Intrinsic value of FBR - FBRC

Previous Close

$17.55

  Intrinsic Value

$11.71

stock screener

  Rating & Target

sell

-33%

  Value-price divergence*

-51%

Previous close

$17.55

 
Intrinsic value

$11.71

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence*

-51%

Our model is not good at valuating stocks of financial companies, such as FBRC.

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

We calculate the intrinsic value of FBRC 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 0.1

 

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, %
  -22.58
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
Revenue, $m
  120
  180
  262
  370
  511
  687
  904
  1,165
  1,474
  1,833
  2,244
  2,709
  3,226
  3,798
  4,422
  5,098
  5,826
  6,603
  7,429
  8,302
  9,221
  10,187
  11,198
  12,254
  13,356
  14,503
  15,696
  16,938
  18,228
  19,568
  20,962
Variable operating expenses, $m
 
  123
  179
  253
  349
  469
  617
  796
  1,007
  1,252
  1,533
  1,850
  2,204
  2,594
  3,020
  3,482
  3,979
  4,510
  5,074
  5,670
  6,298
  6,958
  7,648
  8,370
  9,122
  9,905
  10,721
  11,568
  12,449
  13,365
  14,317
Fixed operating expenses, $m
 
  69
  70
  72
  74
  76
  78
  80
  82
  84
  86
  88
  90
  92
  95
  97
  99
  102
  104
  107
  110
  113
  115
  118
  121
  124
  127
  131
  134
  137
  141
Total operating expenses, $m
  147
  192
  249
  325
  423
  545
  695
  876
  1,089
  1,336
  1,619
  1,938
  2,294
  2,686
  3,115
  3,579
  4,078
  4,612
  5,178
  5,777
  6,408
  7,071
  7,763
  8,488
  9,243
  10,029
  10,848
  11,699
  12,583
  13,502
  14,458
Operating income, $m
  -28
  -12
  13
  45
  88
  142
  209
  290
  386
  497
  626
  771
  933
  1,112
  1,307
  1,519
  1,747
  1,991
  2,250
  2,525
  2,813
  3,117
  3,434
  3,766
  4,113
  4,473
  4,848
  5,239
  5,644
  6,066
  6,504
EBITDA, $m
  -24
  -9
  17
  51
  96
  152
  223
  308
  408
  526
  660
  812
  982
  1,170
  1,375
  1,598
  1,837
  2,093
  2,365
  2,652
  2,955
  3,274
  3,607
  3,955
  4,318
  4,696
  5,090
  5,500
  5,925
  6,367
  6,827
Interest expense (income), $m
  22
  0
  8,250
  21,223
  38,418
  60,603
  88,521
  122,866
  164,251
  213,190
  270,084
  335,221
  408,772
  490,809
  581,317
  680,207
  787,340
  902,545
  1,025,635
  1,156,421
  1,294,732
  1,440,418
  1,593,365
  1,753,499
  1,920,790
  2,095,259
  2,276,971
  2,466,046
  2,662,650
  2,867,000
  3,079,361
Earnings before tax, $m
  -28
  -12
  -8,237
  -21,178
  -38,331
  -60,461
  -88,312
  -122,576
  -163,865
  -212,692
  -269,459
  -334,450
  -407,839
  -489,698
  -580,009
  -678,687
  -785,593
  -900,554
  -1,023,384
  -1,153,897
  -1,291,918
  -1,437,301
  -1,589,930
  -1,749,732
  -1,916,678
  -2,090,785
  -2,272,123
  -2,460,807
  -2,657,006
  -2,860,934
  -3,072,856
Tax expense, $m
  38
  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
Net income, $m
  -66
  -12
  -8,237
  -21,178
  -38,331
  -60,461
  -88,312
  -122,576
  -163,865
  -212,692
  -269,459
  -334,450
  -407,839
  -489,698
  -580,009
  -678,687
  -785,593
  -900,554
  -1,023,384
  -1,153,897
  -1,291,918
  -1,437,301
  -1,589,930
  -1,749,732
  -1,916,678
  -2,090,785
  -2,272,123
  -2,460,807
  -2,657,006
  -2,860,934
  -3,072,856

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  75
  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
  1,038
  1,440
  2,095
  2,964
  4,084
  5,494
  7,229
  9,319
  11,790
  14,664
  17,954
  21,668
  25,812
  30,383
  35,377
  40,788
  46,606
  52,823
  59,428
  66,414
  73,772
  81,496
  89,584
  98,033
  106,844
  116,022
  125,571
  135,501
  145,821
  156,547
  167,692
Adjusted assets (=assets-cash), $m
  963
  1,440
  2,095
  2,964
  4,084
  5,494
  7,229
  9,319
  11,790
  14,664
  17,954
  21,668
  25,812
  30,383
  35,377
  40,788
  46,606
  52,823
  59,428
  66,414
  73,772
  81,496
  89,584
  98,033
  106,844
  116,022
  125,571
  135,501
  145,821
  156,547
  167,692
Revenue / Adjusted assets
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
Average production assets, $m
  19
  28
  40
  57
  79
  106
  139
  179
  227
  282
  346
  417
  497
  585
  681
  785
  897
  1,017
  1,144
  1,278
  1,420
  1,569
  1,724
  1,887
  2,057
  2,233
  2,417
  2,608
  2,807
  3,014
  3,228
Working capital, $m
  0
  -18
  -26
  -37
  -51
  -69
  -90
  -116
  -147
  -183
  -224
  -271
  -323
  -380
  -442
  -510
  -583
  -660
  -743
  -830
  -922
  -1,019
  -1,120
  -1,225
  -1,336
  -1,450
  -1,570
  -1,694
  -1,823
  -1,957
  -2,096
Total debt, $m
  0
  375
  965
  1,746
  2,755
  4,024
  5,585
  7,466
  9,690
  12,277
  15,237
  18,581
  22,310
  26,423
  30,918
  35,788
  41,025
  46,620
  52,565
  58,851
  65,474
  72,426
  79,704
  87,309
  95,239
  103,499
  112,093
  121,030
  130,318
  139,971
  150,002
Total liabilities, $m
  921
  1,296
  1,886
  2,667
  3,676
  4,945
  6,506
  8,387
  10,611
  13,198
  16,158
  19,502
  23,231
  27,344
  31,839
  36,709
  41,946
  47,541
  53,486
  59,772
  66,395
  73,347
  80,625
  88,230
  96,160
  104,420
  113,014
  121,951
  131,239
  140,892
  150,923
Total equity, $m
  117
  144
  210
  296
  408
  549
  723
  932
  1,179
  1,466
  1,795
  2,167
  2,581
  3,038
  3,538
  4,079
  4,661
  5,282
  5,943
  6,641
  7,377
  8,150
  8,958
  9,803
  10,684
  11,602
  12,557
  13,550
  14,582
  15,655
  16,769
Total liabilities and equity, $m
  1,038
  1,440
  2,096
  2,963
  4,084
  5,494
  7,229
  9,319
  11,790
  14,664
  17,953
  21,669
  25,812
  30,382
  35,377
  40,788
  46,607
  52,823
  59,429
  66,413
  73,772
  81,497
  89,583
  98,033
  106,844
  116,022
  125,571
  135,501
  145,821
  156,547
  167,692
Debt-to-equity ratio
  0.000
  2.600
  4.600
  5.890
  6.740
  7.320
  7.730
  8.010
  8.220
  8.370
  8.490
  8.570
  8.640
  8.700
  8.740
  8.770
  8.800
  8.830
  8.850
  8.860
  8.880
  8.890
  8.900
  8.910
  8.910
  8.920
  8.930
  8.930
  8.940
  8.940
  8.950
Adjusted equity ratio
  0.044
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -66
  -12
  -8,237
  -21,178
  -38,331
  -60,461
  -88,312
  -122,576
  -163,865
  -212,692
  -269,459
  -334,450
  -407,839
  -489,698
  -580,009
  -678,687
  -785,593
  -900,554
  -1,023,384
  -1,153,897
  -1,291,918
  -1,437,301
  -1,589,930
  -1,749,732
  -1,916,678
  -2,090,785
  -2,272,123
  -2,460,807
  -2,657,006
  -2,860,934
  -3,072,856
Depreciation, amort., depletion, $m
  4
  3
  4
  6
  8
  11
  14
  18
  23
  28
  35
  42
  50
  58
  68
  79
  90
  102
  114
  128
  142
  157
  172
  189
  206
  223
  242
  261
  281
  301
  323
Funds from operations, $m
  -24
  -9
  -8,233
  -21,172
  -38,323
  -60,450
  -88,298
  -122,558
  -163,843
  -212,664
  -269,424
  -334,408
  -407,789
  -489,639
  -579,941
  -678,609
  -785,503
  -900,452
  -1,023,270
  -1,153,769
  -1,291,776
  -1,437,144
  -1,589,758
  -1,749,544
  -1,916,472
  -2,090,562
  -2,271,881
  -2,460,546
  -2,656,725
  -2,860,633
  -3,072,533
Change in working capital, $m
  0
  -6
  -8
  -11
  -14
  -18
  -22
  -26
  -31
  -36
  -41
  -46
  -52
  -57
  -62
  -68
  -73
  -78
  -83
  -87
  -92
  -97
  -101
  -106
  -110
  -115
  -119
  -124
  -129
  -134
  -139
Cash from operations, $m
  -24
  -3
  -8,225
  -21,161
  -38,309
  -60,433
  -88,276
  -122,532
  -163,812
  -212,628
  -269,383
  -334,362
  -407,738
  -489,582
  -579,879
  -678,541
  -785,430
  -900,375
  -1,023,187
  -1,153,682
  -1,291,684
  -1,437,048
  -1,589,657
  -1,749,438
  -1,916,362
  -2,090,447
  -2,271,761
  -2,460,422
  -2,656,596
  -2,860,499
  -3,072,394
Maintenance CAPEX, $m
  0
  -2
  -3
  -4
  -6
  -8
  -11
  -14
  -18
  -23
  -28
  -35
  -42
  -50
  -58
  -68
  -79
  -90
  -102
  -114
  -128
  -142
  -157
  -172
  -189
  -206
  -223
  -242
  -261
  -281
  -301
New CAPEX, $m
  -1
  -9
  -13
  -17
  -22
  -27
  -33
  -40
  -48
  -55
  -63
  -72
  -80
  -88
  -96
  -104
  -112
  -120
  -127
  -134
  -142
  -149
  -156
  -163
  -170
  -177
  -184
  -191
  -199
  -206
  -215
Cash from investing activities, $m
  57
  -11
  -16
  -21
  -28
  -35
  -44
  -54
  -66
  -78
  -91
  -107
  -122
  -138
  -154
  -172
  -191
  -210
  -229
  -248
  -270
  -291
  -313
  -335
  -359
  -383
  -407
  -433
  -460
  -487
  -516
Free cash flow, $m
  33
  -14
  -8,241
  -21,182
  -38,336
  -60,468
  -88,320
  -122,586
  -163,877
  -212,706
  -269,475
  -334,468
  -407,859
  -489,720
  -580,034
  -678,713
  -785,621
  -900,584
  -1,023,416
  -1,153,931
  -1,291,954
  -1,437,338
  -1,589,969
  -1,749,773
  -1,916,720
  -2,090,830
  -2,272,169
  -2,460,855
  -2,657,055
  -2,860,986
  -3,072,910
Issuance/(repayment) of debt, $m
  0
  375
  590
  782
  1,008
  1,269
  1,561
  1,881
  2,225
  2,586
  2,961
  3,343
  3,729
  4,114
  4,495
  4,870
  5,237
  5,595
  5,945
  6,287
  6,622
  6,952
  7,279
  7,604
  7,930
  8,260
  8,594
  8,937
  9,289
  9,653
  10,031
Issuance/(repurchase) of shares, $m
  -22
  114
  8,303
  21,265
  38,443
  60,602
  88,485
  122,785
  164,112
  212,980
  269,788
  334,821
  408,253
  490,155
  580,509
  679,228
  786,175
  901,176
  1,024,045
  1,154,595
  1,292,654
  1,438,073
  1,590,739
  1,750,577
  1,917,559
  2,091,703
  2,273,077
  2,461,800
  2,658,038
  2,862,007
  3,073,971
Cash from financing (excl. dividends), $m  
  -22
  489
  8,893
  22,047
  39,451
  61,871
  90,046
  124,666
  166,337
  215,566
  272,749
  338,164
  411,982
  494,269
  585,004
  684,098
  791,412
  906,771
  1,029,990
  1,160,882
  1,299,276
  1,445,025
  1,598,018
  1,758,181
  1,925,489
  2,099,963
  2,281,671
  2,470,737
  2,667,327
  2,871,660
  3,084,002
Total cash flow (excl. dividends), $m
  11
  475
  652
  864
  1,115
  1,403
  1,726
  2,080
  2,460
  2,860
  3,274
  3,697
  4,123
  4,549
  4,970
  5,385
  5,790
  6,187
  6,574
  6,952
  7,322
  7,687
  8,049
  8,408
  8,769
  9,133
  9,503
  9,882
  10,271
  10,674
  11,092
Retained Cash Flow (-), $m
  94
  -114
  -8,303
  -21,265
  -38,443
  -60,602
  -88,485
  -122,785
  -164,112
  -212,980
  -269,788
  -334,821
  -408,253
  -490,155
  -580,509
  -679,228
  -786,175
  -901,176
  -1,024,045
  -1,154,595
  -1,292,654
  -1,438,073
  -1,590,739
  -1,750,577
  -1,917,559
  -2,091,703
  -2,273,077
  -2,461,800
  -2,658,038
  -2,862,007
  -3,073,971
Prev. year cash balance distribution, $m
 
  75
  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
 
  436
  -7,651
  -20,400
  -37,328
  -59,199
  -86,759
  -120,705
  -161,653
  -210,120
  -266,514
  -331,125
  -404,130
  -485,606
  -575,539
  -673,844
  -780,384
  -894,989
  -1,017,471
  -1,147,644
  -1,285,332
  -1,430,386
  -1,582,691
  -1,742,169
  -1,908,790
  -2,082,570
  -2,263,574
  -2,451,918
  -2,647,767
  -2,851,333
  -3,062,879
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
 
  418
  -7,004
  -17,754
  -30,736
  -45,886
  -62,965
  -81,547
  -101,037
  -120,703
  -139,723
  -157,246
  -172,457
  -184,636
  -193,218
  -197,829
  -198,312
  -194,735
  -187,377
  -176,705
  -163,326
  -147,949
  -131,322
  -114,184
  -97,218
  -81,015
  -66,040
  -52,625
  -40,965
  -31,125
  -23,062
Current shareholders' claim on cash, %
  100
  27.6
  0.5
  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
  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

FBR & Co. operates as an investment banking and institutional brokerage firm primarily in the United States. The company operates through two segments, Capital Markets and Principal Investing. The Capital Markets segment offers capital raising services, including underwriting and placement of public and private equity, as well as equity-linked and debt securities; and financial advisory services comprising merger and acquisition advisory, liability management and financial restructuring, and strategic partnerships. This segment also provides research, securities lending, and institutional sales and trading services to institutional investors, such as mutual funds, insurance companies, hedge funds, banks and broker-dealers, family offices, money managers, and pension and profit-sharing plans. This segment serves consumer, energy and natural resources, financial institutions, healthcare, insurance, real estate, and technology, media, and telecommunications sectors. The Principal Investing segment consists of investments in merchant banking, marketable equity securities, non-public equity securities, corporate debt investments, and non-registered investment funds that are managed by third parties and U.S. Treasury securities. The company was formerly known as FBR Capital Markets Corporation and changed its name to FBR & Co. in June 2011. FBR & Co. is headquartered in Arlington, Virginia.

FINANCIAL RATIOS  of  FBR (FBRC)

Valuation Ratios
P/E Ratio -1.8
Price to Sales 1
Price to Book 1
Price to Tangible Book
Price to Cash Flow -5.1
Price to Free Cash Flow -4.9
Growth Rates
Sales Growth Rate -22.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.4%
Ret/ On Assets - 3 Yr. Avg. 1.6%
Return On Total Capital -40%
Ret/ On T. Cap. - 3 Yr. Avg. -12.5%
Return On Equity -40.2%
Return On Equity - 3 Yr. Avg. -12.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 77.5%
Gross Margin - 3 Yr. Avg. 79.6%
EBITDA Margin -1.7%
EBITDA Margin - 3 Yr. Avg. 11.1%
Operating Margin -22.5%
Oper. Margin - 3 Yr. Avg. -8.1%
Pre-Tax Margin -23.3%
Pre-Tax Margin - 3 Yr. Avg. -8.4%
Net Profit Margin -55%
Net Profit Margin - 3 Yr. Avg. -17%
Effective Tax Rate -135.7%
Eff/ Tax Rate - 3 Yr. Avg. -26.5%
Payout Ratio -9.1%

FBRC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FBRC stock intrinsic value calculation we used $120 million for the last fiscal year's total revenue generated by FBR. The default revenue input number comes from 2016 income statement of FBR. 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 FBRC stock valuation model: a) initial revenue growth rate of 50% 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 FBRC is calculated based on our internal credit rating of FBR, 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 FBR.
    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 FBRC stock the variable cost ratio is equal to 68.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $67 million in the base year in the intrinsic value calculation for FBRC 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 2200% for FBR.

Corporate tax rate of 27% is the nominal tax rate for FBR. 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 FBRC 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 FBRC are equal to 15.4%.

Life of production assets of 10 years is the average useful life of capital assets used in FBR 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 FBRC is equal to -10%. 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 - $117 million for FBR - 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 6.878 million for FBR 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 FBR at the current share price and the inputted number of shares is $0.1 billion.

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Stock chart of FBRC Financial statements of FBRC
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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