Intrinsic value of Newell Brands - NWL

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$53.10

  Intrinsic Value

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  Value-price divergence*

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$53.10

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

We calculate the intrinsic value of NWL 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 25.4

 

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, %
  124.21
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  13,264
  21,222
  32,789
  49,035
  71,148
  100,379
  137,998
  185,234
  243,224
  312,971
  395,307
  490,882
  600,150
  723,383
  860,683
  1,012,010
  1,177,211
  1,356,048
  1,548,233
  1,753,455
  1,971,403
  2,201,796
  2,444,391
  2,699,004
  2,965,520
  3,243,898
  3,534,177
  3,836,476
  4,150,999
  4,478,032
  4,817,940
Variable operating expenses, $m
 
  18,802
  28,488
  42,095
  60,614
  85,095
  116,601
  156,161
  204,728
  263,140
  332,097
  411,112
  502,624
  605,831
  720,819
  847,555
  985,910
  1,135,686
  1,296,641
  1,468,513
  1,651,044
  1,843,997
  2,047,170
  2,260,408
  2,483,614
  2,716,755
  2,959,862
  3,213,037
  3,476,449
  3,750,338
  4,035,010
Fixed operating expenses, $m
 
  77
  79
  81
  83
  85
  87
  89
  91
  94
  96
  98
  101
  103
  106
  109
  111
  114
  117
  120
  123
  126
  129
  132
  136
  139
  143
  146
  150
  153
  157
Total operating expenses, $m
  12,212
  18,879
  28,567
  42,176
  60,697
  85,180
  116,688
  156,250
  204,819
  263,234
  332,193
  411,210
  502,725
  605,934
  720,925
  847,664
  986,021
  1,135,800
  1,296,758
  1,468,633
  1,651,167
  1,844,123
  2,047,299
  2,260,540
  2,483,750
  2,716,894
  2,960,005
  3,213,183
  3,476,599
  3,750,491
  4,035,167
Operating income, $m
  1,053
  2,344
  4,221
  6,860
  10,451
  15,199
  21,310
  28,984
  38,405
  49,737
  63,115
  79,671
  97,425
  117,448
  139,758
  164,346
  191,189
  220,248
  251,476
  284,822
  320,236
  357,672
  397,092
  438,464
  481,770
  527,004
  574,172
  623,293
  674,400
  727,540
  782,773
EBITDA, $m
  1,490
  3,793
  5,900
  8,860
  12,890
  18,218
  25,075
  33,686
  44,257
  56,972
  71,983
  89,407
  109,328
  131,796
  156,828
  184,418
  214,537
  247,143
  282,182
  319,599
  359,336
  401,341
  445,572
  491,994
  540,587
  591,342
  644,266
  699,383
  756,728
  816,355
  878,328
Interest expense (income), $m
  316
  396
  855
  1,524
  2,462
  3,740
  5,429
  7,602
  10,331
  13,682
  17,711
  22,469
  27,991
  34,304
  41,424
  49,356
  58,099
  67,644
  77,977
  89,080
  100,937
  113,530
  126,841
  140,857
  155,568
  170,966
  187,050
  203,821
  221,287
  239,459
  258,354
Earnings before tax, $m
  815
  1,948
  3,366
  5,336
  7,989
  11,459
  15,881
  21,382
  28,074
  36,055
  45,403
  57,203
  69,435
  83,145
  98,334
  114,990
  133,089
  152,604
  173,499
  195,741
  219,299
  244,143
  270,251
  297,607
  326,202
  356,038
  387,122
  419,472
  453,113
  488,081
  524,419
Tax expense, $m
  286
  526
  909
  1,441
  2,157
  3,094
  4,288
  5,773
  7,580
  9,735
  12,259
  15,445
  18,747
  22,449
  26,550
  31,047
  35,934
  41,203
  46,845
  52,850
  59,211
  65,919
  72,968
  80,354
  88,075
  96,130
  104,523
  113,257
  122,341
  131,782
  141,593
Net income, $m
  528
  1,422
  2,457
  3,895
  5,832
  8,365
  11,593
  15,609
  20,494
  26,320
  33,144
  41,758
  50,687
  60,696
  71,784
  83,943
  97,155
  111,401
  126,654
  142,891
  160,088
  178,224
  197,283
  217,253
  238,128
  259,908
  282,599
  306,214
  330,773
  356,299
  382,826

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  588
  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
  33,838
  53,323
  82,383
  123,204
  178,763
  252,209
  346,730
  465,413
  611,116
  786,358
  993,234
  1,233,372
  1,507,915
  1,817,545
  2,162,519
  2,542,739
  2,957,816
  3,407,155
  3,890,033
  4,405,665
  4,953,275
  5,532,150
  6,141,685
  6,781,418
  7,451,056
  8,150,499
  8,879,841
  9,639,387
  10,429,646
  11,251,337
  12,105,378
Adjusted assets (=assets-cash), $m
  33,250
  53,323
  82,383
  123,204
  178,763
  252,209
  346,730
  465,413
  611,116
  786,358
  993,234
  1,233,372
  1,507,915
  1,817,545
  2,162,519
  2,542,739
  2,957,816
  3,407,155
  3,890,033
  4,405,665
  4,953,275
  5,532,150
  6,141,685
  6,781,418
  7,451,056
  8,150,499
  8,879,841
  9,639,387
  10,429,646
  11,251,337
  12,105,378
Revenue / Adjusted assets
  0.399
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
  0.398
Average production assets, $m
  8,659
  12,627
  19,509
  29,176
  42,333
  59,726
  82,109
  110,214
  144,718
  186,217
  235,208
  292,075
  357,089
  430,413
  512,106
  602,146
  700,440
  806,848
  921,199
  1,043,305
  1,172,985
  1,310,068
  1,454,412
  1,605,907
  1,764,485
  1,930,120
  2,102,835
  2,282,703
  2,469,845
  2,664,429
  2,866,674
Working capital, $m
  3,193
  5,136
  7,935
  11,867
  17,218
  24,292
  33,396
  44,827
  58,860
  75,739
  95,664
  118,793
  145,236
  175,059
  208,285
  244,906
  284,885
  328,164
  374,672
  424,336
  477,080
  532,835
  591,543
  653,159
  717,656
  785,023
  855,271
  928,427
  1,004,542
  1,083,684
  1,165,942
Total debt, $m
  11,893
  24,438
  43,531
  70,350
  106,853
  155,107
  217,206
  295,181
  390,908
  506,042
  641,960
  799,730
  980,105
  1,183,532
  1,410,180
  1,659,984
  1,932,690
  2,227,906
  2,545,157
  2,883,927
  3,243,707
  3,624,028
  4,024,492
  4,444,796
  4,884,749
  5,344,283
  5,823,461
  6,322,482
  6,841,683
  7,381,533
  7,942,638
Total liabilities, $m
  22,489
  35,033
  54,126
  80,945
  117,448
  165,702
  227,801
  305,776
  401,503
  516,637
  652,555
  810,325
  990,700
  1,194,127
  1,420,775
  1,670,579
  1,943,285
  2,238,501
  2,555,752
  2,894,522
  3,254,302
  3,634,623
  4,035,087
  4,455,391
  4,895,344
  5,354,878
  5,834,056
  6,333,077
  6,852,278
  7,392,128
  7,953,233
Total equity, $m
  11,349
  18,290
  28,258
  42,259
  61,316
  86,508
  118,928
  159,637
  209,613
  269,721
  340,679
  423,046
  517,215
  623,418
  741,744
  872,159
  1,014,531
  1,168,654
  1,334,281
  1,511,143
  1,698,973
  1,897,527
  2,106,598
  2,326,026
  2,555,712
  2,795,621
  3,045,785
  3,306,310
  3,577,369
  3,859,209
  4,152,144
Total liabilities and equity, $m
  33,838
  53,323
  82,384
  123,204
  178,764
  252,210
  346,729
  465,413
  611,116
  786,358
  993,234
  1,233,371
  1,507,915
  1,817,545
  2,162,519
  2,542,738
  2,957,816
  3,407,155
  3,890,033
  4,405,665
  4,953,275
  5,532,150
  6,141,685
  6,781,417
  7,451,056
  8,150,499
  8,879,841
  9,639,387
  10,429,647
  11,251,337
  12,105,377
Debt-to-equity ratio
  1.048
  1.340
  1.540
  1.660
  1.740
  1.790
  1.830
  1.850
  1.860
  1.880
  1.880
  1.890
  1.890
  1.900
  1.900
  1.900
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
  1.910
Adjusted equity ratio
  0.341
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343
  0.343

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  528
  1,422
  2,457
  3,895
  5,832
  8,365
  11,593
  15,609
  20,494
  26,320
  33,144
  41,758
  50,687
  60,696
  71,784
  83,943
  97,155
  111,401
  126,654
  142,891
  160,088
  178,224
  197,283
  217,253
  238,128
  259,908
  282,599
  306,214
  330,773
  356,299
  382,826
Depreciation, amort., depletion, $m
  437
  1,449
  1,678
  2,001
  2,439
  3,019
  3,765
  4,702
  5,852
  7,235
  8,868
  9,736
  11,903
  14,347
  17,070
  20,072
  23,348
  26,895
  30,707
  34,777
  39,100
  43,669
  48,480
  53,530
  58,816
  64,337
  70,095
  76,090
  82,328
  88,814
  95,556
Funds from operations, $m
  2,661
  2,871
  4,136
  5,896
  8,271
  11,384
  15,358
  20,310
  26,346
  33,556
  42,013
  51,494
  62,590
  75,043
  88,854
  104,014
  120,503
  138,296
  157,361
  177,668
  199,188
  221,893
  245,763
  270,783
  296,944
  324,245
  352,694
  382,304
  413,101
  445,114
  478,382
Change in working capital, $m
  832
  1,926
  2,799
  3,932
  5,351
  7,074
  9,104
  11,431
  14,034
  16,879
  19,925
  23,129
  26,443
  29,822
  33,227
  36,621
  39,979
  43,279
  46,509
  49,664
  52,744
  55,755
  58,708
  61,616
  64,497
  67,367
  70,247
  73,156
  76,115
  79,142
  82,258
Cash from operations, $m
  1,829
  7,170
  1,337
  1,964
  2,920
  4,310
  6,255
  8,879
  12,312
  16,677
  22,087
  28,365
  36,147
  45,221
  55,627
  67,393
  80,525
  95,017
  110,852
  128,004
  146,444
  166,138
  187,056
  209,167
  232,447
  256,878
  282,446
  309,148
  336,986
  365,972
  396,124
Maintenance CAPEX, $m
  0
  -263
  -421
  -650
  -973
  -1,411
  -1,991
  -2,737
  -3,674
  -4,824
  -6,207
  -7,840
  -9,736
  -11,903
  -14,347
  -17,070
  -20,072
  -23,348
  -26,895
  -30,707
  -34,777
  -39,100
  -43,669
  -48,480
  -53,530
  -58,816
  -64,337
  -70,095
  -76,090
  -82,328
  -88,814
New CAPEX, $m
  -441
  -4,740
  -6,882
  -9,667
  -13,157
  -17,393
  -22,383
  -28,105
  -34,504
  -41,499
  -48,990
  -56,867
  -65,015
  -73,323
  -81,693
  -90,040
  -98,294
  -106,408
  -114,350
  -122,107
  -129,680
  -137,083
  -144,344
  -151,495
  -158,577
  -165,635
  -172,716
  -179,868
  -187,141
  -194,585
  -202,245
Cash from investing activities, $m
  -8,825
  -5,003
  -7,303
  -10,317
  -14,130
  -18,804
  -24,374
  -30,842
  -38,178
  -46,323
  -55,197
  -64,707
  -74,751
  -85,226
  -96,040
  -107,110
  -118,366
  -129,756
  -141,245
  -152,814
  -164,457
  -176,183
  -188,013
  -199,975
  -212,107
  -224,451
  -237,053
  -249,963
  -263,231
  -276,913
  -291,059
Free cash flow, $m
  -6,996
  2,167
  -5,966
  -8,353
  -11,210
  -14,494
  -18,120
  -21,963
  -25,866
  -29,646
  -33,111
  -36,342
  -38,603
  -40,006
  -40,413
  -39,717
  -37,841
  -34,739
  -30,393
  -24,809
  -18,013
  -10,045
  -957
  9,191
  20,340
  32,427
  45,393
  59,186
  73,755
  89,059
  105,064
Issuance/(repayment) of debt, $m
  7,673
  13,133
  19,093
  26,819
  36,502
  48,254
  62,100
  77,975
  95,727
  115,134
  135,918
  157,770
  180,375
  203,427
  226,648
  249,804
  272,706
  295,216
  317,250
  338,770
  359,780
  380,321
  400,464
  420,304
  439,953
  459,534
  479,178
  499,021
  519,201
  539,851
  561,105
Issuance/(repurchase) of shares, $m
  -16
  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  
  7,669
  13,133
  19,093
  26,819
  36,502
  48,254
  62,100
  77,975
  95,727
  115,134
  135,918
  157,770
  180,375
  203,427
  226,648
  249,804
  272,706
  295,216
  317,250
  338,770
  359,780
  380,321
  400,464
  420,304
  439,953
  459,534
  479,178
  499,021
  519,201
  539,851
  561,105
Total cash flow (excl. dividends), $m
  642
  15,300
  13,127
  18,466
  25,292
  33,760
  43,980
  56,012
  69,862
  85,488
  102,807
  121,428
  141,772
  163,421
  186,235
  210,087
  234,864
  260,477
  286,857
  313,961
  341,767
  370,276
  399,507
  429,496
  460,292
  491,960
  524,571
  558,207
  592,955
  628,910
  666,169
Retained Cash Flow (-), $m
  -9,526
  -6,880
  -9,968
  -14,002
  -19,057
  -25,192
  -32,420
  -40,708
  -49,976
  -60,108
  -70,959
  -82,367
  -94,168
  -106,203
  -118,326
  -130,415
  -142,371
  -154,124
  -165,627
  -176,862
  -187,830
  -198,554
  -209,070
  -219,428
  -229,686
  -239,909
  -250,164
  -260,524
  -271,059
  -281,840
  -292,936
Prev. year cash balance distribution, $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 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
 
  8,420
  3,159
  4,465
  6,236
  8,568
  11,560
  15,304
  19,885
  25,380
  31,849
  39,061
  47,604
  57,218
  67,909
  79,672
  92,493
  106,353
  121,230
  137,099
  153,937
  171,722
  190,437
  210,067
  230,606
  252,051
  274,407
  297,683
  321,896
  347,070
  373,233
Discount rate, %
 
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.24
  23.35
  24.52
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.50
  36.22
PV of cash for distribution, $m
 
  7,739
  2,647
  3,382
  4,230
  5,155
  6,104
  7,013
  7,815
  8,448
  8,858
  8,950
  8,850
  8,495
  7,915
  7,161
  6,290
  5,364
  4,439
  3,564
  2,775
  2,094
  1,530
  1,082
  740
  489
  311
  191
  113
  64
  35
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

Newell Brands Inc. designs, sources, and distributes consumer and commercial products worldwide. The company offers markers and highlighters, pens, and pencils; art products; activity-based adhesive and cutting products; fine writing instruments; and labeling solutions under the Sharpie, Paper Mate, Expo, Prismacolor, Mr.Sketch, Elmer's, X-Acto, Parker, Waterman, and Dymo Office brands. It also provides indoor/outdoor organization, food storage, and home storage products; durable beverage containers; gourmet cookware, bakeware, and cutlery; and hair care accessories under the Rubbermaid, Contigo, Bubba, Calphalon, and Goody brands; and home fragrance products under the WoodWick Candle brand. In addition, the company offers hand and power tool accessories, industrial band saw blades, tools for HVAC systems, and industrial label makers and printers under Irwin, Lenox, Hilmor, and Dymo Industrial brands; cleaning and refuse products, hygiene systems, and material handling solutions under the Rubbermaid Commercial Products brand names; and infant and juvenile products, such as car seats, strollers, highchairs, and playards directly under the Graco, Baby Jogger, Aprica, and Teutonia brands. Further, it provides branded consumer products, consumables, and household staples under the Yankee Candle, Waddington, Ball, Diamond, First Alert, NUK, and Pine Mountain brands; kitchen appliances and home environment products under the Crock-Pot, FoodSaver, Holmes, Mr. Coffee, Oster, Rainbow, and Sunbeam brands; products for outdoor and outdoor-related activities under the Coleman, Jostens, Berkley, Shakespeare, Rawlings, Völkl, K2, and Marmot brands; and plastic products, including closures, contact lens packaging, medical disposables, plastic cutlery, and rigid packaging under the Jarden name. The company was formerly known as Newell Rubbermaid Inc. and changed its name to Newell Brands Inc. in April 2016. The company was founded in 1903 and is headquartered in Atlanta, Georgia.

FINANCIAL RATIOS  of  Newell Brands (NWL)

Valuation Ratios
P/E Ratio 48.5
Price to Sales 1.9
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 18.5
Growth Rates
Sales Growth Rate 124.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 109%
Cap. Spend. - 3 Yr. Gr. Rate 26.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.4
LT Debt to Equity 99.5%
Total Debt to Equity 104.8%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 3.8%
Ret/ On T. Cap. - 3 Yr. Avg. 6.8%
Return On Equity 8%
Return On Equity - 3 Yr. Avg. 15.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 33.2%
Gross Margin - 3 Yr. Avg. 36.9%
EBITDA Margin 11.8%
EBITDA Margin - 3 Yr. Avg. 11.2%
Operating Margin 7.9%
Oper. Margin - 3 Yr. Avg. 8.4%
Pre-Tax Margin 6.1%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 4%
Net Profit Margin - 3 Yr. Avg. 5.5%
Effective Tax Rate 35.1%
Eff/ Tax Rate - 3 Yr. Avg. 25.9%
Payout Ratio 62.3%

NWL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NWL stock intrinsic value calculation we used $13264 million for the last fiscal year's total revenue generated by Newell Brands. The default revenue input number comes from 2016 income statement of Newell Brands. 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 NWL stock valuation model: a) initial revenue growth rate of 60% 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 8.8%, whose default value for NWL is calculated based on our internal credit rating of Newell Brands, 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 Newell Brands.
    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 NWL stock the variable cost ratio is equal to 91.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $75 million in the base year in the intrinsic value calculation for NWL 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 Newell Brands.

Corporate tax rate of 27% is the nominal tax rate for Newell Brands. 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 NWL 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 NWL are equal to 59.5%.

Life of production assets of 33 years is the average useful life of capital assets used in Newell Brands 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 NWL is equal to 24.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $11410 million for Newell Brands - 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 477.823 million for Newell Brands 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 Newell Brands at the current share price and the inputted number of shares is $25.4 billion.


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Stock chart of NWL Financial statements of NWL Annual reports of NWL
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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