Intrinsic value of Polaris Industries - PII

Previous Close

$94.33

  Intrinsic Value

$204.96

stock screener

  Rating & Target

str. buy

+117%

  Value-price divergence*

-30%

Previous close

$94.33

 
Intrinsic value

$204.96

 
Up/down potential

+117%

 
Rating

str. buy

 
Value-price divergence*

-30%

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

We calculate the intrinsic value of PII 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 5.8

 

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, %
  -4.28
  17.40
  16.16
  15.04
  14.04
  13.14
  12.32
  11.59
  10.93
  10.34
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
Revenue, $m
  4,517
  5,303
  6,160
  7,087
  8,082
  9,143
  10,270
  11,460
  12,713
  14,027
  15,402
  16,838
  18,335
  19,894
  21,516
  23,202
  24,954
  26,776
  28,668
  30,635
  32,680
  34,807
  37,019
  39,322
  41,720
  44,219
  46,824
  49,540
  52,374
  55,333
  58,423
Variable operating expenses, $m
 
  4,490
  5,208
  5,985
  6,820
  7,710
  8,655
  9,653
  10,704
  11,806
  12,959
  14,121
  15,377
  16,684
  18,044
  19,459
  20,928
  22,456
  24,043
  25,692
  27,407
  29,191
  31,046
  32,978
  34,989
  37,085
  39,269
  41,547
  43,924
  46,405
  48,997
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
  4,166
  4,490
  5,208
  5,985
  6,820
  7,710
  8,655
  9,653
  10,704
  11,806
  12,959
  14,121
  15,377
  16,684
  18,044
  19,459
  20,928
  22,456
  24,043
  25,692
  27,407
  29,191
  31,046
  32,978
  34,989
  37,085
  39,269
  41,547
  43,924
  46,405
  48,997
Operating income, $m
  350
  813
  952
  1,101
  1,262
  1,433
  1,615
  1,807
  2,009
  2,221
  2,443
  2,717
  2,958
  3,210
  3,471
  3,743
  4,026
  4,320
  4,625
  4,943
  5,273
  5,616
  5,973
  6,344
  6,731
  7,134
  7,555
  7,993
  8,450
  8,928
  9,426
EBITDA, $m
  518
  926
  1,076
  1,238
  1,411
  1,597
  1,794
  2,001
  2,220
  2,450
  2,690
  2,941
  3,202
  3,474
  3,758
  4,052
  4,358
  4,676
  5,007
  5,350
  5,707
  6,079
  6,465
  6,867
  7,286
  7,723
  8,177
  8,652
  9,147
  9,663
  10,203
Interest expense (income), $m
  16
  40
  53
  68
  84
  101
  120
  139
  160
  182
  204
  228
  253
  279
  306
  334
  363
  393
  425
  457
  491
  527
  563
  602
  641
  683
  726
  771
  818
  867
  918
Earnings before tax, $m
  313
  774
  898
  1,033
  1,177
  1,331
  1,495
  1,667
  1,849
  2,039
  2,239
  2,489
  2,705
  2,931
  3,166
  3,410
  3,663
  3,927
  4,201
  4,485
  4,781
  5,089
  5,409
  5,743
  6,090
  6,452
  6,829
  7,222
  7,632
  8,061
  8,508
Tax expense, $m
  100
  209
  243
  279
  318
  360
  404
  450
  499
  551
  604
  672
  730
  791
  855
  921
  989
  1,060
  1,134
  1,211
  1,291
  1,374
  1,461
  1,551
  1,644
  1,742
  1,844
  1,950
  2,061
  2,176
  2,297
Net income, $m
  213
  565
  656
  754
  860
  972
  1,091
  1,217
  1,350
  1,489
  1,634
  1,817
  1,975
  2,140
  2,311
  2,489
  2,674
  2,867
  3,067
  3,274
  3,490
  3,715
  3,949
  4,192
  4,446
  4,710
  4,985
  5,272
  5,572
  5,884
  6,211

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  127
  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
  3,100
  3,491
  4,055
  4,665
  5,320
  6,019
  6,761
  7,544
  8,369
  9,234
  10,140
  11,085
  12,071
  13,097
  14,164
  15,275
  16,428
  17,627
  18,873
  20,168
  21,514
  22,914
  24,371
  25,887
  27,466
  29,111
  30,825
  32,614
  34,479
  36,427
  38,461
Adjusted assets (=assets-cash), $m
  2,973
  3,491
  4,055
  4,665
  5,320
  6,019
  6,761
  7,544
  8,369
  9,234
  10,140
  11,085
  12,071
  13,097
  14,164
  15,275
  16,428
  17,627
  18,873
  20,168
  21,514
  22,914
  24,371
  25,887
  27,466
  29,111
  30,825
  32,614
  34,479
  36,427
  38,461
Revenue / Adjusted assets
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
  1.519
Average production assets, $m
  602
  705
  819
  943
  1,075
  1,216
  1,366
  1,524
  1,691
  1,866
  2,048
  2,239
  2,439
  2,646
  2,862
  3,086
  3,319
  3,561
  3,813
  4,074
  4,346
  4,629
  4,924
  5,230
  5,549
  5,881
  6,228
  6,589
  6,966
  7,359
  7,770
Working capital, $m
  231
  127
  148
  170
  194
  219
  246
  275
  305
  337
  370
  404
  440
  477
  516
  557
  599
  643
  688
  735
  784
  835
  888
  944
  1,001
  1,061
  1,124
  1,189
  1,257
  1,328
  1,402
Total debt, $m
  1,142
  1,527
  1,950
  2,408
  2,899
  3,423
  3,980
  4,567
  5,186
  5,835
  6,514
  7,223
  7,962
  8,732
  9,532
  10,365
  11,230
  12,129
  13,064
  14,035
  15,045
  16,095
  17,187
  18,324
  19,508
  20,742
  22,028
  23,369
  24,769
  26,229
  27,755
Total liabilities, $m
  2,233
  2,618
  3,041
  3,499
  3,990
  4,514
  5,071
  5,658
  6,277
  6,926
  7,605
  8,314
  9,053
  9,823
  10,623
  11,456
  12,321
  13,220
  14,155
  15,126
  16,136
  17,186
  18,278
  19,415
  20,599
  21,833
  23,119
  24,460
  25,860
  27,320
  28,846
Total equity, $m
  867
  873
  1,014
  1,166
  1,330
  1,505
  1,690
  1,886
  2,092
  2,309
  2,535
  2,771
  3,018
  3,274
  3,541
  3,819
  4,107
  4,407
  4,718
  5,042
  5,379
  5,729
  6,093
  6,472
  6,866
  7,278
  7,706
  8,153
  8,620
  9,107
  9,615
Total liabilities and equity, $m
  3,100
  3,491
  4,055
  4,665
  5,320
  6,019
  6,761
  7,544
  8,369
  9,235
  10,140
  11,085
  12,071
  13,097
  14,164
  15,275
  16,428
  17,627
  18,873
  20,168
  21,515
  22,915
  24,371
  25,887
  27,465
  29,111
  30,825
  32,613
  34,480
  36,427
  38,461
Debt-to-equity ratio
  1.317
  1.750
  1.920
  2.060
  2.180
  2.270
  2.350
  2.420
  2.480
  2.530
  2.570
  2.610
  2.640
  2.670
  2.690
  2.710
  2.730
  2.750
  2.770
  2.780
  2.800
  2.810
  2.820
  2.830
  2.840
  2.850
  2.860
  2.870
  2.870
  2.880
  2.890
Adjusted equity ratio
  0.249
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  213
  565
  656
  754
  860
  972
  1,091
  1,217
  1,350
  1,489
  1,634
  1,817
  1,975
  2,140
  2,311
  2,489
  2,674
  2,867
  3,067
  3,274
  3,490
  3,715
  3,949
  4,192
  4,446
  4,710
  4,985
  5,272
  5,572
  5,884
  6,211
Depreciation, amort., depletion, $m
  168
  113
  124
  136
  150
  164
  179
  195
  211
  229
  247
  224
  244
  265
  286
  309
  332
  356
  381
  407
  435
  463
  492
  523
  555
  588
  623
  659
  697
  736
  777
Funds from operations, $m
  752
  677
  780
  890
  1,009
  1,136
  1,270
  1,412
  1,561
  1,718
  1,881
  2,041
  2,219
  2,404
  2,597
  2,798
  3,006
  3,223
  3,448
  3,682
  3,925
  4,178
  4,441
  4,715
  5,001
  5,298
  5,608
  5,931
  6,268
  6,620
  6,988
Change in working capital, $m
  180
  19
  21
  22
  24
  25
  27
  29
  30
  32
  33
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
Cash from operations, $m
  572
  659
  759
  868
  985
  1,110
  1,243
  1,383
  1,531
  1,686
  1,848
  2,006
  2,183
  2,367
  2,558
  2,757
  2,964
  3,179
  3,402
  3,635
  3,876
  4,127
  4,388
  4,660
  4,943
  5,238
  5,545
  5,866
  6,200
  6,549
  6,914
Maintenance CAPEX, $m
  0
  -60
  -71
  -82
  -94
  -107
  -122
  -137
  -152
  -169
  -187
  -205
  -224
  -244
  -265
  -286
  -309
  -332
  -356
  -381
  -407
  -435
  -463
  -492
  -523
  -555
  -588
  -623
  -659
  -697
  -736
New CAPEX, $m
  -209
  -103
  -114
  -123
  -132
  -141
  -150
  -158
  -167
  -175
  -183
  -191
  -199
  -207
  -216
  -224
  -233
  -242
  -252
  -262
  -272
  -283
  -294
  -306
  -319
  -332
  -346
  -361
  -377
  -393
  -411
Cash from investing activities, $m
  -909
  -163
  -185
  -205
  -226
  -248
  -272
  -295
  -319
  -344
  -370
  -396
  -423
  -451
  -481
  -510
  -542
  -574
  -608
  -643
  -679
  -718
  -757
  -798
  -842
  -887
  -934
  -984
  -1,036
  -1,090
  -1,147
Free cash flow, $m
  -337
  495
  575
  663
  759
  862
  972
  1,088
  1,212
  1,342
  1,479
  1,610
  1,760
  1,916
  2,078
  2,247
  2,422
  2,605
  2,795
  2,992
  3,197
  3,410
  3,631
  3,861
  4,101
  4,351
  4,611
  4,882
  5,164
  5,459
  5,767
Issuance/(repayment) of debt, $m
  679
  389
  423
  458
  491
  524
  556
  588
  619
  649
  679
  709
  739
  770
  801
  833
  865
  899
  934
  971
  1,010
  1,050
  1,092
  1,137
  1,184
  1,234
  1,286
  1,341
  1,399
  1,461
  1,526
Issuance/(repurchase) of shares, $m
  -228
  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  
  454
  389
  423
  458
  491
  524
  556
  588
  619
  649
  679
  709
  739
  770
  801
  833
  865
  899
  934
  971
  1,010
  1,050
  1,092
  1,137
  1,184
  1,234
  1,286
  1,341
  1,399
  1,461
  1,526
Total cash flow (excl. dividends), $m
  112
  884
  998
  1,121
  1,250
  1,386
  1,528
  1,676
  1,830
  1,991
  2,158
  2,319
  2,499
  2,685
  2,879
  3,079
  3,288
  3,504
  3,729
  3,963
  4,206
  4,460
  4,723
  4,998
  5,285
  5,584
  5,897
  6,223
  6,564
  6,920
  7,292
Retained Cash Flow (-), $m
  114
  -129
  -141
  -153
  -164
  -175
  -185
  -196
  -206
  -216
  -226
  -236
  -246
  -257
  -267
  -278
  -288
  -300
  -311
  -324
  -337
  -350
  -364
  -379
  -395
  -411
  -429
  -447
  -466
  -487
  -509
Prev. year cash balance distribution, $m
 
  123
  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
 
  879
  857
  968
  1,086
  1,211
  1,342
  1,480
  1,624
  1,775
  1,931
  2,083
  2,253
  2,429
  2,612
  2,802
  2,999
  3,204
  3,418
  3,639
  3,870
  4,110
  4,359
  4,619
  4,890
  5,173
  5,468
  5,776
  6,097
  6,433
  6,784
Discount rate, %
 
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
 
  824
  749
  784
  809
  823
  826
  818
  798
  768
  729
  677
  624
  566
  506
  444
  383
  325
  271
  221
  177
  139
  106
  80
  58
  42
  29
  19
  13
  8
  5
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

Polaris Industries Inc. designs, engineers, manufactures, and markets power sports vehicles worldwide. It operates through four segments: Off-Road Vehicles (ORVs)/Snowmobiles, Motorcycles, Global Adjacent Markets, and Other. The company provides ORVs, including all-terrain vehicles and side-by-side vehicles for recreational, military, and utility use; snowmobiles and technical riding gears; three-wheel motorcycles; and low emission, light duty hauling, passenger, commercial, and industrial vehicles. It also produces or supplies various replacement parts and accessories consisting of winches, bumpers/brush guards, plows, racks, wheels, mowers, tires, lighting and audio systems, pull-behinds, cabs systems, cargo box accessories, tracks, and oils for ORVs; covers, traction products, reverse kits, electric starters, tracks, bags, windshields, oils, and lubricants for snowmobiles; and saddle bags, handlebars, backrests, exhausts, windshields, seats, oils, and various chrome accessories for motorcycles. In addition, the company sells recreational apparel, such as helmets, jackets, pants, hats, goggles, gloves, boots, bibs, and leathers through a network of independent dealers and distributors, as well as through online. Polaris Industries Inc. markets its products under the GEM, Goupil, Aixam, Taylor-Dunn, Klim, Timbersled, Indian Motorcycle, and kolpin brands, as well as under the BRUTUS, RZR, RANGER, GENERAL, Sportsman, Polaris ACE, RIDE COMMAND, Pro Armor, AXYS, DAGOR, Sportsman MV, MRZR, and Slingshot names. Further, it manufactures, distributes, retails, and installs aftermarket parts and accessories for light trucks, jeeps, sport-utility vehicles, and other four-wheel drive vehicles under the Pro Comp, Smittybilt, Rubicon Express, Poison Spyder, Trail Master, LRG, and G2 Axle & Gear brands through its stores, call centers, and e-commerce sites. Polaris Industries Inc. was founded in 1954 and is headquartered in Medina, Minnesota.

FINANCIAL RATIOS  of  Polaris Industries (PII)

Valuation Ratios
P/E Ratio 27.9
Price to Sales 1.3
Price to Book 6.9
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 16.4
Growth Rates
Sales Growth Rate -4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.1%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio 32
Current Ratio 0
LT Debt to Equity 131.3%
Total Debt to Equity 131.7%
Interest Coverage 21
Management Effectiveness
Return On Assets 8.2%
Ret/ On Assets - 3 Yr. Avg. 17.8%
Return On Total Capital 12.3%
Ret/ On T. Cap. - 3 Yr. Avg. 31.9%
Return On Equity 23.1%
Return On Equity - 3 Yr. Avg. 45.8%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 24.5%
Gross Margin - 3 Yr. Avg. 27.4%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 15.9%
Operating Margin 7.8%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 6.9%
Pre-Tax Margin - 3 Yr. Avg. 12.4%
Net Profit Margin 4.7%
Net Profit Margin - 3 Yr. Avg. 8.2%
Effective Tax Rate 31.9%
Eff/ Tax Rate - 3 Yr. Avg. 33.6%
Payout Ratio 65.7%

PII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PII stock intrinsic value calculation we used $4517 million for the last fiscal year's total revenue generated by Polaris Industries. The default revenue input number comes from 2016 income statement of Polaris Industries. 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 PII stock valuation model: a) initial revenue growth rate of 17.4% 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 6.6%, whose default value for PII is calculated based on our internal credit rating of Polaris Industries, 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 Polaris Industries.
    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 PII stock the variable cost ratio is equal to 84.8%.

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 PII 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 Polaris Industries.

Corporate tax rate of 27% is the nominal tax rate for Polaris Industries. 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 PII 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 PII are equal to 13.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Polaris Industries 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 PII is equal to 2.4%. 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 - $867 million for Polaris Industries - 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 61.62 million for Polaris Industries 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 Polaris Industries at the current share price and the inputted number of shares is $5.8 billion.

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COMPANY NEWS

▶ Better Buy: Polaris Industries Inc. vs. Harley-Davidson   [Jul-22-17 10:33AM  Motley Fool]
▶ Polaris Industries beats Street 2Q forecasts   [12:21AM  Associated Press]
▶ Polaris Reports 2017 Second Quarter Results   [06:00AM  Business Wire]
▶ Polaris Recalling Thousands of ATVs Due to Fire, Fuel Leaks   [Jul-19-17 03:08PM  TheStreet.com]
▶ Harley-Davidson Slashes Shipment Guidance; Stock Plunges   [04:10PM  Investor's Business Daily]
▶ 3 Reasons Polaris Industries Stock Could Fall   [Jul-03-17 09:28AM  Motley Fool]
▶ Polaris Industries Inc. on a Rough Path in 2017 So Far   [Jun-30-17 08:03AM  Motley Fool]
▶ 3 Reasons Polaris Industries Stock Could Rise   [Jun-28-17 08:32AM  Motley Fool]
▶ How Risky Is Polaris Industries?   [Jun-21-17 04:33PM  Motley Fool]
▶ Polaris recalls up to 35,000 ATVs because of asbestos bans   [Jun-19-17 05:24PM  Associated Press]
▶ 2 Hated Dividend Stocks That Are Buys   [Jun-09-17 09:49AM  Motley Fool]
▶ Is Polaris Industries' RZR the Ford Pinto of ATVs?   [May-09-17 09:47AM  Motley Fool]
▶ Polaris' Profits Headed North   [07:00AM  Morningstar]
▶ Polaris Declares Regular Cash Dividend   [Apr-27-17 05:00PM  Business Wire]
▶ Polaris will close Milford plant, lay off nearly 300 employees   [Apr-26-17 01:50PM  American City Business Journals]
▶ Polaris Industries reports 1Q loss   [06:08AM  Associated Press]
▶ Polaris Reports 2017 First Quarter Results   [06:00AM  Business Wire]
▶ Harley-Davidson Sales Are Falling Again   [Apr-24-17 12:13PM  Motley Fool]
▶ 10 Cheap Stocks Set to Grow Their Dividends   [Apr-19-17 06:00AM  Morningstar]
▶ How Polaris Industries Inc. Makes Most of Its Money   [Apr-18-17 10:49AM  Motley Fool]
▶ Harley-Davidson partners with Sailor Jerry Spiced Rum   [Apr-13-17 02:15PM  American City Business Journals]
▶ Another Year, Another Recall Mess for Polaris Industries   [Mar-28-17 09:41AM  Motley Fool]
▶ Polaris Industries to recall about 19,200 ATVs   [Mar-21-17 12:59PM  Reuters]
▶ This Stock Could Be the Next Dividend Aristocrat   [Mar-17-17 04:08PM  at Motley Fool]
▶ 2 Top Dividend Stocks to Buy in March   [Mar-14-17 03:23PM  at Motley Fool]
▶ Polaris unveils 2018 snowmobile model lineup (slideshow)   [Mar-10-17 12:45PM  at bizjournals.com]
▶ 2018 Polaris® Snowmobile and Timbersled Lineup   [Mar-07-17 02:13PM  Business Wire]
▶ Polaris Rides with gr8 People   [11:30AM  GlobeNewswire]
▶ 12 Motorcycle Statistics That'll Floor You   [Mar-05-17 10:16AM  at Motley Fool]
Stock chart of PII Financial statements of PII Annual reports of PII
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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