Intrinsic value of Lincoln National - LNC

Previous Close

$68.02

  Intrinsic Value

$186.81

stock screener

  Rating & Target

str. buy

+175%

  Value-price divergence*

0%

Previous close

$68.02

 
Intrinsic value

$186.81

 
Up/down potential

+175%

 
Rating

str. buy

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of LNC 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 15.2

 

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, %
  -1.29
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.15
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.04
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
Revenue, $m
  0
  14,234
  14,997
  15,796
  16,632
  17,507
  18,423
  19,384
  20,390
  21,445
  22,550
  23,709
  24,924
  26,199
  27,535
  28,937
  30,408
  31,951
  33,570
  35,268
  37,051
  38,921
  40,884
  42,945
  45,107
  47,377
  49,759
  52,260
  54,885
  57,641
  60,534
Variable operating expenses, $m
 
  12,414
  13,067
  13,751
  14,467
  15,216
  16,001
  16,823
  17,685
  18,588
  19,534
  20,299
  21,339
  22,430
  23,575
  24,775
  26,034
  27,355
  28,741
  30,196
  31,722
  33,323
  35,004
  36,768
  38,619
  40,563
  42,602
  44,744
  46,991
  49,351
  51,827
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
  11,666
  12,414
  13,067
  13,751
  14,467
  15,216
  16,001
  16,823
  17,685
  18,588
  19,534
  20,299
  21,339
  22,430
  23,575
  24,775
  26,034
  27,355
  28,741
  30,196
  31,722
  33,323
  35,004
  36,768
  38,619
  40,563
  42,602
  44,744
  46,991
  49,351
  51,827
Operating income, $m
  1,839
  1,820
  1,930
  2,045
  2,165
  2,291
  2,423
  2,561
  2,705
  2,857
  3,016
  3,410
  3,585
  3,768
  3,960
  4,162
  4,374
  4,596
  4,828
  5,073
  5,329
  5,598
  5,880
  6,177
  6,488
  6,814
  7,157
  7,517
  7,894
  8,291
  8,707
EBITDA, $m
  1,839
  2,054
  2,165
  2,280
  2,400
  2,527
  2,659
  2,798
  2,943
  3,095
  3,255
  3,422
  3,597
  3,781
  3,974
  4,177
  4,389
  4,611
  4,845
  5,090
  5,348
  5,618
  5,901
  6,198
  6,510
  6,838
  7,182
  7,543
  7,922
  8,319
  8,737
Interest expense (income), $m
  274
  267
  228
  888
  1,579
  2,302
  3,060
  3,853
  4,684
  5,555
  6,468
  7,424
  8,427
  9,479
  10,582
  11,738
  12,952
  14,224
  15,560
  16,960
  18,430
  19,973
  21,592
  23,291
  25,074
  26,945
  28,909
  30,971
  33,135
  35,407
  37,792
Earnings before tax, $m
  1,458
  1,553
  1,702
  1,156
  586
  -12
  -637
  -1,292
  -1,979
  -2,698
  -3,452
  -4,014
  -4,842
  -5,711
  -6,621
  -7,576
  -8,578
  -9,629
  -10,731
  -11,888
  -13,101
  -14,375
  -15,711
  -17,114
  -18,586
  -20,131
  -21,752
  -23,454
  -25,241
  -27,116
  -29,085
Tax expense, $m
  266
  419
  459
  312
  158
  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
  1,192
  1,134
  1,242
  844
  428
  -12
  -637
  -1,292
  -1,979
  -2,698
  -3,452
  -4,014
  -4,842
  -5,711
  -6,621
  -7,576
  -8,578
  -9,629
  -10,731
  -11,888
  -13,101
  -14,375
  -15,711
  -17,114
  -18,586
  -20,131
  -21,752
  -23,454
  -25,241
  -27,116
  -29,085

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
  261,627
  273,736
  288,408
  303,763
  319,837
  336,668
  354,297
  372,765
  392,116
  412,397
  433,656
  455,944
  479,313
  503,820
  529,524
  556,484
  584,767
  614,439
  645,571
  678,237
  712,515
  748,487
  786,239
  825,861
  867,447
  911,096
  956,912
  1,005,005
  1,055,489
  1,108,485
  1,164,118
Adjusted assets (=assets-cash), $m
  261,627
  273,736
  288,408
  303,763
  319,837
  336,668
  354,297
  372,765
  392,116
  412,397
  433,656
  455,944
  479,313
  503,820
  529,524
  556,484
  584,767
  614,439
  645,571
  678,237
  712,515
  748,487
  786,239
  825,861
  867,447
  911,096
  956,912
  1,005,005
  1,055,489
  1,108,485
  1,164,118
Revenue / Adjusted assets
  0.000
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
Average production assets, $m
  64
  71
  75
  79
  83
  88
  92
  97
  102
  107
  113
  119
  125
  131
  138
  145
  152
  160
  168
  176
  185
  195
  204
  215
  226
  237
  249
  261
  274
  288
  303
Working capital, $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 debt, $m
  5,345
  4,558
  17,763
  31,583
  46,049
  61,197
  77,063
  93,684
  111,101
  129,353
  148,487
  168,545
  189,578
  211,634
  234,767
  259,032
  284,486
  311,191
  339,210
  368,609
  399,460
  431,835
  465,811
  501,471
  538,898
  578,182
  619,417
  662,701
  708,136
  755,832
  805,902
Total liabilities, $m
  247,149
  246,362
  259,567
  273,387
  287,853
  303,001
  318,867
  335,488
  352,905
  371,157
  390,291
  410,349
  431,382
  453,438
  476,571
  500,836
  526,290
  552,995
  581,014
  610,413
  641,264
  673,639
  707,615
  743,275
  780,702
  819,986
  861,221
  904,505
  949,940
  997,636
  1,047,706
Total equity, $m
  14,478
  27,374
  28,841
  30,376
  31,984
  33,667
  35,430
  37,276
  39,212
  41,240
  43,366
  45,594
  47,931
  50,382
  52,952
  55,648
  58,477
  61,444
  64,557
  67,824
  71,252
  74,849
  78,624
  82,586
  86,745
  91,110
  95,691
  100,501
  105,549
  110,848
  116,412
Total liabilities and equity, $m
  261,627
  273,736
  288,408
  303,763
  319,837
  336,668
  354,297
  372,764
  392,117
  412,397
  433,657
  455,943
  479,313
  503,820
  529,523
  556,484
  584,767
  614,439
  645,571
  678,237
  712,516
  748,488
  786,239
  825,861
  867,447
  911,096
  956,912
  1,005,006
  1,055,489
  1,108,484
  1,164,118
Debt-to-equity ratio
  0.369
  0.170
  0.620
  1.040
  1.440
  1.820
  2.180
  2.510
  2.830
  3.140
  3.420
  3.700
  3.960
  4.200
  4.430
  4.650
  4.860
  5.060
  5.250
  5.430
  5.610
  5.770
  5.920
  6.070
  6.210
  6.350
  6.470
  6.590
  6.710
  6.820
  6.920
Adjusted equity ratio
  0.055
  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
  1,192
  1,134
  1,242
  844
  428
  -12
  -637
  -1,292
  -1,979
  -2,698
  -3,452
  -4,014
  -4,842
  -5,711
  -6,621
  -7,576
  -8,578
  -9,629
  -10,731
  -11,888
  -13,101
  -14,375
  -15,711
  -17,114
  -18,586
  -20,131
  -21,752
  -23,454
  -25,241
  -27,116
  -29,085
Depreciation, amort., depletion, $m
  0
  234
  235
  235
  236
  236
  237
  237
  237
  238
  239
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  19
  20
  21
  23
  24
  25
  26
  27
  29
  30
Funds from operations, $m
  2,223
  1,368
  1,477
  1,079
  663
  224
  -401
  -1,055
  -1,741
  -2,460
  -3,213
  -4,002
  -4,830
  -5,698
  -6,608
  -7,562
  -8,563
  -9,613
  -10,714
  -11,870
  -13,083
  -14,355
  -15,691
  -17,092
  -18,563
  -20,107
  -21,727
  -23,428
  -25,213
  -27,087
  -29,055
Change in working capital, $m
  951
  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 operations, $m
  1,272
  1,368
  1,477
  1,079
  663
  224
  -401
  -1,055
  -1,741
  -2,460
  -3,213
  -4,002
  -4,830
  -5,698
  -6,608
  -7,562
  -8,563
  -9,613
  -10,714
  -11,870
  -13,083
  -14,355
  -15,691
  -17,092
  -18,563
  -20,107
  -21,727
  -23,428
  -25,213
  -27,087
  -29,055
Maintenance CAPEX, $m
  0
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
New CAPEX, $m
  0
  -7
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -14
Cash from investing activities, $m
  -3,666
  -13
  -11
  -11
  -12
  -12
  -14
  -14
  -15
  -15
  -17
  -17
  -18
  -18
  -20
  -21
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -34
  -36
  -38
  -39
  -41
  -43
Free cash flow, $m
  -2,394
  1,354
  1,466
  1,068
  651
  212
  -414
  -1,069
  -1,756
  -2,475
  -3,229
  -4,019
  -4,848
  -5,716
  -6,627
  -7,583
  -8,585
  -9,636
  -10,738
  -11,895
  -13,109
  -14,383
  -15,720
  -17,123
  -18,595
  -20,141
  -21,763
  -23,465
  -25,253
  -27,129
  -29,098
Issuance/(repayment) of debt, $m
  -205
  -787
  13,205
  13,819
  14,467
  15,148
  15,866
  16,621
  17,416
  18,253
  19,133
  20,059
  21,033
  22,056
  23,133
  24,265
  25,454
  26,705
  28,019
  29,400
  30,850
  32,375
  33,977
  35,660
  37,427
  39,284
  41,235
  43,284
  45,436
  47,696
  50,070
Issuance/(repurchase) of shares, $m
  -853
  11,762
  225
  691
  1,180
  1,695
  2,400
  3,139
  3,914
  4,726
  5,577
  6,243
  7,179
  8,161
  9,192
  10,272
  11,406
  12,596
  13,844
  15,154
  16,529
  17,972
  19,486
  21,076
  22,744
  24,496
  26,334
  28,264
  30,289
  32,416
  34,648
Cash from financing (excl. dividends), $m  
  2,208
  10,975
  13,430
  14,510
  15,647
  16,843
  18,266
  19,760
  21,330
  22,979
  24,710
  26,302
  28,212
  30,217
  32,325
  34,537
  36,860
  39,301
  41,863
  44,554
  47,379
  50,347
  53,463
  56,736
  60,171
  63,780
  67,569
  71,548
  75,725
  80,112
  84,718
Total cash flow (excl. dividends), $m
  -186
  12,330
  14,896
  15,579
  16,297
  17,055
  17,852
  18,691
  19,574
  20,504
  21,481
  22,282
  23,364
  24,501
  25,697
  26,954
  28,276
  29,665
  31,125
  32,658
  34,270
  35,964
  37,743
  39,612
  41,576
  43,639
  45,806
  48,082
  50,472
  52,983
  55,620
Retained Cash Flow (-), $m
  -861
  -12,896
  -1,467
  -1,535
  -1,607
  -1,695
  -2,400
  -3,139
  -3,914
  -4,726
  -5,577
  -6,243
  -7,179
  -8,161
  -9,192
  -10,272
  -11,406
  -12,596
  -13,844
  -15,154
  -16,529
  -17,972
  -19,486
  -21,076
  -22,744
  -24,496
  -26,334
  -28,264
  -30,289
  -32,416
  -34,648
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
 
  -566
  13,429
  14,043
  14,690
  15,360
  15,452
  15,552
  15,660
  15,778
  15,904
  16,039
  16,185
  16,340
  16,506
  16,682
  16,870
  17,069
  17,280
  17,504
  17,741
  17,992
  18,257
  18,536
  18,832
  19,143
  19,472
  19,818
  20,183
  20,567
  20,972
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  -527
  11,585
  11,133
  10,619
  10,041
  9,054
  8,092
  7,163
  6,276
  5,440
  4,661
  3,944
  3,294
  2,713
  2,202
  1,759
  1,382
  1,067
  808
  601
  437
  311
  216
  147
  97
  62
  39
  24
  14
  8
Current shareholders' claim on cash, %
  100
  56.3
  55.9
  54.6
  52.7
  50.1
  47.0
  43.3
  39.3
  35.3
  31.3
  27.5
  23.9
  20.5
  17.5
  14.8
  12.4
  10.2
  8.4
  6.9
  5.6
  4.5
  3.6
  2.9
  2.3
  1.8
  1.4
  1.1
  0.9
  0.7
  0.5

Lincoln National Corporation, through its subsidiaries, engages in the multiple insurance and retirement businesses in the United States. It operates through four segments: Annuities, Retirement Plan Services, Life Insurance, and Group Protection. The company sells a range of wealth protection, accumulation, and retirement income products and solutions. The company’s products include fixed and indexed annuities, variable annuities, universal life insurance (UL), variable universal life insurance (VUL), linked-benefit UL, term life insurance, indexed universal life insurance, and employer-sponsored retirement plans and services, as well as group life, disability, and dental products. It also provides various plan investment vehicles, including individual and group variable annuities, group fixed annuities, and mutual fund-based programs; single and survivorship versions of UL and VUL, including corporate-owned UL and VUL, and bank-owned UL and VUL insurance products; and group non-medical insurance products, principally term life, universal life, disability, dental, vision, accident, and critical illness insurance to the employer market place through various forms of contributory and non-contributory plans. The company distributes its products through consultants, brokers, planners, agents, financial advisors, third-party administrators, and other intermediaries. Lincoln National Corporation was founded in 1904 and is headquartered in Radnor, Pennsylvania.

FINANCIAL RATIOS  of  Lincoln National (LNC)

Valuation Ratios
P/E Ratio 12.9
Price to Sales 1.1
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow 12.1
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 36.9%
Total Debt to Equity 36.9%
Interest Coverage 6
Management Effectiveness
Return On Assets 0.6%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital 6.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 12.8%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 13.6%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 10.8%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 8.8%
Net Profit Margin - 3 Yr. Avg. 9.5%
Effective Tax Rate 18.2%
Eff/ Tax Rate - 3 Yr. Avg. 20.6%
Payout Ratio 20%

LNC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LNC stock intrinsic value calculation we used $13505 million for the last fiscal year's total revenue generated by Lincoln National. The default revenue input number comes from 2016 income statement of Lincoln National. 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 LNC stock valuation model: a) initial revenue growth rate of 5.4% 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 7.3%, whose default value for LNC is calculated based on our internal credit rating of Lincoln National, 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 Lincoln National.
    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 LNC stock the variable cost ratio is equal to 87.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for LNC 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 5% for Lincoln National.

Corporate tax rate of 27% is the nominal tax rate for Lincoln National. 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 LNC 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 LNC are equal to 0.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Lincoln National 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 LNC is equal to 0%. 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 - $14478 million for Lincoln National - 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 223.006 million for Lincoln National 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 Lincoln National at the current share price and the inputted number of shares is $15.2 billion.

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COMPANY NEWS

▶ 6 Undervalued Stocks Based on the Peter Lynch Value   [Aug-03-17 06:26PM  GuruFocus.com]
▶ Lincoln National beats 2Q profit forecasts   [Aug-02-17 10:41PM  Associated Press]
▶ Tesla Remains Substantially Overvalued, Doug Kass Warns   [Jul-10-17 07:15PM  TheStreet.com]
▶ How Some of Kass' Favorite Shorts Are Doing: Best of Kass   [Jul-07-17 04:08PM  TheStreet.com]
▶ Lincoln Financial Group to Report Second Quarter Earnings   [Jun-22-17 11:00AM  Business Wire]
▶ Lincoln Financial Group Launches Informed Advisor Blog   [Jun-14-17 12:21PM  Business Wire]
▶ Rosy Financials, Bull; Three-Day Weekend: Best of Kass   [May-26-17 09:00PM  TheStreet.com]
▶ Lincoln Financial Group Employees Rise Against Hunger   [May-08-17 02:00PM  Business Wire]
▶ Lincoln National beats 1Q profit forecasts   [May-03-17 04:34PM  Associated Press]
▶ Personal Finance: What Women Do Better Than Men   [Apr-18-17 10:05AM  Business Wire]
▶ Lincoln National Stock Trades Ex-Dividend Thursday   [Apr-04-17 09:10AM  Investopedia]
▶ Lincoln Financial Group to Report First Quarter Earnings   [Mar-23-17 11:00AM  Business Wire]
▶ Lincoln Financial Group Adds Digital Chief Reporting Directly to CEO   [Mar-15-17 03:44PM  at The Wall Street Journal]
Stock chart of LNC Financial statements of LNC
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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