Intrinsic value of O'Reilly Automotive - ORLY

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$269.28

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$269.28

 
Intrinsic value

$292.49

 
Up/down potential

+9%

 
Rating

hold

 
Value-price divergence* premium content

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

We calculate the intrinsic value of ORLY 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 24.4

 

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, %
  7.86
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  8,593
  9,255
  9,942
  10,657
  11,399
  12,171
  12,974
  13,809
  14,678
  15,582
  16,524
  17,506
  18,530
  19,597
  20,712
  21,875
  23,091
  24,361
  25,688
  27,077
  28,529
  30,050
  31,641
  33,307
  35,052
  36,880
  38,796
  40,803
  42,907
  45,113
  47,426
Variable operating expenses, $m
 
  6,518
  6,997
  7,494
  8,011
  8,548
  9,107
  9,688
  10,292
  10,922
  11,577
  12,182
  12,894
  13,637
  14,413
  15,222
  16,068
  16,952
  17,876
  18,842
  19,853
  20,910
  22,018
  23,177
  24,392
  25,664
  26,997
  28,393
  29,858
  31,393
  33,002
Fixed operating expenses, $m
 
  883
  905
  927
  950
  974
  998
  1,023
  1,049
  1,075
  1,102
  1,130
  1,158
  1,187
  1,217
  1,247
  1,278
  1,310
  1,343
  1,376
  1,411
  1,446
  1,482
  1,519
  1,557
  1,596
  1,636
  1,677
  1,719
  1,762
  1,806
Total operating expenses, $m
  6,894
  7,401
  7,902
  8,421
  8,961
  9,522
  10,105
  10,711
  11,341
  11,997
  12,679
  13,312
  14,052
  14,824
  15,630
  16,469
  17,346
  18,262
  19,219
  20,218
  21,264
  22,356
  23,500
  24,696
  25,949
  27,260
  28,633
  30,070
  31,577
  33,155
  34,808
Operating income, $m
  1,699
  1,854
  2,041
  2,235
  2,438
  2,649
  2,869
  3,098
  3,336
  3,585
  3,845
  4,194
  4,478
  4,773
  5,083
  5,406
  5,745
  6,099
  6,470
  6,859
  7,266
  7,693
  8,141
  8,611
  9,103
  9,620
  10,163
  10,733
  11,331
  11,959
  12,618
EBITDA, $m
  1,917
  2,119
  2,320
  2,530
  2,747
  2,974
  3,210
  3,456
  3,712
  3,979
  4,258
  4,549
  4,852
  5,170
  5,502
  5,849
  6,212
  6,592
  6,990
  7,406
  7,843
  8,301
  8,781
  9,284
  9,812
  10,366
  10,948
  11,558
  12,199
  12,871
  13,578
Interest expense (income), $m
  64
  74
  90
  108
  126
  144
  164
  184
  205
  227
  250
  274
  299
  325
  352
  380
  409
  440
  472
  506
  541
  578
  616
  656
  699
  743
  789
  837
  888
  941
  997
Earnings before tax, $m
  1,637
  1,780
  1,951
  2,128
  2,312
  2,505
  2,705
  2,914
  3,131
  3,358
  3,595
  3,920
  4,179
  4,449
  4,731
  5,026
  5,335
  5,659
  5,998
  6,353
  6,725
  7,115
  7,525
  7,954
  8,405
  8,878
  9,374
  9,895
  10,442
  11,017
  11,621
Tax expense, $m
  599
  481
  527
  575
  624
  676
  730
  787
  845
  907
  971
  1,059
  1,128
  1,201
  1,277
  1,357
  1,440
  1,528
  1,619
  1,715
  1,816
  1,921
  2,032
  2,148
  2,269
  2,397
  2,531
  2,672
  2,819
  2,975
  3,138
Net income, $m
  1,038
  1,299
  1,424
  1,553
  1,688
  1,828
  1,975
  2,127
  2,286
  2,451
  2,624
  2,862
  3,050
  3,247
  3,453
  3,669
  3,895
  4,131
  4,378
  4,637
  4,909
  5,194
  5,493
  5,806
  6,135
  6,481
  6,843
  7,223
  7,623
  8,043
  8,483

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  147
  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
  7,204
  7,598
  8,163
  8,749
  9,359
  9,993
  10,652
  11,337
  12,051
  12,793
  13,567
  14,373
  15,213
  16,090
  17,005
  17,960
  18,958
  20,001
  21,091
  22,231
  23,423
  24,671
  25,978
  27,346
  28,778
  30,279
  31,852
  33,500
  35,228
  37,039
  38,938
Adjusted assets (=assets-cash), $m
  7,057
  7,598
  8,163
  8,749
  9,359
  9,993
  10,652
  11,337
  12,051
  12,793
  13,567
  14,373
  15,213
  16,090
  17,005
  17,960
  18,958
  20,001
  21,091
  22,231
  23,423
  24,671
  25,978
  27,346
  28,778
  30,279
  31,852
  33,500
  35,228
  37,039
  38,938
Revenue / Adjusted assets
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
  1.218
Average production assets, $m
  3,004
  3,239
  3,480
  3,730
  3,990
  4,260
  4,541
  4,833
  5,137
  5,454
  5,783
  6,127
  6,485
  6,859
  7,249
  7,656
  8,082
  8,526
  8,991
  9,477
  9,985
  10,517
  11,074
  11,657
  12,268
  12,908
  13,578
  14,281
  15,018
  15,790
  16,599
Working capital, $m
  -143
  -315
  -338
  -362
  -388
  -414
  -441
  -469
  -499
  -530
  -562
  -595
  -630
  -666
  -704
  -744
  -785
  -828
  -873
  -921
  -970
  -1,022
  -1,076
  -1,132
  -1,192
  -1,254
  -1,319
  -1,387
  -1,459
  -1,534
  -1,612
Total debt, $m
  1,887
  2,313
  2,759
  3,222
  3,704
  4,204
  4,725
  5,266
  5,830
  6,417
  7,028
  7,664
  8,328
  9,021
  9,744
  10,498
  11,287
  12,110
  12,972
  13,872
  14,814
  15,800
  16,832
  17,913
  19,045
  20,231
  21,473
  22,775
  24,140
  25,571
  27,071
Total liabilities, $m
  5,577
  6,003
  6,449
  6,912
  7,394
  7,894
  8,415
  8,956
  9,520
  10,107
  10,718
  11,354
  12,018
  12,711
  13,434
  14,188
  14,977
  15,800
  16,662
  17,562
  18,504
  19,490
  20,522
  21,603
  22,735
  23,921
  25,163
  26,465
  27,830
  29,261
  30,761
Total equity, $m
  1,627
  1,596
  1,714
  1,837
  1,965
  2,099
  2,237
  2,381
  2,531
  2,687
  2,849
  3,018
  3,195
  3,379
  3,571
  3,772
  3,981
  4,200
  4,429
  4,668
  4,919
  5,181
  5,455
  5,743
  6,043
  6,359
  6,689
  7,035
  7,398
  7,778
  8,177
Total liabilities and equity, $m
  7,204
  7,599
  8,163
  8,749
  9,359
  9,993
  10,652
  11,337
  12,051
  12,794
  13,567
  14,372
  15,213
  16,090
  17,005
  17,960
  18,958
  20,000
  21,091
  22,230
  23,423
  24,671
  25,977
  27,346
  28,778
  30,280
  31,852
  33,500
  35,228
  37,039
  38,938
Debt-to-equity ratio
  1.160
  1.450
  1.610
  1.750
  1.880
  2.000
  2.110
  2.210
  2.300
  2.390
  2.470
  2.540
  2.610
  2.670
  2.730
  2.780
  2.840
  2.880
  2.930
  2.970
  3.010
  3.050
  3.090
  3.120
  3.150
  3.180
  3.210
  3.240
  3.260
  3.290
  3.310
Adjusted equity ratio
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210
  0.210

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,038
  1,299
  1,424
  1,553
  1,688
  1,828
  1,975
  2,127
  2,286
  2,451
  2,624
  2,862
  3,050
  3,247
  3,453
  3,669
  3,895
  4,131
  4,378
  4,637
  4,909
  5,194
  5,493
  5,806
  6,135
  6,481
  6,843
  7,223
  7,623
  8,043
  8,483
Depreciation, amort., depletion, $m
  218
  266
  280
  294
  309
  325
  341
  358
  375
  394
  413
  354
  375
  396
  419
  443
  467
  493
  520
  548
  577
  608
  640
  674
  709
  746
  785
  825
  868
  913
  959
Funds from operations, $m
  1,670
  1,565
  1,704
  1,847
  1,997
  2,153
  2,316
  2,485
  2,661
  2,845
  3,037
  3,216
  3,425
  3,644
  3,872
  4,112
  4,362
  4,624
  4,898
  5,185
  5,486
  5,802
  6,133
  6,480
  6,845
  7,227
  7,628
  8,049
  8,491
  8,955
  9,443
Change in working capital, $m
  216
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
Cash from operations, $m
  1,454
  1,718
  1,727
  1,872
  2,022
  2,179
  2,343
  2,513
  2,691
  2,876
  3,069
  3,249
  3,460
  3,680
  3,910
  4,151
  4,403
  4,667
  4,943
  5,232
  5,536
  5,854
  6,187
  6,537
  6,904
  7,289
  7,693
  8,117
  8,563
  9,030
  9,521
Maintenance CAPEX, $m
  0
  -174
  -187
  -201
  -216
  -231
  -246
  -262
  -279
  -297
  -315
  -334
  -354
  -375
  -396
  -419
  -443
  -467
  -493
  -520
  -548
  -577
  -608
  -640
  -674
  -709
  -746
  -785
  -825
  -868
  -913
New CAPEX, $m
  -476
  -236
  -241
  -250
  -260
  -270
  -281
  -292
  -304
  -317
  -330
  -344
  -358
  -374
  -390
  -407
  -425
  -445
  -465
  -486
  -508
  -532
  -557
  -583
  -611
  -640
  -670
  -703
  -736
  -772
  -810
Cash from investing activities, $m
  -529
  -410
  -428
  -451
  -476
  -501
  -527
  -554
  -583
  -614
  -645
  -678
  -712
  -749
  -786
  -826
  -868
  -912
  -958
  -1,006
  -1,056
  -1,109
  -1,165
  -1,223
  -1,285
  -1,349
  -1,416
  -1,488
  -1,561
  -1,640
  -1,723
Free cash flow, $m
  925
  1,309
  1,299
  1,420
  1,547
  1,679
  1,816
  1,958
  2,107
  2,262
  2,424
  2,572
  2,748
  2,932
  3,124
  3,325
  3,535
  3,755
  3,986
  4,227
  4,480
  4,745
  5,022
  5,314
  5,619
  5,940
  6,276
  6,630
  7,001
  7,390
  7,799
Issuance/(repayment) of debt, $m
  499
  426
  446
  463
  482
  501
  521
  541
  563
  587
  611
  637
  664
  693
  723
  755
  788
  824
  861
  901
  942
  986
  1,032
  1,081
  1,132
  1,186
  1,242
  1,302
  1,365
  1,431
  1,500
Issuance/(repurchase) of shares, $m
  -1,446
  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  
  -895
  426
  446
  463
  482
  501
  521
  541
  563
  587
  611
  637
  664
  693
  723
  755
  788
  824
  861
  901
  942
  986
  1,032
  1,081
  1,132
  1,186
  1,242
  1,302
  1,365
  1,431
  1,500
Total cash flow (excl. dividends), $m
  30
  1,735
  1,745
  1,884
  2,029
  2,179
  2,336
  2,500
  2,671
  2,849
  3,035
  3,208
  3,412
  3,624
  3,847
  4,080
  4,323
  4,579
  4,847
  5,127
  5,422
  5,730
  6,054
  6,394
  6,751
  7,126
  7,519
  7,932
  8,365
  8,821
  9,299
Retained Cash Flow (-), $m
  334
  -116
  -119
  -123
  -128
  -133
  -138
  -144
  -150
  -156
  -162
  -169
  -176
  -184
  -192
  -201
  -210
  -219
  -229
  -239
  -250
  -262
  -274
  -287
  -301
  -315
  -330
  -346
  -363
  -380
  -399
Prev. year cash balance distribution, $m
 
  147
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,766
  1,626
  1,761
  1,901
  2,046
  2,198
  2,356
  2,521
  2,693
  2,873
  3,039
  3,235
  3,440
  3,655
  3,879
  4,114
  4,360
  4,618
  4,888
  5,171
  5,468
  5,780
  6,107
  6,450
  6,810
  7,189
  7,586
  8,003
  8,441
  8,900
Discount rate, %
 
  4.80
  5.04
  5.29
  5.56
  5.83
  6.13
  6.43
  6.75
  7.09
  7.45
  7.82
  8.21
  8.62
  9.05
  9.50
  9.98
  10.48
  11.00
  11.55
  12.13
  12.74
  13.37
  14.04
  14.74
  15.48
  16.25
  17.07
  17.92
  18.82
  19.76
PV of cash for distribution, $m
 
  1,685
  1,474
  1,508
  1,531
  1,541
  1,538
  1,523
  1,494
  1,454
  1,401
  1,328
  1,255
  1,174
  1,086
  994
  898
  801
  706
  612
  524
  441
  365
  297
  238
  186
  143
  108
  79
  57
  40
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

O’Reilly Automotive, Inc., together with its subsidiaries, engages in the retail of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. The company provides new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature controls, chassis parts, driveline parts, and engine parts; maintenance items comprising oil, antifreeze products, fluids, filters, wiper blades, lighting products, engine additives, and appearance products; and accessories, such as floor mats, seat covers, and truck accessories. Its stores offer auto body paint and related materials, automotive tools, and professional service provider service equipment. The company’s stores also offer enhanced services and programs comprising used oil, oil filter, and battery recycling; battery, wiper, and bulb replacement; battery diagnostic testing; electrical and module testing; check engine light code extraction; loaner tool program; drum and rotor resurfacing; custom hydraulic hoses; professional paint shop mixing and related materials; and machine shops. Its stores provide do-it-yourself and professional service provider customers a selection of brand name, house brands, and private label products for domestic and imported automobiles, vans, and trucks. As of December 31, 2015, the company operated 4,571 stores in 44 states. O’Reilly Automotive, Inc. was founded in 1957 and is headquartered in Springfield, Missouri.

FINANCIAL RATIOS  of  O'Reilly Automotive (ORLY)

Valuation Ratios
P/E Ratio 24.1
Price to Sales 2.9
Price to Book 15.4
Price to Tangible Book
Price to Cash Flow 17.2
Price to Free Cash Flow 25.6
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 116%
Total Debt to Equity 116%
Interest Coverage 27
Management Effectiveness
Return On Assets 15.5%
Ret/ On Assets - 3 Yr. Avg. 14.3%
Return On Total Capital 30.2%
Ret/ On T. Cap. - 3 Yr. Avg. 26.9%
Return On Equity 57.9%
Return On Equity - 3 Yr. Avg. 47.9%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 52.5%
Gross Margin - 3 Yr. Avg. 52%
EBITDA Margin 22.3%
EBITDA Margin - 3 Yr. Avg. 21.4%
Operating Margin 19.8%
Oper. Margin - 3 Yr. Avg. 18.8%
Pre-Tax Margin 19.1%
Pre-Tax Margin - 3 Yr. Avg. 18.1%
Net Profit Margin 12.1%
Net Profit Margin - 3 Yr. Avg. 11.5%
Effective Tax Rate 36.6%
Eff/ Tax Rate - 3 Yr. Avg. 36.4%
Payout Ratio 0%

ORLY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ORLY stock intrinsic value calculation we used $8593 million for the last fiscal year's total revenue generated by O'Reilly Automotive. The default revenue input number comes from 2016 income statement of O'Reilly Automotive. 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 ORLY stock valuation model: a) initial revenue growth rate of 7.7% 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 4.8%, whose default value for ORLY is calculated based on our internal credit rating of O'Reilly Automotive, 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 O'Reilly Automotive.
    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 ORLY stock the variable cost ratio is equal to 70.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $861 million in the base year in the intrinsic value calculation for ORLY 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 3.9% for O'Reilly Automotive.

Corporate tax rate of 27% is the nominal tax rate for O'Reilly Automotive. 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 ORLY 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 ORLY are equal to 35%.

Life of production assets of 17.3 years is the average useful life of capital assets used in O'Reilly Automotive 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 ORLY is equal to -3.4%. 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 - $1627 million for O'Reilly Automotive - 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 90.795 million for O'Reilly Automotive 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 O'Reilly Automotive at the current share price and the inputted number of shares is $24.4 billion.


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