Intrinsic value of Level 3 Communications - LVLT

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$60.88

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$60.88

 
Intrinsic value

$27.62

 
Up/down potential

-55%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of LVLT 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 22.0

 

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, %
  -0.69
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  8,172
  8,335
  8,527
  8,746
  8,992
  9,265
  9,564
  9,890
  10,242
  10,622
  11,030
  11,466
  11,931
  12,427
  12,953
  13,512
  14,104
  14,731
  15,394
  16,094
  16,834
  17,614
  18,437
  19,304
  20,218
  21,181
  22,194
  23,261
  24,383
  25,564
  26,806
Variable operating expenses, $m
 
  7,370
  7,521
  7,695
  7,890
  8,105
  8,342
  8,600
  8,879
  9,180
  9,502
  9,074
  9,443
  9,835
  10,252
  10,694
  11,162
  11,659
  12,183
  12,737
  13,323
  13,940
  14,591
  15,278
  16,001
  16,763
  17,565
  18,409
  19,298
  20,232
  21,215
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
  6,768
  7,370
  7,521
  7,695
  7,890
  8,105
  8,342
  8,600
  8,879
  9,180
  9,502
  9,074
  9,443
  9,835
  10,252
  10,694
  11,162
  11,659
  12,183
  12,737
  13,323
  13,940
  14,591
  15,278
  16,001
  16,763
  17,565
  18,409
  19,298
  20,232
  21,215
Operating income, $m
  1,404
  966
  1,006
  1,051
  1,103
  1,160
  1,222
  1,290
  1,363
  1,443
  1,528
  2,392
  2,489
  2,592
  2,702
  2,818
  2,942
  3,073
  3,211
  3,357
  3,511
  3,674
  3,846
  4,027
  4,217
  4,418
  4,629
  4,852
  5,086
  5,332
  5,591
EBITDA, $m
  2,654
  2,489
  2,546
  2,611
  2,685
  2,766
  2,856
  2,953
  3,058
  3,172
  3,293
  3,424
  3,562
  3,710
  3,868
  4,034
  4,211
  4,398
  4,596
  4,805
  5,026
  5,259
  5,505
  5,764
  6,037
  6,324
  6,627
  6,945
  7,280
  7,633
  8,004
Interest expense (income), $m
  508
  511
  524
  540
  557
  577
  599
  623
  649
  678
  708
  741
  776
  813
  853
  895
  940
  988
  1,038
  1,091
  1,148
  1,207
  1,270
  1,336
  1,406
  1,479
  1,556
  1,638
  1,723
  1,814
  1,908
Earnings before tax, $m
  842
  454
  481
  512
  545
  582
  623
  667
  714
  765
  820
  1,651
  1,713
  1,779
  1,849
  1,923
  2,002
  2,085
  2,173
  2,266
  2,364
  2,467
  2,576
  2,691
  2,812
  2,939
  3,073
  3,214
  3,363
  3,519
  3,683
Tax expense, $m
  165
  123
  130
  138
  147
  157
  168
  180
  193
  207
  221
  446
  462
  480
  499
  519
  540
  563
  587
  612
  638
  666
  695
  726
  759
  794
  830
  868
  908
  950
  994
Net income, $m
  677
  332
  351
  373
  398
  425
  455
  487
  521
  558
  598
  1,205
  1,250
  1,298
  1,350
  1,404
  1,461
  1,522
  1,586
  1,654
  1,725
  1,801
  1,880
  1,964
  2,052
  2,145
  2,243
  2,346
  2,455
  2,569
  2,689

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,819
  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
  24,888
  23,546
  24,088
  24,707
  25,402
  26,172
  27,017
  27,937
  28,933
  30,006
  31,158
  32,390
  33,704
  35,104
  36,592
  38,170
  39,843
  41,613
  43,486
  45,464
  47,553
  49,758
  52,082
  54,532
  57,114
  59,833
  62,696
  65,709
  68,880
  72,216
  75,724
Adjusted assets (=assets-cash), $m
  23,069
  23,546
  24,088
  24,707
  25,402
  26,172
  27,017
  27,937
  28,933
  30,006
  31,158
  32,390
  33,704
  35,104
  36,592
  38,170
  39,843
  41,613
  43,486
  45,464
  47,553
  49,758
  52,082
  54,532
  57,114
  59,833
  62,696
  65,709
  68,880
  72,216
  75,724
Revenue / Adjusted assets
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
  0.354
Average production assets, $m
  11,030
  11,253
  11,512
  11,808
  12,140
  12,508
  12,912
  13,351
  13,827
  14,340
  14,890
  15,479
  16,107
  16,776
  17,487
  18,241
  19,041
  19,887
  20,782
  21,727
  22,726
  23,779
  24,890
  26,061
  27,295
  28,594
  29,962
  31,402
  32,918
  34,512
  36,189
Working capital, $m
  1,182
  -642
  -657
  -673
  -692
  -713
  -736
  -762
  -789
  -818
  -849
  -883
  -919
  -957
  -997
  -1,040
  -1,086
  -1,134
  -1,185
  -1,239
  -1,296
  -1,356
  -1,420
  -1,486
  -1,557
  -1,631
  -1,709
  -1,791
  -1,878
  -1,968
  -2,064
Total debt, $m
  10,884
  11,159
  11,486
  11,861
  12,281
  12,747
  13,258
  13,815
  14,418
  15,067
  15,764
  16,509
  17,304
  18,151
  19,051
  20,006
  21,018
  22,089
  23,222
  24,419
  25,683
  27,016
  28,423
  29,905
  31,467
  33,112
  34,844
  36,667
  38,585
  40,603
  42,726
Total liabilities, $m
  13,971
  14,246
  14,573
  14,948
  15,368
  15,834
  16,345
  16,902
  17,505
  18,154
  18,851
  19,596
  20,391
  21,238
  22,138
  23,093
  24,105
  25,176
  26,309
  27,506
  28,770
  30,103
  31,510
  32,992
  34,554
  36,199
  37,931
  39,754
  41,672
  43,690
  45,813
Total equity, $m
  10,917
  9,301
  9,515
  9,759
  10,034
  10,338
  10,672
  11,035
  11,429
  11,852
  12,307
  12,794
  13,313
  13,866
  14,454
  15,077
  15,738
  16,437
  17,177
  17,958
  18,784
  19,654
  20,572
  21,540
  22,560
  23,634
  24,765
  25,955
  27,208
  28,525
  29,911
Total liabilities and equity, $m
  24,888
  23,547
  24,088
  24,707
  25,402
  26,172
  27,017
  27,937
  28,934
  30,006
  31,158
  32,390
  33,704
  35,104
  36,592
  38,170
  39,843
  41,613
  43,486
  45,464
  47,554
  49,757
  52,082
  54,532
  57,114
  59,833
  62,696
  65,709
  68,880
  72,215
  75,724
Debt-to-equity ratio
  0.997
  1.200
  1.210
  1.220
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.340
  1.340
  1.350
  1.360
  1.370
  1.370
  1.380
  1.390
  1.390
  1.400
  1.410
  1.410
  1.420
  1.420
  1.430
Adjusted equity ratio
  0.394
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395
  0.395

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  677
  332
  351
  373
  398
  425
  455
  487
  521
  558
  598
  1,205
  1,250
  1,298
  1,350
  1,404
  1,461
  1,522
  1,586
  1,654
  1,725
  1,801
  1,880
  1,964
  2,052
  2,145
  2,243
  2,346
  2,455
  2,569
  2,689
Depreciation, amort., depletion, $m
  1,250
  1,523
  1,540
  1,560
  1,582
  1,607
  1,634
  1,663
  1,695
  1,729
  1,766
  1,032
  1,074
  1,118
  1,166
  1,216
  1,269
  1,326
  1,385
  1,448
  1,515
  1,585
  1,659
  1,737
  1,820
  1,906
  1,997
  2,093
  2,195
  2,301
  2,413
Funds from operations, $m
  2,431
  1,855
  1,892
  1,933
  1,980
  2,032
  2,088
  2,150
  2,216
  2,287
  2,364
  2,237
  2,324
  2,417
  2,515
  2,620
  2,731
  2,848
  2,972
  3,102
  3,240
  3,386
  3,540
  3,702
  3,872
  4,052
  4,241
  4,440
  4,649
  4,869
  5,101
Change in working capital, $m
  88
  -13
  -15
  -17
  -19
  -21
  -23
  -25
  -27
  -29
  -31
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
  -96
Cash from operations, $m
  2,343
  1,892
  1,906
  1,950
  1,999
  2,053
  2,111
  2,175
  2,243
  2,317
  2,395
  2,271
  2,360
  2,455
  2,556
  2,663
  2,776
  2,896
  3,023
  3,156
  3,297
  3,446
  3,603
  3,768
  3,942
  4,126
  4,319
  4,522
  4,736
  4,960
  5,197
Maintenance CAPEX, $m
  0
  -735
  -750
  -767
  -787
  -809
  -834
  -861
  -890
  -922
  -956
  -993
  -1,032
  -1,074
  -1,118
  -1,166
  -1,216
  -1,269
  -1,326
  -1,385
  -1,448
  -1,515
  -1,585
  -1,659
  -1,737
  -1,820
  -1,906
  -1,997
  -2,093
  -2,195
  -2,301
New CAPEX, $m
  -1,334
  -223
  -259
  -296
  -332
  -368
  -404
  -440
  -476
  -513
  -550
  -589
  -628
  -669
  -711
  -754
  -799
  -846
  -895
  -946
  -998
  -1,053
  -1,111
  -1,171
  -1,234
  -1,299
  -1,368
  -1,440
  -1,515
  -1,594
  -1,677
Cash from investing activities, $m
  -1,319
  -958
  -1,009
  -1,063
  -1,119
  -1,177
  -1,238
  -1,301
  -1,366
  -1,435
  -1,506
  -1,582
  -1,660
  -1,743
  -1,829
  -1,920
  -2,015
  -2,115
  -2,221
  -2,331
  -2,446
  -2,568
  -2,696
  -2,830
  -2,971
  -3,119
  -3,274
  -3,437
  -3,608
  -3,789
  -3,978
Free cash flow, $m
  1,024
  933
  897
  887
  880
  876
  874
  874
  877
  882
  889
  689
  700
  712
  727
  743
  761
  780
  802
  825
  851
  878
  907
  938
  971
  1,007
  1,044
  1,084
  1,127
  1,172
  1,219
Issuance/(repayment) of debt, $m
  -56
  282
  328
  375
  420
  466
  511
  557
  603
  649
  697
  745
  795
  847
  900
  955
  1,012
  1,071
  1,133
  1,197
  1,264
  1,334
  1,406
  1,482
  1,562
  1,645
  1,732
  1,823
  1,918
  2,018
  2,123
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -56
  282
  328
  375
  420
  466
  511
  557
  603
  649
  697
  745
  795
  847
  900
  955
  1,012
  1,071
  1,133
  1,197
  1,264
  1,334
  1,406
  1,482
  1,562
  1,645
  1,732
  1,823
  1,918
  2,018
  2,123
Total cash flow (excl. dividends), $m
  965
  1,215
  1,225
  1,262
  1,300
  1,341
  1,385
  1,431
  1,480
  1,531
  1,586
  1,434
  1,495
  1,559
  1,627
  1,698
  1,773
  1,852
  1,935
  2,022
  2,114
  2,211
  2,313
  2,420
  2,533
  2,652
  2,776
  2,907
  3,045
  3,190
  3,342
Retained Cash Flow (-), $m
  -791
  -196
  -214
  -245
  -275
  -304
  -334
  -363
  -393
  -424
  -455
  -487
  -519
  -553
  -588
  -623
  -661
  -699
  -740
  -782
  -825
  -871
  -918
  -968
  -1,020
  -1,074
  -1,131
  -1,190
  -1,252
  -1,318
  -1,386
Prev. year cash balance distribution, $m
 
  1,812
  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
 
  2,831
  1,011
  1,017
  1,026
  1,037
  1,051
  1,068
  1,086
  1,107
  1,131
  948
  976
  1,006
  1,039
  1,074
  1,112
  1,152
  1,195
  1,241
  1,289
  1,341
  1,395
  1,453
  1,513
  1,578
  1,646
  1,717
  1,793
  1,872
  1,956
Discount rate, %
 
  7.00
  7.35
  7.72
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.86
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.85
  17.69
  18.57
  19.50
  20.48
  21.50
  22.58
  23.70
  24.89
  26.13
  27.44
  28.81
PV of cash for distribution, $m
 
  2,646
  877
  814
  751
  690
  629
  570
  512
  457
  403
  289
  251
  216
  183
  153
  126
  103
  82
  64
  50
  37
  28
  20
  14
  10
  7
  4
  3
  2
  1
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

Level 3 Communications, Inc., together with its subsidiaries, operates as a facilities-based provider of a range of integrated communications services. It operates through North America, EMEA, and Latin America segments. The company offers Internet protocol (IP) and data services comprising Internet services, virtual private network, content delivery network, media delivery, Vyvx broadcast, managed, Ethernet, cloud and IT, and cloud connect solutions, as well as Communications as a Service. It also provides transport and fiber services comprising wavelengths, private lines, transoceanic services, and dark fiber, as well as related professional services; local and enterprise voice services, including Voice over Internet Protocol services and traditional circuit-switch based services; collaboration services, such as audio, Web, and video collaboration services; colocation and data center services comprising cloud, hosting, and application management solutions; and security services for mobile users or remote offices, governance, risk management, and compliance. In addition, the company offers wholesale voice services, including voice termination and toll free services. It primarily serves various types of customers, such as enterprises, content, government, and wholesale. Level 3 Communications, Inc. was founded in 1884 and is headquartered in Broomfield, Colorado.

FINANCIAL RATIOS  of  Level 3 Communications (LVLT)

Valuation Ratios
P/E Ratio 32.4
Price to Sales 2.7
Price to Book 2
Price to Tangible Book
Price to Cash Flow 9.4
Price to Free Cash Flow 21.7
Growth Rates
Sales Growth Rate -0.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 8.5%
Cap. Spend. - 3 Yr. Gr. Rate 11.9%
Financial Strength
Quick Ratio 260
Current Ratio 0.1
LT Debt to Equity 99.6%
Total Debt to Equity 99.7%
Interest Coverage 3
Management Effectiveness
Return On Assets 4.4%
Ret/ On Assets - 3 Yr. Avg. 20.8%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 50.2%
Gross Margin - 3 Yr. Avg. 47.6%
EBITDA Margin 31.8%
EBITDA Margin - 3 Yr. Avg. 27.3%
Operating Margin 17.2%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 10.3%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin 8.3%
Net Profit Margin - 3 Yr. Avg. 18.2%
Effective Tax Rate 19.6%
Eff/ Tax Rate - 3 Yr. Avg. -375.1%
Payout Ratio 0%

LVLT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LVLT stock intrinsic value calculation we used $8172 million for the last fiscal year's total revenue generated by Level 3 Communications. The default revenue input number comes from 2016 income statement of Level 3 Communications. 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 LVLT stock valuation model: a) initial revenue growth rate of 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 7%, whose default value for LVLT is calculated based on our internal credit rating of Level 3 Communications, 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 Level 3 Communications.
    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 LVLT stock the variable cost ratio is equal to 88.6%.

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 LVLT 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 4.7% for Level 3 Communications.

Corporate tax rate of 27% is the nominal tax rate for Level 3 Communications. 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 LVLT 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 LVLT are equal to 135%.

Life of production assets of 15 years is the average useful life of capital assets used in Level 3 Communications 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 LVLT is equal to -7.7%. 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 - $10917 million for Level 3 Communications - 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 361.762 million for Level 3 Communications 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 Level 3 Communications at the current share price and the inputted number of shares is $22.0 billion.


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Stock chart of LVLT Financial statements of LVLT
Valuation of Stocks

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