Intrinsic value of ArcelorMittal ADR - MT

Previous Close

$35.03

  Intrinsic Value

$6.07

stock screener

  Rating & Target

str. sell

-83%

Previous close

$35.03

 
Intrinsic value

$6.07

 
Up/down potential

-83%

 
Rating

str. sell

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  21.50
  19.85
  18.37
  17.03
  15.83
  14.74
  13.77
  12.89
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
Revenue, $m
  56,791
  69,001
  82,698
  97,885
  114,554
  132,682
  152,244
  173,206
  195,536
  219,201
  244,173
  270,429
  297,953
  326,736
  356,776
  388,082
  420,670
  454,566
  489,803
  526,423
  564,478
  604,025
  645,131
  687,870
  732,323
  778,578
  826,729
  876,879
  929,137
  983,617
  1,040,442
Variable operating expenses, $m
 
  73,373
  87,834
  103,868
  121,466
  140,606
  161,258
  183,389
  206,963
  231,948
  258,313
  285,508
  314,567
  344,954
  376,670
  409,721
  444,127
  479,912
  517,113
  555,776
  595,952
  637,705
  681,103
  726,225
  773,157
  821,991
  872,827
  925,773
  980,945
  1,038,462
  1,098,456
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
  73,373
  87,834
  103,868
  121,466
  140,606
  161,258
  183,389
  206,963
  231,948
  258,313
  285,508
  314,567
  344,954
  376,670
  409,721
  444,127
  479,912
  517,113
  555,776
  595,952
  637,705
  681,103
  726,225
  773,157
  821,991
  872,827
  925,773
  980,945
  1,038,462
  1,098,456
Operating income, $m
  4,161
  -4,372
  -5,136
  -5,983
  -6,912
  -7,923
  -9,014
  -10,183
  -11,428
  -12,747
  -14,140
  -15,079
  -16,614
  -18,219
  -19,894
  -21,639
  -23,456
  -25,346
  -27,311
  -29,353
  -31,475
  -33,680
  -35,972
  -38,355
  -40,834
  -43,413
  -46,098
  -48,894
  -51,808
  -54,846
  -58,014
EBITDA, $m
  6,882
  -954
  -1,143
  -1,353
  -1,584
  -1,834
  -2,105
  -2,395
  -2,703
  -3,031
  -3,376
  -3,739
  -4,119
  -4,517
  -4,933
  -5,366
  -5,816
  -6,285
  -6,772
  -7,278
  -7,804
  -8,351
  -8,919
  -9,510
  -10,125
  -10,764
  -11,430
  -12,124
  -12,846
  -13,599
  -14,385
Interest expense (income), $m
  1,354
  955
  1,707
  2,550
  3,485
  4,510
  5,626
  6,829
  8,119
  9,493
  10,949
  12,485
  14,101
  15,794
  17,565
  19,413
  21,340
  23,345
  25,430
  27,598
  29,851
  32,193
  34,626
  37,155
  39,785
  42,520
  45,365
  48,328
  51,414
  54,629
  57,981
Earnings before tax, $m
  2,720
  -5,327
  -6,843
  -8,533
  -10,397
  -12,433
  -14,639
  -17,012
  -19,547
  -22,240
  -25,088
  -27,564
  -30,714
  -34,013
  -37,459
  -41,052
  -44,796
  -48,691
  -52,741
  -56,951
  -61,326
  -65,872
  -70,598
  -75,510
  -80,618
  -85,932
  -91,463
  -97,222
  -103,221
  -109,474
  -115,995
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
  -5,327
  -6,843
  -8,533
  -10,397
  -12,433
  -14,639
  -17,012
  -19,547
  -22,240
  -25,088
  -27,564
  -30,714
  -34,013
  -37,459
  -41,052
  -44,796
  -48,691
  -52,741
  -56,951
  -61,326
  -65,872
  -70,598
  -75,510
  -80,618
  -85,932
  -91,463
  -97,222
  -103,221
  -109,474
  -115,995

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
  88,237
  105,752
  125,173
  146,488
  169,671
  194,685
  221,491
  250,046
  280,308
  312,242
  345,818
  381,015
  417,821
  456,236
  496,269
  537,942
  581,286
  626,346
  673,175
  721,838
  772,410
  824,976
  879,630
  936,475
  995,624
  1,057,199
  1,121,329
  1,188,154
  1,257,822
  1,330,489
Adjusted assets (=assets-cash), $m
  72,641
  88,237
  105,752
  125,173
  146,488
  169,671
  194,685
  221,491
  250,046
  280,308
  312,242
  345,818
  381,015
  417,821
  456,236
  496,269
  537,942
  581,286
  626,346
  673,175
  721,838
  772,410
  824,976
  879,630
  936,475
  995,624
  1,057,199
  1,121,329
  1,188,154
  1,257,822
  1,330,489
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
  43,402
  52,017
  61,570
  72,054
  83,457
  95,761
  108,947
  122,992
  137,877
  153,585
  170,100
  187,413
  205,517
  224,412
  244,104
  264,602
  285,922
  308,086
  331,120
  355,056
  379,932
  405,788
  432,671
  460,631
  489,725
  520,013
  551,557
  584,427
  618,695
  654,438
Working capital, $m
  4,132
  4,278
  5,127
  6,069
  7,102
  8,226
  9,439
  10,739
  12,123
  13,590
  15,139
  16,767
  18,473
  20,258
  22,120
  24,061
  26,082
  28,183
  30,368
  32,638
  34,998
  37,450
  39,998
  42,648
  45,404
  48,272
  51,257
  54,367
  57,606
  60,984
  64,507
Total debt, $m
  13,674
  21,080
  31,483
  43,020
  55,681
  69,451
  84,310
  100,233
  117,194
  135,170
  154,139
  174,083
  194,990
  216,853
  239,671
  263,451
  288,204
  313,951
  340,716
  368,533
  397,439
  427,479
  458,703
  491,167
  524,933
  560,068
  596,643
  634,736
  674,431
  715,813
  758,977
Total liabilities, $m
  45,007
  52,413
  62,816
  74,353
  87,014
  100,784
  115,643
  131,566
  148,527
  166,503
  185,472
  205,416
  226,323
  248,186
  271,004
  294,784
  319,537
  345,284
  372,049
  399,866
  428,772
  458,812
  490,036
  522,500
  556,266
  591,401
  627,976
  666,069
  705,764
  747,146
  790,310
Total equity, $m
  30,135
  35,824
  42,935
  50,820
  59,474
  68,886
  79,042
  89,925
  101,518
  113,805
  126,770
  140,402
  154,692
  169,635
  185,232
  201,485
  218,404
  236,002
  254,296
  273,309
  293,066
  313,599
  334,940
  357,130
  380,209
  404,223
  429,223
  455,260
  482,391
  510,676
  540,178
Total liabilities and equity, $m
  75,142
  88,237
  105,751
  125,173
  146,488
  169,670
  194,685
  221,491
  250,045
  280,308
  312,242
  345,818
  381,015
  417,821
  456,236
  496,269
  537,941
  581,286
  626,345
  673,175
  721,838
  772,411
  824,976
  879,630
  936,475
  995,624
  1,057,199
  1,121,329
  1,188,155
  1,257,822
  1,330,488
Debt-to-equity ratio
  0.454
  0.590
  0.730
  0.850
  0.940
  1.010
  1.070
  1.110
  1.150
  1.190
  1.220
  1.240
  1.260
  1.280
  1.290
  1.310
  1.320
  1.330
  1.340
  1.350
  1.360
  1.360
  1.370
  1.380
  1.380
  1.390
  1.390
  1.390
  1.400
  1.400
  1.410
Adjusted equity ratio
  0.396
  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
  -5,327
  -6,843
  -8,533
  -10,397
  -12,433
  -14,639
  -17,012
  -19,547
  -22,240
  -25,088
  -27,564
  -30,714
  -34,013
  -37,459
  -41,052
  -44,796
  -48,691
  -52,741
  -56,951
  -61,326
  -65,872
  -70,598
  -75,510
  -80,618
  -85,932
  -91,463
  -97,222
  -103,221
  -109,474
  -115,995
Depreciation, amort., depletion, $m
  2,721
  3,418
  3,993
  4,629
  5,328
  6,089
  6,909
  7,788
  8,724
  9,717
  10,764
  11,340
  12,494
  13,701
  14,961
  16,274
  17,640
  19,061
  20,539
  22,075
  23,670
  25,329
  27,053
  28,845
  30,709
  32,648
  34,668
  36,770
  38,962
  41,246
  43,629
Funds from operations, $m
  -486
  -1,909
  -2,851
  -3,903
  -5,068
  -6,345
  -7,730
  -9,224
  -10,822
  -12,523
  -14,325
  -16,224
  -18,220
  -20,312
  -22,498
  -24,779
  -27,156
  -29,629
  -32,202
  -34,876
  -37,656
  -40,544
  -43,545
  -46,665
  -49,909
  -53,284
  -56,796
  -60,452
  -64,260
  -68,228
  -72,366
Change in working capital, $m
  -3,181
  757
  849
  942
  1,033
  1,124
  1,213
  1,300
  1,384
  1,467
  1,548
  1,628
  1,706
  1,785
  1,863
  1,941
  2,020
  2,102
  2,185
  2,270
  2,359
  2,452
  2,549
  2,650
  2,756
  2,868
  2,985
  3,109
  3,240
  3,378
  3,523
Cash from operations, $m
  2,695
  -2,666
  -3,700
  -4,845
  -6,102
  -7,469
  -8,943
  -10,523
  -12,207
  -13,991
  -15,873
  -17,852
  -19,927
  -22,096
  -24,360
  -26,720
  -29,176
  -31,731
  -34,387
  -37,147
  -40,015
  -42,996
  -46,094
  -49,315
  -52,666
  -56,152
  -59,781
  -63,561
  -67,500
  -71,606
  -75,889
Maintenance CAPEX, $m
  0
  -2,382
  -2,893
  -3,468
  -4,105
  -4,804
  -5,564
  -6,384
  -7,263
  -8,199
  -9,192
  -10,239
  -11,340
  -12,494
  -13,701
  -14,961
  -16,274
  -17,640
  -19,061
  -20,539
  -22,075
  -23,670
  -25,329
  -27,053
  -28,845
  -30,709
  -32,648
  -34,668
  -36,770
  -38,962
  -41,246
New CAPEX, $m
  -2,444
  -7,670
  -8,615
  -9,553
  -10,484
  -11,403
  -12,304
  -13,185
  -14,045
  -14,885
  -15,708
  -16,515
  -17,313
  -18,104
  -18,895
  -19,691
  -20,498
  -21,320
  -22,164
  -23,034
  -23,936
  -24,875
  -25,856
  -26,883
  -27,961
  -29,094
  -30,287
  -31,544
  -32,870
  -34,268
  -35,743
Cash from investing activities, $m
  -1,143
  -10,052
  -11,508
  -13,021
  -14,589
  -16,207
  -17,868
  -19,569
  -21,308
  -23,084
  -24,900
  -26,754
  -28,653
  -30,598
  -32,596
  -34,652
  -36,772
  -38,960
  -41,225
  -43,573
  -46,011
  -48,545
  -51,185
  -53,936
  -56,806
  -59,803
  -62,935
  -66,212
  -69,640
  -73,230
  -76,989
Free cash flow, $m
  1,552
  -12,718
  -15,209
  -17,866
  -20,691
  -23,675
  -26,811
  -30,093
  -33,515
  -37,075
  -40,772
  -44,606
  -48,579
  -52,694
  -56,957
  -61,372
  -65,948
  -70,691
  -75,612
  -80,720
  -86,026
  -91,541
  -97,279
  -103,251
  -109,471
  -115,955
  -122,717
  -129,773
  -137,140
  -144,836
  -152,878
Issuance/(repayment) of debt, $m
  -6,007
  9,291
  10,404
  11,536
  12,661
  13,771
  14,859
  15,923
  16,961
  17,976
  18,969
  19,944
  20,907
  21,863
  22,818
  23,780
  24,754
  25,747
  26,766
  27,817
  28,906
  30,040
  31,224
  32,464
  33,766
  35,135
  36,575
  38,094
  39,694
  41,383
  43,164
Issuance/(repurchase) of shares, $m
  3,115
  11,632
  13,954
  16,418
  19,051
  21,845
  24,795
  27,895
  31,140
  34,526
  38,054
  41,196
  45,004
  48,956
  53,055
  57,306
  61,715
  66,289
  71,035
  75,964
  81,083
  86,405
  91,939
  97,699
  103,697
  109,947
  116,462
  123,259
  130,353
  137,760
  145,498
Cash from financing (excl. dividends), $m  
  -2,865
  20,923
  24,358
  27,954
  31,712
  35,616
  39,654
  43,818
  48,101
  52,502
  57,023
  61,140
  65,911
  70,819
  75,873
  81,086
  86,469
  92,036
  97,801
  103,781
  109,989
  116,445
  123,163
  130,163
  137,463
  145,082
  153,037
  161,353
  170,047
  179,143
  188,662
Total cash flow (excl. dividends), $m
  -1,440
  8,205
  9,150
  10,088
  11,021
  11,941
  12,843
  13,725
  14,586
  15,427
  16,250
  16,534
  17,332
  18,125
  18,917
  19,714
  20,521
  21,344
  22,189
  23,060
  23,963
  24,903
  25,885
  26,913
  27,992
  29,127
  30,321
  31,580
  32,907
  34,306
  35,783
Retained Cash Flow (-), $m
  -4,863
  -11,632
  -13,954
  -16,418
  -19,051
  -21,845
  -24,795
  -27,895
  -31,140
  -34,526
  -38,054
  -41,196
  -45,004
  -48,956
  -53,055
  -57,306
  -61,715
  -66,289
  -71,035
  -75,964
  -81,083
  -86,405
  -91,939
  -97,699
  -103,697
  -109,947
  -116,462
  -123,259
  -130,353
  -137,760
  -145,498
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
 
  -2,812
  -4,805
  -6,330
  -8,030
  -9,905
  -11,953
  -14,170
  -16,554
  -19,100
  -21,804
  -24,662
  -27,672
  -30,832
  -34,138
  -37,592
  -41,194
  -44,944
  -48,846
  -52,903
  -57,120
  -61,501
  -66,054
  -70,786
  -75,705
  -80,820
  -86,141
  -91,679
  -97,446
  -103,453
  -109,714
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  -2,688
  -4,372
  -5,457
  -6,525
  -7,546
  -8,488
  -9,322
  -10,023
  -10,569
  -10,944
  -11,139
  -11,152
  -10,987
  -10,653
  -10,169
  -9,554
  -8,836
  -8,040
  -7,196
  -6,333
  -5,478
  -4,654
  -3,881
  -3,174
  -2,545
  -1,998
  -1,534
  -1,152
  -845
  -604
Current shareholders' claim on cash, %
  100
  75.1
  56.6
  42.9
  32.6
  24.9
  19.1
  14.8
  11.4
  8.9
  6.9
  5.5
  4.3
  3.4
  2.7
  2.1
  1.7
  1.4
  1.1
  0.9
  0.7
  0.6
  0.4
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1

ArcelorMittal S.A. (ArcelorMittal) is a holding company. The Company, together with its subsidiaries, owns and operates steel manufacturing and mining facilities in Europe, North and South America, Asia and Africa. ArcelorMittal operates through five segments, which include NAFTA; Europe; Brazil; Africa and Commonwealth of Independent States (ACIS), and Mining. The NAFTA segment produces flat, long and tubular products. The Brazil segment includes the flat operations of Brazil, and the long and tubular operations of Brazil and neighboring countries. The Europe segment is the flat steel producer in Europe. The ACIS segment produces a combination of flat, long products and tubular products. The Mining segment comprises all mines owned by ArcelorMittal in the Americas, Asia, Europe and Africa. It produces a range of finished and semi-finished steel products (semis).

FINANCIAL RATIOS  of  ArcelorMittal ADR (MT)

Valuation Ratios
P/E Ratio 20.1
Price to Sales 0.6
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 13.3
Price to Free Cash Flow 142.3
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. -0.5%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -4.2%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. -6.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 10.1%
Gross Margin - 3 Yr. Avg. 7.6%
EBITDA Margin 12%
EBITDA Margin - 3 Yr. Avg. 4.7%
Operating Margin 7.3%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 4.8%
Pre-Tax Margin - 3 Yr. Avg. -2.6%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. -3.6%
Effective Tax Rate 36.3%
Eff/ Tax Rate - 3 Yr. Avg. -21%
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 21.5% 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 4.6%, 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 1024.45 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 $35.9 billion.

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Financial statements 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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