Intrinsic value of Intercontinental Exchange - ICE

Previous Close

$66.83

  Intrinsic Value

$1,072

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

-77%

Previous close

$66.83

 
Intrinsic value

$1,072

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

-77%

Our model is not good at valuating stocks of financial companies, such as ICE.

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

We calculate the intrinsic value of ICE 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 2013), $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 39.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2013(a)
   2014
   2015
   2016
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  22.82
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,674
  2,678
  4,138
  6,189
  8,979
  12,668
  17,416
  23,378
  30,696
  39,499
  49,890
  61,952
  75,743
  91,295
  108,624
  127,722
  148,571
  171,142
  195,397
  221,297
  248,803
  277,880
  308,497
  340,631
  374,267
  409,400
  446,035
  484,187
  523,882
  565,156
  608,054
Variable operating expenses, $m
 
  483
  228
  -130
  -617
  -1,261
  -2,090
  -3,131
  -4,408
  -5,945
  -7,759
  -10,815
  -13,222
  -15,937
  -18,962
  -22,296
  -25,935
  -29,875
  -34,109
  -38,630
  -43,432
  -48,508
  -53,852
  -59,462
  -65,333
  -71,466
  -77,861
  -84,521
  -91,450
  -98,655
  -106,144
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
  884
  483
  228
  -130
  -617
  -1,261
  -2,090
  -3,131
  -4,408
  -5,945
  -7,759
  -10,815
  -13,222
  -15,937
  -18,962
  -22,296
  -25,935
  -29,875
  -34,109
  -38,630
  -43,432
  -48,508
  -53,852
  -59,462
  -65,333
  -71,466
  -77,861
  -84,521
  -91,450
  -98,655
  -106,144
Operating income, $m
  790
  2,196
  3,910
  6,319
  9,597
  13,930
  19,506
  26,509
  35,105
  45,444
  57,649
  72,767
  88,965
  107,232
  127,585
  150,018
  174,506
  201,017
  229,506
  259,927
  292,235
  326,388
  362,350
  400,093
  439,600
  480,866
  523,896
  568,708
  615,332
  663,811
  714,198
EBITDA, $m
  951
  3,422
  5,287
  7,906
  11,472
  16,185
  22,251
  29,867
  39,218
  50,464
  63,740
  79,150
  96,769
  116,639
  138,777
  163,177
  189,814
  218,650
  249,638
  282,728
  317,870
  355,019
  394,135
  435,189
  478,162
  523,048
  569,853
  618,596
  669,310
  722,041
  776,848
Interest expense (income), $m
  32
  141
  1,244
  2,822
  5,038
  8,055
  12,043
  17,175
  23,619
  31,530
  41,046
  52,278
  65,317
  80,224
  97,036
  115,767
  136,411
  158,949
  183,346
  209,565
  237,562
  267,296
  298,727
  331,823
  366,558
  402,917
  440,895
  480,496
  521,737
  564,645
  609,260
Earnings before tax, $m
  500
  2,055
  2,666
  3,497
  4,558
  5,875
  7,463
  9,333
  11,486
  13,913
  16,604
  20,489
  23,648
  27,008
  30,550
  34,251
  38,095
  42,068
  46,159
  50,362
  54,673
  59,092
  63,623
  68,270
  73,042
  77,949
  83,002
  88,213
  93,596
  99,166
  104,937
Tax expense, $m
  230
  555
  720
  944
  1,231
  1,586
  2,015
  2,520
  3,101
  3,757
  4,483
  5,532
  6,385
  7,292
  8,248
  9,248
  10,286
  11,358
  12,463
  13,598
  14,762
  15,955
  17,178
  18,433
  19,721
  21,046
  22,410
  23,817
  25,271
  26,775
  28,333
Net income, $m
  254
  1,500
  1,946
  2,553
  3,328
  4,289
  5,448
  6,813
  8,384
  10,157
  12,121
  14,957
  17,263
  19,716
  22,301
  25,003
  27,809
  30,710
  33,696
  36,764
  39,911
  43,137
  46,445
  49,837
  53,321
  56,903
  60,591
  64,395
  68,325
  72,391
  76,604

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,035
  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
  64,818
  103,015
  159,159
  238,022
  345,358
  487,250
  669,856
  899,143
  1,180,632
  1,519,186
  1,918,856
  2,382,784
  2,913,181
  3,511,363
  4,177,829
  4,912,385
  5,714,283
  6,582,375
  7,515,259
  8,511,422
  9,569,365
  10,687,709
  11,865,286
  13,101,202
  14,394,896
  15,746,167
  17,155,203
  18,622,589
  20,149,313
  21,736,759
  23,386,703
Adjusted assets (=assets-cash), $m
  63,783
  103,015
  159,159
  238,022
  345,358
  487,250
  669,856
  899,143
  1,180,632
  1,519,186
  1,918,856
  2,382,784
  2,913,181
  3,511,363
  4,177,829
  4,912,385
  5,714,283
  6,582,375
  7,515,259
  8,511,422
  9,569,365
  10,687,709
  11,865,286
  13,101,202
  14,394,896
  15,746,167
  17,155,203
  18,622,589
  20,149,313
  21,736,759
  23,386,703
Revenue / Adjusted assets
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
Average production assets, $m
  5,174
  8,279
  12,791
  19,129
  27,755
  39,158
  53,834
  72,261
  94,883
  122,091
  154,211
  191,495
  234,121
  282,194
  335,755
  394,789
  459,234
  528,999
  603,971
  684,029
  769,052
  858,928
  953,566
  1,052,891
  1,156,860
  1,265,456
  1,378,695
  1,496,623
  1,619,320
  1,746,896
  1,879,496
Working capital, $m
  -83
  27
  41
  62
  90
  127
  174
  234
  307
  395
  499
  620
  757
  913
  1,086
  1,277
  1,486
  1,711
  1,954
  2,213
  2,488
  2,779
  3,085
  3,406
  3,743
  4,094
  4,460
  4,842
  5,239
  5,652
  6,081
Total debt, $m
  5,058
  35,544
  80,627
  143,955
  230,145
  344,085
  490,718
  674,835
  900,870
  1,172,730
  1,493,664
  1,866,198
  2,292,108
  2,772,448
  3,307,620
  3,897,468
  4,541,392
  5,238,470
  5,987,576
  6,787,495
  7,637,023
  8,535,053
  9,480,647
  10,473,088
  11,511,924
  12,596,995
  13,728,451
  14,906,762
  16,132,721
  17,407,440
  18,732,346
Total liabilities, $m
  52,235
  82,721
  127,804
  191,132
  277,322
  391,262
  537,895
  722,012
  948,047
  1,219,907
  1,540,841
  1,913,375
  2,339,285
  2,819,625
  3,354,797
  3,944,645
  4,588,569
  5,285,647
  6,034,753
  6,834,672
  7,684,200
  8,582,230
  9,527,824
  10,520,265
  11,559,101
  12,644,172
  13,775,628
  14,953,939
  16,179,898
  17,454,617
  18,779,523
Total equity, $m
  12,583
  20,294
  31,354
  46,890
  68,036
  95,988
  131,962
  177,131
  232,585
  299,280
  378,015
  469,408
  573,897
  691,739
  823,032
  967,740
  1,125,714
  1,296,728
  1,480,506
  1,676,750
  1,885,165
  2,105,479
  2,337,461
  2,580,937
  2,835,794
  3,101,995
  3,379,575
  3,668,650
  3,969,415
  4,282,142
  4,607,181
Total liabilities and equity, $m
  64,818
  103,015
  159,158
  238,022
  345,358
  487,250
  669,857
  899,143
  1,180,632
  1,519,187
  1,918,856
  2,382,783
  2,913,182
  3,511,364
  4,177,829
  4,912,385
  5,714,283
  6,582,375
  7,515,259
  8,511,422
  9,569,365
  10,687,709
  11,865,285
  13,101,202
  14,394,895
  15,746,167
  17,155,203
  18,622,589
  20,149,313
  21,736,759
  23,386,704
Debt-to-equity ratio
  0.402
  1.750
  2.570
  3.070
  3.380
  3.580
  3.720
  3.810
  3.870
  3.920
  3.950
  3.980
  3.990
  4.010
  4.020
  4.030
  4.030
  4.040
  4.040
  4.050
  4.050
  4.050
  4.060
  4.060
  4.060
  4.060
  4.060
  4.060
  4.060
  4.070
  4.070
Adjusted equity ratio
  0.181
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197
  0.197

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  254
  1,500
  1,946
  2,553
  3,328
  4,289
  5,448
  6,813
  8,384
  10,157
  12,121
  14,957
  17,263
  19,716
  22,301
  25,003
  27,809
  30,710
  33,696
  36,764
  39,911
  43,137
  46,445
  49,837
  53,321
  56,903
  60,591
  64,395
  68,325
  72,391
  76,604
Depreciation, amort., depletion, $m
  161
  1,226
  1,376
  1,588
  1,875
  2,255
  2,745
  3,359
  4,113
  5,020
  6,090
  6,383
  7,804
  9,406
  11,192
  13,160
  15,308
  17,633
  20,132
  22,801
  25,635
  28,631
  31,786
  35,096
  38,562
  42,182
  45,957
  49,887
  53,977
  58,230
  62,650
Funds from operations, $m
  788
  2,726
  3,323
  4,140
  5,203
  6,544
  8,193
  10,172
  12,497
  15,177
  18,211
  21,340
  25,067
  29,123
  33,493
  38,163
  43,117
  48,343
  53,829
  59,565
  65,546
  71,768
  78,230
  84,934
  91,883
  99,085
  106,548
  114,283
  122,302
  130,621
  139,254
Change in working capital, $m
  53
  10
  15
  21
  28
  37
  47
  60
  73
  88
  104
  121
  138
  156
  173
  191
  208
  226
  243
  259
  275
  291
  306
  321
  336
  351
  366
  382
  397
  413
  429
Cash from operations, $m
  735
  2,716
  3,308
  4,120
  5,175
  6,507
  8,145
  10,113
  12,424
  15,088
  18,107
  21,219
  24,929
  28,967
  33,320
  37,972
  42,909
  48,117
  53,586
  59,306
  65,271
  71,477
  77,924
  84,612
  91,547
  98,733
  106,181
  113,901
  121,905
  130,208
  138,825
Maintenance CAPEX, $m
  0
  -172
  -276
  -426
  -638
  -925
  -1,305
  -1,794
  -2,409
  -3,163
  -4,070
  -5,140
  -6,383
  -7,804
  -9,406
  -11,192
  -13,160
  -15,308
  -17,633
  -20,132
  -22,801
  -25,635
  -28,631
  -31,786
  -35,096
  -38,562
  -42,182
  -45,957
  -49,887
  -53,977
  -58,230
New CAPEX, $m
  -181
  -3,105
  -4,512
  -6,338
  -8,626
  -11,403
  -14,675
  -18,427
  -22,622
  -27,208
  -32,120
  -37,284
  -42,626
  -48,073
  -53,561
  -59,033
  -64,445
  -69,765
  -74,972
  -80,058
  -85,023
  -89,877
  -94,637
  -99,326
  -103,969
  -108,596
  -113,239
  -117,928
  -122,697
  -127,577
  -132,599
Cash from investing activities, $m
  -2,523
  -3,277
  -4,788
  -6,764
  -9,264
  -12,328
  -15,980
  -20,221
  -25,031
  -30,371
  -36,190
  -42,424
  -49,009
  -55,877
  -62,967
  -70,225
  -77,605
  -85,073
  -92,605
  -100,190
  -107,824
  -115,512
  -123,268
  -131,112
  -139,065
  -147,158
  -155,421
  -163,885
  -172,584
  -181,554
  -190,829
Free cash flow, $m
  -1,788
  -562
  -1,480
  -2,644
  -4,089
  -5,821
  -7,835
  -10,109
  -12,607
  -15,283
  -18,082
  -21,205
  -24,080
  -26,910
  -29,648
  -32,253
  -34,696
  -36,956
  -39,019
  -40,884
  -42,552
  -44,034
  -45,344
  -46,499
  -47,519
  -48,425
  -49,239
  -49,983
  -50,679
  -51,346
  -52,004
Issuance/(repayment) of debt, $m
  1,320
  31,521
  45,083
  63,327
  86,191
  113,939
  146,633
  184,117
  226,035
  271,859
  320,935
  372,534
  425,909
  480,340
  535,172
  589,848
  643,924
  697,078
  749,106
  799,919
  849,528
  898,031
  945,594
  992,441
  1,038,836
  1,085,071
  1,131,456
  1,178,311
  1,225,959
  1,274,719
  1,324,905
Issuance/(repurchase) of shares, $m
  -64
  6,211
  9,114
  12,983
  17,818
  23,664
  30,525
  38,356
  47,069
  56,539
  66,614
  76,437
  87,226
  98,126
  108,993
  119,704
  130,165
  140,304
  150,082
  159,480
  168,503
  177,177
  185,538
  193,638
  201,537
  209,298
  216,989
  224,680
  232,440
  240,336
  248,435
Cash from financing (excl. dividends), $m  
  1,194
  37,732
  54,197
  76,310
  104,009
  137,603
  177,158
  222,473
  273,104
  328,398
  387,549
  448,971
  513,135
  578,466
  644,165
  709,552
  774,089
  837,382
  899,188
  959,399
  1,018,031
  1,075,208
  1,131,132
  1,186,079
  1,240,373
  1,294,369
  1,348,445
  1,402,991
  1,458,399
  1,515,055
  1,573,340
Total cash flow (excl. dividends), $m
  -576
  37,171
  52,717
  73,666
  99,920
  131,782
  169,323
  212,365
  260,498
  313,115
  369,467
  427,766
  489,055
  551,555
  614,517
  677,299
  739,393
  800,426
  860,168
  918,515
  975,479
  1,031,173
  1,085,788
  1,139,580
  1,192,854
  1,245,943
  1,299,206
  1,353,008
  1,407,720
  1,463,709
  1,521,336
Retained Cash Flow (-), $m
  -8,940
  -7,711
  -11,060
  -15,536
  -21,145
  -27,953
  -35,973
  -45,170
  -55,453
  -66,695
  -78,735
  -91,394
  -104,488
  -117,842
  -131,294
  -144,707
  -157,974
  -171,014
  -183,778
  -196,244
  -208,415
  -220,314
  -231,983
  -243,476
  -254,858
  -266,200
  -277,580
  -289,075
  -300,765
  -312,727
  -325,039
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
 
  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
 
  29,459
  41,657
  58,130
  78,774
  103,829
  133,349
  167,195
  205,044
  246,420
  290,732
  336,372
  384,566
  433,713
  483,223
  532,592
  581,419
  629,412
  676,390
  722,271
  767,065
  810,859
  853,805
  896,105
  937,996
  979,743
  1,021,626
  1,063,933
  1,106,955
  1,150,982
  1,196,297
Discount rate, %
 
  6.20
  6.51
  6.84
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.28
  12.89
  13.53
  14.21
  14.92
  15.67
  16.45
  17.27
  18.14
  19.04
  20.00
  21.00
  22.05
  23.15
  24.30
  25.52
PV of cash for distribution, $m
 
  27,740
  36,720
  47,671
  59,700
  72,202
  84,440
  95,628
  105,013
  111,969
  116,055
  116,734
  114,740
  109,945
  102,776
  93,781
  83,568
  72,745
  61,871
  51,417
  41,748
  33,112
  25,645
  19,387
  14,298
  10,280
  7,199
  4,907
  3,253
  2,094
  1,308
Current shareholders' claim on cash, %
  100
  86.5
  75.7
  67.0
  59.8
  53.8
  48.9
  44.8
  41.3
  38.4
  35.8
  33.7
  31.8
  30.2
  28.8
  27.5
  26.4
  25.4
  24.5
  23.7
  22.9
  22.3
  21.7
  21.1
  20.6
  20.1
  19.7
  19.3
  18.9
  18.6
  18.2

Intercontinental Exchange, Inc. is an operator of regulated exchanges, clearing houses and listings venues. The Company provides data services for commodity and financial markets. The Company's segments include Trading and Clearing segment, and Data and Listings segment. The Trading and Clearing segment includes the Company's transaction-based execution and clearing businesses. The Company's Data and Listings segment includes its subscription-based data services and securities listings businesses. The Company operates regulated marketplaces for listing, trading and clearing a range of derivatives and securities contracts across the asset classes, including energy and agricultural commodities, interest rates, equities, equity derivatives, exchange traded funds, credit derivatives, bonds and currencies. The Company offers market data services to support the trading, investment, risk management and connectivity needs of customers across a range of asset classes. _tck('aft');

FINANCIAL RATIOS  of  Intercontinental Exchange (ICE)

Valuation Ratios
P/E Ratio 30.3
Price to Sales 4.6
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 10.5
Price to Free Cash Flow 13.9
Growth Rates
Sales Growth Rate 22.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 166.2%
Cap. Spend. - 3 Yr. Gr. Rate 30.4%
Financial Strength
Quick Ratio 1
Current Ratio 1
LT Debt to Equity 31.2%
Total Debt to Equity 40.2%
Interest Coverage 17
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 1.3%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 3.1%
Return On Equity - 3 Yr. Avg. 12.2%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 41.4%
EBITDA Margin - 3 Yr. Avg. 59.9%
Operating Margin 47.2%
Oper. Margin - 3 Yr. Avg. 55.9%
Pre-Tax Margin 29.9%
Pre-Tax Margin - 3 Yr. Avg. 48.4%
Net Profit Margin 15.2%
Net Profit Margin - 3 Yr. Avg. 31.4%
Effective Tax Rate 46%
Eff/ Tax Rate - 3 Yr. Avg. 35.4%
Payout Ratio 29.5%

ICE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ICE stock intrinsic value calculation we used $1674 million for the last fiscal year's total revenue generated by Intercontinental Exchange. The default revenue input number comes from 2013 income statement of Intercontinental Exchange. 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 ICE stock valuation model: a) initial revenue growth rate of 60% 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 6.2%, whose default value for ICE is calculated based on our internal credit rating of Intercontinental Exchange, 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 Intercontinental Exchange.
    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 ICE stock the variable cost ratio is equal to 39.3%.

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 ICE 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 Intercontinental Exchange.

Corporate tax rate of 27% is the nominal tax rate for Intercontinental Exchange. 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 ICE 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 ICE are equal to 309.1%.

Life of production assets of 67.7 years is the average useful life of capital assets used in Intercontinental Exchange 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 ICE is equal to 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 - $12583 million for Intercontinental Exchange - 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 595.016 million for Intercontinental Exchange 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 Intercontinental Exchange at the current share price and the inputted number of shares is $39.8 billion.

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COMPANY NEWS

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▶ [$$] US oil futures market overtakes London   [10:29AM  Financial Times]
▶ Motel 6 Just Left the Light on for ICE   [Sep-14-17 11:25AM  Bloomberg]
▶ A 'Favorable' Regulatory Environment for ICE   [Aug-22-17 11:55AM  Barrons.com]
▶ TMX beats profit expectations as it cuts costs   [Aug-09-17 09:06PM  Reuters]
▶ [$$] TP ICAP looks to buy trading software platform Trayport   [Aug-08-17 06:30AM  Financial Times]
▶ NYSE Leads Global IPO Listings for First Half of 2017   [Jul-19-17 10:11AM  Business Wire]
▶ American Stock Exchange: Then and Now   [Jul-15-17 10:52AM  Benzinga]
▶ [$$] ICE to Supervise LBMA Silver-Price Benchmark   [12:34AM  The Wall Street Journal]
▶ [$$] ICE to Supervise LBMA Silver Benchmark   [Jul-14-17 04:07PM  The Wall Street Journal]
▶ BlackRock moves 50 ETFs to NYSE's rival exchanges   [Jun-30-17 05:32PM  Reuters]
Financial statements of ICE
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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