310
  2,389
  2,474
  2,564
  2,442
  2,544
  2,652
  2,766
  2,886
  3,014
  3,148
  3,290
  3,440
  3,597
  3,763
  3,938
  4,123
  4,317
  4,521
  4,736
  4,962
  5,199
  5,449
  5,711
Issuance/(repayment) of debt, $m
  289
  357
  377
  407
  438
  470
  502
  535
  569
  605
  641
  679
  719
  760
  802
  847
  894
  942
  993
  1,046
  1,102
  1,160
  1,220
  1,284
  1,351
  1,421
  1,494
  1,571
  1,651
  1,736
  1,824
Issuance/(repurchase) of shares, $m
  -1,431
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,177
  357
  377
  407
  438
  470
  502
  535
  569
  605
  641
  679
  719
  760
  802
  847
  894
  942
  993
  1,046
  1,102
  1,160
  1,220
  1,284
  1,351
  1,421
  1,494
  1,571
  1,651
  1,736
  1,824
Total cash flow (excl. dividends), $m
  -90
  2,298
  2,366
  2,451
  2,541
  2,636
  2,738
  2,845
  2,958
  3,078
  3,205
  3,122
  3,263
  3,411
  3,568
  3,733
  3,907
  4,090
  4,283
  4,486
  4,699
  4,923
  5,159
  5,407
  5,668
  5,942
  6,230
  6,532
  6,850
  7,185
  7,536
Retained Cash Flow (-), $m
  284
  -164
  -177
  -192
  -206
  -221
  -236
  -252
  -268
  -284
  -302
  -320
  -338
  -358
  -378
  -399
  -421
  -443
  -467
  -492
  -518
  -546
  -574
  -604
  -636
  -669
  -703
  -739
  -777
  -817
  -859
Prev. year cash balance distribution, $m
 
  218
  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
 
  2,351
  2,188
  2,259
  2,334
  2,415
  2,501
  2,593
  2,690
  2,794
  2,903
  2,802
  2,924
  3,054
  3,190
  3,335
  3,487
  3,647
  3,816
  3,993
  4,180
  4,377
  4,585
  4,803
  5,032
  5,273
  5,527
  5,793
  6,073
  6,368
  6,677
Discount rate, %
 
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
 
  2,203
  1,910
  1,824
  1,731
  1,633
  1,529
  1,420
  1,309
  1,195
  1,080
  897
  796
  697
  603
  515
  433
  358
  292
  233
  183
  141
  106
  78
  56
  40
  27
  18
  12
  7
  4
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

Discovery Communications, Inc. operates as a media company worldwide. The company operates through U.S. Networks, International Networks, and Education and Other segments. It owns and operates various television networks under the Discovery Channel, TLC, Animal Planet, Investigation Discovery, Science Channel, Velocity, Discovery Family, American Heroes Channel, Destination America, Discovery Life, Oprah Winfrey Network, Eurosport, DMAX, and Discovery Kids brands, as well as other regional television networks. The company’s content spans genres, including survival, exploration, sports, lifestyle, general entertainment, heroes, adventure, crime and investigation, health, and kids. It also develops and sells curriculum-based education products and services, such as an online suite of curriculum-based video on demand (VOD) tools, professional development services, and digital textbooks, as well as student assessments; and publishes hard copy curriculum-based content for K-12 schools. In addition, the company operates production studios that develop content for television service providers, as well as Websites. It provides content through various distribution platforms comprising pay-television, free-to-air and broadcast television, Websites, digital distribution arrangements, and content licensing agreements, as well as various platforms that include brand-aligned Websites, Web-native networks, on-line streaming, mobile devices, VOD, and broadband channels. As of December 31, 2016, the company operated approximately 400 distribution feeds in 40 languages internationally. Discovery Communications, Inc. is headquartered in Silver Spring, Maryland.

FINANCIAL RATIOS  of  Discovery Communications Series A (DISCA)

Valuation Ratios
P/E Ratio 8.5
Price to Sales 1.6
Price to Book 2
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 7.9
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 0.3
LT Debt to Equity 151.8%
Total Debt to Equity 153.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 9.1%
Ret/ On Assets - 3 Yr. Avg. 8.5%
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 $6497 million for the last fiscal year's total revenue generated by Discovery Communications Series A. The default revenue input number comes from 2016 income statement of Discovery Communications Series A. 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 3.3% 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 6.7%, whose default value for DISCA is calculated based on our internal credit rating of Discovery Communications Series A, 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 Communications Series A.
    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%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 4.4% for Discovery Communications Series A.

Corporate tax rate of 27% is the nominal tax rate for Discovery Communications Series A. 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 64.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Discovery Communications Series A 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 12.6%. 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 - $5167 million for Discovery Communications Series A - 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 379.383 million for Discovery Communications Series A 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 Communications Series A at the current share price and the inputted number of shares is $9.9 billion.


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Stock chart of DISCA Financial statements of DISCA Annual reports 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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