Intrinsic value of Norfolk Southern - NSC

Previous Close

$141.11

  Intrinsic Value

$27.17

stock screener

  Rating & Target

str. sell

-81%

Previous close

$141.11

 
Intrinsic value

$27.17

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of NSC 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 40.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.93
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.78
  5.71
  5.64
  5.57
  5.51
  5.46
  5.42
  5.38
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
Revenue, $m
  9,888
  10,630
  11,400
  12,201
  13,034
  13,899
  14,799
  15,736
  16,711
  17,726
  18,784
  19,887
  21,037
  22,238
  23,491
  24,800
  26,167
  27,597
  29,092
  30,656
  32,292
  34,005
  35,798
  37,676
  39,643
  41,705
  43,865
  46,129
  48,502
  50,991
  53,600
Variable operating expenses, $m
 
  7,717
  8,277
  8,858
  9,462
  10,091
  10,744
  11,424
  12,132
  12,869
  13,637
  14,438
  15,273
  16,145
  17,054
  18,005
  18,998
  20,035
  21,121
  22,256
  23,444
  24,687
  25,989
  27,353
  28,781
  30,278
  31,846
  33,489
  35,213
  37,019
  38,914
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
  6,818
  7,717
  8,277
  8,858
  9,462
  10,091
  10,744
  11,424
  12,132
  12,869
  13,637
  14,438
  15,273
  16,145
  17,054
  18,005
  18,998
  20,035
  21,121
  22,256
  23,444
  24,687
  25,989
  27,353
  28,781
  30,278
  31,846
  33,489
  35,213
  37,019
  38,914
Operating income, $m
  3,070
  2,913
  3,124
  3,343
  3,571
  3,808
  4,055
  4,312
  4,579
  4,857
  5,147
  5,449
  5,764
  6,093
  6,437
  6,795
  7,170
  7,562
  7,971
  8,400
  8,848
  9,317
  9,809
  10,323
  10,862
  11,427
  12,019
  12,639
  13,290
  13,971
  14,687
EBITDA, $m
  4,100
  4,020
  4,312
  4,615
  4,929
  5,257
  5,597
  5,951
  6,320
  6,704
  7,104
  7,521
  7,957
  8,411
  8,885
  9,380
  9,897
  10,437
  11,003
  11,594
  12,213
  12,861
  13,539
  14,249
  14,994
  15,773
  16,590
  17,446
  18,344
  19,285
  20,272
Interest expense (income), $m
  0
  335
  393
  452
  514
  578
  645
  715
  787
  863
  941
  1,023
  1,109
  1,197
  1,290
  1,387
  1,488
  1,594
  1,705
  1,820
  1,941
  2,068
  2,200
  2,339
  2,484
  2,636
  2,796
  2,963
  3,138
  3,322
  3,514
Earnings before tax, $m
  2,582
  2,578
  2,731
  2,891
  3,057
  3,230
  3,410
  3,597
  3,791
  3,994
  4,205
  4,426
  4,656
  4,896
  5,146
  5,408
  5,681
  5,967
  6,266
  6,579
  6,907
  7,249
  7,608
  7,984
  8,378
  8,791
  9,223
  9,676
  10,152
  10,650
  11,173
Tax expense, $m
  914
  696
  737
  781
  825
  872
  921
  971
  1,024
  1,078
  1,135
  1,195
  1,257
  1,322
  1,389
  1,460
  1,534
  1,611
  1,692
  1,776
  1,865
  1,957
  2,054
  2,156
  2,262
  2,373
  2,490
  2,613
  2,741
  2,875
  3,017
Net income, $m
  1,668
  1,882
  1,994
  2,110
  2,232
  2,358
  2,489
  2,625
  2,768
  2,916
  3,070
  3,231
  3,399
  3,574
  3,757
  3,948
  4,147
  4,356
  4,574
  4,803
  5,042
  5,292
  5,554
  5,828
  6,116
  6,417
  6,733
  7,064
  7,411
  7,774
  8,156

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  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
  0
Total assets, $m
  34,892
  36,528
  39,176
  41,928
  44,789
  47,763
  50,856
  54,075
  57,425
  60,914
  64,550
  68,340
  72,293
  76,418
  80,725
  85,223
  89,922
  94,835
  99,972
  105,346
  110,969
  116,855
  123,017
  129,471
  136,231
  143,315
  150,738
  158,518
  166,674
  175,226
  184,194
Adjusted assets (=assets-cash), $m
  33,936
  36,528
  39,176
  41,928
  44,789
  47,763
  50,856
  54,075
  57,425
  60,914
  64,550
  68,340
  72,293
  76,418
  80,725
  85,223
  89,922
  94,835
  99,972
  105,346
  110,969
  116,855
  123,017
  129,471
  136,231
  143,315
  150,738
  158,518
  166,674
  175,226
  184,194
Revenue / Adjusted assets
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
Average production assets, $m
  29,372
  31,570
  33,859
  36,237
  38,710
  41,280
  43,953
  46,735
  49,631
  52,646
  55,788
  59,064
  62,481
  66,046
  69,768
  73,655
  77,717
  81,963
  86,403
  91,047
  95,907
  100,994
  106,320
  111,898
  117,741
  123,863
  130,278
  137,002
  144,052
  151,443
  159,193
Working capital, $m
  -48
  -383
  -410
  -439
  -469
  -500
  -533
  -566
  -602
  -638
  -676
  -716
  -757
  -801
  -846
  -893
  -942
  -993
  -1,047
  -1,104
  -1,163
  -1,224
  -1,289
  -1,356
  -1,427
  -1,501
  -1,579
  -1,661
  -1,746
  -1,836
  -1,930
Total debt, $m
  10,212
  11,216
  12,919
  14,689
  16,528
  18,441
  20,429
  22,499
  24,653
  26,897
  29,235
  31,672
  34,213
  36,866
  39,635
  42,527
  45,549
  48,708
  52,011
  55,467
  59,082
  62,867
  66,829
  70,979
  75,326
  79,880
  84,653
  89,656
  94,901
  100,399
  106,166
Total liabilities, $m
  22,483
  23,487
  25,190
  26,960
  28,799
  30,712
  32,700
  34,770
  36,924
  39,168
  41,506
  43,943
  46,484
  49,137
  51,906
  54,798
  57,820
  60,979
  64,282
  67,738
  71,353
  75,138
  79,100
  83,250
  87,597
  92,151
  96,924
  101,927
  107,172
  112,670
  118,437
Total equity, $m
  12,409
  13,040
  13,986
  14,968
  15,990
  17,051
  18,156
  19,305
  20,501
  21,746
  23,044
  24,397
  25,809
  27,281
  28,819
  30,424
  32,102
  33,856
  35,690
  37,609
  39,616
  41,717
  43,917
  46,221
  48,635
  51,163
  53,813
  56,591
  59,503
  62,556
  65,757
Total liabilities and equity, $m
  34,892
  36,527
  39,176
  41,928
  44,789
  47,763
  50,856
  54,075
  57,425
  60,914
  64,550
  68,340
  72,293
  76,418
  80,725
  85,222
  89,922
  94,835
  99,972
  105,347
  110,969
  116,855
  123,017
  129,471
  136,232
  143,314
  150,737
  158,518
  166,675
  175,226
  184,194
Debt-to-equity ratio
  0.823
  0.860
  0.920
  0.980
  1.030
  1.080
  1.130
  1.170
  1.200
  1.240
  1.270
  1.300
  1.330
  1.350
  1.380
  1.400
  1.420
  1.440
  1.460
  1.470
  1.490
  1.510
  1.520
  1.540
  1.550
  1.560
  1.570
  1.580
  1.590
  1.600
  1.610
Adjusted equity ratio
  0.340
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,668
  1,882
  1,994
  2,110
  2,232
  2,358
  2,489
  2,625
  2,768
  2,916
  3,070
  3,231
  3,399
  3,574
  3,757
  3,948
  4,147
  4,356
  4,574
  4,803
  5,042
  5,292
  5,554
  5,828
  6,116
  6,417
  6,733
  7,064
  7,411
  7,774
  8,156
Depreciation, amort., depletion, $m
  1,030
  1,108
  1,188
  1,271
  1,358
  1,448
  1,542
  1,640
  1,741
  1,847
  1,957
  2,072
  2,192
  2,317
  2,448
  2,584
  2,727
  2,876
  3,032
  3,195
  3,365
  3,544
  3,731
  3,926
  4,131
  4,346
  4,571
  4,807
  5,054
  5,314
  5,586
Funds from operations, $m
  3,189
  2,990
  3,182
  3,382
  3,590
  3,806
  4,031
  4,265
  4,509
  4,763
  5,027
  5,303
  5,591
  5,891
  6,205
  6,532
  6,874
  7,232
  7,606
  7,998
  8,407
  8,836
  9,285
  9,755
  10,247
  10,763
  11,304
  11,871
  12,465
  13,088
  13,742
Change in working capital, $m
  155
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -82
  -85
  -90
  -94
Cash from operations, $m
  3,034
  3,016
  3,209
  3,411
  3,620
  3,837
  4,064
  4,299
  4,544
  4,799
  5,066
  5,343
  5,632
  5,934
  6,250
  6,579
  6,924
  7,284
  7,660
  8,054
  8,466
  8,897
  9,349
  9,822
  10,318
  10,837
  11,382
  11,952
  12,551
  13,178
  13,836
Maintenance CAPEX, $m
  0
  -1,031
  -1,108
  -1,188
  -1,271
  -1,358
  -1,448
  -1,542
  -1,640
  -1,741
  -1,847
  -1,957
  -2,072
  -2,192
  -2,317
  -2,448
  -2,584
  -2,727
  -2,876
  -3,032
  -3,195
  -3,365
  -3,544
  -3,731
  -3,926
  -4,131
  -4,346
  -4,571
  -4,807
  -5,054
  -5,314
New CAPEX, $m
  -1,887
  -2,198
  -2,289
  -2,379
  -2,472
  -2,570
  -2,673
  -2,782
  -2,896
  -3,016
  -3,142
  -3,276
  -3,417
  -3,565
  -3,722
  -3,887
  -4,062
  -4,246
  -4,440
  -4,644
  -4,860
  -5,087
  -5,326
  -5,578
  -5,843
  -6,122
  -6,415
  -6,724
  -7,049
  -7,391
  -7,750
Cash from investing activities, $m
  -1,832
  -3,229
  -3,397
  -3,567
  -3,743
  -3,928
  -4,121
  -4,324
  -4,536
  -4,757
  -4,989
  -5,233
  -5,489
  -5,757
  -6,039
  -6,335
  -6,646
  -6,973
  -7,316
  -7,676
  -8,055
  -8,452
  -8,870
  -9,309
  -9,769
  -10,253
  -10,761
  -11,295
  -11,856
  -12,445
  -13,064
Free cash flow, $m
  1,202
  -213
  -187
  -156
  -124
  -91
  -58
  -25
  9
  42
  76
  110
  143
  177
  210
  244
  277
  311
  344
  378
  411
  445
  480
  514
  549
  584
  620
  657
  694
  732
  771
Issuance/(repayment) of debt, $m
  94
  1,654
  1,703
  1,770
  1,839
  1,912
  1,989
  2,069
  2,154
  2,244
  2,338
  2,437
  2,542
  2,652
  2,769
  2,892
  3,022
  3,159
  3,303
  3,455
  3,616
  3,785
  3,962
  4,150
  4,347
  4,555
  4,773
  5,003
  5,245
  5,499
  5,766
Issuance/(repurchase) of shares, $m
  -746
  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 from financing (excl. dividends), $m  
  -652
  1,654
  1,703
  1,770
  1,839
  1,912
  1,989
  2,069
  2,154
  2,244
  2,338
  2,437
  2,542
  2,652
  2,769
  2,892
  3,022
  3,159
  3,303
  3,455
  3,616
  3,785
  3,962
  4,150
  4,347
  4,555
  4,773
  5,003
  5,245
  5,499
  5,766
Total cash flow (excl. dividends), $m
  550
  1,442
  1,516
  1,614
  1,715
  1,821
  1,931
  2,045
  2,163
  2,286
  2,414
  2,547
  2,685
  2,829
  2,980
  3,136
  3,299
  3,470
  3,647
  3,833
  4,027
  4,230
  4,442
  4,664
  4,896
  5,139
  5,393
  5,660
  5,939
  6,231
  6,538
Retained Cash Flow (-), $m
  -221
  -937
  -945
  -983
  -1,021
  -1,062
  -1,104
  -1,149
  -1,196
  -1,246
  -1,298
  -1,353
  -1,411
  -1,473
  -1,537
  -1,606
  -1,678
  -1,754
  -1,834
  -1,918
  -2,007
  -2,101
  -2,200
  -2,304
  -2,413
  -2,529
  -2,650
  -2,778
  -2,912
  -3,053
  -3,201
Prev. year cash balance distribution, $m
 
  306
  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
 
  810
  570
  631
  694
  759
  826
  896
  967
  1,040
  1,116
  1,194
  1,274
  1,357
  1,442
  1,530
  1,621
  1,716
  1,813
  1,915
  2,020
  2,129
  2,242
  2,360
  2,482
  2,610
  2,743
  2,882
  3,027
  3,178
  3,336
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  761
  500
  513
  519
  519
  512
  499
  480
  456
  427
  395
  360
  323
  286
  249
  213
  180
  149
  121
  96
  75
  58
  43
  31
  22
  16
  11
  7
  4
  3
Current shareholders' claim on cash, %
  100
  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
  100.0

Norfolk Southern Corporation is a holding company engaged in the rail transportation business. As of December 31, 2016, the Company operated approximately 19,500 miles of road primarily in the East and Midwest. The Company is engaged in the rail transportation of raw materials, intermediate products and finished goods primarily in the Southeast, East and Midwest. The Company, through interchange with rail carriers, to and from the rest of the United States. The Company also transports overseas freight through various Atlantic and Gulf Coast ports. It provides logistics services and offers the intermodal network in the eastern half of the United States. The Company's system reaches various manufacturing plants, electric generating facilities, mines, distribution centers and other businesses located in its service area. The Company's intermodal market group consists of shipments moving in trailers, domestic and international containers, and RoadRailer equipment.

FINANCIAL RATIOS  of  Norfolk Southern (NSC)

Valuation Ratios
P/E Ratio 24.6
Price to Sales 4.1
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 13.5
Price to Free Cash Flow 35.7
Growth Rates
Sales Growth Rate -5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20.9%
Cap. Spend. - 3 Yr. Gr. Rate -0.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 77.1%
Total Debt to Equity 82.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 7.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 13.6%
Return On Equity - 3 Yr. Avg. 14.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 44.6%
Gross Margin - 3 Yr. Avg. 42.2%
EBITDA Margin 36.5%
EBITDA Margin - 3 Yr. Avg. 35%
Operating Margin 31%
Oper. Margin - 3 Yr. Avg. 29.7%
Pre-Tax Margin 26.1%
Pre-Tax Margin - 3 Yr. Avg. 25.4%
Net Profit Margin 16.9%
Net Profit Margin - 3 Yr. Avg. 16.3%
Effective Tax Rate 35.4%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 41.7%

NSC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NSC stock intrinsic value calculation we used $9888 million for the last fiscal year's total revenue generated by Norfolk Southern. The default revenue input number comes from 2016 income statement of Norfolk Southern. 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 NSC stock valuation model: a) initial revenue growth rate of 7.5% 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 6.5%, whose default value for NSC is calculated based on our internal credit rating of Norfolk Southern, 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 Norfolk Southern.
    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 NSC stock the variable cost ratio is equal to 72.6%.

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 NSC 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 3.5% for Norfolk Southern.

Corporate tax rate of 27% is the nominal tax rate for Norfolk Southern. 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 NSC 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 NSC are equal to 297%.

Life of production assets of 28.5 years is the average useful life of capital assets used in Norfolk Southern 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 NSC is equal to -3.6%. 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 - $12409 million for Norfolk Southern - 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 288.211 million for Norfolk Southern 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 Norfolk Southern at the current share price and the inputted number of shares is $40.7 billion.

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COMPANY NEWS

▶ CSX Dives Below Buy Point As CEO Harrison Takes Medical Leave   [Dec-15-17 04:14PM  Investor's Business Daily]
▶ CSX Dives Below Buy Point As CEO Harrison Takes Medical Leave   [11:16AM  Investor's Business Daily]
▶ Coal, Intermodal Lead Railroads' Resurgence   [Dec-07-17 02:39PM  Zacks]
▶ Transports charging higher   [Nov-30-17 04:40PM  CNBC Videos]
▶ Norfolk Southern Gets Relative Strength Rating Upgrade   [03:00AM  Investor's Business Daily]
▶ Comparing NSCs Carload Traffic in Week 46   [Nov-28-17 11:06AM  Market Realist]
▶ Five big movers in the blitz   [01:36PM  CNBC Videos]
▶ Why Norfolk Southerns Railcar Traffic Rose in Week 45   [Nov-21-17 04:25PM  Market Realist]
▶ What Pushed Freight Volumes for Norfolk Southern in Week 44?   [Nov-15-17 01:18PM  Market Realist]
▶ Norfolk Southern Running Out of Steam   [Nov-08-17 02:11PM  TheStreet.com]
▶ How Norfolk Southerns Freight Traffic Trended in Week 42   [Oct-31-17 09:03AM  Market Realist]
▶ Why Norfolk Southerns Coal Revenues Rose in 3Q17?   [Oct-27-17 02:31PM  Market Realist]
▶ These 'safety' stocks become dangerous during expansion   [Oct-26-17 07:07PM  CNBC Videos]
▶ Cramer's Stop Trading: Norfork Southern   [09:55AM  CNBC Videos]
▶ Norfolk Southern declares quarterly dividend   [Oct-24-17 12:36PM  PR Newswire]
▶ Rail Freight is Losing Market Share   [Oct-21-17 07:38AM  Forbes]
▶ Norfolk Southern: How Its Freight Volumes Trended in Week 41   [Oct-20-17 05:36PM  Market Realist]
▶ Why CSXs Operating Margins Soared in 3Q17   [Oct-18-17 04:57PM  Market Realist]
▶ CSXs Double-Digit Coal Revenue Rise in 3Q17   [04:57PM  Market Realist]
▶ Inside Norfolk Southerns Freight Volume Growth in Week 39   [Oct-09-17 09:12AM  Market Realist]
▶ Norfolk Southern Names New CIO   [Oct-05-17 04:15PM  The Wall Street Journal]
▶ Yahoo Finance Live: Midday Movers - Oct 4th, 2017   [Oct-04-17 09:40AM  Yahoo Finance Video]
▶ Norfolk Southern names Ehlers chief information officer   [Oct-03-17 04:35PM  PR Newswire]
▶ Norfolk Southern Is Rolling Right Along   [Sep-29-17 02:40PM  TheStreet.com]
Financial statements of NSC
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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