Intrinsic value of Lear Corp. - LEA

Previous Close

$145.54

  Intrinsic Value

$1,109

stock screener

  Rating & Target

str. buy

+662%

  Value-price divergence*

+94%

Previous close

$145.54

 
Intrinsic value

$1,109

 
Up/down potential

+662%

 
Rating

str. buy

 
Value-price divergence*

+94%

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

We calculate the intrinsic value of LEA 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 10.0

 

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, %
  1.91
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
Revenue, $m
  18,558
  19,894
  21,283
  22,726
  24,227
  25,788
  27,412
  29,104
  30,865
  32,701
  34,614
  36,611
  38,694
  40,869
  43,141
  45,515
  47,997
  50,592
  53,308
  56,149
  59,123
  62,238
  65,499
  68,916
  72,497
  76,249
  80,181
  84,305
  88,628
  93,161
  97,916
Variable operating expenses, $m
 
  3,732
  3,985
  4,247
  4,520
  4,804
  5,100
  5,408
  5,728
  6,062
  6,410
  6,662
  7,041
  7,436
  7,850
  8,282
  8,734
  9,206
  9,700
  10,217
  10,758
  11,325
  11,918
  12,540
  13,191
  13,874
  14,590
  15,340
  16,127
  16,952
  17,817
Fixed operating expenses, $m
 
  14,366
  14,726
  15,094
  15,471
  15,858
  16,254
  16,661
  17,077
  17,504
  17,942
  18,390
  18,850
  19,321
  19,804
  20,299
  20,807
  21,327
  21,860
  22,407
  22,967
  23,541
  24,130
  24,733
  25,351
  25,985
  26,635
  27,300
  27,983
  28,682
  29,400
Total operating expenses, $m
  17,137
  18,098
  18,711
  19,341
  19,991
  20,662
  21,354
  22,069
  22,805
  23,566
  24,352
  25,052
  25,891
  26,757
  27,654
  28,581
  29,541
  30,533
  31,560
  32,624
  33,725
  34,866
  36,048
  37,273
  38,542
  39,859
  41,225
  42,640
  44,110
  45,634
  47,217
Operating income, $m
  1,421
  1,796
  2,573
  3,385
  4,236
  5,126
  6,058
  7,035
  8,060
  9,134
  10,262
  11,559
  12,803
  14,111
  15,487
  16,934
  18,457
  20,060
  21,748
  23,526
  25,399
  27,372
  29,452
  31,644
  33,954
  36,390
  38,957
  41,664
  44,518
  47,527
  50,699
EBITDA, $m
  1,799
  2,143
  2,936
  3,765
  4,633
  5,542
  6,494
  7,491
  8,536
  9,632
  10,783
  11,991
  13,260
  14,593
  15,996
  17,471
  19,023
  20,657
  22,377
  24,188
  26,096
  28,106
  30,225
  32,457
  34,809
  37,289
  39,903
  42,659
  45,564
  48,626
  51,855
Interest expense (income), $m
  89
  87
  110
  133
  157
  183
  209
  236
  265
  295
  326
  358
  391
  427
  463
  502
  542
  583
  627
  673
  721
  771
  823
  878
  936
  996
  1,059
  1,126
  1,195
  1,268
  1,344
Earnings before tax, $m
  1,338
  1,708
  2,463
  3,252
  4,078
  4,943
  5,849
  6,799
  7,795
  8,840
  9,937
  11,201
  12,412
  13,685
  15,024
  16,432
  17,915
  19,476
  21,121
  22,853
  24,678
  26,601
  28,628
  30,765
  33,018
  35,393
  37,898
  40,538
  43,323
  46,259
  49,355
Tax expense, $m
  370
  461
  665
  878
  1,101
  1,335
  1,579
  1,836
  2,105
  2,387
  2,683
  3,024
  3,351
  3,695
  4,056
  4,437
  4,837
  5,259
  5,703
  6,170
  6,663
  7,182
  7,730
  8,307
  8,915
  9,556
  10,232
  10,945
  11,697
  12,490
  13,326
Net income, $m
  975
  1,247
  1,798
  2,374
  2,977
  3,608
  4,270
  4,963
  5,690
  6,453
  7,254
  8,177
  9,061
  9,990
  10,967
  11,996
  13,078
  14,218
  15,418
  16,683
  18,015
  19,419
  20,899
  22,459
  24,103
  25,837
  27,665
  29,593
  31,626
  33,769
  36,029

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,272
  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
  9,901
  9,249
  9,894
  10,565
  11,263
  11,989
  12,744
  13,530
  14,349
  15,202
  16,092
  17,020
  17,989
  19,000
  20,056
  21,160
  22,314
  23,520
  24,783
  26,104
  27,486
  28,934
  30,451
  32,039
  33,704
  35,448
  37,276
  39,193
  41,203
  43,311
  45,521
Adjusted assets (=assets-cash), $m
  8,629
  9,249
  9,894
  10,565
  11,263
  11,989
  12,744
  13,530
  14,349
  15,202
  16,092
  17,020
  17,989
  19,000
  20,056
  21,160
  22,314
  23,520
  24,783
  26,104
  27,486
  28,934
  30,451
  32,039
  33,704
  35,448
  37,276
  39,193
  41,203
  43,311
  45,521
Revenue / Adjusted assets
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
  2.151
Average production assets, $m
  2,194
  2,348
  2,511
  2,682
  2,859
  3,043
  3,235
  3,434
  3,642
  3,859
  4,084
  4,320
  4,566
  4,823
  5,091
  5,371
  5,664
  5,970
  6,290
  6,626
  6,977
  7,344
  7,729
  8,132
  8,555
  8,997
  9,461
  9,948
  10,458
  10,993
  11,554
Working capital, $m
  1,467
  259
  277
  295
  315
  335
  356
  378
  401
  425
  450
  476
  503
  531
  561
  592
  624
  658
  693
  730
  769
  809
  851
  896
  942
  991
  1,042
  1,096
  1,152
  1,211
  1,273
Total debt, $m
  1,942
  2,386
  2,895
  3,424
  3,973
  4,545
  5,140
  5,760
  6,405
  7,078
  7,779
  8,510
  9,273
  10,070
  10,902
  11,772
  12,681
  13,632
  14,627
  15,668
  16,757
  17,898
  19,093
  20,345
  21,656
  23,031
  24,472
  25,982
  27,566
  29,227
  30,969
Total liabilities, $m
  6,843
  7,288
  7,797
  8,326
  8,875
  9,447
  10,042
  10,662
  11,307
  11,980
  12,681
  13,412
  14,175
  14,972
  15,804
  16,674
  17,583
  18,534
  19,529
  20,570
  21,659
  22,800
  23,995
  25,247
  26,558
  27,933
  29,374
  30,884
  32,468
  34,129
  35,871
Total equity, $m
  3,057
  1,961
  2,098
  2,240
  2,388
  2,542
  2,702
  2,868
  3,042
  3,223
  3,412
  3,608
  3,814
  4,028
  4,252
  4,486
  4,731
  4,986
  5,254
  5,534
  5,827
  6,134
  6,456
  6,792
  7,145
  7,515
  7,903
  8,309
  8,735
  9,182
  9,650
Total liabilities and equity, $m
  9,900
  9,249
  9,895
  10,566
  11,263
  11,989
  12,744
  13,530
  14,349
  15,203
  16,093
  17,020
  17,989
  19,000
  20,056
  21,160
  22,314
  23,520
  24,783
  26,104
  27,486
  28,934
  30,451
  32,039
  33,703
  35,448
  37,277
  39,193
  41,203
  43,311
  45,521
Debt-to-equity ratio
  0.635
  1.220
  1.380
  1.530
  1.660
  1.790
  1.900
  2.010
  2.110
  2.200
  2.280
  2.360
  2.430
  2.500
  2.560
  2.620
  2.680
  2.730
  2.780
  2.830
  2.880
  2.920
  2.960
  3.000
  3.030
  3.060
  3.100
  3.130
  3.160
  3.180
  3.210
Adjusted equity ratio
  0.208
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212
  0.212

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  975
  1,247
  1,798
  2,374
  2,977
  3,608
  4,270
  4,963
  5,690
  6,453
  7,254
  8,177
  9,061
  9,990
  10,967
  11,996
  13,078
  14,218
  15,418
  16,683
  18,015
  19,419
  20,899
  22,459
  24,103
  25,837
  27,665
  29,593
  31,626
  33,769
  36,029
Depreciation, amort., depletion, $m
  378
  347
  363
  380
  398
  416
  436
  456
  476
  498
  521
  432
  457
  482
  509
  537
  566
  597
  629
  663
  698
  734
  773
  813
  855
  900
  946
  995
  1,046
  1,099
  1,155
Funds from operations, $m
  1,732
  1,594
  2,161
  2,754
  3,375
  4,025
  4,705
  5,419
  6,166
  6,951
  7,774
  8,609
  9,517
  10,472
  11,476
  12,533
  13,644
  14,815
  16,047
  17,345
  18,712
  20,153
  21,672
  23,272
  24,959
  26,737
  28,611
  30,588
  32,672
  34,868
  37,185
Change in working capital, $m
  113
  17
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  40
  42
  44
  47
  49
  51
  54
  56
  59
  62
Cash from operations, $m
  1,619
  1,577
  2,143
  2,735
  3,355
  4,004
  4,684
  5,397
  6,143
  6,927
  7,749
  8,583
  9,490
  10,444
  11,447
  12,502
  13,612
  14,781
  16,012
  17,308
  18,674
  20,113
  21,629
  23,227
  24,912
  26,688
  28,560
  30,534
  32,615
  34,809
  37,123
Maintenance CAPEX, $m
  0
  -219
  -235
  -251
  -268
  -286
  -304
  -323
  -343
  -364
  -386
  -408
  -432
  -457
  -482
  -509
  -537
  -566
  -597
  -629
  -663
  -698
  -734
  -773
  -813
  -855
  -900
  -946
  -995
  -1,046
  -1,099
New CAPEX, $m
  -528
  -154
  -164
  -170
  -177
  -184
  -192
  -200
  -208
  -217
  -226
  -236
  -246
  -257
  -268
  -280
  -293
  -306
  -320
  -335
  -351
  -367
  -385
  -403
  -422
  -443
  -464
  -487
  -510
  -535
  -561
Cash from investing activities, $m
  -637
  -373
  -399
  -421
  -445
  -470
  -496
  -523
  -551
  -581
  -612
  -644
  -678
  -714
  -750
  -789
  -830
  -872
  -917
  -964
  -1,014
  -1,065
  -1,119
  -1,176
  -1,235
  -1,298
  -1,364
  -1,433
  -1,505
  -1,581
  -1,660
Free cash flow, $m
  982
  1,204
  1,744
  2,314
  2,910
  3,534
  4,188
  4,874
  5,592
  6,346
  7,138
  7,939
  8,812
  9,731
  10,696
  11,713
  12,782
  13,908
  15,094
  16,344
  17,660
  19,048
  20,510
  22,051
  23,676
  25,390
  27,197
  29,102
  31,110
  33,229
  35,462
Issuance/(repayment) of debt, $m
  -13
  489
  509
  529
  550
  572
  595
  620
  645
  672
  701
  731
  763
  797
  832
  870
  909
  951
  995
  1,041
  1,090
  1,141
  1,195
  1,252
  1,312
  1,375
  1,441
  1,510
  1,584
  1,661
  1,742
Issuance/(repurchase) of shares, $m
  -659
  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  
  -784
  489
  509
  529
  550
  572
  595
  620
  645
  672
  701
  731
  763
  797
  832
  870
  909
  951
  995
  1,041
  1,090
  1,141
  1,195
  1,252
  1,312
  1,375
  1,441
  1,510
  1,584
  1,661
  1,742
Total cash flow (excl. dividends), $m
  164
  1,693
  2,253
  2,843
  3,460
  4,106
  4,783
  5,493
  6,237
  7,019
  7,839
  8,670
  9,575
  10,527
  11,529
  12,582
  13,691
  14,859
  16,089
  17,385
  18,750
  20,189
  21,705
  23,303
  24,988
  26,764
  28,637
  30,612
  32,694
  34,889
  37,204
Retained Cash Flow (-), $m
  -130
  -131
  -137
  -142
  -148
  -154
  -160
  -167
  -174
  -181
  -189
  -197
  -205
  -214
  -224
  -234
  -245
  -256
  -268
  -280
  -293
  -307
  -321
  -337
  -353
  -370
  -388
  -406
  -426
  -447
  -469
Prev. year cash balance distribution, $m
 
  1,227
  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
 
  2,789
  2,116
  2,701
  3,312
  3,952
  4,623
  5,326
  6,064
  6,838
  7,650
  8,473
  9,370
  10,313
  11,305
  12,348
  13,447
  14,603
  15,821
  17,105
  18,457
  19,882
  21,383
  22,966
  24,635
  26,395
  28,250
  30,206
  32,268
  34,443
  36,736
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
 
  2,674
  1,937
  2,350
  2,727
  3,064
  3,355
  3,598
  3,790
  3,928
  4,011
  4,024
  3,999
  3,921
  3,795
  3,625
  3,417
  3,177
  2,914
  2,634
  2,345
  2,056
  1,774
  1,505
  1,255
  1,027
  824
  648
  499
  376
  277
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

Lear Corporation designs, develops, engineers, manufactures, assembles, and supplies automotive seating, electrical distribution systems, and related components primarily to automotive original equipment manufacturers worldwide. It operates in two segments, Seating and E-Systems. The Seating segment provides seat systems and related components, including leather and fabric products, seat trim covers, recliner mechanisms, seat tracks, seat structures and mechanisms, seat foams, and headrests primarily for automobiles and light trucks, compact cars, and sport utility vehicles, as well as thermoelectric seat heating and cooling systems. The E-Systems segment offers electrical distribution systems and components for managing power and distributing signals within the vehicle for traditional vehicle architectures, as well as high power and hybrid electric systems. This segmentÂ’s products include wiring harnesses, terminals and connectors, and junction boxes; and electronic control modules, such as body control modules, gateway modules, and lighting control modules and audio amplifiers, as well as associated software. It also provides wireless communication modules comprising passive entry, remote keyless entry, and dual range/dual function remote keyless entry systems; and cybersecurity, which securely processes various signals to, from and within the vehicle, as well road infrastructure. Lear Corporation was founded in 1917 and is headquartered in Southfield, Michigan.

FINANCIAL RATIOS  of  Lear Corp. (LEA)

Valuation Ratios
P/E Ratio 10.4
Price to Sales 0.5
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow 9.3
Growth Rates
Sales Growth Rate 1.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 8.6%
Cap. Spend. - 3 Yr. Gr. Rate 2.8%
Financial Strength
Quick Ratio 28
Current Ratio 0.1
LT Debt to Equity 62.1%
Total Debt to Equity 63.5%
Interest Coverage 16
Management Effectiveness
Return On Assets 10.8%
Ret/ On Assets - 3 Yr. Avg. 9.3%
Return On Total Capital 19.7%
Ret/ On T. Cap. - 3 Yr. Avg. 16.9%
Return On Equity 32.6%
Return On Equity - 3 Yr. Avg. 26.8%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 11.6%
Gross Margin - 3 Yr. Avg. 10.3%
EBITDA Margin 9.7%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 7.7%
Oper. Margin - 3 Yr. Avg. 6.2%
Pre-Tax Margin 7.2%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin 5.3%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 27.7%
Eff/ Tax Rate - 3 Yr. Avg. 23.6%
Payout Ratio 9.1%

LEA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LEA stock intrinsic value calculation we used $18558 million for the last fiscal year's total revenue generated by Lear Corp.. The default revenue input number comes from 2016 income statement of Lear Corp.. 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 LEA stock valuation model: a) initial revenue growth rate of 7.2% 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 LEA is calculated based on our internal credit rating of Lear Corp., 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 Lear Corp..
    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 LEA stock the variable cost ratio is equal to 18.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14016 million in the base year in the intrinsic value calculation for LEA 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 4.6% for Lear Corp..

Corporate tax rate of 27% is the nominal tax rate for Lear Corp.. 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 LEA 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 LEA are equal to 11.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Lear Corp. 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 LEA is equal to 1.3%. 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 - $3057 million for Lear Corp. - 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 68.634 million for Lear Corp. 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 Lear Corp. at the current share price and the inputted number of shares is $10.0 billion.

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DLPH Delphi Automot 94.18 96.04  hold

COMPANY NEWS

▶ Michigan moves to snag 1,500 jobs for Flint, other cities   [Aug-22-17 03:31PM  Associated Press]
▶ Lear Announces Closing of Refinancing Transactions   [Aug-17-17 11:32AM  PR Newswire]
▶ Lear Announces Offering of Senior Notes   [10:02AM  PR Newswire]
▶ Lear Declares Quarterly Cash Dividend   [Aug-10-17 11:21AM  PR Newswire]
▶ ETFs with exposure to Lear Corp. : August 8, 2017   [Aug-08-17 04:44PM  Capital Cube]
▶ Lear Refinances Credit Agreement   [04:15PM  PR Newswire]
▶ Story Stocks from Briefing.com   [Jul-26-17 12:28PM  Briefing.com]
▶ ETFs with exposure to Lear Corp. : July 24, 2017   [Jul-24-17 04:58PM  Capital Cube]
▶ ETFs with exposure to Lear Corp. : July 14, 2017   [Jul-14-17 03:18PM  Capital Cube]
▶ Lear Corp. Value Analysis (NYSE:LEA) : June 20, 2017   [Jun-20-17 03:57PM  Capital Cube]
▶ [$$] US car sector hit after analysts lower sales outlook   [Jun-08-17 06:57PM  Financial Times]
▶ Top 5 ROE Stocks to Buy as Markets Rebound   [May-23-17 09:13AM  Zacks]
▶ Lear Declares Quarterly Cash Dividend   [May-18-17 01:35PM  PR Newswire]
▶ ETFs with exposure to Lear Corp. : April 26, 2017   [Apr-26-17 03:25PM  Capital Cube]
▶ Lear tops Street 1Q forecasts   [07:26AM  Associated Press]
▶ Lear Corp. Value Analysis (NYSE:LEA) : April 24, 2017   [Apr-24-17 03:33PM  Capital Cube]
▶ Three Reasons The Bears Are Wrong About Lear Corp.   [Apr-20-17 01:56PM  Barrons.com]
▶ Adient Eyes Aerospace Market, Teams up with Boeing   [Mar-28-17 09:46AM  Investopedia]
Stock chart of LEA Financial statements of LEA
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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