Intrinsic value of Newell Brands - NWL

Previous Close

$50.74

  Intrinsic Value

$177.47

stock screener

  Rating & Target

str. buy

+250%

  Value-price divergence*

+1767%

Previous close

$50.74

 
Intrinsic value

$177.47

 
Up/down potential

+250%

 
Rating

str. buy

 
Value-price divergence*

+1767%

*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 24.2

 

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
 
  18,805
  28,497
  42,111
  60,641
  85,135
  116,659
  156,240
  204,833
  263,278
  332,272
  411,338
  502,900
  606,164
  721,215
  848,021
  986,452
  1,136,310
  1,297,353
  1,469,319
  1,651,951
  1,845,010
  2,048,294
  2,261,649
  2,484,978
  2,718,247
  2,961,488
  3,214,801
  3,478,358
  3,752,398
  4,037,226
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
  18,882
  28,576
  42,192
  60,724
  85,220
  116,746
  156,329
  204,924
  263,372
  332,368
  411,436
  503,001
  606,267
  721,321
  848,130
  986,563
  1,136,424
  1,297,470
  1,469,439
  1,652,074
  1,845,136
  2,048,423
  2,261,781
  2,485,114
  2,718,386
  2,961,631
  3,214,947
  3,478,508
  3,752,551
  4,037,383
Operating income, $m
  1,053
  2,340
  4,212
  6,843
  10,424
  15,159
  21,253
  28,905
  38,300
  49,599
  62,939
  79,446
  97,149
  117,116
  139,362
  163,881
  190,648
  219,624
  250,764
  284,015
  319,329
  356,660
  395,968
  437,223
  480,407
  525,512
  572,547
  621,528
  672,491
  725,481
  780,557
EBITDA, $m
  1,490
  3,824
  5,948
  8,932
  12,995
  18,366
  25,278
  33,959
  44,616
  57,433
  72,565
  90,130
  110,213
  132,861
  158,096
  185,909
  216,272
  249,141
  284,463
  322,182
  362,240
  404,586
  449,174
  495,971
  544,956
  596,121
  649,474
  705,036
  762,845
  822,953
  885,427
Interest expense (income), $m
  316
  475
  1,027
  1,829
  2,956
  4,490
  6,518
  9,128
  12,404
  16,427
  21,265
  26,977
  33,607
  41,186
  49,735
  59,259
  69,757
  81,216
  93,622
  106,953
  121,189
  136,308
  152,290
  169,118
  186,781
  205,268
  224,579
  244,715
  265,685
  287,503
  310,189
Earnings before tax, $m
  815
  1,865
  3,185
  5,014
  7,468
  10,669
  14,735
  19,777
  25,895
  33,172
  41,674
  52,469
  63,543
  75,929
  89,627
  104,621
  120,891
  138,408
  157,142
  177,062
  198,140
  220,352
  243,678
  268,104
  293,626
  320,244
  347,967
  376,813
  406,806
  437,978
  470,368
Tax expense, $m
  286
  504
  860
  1,354
  2,016
  2,881
  3,978
  5,340
  6,992
  8,956
  11,252
  14,167
  17,157
  20,501
  24,199
  28,248
  32,641
  37,370
  42,428
  47,807
  53,498
  59,495
  65,793
  72,388
  79,279
  86,466
  93,951
  101,740
  109,838
  118,254
  126,999
Net income, $m
  528
  1,362
  2,325
  3,660
  5,452
  7,788
  10,756
  14,437
  18,903
  24,216
  30,422
  38,302
  46,386
  55,428
  65,428
  76,374
  88,250
  101,038
  114,713
  129,255
  144,642
  160,857
  177,885
  195,716
  214,347
  233,778
  254,016
  275,074
  296,968
  319,724
  343,368

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
  53,189
  82,177
  122,896
  178,315
  251,577
  345,861
  464,246
  609,585
  784,387
  990,745
  1,230,281
  1,504,136
  1,812,989
  2,157,100
  2,536,366
  2,950,403
  3,398,616
  3,880,283
  4,394,623
  4,940,861
  5,518,285
  6,126,292
  6,764,422
  7,432,382
  8,130,071
  8,857,586
  9,615,228
  10,403,507
  11,223,138
  12,075,038
Adjusted assets (=assets-cash), $m
  33,250
  53,189
  82,177
  122,896
  178,315
  251,577
  345,861
  464,246
  609,585
  784,387
  990,745
  1,230,281
  1,504,136
  1,812,989
  2,157,100
  2,536,366
  2,950,403
  3,398,616
  3,880,283
  4,394,623
  4,940,861
  5,518,285
  6,126,292
  6,764,422
  7,432,382
  8,130,071
  8,857,586
  9,615,228
  10,403,507
  11,223,138
  12,075,038
Revenue / Adjusted assets
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
  0.399
Average production assets, $m
  8,659
  13,858
  21,411
  32,020
  46,460
  65,548
  90,113
  120,958
  158,825
  204,370
  258,136
  320,546
  391,898
  472,369
  562,026
  660,843
  768,719
  885,499
  1,010,996
  1,145,006
  1,287,326
  1,437,773
  1,596,187
  1,762,450
  1,936,485
  2,118,266
  2,307,817
  2,505,219
  2,710,602
  2,924,155
  3,146,115
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
  24,456
  43,559
  70,392
  106,914
  155,193
  217,326
  295,342
  391,120
  506,315
  642,305
  800,159
  980,630
  1,184,164
  1,410,933
  1,660,869
  1,933,719
  2,229,092
  2,546,511
  2,885,461
  3,245,431
  3,625,954
  4,026,631
  4,447,158
  4,887,344
  5,347,121
  5,826,553
  6,325,839
  6,845,315
  7,385,452
  7,946,854
Total liabilities, $m
  22,489
  35,052
  54,155
  80,988
  117,510
  165,789
  227,922
  305,938
  401,716
  516,911
  652,901
  810,755
  991,226
  1,194,760
  1,421,529
  1,671,465
  1,944,315
  2,239,688
  2,557,107
  2,896,057
  3,256,027
  3,636,550
  4,037,227
  4,457,754
  4,897,940
  5,357,717
  5,837,149
  6,336,435
  6,855,911
  7,396,048
  7,957,450
Total equity, $m
  11,349
  18,137
  28,022
  41,907
  60,806
  85,788
  117,938
  158,308
  207,868
  267,476
  337,844
  419,526
  512,910
  618,229
  735,571
  864,901
  1,006,087
  1,158,928
  1,323,177
  1,498,566
  1,684,834
  1,881,735
  2,089,066
  2,306,668
  2,534,442
  2,772,354
  3,020,437
  3,278,793
  3,547,596
  3,827,090
  4,117,588
Total liabilities and equity, $m
  33,838
  53,189
  82,177
  122,895
  178,316
  251,577
  345,860
  464,246
  609,584
  784,387
  990,745
  1,230,281
  1,504,136
  1,812,989
  2,157,100
  2,536,366
  2,950,402
  3,398,616
  3,880,284
  4,394,623
  4,940,861
  5,518,285
  6,126,293
  6,764,422
  7,432,382
  8,130,071
  8,857,586
  9,615,228
  10,403,507
  11,223,138
  12,075,038
Debt-to-equity ratio
  1.048
  1.350
  1.550
  1.680
  1.760
  1.810
  1.840
  1.870
  1.880
  1.890
  1.900
  1.910
  1.910
  1.920
  1.920
  1.920
  1.920
  1.920
  1.920
  1.930
  1.930
  1.930
  1.930
  1.930
  1.930
  1.930
  1.930
  1.930
  1.930
  1.930
  1.930
Adjusted equity ratio
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  528
  1,362
  2,325
  3,660
  5,452
  7,788
  10,756
  14,437
  18,903
  24,216
  30,422
  38,302
  46,386
  55,428
  65,428
  76,374
  88,250
  101,038
  114,713
  129,255
  144,642
  160,857
  177,885
  195,716
  214,347
  233,778
  254,016
  275,074
  296,968
  319,724
  343,368
Depreciation, amort., depletion, $m
  437
  1,484
  1,736
  2,089
  2,571
  3,207
  4,026
  5,054
  6,316
  7,834
  9,626
  10,685
  13,063
  15,746
  18,734
  22,028
  25,624
  29,517
  33,700
  38,167
  42,911
  47,926
  53,206
  58,748
  64,549
  70,609
  76,927
  83,507
  90,353
  97,472
  104,870
Funds from operations, $m
  2,661
  2,846
  4,061
  5,749
  8,022
  10,995
  14,782
  19,491
  25,220
  32,050
  40,048
  48,987
  59,449
  71,174
  84,162
  98,402
  113,874
  130,554
  148,413
  167,422
  187,553
  208,783
  231,091
  254,464
  278,896
  304,387
  330,943
  358,581
  387,322
  417,195
  448,239
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
  920
  1,262
  1,818
  2,671
  3,921
  5,678
  8,060
  11,186
  15,171
  20,123
  25,858
  33,006
  41,352
  50,935
  61,781
  73,896
  87,276
  101,904
  117,758
  134,810
  153,028
  172,383
  192,848
  214,399
  237,019
  260,696
  285,425
  311,207
  338,054
  365,981
Maintenance CAPEX, $m
  0
  -289
  -462
  -714
  -1,067
  -1,549
  -2,185
  -3,004
  -4,032
  -5,294
  -6,812
  -8,605
  -10,685
  -13,063
  -15,746
  -18,734
  -22,028
  -25,624
  -29,517
  -33,700
  -38,167
  -42,911
  -47,926
  -53,206
  -58,748
  -64,549
  -70,609
  -76,927
  -83,507
  -90,353
  -97,472
New CAPEX, $m
  -441
  -5,199
  -7,553
  -10,609
  -14,439
  -19,088
  -24,565
  -30,845
  -37,867
  -45,544
  -53,766
  -62,410
  -71,352
  -80,471
  -89,657
  -98,817
  -107,876
  -116,781
  -125,497
  -134,010
  -142,321
  -150,446
  -158,414
  -166,263
  -174,035
  -181,781
  -189,552
  -197,401
  -205,384
  -213,552
  -221,960
Cash from investing activities, $m
  -8,825
  -5,488
  -8,015
  -11,323
  -15,506
  -20,637
  -26,750
  -33,849
  -41,899
  -50,838
  -60,578
  -71,015
  -82,037
  -93,534
  -105,403
  -117,551
  -129,904
  -142,405
  -155,014
  -167,710
  -180,488
  -193,357
  -206,340
  -219,469
  -232,783
  -246,330
  -260,161
  -274,328
  -288,891
  -303,905
  -319,432
Free cash flow, $m
  -6,996
  -4,568
  -6,753
  -9,505
  -12,836
  -16,716
  -21,072
  -25,789
  -30,713
  -35,667
  -40,455
  -45,157
  -49,031
  -52,182
  -54,467
  -55,770
  -56,008
  -55,129
  -53,109
  -49,951
  -45,678
  -40,329
  -33,957
  -26,621
  -18,384
  -9,311
  536
  11,096
  22,316
  34,148
  46,549
Issuance/(repayment) of debt, $m
  7,673
  13,151
  19,103
  26,834
  36,522
  48,280
  62,133
  78,016
  95,778
  115,195
  135,990
  157,854
  180,471
  203,535
  226,769
  249,937
  272,850
  295,373
  317,419
  338,950
  359,971
  380,523
  400,677
  420,527
  440,186
  459,777
  479,432
  499,286
  519,476
  540,137
  561,402
Issuance/(repurchase) of shares, $m
  -16
  5,427
  7,560
  10,225
  13,447
  17,194
  21,394
  25,932
  30,657
  35,392
  39,946
  43,379
  46,999
  49,891
  51,914
  52,956
  52,936
  51,803
  49,535
  46,135
  41,625
  36,045
  29,446
  21,886
  13,428
  4,134
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  7,669
  18,578
  26,663
  37,059
  49,969
  65,474
  83,527
  103,948
  126,435
  150,587
  175,936
  201,233
  227,470
  253,426
  278,683
  302,893
  325,786
  347,176
  366,954
  385,085
  401,596
  416,568
  430,123
  442,413
  453,614
  463,911
  479,432
  499,286
  519,476
  540,137
  561,402
Total cash flow (excl. dividends), $m
  642
  14,009
  19,910
  27,553
  37,132
  48,758
  62,455
  78,160
  95,722
  114,920
  135,480
  156,077
  178,439
  201,243
  224,215
  247,122
  269,778
  292,047
  313,845
  335,133
  355,918
  376,238
  396,165
  415,792
  435,230
  454,600
  479,968
  510,382
  541,792
  574,285
  607,952
Retained Cash Flow (-), $m
  -9,526
  -6,788
  -9,885
  -13,885
  -18,898
  -24,982
  -32,151
  -40,369
  -49,560
  -59,608
  -70,368
  -81,682
  -93,385
  -105,319
  -117,342
  -129,330
  -141,187
  -152,841
  -164,249
  -175,390
  -186,267
  -196,902
  -207,330
  -217,602
  -227,775
  -237,912
  -248,082
  -258,356
  -268,803
  -279,494
  -290,498
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
 
  7,221
  10,025
  13,668
  18,234
  23,776
  30,304
  37,790
  46,161
  55,312
  65,112
  74,395
  85,054
  95,924
  106,874
  117,792
  128,591
  139,206
  149,596
  159,744
  169,650
  179,336
  188,835
  198,190
  207,455
  216,688
  231,885
  252,026
  272,989
  294,790
  317,454
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
 
  6,637
  8,401
  10,353
  12,370
  14,304
  16,001
  17,317
  18,142
  18,410
  18,109
  17,045
  15,813
  14,241
  12,457
  10,588
  8,745
  7,021
  5,478
  4,153
  3,058
  2,187
  1,517
  1,021
  666
  420
  263
  162
  96
  55
  30
Current shareholders' claim on cash, %
  100
  81.7
  68.4
  58.4
  50.8
  44.8
  40.1
  36.4
  33.4
  30.9
  28.9
  27.3
  25.9
  24.8
  23.8
  23.1
  22.4
  21.9
  21.5
  21.1
  20.8
  20.6
  20.5
  20.4
  20.3
  20.3
  20.3
  20.3
  20.3
  20.3
  20.3

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 46.4
Price to Sales 1.8
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 13.4
Price to Free Cash Flow 17.6
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 4.2% 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 65.3%.

Life of production assets of 34.7 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 - $11349 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 $24.2 billion.

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COMPANY NEWS

▶ Newell Brands Declares Dividend on Common Stock   [Aug-09-17 04:15PM  Business Wire]
▶ Newell Brands beats Street 2Q forecasts   [Aug-04-17 09:42PM  Associated Press]
▶ Newell Brands beats Street 2Q forecasts   [06:41AM  Associated Press]
▶ Top global ideas for 2017: RBC   [02:30PM  CNBC Videos]
▶ The 3 Highest Growth Stocks in the Market Today   [Jun-19-17 01:49PM  Motley Fool]
▶ Jostens Yearbook Covers Win Five Gold Leaf Awards   [Jun-16-17 03:08PM  GlobeNewswire]
▶ Story Stocks from Briefing.com   [Jun-14-17 12:09PM  Briefing.com]
▶ How to Invest in the Slime Craze   [Jun-13-17 07:11AM  Fortune]
▶ Jostens delivers Seattle Sounders MLS Cup Championship Ring   [May-23-17 06:30PM  GlobeNewswire]
▶ ETFs with exposure to Newell Brands, Inc. : May 16, 2017   [May-16-17 12:57PM  Capital Cube]
▶ Newell Brands Can Muster the Strength to Break Out   [May-10-17 10:44AM  TheStreet.com]
▶ Newell Brands Should Continue to Clean Up   [May-09-17 11:00AM  TheStreet.com]
▶ Newell Brands: Cramer's Top Takeaways   [06:39AM  TheStreet.com]
▶ What Happened in the Stock Market Today   [04:55PM  Motley Fool]
▶ Story Stocks from Briefing.com   [12:16PM  Briefing.com]
▶ Jim Cramer -- Newell Brands Is on Fire   [10:14AM  TheStreet.com]
▶ Rubbermaid Owner Soars   [09:37AM  Bloomberg]
▶ Newell Brands beats Street 1Q forecasts   [07:06AM  Associated Press]
▶ Jim Cramer -- Newell Needs to Prove Itself   [12:53PM  TheStreet.com]
▶ Newell Brands Stock Gets Rating Downgrade at Wells Fargo   [May-01-17 10:01AM  TheStreet.com]
▶ Cramer: Donald Trump Is Hurting Newell Brands' Stock Price   [Apr-29-17 02:00PM  TheStreet.com]
▶ Jostens delivers Chicago Cubs World Championship Ring   [Apr-13-17 12:09AM  PR Newswire]
▶ Newell Brands sells fire starter businesses   [Apr-10-17 08:41AM  MarketWatch]
Stock chart of NWL Financial statements 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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