Intrinsic value of Honeywell International - HON

Previous Close

$153.13

  Intrinsic Value

$140.49

stock screener

  Rating & Target

hold

-8%

Previous close

$153.13

 
Intrinsic value

$140.49

 
Up/down potential

-8%

 
Rating

hold

We calculate the intrinsic value of HON 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  1.87
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
Revenue, $m
  39,302
  41,791
  43,165
  44,659
  46,274
  48,011
  49,873
  51,863
  53,984
  56,242
  58,640
  61,184
  63,878
  66,729
  69,743
  72,927
  76,289
  79,834
  83,573
  87,513
  91,665
  96,036
  100,638
  105,482
  110,578
  115,940
  121,578
  127,508
  133,743
  140,297
  147,186
Variable operating expenses, $m
 
  25,881
  26,658
  27,502
  28,414
  29,395
  30,446
  31,570
  32,769
  34,044
  35,398
  34,558
  36,079
  37,690
  39,392
  41,191
  43,089
  45,092
  47,204
  49,429
  51,774
  54,243
  56,842
  59,578
  62,457
  65,485
  68,670
  72,019
  75,540
  79,242
  83,133
Fixed operating expenses, $m
 
  8,576
  8,764
  8,957
  9,154
  9,356
  9,561
  9,772
  9,987
  10,206
  10,431
  10,660
  10,895
  11,135
  11,380
  11,630
  11,886
  12,147
  12,415
  12,688
  12,967
  13,252
  13,544
  13,842
  14,146
  14,457
  14,775
  15,100
  15,433
  15,772
  16,119
Total operating expenses, $m
  32,855
  34,457
  35,422
  36,459
  37,568
  38,751
  40,007
  41,342
  42,756
  44,250
  45,829
  45,218
  46,974
  48,825
  50,772
  52,821
  54,975
  57,239
  59,619
  62,117
  64,741
  67,495
  70,386
  73,420
  76,603
  79,942
  83,445
  87,119
  90,973
  95,014
  99,252
Operating income, $m
  6,447
  7,334
  7,743
  8,201
  8,706
  9,261
  9,865
  10,521
  11,229
  11,992
  12,811
  15,966
  16,904
  17,905
  18,972
  20,107
  21,314
  22,595
  23,955
  25,397
  26,924
  28,541
  30,252
  32,062
  33,976
  35,998
  38,133
  40,389
  42,770
  45,283
  47,934
EBITDA, $m
  7,477
  12,540
  13,046
  13,609
  14,227
  14,903
  15,638
  16,434
  17,291
  18,212
  19,199
  20,255
  21,382
  22,582
  23,861
  25,219
  26,661
  28,192
  29,814
  31,531
  33,350
  35,273
  37,307
  39,457
  41,727
  44,125
  46,656
  49,327
  52,145
  55,117
  58,251
Interest expense (income), $m
  329
  966
  1,034
  1,111
  1,195
  1,286
  1,383
  1,487
  1,599
  1,718
  1,844
  1,979
  2,121
  2,272
  2,432
  2,601
  2,780
  2,968
  3,167
  3,376
  3,597
  3,830
  4,075
  4,333
  4,604
  4,890
  5,191
  5,507
  5,839
  6,189
  6,556
Earnings before tax, $m
  6,447
  6,368
  6,709
  7,089
  7,511
  7,975
  8,482
  9,033
  9,630
  10,274
  10,967
  13,987
  14,782
  15,632
  16,539
  17,506
  18,534
  19,627
  20,788
  22,020
  23,327
  24,711
  26,177
  27,729
  29,371
  31,107
  32,943
  34,882
  36,931
  39,094
  41,378
Tax expense, $m
  1,601
  1,719
  1,811
  1,914
  2,028
  2,153
  2,290
  2,439
  2,600
  2,774
  2,961
  3,776
  3,991
  4,221
  4,466
  4,727
  5,004
  5,299
  5,613
  5,945
  6,298
  6,672
  7,068
  7,487
  7,930
  8,399
  8,895
  9,418
  9,971
  10,555
  11,172
Net income, $m
  4,809
  4,649
  4,898
  5,175
  5,483
  5,822
  6,192
  6,594
  7,030
  7,500
  8,006
  10,210
  10,791
  11,412
  12,074
  12,779
  13,530
  14,328
  15,175
  16,075
  17,029
  18,039
  19,109
  20,242
  21,441
  22,708
  24,048
  25,464
  26,959
  28,539
  30,206

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  9,874
  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
  54,146
  61,187
  63,200
  65,387
  67,751
  70,294
  73,020
  75,934
  79,040
  82,346
  85,857
  89,581
  93,526
  97,700
  102,113
  106,775
  111,696
  116,888
  122,362
  128,131
  134,209
  140,609
  147,347
  154,439
  161,901
  169,750
  178,006
  186,688
  195,816
  205,412
  215,499
Adjusted assets (=assets-cash), $m
  44,272
  61,187
  63,200
  65,387
  67,751
  70,294
  73,020
  75,934
  79,040
  82,346
  85,857
  89,581
  93,526
  97,700
  102,113
  106,775
  111,696
  116,888
  122,362
  128,131
  134,209
  140,609
  147,347
  154,439
  161,901
  169,750
  178,006
  186,688
  195,816
  205,412
  215,499
Revenue / Adjusted assets
  0.888
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
  0.683
Average production assets, $m
  10,397
  29,295
  30,259
  31,306
  32,438
  33,655
  34,961
  36,356
  37,843
  39,426
  41,107
  42,890
  44,779
  46,777
  48,890
  51,122
  53,478
  55,964
  58,585
  61,347
  64,257
  67,321
  70,547
  73,943
  77,515
  81,274
  85,226
  89,383
  93,754
  98,348
  103,177
Working capital, $m
  6,727
  -2,048
  -2,115
  -2,188
  -2,267
  -2,353
  -2,444
  -2,541
  -2,645
  -2,756
  -2,873
  -2,998
  -3,130
  -3,270
  -3,417
  -3,573
  -3,738
  -3,912
  -4,095
  -4,288
  -4,492
  -4,706
  -4,931
  -5,169
  -5,418
  -5,681
  -5,957
  -6,248
  -6,553
  -6,875
  -7,212
Total debt, $m
  15,775
  19,152
  20,580
  22,130
  23,806
  25,609
  27,542
  29,608
  31,810
  34,154
  36,643
  39,284
  42,081
  45,040
  48,169
  51,475
  54,964
  58,644
  62,526
  66,616
  70,925
  75,463
  80,240
  85,268
  90,559
  96,124
  101,978
  108,133
  114,605
  121,408
  128,560
Total liabilities, $m
  34,777
  43,381
  44,809
  46,359
  48,035
  49,838
  51,771
  53,837
  56,039
  58,383
  60,872
  63,513
  66,310
  69,269
  72,398
  75,704
  79,193
  82,873
  86,755
  90,845
  95,154
  99,692
  104,469
  109,497
  114,788
  120,353
  126,207
  132,362
  138,834
  145,637
  152,789
Total equity, $m
  19,369
  17,805
  18,391
  19,028
  19,715
  20,455
  21,249
  22,097
  23,001
  23,963
  24,984
  26,068
  27,216
  28,431
  29,715
  31,072
  32,504
  34,014
  35,607
  37,286
  39,055
  40,917
  42,878
  44,942
  47,113
  49,397
  51,800
  54,326
  56,983
  59,775
  62,710
Total liabilities and equity, $m
  54,146
  61,186
  63,200
  65,387
  67,750
  70,293
  73,020
  75,934
  79,040
  82,346
  85,856
  89,581
  93,526
  97,700
  102,113
  106,776
  111,697
  116,887
  122,362
  128,131
  134,209
  140,609
  147,347
  154,439
  161,901
  169,750
  178,007
  186,688
  195,817
  205,412
  215,499
Debt-to-equity ratio
  0.814
  1.080
  1.120
  1.160
  1.210
  1.250
  1.300
  1.340
  1.380
  1.430
  1.470
  1.510
  1.550
  1.580
  1.620
  1.660
  1.690
  1.720
  1.760
  1.790
  1.820
  1.840
  1.870
  1.900
  1.920
  1.950
  1.970
  1.990
  2.010
  2.030
  2.050
Adjusted equity ratio
  0.290
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,809
  4,649
  4,898
  5,175
  5,483
  5,822
  6,192
  6,594
  7,030
  7,500
  8,006
  10,210
  10,791
  11,412
  12,074
  12,779
  13,530
  14,328
  15,175
  16,075
  17,029
  18,039
  19,109
  20,242
  21,441
  22,708
  24,048
  25,464
  26,959
  28,539
  30,206
Depreciation, amort., depletion, $m
  1,030
  5,207
  5,303
  5,408
  5,521
  5,643
  5,773
  5,913
  6,062
  6,220
  6,388
  4,289
  4,478
  4,678
  4,889
  5,112
  5,348
  5,596
  5,858
  6,135
  6,426
  6,732
  7,055
  7,394
  7,752
  8,127
  8,523
  8,938
  9,375
  9,835
  10,318
Funds from operations, $m
  5,314
  9,855
  10,201
  10,583
  11,004
  11,465
  11,965
  12,507
  13,092
  13,720
  14,394
  14,499
  15,269
  16,089
  16,963
  17,891
  18,878
  19,924
  21,034
  22,210
  23,454
  24,771
  26,164
  27,637
  29,192
  30,836
  32,571
  34,402
  36,335
  38,373
  40,523
Change in working capital, $m
  -184
  -62
  -67
  -73
  -79
  -85
  -91
  -98
  -104
  -111
  -118
  -125
  -132
  -140
  -148
  -156
  -165
  -174
  -183
  -193
  -203
  -214
  -226
  -237
  -250
  -263
  -276
  -291
  -305
  -321
  -338
Cash from operations, $m
  5,498
  9,917
  10,268
  10,656
  11,083
  11,550
  12,057
  12,605
  13,196
  13,831
  14,511
  14,624
  15,401
  16,229
  17,110
  18,047
  19,042
  20,098
  21,217
  22,403
  23,658
  24,986
  26,390
  27,874
  29,442
  31,098
  32,847
  34,693
  36,640
  38,694
  40,861
Maintenance CAPEX, $m
  0
  -2,842
  -2,930
  -3,026
  -3,131
  -3,244
  -3,366
  -3,496
  -3,636
  -3,784
  -3,943
  -4,111
  -4,289
  -4,478
  -4,678
  -4,889
  -5,112
  -5,348
  -5,596
  -5,858
  -6,135
  -6,426
  -6,732
  -7,055
  -7,394
  -7,752
  -8,127
  -8,523
  -8,938
  -9,375
  -9,835
New CAPEX, $m
  -1,095
  -879
  -964
  -1,047
  -1,132
  -1,218
  -1,305
  -1,395
  -1,487
  -1,583
  -1,681
  -1,783
  -1,889
  -1,999
  -2,113
  -2,232
  -2,356
  -2,486
  -2,621
  -2,762
  -2,910
  -3,064
  -3,226
  -3,395
  -3,573
  -3,758
  -3,953
  -4,157
  -4,370
  -4,594
  -4,829
Cash from investing activities, $m
  -3,342
  -3,721
  -3,894
  -4,073
  -4,263
  -4,462
  -4,671
  -4,891
  -5,123
  -5,367
  -5,624
  -5,894
  -6,178
  -6,477
  -6,791
  -7,121
  -7,468
  -7,834
  -8,217
  -8,620
  -9,045
  -9,490
  -9,958
  -10,450
  -10,967
  -11,510
  -12,080
  -12,680
  -13,308
  -13,969
  -14,664
Free cash flow, $m
  2,156
  6,197
  6,375
  6,583
  6,821
  7,088
  7,386
  7,714
  8,073
  8,464
  8,887
  8,730
  9,223
  9,753
  10,320
  10,926
  11,574
  12,265
  13,000
  13,782
  14,613
  15,495
  16,432
  17,424
  18,475
  19,589
  20,767
  22,013
  23,332
  24,725
  26,197
Issuance/(repayment) of debt, $m
  3,942
  1,270
  1,427
  1,551
  1,676
  1,803
  1,933
  2,066
  2,203
  2,344
  2,489
  2,640
  2,797
  2,960
  3,129
  3,305
  3,489
  3,681
  3,881
  4,090
  4,309
  4,538
  4,777
  5,028
  5,290
  5,565
  5,853
  6,155
  6,472
  6,804
  7,152
Issuance/(repurchase) of shares, $m
  -1,670
  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  
  2,261
  1,270
  1,427
  1,551
  1,676
  1,803
  1,933
  2,066
  2,203
  2,344
  2,489
  2,640
  2,797
  2,960
  3,129
  3,305
  3,489
  3,681
  3,881
  4,090
  4,309
  4,538
  4,777
  5,028
  5,290
  5,565
  5,853
  6,155
  6,472
  6,804
  7,152
Total cash flow (excl. dividends), $m
  4,303
  7,467
  7,802
  8,134
  8,497
  8,891
  9,319
  9,779
  10,275
  10,807
  11,377
  11,371
  12,020
  12,712
  13,449
  14,232
  15,063
  15,945
  16,881
  17,872
  18,922
  20,033
  21,209
  22,452
  23,766
  25,154
  26,620
  28,169
  29,803
  31,528
  33,348
Retained Cash Flow (-), $m
  -1,086
  -529
  -586
  -637
  -688
  -740
  -793
  -848
  -904
  -962
  -1,022
  -1,084
  -1,148
  -1,215
  -1,284
  -1,357
  -1,432
  -1,511
  -1,593
  -1,679
  -1,769
  -1,863
  -1,961
  -2,064
  -2,171
  -2,284
  -2,402
  -2,526
  -2,656
  -2,792
  -2,935
Prev. year cash balance distribution, $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 flow adjustment, $m
 
  162
  167
  173
  179
  185
  192
  199
  207
  216
  225
  235
  245
  256
  267
  279
  292
  305
  319
  334
  350
  367
  384
  403
  422
  442
  464
  486
  510
  535
  561
Cash available for distribution, $m
 
  6,938
  7,216
  7,497
  7,809
  8,151
  8,525
  8,932
  9,371
  9,845
  10,355
  10,287
  10,872
  11,497
  12,164
  12,875
  13,631
  14,435
  15,288
  16,193
  17,154
  18,171
  19,248
  20,388
  21,594
  22,870
  24,218
  25,642
  27,147
  28,736
  30,413
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
 
  6,652
  6,606
  6,525
  6,430
  6,318
  6,187
  6,034
  5,857
  5,656
  5,429
  4,885
  4,640
  4,372
  4,084
  3,780
  3,464
  3,141
  2,815
  2,493
  2,180
  1,879
  1,597
  1,336
  1,100
  890
  707
  550
  420
  314
  229
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

Honeywell International Inc. is a technology and manufacturing company. The Company operates through four segments: Aerospace, Home and Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. The Company's Aerospace segment supplies products, software and services for aircraft and vehicles that it sells to original equipment manufacturers (OEMs) and other customers. The Home and Building Technologies segment provides products, software, solutions and technologies that help owners of homes stay connected and in control of their comfort, security and energy use. The Performance Materials and Technologies segment is engaged in developing and manufacturing materials, process technologies and automation solutions. The Safety and Productivity Solutions segment is engaged in providing products, software and connected solutions to customers that manage productivity, workplace safety and asset performance.

FINANCIAL RATIOS  of  Honeywell International (HON)

Valuation Ratios
P/E Ratio 24.2
Price to Sales 3
Price to Book 6
Price to Tangible Book
Price to Cash Flow 21.2
Price to Free Cash Flow 26.5
Growth Rates
Sales Growth Rate 1.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.1%
Cap. Spend. - 3 Yr. Gr. Rate 2.9%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 62.9%
Total Debt to Equity 81.4%
Interest Coverage 21
Management Effectiveness
Return On Assets 9.8%
Ret/ On Assets - 3 Yr. Avg. 10.1%
Return On Total Capital 14.7%
Ret/ On T. Cap. - 3 Yr. Avg. 15.9%
Return On Equity 25.5%
Return On Equity - 3 Yr. Avg. 25.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 30.9%
Gross Margin - 3 Yr. Avg. 29.9%
EBITDA Margin 19.9%
EBITDA Margin - 3 Yr. Avg. 19.2%
Operating Margin 16.4%
Oper. Margin - 3 Yr. Avg. 16%
Pre-Tax Margin 16.4%
Pre-Tax Margin - 3 Yr. Avg. 16%
Net Profit Margin 12.2%
Net Profit Margin - 3 Yr. Avg. 11.7%
Effective Tax Rate 24.8%
Eff/ Tax Rate - 3 Yr. Avg. 25.6%
Payout Ratio 39.8%

HON stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HON stock intrinsic value calculation we used $40534 million for the last fiscal year's total revenue generated by Honeywell International. The default revenue input number comes from 2016 income statement of Honeywell International. 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 HON stock valuation model: a) initial revenue growth rate of 3.1% 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 HON is calculated based on our internal credit rating of Honeywell International, 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 Honeywell International.
    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 HON stock the variable cost ratio is equal to 62.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $8391 million in the base year in the intrinsic value calculation for HON 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 5.4% for Honeywell International.

Corporate tax rate of 27% is the nominal tax rate for Honeywell International. 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 HON stock is equal to 0.4%.

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 HON are equal to 70.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Honeywell International 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 HON is equal to -4.9%. 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 - $17276 million for Honeywell International - 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 762 million for Honeywell International 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 Honeywell International at the current share price and the inputted number of shares is $116.7 billion.

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COMPANY NEWS

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▶ Honeywell: Airlines expect to spend millions on connected aircraft tech   [Jun-19-18 03:50PM  American City Business Journals]
▶ [$$] US business leaders warn on impact of Trump tariffs   [Jun-17-18 11:03PM  Financial Times]
▶ Honeywell Reiterates Interest in Bolt-On Acquisitions   [Jun-14-18 02:09PM  TheStreet.com]
▶ Honeywell Is Ready to Rally   [01:03PM  TheStreet.com]
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Financial statements of HON
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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