Intrinsic value of United Continental Holdings - UAL

Previous Close

$58.76

  Intrinsic Value

$200.46

stock screener

  Rating & Target

str. buy

+241%

Previous close

$58.76

 
Intrinsic value

$200.46

 
Up/down potential

+241%

 
Rating

str. buy

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 17.4

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  36,556
  37,287
  38,145
  39,125
  40,226
  41,445
  42,783
  44,240
  45,817
  47,517
  49,340
  51,291
  53,373
  55,589
  57,945
  60,444
  63,093
  65,897
  68,862
  71,995
  75,303
  78,794
  82,475
  86,355
  90,443
  94,749
  99,282
  104,054
  109,075
  114,358
  119,914
Variable operating expenses, $m
 
  13,675
  13,979
  14,327
  14,717
  15,150
  15,624
  16,141
  16,700
  17,303
  17,950
  18,189
  18,927
  19,713
  20,549
  21,435
  22,375
  23,369
  24,420
  25,532
  26,705
  27,942
  29,248
  30,624
  32,074
  33,601
  35,208
  36,900
  38,681
  40,554
  42,525
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
  33,430
  34,228
  35,082
  35,991
  36,956
  37,975
  39,051
  40,182
  41,372
  42,621
  43,477
  44,847
  46,281
  47,781
  49,348
  50,986
  52,695
  54,479
  56,343
  58,286
  60,313
  62,428
  64,633
  66,934
  69,332
  71,832
  74,440
  77,159
  79,994
  82,951
Operating income, $m
  4,338
  3,857
  3,917
  4,043
  4,234
  4,490
  4,808
  5,190
  5,635
  6,144
  6,719
  7,814
  8,525
  9,308
  10,164
  11,096
  12,108
  13,202
  14,383
  15,653
  17,018
  18,481
  20,047
  21,722
  23,510
  25,417
  27,450
  29,614
  31,916
  34,363
  36,963
EBITDA, $m
  6,315
  6,030
  6,129
  6,301
  6,543
  6,855
  7,235
  7,684
  8,202
  8,790
  9,449
  10,181
  10,989
  11,873
  12,838
  13,886
  15,020
  16,243
  17,561
  18,976
  20,493
  22,117
  23,854
  25,707
  27,684
  29,790
  32,032
  34,416
  36,950
  39,641
  42,497
Interest expense (income), $m
  584
  537
  568
  604
  645
  691
  741
  797
  858
  924
  995
  1,071
  1,153
  1,239
  1,332
  1,430
  1,535
  1,645
  1,762
  1,886
  2,017
  2,155
  2,301
  2,454
  2,616
  2,787
  2,967
  3,156
  3,355
  3,565
  3,785
Earnings before tax, $m
  3,819
  3,320
  3,349
  3,439
  3,590
  3,799
  4,067
  4,392
  4,777
  5,220
  5,725
  6,743
  7,373
  8,068
  8,832
  9,666
  10,573
  11,557
  12,620
  13,767
  15,001
  16,326
  17,747
  19,267
  20,894
  22,630
  24,483
  26,458
  28,560
  30,798
  33,177
Tax expense, $m
  1,376
  896
  904
  929
  969
  1,026
  1,098
  1,186
  1,290
  1,409
  1,546
  1,821
  1,991
  2,178
  2,385
  2,610
  2,855
  3,120
  3,407
  3,717
  4,050
  4,408
  4,792
  5,202
  5,641
  6,110
  6,610
  7,144
  7,711
  8,315
  8,958
Net income, $m
  2,263
  2,424
  2,445
  2,511
  2,621
  2,773
  2,969
  3,206
  3,487
  3,811
  4,179
  4,922
  5,382
  5,890
  6,447
  7,056
  7,718
  8,437
  9,213
  10,050
  10,951
  11,918
  12,955
  14,065
  15,252
  16,520
  17,873
  19,314
  20,849
  22,483
  24,219

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
  36,413
  37,251
  38,208
  39,283
  40,474
  41,780
  43,203
  44,744
  46,403
  48,184
  50,089
  52,122
  54,286
  56,587
  59,028
  61,614
  64,353
  67,248
  70,308
  73,538
  76,947
  80,542
  84,331
  88,323
  92,528
  96,955
  101,615
  106,519
  111,677
  117,103
Adjusted assets (=assets-cash), $m
  35,712
  36,413
  37,251
  38,208
  39,283
  40,474
  41,780
  43,203
  44,744
  46,403
  48,184
  50,089
  52,122
  54,286
  56,587
  59,028
  61,614
  64,353
  67,248
  70,308
  73,538
  76,947
  80,542
  84,331
  88,323
  92,528
  96,955
  101,615
  106,519
  111,677
  117,103
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
  26,847
  27,464
  28,170
  28,962
  29,841
  30,804
  31,853
  32,989
  34,212
  35,525
  36,930
  38,428
  40,024
  41,720
  43,520
  45,427
  47,446
  49,581
  51,837
  54,218
  56,732
  59,382
  62,176
  65,119
  68,219
  71,483
  74,919
  78,534
  82,337
  86,338
Working capital, $m
  -4,977
  -8,613
  -8,811
  -9,038
  -9,292
  -9,574
  -9,883
  -10,220
  -10,584
  -10,976
  -11,398
  -11,848
  -12,329
  -12,841
  -13,385
  -13,963
  -14,575
  -15,222
  -15,907
  -16,631
  -17,395
  -18,201
  -19,052
  -19,948
  -20,892
  -21,887
  -22,934
  -24,036
  -25,196
  -26,417
  -27,700
Total debt, $m
  11,705
  11,357
  12,073
  12,892
  13,811
  14,829
  15,946
  17,163
  18,480
  19,899
  21,421
  23,050
  24,788
  26,639
  28,606
  30,693
  32,904
  35,246
  37,721
  40,337
  43,099
  46,014
  49,087
  52,327
  55,741
  59,336
  63,121
  67,105
  71,297
  75,708
  80,347
Total liabilities, $m
  31,481
  31,133
  31,849
  32,668
  33,587
  34,605
  35,722
  36,939
  38,256
  39,675
  41,197
  42,826
  44,564
  46,415
  48,382
  50,469
  52,680
  55,022
  57,497
  60,113
  62,875
  65,790
  68,863
  72,103
  75,517
  79,112
  82,897
  86,881
  91,073
  95,484
  100,123
Total equity, $m
  8,659
  5,280
  5,401
  5,540
  5,696
  5,869
  6,058
  6,264
  6,488
  6,728
  6,987
  7,263
  7,558
  7,872
  8,205
  8,559
  8,934
  9,331
  9,751
  10,195
  10,663
  11,157
  11,679
  12,228
  12,807
  13,417
  14,059
  14,734
  15,445
  16,193
  16,980
Total liabilities and equity, $m
  40,140
  36,413
  37,250
  38,208
  39,283
  40,474
  41,780
  43,203
  44,744
  46,403
  48,184
  50,089
  52,122
  54,287
  56,587
  59,028
  61,614
  64,353
  67,248
  70,308
  73,538
  76,947
  80,542
  84,331
  88,324
  92,529
  96,956
  101,615
  106,518
  111,677
  117,103
Debt-to-equity ratio
  1.352
  2.150
  2.240
  2.330
  2.420
  2.530
  2.630
  2.740
  2.850
  2.960
  3.070
  3.170
  3.280
  3.380
  3.490
  3.590
  3.680
  3.780
  3.870
  3.960
  4.040
  4.120
  4.200
  4.280
  4.350
  4.420
  4.490
  4.550
  4.620
  4.680
  4.730
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
  2,424
  2,445
  2,511
  2,621
  2,773
  2,969
  3,206
  3,487
  3,811
  4,179
  4,922
  5,382
  5,890
  6,447
  7,056
  7,718
  8,437
  9,213
  10,050
  10,951
  11,918
  12,955
  14,065
  15,252
  16,520
  17,873
  19,314
  20,849
  22,483
  24,219
Depreciation, amort., depletion, $m
  1,977
  2,173
  2,213
  2,258
  2,309
  2,365
  2,427
  2,494
  2,567
  2,645
  2,730
  2,367
  2,463
  2,566
  2,674
  2,790
  2,912
  3,041
  3,178
  3,323
  3,476
  3,637
  3,807
  3,986
  4,174
  4,373
  4,582
  4,802
  5,034
  5,278
  5,534
Funds from operations, $m
  4,696
  4,597
  4,657
  4,769
  4,929
  5,138
  5,396
  5,701
  6,054
  6,456
  6,908
  7,290
  7,846
  8,456
  9,122
  9,846
  10,630
  11,478
  12,391
  13,373
  14,426
  15,555
  16,762
  18,051
  19,427
  20,893
  22,455
  24,117
  25,883
  27,761
  29,754
Change in working capital, $m
  -846
  -169
  -198
  -226
  -254
  -282
  -309
  -337
  -364
  -393
  -421
  -451
  -481
  -512
  -544
  -577
  -612
  -648
  -685
  -724
  -764
  -806
  -850
  -896
  -944
  -995
  -1,047
  -1,102
  -1,160
  -1,220
  -1,284
Cash from operations, $m
  5,542
  4,766
  4,855
  4,995
  5,184
  5,420
  5,705
  6,037
  6,418
  6,849
  7,330
  7,740
  8,326
  8,968
  9,666
  10,423
  11,242
  12,126
  13,076
  14,097
  15,190
  16,361
  17,612
  18,947
  20,371
  21,888
  23,502
  25,219
  27,043
  28,981
  31,037
Maintenance CAPEX, $m
  0
  -1,688
  -1,721
  -1,761
  -1,806
  -1,857
  -1,913
  -1,975
  -2,042
  -2,115
  -2,193
  -2,277
  -2,367
  -2,463
  -2,566
  -2,674
  -2,790
  -2,912
  -3,041
  -3,178
  -3,323
  -3,476
  -3,637
  -3,807
  -3,986
  -4,174
  -4,373
  -4,582
  -4,802
  -5,034
  -5,278
New CAPEX, $m
  -3,223
  -514
  -617
  -706
  -792
  -878
  -963
  -1,049
  -1,136
  -1,223
  -1,313
  -1,405
  -1,499
  -1,596
  -1,696
  -1,800
  -1,907
  -2,019
  -2,135
  -2,256
  -2,382
  -2,513
  -2,650
  -2,794
  -2,943
  -3,100
  -3,264
  -3,436
  -3,615
  -3,803
  -4,001
Cash from investing activities, $m
  -3,238
  -2,202
  -2,338
  -2,467
  -2,598
  -2,735
  -2,876
  -3,024
  -3,178
  -3,338
  -3,506
  -3,682
  -3,866
  -4,059
  -4,262
  -4,474
  -4,697
  -4,931
  -5,176
  -5,434
  -5,705
  -5,989
  -6,287
  -6,601
  -6,929
  -7,274
  -7,637
  -8,018
  -8,417
  -8,837
  -9,279
Free cash flow, $m
  2,304
  2,564
  2,517
  2,529
  2,585
  2,686
  2,828
  3,013
  3,241
  3,511
  3,824
  4,058
  4,460
  4,908
  5,404
  5,949
  6,545
  7,195
  7,900
  8,662
  9,486
  10,372
  11,325
  12,347
  13,442
  14,613
  15,865
  17,201
  18,626
  20,143
  21,759
Issuance/(repayment) of debt, $m
  -543
  617
  716
  819
  919
  1,018
  1,117
  1,217
  1,317
  1,419
  1,523
  1,629
  1,738
  1,851
  1,967
  2,087
  2,212
  2,341
  2,476
  2,616
  2,762
  2,914
  3,074
  3,240
  3,413
  3,595
  3,785
  3,984
  4,192
  4,411
  4,639
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
  617
  716
  819
  919
  1,018
  1,117
  1,217
  1,317
  1,419
  1,523
  1,629
  1,738
  1,851
  1,967
  2,087
  2,212
  2,341
  2,476
  2,616
  2,762
  2,914
  3,074
  3,240
  3,413
  3,595
  3,785
  3,984
  4,192
  4,411
  4,639
Total cash flow (excl. dividends), $m
  -909
  3,181
  3,233
  3,347
  3,504
  3,704
  3,946
  4,230
  4,558
  4,929
  5,346
  5,687
  6,198
  6,759
  7,371
  8,036
  8,757
  9,536
  10,375
  11,278
  12,248
  13,287
  14,398
  15,587
  16,855
  18,208
  19,650
  21,185
  22,818
  24,554
  26,398
Retained Cash Flow (-), $m
  307
  -84
  -121
  -139
  -156
  -173
  -189
  -206
  -223
  -241
  -258
  -276
  -295
  -314
  -334
  -354
  -375
  -397
  -420
  -444
  -468
  -494
  -521
  -549
  -579
  -610
  -642
  -676
  -711
  -748
  -787
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
 
  6,560
  3,112
  3,209
  3,349
  3,531
  3,756
  4,024
  4,334
  4,689
  5,088
  5,411
  5,904
  6,445
  7,037
  7,682
  8,382
  9,139
  9,956
  10,835
  11,779
  12,792
  13,877
  15,037
  16,276
  17,599
  19,008
  20,509
  22,107
  23,806
  25,611
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
 
  6,290
  2,849
  2,792
  2,757
  2,737
  2,726
  2,718
  2,709
  2,693
  2,667
  2,570
  2,519
  2,451
  2,363
  2,255
  2,130
  1,988
  1,833
  1,668
  1,497
  1,323
  1,151
  986
  829
  685
  555
  440
  342
  260
  193
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 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 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 296.327 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 $17.4 billion.

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COMPANY NEWS

▶ United Airlines to begin flights from Denver to Florida's largest city   [Nov-21-17 05:35PM  American City Business Journals]
▶ United Airlines expanding route network to 10 new markets next spring   [02:12PM  American City Business Journals]
▶ Wilmington airport adds flights to Chicago, Washington-Dulles   [Nov-20-17 06:42PM  American City Business Journals]
▶ WOW air offers low-ball fares from Los Angeles to Europe   [02:30PM  American City Business Journals]
▶ United Airlines gets a grim gift from WOW air   [02:15PM  American City Business Journals]
▶ Complaints against Frontier Airlines trend lower than last year   [07:55PM  American City Business Journals]
▶ United in Equality   [10:31AM  PR Newswire]
▶ Why Qatar Airways CEO and Jill Zuckman should NOT be at same parties   [04:20PM  American City Business Journals]
▶ United Airlines resumes service to New Delhi after flights grounded by pollution   [Nov-13-17 05:30PM  American City Business Journals]
▶ Spirit Airlines giving big four domestic carriers reason to worry   [04:45PM  American City Business Journals]
▶ United Airlines debuting limited-edition travel bags   [Nov-10-17 04:30PM  American City Business Journals]
▶ United Airlines debuting limited-edition travel bags   [12:45PM  American City Business Journals]
▶ Basic Math Is on Spirit Airlines' Side   [Nov-09-17 04:39PM  Motley Fool]
▶ United Airlines' ops report indicates traffic falling internationally   [02:10PM  American City Business Journals]
▶ 4 Top Airline Stocks to Buy Now   [Nov-08-17 09:40PM  Motley Fool]
▶ Delta Air Lines leads for on-time arrivals in October   [04:30PM  American City Business Journals]
▶ United Airlines names a second regional president, for California   [01:40PM  American City Business Journals]
▶ United Continental Needs a Flight Plan   [12:50PM  TheStreet.com]
▶ 1 Airline That Soared in October -- and 2 That Didn't   [Nov-07-17 06:27PM  Motley Fool]
▶ United Airlines 747 flying off into the sunset today how it played out   [06:03PM  American City Business Journals]
▶ United Airlines reveals its roster of Olympic athletes for 2018 Games   [04:37PM  American City Business Journals]
▶ United Airlines names regional president in New York City to promote the airline   [Nov-06-17 11:50PM  American City Business Journals]
▶ [$$] United Considers Buying New Boeing 767 Passenger Jets   [12:32AM  The Wall Street Journal]
▶ [$$] United Considers Buying New Boeing 767 Passenger Jets   [09:00AM  The Wall Street Journal]
▶ United flight returns to Beijing after passenger altercation   [Nov-04-17 05:27PM  Associated Press]
▶ Thanksgiving Air Travel to Jump 3% in 2017   [01:32PM  TheStreet.com]
▶ Why American Airlines Group, Inc. Stock Keeps Sinking   [Oct-31-17 03:35PM  Motley Fool]
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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