Intrinsic value of Nord Anglia Education - NORD

Previous Close

$32.57

  Intrinsic Value

$165.02

stock screener

  Rating & Target

str. buy

+407%

  Value-price divergence*

-14%

Previous close

$32.57

 
Intrinsic value

$165.02

 
Up/down potential

+407%

 
Rating

str. buy

 
Value-price divergence*

-14%

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

We calculate the intrinsic value of NORD 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 3.4

 

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, %
  49.39
  49.40
  44.96
  40.96
  37.37
  34.13
  31.22
  28.60
  26.24
  24.11
  22.20
  20.48
  18.93
  17.54
  16.29
  15.16
  14.14
  13.23
  12.40
  11.66
  11.00
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
Revenue, $m
  856
  1,279
  1,854
  2,613
  3,590
  4,815
  6,318
  8,125
  10,256
  12,730
  15,556
  18,742
  22,290
  26,200
  30,467
  35,085
  40,046
  45,343
  50,968
  56,913
  63,172
  69,741
  76,616
  83,797
  91,284
  99,081
  107,193
  115,628
  124,395
  133,505
  142,972
Variable operating expenses, $m
 
  962
  1,347
  1,857
  2,512
  3,334
  4,343
  5,555
  6,985
  8,645
  10,541
  12,575
  14,956
  17,579
  20,442
  23,541
  26,870
  30,424
  34,198
  38,187
  42,387
  46,794
  51,407
  56,225
  61,249
  66,481
  71,924
  77,583
  83,466
  89,578
  95,931
Fixed operating expenses, $m
 
  55
  57
  58
  60
  61
  63
  64
  66
  67
  69
  71
  73
  74
  76
  78
  80
  82
  84
  86
  88
  91
  93
  95
  98
  100
  103
  105
  108
  111
  113
Total operating expenses, $m
  731
  1,017
  1,404
  1,915
  2,572
  3,395
  4,406
  5,619
  7,051
  8,712
  10,610
  12,646
  15,029
  17,653
  20,518
  23,619
  26,950
  30,506
  34,282
  38,273
  42,475
  46,885
  51,500
  56,320
  61,347
  66,581
  72,027
  77,688
  83,574
  89,689
  96,044
Operating income, $m
  125
  262
  450
  698
  1,018
  1,420
  1,913
  2,506
  3,205
  4,017
  4,946
  6,096
  7,261
  8,546
  9,948
  11,466
  13,096
  14,837
  16,686
  18,640
  20,697
  22,856
  25,116
  27,476
  29,937
  32,500
  35,167
  37,940
  40,822
  43,816
  46,929
EBITDA, $m
  190
  406
  611
  884
  1,234
  1,674
  2,214
  2,864
  3,630
  4,520
  5,537
  6,683
  7,960
  9,367
  10,903
  12,566
  14,352
  16,259
  18,284
  20,424
  22,677
  25,042
  27,518
  30,103
  32,799
  35,607
  38,528
  41,565
  44,721
  48,002
  51,411
Interest expense (income), $m
  63
  61
  93
  159
  245
  355
  494
  664
  869
  1,110
  1,391
  1,711
  2,072
  2,474
  2,917
  3,400
  3,923
  4,485
  5,085
  5,723
  6,396
  7,105
  7,849
  8,628
  9,442
  10,290
  11,173
  12,092
  13,048
  14,041
  15,073
Earnings before tax, $m
  62
  201
  356
  540
  773
  1,064
  1,419
  1,841
  2,336
  2,907
  3,555
  4,385
  5,190
  6,072
  7,031
  8,066
  9,173
  10,352
  11,600
  12,917
  14,301
  15,751
  17,267
  18,848
  20,496
  22,211
  23,994
  25,848
  27,774
  29,776
  31,856
Tax expense, $m
  13
  54
  96
  146
  209
  287
  383
  497
  631
  785
  960
  1,184
  1,401
  1,640
  1,898
  2,178
  2,477
  2,795
  3,132
  3,488
  3,861
  4,253
  4,662
  5,089
  5,534
  5,997
  6,478
  6,979
  7,499
  8,039
  8,601
Net income, $m
  47
  147
  260
  394
  565
  777
  1,036
  1,344
  1,706
  2,122
  2,595
  3,201
  3,789
  4,433
  5,133
  5,888
  6,696
  7,557
  8,468
  9,429
  10,440
  11,498
  12,605
  13,759
  14,962
  16,214
  17,516
  18,869
  20,275
  21,736
  23,255

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  372
  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
  2,368
  2,981
  4,321
  6,091
  8,368
  11,224
  14,727
  18,939
  23,908
  29,673
  36,260
  43,687
  51,958
  61,072
  71,018
  81,782
  93,348
  105,695
  118,806
  132,664
  147,254
  162,566
  178,592
  195,330
  212,783
  230,959
  249,868
  269,530
  289,965
  311,201
  333,269
Adjusted assets (=assets-cash), $m
  1,996
  2,981
  4,321
  6,091
  8,368
  11,224
  14,727
  18,939
  23,908
  29,673
  36,260
  43,687
  51,958
  61,072
  71,018
  81,782
  93,348
  105,695
  118,806
  132,664
  147,254
  162,566
  178,592
  195,330
  212,783
  230,959
  249,868
  269,530
  289,965
  311,201
  333,269
Revenue / Adjusted assets
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
  0.429
Average production assets, $m
  735
  1,099
  1,592
  2,245
  3,084
  4,136
  5,427
  6,979
  8,810
  10,935
  13,362
  16,099
  19,147
  22,506
  26,171
  30,138
  34,400
  38,950
  43,781
  48,888
  54,265
  59,907
  65,813
  71,981
  78,413
  85,111
  92,079
  99,325
  106,855
  114,681
  122,813
Working capital, $m
  -179
  -815
  -1,181
  -1,665
  -2,287
  -3,067
  -4,025
  -5,176
  -6,533
  -8,109
  -9,909
  -11,939
  -14,199
  -16,689
  -19,407
  -22,349
  -25,509
  -28,884
  -32,467
  -36,254
  -40,241
  -44,425
  -48,804
  -53,378
  -58,148
  -63,115
  -68,282
  -73,655
  -79,240
  -85,043
  -91,073
Total debt, $m
  1,128
  1,730
  2,936
  4,529
  6,578
  9,148
  12,302
  16,092
  20,564
  25,752
  31,681
  38,365
  45,810
  54,012
  62,963
  72,651
  83,060
  94,173
  105,973
  118,445
  131,576
  145,356
  159,780
  174,844
  190,552
  206,910
  223,928
  241,624
  260,015
  279,128
  298,989
Total liabilities, $m
  2,082
  2,683
  3,889
  5,482
  7,531
  10,101
  13,255
  17,045
  21,517
  26,705
  32,634
  39,318
  46,763
  54,965
  63,916
  73,604
  84,013
  95,126
  106,926
  119,398
  132,529
  146,309
  160,733
  175,797
  191,505
  207,863
  224,881
  242,577
  260,968
  280,081
  299,942
Total equity, $m
  287
  298
  432
  609
  837
  1,122
  1,473
  1,894
  2,391
  2,967
  3,626
  4,369
  5,196
  6,107
  7,102
  8,178
  9,335
  10,570
  11,881
  13,266
  14,725
  16,257
  17,859
  19,533
  21,278
  23,096
  24,987
  26,953
  28,996
  31,120
  33,327
Total liabilities and equity, $m
  2,369
  2,981
  4,321
  6,091
  8,368
  11,223
  14,728
  18,939
  23,908
  29,672
  36,260
  43,687
  51,959
  61,072
  71,018
  81,782
  93,348
  105,696
  118,807
  132,664
  147,254
  162,566
  178,592
  195,330
  212,783
  230,959
  249,868
  269,530
  289,964
  311,201
  333,269
Debt-to-equity ratio
  3.930
  5.800
  6.790
  7.440
  7.860
  8.150
  8.350
  8.500
  8.600
  8.680
  8.740
  8.780
  8.820
  8.840
  8.870
  8.880
  8.900
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.960
  8.960
  8.970
  8.970
  8.970
Adjusted equity ratio
  -0.043
  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
  47
  147
  260
  394
  565
  777
  1,036
  1,344
  1,706
  2,122
  2,595
  3,201
  3,789
  4,433
  5,133
  5,888
  6,696
  7,557
  8,468
  9,429
  10,440
  11,498
  12,605
  13,759
  14,962
  16,214
  17,516
  18,869
  20,275
  21,736
  23,255
Depreciation, amort., depletion, $m
  65
  144
  162
  186
  216
  255
  302
  358
  425
  503
  591
  588
  699
  821
  955
  1,100
  1,255
  1,422
  1,598
  1,784
  1,980
  2,186
  2,402
  2,627
  2,862
  3,106
  3,361
  3,625
  3,900
  4,185
  4,482
Funds from operations, $m
  60
  291
  422
  579
  781
  1,032
  1,337
  1,702
  2,131
  2,625
  3,186
  3,789
  4,487
  5,254
  6,088
  6,988
  7,952
  8,978
  10,066
  11,214
  12,420
  13,685
  15,007
  16,386
  17,824
  19,320
  20,876
  22,494
  24,175
  25,922
  27,737
Change in working capital, $m
  -65
  -269
  -366
  -484
  -622
  -780
  -957
  -1,151
  -1,358
  -1,575
  -1,800
  -2,029
  -2,260
  -2,490
  -2,718
  -2,942
  -3,160
  -3,374
  -3,583
  -3,787
  -3,987
  -4,184
  -4,379
  -4,574
  -4,769
  -4,967
  -5,167
  -5,373
  -5,584
  -5,803
  -6,031
Cash from operations, $m
  125
  560
  788
  1,063
  1,403
  1,812
  2,295
  2,853
  3,489
  4,200
  4,987
  5,818
  6,748
  7,745
  8,806
  9,929
  11,112
  12,353
  13,649
  15,001
  16,407
  17,869
  19,386
  20,960
  22,593
  24,287
  26,044
  27,867
  29,759
  31,725
  33,768
Maintenance CAPEX, $m
  0
  -27
  -40
  -58
  -82
  -113
  -151
  -198
  -255
  -322
  -399
  -488
  -588
  -699
  -821
  -955
  -1,100
  -1,255
  -1,422
  -1,598
  -1,784
  -1,980
  -2,186
  -2,402
  -2,627
  -2,862
  -3,106
  -3,361
  -3,625
  -3,900
  -4,185
New CAPEX, $m
  -96
  -364
  -494
  -652
  -839
  -1,052
  -1,291
  -1,552
  -1,831
  -2,124
  -2,428
  -2,737
  -3,048
  -3,358
  -3,665
  -3,967
  -4,262
  -4,550
  -4,832
  -5,107
  -5,377
  -5,642
  -5,906
  -6,168
  -6,432
  -6,698
  -6,968
  -7,245
  -7,531
  -7,826
  -8,132
Cash from investing activities, $m
  40
  -391
  -534
  -710
  -921
  -1,165
  -1,442
  -1,750
  -2,086
  -2,446
  -2,827
  -3,225
  -3,636
  -4,057
  -4,486
  -4,922
  -5,362
  -5,805
  -6,254
  -6,705
  -7,161
  -7,622
  -8,092
  -8,570
  -9,059
  -9,560
  -10,074
  -10,606
  -11,156
  -11,726
  -12,317
Free cash flow, $m
  165
  170
  254
  353
  482
  647
  853
  1,103
  1,403
  1,754
  2,160
  2,594
  3,112
  3,687
  4,320
  5,007
  5,750
  6,547
  7,396
  8,296
  9,246
  10,246
  11,294
  12,390
  13,534
  14,727
  15,969
  17,261
  18,604
  19,999
  21,450
Issuance/(repayment) of debt, $m
  -9
  608
  1,206
  1,593
  2,049
  2,570
  3,153
  3,790
  4,472
  5,188
  5,929
  6,684
  7,444
  8,202
  8,951
  9,688
  10,409
  11,113
  11,800
  12,472
  13,131
  13,780
  14,423
  15,064
  15,708
  16,358
  17,019
  17,695
  18,392
  19,112
  19,861
Issuance/(repurchase) of shares, $m
  0
  230
  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  
  -11
  838
  1,206
  1,593
  2,049
  2,570
  3,153
  3,790
  4,472
  5,188
  5,929
  6,684
  7,444
  8,202
  8,951
  9,688
  10,409
  11,113
  11,800
  12,472
  13,131
  13,780
  14,423
  15,064
  15,708
  16,358
  17,019
  17,695
  18,392
  19,112
  19,861
Total cash flow (excl. dividends), $m
  147
  1,008
  1,460
  1,946
  2,531
  3,217
  4,006
  4,894
  5,875
  6,942
  8,089
  9,278
  10,556
  11,890
  13,271
  14,695
  16,159
  17,660
  19,196
  20,768
  22,377
  24,026
  25,717
  27,455
  29,242
  31,085
  32,988
  34,956
  36,995
  39,112
  41,311
Retained Cash Flow (-), $m
  -10
  -377
  -134
  -177
  -228
  -286
  -350
  -421
  -497
  -576
  -659
  -743
  -827
  -911
  -995
  -1,076
  -1,157
  -1,235
  -1,311
  -1,386
  -1,459
  -1,531
  -1,603
  -1,674
  -1,745
  -1,818
  -1,891
  -1,966
  -2,044
  -2,124
  -2,207
Prev. year cash balance distribution, $m
 
  366
  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
 
  997
  1,326
  1,769
  2,303
  2,932
  3,656
  4,472
  5,378
  6,366
  7,430
  8,535
  9,729
  10,978
  12,276
  13,619
  15,003
  16,425
  17,885
  19,382
  20,918
  22,495
  24,115
  25,781
  27,497
  29,267
  31,097
  32,990
  34,952
  36,988
  39,104
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  925
  1,133
  1,381
  1,630
  1,864
  2,069
  2,230
  2,338
  2,385
  2,371
  2,290
  2,165
  1,997
  1,798
  1,580
  1,355
  1,134
  926
  738
  573
  433
  319
  228
  159
  107
  70
  44
  27
  16
  9
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

Nord Anglia Education, Inc. is an operator of international schools. As of August 31, 2016, the Company taught over 37,000 students, from kindergarten through the end of secondary school (K-12), at its 43 schools in China, Europe, the Middle East, South East Asia and North America. The Company's segments include China, Europe, Middle East (ME), Southeast Asia (SEA), North America and Other. The China segment includes its activities in the People's Republic of China and the Hong Kong Special Administrative Region. The Europe segment includes the Company's activities in Switzerland, Slovakia, Hungary, the Czech Republic, Spain and Poland. The ME segment includes the Company's activities in the United Arab Emirates and Qatar. The SEA segment includes the Company's activities in Thailand, Singapore, Cambodia and Vietnam. The North America segment includes the Company's activities in the United States and Mexico. The Other segment includes the Learning Services division.

FINANCIAL RATIOS  of  Nord Anglia Education (NORD)

Valuation Ratios
P/E Ratio 72.2
Price to Sales 4
Price to Book 11.8
Price to Tangible Book
Price to Cash Flow 27.1
Price to Free Cash Flow 116.9
Growth Rates
Sales Growth Rate 49.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 50%
Cap. Spend. - 3 Yr. Gr. Rate 32%
Financial Strength
Quick Ratio 62
Current Ratio 0
LT Debt to Equity 390.9%
Total Debt to Equity 393%
Interest Coverage 2
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 3.2%
Ret/ On T. Cap. - 3 Yr. Avg. -2.8%
Return On Equity 16.7%
Return On Equity - 3 Yr. Avg. -21.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 39%
Gross Margin - 3 Yr. Avg. 39.2%
EBITDA Margin 22.2%
EBITDA Margin - 3 Yr. Avg. 16.2%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 7.9%
Pre-Tax Margin 7.2%
Pre-Tax Margin - 3 Yr. Avg. -1%
Net Profit Margin 5.5%
Net Profit Margin - 3 Yr. Avg. -4.1%
Effective Tax Rate 21%
Eff/ Tax Rate - 3 Yr. Avg. 14.2%
Payout Ratio 2.1%

NORD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NORD stock intrinsic value calculation we used $856 million for the last fiscal year's total revenue generated by Nord Anglia Education. The default revenue input number comes from 2016 income statement of Nord Anglia Education. 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 NORD stock valuation model: a) initial revenue growth rate of 49.4% 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 7.8%, whose default value for NORD is calculated based on our internal credit rating of Nord Anglia Education, 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 Nord Anglia Education.
    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 NORD stock the variable cost ratio is equal to 79.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $54 million in the base year in the intrinsic value calculation for NORD 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 5.4% for Nord Anglia Education.

Corporate tax rate of 27% is the nominal tax rate for Nord Anglia Education. 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 NORD 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 NORD are equal to 85.9%.

Life of production assets of 27.4 years is the average useful life of capital assets used in Nord Anglia Education 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 NORD is equal to -63.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $287 million for Nord Anglia Education - 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 103.936 million for Nord Anglia Education 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 Nord Anglia Education at the current share price and the inputted number of shares is $3.4 billion.

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Financial statements of NORD
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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