Intrinsic value of Five Oaks Investment - OAKS

Previous Close

$3.44

  Intrinsic Value

$6.49

stock screener

  Rating & Target

str. buy

+89%

Previous close

$3.44

 
Intrinsic value

$6.49

 
Up/down potential

+89%

 
Rating

str. buy

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

We calculate the intrinsic value of OAKS 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -25.22
  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
  86
  29
  44
  67
  97
  136
  187
  251
  330
  425
  536
  666
  814
  982
  1,168
  1,373
  1,598
  1,840
  2,101
  2,380
  2,675
  2,988
  3,317
  3,663
  4,024
  4,402
  4,796
  5,206
  5,633
  6,077
  6,538
Variable operating expenses, $m
 
  57
  88
  132
  192
  270
  371
  498
  654
  842
  1,063
  1,320
  1,614
  1,946
  2,315
  2,722
  3,166
  3,647
  4,164
  4,716
  5,302
  5,922
  6,574
  7,259
  7,976
  8,725
  9,505
  10,318
  11,164
  12,044
  12,958
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
  94
  57
  88
  132
  192
  270
  371
  498
  654
  842
  1,063
  1,320
  1,614
  1,946
  2,315
  2,722
  3,166
  3,647
  4,164
  4,716
  5,302
  5,922
  6,574
  7,259
  7,976
  8,725
  9,505
  10,318
  11,164
  12,044
  12,958
Operating income, $m
  -8
  -28
  -44
  -66
  -95
  -134
  -184
  -247
  -324
  -417
  -527
  -654
  -800
  -964
  -1,147
  -1,348
  -1,569
  -1,807
  -2,063
  -2,336
  -2,627
  -2,934
  -3,257
  -3,596
  -3,951
  -4,322
  -4,709
  -5,112
  -5,531
  -5,967
  -6,420
EBITDA, $m
  -8
  375
  580
  867
  1,258
  1,775
  2,440
  3,275
  4,300
  5,533
  6,988
  8,678
  10,610
  12,788
  15,215
  17,891
  20,811
  23,973
  27,370
  30,998
  34,851
  38,924
  43,213
  47,714
  52,426
  57,347
  62,479
  67,823
  73,383
  79,164
  85,173
Interest expense (income), $m
  6
  138
  139
  140
  141
  142
  144
  146
  149
  153
  157
  162
  168
  175
  183
  192
  201
  211
  223
  235
  248
  261
  276
  291
  307
  324
  341
  360
  379
  398
  419
Earnings before tax, $m
  -8
  -167
  -183
  -205
  -236
  -276
  -328
  -393
  -473
  -570
  -684
  -816
  -968
  -1,139
  -1,330
  -1,540
  -1,770
  -2,018
  -2,286
  -2,571
  -2,875
  -3,195
  -3,533
  -3,887
  -4,259
  -4,646
  -5,051
  -5,472
  -5,910
  -6,365
  -6,839
Tax expense, $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
Net income, $m
  -8
  -167
  -183
  -205
  -236
  -276
  -328
  -393
  -473
  -570
  -684
  -816
  -968
  -1,139
  -1,330
  -1,540
  -1,770
  -2,018
  -2,286
  -2,571
  -2,875
  -3,195
  -3,533
  -3,887
  -4,259
  -4,646
  -5,051
  -5,472
  -5,910
  -6,365
  -6,839

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  28
  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
  2,300
  -165
  -254
  -380
  -552
  -778
  -1,070
  -1,436
  -1,886
  -2,427
  -3,065
  -3,807
  -4,654
  -5,610
  -6,674
  -7,848
  -9,129
  -10,516
  -12,006
  -13,597
  -15,287
  -17,074
  -18,955
  -20,930
  -22,996
  -25,155
  -27,406
  -29,750
  -32,189
  -34,725
  -37,361
Adjusted assets (=assets-cash), $m
  2,272
  -165
  -254
  -380
  -552
  -778
  -1,070
  -1,436
  -1,886
  -2,427
  -3,065
  -3,807
  -4,654
  -5,610
  -6,674
  -7,848
  -9,129
  -10,516
  -12,006
  -13,597
  -15,287
  -17,074
  -18,955
  -20,930
  -22,996
  -25,155
  -27,406
  -29,750
  -32,189
  -34,725
  -37,361
Revenue / Adjusted assets
  0.038
  -0.176
  -0.173
  -0.176
  -0.176
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
  -0.175
Average production assets, $m
  0
  4,035
  6,233
  9,322
  13,526
  19,083
  26,235
  35,215
  46,239
  59,498
  75,151
  93,321
  114,094
  137,521
  163,623
  192,392
  223,798
  257,797
  294,333
  333,347
  374,781
  418,581
  464,700
  513,104
  563,771
  616,693
  671,878
  729,348
  789,141
  851,313
  915,932
Working capital, $m
  0
  -4,040
  -6,241
  -9,334
  -13,543
  -19,107
  -26,267
  -35,258
  -46,296
  -59,572
  -75,245
  -93,437
  -114,235
  -137,692
  -163,827
  -192,631
  -224,076
  -258,117
  -294,698
  -333,761
  -375,246
  -419,100
  -465,277
  -513,742
  -564,472
  -617,459
  -672,712
  -730,253
  -790,121
  -852,370
  -917,070
Total debt, $m
  2,144
  2,571
  2,585
  2,604
  2,630
  2,664
  2,707
  2,762
  2,830
  2,911
  3,007
  3,118
  3,245
  3,388
  3,548
  3,724
  3,916
  4,124
  4,348
  4,586
  4,840
  5,108
  5,390
  5,686
  5,996
  6,320
  6,658
  7,009
  7,375
  7,756
  8,151
Total liabilities, $m
  2,157
  25
  38
  57
  83
  117
  161
  215
  283
  364
  460
  571
  698
  841
  1,001
  1,177
  1,369
  1,577
  1,801
  2,040
  2,293
  2,561
  2,843
  3,139
  3,449
  3,773
  4,111
  4,463
  4,828
  5,209
  5,604
Total equity, $m
  142
  -189
  -292
  -437
  -634
  -895
  -1,231
  -1,652
  -2,169
  -2,791
  -3,525
  -4,378
  -5,352
  -6,451
  -7,675
  -9,025
  -10,498
  -12,093
  -13,807
  -15,637
  -17,581
  -19,635
  -21,799
  -24,069
  -26,446
  -28,928
  -31,517
  -34,213
  -37,018
  -39,934
  -42,965
Total liabilities and equity, $m
  2,299
  -164
  -254
  -380
  -551
  -778
  -1,070
  -1,437
  -1,886
  -2,427
  -3,065
  -3,807
  -4,654
  -5,610
  -6,674
  -7,848
  -9,129
  -10,516
  -12,006
  -13,597
  -15,288
  -17,074
  -18,956
  -20,930
  -22,997
  -25,155
  -27,406
  -29,750
  -32,190
  -34,725
  -37,361
Debt-to-equity ratio
  15.099
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  0.063
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -8
  -167
  -183
  -205
  -236
  -276
  -328
  -393
  -473
  -570
  -684
  -816
  -968
  -1,139
  -1,330
  -1,540
  -1,770
  -2,018
  -2,286
  -2,571
  -2,875
  -3,195
  -3,533
  -3,887
  -4,259
  -4,646
  -5,051
  -5,472
  -5,910
  -6,365
  -6,839
Depreciation, amort., depletion, $m
  0
  404
  624
  932
  1,353
  1,908
  2,624
  3,522
  4,624
  5,950
  7,515
  9,332
  11,409
  13,752
  16,362
  19,239
  22,380
  25,780
  29,433
  33,335
  37,478
  41,858
  46,470
  51,310
  56,377
  61,669
  67,188
  72,935
  78,914
  85,131
  91,593
Funds from operations, $m
  3
  237
  441
  727
  1,117
  1,633
  2,296
  3,128
  4,151
  5,380
  6,831
  8,516
  10,441
  12,613
  15,033
  17,699
  20,610
  23,761
  27,148
  30,763
  34,604
  38,663
  42,937
  47,423
  52,119
  57,023
  62,137
  67,463
  73,004
  78,766
  84,755
Change in working capital, $m
  1
  -1,515
  -2,202
  -3,092
  -4,209
  -5,564
  -7,161
  -8,991
  -11,038
  -13,276
  -15,672
  -18,192
  -20,799
  -23,457
  -26,134
  -28,804
  -31,445
  -34,041
  -36,581
  -39,063
  -41,485
  -43,854
  -46,177
  -48,464
  -50,730
  -52,988
  -55,253
  -57,541
  -59,868
  -62,249
  -64,700
Cash from operations, $m
  2
  1,752
  2,642
  3,820
  5,326
  7,197
  9,456
  12,120
  15,189
  18,656
  22,504
  26,708
  31,240
  36,070
  41,167
  46,503
  52,055
  57,802
  63,729
  69,826
  76,089
  82,517
  89,114
  95,887
  102,849
  110,011
  117,390
  125,004
  132,872
  141,015
  149,454
Maintenance CAPEX, $m
  0
  -246
  -403
  -623
  -932
  -1,353
  -1,908
  -2,623
  -3,521
  -4,624
  -5,950
  -7,515
  -9,332
  -11,409
  -13,752
  -16,362
  -19,239
  -22,380
  -25,780
  -29,433
  -33,335
  -37,478
  -41,858
  -46,470
  -51,310
  -56,377
  -61,669
  -67,188
  -72,935
  -78,914
  -85,131
New CAPEX, $m
  0
  -1,574
  -2,199
  -3,089
  -4,204
  -5,557
  -7,152
  -8,980
  -11,024
  -13,259
  -15,653
  -18,170
  -20,773
  -23,428
  -26,102
  -28,769
  -31,406
  -33,999
  -36,536
  -39,014
  -41,434
  -43,800
  -46,119
  -48,404
  -50,667
  -52,922
  -55,184
  -57,470
  -59,794
  -62,172
  -64,620
Cash from investing activities, $m
  -219
  -1,820
  -2,602
  -3,712
  -5,136
  -6,910
  -9,060
  -11,603
  -14,545
  -17,883
  -21,603
  -25,685
  -30,105
  -34,837
  -39,854
  -45,131
  -50,645
  -56,379
  -62,316
  -68,447
  -74,769
  -81,278
  -87,977
  -94,874
  -101,977
  -109,299
  -116,853
  -124,658
  -132,729
  -141,086
  -149,751
Free cash flow, $m
  -217
  -68
  40
  108
  190
  287
  396
  516
  643
  773
  901
  1,023
  1,135
  1,233
  1,313
  1,373
  1,410
  1,424
  1,413
  1,379
  1,320
  1,239
  1,136
  1,013
  871
  712
  536
  347
  144
  -71
  -296
Issuance/(repayment) of debt, $m
  236
  10
  13
  19
  26
  34
  44
  55
  67
  81
  96
  111
  127
  143
  160
  176
  192
  208
  224
  239
  254
  268
  282
  296
  310
  324
  338
  352
  366
  380
  395
Issuance/(repurchase) of shares, $m
  15
  -74
  -103
  -145
  -197
  -261
  -335
  -421
  -517
  -622
  -734
  -852
  -974
  -1,099
  -1,224
  -1,350
  -1,473
  -1,595
  -1,714
  -1,830
  -1,944
  -2,055
  -2,163
  -2,271
  -2,377
  -2,483
  -2,589
  -2,696
  -2,805
  -2,916
  -3,031
Cash from financing (excl. dividends), $m  
  251
  -64
  -90
  -126
  -171
  -227
  -291
  -366
  -450
  -541
  -638
  -741
  -847
  -956
  -1,064
  -1,174
  -1,281
  -1,387
  -1,490
  -1,591
  -1,690
  -1,787
  -1,881
  -1,975
  -2,067
  -2,159
  -2,251
  -2,344
  -2,439
  -2,536
  -2,636
Total cash flow (excl. dividends), $m
  34
  -133
  -50
  -18
  19
  60
  105
  150
  193
  232
  262
  282
  288
  277
  248
  199
  129
  37
  -77
  -213
  -370
  -547
  -745
  -961
  -1,196
  -1,447
  -1,715
  -1,997
  -2,295
  -2,607
  -2,932
Retained Cash Flow (-), $m
  35
  -93
  -80
  -60
  -38
  -15
  8
  28
  44
  52
  50
  36
  6
  -40
  -105
  -191
  -296
  -424
  -572
  -741
  -931
  -1,141
  -1,370
  -1,617
  -1,882
  -2,164
  -2,462
  -2,776
  -3,105
  -3,449
  -3,807
Prev. year cash balance distribution, $m
 
  116
  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
 
  -93
  -80
  -60
  -20
  45
  112
  178
  237
  284
  312
  318
  294
  237
  143
  8
  -168
  -387
  -572
  -741
  -931
  -1,141
  -1,370
  -1,617
  -1,882
  -2,164
  -2,462
  -2,776
  -3,105
  -3,449
  -3,807
Discount rate, %
 
  14.00
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.68
  21.72
  22.80
  23.94
  25.14
  26.40
  27.72
  29.10
  30.56
  32.09
  33.69
  35.38
  37.15
  39.00
  40.95
  43.00
  45.15
  47.41
  49.78
  52.27
  54.88
  57.63
PV of cash for distribution, $m
 
  -82
  -61
  -39
  -11
  20
  42
  53
  56
  52
  44
  33
  22
  13
  5
  0
  -3
  -4
  -4
  -3
  -2
  -2
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
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

Five Oaks Investment Corp. is a real estate investment trust. The Company is focused on investing on a leveraged basis in mortgage and other real estate-related assets, particularly residential mortgage loans and mortgage-backed securities (MBS). The Company invests in various assets, such as Agency residential MBS (RMBS); securitizations backed by multi-family mortgage loans, or Multi-Family MBS; residential mortgage loans and other mortgage-related investments, including mortgage servicing rights (MSRs), and Non-Agency RMBS. The Company finances its investments in Agency RMBS, Multi-Family MBS, residential mortgage loans and Non-Agency RMBS primarily through short-term borrowings structured as repurchase agreements. The Company is externally managed and advised by Oak Circle Capital Partners LLC.

FINANCIAL RATIOS  of  Five Oaks Investment (OAKS)

Valuation Ratios
P/E Ratio -7.5
Price to Sales 0.7
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 30.2
Price to Free Cash Flow 30.2
Growth Rates
Sales Growth Rate -25.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 943%
Total Debt to Equity 1509.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.1%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. -0.1%
Return On Equity -5%
Return On Equity - 3 Yr. Avg. -1.1%
Asset Turnover 0
Profitability Ratios
Gross Margin 18.6%
Gross Margin - 3 Yr. Avg. 29.4%
EBITDA Margin -2.3%
EBITDA Margin - 3 Yr. Avg. 6.7%
Operating Margin -9.3%
Oper. Margin - 3 Yr. Avg. -1%
Pre-Tax Margin -9.3%
Pre-Tax Margin - 3 Yr. Avg. -1%
Net Profit Margin -9.3%
Net Profit Margin - 3 Yr. Avg. -1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -412.5%

OAKS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OAKS stock intrinsic value calculation we used $18 million for the last fiscal year's total revenue generated by Five Oaks Investment. The default revenue input number comes from 2016 income statement of Five Oaks Investment. 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 OAKS 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 14%, whose default value for OAKS is calculated based on our internal credit rating of Five Oaks Investment, 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 Five Oaks Investment.
    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 OAKS stock the variable cost ratio is equal to 199.3%.

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 OAKS 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 5.4% for Five Oaks Investment.

Corporate tax rate of 27% is the nominal tax rate for Five Oaks Investment. 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 OAKS 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 OAKS are equal to 14008.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Five Oaks Investment 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 OAKS is equal to -14026.3%. 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 - $0 million for Five Oaks Investment - 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 20 million for Five Oaks Investment 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 Five Oaks Investment at the current share price and the inputted number of shares is $0.1 billion.

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Financial statements of OAKS
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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