Intrinsic value of United Technologies - UTX

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$122.07

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$122.07

 
Intrinsic value

$134.24

 
Up/down potential

+10%

 
Rating

hold

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

We calculate the intrinsic value of UTX 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 97.7

 

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, %
  2.04
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  57,244
  58,675
  60,289
  62,082
  64,055
  66,207
  68,540
  71,056
  73,760
  76,654
  79,744
  83,036
  86,536
  90,252
  94,191
  98,362
  102,774
  107,437
  112,360
  117,557
  123,038
  128,816
  134,904
  141,317
  148,070
  155,178
  162,659
  170,529
  178,807
  187,514
  196,669
Variable operating expenses, $m
 
  13,486
  13,783
  14,112
  14,475
  14,870
  15,299
  15,761
  16,258
  16,790
  17,357
  15,256
  15,899
  16,582
  17,306
  18,072
  18,883
  19,739
  20,644
  21,599
  22,606
  23,667
  24,786
  25,964
  27,205
  28,511
  29,885
  31,331
  32,852
  34,452
  36,134
Fixed operating expenses, $m
 
  37,649
  38,591
  39,555
  40,544
  41,558
  42,597
  43,662
  44,753
  45,872
  47,019
  48,194
  49,399
  50,634
  51,900
  53,197
  54,527
  55,891
  57,288
  58,720
  60,188
  61,693
  63,235
  64,816
  66,436
  68,097
  69,800
  71,545
  73,333
  75,167
  77,046
Total operating expenses, $m
  49,072
  51,135
  52,374
  53,667
  55,019
  56,428
  57,896
  59,423
  61,011
  62,662
  64,376
  63,450
  65,298
  67,216
  69,206
  71,269
  73,410
  75,630
  77,932
  80,319
  82,794
  85,360
  88,021
  90,780
  93,641
  96,608
  99,685
  102,876
  106,185
  109,619
  113,180
Operating income, $m
  8,172
  7,540
  7,915
  8,415
  9,036
  9,779
  10,645
  11,634
  12,749
  13,992
  15,368
  19,586
  21,238
  23,036
  24,986
  27,093
  29,364
  31,807
  34,429
  37,238
  40,244
  43,456
  46,883
  50,537
  54,429
  58,570
  62,974
  67,653
  72,622
  77,895
  83,489
EBITDA, $m
  10,134
  11,201
  11,603
  12,132
  12,785
  13,563
  14,467
  15,497
  16,656
  17,947
  19,373
  20,938
  22,647
  24,506
  26,520
  28,695
  31,038
  33,557
  36,259
  39,153
  42,248
  45,554
  49,080
  52,839
  56,840
  61,097
  65,623
  70,430
  75,534
  80,949
  86,692
Interest expense (income), $m
  1,157
  1,128
  1,209
  1,297
  1,394
  1,502
  1,619
  1,746
  1,883
  2,030
  2,188
  2,356
  2,536
  2,726
  2,929
  3,143
  3,371
  3,611
  3,865
  4,133
  4,416
  4,715
  5,030
  5,361
  5,711
  6,079
  6,466
  6,873
  7,302
  7,753
  8,227
Earnings before tax, $m
  7,133
  6,411
  6,707
  7,118
  7,642
  8,277
  9,026
  9,888
  10,865
  11,962
  13,180
  17,229
  18,702
  20,310
  22,057
  23,949
  25,993
  28,196
  30,564
  33,105
  35,828
  38,741
  41,853
  45,176
  48,718
  52,491
  56,508
  60,779
  65,320
  70,142
  75,261
Tax expense, $m
  1,697
  1,731
  1,811
  1,922
  2,063
  2,235
  2,437
  2,670
  2,934
  3,230
  3,559
  4,652
  5,050
  5,484
  5,955
  6,466
  7,018
  7,613
  8,252
  8,938
  9,673
  10,460
  11,300
  12,197
  13,154
  14,173
  15,257
  16,410
  17,636
  18,938
  20,321
Net income, $m
  5,055
  4,680
  4,896
  5,196
  5,578
  6,042
  6,589
  7,218
  7,932
  8,732
  9,621
  12,577
  13,653
  14,826
  16,101
  17,483
  18,975
  20,583
  22,311
  24,167
  26,154
  28,281
  30,553
  32,978
  35,564
  38,319
  41,251
  44,369
  47,683
  51,204
  54,941

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7,157
  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
  89,706
  84,668
  86,997
  89,585
  92,431
  95,537
  98,903
  102,534
  106,435
  110,611
  115,071
  119,821
  124,872
  130,234
  135,918
  141,937
  148,303
  155,031
  162,136
  169,635
  177,544
  185,881
  194,667
  203,921
  213,665
  223,922
  234,716
  246,073
  258,019
  270,582
  283,793
Adjusted assets (=assets-cash), $m
  82,549
  84,668
  86,997
  89,585
  92,431
  95,537
  98,903
  102,534
  106,435
  110,611
  115,071
  119,821
  124,872
  130,234
  135,918
  141,937
  148,303
  155,031
  162,136
  169,635
  177,544
  185,881
  194,667
  203,921
  213,665
  223,922
  234,716
  246,073
  258,019
  270,582
  283,793
Revenue / Adjusted assets
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
Average production assets, $m
  24,589
  25,230
  25,924
  26,695
  27,544
  28,469
  29,472
  30,554
  31,717
  32,961
  34,290
  35,706
  37,211
  38,808
  40,502
  42,296
  44,193
  46,198
  48,315
  50,549
  52,906
  55,391
  58,009
  60,766
  63,670
  66,727
  69,943
  73,327
  76,887
  80,631
  84,567
Working capital, $m
  6,644
  1,760
  1,809
  1,862
  1,922
  1,986
  2,056
  2,132
  2,213
  2,300
  2,392
  2,491
  2,596
  2,708
  2,826
  2,951
  3,083
  3,223
  3,371
  3,527
  3,691
  3,864
  4,047
  4,240
  4,442
  4,655
  4,880
  5,116
  5,364
  5,625
  5,900
Total debt, $m
  23,901
  23,243
  24,934
  26,813
  28,879
  31,134
  33,578
  36,214
  39,046
  42,078
  45,315
  48,764
  52,431
  56,324
  60,451
  64,820
  69,442
  74,327
  79,485
  84,929
  90,671
  96,724
  103,102
  109,821
  116,895
  124,342
  132,178
  140,423
  149,096
  158,217
  167,808
Total liabilities, $m
  62,127
  61,469
  63,160
  65,039
  67,105
  69,360
  71,804
  74,440
  77,272
  80,304
  83,541
  86,990
  90,657
  94,550
  98,677
  103,046
  107,668
  112,553
  117,711
  123,155
  128,897
  134,950
  141,328
  148,047
  155,121
  162,568
  170,404
  178,649
  187,322
  196,443
  206,034
Total equity, $m
  27,579
  23,199
  23,837
  24,546
  25,326
  26,177
  27,100
  28,094
  29,163
  30,308
  31,529
  32,831
  34,215
  35,684
  37,242
  38,891
  40,635
  42,479
  44,425
  46,480
  48,647
  50,931
  53,339
  55,874
  58,544
  61,355
  64,312
  67,424
  70,697
  74,140
  77,759
Total liabilities and equity, $m
  89,706
  84,668
  86,997
  89,585
  92,431
  95,537
  98,904
  102,534
  106,435
  110,612
  115,070
  119,821
  124,872
  130,234
  135,919
  141,937
  148,303
  155,032
  162,136
  169,635
  177,544
  185,881
  194,667
  203,921
  213,665
  223,923
  234,716
  246,073
  258,019
  270,583
  283,793
Debt-to-equity ratio
  0.867
  1.000
  1.050
  1.090
  1.140
  1.190
  1.240
  1.290
  1.340
  1.390
  1.440
  1.490
  1.530
  1.580
  1.620
  1.670
  1.710
  1.750
  1.790
  1.830
  1.860
  1.900
  1.930
  1.970
  2.000
  2.030
  2.060
  2.080
  2.110
  2.130
  2.160
Adjusted equity ratio
  0.255
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,055
  4,680
  4,896
  5,196
  5,578
  6,042
  6,589
  7,218
  7,932
  8,732
  9,621
  12,577
  13,653
  14,826
  16,101
  17,483
  18,975
  20,583
  22,311
  24,167
  26,154
  28,281
  30,553
  32,978
  35,564
  38,319
  41,251
  44,369
  47,683
  51,204
  54,941
Depreciation, amort., depletion, $m
  1,962
  3,662
  3,688
  3,717
  3,749
  3,784
  3,822
  3,863
  3,907
  3,954
  4,005
  1,352
  1,409
  1,470
  1,534
  1,602
  1,674
  1,750
  1,830
  1,915
  2,004
  2,098
  2,197
  2,302
  2,412
  2,528
  2,649
  2,778
  2,912
  3,054
  3,203
Funds from operations, $m
  2,344
  8,342
  8,584
  8,913
  9,328
  9,827
  10,411
  11,081
  11,839
  12,687
  13,626
  13,930
  15,062
  16,296
  17,636
  19,085
  20,649
  22,333
  24,142
  26,081
  28,158
  30,379
  32,750
  35,280
  37,976
  40,846
  43,900
  47,147
  50,596
  54,258
  58,144
Change in working capital, $m
  -1,536
  43
  48
  54
  59
  65
  70
  75
  81
  87
  93
  99
  105
  111
  118
  125
  132
  140
  148
  156
  164
  173
  183
  192
  203
  213
  224
  236
  248
  261
  275
Cash from operations, $m
  3,880
  8,552
  8,535
  8,860
  9,269
  9,762
  10,341
  11,006
  11,758
  12,600
  13,533
  13,831
  14,957
  16,185
  17,517
  18,960
  20,517
  22,193
  23,994
  25,925
  27,994
  30,206
  32,568
  35,088
  37,773
  40,633
  43,676
  46,910
  50,347
  53,997
  57,870
Maintenance CAPEX, $m
  0
  -931
  -956
  -982
  -1,011
  -1,043
  -1,078
  -1,116
  -1,157
  -1,201
  -1,249
  -1,299
  -1,352
  -1,409
  -1,470
  -1,534
  -1,602
  -1,674
  -1,750
  -1,830
  -1,915
  -2,004
  -2,098
  -2,197
  -2,302
  -2,412
  -2,528
  -2,649
  -2,778
  -2,912
  -3,054
New CAPEX, $m
  -2,087
  -642
  -694
  -771
  -848
  -925
  -1,003
  -1,082
  -1,162
  -1,245
  -1,329
  -1,416
  -1,505
  -1,598
  -1,694
  -1,793
  -1,897
  -2,005
  -2,117
  -2,234
  -2,357
  -2,485
  -2,618
  -2,758
  -2,904
  -3,057
  -3,217
  -3,384
  -3,560
  -3,744
  -3,937
Cash from investing activities, $m
  -2,503
  -1,573
  -1,650
  -1,753
  -1,859
  -1,968
  -2,081
  -2,198
  -2,319
  -2,446
  -2,578
  -2,715
  -2,857
  -3,007
  -3,164
  -3,327
  -3,499
  -3,679
  -3,867
  -4,064
  -4,272
  -4,489
  -4,716
  -4,955
  -5,206
  -5,469
  -5,745
  -6,033
  -6,338
  -6,656
  -6,991
Free cash flow, $m
  1,377
  6,979
  6,886
  7,106
  7,409
  7,793
  8,259
  8,807
  9,438
  10,154
  10,956
  11,117
  12,099
  13,177
  14,354
  15,632
  17,018
  18,514
  20,127
  21,861
  23,722
  25,717
  27,851
  30,133
  32,568
  35,165
  37,932
  40,877
  44,010
  47,341
  50,879
Issuance/(repayment) of debt, $m
  3,686
  1,546
  1,690
  1,879
  2,067
  2,255
  2,444
  2,636
  2,832
  3,032
  3,237
  3,449
  3,667
  3,893
  4,127
  4,369
  4,622
  4,885
  5,158
  5,444
  5,742
  6,053
  6,378
  6,718
  7,074
  7,447
  7,837
  8,245
  8,673
  9,121
  9,591
Issuance/(repurchase) of shares, $m
  -2,241
  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  
  881
  1,546
  1,690
  1,879
  2,067
  2,255
  2,444
  2,636
  2,832
  3,032
  3,237
  3,449
  3,667
  3,893
  4,127
  4,369
  4,622
  4,885
  5,158
  5,444
  5,742
  6,053
  6,378
  6,718
  7,074
  7,447
  7,837
  8,245
  8,673
  9,121
  9,591
Total cash flow (excl. dividends), $m
  2,138
  8,525
  8,576
  8,985
  9,476
  10,048
  10,703
  11,443
  12,270
  13,186
  14,193
  14,565
  15,767
  17,070
  18,480
  20,002
  21,639
  23,399
  25,285
  27,305
  29,464
  31,770
  34,230
  36,851
  39,642
  42,611
  45,768
  49,122
  52,683
  56,462
  60,470
Retained Cash Flow (-), $m
  -221
  -573
  -638
  -709
  -780
  -851
  -922
  -995
  -1,069
  -1,144
  -1,222
  -1,302
  -1,384
  -1,469
  -1,557
  -1,649
  -1,744
  -1,844
  -1,947
  -2,055
  -2,167
  -2,284
  -2,407
  -2,536
  -2,670
  -2,810
  -2,958
  -3,112
  -3,273
  -3,442
  -3,620
Prev. year cash balance distribution, $m
 
  4,953
  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
 
  12,905
  7,938
  8,276
  8,696
  9,197
  9,781
  10,449
  11,201
  12,042
  12,972
  13,264
  14,383
  15,601
  16,923
  18,353
  19,895
  21,555
  23,338
  25,250
  27,297
  29,486
  31,823
  34,316
  36,972
  39,801
  42,811
  46,010
  49,410
  53,019
  56,850
Discount rate, %
 
  5.90
  6.20
  6.50
  6.83
  7.17
  7.53
  7.91
  8.30
  8.72
  9.15
  9.61
  10.09
  10.60
  11.13
  11.68
  12.27
  12.88
  13.52
  14.20
  14.91
  15.65
  16.44
  17.26
  18.12
  19.03
  19.98
  20.98
  22.03
  23.13
  24.29
PV of cash for distribution, $m
 
  12,186
  7,039
  6,850
  6,676
  6,505
  6,327
  6,134
  5,918
  5,676
  5,403
  4,834
  4,537
  4,213
  3,864
  3,499
  3,125
  2,749
  2,380
  2,026
  1,694
  1,391
  1,119
  881
  679
  511
  376
  269
  188
  127
  84
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 Technologies Corporation provides technology products and services to building systems and aerospace industries worldwide. Its Otis segment designs, manufactures, sells, and installs passenger and freight elevators, escalators, and moving walkways; and offers modernization products to upgrade elevators and escalators, as well as maintenance and repair services. The company’s UTC Climate, Controls & Security segment provides heating, ventilating, air conditioning, and refrigeration solutions, such as controls for residential, commercial, industrial, and transportation applications. This segment offers electronic security products, including intruder alarms, access control systems, and video surveillance systems; fire safety products; and design, installation, systems integration, repair, maintenance, monitoring, and inspection services. Its Pratt & Whitney segment supplies aircraft engines for commercial, military, business jet, and general aviation markets; and provides aftermarket maintenance, repair, and overhaul, as well as fleet management services. The company’s UTC Aerospace Systems segment provides electric power generation, power management, and distribution systems; air data and aircraft sensing systems; engine control, intelligence, surveillance, and reconnaissance systems; engine components; environmental control systems; fire and ice detection, and protection systems; propeller systems; engine nacelle systems; aircraft lighting and seating, and cargo systems; actuation and landing systems; space products and subsystems; and aftermarket services. United Technologies Corporation offers its services through manufacturers’ representatives, distributors, wholesalers, dealers, retail outlets, and sales representatives, as well as directly to customers. United Technologies Corporation was founded in 1934 and is headquartered in Farmington, Connecticut.

FINANCIAL RATIOS  of  United Technologies (UTX)

Valuation Ratios
P/E Ratio 19.5
Price to Sales 1.7
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 25.4
Price to Free Cash Flow 55.1
Growth Rates
Sales Growth Rate 2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -0.1%
Cap. Spend. - 3 Yr. Gr. Rate -1.8%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 78.7%
Total Debt to Equity 86.7%
Interest Coverage 7
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 7.9%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 12.6%
Return On Equity 18.4%
Return On Equity - 3 Yr. Avg. 21.4%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 27.6%
Gross Margin - 3 Yr. Avg. 28.4%
EBITDA Margin 17.9%
EBITDA Margin - 3 Yr. Avg. 18.2%
Operating Margin 14.3%
Oper. Margin - 3 Yr. Avg. 14.6%
Pre-Tax Margin 12.5%
Pre-Tax Margin - 3 Yr. Avg. 13%
Net Profit Margin 8.8%
Net Profit Margin - 3 Yr. Avg. 11%
Effective Tax Rate 23.8%
Eff/ Tax Rate - 3 Yr. Avg. 27.4%
Payout Ratio 40.9%

UTX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UTX stock intrinsic value calculation we used $57244 million for the last fiscal year's total revenue generated by United Technologies. The default revenue input number comes from 2016 income statement of United Technologies. 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 UTX stock valuation model: a) initial revenue growth rate of 2.5% 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 5.9%, whose default value for UTX is calculated based on our internal credit rating of United Technologies, 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 Technologies.
    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 UTX stock the variable cost ratio is equal to 23.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $36731 million in the base year in the intrinsic value calculation for UTX 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 5.2% for United Technologies.

Corporate tax rate of 27% is the nominal tax rate for United Technologies. 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 UTX 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 UTX are equal to 43%.

Life of production assets of 26.4 years is the average useful life of capital assets used in United Technologies 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 UTX is equal to 3%. 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 - $27579 million for United Technologies - 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 800.018 million for United Technologies 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 Technologies at the current share price and the inputted number of shares is $97.7 billion.


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COMPANY NEWS

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▶ As UTX Finds Its Price, Vetr Calls Hold   [May-02-17 05:02PM  Benzinga]
▶ United Technologies Prices Offering Of Senior Notes   [May-01-17 05:46PM  PR Newswire]
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▶ United Technologies Beats Q1 Forecasts On Broad Strength   [04:12PM  Investor's Business Daily]
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▶ UTC Board of Directors Announces Quarterly Dividend   [Apr-24-17 11:08AM  PR Newswire]
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Stock chart of UTX Financial statements of UTX Annual reports of UTX
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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