Intrinsic value of Nationstar Mortgage Holdings - NSM

Previous Close

$19.65

  Intrinsic Value

$27.82

stock screener

  Rating & Target

buy

+42%

Previous close

$19.65

 
Intrinsic value

$27.82

 
Up/down potential

+42%

 
Rating

buy

Our model is not good at valuating stocks of financial companies, such as NSM.

We calculate the intrinsic value of NSM 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 1.9

 

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, %
  -3.72
  15.50
  14.45
  13.51
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
Revenue, $m
  1,915
  2,212
  2,531
  2,873
  3,237
  3,622
  4,027
  4,453
  4,900
  5,366
  5,853
  6,360
  6,887
  7,436
  8,006
  8,599
  9,215
  9,855
  10,520
  11,212
  11,931
  12,680
  13,460
  14,272
  15,119
  16,001
  16,922
  17,883
  18,886
  19,934
  21,029
Variable operating expenses, $m
 
  1,315
  1,504
  1,706
  1,921
  2,148
  2,388
  2,640
  2,904
  3,180
  3,467
  3,760
  4,071
  4,396
  4,733
  5,083
  5,447
  5,825
  6,219
  6,628
  7,053
  7,496
  7,957
  8,437
  8,937
  9,459
  10,003
  10,571
  11,164
  11,784
  12,431
Fixed operating expenses, $m
 
  531
  544
  558
  572
  586
  601
  616
  631
  647
  663
  680
  697
  714
  732
  750
  769
  788
  808
  828
  849
  870
  892
  914
  937
  960
  984
  1,009
  1,034
  1,060
  1,087
Total operating expenses, $m
  1,644
  1,846
  2,048
  2,264
  2,493
  2,734
  2,989
  3,256
  3,535
  3,827
  4,130
  4,440
  4,768
  5,110
  5,465
  5,833
  6,216
  6,613
  7,027
  7,456
  7,902
  8,366
  8,849
  9,351
  9,874
  10,419
  10,987
  11,580
  12,198
  12,844
  13,518
Operating income, $m
  271
  366
  483
  610
  744
  887
  1,039
  1,198
  1,365
  1,540
  1,723
  1,921
  2,119
  2,326
  2,542
  2,766
  2,999
  3,241
  3,493
  3,756
  4,030
  4,315
  4,612
  4,921
  5,245
  5,582
  5,934
  6,303
  6,688
  7,090
  7,512
EBITDA, $m
  334
  506
  643
  789
  946
  1,112
  1,287
  1,472
  1,666
  1,869
  2,081
  2,302
  2,532
  2,772
  3,022
  3,281
  3,551
  3,832
  4,124
  4,428
  4,745
  5,075
  5,419
  5,777
  6,151
  6,542
  6,949
  7,375
  7,820
  8,286
  8,773
Interest expense (income), $m
  694
  773
  875
  1,021
  1,178
  1,345
  1,522
  1,708
  1,904
  2,109
  2,323
  2,546
  2,779
  3,021
  3,273
  3,534
  3,806
  4,089
  4,383
  4,688
  5,006
  5,336
  5,680
  6,038
  6,410
  6,799
  7,204
  7,627
  8,068
  8,528
  9,009
Earnings before tax, $m
  29
  -407
  -391
  -412
  -434
  -458
  -483
  -510
  -539
  -569
  -600
  -625
  -659
  -695
  -731
  -769
  -808
  -848
  -890
  -932
  -976
  -1,022
  -1,068
  -1,116
  -1,166
  -1,217
  -1,270
  -1,324
  -1,380
  -1,438
  -1,498
Tax expense, $m
  13
  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
  19
  -407
  -391
  -412
  -434
  -458
  -483
  -510
  -539
  -569
  -600
  -625
  -659
  -695
  -731
  -769
  -808
  -848
  -890
  -932
  -976
  -1,022
  -1,068
  -1,116
  -1,166
  -1,217
  -1,270
  -1,324
  -1,380
  -1,438
  -1,498

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  489
  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
  19,593
  22,118
  25,314
  28,733
  32,369
  36,217
  40,274
  44,535
  48,998
  53,663
  58,529
  63,598
  68,874
  74,360
  80,062
  85,989
  92,147
  98,547
  105,200
  112,118
  119,314
  126,803
  134,600
  142,722
  151,186
  160,012
  169,219
  178,828
  188,861
  199,342
  210,295
Adjusted assets (=assets-cash), $m
  19,104
  22,118
  25,314
  28,733
  32,369
  36,217
  40,274
  44,535
  48,998
  53,663
  58,529
  63,598
  68,874
  74,360
  80,062
  85,989
  92,147
  98,547
  105,200
  112,118
  119,314
  126,803
  134,600
  142,722
  151,186
  160,012
  169,219
  178,828
  188,861
  199,342
  210,295
Revenue / Adjusted assets
  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
  0.100
Average production assets, $m
  3,445
  3,979
  4,554
  5,169
  5,823
  6,516
  7,245
  8,012
  8,815
  9,654
  10,529
  11,441
  12,390
  13,377
  14,403
  15,469
  16,577
  17,729
  18,926
  20,170
  21,465
  22,812
  24,215
  25,676
  27,198
  28,786
  30,442
  32,171
  33,976
  35,862
  37,832
Working capital, $m
  0
  -564
  -646
  -733
  -825
  -924
  -1,027
  -1,136
  -1,249
  -1,368
  -1,492
  -1,622
  -1,756
  -1,896
  -2,042
  -2,193
  -2,350
  -2,513
  -2,683
  -2,859
  -3,043
  -3,233
  -3,432
  -3,639
  -3,855
  -4,080
  -4,315
  -4,560
  -4,816
  -5,083
  -5,363
Total debt, $m
  15,162
  17,152
  20,029
  23,106
  26,378
  29,842
  33,492
  37,327
  41,344
  45,543
  49,922
  54,484
  59,232
  64,170
  69,302
  74,636
  80,178
  85,939
  91,926
  98,152
  104,629
  111,369
  118,386
  125,696
  133,314
  141,257
  149,543
  158,191
  167,221
  176,654
  186,511
Total liabilities, $m
  17,916
  19,906
  22,783
  25,860
  29,132
  32,596
  36,246
  40,081
  44,098
  48,297
  52,676
  57,238
  61,986
  66,924
  72,056
  77,390
  82,932
  88,693
  94,680
  100,906
  107,383
  114,123
  121,140
  128,450
  136,068
  144,011
  152,297
  160,945
  169,975
  179,408
  189,265
Total equity, $m
  1,677
  2,212
  2,531
  2,873
  3,237
  3,622
  4,027
  4,453
  4,900
  5,366
  5,853
  6,360
  6,887
  7,436
  8,006
  8,599
  9,215
  9,855
  10,520
  11,212
  11,931
  12,680
  13,460
  14,272
  15,119
  16,001
  16,922
  17,883
  18,886
  19,934
  21,029
Total liabilities and equity, $m
  19,593
  22,118
  25,314
  28,733
  32,369
  36,218
  40,273
  44,534
  48,998
  53,663
  58,529
  63,598
  68,873
  74,360
  80,062
  85,989
  92,147
  98,548
  105,200
  112,118
  119,314
  126,803
  134,600
  142,722
  151,187
  160,012
  169,219
  178,828
  188,861
  199,342
  210,294
Debt-to-equity ratio
  9.041
  7.750
  7.910
  8.040
  8.150
  8.240
  8.320
  8.380
  8.440
  8.490
  8.530
  8.570
  8.600
  8.630
  8.660
  8.680
  8.700
  8.720
  8.740
  8.750
  8.770
  8.780
  8.800
  8.810
  8.820
  8.830
  8.840
  8.850
  8.850
  8.860
  8.870
Adjusted equity ratio
  0.062
  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
  19
  -407
  -391
  -412
  -434
  -458
  -483
  -510
  -539
  -569
  -600
  -625
  -659
  -695
  -731
  -769
  -808
  -848
  -890
  -932
  -976
  -1,022
  -1,068
  -1,116
  -1,166
  -1,217
  -1,270
  -1,324
  -1,380
  -1,438
  -1,498
Depreciation, amort., depletion, $m
  63
  140
  159
  180
  202
  225
  249
  274
  301
  329
  358
  381
  413
  446
  480
  516
  553
  591
  631
  672
  715
  760
  807
  856
  907
  960
  1,015
  1,072
  1,133
  1,195
  1,261
Funds from operations, $m
  1,760
  -267
  -232
  -232
  -233
  -233
  -234
  -236
  -238
  -240
  -242
  -244
  -246
  -249
  -251
  -253
  -255
  -257
  -259
  -260
  -261
  -261
  -261
  -261
  -259
  -257
  -255
  -252
  -248
  -243
  -237
Change in working capital, $m
  789
  -76
  -82
  -87
  -93
  -98
  -103
  -109
  -114
  -119
  -124
  -129
  -135
  -140
  -145
  -151
  -157
  -163
  -170
  -176
  -184
  -191
  -199
  -207
  -216
  -225
  -235
  -245
  -256
  -267
  -279
Cash from operations, $m
  971
  -192
  -151
  -145
  -140
  -135
  -131
  -127
  -124
  -121
  -118
  -115
  -112
  -109
  -106
  -102
  -98
  -94
  -89
  -83
  -77
  -70
  -62
  -53
  -43
  -32
  -20
  -7
  8
  25
  43
Maintenance CAPEX, $m
  0
  -115
  -133
  -152
  -172
  -194
  -217
  -242
  -267
  -294
  -322
  -351
  -381
  -413
  -446
  -480
  -516
  -553
  -591
  -631
  -672
  -715
  -760
  -807
  -856
  -907
  -960
  -1,015
  -1,072
  -1,133
  -1,195
New CAPEX, $m
  -62
  -534
  -575
  -615
  -654
  -692
  -730
  -767
  -803
  -839
  -875
  -912
  -949
  -987
  -1,026
  -1,066
  -1,108
  -1,151
  -1,197
  -1,245
  -1,295
  -1,347
  -1,403
  -1,461
  -1,523
  -1,588
  -1,656
  -1,729
  -1,805
  -1,886
  -1,970
Cash from investing activities, $m
  -3,738
  -649
  -708
  -767
  -826
  -886
  -947
  -1,009
  -1,070
  -1,133
  -1,197
  -1,263
  -1,330
  -1,400
  -1,472
  -1,546
  -1,624
  -1,704
  -1,788
  -1,876
  -1,967
  -2,062
  -2,163
  -2,268
  -2,379
  -2,495
  -2,616
  -2,744
  -2,877
  -3,019
  -3,165
Free cash flow, $m
  -2,767
  -840
  -858
  -912
  -966
  -1,022
  -1,078
  -1,135
  -1,194
  -1,254
  -1,315
  -1,378
  -1,442
  -1,509
  -1,577
  -1,648
  -1,722
  -1,798
  -1,877
  -1,959
  -2,044
  -2,133
  -2,225
  -2,322
  -2,422
  -2,527
  -2,636
  -2,750
  -2,869
  -2,993
  -3,123
Issuance/(repayment) of debt, $m
  482
  1,990
  2,876
  3,077
  3,272
  3,464
  3,651
  3,835
  4,017
  4,198
  4,379
  4,562
  4,748
  4,938
  5,132
  5,334
  5,543
  5,760
  5,988
  6,226
  6,477
  6,740
  7,017
  7,310
  7,618
  7,943
  8,286
  8,648
  9,030
  9,433
  9,858
Issuance/(repurchase) of shares, $m
  -114
  1,431
  711
  754
  798
  843
  889
  936
  985
  1,035
  1,087
  1,132
  1,187
  1,243
  1,301
  1,361
  1,424
  1,488
  1,555
  1,624
  1,696
  1,770
  1,848
  1,929
  2,012
  2,100
  2,190
  2,285
  2,383
  2,486
  2,593
Cash from financing (excl. dividends), $m  
  2,643
  3,421
  3,587
  3,831
  4,070
  4,307
  4,540
  4,771
  5,002
  5,233
  5,466
  5,694
  5,935
  6,181
  6,433
  6,695
  6,967
  7,248
  7,543
  7,850
  8,173
  8,510
  8,865
  9,239
  9,630
  10,043
  10,476
  10,933
  11,413
  11,919
  12,451
Total cash flow (excl. dividends), $m
  -124
  2,581
  2,729
  2,919
  3,104
  3,285
  3,462
  3,636
  3,808
  3,980
  4,151
  4,317
  4,493
  4,672
  4,856
  5,047
  5,244
  5,450
  5,666
  5,891
  6,128
  6,377
  6,640
  6,916
  7,208
  7,516
  7,840
  8,183
  8,544
  8,925
  9,328
Retained Cash Flow (-), $m
  81
  -1,431
  -711
  -754
  -798
  -843
  -889
  -936
  -985
  -1,035
  -1,087
  -1,132
  -1,187
  -1,243
  -1,301
  -1,361
  -1,424
  -1,488
  -1,555
  -1,624
  -1,696
  -1,770
  -1,848
  -1,929
  -2,012
  -2,100
  -2,190
  -2,285
  -2,383
  -2,486
  -2,593
Prev. year cash balance distribution, $m
 
  489
  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
 
  1,639
  2,018
  2,165
  2,306
  2,442
  2,573
  2,700
  2,823
  2,944
  3,065
  3,185
  3,306
  3,429
  3,555
  3,685
  3,821
  3,962
  4,111
  4,267
  4,432
  4,607
  4,792
  4,988
  5,196
  5,416
  5,650
  5,898
  6,161
  6,439
  6,735
Discount rate, %
 
  14.10
  14.81
  15.55
  16.32
  17.14
  18.00
  18.90
  19.84
  20.83
  21.87
  22.97
  24.12
  25.32
  26.59
  27.92
  29.31
  30.78
  32.32
  33.93
  35.63
  37.41
  39.28
  41.25
  43.31
  45.47
  47.75
  50.13
  52.64
  55.27
  58.04
PV of cash for distribution, $m
 
  1,436
  1,531
  1,403
  1,260
  1,107
  953
  804
  664
  536
  424
  328
  247
  182
  131
  92
  63
  41
  27
  17
  10
  6
  3
  2
  1
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  48.7
  38.0
  30.2
  24.3
  19.8
  16.3
  13.6
  11.4
  9.6
  8.1
  7.0
  6.0
  5.2
  4.5
  3.9
  3.4
  3.0
  2.6
  2.3
  2.0
  1.8
  1.6
  1.4
  1.3
  1.1
  1.0
  0.9
  0.8
  0.7
  0.7

Nationstar Mortgage Holdings Inc. provides servicing, origination and transaction based services principally to single-family residences throughout the United States. The Company operates through three segments: Servicing, Originations and Xome. The Company provides residential loan services in the United States. The Company also operates an integrated residential loan origination platform that is primarily focused on customer retention. Its Xome subsidiary offers an array of complementary services related to the purchase and disposition of residential real estate. It provides non-bank services and residential mortgage services in the United States conducting operations through its Nationstar Mortgage and Champion Mortgage brands. It originates and purchases conventional mortgage loans conforming to the underwriting standards of the government sponsored entities, which it collectively refers to as Agency loans. The Xome segment is a provider of technology and data-enhanced solutions.

FINANCIAL RATIOS  of  Nationstar Mortgage Holdings (NSM)

Valuation Ratios
P/E Ratio 100.8
Price to Sales 1
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 2
Price to Free Cash Flow 2.1
Growth Rates
Sales Growth Rate -3.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 8.8%
Cap. Spend. - 3 Yr. Gr. Rate 4.8%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 904.1%
Total Debt to Equity 904.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 2.2%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 0.1%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity 1.1%
Return On Equity - 3 Yr. Avg. 7.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 41%
EBITDA Margin - 3 Yr. Avg. 36.9%
Operating Margin 14.2%
Oper. Margin - 3 Yr. Avg. 20.2%
Pre-Tax Margin 1.5%
Pre-Tax Margin - 3 Yr. Avg. 6.2%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. 4.7%
Effective Tax Rate 44.8%
Eff/ Tax Rate - 3 Yr. Avg. 29.3%
Payout Ratio 0%

NSM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NSM stock intrinsic value calculation we used $1915 million for the last fiscal year's total revenue generated by Nationstar Mortgage Holdings. The default revenue input number comes from 2016 income statement of Nationstar Mortgage Holdings. 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 NSM stock valuation model: a) initial revenue growth rate of 15.5% 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 14.1%, whose default value for NSM is calculated based on our internal credit rating of Nationstar Mortgage Holdings, 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 Nationstar Mortgage Holdings.
    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 NSM stock the variable cost ratio is equal to 59.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $518 million in the base year in the intrinsic value calculation for NSM 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 5.1% for Nationstar Mortgage Holdings.

Corporate tax rate of 27% is the nominal tax rate for Nationstar Mortgage Holdings. 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 NSM 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 NSM are equal to 179.9%.

Life of production assets of 55.8 years is the average useful life of capital assets used in Nationstar Mortgage Holdings 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 NSM is equal to -25.5%. 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 - $1677 million for Nationstar Mortgage Holdings - 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 97.71 million for Nationstar Mortgage Holdings 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 Nationstar Mortgage Holdings at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ Nationstar Rebrands as Mr. Cooper   [Aug-23-17 10:30PM  Business Wire]
▶ Nationstar Rebrands as Mr. Cooper   [Aug-21-17 10:45AM  Business Wire]
▶ Today's Bell Ringer, August 21, 2017   [09:13AM  CNBC Videos]
▶ Nationstar reports 2Q loss   [Aug-03-17 07:40PM  Associated Press]
▶ Nationstar misses 1Q profit forecasts   [May-04-17 08:57AM  Associated Press]
▶ Nationstar to Officially Become Mr. Cooper in August 2017   [May-02-17 09:00AM  Business Wire]
▶ Nationstar to Discuss First Quarter Results on May 4, 2017   [Apr-20-17 04:00PM  Business Wire]
▶ Nationstar posts 4Q profit   [07:31AM  Associated Press]
▶ Should You Avoid Nationstar Mortgage Holdings Inc (NSM)?   [Dec-06-16 08:01PM  at Insider Monkey]
Financial statements of NSM
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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