Intrinsic value of Controladora Vuela Compania de Aviacion - VLRS

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$14.45

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of VLRS 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 1.3

 

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, %
  29.32
  27.00
  24.80
  22.82
  21.04
  19.43
  17.99
  16.69
  15.52
  14.47
  13.52
  12.67
  11.90
  11.21
  10.59
  10.03
  9.53
  9.08
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
Revenue, $m
  1,191
  29,860
  37,266
  45,770
  55,399
  66,165
  78,068
  91,099
  105,240
  120,469
  136,760
  154,089
  172,431
  191,767
  212,079
  233,357
  255,595
  278,794
  302,963
  328,115
  354,272
  381,461
  409,717
  439,079
  469,595
  501,315
  534,299
  568,608
  604,313
  641,486
  680,208
Variable operating expenses, $m
 
  25,740
  32,123
  39,453
  47,754
  57,034
  67,295
  78,528
  90,717
  103,844
  117,887
  132,825
  148,636
  165,303
  182,812
  201,154
  220,323
  240,321
  261,154
  282,835
  305,382
  328,820
  353,176
  378,486
  404,791
  432,134
  460,565
  490,140
  520,918
  552,961
  586,339
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
  1,052
  25,740
  32,123
  39,453
  47,754
  57,034
  67,295
  78,528
  90,717
  103,844
  117,887
  132,825
  148,636
  165,303
  182,812
  201,154
  220,323
  240,321
  261,154
  282,835
  305,382
  328,820
  353,176
  378,486
  404,791
  432,134
  460,565
  490,140
  520,918
  552,961
  586,339
Operating income, $m
  139
  4,121
  5,143
  6,316
  7,645
  9,131
  10,773
  12,572
  14,523
  16,625
  18,873
  21,264
  23,796
  26,464
  29,267
  32,203
  35,272
  38,474
  41,809
  45,280
  48,890
  52,642
  56,541
  60,593
  64,804
  69,181
  73,733
  78,468
  83,395
  88,525
  93,869
EBITDA, $m
  166
  4,473
  5,582
  6,856
  8,299
  9,911
  11,695
  13,647
  15,765
  18,046
  20,487
  23,083
  25,830
  28,727
  31,769
  34,957
  38,288
  41,763
  45,384
  49,152
  53,070
  57,143
  61,376
  65,774
  70,345
  75,097
  80,038
  85,178
  90,526
  96,095
  101,895
Interest expense (income), $m
  2
  0
  98
  213
  345
  495
  662
  847
  1,049
  1,268
  1,505
  1,757
  2,026
  2,311
  2,611
  2,926
  3,256
  3,601
  3,961
  4,336
  4,727
  5,133
  5,555
  5,993
  6,449
  6,922
  7,414
  7,926
  8,459
  9,013
  9,590
Earnings before tax, $m
  252
  4,121
  5,044
  6,103
  7,300
  8,636
  10,112
  11,725
  13,474
  15,357
  17,368
  19,507
  21,769
  24,153
  26,656
  29,277
  32,016
  34,872
  37,848
  40,943
  44,163
  47,509
  50,986
  54,600
  58,355
  62,259
  66,319
  70,542
  74,937
  79,512
  84,279
Tax expense, $m
  74
  1,113
  1,362
  1,648
  1,971
  2,332
  2,730
  3,166
  3,638
  4,146
  4,689
  5,267
  5,878
  6,521
  7,197
  7,905
  8,644
  9,416
  10,219
  11,055
  11,924
  12,827
  13,766
  14,742
  15,756
  16,810
  17,906
  19,046
  20,233
  21,468
  22,755
Net income, $m
  178
  3,008
  3,682
  4,455
  5,329
  6,304
  7,381
  8,559
  9,836
  11,210
  12,679
  14,240
  15,892
  17,632
  19,459
  21,372
  23,372
  25,457
  27,629
  29,889
  32,239
  34,682
  37,220
  39,858
  42,599
  45,449
  48,413
  51,495
  54,704
  58,044
  61,524

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  358
  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
  1,104
  19,327
  24,120
  29,624
  35,857
  42,825
  50,530
  58,964
  68,117
  77,973
  88,518
  99,734
  111,606
  124,121
  137,268
  151,040
  165,434
  180,449
  196,092
  212,372
  229,302
  246,901
  265,189
  284,194
  303,945
  324,476
  345,824
  368,031
  391,141
  415,201
  440,264
Adjusted assets (=assets-cash), $m
  746
  19,327
  24,120
  29,624
  35,857
  42,825
  50,530
  58,964
  68,117
  77,973
  88,518
  99,734
  111,606
  124,121
  137,268
  151,040
  165,434
  180,449
  196,092
  212,372
  229,302
  246,901
  265,189
  284,194
  303,945
  324,476
  345,824
  368,031
  391,141
  415,201
  440,264
Revenue / Adjusted assets
  1.597
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
  1.545
Average production assets, $m
  134
  1,762
  2,199
  2,700
  3,269
  3,904
  4,606
  5,375
  6,209
  7,108
  8,069
  9,091
  10,173
  11,314
  12,513
  13,768
  15,080
  16,449
  17,875
  19,359
  20,902
  22,506
  24,173
  25,906
  27,706
  29,578
  31,524
  33,548
  35,654
  37,848
  40,132
Working capital, $m
  185
  -2,986
  -3,727
  -4,577
  -5,540
  -6,616
  -7,807
  -9,110
  -10,524
  -12,047
  -13,676
  -15,409
  -17,243
  -19,177
  -21,208
  -23,336
  -25,559
  -27,879
  -30,296
  -32,812
  -35,427
  -38,146
  -40,972
  -43,908
  -46,959
  -50,132
  -53,430
  -56,861
  -60,431
  -64,149
  -68,021
Total debt, $m
  101
  2,813
  6,096
  9,867
  14,136
  18,909
  24,187
  29,964
  36,234
  42,986
  50,209
  57,892
  66,024
  74,597
  83,603
  93,036
  102,896
  113,182
  123,897
  135,049
  146,646
  158,701
  171,228
  184,247
  197,776
  211,840
  226,464
  241,675
  257,506
  273,987
  291,155
Total liabilities, $m
  557
  13,239
  16,522
  20,293
  24,562
  29,335
  34,613
  40,390
  46,660
  53,412
  60,635
  68,318
  76,450
  85,023
  94,029
  103,462
  113,322
  123,608
  134,323
  145,475
  157,072
  169,127
  181,654
  194,673
  208,202
  222,266
  236,890
  252,101
  267,932
  284,413
  301,581
Total equity, $m
  547
  6,088
  7,598
  9,332
  11,295
  13,490
  15,917
  18,574
  21,457
  24,562
  27,883
  31,416
  35,156
  39,098
  43,239
  47,578
  52,112
  56,842
  61,769
  66,897
  72,230
  77,774
  83,535
  89,521
  95,743
  102,210
  108,935
  115,930
  123,209
  130,788
  138,683
Total liabilities and equity, $m
  1,104
  19,327
  24,120
  29,625
  35,857
  42,825
  50,530
  58,964
  68,117
  77,974
  88,518
  99,734
  111,606
  124,121
  137,268
  151,040
  165,434
  180,450
  196,092
  212,372
  229,302
  246,901
  265,189
  284,194
  303,945
  324,476
  345,825
  368,031
  391,141
  415,201
  440,264
Debt-to-equity ratio
  0.185
  0.460
  0.800
  1.060
  1.250
  1.400
  1.520
  1.610
  1.690
  1.750
  1.800
  1.840
  1.880
  1.910
  1.930
  1.960
  1.970
  1.990
  2.010
  2.020
  2.030
  2.040
  2.050
  2.060
  2.070
  2.070
  2.080
  2.080
  2.090
  2.090
  2.100
Adjusted equity ratio
  0.253
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315
  0.315

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  178
  3,008
  3,682
  4,455
  5,329
  6,304
  7,381
  8,559
  9,836
  11,210
  12,679
  14,240
  15,892
  17,632
  19,459
  21,372
  23,372
  25,457
  27,629
  29,889
  32,239
  34,682
  37,220
  39,858
  42,599
  45,449
  48,413
  51,495
  54,704
  58,044
  61,524
Depreciation, amort., depletion, $m
  27
  352
  440
  540
  654
  781
  921
  1,075
  1,242
  1,422
  1,614
  1,818
  2,035
  2,263
  2,503
  2,754
  3,016
  3,290
  3,575
  3,872
  4,180
  4,501
  4,835
  5,181
  5,541
  5,916
  6,305
  6,710
  7,131
  7,570
  8,026
Funds from operations, $m
  -113
  3,360
  4,122
  4,995
  5,982
  7,085
  8,303
  9,634
  11,078
  12,632
  14,293
  16,058
  17,926
  19,895
  21,961
  24,126
  26,388
  28,747
  31,204
  33,760
  36,419
  39,183
  42,055
  45,039
  48,141
  51,365
  54,717
  58,205
  61,835
  65,614
  69,550
Change in working capital, $m
  -163
  -635
  -741
  -850
  -963
  -1,077
  -1,190
  -1,303
  -1,414
  -1,523
  -1,629
  -1,733
  -1,834
  -1,934
  -2,031
  -2,128
  -2,224
  -2,320
  -2,417
  -2,515
  -2,616
  -2,719
  -2,826
  -2,936
  -3,052
  -3,172
  -3,298
  -3,431
  -3,570
  -3,717
  -3,872
Cash from operations, $m
  50
  2,730
  4,863
  5,846
  6,945
  8,162
  9,493
  10,937
  12,492
  14,155
  15,922
  17,791
  19,761
  21,828
  23,993
  26,254
  28,611
  31,066
  33,621
  36,276
  39,035
  41,902
  44,880
  47,975
  51,192
  54,537
  58,016
  61,636
  65,405
  69,331
  73,422
Maintenance CAPEX, $m
  0
  -276
  -352
  -440
  -540
  -654
  -781
  -921
  -1,075
  -1,242
  -1,422
  -1,614
  -1,818
  -2,035
  -2,263
  -2,503
  -2,754
  -3,016
  -3,290
  -3,575
  -3,872
  -4,180
  -4,501
  -4,835
  -5,181
  -5,541
  -5,916
  -6,305
  -6,710
  -7,131
  -7,570
New CAPEX, $m
  -114
  -382
  -437
  -502
  -568
  -635
  -702
  -769
  -834
  -898
  -961
  -1,022
  -1,082
  -1,141
  -1,198
  -1,255
  -1,312
  -1,369
  -1,426
  -1,484
  -1,543
  -1,604
  -1,667
  -1,732
  -1,800
  -1,872
  -1,946
  -2,024
  -2,107
  -2,193
  -2,285
Cash from investing activities, $m
  -1
  -658
  -789
  -942
  -1,108
  -1,289
  -1,483
  -1,690
  -1,909
  -2,140
  -2,383
  -2,636
  -2,900
  -3,176
  -3,461
  -3,758
  -4,066
  -4,385
  -4,716
  -5,059
  -5,415
  -5,784
  -6,168
  -6,567
  -6,981
  -7,413
  -7,862
  -8,329
  -8,817
  -9,324
  -9,855
Free cash flow, $m
  49
  2,072
  4,073
  4,904
  5,837
  6,873
  8,010
  9,247
  10,583
  12,014
  13,539
  15,155
  16,860
  18,653
  20,531
  22,496
  24,546
  26,682
  28,905
  31,217
  33,620
  36,117
  38,712
  41,408
  44,211
  47,124
  50,154
  53,307
  56,589
  60,007
  63,568
Issuance/(repayment) of debt, $m
  9
  2,813
  3,283
  3,770
  4,269
  4,773
  5,278
  5,777
  6,270
  6,752
  7,223
  7,683
  8,132
  8,573
  9,006
  9,434
  9,860
  10,286
  10,716
  11,152
  11,597
  12,055
  12,528
  13,018
  13,529
  14,064
  14,624
  15,212
  15,830
  16,481
  17,168
Issuance/(repurchase) of shares, $m
  -1
  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  
  1
  2,813
  3,283
  3,770
  4,269
  4,773
  5,278
  5,777
  6,270
  6,752
  7,223
  7,683
  8,132
  8,573
  9,006
  9,434
  9,860
  10,286
  10,716
  11,152
  11,597
  12,055
  12,528
  13,018
  13,529
  14,064
  14,624
  15,212
  15,830
  16,481
  17,168
Total cash flow (excl. dividends), $m
  97
  4,885
  7,357
  8,674
  10,106
  11,646
  13,288
  15,025
  16,853
  18,766
  20,762
  22,838
  24,993
  27,225
  29,537
  31,930
  34,405
  36,968
  39,620
  42,368
  45,217
  48,172
  51,240
  54,427
  57,740
  61,188
  64,778
  68,519
  72,419
  76,488
  80,736
Retained Cash Flow (-), $m
  -201
  -1,300
  -1,510
  -1,734
  -1,963
  -2,195
  -2,427
  -2,657
  -2,883
  -3,105
  -3,322
  -3,533
  -3,740
  -3,942
  -4,141
  -4,338
  -4,534
  -4,730
  -4,928
  -5,128
  -5,333
  -5,543
  -5,761
  -5,986
  -6,222
  -6,467
  -6,725
  -6,995
  -7,280
  -7,579
  -7,895
Prev. year cash balance distribution, $m
 
  6,006
  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
 
  9,591
  5,847
  6,941
  8,143
  9,451
  10,861
  12,368
  13,969
  15,661
  17,441
  19,305
  21,253
  23,283
  25,396
  27,591
  29,871
  32,238
  34,693
  37,240
  39,884
  42,629
  45,479
  48,440
  51,519
  54,721
  58,053
  61,524
  65,139
  68,909
  72,841
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
 
  9,195
  5,352
  6,040
  6,705
  7,326
  7,882
  8,356
  8,731
  8,997
  9,143
  9,168
  9,069
  8,853
  8,526
  8,100
  7,591
  7,014
  6,389
  5,734
  5,068
  4,409
  3,774
  3,175
  2,624
  2,129
  1,694
  1,320
  1,008
  752
  548
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

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. provides air transportation services for passengers, cargo, and mail in Mexico and internationally. As of December 31, 2015, the company operated a fleet of 56 Airbus narrow-body aircraft, which include 18 Airbus A319s, 36 A320s, and 2 A321s. It operates approximately 272 daily flights on routes that connect 40 cities in Mexico and 22 cities in the United States and Central America. The company also offers recruitment and payroll services. Controladora Vuela Compania de Aviacion, S.A.B. de C.V. was founded in 2003 and is headquartered in Mexico City, Mexico.

FINANCIAL RATIOS  of  Controladora Vuela Compania de Aviacion (VLRS)

Valuation Ratios
P/E Ratio 81.1
Price to Sales 12.1
Price to Book 26.4
Price to Tangible Book
Price to Cash Flow 288.6
Price to Free Cash Flow -225.5
Growth Rates
Sales Growth Rate 29.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 54.1%
Cap. Spend. - 3 Yr. Gr. Rate 14.1%
Financial Strength
Quick Ratio 7
Current Ratio 0.5
LT Debt to Equity 8.8%
Total Debt to Equity 18.5%
Interest Coverage 127
Management Effectiveness
Return On Assets 19.1%
Ret/ On Assets - 3 Yr. Avg. 15.3%
Return On Total Capital 33.1%
Ret/ On T. Cap. - 3 Yr. Avg. 26.6%
Return On Equity 39.9%
Return On Equity - 3 Yr. Avg. 32.7%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 29.9%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 23.6%
EBITDA Margin - 3 Yr. Avg. 17.6%
Operating Margin 11.7%
Oper. Margin - 3 Yr. Avg. 9%
Pre-Tax Margin 21.2%
Pre-Tax Margin - 3 Yr. Avg. 15%
Net Profit Margin 14.9%
Net Profit Margin - 3 Yr. Avg. 11%
Effective Tax Rate 29.4%
Eff/ Tax Rate - 3 Yr. Avg. 21.6%
Payout Ratio 0%

VLRS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VLRS stock intrinsic value calculation we used $23512 million for the last fiscal year's total revenue generated by Controladora Vuela Compania de Aviacion . The default revenue input number comes from 2016 income statement of Controladora Vuela Compania de Aviacion . 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 VLRS stock valuation model: a) initial revenue growth rate of 27% 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 VLRS is calculated based on our internal credit rating of Controladora Vuela Compania de Aviacion , 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 Controladora Vuela Compania de Aviacion .
    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 VLRS stock the variable cost ratio is equal to 86.2%.

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 VLRS 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 Controladora Vuela Compania de Aviacion .

Corporate tax rate of 27% is the nominal tax rate for Controladora Vuela Compania de Aviacion . 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 VLRS 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 VLRS are equal to 5.9%.

Life of production assets of 2.6 years is the average useful life of capital assets used in Controladora Vuela Compania de Aviacion 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 VLRS is equal to -10%. 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 - $10794 million for Controladora Vuela Compania de Aviacion - 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 89.172 million for Controladora Vuela Compania de Aviacion 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 Controladora Vuela Compania de Aviacion at the current share price and the inputted number of shares is $1.3 billion.


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COMPANY NEWS

▶ Volaris to launch new nonstop flights from San Antonio to Mexico   [May-17-17 08:59AM  American City Business Journals]
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▶ Why These 2 Airlines Went Opposite Ways on Friday   [Apr-24-17 08:20AM  Motley Fool]
▶ Controladora Vuela reports 1Q loss   [Apr-20-17 07:58AM  Associated Press]
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▶ Why Volaris Stock Tanked 10.8% on Wednesday   [08:42AM  at Motley Fool]
▶ Volaris Announces Relevant Event   [Aug-22-16 05:30PM  Business Wire]
▶ Five Mexican Stocks Hedge Funds Are Bullish On   [Jun-11-16 06:04PM  at Insider Monkey]
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▶ Controladora Vuela posts 1Q profit   [Apr-25-16 07:37AM  AP]
Stock chart of VLRS Financial statements of VLRS Annual reports of VLRS
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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