Intrinsic value of Honeywell International - HON

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$129.79

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$129.79

 
Intrinsic value

$126.70

 
Up/down potential

-2%

 
Rating

hold

 
Value-price divergence* premium content

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

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

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 98.3

 

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
  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
  39,302
  40,088
  41,010
  42,064
  43,247
  44,558
  45,997
  47,564
  49,259
  51,086
  53,047
  55,144
  57,382
  59,765
  62,297
  64,985
  67,833
  70,847
  74,035
  77,403
  80,960
  84,713
  88,670
  92,842
  97,237
  101,866
  106,740
  111,870
  117,269
  122,948
  128,922
Variable operating expenses, $m
 
  33,198
  33,920
  34,747
  35,674
  36,702
  37,830
  39,058
  40,387
  41,819
  43,356
  43,230
  44,984
  46,853
  48,838
  50,945
  53,177
  55,540
  58,040
  60,680
  63,468
  66,410
  69,513
  72,783
  76,229
  79,858
  83,679
  87,700
  91,932
  96,385
  101,068
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
  32,855
  33,198
  33,920
  34,747
  35,674
  36,702
  37,830
  39,058
  40,387
  41,819
  43,356
  43,230
  44,984
  46,853
  48,838
  50,945
  53,177
  55,540
  58,040
  60,680
  63,468
  66,410
  69,513
  72,783
  76,229
  79,858
  83,679
  87,700
  91,932
  96,385
  101,068
Operating income, $m
  6,447
  6,890
  7,090
  7,317
  7,573
  7,856
  8,167
  8,506
  8,872
  9,267
  9,690
  11,914
  12,398
  12,912
  13,460
  14,040
  14,655
  15,307
  15,996
  16,723
  17,492
  18,302
  19,158
  20,059
  21,008
  22,009
  23,062
  24,170
  25,336
  26,563
  27,854
EBITDA, $m
  7,477
  9,064
  9,272
  9,510
  9,778
  10,074
  10,400
  10,754
  11,137
  11,550
  11,993
  12,468
  12,974
  13,512
  14,085
  14,693
  15,336
  16,018
  16,739
  17,500
  18,304
  19,153
  20,048
  20,991
  21,984
  23,031
  24,133
  25,293
  26,513
  27,797
  29,148
Interest expense (income), $m
  329
  426
  447
  473
  502
  535
  571
  611
  655
  702
  752
  807
  865
  927
  993
  1,064
  1,138
  1,217
  1,301
  1,389
  1,483
  1,581
  1,686
  1,795
  1,911
  2,033
  2,161
  2,297
  2,439
  2,589
  2,746
Earnings before tax, $m
  6,447
  6,464
  6,642
  6,845
  7,071
  7,321
  7,596
  7,894
  8,217
  8,565
  8,938
  11,107
  11,533
  11,985
  12,466
  12,977
  13,517
  14,090
  14,695
  15,334
  16,009
  16,721
  17,472
  18,263
  19,097
  19,976
  20,900
  21,873
  22,897
  23,974
  25,108
Tax expense, $m
  1,601
  1,745
  1,793
  1,848
  1,909
  1,977
  2,051
  2,131
  2,219
  2,313
  2,413
  2,999
  3,114
  3,236
  3,366
  3,504
  3,650
  3,804
  3,968
  4,140
  4,322
  4,515
  4,717
  4,931
  5,156
  5,393
  5,643
  5,906
  6,182
  6,473
  6,779
Net income, $m
  4,809
  4,719
  4,849
  4,996
  5,162
  5,345
  5,545
  5,763
  5,999
  6,252
  6,525
  8,108
  8,419
  8,749
  9,100
  9,473
  9,868
  10,285
  10,727
  11,194
  11,687
  12,206
  12,755
  13,332
  13,941
  14,582
  15,257
  15,967
  16,715
  17,501
  18,328

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
  45,144
  46,183
  47,369
  48,702
  50,178
  51,798
  53,563
  55,472
  57,529
  59,737
  62,099
  64,619
  67,303
  70,155
  73,181
  76,388
  79,783
  83,373
  87,166
  91,171
  95,397
  99,854
  104,552
  109,501
  114,714
  120,203
  125,980
  132,059
  138,455
  145,182
Adjusted assets (=assets-cash), $m
  44,272
  45,144
  46,183
  47,369
  48,702
  50,178
  51,798
  53,563
  55,472
  57,529
  59,737
  62,099
  64,619
  67,303
  70,155
  73,181
  76,388
  79,783
  83,373
  87,166
  91,171
  95,397
  99,854
  104,552
  109,501
  114,714
  120,203
  125,980
  132,059
  138,455
  145,182
Revenue / Adjusted assets
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
  0.888
Average production assets, $m
  10,397
  10,623
  10,868
  11,147
  11,461
  11,808
  12,189
  12,604
  13,054
  13,538
  14,057
  14,613
  15,206
  15,838
  16,509
  17,221
  17,976
  18,775
  19,619
  20,512
  21,454
  22,449
  23,498
  24,603
  25,768
  26,995
  28,286
  29,646
  31,076
  32,581
  34,164
Working capital, $m
  6,727
  441
  451
  463
  476
  490
  506
  523
  542
  562
  584
  607
  631
  657
  685
  715
  746
  779
  814
  851
  891
  932
  975
  1,021
  1,070
  1,121
  1,174
  1,231
  1,290
  1,352
  1,418
Total debt, $m
  15,775
  12,780
  13,510
  14,346
  15,284
  16,324
  17,464
  18,706
  20,050
  21,499
  23,053
  24,716
  26,490
  28,379
  30,387
  32,517
  34,775
  37,165
  39,692
  42,363
  45,182
  48,158
  51,295
  54,602
  58,087
  61,757
  65,621
  69,688
  73,968
  78,470
  83,206
Total liabilities, $m
  34,777
  31,782
  32,512
  33,348
  34,286
  35,326
  36,466
  37,708
  39,052
  40,501
  42,055
  43,718
  45,492
  47,381
  49,389
  51,519
  53,777
  56,167
  58,694
  61,365
  64,184
  67,160
  70,297
  73,604
  77,089
  80,759
  84,623
  88,690
  92,970
  97,472
  102,208
Total equity, $m
  19,369
  13,363
  13,670
  14,021
  14,416
  14,853
  15,332
  15,855
  16,420
  17,029
  17,682
  18,381
  19,127
  19,922
  20,766
  21,662
  22,611
  23,616
  24,678
  25,801
  26,987
  28,238
  29,557
  30,947
  32,412
  33,955
  35,580
  37,290
  39,090
  40,983
  42,974
Total liabilities and equity, $m
  54,146
  45,145
  46,182
  47,369
  48,702
  50,179
  51,798
  53,563
  55,472
  57,530
  59,737
  62,099
  64,619
  67,303
  70,155
  73,181
  76,388
  79,783
  83,372
  87,166
  91,171
  95,398
  99,854
  104,551
  109,501
  114,714
  120,203
  125,980
  132,060
  138,455
  145,182
Debt-to-equity ratio
  0.814
  0.960
  0.990
  1.020
  1.060
  1.100
  1.140
  1.180
  1.220
  1.260
  1.300
  1.340
  1.380
  1.420
  1.460
  1.500
  1.540
  1.570
  1.610
  1.640
  1.670
  1.710
  1.740
  1.760
  1.790
  1.820
  1.840
  1.870
  1.890
  1.910
  1.940
Adjusted equity ratio
  0.290
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,809
  4,719
  4,849
  4,996
  5,162
  5,345
  5,545
  5,763
  5,999
  6,252
  6,525
  8,108
  8,419
  8,749
  9,100
  9,473
  9,868
  10,285
  10,727
  11,194
  11,687
  12,206
  12,755
  13,332
  13,941
  14,582
  15,257
  15,967
  16,715
  17,501
  18,328
Depreciation, amort., depletion, $m
  1,030
  2,173
  2,182
  2,193
  2,205
  2,218
  2,232
  2,248
  2,265
  2,283
  2,303
  554
  576
  600
  625
  652
  681
  711
  743
  777
  813
  850
  890
  932
  976
  1,023
  1,071
  1,123
  1,177
  1,234
  1,294
Funds from operations, $m
  5,314
  6,892
  7,031
  7,189
  7,367
  7,563
  7,777
  8,011
  8,264
  8,536
  8,828
  8,662
  8,995
  9,349
  9,726
  10,125
  10,549
  10,997
  11,470
  11,971
  12,499
  13,057
  13,645
  14,264
  14,917
  15,605
  16,329
  17,090
  17,892
  18,736
  19,623
Change in working capital, $m
  -184
  9
  10
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  62
  66
Cash from operations, $m
  5,498
  6,914
  7,021
  7,178
  7,354
  7,548
  7,762
  7,994
  8,245
  8,516
  8,806
  8,639
  8,970
  9,323
  9,698
  10,096
  10,517
  10,963
  11,435
  11,934
  12,460
  13,015
  13,601
  14,218
  14,869
  15,554
  16,275
  17,034
  17,833
  18,673
  19,557
Maintenance CAPEX, $m
  0
  -394
  -402
  -412
  -422
  -434
  -447
  -462
  -477
  -494
  -513
  -532
  -554
  -576
  -600
  -625
  -652
  -681
  -711
  -743
  -777
  -813
  -850
  -890
  -932
  -976
  -1,023
  -1,071
  -1,123
  -1,177
  -1,234
New CAPEX, $m
  -1,095
  -227
  -244
  -279
  -314
  -347
  -381
  -415
  -449
  -484
  -520
  -556
  -593
  -631
  -671
  -712
  -755
  -799
  -845
  -893
  -942
  -994
  -1,049
  -1,105
  -1,165
  -1,227
  -1,292
  -1,359
  -1,431
  -1,505
  -1,583
Cash from investing activities, $m
  -3,342
  -621
  -646
  -691
  -736
  -781
  -828
  -877
  -926
  -978
  -1,033
  -1,088
  -1,147
  -1,207
  -1,271
  -1,337
  -1,407
  -1,480
  -1,556
  -1,636
  -1,719
  -1,807
  -1,899
  -1,995
  -2,097
  -2,203
  -2,315
  -2,430
  -2,554
  -2,682
  -2,817
Free cash flow, $m
  2,156
  6,293
  6,374
  6,487
  6,618
  6,767
  6,933
  7,117
  7,318
  7,537
  7,774
  7,550
  7,824
  8,115
  8,427
  8,758
  9,110
  9,484
  9,879
  10,298
  10,741
  11,208
  11,702
  12,223
  12,772
  13,351
  13,961
  14,603
  15,279
  15,991
  16,740
Issuance/(repayment) of debt, $m
  3,942
  598
  731
  836
  938
  1,039
  1,140
  1,242
  1,344
  1,448
  1,554
  1,663
  1,774
  1,889
  2,008
  2,130
  2,258
  2,390
  2,527
  2,670
  2,820
  2,975
  3,138
  3,307
  3,485
  3,670
  3,864
  4,067
  4,280
  4,503
  4,736
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
  598
  731
  836
  938
  1,039
  1,140
  1,242
  1,344
  1,448
  1,554
  1,663
  1,774
  1,889
  2,008
  2,130
  2,258
  2,390
  2,527
  2,670
  2,820
  2,975
  3,138
  3,307
  3,485
  3,670
  3,864
  4,067
  4,280
  4,503
  4,736
Total cash flow (excl. dividends), $m
  4,303
  6,891
  7,105
  7,322
  7,556
  7,806
  8,074
  8,359
  8,663
  8,985
  9,328
  9,213
  9,598
  10,005
  10,435
  10,889
  11,368
  11,874
  12,407
  12,968
  13,560
  14,183
  14,840
  15,530
  16,257
  17,021
  17,825
  18,670
  19,559
  20,493
  21,476
Retained Cash Flow (-), $m
  -1,086
  -275
  -307
  -351
  -394
  -437
  -480
  -522
  -565
  -609
  -654
  -699
  -746
  -794
  -844
  -896
  -949
  -1,005
  -1,063
  -1,123
  -1,185
  -1,251
  -1,319
  -1,391
  -1,465
  -1,543
  -1,625
  -1,710
  -1,799
  -1,893
  -1,991
Prev. year cash balance distribution, $m
 
  6,281
  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
 
  12,897
  6,798
  6,971
  7,161
  7,369
  7,594
  7,837
  8,097
  8,377
  8,675
  8,514
  8,852
  9,210
  9,590
  9,993
  10,419
  10,869
  11,344
  11,846
  12,375
  12,933
  13,520
  14,140
  14,792
  15,478
  16,200
  16,960
  17,760
  18,600
  19,484
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
 
  12,365
  6,223
  6,067
  5,897
  5,712
  5,511
  5,294
  5,061
  4,812
  4,548
  4,043
  3,777
  3,502
  3,220
  2,934
  2,648
  2,365
  2,089
  1,824
  1,572
  1,338
  1,122
  927
  753
  602
  473
  364
  275
  203
  147
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. operates as a diversified technology and manufacturing company worldwide. It operates through four segments: Aerospace; Home and Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions. The Aerospace segment supplies products, software, and services for aircraft and vehicles that it sells to original equipment manufacturers and other customers in various markets, including air transport, regional, business and general aviation aircraft, airlines, aircraft operators, defense and space contractors, and automotive and truck manufacturers. The Home and Building Technologies segment provides products, software, solutions, and technologies that help homes owners, commercial building owners, and occupants, as well as electricity, gas, and water providers. The Performance Materials and Technologies segment develops and manufactures advanced materials, process technologies, and automation solutions. The Safety and Productivity Solutions segment provides products, software, and connected solutions to customers that enhance productivity, workplace safety, and asset performance. The company was founded in 1920 and is based in Morris Plains, New Jersey.

FINANCIAL RATIOS  of  Honeywell International (HON)

Valuation Ratios
P/E Ratio 20.5
Price to Sales 2.5
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 18
Price to Free Cash Flow 22.4
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 $39302 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 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 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 82.9%.

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 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 3.5% 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%.

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 26.5%.

Life of production assets of 26.4 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 1.1%. 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 - $19369 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 757.428 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 $98.3 billion.


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Stock chart of HON 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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