Intrinsic value of IRSA-Inversiones y Representaciones GDR - IRS

Previous Close

$30.00

  Intrinsic Value

$4,564

stock screener

  Rating & Target

str. buy

+999%

Previous close

$30.00

 
Intrinsic value

$4,564

 
Up/down potential

+999%

 
Rating

str. buy

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

We calculate the intrinsic value of IRS 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 2017), $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 1.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  135.35
  53.50
  48.65
  44.29
  40.36
  36.82
  33.64
  30.77
  28.20
  25.88
  23.79
  21.91
  20.22
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
Revenue, $m
  4,747
  7,287
  10,832
  15,628
  21,935
  30,012
  40,108
  52,451
  67,241
  84,641
  104,778
  127,735
  153,563
  182,276
  213,861
  248,282
  285,489
  325,421
  368,014
  413,204
  460,936
  511,162
  563,846
  618,969
  676,524
  736,523
  798,993
  863,980
  931,546
  1,001,768
  1,074,741
Variable operating expenses, $m
 
  2,555
  3,790
  5,460
  7,657
  10,470
  13,985
  18,284
  23,435
  29,494
  36,507
  44,484
  53,478
  63,478
  74,477
  86,464
  99,422
  113,328
  128,161
  143,899
  160,521
  178,012
  196,360
  215,556
  235,600
  256,494
  278,250
  300,881
  324,411
  348,866
  374,279
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
  4,136
  2,555
  3,790
  5,460
  7,657
  10,470
  13,985
  18,284
  23,435
  29,494
  36,507
  44,484
  53,478
  63,478
  74,477
  86,464
  99,422
  113,328
  128,161
  143,899
  160,521
  178,012
  196,360
  215,556
  235,600
  256,494
  278,250
  300,881
  324,411
  348,866
  374,279
Operating income, $m
  611
  4,731
  7,042
  10,168
  14,279
  19,543
  26,123
  34,167
  43,807
  55,147
  68,271
  83,251
  100,085
  118,798
  139,384
  161,818
  186,068
  212,093
  239,853
  269,306
  300,415
  333,150
  367,487
  403,413
  440,924
  480,028
  520,743
  563,099
  607,135
  652,902
  700,462
EBITDA, $m
  913
  5,181
  7,701
  11,112
  15,596
  21,339
  28,517
  37,293
  47,808
  60,180
  74,497
  90,820
  109,183
  129,598
  152,055
  176,529
  202,983
  231,374
  261,658
  293,788
  327,726
  363,436
  400,895
  440,087
  481,008
  523,667
  568,084
  614,290
  662,329
  712,257
  764,140
Interest expense (income), $m
  364
  329
  570
  959
  1,484
  2,175
  3,060
  4,167
  5,519
  7,140
  9,047
  11,254
  13,769
  16,600
  19,746
  23,208
  26,980
  31,057
  35,433
  40,101
  45,053
  50,283
  55,787
  61,561
  67,602
  73,909
  80,484
  87,330
  94,451
  101,855
  109,551
Earnings before tax, $m
  327
  4,402
  6,472
  9,209
  12,794
  17,367
  23,062
  30,000
  38,287
  48,007
  59,224
  71,998
  86,315
  102,199
  119,638
  138,610
  159,088
  181,036
  204,420
  229,205
  255,362
  282,866
  311,699
  341,852
  373,323
  406,120
  440,260
  475,769
  512,683
  551,046
  590,911
Tax expense, $m
  186
  1,189
  1,747
  2,487
  3,454
  4,689
  6,227
  8,100
  10,338
  12,962
  15,990
  19,439
  23,305
  27,594
  32,302
  37,425
  42,954
  48,880
  55,193
  61,885
  68,948
  76,374
  84,159
  92,300
  100,797
  109,652
  118,870
  128,458
  138,425
  148,783
  159,546
Net income, $m
  194
  3,213
  4,724
  6,723
  9,340
  12,678
  16,835
  21,900
  27,950
  35,045
  43,233
  52,558
  63,010
  74,605
  87,335
  101,186
  116,134
  132,156
  149,227
  167,320
  186,414
  206,492
  227,541
  249,552
  272,526
  296,467
  321,390
  347,312
  374,259
  402,264
  431,365

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,505
  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
  14,799
  18,877
  28,061
  40,488
  56,828
  77,752
  103,907
  135,884
  174,200
  219,278
  271,445
  330,920
  397,832
  472,218
  554,044
  643,219
  739,610
  843,060
  953,404
  1,070,478
  1,194,135
  1,324,254
  1,460,742
  1,603,546
  1,752,653
  1,908,090
  2,069,930
  2,238,290
  2,413,331
  2,595,253
  2,784,302
Adjusted assets (=assets-cash), $m
  12,294
  18,877
  28,061
  40,488
  56,828
  77,752
  103,907
  135,884
  174,200
  219,278
  271,445
  330,920
  397,832
  472,218
  554,044
  643,219
  739,610
  843,060
  953,404
  1,070,478
  1,194,135
  1,324,254
  1,460,742
  1,603,546
  1,752,653
  1,908,090
  2,069,930
  2,238,290
  2,413,331
  2,595,253
  2,784,302
Revenue / Adjusted assets
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
  0.386
Average production assets, $m
  2,250
  3,454
  5,134
  7,408
  10,397
  14,226
  19,011
  24,862
  31,872
  40,120
  49,665
  60,547
  72,789
  86,399
  101,370
  117,686
  135,322
  154,250
  174,439
  195,859
  218,484
  242,291
  267,263
  293,391
  320,672
  349,112
  378,723
  409,527
  441,553
  474,838
  509,427
Working capital, $m
  1,219
  -15
  -22
  -31
  -44
  -60
  -80
  -105
  -134
  -169
  -210
  -255
  -307
  -365
  -428
  -497
  -571
  -651
  -736
  -826
  -922
  -1,022
  -1,128
  -1,238
  -1,353
  -1,473
  -1,598
  -1,728
  -1,863
  -2,004
  -2,149
Total debt, $m
  8,283
  12,129
  20,394
  31,578
  46,284
  65,116
  88,655
  117,435
  151,919
  192,490
  239,439
  292,967
  353,188
  420,135
  493,779
  574,036
  660,788
  753,893
  853,202
  958,569
  1,069,861
  1,186,967
  1,309,807
  1,438,331
  1,572,526
  1,712,420
  1,858,076
  2,009,600
  2,167,136
  2,330,867
  2,501,011
Total liabilities, $m
  13,144
  16,990
  25,255
  36,439
  51,145
  69,977
  93,516
  122,296
  156,780
  197,351
  244,300
  297,828
  358,049
  424,996
  498,640
  578,897
  665,649
  758,754
  858,063
  963,430
  1,074,722
  1,191,828
  1,314,668
  1,443,192
  1,577,387
  1,717,281
  1,862,937
  2,014,461
  2,171,997
  2,335,728
  2,505,872
Total equity, $m
  1,655
  1,888
  2,806
  4,049
  5,683
  7,775
  10,391
  13,588
  17,420
  21,928
  27,144
  33,092
  39,783
  47,222
  55,404
  64,322
  73,961
  84,306
  95,340
  107,048
  119,414
  132,425
  146,074
  160,355
  175,265
  190,809
  206,993
  223,829
  241,333
  259,525
  278,430
Total liabilities and equity, $m
  14,799
  18,878
  28,061
  40,488
  56,828
  77,752
  103,907
  135,884
  174,200
  219,279
  271,444
  330,920
  397,832
  472,218
  554,044
  643,219
  739,610
  843,060
  953,403
  1,070,478
  1,194,136
  1,324,253
  1,460,742
  1,603,547
  1,752,652
  1,908,090
  2,069,930
  2,238,290
  2,413,330
  2,595,253
  2,784,302
Debt-to-equity ratio
  5.005
  6.420
  7.270
  7.800
  8.140
  8.370
  8.530
  8.640
  8.720
  8.780
  8.820
  8.850
  8.880
  8.900
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
Adjusted equity ratio
  -0.069
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  194
  3,213
  4,724
  6,723
  9,340
  12,678
  16,835
  21,900
  27,950
  35,045
  43,233
  52,558
  63,010
  74,605
  87,335
  101,186
  116,134
  132,156
  149,227
  167,320
  186,414
  206,492
  227,541
  249,552
  272,526
  296,467
  321,390
  347,312
  374,259
  402,264
  431,365
Depreciation, amort., depletion, $m
  302
  450
  660
  944
  1,317
  1,796
  2,394
  3,126
  4,002
  5,033
  6,226
  7,568
  9,099
  10,800
  12,671
  14,711
  16,915
  19,281
  21,805
  24,482
  27,310
  30,286
  33,408
  36,674
  40,084
  43,639
  47,340
  51,191
  55,194
  59,355
  63,678
Funds from operations, $m
  480
  3,663
  5,384
  7,667
  10,657
  14,474
  19,230
  25,026
  31,951
  40,078
  49,459
  60,127
  72,109
  85,405
  100,007
  115,896
  133,049
  151,438
  171,031
  191,802
  213,725
  236,779
  260,948
  286,226
  312,610
  340,106
  368,730
  398,502
  429,453
  461,619
  495,044
Change in working capital, $m
  -90
  -5
  -7
  -10
  -13
  -16
  -20
  -25
  -30
  -35
  -40
  -46
  -52
  -57
  -63
  -69
  -74
  -80
  -85
  -90
  -95
  -100
  -105
  -110
  -115
  -120
  -125
  -130
  -135
  -140
  -146
Cash from operations, $m
  570
  3,668
  5,391
  7,676
  10,670
  14,490
  19,250
  25,051
  31,981
  40,113
  49,500
  60,173
  72,160
  85,462
  100,070
  115,965
  133,124
  151,517
  171,117
  191,893
  213,820
  236,879
  261,054
  286,336
  312,725
  340,226
  368,855
  398,632
  429,588
  461,759
  495,189
Maintenance CAPEX, $m
  0
  -281
  -432
  -642
  -926
  -1,300
  -1,778
  -2,376
  -3,108
  -3,984
  -5,015
  -6,208
  -7,568
  -9,099
  -10,800
  -12,671
  -14,711
  -16,915
  -19,281
  -21,805
  -24,482
  -27,310
  -30,286
  -33,408
  -36,674
  -40,084
  -43,639
  -47,340
  -51,191
  -55,194
  -59,355
New CAPEX, $m
  -383
  -1,204
  -1,680
  -2,274
  -2,990
  -3,828
  -4,785
  -5,851
  -7,010
  -8,248
  -9,545
  -10,882
  -12,242
  -13,610
  -14,971
  -16,316
  -17,636
  -18,928
  -20,189
  -21,420
  -22,625
  -23,807
  -24,972
  -26,128
  -27,281
  -28,439
  -29,611
  -30,804
  -32,026
  -33,285
  -34,589
Cash from investing activities, $m
  -132
  -1,485
  -2,112
  -2,916
  -3,916
  -5,128
  -6,563
  -8,227
  -10,118
  -12,232
  -14,560
  -17,090
  -19,810
  -22,709
  -25,771
  -28,987
  -32,347
  -35,843
  -39,470
  -43,225
  -47,107
  -51,117
  -55,258
  -59,536
  -63,955
  -68,523
  -73,250
  -78,144
  -83,217
  -88,479
  -93,944
Free cash flow, $m
  438
  2,183
  3,279
  4,761
  6,754
  9,362
  12,686
  16,823
  21,863
  27,881
  34,940
  43,083
  52,350
  62,754
  74,299
  86,978
  100,777
  115,675
  131,646
  148,667
  166,713
  185,762
  205,795
  226,800
  248,770
  271,703
  295,605
  320,488
  346,371
  373,280
  401,246
Issuance/(repayment) of debt, $m
  420
  5,121
  8,265
  11,184
  14,706
  18,832
  23,539
  28,779
  34,484
  40,571
  46,949
  53,528
  60,220
  66,947
  73,644
  80,257
  86,752
  93,105
  99,309
  105,367
  111,292
  117,107
  122,840
  128,524
  134,196
  139,893
  145,656
  151,524
  157,536
  163,730
  170,144
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  259
  5,121
  8,265
  11,184
  14,706
  18,832
  23,539
  28,779
  34,484
  40,571
  46,949
  53,528
  60,220
  66,947
  73,644
  80,257
  86,752
  93,105
  99,309
  105,367
  111,292
  117,107
  122,840
  128,524
  134,196
  139,893
  145,656
  151,524
  157,536
  163,730
  170,144
Total cash flow (excl. dividends), $m
  864
  7,303
  11,544
  15,945
  21,460
  28,194
  36,225
  45,603
  56,347
  68,452
  81,890
  96,611
  112,570
  129,701
  147,942
  167,235
  187,529
  208,780
  230,955
  254,034
  278,005
  302,868
  328,635
  355,324
  382,965
  411,596
  441,261
  472,012
  503,907
  537,010
  571,390
Retained Cash Flow (-), $m
  -271
  -1,463
  -918
  -1,243
  -1,634
  -2,092
  -2,615
  -3,198
  -3,832
  -4,508
  -5,217
  -5,948
  -6,691
  -7,439
  -8,183
  -8,917
  -9,639
  -10,345
  -11,034
  -11,707
  -12,366
  -13,012
  -13,649
  -14,280
  -14,911
  -15,544
  -16,184
  -16,836
  -17,504
  -18,192
  -18,905
Prev. year cash balance distribution, $m
 
  1,230
  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
 
  7,071
  10,626
  14,702
  19,826
  26,102
  33,610
  42,405
  52,515
  63,944
  76,673
  90,663
  105,879
  122,262
  139,760
  158,318
  177,890
  198,435
  219,921
  242,327
  265,639
  289,856
  314,986
  341,043
  368,055
  396,053
  425,077
  455,176
  486,403
  518,818
  552,485
Discount rate, %
 
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
 
  6,457
  8,786
  10,905
  13,061
  15,114
  16,915
  18,328
  19,248
  19,608
  19,390
  18,625
  17,385
  15,774
  13,915
  11,934
  9,948
  8,060
  6,343
  4,846
  3,593
  2,582
  1,798
  1,212
  789
  497
  301
  176
  99
  53
  28
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

IRSA Inversiones y Representaciones Sociedad Anonima is a holding company. The Company invests on its own behalf and through investee companies in companies operating in various sectors of the Israeli and global economy. The Company's segments are Cellcom, which includes cellular telephone services, content and added value services, other services and revenues from the sale of end user equipment in the cellular field; Property and Buildings and projects in Las Vegas, which includes the rental of income-generating properties and residential buildings; Shufersal, which includes retail and the rental of income-generating properties; Adama, which includes the sale of agro products and non-agro products; Clal Insurance Enterprise Holdings, which operates through subsidiary companies in the fields of insurance, pensions and provident funds, in the field of financial services and in the holding of assets and real businesses, and Others.

FINANCIAL RATIOS  of  IRSA-Inversiones y Representaciones GDR (IRS)

Valuation Ratios
P/E Ratio 88.7
Price to Sales 3.6
Price to Book 10.4
Price to Tangible Book
Price to Cash Flow 30.2
Price to Free Cash Flow 92
Growth Rates
Sales Growth Rate 135.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 192.4%
Cap. Spend. - 3 Yr. Gr. Rate 82.3%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 423.4%
Total Debt to Equity 500.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 9.7%
Return On Equity 12.8%
Return On Equity - 3 Yr. Avg. 28.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 30.5%
Gross Margin - 3 Yr. Avg. 41.1%
EBITDA Margin 20.9%
EBITDA Margin - 3 Yr. Avg. 76.7%
Operating Margin 12.9%
Oper. Margin - 3 Yr. Avg. 79.3%
Pre-Tax Margin 6.9%
Pre-Tax Margin - 3 Yr. Avg. 60.7%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. 34.9%
Effective Tax Rate 56.9%
Eff/ Tax Rate - 3 Yr. Avg. 45.1%
Payout Ratio 83%

IRS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IRS stock intrinsic value calculation we used $4747 million for the last fiscal year's total revenue generated by IRSA-Inversiones y Representaciones GDR. The default revenue input number comes from 2017 income statement of IRSA-Inversiones y Representaciones GDR. 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 IRS stock valuation model: a) initial revenue growth rate of 53.5% 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 9.5%, whose default value for IRS is calculated based on our internal credit rating of IRSA-Inversiones y Representaciones GDR, 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 IRSA-Inversiones y Representaciones GDR.
    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 IRS stock the variable cost ratio is equal to 35.2%.

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 IRS 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 4.7% for IRSA-Inversiones y Representaciones GDR.

Corporate tax rate of 27% is the nominal tax rate for IRSA-Inversiones y Representaciones GDR. 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 IRS 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 IRS are equal to 47.4%.

Life of production assets of 8 years is the average useful life of capital assets used in IRSA-Inversiones y Representaciones GDR 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 IRS is equal to -0.2%. 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 - $1655 million for IRSA-Inversiones y Representaciones GDR - 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 58.233 million for IRSA-Inversiones y Representaciones GDR 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 IRSA-Inversiones y Representaciones GDR at the current share price and the inputted number of shares is $1.7 billion.

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COMPANY NEWS

▶ 5 Real Estate Companies Gurus Are Buying   [Aug-28-17 03:50PM  GuruFocus.com]
▶ IRSA Inversiones posts 2Q profit   [Feb-13-17 02:26PM  Associated Press]
▶ Clearwater Paper Corp (CLW) Hedge Funds Are Snapping Up   [Dec-09-16 01:22AM  Insider Monkey]
▶ Argentina: Tax Amnesty For $400B In Hidden Assets?   [Aug-18-16 05:21PM  at Barrons.com]
▶ Argentina: If Congress OKs Holdout Bond Deal? Investors Win   [Mar-01-16 11:01AM  at Barrons.com]
▶ Hedge Funds Are Betting On PHH Corporation (PHH)   [Nov-30  01:06PM  at Insider Monkey]
▶ Do Hedge Funds Love SkyWest, Inc. (SKYW)?   [11:05AM  at Insider Monkey]
▶ IRSA Inversiones y Representaciones S.A. Material Fact   [Nov-24  09:30AM  PR Newswire]
▶ IRSA Inversiones y Representaciones S.A. Material Fact   [Nov-20  10:02AM  PR Newswire]
Financial statements of IRS
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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