Intrinsic value of L3 Technologies - LLL

Previous Close

$180.67

  Intrinsic Value

$198.47

stock screener

  Rating & Target

hold

+10%

  Value-price divergence*

+209%

Previous close

$180.67

 
Intrinsic value

$198.47

 
Up/down potential

+10%

 
Rating

hold

 
Value-price divergence*

+209%

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

We calculate the intrinsic value of LLL 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 14.0

 

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, %
  0.43
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.62
  8.25
  7.93
  7.64
  7.37
  7.14
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
Revenue, $m
  10,511
  11,919
  13,417
  15,000
  16,669
  18,421
  20,256
  22,173
  24,172
  26,255
  28,422
  30,676
  33,018
  35,452
  37,982
  40,611
  43,344
  46,185
  49,142
  52,218
  55,422
  58,759
  62,237
  65,863
  69,647
  73,596
  77,720
  82,027
  86,529
  91,236
  96,159
Variable operating expenses, $m
 
  11,295
  12,631
  14,045
  15,534
  17,098
  18,736
  20,447
  22,232
  24,091
  26,025
  27,381
  29,471
  31,644
  33,902
  36,249
  38,688
  41,225
  43,863
  46,609
  49,469
  52,447
  55,552
  58,789
  62,166
  65,691
  69,372
  73,217
  77,235
  81,437
  85,831
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
  9,510
  11,295
  12,631
  14,045
  15,534
  17,098
  18,736
  20,447
  22,232
  24,091
  26,025
  27,381
  29,471
  31,644
  33,902
  36,249
  38,688
  41,225
  43,863
  46,609
  49,469
  52,447
  55,552
  58,789
  62,166
  65,691
  69,372
  73,217
  77,235
  81,437
  85,831
Operating income, $m
  1,001
  624
  785
  955
  1,134
  1,323
  1,520
  1,726
  1,940
  2,164
  2,397
  3,295
  3,546
  3,808
  4,080
  4,362
  4,656
  4,961
  5,278
  5,609
  5,953
  6,311
  6,685
  7,074
  7,481
  7,905
  8,348
  8,811
  9,294
  9,800
  10,329
EBITDA, $m
  1,207
  1,330
  1,497
  1,674
  1,860
  2,056
  2,261
  2,475
  2,698
  2,930
  3,172
  3,424
  3,685
  3,957
  4,239
  4,533
  4,838
  5,155
  5,485
  5,828
  6,186
  6,558
  6,946
  7,351
  7,773
  8,214
  8,674
  9,155
  9,658
  10,183
  10,732
Interest expense (income), $m
  162
  154
  199
  247
  297
  351
  407
  466
  527
  591
  658
  727
  799
  874
  952
  1,033
  1,117
  1,205
  1,296
  1,390
  1,489
  1,591
  1,698
  1,809
  1,925
  2,047
  2,173
  2,305
  2,443
  2,587
  2,738
Earnings before tax, $m
  850
  471
  586
  709
  837
  972
  1,113
  1,260
  1,413
  1,573
  1,739
  2,568
  2,747
  2,934
  3,128
  3,329
  3,538
  3,756
  3,983
  4,219
  4,464
  4,720
  4,987
  5,265
  5,555
  5,858
  6,175
  6,506
  6,851
  7,213
  7,591
Tax expense, $m
  189
  127
  158
  191
  226
  262
  300
  340
  382
  425
  470
  693
  742
  792
  844
  899
  955
  1,014
  1,075
  1,139
  1,205
  1,274
  1,346
  1,422
  1,500
  1,582
  1,667
  1,757
  1,850
  1,947
  2,050
Net income, $m
  710
  344
  428
  517
  611
  709
  812
  920
  1,032
  1,148
  1,270
  1,875
  2,006
  2,142
  2,283
  2,430
  2,583
  2,742
  2,907
  3,080
  3,259
  3,446
  3,640
  3,844
  4,055
  4,277
  4,508
  4,749
  5,002
  5,265
  5,541

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  363
  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
  11,865
  13,041
  14,679
  16,412
  18,237
  20,154
  22,162
  24,259
  26,447
  28,725
  31,096
  33,562
  36,125
  38,788
  41,555
  44,432
  47,422
  50,531
  53,765
  57,132
  60,636
  64,288
  68,093
  72,061
  76,200
  80,521
  85,032
  89,746
  94,671
  99,821
  105,207
Adjusted assets (=assets-cash), $m
  11,502
  13,041
  14,679
  16,412
  18,237
  20,154
  22,162
  24,259
  26,447
  28,725
  31,096
  33,562
  36,125
  38,788
  41,555
  44,432
  47,422
  50,531
  53,765
  57,132
  60,636
  64,288
  68,093
  72,061
  76,200
  80,521
  85,032
  89,746
  94,671
  99,821
  105,207
Revenue / Adjusted assets
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
  0.914
Average production assets, $m
  1,328
  1,502
  1,690
  1,890
  2,100
  2,321
  2,552
  2,794
  3,046
  3,308
  3,581
  3,865
  4,160
  4,467
  4,786
  5,117
  5,461
  5,819
  6,192
  6,580
  6,983
  7,404
  7,842
  8,299
  8,776
  9,273
  9,793
  10,335
  10,903
  11,496
  12,116
Working capital, $m
  1,562
  1,359
  1,529
  1,710
  1,900
  2,100
  2,309
  2,528
  2,756
  2,993
  3,240
  3,497
  3,764
  4,042
  4,330
  4,630
  4,941
  5,265
  5,602
  5,953
  6,318
  6,699
  7,095
  7,508
  7,940
  8,390
  8,860
  9,351
  9,864
  10,401
  10,962
Total debt, $m
  3,338
  4,320
  5,362
  6,464
  7,625
  8,844
  10,121
  11,455
  12,846
  14,295
  15,803
  17,371
  19,001
  20,695
  22,455
  24,285
  26,186
  28,164
  30,221
  32,362
  34,591
  36,913
  39,333
  41,857
  44,489
  47,237
  50,107
  53,104
  56,237
  59,512
  62,938
Total liabilities, $m
  7,312
  8,294
  9,336
  10,438
  11,599
  12,818
  14,095
  15,429
  16,820
  18,269
  19,777
  21,345
  22,975
  24,669
  26,429
  28,259
  30,160
  32,138
  34,195
  36,336
  38,565
  40,887
  43,307
  45,831
  48,463
  51,211
  54,081
  57,078
  60,211
  63,486
  66,912
Total equity, $m
  4,553
  4,747
  5,343
  5,974
  6,638
  7,336
  8,067
  8,830
  9,627
  10,456
  11,319
  12,217
  13,149
  14,119
  15,126
  16,173
  17,262
  18,393
  19,571
  20,796
  22,072
  23,401
  24,786
  26,230
  27,737
  29,310
  30,952
  32,667
  34,460
  36,335
  38,295
Total liabilities and equity, $m
  11,865
  13,041
  14,679
  16,412
  18,237
  20,154
  22,162
  24,259
  26,447
  28,725
  31,096
  33,562
  36,124
  38,788
  41,555
  44,432
  47,422
  50,531
  53,766
  57,132
  60,637
  64,288
  68,093
  72,061
  76,200
  80,521
  85,033
  89,745
  94,671
  99,821
  105,207
Debt-to-equity ratio
  0.733
  0.910
  1.000
  1.080
  1.150
  1.210
  1.250
  1.300
  1.330
  1.370
  1.400
  1.420
  1.450
  1.470
  1.480
  1.500
  1.520
  1.530
  1.540
  1.560
  1.570
  1.580
  1.590
  1.600
  1.600
  1.610
  1.620
  1.630
  1.630
  1.640
  1.640
Adjusted equity ratio
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364
  0.364

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  710
  344
  428
  517
  611
  709
  812
  920
  1,032
  1,148
  1,270
  1,875
  2,006
  2,142
  2,283
  2,430
  2,583
  2,742
  2,907
  3,080
  3,259
  3,446
  3,640
  3,844
  4,055
  4,277
  4,508
  4,749
  5,002
  5,265
  5,541
Depreciation, amort., depletion, $m
  206
  706
  712
  719
  726
  733
  741
  749
  758
  766
  775
  129
  139
  149
  160
  171
  182
  194
  206
  219
  233
  247
  261
  277
  293
  309
  326
  345
  363
  383
  404
Funds from operations, $m
  998
  1,050
  1,140
  1,236
  1,337
  1,443
  1,553
  1,669
  1,789
  1,915
  2,045
  2,003
  2,144
  2,291
  2,443
  2,601
  2,765
  2,936
  3,114
  3,299
  3,492
  3,692
  3,902
  4,120
  4,348
  4,586
  4,834
  5,094
  5,365
  5,649
  5,945
Change in working capital, $m
  -43
  161
  171
  181
  190
  200
  209
  219
  228
  237
  247
  257
  267
  278
  288
  300
  312
  324
  337
  351
  365
  380
  396
  413
  431
  450
  470
  491
  513
  537
  561
Cash from operations, $m
  1,041
  889
  970
  1,056
  1,147
  1,243
  1,344
  1,450
  1,561
  1,677
  1,798
  1,747
  1,877
  2,013
  2,154
  2,301
  2,454
  2,612
  2,777
  2,948
  3,126
  3,312
  3,505
  3,707
  3,917
  4,136
  4,364
  4,603
  4,852
  5,112
  5,384
Maintenance CAPEX, $m
  0
  -44
  -50
  -56
  -63
  -70
  -77
  -85
  -93
  -102
  -110
  -119
  -129
  -139
  -149
  -160
  -171
  -182
  -194
  -206
  -219
  -233
  -247
  -261
  -277
  -293
  -309
  -326
  -345
  -363
  -383
New CAPEX, $m
  -216
  -174
  -189
  -200
  -210
  -221
  -231
  -242
  -252
  -262
  -273
  -284
  -295
  -307
  -319
  -331
  -344
  -358
  -372
  -388
  -404
  -420
  -438
  -457
  -477
  -498
  -520
  -543
  -567
  -593
  -620
Cash from investing activities, $m
  -16
  -218
  -239
  -256
  -273
  -291
  -308
  -327
  -345
  -364
  -383
  -403
  -424
  -446
  -468
  -491
  -515
  -540
  -566
  -594
  -623
  -653
  -685
  -718
  -754
  -791
  -829
  -869
  -912
  -956
  -1,003
Free cash flow, $m
  1,025
  671
  731
  800
  874
  952
  1,036
  1,124
  1,216
  1,313
  1,415
  1,343
  1,453
  1,568
  1,687
  1,810
  1,939
  2,072
  2,210
  2,354
  2,504
  2,659
  2,820
  2,988
  3,163
  3,346
  3,535
  3,733
  3,940
  4,156
  4,381
Issuance/(repayment) of debt, $m
  -309
  982
  1,042
  1,102
  1,161
  1,219
  1,277
  1,334
  1,391
  1,449
  1,508
  1,568
  1,630
  1,694
  1,760
  1,829
  1,902
  1,977
  2,057
  2,141
  2,229
  2,322
  2,420
  2,524
  2,633
  2,748
  2,869
  2,998
  3,133
  3,275
  3,425
Issuance/(repurchase) of shares, $m
  -310
  213
  168
  113
  53
  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  
  -636
  1,195
  1,210
  1,215
  1,214
  1,219
  1,277
  1,334
  1,391
  1,449
  1,508
  1,568
  1,630
  1,694
  1,760
  1,829
  1,902
  1,977
  2,057
  2,141
  2,229
  2,322
  2,420
  2,524
  2,633
  2,748
  2,869
  2,998
  3,133
  3,275
  3,425
Total cash flow (excl. dividends), $m
  376
  1,866
  1,941
  2,015
  2,088
  2,171
  2,312
  2,458
  2,608
  2,762
  2,923
  2,911
  3,083
  3,262
  3,447
  3,640
  3,840
  4,049
  4,267
  4,495
  4,733
  4,981
  5,240
  5,512
  5,796
  6,093
  6,405
  6,731
  7,073
  7,431
  7,806
Retained Cash Flow (-), $m
  -198
  -557
  -596
  -631
  -665
  -698
  -731
  -763
  -796
  -829
  -863
  -897
  -933
  -969
  -1,007
  -1,047
  -1,088
  -1,132
  -1,177
  -1,225
  -1,276
  -1,329
  -1,385
  -1,444
  -1,507
  -1,573
  -1,642
  -1,716
  -1,793
  -1,875
  -1,960
Prev. year cash balance distribution, $m
 
  363
  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
 
  1,672
  1,345
  1,385
  1,424
  1,474
  1,582
  1,694
  1,811
  1,933
  2,060
  2,014
  2,150
  2,292
  2,440
  2,593
  2,752
  2,918
  3,090
  3,270
  3,457
  3,652
  3,855
  4,068
  4,289
  4,521
  4,763
  5,015
  5,280
  5,556
  5,846
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  1,577
  1,190
  1,143
  1,088
  1,036
  1,016
  986
  947
  900
  846
  722
  666
  606
  544
  481
  420
  360
  304
  252
  205
  164
  129
  99
  74
  54
  39
  27
  18
  12
  8
Current shareholders' claim on cash, %
  100
  98.4
  97.3
  96.6
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3
  96.3

L3 Technologies, Inc. provides aerospace systems, and a range of communication and electronic systems and products used on military and commercial platforms in the United States and internationally. The company operates in three segments: Electronic Systems, Aerospace Systems, and Communication Systems. It offers a range of products and services, including components, products, subsystems, and systems, as well as related services to military and commercial customers in business areas, including precision engagement and training, power and propulsion systems, aviation products and security systems, sensor systems, warrior systems, and optics, telescopes, and precision optical subsystems. The company also provides fleet management sustainment and support, such as procurement, systems integration, sensor development, modifications, and periodic depot maintenance for intelligence, surveillance, and reconnaissance, as well as special mission aircraft and airborne systems; strategic and tactical signals intelligence systems; secure data links; microwave products; secure terminal and communication network equipment and encryption management; and communication systems for surface and undersea vessels, and manned space flights. In addition, it offers modernization, upgrades and sustainment, maintenance, and logistics support services for military and government aircraft, and other platforms. Further, the company provides night vision and image intensification equipment, and security and detection systems. It serves the United States (U.S.) Department of Defense and its prime contractors, the U.S. Government intelligence agencies, the U.S. Department of Homeland Security, foreign governments, and domestic and international commercial customers. The company was formerly known as L-3 Communications Holdings, Inc. and changed its name to L3 Technologies, Inc. in December 2016. L3 Technologies, Inc. was founded in 1997 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  L3 Technologies (LLL)

Valuation Ratios
P/E Ratio 19.7
Price to Sales 1.3
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 13.4
Price to Free Cash Flow 16.9
Growth Rates
Sales Growth Rate 0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.6%
Cap. Spend. - 3 Yr. Gr. Rate 1.1%
Financial Strength
Quick Ratio NaN
Current Ratio 1.1
LT Debt to Equity 73.3%
Total Debt to Equity 73.3%
Interest Coverage 6
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital 8.9%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 15.9%
Return On Equity - 3 Yr. Avg. 7.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 9.6%
Gross Margin - 3 Yr. Avg. 9.1%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 10%
Operating Margin 9.5%
Oper. Margin - 3 Yr. Avg. 7.8%
Pre-Tax Margin 8.1%
Pre-Tax Margin - 3 Yr. Avg. 6.4%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 22.2%
Eff/ Tax Rate - 3 Yr. Avg. 18.7%
Payout Ratio 31%

LLL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LLL stock intrinsic value calculation we used $10511 million for the last fiscal year's total revenue generated by L3 Technologies. The default revenue input number comes from 2016 income statement of L3 Technologies. 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 LLL stock valuation model: a) initial revenue growth rate of 13.4% 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%, whose default value for LLL is calculated based on our internal credit rating of L3 Technologies, 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 L3 Technologies.
    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 LLL stock the variable cost ratio is equal to 95.5%.

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 LLL 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 L3 Technologies.

Corporate tax rate of 27% is the nominal tax rate for L3 Technologies. 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 LLL 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 LLL are equal to 12.6%.

Life of production assets of 37.6 years is the average useful life of capital assets used in L3 Technologies 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 LLL is equal to 11.4%. 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 - $4553 million for L3 Technologies - 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 77.513 million for L3 Technologies 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 L3 Technologies at the current share price and the inputted number of shares is $14.0 billion.

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COMPANY NEWS

▶ What's working: Defense stocks   [Aug-14-17 06:51AM  CNBC Videos]
▶ The Bull Run in L3 Technologies Continues   [03:38PM  TheStreet.com]
▶ How Is Motorola Solutions Increasing Shareholder Value?   [Jul-31-17 06:05PM  Market Realist]
▶ L-3 beats Street 2Q forecasts   [Jul-27-17 10:40PM  Associated Press]
▶ L3 Announces Second Quarter 2017 Results   [06:55AM  Business Wire]
▶ Stocks With Rising Relative Strength: L3 Technologies   [03:00AM  Investor's Business Daily]
▶ L3 Technologies Declares Quarterly Dividend   [11:16AM  Business Wire]
▶ Lockheed Martin, L3 Technologies land $16M contracts with local work   [Jul-13-17 02:30PM  American City Business Journals]
▶ Defense in the Trader Blitz   [May-22-17 01:26PM  CNBC Videos]
▶ L3 Acquires Open Water Power, Inc.   [09:00AM  Business Wire]
▶ ETFs with exposure to L3 Technologies, Inc. : May 2, 2017   [May-02-17 04:17PM  Capital Cube]
▶ L-3 tops Street 1Q forecasts   [07:04AM  Associated Press]
▶ L3 Announces First Quarter 2017 Results   [06:55AM  Business Wire]
▶ Defense Stock Roundup: TXT, HON, LMT and COL   [Apr-26-17 04:03PM  Zacks]
▶ L3 Acquires OceanServer Technology   [Apr-04-17 03:45PM  Business Wire]
▶ Trading Nation: Great potential in defense space   [Mar-02-17 02:50PM  CNBC Videos]
▶ Aerojet Rocketdyne Makes a Small But Brilliant Buy   [Feb-24-17 03:05PM  at Motley Fool]
▶ L3 to Present at the Barclays Industrial Select Conference   [Feb-21-17 06:20PM  Business Wire]
▶ Who Is Canada's Biggest Defense Contractor?   [08:54AM  at Motley Fool]
▶ Boeing Training Jet Rivals Are Dropping Like Flies   [Feb-19-17 08:13AM  at Motley Fool]
▶ L3 Increases Quarterly Dividend   [Feb-13-17 02:05PM  Business Wire]
Financial statements of LLL
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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