Intrinsic value of United Parcel Service Cl B - UPS

Previous Close

$114.76

  Intrinsic Value

$87.79

stock screener

  Rating & Target

sell

-24%

  Value-price divergence*

-51%

Previous close

$114.76

 
Intrinsic value

$87.79

 
Up/down potential

-24%

 
Rating

sell

 
Value-price divergence*

-51%

*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 98.9

 

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
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
  5.57
  5.52
  5.46
  5.42
  5.38
  5.34
  5.31
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
Revenue, $m
  60,906
  64,682
  68,615
  72,713
  76,984
  81,440
  86,089
  90,942
  96,011
  101,308
  106,844
  112,633
  118,689
  125,026
  131,658
  138,603
  145,875
  153,493
  161,475
  169,840
  178,607
  187,798
  197,435
  207,540
  218,137
  229,253
  240,913
  253,146
  265,980
  279,446
  293,576
Variable operating expenses, $m
 
  56,186
  59,579
  63,114
  66,800
  70,644
  74,656
  78,843
  83,217
  87,787
  92,564
  97,184
  102,409
  107,876
  113,599
  119,591
  125,866
  132,439
  139,326
  146,543
  154,108
  162,038
  170,353
  179,072
  188,216
  197,807
  207,868
  218,422
  229,496
  241,115
  253,307
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
  56,186
  59,579
  63,114
  66,800
  70,644
  74,656
  78,843
  83,217
  87,787
  92,564
  97,184
  102,409
  107,876
  113,599
  119,591
  125,866
  132,439
  139,326
  146,543
  154,108
  162,038
  170,353
  179,072
  188,216
  197,807
  207,868
  218,422
  229,496
  241,115
  253,307
Operating income, $m
  5,467
  8,497
  9,036
  9,598
  10,184
  10,795
  11,433
  12,099
  12,794
  13,521
  14,280
  15,450
  16,280
  17,150
  18,059
  19,012
  20,010
  21,054
  22,149
  23,297
  24,499
  25,760
  27,082
  28,468
  29,922
  31,446
  33,046
  34,724
  36,484
  38,331
  40,269
EBITDA, $m
  7,691
  10,879
  11,541
  12,230
  12,948
  13,698
  14,480
  15,296
  16,149
  17,040
  17,971
  18,945
  19,963
  21,029
  22,144
  23,313
  24,536
  25,817
  27,160
  28,566
  30,041
  31,587
  33,208
  34,907
  36,690
  38,560
  40,521
  42,578
  44,737
  47,002
  49,378
Interest expense (income), $m
  373
  563
  515
  597
  682
  772
  865
  962
  1,063
  1,169
  1,280
  1,395
  1,516
  1,643
  1,775
  1,914
  2,059
  2,211
  2,370
  2,537
  2,711
  2,894
  3,086
  3,288
  3,499
  3,720
  3,952
  4,196
  4,451
  4,720
  5,001
Earnings before tax, $m
  5,136
  7,934
  8,521
  9,001
  9,502
  10,024
  10,568
  11,137
  11,731
  12,351
  13,000
  14,054
  14,764
  15,507
  16,284
  17,098
  17,951
  18,844
  19,779
  20,760
  21,788
  22,866
  23,995
  25,180
  26,423
  27,726
  29,093
  30,528
  32,033
  33,612
  35,269
Tax expense, $m
  1,705
  2,142
  2,301
  2,430
  2,565
  2,706
  2,853
  3,007
  3,167
  3,335
  3,510
  3,795
  3,986
  4,187
  4,397
  4,617
  4,847
  5,088
  5,340
  5,605
  5,883
  6,174
  6,479
  6,799
  7,134
  7,486
  7,855
  8,242
  8,649
  9,075
  9,523
Net income, $m
  3,431
  5,792
  6,221
  6,571
  6,936
  7,317
  7,715
  8,130
  8,563
  9,017
  9,490
  10,260
  10,778
  11,320
  11,887
  12,482
  13,104
  13,756
  14,439
  15,155
  15,905
  16,692
  17,517
  18,382
  19,289
  20,240
  21,238
  22,285
  23,384
  24,536
  25,746

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
  42,893
  45,501
  48,218
  51,051
  54,005
  57,088
  60,306
  63,668
  67,180
  70,851
  74,690
  78,706
  82,908
  87,307
  91,912
  96,734
  101,786
  107,079
  112,626
  118,440
  124,535
  130,925
  137,626
  144,653
  152,025
  159,757
  167,869
  176,379
  185,309
  194,679
Adjusted assets (=assets-cash), $m
  35,810
  42,893
  45,501
  48,218
  51,051
  54,005
  57,088
  60,306
  63,668
  67,180
  70,851
  74,690
  78,706
  82,908
  87,307
  91,912
  96,734
  101,786
  107,079
  112,626
  118,440
  124,535
  130,925
  137,626
  144,653
  152,025
  159,757
  167,869
  176,379
  185,309
  194,679
Revenue / Adjusted assets
  1.701
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
  1.508
Average production assets, $m
  20,230
  21,474
  22,780
  24,141
  25,559
  27,038
  28,581
  30,193
  31,876
  33,634
  35,472
  37,394
  39,405
  41,509
  43,711
  46,016
  48,431
  50,960
  53,610
  56,387
  59,298
  62,349
  65,548
  68,903
  72,422
  76,112
  79,983
  84,044
  88,305
  92,776
  97,467
Working capital, $m
  2,119
  1,294
  1,372
  1,454
  1,540
  1,629
  1,722
  1,819
  1,920
  2,026
  2,137
  2,253
  2,374
  2,501
  2,633
  2,772
  2,918
  3,070
  3,230
  3,397
  3,572
  3,756
  3,949
  4,151
  4,363
  4,585
  4,818
  5,063
  5,320
  5,589
  5,872
Total debt, $m
  16,075
  14,706
  17,054
  19,499
  22,049
  24,708
  27,482
  30,379
  33,404
  36,565
  39,869
  43,324
  46,939
  50,721
  54,679
  58,823
  63,164
  67,711
  72,474
  77,466
  82,699
  88,184
  93,935
  99,966
  106,291
  112,925
  119,884
  127,185
  134,844
  142,881
  151,314
Total liabilities, $m
  39,972
  38,603
  40,951
  43,396
  45,946
  48,605
  51,379
  54,276
  57,301
  60,462
  63,766
  67,221
  70,836
  74,618
  78,576
  82,720
  87,061
  91,608
  96,371
  101,363
  106,596
  112,081
  117,832
  123,863
  130,188
  136,822
  143,781
  151,082
  158,741
  166,778
  175,211
Total equity, $m
  405
  4,289
  4,550
  4,822
  5,105
  5,401
  5,709
  6,031
  6,367
  6,718
  7,085
  7,469
  7,871
  8,291
  8,731
  9,191
  9,673
  10,179
  10,708
  11,263
  11,844
  12,453
  13,092
  13,763
  14,465
  15,202
  15,976
  16,787
  17,638
  18,531
  19,468
Total liabilities and equity, $m
  40,377
  42,892
  45,501
  48,218
  51,051
  54,006
  57,088
  60,307
  63,668
  67,180
  70,851
  74,690
  78,707
  82,909
  87,307
  91,911
  96,734
  101,787
  107,079
  112,626
  118,440
  124,534
  130,924
  137,626
  144,653
  152,024
  159,757
  167,869
  176,379
  185,309
  194,679
Debt-to-equity ratio
  39.691
  3.430
  3.750
  4.040
  4.320
  4.580
  4.810
  5.040
  5.250
  5.440
  5.630
  5.800
  5.960
  6.120
  6.260
  6.400
  6.530
  6.650
  6.770
  6.880
  6.980
  7.080
  7.170
  7.260
  7.350
  7.430
  7.500
  7.580
  7.650
  7.710
  7.770
Adjusted equity ratio
  -0.116
  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
  5,792
  6,221
  6,571
  6,936
  7,317
  7,715
  8,130
  8,563
  9,017
  9,490
  10,260
  10,778
  11,320
  11,887
  12,482
  13,104
  13,756
  14,439
  15,155
  15,905
  16,692
  17,517
  18,382
  19,289
  20,240
  21,238
  22,285
  23,384
  24,536
  25,746
Depreciation, amort., depletion, $m
  2,224
  2,383
  2,505
  2,632
  2,764
  2,903
  3,047
  3,197
  3,355
  3,519
  3,691
  3,495
  3,683
  3,879
  4,085
  4,301
  4,526
  4,763
  5,010
  5,270
  5,542
  5,827
  6,126
  6,440
  6,768
  7,113
  7,475
  7,855
  8,253
  8,671
  9,109
Funds from operations, $m
  5,739
  8,175
  8,725
  9,203
  9,701
  10,220
  10,762
  11,327
  11,918
  12,536
  13,181
  13,754
  14,460
  15,199
  15,973
  16,782
  17,630
  18,519
  19,449
  20,425
  21,447
  22,519
  23,643
  24,821
  26,057
  27,353
  28,713
  30,140
  31,637
  33,207
  34,855
Change in working capital, $m
  -734
  76
  79
  82
  85
  89
  93
  97
  101
  106
  111
  116
  121
  127
  133
  139
  145
  152
  160
  167
  175
  184
  193
  202
  212
  222
  233
  245
  257
  269
  283
Cash from operations, $m
  6,473
  8,099
  8,647
  9,121
  9,615
  10,131
  10,669
  11,230
  11,817
  12,430
  13,070
  13,639
  14,339
  15,072
  15,840
  16,643
  17,485
  18,366
  19,290
  20,257
  21,272
  22,335
  23,450
  24,619
  25,845
  27,131
  28,480
  29,895
  31,380
  32,938
  34,573
Maintenance CAPEX, $m
  0
  -1,891
  -2,007
  -2,129
  -2,256
  -2,389
  -2,527
  -2,671
  -2,822
  -2,979
  -3,143
  -3,315
  -3,495
  -3,683
  -3,879
  -4,085
  -4,301
  -4,526
  -4,763
  -5,010
  -5,270
  -5,542
  -5,827
  -6,126
  -6,440
  -6,768
  -7,113
  -7,475
  -7,855
  -8,253
  -8,671
New CAPEX, $m
  -2,965
  -1,245
  -1,306
  -1,360
  -1,418
  -1,479
  -1,543
  -1,611
  -1,683
  -1,758
  -1,838
  -1,922
  -2,011
  -2,104
  -2,202
  -2,306
  -2,414
  -2,529
  -2,650
  -2,777
  -2,911
  -3,051
  -3,199
  -3,355
  -3,518
  -3,690
  -3,871
  -4,061
  -4,261
  -4,471
  -4,691
Cash from investing activities, $m
  -2,566
  -3,136
  -3,313
  -3,489
  -3,674
  -3,868
  -4,070
  -4,282
  -4,505
  -4,737
  -4,981
  -5,237
  -5,506
  -5,787
  -6,081
  -6,391
  -6,715
  -7,055
  -7,413
  -7,787
  -8,181
  -8,593
  -9,026
  -9,481
  -9,958
  -10,458
  -10,984
  -11,536
  -12,116
  -12,724
  -13,362
Free cash flow, $m
  3,907
  4,963
  5,334
  5,631
  5,941
  6,263
  6,598
  6,948
  7,312
  7,692
  8,089
  8,401
  8,834
  9,286
  9,759
  10,253
  10,770
  11,311
  11,877
  12,470
  13,091
  13,742
  14,424
  15,138
  15,887
  16,672
  17,496
  18,359
  19,264
  20,214
  21,211
Issuance/(repayment) of debt, $m
  2,034
  -1,369
  2,347
  2,446
  2,549
  2,659
  2,775
  2,897
  3,025
  3,161
  3,304
  3,455
  3,614
  3,782
  3,958
  4,145
  4,340
  4,547
  4,764
  4,992
  5,232
  5,485
  5,751
  6,031
  6,325
  6,634
  6,959
  7,301
  7,660
  8,037
  8,433
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
  -1,369
  2,347
  2,446
  2,549
  2,659
  2,775
  2,897
  3,025
  3,161
  3,304
  3,455
  3,614
  3,782
  3,958
  4,145
  4,340
  4,547
  4,764
  4,992
  5,232
  5,485
  5,751
  6,031
  6,325
  6,634
  6,959
  7,301
  7,660
  8,037
  8,433
Total cash flow (excl. dividends), $m
  3,389
  3,595
  7,681
  8,077
  8,490
  8,922
  9,373
  9,844
  10,337
  10,853
  11,393
  11,857
  12,448
  13,068
  13,717
  14,397
  15,110
  15,857
  16,641
  17,462
  18,324
  19,227
  20,175
  21,169
  22,212
  23,306
  24,455
  25,659
  26,924
  28,251
  29,644
Retained Cash Flow (-), $m
  2,065
  -3,884
  -261
  -272
  -283
  -295
  -308
  -322
  -336
  -351
  -367
  -384
  -402
  -420
  -440
  -461
  -482
  -505
  -529
  -555
  -581
  -609
  -639
  -670
  -703
  -737
  -773
  -811
  -851
  -893
  -937
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
 
  -289
  7,420
  7,805
  8,207
  8,626
  9,065
  9,523
  10,001
  10,502
  11,026
  11,473
  12,047
  12,648
  13,277
  13,937
  14,628
  15,352
  16,111
  16,908
  17,742
  18,618
  19,536
  20,499
  21,509
  22,569
  23,681
  24,848
  26,073
  27,358
  28,707
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
 
  -272
  6,528
  6,381
  6,193
  5,965
  5,699
  5,399
  5,069
  4,714
  4,340
  3,917
  3,528
  3,140
  2,758
  2,390
  2,041
  1,717
  1,422
  1,157
  924
  725
  557
  419
  308
  221
  155
  106
  70
  45
  28
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., a package delivery company, provides transportation, logistics, and financial services in the United States and internationally. It operates in three segments: U.S. Domestic Package, International Package, and Supply Chain & Freight. The U.S. Domestic Package segment offers time-definite delivery of letters, documents, small packages, and palletized freight through air and ground services in the United States. The International Package segment provides guaranteed day and time-definite international shipping services in Europe, the Asia Pacific, Canada and Latin America, the Indian sub-continent, the Middle East, and Africa. It offers guaranteed time-definite express options, including Express Plus, Express, and Express Saver. The Supply Chain & Freight segment offers international air and ocean freight forwarding, customs brokerage, truckload freight brokerage, distribution and post-sales services, and mail and consulting services in approximately 220 countries and territories; and less-than-truckload and truckload services to customers in North America. The company also offers shipping, visibility, and billing technologies; and insurance, financing, and payment services. It operates a fleet of approximately 114,000 package cars, vans, tractors, and motorcycles; and owns 40,000 containers used to transport cargo in its aircraft. United Parcel Service, Inc. was founded in 1907 and is headquartered in Atlanta, Georgia.

FINANCIAL RATIOS  of  United Parcel Service Cl B (UPS)

Valuation Ratios
P/E Ratio 29
Price to Sales 1.6
Price to Book 246
Price to Tangible Book
Price to Cash Flow 15.4
Price to Free Cash Flow 28.4
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. 13.9%
Return On Total Capital 20.6%
Ret/ On T. Cap. - 3 Yr. Avg. 33.4%
Return On Equity 238.7%
Return On Equity - 3 Yr. Avg. 244%
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 6.2% 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 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 862.169 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 $98.9 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Did EXPD Surpass Analysts Revenue Estimates in 2Q17?   [Aug-15-17 02:36PM  Market Realist]
▶ UPS drops touchscreens in favor of virtual reality headsets (Video)   [12:55PM  American City Business Journals]
▶ Naughty or Nice? A Very UPS Christmas   [Aug-14-17 01:46PM  Barrons.com]
▶ An Undervalued UPS Makes for a Ripe Investment Opportunity   [Aug-13-17 12:55PM  GuruFocus.com]
▶ List Leaders: The largest logistics firms in the metro   [07:13AM  American City Business Journals]
▶ XPO Logistics 2Q17 Earnings Missed Estimate   [Aug-09-17 02:36PM  Market Realist]
▶ Today's Top Supply Chain and Logistics News From WSJ   [Aug-04-17 06:52AM  The Wall Street Journal]
▶ FedEx to Skip Holiday Surcharges for Most Orders   [12:19AM  The Wall Street Journal]
▶ UPS pension plan concerns continue with protests outside Kansas City terminals   [Aug-03-17 04:35PM  American City Business Journals]
▶ UPS Board Announces Quarterly Dividend   [04:15PM  GlobeNewswire]
▶ FedEx Gift To Holiday Shoppers Is A Lump Of Coal For UPS   [04:07PM  Investor's Business Daily]
▶ FedEx to Skip Holiday Surcharges for Most Orders   [09:45AM  The Wall Street Journal]
▶ UPS Commemorates 110-Year Anniversary And Seattle Roots   [Aug-02-17 01:07PM  GlobeNewswire]
▶ Inside UPSs Solid 2Q17 Growth in Its US Domestic Segment   [Aug-01-17 06:05PM  Market Realist]
▶ UPS Announced It Will Ship More Beer and Wine   [Jul-31-17 04:56PM  InvestorPlace]
▶ Drink up: UPS expanding its global shipment of alcohol, wine and beer   [11:15AM  American City Business Journals]
▶ UPS CFO Sees More Packages Going to U.S. Homes vs Stores   [Jul-27-17 08:34PM  Bloomberg Video]
▶ Online-shopping energizes UPS in second quarter   [05:32PM  Associated Press]
▶ [$$] UPS Earnings: What to Watch   [08:00AM  The Wall Street Journal]
▶ FERRARI: Ferrari and UPS renew the sponsorship agreement   [Jul-24-17 04:15PM  GlobeNewswire]
▶ More workers are quitting their jobs and thats a good thing   [Jul-21-17 03:40PM  American City Business Journals]
▶ 4 Things You Didn't Know About FedEx Corporation   [Jul-20-17 07:51AM  Motley Fool]
▶ Dow Transports Say This Rally Could Keep Truckin'   [Jul-18-17 08:52PM  The Wall Street Journal]
▶ [$$] FedEx Struggles to Bounce Back From Cyberattack   [12:44AM  The Wall Street Journal]
▶ Dow Transports Say This Rally Could Keep Truckin   [12:44AM  The Wall Street Journal]
▶ [$$] FedEx Struggles to Bounce Back From Cyberattack   [Jul-17-17 03:46PM  The Wall Street Journal]
▶ 3 Warren Buffett Stocks You Can Buy and Hold for Decades   [Jul-16-17 07:22AM  Motley Fool]
▶ UPS to give new package handlers a big weekly bonus   [Jul-14-17 10:15AM  American City Business Journals]
▶ 3 Great Reasons to Buy United Parcel Service Stock   [Jul-13-17 09:44AM  Motley Fool]
▶ Is UPS Pushing Shoppers to Amazon?   [Jul-10-17 03:28PM  Motley Fool]
▶ The Face of America's Pension Crisis   [08:01AM  Motley Fool]
Stock chart of UPS 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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