Intrinsic value of ArcelorMittal ADR - MT

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$21.41

  Intrinsic Value

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  Value-price divergence*

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$21.41

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

We calculate the intrinsic value of MT 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 65.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -10.68
  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
  56,791
  57,927
  59,259
  60,782
  62,492
  64,386
  66,465
  68,729
  71,179
  73,819
  76,652
  79,683
  82,917
  86,360
  90,019
  93,902
  98,018
  102,374
  106,980
  111,847
  116,986
  122,409
  128,128
  134,155
  140,507
  147,196
  154,238
  161,651
  169,452
  177,659
  186,290
Variable operating expenses, $m
 
  61,682
  63,088
  64,696
  66,501
  68,501
  70,696
  73,086
  75,673
  78,460
  81,451
  84,126
  87,540
  91,175
  95,039
  99,138
  103,483
  108,082
  112,945
  118,084
  123,509
  129,234
  135,272
  141,636
  148,341
  155,403
  162,839
  170,665
  178,900
  187,565
  196,678
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
  52,630
  61,682
  63,088
  64,696
  66,501
  68,501
  70,696
  73,086
  75,673
  78,460
  81,451
  84,126
  87,540
  91,175
  95,039
  99,138
  103,483
  108,082
  112,945
  118,084
  123,509
  129,234
  135,272
  141,636
  148,341
  155,403
  162,839
  170,665
  178,900
  187,565
  196,678
Operating income, $m
  4,161
  -3,755
  -3,829
  -3,914
  -4,009
  -4,115
  -4,231
  -4,357
  -4,494
  -4,641
  -4,799
  -4,443
  -4,623
  -4,815
  -5,019
  -5,236
  -5,465
  -5,708
  -5,965
  -6,237
  -6,523
  -6,825
  -7,144
  -7,480
  -7,835
  -8,207
  -8,600
  -9,014
  -9,448
  -9,906
  -10,387
EBITDA, $m
  6,882
  -801
  -819
  -840
  -864
  -890
  -919
  -950
  -984
  -1,021
  -1,060
  -1,102
  -1,146
  -1,194
  -1,245
  -1,298
  -1,355
  -1,415
  -1,479
  -1,546
  -1,617
  -1,692
  -1,771
  -1,855
  -1,943
  -2,035
  -2,132
  -2,235
  -2,343
  -2,456
  -2,576
Interest expense (income), $m
  1,354
  955
  1,026
  1,108
  1,202
  1,307
  1,424
  1,551
  1,691
  1,841
  2,004
  2,178
  2,365
  2,564
  2,775
  3,001
  3,240
  3,493
  3,761
  4,044
  4,344
  4,660
  4,993
  5,345
  5,716
  6,107
  6,519
  6,952
  7,408
  7,888
  8,393
Earnings before tax, $m
  2,720
  -4,710
  -4,855
  -5,022
  -5,211
  -5,422
  -5,654
  -5,908
  -6,184
  -6,482
  -6,803
  -6,621
  -6,988
  -7,379
  -7,795
  -8,237
  -8,705
  -9,201
  -9,726
  -10,281
  -10,867
  -11,485
  -12,138
  -12,826
  -13,551
  -14,314
  -15,119
  -15,965
  -16,856
  -17,794
  -18,780
Tax expense, $m
  986
  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
Net income, $m
  1,779
  -4,710
  -4,855
  -5,022
  -5,211
  -5,422
  -5,654
  -5,908
  -6,184
  -6,482
  -6,803
  -6,621
  -6,988
  -7,379
  -7,795
  -8,237
  -8,705
  -9,201
  -9,726
  -10,281
  -10,867
  -11,485
  -12,138
  -12,826
  -13,551
  -14,314
  -15,119
  -15,965
  -16,856
  -17,794
  -18,780

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,501
  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
  75,142
  74,075
  75,779
  77,726
  79,913
  82,336
  84,994
  87,888
  91,022
  94,397
  98,020
  101,896
  106,031
  110,435
  115,114
  120,080
  125,342
  130,912
  136,803
  143,027
  149,599
  156,533
  163,846
  171,554
  179,676
  188,230
  197,236
  206,715
  216,690
  227,185
  238,223
Adjusted assets (=assets-cash), $m
  72,641
  74,075
  75,779
  77,726
  79,913
  82,336
  84,994
  87,888
  91,022
  94,397
  98,020
  101,896
  106,031
  110,435
  115,114
  120,080
  125,342
  130,912
  136,803
  143,027
  149,599
  156,533
  163,846
  171,554
  179,676
  188,230
  197,236
  206,715
  216,690
  227,185
  238,223
Revenue / Adjusted assets
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
Average production assets, $m
  35,732
  36,436
  37,274
  38,232
  39,307
  40,499
  41,807
  43,230
  44,772
  46,432
  48,214
  50,120
  52,154
  54,320
  56,622
  59,065
  61,653
  64,393
  67,290
  70,352
  73,584
  76,995
  80,592
  84,384
  88,379
  92,586
  97,016
  101,679
  106,585
  111,747
  117,177
Working capital, $m
  4,132
  3,591
  3,674
  3,768
  3,874
  3,992
  4,121
  4,261
  4,413
  4,577
  4,752
  4,940
  5,141
  5,354
  5,581
  5,822
  6,077
  6,347
  6,633
  6,935
  7,253
  7,589
  7,944
  8,318
  8,711
  9,126
  9,563
  10,022
  10,506
  11,015
  11,550
Total debt, $m
  13,674
  12,668
  13,680
  14,837
  16,135
  17,574
  19,153
  20,873
  22,734
  24,739
  26,891
  29,193
  31,650
  34,265
  37,045
  39,994
  43,120
  46,429
  49,928
  53,625
  57,529
  61,648
  65,992
  70,570
  75,394
  80,475
  85,825
  91,456
  97,381
  103,615
  110,171
Total liabilities, $m
  45,007
  44,001
  45,013
  46,170
  47,468
  48,907
  50,486
  52,206
  54,067
  56,072
  58,224
  60,526
  62,983
  65,598
  68,378
  71,327
  74,453
  77,762
  81,261
  84,958
  88,862
  92,981
  97,325
  101,903
  106,727
  111,808
  117,158
  122,789
  128,714
  134,948
  141,504
Total equity, $m
  30,135
  30,075
  30,766
  31,557
  32,445
  33,428
  34,508
  35,683
  36,955
  38,325
  39,796
  41,370
  43,049
  44,836
  46,736
  48,752
  50,889
  53,150
  55,542
  58,069
  60,737
  63,553
  66,522
  69,651
  72,948
  76,421
  80,078
  83,926
  87,976
  92,237
  96,719
Total liabilities and equity, $m
  75,142
  74,076
  75,779
  77,727
  79,913
  82,335
  84,994
  87,889
  91,022
  94,397
  98,020
  101,896
  106,032
  110,434
  115,114
  120,079
  125,342
  130,912
  136,803
  143,027
  149,599
  156,534
  163,847
  171,554
  179,675
  188,229
  197,236
  206,715
  216,690
  227,185
  238,223
Debt-to-equity ratio
  0.454
  0.420
  0.440
  0.470
  0.500
  0.530
  0.560
  0.580
  0.620
  0.650
  0.680
  0.710
  0.740
  0.760
  0.790
  0.820
  0.850
  0.870
  0.900
  0.920
  0.950
  0.970
  0.990
  1.010
  1.030
  1.050
  1.070
  1.090
  1.110
  1.120
  1.140
Adjusted equity ratio
  0.380
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,779
  -4,710
  -4,855
  -5,022
  -5,211
  -5,422
  -5,654
  -5,908
  -6,184
  -6,482
  -6,803
  -6,621
  -6,988
  -7,379
  -7,795
  -8,237
  -8,705
  -9,201
  -9,726
  -10,281
  -10,867
  -11,485
  -12,138
  -12,826
  -13,551
  -14,314
  -15,119
  -15,965
  -16,856
  -17,794
  -18,780
Depreciation, amort., depletion, $m
  2,721
  2,954
  3,010
  3,074
  3,145
  3,225
  3,312
  3,407
  3,510
  3,620
  3,739
  3,341
  3,477
  3,621
  3,775
  3,938
  4,110
  4,293
  4,486
  4,690
  4,906
  5,133
  5,373
  5,626
  5,892
  6,172
  6,468
  6,779
  7,106
  7,450
  7,812
Funds from operations, $m
  1,614
  -1,756
  -1,845
  -1,948
  -2,066
  -2,197
  -2,342
  -2,502
  -2,675
  -2,862
  -3,064
  -3,280
  -3,511
  -3,758
  -4,020
  -4,299
  -4,595
  -4,908
  -5,240
  -5,591
  -5,961
  -6,352
  -6,765
  -7,200
  -7,659
  -8,142
  -8,651
  -9,187
  -9,751
  -10,344
  -10,968
Change in working capital, $m
  -1,081
  70
  83
  94
  106
  117
  129
  140
  152
  164
  176
  188
  201
  213
  227
  241
  255
  270
  286
  302
  319
  336
  355
  374
  394
  415
  437
  460
  484
  509
  535
Cash from operations, $m
  2,695
  -2,324
  -1,928
  -2,043
  -2,172
  -2,315
  -2,471
  -2,642
  -2,827
  -3,026
  -3,239
  -3,468
  -3,712
  -3,971
  -4,247
  -4,540
  -4,850
  -5,178
  -5,525
  -5,892
  -6,280
  -6,688
  -7,119
  -7,574
  -8,053
  -8,557
  -9,088
  -9,646
  -10,234
  -10,853
  -11,504
Maintenance CAPEX, $m
  0
  -2,382
  -2,429
  -2,485
  -2,549
  -2,620
  -2,700
  -2,787
  -2,882
  -2,985
  -3,095
  -3,214
  -3,341
  -3,477
  -3,621
  -3,775
  -3,938
  -4,110
  -4,293
  -4,486
  -4,690
  -4,906
  -5,133
  -5,373
  -5,626
  -5,892
  -6,172
  -6,468
  -6,779
  -7,106
  -7,450
New CAPEX, $m
  -2,444
  -704
  -838
  -958
  -1,075
  -1,192
  -1,308
  -1,424
  -1,541
  -1,660
  -1,782
  -1,906
  -2,034
  -2,166
  -2,302
  -2,443
  -2,588
  -2,740
  -2,897
  -3,062
  -3,232
  -3,411
  -3,597
  -3,792
  -3,995
  -4,207
  -4,430
  -4,663
  -4,907
  -5,162
  -5,429
Cash from investing activities, $m
  -1,143
  -3,086
  -3,267
  -3,443
  -3,624
  -3,812
  -4,008
  -4,211
  -4,423
  -4,645
  -4,877
  -5,120
  -5,375
  -5,643
  -5,923
  -6,218
  -6,526
  -6,850
  -7,190
  -7,548
  -7,922
  -8,317
  -8,730
  -9,165
  -9,621
  -10,099
  -10,602
  -11,131
  -11,686
  -12,268
  -12,879
Free cash flow, $m
  1,552
  -5,410
  -5,195
  -5,486
  -5,796
  -6,127
  -6,479
  -6,853
  -7,250
  -7,671
  -8,117
  -8,588
  -9,087
  -9,614
  -10,170
  -10,757
  -11,376
  -12,028
  -12,716
  -13,440
  -14,202
  -15,005
  -15,850
  -16,738
  -17,673
  -18,656
  -19,690
  -20,777
  -21,920
  -23,121
  -24,383
Issuance/(repayment) of debt, $m
  -6,007
  879
  1,012
  1,157
  1,299
  1,439
  1,579
  1,719
  1,861
  2,005
  2,152
  2,302
  2,456
  2,615
  2,780
  2,950
  3,126
  3,309
  3,499
  3,697
  3,904
  4,119
  4,344
  4,579
  4,824
  5,081
  5,350
  5,631
  5,925
  6,234
  6,557
Issuance/(repurchase) of shares, $m
  3,115
  4,471
  4,875
  5,120
  5,385
  5,671
  5,979
  6,309
  6,661
  7,036
  7,436
  7,860
  8,310
  8,786
  9,290
  9,823
  10,387
  10,981
  11,608
  12,270
  12,967
  13,701
  14,475
  15,289
  16,146
  17,048
  17,997
  18,995
  20,044
  21,148
  22,308
Cash from financing (excl. dividends), $m  
  -2,865
  5,350
  5,887
  6,277
  6,684
  7,110
  7,558
  8,028
  8,522
  9,041
  9,588
  10,162
  10,766
  11,401
  12,070
  12,773
  13,513
  14,290
  15,107
  15,967
  16,871
  17,820
  18,819
  19,868
  20,970
  22,129
  23,347
  24,626
  25,969
  27,382
  28,865
Total cash flow (excl. dividends), $m
  -1,440
  -4,532
  -4,183
  -4,329
  -4,497
  -4,688
  -4,900
  -5,133
  -5,389
  -5,666
  -5,965
  -6,286
  -6,631
  -6,998
  -7,390
  -7,807
  -8,250
  -8,720
  -9,217
  -9,743
  -10,299
  -10,886
  -11,506
  -12,159
  -12,849
  -13,575
  -14,340
  -15,146
  -15,994
  -16,887
  -17,826
Retained Cash Flow (-), $m
  -4,863
  -556
  -692
  -791
  -888
  -984
  -1,079
  -1,175
  -1,272
  -1,371
  -1,471
  -1,574
  -1,679
  -1,788
  -1,900
  -2,016
  -2,136
  -2,262
  -2,392
  -2,527
  -2,668
  -2,815
  -2,969
  -3,130
  -3,297
  -3,473
  -3,656
  -3,849
  -4,050
  -4,261
  -4,482
Prev. year cash balance distribution, $m
 
  616
  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
  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
Discount rate, %
 
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for 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
Current shareholders' claim on cash, %
  100
  93.5
  86.9
  80.7
  74.8
  69.2
  64.0
  59.0
  54.3
  49.9
  45.8
  42.0
  38.4
  35.1
  32.0
  29.2
  26.6
  24.2
  22.0
  19.9
  18.1
  16.4
  14.8
  13.4
  12.1
  10.9
  9.8
  8.9
  8.0
  7.2
  6.5

ArcelorMittal, together with its subsidiaries, operates as an integrated steel and mining company worldwide. The company operates through five segments: NAFTA; Brazil; Europe; Africa and Commonwealth of Independent States; and Mining. It produces finished and semi-finished steel products. The company’s products include flat products, such as slabs, plates, hot-and cold-rolled coils and sheets, hot-dipped and electro-galvanized coils and sheets, and tinplate and color coated coils and sheets; and seamless and welded pipes and tubes. It also offers long products, including blooms and billets, bars, wire-rods, structural sections, rails, sheet piles, and wire-products. The company provides its steel products to the automotive, appliance, engineering, construction, energy, and machinery industries. It sells its products in local markets and through a centralized marketing organization in approximately 160 countries. In addition, the company produces mining products, including iron ore lumps, fines, concentrates, pellets, and sinter feeds, as well as coking, pulverized coal injection, and thermal coal. It has iron ore mining activities in Brazil, Bosnia, Canada, Kazakhstan, Liberia, Mexico, Ukraine, and the United States; and coal mining activities in Kazakhstan and the United States. ArcelorMittal was founded in 1976 and is headquartered in Luxembourg, Luxembourg.

FINANCIAL RATIOS  of  ArcelorMittal ADR (MT)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -10.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.7%
Cap. Spend. - 3 Yr. Gr. Rate -6.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 39.1%
Total Debt to Equity 45.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. -0.4%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -3.9%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. -6.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 11.2%
Gross Margin - 3 Yr. Avg. 5.4%
EBITDA Margin 12%
EBITDA Margin - 3 Yr. Avg. 4.9%
Operating Margin 7.3%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 4.8%
Pre-Tax Margin - 3 Yr. Avg. -2.4%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. -3.4%
Effective Tax Rate 36.3%
Eff/ Tax Rate - 3 Yr. Avg. -21.2%
Payout Ratio 3.4%

MT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MT stock intrinsic value calculation we used $56791 million for the last fiscal year's total revenue generated by ArcelorMittal ADR. The default revenue input number comes from 2016 income statement of ArcelorMittal ADR. 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 MT 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 5.4%, whose default value for MT is calculated based on our internal credit rating of ArcelorMittal ADR, 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 ArcelorMittal ADR.
    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 MT stock the variable cost ratio is equal to 106.5%.

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 MT 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 8.1% for ArcelorMittal ADR.

Corporate tax rate of 27% is the nominal tax rate for ArcelorMittal ADR. 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 MT 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 MT are equal to 62.9%.

Life of production assets of 15 years is the average useful life of capital assets used in ArcelorMittal ADR 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 MT is equal to 6.2%. 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 - $30135 million for ArcelorMittal ADR - 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 3046.59 million for ArcelorMittal ADR 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 ArcelorMittal ADR at the current share price and the inputted number of shares is $65.2 billion.


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Stock chart of MT Financial statements of MT Annual reports of MT
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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