Intrinsic value of United Parcel Service Cl B - UPS

Previous Close

$118.15

  Intrinsic Value

$93.72

stock screener

  Rating & Target

sell

-21%

  Value-price divergence*

+25%

Previous close

$118.15

 
Intrinsic value

$93.72

 
Up/down potential

-21%

 
Rating

sell

 
Value-price divergence*

+25%

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

We calculate the intrinsic value of UPS 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 102.4

 

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, %
  4.36
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
  5.13
Revenue, $m
  60,906
  65,596
  70,470
  75,534
  80,798
  86,269
  91,958
  97,875
  104,033
  110,444
  117,121
  124,080
  131,335
  138,903
  146,802
  155,048
  163,663
  172,665
  182,075
  191,917
  202,213
  212,987
  224,266
  236,076
  248,444
  261,402
  274,978
  289,207
  304,121
  319,757
  336,152
Variable operating expenses, $m
 
  56,974
  61,179
  65,549
  70,090
  74,811
  79,720
  84,825
  90,138
  95,670
  101,431
  107,060
  113,320
  119,850
  126,665
  133,781
  141,213
  148,981
  157,100
  165,592
  174,476
  183,772
  193,504
  203,693
  214,366
  225,546
  237,260
  249,537
  262,406
  275,897
  290,042
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
  55,439
  56,974
  61,179
  65,549
  70,090
  74,811
  79,720
  84,825
  90,138
  95,670
  101,431
  107,060
  113,320
  119,850
  126,665
  133,781
  141,213
  148,981
  157,100
  165,592
  174,476
  183,772
  193,504
  203,693
  214,366
  225,546
  237,260
  249,537
  262,406
  275,897
  290,042
Operating income, $m
  5,467
  8,622
  9,291
  9,985
  10,707
  11,458
  12,238
  13,050
  13,894
  14,774
  15,690
  17,020
  18,015
  19,053
  20,137
  21,268
  22,449
  23,684
  24,975
  26,325
  27,737
  29,215
  30,762
  32,382
  34,079
  35,856
  37,718
  39,670
  41,716
  43,861
  46,109
EBITDA, $m
  7,691
  11,033
  11,853
  12,705
  13,590
  14,510
  15,467
  16,462
  17,498
  18,576
  19,699
  20,870
  22,090
  23,363
  24,692
  26,079
  27,528
  29,042
  30,624
  32,280
  34,012
  35,824
  37,721
  39,707
  41,787
  43,967
  46,250
  48,644
  51,152
  53,782
  56,540
Interest expense (income), $m
  373
  434
  378
  469
  562
  660
  761
  867
  976
  1,090
  1,209
  1,333
  1,461
  1,596
  1,736
  1,882
  2,035
  2,194
  2,361
  2,535
  2,718
  2,908
  3,108
  3,317
  3,535
  3,764
  4,004
  4,256
  4,519
  4,795
  5,085
Earnings before tax, $m
  5,136
  8,188
  8,912
  9,517
  10,145
  10,798
  11,477
  12,183
  12,918
  13,684
  14,481
  15,687
  16,554
  17,457
  18,401
  19,386
  20,415
  21,490
  22,614
  23,790
  25,020
  26,307
  27,654
  29,065
  30,543
  32,092
  33,714
  35,414
  37,197
  39,065
  41,024
Tax expense, $m
  1,705
  2,211
  2,406
  2,569
  2,739
  2,915
  3,099
  3,289
  3,488
  3,695
  3,910
  4,236
  4,469
  4,714
  4,968
  5,234
  5,512
  5,802
  6,106
  6,423
  6,755
  7,103
  7,467
  7,848
  8,247
  8,665
  9,103
  9,562
  10,043
  10,548
  11,077
Net income, $m
  3,431
  5,977
  6,506
  6,947
  7,406
  7,882
  8,378
  8,894
  9,430
  9,989
  10,571
  11,452
  12,084
  12,744
  13,432
  14,151
  14,903
  15,688
  16,508
  17,366
  18,264
  19,204
  20,188
  21,218
  22,297
  23,427
  24,611
  25,852
  27,154
  28,518
  29,948

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,567
  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
  40,377
  38,563
  41,428
  44,406
  47,500
  50,717
  54,061
  57,540
  61,160
  64,929
  68,854
  72,945
  77,210
  81,660
  86,303
  91,151
  96,216
  101,508
  107,040
  112,826
  118,879
  125,213
  131,844
  138,786
  146,058
  153,675
  161,657
  170,022
  178,790
  187,982
  197,620
Adjusted assets (=assets-cash), $m
  35,810
  38,563
  41,428
  44,406
  47,500
  50,717
  54,061
  57,540
  61,160
  64,929
  68,854
  72,945
  77,210
  81,660
  86,303
  91,151
  96,216
  101,508
  107,040
  112,826
  118,879
  125,213
  131,844
  138,786
  146,058
  153,675
  161,657
  170,022
  178,790
  187,982
  197,620
Revenue / Adjusted assets
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
  1.701
Average production assets, $m
  20,230
  21,778
  23,396
  25,077
  26,825
  28,641
  30,530
  32,495
  34,539
  36,667
  38,884
  41,194
  43,603
  46,116
  48,738
  51,476
  54,336
  57,325
  60,449
  63,716
  67,135
  70,712
  74,456
  78,377
  82,484
  86,785
  91,293
  96,017
  100,968
  106,159
  111,602
Working capital, $m
  2,119
  1,312
  1,409
  1,511
  1,616
  1,725
  1,839
  1,958
  2,081
  2,209
  2,342
  2,482
  2,627
  2,778
  2,936
  3,101
  3,273
  3,453
  3,642
  3,838
  4,044
  4,260
  4,485
  4,722
  4,969
  5,228
  5,500
  5,784
  6,082
  6,395
  6,723
Total debt, $m
  16,075
  10,810
  13,388
  16,068
  18,853
  21,748
  24,758
  27,889
  31,147
  34,539
  38,072
  41,754
  45,592
  49,597
  53,776
  58,139
  62,697
  67,460
  72,439
  77,646
  83,094
  88,795
  94,762
  101,011
  107,555
  114,411
  121,594
  129,123
  137,014
  145,287
  153,961
Total liabilities, $m
  39,972
  34,707
  37,285
  39,965
  42,750
  45,645
  48,655
  51,786
  55,044
  58,436
  61,969
  65,651
  69,489
  73,494
  77,673
  82,036
  86,594
  91,357
  96,336
  101,543
  106,991
  112,692
  118,659
  124,908
  131,452
  138,308
  145,491
  153,020
  160,911
  169,184
  177,858
Total equity, $m
  405
  3,856
  4,143
  4,441
  4,750
  5,072
  5,406
  5,754
  6,116
  6,493
  6,885
  7,295
  7,721
  8,166
  8,630
  9,115
  9,622
  10,151
  10,704
  11,283
  11,888
  12,521
  13,184
  13,879
  14,606
  15,368
  16,166
  17,002
  17,879
  18,798
  19,762
Total liabilities and equity, $m
  40,377
  38,563
  41,428
  44,406
  47,500
  50,717
  54,061
  57,540
  61,160
  64,929
  68,854
  72,946
  77,210
  81,660
  86,303
  91,151
  96,216
  101,508
  107,040
  112,826
  118,879
  125,213
  131,843
  138,787
  146,058
  153,676
  161,657
  170,022
  178,790
  187,982
  197,620
Debt-to-equity ratio
  39.691
  2.800
  3.230
  3.620
  3.970
  4.290
  4.580
  4.850
  5.090
  5.320
  5.530
  5.720
  5.900
  6.070
  6.230
  6.380
  6.520
  6.650
  6.770
  6.880
  6.990
  7.090
  7.190
  7.280
  7.360
  7.440
  7.520
  7.590
  7.660
  7.730
  7.790
Adjusted equity ratio
  -0.025
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,431
  5,977
  6,506
  6,947
  7,406
  7,882
  8,378
  8,894
  9,430
  9,989
  10,571
  11,452
  12,084
  12,744
  13,432
  14,151
  14,903
  15,688
  16,508
  17,366
  18,264
  19,204
  20,188
  21,218
  22,297
  23,427
  24,611
  25,852
  27,154
  28,518
  29,948
Depreciation, amort., depletion, $m
  2,224
  2,411
  2,562
  2,719
  2,883
  3,052
  3,229
  3,413
  3,604
  3,803
  4,010
  3,850
  4,075
  4,310
  4,555
  4,811
  5,078
  5,357
  5,649
  5,955
  6,274
  6,609
  6,959
  7,325
  7,709
  8,111
  8,532
  8,974
  9,436
  9,921
  10,430
Funds from operations, $m
  5,739
  8,388
  9,068
  9,667
  10,288
  10,935
  11,607
  12,306
  13,034
  13,792
  14,581
  15,302
  16,159
  17,054
  17,987
  18,962
  19,981
  21,045
  22,158
  23,321
  24,539
  25,813
  27,146
  28,543
  30,005
  31,538
  33,143
  34,826
  36,590
  38,439
  40,378
Change in working capital, $m
  -734
  94
  97
  101
  105
  109
  114
  118
  123
  128
  134
  139
  145
  151
  158
  165
  172
  180
  188
  197
  206
  215
  226
  236
  247
  259
  272
  285
  298
  313
  328
Cash from operations, $m
  6,473
  8,295
  8,971
  9,565
  10,183
  10,825
  11,493
  12,188
  12,911
  13,663
  14,447
  15,163
  16,014
  16,902
  17,829
  18,797
  19,808
  20,865
  21,969
  23,124
  24,333
  25,597
  26,921
  28,307
  29,758
  31,279
  32,872
  34,541
  36,292
  38,126
  40,050
Maintenance CAPEX, $m
  0
  -1,891
  -2,035
  -2,187
  -2,344
  -2,507
  -2,677
  -2,853
  -3,037
  -3,228
  -3,427
  -3,634
  -3,850
  -4,075
  -4,310
  -4,555
  -4,811
  -5,078
  -5,357
  -5,649
  -5,955
  -6,274
  -6,609
  -6,959
  -7,325
  -7,709
  -8,111
  -8,532
  -8,974
  -9,436
  -9,921
New CAPEX, $m
  -2,965
  -1,548
  -1,618
  -1,681
  -1,747
  -1,816
  -1,889
  -1,965
  -2,044
  -2,128
  -2,217
  -2,310
  -2,409
  -2,513
  -2,622
  -2,738
  -2,860
  -2,989
  -3,124
  -3,267
  -3,418
  -3,577
  -3,744
  -3,921
  -4,106
  -4,302
  -4,507
  -4,724
  -4,952
  -5,191
  -5,443
Cash from investing activities, $m
  -2,566
  -3,439
  -3,653
  -3,868
  -4,091
  -4,323
  -4,566
  -4,818
  -5,081
  -5,356
  -5,644
  -5,944
  -6,259
  -6,588
  -6,932
  -7,293
  -7,671
  -8,067
  -8,481
  -8,916
  -9,373
  -9,851
  -10,353
  -10,880
  -11,431
  -12,011
  -12,618
  -13,256
  -13,926
  -14,627
  -15,364
Free cash flow, $m
  3,907
  4,856
  5,317
  5,697
  6,092
  6,502
  6,928
  7,370
  7,830
  8,307
  8,803
  9,218
  9,755
  10,315
  10,897
  11,504
  12,138
  12,798
  13,488
  14,208
  14,960
  15,746
  16,568
  17,427
  18,327
  19,268
  20,253
  21,285
  22,366
  23,499
  24,686
Issuance/(repayment) of debt, $m
  2,034
  -1,584
  2,579
  2,680
  2,785
  2,895
  3,010
  3,131
  3,258
  3,392
  3,533
  3,682
  3,839
  4,004
  4,179
  4,363
  4,558
  4,763
  4,979
  5,207
  5,448
  5,701
  5,968
  6,248
  6,544
  6,856
  7,183
  7,528
  7,891
  8,273
  8,674
Issuance/(repurchase) of shares, $m
  -2,433
  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  
  -497
  -1,584
  2,579
  2,680
  2,785
  2,895
  3,010
  3,131
  3,258
  3,392
  3,533
  3,682
  3,839
  4,004
  4,179
  4,363
  4,558
  4,763
  4,979
  5,207
  5,448
  5,701
  5,968
  6,248
  6,544
  6,856
  7,183
  7,528
  7,891
  8,273
  8,674
Total cash flow (excl. dividends), $m
  3,389
  3,271
  7,896
  8,377
  8,877
  9,397
  9,938
  10,501
  11,088
  11,699
  12,336
  12,900
  13,594
  14,319
  15,076
  15,868
  16,695
  17,561
  18,467
  19,415
  20,407
  21,446
  22,535
  23,676
  24,871
  26,124
  27,437
  28,814
  30,258
  31,772
  33,360
Retained Cash Flow (-), $m
  2,065
  -4,337
  -287
  -298
  -309
  -322
  -334
  -348
  -362
  -377
  -393
  -409
  -427
  -445
  -464
  -485
  -506
  -529
  -553
  -579
  -605
  -633
  -663
  -694
  -727
  -762
  -798
  -836
  -877
  -919
  -964
Prev. year cash balance distribution, $m
 
  886
  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
 
  -180
  7,609
  8,079
  8,567
  9,075
  9,603
  10,153
  10,726
  11,322
  11,944
  12,491
  13,168
  13,874
  14,612
  15,383
  16,189
  17,032
  17,914
  18,836
  19,802
  20,813
  21,872
  22,981
  24,144
  25,362
  26,639
  27,977
  29,381
  30,853
  32,396
Discount rate, %
 
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for distribution, $m
 
  -169
  6,694
  6,605
  6,465
  6,275
  6,038
  5,757
  5,437
  5,082
  4,701
  4,265
  3,857
  3,444
  3,035
  2,638
  2,259
  1,905
  1,581
  1,289
  1,032
  810
  624
  470
  346
  249
  175
  119
  79
  51
  32
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 Parcel Service, Inc. (UPS) is a package delivery company. The Company is a provider of global supply chain management solutions. The Company operates through three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain & Freight operations. As of December 31, 2016, the Company delivered packages in over 220 countries and territories. The Company offers a spectrum of the United States domestic guaranteed ground and air package transportation services. The International Package segment includes the small package operations in Europe, Asia-Pacific, Canada and Latin America, the Indian sub-continent, the Middle East and Africa. The Supply Chain & Freight segment includes its forwarding and logistics services, truckload freight brokerage, UPS Freight and its financial offerings through UPS Capital. The Company serves the global market for logistics services, which include transportation, distribution, contract logistics and ground freight.

FINANCIAL RATIOS  of  United Parcel Service Cl B (UPS)

Valuation Ratios
P/E Ratio 29.9
Price to Sales 1.7
Price to Book 253.2
Price to Tangible Book
Price to Cash Flow 15.8
Price to Free Cash Flow 29.2
Growth Rates
Sales Growth Rate 4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 24.6%
Cap. Spend. - 3 Yr. Gr. Rate 7.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 3060.2%
Total Debt to Equity 3969.1%
Interest Coverage 15
Management Effectiveness
Return On Assets 9.4%
Ret/ On Assets - 3 Yr. Avg. 10.7%
Return On Total Capital 20.6%
Ret/ On T. Cap. - 3 Yr. Avg. 24.4%
Return On Equity 238.7%
Return On Equity - 3 Yr. Avg. 173.1%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 81.5%
Gross Margin - 3 Yr. Avg. 80.8%
EBITDA Margin 12.7%
EBITDA Margin - 3 Yr. Avg. 13.8%
Operating Margin 9%
Oper. Margin - 3 Yr. Avg. 10.2%
Pre-Tax Margin 8.4%
Pre-Tax Margin - 3 Yr. Avg. 9.7%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 6.4%
Effective Tax Rate 33.2%
Eff/ Tax Rate - 3 Yr. Avg. 33.9%
Payout Ratio 77%

UPS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UPS stock intrinsic value calculation we used $60906 million for the last fiscal year's total revenue generated by United Parcel Service Cl B. The default revenue input number comes from 2016 income statement of United Parcel Service Cl B. 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 UPS stock valuation model: a) initial revenue growth rate of 7.7% 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 6.3%, whose default value for UPS is calculated based on our internal credit rating of United Parcel Service Cl B, 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 Parcel Service Cl B.
    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 UPS stock the variable cost ratio is equal to 86.9%.

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 UPS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for United Parcel Service Cl B.

Corporate tax rate of 27% is the nominal tax rate for United Parcel Service Cl B. 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 UPS 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 UPS are equal to 33.2%.

Life of production assets of 10.7 years is the average useful life of capital assets used in United Parcel Service Cl B 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 UPS is equal to 2%. 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 - $405 million for United Parcel Service Cl B - 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 866.314 million for United Parcel Service Cl B 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 Parcel Service Cl B at the current share price and the inputted number of shares is $102.4 billion.

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COMPANY NEWS

▶ UPS's safest driver ever goes 55 years without an accident   [Oct-19-17 01:55PM  American City Business Journals]
▶ Is Amazon in Too Many Businesses?   [06:30AM  24/7 Wall St.]
▶ Constellation Brands and Biogen rise; Navient plunges   [Oct-05-17 05:36PM  Associated Press]
▶ Amazon Tests Third-Party Merchant Deliveries As Partners Fall   [04:45PM  Investor's Business Daily]
▶ UPS, FedEx shares drop on Amazon fears   [10:23AM  CNBC Videos]
▶ [$$] Digital Leaders to Laggards: 'The Journey Never Ends'   [Oct-04-17 04:04PM  The Wall Street Journal]
▶ 3 Reasons to Sell FedEx Corporation Stock   [Oct-03-17 09:45AM  Motley Fool]
▶ UPS picks Louisville to expand flight simulation operation   [11:20AM  American City Business Journals]
▶ 5 Holiday Buys That Yield Up To 7.4%   [Oct-01-17 09:12AM  Forbes]
▶ United Parcel Service Prepares to Deliver   [Sep-29-17 10:41AM  TheStreet.com]
▶ UPS plans new project with 130 jobs, multi-million dollar investment   [01:50PM  American City Business Journals]
▶ 5 Crucial Takeaways From FedEx's Earnings   [07:34AM  Motley Fool]
▶ Why FedEx Missed Analysts Earnings Estimates in 1Q18   [Sep-21-17 03:42PM  Market Realist]
▶ UPS will hire about 95,000 extra workers for holiday season   [Sep-20-17 05:02PM  Associated Press]
▶ Need 95K: UPS sticking with its magic number for seasonal hiring binge   [01:25PM  American City Business Journals]
▶ FedEx: You're Forgiven   [10:06AM  Barrons.com]
▶ UPS To Hire About 95,000 For Holiday Season   [09:00AM  GlobeNewswire]
▶ The UPS Store Celebrates 5,000th Retail Location Milestone!   [Sep-19-17 11:00AM  GlobeNewswire]
▶ Check out this timelapse video of Mercedes-Benz Stadium's construction   [Sep-14-17 05:10PM  American City Business Journals]
Financial statements of UPS
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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