Intrinsic value of TE Connectivity - TEL

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$78.01

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$78.01

 
Intrinsic value

$84.95

 
Up/down potential

+9%

 
Rating

hold

 
Value-price divergence* premium content

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

We calculate the intrinsic value of TEL 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 28.0

 

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, %
  0.04
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
Revenue, $m
  12,238
  13,376
  14,563
  15,798
  17,083
  18,419
  19,808
  21,251
  22,750
  24,309
  25,929
  27,615
  29,368
  31,193
  33,094
  35,074
  37,138
  39,291
  41,537
  43,882
  46,331
  48,890
  51,565
  54,361
  57,286
  60,347
  63,551
  66,905
  70,418
  74,097
  77,952
Variable operating expenses, $m
 
  11,412
  12,376
  13,379
  14,423
  15,508
  16,636
  17,808
  19,025
  20,291
  21,607
  22,427
  23,851
  25,333
  26,876
  28,484
  30,161
  31,909
  33,733
  35,638
  37,627
  39,705
  41,877
  44,148
  46,524
  49,009
  51,611
  54,335
  57,188
  60,176
  63,307
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
  10,336
  11,412
  12,376
  13,379
  14,423
  15,508
  16,636
  17,808
  19,025
  20,291
  21,607
  22,427
  23,851
  25,333
  26,876
  28,484
  30,161
  31,909
  33,733
  35,638
  37,627
  39,705
  41,877
  44,148
  46,524
  49,009
  51,611
  54,335
  57,188
  60,176
  63,307
Operating income, $m
  1,902
  1,964
  2,187
  2,419
  2,660
  2,911
  3,172
  3,443
  3,725
  4,018
  4,322
  5,188
  5,518
  5,860
  6,218
  6,590
  6,977
  7,382
  7,804
  8,244
  8,705
  9,185
  9,688
  10,213
  10,763
  11,338
  11,940
  12,570
  13,230
  13,921
  14,645
EBITDA, $m
  2,487
  2,759
  3,004
  3,259
  3,524
  3,799
  4,086
  4,384
  4,693
  5,014
  5,349
  5,696
  6,058
  6,435
  6,827
  7,235
  7,661
  8,105
  8,568
  9,052
  9,557
  10,085
  10,637
  11,214
  11,817
  12,448
  13,109
  13,801
  14,526
  15,285
  16,080
Interest expense (income), $m
  117
  131
  159
  189
  220
  252
  286
  321
  357
  394
  434
  474
  517
  561
  606
  654
  704
  756
  810
  866
  925
  987
  1,051
  1,118
  1,188
  1,262
  1,339
  1,419
  1,503
  1,591
  1,684
Earnings before tax, $m
  1,162
  1,833
  2,028
  2,230
  2,440
  2,659
  2,887
  3,123
  3,368
  3,623
  3,889
  4,714
  5,001
  5,300
  5,611
  5,935
  6,274
  6,626
  6,994
  7,378
  7,780
  8,199
  8,637
  9,095
  9,575
  10,076
  10,601
  11,151
  11,727
  12,330
  12,962
Tax expense, $m
  -779
  495
  547
  602
  659
  718
  779
  843
  909
  978
  1,050
  1,273
  1,350
  1,431
  1,515
  1,603
  1,694
  1,789
  1,888
  1,992
  2,100
  2,214
  2,332
  2,456
  2,585
  2,721
  2,862
  3,011
  3,166
  3,329
  3,500
Net income, $m
  2,009
  1,338
  1,480
  1,628
  1,782
  1,941
  2,107
  2,280
  2,459
  2,645
  2,839
  3,441
  3,651
  3,869
  4,096
  4,333
  4,580
  4,837
  5,106
  5,386
  5,679
  5,985
  6,305
  6,640
  6,989
  7,356
  7,739
  8,140
  8,560
  9,001
  9,462

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  647
  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
  17,608
  18,527
  20,170
  21,881
  23,661
  25,511
  27,435
  29,433
  31,510
  33,669
  35,913
  38,248
  40,676
  43,204
  45,836
  48,579
  51,438
  54,420
  57,531
  60,779
  64,171
  67,715
  71,419
  75,293
  79,344
  83,583
  88,021
  92,666
  97,531
  102,627
  107,967
Adjusted assets (=assets-cash), $m
  16,961
  18,527
  20,170
  21,881
  23,661
  25,511
  27,435
  29,433
  31,510
  33,669
  35,913
  38,248
  40,676
  43,204
  45,836
  48,579
  51,438
  54,420
  57,531
  60,779
  64,171
  67,715
  71,419
  75,293
  79,344
  83,583
  88,021
  92,666
  97,531
  102,627
  107,967
Revenue / Adjusted assets
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
Average production assets, $m
  3,243
  3,545
  3,859
  4,186
  4,527
  4,881
  5,249
  5,631
  6,029
  6,442
  6,871
  7,318
  7,783
  8,266
  8,770
  9,295
  9,842
  10,412
  11,007
  11,629
  12,278
  12,956
  13,665
  14,406
  15,181
  15,992
  16,841
  17,730
  18,661
  19,636
  20,657
Working capital, $m
  1,709
  1,525
  1,660
  1,801
  1,947
  2,100
  2,258
  2,423
  2,594
  2,771
  2,956
  3,148
  3,348
  3,556
  3,773
  3,998
  4,234
  4,479
  4,735
  5,003
  5,282
  5,573
  5,878
  6,197
  6,531
  6,880
  7,245
  7,627
  8,028
  8,447
  8,887
Total debt, $m
  4,070
  4,544
  5,395
  6,281
  7,203
  8,162
  9,158
  10,193
  11,269
  12,388
  13,550
  14,759
  16,017
  17,327
  18,690
  20,111
  21,592
  23,136
  24,748
  26,430
  28,187
  30,023
  31,942
  33,949
  36,047
  38,243
  40,542
  42,948
  45,468
  48,108
  50,874
Total liabilities, $m
  9,123
  9,597
  10,448
  11,334
  12,256
  13,215
  14,211
  15,246
  16,322
  17,441
  18,603
  19,812
  21,070
  22,380
  23,743
  25,164
  26,645
  28,189
  29,801
  31,483
  33,240
  35,076
  36,995
  39,002
  41,100
  43,296
  45,595
  48,001
  50,521
  53,161
  55,927
Total equity, $m
  8,485
  8,930
  9,722
  10,547
  11,404
  12,296
  13,223
  14,187
  15,188
  16,228
  17,310
  18,435
  19,606
  20,824
  22,093
  23,415
  24,793
  26,230
  27,730
  29,295
  30,930
  32,639
  34,424
  36,291
  38,244
  40,287
  42,426
  44,665
  47,010
  49,466
  52,040
Total liabilities and equity, $m
  17,608
  18,527
  20,170
  21,881
  23,660
  25,511
  27,434
  29,433
  31,510
  33,669
  35,913
  38,247
  40,676
  43,204
  45,836
  48,579
  51,438
  54,419
  57,531
  60,778
  64,170
  67,715
  71,419
  75,293
  79,344
  83,583
  88,021
  92,666
  97,531
  102,627
  107,967
Debt-to-equity ratio
  0.480
  0.510
  0.550
  0.600
  0.630
  0.660
  0.690
  0.720
  0.740
  0.760
  0.780
  0.800
  0.820
  0.830
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.940
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
Adjusted equity ratio
  0.462
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482
  0.482

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,009
  1,338
  1,480
  1,628
  1,782
  1,941
  2,107
  2,280
  2,459
  2,645
  2,839
  3,441
  3,651
  3,869
  4,096
  4,333
  4,580
  4,837
  5,106
  5,386
  5,679
  5,985
  6,305
  6,640
  6,989
  7,356
  7,739
  8,140
  8,560
  9,001
  9,462
Depreciation, amort., depletion, $m
  585
  795
  817
  840
  864
  888
  914
  940
  968
  997
  1,026
  508
  540
  574
  609
  645
  683
  723
  764
  808
  853
  900
  949
  1,000
  1,054
  1,111
  1,170
  1,231
  1,296
  1,364
  1,435
Funds from operations, $m
  539
  2,133
  2,297
  2,468
  2,645
  2,829
  3,021
  3,220
  3,427
  3,642
  3,865
  3,949
  4,191
  4,443
  4,705
  4,978
  5,263
  5,560
  5,870
  6,194
  6,532
  6,885
  7,254
  7,640
  8,044
  8,466
  8,908
  9,371
  9,856
  10,364
  10,896
Change in working capital, $m
  -1,383
  130
  135
  141
  147
  152
  158
  165
  171
  178
  185
  192
  200
  208
  217
  226
  235
  245
  256
  267
  279
  292
  305
  319
  333
  349
  365
  382
  400
  419
  439
Cash from operations, $m
  1,922
  3,692
  2,162
  2,327
  2,499
  2,677
  2,863
  3,055
  3,256
  3,464
  3,680
  3,757
  3,991
  4,235
  4,488
  4,753
  5,028
  5,315
  5,614
  5,926
  6,252
  6,593
  6,949
  7,321
  7,710
  8,117
  8,543
  8,989
  9,456
  9,945
  10,457
Maintenance CAPEX, $m
  0
  -225
  -246
  -268
  -291
  -314
  -339
  -365
  -391
  -419
  -447
  -477
  -508
  -540
  -574
  -609
  -645
  -683
  -723
  -764
  -808
  -853
  -900
  -949
  -1,000
  -1,054
  -1,111
  -1,170
  -1,231
  -1,296
  -1,364
New CAPEX, $m
  -628
  -302
  -314
  -327
  -341
  -354
  -368
  -382
  -397
  -413
  -429
  -447
  -465
  -484
  -504
  -525
  -547
  -570
  -595
  -621
  -649
  -678
  -709
  -741
  -775
  -811
  -849
  -889
  -931
  -975
  -1,022
Cash from investing activities, $m
  -1,581
  -527
  -560
  -595
  -632
  -668
  -707
  -747
  -788
  -832
  -876
  -924
  -973
  -1,024
  -1,078
  -1,134
  -1,192
  -1,253
  -1,318
  -1,385
  -1,457
  -1,531
  -1,609
  -1,690
  -1,775
  -1,865
  -1,960
  -2,059
  -2,162
  -2,271
  -2,386
Free cash flow, $m
  341
  3,165
  1,602
  1,732
  1,867
  2,009
  2,156
  2,308
  2,467
  2,632
  2,804
  2,833
  3,018
  3,211
  3,411
  3,619
  3,835
  4,061
  4,296
  4,541
  4,796
  5,062
  5,341
  5,631
  5,935
  6,252
  6,584
  6,931
  7,294
  7,674
  8,072
Issuance/(repayment) of debt, $m
  181
  805
  851
  886
  922
  959
  996
  1,035
  1,076
  1,118
  1,163
  1,209
  1,258
  1,309
  1,364
  1,421
  1,481
  1,545
  1,612
  1,682
  1,757
  1,836
  1,919
  2,006
  2,099
  2,196
  2,298
  2,406
  2,520
  2,640
  2,766
Issuance/(repurchase) of shares, $m
  -2,697
  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  
  -2,521
  805
  851
  886
  922
  959
  996
  1,035
  1,076
  1,118
  1,163
  1,209
  1,258
  1,309
  1,364
  1,421
  1,481
  1,545
  1,612
  1,682
  1,757
  1,836
  1,919
  2,006
  2,099
  2,196
  2,298
  2,406
  2,520
  2,640
  2,766
Total cash flow (excl. dividends), $m
  -2,173
  3,970
  2,453
  2,618
  2,789
  2,967
  3,152
  3,344
  3,543
  3,751
  3,966
  4,043
  4,276
  4,520
  4,774
  5,040
  5,316
  5,605
  5,907
  6,223
  6,553
  6,898
  7,259
  7,637
  8,033
  8,448
  8,882
  9,337
  9,814
  10,314
  10,838
Retained Cash Flow (-), $m
  1,100
  -761
  -792
  -825
  -858
  -892
  -927
  -963
  -1,001
  -1,041
  -1,082
  -1,125
  -1,171
  -1,218
  -1,269
  -1,322
  -1,378
  -1,437
  -1,500
  -1,565
  -1,635
  -1,708
  -1,785
  -1,867
  -1,953
  -2,043
  -2,139
  -2,239
  -2,345
  -2,456
  -2,574
Prev. year cash balance distribution, $m
 
  316
  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
 
  3,525
  1,661
  1,793
  1,931
  2,075
  2,225
  2,380
  2,542
  2,710
  2,884
  2,917
  3,106
  3,302
  3,506
  3,718
  3,938
  4,168
  4,408
  4,657
  4,918
  5,190
  5,474
  5,771
  6,080
  6,405
  6,743
  7,098
  7,469
  7,857
  8,264
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  3,379
  1,520
  1,561
  1,590
  1,609
  1,615
  1,608
  1,589
  1,557
  1,512
  1,385
  1,325
  1,255
  1,177
  1,091
  1,001
  907
  812
  717
  625
  537
  454
  378
  310
  249
  197
  152
  116
  86
  62
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

TE Connectivity Ltd., together with its subsidiaries, engages in the design, manufacture, and sale of connectivity and sensors solutions in the Americas, Europe, the Middle East, Africa, and the Asia–Pacific. The company operates through three segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. The Transportation Solutions segment primarily provides terminals and connector systems and components, sensors, and relays, as well as application tooling and wires, and heat shrink tubing for use in the automotive, commercial transportation, and sensor markets. The Industrial Solutions segment offers terminals and connector systems and components; heat shrink tubing; relays; and wires and cables for industrial equipment, aerospace, defense, oil and gas, and energy markets. The Communications Solutions segment supplies electronic components, such as terminals and connector systems and components, undersea telecommunication systems, antennas, relays, and heat shrink tubing for the data and devices, subsea communications, and appliances markets. TE Connectivity Ltd. offers its products to approximately 150 countries primarily through direct selling to manufacturers, as well as through third-party distributors. The company was formerly known as Tyco Electronics Ltd. and changed its name to TE Connectivity Ltd. in March 2011. TE Connectivity Ltd. was incorporated in 2000 and is based in Schaffhausen, Switzerland.

FINANCIAL RATIOS  of  TE Connectivity (TEL)

Valuation Ratios
P/E Ratio 13.8
Price to Sales 2.3
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 14.4
Price to Free Cash Flow 21.4
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.7%
Cap. Spend. - 3 Yr. Gr. Rate 1.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 44.1%
Total Debt to Equity 48%
Interest Coverage 11
Management Effectiveness
Return On Assets 11.5%
Ret/ On Assets - 3 Yr. Avg. 11.2%
Return On Total Capital 15.4%
Ret/ On T. Cap. - 3 Yr. Avg. 16.2%
Return On Equity 22.2%
Return On Equity - 3 Yr. Avg. 22.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 33%
Gross Margin - 3 Yr. Avg. 33.2%
EBITDA Margin 15.2%
EBITDA Margin - 3 Yr. Avg. 18.2%
Operating Margin 15.5%
Oper. Margin - 3 Yr. Avg. 15%
Pre-Tax Margin 9.5%
Pre-Tax Margin - 3 Yr. Avg. 12.4%
Net Profit Margin 16.4%
Net Profit Margin - 3 Yr. Avg. 17%
Effective Tax Rate -67%
Eff/ Tax Rate - 3 Yr. Avg. -12.4%
Payout Ratio 25.3%

TEL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TEL stock intrinsic value calculation we used $12238 million for the last fiscal year's total revenue generated by TE Connectivity. The default revenue input number comes from 2016 income statement of TE Connectivity. 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 TEL stock valuation model: a) initial revenue growth rate of 9.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TEL is calculated based on our internal credit rating of TE Connectivity, 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 TE Connectivity.
    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 TEL stock the variable cost ratio is equal to 85.7%.

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 TEL 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 TE Connectivity.

Corporate tax rate of 27% is the nominal tax rate for TE Connectivity. 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 TEL 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 TEL are equal to 26.5%.

Life of production assets of 14.4 years is the average useful life of capital assets used in TE Connectivity 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 TEL is equal to 11.4%. 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 - $8485 million for TE Connectivity - 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 359.089 million for TE Connectivity 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 TE Connectivity at the current share price and the inputted number of shares is $28.0 billion.


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COMPANY NEWS

▶ ETFs with exposure to TE Connectivity Ltd. : May 11, 2017   [May-11-17 05:36PM  Capital Cube]
▶ ETFs with exposure to TE Connectivity Ltd. : May 1, 2017   [May-01-17 04:29PM  Capital Cube]
▶ Terrence Curtin on TE Connectivity's growth   [Apr-26-17 05:29PM  Yahoo Finance Video]
▶ TE Connectivity beats Street 2Q forecasts   [06:20AM  Associated Press]
▶ Telenor Moving Into Mobile Finance   [Mar-09-17 09:28PM  Bloomberg Video]
▶ Telenor CEO Looking to Monetize Growing Data Demand   [Feb-27-17 03:23AM  Bloomberg Video]
▶ TE Connectivity Announces 3-in-2 Memory Card Connectors   [Feb-22-17 08:03AM  Business Wire]
▶ $50 Billion Fund Has A Fortune Invested In These 5 Stocks   [Dec-06-16 10:14AM  at Insider Monkey]
▶ Is TE Connectivity Ltd (TEL) A Good Stock To Buy?   [Dec-01-16 04:14PM  at Insider Monkey]
▶ 3 takeaways from CommScopes strong quarterly earnings report   [Nov-03-16 03:00PM  at bizjournals.com]
Stock chart of TEL Financial statements of TEL Annual reports of TEL
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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