Intrinsic value of Moody's - MCO

Previous Close

$130.49

  Intrinsic Value

$73.67

stock screener

  Rating & Target

sell

-44%

  Value-price divergence*

-76%

Previous close

$130.49

 
Intrinsic value

$73.67

 
Up/down potential

-44%

 
Rating

sell

 
Value-price divergence*

-76%

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

We calculate the intrinsic value of MCO 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 24.7

 

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, %
  3.41
  19.50
  18.05
  16.75
  15.57
  14.51
  13.56
  12.71
  11.94
  11.24
  10.62
  10.06
  9.55
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
Revenue, $m
  3,604
  4,307
  5,084
  5,935
  6,860
  7,855
  8,921
  10,054
  11,254
  12,519
  13,848
  15,241
  16,697
  18,215
  19,797
  21,444
  23,156
  24,936
  26,786
  28,708
  30,706
  32,783
  34,942
  37,188
  39,525
  41,959
  44,493
  47,135
  49,889
  52,762
  55,760
Variable operating expenses, $m
 
  2,465
  2,892
  3,359
  3,866
  4,412
  4,996
  5,618
  6,276
  6,970
  7,699
  8,361
  9,160
  9,993
  10,861
  11,764
  12,703
  13,680
  14,694
  15,749
  16,845
  17,984
  19,169
  20,401
  21,683
  23,018
  24,408
  25,858
  27,368
  28,945
  30,589
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
  2,966
  2,465
  2,892
  3,359
  3,866
  4,412
  4,996
  5,618
  6,276
  6,970
  7,699
  8,361
  9,160
  9,993
  10,861
  11,764
  12,703
  13,680
  14,694
  15,749
  16,845
  17,984
  19,169
  20,401
  21,683
  23,018
  24,408
  25,858
  27,368
  28,945
  30,589
Operating income, $m
  639
  1,842
  2,193
  2,577
  2,994
  3,444
  3,924
  4,436
  4,978
  5,549
  6,149
  6,880
  7,537
  8,223
  8,937
  9,680
  10,453
  11,257
  12,092
  12,959
  13,861
  14,798
  15,773
  16,787
  17,842
  18,941
  20,085
  21,277
  22,520
  23,817
  25,171
EBITDA, $m
  766
  2,002
  2,363
  2,759
  3,188
  3,651
  4,146
  4,673
  5,231
  5,819
  6,437
  7,084
  7,761
  8,466
  9,202
  9,967
  10,763
  11,590
  12,450
  13,344
  14,272
  15,237
  16,241
  17,285
  18,371
  19,502
  20,680
  21,908
  23,188
  24,524
  25,917
Interest expense (income), $m
  137
  138
  104
  146
  193
  243
  297
  355
  417
  483
  552
  624
  700
  779
  862
  948
  1,038
  1,131
  1,228
  1,329
  1,434
  1,543
  1,656
  1,774
  1,896
  2,024
  2,156
  2,294
  2,438
  2,588
  2,745
Earnings before tax, $m
  558
  1,704
  2,089
  2,431
  2,801
  3,200
  3,627
  4,081
  4,561
  5,066
  5,597
  6,256
  6,837
  7,443
  8,075
  8,732
  9,415
  10,125
  10,863
  11,630
  12,427
  13,256
  14,117
  15,013
  15,946
  16,917
  17,929
  18,983
  20,082
  21,229
  22,426
Tax expense, $m
  282
  460
  564
  656
  756
  864
  979
  1,102
  1,231
  1,368
  1,511
  1,689
  1,846
  2,010
  2,180
  2,358
  2,542
  2,734
  2,933
  3,140
  3,355
  3,579
  3,812
  4,054
  4,305
  4,568
  4,841
  5,125
  5,422
  5,732
  6,055
Net income, $m
  267
  1,244
  1,525
  1,774
  2,045
  2,336
  2,648
  2,979
  3,329
  3,698
  4,086
  4,567
  4,991
  5,434
  5,894
  6,374
  6,873
  7,391
  7,930
  8,490
  9,072
  9,677
  10,305
  10,960
  11,641
  12,349
  13,088
  13,857
  14,660
  15,497
  16,371

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,225
  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
  5,327
  6,362
  7,510
  8,767
  10,132
  11,603
  13,177
  14,851
  16,623
  18,492
  20,456
  22,513
  24,663
  26,906
  29,243
  31,675
  34,204
  36,833
  39,566
  42,405
  45,356
  48,423
  51,613
  54,930
  58,383
  61,977
  65,721
  69,623
  73,691
  77,935
  82,364
Adjusted assets (=assets-cash), $m
  3,102
  6,362
  7,510
  8,767
  10,132
  11,603
  13,177
  14,851
  16,623
  18,492
  20,456
  22,513
  24,663
  26,906
  29,243
  31,675
  34,204
  36,833
  39,566
  42,405
  45,356
  48,423
  51,613
  54,930
  58,383
  61,977
  65,721
  69,623
  73,691
  77,935
  82,364
Revenue / Adjusted assets
  1.162
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
  0.677
Average production assets, $m
  613
  732
  864
  1,009
  1,166
  1,335
  1,517
  1,709
  1,913
  2,128
  2,354
  2,591
  2,838
  3,097
  3,366
  3,645
  3,937
  4,239
  4,554
  4,880
  5,220
  5,573
  5,940
  6,322
  6,719
  7,133
  7,564
  8,013
  8,481
  8,970
  9,479
Working capital, $m
  825
  -431
  -508
  -594
  -686
  -786
  -892
  -1,005
  -1,125
  -1,252
  -1,385
  -1,524
  -1,670
  -1,822
  -1,980
  -2,144
  -2,316
  -2,494
  -2,679
  -2,871
  -3,071
  -3,278
  -3,494
  -3,719
  -3,953
  -4,196
  -4,449
  -4,713
  -4,989
  -5,276
  -5,576
Total debt, $m
  3,363
  2,536
  3,570
  4,702
  5,930
  7,254
  8,670
  10,177
  11,772
  13,454
  15,221
  17,072
  19,007
  21,026
  23,129
  25,318
  27,595
  29,961
  32,420
  34,976
  37,631
  40,392
  43,262
  46,248
  49,355
  52,590
  55,960
  59,472
  63,133
  66,952
  70,939
Total liabilities, $m
  6,552
  5,725
  6,759
  7,891
  9,119
  10,443
  11,859
  13,366
  14,961
  16,643
  18,410
  20,261
  22,196
  24,215
  26,318
  28,507
  30,784
  33,150
  35,609
  38,165
  40,820
  43,581
  46,451
  49,437
  52,544
  55,779
  59,149
  62,661
  66,322
  70,141
  74,128
Total equity, $m
  -1,225
  636
  751
  877
  1,013
  1,160
  1,318
  1,485
  1,662
  1,849
  2,046
  2,251
  2,466
  2,691
  2,924
  3,167
  3,420
  3,683
  3,957
  4,241
  4,536
  4,842
  5,161
  5,493
  5,838
  6,198
  6,572
  6,962
  7,369
  7,793
  8,236
Total liabilities and equity, $m
  5,327
  6,361
  7,510
  8,768
  10,132
  11,603
  13,177
  14,851
  16,623
  18,492
  20,456
  22,512
  24,662
  26,906
  29,242
  31,674
  34,204
  36,833
  39,566
  42,406
  45,356
  48,423
  51,612
  54,930
  58,382
  61,977
  65,721
  69,623
  73,691
  77,934
  82,364
Debt-to-equity ratio
  -2.745
  3.990
  4.750
  5.360
  5.850
  6.250
  6.580
  6.850
  7.080
  7.280
  7.440
  7.580
  7.710
  7.810
  7.910
  7.990
  8.070
  8.130
  8.190
  8.250
  8.300
  8.340
  8.380
  8.420
  8.450
  8.490
  8.510
  8.540
  8.570
  8.590
  8.610
Adjusted equity ratio
  -1.112
  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
  267
  1,244
  1,525
  1,774
  2,045
  2,336
  2,648
  2,979
  3,329
  3,698
  4,086
  4,567
  4,991
  5,434
  5,894
  6,374
  6,873
  7,391
  7,930
  8,490
  9,072
  9,677
  10,305
  10,960
  11,641
  12,349
  13,088
  13,857
  14,660
  15,497
  16,371
Depreciation, amort., depletion, $m
  127
  160
  170
  182
  194
  208
  222
  237
  253
  270
  288
  204
  223
  244
  265
  287
  310
  334
  359
  384
  411
  439
  468
  498
  529
  562
  596
  631
  668
  706
  746
Funds from operations, $m
  2,176
  1,404
  1,695
  1,956
  2,239
  2,544
  2,870
  3,216
  3,582
  3,968
  4,374
  4,771
  5,215
  5,677
  6,160
  6,661
  7,183
  7,725
  8,289
  8,874
  9,483
  10,115
  10,773
  11,458
  12,170
  12,911
  13,683
  14,488
  15,328
  16,203
  17,117
Change in working capital, $m
  950
  -70
  -78
  -85
  -92
  -100
  -107
  -113
  -120
  -127
  -133
  -139
  -146
  -152
  -158
  -165
  -171
  -178
  -185
  -192
  -200
  -208
  -216
  -225
  -234
  -243
  -253
  -264
  -275
  -287
  -300
Cash from operations, $m
  1,226
  1,474
  1,773
  2,041
  2,332
  2,643
  2,976
  3,329
  3,702
  4,095
  4,507
  4,910
  5,360
  5,829
  6,318
  6,826
  7,354
  7,903
  8,474
  9,066
  9,683
  10,323
  10,989
  11,682
  12,403
  13,154
  13,937
  14,753
  15,603
  16,491
  17,417
Maintenance CAPEX, $m
  0
  -48
  -58
  -68
  -79
  -92
  -105
  -119
  -135
  -151
  -168
  -185
  -204
  -223
  -244
  -265
  -287
  -310
  -334
  -359
  -384
  -411
  -439
  -468
  -498
  -529
  -562
  -596
  -631
  -668
  -706
New CAPEX, $m
  -115
  -119
  -132
  -145
  -157
  -169
  -181
  -193
  -204
  -215
  -226
  -237
  -247
  -258
  -269
  -280
  -291
  -303
  -314
  -327
  -340
  -353
  -367
  -382
  -397
  -414
  -431
  -449
  -468
  -488
  -510
Cash from investing activities, $m
  102
  -167
  -190
  -213
  -236
  -261
  -286
  -312
  -339
  -366
  -394
  -422
  -451
  -481
  -513
  -545
  -578
  -613
  -648
  -686
  -724
  -764
  -806
  -850
  -895
  -943
  -993
  -1,045
  -1,099
  -1,156
  -1,216
Free cash flow, $m
  1,328
  1,307
  1,583
  1,829
  2,095
  2,382
  2,690
  3,017
  3,364
  3,729
  4,113
  4,488
  4,909
  5,348
  5,805
  6,281
  6,776
  7,291
  7,825
  8,381
  8,959
  9,559
  10,183
  10,833
  11,508
  12,212
  12,944
  13,708
  14,504
  15,334
  16,201
Issuance/(repayment) of debt, $m
  0
  -827
  1,033
  1,132
  1,229
  1,324
  1,416
  1,507
  1,595
  1,682
  1,767
  1,851
  1,935
  2,019
  2,103
  2,189
  2,276
  2,366
  2,459
  2,555
  2,656
  2,761
  2,870
  2,986
  3,107
  3,235
  3,370
  3,512
  3,661
  3,819
  3,986
Issuance/(repurchase) of shares, $m
  -783
  617
  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  
  -725
  -210
  1,033
  1,132
  1,229
  1,324
  1,416
  1,507
  1,595
  1,682
  1,767
  1,851
  1,935
  2,019
  2,103
  2,189
  2,276
  2,366
  2,459
  2,555
  2,656
  2,761
  2,870
  2,986
  3,107
  3,235
  3,370
  3,512
  3,661
  3,819
  3,986
Total cash flow (excl. dividends), $m
  579
  1,097
  2,617
  2,960
  3,324
  3,706
  4,106
  4,524
  4,959
  5,411
  5,880
  6,339
  6,844
  7,366
  7,908
  8,470
  9,052
  9,657
  10,284
  10,937
  11,614
  12,320
  13,054
  13,818
  14,615
  15,447
  16,314
  17,220
  18,165
  19,154
  20,187
Retained Cash Flow (-), $m
  660
  -1,861
  -115
  -126
  -137
  -147
  -157
  -167
  -177
  -187
  -196
  -206
  -215
  -224
  -234
  -243
  -253
  -263
  -273
  -284
  -295
  -307
  -319
  -332
  -345
  -359
  -374
  -390
  -407
  -424
  -443
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
 
  -764
  2,502
  2,835
  3,187
  3,559
  3,949
  4,356
  4,782
  5,224
  5,684
  6,134
  6,629
  7,142
  7,674
  8,227
  8,799
  9,394
  10,011
  10,653
  11,319
  12,013
  12,735
  13,487
  14,270
  15,087
  15,940
  16,829
  17,759
  18,730
  19,744
Discount rate, %
 
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
 
  -708
  2,133
  2,206
  2,246
  2,250
  2,219
  2,154
  2,058
  1,934
  1,789
  1,620
  1,449
  1,273
  1,098
  930
  772
  628
  501
  390
  297
  221
  160
  113
  78
  52
  34
  21
  13
  7
  4
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Moody’s Corporation provides credit ratings; and credit, capital markets, and economic related research, data, and analytical tools worldwide. It operates through two segments, Moody’s Investors Service and Moody’s Analytics. The Moody’s Investors Service segment publishes credit ratings on various debt obligations and entities that issue such obligations comprising various corporate and governmental obligations, structured finance securities, and commercial paper programs. This segment provides ratings in approximately 120 countries. Its ratings are disseminated through press releases to the public through print and electronic media, including the Internet and real-time information systems for use by securities traders and investors. As of December 31, 2016, this segment had ratings relationships with approximately 11,000 corporate issuers and approximately 18,000 public finance issuers. It also rated and monitored ratings on approximately 64,000 structured finance obligations. The Moody’s Analytics segment develops products and services that support financial analysis and risk management activities of institutional participants in financial markets; and distributes research and data, such as research on debt issuers, industry studies, and commentary on topical credit related events. This segment also offers economic research, and credit data and analytical tools; software solutions and related risk management services; and outsourced research and analytical services with financial training and certification programs. The company was formerly known as Dun and Bradstreet Company and changed its name to Moody’s Corporation in September 2000. Moody’s Corporation was founded in 1900 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Moody's (MCO)

Valuation Ratios
P/E Ratio 93.2
Price to Sales 6.9
Price to Book -20.3
Price to Tangible Book
Price to Cash Flow 20.3
Price to Free Cash Flow 22.4
Growth Rates
Sales Growth Rate 3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.2%
Cap. Spend. - 3 Yr. Gr. Rate 22.3%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity -250%
Total Debt to Equity -274.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 16.9%
Return On Total Capital 10.8%
Ret/ On T. Cap. - 3 Yr. Avg. 29.5%
Return On Equity -29.8%
Return On Equity - 3 Yr. Avg. 349.3%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 71.5%
Gross Margin - 3 Yr. Avg. 71.9%
EBITDA Margin 22.8%
EBITDA Margin - 3 Yr. Avg. 39.6%
Operating Margin 17.7%
Oper. Margin - 3 Yr. Avg. 35.4%
Pre-Tax Margin 15.5%
Pre-Tax Margin - 3 Yr. Avg. 33%
Net Profit Margin 7.4%
Net Profit Margin - 3 Yr. Avg. 21.4%
Effective Tax Rate 50.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.6%
Payout Ratio 106.7%

MCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MCO stock intrinsic value calculation we used $3604 million for the last fiscal year's total revenue generated by Moody's. The default revenue input number comes from 2016 income statement of Moody's. 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 MCO stock valuation model: a) initial revenue growth rate of 19.5% 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 7.9%, whose default value for MCO is calculated based on our internal credit rating of Moody's, 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 Moody's.
    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 MCO stock the variable cost ratio is equal to 57.7%.

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 MCO 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 4.1% for Moody's.

Corporate tax rate of 27% is the nominal tax rate for Moody's. 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 MCO 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 MCO are equal to 17%.

Life of production assets of 12.7 years is the average useful life of capital assets used in Moody's 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 MCO is equal to -10%. 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 - $-1225 million for Moody's - 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 189.664 million for Moody's 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 Moody's at the current share price and the inputted number of shares is $24.7 billion.

RELATED COMPANIES Price Int.Val. Rating
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DNB Dun&Bradstreet 110.06 10.96  str.sell
MORN Morningstar 81.63 100.42  buy
CLGX CoreLogic 44.80 36.67  hold
MSCI MSCI 111.12 66.74  sell
TRU TransUnion 46.49 34.05  sell

COMPANY NEWS

▶ ETFs with exposure to Moodys Corp. : August 11, 2017   [Aug-11-17 05:57PM  Capital Cube]
▶ Trump's Impact on the Economy in 90 Seconds   [Aug-04-17 11:51AM  Bloomberg Video]
▶ Moody's beats Street 2Q forecasts   [Jul-21-17 08:55PM  Associated Press]
▶ Stocks to Watch: Microsoft, GE, eBay, Capital One, Visa   [09:30AM  The Wall Street Journal]
▶ China's economic growth holds steady despite slowdown fears   [Jul-16-17 11:49PM  Associated Press]
▶ UK unemployment rate falls to 42-year low but wages subdued   [Jul-12-17 05:35PM  Associated Press]
▶ Moodys Corporation Declares Quarterly Dividend   [Jul-11-17 05:00PM  Business Wire]
▶ Illinois Senate nixes vetoes of budget plan with tax hike   [Jul-04-17 07:39PM  Associated Press]
▶ Lawmakers return to Capitol after voting to raise taxes   [Jul-03-17 12:48PM  Associated Press]
▶ Moody's Gives AIIB Top Credit Rating   [12:02AM  Bloomberg Video]
▶ Kansas tax hike hailed as fix doesn't quite balance budget   [Jun-18-17 11:45AM  Associated Press]
▶ Moody's Corporation Prices Senior Unsecured Notes Offering   [Jun-01-17 05:10PM  Business Wire]
▶ China factory activity steady in May, services rebound   [May-30-17 11:21PM  Associated Press]
▶ Asian shares gain, tracking Wall St advance, oil price rally   [May-24-17 11:07PM  Associated Press]
▶ China's Bill Will Have to Be Paid   [10:51PM  Bloomberg]
▶ Moody's China Cut Is Curiously Timed   [12:49AM  Bloomberg]
▶ Why Moody's Downgraded China to A1   [May-23-17 11:30PM  Bloomberg Video]
▶ Ozimek Says Labor Participation Rate Has Room to Improve   [May-22-17 05:57PM  Bloomberg Video]
▶ Trouble Brews in Subprime Auto Loan Market   [04:13PM  Bloomberg Video]
▶ Company News for May 16, 2017   [May-16-17 10:12AM  Zacks]
▶ Moodys to Acquire Bureau van Dijk   [07:00AM  Business Wire]
▶ ETFs with exposure to Moodys Corp. : May 12, 2017   [May-12-17 04:12PM  Capital Cube]
▶ Moody's Calls Australia's Fiscal Strength 'Very High'   [May-09-17 07:08PM  Bloomberg Video]
▶ With Macron win confirmed, European market rally hits pause   [May-08-17 11:55AM  Associated Press]
▶ Berkshire Hathaway Annual Meeting   [May-05-17 11:53AM  Yahoo Finance Video]
▶ Moody's beats Street 1Q forecasts   [07:05AM  Associated Press]
Stock chart of MCO Financial statements of MCO
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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