Intrinsic value of Discovery Communications Series C - DISCK

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$28.71

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$28.71

 
Intrinsic value

$50.71

 
Up/down potential

+77%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of DISCK 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 11.4

 

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
  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
  6,497
  6,627
  6,779
  6,954
  7,149
  7,366
  7,604
  7,863
  8,143
  8,445
  8,769
  9,116
  9,486
  9,880
  10,298
  10,743
  11,213
  11,712
  12,239
  12,796
  13,383
  14,004
  14,658
  15,348
  16,074
  16,839
  17,645
  18,493
  19,386
  20,324
  21,312
Variable operating expenses, $m
 
  4,557
  4,643
  4,741
  4,852
  4,975
  5,110
  5,256
  5,415
  5,586
  5,770
  5,162
  5,371
  5,594
  5,831
  6,083
  6,350
  6,632
  6,930
  7,245
  7,578
  7,930
  8,300
  8,691
  9,102
  9,535
  9,992
  10,472
  10,977
  11,509
  12,068
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
  4,557
  4,643
  4,741
  4,852
  4,975
  5,110
  5,256
  5,415
  5,586
  5,770
  5,162
  5,371
  5,594
  5,831
  6,083
  6,350
  6,632
  6,930
  7,245
  7,578
  7,930
  8,300
  8,691
  9,102
  9,535
  9,992
  10,472
  10,977
  11,509
  12,068
Operating income, $m
  1,996
  2,070
  2,137
  2,212
  2,297
  2,391
  2,494
  2,606
  2,728
  2,859
  3,000
  3,954
  4,114
  4,285
  4,467
  4,660
  4,864
  5,080
  5,309
  5,550
  5,805
  6,074
  6,358
  6,657
  6,972
  7,304
  7,654
  8,021
  8,409
  8,816
  9,244
EBITDA, $m
  4,091
  3,594
  3,677
  3,772
  3,878
  3,995
  4,124
  4,265
  4,417
  4,581
  4,756
  4,944
  5,145
  5,359
  5,586
  5,827
  6,082
  6,352
  6,638
  6,940
  7,259
  7,596
  7,950
  8,324
  8,719
  9,134
  9,571
  10,031
  10,515
  11,024
  11,559
Interest expense (income), $m
  343
  345
  355
  366
  378
  392
  407
  424
  443
  463
  484
  507
  532
  558
  586
  616
  648
  681
  717
  754
  794
  836
  880
  927
  976
  1,028
  1,082
  1,140
  1,200
  1,264
  1,330
Earnings before tax, $m
  1,671
  1,725
  1,782
  1,847
  1,919
  1,999
  2,087
  2,182
  2,285
  2,396
  2,515
  3,447
  3,582
  3,727
  3,880
  4,043
  4,216
  4,399
  4,592
  4,796
  5,011
  5,238
  5,478
  5,730
  5,996
  6,276
  6,571
  6,882
  7,208
  7,552
  7,914
Tax expense, $m
  453
  466
  481
  499
  518
  540
  563
  589
  617
  647
  679
  931
  967
  1,006
  1,048
  1,092
  1,138
  1,188
  1,240
  1,295
  1,353
  1,414
  1,479
  1,547
  1,619
  1,695
  1,774
  1,858
  1,946
  2,039
  2,137
Net income, $m
  1,194
  1,260
  1,301
  1,348
  1,401
  1,459
  1,523
  1,593
  1,668
  1,749
  1,836
  2,516
  2,615
  2,721
  2,833
  2,952
  3,078
  3,211
  3,352
  3,501
  3,658
  3,824
  3,999
  4,183
  4,377
  4,582
  4,797
  5,024
  5,262
  5,513
  5,777

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
  15,778
  16,141
  16,556
  17,022
  17,538
  18,104
  18,721
  19,388
  20,107
  20,879
  21,704
  22,585
  23,523
  24,520
  25,578
  26,699
  27,885
  29,140
  30,466
  31,865
  33,342
  34,900
  36,542
  38,272
  40,094
  42,012
  44,032
  46,156
  48,392
  50,743
Adjusted assets (=assets-cash), $m
  15,458
  15,778
  16,141
  16,556
  17,022
  17,538
  18,104
  18,721
  19,388
  20,107
  20,879
  21,704
  22,585
  23,523
  24,520
  25,578
  26,699
  27,885
  29,140
  30,466
  31,865
  33,342
  34,900
  36,542
  38,272
  40,094
  42,012
  44,032
  46,156
  48,392
  50,743
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
  4,248
  4,346
  4,457
  4,583
  4,722
  4,874
  5,040
  5,220
  5,413
  5,621
  5,843
  6,080
  6,333
  6,601
  6,886
  7,188
  7,507
  7,845
  8,202
  8,579
  8,976
  9,396
  9,838
  10,304
  10,794
  11,311
  11,854
  12,426
  13,028
  13,661
Working capital, $m
  1,038
  835
  854
  876
  901
  928
  958
  991
  1,026
  1,064
  1,105
  1,149
  1,195
  1,245
  1,298
  1,354
  1,413
  1,476
  1,542
  1,612
  1,686
  1,764
  1,847
  1,934
  2,025
  2,122
  2,223
  2,330
  2,443
  2,561
  2,685
Total debt, $m
  7,923
  8,061
  8,308
  8,590
  8,907
  9,258
  9,643
  10,062
  10,516
  11,005
  11,530
  12,091
  12,690
  13,328
  14,006
  14,725
  15,487
  16,294
  17,147
  18,049
  19,000
  20,005
  21,064
  22,181
  23,357
  24,596
  25,900
  27,273
  28,718
  30,238
  31,837
Total liabilities, $m
  10,591
  10,729
  10,976
  11,258
  11,575
  11,926
  12,311
  12,730
  13,184
  13,673
  14,198
  14,759
  15,358
  15,996
  16,674
  17,393
  18,155
  18,962
  19,815
  20,717
  21,668
  22,673
  23,732
  24,849
  26,025
  27,264
  28,568
  29,941
  31,386
  32,906
  34,505
Total equity, $m
  5,167
  5,049
  5,165
  5,298
  5,447
  5,612
  5,793
  5,991
  6,204
  6,434
  6,681
  6,945
  7,227
  7,527
  7,846
  8,185
  8,544
  8,923
  9,325
  9,749
  10,197
  10,670
  11,168
  11,693
  12,247
  12,830
  13,444
  14,090
  14,770
  15,485
  16,238
Total liabilities and equity, $m
  15,758
  15,778
  16,141
  16,556
  17,022
  17,538
  18,104
  18,721
  19,388
  20,107
  20,879
  21,704
  22,585
  23,523
  24,520
  25,578
  26,699
  27,885
  29,140
  30,466
  31,865
  33,343
  34,900
  36,542
  38,272
  40,094
  42,012
  44,031
  46,156
  48,391
  50,743
Debt-to-equity ratio
  1.533
  1.600
  1.610
  1.620
  1.640
  1.650
  1.660
  1.680
  1.690
  1.710
  1.730
  1.740
  1.760
  1.770
  1.780
  1.800
  1.810
  1.830
  1.840
  1.850
  1.860
  1.870
  1.890
  1.900
  1.910
  1.920
  1.930
  1.940
  1.940
  1.950
  1.960
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
  1,260
  1,301
  1,348
  1,401
  1,459
  1,523
  1,593
  1,668
  1,749
  1,836
  2,516
  2,615
  2,721
  2,833
  2,952
  3,078
  3,211
  3,352
  3,501
  3,658
  3,824
  3,999
  4,183
  4,377
  4,582
  4,797
  5,024
  5,262
  5,513
  5,777
Depreciation, amort., depletion, $m
  2,095
  1,524
  1,541
  1,559
  1,581
  1,604
  1,630
  1,658
  1,689
  1,722
  1,757
  990
  1,031
  1,073
  1,119
  1,167
  1,218
  1,272
  1,330
  1,390
  1,454
  1,521
  1,593
  1,667
  1,746
  1,830
  1,917
  2,009
  2,106
  2,208
  2,315
Funds from operations, $m
  -705
  2,784
  2,841
  2,907
  2,982
  3,064
  3,153
  3,251
  3,357
  3,471
  3,593
  3,506
  3,646
  3,794
  3,952
  4,119
  4,296
  4,483
  4,682
  4,891
  5,112
  5,345
  5,591
  5,850
  6,124
  6,411
  6,714
  7,033
  7,368
  7,721
  8,092
Change in working capital, $m
  -2,078
  16
  19
  22
  25
  27
  30
  33
  35
  38
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  92
  96
  102
  107
  112
  118
  124
Cash from operations, $m
  1,373
  2,685
  2,822
  2,886
  2,957
  3,036
  3,123
  3,219
  3,322
  3,433
  3,552
  3,463
  3,599
  3,744
  3,899
  4,063
  4,237
  4,421
  4,615
  4,821
  5,038
  5,267
  5,509
  5,764
  6,032
  6,315
  6,613
  6,926
  7,256
  7,603
  7,968
Maintenance CAPEX, $m
  0
  -706
  -720
  -737
  -755
  -777
  -800
  -826
  -854
  -885
  -918
  -953
  -990
  -1,031
  -1,073
  -1,119
  -1,167
  -1,218
  -1,272
  -1,330
  -1,390
  -1,454
  -1,521
  -1,593
  -1,667
  -1,746
  -1,830
  -1,917
  -2,009
  -2,106
  -2,208
New CAPEX, $m
  -88
  -82
  -98
  -112
  -125
  -139
  -152
  -166
  -180
  -194
  -208
  -222
  -237
  -253
  -268
  -285
  -302
  -319
  -338
  -357
  -377
  -398
  -419
  -442
  -466
  -491
  -516
  -544
  -572
  -602
  -633
Cash from investing activities, $m
  -256
  -788
  -818
  -849
  -880
  -916
  -952
  -992
  -1,034
  -1,079
  -1,126
  -1,175
  -1,227
  -1,284
  -1,341
  -1,404
  -1,469
  -1,537
  -1,610
  -1,687
  -1,767
  -1,852
  -1,940
  -2,035
  -2,133
  -2,237
  -2,346
  -2,461
  -2,581
  -2,708
  -2,841
Free cash flow, $m
  1,117
  1,896
  2,004
  2,037
  2,076
  2,121
  2,171
  2,226
  2,288
  2,354
  2,427
  2,288
  2,372
  2,461
  2,557
  2,659
  2,768
  2,883
  3,005
  3,134
  3,271
  3,415
  3,568
  3,729
  3,899
  4,078
  4,267
  4,465
  4,675
  4,895
  5,127
Issuance/(repayment) of debt, $m
  289
  220
  247
  282
  317
  351
  385
  419
  454
  489
  525
  561
  599
  638
  678
  719
  762
  807
  853
  902
  952
  1,004
  1,059
  1,116
  1,176
  1,239
  1,304
  1,373
  1,445
  1,520
  1,599
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
  220
  247
  282
  317
  351
  385
  419
  454
  489
  525
  561
  599
  638
  678
  719
  762
  807
  853
  902
  952
  1,004
  1,059
  1,116
  1,176
  1,239
  1,304
  1,373
  1,445
  1,520
  1,599
Total cash flow (excl. dividends), $m
  -90
  2,117
  2,251
  2,319
  2,393
  2,472
  2,556
  2,646
  2,742
  2,843
  2,952
  2,849
  2,971
  3,099
  3,235
  3,378
  3,530
  3,690
  3,858
  4,036
  4,223
  4,420
  4,627
  4,846
  5,075
  5,317
  5,571
  5,838
  6,120
  6,415
  6,726
Retained Cash Flow (-), $m
  284
  -100
  -116
  -133
  -149
  -165
  -181
  -197
  -214
  -230
  -247
  -264
  -282
  -300
  -319
  -338
  -359
  -380
  -402
  -424
  -448
  -473
  -498
  -525
  -554
  -583
  -614
  -646
  -680
  -715
  -752
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
 
  2,235
  2,135
  2,187
  2,244
  2,306
  2,375
  2,448
  2,528
  2,613
  2,705
  2,585
  2,689
  2,799
  2,916
  3,040
  3,171
  3,310
  3,457
  3,611
  3,775
  3,947
  4,129
  4,320
  4,522
  4,734
  4,957
  5,192
  5,440
  5,700
  5,973
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
 
  2,094
  1,864
  1,766
  1,664
  1,559
  1,451
  1,341
  1,230
  1,118
  1,006
  827
  731
  639
  551
  469
  394
  325
  264
  211
  165
  127
  96
  70
  51
  36
  24
  16
  10
  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 C (DISCK)

Valuation Ratios
P/E Ratio 9.4
Price to Sales 1.7
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 8.2
Price to Free Cash Flow 8.7
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%

DISCK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DISCK stock intrinsic value calculation we used $6497 million for the last fiscal year's total revenue generated by Discovery Communications Series C. The default revenue input number comes from 2016 income statement of Discovery Communications Series C. 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 DISCK stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.7%, whose default value for DISCK is calculated based on our internal credit rating of Discovery Communications Series C, 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 C.
    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 DISCK 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 DISCK 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 C.

Corporate tax rate of 27% is the nominal tax rate for Discovery Communications Series C. 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 DISCK 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 DISCK are equal to 64.1%.

Life of production assets of 5.9 years is the average useful life of capital assets used in Discovery Communications Series C 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 DISCK 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 C - 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 396.68 million for Discovery Communications Series C 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 C at the current share price and the inputted number of shares is $11.4 billion.


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COMPANY NEWS

▶ Opening Bell, April 10, 2017   [Apr-10-17 09:29AM  CNBC Videos]
▶ Discovery Touts Content for Snapchat and Amazon   [Mar-28-17 03:26PM  The Wall Street Journal]
▶ Discoverys Yuko Suguro joins TVT as Head of Operations   [Mar-15-17 06:00PM  Business Wire]
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▶ [$$] Business Watch   [Feb-14-17 08:18PM  at The Wall Street Journal]
▶ [$$] Discovery Profit Rises, but Content Costs Weigh on Europe   [02:24PM  at The Wall Street Journal]
▶ STX taps new CFO   [Feb-13-17 06:50PM  at bizjournals.com]
▶ Is Discovery Communications Stock a Good Value for 2017?   [Jan-07-17 12:26PM  at Motley Fool]
▶ Three Forgotten Stocks Poised To Surge In 2017   [Jan-05-17 08:24AM  at Forbes]
▶ [$$] Tribune Media's CEO Liguori to Advise Sony Board   [Dec-12-16 04:20PM  at The Wall Street Journal]
▶ 2 Cheap Cable Stocks for 2017   [Nov-30-16 12:56PM  at Motley Fool]
▶ Top 10 Channels People Want to Buy a la Carte   [Nov-27-16 02:41PM  at Motley Fool]
▶ [$$] Discovery Communications Profit Declines 22%   [11:33AM  at The Wall Street Journal]
Stock chart of DISCK Financial statements of DISCK
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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