Intrinsic value of TERNIUM ADR - TX

Previous Close

$33.60

  Intrinsic Value

$4.68

stock screener

  Rating & Target

str. sell

-86%

Previous close

$33.60

 
Intrinsic value

$4.68

 
Up/down potential

-86%

 
Rating

str. sell

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  33.60
  30.74
  28.17
  25.85
  23.76
  21.89
  20.20
  18.68
  17.31
  16.08
  14.97
  13.97
  13.08
  12.27
  11.54
  10.89
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
Revenue, $m
  7,224
  9,651
  12,618
  16,172
  20,352
  25,189
  30,702
  36,904
  43,798
  51,380
  59,641
  68,571
  78,154
  88,375
  99,218
  110,670
  122,721
  135,360
  148,585
  162,392
  176,786
  191,772
  207,362
  223,570
  240,416
  257,921
  276,113
  295,021
  314,678
  335,122
  356,393
Variable operating expenses, $m
 
  8,847
  11,547
  14,780
  18,584
  22,984
  28,000
  33,643
  39,915
  46,813
  54,330
  62,388
  71,107
  80,406
  90,272
  100,692
  111,656
  123,156
  135,188
  147,750
  160,846
  174,481
  188,665
  203,412
  218,739
  234,666
  251,218
  268,421
  286,306
  304,906
  324,259
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
  8,847
  11,547
  14,780
  18,584
  22,984
  28,000
  33,643
  39,915
  46,813
  54,330
  62,388
  71,107
  80,406
  90,272
  100,692
  111,656
  123,156
  135,188
  147,750
  160,846
  174,481
  188,665
  203,412
  218,739
  234,666
  251,218
  268,421
  286,306
  304,906
  324,259
Operating income, $m
  1,142
  804
  1,071
  1,392
  1,769
  2,205
  2,702
  3,261
  3,883
  4,566
  5,311
  6,183
  7,047
  7,968
  8,946
  9,978
  11,065
  12,205
  13,397
  14,642
  15,940
  17,291
  18,697
  20,158
  21,677
  23,255
  24,895
  26,600
  28,373
  30,216
  32,134
EBITDA, $m
  1,549
  1,342
  1,754
  2,248
  2,830
  3,502
  4,269
  5,131
  6,089
  7,144
  8,292
  9,534
  10,866
  12,287
  13,795
  15,387
  17,062
  18,820
  20,658
  22,578
  24,579
  26,663
  28,831
  31,084
  33,426
  35,860
  38,389
  41,018
  43,751
  46,594
  49,551
Interest expense (income), $m
  77
  50
  118
  201
  300
  417
  552
  706
  879
  1,072
  1,284
  1,514
  1,764
  2,032
  2,317
  2,620
  2,940
  3,277
  3,630
  3,999
  4,385
  4,787
  5,206
  5,641
  6,094
  6,565
  7,054
  7,562
  8,090
  8,640
  9,211
Earnings before tax, $m
  1,118
  754
  954
  1,191
  1,469
  1,788
  2,150
  2,555
  3,004
  3,495
  4,028
  4,668
  5,283
  5,937
  6,629
  7,358
  8,125
  8,928
  9,767
  10,643
  11,555
  12,504
  13,491
  14,517
  15,583
  16,690
  17,842
  19,038
  20,282
  21,576
  22,923
Tax expense, $m
  411
  204
  258
  322
  397
  483
  581
  690
  811
  944
  1,088
  1,260
  1,426
  1,603
  1,790
  1,987
  2,194
  2,411
  2,637
  2,874
  3,120
  3,376
  3,643
  3,919
  4,207
  4,506
  4,817
  5,140
  5,476
  5,826
  6,189
Net income, $m
  596
  550
  696
  870
  1,072
  1,305
  1,570
  1,865
  2,193
  2,551
  2,940
  3,408
  3,856
  4,334
  4,839
  5,372
  5,931
  6,517
  7,130
  7,769
  8,435
  9,128
  9,848
  10,597
  11,375
  12,184
  13,024
  13,898
  14,806
  15,751
  16,734

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
  10,676
  13,958
  17,889
  22,514
  27,864
  33,963
  40,823
  48,449
  56,836
  65,975
  75,853
  86,453
  97,759
  109,754
  122,423
  135,753
  149,735
  164,364
  179,637
  195,559
  212,137
  229,383
  247,312
  265,947
  285,311
  305,435
  326,350
  348,095
  370,710
  394,240
Adjusted assets (=assets-cash), $m
  7,995
  10,676
  13,958
  17,889
  22,514
  27,864
  33,963
  40,823
  48,449
  56,836
  65,975
  75,853
  86,453
  97,759
  109,754
  122,423
  135,753
  149,735
  164,364
  179,637
  195,559
  212,137
  229,383
  247,312
  265,947
  285,311
  305,435
  326,350
  348,095
  370,710
  394,240
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
  5,849
  7,647
  9,800
  12,334
  15,265
  18,606
  22,364
  26,541
  31,136
  36,143
  41,554
  47,361
  53,555
  60,126
  67,066
  74,369
  82,028
  90,042
  98,410
  107,132
  116,214
  125,661
  135,484
  145,692
  156,300
  167,324
  178,783
  190,695
  203,084
  215,974
Working capital, $m
  859
  1,805
  2,360
  3,024
  3,806
  4,710
  5,741
  6,901
  8,190
  9,608
  11,153
  12,823
  14,615
  16,526
  18,554
  20,695
  22,949
  25,312
  27,785
  30,367
  33,059
  35,861
  38,777
  41,808
  44,958
  48,231
  51,633
  55,169
  58,845
  62,668
  66,645
Total debt, $m
  1,219
  2,102
  3,582
  5,355
  7,441
  9,854
  12,604
  15,698
  19,137
  22,920
  27,042
  31,497
  36,278
  41,376
  46,786
  52,500
  58,512
  64,817
  71,415
  78,303
  85,484
  92,961
  100,739
  108,825
  117,229
  125,962
  135,038
  144,471
  154,278
  164,477
  175,089
Total liabilities, $m
  3,932
  4,815
  6,295
  8,068
  10,154
  12,567
  15,317
  18,411
  21,850
  25,633
  29,755
  34,210
  38,991
  44,089
  49,499
  55,213
  61,225
  67,530
  74,128
  81,016
  88,197
  95,674
  103,452
  111,538
  119,942
  128,675
  137,751
  147,184
  156,991
  167,190
  177,802
Total equity, $m
  4,391
  5,861
  7,663
  9,821
  12,360
  15,297
  18,646
  22,412
  26,598
  31,203
  36,220
  41,643
  47,463
  53,670
  60,255
  67,210
  74,528
  82,204
  90,236
  98,621
  107,362
  116,463
  125,931
  135,774
  146,005
  156,636
  167,684
  179,166
  191,104
  203,520
  216,438
Total liabilities and equity, $m
  8,323
  10,676
  13,958
  17,889
  22,514
  27,864
  33,963
  40,823
  48,448
  56,836
  65,975
  75,853
  86,454
  97,759
  109,754
  122,423
  135,753
  149,734
  164,364
  179,637
  195,559
  212,137
  229,383
  247,312
  265,947
  285,311
  305,435
  326,350
  348,095
  370,710
  394,240
Debt-to-equity ratio
  0.278
  0.360
  0.470
  0.550
  0.600
  0.640
  0.680
  0.700
  0.720
  0.730
  0.750
  0.760
  0.760
  0.770
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
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
  550
  696
  870
  1,072
  1,305
  1,570
  1,865
  2,193
  2,551
  2,940
  3,408
  3,856
  4,334
  4,839
  5,372
  5,931
  6,517
  7,130
  7,769
  8,435
  9,128
  9,848
  10,597
  11,375
  12,184
  13,024
  13,898
  14,806
  15,751
  16,734
Depreciation, amort., depletion, $m
  407
  538
  683
  857
  1,061
  1,297
  1,567
  1,870
  2,207
  2,577
  2,981
  3,351
  3,819
  4,319
  4,849
  5,409
  5,997
  6,615
  7,261
  7,936
  8,640
  9,372
  10,134
  10,926
  11,749
  12,605
  13,494
  14,418
  15,379
  16,378
  17,417
Funds from operations, $m
  1,043
  1,088
  1,379
  1,726
  2,133
  2,603
  3,136
  3,735
  4,399
  5,128
  5,921
  6,759
  7,676
  8,653
  9,688
  10,780
  11,929
  13,133
  14,392
  15,705
  17,075
  18,500
  19,982
  21,523
  23,125
  24,789
  26,518
  28,316
  30,185
  32,128
  34,151
Change in working capital, $m
  -57
  454
  555
  665
  782
  904
  1,031
  1,160
  1,289
  1,418
  1,545
  1,670
  1,792
  1,911
  2,028
  2,142
  2,253
  2,364
  2,473
  2,582
  2,692
  2,802
  2,915
  3,031
  3,150
  3,274
  3,402
  3,536
  3,676
  3,823
  3,978
Cash from operations, $m
  1,100
  634
  824
  1,062
  1,351
  1,698
  2,105
  2,575
  3,110
  3,710
  4,376
  5,089
  5,884
  6,741
  7,660
  8,639
  9,675
  10,769
  11,919
  13,123
  14,383
  15,697
  17,067
  18,492
  19,975
  21,515
  23,116
  24,780
  26,509
  28,305
  30,173
Maintenance CAPEX, $m
  0
  -353
  -472
  -617
  -790
  -995
  -1,231
  -1,500
  -1,804
  -2,140
  -2,511
  -2,915
  -3,351
  -3,819
  -4,319
  -4,849
  -5,409
  -5,997
  -6,615
  -7,261
  -7,936
  -8,640
  -9,372
  -10,134
  -10,926
  -11,749
  -12,605
  -13,494
  -14,418
  -15,379
  -16,378
New CAPEX, $m
  -435
  -1,474
  -1,798
  -2,154
  -2,533
  -2,931
  -3,341
  -3,758
  -4,177
  -4,595
  -5,007
  -5,411
  -5,807
  -6,194
  -6,571
  -6,940
  -7,302
  -7,660
  -8,014
  -8,367
  -8,722
  -9,082
  -9,447
  -9,822
  -10,208
  -10,608
  -11,024
  -11,458
  -11,912
  -12,389
  -12,890
Cash from investing activities, $m
  -555
  -1,827
  -2,270
  -2,771
  -3,323
  -3,926
  -4,572
  -5,258
  -5,981
  -6,735
  -7,518
  -8,326
  -9,158
  -10,013
  -10,890
  -11,789
  -12,711
  -13,657
  -14,629
  -15,628
  -16,658
  -17,722
  -18,819
  -19,956
  -21,134
  -22,357
  -23,629
  -24,952
  -26,330
  -27,768
  -29,268
Free cash flow, $m
  545
  -1,192
  -1,445
  -1,709
  -1,972
  -2,227
  -2,467
  -2,683
  -2,871
  -3,025
  -3,141
  -3,237
  -3,274
  -3,272
  -3,230
  -3,150
  -3,036
  -2,888
  -2,711
  -2,505
  -2,276
  -2,024
  -1,753
  -1,464
  -1,160
  -842
  -513
  -172
  178
  538
  906
Issuance/(repayment) of debt, $m
  -281
  1,211
  1,480
  1,773
  2,086
  2,413
  2,751
  3,094
  3,439
  3,783
  4,122
  4,455
  4,781
  5,099
  5,410
  5,714
  6,012
  6,306
  6,598
  6,888
  7,181
  7,477
  7,778
  8,086
  8,404
  8,733
  9,076
  9,433
  9,807
  10,199
  10,612
Issuance/(repurchase) of shares, $m
  0
  920
  1,105
  1,289
  1,466
  1,632
  1,779
  1,901
  1,994
  2,053
  2,077
  2,015
  1,963
  1,873
  1,746
  1,583
  1,387
  1,159
  901
  616
  306
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -332
  2,131
  2,585
  3,062
  3,552
  4,045
  4,530
  4,995
  5,433
  5,836
  6,199
  6,470
  6,744
  6,972
  7,156
  7,297
  7,399
  7,465
  7,499
  7,504
  7,487
  7,477
  7,778
  8,086
  8,404
  8,733
  9,076
  9,433
  9,807
  10,199
  10,612
Total cash flow (excl. dividends), $m
  209
  938
  1,140
  1,353
  1,580
  1,817
  2,062
  2,312
  2,562
  2,811
  3,058
  3,233
  3,470
  3,701
  3,926
  4,147
  4,363
  4,576
  4,788
  4,999
  5,211
  5,453
  6,025
  6,622
  7,244
  7,891
  8,563
  9,261
  9,985
  10,737
  11,518
Retained Cash Flow (-), $m
  -358
  -1,470
  -1,802
  -2,158
  -2,539
  -2,937
  -3,348
  -3,766
  -4,186
  -4,605
  -5,017
  -5,423
  -5,820
  -6,207
  -6,585
  -6,955
  -7,318
  -7,676
  -8,031
  -8,385
  -8,741
  -9,101
  -9,468
  -9,843
  -10,230
  -10,631
  -11,048
  -11,483
  -11,938
  -12,416
  -12,918
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
 
  -532
  -661
  -805
  -959
  -1,120
  -1,286
  -1,455
  -1,624
  -1,793
  -1,960
  -2,190
  -2,350
  -2,506
  -2,659
  -2,809
  -2,955
  -3,100
  -3,243
  -3,386
  -3,530
  -3,649
  -3,443
  -3,221
  -2,986
  -2,740
  -2,485
  -2,222
  -1,953
  -1,678
  -1,400
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
 
  -510
  -605
  -701
  -790
  -868
  -933
  -983
  -1,015
  -1,030
  -1,028
  -1,040
  -1,003
  -953
  -893
  -825
  -751
  -674
  -597
  -521
  -449
  -377
  -286
  -211
  -152
  -107
  -72
  -48
  -30
  -18
  -11
Current shareholders' claim on cash, %
  100
  87.9
  78.3
  70.5
  64.2
  59.1
  54.9
  51.5
  48.6
  46.3
  44.4
  42.8
  41.5
  40.5
  39.6
  39.0
  38.4
  38.0
  37.8
  37.6
  37.5
  37.5
  37.5
  37.5
  37.5
  37.5
  37.5
  37.5
  37.5
  37.5
  37.5

Ternium S.A. is a producer of steel products. The Company produces finished and semi-finished steel products and iron ore, which are sold either directly to steel manufacturers, steel processors or end users. The Company operates through two segments: Steel and Mining. The Steel segment includes the sales of steel products and the Mining segment includes the sales of iron ore products, which are primarily inter-company. The Steel segment comprises three operating segments: Mexico, the Southern Region and Other Markets. In the steel segment, steel products include slabs, billets and round bars (steel in its basic, semi-finished state), hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plate, hot dipped galvanized and electrogalvanized sheets and pre-painted sheets, steel pipes and tubular products, beams, roll-formed products, and other products. In the mining segment, iron ore is sold as concentrates (fines) and pellets.

FINANCIAL RATIOS  of  TERNIUM ADR (TX)

Valuation Ratios
P/E Ratio 110.7
Price to Sales 9.1
Price to Book 15
Price to Tangible Book
Price to Cash Flow 60
Price to Free Cash Flow 99.2
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 33.6% 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 199.43 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 $6.7 billion.

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COMPANY NEWS

▶ Should You Buy Ternium SA (TX) Now?   [Dec-06-17 01:01PM  Simply Wall St.]
▶ Top Rated Dividend Stocks   [Nov-27-17 08:02AM  Simply Wall St.]
▶ Tenaris Announces 2017 Third Quarter Results   [Nov-01-17 04:45PM  Marketwired]
▶ Ternium Announces CEO Succession   [Oct-31-17 04:30PM  Business Wire]
▶ All You Need To Know About Ternium SAs (TX) Financial Health   [Oct-19-17 02:37PM  Simply Wall St.]
▶ Is There Now An Opportunity In Ternium SA (TX)?   [Sep-08-17 04:02PM  Simply Wall St.]
▶ ETFs with exposure to Ternium SA : August 30, 2017   [Aug-29-17 08:53PM  Capital Cube]
▶ 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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▶ Top Ranked Income Stocks to Buy for May 15th   [May-15-17 10:33AM  Zacks]
▶ 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]
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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