Intrinsic value of Steel Dynamics - STLD

Previous Close

$33.95

  Intrinsic Value

$2.61

stock screener

  Rating & Target

str. sell

-92%

  Value-price divergence*

-110%

Previous close

$33.95

 
Intrinsic value

$2.61

 
Up/down potential

-92%

 
Rating

str. sell

 
Value-price divergence*

-110%

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

We calculate the intrinsic value of STLD 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 8.3

 

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, %
  2.41
  36.00
  32.90
  30.11
  27.60
  25.34
  23.31
  21.47
  19.83
  18.34
  17.01
  15.81
  14.73
  13.76
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.23
  7.00
  6.80
  6.62
  6.46
Revenue, $m
  7,777
  10,577
  14,056
  18,289
  23,336
  29,250
  36,066
  43,811
  52,498
  62,129
  72,697
  84,189
  96,589
  109,875
  124,026
  139,024
  154,848
  171,485
  188,925
  207,162
  226,196
  246,030
  266,677
  288,152
  310,477
  333,678
  357,788
  382,843
  408,887
  435,965
  464,129
Variable operating expenses, $m
 
  10,668
  14,165
  18,419
  23,491
  29,434
  36,284
  44,067
  52,797
  62,475
  73,096
  84,606
  97,067
  110,418
  124,640
  139,711
  155,614
  172,334
  189,860
  208,187
  227,314
  247,247
  267,996
  289,578
  312,013
  335,329
  359,558
  384,737
  410,910
  438,122
  466,425
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
  7,049
  10,668
  14,165
  18,419
  23,491
  29,434
  36,284
  44,067
  52,797
  62,475
  73,096
  84,606
  97,067
  110,418
  124,640
  139,711
  155,614
  172,334
  189,860
  208,187
  227,314
  247,247
  267,996
  289,578
  312,013
  335,329
  359,558
  384,737
  410,910
  438,122
  466,425
Operating income, $m
  728
  -92
  -109
  -130
  -155
  -184
  -218
  -256
  -299
  -347
  -399
  -416
  -478
  -544
  -614
  -688
  -766
  -848
  -935
  -1,025
  -1,119
  -1,217
  -1,319
  -1,425
  -1,536
  -1,651
  -1,770
  -1,894
  -2,023
  -2,157
  -2,296
EBITDA, $m
  1,024
  305
  405
  527
  672
  842
  1,039
  1,262
  1,512
  1,790
  2,094
  2,425
  2,782
  3,165
  3,572
  4,004
  4,460
  4,939
  5,442
  5,967
  6,515
  7,087
  7,681
  8,300
  8,943
  9,611
  10,305
  11,027
  11,777
  12,557
  13,368
Interest expense (income), $m
  151
  144
  220
  316
  432
  570
  732
  919
  1,131
  1,370
  1,634
  1,923
  2,238
  2,578
  2,942
  3,330
  3,741
  4,175
  4,631
  5,109
  5,609
  6,131
  6,675
  7,241
  7,830
  8,441
  9,078
  9,738
  10,425
  11,139
  11,881
Earnings before tax, $m
  564
  -235
  -329
  -446
  -587
  -754
  -950
  -1,175
  -1,430
  -1,716
  -2,032
  -2,340
  -2,716
  -3,122
  -3,556
  -4,018
  -4,507
  -5,024
  -5,566
  -6,134
  -6,728
  -7,348
  -7,994
  -8,666
  -9,365
  -10,092
  -10,847
  -11,632
  -12,448
  -13,296
  -14,177
Tax expense, $m
  204
  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
  382
  -235
  -329
  -446
  -587
  -754
  -950
  -1,175
  -1,430
  -1,716
  -2,032
  -2,340
  -2,716
  -3,122
  -3,556
  -4,018
  -4,507
  -5,024
  -5,566
  -6,134
  -6,728
  -7,348
  -7,994
  -8,666
  -9,365
  -10,092
  -10,847
  -11,632
  -12,448
  -13,296
  -14,177

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  843
  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
  6,424
  7,593
  10,091
  13,129
  16,753
  20,998
  25,891
  31,451
  37,687
  44,601
  52,187
  60,437
  69,339
  78,876
  89,036
  99,802
  111,162
  123,105
  135,625
  148,717
  162,380
  176,619
  191,441
  206,857
  222,884
  239,539
  256,847
  274,834
  293,530
  312,968
  333,187
Adjusted assets (=assets-cash), $m
  5,581
  7,593
  10,091
  13,129
  16,753
  20,998
  25,891
  31,451
  37,687
  44,601
  52,187
  60,437
  69,339
  78,876
  89,036
  99,802
  111,162
  123,105
  135,625
  148,717
  162,380
  176,619
  191,441
  206,857
  222,884
  239,539
  256,847
  274,834
  293,530
  312,968
  333,187
Revenue / Adjusted assets
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
  1.393
Average production assets, $m
  3,151
  4,284
  5,693
  7,407
  9,451
  11,846
  14,607
  17,744
  21,262
  25,162
  29,442
  34,097
  39,118
  44,499
  50,231
  56,305
  62,713
  69,452
  76,515
  83,901
  91,609
  99,642
  108,004
  116,702
  125,743
  135,140
  144,904
  155,052
  165,599
  176,566
  187,972
Working capital, $m
  2,217
  1,872
  2,488
  3,237
  4,131
  5,177
  6,384
  7,755
  9,292
  10,997
  12,867
  14,901
  17,096
  19,448
  21,953
  24,607
  27,408
  30,353
  33,440
  36,668
  40,037
  43,547
  47,202
  51,003
  54,954
  59,061
  63,328
  67,763
  72,373
  77,166
  82,151
Total debt, $m
  2,357
  3,613
  5,177
  7,079
  9,347
  12,004
  15,068
  18,548
  22,452
  26,780
  31,529
  36,694
  42,266
  48,237
  54,596
  61,336
  68,447
  75,924
  83,761
  91,957
  100,510
  109,424
  118,702
  128,353
  138,385
  148,811
  159,646
  170,906
  182,610
  194,778
  207,435
Total liabilities, $m
  3,497
  4,753
  6,317
  8,219
  10,487
  13,144
  16,208
  19,688
  23,592
  27,920
  32,669
  37,834
  43,406
  49,377
  55,736
  62,476
  69,587
  77,064
  84,901
  93,097
  101,650
  110,564
  119,842
  129,493
  139,525
  149,951
  160,786
  172,046
  183,750
  195,918
  208,575
Total equity, $m
  2,927
  2,840
  3,774
  4,910
  6,265
  7,853
  9,683
  11,763
  14,095
  16,681
  19,518
  22,604
  25,933
  29,500
  33,299
  37,326
  41,574
  46,041
  50,724
  55,620
  60,730
  66,056
  71,599
  77,365
  83,358
  89,588
  96,061
  102,788
  109,780
  117,050
  124,612
Total liabilities and equity, $m
  6,424
  7,593
  10,091
  13,129
  16,752
  20,997
  25,891
  31,451
  37,687
  44,601
  52,187
  60,438
  69,339
  78,877
  89,035
  99,802
  111,161
  123,105
  135,625
  148,717
  162,380
  176,620
  191,441
  206,858
  222,883
  239,539
  256,847
  274,834
  293,530
  312,968
  333,187
Debt-to-equity ratio
  0.805
  1.270
  1.370
  1.440
  1.490
  1.530
  1.560
  1.580
  1.590
  1.610
  1.620
  1.620
  1.630
  1.640
  1.640
  1.640
  1.650
  1.650
  1.650
  1.650
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
  1.660
Adjusted equity ratio
  0.373
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  382
  -235
  -329
  -446
  -587
  -754
  -950
  -1,175
  -1,430
  -1,716
  -2,032
  -2,340
  -2,716
  -3,122
  -3,556
  -4,018
  -4,507
  -5,024
  -5,566
  -6,134
  -6,728
  -7,348
  -7,994
  -8,666
  -9,365
  -10,092
  -10,847
  -11,632
  -12,448
  -13,296
  -14,177
Depreciation, amort., depletion, $m
  296
  396
  514
  657
  827
  1,026
  1,257
  1,518
  1,811
  2,136
  2,493
  2,841
  3,260
  3,708
  4,186
  4,692
  5,226
  5,788
  6,376
  6,992
  7,634
  8,304
  9,000
  9,725
  10,479
  11,262
  12,075
  12,921
  13,800
  14,714
  15,664
Funds from operations, $m
  811
  161
  184
  211
  240
  272
  307
  343
  381
  420
  460
  502
  544
  587
  630
  674
  719
  764
  810
  858
  906
  955
  1,006
  1,059
  1,113
  1,170
  1,228
  1,289
  1,352
  1,418
  1,487
Change in working capital, $m
  -42
  496
  616
  749
  893
  1,047
  1,207
  1,371
  1,538
  1,705
  1,871
  2,034
  2,195
  2,352
  2,505
  2,654
  2,801
  2,945
  3,087
  3,228
  3,369
  3,511
  3,654
  3,801
  3,951
  4,107
  4,267
  4,435
  4,610
  4,793
  4,985
Cash from operations, $m
  853
  -334
  -431
  -538
  -653
  -774
  -900
  -1,028
  -1,157
  -1,285
  -1,410
  -1,533
  -1,651
  -1,765
  -1,875
  -1,981
  -2,082
  -2,181
  -2,277
  -2,370
  -2,463
  -2,555
  -2,648
  -2,742
  -2,838
  -2,937
  -3,039
  -3,146
  -3,258
  -3,375
  -3,498
Maintenance CAPEX, $m
  0
  -263
  -357
  -474
  -617
  -788
  -987
  -1,217
  -1,479
  -1,772
  -2,097
  -2,454
  -2,841
  -3,260
  -3,708
  -4,186
  -4,692
  -5,226
  -5,788
  -6,376
  -6,992
  -7,634
  -8,304
  -9,000
  -9,725
  -10,479
  -11,262
  -12,075
  -12,921
  -13,800
  -14,714
New CAPEX, $m
  -198
  -1,133
  -1,409
  -1,714
  -2,044
  -2,395
  -2,761
  -3,137
  -3,518
  -3,900
  -4,280
  -4,655
  -5,022
  -5,381
  -5,731
  -6,074
  -6,409
  -6,738
  -7,063
  -7,386
  -7,708
  -8,033
  -8,362
  -8,697
  -9,041
  -9,396
  -9,764
  -10,148
  -10,548
  -10,967
  -11,406
Cash from investing activities, $m
  -313
  -1,396
  -1,766
  -2,188
  -2,661
  -3,183
  -3,748
  -4,354
  -4,997
  -5,672
  -6,377
  -7,109
  -7,863
  -8,641
  -9,439
  -10,260
  -11,101
  -11,964
  -12,851
  -13,762
  -14,700
  -15,667
  -16,666
  -17,697
  -18,766
  -19,875
  -21,026
  -22,223
  -23,469
  -24,767
  -26,120
Free cash flow, $m
  540
  -1,730
  -2,198
  -2,727
  -3,315
  -3,957
  -4,648
  -5,382
  -6,154
  -6,957
  -7,787
  -8,641
  -9,514
  -10,406
  -11,315
  -12,240
  -13,183
  -14,145
  -15,127
  -16,133
  -17,163
  -18,223
  -19,314
  -20,440
  -21,605
  -22,812
  -24,066
  -25,369
  -26,726
  -28,141
  -29,618
Issuance/(repayment) of debt, $m
  -255
  1,260
  1,564
  1,902
  2,268
  2,657
  3,063
  3,481
  3,904
  4,328
  4,749
  5,165
  5,572
  5,971
  6,360
  6,740
  7,111
  7,477
  7,837
  8,195
  8,553
  8,914
  9,278
  9,651
  10,032
  10,426
  10,835
  11,260
  11,704
  12,169
  12,657
Issuance/(repurchase) of shares, $m
  -15
  987
  1,263
  1,582
  1,942
  2,342
  2,780
  3,255
  3,763
  4,302
  4,870
  5,425
  6,045
  6,689
  7,355
  8,045
  8,756
  9,490
  10,248
  11,031
  11,838
  12,673
  13,537
  14,432
  15,359
  16,321
  17,320
  18,359
  19,440
  20,566
  21,739
Cash from financing (excl. dividends), $m  
  -289
  2,247
  2,827
  3,484
  4,210
  4,999
  5,843
  6,736
  7,667
  8,630
  9,619
  10,590
  11,617
  12,660
  13,715
  14,785
  15,867
  16,967
  18,085
  19,226
  20,391
  21,587
  22,815
  24,083
  25,391
  26,747
  28,155
  29,619
  31,144
  32,735
  34,396
Total cash flow (excl. dividends), $m
  250
  517
  630
  757
  895
  1,042
  1,196
  1,353
  1,513
  1,673
  1,832
  1,949
  2,103
  2,254
  2,400
  2,544
  2,684
  2,822
  2,958
  3,093
  3,229
  3,364
  3,502
  3,643
  3,787
  3,936
  4,090
  4,250
  4,418
  4,593
  4,777
Retained Cash Flow (-), $m
  -247
  -987
  -1,263
  -1,582
  -1,942
  -2,342
  -2,780
  -3,255
  -3,763
  -4,302
  -4,870
  -5,425
  -6,045
  -6,689
  -7,355
  -8,045
  -8,756
  -9,490
  -10,248
  -11,031
  -11,838
  -12,673
  -13,537
  -14,432
  -15,359
  -16,321
  -17,320
  -18,359
  -19,440
  -20,566
  -21,739
Prev. year cash balance distribution, $m
 
  839
  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
 
  369
  -634
  -825
  -1,046
  -1,299
  -1,585
  -1,902
  -2,250
  -2,629
  -3,038
  -3,476
  -3,942
  -4,435
  -4,955
  -5,501
  -6,072
  -6,668
  -7,290
  -7,937
  -8,610
  -9,309
  -10,035
  -10,789
  -11,572
  -12,386
  -13,231
  -14,109
  -15,023
  -15,973
  -16,962
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  354
  -578
  -713
  -854
  -996
  -1,133
  -1,262
  -1,377
  -1,473
  -1,547
  -1,596
  -1,619
  -1,615
  -1,584
  -1,529
  -1,452
  -1,356
  -1,246
  -1,125
  -999
  -871
  -747
  -628
  -518
  -418
  -331
  -256
  -194
  -144
  -104
Current shareholders' claim on cash, %
  100
  85.6
  74.0
  64.4
  56.5
  49.9
  44.3
  39.6
  35.5
  32.1
  29.1
  26.5
  24.2
  22.1
  20.3
  18.7
  17.3
  16.0
  14.8
  13.8
  12.8
  11.9
  11.1
  10.4
  9.7
  9.1
  8.5
  7.9
  7.4
  7.0
  6.5

Steel Dynamics, Inc., together with its subsidiaries, manufactures and sells steel products; processes and sells recycled ferrous and nonferrous metals; and fabricates and sells steel joist and deck products in the United States and internationally. The company operates through Steel Operations, Metals Recycling Operations, and Steel Fabrication Operations segments. The Steel Operations segment provides a range of sheet steel products, such as hot roll, cold roll, and coated steel products; structural steel beams and pilings to construction market; various rail products for the railroad industry; rounds, round-cornered squares, and round engineered bars; angles, merchant rounds, flats and channels, and reinforcing bar; and beams, channels, and specialty steel sections. This segment offers its products for automotive, construction, manufacturing, transportation, heavy and agriculture equipment, and pipe and tube markets. The Metals Recycling Operations segment is involved in the purchase, process, and resale of ferrous and nonferrous scrap metals into reusable forms and grades. Its ferrous products include heavy melting steel, busheling, bundled scrap, shredded scrap, steel turnings, and cast iron products; and nonferrous products comprise aluminum, brass, copper, stainless steel, and other nonferrous metals. This segment also provides transportation logistics, management, marketing, brokerage, and consulting services related to the scrap industry. The Steel Fabrication Operations segment produces steel building components comprising steel joists, girders, trusses, and steel decks primarily for the non-residential construction industry. The company also produces pig and hot briquetted iron; and iron nugget products that are used in electric arc furnace steel mills. Steel Dynamics, Inc. was founded in 1993 and is headquartered in Fort Wayne, Indiana.

FINANCIAL RATIOS  of  Steel Dynamics (STLD)

Valuation Ratios
P/E Ratio 21.7
Price to Sales 1.1
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 12.6
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 72.2%
Cap. Spend. - 3 Yr. Gr. Rate 1.1%
Financial Strength
Quick Ratio 211
Current Ratio 0.1
LT Debt to Equity 80.4%
Total Debt to Equity 80.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 13.6%
Return On Equity - 3 Yr. Avg. 4.9%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 17.2%
Gross Margin - 3 Yr. Avg. 12.6%
EBITDA Margin 13%
EBITDA Margin - 3 Yr. Avg. 7.3%
Operating Margin 9.4%
Oper. Margin - 3 Yr. Avg. 4%
Pre-Tax Margin 7.3%
Pre-Tax Margin - 3 Yr. Avg. 2%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 1.7%
Effective Tax Rate 36.2%
Eff/ Tax Rate - 3 Yr. Avg. 40.2%
Payout Ratio 35.6%

STLD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STLD stock intrinsic value calculation we used $7777 million for the last fiscal year's total revenue generated by Steel Dynamics. The default revenue input number comes from 2016 income statement of Steel Dynamics. 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 STLD stock valuation model: a) initial revenue growth rate of 36% 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 4.5%, whose default value for STLD is calculated based on our internal credit rating of Steel Dynamics, 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 Steel Dynamics.
    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 STLD stock the variable cost ratio is equal to 101%.

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 STLD 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 6.1% for Steel Dynamics.

Corporate tax rate of 27% is the nominal tax rate for Steel Dynamics. 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 STLD 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 STLD are equal to 40.5%.

Life of production assets of 12 years is the average useful life of capital assets used in Steel Dynamics 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 STLD is equal to 17.7%. 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 - $2927 million for Steel Dynamics - 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 243.028 million for Steel Dynamics 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 Steel Dynamics at the current share price and the inputted number of shares is $8.3 billion.

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Financial statements of STLD
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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