Intrinsic value of Dentsply Sirona - XRAY

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$63.47

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$63.47

 
Intrinsic value

$9.87

 
Up/down potential

-84%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of XRAY 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 14.5

 

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, %
  40.05
  48.60
  44.24
  40.32
  36.78
  33.61
  30.75
  28.17
  25.85
  23.77
  21.89
  20.20
  18.68
  17.31
  16.08
  14.97
  13.98
  13.08
  12.27
  11.54
  10.89
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.54
  7.28
  7.05
Revenue, $m
  3,745
  5,565
  8,027
  11,263
  15,406
  20,584
  26,912
  34,494
  43,412
  53,730
  65,492
  78,723
  93,431
  109,607
  127,235
  146,287
  166,734
  188,541
  211,677
  236,114
  261,826
  288,796
  317,013
  346,475
  377,187
  409,164
  442,430
  477,014
  512,959
  550,312
  589,129
Variable operating expenses, $m
 
  4,497
  6,223
  8,492
  11,396
  15,026
  19,463
  24,778
  31,030
  38,264
  46,510
  55,190
  65,501
  76,842
  89,200
  102,557
  116,892
  132,180
  148,400
  165,532
  183,558
  202,465
  222,248
  242,902
  264,434
  286,852
  310,173
  334,420
  359,619
  385,806
  413,019
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
  3,291
  4,497
  6,223
  8,492
  11,396
  15,026
  19,463
  24,778
  31,030
  38,264
  46,510
  55,190
  65,501
  76,842
  89,200
  102,557
  116,892
  132,180
  148,400
  165,532
  183,558
  202,465
  222,248
  242,902
  264,434
  286,852
  310,173
  334,420
  359,619
  385,806
  413,019
Operating income, $m
  455
  1,068
  1,804
  2,772
  4,010
  5,558
  7,450
  9,716
  12,382
  15,466
  18,983
  23,533
  27,929
  32,765
  38,035
  43,730
  49,842
  56,361
  63,277
  70,582
  78,268
  86,330
  94,765
  103,572
  112,753
  122,312
  132,256
  142,595
  153,340
  164,506
  176,109
EBITDA, $m
  727
  1,819
  2,623
  3,681
  5,034
  6,726
  8,794
  11,272
  14,186
  17,557
  21,401
  25,725
  30,530
  35,816
  41,577
  47,802
  54,484
  61,610
  69,170
  77,155
  85,557
  94,370
  103,591
  113,218
  123,254
  133,703
  144,573
  155,874
  167,620
  179,826
  192,510
Interest expense (income), $m
  37
  53
  113
  194
  300
  436
  607
  815
  1,064
  1,358
  1,697
  2,084
  2,519
  3,003
  3,535
  4,115
  4,741
  5,414
  6,131
  6,892
  7,696
  8,542
  9,429
  10,357
  11,326
  12,336
  13,388
  14,482
  15,619
  16,802
  18,030
Earnings before tax, $m
  441
  1,015
  1,692
  2,578
  3,710
  5,122
  6,843
  8,901
  11,318
  14,109
  17,286
  21,449
  25,410
  29,762
  34,500
  39,615
  45,101
  50,947
  57,146
  63,690
  70,572
  77,789
  85,337
  93,216
  101,428
  109,976
  118,869
  128,113
  137,720
  147,704
  158,079
Tax expense, $m
  10
  274
  457
  696
  1,002
  1,383
  1,848
  2,403
  3,056
  3,809
  4,667
  5,791
  6,861
  8,036
  9,315
  10,696
  12,177
  13,756
  15,429
  17,196
  19,055
  21,003
  23,041
  25,168
  27,385
  29,694
  32,095
  34,591
  37,185
  39,880
  42,681
Net income, $m
  430
  741
  1,235
  1,882
  2,708
  3,739
  4,995
  6,498
  8,262
  10,299
  12,619
  15,658
  18,550
  21,727
  25,185
  28,919
  32,924
  37,191
  41,717
  46,494
  51,518
  56,786
  62,296
  68,047
  74,042
  80,283
  86,774
  93,522
  100,536
  107,824
  115,398

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  385
  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
  11,656
  16,762
  24,178
  33,925
  46,405
  61,999
  81,061
  103,897
  130,758
  161,838
  197,266
  237,119
  281,418
  330,142
  383,237
  440,624
  502,210
  567,894
  637,582
  711,185
  788,631
  869,866
  954,858
  1,043,599
  1,136,106
  1,232,423
  1,332,619
  1,436,791
  1,545,058
  1,657,565
  1,774,484
Adjusted assets (=assets-cash), $m
  11,271
  16,762
  24,178
  33,925
  46,405
  61,999
  81,061
  103,897
  130,758
  161,838
  197,266
  237,119
  281,418
  330,142
  383,237
  440,624
  502,210
  567,894
  637,582
  711,185
  788,631
  869,866
  954,858
  1,043,599
  1,136,106
  1,232,423
  1,332,619
  1,436,791
  1,545,058
  1,657,565
  1,774,484
Revenue / Adjusted assets
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
Average production assets, $m
  2,459
  3,656
  5,274
  7,400
  10,122
  13,524
  17,681
  22,662
  28,522
  35,301
  43,028
  51,721
  61,384
  72,012
  83,593
  96,111
  109,544
  123,871
  139,072
  155,127
  172,019
  189,739
  208,277
  227,634
  247,812
  268,821
  290,676
  313,399
  337,014
  361,555
  387,057
Working capital, $m
  1,112
  1,113
  1,605
  2,253
  3,081
  4,117
  5,382
  6,899
  8,682
  10,746
  13,098
  15,745
  18,686
  21,921
  25,447
  29,257
  33,347
  37,708
  42,335
  47,223
  52,365
  57,759
  63,403
  69,295
  75,437
  81,833
  88,486
  95,403
  102,592
  110,062
  117,826
Total debt, $m
  1,532
  3,220
  5,533
  8,575
  12,468
  17,334
  23,281
  30,406
  38,787
  48,483
  59,537
  71,971
  85,792
  100,994
  117,560
  135,465
  154,679
  175,173
  196,916
  219,880
  244,043
  269,388
  295,906
  323,593
  352,455
  382,506
  413,767
  446,269
  480,048
  515,150
  551,629
Total liabilities, $m
  3,542
  5,230
  7,543
  10,585
  14,478
  19,344
  25,291
  32,416
  40,797
  50,493
  61,547
  73,981
  87,802
  103,004
  119,570
  137,475
  156,689
  177,183
  198,926
  221,890
  246,053
  271,398
  297,916
  325,603
  354,465
  384,516
  415,777
  448,279
  482,058
  517,160
  553,639
Total equity, $m
  8,114
  11,532
  16,634
  23,341
  31,926
  42,656
  55,770
  71,481
  89,962
  111,344
  135,719
  163,138
  193,615
  227,138
  263,667
  303,149
  345,520
  390,711
  438,657
  489,296
  542,578
  598,468
  656,942
  717,996
  781,641
  847,907
  916,842
  988,512
  1,063,000
  1,140,405
  1,220,845
Total liabilities and equity, $m
  11,656
  16,762
  24,177
  33,926
  46,404
  62,000
  81,061
  103,897
  130,759
  161,837
  197,266
  237,119
  281,417
  330,142
  383,237
  440,624
  502,209
  567,894
  637,583
  711,186
  788,631
  869,866
  954,858
  1,043,599
  1,136,106
  1,232,423
  1,332,619
  1,436,791
  1,545,058
  1,657,565
  1,774,484
Debt-to-equity ratio
  0.189
  0.280
  0.330
  0.370
  0.390
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
Adjusted equity ratio
  0.686
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688
  0.688

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  430
  741
  1,235
  1,882
  2,708
  3,739
  4,995
  6,498
  8,262
  10,299
  12,619
  15,658
  18,550
  21,727
  25,185
  28,919
  32,924
  37,191
  41,717
  46,494
  51,518
  56,786
  62,296
  68,047
  74,042
  80,283
  86,774
  93,522
  100,536
  107,824
  115,398
Depreciation, amort., depletion, $m
  272
  750
  819
  909
  1,024
  1,168
  1,344
  1,555
  1,804
  2,091
  2,418
  2,192
  2,601
  3,051
  3,542
  4,072
  4,642
  5,249
  5,893
  6,573
  7,289
  8,040
  8,825
  9,646
  10,501
  11,391
  12,317
  13,280
  14,280
  15,320
  16,401
Funds from operations, $m
  520
  1,491
  2,054
  2,791
  3,732
  4,907
  6,340
  8,053
  10,066
  12,390
  15,037
  17,849
  21,151
  24,778
  28,727
  32,992
  37,565
  42,440
  47,609
  53,067
  58,807
  64,826
  71,121
  77,693
  84,543
  91,673
  99,091
  106,802
  114,816
  123,144
  131,798
Change in working capital, $m
  -43
  364
  492
  647
  829
  1,035
  1,266
  1,516
  1,784
  2,064
  2,352
  2,646
  2,941
  3,235
  3,526
  3,810
  4,089
  4,361
  4,627
  4,887
  5,142
  5,394
  5,643
  5,892
  6,142
  6,395
  6,653
  6,917
  7,189
  7,471
  7,763
Cash from operations, $m
  563
  2,426
  1,561
  2,144
  2,904
  3,871
  5,074
  6,537
  8,282
  10,327
  12,684
  15,203
  18,209
  21,543
  25,201
  29,181
  33,476
  38,079
  42,982
  48,179
  53,664
  59,432
  65,478
  71,801
  78,400
  85,278
  92,438
  99,885
  107,627
  115,674
  124,035
Maintenance CAPEX, $m
  0
  -104
  -155
  -223
  -314
  -429
  -573
  -749
  -960
  -1,209
  -1,496
  -1,823
  -2,192
  -2,601
  -3,051
  -3,542
  -4,072
  -4,642
  -5,249
  -5,893
  -6,573
  -7,289
  -8,040
  -8,825
  -9,646
  -10,501
  -11,391
  -12,317
  -13,280
  -14,280
  -15,320
New CAPEX, $m
  -126
  -1,197
  -1,618
  -2,126
  -2,722
  -3,402
  -4,158
  -4,981
  -5,859
  -6,779
  -7,728
  -8,693
  -9,663
  -10,628
  -11,581
  -12,517
  -13,433
  -14,327
  -15,201
  -16,055
  -16,893
  -17,719
  -18,539
  -19,356
  -20,178
  -21,009
  -21,855
  -22,722
  -23,616
  -24,541
  -25,503
Cash from investing activities, $m
  60
  -1,301
  -1,773
  -2,349
  -3,036
  -3,831
  -4,731
  -5,730
  -6,819
  -7,988
  -9,224
  -10,516
  -11,855
  -13,229
  -14,632
  -16,059
  -17,505
  -18,969
  -20,450
  -21,948
  -23,466
  -25,008
  -26,579
  -28,181
  -29,824
  -31,510
  -33,246
  -35,039
  -36,896
  -38,821
  -40,823
Free cash flow, $m
  623
  1,125
  -211
  -206
  -132
  41
  343
  807
  1,463
  2,339
  3,461
  4,687
  6,355
  8,314
  10,569
  13,122
  15,970
  19,110
  22,533
  26,232
  30,198
  34,423
  38,899
  43,619
  48,577
  53,768
  59,192
  64,846
  70,732
  76,853
  83,212
Issuance/(repayment) of debt, $m
  299
  1,709
  2,314
  3,041
  3,894
  4,866
  5,947
  7,125
  8,381
  9,697
  11,054
  12,434
  13,821
  15,202
  16,566
  17,905
  19,215
  20,494
  21,743
  22,964
  24,163
  25,345
  26,517
  27,687
  28,862
  30,051
  31,261
  32,501
  33,779
  35,102
  36,479
Issuance/(repurchase) of shares, $m
  -773
  585
  3,000
  3,871
  4,824
  5,823
  6,824
  7,779
  8,637
  9,347
  9,860
  10,297
  10,301
  10,007
  9,395
  8,456
  7,186
  5,588
  3,670
  1,443
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -461
  2,294
  5,314
  6,912
  8,718
  10,689
  12,771
  14,904
  17,018
  19,044
  20,914
  22,731
  24,122
  25,209
  25,961
  26,361
  26,401
  26,082
  25,413
  24,407
  24,163
  25,345
  26,517
  27,687
  28,862
  30,051
  31,261
  32,501
  33,779
  35,102
  36,479
Total cash flow (excl. dividends), $m
  164
  2,834
  2,102
  2,835
  3,762
  4,907
  6,291
  7,932
  9,843
  12,036
  14,515
  17,121
  20,176
  23,516
  27,134
  31,026
  35,185
  39,603
  44,275
  49,196
  54,361
  59,769
  65,417
  71,306
  77,439
  83,819
  90,453
  97,348
  104,511
  111,955
  119,691
Retained Cash Flow (-), $m
  -5,776
  -3,782
  -5,102
  -6,706
  -8,586
  -10,729
  -13,115
  -15,711
  -18,481
  -21,382
  -24,375
  -27,418
  -30,478
  -33,522
  -36,529
  -39,482
  -42,371
  -45,191
  -47,945
  -50,639
  -53,283
  -55,890
  -58,474
  -61,054
  -63,645
  -66,266
  -68,935
  -71,670
  -74,488
  -77,405
  -80,440
Prev. year cash balance distribution, $m
 
  364
  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
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1,079
  3,879
  6,942
  10,252
  13,794
  17,553
  21,518
  25,678
  30,024
  34,550
  39,251
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
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  137
  401
  576
  672
  703
  683
  628
  551
  465
  377
  296
Current shareholders' claim on cash, %
  100
  96.0
  83.8
  74.1
  66.5
  60.3
  55.4
  51.4
  48.1
  45.5
  43.3
  41.6
  40.2
  39.0
  38.2
  37.5
  37.0
  36.7
  36.5
  36.4
  36.4
  36.4
  36.4
  36.4
  36.4
  36.4
  36.4
  36.4
  36.4
  36.4
  36.4

DENTSPLY International Inc. designs, develops, manufactures, and markets various consumable dental products for the professional dental market in the United States and internationally. The company provides dental consumable products, including dental anesthetics, prophylaxis paste, dental sealants, impression materials, restorative materials, tooth whiteners, and topical fluoride; and small equipment products comprising dental handpieces, intraoral curing light systems, dental diagnostic systems, and ultrasonic scalers and polishers. It also offers dental laboratory products, such as dental prosthetics that include artificial teeth, precious metal dental alloys, dental ceramics, and crown and bridge materials, as well as computer aided design and machining ceramic systems, and porcelain furnaces. In addition, the company provides dental specialty products, which include endodontic instruments and materials, implants and related products, 3D digital scanning and treatment planning software, and dental and orthodontic appliances and accessories. Further, it offers consumable medical device products, such as urology catheters, various surgical products, medical drills, and other products. The company markets and sells its dental products through distributors, dealers, and importers to dentists, dental hygienists, dental assistants, dental laboratories, and dental schools; and medical products directly, as well as through distributors to urologists, urology nurses, and general practitioners. DENTSPLY International Inc. was founded in 1899 and is headquartered in York, Pennsylvania.

FINANCIAL RATIOS  of  Dentsply Sirona (XRAY)

Valuation Ratios
P/E Ratio 34
Price to Sales 3.9
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 25.9
Price to Free Cash Flow 33.4
Growth Rates
Sales Growth Rate 40.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 75%
Cap. Spend. - 3 Yr. Gr. Rate 4.5%
Financial Strength
Quick Ratio 18
Current Ratio 0.3
LT Debt to Equity 18.6%
Total Debt to Equity 18.9%
Interest Coverage 13
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 6.5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.4%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 10.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 53.4%
Gross Margin - 3 Yr. Avg. 55%
EBITDA Margin 20%
EBITDA Margin - 3 Yr. Avg. 19.6%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 13.8%
Pre-Tax Margin 11.8%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin 11.5%
Net Profit Margin - 3 Yr. Avg. 10.6%
Effective Tax Rate 2.3%
Eff/ Tax Rate - 3 Yr. Avg. 15.2%
Payout Ratio 15.1%

XRAY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XRAY stock intrinsic value calculation we used $3745 million for the last fiscal year's total revenue generated by Dentsply Sirona. The default revenue input number comes from 2016 income statement of Dentsply Sirona. 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 XRAY stock valuation model: a) initial revenue growth rate of 48.6% 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 XRAY is calculated based on our internal credit rating of Dentsply Sirona, 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 Dentsply Sirona.
    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 XRAY stock the variable cost ratio is equal to 86%.

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 XRAY 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 Dentsply Sirona.

Corporate tax rate of 27% is the nominal tax rate for Dentsply Sirona. 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 XRAY 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 XRAY are equal to 65.7%.

Life of production assets of 23.6 years is the average useful life of capital assets used in Dentsply Sirona 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 XRAY is equal to 20%. 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 - $8114 million for Dentsply Sirona - 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 228.86 million for Dentsply Sirona 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 Dentsply Sirona at the current share price and the inputted number of shares is $14.5 billion.


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Stock chart of XRAY Financial statements of XRAY
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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