Intrinsic value of Praxair - PX

Previous Close

$139.90

  Intrinsic Value

$62.43

stock screener

  Rating & Target

str. sell

-55%

  Value-price divergence*

+21%

Previous close

$139.90

 
Intrinsic value

$62.43

 
Up/down potential

-55%

 
Rating

str. sell

 
Value-price divergence*

+21%

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

We calculate the intrinsic value of PX 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 40.1

 

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, %
  -2.25
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  10,534
  11,198
  11,889
  12,608
  13,358
  14,140
  14,955
  15,807
  16,695
  17,623
  18,593
  19,607
  20,668
  21,777
  22,938
  24,153
  25,425
  26,757
  28,153
  29,616
  31,149
  32,755
  34,440
  36,206
  38,058
  40,000
  42,038
  44,175
  46,417
  48,769
  51,238
Variable operating expenses, $m
 
  7,337
  7,771
  8,222
  8,693
  9,183
  9,695
  10,229
  10,786
  11,369
  11,977
  12,302
  12,967
  13,663
  14,391
  15,154
  15,952
  16,788
  17,664
  18,581
  19,543
  20,551
  21,608
  22,716
  23,878
  25,097
  26,375
  27,716
  29,122
  30,598
  32,147
Fixed operating expenses, $m
 
  1,444
  1,480
  1,517
  1,555
  1,594
  1,634
  1,675
  1,717
  1,760
  1,804
  1,849
  1,895
  1,942
  1,991
  2,041
  2,092
  2,144
  2,198
  2,252
  2,309
  2,367
  2,426
  2,486
  2,548
  2,612
  2,678
  2,744
  2,813
  2,883
  2,955
Total operating expenses, $m
  8,296
  8,781
  9,251
  9,739
  10,248
  10,777
  11,329
  11,904
  12,503
  13,129
  13,781
  14,151
  14,862
  15,605
  16,382
  17,195
  18,044
  18,932
  19,862
  20,833
  21,852
  22,918
  24,034
  25,202
  26,426
  27,709
  29,053
  30,460
  31,935
  33,481
  35,102
Operating income, $m
  2,238
  2,416
  2,638
  2,869
  3,110
  3,363
  3,627
  3,903
  4,192
  4,495
  4,812
  5,457
  5,806
  6,171
  6,555
  6,958
  7,381
  7,826
  8,292
  8,782
  9,297
  9,838
  10,406
  11,004
  11,631
  12,291
  12,985
  13,715
  14,481
  15,288
  16,135
EBITDA, $m
  3,360
  3,679
  3,959
  4,251
  4,556
  4,875
  5,208
  5,557
  5,922
  6,303
  6,703
  7,122
  7,561
  8,021
  8,503
  9,010
  9,541
  10,098
  10,683
  11,297
  11,942
  12,620
  13,331
  14,078
  14,864
  15,688
  16,555
  17,466
  18,423
  19,429
  20,486
Interest expense (income), $m
  189
  315
  345
  377
  410
  444
  480
  517
  556
  597
  640
  684
  730
  779
  830
  883
  939
  997
  1,058
  1,122
  1,189
  1,259
  1,333
  1,410
  1,491
  1,576
  1,665
  1,758
  1,856
  1,959
  2,066
Earnings before tax, $m
  2,048
  2,102
  2,292
  2,492
  2,700
  2,918
  3,147
  3,386
  3,636
  3,898
  4,173
  4,773
  5,075
  5,393
  5,726
  6,075
  6,443
  6,829
  7,234
  7,660
  8,108
  8,579
  9,073
  9,594
  10,141
  10,716
  11,321
  11,957
  12,625
  13,329
  14,069
Tax expense, $m
  551
  567
  619
  673
  729
  788
  850
  914
  982
  1,052
  1,127
  1,289
  1,370
  1,456
  1,546
  1,640
  1,740
  1,844
  1,953
  2,068
  2,189
  2,316
  2,450
  2,590
  2,738
  2,893
  3,057
  3,228
  3,409
  3,599
  3,799
Net income, $m
  1,500
  1,534
  1,673
  1,819
  1,971
  2,130
  2,297
  2,471
  2,654
  2,845
  3,046
  3,484
  3,705
  3,937
  4,180
  4,435
  4,703
  4,985
  5,281
  5,592
  5,919
  6,262
  6,624
  7,003
  7,403
  7,823
  8,264
  8,728
  9,217
  9,730
  10,270

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  524
  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
  19,332
  19,996
  21,230
  22,515
  23,854
  25,250
  26,706
  28,226
  29,813
  31,470
  33,202
  35,013
  36,906
  38,887
  40,960
  43,130
  45,402
  47,781
  50,274
  52,886
  55,623
  58,492
  61,500
  64,653
  67,960
  71,429
  75,067
  78,883
  82,887
  87,088
  91,496
Adjusted assets (=assets-cash), $m
  18,808
  19,996
  21,230
  22,515
  23,854
  25,250
  26,706
  28,226
  29,813
  31,470
  33,202
  35,013
  36,906
  38,887
  40,960
  43,130
  45,402
  47,781
  50,274
  52,886
  55,623
  58,492
  61,500
  64,653
  67,960
  71,429
  75,067
  78,883
  82,887
  87,088
  91,496
Revenue / Adjusted assets
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
Average production assets, $m
  11,813
  12,553
  13,327
  14,134
  14,974
  15,851
  16,765
  17,719
  18,715
  19,756
  20,843
  21,980
  23,168
  24,412
  25,713
  27,075
  28,501
  29,995
  31,560
  33,199
  34,918
  36,719
  38,607
  40,587
  42,663
  44,840
  47,124
  49,520
  52,033
  54,670
  57,437
Working capital, $m
  402
  504
  535
  567
  601
  636
  673
  711
  751
  793
  837
  882
  930
  980
  1,032
  1,087
  1,144
  1,204
  1,267
  1,333
  1,402
  1,474
  1,550
  1,629
  1,713
  1,800
  1,892
  1,988
  2,089
  2,195
  2,306
Total debt, $m
  9,515
  9,861
  10,765
  11,707
  12,689
  13,712
  14,780
  15,894
  17,057
  18,272
  19,541
  20,868
  22,256
  23,708
  25,228
  26,818
  28,483
  30,228
  32,055
  33,969
  35,975
  38,078
  40,283
  42,595
  45,019
  47,561
  50,228
  53,026
  55,960
  59,040
  62,270
Total liabilities, $m
  14,311
  14,657
  15,561
  16,503
  17,485
  18,508
  19,576
  20,690
  21,853
  23,068
  24,337
  25,664
  27,052
  28,504
  30,024
  31,614
  33,279
  35,024
  36,851
  38,765
  40,771
  42,874
  45,079
  47,391
  49,815
  52,357
  55,024
  57,822
  60,756
  63,836
  67,066
Total equity, $m
  5,021
  5,339
  5,668
  6,011
  6,369
  6,742
  7,131
  7,536
  7,960
  8,403
  8,865
  9,348
  9,854
  10,383
  10,936
  11,516
  12,122
  12,758
  13,423
  14,120
  14,851
  15,617
  16,420
  17,262
  18,145
  19,072
  20,043
  21,062
  22,131
  23,252
  24,429
Total liabilities and equity, $m
  19,332
  19,996
  21,229
  22,514
  23,854
  25,250
  26,707
  28,226
  29,813
  31,471
  33,202
  35,012
  36,906
  38,887
  40,960
  43,130
  45,401
  47,782
  50,274
  52,885
  55,622
  58,491
  61,499
  64,653
  67,960
  71,429
  75,067
  78,884
  82,887
  87,088
  91,495
Debt-to-equity ratio
  1.895
  1.850
  1.900
  1.950
  1.990
  2.030
  2.070
  2.110
  2.140
  2.170
  2.200
  2.230
  2.260
  2.280
  2.310
  2.330
  2.350
  2.370
  2.390
  2.410
  2.420
  2.440
  2.450
  2.470
  2.480
  2.490
  2.510
  2.520
  2.530
  2.540
  2.550
Adjusted equity ratio
  0.262
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,500
  1,534
  1,673
  1,819
  1,971
  2,130
  2,297
  2,471
  2,654
  2,845
  3,046
  3,484
  3,705
  3,937
  4,180
  4,435
  4,703
  4,985
  5,281
  5,592
  5,919
  6,262
  6,624
  7,003
  7,403
  7,823
  8,264
  8,728
  9,217
  9,730
  10,270
Depreciation, amort., depletion, $m
  1,122
  1,263
  1,321
  1,382
  1,446
  1,513
  1,582
  1,654
  1,730
  1,808
  1,891
  1,665
  1,755
  1,849
  1,948
  2,051
  2,159
  2,272
  2,391
  2,515
  2,645
  2,782
  2,925
  3,075
  3,232
  3,397
  3,570
  3,752
  3,942
  4,142
  4,351
Funds from operations, $m
  2,820
  2,797
  2,995
  3,201
  3,417
  3,643
  3,879
  4,125
  4,384
  4,654
  4,937
  5,149
  5,460
  5,786
  6,128
  6,486
  6,862
  7,257
  7,672
  8,107
  8,564
  9,044
  9,548
  10,078
  10,635
  11,220
  11,834
  12,480
  13,159
  13,872
  14,622
Change in working capital, $m
  47
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  92
  96
  101
  106
  111
Cash from operations, $m
  2,773
  2,767
  2,964
  3,169
  3,384
  3,608
  3,842
  4,087
  4,344
  4,612
  4,893
  5,104
  5,412
  5,736
  6,075
  6,432
  6,805
  7,197
  7,609
  8,041
  8,495
  8,972
  9,473
  9,999
  10,551
  11,132
  11,742
  12,384
  13,058
  13,766
  14,510
Maintenance CAPEX, $m
  0
  -895
  -951
  -1,010
  -1,071
  -1,134
  -1,201
  -1,270
  -1,342
  -1,418
  -1,497
  -1,579
  -1,665
  -1,755
  -1,849
  -1,948
  -2,051
  -2,159
  -2,272
  -2,391
  -2,515
  -2,645
  -2,782
  -2,925
  -3,075
  -3,232
  -3,397
  -3,570
  -3,752
  -3,942
  -4,142
New CAPEX, $m
  -1,465
  -740
  -774
  -807
  -841
  -876
  -914
  -954
  -996
  -1,040
  -1,087
  -1,137
  -1,189
  -1,243
  -1,301
  -1,362
  -1,426
  -1,494
  -1,565
  -1,640
  -1,718
  -1,801
  -1,888
  -1,980
  -2,076
  -2,177
  -2,284
  -2,396
  -2,513
  -2,637
  -2,767
Cash from investing activities, $m
  -1,770
  -1,635
  -1,725
  -1,817
  -1,912
  -2,010
  -2,115
  -2,224
  -2,338
  -2,458
  -2,584
  -2,716
  -2,854
  -2,998
  -3,150
  -3,310
  -3,477
  -3,653
  -3,837
  -4,031
  -4,233
  -4,446
  -4,670
  -4,905
  -5,151
  -5,409
  -5,681
  -5,966
  -6,265
  -6,579
  -6,909
Free cash flow, $m
  1,003
  1,132
  1,238
  1,353
  1,472
  1,597
  1,727
  1,863
  2,005
  2,154
  2,309
  2,388
  2,559
  2,737
  2,925
  3,121
  3,328
  3,544
  3,772
  4,011
  4,262
  4,525
  4,803
  5,094
  5,401
  5,723
  6,062
  6,418
  6,793
  7,187
  7,602
Issuance/(repayment) of debt, $m
  357
  870
  904
  942
  982
  1,023
  1,067
  1,114
  1,163
  1,215
  1,270
  1,327
  1,388
  1,452
  1,519
  1,590
  1,665
  1,744
  1,827
  1,914
  2,006
  2,103
  2,205
  2,312
  2,424
  2,542
  2,667
  2,797
  2,935
  3,079
  3,231
Issuance/(repurchase) of shares, $m
  -89
  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  
  213
  870
  904
  942
  982
  1,023
  1,067
  1,114
  1,163
  1,215
  1,270
  1,327
  1,388
  1,452
  1,519
  1,590
  1,665
  1,744
  1,827
  1,914
  2,006
  2,103
  2,205
  2,312
  2,424
  2,542
  2,667
  2,797
  2,935
  3,079
  3,231
Total cash flow (excl. dividends), $m
  1,233
  2,002
  2,143
  2,295
  2,454
  2,620
  2,795
  2,977
  3,168
  3,369
  3,579
  3,715
  3,946
  4,189
  4,444
  4,712
  4,993
  5,289
  5,599
  5,925
  6,268
  6,629
  7,007
  7,406
  7,825
  8,265
  8,728
  9,215
  9,727
  10,266
  10,833
Retained Cash Flow (-), $m
  -632
  -318
  -329
  -343
  -358
  -373
  -389
  -406
  -424
  -443
  -462
  -483
  -506
  -529
  -553
  -579
  -607
  -635
  -666
  -697
  -731
  -766
  -803
  -842
  -883
  -926
  -971
  -1,019
  -1,069
  -1,122
  -1,177
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
 
  1,684
  1,813
  1,952
  2,096
  2,248
  2,406
  2,571
  2,745
  2,926
  3,116
  3,232
  3,441
  3,660
  3,891
  4,133
  4,387
  4,653
  4,933
  5,228
  5,537
  5,862
  6,204
  6,564
  6,942
  7,339
  7,757
  8,196
  8,658
  9,145
  9,656
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  1,558
  1,540
  1,510
  1,465
  1,405
  1,333
  1,250
  1,157
  1,058
  954
  827
  725
  626
  532
  444
  364
  292
  230
  177
  134
  98
  71
  49
  34
  22
  14
  9
  5
  3
  2
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

Praxair, Inc. is an industrial gas company. The Company's operations are organized into five segments, four of which have been determined on a geographic basis of segmentation: North America, Europe, South America and Asia. In addition, it operates its surface technologies business through its subsidiary, Praxair Surface Technologies, Inc., which represents the fifth segment. Its operations consist of two product lines: industrial gases and surface technologies. Its industrial gases product line centers on the manufacturing and distribution of atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases). It also designs, engineers and builds equipment that produces industrial gases primarily for internal use. Its Surface Technologies segment, operated through Praxair Surface Technologies, Inc., supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders.

FINANCIAL RATIOS  of  Praxair (PX)

Valuation Ratios
P/E Ratio 26.6
Price to Sales 3.8
Price to Book 7.9
Price to Tangible Book
Price to Cash Flow 14.4
Price to Free Cash Flow 30.5
Growth Rates
Sales Growth Rate -2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.9%
Cap. Spend. - 3 Yr. Gr. Rate -6.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 177.6%
Total Debt to Equity 189.5%
Interest Coverage 12
Management Effectiveness
Return On Assets 8.7%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 10.9%
Return On Equity 31.9%
Return On Equity - 3 Yr. Avg. 30.2%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 44.4%
Gross Margin - 3 Yr. Avg. 44.1%
EBITDA Margin 31.9%
EBITDA Margin - 3 Yr. Avg. 31.5%
Operating Margin 21.2%
Oper. Margin - 3 Yr. Avg. 21.3%
Pre-Tax Margin 19.4%
Pre-Tax Margin - 3 Yr. Avg. 19.7%
Net Profit Margin 14.2%
Net Profit Margin - 3 Yr. Avg. 14.1%
Effective Tax Rate 26.9%
Eff/ Tax Rate - 3 Yr. Avg. 28%
Payout Ratio 57.1%

PX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PX stock intrinsic value calculation we used $10534 million for the last fiscal year's total revenue generated by Praxair. The default revenue input number comes from 2016 income statement of Praxair. 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 PX stock valuation model: a) initial revenue growth rate of 6.3% 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 8.1%, whose default value for PX is calculated based on our internal credit rating of Praxair, 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 Praxair.
    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 PX stock the variable cost ratio is equal to 65.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1409 million in the base year in the intrinsic value calculation for PX 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 Praxair.

Corporate tax rate of 27% is the nominal tax rate for Praxair. 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 PX 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 PX are equal to 112.1%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Praxair 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 PX is equal to 4.5%. 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 - $5021 million for Praxair - 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 286.588 million for Praxair 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 Praxair at the current share price and the inputted number of shares is $40.1 billion.

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COMPANY NEWS

▶ Praxair Signs Contract with Huali Microelectronics   [Oct-16-17 08:29AM  Market Realist]
▶ IBD Rating Upgrades: Praxair Shows Improved Relative Price Strength   [Sep-21-17 03:00AM  Investor's Business Daily]
▶ Praxair Named to FTSE4Good Index Series   [08:35AM  Business Wire]
▶ Why Mallinckrodt Got Crushed   [Sep-05-17 04:51PM  Barrons.com]
▶ Praxair, Linde Likely to Make Divestitures for FTC OK   [Aug-30-17 06:21AM  TheStreet.com]
▶ Transformative Industrial Gas Merger Takes Shape   [Aug-25-17 07:00AM  Morningstar]
▶ Praxair beats 2Q profit forecasts   [Jul-27-17 03:45PM  Associated Press]
▶ Praxair Reports Second-Quarter 2017 Results   [06:01AM  Business Wire]
▶ Jerome Dodson Comments on Praxair   [Jul-25-17 07:23PM  GuruFocus.com]
▶ Why Analysts Expect a Turnaround for DuPont in 2Q17   [Jul-21-17 08:08AM  Market Realist]
▶ What Praxair Has on Deck in South Korea   [Jul-19-17 07:36AM  Market Realist]
▶ Wall Streets Views and Recommendations for Praxair   [Jul-07-17 09:08AM  Market Realist]
▶ Can Praxair Manage Its Interest Expense?   [07:39AM  Market Realist]
▶ Where Does Praxair Stock Stand at the End of 1H17?   [Jul-06-17 05:35PM  Market Realist]
▶ ETFs with exposure to Praxair, Inc. : July 3, 2017   [Jul-03-17 03:43PM  Capital Cube]
▶ Linde to terminate ADRs due to Praxair merger   [Jun-23-17 08:20AM  Reuters]
▶ ETFs with exposure to Praxair, Inc. : June 22, 2017   [Jun-22-17 04:17PM  Capital Cube]
▶ Why APDs Latest Valuations Matter   [09:06AM  Market Realist]
▶ APD to Pay Its Third Dividend This Year   [09:09AM  Market Realist]
▶ DuPont-DOW Merger Clears One More Hurdle   [Jun-19-17 08:31AM  Market Realist]
▶ Praxair: Cramer's Top Takeaways   [Jun-17-17 06:41AM  TheStreet.com]
▶ THE DAY AHEAD-North America, June 2   [Jun-01-17 05:46PM  Reuters]
Financial statements of PX
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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