Intrinsic value of TERNIUM ADR - TX

Previous Close

$28.75

  Intrinsic Value

$4.59

stock screener

  Rating & Target

str. sell

-84%

  Value-price divergence*

-44%

Previous close

$28.75

 
Intrinsic value

$4.59

 
Up/down potential

-84%

 
Rating

str. sell

 
Value-price divergence*

-44%

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

We calculate the intrinsic value of TX 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 5.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -8.29
  23.20
  21.38
  19.74
  18.27
  16.94
  15.75
  14.67
  13.71
  12.83
  12.05
  11.35
  10.71
  10.14
  9.63
  9.16
  8.75
  8.37
  8.04
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
Revenue, $m
  7,224
  8,900
  10,803
  12,935
  15,298
  17,890
  20,707
  23,746
  27,000
  30,465
  34,137
  38,010
  42,081
  46,348
  50,810
  55,466
  60,318
  65,368
  70,620
  76,080
  81,755
  87,651
  93,779
  100,149
  106,772
  113,661
  120,829
  128,291
  136,064
  144,163
  152,607
Variable operating expenses, $m
 
  8,164
  9,895
  11,835
  13,985
  16,343
  18,907
  21,671
  24,632
  27,785
  31,125
  34,583
  38,287
  42,169
  46,229
  50,465
  54,879
  59,474
  64,253
  69,220
  74,383
  79,748
  85,324
  91,119
  97,145
  103,413
  109,935
  116,724
  123,795
  131,164
  138,847
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
  6,082
  8,164
  9,895
  11,835
  13,985
  16,343
  18,907
  21,671
  24,632
  27,785
  31,125
  34,583
  38,287
  42,169
  46,229
  50,465
  54,879
  59,474
  64,253
  69,220
  74,383
  79,748
  85,324
  91,119
  97,145
  103,413
  109,935
  116,724
  123,795
  131,164
  138,847
Operating income, $m
  1,142
  736
  908
  1,100
  1,313
  1,547
  1,801
  2,075
  2,368
  2,681
  3,012
  3,427
  3,794
  4,179
  4,581
  5,001
  5,438
  5,894
  6,367
  6,860
  7,371
  7,903
  8,456
  9,030
  9,627
  10,248
  10,894
  11,567
  12,268
  12,998
  13,760
EBITDA, $m
  1,549
  1,237
  1,502
  1,798
  2,127
  2,487
  2,879
  3,301
  3,754
  4,236
  4,746
  5,285
  5,851
  6,444
  7,064
  7,712
  8,386
  9,088
  9,819
  10,578
  11,367
  12,187
  13,039
  13,924
  14,845
  15,803
  16,799
  17,837
  18,918
  20,044
  21,218
Interest expense (income), $m
  77
  50
  97
  150
  209
  275
  348
  427
  511
  602
  699
  802
  910
  1,024
  1,143
  1,268
  1,398
  1,533
  1,674
  1,821
  1,974
  2,132
  2,297
  2,468
  2,646
  2,831
  3,024
  3,224
  3,432
  3,649
  3,876
Earnings before tax, $m
  1,118
  686
  811
  950
  1,104
  1,271
  1,453
  1,648
  1,857
  2,078
  2,312
  2,625
  2,884
  3,155
  3,438
  3,733
  4,041
  4,361
  4,693
  5,039
  5,398
  5,771
  6,159
  6,562
  6,981
  7,417
  7,871
  8,343
  8,836
  9,349
  9,884
Tax expense, $m
  411
  185
  219
  257
  298
  343
  392
  445
  501
  561
  624
  709
  779
  852
  928
  1,008
  1,091
  1,177
  1,267
  1,360
  1,457
  1,558
  1,663
  1,772
  1,885
  2,003
  2,125
  2,253
  2,386
  2,524
  2,669
Net income, $m
  596
  501
  592
  694
  806
  928
  1,061
  1,203
  1,355
  1,517
  1,688
  1,916
  2,105
  2,303
  2,510
  2,725
  2,950
  3,183
  3,426
  3,678
  3,940
  4,213
  4,496
  4,790
  5,096
  5,414
  5,746
  6,091
  6,450
  6,825
  7,215

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  328
  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
  8,323
  9,845
  11,950
  14,309
  16,923
  19,790
  22,906
  26,267
  29,867
  33,700
  37,762
  42,046
  46,550
  51,270
  56,206
  61,356
  66,723
  72,309
  78,120
  84,159
  90,437
  96,959
  103,738
  110,785
  118,111
  125,731
  133,660
  141,915
  150,513
  159,472
  168,813
Adjusted assets (=assets-cash), $m
  7,995
  9,845
  11,950
  14,309
  16,923
  19,790
  22,906
  26,267
  29,867
  33,700
  37,762
  42,046
  46,550
  51,270
  56,206
  61,356
  66,723
  72,309
  78,120
  84,159
  90,437
  96,959
  103,738
  110,785
  118,111
  125,731
  133,660
  141,915
  150,513
  159,472
  168,813
Revenue / Adjusted assets
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
  0.904
Average production assets, $m
  4,375
  5,393
  6,546
  7,839
  9,271
  10,841
  12,549
  14,390
  16,362
  18,462
  20,687
  23,034
  25,501
  28,087
  30,791
  33,612
  36,552
  39,613
  42,796
  46,105
  49,543
  53,117
  56,830
  60,690
  64,704
  68,878
  73,222
  77,744
  82,454
  87,363
  92,480
Working capital, $m
  859
  1,664
  2,020
  2,419
  2,861
  3,345
  3,872
  4,440
  5,049
  5,697
  6,384
  7,108
  7,869
  8,667
  9,501
  10,372
  11,279
  12,224
  13,206
  14,227
  15,288
  16,391
  17,537
  18,728
  19,966
  21,255
  22,595
  23,990
  25,444
  26,958
  28,537
Total debt, $m
  1,219
  1,727
  2,676
  3,740
  4,919
  6,212
  7,618
  9,134
  10,757
  12,486
  14,318
  16,250
  18,281
  20,410
  22,636
  24,959
  27,379
  29,898
  32,519
  35,243
  38,074
  41,016
  44,073
  47,251
  50,555
  53,992
  57,568
  61,291
  65,168
  69,209
  73,422
Total liabilities, $m
  3,932
  4,440
  5,389
  6,453
  7,632
  8,925
  10,331
  11,847
  13,470
  15,199
  17,031
  18,963
  20,994
  23,123
  25,349
  27,672
  30,092
  32,611
  35,232
  37,956
  40,787
  43,729
  46,786
  49,964
  53,268
  56,705
  60,281
  64,004
  67,881
  71,922
  76,135
Total equity, $m
  4,391
  5,405
  6,561
  7,856
  9,291
  10,865
  12,576
  14,421
  16,397
  18,502
  20,731
  23,083
  25,556
  28,147
  30,857
  33,684
  36,631
  39,698
  42,888
  46,204
  49,650
  53,231
  56,952
  60,821
  64,843
  69,026
  73,380
  77,911
  82,631
  87,550
  92,678
Total liabilities and equity, $m
  8,323
  9,845
  11,950
  14,309
  16,923
  19,790
  22,907
  26,268
  29,867
  33,701
  37,762
  42,046
  46,550
  51,270
  56,206
  61,356
  66,723
  72,309
  78,120
  84,160
  90,437
  96,960
  103,738
  110,785
  118,111
  125,731
  133,661
  141,915
  150,512
  159,472
  168,813
Debt-to-equity ratio
  0.278
  0.320
  0.410
  0.480
  0.530
  0.570
  0.610
  0.630
  0.660
  0.670
  0.690
  0.700
  0.720
  0.730
  0.730
  0.740
  0.750
  0.750
  0.760
  0.760
  0.770
  0.770
  0.770
  0.780
  0.780
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
Adjusted equity ratio
  0.508
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  596
  501
  592
  694
  806
  928
  1,061
  1,203
  1,355
  1,517
  1,688
  1,916
  2,105
  2,303
  2,510
  2,725
  2,950
  3,183
  3,426
  3,678
  3,940
  4,213
  4,496
  4,790
  5,096
  5,414
  5,746
  6,091
  6,450
  6,825
  7,215
Depreciation, amort., depletion, $m
  407
  501
  594
  698
  814
  941
  1,078
  1,227
  1,386
  1,555
  1,734
  1,858
  2,057
  2,265
  2,483
  2,711
  2,948
  3,195
  3,451
  3,718
  3,995
  4,284
  4,583
  4,894
  5,218
  5,555
  5,905
  6,270
  6,650
  7,045
  7,458
Funds from operations, $m
  1,043
  1,002
  1,186
  1,392
  1,620
  1,869
  2,139
  2,430
  2,741
  3,072
  3,423
  3,774
  4,162
  4,568
  4,993
  5,436
  5,898
  6,378
  6,877
  7,396
  7,936
  8,496
  9,079
  9,684
  10,314
  10,969
  11,651
  12,360
  13,100
  13,870
  14,673
Change in working capital, $m
  -57
  313
  356
  399
  442
  485
  527
  568
  609
  648
  687
  724
  761
  798
  834
  871
  907
  944
  982
  1,021
  1,061
  1,103
  1,146
  1,191
  1,238
  1,288
  1,340
  1,395
  1,453
  1,515
  1,579
Cash from operations, $m
  1,100
  689
  830
  993
  1,178
  1,384
  1,612
  1,862
  2,133
  2,424
  2,736
  3,050
  3,401
  3,770
  4,159
  4,565
  4,990
  5,433
  5,895
  6,375
  6,875
  7,394
  7,933
  8,493
  9,076
  9,681
  10,310
  10,965
  11,646
  12,355
  13,094
Maintenance CAPEX, $m
  0
  -353
  -435
  -528
  -632
  -748
  -874
  -1,012
  -1,160
  -1,320
  -1,489
  -1,668
  -1,858
  -2,057
  -2,265
  -2,483
  -2,711
  -2,948
  -3,195
  -3,451
  -3,718
  -3,995
  -4,284
  -4,583
  -4,894
  -5,218
  -5,555
  -5,905
  -6,270
  -6,650
  -7,045
New CAPEX, $m
  -435
  -1,019
  -1,153
  -1,292
  -1,432
  -1,571
  -1,707
  -1,841
  -1,972
  -2,100
  -2,225
  -2,347
  -2,467
  -2,586
  -2,704
  -2,822
  -2,940
  -3,060
  -3,183
  -3,309
  -3,439
  -3,573
  -3,714
  -3,860
  -4,013
  -4,175
  -4,344
  -4,522
  -4,710
  -4,908
  -5,117
Cash from investing activities, $m
  -555
  -1,372
  -1,588
  -1,820
  -2,064
  -2,319
  -2,581
  -2,853
  -3,132
  -3,420
  -3,714
  -4,015
  -4,325
  -4,643
  -4,969
  -5,305
  -5,651
  -6,008
  -6,378
  -6,760
  -7,157
  -7,568
  -7,998
  -8,443
  -8,907
  -9,393
  -9,899
  -10,427
  -10,980
  -11,558
  -12,162
Free cash flow, $m
  545
  -683
  -758
  -827
  -886
  -934
  -969
  -991
  -1,000
  -995
  -978
  -966
  -924
  -872
  -810
  -739
  -661
  -575
  -483
  -385
  -282
  -175
  -64
  50
  168
  288
  412
  538
  666
  798
  932
Issuance/(repayment) of debt, $m
  -281
  836
  949
  1,064
  1,179
  1,293
  1,405
  1,516
  1,624
  1,729
  1,832
  1,932
  2,031
  2,129
  2,226
  2,323
  2,420
  2,519
  2,620
  2,724
  2,831
  2,942
  3,057
  3,178
  3,304
  3,437
  3,576
  3,723
  3,878
  4,041
  4,213
Issuance/(repurchase) of shares, $m
  0
  513
  563
  602
  629
  646
  650
  642
  621
  587
  542
  436
  367
  288
  200
  102
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -332
  1,349
  1,512
  1,666
  1,808
  1,939
  2,055
  2,158
  2,245
  2,316
  2,374
  2,368
  2,398
  2,417
  2,426
  2,425
  2,420
  2,519
  2,620
  2,724
  2,831
  2,942
  3,057
  3,178
  3,304
  3,437
  3,576
  3,723
  3,878
  4,041
  4,213
Total cash flow (excl. dividends), $m
  209
  666
  755
  838
  922
  1,005
  1,086
  1,166
  1,244
  1,321
  1,395
  1,402
  1,474
  1,545
  1,615
  1,686
  1,760
  1,945
  2,138
  2,339
  2,549
  2,767
  2,993
  3,228
  3,472
  3,725
  3,988
  4,261
  4,544
  4,838
  5,144
Retained Cash Flow (-), $m
  -358
  -1,014
  -1,156
  -1,295
  -1,435
  -1,574
  -1,711
  -1,845
  -1,976
  -2,104
  -2,230
  -2,352
  -2,473
  -2,591
  -2,710
  -2,828
  -2,946
  -3,067
  -3,190
  -3,316
  -3,446
  -3,581
  -3,722
  -3,868
  -4,022
  -4,183
  -4,353
  -4,532
  -4,720
  -4,919
  -5,128
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -348
  -400
  -457
  -513
  -569
  -625
  -679
  -732
  -784
  -834
  -950
  -998
  -1,046
  -1,094
  -1,142
  -1,186
  -1,122
  -1,052
  -977
  -897
  -814
  -729
  -640
  -550
  -458
  -365
  -271
  -176
  -80
  16
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
 
  -333
  -367
  -398
  -423
  -441
  -453
  -459
  -457
  -450
  -437
  -451
  -426
  -398
  -367
  -335
  -302
  -244
  -194
  -150
  -114
  -84
  -60
  -42
  -28
  -18
  -11
  -6
  -3
  -1
  0
Current shareholders' claim on cash, %
  100
  91.9
  85.3
  79.8
  75.2
  71.5
  68.4
  65.9
  63.8
  62.2
  60.8
  59.9
  59.2
  58.7
  58.4
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2
  58.2

Ternium S.A. manufactures and processes various steel products in Mexico, Argentina, Bolivia, Chile, Paraguay, Uruguay, the United States, Central America, Colombia, and internationally. It operates through two segments, Steel and Mining. The Steel segment offers steel products, such as slabs, billets and round bars, hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plates, hot dipped galvanized and electrogalvanized sheets, pre-painted sheets, steel pipes and tubular products, beams, and roll formed products, as well as pre-engineered metal building systems. The Mining segment sells iron ore concentrates and pellets. The company serves various companies and small businesses that are operating in the construction, automotive, home appliances, capital goods, container, food, and energy industries. The company was founded in 1961 and is headquartered in Buenos Aires, Argentina. Ternium S.A. is a subsidiary of San Faustin S.A.

FINANCIAL RATIOS  of  TERNIUM ADR (TX)

Valuation Ratios
P/E Ratio 94.7
Price to Sales 7.8
Price to Book 12.9
Price to Tangible Book
Price to Cash Flow 51.3
Price to Free Cash Flow 84.9
Growth Rates
Sales Growth Rate -8.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.9%
Cap. Spend. - 3 Yr. Gr. Rate -13.2%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 9%
Total Debt to Equity 27.8%
Interest Coverage 16
Management Effectiveness
Return On Assets 7.9%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 10.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 14.2%
Return On Equity - 3 Yr. Avg. 3.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 25.5%
Gross Margin - 3 Yr. Avg. 21.3%
EBITDA Margin 22.2%
EBITDA Margin - 3 Yr. Avg. 13.6%
Operating Margin 15.8%
Oper. Margin - 3 Yr. Avg. 12%
Pre-Tax Margin 15.5%
Pre-Tax Margin - 3 Yr. Avg. 7.2%
Net Profit Margin 8.3%
Net Profit Margin - 3 Yr. Avg. 2%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 86.2%
Payout Ratio 29.7%

TX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TX stock intrinsic value calculation we used $7224 million for the last fiscal year's total revenue generated by TERNIUM ADR. The default revenue input number comes from 2016 income statement of TERNIUM ADR. 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 TX stock valuation model: a) initial revenue growth rate of 23.2% 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 TX is calculated based on our internal credit rating of TERNIUM ADR, 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 TERNIUM ADR.
    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 TX stock the variable cost ratio is equal to 91.9%.

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 TX 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 5.6% for TERNIUM ADR.

Corporate tax rate of 27% is the nominal tax rate for TERNIUM ADR. 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 TX 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 TX are equal to 60.6%.

Life of production assets of 12.4 years is the average useful life of capital assets used in TERNIUM ADR 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 TX is equal to 18.7%. 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 - $4391 million for TERNIUM ADR - 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 203.315 million for TERNIUM ADR 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 TERNIUM ADR at the current share price and the inputted number of shares is $5.8 billion.

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COMPANY NEWS

▶ Tenaris Announces 2017 Second Quarter Results   [Aug-02-17 04:31PM  Marketwired]
▶ Steel Stock With 258% EPS Growth Edges Closer To Breakout   [Jul-11-17 04:19PM  Investor's Business Daily]
▶ New Strong Buy Stocks for July 7th   [Jul-07-17 10:31AM  Zacks]
▶ Is Ternium (TX) a Great Growth Stock?   [Jul-06-17 08:39AM  Zacks]
▶ Top Ranked Value Stocks to Buy for July 5th   [Jul-05-17 09:07AM  Zacks]
▶ Steel Stock Shows Renewed Strength And 258% Growth   [01:11PM  Investor's Business Daily]
▶ Steel Stock With 360% Earnings Growth Tests Its Mettle   [Jun-26-17 04:04PM  Investor's Business Daily]
▶ Top Ranked Income Stocks to Buy for May 19th   [May-19-17 10:27AM  Zacks]
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▶ What to Make of ArcelorMittals 1Q17 Performance   [May-12-17 11:05AM  Market Realist]
▶ Top Ranked Income Stocks to Buy for May 11th   [May-11-17 10:26AM  Zacks]
▶ Ternium Files 2016 Form 20-F   [May-01-17 04:43PM  Business Wire]
▶ Tenaris Announces 2017 First Quarter Results   [Apr-26-17 09:11PM  Marketwired]
▶ No. 1 Steel Stock With 258% EPS Growth May Forge New Breakout   [12:18PM  Investor's Business Daily]
▶ Ternium Announces First Quarter 2017 Results   [Apr-25-17 04:15PM  Marketwired]
▶ Top Ranked Income Stocks to Buy for April 19th   [Apr-19-17 10:48AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for April 18th   [Apr-18-17 12:19PM  Zacks]
▶ Top Ranked Income Stocks to Buy for April 17th   [Apr-17-17 11:37AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for April 13th   [Apr-13-17 12:22PM  Zacks]
▶ Top Ranked Income Stocks to Buy for April 12th   [Apr-12-17 10:53AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for April 11th   [Apr-11-17 11:50AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for April 5th   [Apr-05-17 11:10AM  Zacks]
▶ Top Ranked Value Stocks to Buy for April 4th   [Apr-04-17 10:51AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for March 28th   [Mar-28-17 11:22AM  Zacks]
Stock chart of TX Financial statements of TX
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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