Intrinsic value of Eastman Chemical - EMN

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$82.97

  Intrinsic Value

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  Value-price divergence*

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$82.97

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

We calculate the intrinsic value of EMN 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 12.2

 

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, %
  -6.63
  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
  9,008
  9,188
  9,399
  9,641
  9,912
  10,213
  10,542
  10,902
  11,290
  11,709
  12,158
  12,639
  13,152
  13,698
  14,279
  14,894
  15,547
  16,238
  16,969
  17,741
  18,556
  19,416
  20,323
  21,279
  22,287
  23,348
  24,465
  25,641
  26,878
  28,180
  29,549
Variable operating expenses, $m
 
  7,865
  8,036
  8,231
  8,450
  8,693
  8,959
  9,249
  9,563
  9,901
  10,264
  10,206
  10,620
  11,061
  11,530
  12,027
  12,554
  13,112
  13,702
  14,325
  14,984
  15,678
  16,411
  17,183
  17,996
  18,853
  19,755
  20,704
  21,703
  22,754
  23,860
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
  7,710
  7,865
  8,036
  8,231
  8,450
  8,693
  8,959
  9,249
  9,563
  9,901
  10,264
  10,206
  10,620
  11,061
  11,530
  12,027
  12,554
  13,112
  13,702
  14,325
  14,984
  15,678
  16,411
  17,183
  17,996
  18,853
  19,755
  20,704
  21,703
  22,754
  23,860
Operating income, $m
  1,298
  1,323
  1,364
  1,410
  1,462
  1,520
  1,584
  1,653
  1,728
  1,808
  1,895
  2,433
  2,532
  2,637
  2,749
  2,868
  2,993
  3,126
  3,267
  3,416
  3,572
  3,738
  3,913
  4,097
  4,291
  4,495
  4,710
  4,936
  5,175
  5,425
  5,689
EBITDA, $m
  1,878
  2,144
  2,194
  2,250
  2,313
  2,383
  2,460
  2,544
  2,635
  2,733
  2,837
  2,950
  3,069
  3,197
  3,332
  3,476
  3,628
  3,790
  3,960
  4,140
  4,331
  4,531
  4,743
  4,966
  5,201
  5,449
  5,709
  5,984
  6,273
  6,576
  6,896
Interest expense (income), $m
  280
  263
  271
  282
  293
  307
  321
  337
  355
  374
  394
  416
  440
  465
  492
  520
  550
  582
  616
  651
  689
  729
  771
  815
  862
  911
  963
  1,018
  1,075
  1,135
  1,199
Earnings before tax, $m
  1,049
  1,060
  1,092
  1,128
  1,169
  1,213
  1,262
  1,315
  1,373
  1,434
  1,500
  2,017
  2,092
  2,172
  2,257
  2,348
  2,443
  2,544
  2,651
  2,764
  2,883
  3,009
  3,142
  3,281
  3,429
  3,584
  3,747
  3,919
  4,100
  4,290
  4,490
Tax expense, $m
  190
  286
  295
  305
  316
  328
  341
  355
  371
  387
  405
  545
  565
  587
  609
  634
  660
  687
  716
  746
  779
  812
  848
  886
  926
  968
  1,012
  1,058
  1,107
  1,158
  1,212
Net income, $m
  854
  774
  797
  824
  853
  886
  921
  960
  1,002
  1,047
  1,095
  1,472
  1,527
  1,586
  1,648
  1,714
  1,783
  1,857
  1,935
  2,018
  2,105
  2,197
  2,293
  2,395
  2,503
  2,616
  2,735
  2,861
  2,993
  3,132
  3,278

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  181
  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
  15,457
  15,573
  15,931
  16,341
  16,800
  17,310
  17,869
  18,477
  19,136
  19,846
  20,607
  21,422
  22,291
  23,217
  24,201
  25,245
  26,351
  27,522
  28,761
  30,069
  31,451
  32,909
  34,446
  36,067
  37,774
  39,572
  41,466
  43,459
  45,556
  47,762
  50,083
Adjusted assets (=assets-cash), $m
  15,276
  15,573
  15,931
  16,341
  16,800
  17,310
  17,869
  18,477
  19,136
  19,846
  20,607
  21,422
  22,291
  23,217
  24,201
  25,245
  26,351
  27,522
  28,761
  30,069
  31,451
  32,909
  34,446
  36,067
  37,774
  39,572
  41,466
  43,459
  45,556
  47,762
  50,083
Revenue / Adjusted assets
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
Average production assets, $m
  7,763
  7,920
  8,102
  8,311
  8,544
  8,803
  9,088
  9,397
  9,732
  10,093
  10,480
  10,895
  11,337
  11,808
  12,308
  12,839
  13,402
  13,997
  14,627
  15,293
  15,995
  16,737
  17,519
  18,343
  19,211
  20,126
  21,089
  22,102
  23,169
  24,291
  25,471
Working capital, $m
  1,071
  1,194
  1,222
  1,253
  1,289
  1,328
  1,371
  1,417
  1,468
  1,522
  1,581
  1,643
  1,710
  1,781
  1,856
  1,936
  2,021
  2,111
  2,206
  2,306
  2,412
  2,524
  2,642
  2,766
  2,897
  3,035
  3,180
  3,333
  3,494
  3,663
  3,841
Total debt, $m
  6,594
  6,617
  6,869
  7,157
  7,480
  7,838
  8,231
  8,658
  9,122
  9,620
  10,156
  10,729
  11,340
  11,991
  12,682
  13,416
  14,194
  15,017
  15,888
  16,808
  17,779
  18,804
  19,885
  21,024
  22,224
  23,488
  24,819
  26,220
  27,695
  29,246
  30,877
Total liabilities, $m
  10,925
  10,948
  11,200
  11,488
  11,811
  12,169
  12,562
  12,989
  13,453
  13,951
  14,487
  15,060
  15,671
  16,322
  17,013
  17,747
  18,525
  19,348
  20,219
  21,139
  22,110
  23,135
  24,216
  25,355
  26,555
  27,819
  29,150
  30,551
  32,026
  33,577
  35,208
Total equity, $m
  4,532
  4,625
  4,732
  4,853
  4,990
  5,141
  5,307
  5,488
  5,683
  5,894
  6,120
  6,362
  6,621
  6,895
  7,188
  7,498
  7,826
  8,174
  8,542
  8,931
  9,341
  9,774
  10,230
  10,712
  11,219
  11,753
  12,315
  12,907
  13,530
  14,185
  14,875
Total liabilities and equity, $m
  15,457
  15,573
  15,932
  16,341
  16,801
  17,310
  17,869
  18,477
  19,136
  19,845
  20,607
  21,422
  22,292
  23,217
  24,201
  25,245
  26,351
  27,522
  28,761
  30,070
  31,451
  32,909
  34,446
  36,067
  37,774
  39,572
  41,465
  43,458
  45,556
  47,762
  50,083
Debt-to-equity ratio
  1.455
  1.430
  1.450
  1.470
  1.500
  1.520
  1.550
  1.580
  1.600
  1.630
  1.660
  1.690
  1.710
  1.740
  1.760
  1.790
  1.810
  1.840
  1.860
  1.880
  1.900
  1.920
  1.940
  1.960
  1.980
  2.000
  2.020
  2.030
  2.050
  2.060
  2.080
Adjusted equity ratio
  0.285
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  854
  774
  797
  824
  853
  886
  921
  960
  1,002
  1,047
  1,095
  1,472
  1,527
  1,586
  1,648
  1,714
  1,783
  1,857
  1,935
  2,018
  2,105
  2,197
  2,293
  2,395
  2,503
  2,616
  2,735
  2,861
  2,993
  3,132
  3,278
Depreciation, amort., depletion, $m
  580
  821
  830
  840
  851
  863
  877
  891
  907
  924
  943
  516
  537
  560
  583
  608
  635
  663
  693
  725
  758
  793
  830
  869
  910
  954
  999
  1,047
  1,098
  1,151
  1,207
Funds from operations, $m
  1,292
  1,595
  1,627
  1,664
  1,704
  1,749
  1,798
  1,852
  1,909
  1,971
  2,038
  1,989
  2,065
  2,145
  2,231
  2,322
  2,419
  2,521
  2,629
  2,743
  2,863
  2,990
  3,124
  3,265
  3,413
  3,570
  3,735
  3,908
  4,091
  4,283
  4,485
Change in working capital, $m
  -93
  23
  27
  31
  35
  39
  43
  47
  51
  54
  58
  62
  67
  71
  75
  80
  85
  90
  95
  100
  106
  112
  118
  124
  131
  138
  145
  153
  161
  169
  178
Cash from operations, $m
  1,385
  1,554
  1,600
  1,632
  1,669
  1,710
  1,755
  1,805
  1,859
  1,917
  1,980
  1,926
  1,998
  2,074
  2,156
  2,242
  2,334
  2,431
  2,534
  2,642
  2,757
  2,878
  3,006
  3,141
  3,282
  3,432
  3,590
  3,755
  3,930
  4,114
  4,307
Maintenance CAPEX, $m
  0
  -368
  -375
  -384
  -394
  -405
  -417
  -431
  -445
  -461
  -478
  -497
  -516
  -537
  -560
  -583
  -608
  -635
  -663
  -693
  -725
  -758
  -793
  -830
  -869
  -910
  -954
  -999
  -1,047
  -1,098
  -1,151
New CAPEX, $m
  -626
  -158
  -182
  -208
  -234
  -259
  -284
  -309
  -335
  -361
  -387
  -414
  -442
  -471
  -500
  -531
  -563
  -596
  -630
  -665
  -703
  -741
  -782
  -824
  -868
  -915
  -963
  -1,014
  -1,067
  -1,122
  -1,180
Cash from investing activities, $m
  -655
  -526
  -557
  -592
  -628
  -664
  -701
  -740
  -780
  -822
  -865
  -911
  -958
  -1,008
  -1,060
  -1,114
  -1,171
  -1,231
  -1,293
  -1,358
  -1,428
  -1,499
  -1,575
  -1,654
  -1,737
  -1,825
  -1,917
  -2,013
  -2,114
  -2,220
  -2,331
Free cash flow, $m
  730
  1,029
  1,042
  1,040
  1,041
  1,046
  1,054
  1,065
  1,078
  1,095
  1,114
  1,015
  1,039
  1,066
  1,096
  1,128
  1,163
  1,200
  1,240
  1,283
  1,330
  1,379
  1,431
  1,486
  1,545
  1,607
  1,673
  1,742
  1,816
  1,893
  1,975
Issuance/(repayment) of debt, $m
  -428
  204
  252
  288
  323
  358
  393
  428
  463
  499
  535
  573
  611
  651
  692
  734
  778
  823
  871
  920
  971
  1,025
  1,081
  1,139
  1,200
  1,264
  1,331
  1,401
  1,474
  1,551
  1,631
Issuance/(repurchase) of shares, $m
  -130
  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  
  -566
  204
  252
  288
  323
  358
  393
  428
  463
  499
  535
  573
  611
  651
  692
  734
  778
  823
  871
  920
  971
  1,025
  1,081
  1,139
  1,200
  1,264
  1,331
  1,401
  1,474
  1,551
  1,631
Total cash flow (excl. dividends), $m
  160
  1,233
  1,294
  1,328
  1,365
  1,404
  1,447
  1,493
  1,541
  1,594
  1,649
  1,588
  1,651
  1,717
  1,787
  1,862
  1,940
  2,023
  2,111
  2,203
  2,301
  2,403
  2,511
  2,625
  2,745
  2,871
  3,004
  3,143
  3,290
  3,444
  3,607
Retained Cash Flow (-), $m
  -591
  -93
  -106
  -122
  -137
  -151
  -166
  -181
  -196
  -211
  -226
  -242
  -258
  -275
  -292
  -310
  -329
  -348
  -368
  -389
  -410
  -433
  -457
  -481
  -507
  -534
  -562
  -592
  -623
  -655
  -689
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
 
  1,139
  1,188
  1,206
  1,228
  1,253
  1,281
  1,312
  1,346
  1,383
  1,423
  1,346
  1,392
  1,442
  1,495
  1,552
  1,612
  1,676
  1,743
  1,815
  1,890
  1,970
  2,055
  2,144
  2,238
  2,337
  2,442
  2,551
  2,667
  2,789
  2,917
Discount rate, %
 
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
  34.58
PV of cash for distribution, $m
 
  1,051
  1,003
  925
  847
  771
  695
  622
  551
  483
  418
  328
  278
  232
  191
  154
  123
  96
  73
  55
  40
  29
  20
  14
  9
  6
  4
  2
  1
  1
  0
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

Eastman Chemical Company manufactures and sells materials, specialty additives, chemicals, and fibers in the United States and internationally. The company’s Additives & Functional Products segment offers specialty coalescents, specialty and commodity solvents, paint additives, and specialty polymers; hydrocarbon and rosin resins; sulfur and antidegradant rubber additives; performance resins and amine-derivative-based building blocks; heat transfer and aviation fluids; formic-acid based solutions; and metam based soil fumigants, thiram and ziram based fungicides, and plant growth regulators. Its products are used in coatings, tires, consumables, building and construction, animal nutrition, care chemical, crop protection, and energy markets. Its Advanced Materials segment provides copolyesters, cellulose esters, polyvinyl butyral (PVB) sheets, specialty (PVB) intermediates, and window film and protective film products for value-added end uses in transportation, consumables, building and construction, durable goods, and health and wellness products. The company’s Chemical Intermediates segment offers Olefin derivatives, acetyls, ethylene, and commodity solvents; primary non-phthalate and phthala plasticizers, and a range of niche non- phthalate plasticizers; and methylamines and salts higher amines and solvents used in industrial chemicals and processing, building and construction, health and wellness, and agrochemicals markets. Its Fibers segment offers Estron acetate tow and Estrobond triacetin plasticizers for manufacturing cigarette filters; Estron natural and Chromspun solution dyed acetate yarns for use in apparel, home furnishings, and industrial fabrics; and cellulose acetate flake and acetyl raw materials for other acetate fiber producers, as well as acetyl chemical products. The company also offers aviation turbine engine oil; wet-laid nonwovens; and specialty films. Eastman Chemical Company was founded in 1920 and is headquartered in Kingsport, Tennessee.

FINANCIAL RATIOS  of  Eastman Chemical (EMN)

Valuation Ratios
P/E Ratio 14.2
Price to Sales 1.3
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 16
Growth Rates
Sales Growth Rate -6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4%
Cap. Spend. - 3 Yr. Gr. Rate 5.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 139.3%
Total Debt to Equity 145.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 6.7%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.8%
Return On Equity 20.2%
Return On Equity - 3 Yr. Avg. 21.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 26.1%
Gross Margin - 3 Yr. Avg. 25.4%
EBITDA Margin 21.2%
EBITDA Margin - 3 Yr. Avg. 19.5%
Operating Margin 14.4%
Oper. Margin - 3 Yr. Avg. 13.7%
Pre-Tax Margin 11.6%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 9.5%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 18.1%
Eff/ Tax Rate - 3 Yr. Avg. 22.1%
Payout Ratio 31.9%

EMN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EMN stock intrinsic value calculation we used $9008 million for the last fiscal year's total revenue generated by Eastman Chemical. The default revenue input number comes from 2016 income statement of Eastman Chemical. 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 EMN 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 8.4%, whose default value for EMN is calculated based on our internal credit rating of Eastman Chemical, 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 Eastman Chemical.
    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 EMN stock the variable cost ratio is equal to 85.7%.

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 EMN 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 4.1% for Eastman Chemical.

Corporate tax rate of 27% is the nominal tax rate for Eastman Chemical. 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 EMN 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 EMN are equal to 86.2%.

Life of production assets of 21.1 years is the average useful life of capital assets used in Eastman Chemical 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 EMN is equal to 13%. 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 - $4532 million for Eastman Chemical - 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 147.293 million for Eastman Chemical 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 Eastman Chemical at the current share price and the inputted number of shares is $12.2 billion.


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COMPANY NEWS

▶ The top 25% in a year   [Jun-19-17 01:54PM  CNBC Videos]
▶ Analysts Latest Recommendations for Eastman Chemical   [Jun-01-17 10:38AM  Market Realist]
▶ Eastman Chemicals Stock Performance in 2017   [07:39AM  Market Realist]
▶ Eastman to Expand Performance Films Capacity   [May-30-17 02:27PM  GlobeNewswire]
▶ Eastman Chemical Comes Up with Treva, a New Bioplastic   [May-23-17 07:39AM  Market Realist]
▶ Eastman Board Declares Dividend   [11:42AM  GlobeNewswire]
▶ Eastman Chemical Raises Esters Prices   [May-01-17 01:05PM  Market Realist]
▶ [$$] Settlement Would Have Companies Pay Millions for Chemical Spill   [Apr-28-17 03:46PM  The Wall Street Journal]
▶ Eastman Chemical tops Street 1Q forecasts   [Apr-27-17 05:06PM  Associated Press]
▶ What Are Dow Chemicals Valuations ahead of 1Q17 Earnings?   [Apr-21-17 09:06AM  Market Realist]
▶ Worker's widow: Company was negligent in plant explosion   [Apr-20-17 03:03PM  Associated Press]
▶ Inside Eastman Chemicals Latest Valuations   [Mar-30-17 09:07AM  Market Realist]
▶ Chemicals Industry Stock Outlook - March 2017   [Mar-29-17 03:46PM  Investopedia]
▶ Eastman Chemicals Dividend Yield in Context   [02:35PM  Market Realist]
▶ Eastman Board Declares Dividend   [Feb-16-17 03:28PM  GlobeNewswire]
▶ Eastman Board Declares Dividend   [02:33PM  ACN Newswire]
▶ [$$] Why Companies May Behave Themselves Even as Regulations Are Eased   [Feb-09-17 12:09AM  at The Wall Street Journal]
Stock chart of EMN Financial statements of EMN Annual reports of EMN
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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