Intrinsic value of Edwards Lifesciences - EW

Previous Close

$115.87

  Intrinsic Value

$137.96

stock screener

  Rating & Target

hold

+19%

  Value-price divergence*

+93%

Previous close

$115.87

 
Intrinsic value

$137.96

 
Up/down potential

+19%

 
Rating

hold

 
Value-price divergence*

+93%

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

We calculate the intrinsic value of EW 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 24.5

 

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, %
  18.85
  26.80
  24.62
  22.66
  20.89
  19.30
  17.87
  16.59
  15.43
  14.38
  13.45
  12.60
  11.84
  11.16
  10.54
  9.99
  9.49
  9.04
  8.64
  8.27
  7.94
  7.65
  7.39
  7.15
  6.93
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
Revenue, $m
  2,964
  3,758
  4,684
  5,745
  6,945
  8,286
  9,767
  11,386
  13,143
  15,034
  17,055
  19,204
  21,478
  23,874
  26,391
  29,027
  31,781
  34,654
  37,646
  40,760
  43,999
  47,365
  50,863
  54,498
  58,276
  62,203
  66,286
  70,534
  74,955
  79,558
  84,353
Variable operating expenses, $m
 
  2,802
  3,476
  4,250
  5,125
  6,102
  7,181
  8,362
  9,642
  11,020
  12,494
  13,997
  15,655
  17,401
  19,236
  21,157
  23,164
  25,258
  27,440
  29,709
  32,070
  34,523
  37,073
  39,722
  42,476
  45,338
  48,315
  51,411
  54,633
  57,988
  61,483
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
  2,226
  2,802
  3,476
  4,250
  5,125
  6,102
  7,181
  8,362
  9,642
  11,020
  12,494
  13,997
  15,655
  17,401
  19,236
  21,157
  23,164
  25,258
  27,440
  29,709
  32,070
  34,523
  37,073
  39,722
  42,476
  45,338
  48,315
  51,411
  54,633
  57,988
  61,483
Operating income, $m
  738
  956
  1,207
  1,495
  1,820
  2,184
  2,585
  3,024
  3,501
  4,013
  4,561
  5,207
  5,823
  6,473
  7,155
  7,870
  8,616
  9,395
  10,207
  11,051
  11,929
  12,842
  13,790
  14,775
  15,800
  16,864
  17,972
  19,123
  20,322
  21,570
  22,870
EBITDA, $m
  809
  1,068
  1,330
  1,632
  1,973
  2,353
  2,774
  3,234
  3,733
  4,270
  4,844
  5,455
  6,101
  6,781
  7,496
  8,245
  9,027
  9,843
  10,693
  11,577
  12,497
  13,453
  14,447
  15,479
  16,552
  17,668
  18,828
  20,034
  21,290
  22,597
  23,959
Interest expense (income), $m
  16
  29
  47
  67
  91
  118
  148
  181
  217
  256
  298
  344
  392
  442
  496
  552
  611
  673
  737
  804
  873
  945
  1,021
  1,099
  1,180
  1,264
  1,352
  1,443
  1,538
  1,637
  1,740
Earnings before tax, $m
  738
  928
  1,161
  1,428
  1,729
  2,066
  2,438
  2,844
  3,284
  3,757
  4,263
  4,863
  5,432
  6,030
  6,659
  7,318
  8,005
  8,723
  9,470
  10,247
  11,056
  11,896
  12,769
  13,677
  14,620
  15,600
  16,619
  17,680
  18,784
  19,933
  21,130
Tax expense, $m
  168
  250
  313
  385
  467
  558
  658
  768
  887
  1,014
  1,151
  1,313
  1,467
  1,628
  1,798
  1,976
  2,161
  2,355
  2,557
  2,767
  2,985
  3,212
  3,448
  3,693
  3,947
  4,212
  4,487
  4,774
  5,072
  5,382
  5,705
Net income, $m
  570
  677
  847
  1,042
  1,262
  1,508
  1,779
  2,076
  2,397
  2,743
  3,112
  3,550
  3,965
  4,402
  4,861
  5,342
  5,844
  6,368
  6,913
  7,481
  8,071
  8,684
  9,322
  9,984
  10,672
  11,388
  12,132
  12,906
  13,712
  14,551
  15,425

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,271
  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
  4,510
  4,107
  5,119
  6,279
  7,590
  9,055
  10,674
  12,444
  14,364
  16,430
  18,639
  20,988
  23,473
  26,092
  28,843
  31,723
  34,733
  37,873
  41,143
  44,547
  48,086
  51,765
  55,588
  59,560
  63,689
  67,981
  72,444
  77,087
  81,918
  86,949
  92,189
Adjusted assets (=assets-cash), $m
  3,239
  4,107
  5,119
  6,279
  7,590
  9,055
  10,674
  12,444
  14,364
  16,430
  18,639
  20,988
  23,473
  26,092
  28,843
  31,723
  34,733
  37,873
  41,143
  44,547
  48,086
  51,765
  55,588
  59,560
  63,689
  67,981
  72,444
  77,087
  81,918
  86,949
  92,189
Revenue / Adjusted assets
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
  0.915
Average production assets, $m
  736
  932
  1,162
  1,425
  1,722
  2,055
  2,422
  2,824
  3,259
  3,728
  4,230
  4,763
  5,327
  5,921
  6,545
  7,199
  7,882
  8,594
  9,336
  10,109
  10,912
  11,746
  12,614
  13,515
  14,452
  15,426
  16,439
  17,493
  18,589
  19,730
  20,920
Working capital, $m
  1,707
  552
  688
  844
  1,021
  1,218
  1,436
  1,674
  1,932
  2,210
  2,507
  2,823
  3,157
  3,510
  3,879
  4,267
  4,672
  5,094
  5,534
  5,992
  6,468
  6,963
  7,477
  8,011
  8,567
  9,144
  9,744
  10,369
  11,018
  11,695
  12,400
Total debt, $m
  822
  1,330
  1,920
  2,598
  3,364
  4,219
  5,165
  6,198
  7,320
  8,526
  9,816
  11,188
  12,639
  14,169
  15,775
  17,457
  19,215
  21,049
  22,959
  24,946
  27,013
  29,162
  31,394
  33,714
  36,126
  38,632
  41,238
  43,950
  46,771
  49,709
  52,769
Total liabilities, $m
  1,891
  2,399
  2,989
  3,667
  4,433
  5,288
  6,234
  7,267
  8,389
  9,595
  10,885
  12,257
  13,708
  15,238
  16,844
  18,526
  20,284
  22,118
  24,028
  26,015
  28,082
  30,231
  32,463
  34,783
  37,195
  39,701
  42,307
  45,019
  47,840
  50,778
  53,838
Total equity, $m
  2,619
  1,709
  2,129
  2,612
  3,158
  3,767
  4,440
  5,177
  5,975
  6,835
  7,754
  8,731
  9,765
  10,854
  11,998
  13,197
  14,449
  15,755
  17,116
  18,531
  20,004
  21,534
  23,124
  24,777
  26,495
  28,280
  30,137
  32,068
  34,078
  36,171
  38,351
Total liabilities and equity, $m
  4,510
  4,108
  5,118
  6,279
  7,591
  9,055
  10,674
  12,444
  14,364
  16,430
  18,639
  20,988
  23,473
  26,092
  28,842
  31,723
  34,733
  37,873
  41,144
  44,546
  48,086
  51,765
  55,587
  59,560
  63,690
  67,981
  72,444
  77,087
  81,918
  86,949
  92,189
Debt-to-equity ratio
  0.314
  0.780
  0.900
  0.990
  1.070
  1.120
  1.160
  1.200
  1.220
  1.250
  1.270
  1.280
  1.290
  1.310
  1.310
  1.320
  1.330
  1.340
  1.340
  1.350
  1.350
  1.350
  1.360
  1.360
  1.360
  1.370
  1.370
  1.370
  1.370
  1.370
  1.380
Adjusted equity ratio
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416
  0.416

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  570
  677
  847
  1,042
  1,262
  1,508
  1,779
  2,076
  2,397
  2,743
  3,112
  3,550
  3,965
  4,402
  4,861
  5,342
  5,844
  6,368
  6,913
  7,481
  8,071
  8,684
  9,322
  9,984
  10,672
  11,388
  12,132
  12,906
  13,712
  14,551
  15,425
Depreciation, amort., depletion, $m
  71
  111
  123
  137
  152
  170
  189
  210
  232
  257
  283
  248
  277
  308
  341
  375
  411
  448
  486
  526
  568
  612
  657
  704
  753
  803
  856
  911
  968
  1,028
  1,090
Funds from operations, $m
  770
  788
  970
  1,179
  1,415
  1,678
  1,968
  2,286
  2,630
  2,999
  3,395
  3,798
  4,242
  4,711
  5,202
  5,717
  6,254
  6,815
  7,399
  8,007
  8,639
  9,296
  9,979
  10,688
  11,425
  12,191
  12,988
  13,817
  14,680
  15,579
  16,514
Change in working capital, $m
  66
  117
  136
  156
  176
  197
  218
  238
  258
  278
  297
  316
  334
  352
  370
  387
  405
  422
  440
  458
  476
  495
  514
  534
  555
  577
  600
  624
  650
  677
  705
Cash from operations, $m
  704
  672
  834
  1,023
  1,238
  1,481
  1,751
  2,047
  2,371
  2,722
  3,098
  3,482
  3,908
  4,358
  4,832
  5,329
  5,850
  6,393
  6,959
  7,549
  8,163
  8,801
  9,464
  10,154
  10,870
  11,614
  12,388
  13,193
  14,030
  14,902
  15,810
Maintenance CAPEX, $m
  0
  -38
  -49
  -60
  -74
  -90
  -107
  -126
  -147
  -170
  -194
  -220
  -248
  -277
  -308
  -341
  -375
  -411
  -448
  -486
  -526
  -568
  -612
  -657
  -704
  -753
  -803
  -856
  -911
  -968
  -1,028
New CAPEX, $m
  -217
  -196
  -229
  -263
  -298
  -332
  -367
  -402
  -436
  -469
  -501
  -533
  -564
  -594
  -624
  -654
  -683
  -712
  -742
  -772
  -803
  -835
  -868
  -901
  -937
  -974
  -1,013
  -1,053
  -1,096
  -1,142
  -1,189
Cash from investing activities, $m
  -212
  -234
  -278
  -323
  -372
  -422
  -474
  -528
  -583
  -639
  -695
  -753
  -812
  -871
  -932
  -995
  -1,058
  -1,123
  -1,190
  -1,258
  -1,329
  -1,403
  -1,480
  -1,558
  -1,641
  -1,727
  -1,816
  -1,909
  -2,007
  -2,110
  -2,217
Free cash flow, $m
  492
  437
  556
  699
  867
  1,059
  1,276
  1,520
  1,789
  2,083
  2,402
  2,729
  3,096
  3,487
  3,900
  4,335
  4,792
  5,270
  5,770
  6,291
  6,833
  7,398
  7,985
  8,595
  9,229
  9,888
  10,572
  11,283
  12,023
  12,792
  13,593
Issuance/(repayment) of debt, $m
  222
  508
  591
  677
  766
  856
  945
  1,034
  1,121
  1,207
  1,290
  1,372
  1,451
  1,529
  1,606
  1,682
  1,758
  1,834
  1,910
  1,988
  2,067
  2,148
  2,233
  2,320
  2,411
  2,507
  2,606
  2,711
  2,822
  2,938
  3,060
Issuance/(repurchase) of shares, $m
  -559
  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  
  -269
  508
  591
  677
  766
  856
  945
  1,034
  1,121
  1,207
  1,290
  1,372
  1,451
  1,529
  1,606
  1,682
  1,758
  1,834
  1,910
  1,988
  2,067
  2,148
  2,233
  2,320
  2,411
  2,507
  2,606
  2,711
  2,822
  2,938
  3,060
Total cash flow (excl. dividends), $m
  212
  945
  1,147
  1,377
  1,633
  1,914
  2,221
  2,553
  2,910
  3,290
  3,692
  4,101
  4,548
  5,016
  5,506
  6,017
  6,549
  7,104
  7,680
  8,278
  8,900
  9,546
  10,218
  10,915
  11,640
  12,394
  13,178
  13,995
  14,845
  15,730
  16,653
Retained Cash Flow (-), $m
  -116
  -361
  -421
  -482
  -546
  -610
  -673
  -736
  -799
  -860
  -919
  -977
  -1,034
  -1,089
  -1,144
  -1,198
  -1,252
  -1,306
  -1,361
  -1,416
  -1,472
  -1,530
  -1,590
  -1,653
  -1,718
  -1,785
  -1,857
  -1,931
  -2,010
  -2,093
  -2,180
Prev. year cash balance distribution, $m
 
  1,271
  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
 
  1,855
  726
  894
  1,087
  1,305
  1,548
  1,817
  2,111
  2,430
  2,773
  3,123
  3,514
  3,927
  4,362
  4,819
  5,297
  5,797
  6,319
  6,863
  7,428
  8,016
  8,627
  9,262
  9,923
  10,609
  11,322
  12,063
  12,835
  13,637
  14,473
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,779
  665
  778
  895
  1,011
  1,124
  1,228
  1,320
  1,396
  1,454
  1,483
  1,499
  1,493
  1,464
  1,415
  1,346
  1,261
  1,164
  1,057
  944
  829
  716
  607
  505
  413
  330
  259
  199
  149
  109
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

Edwards Lifesciences Corporation provides products and technologies to treat structural heart disease and critically ill patients worldwide. It offers transcatheter heart valve therapy products comprising transcatheter aortic heart valves and their delivery systems for the nonsurgical replacement of heart valves. The company also provides surgical heart valve therapy products, such as pericardial valves for aortic and mitral replacement, and minimally invasive aortic heart valve system; and tissue heart valves and repair products, which are used to replace or repair a patientÂ’s diseased or defective heart valve. In addition, it produces pericardial valves from biologically inert animal tissue; and provides heart valve repair therapies, including annuloplasty rings and systems. Further, the company offers critical care products, such as hemodynamic monitoring systems to measure a patientÂ’s heart function in surgical and intensive care settings; pulmonary artery catheters; and continuous venous oximetry catheter for measuring central venous oxygen saturation. Additionally, its critical care products include disposable pressure monitoring devices and closed blood sampling systems to protect patients and clinicians from infection; and peripheral vascular products used to treat endolumenal occlusive disease, such as embolectomy catheters for removing blood clots from peripheral blood vessels. The company distributes its products through direct sales force and independent distributors. Edwards Lifesciences Corporation was founded in 1999 and is headquartered in Irvine, California.

FINANCIAL RATIOS  of  Edwards Lifesciences (EW)

Valuation Ratios
P/E Ratio 43
Price to Sales 8.3
Price to Book 9.4
Price to Tangible Book
Price to Cash Flow 34.8
Price to Free Cash Flow 50.3
Growth Rates
Sales Growth Rate 18.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 102.8%
Cap. Spend. - 3 Yr. Gr. Rate 14.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 31.4%
Total Debt to Equity 31.4%
Interest Coverage 47
Management Effectiveness
Return On Assets 13.6%
Ret/ On Assets - 3 Yr. Avg. 17.8%
Return On Total Capital 17.4%
Ret/ On T. Cap. - 3 Yr. Avg. 22.4%
Return On Equity 22.3%
Return On Equity - 3 Yr. Avg. 28.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 73.1%
Gross Margin - 3 Yr. Avg. 73.8%
EBITDA Margin 27.8%
EBITDA Margin - 3 Yr. Avg. 36.3%
Operating Margin 24.9%
Oper. Margin - 3 Yr. Avg. 33%
Pre-Tax Margin 24.9%
Pre-Tax Margin - 3 Yr. Avg. 33%
Net Profit Margin 19.2%
Net Profit Margin - 3 Yr. Avg. 24.7%
Effective Tax Rate 22.8%
Eff/ Tax Rate - 3 Yr. Avg. 24.1%
Payout Ratio 0%

EW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EW stock intrinsic value calculation we used $2964 million for the last fiscal year's total revenue generated by Edwards Lifesciences. The default revenue input number comes from 2016 income statement of Edwards Lifesciences. 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 EW stock valuation model: a) initial revenue growth rate of 26.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for EW is calculated based on our internal credit rating of Edwards Lifesciences, 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 Edwards Lifesciences.
    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 EW stock the variable cost ratio is equal to 75%.

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 EW 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 3.5% for Edwards Lifesciences.

Corporate tax rate of 27% is the nominal tax rate for Edwards Lifesciences. 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 EW 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 EW are equal to 24.8%.

Life of production assets of 19.2 years is the average useful life of capital assets used in Edwards Lifesciences 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 EW is equal to 14.7%. 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 - $2619 million for Edwards Lifesciences - 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 211.092 million for Edwards Lifesciences 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 Edwards Lifesciences at the current share price and the inputted number of shares is $24.5 billion.

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COMPANY NEWS

▶ Edwards Lifesciences: Cramer's Top Takeaways   [Jul-20-17 06:36AM  TheStreet.com]
▶ Edwards' INSPIRIS RESILIA Valve Receives FDA Approval   [Jul-05-17 09:00AM  PR Newswire]
▶ Edwards Lifesciences Wins a Patent Case against Neovasc   [Jun-26-17 10:38AM  Market Realist]
▶ Heart Valve Maker Trying To Pump Stock Past Buy Zone   [Jun-20-17 04:19PM  Investor's Business Daily]
▶ Best Mutual Funds: News, Performance Reports And Investing Ideas   [Jun-01-17 09:17PM  Investor's Business Daily]
▶ Discussing Edwards Lifesciences Recent Stock Movements   [May-31-17 05:06PM  Market Realist]
▶ Top Stock Picks for the Week of May 29th   [May-30-17 02:49PM  Zacks]
▶ Stocks To Buy And Watch: Top IPOs, Big And Small Caps, Growth Stocks   [May-27-17 11:06AM  Investor's Business Daily]
▶ Medtronic Tops Views On Q4 Sales, Earnings   [08:36AM  Investor's Business Daily]
▶ Hold on Concert's Hair Loss Trials Pushes Shares Down 10%   [May-17-17 09:52AM  TheStreet.com]
Stock chart of EW Financial statements of EW Annual reports of EW
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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