Intrinsic value of United Continental Holdings - UAL

Previous Close

$58.80

  Intrinsic Value

$405.36

stock screener

  Rating & Target

str. buy

+589%

  Value-price divergence*

+255%

Previous close

$58.80

 
Intrinsic value

$405.36

 
Up/down potential

+589%

 
Rating

str. buy

 
Value-price divergence*

+255%

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

We calculate the intrinsic value of UAL 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 18.4

 

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, %
  -3.45
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  36,556
  38,896
  41,330
  43,866
  46,507
  49,259
  52,129
  55,124
  58,249
  61,512
  64,922
  68,485
  72,210
  76,106
  80,182
  84,448
  88,914
  93,590
  98,488
  103,619
  108,996
  114,632
  120,539
  126,732
  133,226
  140,036
  147,178
  154,670
  162,530
  170,775
  179,427
Variable operating expenses, $m
 
  14,246
  15,109
  16,008
  16,945
  17,921
  18,939
  20,001
  21,109
  22,266
  23,475
  24,287
  25,608
  26,989
  28,435
  29,947
  31,531
  33,190
  34,927
  36,746
  38,653
  40,651
  42,746
  44,943
  47,245
  49,661
  52,193
  54,850
  57,638
  60,562
  63,630
Fixed operating expenses, $m
 
  19,755
  20,249
  20,755
  21,274
  21,806
  22,351
  22,910
  23,482
  24,069
  24,671
  25,288
  25,920
  26,568
  27,232
  27,913
  28,611
  29,326
  30,059
  30,811
  31,581
  32,371
  33,180
  34,009
  34,860
  35,731
  36,624
  37,540
  38,478
  39,440
  40,426
Total operating expenses, $m
  32,218
  34,001
  35,358
  36,763
  38,219
  39,727
  41,290
  42,911
  44,591
  46,335
  48,146
  49,575
  51,528
  53,557
  55,667
  57,860
  60,142
  62,516
  64,986
  67,557
  70,234
  73,022
  75,926
  78,952
  82,105
  85,392
  88,817
  92,390
  96,116
  100,002
  104,056
Operating income, $m
  4,338
  4,895
  5,973
  7,102
  8,288
  9,533
  10,840
  12,213
  13,658
  15,177
  16,775
  18,910
  20,682
  22,549
  24,515
  26,587
  28,772
  31,074
  33,502
  36,062
  38,762
  41,610
  44,613
  47,780
  51,121
  54,644
  58,361
  62,280
  66,414
  70,773
  75,371
EBITDA, $m
  6,315
  7,143
  8,332
  9,579
  10,887
  12,258
  13,698
  15,210
  16,798
  18,468
  20,224
  22,071
  24,015
  26,061
  28,216
  30,485
  32,875
  35,394
  38,048
  40,845
  43,793
  46,900
  50,176
  53,629
  57,270
  61,107
  65,153
  69,419
  73,915
  78,655
  83,652
Interest expense (income), $m
  584
  537
  635
  737
  843
  953
  1,068
  1,187
  1,313
  1,443
  1,579
  1,722
  1,870
  2,026
  2,188
  2,359
  2,537
  2,723
  2,918
  3,123
  3,337
  3,562
  3,797
  4,043
  4,302
  4,573
  4,857
  5,156
  5,468
  5,797
  6,141
Earnings before tax, $m
  3,819
  4,358
  5,338
  6,366
  7,446
  8,580
  9,772
  11,026
  12,345
  13,734
  15,196
  17,189
  18,812
  20,523
  22,327
  24,229
  26,235
  28,351
  30,584
  32,939
  35,425
  38,048
  40,816
  43,737
  46,819
  50,071
  53,503
  57,125
  60,946
  64,977
  69,230
Tax expense, $m
  1,376
  1,177
  1,441
  1,719
  2,010
  2,317
  2,638
  2,977
  3,333
  3,708
  4,103
  4,641
  5,079
  5,541
  6,028
  6,542
  7,083
  7,655
  8,258
  8,894
  9,565
  10,273
  11,020
  11,809
  12,641
  13,519
  14,446
  15,424
  16,455
  17,544
  18,692
Net income, $m
  2,263
  3,181
  3,896
  4,647
  5,435
  6,263
  7,134
  8,049
  9,012
  10,026
  11,093
  12,548
  13,733
  14,982
  16,298
  17,687
  19,151
  20,696
  22,326
  24,046
  25,860
  27,775
  29,796
  31,928
  34,178
  36,552
  39,057
  41,701
  44,490
  47,433
  50,538

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,428
  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
  40,140
  37,984
  40,362
  42,838
  45,417
  48,105
  50,908
  53,832
  56,884
  60,071
  63,400
  66,880
  70,517
  74,322
  78,303
  82,469
  86,830
  91,396
  96,180
  101,191
  106,442
  111,945
  117,714
  123,762
  130,103
  136,754
  143,729
  151,045
  158,721
  166,773
  175,221
Adjusted assets (=assets-cash), $m
  35,712
  37,984
  40,362
  42,838
  45,417
  48,105
  50,908
  53,832
  56,884
  60,071
  63,400
  66,880
  70,517
  74,322
  78,303
  82,469
  86,830
  91,396
  96,180
  101,191
  106,442
  111,945
  117,714
  123,762
  130,103
  136,754
  143,729
  151,045
  158,721
  166,773
  175,221
Revenue / Adjusted assets
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
  1.024
Average production assets, $m
  26,333
  28,005
  29,758
  31,583
  33,485
  35,467
  37,533
  39,689
  41,939
  44,289
  46,744
  49,309
  51,991
  54,796
  57,731
  60,802
  64,018
  67,385
  70,911
  74,606
  78,477
  82,535
  86,788
  91,247
  95,923
  100,826
  105,968
  111,363
  117,021
  122,958
  129,187
Working capital, $m
  -4,977
  -8,985
  -9,547
  -10,133
  -10,743
  -11,379
  -12,042
  -12,734
  -13,456
  -14,209
  -14,997
  -15,820
  -16,680
  -17,580
  -18,522
  -19,507
  -20,539
  -21,619
  -22,751
  -23,936
  -25,178
  -26,480
  -27,844
  -29,275
  -30,775
  -32,348
  -33,998
  -35,729
  -37,544
  -39,449
  -41,448
Total debt, $m
  11,705
  12,700
  14,733
  16,850
  19,055
  21,353
  23,750
  26,250
  28,860
  31,584
  34,431
  37,406
  40,516
  43,769
  47,173
  50,735
  54,463
  58,368
  62,458
  66,742
  71,232
  75,937
  80,869
  86,040
  91,462
  97,148
  103,112
  109,368
  115,930
  122,815
  130,038
Total liabilities, $m
  31,481
  32,476
  34,509
  36,626
  38,831
  41,129
  43,526
  46,026
  48,636
  51,360
  54,207
  57,182
  60,292
  63,545
  66,949
  70,511
  74,239
  78,144
  82,234
  86,518
  91,008
  95,713
  100,645
  105,816
  111,238
  116,924
  122,888
  129,144
  135,706
  142,591
  149,814
Total equity, $m
  8,659
  5,508
  5,852
  6,211
  6,585
  6,975
  7,382
  7,806
  8,248
  8,710
  9,193
  9,698
  10,225
  10,777
  11,354
  11,958
  12,590
  13,252
  13,946
  14,673
  15,434
  16,232
  17,068
  17,945
  18,865
  19,829
  20,841
  21,902
  23,014
  24,182
  25,407
Total liabilities and equity, $m
  40,140
  37,984
  40,361
  42,837
  45,416
  48,104
  50,908
  53,832
  56,884
  60,070
  63,400
  66,880
  70,517
  74,322
  78,303
  82,469
  86,829
  91,396
  96,180
  101,191
  106,442
  111,945
  117,713
  123,761
  130,103
  136,753
  143,729
  151,046
  158,720
  166,773
  175,221
Debt-to-equity ratio
  1.352
  2.310
  2.520
  2.710
  2.890
  3.060
  3.220
  3.360
  3.500
  3.630
  3.750
  3.860
  3.960
  4.060
  4.150
  4.240
  4.330
  4.400
  4.480
  4.550
  4.620
  4.680
  4.740
  4.790
  4.850
  4.900
  4.950
  4.990
  5.040
  5.080
  5.120
Adjusted equity ratio
  0.118
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145
  0.145

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,263
  3,181
  3,896
  4,647
  5,435
  6,263
  7,134
  8,049
  9,012
  10,026
  11,093
  12,548
  13,733
  14,982
  16,298
  17,687
  19,151
  20,696
  22,326
  24,046
  25,860
  27,775
  29,796
  31,928
  34,178
  36,552
  39,057
  41,701
  44,490
  47,433
  50,538
Depreciation, amort., depletion, $m
  1,977
  2,247
  2,360
  2,477
  2,599
  2,726
  2,858
  2,996
  3,141
  3,291
  3,449
  3,161
  3,333
  3,513
  3,701
  3,898
  4,104
  4,320
  4,546
  4,782
  5,031
  5,291
  5,563
  5,849
  6,149
  6,463
  6,793
  7,139
  7,501
  7,882
  8,281
Funds from operations, $m
  4,696
  5,429
  6,256
  7,124
  8,034
  8,989
  9,992
  11,045
  12,153
  13,317
  14,542
  15,709
  17,065
  18,494
  19,999
  21,584
  23,255
  25,016
  26,872
  28,828
  30,891
  33,066
  35,359
  37,777
  40,327
  43,015
  45,850
  48,840
  51,992
  55,315
  58,819
Change in working capital, $m
  -846
  -540
  -562
  -586
  -610
  -636
  -663
  -692
  -722
  -754
  -788
  -823
  -861
  -900
  -942
  -985
  -1,032
  -1,080
  -1,131
  -1,185
  -1,242
  -1,302
  -1,365
  -1,431
  -1,500
  -1,573
  -1,650
  -1,731
  -1,816
  -1,905
  -1,998
Cash from operations, $m
  5,542
  5,969
  6,819
  7,710
  8,644
  9,625
  10,655
  11,737
  12,875
  14,071
  15,329
  16,532
  17,926
  19,394
  20,941
  22,570
  24,287
  26,096
  28,003
  30,014
  32,133
  34,367
  36,723
  39,207
  41,827
  44,588
  47,500
  50,570
  53,807
  57,220
  60,818
Maintenance CAPEX, $m
  0
  -1,688
  -1,795
  -1,908
  -2,025
  -2,146
  -2,273
  -2,406
  -2,544
  -2,688
  -2,839
  -2,996
  -3,161
  -3,333
  -3,513
  -3,701
  -3,898
  -4,104
  -4,320
  -4,546
  -4,782
  -5,031
  -5,291
  -5,563
  -5,849
  -6,149
  -6,463
  -6,793
  -7,139
  -7,501
  -7,882
New CAPEX, $m
  -3,223
  -1,672
  -1,753
  -1,825
  -1,902
  -1,982
  -2,067
  -2,156
  -2,250
  -2,350
  -2,455
  -2,565
  -2,682
  -2,805
  -2,935
  -3,071
  -3,215
  -3,367
  -3,527
  -3,695
  -3,871
  -4,057
  -4,253
  -4,459
  -4,676
  -4,903
  -5,143
  -5,394
  -5,659
  -5,937
  -6,229
Cash from investing activities, $m
  -3,238
  -3,360
  -3,548
  -3,733
  -3,927
  -4,128
  -4,340
  -4,562
  -4,794
  -5,038
  -5,294
  -5,561
  -5,843
  -6,138
  -6,448
  -6,772
  -7,113
  -7,471
  -7,847
  -8,241
  -8,653
  -9,088
  -9,544
  -10,022
  -10,525
  -11,052
  -11,606
  -12,187
  -12,798
  -13,438
  -14,111
Free cash flow, $m
  2,304
  2,609
  3,270
  3,977
  4,718
  5,497
  6,315
  7,175
  8,080
  9,033
  10,036
  10,970
  12,083
  13,256
  14,493
  15,798
  17,174
  18,625
  20,157
  21,773
  23,479
  25,279
  27,180
  29,185
  31,302
  33,536
  35,894
  38,383
  41,010
  43,782
  46,707
Issuance/(repayment) of debt, $m
  -543
  1,960
  2,033
  2,117
  2,205
  2,298
  2,396
  2,500
  2,610
  2,725
  2,847
  2,975
  3,110
  3,253
  3,403
  3,562
  3,729
  3,905
  4,090
  4,284
  4,490
  4,705
  4,932
  5,171
  5,422
  5,686
  5,964
  6,256
  6,562
  6,885
  7,224
Issuance/(repurchase) of shares, $m
  -2,608
  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  
  -3,213
  1,960
  2,033
  2,117
  2,205
  2,298
  2,396
  2,500
  2,610
  2,725
  2,847
  2,975
  3,110
  3,253
  3,403
  3,562
  3,729
  3,905
  4,090
  4,284
  4,490
  4,705
  4,932
  5,171
  5,422
  5,686
  5,964
  6,256
  6,562
  6,885
  7,224
Total cash flow (excl. dividends), $m
  -909
  4,570
  5,303
  6,093
  6,923
  7,795
  8,711
  9,675
  10,690
  11,758
  12,882
  13,945
  15,193
  16,509
  17,897
  19,360
  20,903
  22,530
  24,247
  26,058
  27,969
  29,985
  32,112
  34,356
  36,724
  39,222
  41,858
  44,639
  47,572
  50,666
  53,930
Retained Cash Flow (-), $m
  307
  -312
  -345
  -359
  -374
  -390
  -406
  -424
  -443
  -462
  -483
  -505
  -527
  -552
  -577
  -604
  -632
  -662
  -694
  -727
  -761
  -798
  -836
  -877
  -920
  -964
  -1,011
  -1,061
  -1,113
  -1,168
  -1,225
Prev. year cash balance distribution, $m
 
  3,463
  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
 
  7,721
  4,959
  5,734
  6,549
  7,405
  8,305
  9,251
  10,247
  11,296
  12,400
  13,440
  14,666
  15,958
  17,319
  18,756
  20,270
  21,868
  23,553
  25,331
  27,207
  29,187
  31,275
  33,479
  35,804
  38,258
  40,847
  43,578
  46,459
  49,499
  52,705
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
 
  7,403
  4,539
  4,991
  5,393
  5,740
  6,027
  6,250
  6,405
  6,489
  6,501
  6,383
  6,258
  6,067
  5,814
  5,506
  5,151
  4,758
  4,338
  3,900
  3,457
  3,019
  2,595
  2,194
  1,824
  1,488
  1,192
  935
  719
  540
  397
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

United Continental Holdings, Inc. (UAL) is a holding company and its principal subsidiary is United Air Lines, Inc. (United). The Company transports people and cargo through its mainline operations. It has global air rights in North America, Asia-Pacific, Europe, Middle East, Africa and Latin America. The Company, through United and its regional carriers, operates flights from its hubs at Newark Liberty International Airport (Newark Liberty), Chicago O'Hare International Airport (Chicago O'Hare), Denver International Airport (Denver), George Bush Intercontinental Airport (Houston Bush), Los Angeles International Airport (LAX), A.B. Won Pat International Airport (Guam), San Francisco International Airport (SFO) and Washington Dulles International Airport (Washington Dulles). It has contractual relationships with regional carriers to provide regional jet and turboprop service branded as United Express. These regional operations are an extension of the Company's mainline network.

FINANCIAL RATIOS  of  United Continental Holdings (UAL)

Valuation Ratios
P/E Ratio 8.2
Price to Sales 0.5
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 3.3
Price to Free Cash Flow 8
Growth Rates
Sales Growth Rate -3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.3%
Cap. Spend. - 3 Yr. Gr. Rate 8.3%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 124%
Total Debt to Equity 135.2%
Interest Coverage 8
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 11%
Ret/ On T. Cap. - 3 Yr. Avg. 20.2%
Return On Equity 25.7%
Return On Equity - 3 Yr. Avg. 65.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 33.8%
Gross Margin - 3 Yr. Avg. 30.4%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 14.8%
Operating Margin 11.9%
Oper. Margin - 3 Yr. Avg. 10.5%
Pre-Tax Margin 10.4%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 9.5%
Effective Tax Rate 36%
Eff/ Tax Rate - 3 Yr. Avg. 12%
Payout Ratio 0%

UAL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UAL stock intrinsic value calculation we used $36556 million for the last fiscal year's total revenue generated by United Continental Holdings. The default revenue input number comes from 2016 income statement of United Continental Holdings. 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 UAL stock valuation model: a) initial revenue growth rate of 6.4% 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 UAL is calculated based on our internal credit rating of United Continental Holdings, 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 United Continental Holdings.
    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 UAL stock the variable cost ratio is equal to 36.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $19273 million in the base year in the intrinsic value calculation for UAL 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% for United Continental Holdings.

Corporate tax rate of 27% is the nominal tax rate for United Continental Holdings. 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 UAL 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 UAL are equal to 72%.

Life of production assets of 15.6 years is the average useful life of capital assets used in United Continental Holdings 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 UAL is equal to -23.1%. 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 - $8659 million for United Continental Holdings - 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 313.605 million for United Continental Holdings 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 United Continental Holdings at the current share price and the inputted number of shares is $18.4 billion.

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LUV Southwest Airl 54.93 90.39  str.buy
SKYW Skywest 42.35 17.67  sell
JBLU JetBlue Airway 18.62 43.85  str.buy
AVH Avianca Holdin 7.88 18.79  str.buy

COMPANY NEWS

▶ No, airlines are not price gouging hurricane victims   [Sep-25-17 06:10PM  MarketWatch]
▶ United Airlines CEO gives Glassdoor CEO lowdown on employee morale   [03:30PM  American City Business Journals]
▶ Study ranks O'Hare as tops in airline connections   [12:50PM  American City Business Journals]
▶ Sources: The real reason United Airlines suddenly pulled back on Basic Economy fares   [Sep-21-17 04:50PM  American City Business Journals]
▶ The Better Buy in Airlines   [10:27AM  Motley Fool]
▶ United, American Both Wage Fare War, But Analyst Sours On One Airline   [Sep-20-17 04:04PM  Investor's Business Daily]
▶ United Airlines goes all dreamy in newest in-flight safety video   [03:55PM  American City Business Journals]
▶ After United, Delta Air Lines also says goodbye to its Boeing 747s (Photos)   [Sep-19-17 04:20PM  American City Business Journals]
▶ United Airlines plans final flight for its Boeing 747 fleet (Photos)   [Sep-18-17 08:10PM  American City Business Journals]
▶ Singapore Airlines takes flight with new kind of safety video   [03:45PM  American City Business Journals]
▶ United Airlines reveals how it will bid goodbye to the Boeing 747   [03:20PM  American City Business Journals]
▶ United Continental: Now That's a Cut!   [03:16PM  Barrons.com]
▶ Southwest Airlines judged 'safest' for your portfolio, American Airlines downgraded   [Sep-15-17 04:48PM  American City Business Journals]
▶ American Airlines rolls out flashy Flagship Lounge at O'Hare Airport (PHOTOS)   [Sep-13-17 03:15PM  American City Business Journals]
▶ United Continental Reduces Its 3Q17 Guidance   [09:08AM  Market Realist]
▶ Florida airports open but cancellations linger after Irma   [Sep-12-17 05:43PM  Associated Press]
▶ United Airlines surprises with new route to Iceland   [04:37PM  American City Business Journals]
▶ American Airlines expands basic economy fares as United dials back   [09:51AM  American City Business Journals]
▶ Flight cancellations mount as Irma pushes north from Florida   [Sep-11-17 06:53PM  Associated Press]
▶ United Airlines and Chase team up for branded cash-back credit card   [03:45PM  American City Business Journals]
▶ [$$] Airlines Mark Down Tickets in Irma-Affected Areas   [Sep-09-17 04:52PM  The Wall Street Journal]
▶ United Airlines going (really) wide with new economy seating   [04:45PM  American City Business Journals]
▶ [$$] Airline Stocks Tumble as Hurricanes Add to Growth Concerns   [Sep-07-17 05:50PM  The Wall Street Journal]
Financial statements of UAL
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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