Intrinsic value of Loews - L

Previous Close

$47.58

  Intrinsic Value

$41.01

stock screener

  Rating & Target

hold

-14%

  Value-price divergence*

-46%

Previous close

$47.58

 
Intrinsic value

$41.01

 
Up/down potential

-14%

 
Rating

hold

 
Value-price divergence*

-46%

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

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

We calculate the intrinsic value of L 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 16.0

 

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, %
  -2.84
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
Revenue, $m
  0
  13,621
  14,094
  14,604
  15,154
  15,742
  16,371
  17,042
  17,756
  18,513
  19,317
  20,169
  21,069
  22,022
  23,028
  24,089
  25,210
  26,391
  27,635
  28,947
  30,327
  31,781
  33,311
  34,921
  36,614
  38,395
  40,268
  42,237
  44,308
  46,484
  48,770
Variable operating expenses, $m
 
  12,857
  13,302
  13,783
  14,300
  14,854
  15,446
  16,078
  16,749
  17,463
  18,219
  18,986
  19,834
  20,731
  21,678
  22,677
  23,732
  24,844
  26,015
  27,250
  28,550
  29,918
  31,358
  32,874
  34,468
  36,144
  37,908
  39,761
  41,710
  43,758
  45,911
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
  11,714
  12,857
  13,302
  13,783
  14,300
  14,854
  15,446
  16,078
  16,749
  17,463
  18,219
  18,986
  19,834
  20,731
  21,678
  22,677
  23,732
  24,844
  26,015
  27,250
  28,550
  29,918
  31,358
  32,874
  34,468
  36,144
  37,908
  39,761
  41,710
  43,758
  45,911
Operating income, $m
  1,472
  764
  792
  822
  854
  888
  925
  964
  1,006
  1,051
  1,098
  1,182
  1,235
  1,291
  1,350
  1,412
  1,478
  1,547
  1,620
  1,697
  1,778
  1,863
  1,953
  2,047
  2,146
  2,251
  2,361
  2,476
  2,597
  2,725
  2,859
EBITDA, $m
  2,313
  1,586
  1,641
  1,700
  1,764
  1,833
  1,906
  1,984
  2,067
  2,155
  2,249
  2,348
  2,453
  2,564
  2,681
  2,805
  2,935
  3,073
  3,217
  3,370
  3,531
  3,700
  3,878
  4,066
  4,263
  4,470
  4,688
  4,917
  5,158
  5,412
  5,678
Interest expense (income), $m
  511
  517
  613
  714
  822
  939
  1,065
  1,199
  1,341
  1,493
  1,655
  1,826
  2,007
  2,199
  2,402
  2,616
  2,842
  3,081
  3,332
  3,597
  3,876
  4,170
  4,480
  4,806
  5,148
  5,509
  5,888
  6,287
  6,706
  7,147
  7,610
Earnings before tax, $m
  936
  247
  179
  108
  31
  -51
  -140
  -234
  -335
  -443
  -557
  -644
  -772
  -908
  -1,052
  -1,204
  -1,364
  -1,533
  -1,712
  -1,900
  -2,098
  -2,307
  -2,527
  -2,758
  -3,002
  -3,258
  -3,528
  -3,811
  -4,109
  -4,422
  -4,751
Tax expense, $m
  220
  67
  48
  29
  8
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  654
  180
  130
  79
  23
  -51
  -140
  -234
  -335
  -443
  -557
  -644
  -772
  -908
  -1,052
  -1,204
  -1,364
  -1,533
  -1,712
  -1,900
  -2,098
  -2,307
  -2,527
  -2,758
  -3,002
  -3,258
  -3,528
  -3,811
  -4,109
  -4,422
  -4,751

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  76,594
  79,193
  81,941
  84,909
  88,103
  91,525
  95,182
  99,082
  103,230
  107,636
  112,309
  117,259
  122,496
  128,033
  133,881
  140,055
  146,567
  153,434
  160,671
  168,294
  176,322
  184,774
  193,669
  203,028
  212,874
  223,229
  234,118
  245,567
  257,602
  270,253
  283,549
Adjusted assets (=assets-cash), $m
  76,594
  79,193
  81,941
  84,909
  88,103
  91,525
  95,182
  99,082
  103,230
  107,636
  112,309
  117,259
  122,496
  128,033
  133,881
  140,055
  146,567
  153,434
  160,671
  168,294
  176,322
  184,774
  193,669
  203,028
  212,874
  223,229
  234,118
  245,567
  257,602
  270,253
  283,549
Revenue / Adjusted assets
  0.000
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
  0.172
Average production assets, $m
  7,615
  7,873
  8,146
  8,441
  8,759
  9,099
  9,463
  9,850
  10,263
  10,701
  11,165
  11,657
  12,178
  12,729
  13,310
  13,924
  14,571
  15,254
  15,973
  16,731
  17,529
  18,369
  19,254
  20,184
  21,163
  22,193
  23,275
  24,413
  25,610
  26,867
  28,189
Working capital, $m
  0
  109
  113
  117
  121
  126
  131
  136
  142
  148
  155
  161
  169
  176
  184
  193
  202
  211
  221
  232
  243
  254
  266
  279
  293
  307
  322
  338
  354
  372
  390
Total debt, $m
  10,778
  12,771
  14,868
  17,133
  19,569
  22,181
  24,971
  27,946
  31,112
  34,473
  38,039
  41,816
  45,812
  50,036
  54,498
  59,209
  64,178
  69,417
  74,939
  80,755
  86,881
  93,330
  100,116
  107,258
  114,770
  122,671
  130,979
  139,714
  148,897
  158,550
  168,695
Total liabilities, $m
  58,431
  60,424
  62,521
  64,786
  67,222
  69,834
  72,624
  75,599
  78,765
  82,126
  85,692
  89,469
  93,465
  97,689
  102,151
  106,862
  111,831
  117,070
  122,592
  128,408
  134,534
  140,983
  147,769
  154,911
  162,423
  170,324
  178,632
  187,367
  196,550
  206,203
  216,348
Total equity, $m
  18,163
  18,769
  19,420
  20,124
  20,880
  21,691
  22,558
  23,482
  24,466
  25,510
  26,617
  27,790
  29,032
  30,344
  31,730
  33,193
  34,736
  36,364
  38,079
  39,886
  41,788
  43,791
  45,900
  48,118
  50,451
  52,905
  55,486
  58,199
  61,052
  64,050
  67,201
Total liabilities and equity, $m
  76,594
  79,193
  81,941
  84,910
  88,102
  91,525
  95,182
  99,081
  103,231
  107,636
  112,309
  117,259
  122,497
  128,033
  133,881
  140,055
  146,567
  153,434
  160,671
  168,294
  176,322
  184,774
  193,669
  203,029
  212,874
  223,229
  234,118
  245,566
  257,602
  270,253
  283,549
Debt-to-equity ratio
  0.593
  0.680
  0.770
  0.850
  0.940
  1.020
  1.110
  1.190
  1.270
  1.350
  1.430
  1.500
  1.580
  1.650
  1.720
  1.780
  1.850
  1.910
  1.970
  2.020
  2.080
  2.130
  2.180
  2.230
  2.270
  2.320
  2.360
  2.400
  2.440
  2.480
  2.510
Adjusted equity ratio
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237
  0.237

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  654
  180
  130
  79
  23
  -51
  -140
  -234
  -335
  -443
  -557
  -644
  -772
  -908
  -1,052
  -1,204
  -1,364
  -1,533
  -1,712
  -1,900
  -2,098
  -2,307
  -2,527
  -2,758
  -3,002
  -3,258
  -3,528
  -3,811
  -4,109
  -4,422
  -4,751
Depreciation, amort., depletion, $m
  841
  822
  849
  879
  910
  945
  981
  1,020
  1,061
  1,105
  1,151
  1,166
  1,218
  1,273
  1,331
  1,392
  1,457
  1,525
  1,597
  1,673
  1,753
  1,837
  1,925
  2,018
  2,116
  2,219
  2,328
  2,441
  2,561
  2,687
  2,819
Funds from operations, $m
  1,883
  1,002
  980
  958
  933
  893
  841
  785
  726
  662
  594
  522
  446
  365
  279
  189
  93
  -8
  -115
  -227
  -345
  -470
  -602
  -740
  -886
  -1,039
  -1,200
  -1,370
  -1,548
  -1,735
  -1,932
Change in working capital, $m
  -370
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
Cash from operations, $m
  2,253
  998
  976
  953
  929
  889
  836
  780
  720
  656
  588
  515
  439
  357
  271
  180
  84
  -17
  -125
  -237
  -356
  -482
  -614
  -753
  -899
  -1,053
  -1,215
  -1,385
  -1,564
  -1,753
  -1,951
Maintenance CAPEX, $m
  0
  -762
  -787
  -815
  -844
  -876
  -910
  -946
  -985
  -1,026
  -1,070
  -1,117
  -1,166
  -1,218
  -1,273
  -1,331
  -1,392
  -1,457
  -1,525
  -1,597
  -1,673
  -1,753
  -1,837
  -1,925
  -2,018
  -2,116
  -2,219
  -2,328
  -2,441
  -2,561
  -2,687
New CAPEX, $m
  -1,450
  -258
  -273
  -295
  -317
  -340
  -364
  -388
  -412
  -438
  -465
  -492
  -521
  -550
  -581
  -614
  -647
  -683
  -719
  -758
  -798
  -840
  -884
  -930
  -979
  -1,029
  -1,083
  -1,138
  -1,197
  -1,258
  -1,322
Cash from investing activities, $m
  -2,187
  -1,020
  -1,060
  -1,110
  -1,161
  -1,216
  -1,274
  -1,334
  -1,397
  -1,464
  -1,535
  -1,609
  -1,687
  -1,768
  -1,854
  -1,945
  -2,039
  -2,140
  -2,244
  -2,355
  -2,471
  -2,593
  -2,721
  -2,855
  -2,997
  -3,145
  -3,302
  -3,466
  -3,638
  -3,819
  -4,009
Free cash flow, $m
  66
  -21
  -85
  -156
  -233
  -327
  -437
  -554
  -677
  -808
  -947
  -1,093
  -1,248
  -1,411
  -1,583
  -1,765
  -1,956
  -2,157
  -2,369
  -2,593
  -2,828
  -3,075
  -3,335
  -3,609
  -3,896
  -4,199
  -4,517
  -4,851
  -5,202
  -5,571
  -5,959
Issuance/(repayment) of debt, $m
  196
  1,993
  2,097
  2,265
  2,436
  2,611
  2,791
  2,975
  3,165
  3,362
  3,565
  3,777
  3,996
  4,224
  4,462
  4,710
  4,969
  5,239
  5,522
  5,817
  6,126
  6,449
  6,787
  7,141
  7,512
  7,901
  8,308
  8,735
  9,183
  9,653
  10,145
Issuance/(repurchase) of shares, $m
  -134
  426
  521
  625
  734
  862
  1,006
  1,158
  1,318
  1,487
  1,664
  1,817
  2,013
  2,220
  2,438
  2,667
  2,908
  3,161
  3,427
  3,707
  4,001
  4,310
  4,635
  4,977
  5,335
  5,712
  6,108
  6,524
  6,961
  7,420
  7,902
Cash from financing (excl. dividends), $m  
  -82
  2,419
  2,618
  2,890
  3,170
  3,473
  3,797
  4,133
  4,483
  4,849
  5,229
  5,594
  6,009
  6,444
  6,900
  7,377
  7,877
  8,400
  8,949
  9,524
  10,127
  10,759
  11,422
  12,118
  12,847
  13,613
  14,416
  15,259
  16,144
  17,073
  18,047
Total cash flow (excl. dividends), $m
  -29
  2,398
  2,533
  2,734
  2,938
  3,146
  3,360
  3,580
  3,806
  4,040
  4,283
  4,500
  4,762
  5,034
  5,317
  5,613
  5,921
  6,243
  6,579
  6,931
  7,299
  7,684
  8,087
  8,509
  8,951
  9,414
  9,900
  10,409
  10,942
  11,502
  12,088
Retained Cash Flow (-), $m
  -602
  -606
  -651
  -704
  -757
  -862
  -1,006
  -1,158
  -1,318
  -1,487
  -1,664
  -1,817
  -2,013
  -2,220
  -2,438
  -2,667
  -2,908
  -3,161
  -3,427
  -3,707
  -4,001
  -4,310
  -4,635
  -4,977
  -5,335
  -5,712
  -6,108
  -6,524
  -6,961
  -7,420
  -7,902
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
 
  1,792
  1,882
  2,030
  2,181
  2,284
  2,353
  2,421
  2,488
  2,554
  2,619
  2,683
  2,748
  2,814
  2,879
  2,946
  3,013
  3,082
  3,152
  3,224
  3,298
  3,374
  3,452
  3,532
  3,616
  3,702
  3,792
  3,884
  3,981
  4,081
  4,186
Discount rate, %
 
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
 
  1,679
  1,642
  1,639
  1,618
  1,544
  1,438
  1,326
  1,210
  1,092
  974
  859
  748
  642
  544
  455
  374
  303
  241
  188
  144
  109
  80
  58
  41
  28
  19
  12
  8
  5
  3
Current shareholders' claim on cash, %
  100
  97.4
  94.4
  91.1
  87.5
  83.5
  79.4
  75.0
  70.5
  65.9
  61.4
  57.0
  52.6
  48.4
  44.4
  40.5
  36.8
  33.4
  30.2
  27.1
  24.4
  21.8
  19.5
  17.3
  15.4
  13.6
  12.1
  10.6
  9.4
  8.2
  7.2

Loews Corporation, through its subsidiaries, provides commercial property and casualty insurance in the United States, Canada, the United Kingdom, Continental Europe, and Singapore. The company offers management and professional liability insurance and risk management services, and other specialized property and casualty coverages; commercial surety and fidelity bonds; and warranty and alternative risk services primarily for vehicles and portable electronic communication devices. Its commercial property insurance products include standard and excess property, marine, and boiler and machinery coverages; and casualty insurance products comprise workersÂ’ compensation, general and product liability, commercial auto, and umbrella coverages. The company also provides loss-sensitive insurance programs; and risk management, information, and claims administration services; and long term care and life settlement contracts. It markets its insurance products and services primarily through independent agents, brokers, and managing general underwriters to various customers. In addition, the company owns and operates 24 offshore drilling rigs consisting of 4 drillships, 19 semisubmersible rigs, and 1 jack-ups for companies engaged in the exploration and production of hydrocarbons. Further, it is involved in the transportation and storage of natural gas and natural gas liquids (NGLs), and gathering and processing of natural gas. It owns and operates natural gas pipelines covering approximately 13,930 miles of interconnected pipelines; approximately 435 miles of NGL pipelines in Louisiana and Texas; and underground storage fields with aggregate working gas capacity of approximately 205.0 billion cubic feet of natural gas. Additionally, it operates 24 hotels in the United States and 1 hotel in Canada. The company was founded in 1954 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Loews (L)

Valuation Ratios
P/E Ratio 24.5
Price to Sales 1.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 19.9
Growth Rates
Sales Growth Rate -2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.8%
Cap. Spend. - 3 Yr. Gr. Rate -3.5%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 58.7%
Total Debt to Equity 59.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. 1.2%
Return On Total Capital 2.3%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity 3.7%
Return On Equity - 3 Yr. Avg. 2.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 17.4%
EBITDA Margin - 3 Yr. Avg. 17.4%
Operating Margin 11.2%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin 7.1%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 5%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. 10.4%
Payout Ratio 12.8%

L stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the L stock intrinsic value calculation we used $13186 million for the last fiscal year's total revenue generated by Loews. The default revenue input number comes from 2016 income statement of Loews. 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 L stock valuation model: a) initial revenue growth rate of 3.3% 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 6.7%, whose default value for L is calculated based on our internal credit rating of Loews, 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 Loews.
    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 L stock the variable cost ratio is equal to 94.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for L 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 4.8% for Loews.

Corporate tax rate of 27% is the nominal tax rate for Loews. 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 L 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 L are equal to 57.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Loews 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 L is equal to 0.8%. 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 - $18163 million for Loews - 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 335.843 million for Loews 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 Loews at the current share price and the inputted number of shares is $16.0 billion.

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COMPANY NEWS

▶ ETFs with exposure to Loews Corp. : August 17, 2017   [Aug-17-17 03:43PM  Capital Cube]
▶ Diamond Offshore Announces Pricing of Senior Notes   [Aug-01-17 06:00PM  PR Newswire]
▶ 5 Companies Reach Yearly Highs   [01:59PM  GuruFocus.com]
▶ Loews meets 2Q profit forecasts   [Jul-31-17 11:02PM  Associated Press]
▶ Q2 Earnings From Apple   [11:21AM  Zacks]
▶ Convention hotel raises a different flag   [Jun-21-17 04:16PM  American City Business Journals]
▶ Loews Corp. Value Analysis (NYSE:L) : June 9, 2017   [Jun-09-17 02:16PM  Capital Cube]
▶ Business Leaders Petition Tillerson on Foreign Aid Cut   [May-22-17 11:24AM  Bloomberg Video]
▶ ETFs with exposure to Loews Corp. : May 8, 2017   [May-08-17 04:49PM  Capital Cube]
▶ Company News for May 02, 2017   [May-02-17 10:33AM  Zacks]
▶ Market Recon: Another Fed Meeting Beckons   [07:17AM  TheStreet.com]
▶ Loews beats 1Q profit forecasts   [06:06AM  Associated Press]
▶ ETFs with exposure to Loews Corp. : April 24, 2017   [Apr-24-17 02:34PM  Capital Cube]
▶ Loews to Buy Consolidated Container for $1.2 Bln   [Apr-11-17 01:32PM  Investopedia]
▶ Bain-owned Consolidated Container bought by Loews for $1.2B   [11:25AM  American City Business Journals]
▶ Tisch Sons Making $925,000 Each at Loews   [Mar-29-17 11:44AM  Bloomberg]
▶ Is bad weather good news for home improvement stocks?   [Mar-14-17 01:43PM  CNBC Videos]
▶ What Happened in the Stock Market Today   [Feb-23-17 05:01PM  Motley Fool]
▶ What Happened in the Stock Market Today   [05:01PM  at Motley Fool]
▶ What Could Drive Cheniere Energys 4Q16 Revenue Growth   [Feb-21-17 12:21PM  Market Realist]
Stock chart of L Financial statements of L
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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