Intrinsic value of Charles Schwab - SCHW

Previous Close

$44.68

  Intrinsic Value

$83.88

stock screener

  Rating & Target

str. buy

+88%

Previous close

$44.68

 
Intrinsic value

$83.88

 
Up/down potential

+88%

 
Rating

str. buy

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

We calculate the intrinsic value of SCHW 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 59.8

 

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, %
  17.58
  15.50
  14.45
  13.51
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
Revenue, $m
  7,644
  8,829
  10,105
  11,469
  12,921
  14,457
  16,076
  17,777
  19,558
  21,420
  23,363
  25,386
  27,492
  29,682
  31,958
  34,324
  36,782
  39,337
  41,992
  44,754
  47,626
  50,615
  53,728
  56,970
  60,348
  63,871
  67,546
  71,382
  75,387
  79,570
  83,942
Variable operating expenses, $m
 
  3,292
  3,750
  4,240
  4,761
  5,312
  5,893
  6,504
  7,143
  7,811
  8,509
  9,112
  9,868
  10,654
  11,471
  12,320
  13,203
  14,120
  15,073
  16,064
  17,095
  18,168
  19,285
  20,449
  21,662
  22,926
  24,246
  25,622
  27,060
  28,562
  30,131
Fixed operating expenses, $m
 
  1,873
  1,919
  1,967
  2,017
  2,067
  2,119
  2,172
  2,226
  2,282
  2,339
  2,397
  2,457
  2,519
  2,582
  2,646
  2,712
  2,780
  2,849
  2,921
  2,994
  3,069
  3,145
  3,224
  3,305
  3,387
  3,472
  3,559
  3,648
  3,739
  3,832
Total operating expenses, $m
  4,651
  5,165
  5,669
  6,207
  6,778
  7,379
  8,012
  8,676
  9,369
  10,093
  10,848
  11,509
  12,325
  13,173
  14,053
  14,966
  15,915
  16,900
  17,922
  18,985
  20,089
  21,237
  22,430
  23,673
  24,967
  26,313
  27,718
  29,181
  30,708
  32,301
  33,963
Operating income, $m
  2,993
  3,664
  4,435
  5,262
  6,143
  7,078
  8,064
  9,101
  10,189
  11,327
  12,515
  13,877
  15,167
  16,509
  17,905
  19,357
  20,867
  22,437
  24,070
  25,769
  27,537
  29,378
  31,297
  33,297
  35,382
  37,558
  39,829
  42,201
  44,679
  47,270
  49,979
EBITDA, $m
  3,227
  3,895
  4,681
  5,525
  6,424
  7,377
  8,383
  9,441
  10,550
  11,711
  12,923
  14,186
  15,502
  16,871
  18,295
  19,775
  21,315
  22,916
  24,581
  26,314
  28,117
  29,995
  31,952
  33,991
  36,117
  38,336
  40,652
  43,070
  45,598
  48,239
  51,002
Interest expense (income), $m
  160
  5,443
  6,303
  7,419
  8,613
  9,883
  11,228
  12,644
  14,133
  15,691
  17,321
  19,020
  20,791
  22,633
  24,549
  26,541
  28,611
  30,762
  32,997
  35,321
  37,737
  40,251
  42,866
  45,590
  48,426
  51,383
  54,465
  57,681
  61,037
  64,541
  68,202
Earnings before tax, $m
  2,993
  -1,778
  -1,868
  -2,157
  -2,470
  -2,806
  -3,163
  -3,543
  -3,943
  -4,364
  -4,805
  -5,144
  -5,624
  -6,124
  -6,644
  -7,184
  -7,744
  -8,325
  -8,928
  -9,552
  -10,200
  -10,872
  -11,569
  -12,293
  -13,044
  -13,825
  -14,636
  -15,480
  -16,358
  -17,271
  -18,223
Tax expense, $m
  1,104
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  1,889
  -1,778
  -1,868
  -2,157
  -2,470
  -2,806
  -3,163
  -3,543
  -3,943
  -4,364
  -4,805
  -5,144
  -5,624
  -6,124
  -6,644
  -7,184
  -7,744
  -8,325
  -8,928
  -9,552
  -10,200
  -10,872
  -11,569
  -12,293
  -13,044
  -13,825
  -14,636
  -15,480
  -16,358
  -17,271
  -18,223

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10,828
  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
  223,383
  245,245
  280,683
  318,589
  358,905
  401,575
  446,552
  493,798
  543,287
  595,008
  648,963
  705,170
  763,664
  824,494
  887,724
  953,434
  1,021,717
  1,092,682
  1,166,450
  1,243,156
  1,322,947
  1,405,982
  1,492,435
  1,582,488
  1,676,339
  1,774,197
  1,876,280
  1,982,823
  2,094,071
  2,210,282
  2,331,727
Adjusted assets (=assets-cash), $m
  212,555
  245,245
  280,683
  318,589
  358,905
  401,575
  446,552
  493,798
  543,287
  595,008
  648,963
  705,170
  763,664
  824,494
  887,724
  953,434
  1,021,717
  1,092,682
  1,166,450
  1,243,156
  1,322,947
  1,405,982
  1,492,435
  1,582,488
  1,676,339
  1,774,197
  1,876,280
  1,982,823
  2,094,071
  2,210,282
  2,331,727
Revenue / Adjusted assets
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
  0.036
Average production assets, $m
  812
  936
  1,071
  1,216
  1,370
  1,532
  1,704
  1,884
  2,073
  2,271
  2,476
  2,691
  2,914
  3,146
  3,388
  3,638
  3,899
  4,170
  4,451
  4,744
  5,048
  5,365
  5,695
  6,039
  6,397
  6,770
  7,160
  7,566
  7,991
  8,434
  8,898
Working capital, $m
  0
  4,414
  5,052
  5,735
  6,460
  7,228
  8,038
  8,888
  9,779
  10,710
  11,681
  12,693
  13,746
  14,841
  15,979
  17,162
  18,391
  19,668
  20,996
  22,377
  23,813
  25,308
  26,864
  28,485
  30,174
  31,936
  33,773
  35,691
  37,693
  39,785
  41,971
Total debt, $m
  166,330
  180,089
  211,983
  246,098
  282,382
  320,786
  361,265
  403,786
  448,327
  494,875
  543,434
  594,021
  646,665
  701,412
  758,319
  817,458
  878,913
  942,782
  1,009,173
  1,078,208
  1,150,020
  1,224,752
  1,302,559
  1,383,607
  1,468,073
  1,556,145
  1,648,020
  1,743,909
  1,844,032
  1,948,621
  2,057,922
Total liabilities, $m
  206,962
  220,721
  252,615
  286,730
  323,014
  361,418
  401,897
  444,418
  488,959
  535,507
  584,066
  634,653
  687,297
  742,044
  798,951
  858,090
  919,545
  983,414
  1,049,805
  1,118,840
  1,190,652
  1,265,384
  1,343,191
  1,424,239
  1,508,705
  1,596,777
  1,688,652
  1,784,541
  1,884,664
  1,989,253
  2,098,554
Total equity, $m
  16,421
  24,525
  28,068
  31,859
  35,890
  40,158
  44,655
  49,380
  54,329
  59,501
  64,896
  70,517
  76,366
  82,449
  88,772
  95,343
  102,172
  109,268
  116,645
  124,316
  132,295
  140,598
  149,243
  158,249
  167,634
  177,420
  187,628
  198,282
  209,407
  221,028
  233,173
Total liabilities and equity, $m
  223,383
  245,246
  280,683
  318,589
  358,904
  401,576
  446,552
  493,798
  543,288
  595,008
  648,962
  705,170
  763,663
  824,493
  887,723
  953,433
  1,021,717
  1,092,682
  1,166,450
  1,243,156
  1,322,947
  1,405,982
  1,492,434
  1,582,488
  1,676,339
  1,774,197
  1,876,280
  1,982,823
  2,094,071
  2,210,281
  2,331,727
Debt-to-equity ratio
  10.129
  7.340
  7.550
  7.720
  7.870
  7.990
  8.090
  8.180
  8.250
  8.320
  8.370
  8.420
  8.470
  8.510
  8.540
  8.570
  8.600
  8.630
  8.650
  8.670
  8.690
  8.710
  8.730
  8.740
  8.760
  8.770
  8.780
  8.800
  8.810
  8.820
  8.830
Adjusted equity ratio
  0.077
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,889
  -1,778
  -1,868
  -2,157
  -2,470
  -2,806
  -3,163
  -3,543
  -3,943
  -4,364
  -4,805
  -5,144
  -5,624
  -6,124
  -6,644
  -7,184
  -7,744
  -8,325
  -8,928
  -9,552
  -10,200
  -10,872
  -11,569
  -12,293
  -13,044
  -13,825
  -14,636
  -15,480
  -16,358
  -17,271
  -18,223
Depreciation, amort., depletion, $m
  234
  230
  246
  262
  280
  299
  319
  339
  361
  384
  407
  309
  335
  362
  389
  418
  448
  479
  512
  545
  580
  617
  655
  694
  735
  778
  823
  870
  919
  969
  1,023
Funds from operations, $m
  2,775
  -1,548
  -1,622
  -1,895
  -2,190
  -2,507
  -2,845
  -3,204
  -3,582
  -3,981
  -4,398
  -4,834
  -5,289
  -5,763
  -6,255
  -6,766
  -7,296
  -7,846
  -8,416
  -9,007
  -9,620
  -10,256
  -10,915
  -11,599
  -12,309
  -13,047
  -13,813
  -14,610
  -15,439
  -16,302
  -17,200
Change in working capital, $m
  113
  592
  638
  682
  726
  768
  810
  850
  891
  931
  971
  1,012
  1,053
  1,095
  1,138
  1,183
  1,229
  1,277
  1,328
  1,381
  1,436
  1,495
  1,556
  1,621
  1,689
  1,761
  1,838
  1,918
  2,002
  2,092
  2,186
Cash from operations, $m
  2,662
  -2,140
  -2,260
  -2,577
  -2,916
  -3,275
  -3,655
  -4,054
  -4,473
  -4,912
  -5,369
  -5,846
  -6,342
  -6,858
  -7,393
  -7,949
  -8,525
  -9,123
  -9,744
  -10,388
  -11,056
  -11,750
  -12,471
  -13,220
  -13,999
  -14,808
  -15,651
  -16,528
  -17,442
  -18,394
  -19,386
Maintenance CAPEX, $m
  0
  -93
  -108
  -123
  -140
  -157
  -176
  -196
  -217
  -238
  -261
  -285
  -309
  -335
  -362
  -389
  -418
  -448
  -479
  -512
  -545
  -580
  -617
  -655
  -694
  -735
  -778
  -823
  -870
  -919
  -969
New CAPEX, $m
  -346
  -124
  -135
  -145
  -154
  -163
  -172
  -180
  -189
  -197
  -206
  -214
  -223
  -232
  -241
  -251
  -261
  -271
  -281
  -293
  -304
  -317
  -330
  -344
  -358
  -373
  -390
  -407
  -425
  -443
  -463
Cash from investing activities, $m
  -38,775
  -217
  -243
  -268
  -294
  -320
  -348
  -376
  -406
  -435
  -467
  -499
  -532
  -567
  -603
  -640
  -679
  -719
  -760
  -805
  -849
  -897
  -947
  -999
  -1,052
  -1,108
  -1,168
  -1,230
  -1,295
  -1,362
  -1,432
Free cash flow, $m
  -36,113
  -2,358
  -2,503
  -2,845
  -3,209
  -3,595
  -4,002
  -4,430
  -4,879
  -5,347
  -5,836
  -6,345
  -6,875
  -7,425
  -7,996
  -8,589
  -9,204
  -9,842
  -10,505
  -11,192
  -11,906
  -12,647
  -13,418
  -14,218
  -15,051
  -15,917
  -16,819
  -17,758
  -18,736
  -19,756
  -20,819
Issuance/(repayment) of debt, $m
  -7
  24,587
  31,894
  34,116
  36,284
  38,403
  40,479
  42,521
  44,540
  46,548
  48,559
  50,587
  52,645
  54,747
  56,907
  59,139
  61,455
  63,869
  66,391
  69,035
  71,812
  74,732
  77,807
  81,048
  84,466
  88,071
  91,875
  95,889
  100,123
  104,590
  109,301
Issuance/(repurchase) of shares, $m
  1,460
  9,882
  5,412
  5,948
  6,502
  7,073
  7,661
  8,267
  8,892
  9,536
  10,201
  10,764
  11,474
  12,207
  12,967
  13,755
  14,573
  15,422
  16,304
  17,223
  18,179
  19,176
  20,215
  21,298
  22,430
  23,611
  24,845
  26,134
  27,482
  28,892
  30,367
Cash from financing (excl. dividends), $m  
  35,449
  34,469
  37,306
  40,064
  42,786
  45,476
  48,140
  50,788
  53,432
  56,084
  58,760
  61,351
  64,119
  66,954
  69,874
  72,894
  76,028
  79,291
  82,695
  86,258
  89,991
  93,908
  98,022
  102,346
  106,896
  111,682
  116,720
  122,023
  127,605
  133,482
  139,668
Total cash flow (excl. dividends), $m
  -664
  32,111
  34,803
  37,219
  39,577
  41,881
  44,138
  46,359
  48,554
  50,737
  52,924
  55,006
  57,243
  59,529
  61,878
  64,305
  66,824
  69,448
  72,191
  75,066
  78,085
  81,260
  84,604
  88,129
  91,845
  95,765
  99,901
  104,265
  108,870
  113,726
  118,849
Retained Cash Flow (-), $m
  -3,019
  -9,882
  -5,412
  -5,948
  -6,502
  -7,073
  -7,661
  -8,267
  -8,892
  -9,536
  -10,201
  -10,764
  -11,474
  -12,207
  -12,967
  -13,755
  -14,573
  -15,422
  -16,304
  -17,223
  -18,179
  -19,176
  -20,215
  -21,298
  -22,430
  -23,611
  -24,845
  -26,134
  -27,482
  -28,892
  -30,367
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
 
  22,229
  29,392
  31,271
  33,075
  34,808
  36,477
  38,091
  39,662
  41,201
  42,723
  44,242
  45,770
  47,322
  48,911
  50,550
  52,251
  54,026
  55,887
  57,843
  59,906
  62,085
  64,390
  66,830
  69,415
  72,154
  75,057
  78,131
  81,387
  84,834
  88,482
Discount rate, %
 
  13.80
  14.49
  15.21
  15.98
  16.77
  17.61
  18.49
  19.42
  20.39
  21.41
  22.48
  23.60
  24.78
  26.02
  27.32
  28.69
  30.12
  31.63
  33.21
  34.87
  36.62
  38.45
  40.37
  42.39
  44.51
  46.73
  49.07
  51.52
  54.10
  56.80
PV of cash for distribution, $m
 
  19,533
  22,423
  20,446
  18,283
  16,031
  13,781
  11,614
  9,590
  7,756
  6,140
  4,755
  3,600
  2,661
  1,919
  1,349
  923
  615
  397
  249
  151
  89
  50
  27
  14
  7
  4
  2
  1
  0
  0
Current shareholders' claim on cash, %
  100
  85.8
  80.9
  76.5
  72.4
  68.7
  65.3
  62.1
  59.2
  56.5
  53.9
  51.6
  49.4
  47.3
  45.4
  43.5
  41.8
  40.1
  38.5
  37.0
  35.6
  34.2
  32.9
  31.7
  30.5
  29.4
  28.3
  27.2
  26.2
  25.3
  24.4

The Charles Schwab Corporation (CSC) is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company offers a range of products to address individuals' varying investment and financial needs. Its product offerings include brokerage, mutual funds, ETFs, advice solutions, banking and trust. Brokerage provides a range of brokerage accounts with cash management capabilities. Mutual funds offer third-party mutual funds through the Mutual Fund Marketplace.

FINANCIAL RATIOS  of  Charles Schwab (SCHW)

Valuation Ratios
P/E Ratio 31.5
Price to Sales 7.8
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 22.4
Price to Free Cash Flow 25.7
Growth Rates
Sales Growth Rate 17.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.1%
Cap. Spend. - 3 Yr. Gr. Rate 6.8%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 17.5%
Total Debt to Equity 1012.9%
Interest Coverage 20
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 12.7%
Return On Equity - 3 Yr. Avg. 12%
Asset Turnover 0
Profitability Ratios
Gross Margin 97.8%
Gross Margin - 3 Yr. Avg. 98%
EBITDA Margin 44.3%
EBITDA Margin - 3 Yr. Avg. 41.3%
Operating Margin 39.2%
Oper. Margin - 3 Yr. Avg. 36.2%
Pre-Tax Margin 39.2%
Pre-Tax Margin - 3 Yr. Avg. 36.2%
Net Profit Margin 24.7%
Net Profit Margin - 3 Yr. Avg. 22.8%
Effective Tax Rate 36.9%
Eff/ Tax Rate - 3 Yr. Avg. 37%
Payout Ratio 25.7%

SCHW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCHW stock intrinsic value calculation we used $7644 million for the last fiscal year's total revenue generated by Charles Schwab. The default revenue input number comes from 2016 income statement of Charles Schwab. 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 SCHW stock valuation model: a) initial revenue growth rate of 15.5% 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 13.8%, whose default value for SCHW is calculated based on our internal credit rating of Charles Schwab, 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 Charles Schwab.
    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 SCHW stock the variable cost ratio is equal to 37.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1827 million in the base year in the intrinsic value calculation for SCHW 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 Charles Schwab.

Corporate tax rate of 27% is the nominal tax rate for Charles Schwab. 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 SCHW 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 SCHW are equal to 10.6%.

Life of production assets of 8.7 years is the average useful life of capital assets used in Charles Schwab 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 SCHW is equal to 50%. 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 - $16421 million for Charles Schwab - 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 1339.08 million for Charles Schwab 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 Charles Schwab at the current share price and the inputted number of shares is $59.8 billion.

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COMPANY NEWS

▶ Schwab IMPACT 2017 Conference Reflections   [Nov-17-17 06:03PM  Investopedia]
▶ Schwab Impact Conference Enters Home Stretch   [08:35AM  Investor's Business Daily]
▶ Schwab Urges Advisors To Help Clients Navigate Rapidly Changing World   [Nov-15-17 05:20PM  Investor's Business Daily]
▶ The best idea panel from Schwab Impact   [02:15PM  CNBC Videos]
▶ Schwab President & CEO Walt Bettinger   [01:20PM  CNBC Videos]
▶ The 'wall of worry' advisors are facing   [10:40AM  CNBC Videos]
▶ Why Are There So Many Robo-Advisories?   [Nov-14-17 10:55PM  Motley Fool]
▶ Schwab Reports Monthly Activity Highlights   [08:45AM  Business Wire]
▶ Under the Hood at Vanguard Charitable   [06:00AM  Morningstar]
▶ Charles Schwab Sees RS Rating Rise To 72   [03:00AM  Investor's Business Daily]
▶ Should Retirees Use Robo Advisers?   [12:18AM  The Wall Street Journal]
▶ Charles Schwab Gets an ETF Trump Bump   [01:10PM  Investopedia]
▶ Charles Schwab Launches Singapore Office   [Nov-07-17 09:30PM  PR Newswire]
▶ Will 401k Tax Changes Hurt E*Trade and Charles Schwab?   [Nov-01-17 02:01PM  Investopedia]
▶ Insiders at Charles Schwab Sell Shares   [11:50AM  Investopedia]
▶ Schwab Stock Could Be Forming a Double Top   [Oct-30-17 11:48AM  Investopedia]
▶ The Future Price of Investing: Zilch   [12:01AM  Bloomberg]
▶ Charles Schwab Sees Big Jump In ETF Assets In September   [Oct-25-17 11:56AM  Investopedia]
▶ Buy & Hold Fantasy Story Reaches Fever Pitch   [09:38AM  Harvest Exchange]
▶ Schwab Announces Depositary Shares Offering   [09:17AM  Business Wire]
▶ These 3 Online Brokers Are Buys; TD Ameritrade Growth Accelerates   [Oct-24-17 04:03PM  Investor's Business Daily]
▶ Trump, GOP senators to talk taxes over lunch   [10:42AM  Yahoo Finance Video]
▶ EXCLUSIVE: Trade stocks through Facebook Messenger   [Oct-23-17 02:00PM  Yahoo Finance Video]
▶ Who Are The Real Beneficiaries Of Lower Fund-Trading Fees?   [07:53AM  Investor's Business Daily]
▶ Tips on Picking a Roth IRA for Your Teen   [12:03AM  The Wall Street Journal]
▶ Commission-Free ETFs: Not Always the Best Choice   [Oct-21-17 09:00AM  Motley Fool]
▶ Charles Schwab Declares $0.08 Share Quarterly Dividend   [Oct-20-17 02:28PM  Investopedia]
▶ The Latest Shot in the ETF Price Wars   [06:03AM  Motley Fool]
▶ Charles Schwabs Total Expenses Rose in 3Q17   [01:35PM  Market Realist]
Financial statements of SCHW
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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