Intrinsic value of Norfolk Southern - NSC

Previous Close

$118.63

  Intrinsic Value

$30.06

stock screener

  Rating & Target

str. sell

-75%

  Value-price divergence*

-92%

Previous close

$118.63

 
Intrinsic value

$30.06

 
Up/down potential

-75%

 
Rating

str. sell

 
Value-price divergence*

-92%

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

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 34.4

 

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, %
  -5.93
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  9,888
  10,521
  11,179
  11,865
  12,580
  13,324
  14,100
  14,910
  15,756
  16,638
  17,561
  18,524
  19,532
  20,586
  21,688
  22,842
  24,050
  25,315
  26,640
  28,028
  29,482
  31,007
  32,604
  34,280
  36,036
  37,878
  39,810
  41,837
  43,963
  46,193
  48,533
Variable operating expenses, $m
 
  7,638
  8,116
  8,614
  9,133
  9,673
  10,237
  10,825
  11,439
  12,080
  12,749
  13,449
  14,180
  14,945
  15,746
  16,583
  17,460
  18,379
  19,341
  20,348
  21,404
  22,511
  23,671
  24,887
  26,162
  27,500
  28,902
  30,373
  31,917
  33,536
  35,235
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
  7,638
  8,116
  8,614
  9,133
  9,673
  10,237
  10,825
  11,439
  12,080
  12,749
  13,449
  14,180
  14,945
  15,746
  16,583
  17,460
  18,379
  19,341
  20,348
  21,404
  22,511
  23,671
  24,887
  26,162
  27,500
  28,902
  30,373
  31,917
  33,536
  35,235
Operating income, $m
  3,070
  2,883
  3,063
  3,251
  3,447
  3,651
  3,864
  4,085
  4,317
  4,559
  4,812
  5,076
  5,352
  5,641
  5,943
  6,259
  6,590
  6,936
  7,299
  7,680
  8,078
  8,496
  8,934
  9,393
  9,874
  10,379
  10,908
  11,463
  12,046
  12,657
  13,298
EBITDA, $m
  4,100
  3,979
  4,228
  4,488
  4,758
  5,039
  5,333
  5,639
  5,959
  6,293
  6,642
  7,006
  7,387
  7,786
  8,203
  8,639
  9,096
  9,574
  10,076
  10,600
  11,151
  11,727
  12,331
  12,965
  13,629
  14,326
  15,057
  15,823
  16,627
  17,471
  18,356
Interest expense (income), $m
  0
  335
  384
  435
  488
  543
  601
  661
  724
  789
  857
  929
  1,003
  1,081
  1,163
  1,248
  1,337
  1,430
  1,528
  1,631
  1,738
  1,851
  1,968
  2,092
  2,222
  2,357
  2,500
  2,649
  2,806
  2,970
  3,143
Earnings before tax, $m
  2,582
  2,548
  2,679
  2,816
  2,959
  3,107
  3,263
  3,424
  3,593
  3,770
  3,954
  4,147
  4,349
  4,559
  4,780
  5,011
  5,253
  5,506
  5,771
  6,049
  6,340
  6,645
  6,965
  7,301
  7,652
  8,021
  8,408
  8,814
  9,240
  9,686
  10,155
Tax expense, $m
  914
  688
  723
  760
  799
  839
  881
  925
  970
  1,018
  1,068
  1,120
  1,174
  1,231
  1,291
  1,353
  1,418
  1,487
  1,558
  1,633
  1,712
  1,794
  1,881
  1,971
  2,066
  2,166
  2,270
  2,380
  2,495
  2,615
  2,742
Net income, $m
  1,668
  1,860
  1,956
  2,056
  2,160
  2,268
  2,382
  2,500
  2,623
  2,752
  2,887
  3,027
  3,174
  3,328
  3,489
  3,658
  3,834
  4,019
  4,213
  4,416
  4,628
  4,851
  5,085
  5,329
  5,586
  5,855
  6,138
  6,434
  6,745
  7,071
  7,413

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
  36,154
  38,417
  40,774
  43,229
  45,787
  48,455
  51,238
  54,143
  57,177
  60,346
  63,658
  67,120
  70,742
  74,530
  78,496
  82,647
  86,993
  91,546
  96,316
  101,314
  106,552
  112,043
  117,799
  123,835
  130,166
  136,805
  143,769
  151,074
  158,738
  166,780
Adjusted assets (=assets-cash), $m
  33,936
  36,154
  38,417
  40,774
  43,229
  45,787
  48,455
  51,238
  54,143
  57,177
  60,346
  63,658
  67,120
  70,742
  74,530
  78,496
  82,647
  86,993
  91,546
  96,316
  101,314
  106,552
  112,043
  117,799
  123,835
  130,166
  136,805
  143,769
  151,074
  158,738
  166,780
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
  31,247
  33,203
  35,240
  37,361
  39,572
  41,878
  44,284
  46,794
  49,416
  52,155
  55,017
  58,010
  61,140
  64,414
  67,841
  71,429
  75,186
  79,121
  83,243
  87,562
  92,090
  96,835
  101,810
  107,027
  112,498
  118,236
  124,255
  130,569
  137,193
  144,143
Working capital, $m
  -48
  -379
  -402
  -427
  -453
  -480
  -508
  -537
  -567
  -599
  -632
  -667
  -703
  -741
  -781
  -822
  -866
  -911
  -959
  -1,009
  -1,061
  -1,116
  -1,174
  -1,234
  -1,297
  -1,364
  -1,433
  -1,506
  -1,583
  -1,663
  -1,747
Total debt, $m
  10,212
  10,976
  12,431
  13,947
  15,525
  17,170
  18,886
  20,675
  22,543
  24,494
  26,531
  28,661
  30,887
  33,216
  35,652
  38,202
  40,871
  43,666
  46,593
  49,660
  52,874
  56,242
  59,772
  63,474
  67,355
  71,425
  75,694
  80,172
  84,870
  89,798
  94,969
Total liabilities, $m
  22,483
  23,247
  24,702
  26,218
  27,796
  29,441
  31,157
  32,946
  34,814
  36,765
  38,802
  40,932
  43,158
  45,487
  47,923
  50,473
  53,142
  55,937
  58,864
  61,931
  65,145
  68,513
  72,043
  75,745
  79,626
  83,696
  87,965
  92,443
  97,141
  102,069
  107,240
Total equity, $m
  12,409
  12,907
  13,715
  14,556
  15,433
  16,346
  17,298
  18,292
  19,329
  20,412
  21,543
  22,726
  23,962
  25,255
  26,607
  28,023
  29,505
  31,057
  32,682
  34,385
  36,169
  38,039
  39,999
  42,054
  44,209
  46,469
  48,839
  51,325
  53,933
  56,670
  59,540
Total liabilities and equity, $m
  34,892
  36,154
  38,417
  40,774
  43,229
  45,787
  48,455
  51,238
  54,143
  57,177
  60,345
  63,658
  67,120
  70,742
  74,530
  78,496
  82,647
  86,994
  91,546
  96,316
  101,314
  106,552
  112,042
  117,799
  123,835
  130,165
  136,804
  143,768
  151,074
  158,739
  166,780
Debt-to-equity ratio
  0.823
  0.850
  0.910
  0.960
  1.010
  1.050
  1.090
  1.130
  1.170
  1.200
  1.230
  1.260
  1.290
  1.320
  1.340
  1.360
  1.390
  1.410
  1.430
  1.440
  1.460
  1.480
  1.490
  1.510
  1.520
  1.540
  1.550
  1.560
  1.570
  1.580
  1.600
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
  1,860
  1,956
  2,056
  2,160
  2,268
  2,382
  2,500
  2,623
  2,752
  2,887
  3,027
  3,174
  3,328
  3,489
  3,658
  3,834
  4,019
  4,213
  4,416
  4,628
  4,851
  5,085
  5,329
  5,586
  5,855
  6,138
  6,434
  6,745
  7,071
  7,413
Depreciation, amort., depletion, $m
  1,030
  1,096
  1,165
  1,236
  1,311
  1,389
  1,469
  1,554
  1,642
  1,734
  1,830
  1,930
  2,035
  2,145
  2,260
  2,380
  2,506
  2,638
  2,776
  2,921
  3,072
  3,231
  3,398
  3,572
  3,755
  3,947
  4,149
  4,360
  4,581
  4,814
  5,058
Funds from operations, $m
  3,189
  2,956
  3,121
  3,292
  3,471
  3,657
  3,851
  4,054
  4,265
  4,486
  4,717
  4,958
  5,210
  5,474
  5,750
  6,038
  6,341
  6,657
  6,989
  7,336
  7,701
  8,082
  8,482
  8,902
  9,342
  9,803
  10,287
  10,794
  11,326
  11,885
  12,471
Change in working capital, $m
  155
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -43
  -46
  -48
  -50
  -52
  -55
  -58
  -60
  -63
  -66
  -70
  -73
  -77
  -80
  -84
Cash from operations, $m
  3,034
  2,979
  3,144
  3,317
  3,496
  3,684
  3,879
  4,083
  4,296
  4,518
  4,750
  4,992
  5,246
  5,512
  5,789
  6,080
  6,384
  6,703
  7,037
  7,386
  7,753
  8,137
  8,540
  8,962
  9,405
  9,869
  10,356
  10,867
  11,403
  11,965
  12,555
Maintenance CAPEX, $m
  0
  -1,031
  -1,096
  -1,165
  -1,236
  -1,311
  -1,389
  -1,469
  -1,554
  -1,642
  -1,734
  -1,830
  -1,930
  -2,035
  -2,145
  -2,260
  -2,380
  -2,506
  -2,638
  -2,776
  -2,921
  -3,072
  -3,231
  -3,398
  -3,572
  -3,755
  -3,947
  -4,149
  -4,360
  -4,581
  -4,814
New CAPEX, $m
  -1,887
  -1,875
  -1,956
  -2,037
  -2,122
  -2,211
  -2,306
  -2,405
  -2,511
  -2,622
  -2,739
  -2,862
  -2,993
  -3,130
  -3,275
  -3,427
  -3,588
  -3,757
  -3,935
  -4,122
  -4,320
  -4,527
  -4,746
  -4,975
  -5,217
  -5,471
  -5,738
  -6,019
  -6,314
  -6,624
  -6,950
Cash from investing activities, $m
  -1,832
  -2,906
  -3,052
  -3,202
  -3,358
  -3,522
  -3,695
  -3,874
  -4,065
  -4,264
  -4,473
  -4,692
  -4,923
  -5,165
  -5,420
  -5,687
  -5,968
  -6,263
  -6,573
  -6,898
  -7,241
  -7,599
  -7,977
  -8,373
  -8,789
  -9,226
  -9,685
  -10,168
  -10,674
  -11,205
  -11,764
Free cash flow, $m
  1,202
  73
  92
  115
  138
  162
  185
  208
  231
  254
  277
  300
  323
  346
  369
  393
  416
  440
  464
  488
  513
  538
  563
  589
  616
  643
  671
  700
  729
  760
  791
Issuance/(repayment) of debt, $m
  94
  1,414
  1,455
  1,515
  1,578
  1,645
  1,715
  1,790
  1,868
  1,951
  2,038
  2,130
  2,226
  2,329
  2,436
  2,550
  2,669
  2,795
  2,927
  3,067
  3,214
  3,368
  3,531
  3,701
  3,881
  4,070
  4,269
  4,478
  4,697
  4,928
  5,171
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
  1,414
  1,455
  1,515
  1,578
  1,645
  1,715
  1,790
  1,868
  1,951
  2,038
  2,130
  2,226
  2,329
  2,436
  2,550
  2,669
  2,795
  2,927
  3,067
  3,214
  3,368
  3,531
  3,701
  3,881
  4,070
  4,269
  4,478
  4,697
  4,928
  5,171
Total cash flow (excl. dividends), $m
  550
  1,487
  1,547
  1,630
  1,717
  1,807
  1,900
  1,998
  2,099
  2,205
  2,315
  2,430
  2,550
  2,675
  2,806
  2,942
  3,085
  3,235
  3,391
  3,555
  3,726
  3,906
  4,094
  4,291
  4,497
  4,713
  4,940
  5,177
  5,427
  5,688
  5,962
Retained Cash Flow (-), $m
  -221
  -804
  -808
  -841
  -876
  -913
  -952
  -994
  -1,037
  -1,083
  -1,131
  -1,182
  -1,236
  -1,293
  -1,353
  -1,416
  -1,482
  -1,552
  -1,625
  -1,703
  -1,784
  -1,870
  -1,960
  -2,055
  -2,155
  -2,260
  -2,370
  -2,486
  -2,608
  -2,736
  -2,871
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
 
  989
  739
  789
  840
  893
  948
  1,004
  1,062
  1,122
  1,183
  1,247
  1,313
  1,382
  1,453
  1,527
  1,603
  1,683
  1,766
  1,852
  1,942
  2,036
  2,133
  2,235
  2,342
  2,453
  2,570
  2,691
  2,819
  2,952
  3,091
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
 
  929
  648
  641
  629
  611
  588
  559
  527
  491
  453
  412
  371
  329
  288
  248
  211
  176
  145
  117
  93
  72
  55
  41
  30
  21
  15
  10
  6
  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, together with its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods in the United States. It also transports overseas freight through various Atlantic and Gulf Coast ports. In addition, the company is involved in the operation of scheduled passenger trains; leasing or sale of rail property and equipment; development of commercial real estate; telecommunications; and the acquisition, leasing, and management of coal, oil, gas, and minerals, as well as the transport of automotive and industrial products. As of February 14, 2017, it operated approximately 19,500 route miles in 22 states and the District of Columbia. The company was founded in 1883 and is based in Norfolk, Virginia.

FINANCIAL RATIOS  of  Norfolk Southern (NSC)

Valuation Ratios
P/E Ratio 20.7
Price to Sales 3.5
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 11.4
Price to Free Cash Flow 30
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 6.4% 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 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 290.312 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 $34.4 billion.

RELATED COMPANIES Price Int.Val. Rating
CSX CSX 48.78 15.09  str.sell
UNP Union Pacific 103.90 58.92  sell
KSU Kansas City So 105.80 9.57  str.sell
GWR Genesee&Wyomin 65.56 37.34  sell
CP Canadian Pacif 152.11 55.02  str.sell
CNI Canadian Natio 79.50 27.16  str.sell

COMPANY NEWS

▶ Norfolk Southern Promotes CIO Cynthia Earhart to CFO   [Aug-16-17 01:27PM  The Wall Street Journal]
▶ Coal Revival: A Blessing for Railroads   [Aug-10-17 05:57PM  Zacks]
▶ Railroad Industry Stock Outlook - August 2017   [Aug-09-17 03:54PM  Zacks]
▶ Norfolk Southern: Railcars Derailed but Intermodal Rose   [Aug-08-17 08:10AM  Market Realist]
▶ Did Genesee & Wyoming Beat Its Own Revenue Guidance in 2Q17?   [Aug-07-17 09:35AM  Market Realist]
▶ How Analysts View Norfolk Southern after Its 2Q17 Results   [Aug-02-17 07:36AM  Market Realist]
▶ Inside the Solid Rise of NSCs 2Q17 Coal Revenues   [Jul-31-17 04:35PM  Market Realist]
▶ The Market In 5 Minutes   [09:03AM  Benzinga]
▶ Norfolk Southern declares quarterly dividend   [Jul-28-17 02:26PM  PR Newswire]
▶ [$$] Norfolk Southern Says Its Winning Customers From CSX   [01:09AM  The Wall Street Journal]
▶ Norfolk Southern beats 2Q profit forecasts   [Jul-26-17 05:00PM  Associated Press]
▶ [$$] Norfolk Southern Says It's Winning Customers From CSX   [11:43AM  The Wall Street Journal]
▶ Behind Norfolk Southerns Intermodal Surge   [09:11AM  Market Realist]
▶ Inside Norfolk Southerns Freight in Week 28   [07:40AM  Market Realist]
▶ What Led to the Solid Jump in CSXs Coal Revenues in 2Q17?   [Jul-20-17 01:35PM  Market Realist]
▶ The Latest on Canadian Pacifics Freight Volumes   [Jul-19-17 09:06AM  Market Realist]
▶ CSX Rolls Past Q2 Forecasts, Led By Coal, Fuel Recoveries   [04:19PM  Investor's Business Daily]
▶ BNSF Railways Intermodal versus UNPs   [10:37AM  Market Realist]
▶ What Really Pushed CSXs Freight Volumes in Week 27?   [Jul-17-17 10:42AM  Market Realist]
▶ U.S. Coal Industry Is Dying, But Isn't Buried Yet   [Jul-12-17 07:44AM  TheStreet.com]
▶ Behind Norfolk Southerns Freight Volumes in Week 26   [Jul-10-17 04:35PM  Market Realist]
▶ Inside CSXs Week 25 Railcar Freight Volumes   [Jul-04-17 05:35PM  Market Realist]
▶ Why Investors Should Watch the Truck Tonnage Index   [Jun-30-17 07:38AM  Market Realist]
▶ Behind Norfolk Southerns Intermodal Volumes in Week 24   [Jun-26-17 05:05PM  Market Realist]
▶ Inside Genesee & Wyomings May 2017 Freight Volumes   [Jun-23-17 07:35AM  Market Realist]
▶ CSX: Behind Its Carloads Volume in Week 23   [Jun-21-17 07:36AM  Market Realist]
▶ The Two Railroads Warren Buffett Sold May Be On Track To Break Out   [Jun-01-17 04:24PM  Investor's Business Daily]
▶ Reviewing GWRs European Carloads in April 2017   [May-26-17 07:36AM  Market Realist]
▶ How GWRs North American Carloads Trended in April 2017   [May-25-17 10:36AM  Market Realist]
▶ Inside CSXs Intermodal Traffic in Week 19   [May-24-17 10:37AM  Market Realist]
Stock chart of NSC 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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