Intrinsic value of General Dynamics - GD

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$201.32

  Intrinsic Value

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  Value-price divergence*

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$201.32

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

We calculate the intrinsic value of GD 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 60.8

 

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, %
  -0.37
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.15
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
Revenue, $m
  31,353
  33,046
  34,817
  36,671
  38,611
  40,643
  42,772
  45,001
  47,337
  49,786
  52,352
  55,043
  57,864
  60,822
  63,925
  67,180
  70,594
  74,177
  77,935
  81,878
  86,017
  90,359
  94,917
  99,700
  104,720
  109,990
  115,521
  121,327
  127,421
  133,819
  140,535
Variable operating expenses, $m
 
  28,589
  30,060
  31,600
  33,211
  34,899
  36,666
  38,518
  40,458
  42,491
  44,623
  45,713
  48,056
  50,513
  53,090
  55,793
  58,628
  61,603
  64,725
  68,000
  71,436
  75,043
  78,828
  82,800
  86,970
  91,346
  95,940
  100,761
  105,823
  111,136
  116,714
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
  27,044
  28,589
  30,060
  31,600
  33,211
  34,899
  36,666
  38,518
  40,458
  42,491
  44,623
  45,713
  48,056
  50,513
  53,090
  55,793
  58,628
  61,603
  64,725
  68,000
  71,436
  75,043
  78,828
  82,800
  86,970
  91,346
  95,940
  100,761
  105,823
  111,136
  116,714
Operating income, $m
  4,309
  4,457
  4,757
  5,071
  5,400
  5,745
  6,105
  6,483
  6,879
  7,294
  7,729
  9,330
  9,808
  10,310
  10,836
  11,387
  11,966
  12,573
  13,210
  13,879
  14,580
  15,316
  16,089
  16,900
  17,750
  18,644
  19,581
  20,565
  21,598
  22,683
  23,821
EBITDA, $m
  4,763
  5,749
  6,057
  6,380
  6,717
  7,071
  7,441
  7,829
  8,235
  8,661
  9,108
  9,576
  10,067
  10,581
  11,121
  11,687
  12,281
  12,905
  13,558
  14,244
  14,964
  15,720
  16,513
  17,345
  18,218
  19,135
  20,097
  21,107
  22,168
  23,281
  24,449
Interest expense (income), $m
  83
  105
  145
  186
  230
  275
  323
  373
  425
  480
  537
  597
  660
  726
  796
  869
  945
  1,025
  1,109
  1,197
  1,290
  1,387
  1,488
  1,595
  1,707
  1,825
  1,949
  2,078
  2,214
  2,357
  2,507
Earnings before tax, $m
  4,231
  4,352
  4,613
  4,885
  5,171
  5,470
  5,783
  6,111
  6,454
  6,815
  7,192
  8,733
  9,148
  9,583
  10,040
  10,519
  11,021
  11,548
  12,101
  12,682
  13,291
  13,930
  14,600
  15,304
  16,043
  16,819
  17,633
  18,487
  19,384
  20,325
  21,314
Tax expense, $m
  1,169
  1,175
  1,245
  1,319
  1,396
  1,477
  1,561
  1,650
  1,743
  1,840
  1,942
  2,358
  2,470
  2,587
  2,711
  2,840
  2,976
  3,118
  3,267
  3,424
  3,588
  3,761
  3,942
  4,132
  4,332
  4,541
  4,761
  4,991
  5,234
  5,488
  5,755
Net income, $m
  2,955
  3,177
  3,367
  3,566
  3,775
  3,993
  4,221
  4,461
  4,712
  4,975
  5,250
  6,375
  6,678
  6,996
  7,329
  7,679
  8,045
  8,430
  8,834
  9,258
  9,702
  10,169
  10,658
  11,172
  11,711
  12,278
  12,872
  13,495
  14,150
  14,838
  15,559

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,334
  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
  33,172
  32,177
  33,902
  35,707
  37,596
  39,575
  41,647
  43,818
  46,093
  48,477
  50,976
  53,596
  56,343
  59,223
  62,245
  65,414
  68,739
  72,226
  75,886
  79,726
  83,755
  87,984
  92,421
  97,079
  101,967
  107,098
  112,484
  118,137
  124,071
  130,301
  136,840
Adjusted assets (=assets-cash), $m
  30,838
  32,177
  33,902
  35,707
  37,596
  39,575
  41,647
  43,818
  46,093
  48,477
  50,976
  53,596
  56,343
  59,223
  62,245
  65,414
  68,739
  72,226
  75,886
  79,726
  83,755
  87,984
  92,421
  97,079
  101,967
  107,098
  112,484
  118,137
  124,071
  130,301
  136,840
Revenue / Adjusted assets
  1.017
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
  1.027
Average production assets, $m
  2,454
  4,428
  4,666
  4,914
  5,174
  5,446
  5,731
  6,030
  6,343
  6,671
  7,015
  7,376
  7,754
  8,150
  8,566
  9,002
  9,460
  9,940
  10,443
  10,972
  11,526
  12,108
  12,719
  13,360
  14,033
  14,739
  15,480
  16,258
  17,074
  17,932
  18,832
Working capital, $m
  3,084
  1,223
  1,288
  1,357
  1,429
  1,504
  1,583
  1,665
  1,751
  1,842
  1,937
  2,037
  2,141
  2,250
  2,365
  2,486
  2,612
  2,745
  2,884
  3,029
  3,183
  3,343
  3,512
  3,689
  3,875
  4,070
  4,274
  4,489
  4,715
  4,951
  5,200
Total debt, $m
  3,888
  4,130
  5,317
  6,558
  7,858
  9,220
  10,645
  12,139
  13,704
  15,344
  17,063
  18,866
  20,756
  22,738
  24,816
  26,997
  29,284
  31,684
  34,202
  36,843
  39,616
  42,525
  45,578
  48,782
  52,145
  55,675
  59,381
  63,270
  67,353
  71,639
  76,138
Total liabilities, $m
  22,871
  22,138
  23,325
  24,566
  25,866
  27,228
  28,653
  30,147
  31,712
  33,352
  35,071
  36,874
  38,764
  40,746
  42,824
  45,005
  47,292
  49,692
  52,210
  54,851
  57,624
  60,533
  63,586
  66,790
  70,153
  73,683
  77,389
  81,278
  85,361
  89,647
  94,146
Total equity, $m
  10,301
  10,039
  10,577
  11,141
  11,730
  12,347
  12,994
  13,671
  14,381
  15,125
  15,904
  16,722
  17,579
  18,478
  19,420
  20,409
  21,446
  22,535
  23,676
  24,874
  26,132
  27,451
  28,835
  30,289
  31,814
  33,415
  35,095
  36,859
  38,710
  40,654
  42,694
Total liabilities and equity, $m
  33,172
  32,177
  33,902
  35,707
  37,596
  39,575
  41,647
  43,818
  46,093
  48,477
  50,975
  53,596
  56,343
  59,224
  62,244
  65,414
  68,738
  72,227
  75,886
  79,725
  83,756
  87,984
  92,421
  97,079
  101,967
  107,098
  112,484
  118,137
  124,071
  130,301
  136,840
Debt-to-equity ratio
  0.377
  0.410
  0.500
  0.590
  0.670
  0.750
  0.820
  0.890
  0.950
  1.010
  1.070
  1.130
  1.180
  1.230
  1.280
  1.320
  1.370
  1.410
  1.440
  1.480
  1.520
  1.550
  1.580
  1.610
  1.640
  1.670
  1.690
  1.720
  1.740
  1.760
  1.780
Adjusted equity ratio
  0.258
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,955
  3,177
  3,367
  3,566
  3,775
  3,993
  4,221
  4,461
  4,712
  4,975
  5,250
  6,375
  6,678
  6,996
  7,329
  7,679
  8,045
  8,430
  8,834
  9,258
  9,702
  10,169
  10,658
  11,172
  11,711
  12,278
  12,872
  13,495
  14,150
  14,838
  15,559
Depreciation, amort., depletion, $m
  454
  1,292
  1,300
  1,308
  1,317
  1,326
  1,336
  1,346
  1,356
  1,367
  1,378
  246
  258
  272
  286
  300
  315
  331
  348
  366
  384
  404
  424
  445
  468
  491
  516
  542
  569
  598
  628
Funds from operations, $m
  350
  4,469
  4,667
  4,875
  5,092
  5,319
  5,557
  5,806
  6,068
  6,342
  6,629
  6,621
  6,936
  7,267
  7,615
  7,979
  8,361
  8,762
  9,182
  9,623
  10,086
  10,572
  11,082
  11,617
  12,179
  12,769
  13,388
  14,037
  14,719
  15,435
  16,187
Change in working capital, $m
  -1,794
  63
  66
  69
  72
  75
  79
  82
  86
  91
  95
  100
  104
  109
  115
  120
  126
  133
  139
  146
  153
  161
  169
  177
  186
  195
  205
  215
  225
  237
  248
Cash from operations, $m
  2,144
  4,365
  4,602
  4,806
  5,020
  5,244
  5,478
  5,724
  5,981
  6,251
  6,534
  6,521
  6,832
  7,158
  7,500
  7,858
  8,234
  8,629
  9,043
  9,477
  9,933
  10,412
  10,914
  11,440
  11,993
  12,574
  13,183
  13,823
  14,494
  15,199
  15,938
Maintenance CAPEX, $m
  0
  -140
  -148
  -156
  -164
  -172
  -182
  -191
  -201
  -211
  -222
  -234
  -246
  -258
  -272
  -286
  -300
  -315
  -331
  -348
  -366
  -384
  -404
  -424
  -445
  -468
  -491
  -516
  -542
  -569
  -598
New CAPEX, $m
  -392
  -241
  -237
  -248
  -260
  -272
  -285
  -299
  -313
  -328
  -344
  -361
  -378
  -396
  -416
  -436
  -458
  -480
  -504
  -528
  -555
  -582
  -611
  -641
  -673
  -706
  -741
  -778
  -817
  -857
  -900
Cash from investing activities, $m
  -426
  -381
  -385
  -404
  -424
  -444
  -467
  -490
  -514
  -539
  -566
  -595
  -624
  -654
  -688
  -722
  -758
  -795
  -835
  -876
  -921
  -966
  -1,015
  -1,065
  -1,118
  -1,174
  -1,232
  -1,294
  -1,359
  -1,426
  -1,498
Free cash flow, $m
  1,718
  3,984
  4,217
  4,402
  4,596
  4,799
  5,011
  5,234
  5,467
  5,712
  5,967
  5,927
  6,208
  6,503
  6,812
  7,137
  7,477
  7,834
  8,208
  8,601
  9,013
  9,445
  9,899
  10,376
  10,875
  11,400
  11,951
  12,529
  13,135
  13,772
  14,441
Issuance/(repayment) of debt, $m
  492
  1,142
  1,187
  1,242
  1,300
  1,361
  1,426
  1,494
  1,565
  1,640
  1,719
  1,802
  1,890
  1,982
  2,079
  2,180
  2,287
  2,400
  2,518
  2,642
  2,772
  2,909
  3,053
  3,204
  3,363
  3,530
  3,705
  3,889
  4,083
  4,286
  4,499
Issuance/(repurchase) of shares, $m
  -1,704
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,258
  1,142
  1,187
  1,242
  1,300
  1,361
  1,426
  1,494
  1,565
  1,640
  1,719
  1,802
  1,890
  1,982
  2,079
  2,180
  2,287
  2,400
  2,518
  2,642
  2,772
  2,909
  3,053
  3,204
  3,363
  3,530
  3,705
  3,889
  4,083
  4,286
  4,499
Total cash flow (excl. dividends), $m
  460
  5,126
  5,403
  5,644
  5,896
  6,160
  6,437
  6,728
  7,032
  7,352
  7,687
  7,729
  8,098
  8,485
  8,891
  9,317
  9,764
  10,233
  10,726
  11,243
  11,785
  12,355
  12,952
  13,580
  14,239
  14,930
  15,656
  16,418
  17,218
  18,058
  18,940
Retained Cash Flow (-), $m
  437
  -497
  -538
  -563
  -590
  -617
  -647
  -677
  -710
  -744
  -780
  -817
  -857
  -899
  -943
  -989
  -1,037
  -1,088
  -1,142
  -1,198
  -1,257
  -1,319
  -1,385
  -1,453
  -1,525
  -1,601
  -1,680
  -1,764
  -1,852
  -1,944
  -2,040
Prev. year cash balance distribution, $m
 
  1,434
  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
 
  6,063
  4,865
  5,081
  5,306
  5,543
  5,791
  6,050
  6,323
  6,608
  6,907
  6,912
  7,241
  7,586
  7,948
  8,328
  8,727
  9,145
  9,584
  10,045
  10,528
  11,035
  11,568
  12,127
  12,713
  13,329
  13,976
  14,654
  15,367
  16,114
  16,900
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
 
  5,813
  4,454
  4,422
  4,369
  4,296
  4,203
  4,088
  3,952
  3,796
  3,621
  3,282
  3,090
  2,884
  2,668
  2,445
  2,218
  1,990
  1,765
  1,547
  1,338
  1,141
  960
  795
  648
  519
  408
  315
  238
  176
  127
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

General Dynamics Corporation operates as an aerospace and defense company worldwide. It operates through four business groups: Aerospace; Combat Systems; Information Systems and Technology; and Marine Systems. The Aerospace group designs, develops, manufactures, and outfits business-jet aircraft; provides aircraft services, such as maintenance, repair, aircraft management, charter, fixed-base operational, and staffing services; and performs aircraft completion services for other original equipment manufacturers. The Combat Systems group is involved in the design, development, production, modernization, and sustainment of combat vehicles, weapons systems, and munitions. This group offers wheeled combat and tactical vehicles; main battle tanks and tracked combat vehicles; armaments; and maintenance and logistics support and sustainment services. The Information Systems and Technology group provides technologies, products, and services that support a range of military, federal/civilian, state, local, and commercial customers. This group offers information technology solutions and mission support services; communication, command-and-control, and computer mission systems; and imagery, signals, and multi-intelligence systems for customers in the defense sector, intelligence and homeland security communities, and the United States allies. The Marine Systems group designs, constructs, and repairs surface ships and submarines for the United States Navy and Jones Act ships for commercial customers. This group offers nuclear-powered surface combatants, auxiliary and combat-logistics ships, and commercial product carriers and containerships; and provides design and engineering support services, as well as maintenance, modernization, and lifecycle support services. General Dynamics Corporation was founded in 1899 and is based in Falls Church, Virginia.

FINANCIAL RATIOS  of  General Dynamics (GD)

Valuation Ratios
P/E Ratio 20.6
Price to Sales 1.9
Price to Book 5.9
Price to Tangible Book
Price to Cash Flow 28.3
Price to Free Cash Flow 34.7
Growth Rates
Sales Growth Rate -0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.1%
Cap. Spend. - 3 Yr. Gr. Rate -2.1%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 29%
Total Debt to Equity 37.7%
Interest Coverage 52
Management Effectiveness
Return On Assets 9.3%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 20.9%
Ret/ On T. Cap. - 3 Yr. Avg. 18.5%
Return On Equity 28.1%
Return On Equity - 3 Yr. Avg. 24.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 19.9%
Gross Margin - 3 Yr. Avg. 19.5%
EBITDA Margin 15.2%
EBITDA Margin - 3 Yr. Avg. 14.8%
Operating Margin 13.7%
Oper. Margin - 3 Yr. Avg. 13.2%
Pre-Tax Margin 13.5%
Pre-Tax Margin - 3 Yr. Avg. 13%
Net Profit Margin 9.4%
Net Profit Margin - 3 Yr. Avg. 9%
Effective Tax Rate 27.6%
Eff/ Tax Rate - 3 Yr. Avg. 28.3%
Payout Ratio 30.8%

GD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GD stock intrinsic value calculation we used $31353 million for the last fiscal year's total revenue generated by General Dynamics. The default revenue input number comes from 2016 income statement of General Dynamics. 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 GD stock valuation model: a) initial revenue growth rate of 5.4% 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 GD is calculated based on our internal credit rating of General Dynamics, 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 General Dynamics.
    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 GD stock the variable cost ratio is equal to 86.7%.

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 GD 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 General Dynamics.

Corporate tax rate of 27% is the nominal tax rate for General Dynamics. 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 GD 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 GD are equal to 13.4%.

Life of production assets of 34.4 years is the average useful life of capital assets used in General Dynamics 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 GD is equal to 3.7%. 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 - $10976 million for General Dynamics - 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 301.803 million for General Dynamics 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 General Dynamics at the current share price and the inputted number of shares is $60.8 billion.


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COMPANY NEWS

▶ Better Buy: General Dynamics Corporation vs. Raytheon   [Jun-21-17 05:02PM  Motley Fool]
▶ Made in America Is a Matter of National Security   [Jun-15-17 07:10AM  Bloomberg Video]
▶ Lead By Boeing, Defense Stocks Could Be Headed Higher   [Jun-13-17 02:29PM  TheStreet.com]
▶ How Boeing Stock Reacted to the Qatar Crisis   [09:06AM  Market Realist]
▶ General Dynamics Board Declares Dividend   [02:30PM  PR Newswire]
▶ Why General Electric Won't Sink the Industrials   [May-30-17 11:20AM  Barrons.com]
▶ Highest-paid female CEO? IBM's Rometty tops Yahoo's Mayer   [May-24-17 01:54PM  Associated Press]
▶ These stocks outperform during U.S. Saudi arms deals   [May-23-17 03:50PM  CNBC Videos]
▶ Defense And Aerospace Stocks To Watch And Industry News   [11:03AM  Investor's Business Daily]
▶ Defense in the Trader Blitz   [01:26PM  CNBC Videos]
▶ Defense stocks rally on US, Saudi arms deal   [10:44AM  Yahoo Finance Video]
▶ [$$] Trump discusses bolstering security ties with Gulf states   [May-21-17 02:45PM  Financial Times]
▶ 4 Defense Giants In Buy Zone As Saudis Near $100 Billion Arms Package   [May-19-17 04:02PM  Investor's Business Daily]
▶ Defense contractors await Trump's trip   [07:49AM  CNBC Videos]
▶ Nvidia, Wayfair Touted On Earnings, Yelp Panned, Northrop A Buy   [May-10-17 04:06PM  Investor's Business Daily]
▶ Leidos CEO: Trump transition slowing contract awards   [03:20PM  American City Business Journals]
▶ U.S. Navy to delay contract for planned frigate   [May-03-17 04:08PM  Reuters]
▶ General Dynamics makes cybersecurity products acquisition   [12:39PM  American City Business Journals]
▶ 5 Companies Reach Yearly Highs   [12:23PM  GuruFocus.com]
▶ Congressional spending proposal gives local defense firms reason to celebrate   [May-01-17 02:57PM  American City Business Journals]
▶ Why the Navy Needs a New Destroyer   [Apr-29-17 08:13AM  Motley Fool]
▶ Northrop Grumman, General Dynamics Hit Buy Points On Strong Earnings   [Apr-26-17 04:37PM  Investor's Business Daily]
▶ Defense Stocks In Focus   [10:50AM  Zacks]
▶ General Dynamics tops 1Q profit forecasts   [07:38AM  Associated Press]
▶ General Dynamics Poised to Break Out Ahead of Earnings   [Apr-24-17 11:56AM  TheStreet.com]
▶ U.S. defense stocks easily outperform the broader market   [Apr-21-17 11:08AM  MarketWatch]
▶ International demand driving General Dynamics' combat vehicle sales   [Apr-18-17 04:13PM  American City Business Journals]
▶ Options market says volatility set to pop & more   [Apr-13-17 12:42PM  CNBC Videos]
Stock chart of GD Financial statements of GD Annual reports of GD
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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