Intrinsic value of Stanley Black&Decker - SWK

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$135.38

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$135.38

 
Intrinsic value

$149.93

 
Up/down potential

+11%

 
Rating

hold

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

We calculate the intrinsic value of SWK 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 20.7

 

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, %
  2.10
  2.10
  2.39
  2.65
  2.89
  3.10
  3.29
  3.46
  3.61
  3.75
  3.88
  3.99
  4.09
  4.18
  4.26
  4.34
  4.40
  4.46
  4.52
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
Revenue, $m
  11,407
  11,647
  11,925
  12,241
  12,594
  12,984
  13,411
  13,875
  14,376
  14,916
  15,494
  16,112
  16,771
  17,472
  18,217
  19,007
  19,844
  20,729
  21,666
  22,655
  23,699
  24,800
  25,961
  27,185
  28,475
  29,832
  31,262
  32,766
  34,349
  36,015
  37,766
Variable operating expenses, $m
 
  7,614
  7,780
  7,969
  8,180
  8,412
  8,667
  8,943
  9,242
  9,564
  9,909
  9,608
  10,001
  10,419
  10,863
  11,334
  11,833
  12,361
  12,920
  13,509
  14,132
  14,789
  15,481
  16,211
  16,980
  17,790
  18,642
  19,539
  20,483
  21,476
  22,521
Fixed operating expenses, $m
 
  2,663
  2,730
  2,798
  2,868
  2,939
  3,013
  3,088
  3,165
  3,245
  3,326
  3,409
  3,494
  3,581
  3,671
  3,763
  3,857
  3,953
  4,052
  4,153
  4,257
  4,364
  4,473
  4,584
  4,699
  4,817
  4,937
  5,060
  5,187
  5,317
  5,449
Total operating expenses, $m
  10,010
  10,277
  10,510
  10,767
  11,048
  11,351
  11,680
  12,031
  12,407
  12,809
  13,235
  13,017
  13,495
  14,000
  14,534
  15,097
  15,690
  16,314
  16,972
  17,662
  18,389
  19,153
  19,954
  20,795
  21,679
  22,607
  23,579
  24,599
  25,670
  26,793
  27,970
Operating income, $m
  1,397
  1,369
  1,415
  1,474
  1,547
  1,633
  1,732
  1,844
  1,969
  2,107
  2,260
  3,095
  3,276
  3,472
  3,683
  3,910
  4,154
  4,415
  4,694
  4,992
  5,310
  5,648
  6,007
  6,390
  6,796
  7,226
  7,683
  8,167
  8,679
  9,222
  9,796
EBITDA, $m
  1,805
  2,169
  2,218
  2,281
  2,358
  2,448
  2,551
  2,669
  2,799
  2,944
  3,103
  3,276
  3,464
  3,668
  3,887
  4,123
  4,377
  4,648
  4,937
  5,246
  5,575
  5,926
  6,299
  6,695
  7,115
  7,561
  8,034
  8,534
  9,065
  9,626
  10,220
Interest expense (income), $m
  177
  175
  184
  195
  206
  220
  234
  250
  267
  286
  306
  328
  351
  375
  401
  429
  459
  490
  523
  558
  595
  634
  675
  718
  764
  812
  863
  916
  972
  1,031
  1,093
Earnings before tax, $m
  1,226
  1,194
  1,231
  1,280
  1,341
  1,413
  1,498
  1,594
  1,701
  1,821
  1,953
  2,768
  2,925
  3,097
  3,282
  3,481
  3,695
  3,925
  4,171
  4,434
  4,715
  5,014
  5,333
  5,672
  6,032
  6,414
  6,820
  7,251
  7,707
  8,191
  8,703
Tax expense, $m
  261
  322
  332
  346
  362
  382
  404
  430
  459
  492
  527
  747
  790
  836
  886
  940
  998
  1,060
  1,126
  1,197
  1,273
  1,354
  1,440
  1,531
  1,629
  1,732
  1,842
  1,958
  2,081
  2,212
  2,350
Net income, $m
  965
  871
  898
  934
  979
  1,032
  1,093
  1,163
  1,242
  1,330
  1,426
  2,020
  2,136
  2,260
  2,396
  2,541
  2,697
  2,865
  3,045
  3,237
  3,442
  3,660
  3,893
  4,140
  4,403
  4,683
  4,979
  5,293
  5,626
  5,979
  6,353

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,160
  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
  15,635
  14,780
  15,133
  15,534
  15,983
  16,478
  17,019
  17,608
  18,244
  18,929
  19,662
  20,447
  21,283
  22,173
  23,118
  24,121
  25,183
  26,306
  27,494
  28,749
  30,074
  31,472
  32,946
  34,499
  36,135
  37,858
  39,672
  41,582
  43,591
  45,704
  47,927
Adjusted assets (=assets-cash), $m
  14,475
  14,780
  15,133
  15,534
  15,983
  16,478
  17,019
  17,608
  18,244
  18,929
  19,662
  20,447
  21,283
  22,173
  23,118
  24,121
  25,183
  26,306
  27,494
  28,749
  30,074
  31,472
  32,946
  34,499
  36,135
  37,858
  39,672
  41,582
  43,591
  45,704
  47,927
Revenue / Adjusted assets
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
Average production assets, $m
  3,147
  3,214
  3,291
  3,379
  3,476
  3,584
  3,702
  3,830
  3,968
  4,117
  4,276
  4,447
  4,629
  4,822
  5,028
  5,246
  5,477
  5,721
  5,980
  6,253
  6,541
  6,845
  7,165
  7,503
  7,859
  8,234
  8,628
  9,044
  9,480
  9,940
  10,424
Working capital, $m
  1,981
  850
  871
  894
  919
  948
  979
  1,013
  1,049
  1,089
  1,131
  1,176
  1,224
  1,275
  1,330
  1,388
  1,449
  1,513
  1,582
  1,654
  1,730
  1,810
  1,895
  1,985
  2,079
  2,178
  2,282
  2,392
  2,508
  2,629
  2,757
Total debt, $m
  3,827
  4,003
  4,229
  4,485
  4,772
  5,088
  5,434
  5,811
  6,217
  6,654
  7,123
  7,624
  8,159
  8,727
  9,331
  9,972
  10,651
  11,369
  12,128
  12,930
  13,776
  14,670
  15,611
  16,604
  17,649
  18,751
  19,910
  21,130
  22,413
  23,764
  25,184
Total liabilities, $m
  9,268
  9,444
  9,670
  9,926
  10,213
  10,529
  10,875
  11,252
  11,658
  12,095
  12,564
  13,065
  13,600
  14,168
  14,772
  15,413
  16,092
  16,810
  17,569
  18,371
  19,217
  20,111
  21,052
  22,045
  23,090
  24,192
  25,351
  26,571
  27,854
  29,205
  30,625
Total equity, $m
  6,367
  5,336
  5,463
  5,608
  5,770
  5,948
  6,144
  6,356
  6,586
  6,833
  7,098
  7,381
  7,683
  8,004
  8,346
  8,708
  9,091
  9,497
  9,925
  10,379
  10,857
  11,361
  11,893
  12,454
  13,045
  13,667
  14,322
  15,011
  15,736
  16,499
  17,302
Total liabilities and equity, $m
  15,635
  14,780
  15,133
  15,534
  15,983
  16,477
  17,019
  17,608
  18,244
  18,928
  19,662
  20,446
  21,283
  22,172
  23,118
  24,121
  25,183
  26,307
  27,494
  28,750
  30,074
  31,472
  32,945
  34,499
  36,135
  37,859
  39,673
  41,582
  43,590
  45,704
  47,927
Debt-to-equity ratio
  0.601
  0.750
  0.770
  0.800
  0.830
  0.860
  0.880
  0.910
  0.940
  0.970
  1.000
  1.030
  1.060
  1.090
  1.120
  1.150
  1.170
  1.200
  1.220
  1.250
  1.270
  1.290
  1.310
  1.330
  1.350
  1.370
  1.390
  1.410
  1.420
  1.440
  1.460
Adjusted equity ratio
  0.360
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  965
  871
  898
  934
  979
  1,032
  1,093
  1,163
  1,242
  1,330
  1,426
  2,020
  2,136
  2,260
  2,396
  2,541
  2,697
  2,865
  3,045
  3,237
  3,442
  3,660
  3,893
  4,140
  4,403
  4,683
  4,979
  5,293
  5,626
  5,979
  6,353
Depreciation, amort., depletion, $m
  408
  800
  803
  807
  811
  815
  820
  825
  831
  837
  843
  181
  188
  196
  204
  213
  223
  233
  243
  254
  266
  278
  291
  305
  319
  335
  351
  368
  385
  404
  424
Funds from operations, $m
  1,479
  1,671
  1,702
  1,741
  1,789
  1,847
  1,913
  1,988
  2,073
  2,166
  2,269
  2,201
  2,324
  2,457
  2,600
  2,754
  2,920
  3,098
  3,288
  3,491
  3,708
  3,938
  4,184
  4,445
  4,723
  5,017
  5,330
  5,661
  6,012
  6,384
  6,777
Change in working capital, $m
  -6
  17
  20
  23
  26
  28
  31
  34
  37
  39
  42
  45
  48
  51
  54
  58
  61
  65
  68
  72
  76
  80
  85
  89
  94
  99
  104
  110
  116
  122
  128
Cash from operations, $m
  1,485
  2,258
  1,681
  1,718
  1,764
  1,818
  1,882
  1,955
  2,036
  2,127
  2,227
  2,156
  2,276
  2,405
  2,546
  2,697
  2,859
  3,033
  3,220
  3,419
  3,631
  3,858
  4,099
  4,356
  4,629
  4,918
  5,225
  5,551
  5,896
  6,262
  6,649
Maintenance CAPEX, $m
  0
  -128
  -131
  -134
  -137
  -141
  -146
  -150
  -156
  -161
  -167
  -174
  -181
  -188
  -196
  -204
  -213
  -223
  -233
  -243
  -254
  -266
  -278
  -291
  -305
  -319
  -335
  -351
  -368
  -385
  -404
New CAPEX, $m
  -347
  -68
  -77
  -87
  -98
  -108
  -118
  -128
  -138
  -149
  -160
  -171
  -182
  -194
  -206
  -218
  -231
  -244
  -258
  -273
  -288
  -304
  -321
  -338
  -356
  -375
  -395
  -415
  -437
  -460
  -483
Cash from investing activities, $m
  -284
  -196
  -208
  -221
  -235
  -249
  -264
  -278
  -294
  -310
  -327
  -345
  -363
  -382
  -402
  -422
  -444
  -467
  -491
  -516
  -542
  -570
  -599
  -629
  -661
  -694
  -730
  -766
  -805
  -845
  -887
Free cash flow, $m
  1,201
  2,063
  1,474
  1,497
  1,529
  1,569
  1,618
  1,676
  1,742
  1,817
  1,900
  1,812
  1,913
  2,024
  2,144
  2,274
  2,415
  2,566
  2,729
  2,903
  3,089
  3,288
  3,501
  3,727
  3,968
  4,224
  4,496
  4,785
  5,092
  5,417
  5,762
Issuance/(repayment) of debt, $m
  2
  188
  226
  256
  286
  316
  346
  376
  407
  437
  469
  501
  534
  569
  604
  641
  679
  718
  759
  802
  847
  893
  942
  992
  1,046
  1,101
  1,159
  1,220
  1,284
  1,350
  1,420
Issuance/(repurchase) of shares, $m
  -103
  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  
  -102
  188
  226
  256
  286
  316
  346
  376
  407
  437
  469
  501
  534
  569
  604
  641
  679
  718
  759
  802
  847
  893
  942
  992
  1,046
  1,101
  1,159
  1,220
  1,284
  1,350
  1,420
Total cash flow (excl. dividends), $m
  997
  2,251
  1,700
  1,753
  1,815
  1,886
  1,965
  2,052
  2,149
  2,254
  2,369
  2,313
  2,447
  2,592
  2,748
  2,915
  3,093
  3,284
  3,488
  3,705
  3,936
  4,181
  4,442
  4,719
  5,013
  5,325
  5,655
  6,005
  6,375
  6,767
  7,182
Retained Cash Flow (-), $m
  -555
  -117
  -128
  -145
  -162
  -179
  -196
  -213
  -230
  -247
  -265
  -283
  -302
  -321
  -341
  -362
  -383
  -406
  -429
  -453
  -478
  -505
  -532
  -561
  -591
  -622
  -655
  -689
  -725
  -763
  -802
Prev. year cash balance distribution, $m
 
  1,148
  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
 
  3,282
  1,572
  1,608
  1,653
  1,707
  1,769
  1,840
  1,919
  2,007
  2,104
  2,030
  2,145
  2,271
  2,407
  2,553
  2,710
  2,879
  3,059
  3,252
  3,457
  3,677
  3,910
  4,159
  4,423
  4,703
  5,000
  5,316
  5,650
  6,004
  6,380
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
 
  3,141
  1,433
  1,391
  1,349
  1,308
  1,265
  1,221
  1,174
  1,125
  1,072
  932
  881
  827
  770
  710
  648
  585
  523
  461
  401
  344
  291
  242
  198
  159
  125
  97
  73
  54
  39
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

Stanley Black & Decker, Inc. provides tools and storage, commercial electronic security, and engineered fastening systems worldwide. Its Tools & Storage segment provides corded and cordless electric power tools and equipment, including drills, wrenches and drivers, grinders, saws, routers, and sanders; pneumatic tools and fasteners, such as nail guns, nails, staples, and anchors; lawn and garden products comprising trimmers, mowers, edgers, and related accessories; home products, such as vacuums, paint tools, and cleaning appliances; power tool accessories that include drill and router bits, abrasives, and saw blades; measuring, leveling, and layout tools; planes, hammers, demolition tools, knives, saws, chisels, and industrial and automotive tools; and storage products, such as tool boxes, sawhorses, medical cabinets, and engineered storage products. The company’s Security segment offers alarm monitoring, video surveillance, fire alarm monitoring, systems integration, and system maintenance services; markets asset tracking, infant protection, pediatric protection, patient protection, wander management, fall management, and emergency call products; sells automatic doors, commercial hardware, locking mechanisms, electronic keyless entry systems, keying systems, and tubular and mortise door locksets. Its Industrial segment sells fastening products and systems comprising stud welding systems, blind rivets and tools, blind inserts and tools, drawn arc weld studs, plastic and mechanical fasteners, self-piercing riveting systems, nut running systems, micro fasteners, high-strength structural fasteners, and hydraulic tools and accessories; sells and rents custom pipe handling, joint welding, and coating equipment; and provides pipeline inspection services. The company was formerly known as The Stanley Works and changed its name to Stanley Black & Decker, Inc. in March 2010. The company was founded in 1843 and is headquartered in New Britain, Connecticut.

FINANCIAL RATIOS  of  Stanley Black&Decker (SWK)

Valuation Ratios
P/E Ratio 21.4
Price to Sales 1.8
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 13.9
Price to Free Cash Flow 18.1
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11.6%
Cap. Spend. - 3 Yr. Gr. Rate 0.4%
Financial Strength
Quick Ratio 97
Current Ratio 0.2
LT Debt to Equity 59.9%
Total Debt to Equity 60.1%
Interest Coverage 8
Management Effectiveness
Return On Assets 7.2%
Ret/ On Assets - 3 Yr. Avg. 6.5%
Return On Total Capital 9.7%
Ret/ On T. Cap. - 3 Yr. Avg. 8.6%
Return On Equity 15.8%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 37.4%
Gross Margin - 3 Yr. Avg. 36.7%
EBITDA Margin 15.9%
EBITDA Margin - 3 Yr. Avg. 15.5%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 11.7%
Pre-Tax Margin 10.7%
Pre-Tax Margin - 3 Yr. Avg. 10.2%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 7.7%
Effective Tax Rate 21.3%
Eff/ Tax Rate - 3 Yr. Avg. 21.3%
Payout Ratio 34.3%

SWK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SWK stock intrinsic value calculation we used $11407 million for the last fiscal year's total revenue generated by Stanley Black&Decker. The default revenue input number comes from 2016 income statement of Stanley Black&Decker. 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 SWK stock valuation model: a) initial revenue growth rate of 2.1% 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 SWK is calculated based on our internal credit rating of Stanley Black&Decker, 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 Stanley Black&Decker.
    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 SWK stock the variable cost ratio is equal to 65.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2598 million in the base year in the intrinsic value calculation for SWK 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 4.6% for Stanley Black&Decker.

Corporate tax rate of 27% is the nominal tax rate for Stanley Black&Decker. 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 SWK 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 SWK are equal to 27.6%.

Life of production assets of 24.6 years is the average useful life of capital assets used in Stanley Black&Decker 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 SWK is equal to 7.3%. 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 - $6367 million for Stanley Black&Decker - 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 152.856 million for Stanley Black&Decker 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 Stanley Black&Decker at the current share price and the inputted number of shares is $20.7 billion.


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COMPANY NEWS

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▶ Edward Lampert Invests in Sears Holdings   [Mar-28-17 12:25PM  GuruFocus.com]
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▶ Where Is SWK Trading Compared to Peers?   [Mar-17-17 09:06AM  Market Realist]
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Stock chart of SWK Financial statements of SWK Annual reports of SWK
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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