Intrinsic value of Wabtec - WAB

Previous Close

$70.86

  Intrinsic Value

$195.76

stock screener

  Rating & Target

str. buy

+176%

  Value-price divergence*

-3%

Previous close

$70.86

 
Intrinsic value

$195.76

 
Up/down potential

+176%

 
Rating

str. buy

 
Value-price divergence*

-3%

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

We calculate the intrinsic value of WAB 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 6.2

 

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, %
  -11.40
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  2,931
  3,479
  4,082
  4,739
  5,449
  6,212
  7,025
  7,887
  8,799
  9,757
  10,763
  11,816
  12,914
  14,060
  15,252
  16,493
  17,783
  19,123
  20,516
  21,964
  23,469
  25,033
  26,660
  28,353
  30,115
  31,950
  33,861
  35,854
  37,932
  40,101
  42,365
Variable operating expenses, $m
 
  2,056
  2,376
  2,725
  3,102
  3,507
  3,939
  4,397
  4,881
  5,390
  5,924
  6,275
  6,858
  7,467
  8,100
  8,759
  9,444
  10,156
  10,896
  11,664
  12,464
  13,294
  14,158
  15,057
  15,993
  16,967
  17,983
  19,041
  20,145
  21,296
  22,499
Fixed operating expenses, $m
 
  744
  763
  782
  801
  821
  842
  863
  885
  907
  929
  953
  976
  1,001
  1,026
  1,051
  1,078
  1,105
  1,132
  1,161
  1,190
  1,219
  1,250
  1,281
  1,313
  1,346
  1,380
  1,414
  1,449
  1,486
  1,523
Total operating expenses, $m
  2,473
  2,800
  3,139
  3,507
  3,903
  4,328
  4,781
  5,260
  5,766
  6,297
  6,853
  7,228
  7,834
  8,468
  9,126
  9,810
  10,522
  11,261
  12,028
  12,825
  13,654
  14,513
  15,408
  16,338
  17,306
  18,313
  19,363
  20,455
  21,594
  22,782
  24,022
Operating income, $m
  458
  679
  944
  1,233
  1,546
  1,884
  2,244
  2,628
  3,034
  3,461
  3,910
  4,588
  5,080
  5,592
  6,126
  6,683
  7,261
  7,863
  8,489
  9,139
  9,816
  10,519
  11,252
  12,014
  12,809
  13,636
  14,499
  15,399
  16,338
  17,319
  18,343
EBITDA, $m
  528
  934
  1,206
  1,504
  1,827
  2,175
  2,547
  2,942
  3,360
  3,800
  4,263
  4,747
  5,253
  5,782
  6,332
  6,905
  7,501
  8,120
  8,765
  9,435
  10,132
  10,857
  11,611
  12,396
  13,214
  14,066
  14,955
  15,882
  16,849
  17,859
  18,914
Interest expense (income), $m
  30
  62
  90
  120
  154
  190
  228
  269
  313
  359
  408
  459
  513
  568
  626
  687
  750
  815
  883
  954
  1,027
  1,104
  1,183
  1,266
  1,351
  1,441
  1,534
  1,631
  1,732
  1,837
  1,947
Earnings before tax, $m
  413
  618
  854
  1,112
  1,393
  1,694
  2,016
  2,358
  2,720
  3,102
  3,502
  4,129
  4,567
  5,024
  5,500
  5,996
  6,511
  7,048
  7,605
  8,185
  8,788
  9,416
  10,069
  10,749
  11,457
  12,195
  12,965
  13,768
  14,606
  15,482
  16,396
Tax expense, $m
  100
  167
  231
  300
  376
  457
  544
  637
  734
  837
  946
  1,115
  1,233
  1,356
  1,485
  1,619
  1,758
  1,903
  2,053
  2,210
  2,373
  2,542
  2,719
  2,902
  3,093
  3,293
  3,501
  3,717
  3,944
  4,180
  4,427
Net income, $m
  305
  451
  623
  812
  1,017
  1,237
  1,472
  1,722
  1,986
  2,264
  2,556
  3,014
  3,334
  3,668
  4,015
  4,377
  4,753
  5,145
  5,552
  5,975
  6,415
  6,874
  7,350
  7,847
  8,364
  8,903
  9,465
  10,051
  10,663
  11,302
  11,969

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  398
  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
  6,581
  7,340
  8,612
  9,998
  11,497
  13,105
  14,820
  16,640
  18,563
  20,585
  22,707
  24,927
  27,245
  29,662
  32,178
  34,795
  37,516
  40,345
  43,284
  46,338
  49,512
  52,813
  56,245
  59,816
  63,533
  67,404
  71,437
  75,642
  80,026
  84,601
  89,377
Adjusted assets (=assets-cash), $m
  6,183
  7,340
  8,612
  9,998
  11,497
  13,105
  14,820
  16,640
  18,563
  20,585
  22,707
  24,927
  27,245
  29,662
  32,178
  34,795
  37,516
  40,345
  43,284
  46,338
  49,512
  52,813
  56,245
  59,816
  63,533
  67,404
  71,437
  75,642
  80,026
  84,601
  89,377
Revenue / Adjusted assets
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
Average production assets, $m
  1,183
  1,406
  1,649
  1,915
  2,202
  2,510
  2,838
  3,187
  3,555
  3,942
  4,348
  4,773
  5,217
  5,680
  6,162
  6,663
  7,184
  7,726
  8,289
  8,874
  9,481
  10,113
  10,771
  11,455
  12,166
  12,908
  13,680
  14,485
  15,325
  16,201
  17,115
Working capital, $m
  1,421
  1,367
  1,604
  1,862
  2,142
  2,441
  2,761
  3,100
  3,458
  3,835
  4,230
  4,644
  5,075
  5,525
  5,994
  6,482
  6,989
  7,515
  8,063
  8,632
  9,223
  9,838
  10,477
  11,143
  11,835
  12,556
  13,307
  14,091
  14,907
  15,760
  16,649
Total debt, $m
  1,893
  2,560
  3,434
  4,387
  5,416
  6,521
  7,699
  8,950
  10,270
  11,660
  13,118
  14,643
  16,236
  17,896
  19,624
  21,422
  23,292
  25,235
  27,254
  29,352
  31,533
  33,800
  36,158
  38,612
  41,165
  43,825
  46,595
  49,484
  52,496
  55,639
  58,920
Total liabilities, $m
  4,375
  5,042
  5,916
  6,869
  7,898
  9,003
  10,181
  11,432
  12,752
  14,142
  15,600
  17,125
  18,718
  20,378
  22,106
  23,904
  25,774
  27,717
  29,736
  31,834
  34,015
  36,282
  38,640
  41,094
  43,647
  46,307
  49,077
  51,966
  54,978
  58,121
  61,402
Total equity, $m
  2,206
  2,297
  2,696
  3,129
  3,598
  4,102
  4,639
  5,208
  5,810
  6,443
  7,107
  7,802
  8,528
  9,284
  10,072
  10,891
  11,743
  12,628
  13,548
  14,504
  15,497
  16,530
  17,605
  18,722
  19,886
  21,098
  22,360
  23,676
  25,048
  26,480
  27,975
Total liabilities and equity, $m
  6,581
  7,339
  8,612
  9,998
  11,496
  13,105
  14,820
  16,640
  18,562
  20,585
  22,707
  24,927
  27,246
  29,662
  32,178
  34,795
  37,517
  40,345
  43,284
  46,338
  49,512
  52,812
  56,245
  59,816
  63,533
  67,405
  71,437
  75,642
  80,026
  84,601
  89,377
Debt-to-equity ratio
  0.858
  1.110
  1.270
  1.400
  1.510
  1.590
  1.660
  1.720
  1.770
  1.810
  1.850
  1.880
  1.900
  1.930
  1.950
  1.970
  1.980
  2.000
  2.010
  2.020
  2.030
  2.040
  2.050
  2.060
  2.070
  2.080
  2.080
  2.090
  2.100
  2.100
  2.110
Adjusted equity ratio
  0.292
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  305
  451
  623
  812
  1,017
  1,237
  1,472
  1,722
  1,986
  2,264
  2,556
  3,014
  3,334
  3,668
  4,015
  4,377
  4,753
  5,145
  5,552
  5,975
  6,415
  6,874
  7,350
  7,847
  8,364
  8,903
  9,465
  10,051
  10,663
  11,302
  11,969
Depreciation, amort., depletion, $m
  70
  255
  263
  272
  281
  292
  302
  314
  326
  339
  353
  159
  174
  189
  205
  222
  239
  258
  276
  296
  316
  337
  359
  382
  406
  430
  456
  483
  511
  540
  571
Funds from operations, $m
  506
  706
  886
  1,084
  1,298
  1,528
  1,774
  2,036
  2,312
  2,603
  2,909
  3,173
  3,508
  3,857
  4,220
  4,599
  4,993
  5,402
  5,828
  6,271
  6,732
  7,211
  7,709
  8,229
  8,769
  9,333
  9,921
  10,534
  11,173
  11,842
  12,540
Change in working capital, $m
  57
  215
  237
  258
  279
  300
  320
  339
  358
  377
  395
  414
  432
  450
  469
  488
  507
  527
  547
  569
  591
  615
  639
  665
  692
  721
  751
  783
  817
  852
  890
Cash from operations, $m
  449
  490
  649
  826
  1,019
  1,229
  1,455
  1,697
  1,954
  2,227
  2,514
  2,760
  3,076
  3,407
  3,752
  4,111
  4,486
  4,875
  5,281
  5,702
  6,140
  6,596
  7,070
  7,563
  8,077
  8,612
  9,169
  9,750
  10,357
  10,989
  11,650
Maintenance CAPEX, $m
  0
  -39
  -47
  -55
  -64
  -73
  -84
  -95
  -106
  -118
  -131
  -145
  -159
  -174
  -189
  -205
  -222
  -239
  -258
  -276
  -296
  -316
  -337
  -359
  -382
  -406
  -430
  -456
  -483
  -511
  -540
New CAPEX, $m
  -50
  -223
  -244
  -265
  -287
  -308
  -328
  -349
  -368
  -387
  -406
  -425
  -444
  -463
  -482
  -501
  -521
  -542
  -563
  -585
  -608
  -632
  -657
  -684
  -712
  -741
  -772
  -805
  -840
  -876
  -915
Cash from investing activities, $m
  -775
  -262
  -291
  -320
  -351
  -381
  -412
  -444
  -474
  -505
  -537
  -570
  -603
  -637
  -671
  -706
  -743
  -781
  -821
  -861
  -904
  -948
  -994
  -1,043
  -1,094
  -1,147
  -1,202
  -1,261
  -1,323
  -1,387
  -1,455
Free cash flow, $m
  -326
  228
  359
  505
  668
  847
  1,043
  1,254
  1,480
  1,721
  1,976
  2,190
  2,473
  2,770
  3,081
  3,405
  3,743
  4,094
  4,460
  4,841
  5,237
  5,648
  6,076
  6,520
  6,983
  7,465
  7,967
  8,489
  9,034
  9,602
  10,195
Issuance/(repayment) of debt, $m
  772
  797
  874
  952
  1,029
  1,105
  1,178
  1,250
  1,321
  1,390
  1,458
  1,525
  1,592
  1,660
  1,729
  1,798
  1,869
  1,943
  2,019
  2,098
  2,181
  2,267
  2,358
  2,453
  2,554
  2,659
  2,771
  2,888
  3,012
  3,143
  3,281
Issuance/(repurchase) of shares, $m
  -210
  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  
  556
  797
  874
  952
  1,029
  1,105
  1,178
  1,250
  1,321
  1,390
  1,458
  1,525
  1,592
  1,660
  1,729
  1,798
  1,869
  1,943
  2,019
  2,098
  2,181
  2,267
  2,358
  2,453
  2,554
  2,659
  2,771
  2,888
  3,012
  3,143
  3,281
Total cash flow (excl. dividends), $m
  204
  1,026
  1,233
  1,457
  1,697
  1,952
  2,221
  2,504
  2,800
  3,110
  3,434
  3,715
  4,066
  4,430
  4,809
  5,203
  5,612
  6,037
  6,479
  6,939
  7,417
  7,915
  8,434
  8,974
  9,537
  10,124
  10,737
  11,378
  12,046
  12,745
  13,476
Retained Cash Flow (-), $m
  -506
  -359
  -398
  -434
  -469
  -503
  -537
  -570
  -602
  -633
  -664
  -695
  -726
  -756
  -788
  -819
  -852
  -885
  -920
  -956
  -994
  -1,033
  -1,074
  -1,118
  -1,163
  -1,212
  -1,262
  -1,316
  -1,372
  -1,432
  -1,495
Prev. year cash balance distribution, $m
 
  268
  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
 
  934
  835
  1,024
  1,228
  1,449
  1,684
  1,934
  2,199
  2,477
  2,770
  3,020
  3,340
  3,674
  4,022
  4,384
  4,760
  5,152
  5,560
  5,983
  6,424
  6,882
  7,359
  7,856
  8,373
  8,913
  9,475
  10,062
  10,674
  11,313
  11,982
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  877
  731
  832
  919
  990
  1,044
  1,078
  1,092
  1,085
  1,060
  998
  943
  875
  797
  713
  626
  540
  456
  378
  307
  244
  189
  143
  106
  77
  54
  37
  24
  16
  10
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

Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, provides technology-based equipment and services for the freight rail and passenger transit vehicle industries worldwide. It operates in two segments, Freight and Transit. The Freight segment manufactures and services components for new and existing locomotive and freight cars; supplies railway electronics and positive train control equipment; offers signal design and engineering services; builds switcher locomotives; rebuilds freight locomotives; and provides heat exchangers and cooling systems for rail and other industrial markets. This segment serves publicly traded railroads; leasing companies; manufacturers of original equipment, such as locomotives and freight cars; and utilities. The Transit segment manufactures and services components for new and existing passenger transit vehicles, including subway cars and buses; builds commuter locomotives; and refurbishes subway cars. This segment serves public transit authorities and municipalities, leasing companies, and manufacturers of subway cars and buses. The company’s products comprise positive train control equipment and electronically controlled pneumatic braking products; railway electronics, including event recorders, monitoring equipment, and end of train devices; freight car truck components; draft gears, couplers, and slack adjusters; and air compressors and dryers. Its products also include track and switch products; railway braking equipment and related components; friction products consisting brake shoes and pads; door and window assemblies, and accessibility lifts and ramps for buses and subway cars; and traction motors, as well as builds, remanufactures, and overhauls commuter and switcher locomotives, and transit cars. The company was founded in 1869 and is headquartered in Wilmerding, Pennsylvania.

FINANCIAL RATIOS  of  Wabtec (WAB)

Valuation Ratios
P/E Ratio 22.2
Price to Sales 2.3
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 15.1
Price to Free Cash Flow 16.9
Growth Rates
Sales Growth Rate -11.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2%
Cap. Spend. - 3 Yr. Gr. Rate 4%
Financial Strength
Quick Ratio 3
Current Ratio 0.6
LT Debt to Equity 79.9%
Total Debt to Equity 85.8%
Interest Coverage 15
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 10.3%
Return On Total Capital 9.4%
Ret/ On T. Cap. - 3 Yr. Avg. 14.1%
Return On Equity 15.6%
Return On Equity - 3 Yr. Avg. 19.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 31.5%
Gross Margin - 3 Yr. Avg. 31.3%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 18.8%
Operating Margin 15.6%
Oper. Margin - 3 Yr. Avg. 17.1%
Pre-Tax Margin 14.1%
Pre-Tax Margin - 3 Yr. Avg. 16.2%
Net Profit Margin 10.4%
Net Profit Margin - 3 Yr. Avg. 11.3%
Effective Tax Rate 24.2%
Eff/ Tax Rate - 3 Yr. Avg. 28.9%
Payout Ratio 10.5%

WAB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WAB stock intrinsic value calculation we used $2931 million for the last fiscal year's total revenue generated by Wabtec. The default revenue input number comes from 2016 income statement of Wabtec. 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 WAB stock valuation model: a) initial revenue growth rate of 18.7% 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 6.5%, whose default value for WAB is calculated based on our internal credit rating of Wabtec, 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 Wabtec.
    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 WAB stock the variable cost ratio is equal to 60.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $726 million in the base year in the intrinsic value calculation for WAB 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 Wabtec.

Corporate tax rate of 27% is the nominal tax rate for Wabtec. 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 WAB 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 WAB are equal to 40.4%.

Life of production assets of 37.9 years is the average useful life of capital assets used in Wabtec 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 WAB is equal to 39.3%. 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 - $2206 million for Wabtec - 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 88.138 million for Wabtec 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 Wabtec at the current share price and the inputted number of shares is $6.2 billion.

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COMPANY NEWS

▶ New Strong Sell Stocks for July 28th   [Jul-28-17 09:01AM  Zacks]
▶ Wabtec misses Street 2Q forecasts   [Jul-25-17 10:28PM  Associated Press]
▶ Wabtec Announces Earnings Release Date   [Jul-14-17 06:45AM  GlobeNewswire]
▶ FTC Expected To Block Rite Aid-Walgreens Deal: Report   [Jun-09-17 01:13PM  Investor's Business Daily]
▶ Wabtec beats 1Q profit forecasts   [07:30AM  Associated Press]
▶ Rite Aid To Report Q4 As Walgreens Merger Doubts Plague Stock   [Apr-24-17 04:19PM  Investor's Business Daily]
▶ Timeline: Westinghouse Electric Co.   [Mar-29-17 04:45PM  at bizjournals.com]
▶ Timeline: Westinghouse Electric Co.   [04:45PM  American City Business Journals]
▶ State Owned Enterprises Take More Energy Business   [Mar-18-17 10:00AM  Oilprice.com]
▶ [$$] HKW Sells Workhorse Rail to Wabtec   [Dec-21-16 12:18PM  at The Wall Street Journal]
▶ Wabtec Announces Pricing of Senior Notes Offering   [Oct-31-16 04:11PM  GlobeNewswire]
▶ Wabtec Declares Regular Quarterly Dividend   [09:45AM  GlobeNewswire]
▶ [$$] Le Pony mal gard√©, Royal Opera House, London - 'Delight'   [Oct-19-16 09:35AM  at Financial Times]
Stock chart of WAB Financial statements of WAB
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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