Intrinsic value of POSCO ADR - PKX

Previous Close

$73.65

  Intrinsic Value

$25.26

stock screener

  Rating & Target

str. sell

-66%

Previous close

$73.65

 
Intrinsic value

$25.26

 
Up/down potential

-66%

 
Rating

str. sell

We calculate the intrinsic value of PKX 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 25.8

 

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, %
  -8.78
  16.20
  15.08
  14.07
  13.16
  12.35
  11.61
  10.95
  10.36
  9.82
  9.34
  8.91
  8.51
  8.16
  7.85
  7.56
  7.31
  7.08
  6.87
  6.68
  6.51
  6.36
  6.23
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
Revenue, $m
  45,807
  53,228
  61,254
  69,874
  79,073
  88,837
  99,154
  110,014
  121,408
  133,332
  145,784
  158,766
  172,284
  186,348
  200,971
  216,169
  231,962
  248,374
  265,432
  283,166
  301,608
  320,795
  340,766
  361,563
  383,230
  405,816
  429,369
  453,945
  479,599
  506,390
  534,381
Variable operating expenses, $m
 
  51,452
  59,193
  67,506
  76,377
  85,794
  95,744
  106,217
  117,205
  128,705
  140,714
  153,115
  166,152
  179,716
  193,818
  208,475
  223,706
  239,534
  255,985
  273,087
  290,873
  309,378
  328,638
  348,695
  369,591
  391,372
  414,088
  437,788
  462,529
  488,367
  515,361
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
  43,876
  51,452
  59,193
  67,506
  76,377
  85,794
  95,744
  106,217
  117,205
  128,705
  140,714
  153,115
  166,152
  179,716
  193,818
  208,475
  223,706
  239,534
  255,985
  273,087
  290,873
  309,378
  328,638
  348,695
  369,591
  391,372
  414,088
  437,788
  462,529
  488,367
  515,361
Operating income, $m
  1,931
  1,776
  2,061
  2,368
  2,696
  3,043
  3,410
  3,797
  4,202
  4,627
  5,070
  5,651
  6,132
  6,632
  7,153
  7,694
  8,256
  8,840
  9,447
  10,078
  10,735
  11,418
  12,128
  12,869
  13,640
  14,444
  15,282
  16,156
  17,070
  18,023
  19,019
EBITDA, $m
  4,704
  5,010
  5,765
  6,576
  7,442
  8,361
  9,332
  10,354
  11,427
  12,549
  13,721
  14,943
  16,215
  17,539
  18,915
  20,345
  21,832
  23,377
  24,982
  26,651
  28,387
  30,193
  32,072
  34,030
  36,069
  38,195
  40,412
  42,725
  45,139
  47,661
  50,295
Interest expense (income), $m
  597
  458
  603
  760
  929
  1,109
  1,300
  1,503
  1,715
  1,939
  2,172
  2,416
  2,671
  2,935
  3,211
  3,497
  3,795
  4,105
  4,426
  4,760
  5,108
  5,469
  5,845
  6,236
  6,644
  7,068
  7,511
  7,972
  8,454
  8,956
  9,481
Earnings before tax, $m
  1,236
  1,318
  1,459
  1,608
  1,767
  1,934
  2,110
  2,294
  2,487
  2,688
  2,898
  3,234
  3,461
  3,697
  3,942
  4,196
  4,461
  4,735
  5,021
  5,318
  5,627
  5,948
  6,283
  6,632
  6,996
  7,375
  7,771
  8,184
  8,616
  9,067
  9,538
Tax expense, $m
  332
  356
  394
  434
  477
  522
  570
  619
  671
  726
  782
  873
  935
  998
  1,064
  1,133
  1,204
  1,279
  1,356
  1,436
  1,519
  1,606
  1,696
  1,791
  1,889
  1,991
  2,098
  2,210
  2,326
  2,448
  2,575
Net income, $m
  1,176
  962
  1,065
  1,174
  1,290
  1,412
  1,540
  1,675
  1,815
  1,962
  2,115
  2,361
  2,527
  2,699
  2,878
  3,063
  3,256
  3,457
  3,665
  3,882
  4,108
  4,342
  4,587
  4,841
  5,107
  5,384
  5,673
  5,974
  6,289
  6,619
  6,963

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,615
  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
  68,829
  72,320
  83,226
  94,938
  107,436
  120,703
  134,721
  149,475
  164,956
  181,157
  198,076
  215,715
  234,082
  253,191
  273,058
  293,707
  315,166
  337,465
  360,641
  384,736
  409,794
  435,863
  462,998
  491,254
  520,694
  551,380
  583,382
  616,773
  651,629
  688,030
  726,061
Adjusted assets (=assets-cash), $m
  62,214
  72,320
  83,226
  94,938
  107,436
  120,703
  134,721
  149,475
  164,956
  181,157
  198,076
  215,715
  234,082
  253,191
  273,058
  293,707
  315,166
  337,465
  360,641
  384,736
  409,794
  435,863
  462,998
  491,254
  520,694
  551,380
  583,382
  616,773
  651,629
  688,030
  726,061
Revenue / Adjusted assets
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
  0.736
Average production assets, $m
  34,582
  40,187
  46,247
  52,755
  59,700
  67,072
  74,861
  83,060
  91,663
  100,665
  110,067
  119,868
  130,075
  140,693
  151,733
  163,207
  175,131
  187,522
  200,401
  213,790
  227,714
  242,200
  257,279
  272,980
  289,339
  306,391
  324,174
  342,728
  362,097
  382,324
  403,457
Working capital, $m
  8,965
  12,988
  14,946
  17,049
  19,294
  21,676
  24,194
  26,843
  29,624
  32,533
  35,571
  38,739
  42,037
  45,469
  49,037
  52,745
  56,599
  60,603
  64,765
  69,092
  73,592
  78,274
  83,147
  88,221
  93,508
  99,019
  104,766
  110,763
  117,022
  123,559
  130,389
Total debt, $m
  19,691
  17,223
  21,716
  26,541
  31,691
  37,157
  42,932
  49,011
  55,389
  62,064
  69,034
  76,301
  83,869
  91,742
  99,927
  108,434
  117,275
  126,462
  136,011
  145,938
  156,262
  167,003
  178,182
  189,824
  201,953
  214,596
  227,781
  241,538
  255,898
  270,895
  286,564
Total liabilities, $m
  32,264
  29,796
  34,289
  39,114
  44,264
  49,730
  55,505
  61,584
  67,962
  74,637
  81,607
  88,874
  96,442
  104,315
  112,500
  121,007
  129,848
  139,035
  148,584
  158,511
  168,835
  179,576
  190,755
  202,397
  214,526
  227,169
  240,354
  254,111
  268,471
  283,468
  299,137
Total equity, $m
  36,565
  42,524
  48,937
  55,823
  63,172
  70,973
  79,216
  87,891
  96,994
  106,520
  116,468
  126,840
  137,640
  148,876
  160,558
  172,700
  185,317
  198,429
  212,057
  226,225
  240,959
  256,288
  272,243
  288,858
  306,168
  324,211
  343,029
  362,663
  383,158
  404,561
  426,924
Total liabilities and equity, $m
  68,829
  72,320
  83,226
  94,937
  107,436
  120,703
  134,721
  149,475
  164,956
  181,157
  198,075
  215,714
  234,082
  253,191
  273,058
  293,707
  315,165
  337,464
  360,641
  384,736
  409,794
  435,864
  462,998
  491,255
  520,694
  551,380
  583,383
  616,774
  651,629
  688,029
  726,061
Debt-to-equity ratio
  0.539
  0.410
  0.440
  0.480
  0.500
  0.520
  0.540
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.630
  0.640
  0.640
  0.650
  0.650
  0.650
  0.650
  0.660
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.670
Adjusted equity ratio
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588
  0.588

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,176
  962
  1,065
  1,174
  1,290
  1,412
  1,540
  1,675
  1,815
  1,962
  2,115
  2,361
  2,527
  2,699
  2,878
  3,063
  3,256
  3,457
  3,665
  3,882
  4,108
  4,342
  4,587
  4,841
  5,107
  5,384
  5,673
  5,974
  6,289
  6,619
  6,963
Depreciation, amort., depletion, $m
  2,773
  3,234
  3,704
  4,208
  4,747
  5,318
  5,922
  6,557
  7,224
  7,922
  8,651
  9,292
  10,083
  10,906
  11,762
  12,652
  13,576
  14,537
  15,535
  16,573
  17,652
  18,775
  19,944
  21,161
  22,429
  23,751
  25,130
  26,568
  28,070
  29,638
  31,276
Funds from operations, $m
  3,396
  4,196
  4,769
  5,382
  6,036
  6,730
  7,462
  8,232
  9,040
  9,885
  10,766
  11,653
  12,610
  13,605
  14,640
  15,715
  16,832
  17,993
  19,200
  20,455
  21,760
  23,118
  24,531
  26,003
  27,536
  29,135
  30,803
  32,543
  34,359
  36,256
  38,238
Change in working capital, $m
  -1,162
  1,811
  1,959
  2,103
  2,245
  2,382
  2,517
  2,650
  2,780
  2,909
  3,038
  3,168
  3,298
  3,432
  3,568
  3,708
  3,854
  4,005
  4,162
  4,327
  4,500
  4,682
  4,873
  5,074
  5,287
  5,511
  5,747
  5,996
  6,259
  6,537
  6,830
Cash from operations, $m
  4,558
  2,386
  2,810
  3,279
  3,792
  4,347
  4,945
  5,583
  6,260
  6,975
  7,728
  8,486
  9,312
  10,174
  11,072
  12,007
  12,979
  13,989
  15,038
  16,128
  17,260
  18,436
  19,658
  20,928
  22,250
  23,624
  25,055
  26,546
  28,100
  29,719
  31,409
Maintenance CAPEX, $m
  0
  -2,681
  -3,115
  -3,585
  -4,090
  -4,628
  -5,199
  -5,803
  -6,439
  -7,106
  -7,804
  -8,532
  -9,292
  -10,083
  -10,906
  -11,762
  -12,652
  -13,576
  -14,537
  -15,535
  -16,573
  -17,652
  -18,775
  -19,944
  -21,161
  -22,429
  -23,751
  -25,130
  -26,568
  -28,070
  -29,638
New CAPEX, $m
  -2,125
  -5,605
  -6,060
  -6,508
  -6,945
  -7,372
  -7,789
  -8,199
  -8,603
  -9,002
  -9,401
  -9,802
  -10,206
  -10,618
  -11,040
  -11,474
  -11,924
  -12,391
  -12,879
  -13,389
  -13,924
  -14,486
  -15,078
  -15,702
  -16,359
  -17,052
  -17,783
  -18,555
  -19,369
  -20,227
  -21,133
Cash from investing activities, $m
  -3,240
  -8,286
  -9,175
  -10,093
  -11,035
  -12,000
  -12,988
  -14,002
  -15,042
  -16,108
  -17,205
  -18,334
  -19,498
  -20,701
  -21,946
  -23,236
  -24,576
  -25,967
  -27,416
  -28,924
  -30,497
  -32,138
  -33,853
  -35,646
  -37,520
  -39,481
  -41,534
  -43,685
  -45,937
  -48,297
  -50,771
Free cash flow, $m
  1,318
  -5,900
  -6,365
  -6,814
  -7,243
  -7,652
  -8,044
  -8,420
  -8,782
  -9,133
  -9,477
  -9,848
  -10,187
  -10,528
  -10,875
  -11,230
  -11,597
  -11,978
  -12,377
  -12,796
  -13,237
  -13,703
  -14,196
  -14,717
  -15,270
  -15,857
  -16,479
  -17,138
  -17,837
  -18,578
  -19,362
Issuance/(repayment) of debt, $m
  -2,737
  4,147
  4,493
  4,825
  5,149
  5,466
  5,775
  6,079
  6,378
  6,675
  6,970
  7,267
  7,567
  7,873
  8,185
  8,507
  8,841
  9,187
  9,549
  9,927
  10,324
  10,741
  11,179
  11,642
  12,129
  12,643
  13,185
  13,757
  14,360
  14,997
  15,669
Issuance/(repurchase) of shares, $m
  0
  4,997
  5,348
  5,712
  6,059
  6,389
  6,702
  7,001
  7,287
  7,564
  7,833
  8,011
  8,273
  8,537
  8,805
  9,078
  9,361
  9,655
  9,963
  10,286
  10,626
  10,987
  11,368
  11,773
  12,203
  12,660
  13,145
  13,659
  14,206
  14,785
  15,400
Cash from financing (excl. dividends), $m  
  -2,797
  9,144
  9,841
  10,537
  11,208
  11,855
  12,477
  13,080
  13,665
  14,239
  14,803
  15,278
  15,840
  16,410
  16,990
  17,585
  18,202
  18,842
  19,512
  20,213
  20,950
  21,728
  22,547
  23,415
  24,332
  25,303
  26,330
  27,416
  28,566
  29,782
  31,069
Total cash flow (excl. dividends), $m
  -1,479
  3,244
  3,476
  3,724
  3,966
  4,202
  4,434
  4,660
  4,884
  5,105
  5,326
  5,430
  5,654
  5,882
  6,115
  6,356
  6,605
  6,864
  7,134
  7,417
  7,713
  8,025
  8,352
  8,698
  9,062
  9,446
  9,851
  10,278
  10,729
  11,205
  11,706
Retained Cash Flow (-), $m
  -982
  -5,959
  -6,413
  -6,886
  -7,349
  -7,801
  -8,242
  -8,676
  -9,103
  -9,526
  -9,948
  -10,372
  -10,800
  -11,236
  -11,682
  -12,142
  -12,617
  -13,112
  -13,628
  -14,168
  -14,734
  -15,329
  -15,955
  -16,615
  -17,310
  -18,044
  -18,817
  -19,634
  -20,495
  -21,404
  -22,362
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -2,715
  -2,937
  -3,163
  -3,383
  -3,598
  -3,809
  -4,015
  -4,219
  -4,421
  -4,622
  -4,942
  -5,146
  -5,354
  -5,567
  -5,786
  -6,012
  -6,248
  -6,494
  -6,751
  -7,021
  -7,304
  -7,603
  -7,917
  -8,248
  -8,598
  -8,967
  -9,356
  -9,766
  -10,199
  -10,656
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  -2,589
  -2,657
  -2,701
  -2,713
  -2,695
  -2,647
  -2,573
  -2,475
  -2,357
  -2,221
  -2,124
  -1,959
  -1,789
  -1,615
  -1,443
  -1,273
  -1,110
  -956
  -812
  -680
  -561
  -455
  -364
  -285
  -219
  -166
  -122
  -88
  -62
  -43
Current shareholders' claim on cash, %
  100
  83.8
  71.1
  61.0
  52.9
  46.2
  40.8
  36.2
  32.4
  29.2
  26.4
  24.1
  22.0
  20.3
  18.7
  17.3
  16.1
  15.0
  14.0
  13.1
  12.3
  11.5
  10.8
  10.2
  9.6
  9.1
  8.6
  8.1
  7.7
  7.3
  6.9

POSCO is a Korea-based company principally engaged in the manufacture and distribution of steel products. The Company operates in four segments: steel, trading, construction, and others. The steel segment includes production of steel products and sale of such products. The trading segment consists of global trading activities of POSCO Daewoo Corporation, exporting and importing a range of steel products that are both obtained from and supplied to it, as well as between other suppliers and purchasers in Korea and overseas. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects, and commercial and residential buildings, both in Korea and overseas. The others segment includes power generation, liquefied natural gas (LNG) logistics, and network and system integration.

FINANCIAL RATIOS  of  POSCO ADR (PKX)

Valuation Ratios
P/E Ratio 5
Price to Sales 0.1
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 1.3
Price to Free Cash Flow 2.4
Growth Rates
Sales Growth Rate -8.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.6%
Cap. Spend. - 3 Yr. Gr. Rate -19.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 29.7%
Total Debt to Equity 53.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 3.3%
Return On Equity - 3 Yr. Avg. 1.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 12.6%
Gross Margin - 3 Yr. Avg. 11.7%
EBITDA Margin 10.1%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 1.7%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 26.9%
Eff/ Tax Rate - 3 Yr. Avg. 79.8%
Payout Ratio 52%

PKX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PKX stock intrinsic value calculation we used $45807 million for the last fiscal year's total revenue generated by POSCO ADR. The default revenue input number comes from 2016 income statement of POSCO ADR. 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 PKX stock valuation model: a) initial revenue growth rate of 16.2% 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 4.9%, whose default value for PKX is calculated based on our internal credit rating of POSCO ADR, 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 POSCO ADR.
    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 PKX stock the variable cost ratio is equal to 96.7%.

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 PKX 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 POSCO ADR.

Corporate tax rate of 27% is the nominal tax rate for POSCO ADR. 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 PKX 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 PKX are equal to 75.5%.

Life of production assets of 12.9 years is the average useful life of capital assets used in POSCO ADR 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 PKX is equal to 24.4%. 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 - $36565 million for POSCO ADR - 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 350.134 million for POSCO ADR 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 POSCO ADR at the current share price and the inputted number of shares is $25.8 billion.

RELATED COMPANIES Price Int.Val. Rating
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GGB Gerdau ADR 3.55 0.66  str.sell
TX TERNIUM ADR 31.65 4.65  str.sell

COMPANY NEWS

▶ POSCO Shows Market Leadership With Jump To 83 RS Rating   [Sep-29-17 03:00AM  Investor's Business Daily]
▶ Top Ranked Value Stocks to Buy for July 19th   [Jul-19-17 12:26PM  Zacks]
▶ Top Ranked Momentum Stocks to Buy for July 18th   [Jul-18-17 06:01AM  Zacks]
▶ Top Ranked Value Stocks to Buy for July 17th   [Jul-17-17 09:50AM  Zacks]
▶ Top Ranked Momentum Stocks to Buy for July 13th   [Jul-13-17 06:56AM  Zacks]
▶ Top Ranked Value Stocks to Buy for July 12th   [Jul-12-17 11:39AM  Zacks]
▶ Top Ranked Momentum Stocks to Buy for July 10th   [Jul-10-17 10:35AM  Zacks]
▶ New Strong Buy Stocks for July 6th   [Jul-06-17 10:31AM  Zacks]
▶ [$$] 3 Cheap Korean Stocks With Improving Earnings   [Jun-26-17 08:39PM  Barrons.com]
▶ ETFs with exposure to POSCO : June 22, 2017   [Jun-22-17 04:14PM  Capital Cube]
▶ [$$] South Korean consortium named preferred bidder for Arrium   [Jun-15-17 10:29AM  Financial Times]
▶ Why Investors Shouldnt Fret over MTs Negative Free Cash Flow   [May-15-17 07:36AM  Market Realist]
▶ What to Make of ArcelorMittals 1Q17 Performance   [May-12-17 11:05AM  Market Realist]
▶ Top Ranked Value Stocks to Buy for May 5th   [May-05-17 10:19AM  Zacks]
▶ [$$] South Korean Stocks a Better Bet Than Japan   [May-04-17 09:00PM  Barrons.com]
▶ POSCO Files Its Annual Report on Form 20-F   [Apr-28-17 02:00AM  PR Newswire]
▶ [$$] S Korea's Posco steels itself for tough 2017   [Apr-18-17 07:04AM  Financial Times]
▶ ETFs with exposure to POSCO : April 7, 2017   [Apr-07-17 05:17PM  Capital Cube]
▶ Why Cyclical Stocks Make Tricky Long-Term Investments   [Mar-31-17 05:26PM  GuruFocus.com]
▶ South Korea's POSCO Joins Global Steel Rally   [Mar-01-17 03:43PM  TheStreet.com]
▶ [$$] Korean Stocks Better Bet Than Japanese Shares   [Feb-08-17 10:03PM  Barrons.com]
Financial statements of PKX
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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