Intrinsic value of FedEx - FDX

Previous Close

$211.88

  Intrinsic Value

$1,273

stock screener

  Rating & Target

str. buy

+501%

  Value-price divergence*

+866%

Previous close

$211.88

 
Intrinsic value

$1,273

 
Up/down potential

+501%

 
Rating

str. buy

 
Value-price divergence*

+866%

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

We calculate the intrinsic value of FDX 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 56.1

 

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, %
  6.14
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  50,365
  59,683
  69,918
  81,060
  93,090
  105,990
  119,738
  134,316
  149,704
  165,889
  182,860
  200,611
  219,140
  238,452
  258,558
  279,471
  301,212
  323,808
  347,289
  371,690
  397,053
  423,422
  450,848
  479,384
  509,089
  540,026
  572,261
  605,865
  640,915
  677,489
  715,671
Variable operating expenses, $m
 
  34,730
  40,570
  46,928
  53,792
  61,153
  68,998
  77,316
  86,097
  95,332
  105,015
  114,469
  125,042
  136,062
  147,534
  159,467
  171,873
  184,766
  198,164
  212,088
  226,560
  241,606
  257,256
  273,538
  290,488
  308,141
  326,534
  345,709
  365,708
  386,578
  408,365
Fixed operating expenses, $m
 
  18,754
  19,223
  19,704
  20,196
  20,701
  21,219
  21,749
  22,293
  22,850
  23,422
  24,007
  24,607
  25,223
  25,853
  26,500
  27,162
  27,841
  28,537
  29,251
  29,982
  30,731
  31,500
  32,287
  33,094
  33,922
  34,770
  35,639
  36,530
  37,443
  38,379
Total operating expenses, $m
  47,288
  53,484
  59,793
  66,632
  73,988
  81,854
  90,217
  99,065
  108,390
  118,182
  128,437
  138,476
  149,649
  161,285
  173,387
  185,967
  199,035
  212,607
  226,701
  241,339
  256,542
  272,337
  288,756
  305,825
  323,582
  342,063
  361,304
  381,348
  402,238
  424,021
  446,744
Operating income, $m
  3,077
  6,198
  10,125
  14,428
  19,101
  24,136
  29,522
  35,251
  41,315
  47,707
  54,423
  62,134
  69,490
  77,168
  85,170
  93,504
  102,177
  111,201
  120,587
  130,352
  140,511
  151,085
  162,093
  173,559
  185,507
  197,963
  210,957
  224,517
  238,676
  253,468
  268,927
EBITDA, $m
  5,708
  9,395
  13,754
  18,529
  23,710
  29,290
  35,257
  41,602
  48,317
  55,393
  62,826
  70,613
  78,752
  87,246
  96,098
  105,316
  114,908
  124,886
  135,265
  146,061
  157,292
  168,980
  181,147
  193,819
  207,023
  220,787
  235,143
  250,124
  265,764
  282,101
  299,174
Interest expense (income), $m
  321
  481
  689
  918
  1,167
  1,436
  1,724
  2,032
  2,358
  2,702
  3,063
  3,443
  3,839
  4,253
  4,685
  5,134
  5,602
  6,088
  6,593
  7,118
  7,663
  8,230
  8,819
  9,432
  10,070
  10,734
  11,425
  12,146
  12,897
  13,680
  14,498
Earnings before tax, $m
  2,740
  5,718
  9,435
  13,510
  17,934
  22,699
  27,797
  33,219
  38,957
  45,006
  51,360
  58,692
  65,651
  72,915
  80,485
  88,370
  96,576
  105,113
  113,994
  123,234
  132,848
  142,855
  153,274
  164,126
  175,437
  187,229
  199,532
  212,371
  225,780
  239,788
  254,429
Tax expense, $m
  920
  1,544
  2,547
  3,648
  4,842
  6,129
  7,505
  8,969
  10,518
  12,152
  13,867
  15,847
  17,726
  19,687
  21,731
  23,860
  26,075
  28,381
  30,779
  33,273
  35,869
  38,571
  41,384
  44,314
  47,368
  50,552
  53,874
  57,340
  60,960
  64,743
  68,696
Net income, $m
  1,820
  4,174
  6,888
  9,862
  13,092
  16,571
  20,292
  24,250
  28,439
  32,854
  37,493
  42,845
  47,925
  53,228
  58,754
  64,510
  70,500
  76,733
  83,216
  89,961
  96,979
  104,284
  111,890
  119,812
  128,069
  136,677
  145,658
  155,031
  164,819
  175,045
  185,733

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,534
  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
  45,959
  50,280
  58,903
  68,289
  78,425
  89,292
  100,875
  113,156
  126,120
  139,755
  154,052
  169,007
  184,617
  200,887
  217,824
  235,443
  253,759
  272,795
  292,577
  313,134
  334,501
  356,716
  379,821
  403,862
  428,887
  454,950
  482,107
  510,417
  539,945
  570,757
  602,924
Adjusted assets (=assets-cash), $m
  42,425
  50,280
  58,903
  68,289
  78,425
  89,292
  100,875
  113,156
  126,120
  139,755
  154,052
  169,007
  184,617
  200,887
  217,824
  235,443
  253,759
  272,795
  292,577
  313,134
  334,501
  356,716
  379,821
  403,862
  428,887
  454,950
  482,107
  510,417
  539,945
  570,757
  602,924
Revenue / Adjusted assets
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
  1.187
Average production assets, $m
  22,580
  26,738
  31,323
  36,315
  41,704
  47,483
  53,643
  60,174
  67,068
  74,318
  81,921
  89,874
  98,175
  106,827
  115,834
  125,203
  134,943
  145,066
  155,585
  166,517
  177,880
  189,693
  201,980
  214,764
  228,072
  241,931
  256,373
  271,428
  287,130
  303,515
  320,621
Working capital, $m
  3,981
  537
  629
  730
  838
  954
  1,078
  1,209
  1,347
  1,493
  1,646
  1,805
  1,972
  2,146
  2,327
  2,515
  2,711
  2,914
  3,126
  3,345
  3,573
  3,811
  4,058
  4,314
  4,582
  4,860
  5,150
  5,453
  5,768
  6,097
  6,441
Total debt, $m
  13,762
  19,699
  26,236
  33,350
  41,033
  49,270
  58,050
  67,359
  77,186
  87,521
  98,359
  109,694
  121,526
  133,859
  146,698
  160,053
  173,936
  188,366
  203,360
  218,943
  235,139
  251,978
  269,492
  287,714
  306,683
  326,439
  347,024
  368,483
  390,865
  414,221
  438,603
Total liabilities, $m
  32,175
  38,112
  44,649
  51,763
  59,446
  67,683
  76,463
  85,772
  95,599
  105,934
  116,772
  128,107
  139,939
  152,272
  165,111
  178,466
  192,349
  206,779
  221,773
  237,356
  253,552
  270,391
  287,905
  306,127
  325,096
  344,852
  365,437
  386,896
  409,278
  432,634
  457,016
Total equity, $m
  13,784
  12,168
  14,255
  16,526
  18,979
  21,609
  24,412
  27,384
  30,521
  33,821
  37,281
  40,900
  44,677
  48,615
  52,714
  56,977
  61,410
  66,016
  70,804
  75,778
  80,949
  86,325
  91,917
  97,735
  103,791
  110,098
  116,670
  123,521
  130,667
  138,123
  145,908
Total liabilities and equity, $m
  45,959
  50,280
  58,904
  68,289
  78,425
  89,292
  100,875
  113,156
  126,120
  139,755
  154,053
  169,007
  184,616
  200,887
  217,825
  235,443
  253,759
  272,795
  292,577
  313,134
  334,501
  356,716
  379,822
  403,862
  428,887
  454,950
  482,107
  510,417
  539,945
  570,757
  602,924
Debt-to-equity ratio
  0.998
  1.620
  1.840
  2.020
  2.160
  2.280
  2.380
  2.460
  2.530
  2.590
  2.640
  2.680
  2.720
  2.750
  2.780
  2.810
  2.830
  2.850
  2.870
  2.890
  2.900
  2.920
  2.930
  2.940
  2.950
  2.960
  2.970
  2.980
  2.990
  3.000
  3.010
Adjusted equity ratio
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,820
  4,174
  6,888
  9,862
  13,092
  16,571
  20,292
  24,250
  28,439
  32,854
  37,493
  42,845
  47,925
  53,228
  58,754
  64,510
  70,500
  76,733
  83,216
  89,961
  96,979
  104,284
  111,890
  119,812
  128,069
  136,677
  145,658
  155,031
  164,819
  175,045
  185,733
Depreciation, amort., depletion, $m
  2,631
  3,197
  3,630
  4,101
  4,609
  5,154
  5,735
  6,351
  7,002
  7,686
  8,403
  8,479
  9,262
  10,078
  10,928
  11,812
  12,730
  13,685
  14,678
  15,709
  16,781
  17,896
  19,055
  20,261
  21,516
  22,824
  24,186
  25,606
  27,088
  28,633
  30,247
Funds from operations, $m
  5,171
  7,371
  10,517
  13,963
  17,701
  21,725
  26,027
  30,601
  35,441
  40,540
  45,896
  51,324
  57,187
  63,306
  69,682
  76,321
  83,231
  90,418
  97,894
  105,670
  113,760
  122,180
  130,944
  140,073
  149,585
  159,501
  169,844
  180,638
  191,907
  203,678
  215,981
Change in working capital, $m
  -537
  84
  92
  100
  108
  116
  124
  131
  138
  146
  153
  160
  167
  174
  181
  188
  196
  203
  211
  220
  228
  237
  247
  257
  267
  278
  290
  302
  315
  329
  344
Cash from operations, $m
  5,708
  7,287
  10,425
  13,863
  17,593
  21,609
  25,904
  30,470
  35,302
  40,394
  45,743
  51,164
  57,020
  63,132
  69,501
  76,133
  83,035
  90,215
  97,683
  105,450
  113,532
  121,942
  130,698
  139,816
  149,318
  159,223
  169,554
  180,335
  191,591
  203,349
  215,637
Maintenance CAPEX, $m
  0
  -2,130
  -2,522
  -2,955
  -3,426
  -3,934
  -4,480
  -5,061
  -5,677
  -6,327
  -7,011
  -7,728
  -8,479
  -9,262
  -10,078
  -10,928
  -11,812
  -12,730
  -13,685
  -14,678
  -15,709
  -16,781
  -17,896
  -19,055
  -20,261
  -21,516
  -22,824
  -24,186
  -25,606
  -27,088
  -28,633
New CAPEX, $m
  -4,828
  -4,158
  -4,586
  -4,991
  -5,390
  -5,779
  -6,159
  -6,531
  -6,894
  -7,251
  -7,603
  -7,952
  -8,301
  -8,652
  -9,007
  -9,369
  -9,740
  -10,123
  -10,519
  -10,932
  -11,363
  -11,813
  -12,287
  -12,784
  -13,308
  -13,860
  -14,441
  -15,055
  -15,702
  -16,385
  -17,106
Cash from investing activities, $m
  -9,446
  -6,288
  -7,108
  -7,946
  -8,816
  -9,713
  -10,639
  -11,592
  -12,571
  -13,578
  -14,614
  -15,680
  -16,780
  -17,914
  -19,085
  -20,297
  -21,552
  -22,853
  -24,204
  -25,610
  -27,072
  -28,594
  -30,183
  -31,839
  -33,569
  -35,376
  -37,265
  -39,241
  -41,308
  -43,473
  -45,739
Free cash flow, $m
  -3,738
  999
  3,317
  5,916
  8,777
  11,895
  15,265
  18,879
  22,731
  26,816
  31,129
  35,483
  40,241
  45,218
  50,416
  55,836
  61,483
  67,361
  73,478
  79,841
  86,460
  93,348
  100,515
  107,977
  115,749
  123,847
  132,289
  141,094
  150,283
  159,876
  169,898
Issuance/(repayment) of debt, $m
  6,478
  5,966
  6,536
  7,115
  7,682
  8,238
  8,780
  9,309
  9,827
  10,335
  10,837
  11,335
  11,833
  12,333
  12,839
  13,355
  13,884
  14,429
  14,994
  15,582
  16,196
  16,839
  17,514
  18,223
  18,969
  19,756
  20,585
  21,459
  22,382
  23,356
  24,383
Issuance/(repurchase) of shares, $m
  -2,539
  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  
  3,888
  5,966
  6,536
  7,115
  7,682
  8,238
  8,780
  9,309
  9,827
  10,335
  10,837
  11,335
  11,833
  12,333
  12,839
  13,355
  13,884
  14,429
  14,994
  15,582
  16,196
  16,839
  17,514
  18,223
  18,969
  19,756
  20,585
  21,459
  22,382
  23,356
  24,383
Total cash flow (excl. dividends), $m
  48
  6,965
  9,854
  13,031
  16,460
  20,133
  24,044
  28,188
  32,558
  37,152
  41,966
  46,818
  52,073
  57,551
  63,255
  69,191
  75,367
  81,791
  88,472
  95,423
  102,657
  110,187
  118,029
  126,200
  134,718
  143,603
  152,874
  162,554
  172,665
  183,232
  194,281
Retained Cash Flow (-), $m
  1,209
  -1,889
  -2,087
  -2,271
  -2,453
  -2,630
  -2,803
  -2,972
  -3,137
  -3,300
  -3,460
  -3,619
  -3,778
  -3,937
  -4,099
  -4,264
  -4,433
  -4,607
  -4,787
  -4,975
  -5,171
  -5,376
  -5,591
  -5,818
  -6,056
  -6,307
  -6,572
  -6,851
  -7,146
  -7,457
  -7,784
Prev. year cash balance distribution, $m
 
  3,505
  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
 
  8,581
  7,767
  10,759
  14,007
  17,503
  21,241
  25,216
  29,421
  33,852
  38,506
  43,199
  48,295
  53,613
  59,156
  64,928
  70,934
  77,184
  83,685
  90,448
  97,486
  104,811
  112,437
  120,382
  128,662
  137,295
  146,302
  155,702
  165,519
  175,775
  186,496
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  8,196
  7,053
  9,246
  11,332
  13,258
  14,975
  16,443
  17,626
  18,500
  19,050
  19,190
  19,097
  18,697
  18,018
  17,092
  15,961
  14,671
  13,270
  11,808
  10,331
  8,884
  7,503
  6,220
  5,057
  4,030
  3,144
  2,400
  1,790
  1,304
  926
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

FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. The company’s FedEx Express segment provides various shipping services for the delivery of packages and freight; international trade services specializing in customs brokerage, and ocean and air freight forwarding services; assistance with the customs-trade partnership against terrorism program; and customs clearance services, as well as an information tool that allows customers to track and manage imports. This segment also publishes customs duty and tax information; and offers critical inventory logistics, transportation management, and temperature-controlled transportation services, as well as international express transportation, small-package ground delivery, and freight transportation services. Its FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services; and consolidates and delivers low-weight and less time-sensitive business-to-consumer packages, as well as offers third-party logistics services. The company’s FedEx Freight segment offers less-than-truckload freight, and freight-shipping services. As of May 31, 2016, this segment operated approximately 65,000 vehicles and trailers from a network of approximately 370 service centers. Its FedEx Services segment provides sale, marketing, information technology, communication, customer, technical support, billing and collection, and other back-office support services; FedEx Mobile, a suite of solutions to track packages, create shipping labels, view account-specific rate quotes, and access drop-off location information; access to copying and digital printing through retail and Web-based platforms, signs and graphics, professional finishing, computer rentals, and ground shipping and time-definite express shipping services; and packing services, supplies, and boxes. The company was founded in 1971 and is based in Memphis, Tennessee.

FINANCIAL RATIOS  of  FedEx (FDX)

Valuation Ratios
P/E Ratio 30.9
Price to Sales 1.1
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 63.9
Growth Rates
Sales Growth Rate 6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.1%
Cap. Spend. - 3 Yr. Gr. Rate 7.4%
Financial Strength
Quick Ratio 122
Current Ratio 0
LT Debt to Equity 99.6%
Total Debt to Equity 99.8%
Interest Coverage 10
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 12.6%
Return On Equity - 3 Yr. Avg. 11.3%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 71.3%
Gross Margin - 3 Yr. Avg. 69.8%
EBITDA Margin 11.3%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 6.1%
Pre-Tax Margin 5.4%
Pre-Tax Margin - 3 Yr. Avg. 5.6%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 3.6%
Effective Tax Rate 33.6%
Eff/ Tax Rate - 3 Yr. Avg. 35.2%
Payout Ratio 15.2%

FDX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FDX stock intrinsic value calculation we used $50365 million for the last fiscal year's total revenue generated by FedEx. The default revenue input number comes from 2016 income statement of FedEx. 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 FDX stock valuation model: a) initial revenue growth rate of 18.5% 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 4.7%, whose default value for FDX is calculated based on our internal credit rating of FedEx, 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 FedEx.
    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 FDX stock the variable cost ratio is equal to 58.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $18297 million in the base year in the intrinsic value calculation for FDX 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 FedEx.

Corporate tax rate of 27% is the nominal tax rate for FedEx. 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 FDX 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 FDX are equal to 44.8%.

Life of production assets of 10.6 years is the average useful life of capital assets used in FedEx 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 FDX is equal to 0.9%. 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 - $13784 million for FedEx - 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 264.614 million for FedEx 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 FedEx at the current share price and the inputted number of shares is $56.1 billion.

RELATED COMPANIES Price Int.Val. Rating
UPS United Parcel 112.58 87.79  sell
ATSG Air Transport 23.32 12.38  sell

COMPANY NEWS

▶ Boeing discusses its FedEx research partnership   [Jul-20-17 03:45PM  American City Business Journals]
▶ FedEx records another victory over Teamsters   [03:35PM  American City Business Journals]
▶ FedEx Freight Drivers Reject Teamsters in Pennsylvania   [Jul-19-17 10:58PM  Business Wire]
▶ Dow Transports Say This Rally Could Keep Truckin'   [Jul-18-17 08:52PM  The Wall Street Journal]
▶ [$$] FedEx Struggles to Bounce Back From Cyberattack   [12:44AM  The Wall Street Journal]
▶ Dow Transports Say This Rally Could Keep Truckin   [12:44AM  The Wall Street Journal]
▶ Dominion Diamond and Impax rise; FedEx and BlackRock fall   [Jul-17-17 05:17PM  Associated Press]
▶ Financial impact of FedEx/TNT cyber-attack likely to be 'material'   [04:50PM  American City Business Journals]
▶ [$$] FedEx Struggles to Bounce Back From Cyberattack   [03:46PM  The Wall Street Journal]
▶ Teamsters point to 'hard fight' before FedEx union vote   [Jul-14-17 03:35PM  American City Business Journals]
▶ FedEx's TNT almost back online after virus attack   [10:00AM  American City Business Journals]
▶ FedEx Freight drivers vote to decertify union   [Jul-13-17 04:35PM  American City Business Journals]
▶ FedEx-leased facility in downtown Miami sells for 96% gain   [03:15PM  American City Business Journals]
▶ Boeing and FedEx to partner on aerospace innovation   [03:15PM  American City Business Journals]
▶ Boeing discusses its FedEx research partnership   [02:10PM  American City Business Journals]
▶ Is UPS Pushing Shoppers to Amazon?   [Jul-10-17 03:28PM  Motley Fool]
▶ Why FedEx Shares Jumped 12% in June   [Jul-09-17 04:50PM  Motley Fool]
▶ Littler brother's super hero   [Jul-08-17 06:16PM  ABC News Videos]
▶ [$$] Half-Time Scorecard   [01:28AM  Barrons.com]
▶ Mutual Funds Tilting Toward Tech, Health Care, Foreign Stocks   [Jul-07-17 02:40PM  Investor's Business Daily]
▶ [$$] Reckitt and Mondelez warn cyber attack hit sales   [Jul-06-17 07:08PM  Financial Times]
▶ The 3 Best Dividend Stocks In Freight   [Jul-05-17 11:20AM  Motley Fool]
▶ Ukraine: Russian security services were behind cyberattack   [Jul-01-17 06:15PM  Associated Press]
▶ [$$] Correction: FedEx   [01:23AM  Barrons.com]
▶ What Is the Cheapest Way to Ship Goods?   [09:45AM  Motley Fool]
▶ Asian shares rally on Wall St rebound as confidence rises   [Jun-28-17 11:10PM  Associated Press]
▶ FedEx 'significantly affected' by virus, trading briefly halted   [12:53PM  American City Business Journals]
▶ TNT Express Operations Disrupted   [12:35PM  Business Wire]
▶ Computer Virus Spreads to U.S., Hits Merck - Report   [Jun-27-17 09:52PM  TheStreet.com]
▶ FedEx floats plan for government tax reform   [06:15PM  American City Business Journals]
▶ FedEx Is the Adult Tax Talks Need   [01:13PM  Bloomberg]
Stock chart of FDX Financial statements of FDX Annual reports of FDX
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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