Intrinsic value of White Mountains Insurance Group - WTM

Previous Close

$860.75

  Intrinsic Value

$8,239

stock screener

  Rating & Target

str. buy

+857%

Previous close

$860.75

 
Intrinsic value

$8,239

 
Up/down potential

+857%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as WTM.

We calculate the intrinsic value of WTM 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 3.9

 

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, %
  -16.09
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  0
  2,178
  3,364
  5,031
  7,300
  10,300
  14,160
  19,007
  24,957
  32,113
  40,562
  50,369
  61,581
  74,225
  88,313
  103,841
  120,792
  139,142
  158,862
  179,919
  202,283
  225,923
  250,815
  276,941
  304,288
  332,852
  362,637
  393,655
  425,928
  459,484
  494,362
Variable operating expenses, $m
 
  542
  838
  1,253
  1,818
  2,565
  3,526
  4,733
  6,214
  7,996
  10,100
  12,542
  15,334
  18,482
  21,990
  25,856
  30,077
  34,646
  39,557
  44,800
  50,368
  56,255
  62,453
  68,958
  75,768
  82,880
  90,297
  98,020
  106,056
  114,412
  123,096
Fixed operating expenses, $m
 
  1,099
  1,126
  1,154
  1,183
  1,213
  1,243
  1,274
  1,306
  1,339
  1,372
  1,407
  1,442
  1,478
  1,515
  1,553
  1,591
  1,631
  1,672
  1,714
  1,757
  1,801
  1,846
  1,892
  1,939
  1,987
  2,037
  2,088
  2,140
  2,194
  2,249
Total operating expenses, $m
  1,385
  1,641
  1,964
  2,407
  3,001
  3,778
  4,769
  6,007
  7,520
  9,335
  11,472
  13,949
  16,776
  19,960
  23,505
  27,409
  31,668
  36,277
  41,229
  46,514
  52,125
  58,056
  64,299
  70,850
  77,707
  84,867
  92,334
  100,108
  108,196
  116,606
  125,345
Operating income, $m
  -24
  537
  1,400
  2,624
  4,299
  6,522
  9,391
  13,000
  17,437
  22,778
  29,090
  36,420
  44,805
  54,265
  64,809
  76,432
  89,123
  102,865
  117,633
  133,406
  150,158
  167,868
  186,517
  206,091
  226,581
  247,984
  270,303
  293,547
  317,732
  342,879
  369,017
EBITDA, $m
  42
  554
  1,427
  2,664
  4,358
  6,605
  9,504
  13,152
  17,636
  23,035
  29,414
  36,823
  45,298
  54,859
  65,515
  77,263
  90,090
  103,978
  118,904
  134,845
  151,776
  169,675
  188,523
  208,307
  229,015
  250,647
  273,204
  296,696
  321,139
  346,555
  372,972
Interest expense (income), $m
  15
  1
  151
  370
  676
  1,094
  1,645
  2,355
  3,246
  4,340
  5,657
  7,210
  9,014
  11,075
  13,401
  15,991
  18,847
  21,964
  25,338
  28,965
  32,837
  36,950
  41,297
  45,875
  50,679
  55,708
  60,961
  66,438
  72,142
  78,077
  84,248
Earnings before tax, $m
  -40
  535
  1,249
  2,254
  3,623
  5,429
  7,746
  10,645
  14,190
  18,438
  23,433
  29,210
  35,792
  43,190
  51,408
  60,441
  70,277
  80,901
  92,295
  104,441
  117,321
  130,918
  145,220
  160,216
  175,902
  192,276
  209,343
  227,109
  245,590
  264,802
  284,770
Tax expense, $m
  -45
  145
  337
  609
  978
  1,466
  2,091
  2,874
  3,831
  4,978
  6,327
  7,887
  9,664
  11,661
  13,880
  16,319
  18,975
  21,843
  24,920
  28,199
  31,677
  35,348
  39,209
  43,258
  47,494
  51,915
  56,522
  61,319
  66,309
  71,497
  76,888
Net income, $m
  413
  391
  912
  1,646
  2,645
  3,963
  5,654
  7,771
  10,359
  13,460
  17,106
  21,323
  26,128
  31,529
  37,528
  44,122
  51,302
  59,057
  67,375
  76,242
  85,644
  95,570
  106,010
  116,958
  128,409
  140,362
  152,820
  165,790
  179,281
  193,306
  207,882

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  6,545
  10,469
  16,175
  24,190
  35,098
  49,518
  68,076
  91,378
  119,985
  154,392
  195,009
  242,157
  296,060
  356,852
  424,584
  499,235
  580,730
  668,953
  763,759
  864,997
  972,514
  1,086,169
  1,205,843
  1,331,447
  1,462,922
  1,600,249
  1,743,446
  1,892,573
  2,047,731
  2,209,060
  2,376,740
Adjusted assets (=assets-cash), $m
  6,545
  10,469
  16,175
  24,190
  35,098
  49,518
  68,076
  91,378
  119,985
  154,392
  195,009
  242,157
  296,060
  356,852
  424,584
  499,235
  580,730
  668,953
  763,759
  864,997
  972,514
  1,086,169
  1,205,843
  1,331,447
  1,462,922
  1,600,249
  1,743,446
  1,892,573
  2,047,731
  2,209,060
  2,376,740
Revenue / Adjusted assets
  0.000
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
Average production assets, $m
  55
  87
  135
  201
  292
  412
  566
  760
  998
  1,285
  1,622
  2,015
  2,463
  2,969
  3,533
  4,154
  4,832
  5,566
  6,354
  7,197
  8,091
  9,037
  10,033
  11,078
  12,172
  13,314
  14,505
  15,746
  17,037
  18,379
  19,774
Working capital, $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
  0
Total debt, $m
  13
  1,782
  4,350
  7,956
  12,865
  19,354
  27,705
  38,191
  51,064
  66,547
  84,825
  106,042
  130,298
  157,655
  188,134
  221,727
  258,400
  298,100
  340,763
  386,320
  434,702
  485,847
  539,700
  596,222
  655,386
  717,183
  781,622
  848,729
  918,550
  991,148
  1,066,604
Total liabilities, $m
  2,941
  4,711
  7,279
  10,885
  15,794
  22,283
  30,634
  41,120
  53,993
  69,476
  87,754
  108,971
  133,227
  160,584
  191,063
  224,656
  261,329
  301,029
  343,692
  389,249
  437,631
  488,776
  542,629
  599,151
  658,315
  720,112
  784,551
  851,658
  921,479
  994,077
  1,069,533
Total equity, $m
  3,603
  5,758
  8,896
  13,304
  19,304
  27,235
  37,442
  50,258
  65,992
  84,915
  107,255
  133,186
  162,833
  196,269
  233,521
  274,579
  319,402
  367,924
  420,068
  475,749
  534,883
  597,393
  663,214
  732,296
  804,607
  880,137
  958,895
  1,040,915
  1,126,252
  1,214,983
  1,307,207
Total liabilities and equity, $m
  6,544
  10,469
  16,175
  24,189
  35,098
  49,518
  68,076
  91,378
  119,985
  154,391
  195,009
  242,157
  296,060
  356,853
  424,584
  499,235
  580,731
  668,953
  763,760
  864,998
  972,514
  1,086,169
  1,205,843
  1,331,447
  1,462,922
  1,600,249
  1,743,446
  1,892,573
  2,047,731
  2,209,060
  2,376,740
Debt-to-equity ratio
  0.004
  0.310
  0.490
  0.600
  0.670
  0.710
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.820
  0.820
Adjusted equity ratio
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  413
  391
  912
  1,646
  2,645
  3,963
  5,654
  7,771
  10,359
  13,460
  17,106
  21,323
  26,128
  31,529
  37,528
  44,122
  51,302
  59,057
  67,375
  76,242
  85,644
  95,570
  106,010
  116,958
  128,409
  140,362
  152,820
  165,790
  179,281
  193,306
  207,882
Depreciation, amort., depletion, $m
  66
  17
  27
  40
  58
  82
  113
  152
  200
  257
  324
  403
  493
  594
  707
  831
  966
  1,113
  1,271
  1,439
  1,618
  1,807
  2,007
  2,216
  2,434
  2,663
  2,901
  3,149
  3,407
  3,676
  3,955
Funds from operations, $m
  -364
  408
  939
  1,686
  2,703
  4,045
  5,768
  7,923
  10,559
  13,717
  17,431
  21,726
  26,621
  32,123
  38,234
  44,952
  52,268
  60,171
  68,646
  77,681
  87,262
  97,378
  108,017
  119,174
  130,843
  143,025
  155,721
  168,939
  182,688
  196,982
  211,837
Change in working capital, $m
  -209
  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 operations, $m
  -155
  408
  939
  1,686
  2,703
  4,045
  5,768
  7,923
  10,559
  13,717
  17,431
  21,726
  26,621
  32,123
  38,234
  44,952
  52,268
  60,171
  68,646
  77,681
  87,262
  97,378
  108,017
  119,174
  130,843
  143,025
  155,721
  168,939
  182,688
  196,982
  211,837
Maintenance CAPEX, $m
  0
  -11
  -17
  -27
  -40
  -58
  -82
  -113
  -152
  -200
  -257
  -324
  -403
  -493
  -594
  -707
  -831
  -966
  -1,113
  -1,271
  -1,439
  -1,618
  -1,807
  -2,007
  -2,216
  -2,434
  -2,663
  -2,901
  -3,149
  -3,407
  -3,676
New CAPEX, $m
  -4
  -32
  -47
  -67
  -91
  -120
  -154
  -194
  -238
  -286
  -338
  -392
  -448
  -506
  -564
  -621
  -678
  -734
  -789
  -842
  -895
  -946
  -996
  -1,045
  -1,094
  -1,143
  -1,191
  -1,241
  -1,291
  -1,342
  -1,395
Cash from investing activities, $m
  1,277
  -43
  -64
  -94
  -131
  -178
  -236
  -307
  -390
  -486
  -595
  -716
  -851
  -999
  -1,158
  -1,328
  -1,509
  -1,700
  -1,902
  -2,113
  -2,334
  -2,564
  -2,803
  -3,052
  -3,310
  -3,577
  -3,854
  -4,142
  -4,440
  -4,749
  -5,071
Free cash flow, $m
  1,122
  365
  874
  1,592
  2,572
  3,867
  5,531
  7,616
  10,168
  13,231
  16,836
  21,010
  25,769
  31,124
  37,077
  43,625
  50,759
  58,470
  66,744
  75,568
  84,928
  94,814
  105,214
  116,122
  127,534
  139,448
  151,867
  164,797
  178,248
  192,232
  206,766
Issuance/(repayment) of debt, $m
  -405
  1,769
  2,568
  3,607
  4,909
  6,489
  8,351
  10,486
  12,873
  15,483
  18,278
  21,217
  24,256
  27,356
  30,479
  33,593
  36,673
  39,700
  42,663
  45,557
  48,382
  51,145
  53,854
  56,522
  59,164
  61,797
  64,439
  67,107
  69,821
  72,598
  75,456
Issuance/(repurchase) of shares, $m
  -889
  1,764
  2,226
  2,762
  3,355
  3,968
  4,552
  5,045
  5,375
  5,464
  5,233
  4,608
  3,519
  1,907
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -937
  3,533
  4,794
  6,369
  8,264
  10,457
  12,903
  15,531
  18,248
  20,947
  23,511
  25,825
  27,775
  29,263
  30,479
  33,593
  36,673
  39,700
  42,663
  45,557
  48,382
  51,145
  53,854
  56,522
  59,164
  61,797
  64,439
  67,107
  69,821
  72,598
  75,456
Total cash flow (excl. dividends), $m
  184
  3,899
  5,668
  7,961
  10,836
  14,324
  18,434
  23,147
  28,417
  34,178
  40,347
  46,834
  53,544
  60,387
  67,556
  77,218
  87,432
  98,170
  109,407
  121,125
  133,311
  145,958
  159,067
  172,644
  186,697
  201,245
  216,306
  231,904
  248,069
  264,830
  282,222
Retained Cash Flow (-), $m
  310
  -2,155
  -3,138
  -4,408
  -6,000
  -7,931
  -10,207
  -12,816
  -15,734
  -18,924
  -22,340
  -25,931
  -29,647
  -33,436
  -37,252
  -41,058
  -44,822
  -48,522
  -52,144
  -55,681
  -59,134
  -62,510
  -65,821
  -69,082
  -72,311
  -75,530
  -78,759
  -82,020
  -85,337
  -88,731
  -92,224
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
 
  1,743
  2,530
  3,553
  4,836
  6,393
  8,228
  10,331
  12,683
  15,254
  18,008
  20,903
  23,898
  26,952
  30,304
  36,160
  42,610
  49,648
  57,264
  65,444
  74,177
  83,448
  93,246
  103,562
  114,386
  125,715
  137,547
  149,884
  162,732
  176,099
  189,998
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
 
  1,672
  2,316
  3,092
  3,982
  4,955
  5,971
  6,979
  7,927
  8,763
  9,441
  9,926
  10,198
  10,248
  10,174
  10,616
  10,828
  10,803
  10,546
  10,077
  9,426
  8,631
  7,737
  6,788
  5,826
  4,890
  4,013
  3,217
  2,518
  1,922
  1,431
Current shareholders' claim on cash, %
  100
  69.0
  51.0
  39.7
  32.3
  27.1
  23.5
  21.0
  19.1
  17.7
  16.8
  16.2
  15.8
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6
  15.6

White Mountains Insurance Group, Ltd. is a holding company. The Company's principal businesses are conducted through its insurance subsidiaries and other affiliates. Its segments include HG Global/BAM and Other Operations. The HG Global/BAM segment consists of the operations of HG Global Ltd. (HG Global) and Build America Mutual Assurance Company (BAM). The Other Operations segment consists of the Company and its intermediate holding companies, its investment management subsidiary, White Mountains Advisors LLC, and certain consolidated and unconsolidated private capital investments.

FINANCIAL RATIOS  of  White Mountains Insurance Group (WTM)

Valuation Ratios
P/E Ratio 9.5
Price to Sales 2.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow -25.3
Price to Free Cash Flow -24.7
Growth Rates
Sales Growth Rate -16.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0.4%
Total Debt to Equity 0.4%
Interest Coverage -2
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 10.5%
Ret/ On T. Cap. - 3 Yr. Avg. 8.1%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 3%
EBITDA Margin - 3 Yr. Avg. 5.6%
Operating Margin -1.8%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin -2.9%
Pre-Tax Margin - 3 Yr. Avg. 1.6%
Net Profit Margin 30.3%
Net Profit Margin - 3 Yr. Avg. 23.6%
Effective Tax Rate 112.5%
Eff/ Tax Rate - 3 Yr. Avg. 53.4%
Payout Ratio 1.2%

WTM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WTM stock intrinsic value calculation we used $1361 million for the last fiscal year's total revenue generated by White Mountains Insurance Group. The default revenue input number comes from 2016 income statement of White Mountains Insurance Group. 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 WTM stock valuation model: a) initial revenue growth rate of 60% 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 WTM is calculated based on our internal credit rating of White Mountains Insurance Group, 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 White Mountains Insurance Group.
    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 WTM stock the variable cost ratio is equal to 24.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1072 million in the base year in the intrinsic value calculation for WTM 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 8.5% for White Mountains Insurance Group.

Corporate tax rate of 27% is the nominal tax rate for White Mountains Insurance Group. 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 WTM 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 WTM are equal to 4%.

Life of production assets of 0.8 years is the average useful life of capital assets used in White Mountains Insurance Group 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 WTM is equal to 0%. 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 - $3603 million for White Mountains Insurance Group - 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 4.572 million for White Mountains Insurance Group 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 White Mountains Insurance Group at the current share price and the inputted number of shares is $3.9 billion.

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COMPANY NEWS

▶ White Mountains posts 3Q profit   [Nov-08-17 08:29AM  Associated Press]
▶ White Mountains To Acquire 50% Stake in DavidShield   [Oct-03-17 04:30PM  PR Newswire]
▶ Mary Choksi Elected To The White Mountains Board   [Aug-25-17 07:30AM  PR Newswire]
▶ White Mountains posts 2Q profit   [Aug-04-17 11:36PM  Associated Press]
▶ White Mountains posts 1Q profit   [May-03-17 05:28AM  Associated Press]
▶ Reid Campbell to Become CFO of White Mountains   [May-02-17 04:25PM  PR Newswire]
▶ White Mountains Declares Annual Dividend   [08:00AM  PR Newswire]
▶ Bermuda's OneBeacon Insurance Group to Explore Sale   [Jan-18-17 11:28AM  at Bloomberg]
▶ Should You Buy White Mountains Insurance Group Ltd (WTM)?   [Dec-12-16 05:14PM  at Insider Monkey]
Financial statements of WTM
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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