Intrinsic value of TransDigm Group - TDG

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$250.89

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$250.89

 
Intrinsic value

$145.84

 
Up/down potential

-42%

 
Rating

sell

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

We calculate the intrinsic value of TDG 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 13.3

 

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, %
  17.14
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  3,171
  3,713
  4,303
  4,940
  5,623
  6,351
  7,122
  7,936
  8,792
  9,689
  10,628
  11,608
  12,629
  13,692
  14,798
  15,947
  17,142
  18,384
  19,674
  21,015
  22,409
  23,859
  25,368
  26,939
  28,574
  30,279
  32,056
  33,909
  35,843
  37,862
  39,971
Variable operating expenses, $m
 
  2,071
  2,310
  2,568
  2,845
  3,139
  3,452
  3,781
  4,128
  4,491
  4,871
  4,700
  5,114
  5,544
  5,992
  6,457
  6,941
  7,444
  7,966
  8,509
  9,074
  9,661
  10,272
  10,908
  11,570
  12,260
  12,980
  13,730
  14,513
  15,331
  16,185
Fixed operating expenses, $m
 
  54
  56
  57
  59
  60
  61
  63
  65
  66
  68
  70
  71
  73
  75
  77
  79
  81
  83
  85
  87
  89
  91
  94
  96
  98
  101
  103
  106
  108
  111
Total operating expenses, $m
  1,904
  2,125
  2,366
  2,625
  2,904
  3,199
  3,513
  3,844
  4,193
  4,557
  4,939
  4,770
  5,185
  5,617
  6,067
  6,534
  7,020
  7,525
  8,049
  8,594
  9,161
  9,750
  10,363
  11,002
  11,666
  12,358
  13,081
  13,833
  14,619
  15,439
  16,296
Operating income, $m
  1,268
  1,587
  1,937
  2,315
  2,720
  3,151
  3,609
  4,092
  4,600
  5,132
  5,689
  6,838
  7,444
  8,075
  8,731
  9,413
  10,122
  10,859
  11,625
  12,421
  13,249
  14,109
  15,005
  15,937
  16,908
  17,920
  18,975
  20,076
  21,224
  22,423
  23,675
EBITDA, $m
  1,389
  2,226
  2,587
  2,977
  3,395
  3,840
  4,312
  4,810
  5,334
  5,884
  6,459
  7,059
  7,684
  8,335
  9,012
  9,716
  10,448
  11,209
  11,999
  12,820
  13,674
  14,563
  15,487
  16,449
  17,451
  18,496
  19,584
  20,720
  21,905
  23,143
  24,435
Interest expense (income), $m
  449
  477
  406
  479
  558
  643
  734
  830
  931
  1,038
  1,150
  1,266
  1,388
  1,516
  1,648
  1,786
  1,929
  2,077
  2,232
  2,393
  2,560
  2,733
  2,914
  3,101
  3,297
  3,501
  3,713
  3,934
  4,165
  4,406
  4,657
Earnings before tax, $m
  768
  1,110
  1,532
  1,836
  2,161
  2,508
  2,875
  3,262
  3,668
  4,094
  4,539
  5,572
  6,056
  6,559
  7,083
  7,628
  8,194
  8,782
  9,393
  10,028
  10,689
  11,376
  12,091
  12,836
  13,611
  14,420
  15,263
  16,142
  17,059
  18,017
  19,018
Tax expense, $m
  182
  300
  414
  496
  584
  677
  776
  881
  990
  1,105
  1,226
  1,504
  1,635
  1,771
  1,912
  2,060
  2,212
  2,371
  2,536
  2,708
  2,886
  3,072
  3,265
  3,466
  3,675
  3,893
  4,121
  4,358
  4,606
  4,865
  5,135
Net income, $m
  586
  810
  1,118
  1,340
  1,578
  1,831
  2,099
  2,381
  2,678
  2,989
  3,314
  4,067
  4,421
  4,788
  5,171
  5,568
  5,981
  6,411
  6,857
  7,321
  7,803
  8,305
  8,827
  9,370
  9,936
  10,526
  11,142
  11,783
  12,453
  13,153
  13,883

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,587
  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
  10,726
  10,701
  12,401
  14,237
  16,205
  18,301
  20,524
  22,870
  25,337
  27,924
  30,629
  33,452
  36,395
  39,459
  42,645
  45,958
  49,401
  52,979
  56,697
  60,561
  64,579
  68,758
  73,106
  77,633
  82,347
  87,259
  92,380
  97,721
  103,295
  109,113
  115,191
Adjusted assets (=assets-cash), $m
  9,139
  10,701
  12,401
  14,237
  16,205
  18,301
  20,524
  22,870
  25,337
  27,924
  30,629
  33,452
  36,395
  39,459
  42,645
  45,958
  49,401
  52,979
  56,697
  60,561
  64,579
  68,758
  73,106
  77,633
  82,347
  87,259
  92,380
  97,721
  103,295
  109,113
  115,191
Revenue / Adjusted assets
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
Average production assets, $m
  1,808
  2,117
  2,453
  2,816
  3,205
  3,620
  4,059
  4,523
  5,011
  5,523
  6,058
  6,617
  7,199
  7,805
  8,435
  9,090
  9,771
  10,479
  11,214
  11,978
  12,773
  13,600
  14,460
  15,355
  16,287
  17,259
  18,272
  19,328
  20,431
  21,582
  22,784
Working capital, $m
  2,178
  988
  1,145
  1,314
  1,496
  1,689
  1,894
  2,111
  2,339
  2,577
  2,827
  3,088
  3,359
  3,642
  3,936
  4,242
  4,560
  4,890
  5,233
  5,590
  5,961
  6,346
  6,748
  7,166
  7,601
  8,054
  8,527
  9,020
  9,534
  10,071
  10,632
Total debt, $m
  10,196
  8,450
  9,980
  11,632
  13,403
  15,290
  17,291
  19,402
  21,622
  23,950
  26,385
  28,926
  31,575
  34,332
  37,200
  40,181
  43,280
  46,500
  49,846
  53,324
  56,940
  60,701
  64,615
  68,688
  72,931
  77,352
  81,961
  86,768
  91,784
  97,021
  102,491
Total liabilities, $m
  11,378
  9,631
  11,161
  12,813
  14,584
  16,471
  18,472
  20,583
  22,803
  25,131
  27,566
  30,107
  32,756
  35,513
  38,381
  41,362
  44,461
  47,681
  51,027
  54,505
  58,121
  61,882
  65,796
  69,869
  74,112
  78,533
  83,142
  87,949
  92,965
  98,202
  103,672
Total equity, $m
  -651
  1,070
  1,240
  1,424
  1,620
  1,830
  2,052
  2,287
  2,534
  2,792
  3,063
  3,345
  3,640
  3,946
  4,265
  4,596
  4,940
  5,298
  5,670
  6,056
  6,458
  6,876
  7,311
  7,763
  8,235
  8,726
  9,238
  9,772
  10,329
  10,911
  11,519
Total liabilities and equity, $m
  10,727
  10,701
  12,401
  14,237
  16,204
  18,301
  20,524
  22,870
  25,337
  27,923
  30,629
  33,452
  36,396
  39,459
  42,646
  45,958
  49,401
  52,979
  56,697
  60,561
  64,579
  68,758
  73,107
  77,632
  82,347
  87,259
  92,380
  97,721
  103,294
  109,113
  115,191
Debt-to-equity ratio
  -15.662
  7.900
  8.050
  8.170
  8.270
  8.350
  8.420
  8.480
  8.530
  8.580
  8.610
  8.650
  8.680
  8.700
  8.720
  8.740
  8.760
  8.780
  8.790
  8.800
  8.820
  8.830
  8.840
  8.850
  8.860
  8.860
  8.870
  8.880
  8.890
  8.890
  8.900
Adjusted equity ratio
  -0.223
  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
  586
  810
  1,118
  1,340
  1,578
  1,831
  2,099
  2,381
  2,678
  2,989
  3,314
  4,067
  4,421
  4,788
  5,171
  5,568
  5,981
  6,411
  6,857
  7,321
  7,803
  8,305
  8,827
  9,370
  9,936
  10,526
  11,142
  11,783
  12,453
  13,153
  13,883
Depreciation, amort., depletion, $m
  121
  638
  650
  662
  675
  689
  703
  719
  735
  752
  770
  221
  240
  260
  281
  303
  326
  349
  374
  399
  426
  453
  482
  512
  543
  575
  609
  644
  681
  719
  759
Funds from operations, $m
  558
  1,449
  1,768
  2,002
  2,253
  2,519
  2,802
  3,100
  3,413
  3,741
  4,084
  4,288
  4,661
  5,049
  5,452
  5,871
  6,307
  6,760
  7,231
  7,720
  8,229
  8,758
  9,309
  9,882
  10,479
  11,102
  11,751
  12,428
  13,134
  13,872
  14,643
Change in working capital, $m
  -111
  144
  157
  169
  182
  194
  205
  217
  228
  239
  250
  261
  272
  283
  294
  306
  318
  330
  343
  357
  371
  386
  401
  418
  435
  453
  473
  493
  514
  537
  561
Cash from operations, $m
  669
  1,572
  1,611
  1,833
  2,071
  2,326
  2,597
  2,883
  3,185
  3,502
  3,834
  4,027
  4,389
  4,766
  5,158
  5,566
  5,989
  6,430
  6,888
  7,363
  7,858
  8,372
  8,907
  9,464
  10,044
  10,648
  11,278
  11,935
  12,620
  13,335
  14,082
Maintenance CAPEX, $m
  0
  -60
  -71
  -82
  -94
  -107
  -121
  -135
  -151
  -167
  -184
  -202
  -221
  -240
  -260
  -281
  -303
  -326
  -349
  -374
  -399
  -426
  -453
  -482
  -512
  -543
  -575
  -609
  -644
  -681
  -719
New CAPEX, $m
  -44
  -309
  -336
  -363
  -389
  -415
  -440
  -464
  -488
  -512
  -535
  -558
  -582
  -606
  -630
  -655
  -681
  -708
  -735
  -764
  -795
  -827
  -860
  -895
  -932
  -972
  -1,013
  -1,056
  -1,102
  -1,151
  -1,202
Cash from investing activities, $m
  -1,443
  -369
  -407
  -445
  -483
  -522
  -561
  -599
  -639
  -679
  -719
  -760
  -803
  -846
  -890
  -936
  -984
  -1,034
  -1,084
  -1,138
  -1,194
  -1,253
  -1,313
  -1,377
  -1,444
  -1,515
  -1,588
  -1,665
  -1,746
  -1,832
  -1,921
Free cash flow, $m
  -774
  1,203
  1,204
  1,388
  1,588
  1,804
  2,036
  2,284
  2,546
  2,823
  3,115
  3,267
  3,586
  3,920
  4,267
  4,629
  5,005
  5,396
  5,803
  6,225
  6,664
  7,120
  7,594
  8,087
  8,600
  9,134
  9,690
  10,269
  10,873
  11,503
  12,160
Issuance/(repayment) of debt, $m
  1,831
  -1,493
  1,530
  1,652
  1,771
  1,887
  2,000
  2,111
  2,220
  2,328
  2,435
  2,541
  2,649
  2,757
  2,868
  2,981
  3,099
  3,220
  3,346
  3,478
  3,616
  3,761
  3,913
  4,074
  4,243
  4,421
  4,609
  4,807
  5,016
  5,237
  5,470
Issuance/(repurchase) of shares, $m
  -178
  2,011
  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  
  1,650
  518
  1,530
  1,652
  1,771
  1,887
  2,000
  2,111
  2,220
  2,328
  2,435
  2,541
  2,649
  2,757
  2,868
  2,981
  3,099
  3,220
  3,346
  3,478
  3,616
  3,761
  3,913
  4,074
  4,243
  4,421
  4,609
  4,807
  5,016
  5,237
  5,470
Total cash flow (excl. dividends), $m
  876
  -290
  2,734
  3,040
  3,359
  3,691
  4,037
  4,395
  4,767
  5,151
  5,549
  5,808
  6,235
  6,677
  7,135
  7,611
  8,104
  8,616
  9,149
  9,703
  10,280
  10,881
  11,507
  12,161
  12,843
  13,555
  14,299
  15,076
  15,889
  16,740
  17,630
Retained Cash Flow (-), $m
  -387
  -3,055
  -170
  -184
  -197
  -210
  -222
  -235
  -247
  -259
  -271
  -282
  -294
  -306
  -319
  -331
  -344
  -358
  -372
  -386
  -402
  -418
  -435
  -453
  -471
  -491
  -512
  -534
  -557
  -582
  -608
Prev. year cash balance distribution, $m
 
  1,334
  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
 
  0
  2,564
  2,856
  3,162
  3,482
  3,815
  4,161
  4,520
  4,893
  5,279
  5,526
  5,941
  6,371
  6,817
  7,279
  7,760
  8,259
  8,777
  9,317
  9,878
  10,463
  11,073
  11,708
  12,371
  13,064
  13,787
  14,542
  15,332
  16,158
  17,022
Discount rate, %
 
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.06
  25.27
  26.53
  27.86
  29.25
  30.71
  32.25
  33.86
  35.55
  37.33
  39.20
  41.16
  43.22
  45.38
  47.65
  50.03
  52.53
  55.16
PV of cash for distribution, $m
 
  0
  1,971
  1,889
  1,776
  1,637
  1,479
  1,309
  1,135
  963
  799
  630
  499
  386
  291
  213
  152
  105
  71
  46
  29
  18
  10
  6
  3
  2
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

TransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States. The company’s Power & Control segment provides mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, databus and power controls, hoists, winches and lifting devices, and cargo loading and handling systems. This segment serves engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. Its Airframe segment offers engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, aircraft audio systems, lavatory components, seat belts and safety restraints, engineered interior surfaces and related components, lighting and control technology, military personnel parachutes, and cargo delivery systems. This segment serves airframe manufacturers, cabin system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. The company’s Non-aviation segment provides seat belts and safety restraints for ground transportation applications; mechanical/electro-mechanical actuators and controls for space applications; and refueling systems for heavy equipment. It serves off-road vehicle and subsystem, child restraint system, and satellite and space system suppliers; and manufacturers of heavy equipment. The company also offers aerospace pneumatic and hydraulic components and subsystems for commercial transport, regional, business jet, and military applications; extruded plastic interior parts for use in the commercial aerospace industry; faucets and related products for use on commercial transports and regional jets; and unit load devices. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.

FINANCIAL RATIOS  of  TransDigm Group (TDG)

Valuation Ratios
P/E Ratio 22.8
Price to Sales 4.2
Price to Book -20.6
Price to Tangible Book
Price to Cash Flow 20
Price to Free Cash Flow 21.4
Growth Rates
Sales Growth Rate 17.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20%
Cap. Spend. - 3 Yr. Gr. Rate 4.1%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity -1527.3%
Total Debt to Equity -1566.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 9.8%
Ret/ On Assets - 3 Yr. Avg. 9.2%
Return On Total Capital 7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity -69.4%
Return On Equity - 3 Yr. Avg. -45.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 55.5%
Gross Margin - 3 Yr. Avg. 54.6%
EBITDA Margin 42.2%
EBITDA Margin - 3 Yr. Avg. 40.1%
Operating Margin 40%
Oper. Margin - 3 Yr. Avg. 39.6%
Pre-Tax Margin 24.2%
Pre-Tax Margin - 3 Yr. Avg. 22.2%
Net Profit Margin 18.5%
Net Profit Margin - 3 Yr. Avg. 16%
Effective Tax Rate 23.7%
Eff/ Tax Rate - 3 Yr. Avg. 28.4%
Payout Ratio 0.5%

TDG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TDG stock intrinsic value calculation we used $3171 million for the last fiscal year's total revenue generated by TransDigm Group. The default revenue input number comes from 2016 income statement of TransDigm Group. 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 TDG stock valuation model: a) initial revenue growth rate of 17.1% 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 13.4%, whose default value for TDG is calculated based on our internal credit rating of TransDigm Group, 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 TransDigm Group.
    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 TDG stock the variable cost ratio is equal to 58.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $53 million in the base year in the intrinsic value calculation for TDG 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 4.8% for TransDigm Group.

Corporate tax rate of 27% is the nominal tax rate for TransDigm Group. 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 TDG 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 TDG are equal to 57%.

Life of production assets of 57.8 years is the average useful life of capital assets used in TransDigm Group 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 TDG is equal to 26.6%. 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 - $-651 million for TransDigm Group - 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 52.871 million for TransDigm Group 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 TransDigm Group at the current share price and the inputted number of shares is $13.3 billion.


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COMPANY NEWS

▶ [$$] Exploiting Our Good Name   [Apr-08-17 12:01AM  Barrons.com]
▶ [$$] Unfavorable Publicity   [Apr-03-17 06:59AM  The Wall Street Journal]
▶ TransDigm: The End is Nigh?   [Mar-27-17 12:43PM  Barrons.com]
▶ Why TransDigm is Tanking   [02:17PM  at Barrons.com]
▶ TransDigm Stock Upgraded: What You Need to Know   [Mar-14-17 12:40PM  at Motley Fool]
▶ The Hot Stock: TransDigm Group Gains 6.5%   [05:04PM  at Barrons.com]
▶ 3 Stocks Hit Hard By Downgrades This Week   [Jan-21-17 01:16PM  at Motley Fool]
▶ Why TransDigm Stock Tumbled 12% Today   [12:12PM  at Motley Fool]
▶ Transdigm's Business Model Remains a Success   [Jan-18-17 07:00AM  at Morningstar]
Stock chart of TDG Financial statements of TDG
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