Intrinsic value of Oaktree Capital Group - OAK

Previous Close

$47.45

  Intrinsic Value

$1.29

stock screener

  Rating & Target

str. sell

-97%

Previous close

$47.45

 
Intrinsic value

$1.29

 
Up/down potential

-97%

 
Rating

str. sell

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

We calculate the intrinsic value of OAK 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 7.4

 

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, %
  457.43
  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
  1,126
  1,802
  2,783
  4,163
  6,040
  8,521
  11,715
  15,725
  20,648
  26,569
  33,558
  41,672
  50,948
  61,409
  73,065
  85,911
  99,935
  115,117
  131,432
  148,853
  167,355
  186,914
  207,508
  229,122
  251,747
  275,379
  300,021
  325,684
  352,384
  380,147
  409,002
Variable operating expenses, $m
 
  8,392
  12,965
  19,390
  28,134
  39,692
  54,568
  73,246
  96,177
  123,756
  156,314
  194,107
  237,314
  286,043
  340,335
  400,173
  465,498
  536,214
  612,209
  693,359
  779,541
  870,644
  966,571
  1,067,252
  1,172,639
  1,282,716
  1,397,499
  1,517,036
  1,641,406
  1,770,723
  1,905,131
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
  789
  8,392
  12,965
  19,390
  28,134
  39,692
  54,568
  73,246
  96,177
  123,756
  156,314
  194,107
  237,314
  286,043
  340,335
  400,173
  465,498
  536,214
  612,209
  693,359
  779,541
  870,644
  966,571
  1,067,252
  1,172,639
  1,282,716
  1,397,499
  1,517,036
  1,641,406
  1,770,723
  1,905,131
Operating income, $m
  336
  -6,590
  -10,182
  -15,227
  -22,094
  -31,171
  -42,853
  -57,521
  -75,529
  -97,188
  -122,756
  -152,435
  -186,366
  -224,634
  -267,270
  -314,262
  -365,563
  -421,097
  -480,777
  -544,505
  -612,186
  -683,730
  -759,064
  -838,130
  -920,892
  -1,007,337
  -1,097,478
  -1,191,352
  -1,289,022
  -1,390,576
  -1,496,129
EBITDA, $m
  352
  -6,590
  -10,182
  -15,227
  -22,094
  -31,171
  -42,853
  -57,521
  -75,529
  -97,188
  -122,756
  -152,435
  -186,366
  -224,634
  -267,270
  -314,262
  -365,563
  -421,097
  -480,777
  -544,505
  -612,186
  -683,730
  -759,064
  -838,130
  -920,892
  -1,007,337
  -1,097,478
  -1,191,352
  -1,289,022
  -1,390,576
  -1,496,129
Interest expense (income), $m
  100
  43
  174
  377
  661
  1,047
  1,558
  2,215
  3,041
  4,055
  5,274
  6,713
  8,383
  10,293
  12,447
  14,846
  17,491
  20,378
  23,504
  26,863
  30,450
  34,259
  38,286
  42,526
  46,976
  51,634
  56,499
  61,573
  66,856
  72,353
  78,069
Earnings before tax, $m
  609
  -6,633
  -10,356
  -15,604
  -22,754
  -32,218
  -44,411
  -59,737
  -78,570
  -101,242
  -128,029
  -159,148
  -194,749
  -234,927
  -279,717
  -329,109
  -383,054
  -441,476
  -504,281
  -571,368
  -642,635
  -717,989
  -797,349
  -880,655
  -967,867
  -1,058,971
  -1,153,977
  -1,252,925
  -1,355,878
  -1,462,929
  -1,574,198
Tax expense, $m
  43
  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
  195
  -6,633
  -10,356
  -15,604
  -22,754
  -32,218
  -44,411
  -59,737
  -78,570
  -101,242
  -128,029
  -159,148
  -194,749
  -234,927
  -279,717
  -329,109
  -383,054
  -441,476
  -504,281
  -571,368
  -642,635
  -717,989
  -797,349
  -880,655
  -967,867
  -1,058,971
  -1,153,977
  -1,252,925
  -1,355,878
  -1,462,929
  -1,574,198

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  291
  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
  7,649
  11,775
  18,193
  27,207
  39,476
  55,695
  76,568
  102,776
  134,952
  173,650
  219,335
  272,364
  332,991
  401,366
  477,546
  561,510
  653,171
  752,398
  859,031
  972,897
  1,093,825
  1,221,658
  1,356,260
  1,497,532
  1,645,407
  1,799,864
  1,960,924
  2,128,653
  2,303,165
  2,484,618
  2,673,215
Adjusted assets (=assets-cash), $m
  7,358
  11,775
  18,193
  27,207
  39,476
  55,695
  76,568
  102,776
  134,952
  173,650
  219,335
  272,364
  332,991
  401,366
  477,546
  561,510
  653,171
  752,398
  859,031
  972,897
  1,093,825
  1,221,658
  1,356,260
  1,497,532
  1,645,407
  1,799,864
  1,960,924
  2,128,653
  2,303,165
  2,484,618
  2,673,215
Revenue / Adjusted assets
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
  0.153
Average production assets, $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
  0
Working capital, $m
  0
  -465
  -718
  -1,074
  -1,558
  -2,199
  -3,022
  -4,057
  -5,327
  -6,855
  -8,658
  -10,751
  -13,144
  -15,844
  -18,851
  -22,165
  -25,783
  -29,700
  -33,909
  -38,404
  -43,178
  -48,224
  -53,537
  -59,114
  -64,951
  -71,048
  -77,406
  -84,026
  -90,915
  -98,078
  -105,522
Total debt, $m
  1,230
  4,985
  10,760
  18,873
  29,915
  44,513
  63,298
  86,886
  115,844
  150,672
  191,788
  239,514
  294,079
  355,616
  424,179
  499,746
  582,241
  671,545
  767,515
  869,995
  978,830
  1,093,879
  1,215,021
  1,342,165
  1,475,253
  1,614,265
  1,759,218
  1,910,175
  2,067,236
  2,230,543
  2,400,280
Total liabilities, $m
  6,843
  10,598
  16,373
  24,486
  35,528
  50,126
  68,911
  92,499
  121,457
  156,285
  197,401
  245,127
  299,692
  361,229
  429,792
  505,359
  587,854
  677,158
  773,128
  875,608
  984,443
  1,099,492
  1,220,634
  1,347,778
  1,480,866
  1,619,878
  1,764,831
  1,915,788
  2,072,849
  2,236,156
  2,405,893
Total equity, $m
  806
  1,178
  1,819
  2,721
  3,948
  5,570
  7,657
  10,278
  13,495
  17,365
  21,933
  27,236
  33,299
  40,137
  47,755
  56,151
  65,317
  75,240
  85,903
  97,290
  109,383
  122,166
  135,626
  149,753
  164,541
  179,986
  196,092
  212,865
  230,317
  248,462
  267,321
Total liabilities and equity, $m
  7,649
  11,776
  18,192
  27,207
  39,476
  55,696
  76,568
  102,777
  134,952
  173,650
  219,334
  272,363
  332,991
  401,366
  477,547
  561,510
  653,171
  752,398
  859,031
  972,898
  1,093,826
  1,221,658
  1,356,260
  1,497,531
  1,645,407
  1,799,864
  1,960,923
  2,128,653
  2,303,166
  2,484,618
  2,673,214
Debt-to-equity ratio
  1.526
  4.230
  5.910
  6.940
  7.580
  7.990
  8.270
  8.450
  8.580
  8.680
  8.740
  8.790
  8.830
  8.860
  8.880
  8.900
  8.910
  8.930
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
Adjusted equity ratio
  0.070
  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
  195
  -6,633
  -10,356
  -15,604
  -22,754
  -32,218
  -44,411
  -59,737
  -78,570
  -101,242
  -128,029
  -159,148
  -194,749
  -234,927
  -279,717
  -329,109
  -383,054
  -441,476
  -504,281
  -571,368
  -642,635
  -717,989
  -797,349
  -880,655
  -967,867
  -1,058,971
  -1,153,977
  -1,252,925
  -1,355,878
  -1,462,929
  -1,574,198
Depreciation, amort., depletion, $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
Funds from operations, $m
  -6,636
  -6,633
  -10,356
  -15,604
  -22,754
  -32,218
  -44,411
  -59,737
  -78,570
  -101,242
  -128,029
  -159,148
  -194,749
  -234,927
  -279,717
  -329,109
  -383,054
  -441,476
  -504,281
  -571,368
  -642,635
  -717,989
  -797,349
  -880,655
  -967,867
  -1,058,971
  -1,153,977
  -1,252,925
  -1,355,878
  -1,462,929
  -1,574,198
Change in working capital, $m
  -3,606
  -174
  -253
  -356
  -484
  -640
  -824
  -1,035
  -1,270
  -1,528
  -1,803
  -2,093
  -2,393
  -2,699
  -3,007
  -3,314
  -3,618
  -3,917
  -4,209
  -4,495
  -4,774
  -5,046
  -5,313
  -5,577
  -5,837
  -6,097
  -6,358
  -6,621
  -6,889
  -7,163
  -7,445
Cash from operations, $m
  -3,030
  -6,459
  -10,103
  -15,248
  -22,270
  -31,578
  -43,587
  -58,702
  -77,300
  -99,715
  -126,226
  -157,054
  -192,356
  -232,228
  -276,710
  -325,794
  -379,435
  -437,559
  -500,072
  -566,874
  -637,862
  -712,943
  -792,036
  -875,079
  -962,030
  -1,052,874
  -1,147,620
  -1,246,304
  -1,348,989
  -1,455,767
  -1,566,753
Maintenance CAPEX, $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
  0
New CAPEX, $m
  -70
  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 investing activities, $m
  -99
  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
Free cash flow, $m
  -3,129
  -6,459
  -10,103
  -15,248
  -22,270
  -31,578
  -43,587
  -58,702
  -77,300
  -99,715
  -126,226
  -157,054
  -192,356
  -232,228
  -276,710
  -325,794
  -379,435
  -437,559
  -500,072
  -566,874
  -637,862
  -712,943
  -792,036
  -875,079
  -962,030
  -1,052,874
  -1,147,620
  -1,246,304
  -1,348,989
  -1,455,767
  -1,566,753
Issuance/(repayment) of debt, $m
  1,094
  3,755
  5,776
  8,113
  11,042
  14,597
  18,786
  23,588
  28,958
  34,829
  41,116
  47,726
  54,564
  61,538
  68,562
  75,567
  82,495
  89,304
  95,970
  102,480
  108,835
  115,049
  121,142
  127,144
  133,088
  139,011
  144,954
  150,957
  157,061
  163,308
  169,737
Issuance/(repurchase) of shares, $m
  -13
  7,296
  10,998
  16,505
  23,981
  33,840
  46,498
  62,358
  81,788
  105,112
  132,598
  164,450
  200,812
  241,764
  287,335
  337,505
  392,220
  451,399
  514,945
  582,755
  654,728
  730,772
  810,810
  894,782
  982,655
  1,074,417
  1,170,083
  1,269,697
  1,373,329
  1,481,075
  1,593,058
Cash from financing (excl. dividends), $m  
  905
  11,051
  16,774
  24,618
  35,023
  48,437
  65,284
  85,946
  110,746
  139,941
  173,714
  212,176
  255,376
  303,302
  355,897
  413,072
  474,715
  540,703
  610,915
  685,235
  763,563
  845,821
  931,952
  1,021,926
  1,115,743
  1,213,428
  1,315,037
  1,420,654
  1,530,390
  1,644,383
  1,762,795
Total cash flow (excl. dividends), $m
  -2,230
  4,591
  6,671
  9,370
  12,753
  16,859
  21,697
  27,243
  33,446
  40,226
  47,488
  55,123
  63,020
  71,074
  79,187
  87,278
  95,279
  103,144
  110,842
  118,361
  125,702
  132,878
  139,916
  146,848
  153,713
  160,554
  167,417
  174,350
  181,401
  188,616
  196,041
Retained Cash Flow (-), $m
  -72
  -7,296
  -10,998
  -16,505
  -23,981
  -33,840
  -46,498
  -62,358
  -81,788
  -105,112
  -132,598
  -164,450
  -200,812
  -241,764
  -287,335
  -337,505
  -392,220
  -451,399
  -514,945
  -582,755
  -654,728
  -730,772
  -810,810
  -894,782
  -982,655
  -1,074,417
  -1,170,083
  -1,269,697
  -1,373,329
  -1,481,075
  -1,593,058
Prev. year cash balance distribution, $m
 
  291
  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
 
  -2,413
  -4,327
  -7,135
  -11,228
  -16,981
  -24,802
  -35,114
  -48,342
  -64,886
  -85,110
  -109,328
  -137,792
  -170,690
  -208,147
  -250,227
  -296,941
  -348,255
  -404,102
  -464,394
  -529,027
  -597,894
  -670,894
  -747,935
  -828,942
  -913,863
  -1,002,666
  -1,095,347
  -1,191,928
  -1,292,459
  -1,397,016
Discount rate, %
 
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for distribution, $m
 
  -2,296
  -3,899
  -6,055
  -8,926
  -12,571
  -16,989
  -22,106
  -27,768
  -33,744
  -39,746
  -45,446
  -50,510
  -54,631
  -57,556
  -59,110
  -59,215
  -57,888
  -55,244
  -51,475
  -46,834
  -41,606
  -36,082
  -30,540
  -25,217
  -20,304
  -15,932
  -12,174
  -9,053
  -6,545
  -4,597
Current shareholders' claim on cash, %
  100
  39.4
  19.5
  9.8
  5.0
  2.6
  1.4
  0.7
  0.4
  0.2
  0.1
  0.1
  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
  0.0
  0.0
  0.0
  0.0

Oaktree Capital Group, LLC (Oaktree) is an investment manager specializing in alternative investments. The Company operates through investment management segment, which consists of the investment management services that the Company provides to its clients. The Company manages investments in a range of strategies within approximately six asset classes, which include corporate debt, convertible securities, distressed debt, control investing, real estate and listed equities. The Funds managed by Oaktree include commingled funds, separate accounts and collateralized loan obligation vehicles (CLOs). The commingled funds include open-end and closed-end limited partnerships in which it makes an investment and for which it serves as the general partner. CLOs are structured finance vehicles in which the Company typically makes an investment and for which it serves as collateral manager. Its clientele includes the United States pension plans and corporations and/or their pension funds.

FINANCIAL RATIOS  of  Oaktree Capital Group (OAK)

Valuation Ratios
P/E Ratio 37.7
Price to Sales 6.5
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow -2.4
Price to Free Cash Flow -2.4
Growth Rates
Sales Growth Rate 457.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 191.7%
Cap. Spend. - 3 Yr. Gr. Rate 69.5%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 152.6%
Total Debt to Equity 152.6%
Interest Coverage 7
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 0.6%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 2.5%
Return On Equity 25.3%
Return On Equity - 3 Yr. Avg. 20.4%
Asset Turnover 0
Profitability Ratios
Gross Margin 85%
Gross Margin - 3 Yr. Avg. 30.5%
EBITDA Margin 64.4%
EBITDA Margin - 3 Yr. Avg. 191.9%
Operating Margin 29.9%
Oper. Margin - 3 Yr. Avg. -241.4%
Pre-Tax Margin 54.1%
Pre-Tax Margin - 3 Yr. Avg. 145%
Net Profit Margin 17.3%
Net Profit Margin - 3 Yr. Avg. 39.1%
Effective Tax Rate 7.1%
Eff/ Tax Rate - 3 Yr. Avg. 2.2%
Payout Ratio 72.8%

OAK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OAK stock intrinsic value calculation we used $1126 million for the last fiscal year's total revenue generated by Oaktree Capital Group. The default revenue input number comes from 2016 income statement of Oaktree Capital Group. 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 OAK 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 5.1%, whose default value for OAK is calculated based on our internal credit rating of Oaktree Capital Group, 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 Oaktree Capital Group.
    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 OAK stock the variable cost ratio is equal to 465.8%.

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 OAK 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 Oaktree Capital Group.

Corporate tax rate of 27% is the nominal tax rate for Oaktree Capital Group. 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 OAK 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 OAK are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Oaktree Capital Group 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 OAK is equal to -25.8%. 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 - $806 million for Oaktree Capital Group - 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 156.164 million for Oaktree Capital Group 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 Oaktree Capital Group at the current share price and the inputted number of shares is $7.4 billion.

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COMPANY NEWS

▶ [$$] Deal Close Announcements: Oct. 16-20   [Oct-20-17 05:49PM  The Wall Street Journal]
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▶ Alternative Asset Managers All Over the Place in Q3   [Oct-06-17 04:05PM  Barrons.com]
▶ Is Oaktree Capital Group LLC (OAK) A Buy At Its Current Price?   [Sep-29-17 07:27PM  Simply Wall St.]
▶ Oaktree's Marks Sees U.S. Pension Crisis Looming   [Sep-20-17 12:44PM  Bloomberg Video]
▶ [$$] CST Industries Faces Off With Lender Oaktree   [Aug-28-17 02:56PM  The Wall Street Journal]
▶ A Check Up on BDCs   [Aug-16-17 08:44AM  Motley Fool]
▶ U.S. Alt Managers Stockpile Dry Powder   [11:08AM  Barrons.com]
▶ What's Going on in BDC Land?   [Aug-07-17 03:00PM  Motley Fool]
▶ 3 Dividend Stocks for Shrewd Investors   [Aug-06-17 08:15AM  Motley Fool]
▶ Oaktree's Howard Marks on Market Warning, Risks, FAANGs   [Aug-01-17 10:35AM  Bloomberg Video]
▶ Oaktree Capital Keeps Gaining From Strong Markets   [Jul-27-17 06:19PM  Motley Fool]
▶ Oaktree: Is There Much Upside Left?   [10:59AM  Barrons.com]
▶ [$$] Oaktree Is Backing Tembec Deal After Rayonier Ups Offer   [Jul-24-17 03:22PM  The Wall Street Journal]
▶ [$$] Oaktree Buys Out Fifth Street Lending Entities   [12:17PM  The Wall Street Journal]
▶ [$$] Njord Partners Seals Third Deal in Four Months   [Jul-13-17 11:42AM  The Wall Street Journal]
▶ [$$] Oaktree Nears Buyout of Fifth Street Asset Management   [12:46PM  The Wall Street Journal]
▶ [$$] CST Industries Sues Backer Oaktree Capital in Bankruptcy   [Jun-21-17 05:20PM  The Wall Street Journal]
▶ 3 Dividend Stocks That Thrive in Market Crashes   [Jun-10-17 03:00PM  Motley Fool]
▶ 3 Stocks on the Motley Fool Money Radar This Week   [May-17-17 11:08AM  Motley Fool]
▶ [$$] Brickley's Take: JHL, QVT Steal a March on Mine   [03:06PM  The Wall Street Journal]
▶ Alternative Asset Managers: Would We Buy?   [Apr-30-17 03:16PM  Motley Fool]
▶ Making Sense of Fund Managers' Earnings   [Apr-29-17 12:42PM  Motley Fool]
▶ Demystifying Alternative Asset Managers   [08:47AM  Motley Fool]
▶ Oaktree Announces First Quarter 2017 Financial Results   [Apr-27-17 08:30AM  Business Wire]
▶ [$$] Tronc/Oaktree: Follow the buyout money   [Mar-27-17 03:46PM  Financial Times]
▶ [$$] Exco Resources Nears Deal to Stave Off Bankruptcy   [Mar-15-17 03:00PM  at The Wall Street Journal]
▶ Alaska Airlines announces new nonstop service between KC and SF   [Mar-09-17 01:35PM  at bizjournals.com]
▶ Alaska Airlines announces new nonstop service between KC and SF   [01:35PM  American City Business Journals]
▶ The Most Undervalued Sector in the Stock Market Today   [Feb-26-17 08:35AM  Motley Fool]
▶ Oaktree, Radian, DuPont: Doug Kass' Views   [Feb-20-17 01:00AM  TheStreet.com]
▶ 6 Surprising Income Investments Yielding 5% or More   [Feb-16-17 11:10AM  Kiplinger]
▶ [$$] International Game Technology Is Paying Off   [Feb-11-17 12:01AM  at Barrons.com]
Financial statements of OAK
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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