Intrinsic value of Lincoln National - LNC

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$64.72

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$64.72

 
Intrinsic value

$189.49

 
Up/down potential

+193%

 
Rating

str. buy

 
Value-price divergence* premium content

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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 14.6

 

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
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.85
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
Revenue, $m
  0
  14,126
  14,782
  15,473
  16,201
  16,969
  17,777
  18,628
  19,524
  20,467
  21,458
  22,501
  23,598
  24,751
  25,964
  27,238
  28,578
  29,985
  31,465
  33,019
  34,652
  36,368
  38,170
  40,064
  42,053
  44,142
  46,337
  48,641
  51,062
  53,605
  56,275
Variable operating expenses, $m
 
  12,322
  12,883
  13,475
  14,098
  14,756
  15,448
  16,176
  16,943
  17,750
  18,599
  19,265
  20,204
  21,191
  22,229
  23,321
  24,467
  25,673
  26,939
  28,270
  29,668
  31,137
  32,680
  34,302
  36,004
  37,793
  39,672
  41,645
  43,718
  45,895
  48,181
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
  12,322
  12,883
  13,475
  14,098
  14,756
  15,448
  16,176
  16,943
  17,750
  18,599
  19,265
  20,204
  21,191
  22,229
  23,321
  24,467
  25,673
  26,939
  28,270
  29,668
  31,137
  32,680
  34,302
  36,004
  37,793
  39,672
  41,645
  43,718
  45,895
  48,181
Operating income, $m
  1,839
  1,804
  1,899
  1,998
  2,103
  2,213
  2,330
  2,452
  2,581
  2,716
  2,859
  3,236
  3,394
  3,560
  3,734
  3,918
  4,110
  4,313
  4,526
  4,749
  4,984
  5,231
  5,490
  5,762
  6,049
  6,349
  6,665
  6,996
  7,344
  7,710
  8,094
EBITDA, $m
  1,839
  2,039
  2,133
  2,233
  2,338
  2,449
  2,566
  2,689
  2,818
  2,954
  3,097
  3,248
  3,406
  3,572
  3,747
  3,931
  4,125
  4,328
  4,541
  4,766
  5,001
  5,249
  5,509
  5,782
  6,070
  6,371
  6,688
  7,020
  7,370
  7,737
  8,122
Interest expense (income), $m
  274
  267
  134
  702
  1,300
  1,930
  2,594
  3,294
  4,031
  4,806
  5,621
  6,480
  7,382
  8,331
  9,329
  10,379
  11,481
  12,641
  13,859
  15,139
  16,484
  17,897
  19,382
  20,942
  22,581
  24,302
  26,110
  28,009
  30,003
  32,098
  34,298
Earnings before tax, $m
  1,458
  1,537
  1,764
  1,297
  803
  283
  -265
  -842
  -1,450
  -2,089
  -2,762
  -3,243
  -3,988
  -4,771
  -5,595
  -6,461
  -7,371
  -8,328
  -9,333
  -10,390
  -11,500
  -12,666
  -13,892
  -15,180
  -16,532
  -17,953
  -19,445
  -21,013
  -22,659
  -24,388
  -26,204
Tax expense, $m
  266
  415
  476
  350
  217
  76
  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
  1,122
  1,288
  946
  586
  207
  -265
  -842
  -1,450
  -2,089
  -2,762
  -3,243
  -3,988
  -4,771
  -5,595
  -6,461
  -7,371
  -8,328
  -9,333
  -10,390
  -11,500
  -12,666
  -13,892
  -15,180
  -16,532
  -17,953
  -19,445
  -21,013
  -22,659
  -24,388
  -26,204

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
  271,658
  284,263
  297,555
  311,565
  326,326
  341,872
  358,238
  375,465
  393,592
  412,661
  432,719
  453,812
  475,990
  499,305
  523,813
  549,573
  576,644
  605,092
  634,983
  666,389
  699,384
  734,047
  770,461
  808,710
  848,888
  891,089
  935,413
  981,966
  1,030,859
  1,082,207
Adjusted assets (=assets-cash), $m
  261,627
  271,658
  284,263
  297,555
  311,565
  326,326
  341,872
  358,238
  375,465
  393,592
  412,661
  432,719
  453,812
  475,990
  499,305
  523,813
  549,573
  576,644
  605,092
  634,983
  666,389
  699,384
  734,047
  770,461
  808,710
  848,888
  891,089
  935,413
  981,966
  1,030,859
  1,082,207
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
  74
  77
  81
  85
  89
  93
  98
  102
  107
  113
  118
  124
  130
  136
  143
  150
  157
  165
  173
  182
  191
  200
  210
  221
  232
  243
  255
  268
  281
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
  2,688
  14,033
  25,996
  38,605
  51,889
  65,880
  80,611
  96,114
  112,429
  129,591
  147,643
  166,627
  186,587
  207,571
  229,628
  252,811
  277,176
  302,778
  329,681
  357,946
  387,642
  418,839
  451,611
  486,035
  522,195
  560,176
  600,067
  641,965
  685,969
  732,182
Total liabilities, $m
  247,149
  244,492
  255,837
  267,800
  280,409
  293,693
  307,684
  322,415
  337,918
  354,233
  371,395
  389,447
  408,431
  428,391
  449,375
  471,432
  494,615
  518,980
  544,582
  571,485
  599,750
  629,446
  660,643
  693,415
  727,839
  763,999
  801,980
  841,871
  883,769
  927,773
  973,986
Total equity, $m
  14,478
  27,166
  28,426
  29,756
  31,157
  32,633
  34,187
  35,824
  37,546
  39,359
  41,266
  43,272
  45,381
  47,599
  49,931
  52,381
  54,957
  57,664
  60,509
  63,498
  66,639
  69,938
  73,405
  77,046
  80,871
  84,889
  89,109
  93,541
  98,197
  103,086
  108,221
Total liabilities and equity, $m
  261,627
  271,658
  284,263
  297,556
  311,566
  326,326
  341,871
  358,239
  375,464
  393,592
  412,661
  432,719
  453,812
  475,990
  499,306
  523,813
  549,572
  576,644
  605,091
  634,983
  666,389
  699,384
  734,048
  770,461
  808,710
  848,888
  891,089
  935,412
  981,966
  1,030,859
  1,082,207
Debt-to-equity ratio
  0.369
  0.100
  0.490
  0.870
  1.240
  1.590
  1.930
  2.250
  2.560
  2.860
  3.140
  3.410
  3.670
  3.920
  4.160
  4.380
  4.600
  4.810
  5.000
  5.190
  5.370
  5.540
  5.710
  5.860
  6.010
  6.150
  6.290
  6.420
  6.540
  6.650
  6.770
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
  1,122
  1,288
  946
  586
  207
  -265
  -842
  -1,450
  -2,089
  -2,762
  -3,243
  -3,988
  -4,771
  -5,595
  -6,461
  -7,371
  -8,328
  -9,333
  -10,390
  -11,500
  -12,666
  -13,892
  -15,180
  -16,532
  -17,953
  -19,445
  -21,013
  -22,659
  -24,388
  -26,204
Depreciation, amort., depletion, $m
  0
  234
  235
  235
  235
  236
  236
  237
  237
  238
  238
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
Funds from operations, $m
  2,223
  1,357
  1,523
  1,182
  822
  442
  -29
  -605
  -1,213
  -1,852
  -2,524
  -3,232
  -3,976
  -4,759
  -5,582
  -6,447
  -7,357
  -8,313
  -9,317
  -10,373
  -11,483
  -12,648
  -13,873
  -15,159
  -16,511
  -17,931
  -19,422
  -20,988
  -22,634
  -24,361
  -26,176
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
  1,355
  1,523
  1,182
  822
  442
  -29
  -605
  -1,213
  -1,852
  -2,524
  -3,232
  -3,976
  -4,759
  -5,582
  -6,447
  -7,357
  -8,313
  -9,317
  -10,373
  -11,483
  -12,648
  -13,873
  -15,159
  -16,511
  -17,931
  -19,422
  -20,988
  -22,634
  -24,361
  -26,176
Maintenance CAPEX, $m
  0
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
New CAPEX, $m
  0
  -7
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
Cash from investing activities, $m
  -3,666
  -13
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -16
  -16
  -18
  -18
  -19
  -21
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -39
  -40
Free cash flow, $m
  -2,394
  1,342
  1,512
  1,171
  810
  431
  -41
  -619
  -1,226
  -1,866
  -2,540
  -3,248
  -3,993
  -4,776
  -5,600
  -6,467
  -7,377
  -8,334
  -9,340
  -10,397
  -11,507
  -12,674
  -13,900
  -15,188
  -16,541
  -17,962
  -19,455
  -21,023
  -22,670
  -24,400
  -26,216
Issuance/(repayment) of debt, $m
  -205
  -2,657
  11,344
  11,963
  12,609
  13,285
  13,991
  14,730
  15,504
  16,314
  17,163
  18,052
  18,983
  19,960
  20,984
  22,058
  23,183
  24,364
  25,603
  26,902
  28,265
  29,696
  31,197
  32,772
  34,425
  36,160
  37,981
  39,892
  41,898
  44,003
  46,214
Issuance/(repurchase) of shares, $m
  -853
  14,003
  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  
  2,208
  11,346
  11,344
  11,963
  12,609
  13,285
  13,991
  14,730
  15,504
  16,314
  17,163
  18,052
  18,983
  19,960
  20,984
  22,058
  23,183
  24,364
  25,603
  26,902
  28,265
  29,696
  31,197
  32,772
  34,425
  36,160
  37,981
  39,892
  41,898
  44,003
  46,214
Total cash flow (excl. dividends), $m
  -186
  -1,315
  12,857
  13,134
  13,419
  13,715
  13,950
  14,112
  14,278
  14,448
  14,623
  14,804
  14,991
  15,184
  15,384
  15,591
  15,806
  16,030
  16,263
  16,505
  16,758
  17,022
  17,297
  17,584
  17,884
  18,198
  18,526
  18,869
  19,228
  19,604
  19,997
Retained Cash Flow (-), $m
  -861
  -12,688
  -1,260
  -1,329
  -1,401
  -1,476
  -1,555
  -1,637
  -1,723
  -1,813
  -1,907
  -2,006
  -2,109
  -2,218
  -2,332
  -2,451
  -2,576
  -2,707
  -2,845
  -2,989
  -3,141
  -3,300
  -3,466
  -3,641
  -3,825
  -4,018
  -4,220
  -4,432
  -4,655
  -4,889
  -5,135
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
 
  0
  11,596
  11,804
  12,018
  12,239
  12,395
  12,475
  12,555
  12,635
  12,716
  12,798
  12,881
  12,966
  13,052
  13,140
  13,230
  13,323
  13,418
  13,516
  13,618
  13,722
  13,830
  13,943
  14,059
  14,180
  14,306
  14,436
  14,573
  14,714
  14,863
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
 
  0
  10,004
  9,358
  8,688
  8,001
  7,263
  6,491
  5,742
  5,026
  4,350
  3,719
  3,139
  2,614
  2,146
  1,734
  1,380
  1,079
  829
  624
  461
  333
  236
  163
  109
  72
  46
  28
  17
  10
  6
Current shareholders' claim on cash, %
  100
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0
  51.0

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 12.3
Price to Sales 1.1
Price to Book 1
Price to Tangible Book
Price to Cash Flow 11.5
Price to Free Cash Flow 11.5
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 4.6% 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 225.21 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 $14.6 billion.


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COMPANY NEWS

▶ 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]
▶ [$$] In Trump Age, a Different Tack on Workplace Diversity   [Feb-14-17 09:00AM  at The Wall Street Journal]
▶ [$$] MetLife Posts $2.13 Billion Loss, Misses Estimates   [Feb-01-17 11:59PM  at The Wall Street Journal]
▶ [$$] MetLife Posts $2.13 Billion Loss, Misses Estimates   [05:25PM  at The Wall Street Journal]
▶ Is Lincoln National Corporation (LNC) A Good Stock To Buy?   [Nov-27-16 01:48PM  at Insider Monkey]
▶ [$$] UBS Likes Johnson Controls   [Nov-12-16 12:46AM  at Barrons.com]
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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