Intrinsic value of Gerdau ADR - GGB

Previous Close

$3.52

  Intrinsic Value

$0.75

stock screener

  Rating & Target

str. sell

-79%

  Value-price divergence*

-38%

Previous close

$3.52

 
Intrinsic value

$0.75

 
Up/down potential

-79%

 
Rating

str. sell

 
Value-price divergence*

-38%

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

We calculate the intrinsic value of GGB 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 5.4

 

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, %
  -13.61
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  11,904
  12,142
  12,421
  12,741
  13,099
  13,496
  13,932
  14,406
  14,920
  15,473
  16,067
  16,702
  17,380
  18,102
  18,869
  19,683
  20,546
  21,459
  22,424
  23,444
  24,522
  25,658
  26,857
  28,120
  29,452
  30,854
  32,330
  33,884
  35,519
  37,239
  39,048
Variable operating expenses, $m
 
  13,035
  13,328
  13,662
  14,038
  14,455
  14,912
  15,409
  15,948
  16,528
  17,151
  17,518
  18,229
  18,986
  19,791
  20,644
  21,549
  22,507
  23,520
  24,590
  25,719
  26,912
  28,169
  29,494
  30,890
  32,361
  33,909
  35,539
  37,254
  39,058
  40,956
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
  12,422
  13,035
  13,328
  13,662
  14,038
  14,455
  14,912
  15,409
  15,948
  16,528
  17,151
  17,518
  18,229
  18,986
  19,791
  20,644
  21,549
  22,507
  23,520
  24,590
  25,719
  26,912
  28,169
  29,494
  30,890
  32,361
  33,909
  35,539
  37,254
  39,058
  40,956
Operating income, $m
  -517
  -893
  -906
  -922
  -939
  -959
  -980
  -1,003
  -1,028
  -1,055
  -1,084
  -816
  -849
  -884
  -922
  -961
  -1,004
  -1,048
  -1,095
  -1,145
  -1,198
  -1,253
  -1,312
  -1,374
  -1,439
  -1,507
  -1,579
  -1,655
  -1,735
  -1,819
  -1,907
EBITDA, $m
  285
  -58
  -60
  -61
  -63
  -65
  -67
  -69
  -71
  -74
  -77
  -80
  -83
  -87
  -90
  -94
  -98
  -103
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -187
Interest expense (income), $m
  392
  276
  285
  295
  306
  319
  333
  348
  365
  383
  403
  424
  446
  470
  496
  523
  552
  582
  615
  649
  685
  723
  764
  806
  851
  898
  948
  1,000
  1,055
  1,113
  1,174
Earnings before tax, $m
  -816
  -1,169
  -1,191
  -1,216
  -1,245
  -1,277
  -1,313
  -1,351
  -1,393
  -1,438
  -1,487
  -1,240
  -1,295
  -1,355
  -1,418
  -1,485
  -1,555
  -1,631
  -1,710
  -1,794
  -1,883
  -1,977
  -2,075
  -2,180
  -2,289
  -2,405
  -2,527
  -2,655
  -2,790
  -2,932
  -3,081
Tax expense, $m
  96
  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
  -914
  -1,169
  -1,191
  -1,216
  -1,245
  -1,277
  -1,313
  -1,351
  -1,393
  -1,438
  -1,487
  -1,240
  -1,295
  -1,355
  -1,418
  -1,485
  -1,555
  -1,631
  -1,710
  -1,794
  -1,883
  -1,977
  -2,075
  -2,180
  -2,289
  -2,405
  -2,527
  -2,655
  -2,790
  -2,932
  -3,081

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,925
  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
  17,274
  15,647
  16,007
  16,418
  16,880
  17,392
  17,953
  18,565
  19,227
  19,940
  20,705
  21,524
  22,397
  23,327
  24,316
  25,365
  26,476
  27,653
  28,897
  30,212
  31,600
  33,065
  34,609
  36,238
  37,953
  39,760
  41,662
  43,665
  45,772
  47,989
  50,320
Adjusted assets (=assets-cash), $m
  15,349
  15,647
  16,007
  16,418
  16,880
  17,392
  17,953
  18,565
  19,227
  19,940
  20,705
  21,524
  22,397
  23,327
  24,316
  25,365
  26,476
  27,653
  28,897
  30,212
  31,600
  33,065
  34,609
  36,238
  37,953
  39,760
  41,662
  43,665
  45,772
  47,989
  50,320
Revenue / Adjusted assets
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
  0.776
Average production assets, $m
  7,234
  7,382
  7,552
  7,746
  7,964
  8,206
  8,471
  8,759
  9,071
  9,408
  9,769
  10,155
  10,567
  11,006
  11,472
  11,967
  12,492
  13,047
  13,634
  14,254
  14,909
  15,600
  16,329
  17,097
  17,907
  18,759
  19,657
  20,601
  21,596
  22,641
  23,741
Working capital, $m
  2,901
  2,428
  2,484
  2,548
  2,620
  2,699
  2,786
  2,881
  2,984
  3,095
  3,213
  3,340
  3,476
  3,620
  3,774
  3,937
  4,109
  4,292
  4,485
  4,689
  4,904
  5,132
  5,371
  5,624
  5,890
  6,171
  6,466
  6,777
  7,104
  7,448
  7,810
Total debt, $m
  6,826
  5,583
  5,777
  5,998
  6,247
  6,523
  6,826
  7,155
  7,512
  7,896
  8,309
  8,750
  9,221
  9,722
  10,255
  10,821
  11,420
  12,054
  12,725
  13,433
  14,181
  14,971
  15,803
  16,681
  17,606
  18,580
  19,605
  20,684
  21,820
  23,015
  24,272
Total liabilities, $m
  9,677
  8,434
  8,628
  8,849
  9,098
  9,374
  9,677
  10,006
  10,363
  10,747
  11,160
  11,601
  12,072
  12,573
  13,106
  13,672
  14,271
  14,905
  15,576
  16,284
  17,032
  17,822
  18,654
  19,532
  20,457
  21,431
  22,456
  23,535
  24,671
  25,866
  27,123
Total equity, $m
  7,597
  7,213
  7,379
  7,569
  7,782
  8,018
  8,277
  8,558
  8,863
  9,192
  9,545
  9,922
  10,325
  10,754
  11,210
  11,693
  12,206
  12,748
  13,322
  13,928
  14,568
  15,243
  15,955
  16,706
  17,496
  18,329
  19,206
  20,129
  21,101
  22,123
  23,198
Total liabilities and equity, $m
  17,274
  15,647
  16,007
  16,418
  16,880
  17,392
  17,954
  18,564
  19,226
  19,939
  20,705
  21,523
  22,397
  23,327
  24,316
  25,365
  26,477
  27,653
  28,898
  30,212
  31,600
  33,065
  34,609
  36,238
  37,953
  39,760
  41,662
  43,664
  45,772
  47,989
  50,321
Debt-to-equity ratio
  0.899
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.930
  0.940
  0.950
  0.960
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.010
  1.020
  1.030
  1.030
  1.040
  1.050
Adjusted equity ratio
  0.370
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -914
  -1,169
  -1,191
  -1,216
  -1,245
  -1,277
  -1,313
  -1,351
  -1,393
  -1,438
  -1,487
  -1,240
  -1,295
  -1,355
  -1,418
  -1,485
  -1,555
  -1,631
  -1,710
  -1,794
  -1,883
  -1,977
  -2,075
  -2,180
  -2,289
  -2,405
  -2,527
  -2,655
  -2,790
  -2,932
  -3,081
Depreciation, amort., depletion, $m
  802
  834
  847
  861
  877
  894
  913
  934
  957
  981
  1,007
  736
  766
  798
  831
  867
  905
  945
  988
  1,033
  1,080
  1,130
  1,183
  1,239
  1,298
  1,359
  1,424
  1,493
  1,565
  1,641
  1,720
Funds from operations, $m
  919
  -334
  -344
  -356
  -369
  -383
  -399
  -417
  -436
  -457
  -480
  -504
  -530
  -557
  -586
  -617
  -650
  -685
  -722
  -761
  -803
  -846
  -892
  -941
  -992
  -1,046
  -1,102
  -1,162
  -1,225
  -1,291
  -1,361
Change in working capital, $m
  -193
  48
  56
  64
  72
  79
  87
  95
  103
  111
  119
  127
  136
  144
  153
  163
  173
  183
  193
  204
  215
  227
  240
  253
  266
  280
  295
  311
  327
  344
  362
Cash from operations, $m
  1,112
  -382
  -400
  -419
  -440
  -463
  -487
  -512
  -539
  -568
  -598
  -631
  -665
  -701
  -740
  -780
  -823
  -868
  -915
  -965
  -1,018
  -1,074
  -1,132
  -1,193
  -1,258
  -1,326
  -1,398
  -1,473
  -1,552
  -1,635
  -1,723
Maintenance CAPEX, $m
  0
  -524
  -535
  -547
  -561
  -577
  -595
  -614
  -635
  -657
  -682
  -708
  -736
  -766
  -798
  -831
  -867
  -905
  -945
  -988
  -1,033
  -1,080
  -1,130
  -1,183
  -1,239
  -1,298
  -1,359
  -1,424
  -1,493
  -1,565
  -1,641
New CAPEX, $m
  -419
  -148
  -170
  -194
  -218
  -241
  -265
  -288
  -312
  -336
  -361
  -386
  -412
  -439
  -466
  -495
  -524
  -555
  -587
  -620
  -655
  -691
  -729
  -768
  -809
  -852
  -898
  -945
  -994
  -1,046
  -1,100
Cash from investing activities, $m
  -338
  -672
  -705
  -741
  -779
  -818
  -860
  -902
  -947
  -993
  -1,043
  -1,094
  -1,148
  -1,205
  -1,264
  -1,326
  -1,391
  -1,460
  -1,532
  -1,608
  -1,688
  -1,771
  -1,859
  -1,951
  -2,048
  -2,150
  -2,257
  -2,369
  -2,487
  -2,611
  -2,741
Free cash flow, $m
  774
  -1,055
  -1,105
  -1,161
  -1,220
  -1,281
  -1,346
  -1,414
  -1,486
  -1,562
  -1,641
  -1,725
  -1,813
  -1,906
  -2,004
  -2,106
  -2,214
  -2,328
  -2,448
  -2,574
  -2,706
  -2,845
  -2,991
  -3,145
  -3,306
  -3,476
  -3,655
  -3,842
  -4,039
  -4,246
  -4,463
Issuance/(repayment) of debt, $m
  -682
  167
  194
  222
  249
  276
  303
  330
  357
  384
  412
  441
  471
  501
  533
  565
  599
  634
  671
  709
  748
  789
  833
  878
  925
  974
  1,025
  1,079
  1,136
  1,195
  1,257
Issuance/(repurchase) of shares, $m
  -30
  1,300
  1,357
  1,406
  1,458
  1,513
  1,571
  1,633
  1,698
  1,767
  1,840
  1,617
  1,698
  1,783
  1,873
  1,968
  2,068
  2,173
  2,284
  2,400
  2,523
  2,652
  2,788
  2,930
  3,080
  3,238
  3,404
  3,578
  3,761
  3,954
  4,156
Cash from financing (excl. dividends), $m  
  -712
  1,467
  1,551
  1,628
  1,707
  1,789
  1,874
  1,963
  2,055
  2,151
  2,252
  2,058
  2,169
  2,284
  2,406
  2,533
  2,667
  2,807
  2,955
  3,109
  3,271
  3,441
  3,621
  3,808
  4,005
  4,212
  4,429
  4,657
  4,897
  5,149
  5,413
Total cash flow (excl. dividends), $m
  -158
  412
  446
  467
  487
  508
  528
  548
  569
  590
  611
  333
  356
  379
  402
  427
  453
  479
  507
  535
  565
  596
  629
  663
  699
  736
  775
  815
  858
  903
  949
Retained Cash Flow (-), $m
  2,421
  -1,300
  -1,357
  -1,406
  -1,458
  -1,513
  -1,571
  -1,633
  -1,698
  -1,767
  -1,840
  -1,617
  -1,698
  -1,783
  -1,873
  -1,968
  -2,068
  -2,173
  -2,284
  -2,400
  -2,523
  -2,652
  -2,788
  -2,930
  -3,080
  -3,238
  -3,404
  -3,578
  -3,761
  -3,954
  -4,156
Prev. year cash balance distribution, $m
 
  515
  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
 
  -373
  -911
  -939
  -971
  -1,005
  -1,043
  -1,085
  -1,129
  -1,177
  -1,229
  -1,284
  -1,342
  -1,405
  -1,471
  -1,541
  -1,615
  -1,694
  -1,777
  -1,865
  -1,958
  -2,055
  -2,159
  -2,267
  -2,382
  -2,502
  -2,629
  -2,763
  -2,903
  -3,051
  -3,207
Discount rate, %
 
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
 
  -351
  -801
  -768
  -732
  -695
  -656
  -615
  -572
  -528
  -484
  -438
  -393
  -349
  -306
  -264
  -225
  -189
  -157
  -128
  -102
  -80
  -62
  -46
  -34
  -25
  -17
  -12
  -8
  -5
  -3
Current shareholders' claim on cash, %
  100
  79.4
  62.7
  49.4
  38.9
  30.5
  23.9
  18.7
  14.6
  11.4
  8.9
  7.2
  5.8
  4.6
  3.7
  3.0
  2.4
  1.9
  1.5
  1.2
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.2
  0.1
  0.1

Gerdau S.A. produces and commercializes steel products worldwide. The company operates through Brazil Business Operation, North America Business Operation, South America Business Operation, and Special Steel Business Operation segments. It offers semi-finished products, such as billets, blooms, and slabs; common long rolled products, including rebars, merchant bars, and profiles that are used by the construction and manufacturing industries; and drawn products consisting of barbed and barbless fence wire, galvanized wire, fences, concrete reinforcing wire mesh, nails, and clamps, as well as iron ore. It also produces special steel products used in automotive components, machinery, road and agricultural parts, mining equipment, tools, rail components, and maritime mooring. In addition, it provides flat products, such as hot- and cold-rolled steel coils, heavy plates, and structural profiles. The company sells its products through independent distributors, direct sales from the mills, and its retail network. The company was founded in 1901 and is based in Porto Alegre, Brazil.

FINANCIAL RATIOS  of  Gerdau ADR (GGB)

Valuation Ratios
P/E Ratio -6.6
Price to Sales 0.5
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 8.7
Growth Rates
Sales Growth Rate -13.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43%
Cap. Spend. - 3 Yr. Gr. Rate -12.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 71.3%
Total Debt to Equity 89.9%
Interest Coverage -1
Management Effectiveness
Return On Assets -2.4%
Ret/ On Assets - 3 Yr. Avg. -1.4%
Return On Total Capital -5.5%
Ret/ On T. Cap. - 3 Yr. Avg. -3.6%
Return On Equity -10.4%
Return On Equity - 3 Yr. Avg. -6.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 9.2%
Gross Margin - 3 Yr. Avg. 10.4%
EBITDA Margin 3.2%
EBITDA Margin - 3 Yr. Avg. 2.6%
Operating Margin -4.4%
Oper. Margin - 3 Yr. Avg. -1.6%
Pre-Tax Margin -6.9%
Pre-Tax Margin - 3 Yr. Avg. -5.9%
Net Profit Margin -7.7%
Net Profit Margin - 3 Yr. Avg. -4.9%
Effective Tax Rate -11.8%
Eff/ Tax Rate - 3 Yr. Avg. 0.5%
Payout Ratio -3%

GGB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GGB stock intrinsic value calculation we used $11904 million for the last fiscal year's total revenue generated by Gerdau ADR. The default revenue input number comes from 2016 income statement of Gerdau ADR. 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 GGB stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.3%, whose default value for GGB is calculated based on our internal credit rating of Gerdau ADR, 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 Gerdau ADR.
    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 GGB stock the variable cost ratio is equal to 107.4%.

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 GGB 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 5.1% for Gerdau ADR.

Corporate tax rate of 27% is the nominal tax rate for Gerdau ADR. 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 GGB 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 GGB are equal to 60.8%.

Life of production assets of 13.8 years is the average useful life of capital assets used in Gerdau ADR 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 GGB is equal to 20%. 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 - $7597 million for Gerdau ADR - 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 1528.3 million for Gerdau ADR 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 Gerdau ADR at the current share price and the inputted number of shares is $5.4 billion.

RELATED COMPANIES Price Int.Val. Rating
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MT ArcelorMittal 25.97 2.04  str.sell
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COMPANY NEWS

▶ ETFs with exposure to Gerdau SA : May 22, 2017   [May-22-17 01:42PM  Capital Cube]
▶ Why Investors Shouldnt Fret over MTs Negative Free Cash Flow   [May-15-17 07:36AM  Market Realist]
▶ ETFs with exposure to Gerdau SA : May 11, 2017   [May-11-17 04:43PM  Capital Cube]
▶ GERDAU S.A. - Consolidated Information   [08:19AM  PR Newswire]
▶ [$$] Z Capital to Buy Atmosphere Annealing and NitroSteel   [Mar-16-17 11:26AM  The Wall Street Journal]
▶ GERDAU S.A. - Form 20-F   [Mar-15-17 04:30PM  PR Newswire]
▶ Gerdau S.A. - Consolidated Information   [Feb-22-17 07:56AM  PR Newswire]
▶ Brazilian Stocks Keep Rising On Commodity Hopes   [Dec-28-16 09:18AM  at Barrons.com]
▶ Emerging Markets Today: Brazil Reforms, India Scorned   [Dec-14-16 10:12AM  at Barrons.com]
▶ How Gerdau SA (ADR) (GGB) Stacks Up Against Its Peers?   [Dec-13-16 08:54AM  at Insider Monkey]
▶ 15 Latin America Stocks With 2017 Upside   [Dec-07-16 10:49AM  at Barrons.com]
▶ Hedge Funds Are Buying J2 Global Inc (JCOM)   [Nov-29-16 01:17PM  at Insider Monkey]
▶ Five Stocks Under $5.00 for December (NAK, GGB)   [Nov-23-16 10:59AM  at Investopedia]
▶ Gerdau S.A.: Consolidated information   [Nov-09-16 07:00AM  PR Newswire]
▶ Here's Why These Steel Stocks Got Hammered   [Sep-14-16 02:45PM  at Motley Fool]
▶ Gerdau S.A. - Consolidated Information   [09:41AM  PR Newswire]
▶ Stocks Close to Technical Entry Points   [Jul-20-16 01:00PM  at Investopedia]
Stock chart of GGB Financial statements of GGB
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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