Intrinsic value of United States Steel - X

Previous Close

$25.00

  Intrinsic Value

$3.25

stock screener

  Rating & Target

str. sell

-87%

  Value-price divergence*

-77%

Previous close

$25.00

 
Intrinsic value

$3.25

 
Up/down potential

-87%

 
Rating

str. sell

 
Value-price divergence*

-77%

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

We calculate the intrinsic value of X 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 4.4

 

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, %
  -11.34
  16.40
  15.26
  14.23
  13.31
  12.48
  11.73
  11.06
  10.45
  9.91
  9.42
  8.97
  8.58
  8.22
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
Revenue, $m
  10,261
  11,944
  13,766
  15,726
  17,819
  20,043
  22,394
  24,871
  27,470
  30,192
  33,035
  36,000
  39,088
  42,301
  45,641
  49,114
  52,722
  56,472
  60,369
  64,421
  68,634
  73,017
  77,578
  82,328
  87,276
  92,434
  97,812
  103,423
  109,280
  115,396
  121,785
Variable operating expenses, $m
 
  13,222
  15,239
  17,409
  19,726
  22,187
  24,790
  27,532
  30,410
  33,422
  36,570
  39,852
  43,270
  46,827
  50,525
  54,369
  58,363
  62,515
  66,829
  71,314
  75,978
  80,830
  85,879
  91,137
  96,615
  102,324
  108,278
  114,489
  120,973
  127,743
  134,816
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
  10,448
  13,222
  15,239
  17,409
  19,726
  22,187
  24,790
  27,532
  30,410
  33,422
  36,570
  39,852
  43,270
  46,827
  50,525
  54,369
  58,363
  62,515
  66,829
  71,314
  75,978
  80,830
  85,879
  91,137
  96,615
  102,324
  108,278
  114,489
  120,973
  127,743
  134,816
Operating income, $m
  -187
  -1,278
  -1,473
  -1,683
  -1,907
  -2,145
  -2,396
  -2,661
  -2,939
  -3,231
  -3,535
  -3,852
  -4,182
  -4,526
  -4,884
  -5,255
  -5,641
  -6,043
  -6,460
  -6,893
  -7,344
  -7,813
  -8,301
  -8,809
  -9,339
  -9,890
  -10,466
  -11,066
  -11,693
  -12,347
  -13,031
EBITDA, $m
  320
  -768
  -885
  -1,011
  -1,146
  -1,289
  -1,440
  -1,599
  -1,766
  -1,941
  -2,124
  -2,315
  -2,513
  -2,720
  -2,935
  -3,158
  -3,390
  -3,631
  -3,882
  -4,142
  -4,413
  -4,695
  -4,988
  -5,294
  -5,612
  -5,944
  -6,289
  -6,650
  -7,027
  -7,420
  -7,831
Interest expense (income), $m
  193
  188
  258
  335
  417
  505
  598
  697
  801
  910
  1,024
  1,144
  1,268
  1,398
  1,532
  1,673
  1,818
  1,970
  2,127
  2,291
  2,461
  2,638
  2,822
  3,013
  3,212
  3,420
  3,636
  3,862
  4,098
  4,343
  4,600
Earnings before tax, $m
  -416
  -1,466
  -1,731
  -2,018
  -2,324
  -2,650
  -2,994
  -3,358
  -3,740
  -4,141
  -4,559
  -4,996
  -5,450
  -5,924
  -6,416
  -6,928
  -7,460
  -8,012
  -8,587
  -9,184
  -9,805
  -10,450
  -11,122
  -11,822
  -12,551
  -13,310
  -14,102
  -14,928
  -15,791
  -16,691
  -17,631
Tax expense, $m
  24
  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
Net income, $m
  -440
  -1,466
  -1,731
  -2,018
  -2,324
  -2,650
  -2,994
  -3,358
  -3,740
  -4,141
  -4,559
  -4,996
  -5,450
  -5,924
  -6,416
  -6,928
  -7,460
  -8,012
  -8,587
  -9,184
  -9,805
  -10,450
  -11,122
  -11,822
  -12,551
  -13,310
  -14,102
  -14,928
  -15,791
  -16,691
  -17,631

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,515
  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
  9,160
  8,900
  10,258
  11,718
  13,278
  14,935
  16,687
  18,533
  20,470
  22,498
  24,616
  26,826
  29,126
  31,521
  34,010
  36,597
  39,286
  42,081
  44,985
  48,004
  51,143
  54,409
  57,808
  61,347
  65,035
  68,878
  72,885
  77,066
  81,431
  85,988
  90,749
Adjusted assets (=assets-cash), $m
  7,645
  8,900
  10,258
  11,718
  13,278
  14,935
  16,687
  18,533
  20,470
  22,498
  24,616
  26,826
  29,126
  31,521
  34,010
  36,597
  39,286
  42,081
  44,985
  48,004
  51,143
  54,409
  57,808
  61,347
  65,035
  68,878
  72,885
  77,066
  81,431
  85,988
  90,749
Revenue / Adjusted assets
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
  1.342
Average production assets, $m
  4,381
  5,100
  5,878
  6,715
  7,609
  8,558
  9,562
  10,620
  11,730
  12,892
  14,106
  15,372
  16,690
  18,062
  19,489
  20,972
  22,512
  24,114
  25,778
  27,508
  29,307
  31,178
  33,126
  35,154
  37,267
  39,469
  41,766
  44,162
  46,663
  49,274
  52,002
Working capital, $m
  2,025
  657
  757
  865
  980
  1,102
  1,232
  1,368
  1,511
  1,661
  1,817
  1,980
  2,150
  2,327
  2,510
  2,701
  2,900
  3,106
  3,320
  3,543
  3,775
  4,016
  4,267
  4,528
  4,800
  5,084
  5,380
  5,688
  6,010
  6,347
  6,698
Total debt, $m
  3,031
  4,102
  5,316
  6,621
  8,016
  9,497
  11,063
  12,713
  14,445
  16,258
  18,152
  20,127
  22,184
  24,324
  26,550
  28,863
  31,267
  33,765
  36,361
  39,060
  41,867
  44,787
  47,825
  50,990
  54,286
  57,722
  61,304
  65,042
  68,944
  73,018
  77,275
Total liabilities, $m
  6,886
  7,957
  9,171
  10,476
  11,871
  13,352
  14,918
  16,568
  18,300
  20,113
  22,007
  23,982
  26,039
  28,179
  30,405
  32,718
  35,122
  37,620
  40,216
  42,915
  45,722
  48,642
  51,680
  54,845
  58,141
  61,577
  65,159
  68,897
  72,799
  76,873
  81,130
Total equity, $m
  2,274
  943
  1,087
  1,242
  1,407
  1,583
  1,769
  1,964
  2,170
  2,385
  2,609
  2,844
  3,087
  3,341
  3,605
  3,879
  4,164
  4,461
  4,768
  5,088
  5,421
  5,767
  6,128
  6,503
  6,894
  7,301
  7,726
  8,169
  8,632
  9,115
  9,619
Total liabilities and equity, $m
  9,160
  8,900
  10,258
  11,718
  13,278
  14,935
  16,687
  18,532
  20,470
  22,498
  24,616
  26,826
  29,126
  31,520
  34,010
  36,597
  39,286
  42,081
  44,984
  48,003
  51,143
  54,409
  57,808
  61,348
  65,035
  68,878
  72,885
  77,066
  81,431
  85,988
  90,749
Debt-to-equity ratio
  1.333
  4.350
  4.890
  5.330
  5.700
  6.000
  6.250
  6.470
  6.660
  6.820
  6.960
  7.080
  7.190
  7.280
  7.360
  7.440
  7.510
  7.570
  7.630
  7.680
  7.720
  7.770
  7.800
  7.840
  7.870
  7.910
  7.930
  7.960
  7.990
  8.010
  8.030
Adjusted equity ratio
  0.099
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106
  0.106

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -440
  -1,466
  -1,731
  -2,018
  -2,324
  -2,650
  -2,994
  -3,358
  -3,740
  -4,141
  -4,559
  -4,996
  -5,450
  -5,924
  -6,416
  -6,928
  -7,460
  -8,012
  -8,587
  -9,184
  -9,805
  -10,450
  -11,122
  -11,822
  -12,551
  -13,310
  -14,102
  -14,928
  -15,791
  -16,691
  -17,631
Depreciation, amort., depletion, $m
  507
  510
  588
  671
  761
  856
  956
  1,062
  1,173
  1,289
  1,411
  1,537
  1,669
  1,806
  1,949
  2,097
  2,251
  2,411
  2,578
  2,751
  2,931
  3,118
  3,313
  3,515
  3,727
  3,947
  4,177
  4,416
  4,666
  4,927
  5,200
Funds from operations, $m
  1,366
  -956
  -1,144
  -1,346
  -1,563
  -1,794
  -2,038
  -2,296
  -2,567
  -2,851
  -3,148
  -3,458
  -3,781
  -4,118
  -4,467
  -4,831
  -5,208
  -5,601
  -6,009
  -6,433
  -6,874
  -7,333
  -7,810
  -8,307
  -8,824
  -9,364
  -9,926
  -10,512
  -11,124
  -11,763
  -12,431
Change in working capital, $m
  639
  93
  100
  108
  115
  122
  129
  136
  143
  150
  156
  163
  170
  177
  184
  191
  198
  206
  214
  223
  232
  241
  251
  261
  272
  284
  296
  309
  322
  336
  351
Cash from operations, $m
  727
  -1,048
  -1,244
  -1,454
  -1,678
  -1,916
  -2,168
  -2,432
  -2,710
  -3,001
  -3,305
  -3,621
  -3,951
  -4,294
  -4,651
  -5,022
  -5,407
  -5,807
  -6,223
  -6,656
  -7,106
  -7,574
  -8,061
  -8,568
  -9,096
  -9,647
  -10,222
  -10,821
  -11,446
  -12,100
  -12,782
Maintenance CAPEX, $m
  0
  -438
  -510
  -588
  -671
  -761
  -856
  -956
  -1,062
  -1,173
  -1,289
  -1,411
  -1,537
  -1,669
  -1,806
  -1,949
  -2,097
  -2,251
  -2,411
  -2,578
  -2,751
  -2,931
  -3,118
  -3,313
  -3,515
  -3,727
  -3,947
  -4,177
  -4,416
  -4,666
  -4,927
New CAPEX, $m
  -306
  -720
  -778
  -837
  -894
  -950
  -1,004
  -1,057
  -1,110
  -1,162
  -1,214
  -1,266
  -1,319
  -1,372
  -1,427
  -1,483
  -1,541
  -1,601
  -1,664
  -1,730
  -1,799
  -1,872
  -1,948
  -2,028
  -2,113
  -2,202
  -2,296
  -2,396
  -2,501
  -2,612
  -2,728
Cash from investing activities, $m
  -318
  -1,158
  -1,288
  -1,425
  -1,565
  -1,711
  -1,860
  -2,013
  -2,172
  -2,335
  -2,503
  -2,677
  -2,856
  -3,041
  -3,233
  -3,432
  -3,638
  -3,852
  -4,075
  -4,308
  -4,550
  -4,803
  -5,066
  -5,341
  -5,628
  -5,929
  -6,243
  -6,573
  -6,917
  -7,278
  -7,655
Free cash flow, $m
  409
  -2,206
  -2,532
  -2,878
  -3,243
  -3,626
  -4,027
  -4,446
  -4,882
  -5,336
  -5,808
  -6,298
  -6,807
  -7,335
  -7,884
  -8,453
  -9,045
  -9,660
  -10,299
  -10,964
  -11,655
  -12,376
  -13,126
  -13,909
  -14,725
  -15,576
  -16,465
  -17,393
  -18,364
  -19,378
  -20,438
Issuance/(repayment) of debt, $m
  -112
  1,121
  1,214
  1,305
  1,394
  1,481
  1,566
  1,650
  1,732
  1,813
  1,894
  1,975
  2,057
  2,140
  2,226
  2,313
  2,404
  2,498
  2,596
  2,699
  2,807
  2,920
  3,039
  3,164
  3,296
  3,436
  3,583
  3,738
  3,902
  4,074
  4,256
Issuance/(repurchase) of shares, $m
  517
  1,600
  1,875
  2,172
  2,489
  2,825
  3,180
  3,554
  3,946
  4,356
  4,784
  5,230
  5,694
  6,178
  6,680
  7,202
  7,745
  8,309
  8,895
  9,504
  10,137
  10,797
  11,483
  12,197
  12,942
  13,718
  14,527
  15,372
  16,253
  17,174
  18,136
Cash from financing (excl. dividends), $m  
  390
  2,721
  3,089
  3,477
  3,883
  4,306
  4,746
  5,204
  5,678
  6,169
  6,678
  7,205
  7,751
  8,318
  8,906
  9,515
  10,149
  10,807
  11,491
  12,203
  12,944
  13,717
  14,522
  15,361
  16,238
  17,154
  18,110
  19,110
  20,155
  21,248
  22,392
Total cash flow (excl. dividends), $m
  791
  515
  557
  599
  640
  680
  719
  757
  795
  832
  870
  907
  944
  983
  1,022
  1,062
  1,104
  1,147
  1,192
  1,239
  1,289
  1,341
  1,395
  1,453
  1,513
  1,577
  1,645
  1,716
  1,791
  1,871
  1,954
Retained Cash Flow (-), $m
  162
  -1,600
  -1,875
  -2,172
  -2,489
  -2,825
  -3,180
  -3,554
  -3,946
  -4,356
  -4,784
  -5,230
  -5,694
  -6,178
  -6,680
  -7,202
  -7,745
  -8,309
  -8,895
  -9,504
  -10,137
  -10,797
  -11,483
  -12,197
  -12,942
  -13,718
  -14,527
  -15,372
  -16,253
  -17,174
  -18,136
Prev. year cash balance distribution, $m
 
  1,465
  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
 
  380
  -1,318
  -1,573
  -1,849
  -2,145
  -2,461
  -2,796
  -3,150
  -3,523
  -3,914
  -4,323
  -4,750
  -5,195
  -5,658
  -6,140
  -6,641
  -7,162
  -7,703
  -8,265
  -8,849
  -9,456
  -10,088
  -10,745
  -11,428
  -12,140
  -12,882
  -13,655
  -14,462
  -15,303
  -16,182
Discount rate, %
 
  7.40
  7.77
  8.16
  8.57
  8.99
  9.44
  9.92
  10.41
  10.93
  11.48
  12.05
  12.66
  13.29
  13.95
  14.65
  15.38
  16.15
  16.96
  17.81
  18.70
  19.63
  20.62
  21.65
  22.73
  23.87
  25.06
  26.31
  27.63
  29.01
  30.46
PV of cash for distribution, $m
 
  354
  -1,135
  -1,243
  -1,331
  -1,394
  -1,432
  -1,443
  -1,426
  -1,385
  -1,320
  -1,236
  -1,137
  -1,026
  -909
  -790
  -673
  -562
  -459
  -367
  -287
  -219
  -163
  -119
  -84
  -58
  -38
  -25
  -16
  -9
  -6
Current shareholders' claim on cash, %
  100
  49.3
  24.2
  11.9
  5.8
  2.8
  1.4
  0.7
  0.3
  0.2
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0

United States Steel Corporation produces and sells flat-rolled and tubular steel products in North America and Europe. It operates through three segments: Flat-Rolled Products (Flat-Rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular). The Flat-Rolled segment offers slabs, rounds, strip mill plates, sheets, and tin mill products. This segment serves customers in the automotive, consumer and the combined industrial, service center, and mining commercial markets. The USSE segment provides slabs, sheets, strip mill plates, tin mill products, and spiral welded pipes, as well as heating radiators and refractory ceramic materials. This segment serves customers in the construction, service center, conversion, container, transportation, appliance and electrical, oil, gas, and petrochemical markets. The Tubular segment offers seamless and electric resistance welded steel casing and tubing; and standard and line pipe and mechanical tubing products primarily to customers in the oil, gas, and petrochemical markets. The company also provides railroad services; and owns, develops, and manages various real estate assets. United States Steel Corporation was founded in 1901 and is headquartered in Pittsburgh, Pennsylvania.

FINANCIAL RATIOS  of  United States Steel (X)

Valuation Ratios
P/E Ratio -9.9
Price to Sales 0.4
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 6
Price to Free Cash Flow 10.3
Growth Rates
Sales Growth Rate -11.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -38.8%
Cap. Spend. - 3 Yr. Gr. Rate -8.6%
Financial Strength
Quick Ratio 30
Current Ratio 0
LT Debt to Equity 131.1%
Total Debt to Equity 133.3%
Interest Coverage -1
Management Effectiveness
Return On Assets -2.6%
Ret/ On Assets - 3 Yr. Avg. -4.6%
Return On Total Capital -8.1%
Ret/ On T. Cap. - 3 Yr. Avg. -10.7%
Return On Equity -18.7%
Return On Equity - 3 Yr. Avg. -22.8%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 6.2%
Gross Margin - 3 Yr. Avg. 7.2%
EBITDA Margin 2.8%
EBITDA Margin - 3 Yr. Avg. 0.9%
Operating Margin -1.8%
Oper. Margin - 3 Yr. Avg. -3.4%
Pre-Tax Margin -4.1%
Pre-Tax Margin - 3 Yr. Avg. -5.2%
Net Profit Margin -4.3%
Net Profit Margin - 3 Yr. Avg. -6%
Effective Tax Rate -5.8%
Eff/ Tax Rate - 3 Yr. Avg. 7.2%
Payout Ratio -7%

X stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the X stock intrinsic value calculation we used $10261 million for the last fiscal year's total revenue generated by United States Steel. The default revenue input number comes from 2016 income statement of United States Steel. 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 X stock valuation model: a) initial revenue growth rate of 16.4% 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 7.4%, whose default value for X is calculated based on our internal credit rating of United States Steel, 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 States Steel.
    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 X stock the variable cost ratio is equal to 110.7%.

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 X 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 6.3% for United States Steel.

Corporate tax rate of 27% is the nominal tax rate for United States Steel. 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 X 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 X are equal to 42.7%.

Life of production assets of 10 years is the average useful life of capital assets used in United States Steel 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 X is equal to 5.5%. 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 - $2274 million for United States Steel - 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 174.899 million for United States Steel 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 States Steel at the current share price and the inputted number of shares is $4.4 billion.

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COMPANY NEWS

▶ United States Steel: That Was Yesterday   [Jul-27-17 02:45PM  Barrons.com]
▶ "Old dog" stocks teach the market new tricks   [Jul-26-17 06:49PM  CNBC Videos]
▶ Story Stocks from Briefing.com   [11:18AM  Briefing.com]
▶ [$$] U.S. Steel Names Kevin Bradley as CFO   [10:38AM  The Wall Street Journal]
▶ U.S. Steel: Not Broken?   [10:13AM  Barrons.com]
▶ U.S. Steel Names Kevin Bradley New CFO   [09:44AM  TheStreet.com]
▶ U.S. Steel names new CFO   [08:48AM  MarketWatch]
▶ US Steel reports 2Q profit, offers optimistic outlook   [Jul-25-17 06:16PM  Associated Press]
▶ Chipotle, Wynn Resorts, U.S. Steel, Hawaiian Earnings Top   [04:39PM  Investor's Business Daily]
▶ US Steel beats the Street   [04:18PM  CNBC Videos]
▶ U.S. Steel Pops 10% Late On Massive Beat Amid Earnings Cascade   [10:40AM  Investor's Business Daily]
▶ What Markets Would Like to Hear from U.S. Steels Management   [Jul-21-17 10:39AM  Market Realist]
▶ Did U.S. Steel Burn Cash in 2Q17?   [09:12AM  Market Realist]
▶ Which U.S. Steel Segment Will Be the Wild Card in 2Q17?   [Jul-20-17 04:35PM  Market Realist]
▶ Could Wall Streets Views on U.S. Steel Corporation Change?   [Jul-17-17 09:06AM  Market Realist]
▶ Steel Stocks Spike As Trump Says He's Mulling Steel 'Quotas And Tariffs'   [Jul-13-17 04:27PM  Investor's Business Daily]
▶ What US Steel Investors Could Expect for 2Q17 Earnings   [Jul-12-17 04:54PM  Market Realist]
▶ China's ambition, US retreat on show in Serbian factory town   [Jul-10-17 11:39PM  Associated Press]
▶ What to Expect from the Global Steel Industry   [03:35PM  Market Realist]
▶ Steel: Possible US Solution to a Global Issue   [12:05PM  Market Realist]
▶ [$$] Steel Prices Show Durability   [Jul-08-17 12:44AM  Barrons.com]
▶ What Expectations Are Cliffs and Its Peers Setting for 2H17?   [Jul-07-17 03:45PM  Market Realist]
▶ Could US Steel Fall Prey to Geopolitics?   [Jul-06-17 09:09AM  Market Realist]
▶ Why U.S. Steel Stock Rose 8% in June   [Jul-05-17 07:53AM  Motley Fool]
▶ Could President Trump Be US Steels Santa This Year?   [Jul-04-17 07:39AM  Market Realist]
▶ [$$] Bedrock Industries Readies Takeover of Canada's Stelco   [02:13PM  The Wall Street Journal]
Stock chart of X Financial statements of X Annual reports of X
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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