Intrinsic value of MetLife - MET

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$51.27

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$51.27

 
Intrinsic value

$124.24

 
Up/down potential

+142%

 
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 MET.

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

We calculate the intrinsic value of MET 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 55.4

 

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, %
  -9.19
  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
  0
  64,877
  66,369
  68,075
  69,990
  72,112
  74,440
  76,975
  79,719
  82,676
  85,849
  89,243
  92,865
  96,722
  100,820
  105,169
  109,778
  114,657
  119,816
  125,267
  131,023
  137,096
  143,501
  150,252
  157,365
  164,857
  172,745
  181,047
  189,783
  198,975
  208,642
Variable operating expenses, $m
 
  56,814
  58,099
  59,569
  61,219
  63,047
  65,052
  67,236
  69,601
  72,148
  74,881
  76,883
  80,004
  83,326
  86,857
  90,604
  94,574
  98,777
  103,222
  107,918
  112,877
  118,109
  123,627
  129,443
  135,571
  142,025
  148,820
  155,973
  163,499
  171,418
  179,746
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
  62,599
  56,814
  58,099
  59,569
  61,219
  63,047
  65,052
  67,236
  69,601
  72,148
  74,881
  76,883
  80,004
  83,326
  86,857
  90,604
  94,574
  98,777
  103,222
  107,918
  112,877
  118,109
  123,627
  129,443
  135,571
  142,025
  148,820
  155,973
  163,499
  171,418
  179,746
Operating income, $m
  1,006
  8,063
  8,270
  8,506
  8,771
  9,065
  9,388
  9,739
  10,119
  10,528
  10,968
  12,360
  12,861
  13,396
  13,963
  14,565
  15,204
  15,879
  16,594
  17,349
  18,146
  18,987
  19,874
  20,809
  21,794
  22,832
  23,924
  25,074
  26,284
  27,557
  28,896
EBITDA, $m
  1,658
  9,095
  9,304
  9,543
  9,811
  10,109
  10,435
  10,791
  11,175
  11,590
  12,034
  12,510
  13,018
  13,559
  14,133
  14,743
  15,389
  16,073
  16,796
  17,560
  18,367
  19,218
  20,116
  21,063
  22,060
  23,110
  24,216
  25,379
  26,604
  27,893
  29,248
Interest expense (income), $m
  1,202
  1,155
  629
  1,726
  2,980
  4,388
  5,948
  7,660
  9,524
  11,541
  13,715
  16,048
  18,543
  21,206
  24,041
  27,055
  30,252
  33,641
  37,227
  41,021
  45,028
  49,260
  53,725
  58,434
  63,398
  68,627
  74,135
  79,934
  86,038
  92,461
  99,219
Earnings before tax, $m
  -195
  6,908
  7,641
  6,780
  5,791
  4,677
  3,440
  2,079
  595
  -1,013
  -2,747
  -3,688
  -5,682
  -7,811
  -10,078
  -12,489
  -15,048
  -17,761
  -20,633
  -23,672
  -26,882
  -30,273
  -33,851
  -37,625
  -41,603
  -45,795
  -50,211
  -54,860
  -59,754
  -64,904
  -70,323
Tax expense, $m
  -999
  1,865
  2,063
  1,831
  1,564
  1,263
  929
  561
  161
  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
  800
  5,043
  5,578
  4,949
  4,228
  3,414
  2,511
  1,518
  435
  -1,013
  -2,747
  -3,688
  -5,682
  -7,811
  -10,078
  -12,489
  -15,048
  -17,761
  -20,633
  -23,672
  -26,882
  -30,273
  -33,851
  -37,625
  -41,603
  -45,795
  -50,211
  -54,860
  -59,754
  -64,904
  -70,323

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
  898,764
  913,762
  934,778
  958,802
  985,773
  1,015,659
  1,048,450
  1,084,157
  1,122,808
  1,164,449
  1,209,137
  1,256,946
  1,307,960
  1,362,276
  1,420,001
  1,481,256
  1,546,169
  1,614,883
  1,687,547
  1,764,326
  1,845,392
  1,930,931
  2,021,139
  2,116,225
  2,216,410
  2,321,926
  2,433,022
  2,549,957
  2,673,006
  2,802,460
  2,938,623
Adjusted assets (=assets-cash), $m
  898,764
  913,762
  934,778
  958,802
  985,773
  1,015,659
  1,048,450
  1,084,157
  1,122,808
  1,164,449
  1,209,137
  1,256,946
  1,307,960
  1,362,276
  1,420,001
  1,481,256
  1,546,169
  1,614,883
  1,687,547
  1,764,326
  1,845,392
  1,930,931
  2,021,139
  2,116,225
  2,216,410
  2,321,926
  2,433,022
  2,549,957
  2,673,006
  2,802,460
  2,938,623
Revenue / Adjusted assets
  0.000
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
  0.071
Average production assets, $m
  1,850
  1,881
  1,925
  1,974
  2,030
  2,091
  2,159
  2,232
  2,312
  2,398
  2,490
  2,588
  2,693
  2,805
  2,924
  3,050
  3,184
  3,325
  3,475
  3,633
  3,800
  3,976
  4,162
  4,357
  4,564
  4,781
  5,010
  5,250
  5,504
  5,770
  6,051
Working capital, $m
  0
  260
  265
  272
  280
  288
  298
  308
  319
  331
  343
  357
  371
  387
  403
  421
  439
  459
  479
  501
  524
  548
  574
  601
  629
  659
  691
  724
  759
  796
  835
Total debt, $m
  19,913
  10,844
  29,759
  51,380
  75,654
  102,551
  132,063
  164,199
  198,985
  236,462
  276,681
  319,709
  365,622
  414,506
  466,459
  521,588
  580,010
  641,852
  707,251
  776,351
  849,311
  926,296
  1,007,483
  1,093,061
  1,183,227
  1,278,192
  1,378,178
  1,483,419
  1,594,164
  1,710,672
  1,833,219
Total liabilities, $m
  831,455
  822,386
  841,301
  862,922
  887,196
  914,093
  943,605
  975,741
  1,010,527
  1,048,004
  1,088,223
  1,131,251
  1,177,164
  1,226,048
  1,278,001
  1,333,130
  1,391,552
  1,453,394
  1,518,793
  1,587,893
  1,660,853
  1,737,838
  1,819,025
  1,904,603
  1,994,769
  2,089,734
  2,189,720
  2,294,961
  2,405,706
  2,522,214
  2,644,761
Total equity, $m
  67,309
  91,376
  93,478
  95,880
  98,577
  101,566
  104,845
  108,416
  112,281
  116,445
  120,914
  125,695
  130,796
  136,228
  142,000
  148,126
  154,617
  161,488
  168,755
  176,433
  184,539
  193,093
  202,114
  211,623
  221,641
  232,193
  243,302
  254,996
  267,301
  280,246
  293,862
Total liabilities and equity, $m
  898,764
  913,762
  934,779
  958,802
  985,773
  1,015,659
  1,048,450
  1,084,157
  1,122,808
  1,164,449
  1,209,137
  1,256,946
  1,307,960
  1,362,276
  1,420,001
  1,481,256
  1,546,169
  1,614,882
  1,687,548
  1,764,326
  1,845,392
  1,930,931
  2,021,139
  2,116,226
  2,216,410
  2,321,927
  2,433,022
  2,549,957
  2,673,007
  2,802,460
  2,938,623
Debt-to-equity ratio
  0.296
  0.120
  0.320
  0.540
  0.770
  1.010
  1.260
  1.510
  1.770
  2.030
  2.290
  2.540
  2.800
  3.040
  3.280
  3.520
  3.750
  3.970
  4.190
  4.400
  4.600
  4.800
  4.980
  5.170
  5.340
  5.500
  5.660
  5.820
  5.960
  6.100
  6.240
Adjusted equity ratio
  0.075
  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
  800
  5,043
  5,578
  4,949
  4,228
  3,414
  2,511
  1,518
  435
  -1,013
  -2,747
  -3,688
  -5,682
  -7,811
  -10,078
  -12,489
  -15,048
  -17,761
  -20,633
  -23,672
  -26,882
  -30,273
  -33,851
  -37,625
  -41,603
  -45,795
  -50,211
  -54,860
  -59,754
  -64,904
  -70,323
Depreciation, amort., depletion, $m
  652
  1,031
  1,034
  1,037
  1,040
  1,044
  1,048
  1,052
  1,056
  1,061
  1,067
  150
  157
  163
  170
  177
  185
  193
  202
  211
  221
  231
  242
  253
  265
  278
  291
  305
  320
  335
  352
Funds from operations, $m
  31,497
  6,074
  6,612
  5,986
  5,268
  4,458
  3,558
  2,570
  1,491
  48
  -1,680
  -3,537
  -5,525
  -7,647
  -9,908
  -12,312
  -14,863
  -17,568
  -20,431
  -23,460
  -26,661
  -30,042
  -33,609
  -37,371
  -41,338
  -45,517
  -49,919
  -54,555
  -59,434
  -64,569
  -69,971
Change in working capital, $m
  16,670
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
  18
  20
  21
  22
  23
  24
  26
  27
  28
  30
  32
  33
  35
  37
  39
Cash from operations, $m
  14,827
  6,319
  6,606
  5,979
  5,260
  4,449
  3,549
  2,559
  1,480
  37
  -1,693
  -3,551
  -5,540
  -7,663
  -9,925
  -12,329
  -14,882
  -17,587
  -20,452
  -23,482
  -26,684
  -30,066
  -33,635
  -37,398
  -41,366
  -45,547
  -49,951
  -54,588
  -59,469
  -64,606
  -70,010
Maintenance CAPEX, $m
  0
  -108
  -109
  -112
  -115
  -118
  -122
  -126
  -130
  -134
  -139
  -145
  -150
  -157
  -163
  -170
  -177
  -185
  -193
  -202
  -211
  -221
  -231
  -242
  -253
  -265
  -278
  -291
  -305
  -320
  -335
New CAPEX, $m
  -1,515
  -31
  -43
  -49
  -56
  -62
  -68
  -74
  -80
  -86
  -92
  -98
  -105
  -112
  -119
  -126
  -134
  -141
  -150
  -158
  -167
  -176
  -186
  -196
  -206
  -217
  -229
  -241
  -253
  -267
  -280
Cash from investing activities, $m
  -5,850
  -139
  -152
  -161
  -171
  -180
  -190
  -200
  -210
  -220
  -231
  -243
  -255
  -269
  -282
  -296
  -311
  -326
  -343
  -360
  -378
  -397
  -417
  -438
  -459
  -482
  -507
  -532
  -558
  -587
  -615
Free cash flow, $m
  8,977
  6,180
  6,453
  5,818
  5,090
  4,270
  3,360
  2,360
  1,271
  -183
  -1,924
  -3,794
  -5,795
  -7,931
  -10,207
  -12,625
  -15,193
  -17,914
  -20,795
  -23,842
  -27,063
  -30,463
  -34,051
  -37,836
  -41,826
  -46,030
  -50,458
  -55,120
  -60,028
  -65,192
  -70,626
Issuance/(repayment) of debt, $m
  -1,309
  -9,069
  18,915
  21,621
  24,274
  26,897
  29,512
  32,136
  34,786
  37,476
  40,220
  43,028
  45,913
  48,884
  51,953
  55,129
  58,422
  61,842
  65,398
  69,101
  72,960
  76,985
  81,187
  85,577
  90,166
  94,965
  99,986
  105,242
  110,745
  116,508
  122,547
Issuance/(repurchase) of shares, $m
  -372
  26,956
  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  
  -1,711
  17,887
  18,915
  21,621
  24,274
  26,897
  29,512
  32,136
  34,786
  37,476
  40,220
  43,028
  45,913
  48,884
  51,953
  55,129
  58,422
  61,842
  65,398
  69,101
  72,960
  76,985
  81,187
  85,577
  90,166
  94,965
  99,986
  105,242
  110,745
  116,508
  122,547
Total cash flow (excl. dividends), $m
  6,964
  -2,889
  25,368
  27,439
  29,364
  31,167
  32,872
  34,496
  36,057
  37,293
  38,295
  39,234
  40,117
  40,953
  41,747
  42,504
  43,229
  43,928
  44,603
  45,258
  45,897
  46,522
  47,136
  47,741
  48,340
  48,935
  49,528
  50,122
  50,717
  51,316
  51,921
Retained Cash Flow (-), $m
  640
  -24,067
  -2,102
  -2,402
  -2,697
  -2,989
  -3,279
  -3,571
  -3,865
  -4,164
  -4,469
  -4,781
  -5,101
  -5,432
  -5,773
  -6,125
  -6,491
  -6,871
  -7,266
  -7,678
  -8,107
  -8,554
  -9,021
  -9,509
  -10,018
  -10,552
  -11,110
  -11,694
  -12,305
  -12,945
  -13,616
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
  23,266
  25,037
  26,667
  28,178
  29,593
  30,926
  32,192
  33,129
  33,826
  34,453
  35,016
  35,521
  35,974
  36,378
  36,738
  37,057
  37,337
  37,581
  37,791
  37,968
  38,115
  38,233
  38,322
  38,384
  38,419
  38,428
  38,412
  38,371
  38,305
Discount rate, %
 
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
 
  0
  20,032
  19,788
  19,195
  18,319
  17,220
  15,954
  14,575
  13,021
  11,410
  9,852
  8,379
  7,015
  5,778
  4,679
  3,722
  2,906
  2,225
  1,669
  1,226
  880
  617
  422
  281
  182
  115
  70
  41
  24
  13
Current shareholders' claim on cash, %
  100
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3
  67.3

MetLife, Inc. provides life insurance, annuities, employee benefits, and asset management products in the United States, Japan, Latin America, Asia, Europe, and the Middle East. It operates in six segments: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; Latin America; Asia; and Europe, the Middle East and Africa. The company provides variable, universal, term, and whole life products; individual disability income products; personal lines property and casualty insurance, including private passenger automobile, homeowners, and personal excess liability insurance; and variable and fixed annuities for asset accumulation and distribution needs, as well as mutual funds and other securities products. It also offers group insurance products, such as variable, universal, and term life products; dental, group short- and long-term disability, and accidental death and dismemberment coverages; and voluntary and worksite products consisting of personal lines property and casualty insurance, as well as LTC, prepaid legal plans, and critical illness products. In addition, the company provides annuity and investment products comprising guaranteed interest products and other stable value products, income annuities, and separate account contracts for the investment management of defined benefit and defined contribution plan assets; and structured settlements and products to fund postretirement benefits and company-, bank- or trust-owned life insurance, as well as health insurance, group medical, credit insurance, endowment, retirement, and savings products. It serves individuals and corporations, as well as other institutions and their employees. The company sells its products through sales forces, third-party organizations, independent agents, and property and casualty specialists, as well as through career agency, bancassurance, direct marketing, brokerage, and e-commerce channels. MetLife, Inc. was founded in 1863 and is based in New York, New York.

FINANCIAL RATIOS  of  MetLife (MET)

Valuation Ratios
P/E Ratio 70.2
Price to Sales 0.9
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 3.8
Price to Free Cash Flow 4.2
Growth Rates
Sales Growth Rate -9.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate -4.2%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 29.2%
Total Debt to Equity 29.6%
Interest Coverage 1
Management Effectiveness
Return On Assets -0.5%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 0.9%
Ret/ On T. Cap. - 3 Yr. Avg. 4.7%
Return On Equity 1.2%
Return On Equity - 3 Yr. Avg. 6.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 2.6%
EBITDA Margin - 3 Yr. Avg. 10.2%
Operating Margin 1.6%
Oper. Margin - 3 Yr. Avg. 9.2%
Pre-Tax Margin -0.3%
Pre-Tax Margin - 3 Yr. Avg. 7.5%
Net Profit Margin 1.3%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 512.3%
Eff/ Tax Rate - 3 Yr. Avg. 189.7%
Payout Ratio 229.9%

MET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MET stock intrinsic value calculation we used $63605 million for the last fiscal year's total revenue generated by MetLife. The default revenue input number comes from 2016 income statement of MetLife. 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 MET 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 7.4%, whose default value for MET is calculated based on our internal credit rating of MetLife, 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 MetLife.
    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 MET stock the variable cost ratio is equal to 87.6%.

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 MET 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 5.8% for MetLife.

Corporate tax rate of 27% is the nominal tax rate for MetLife. 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 MET 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 MET are equal to 2.9%.

Life of production assets of 17.2 years is the average useful life of capital assets used in MetLife 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 MET is equal to 0.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $67309 million for MetLife - 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 1081.03 million for MetLife 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 MetLife at the current share price and the inputted number of shares is $55.4 billion.


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COMPANY NEWS

▶ Office Tower on Billionaires' Row Snags a Low-Rate Loan   [Apr-11-17 01:08PM  The Wall Street Journal]
▶ [$$] Trump Should Drop FSOC's MetLife Appeal   [Mar-31-17 12:40PM  The Wall Street Journal]
▶ [$$] Trump Should Drop FSOC's MetLife Appeal   [12:40PM  at The Wall Street Journal]
▶ [$$] Does Too Big to Fail Mean Too Big for the Rule of Law?   [12:36AM  The Wall Street Journal]
▶ [$$] Does Too Big to Fail Mean Too Big for the Rule of Law?   [12:36AM  at The Wall Street Journal]
▶ [$$] Americans Shun Life Insurance, Forcing New Tactics at Prudential   [Mar-16-17 07:20AM  at The Wall Street Journal]
▶ U.S. Chamber, MetLife creating quarterly small business index   [Feb-23-17 11:32AM  at bizjournals.com]
▶ MetLife is First U.S. Insurer to Achieve Carbon Neutrality   [Feb-22-17 12:10PM  Business Wire]
▶ [$$] Mnuchins MetLife Job   [12:43AM  at The Wall Street Journal]
▶ MetLife Announces 8 Finalists for collab   [Feb-15-17 09:00PM  Business Wire]
▶ 3 Top Insurance Stocks to Buy in 2017   [Feb-11-17 02:58PM  at Motley Fool]
▶ [$$] A Simple Reason to Hold Complicated MetLife   [01:22PM  at The Wall Street Journal]
▶ [$$] 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]
▶ The Fed Is No Longer The Only Game In Town   [Jan-31-17 07:31PM  at Forbes]
▶ How Décor Can Improve on the Architectural Past   [05:33AM  at The Wall Street Journal]
Stock chart of MET Financial statements of MET
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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