Intrinsic value of American Equity Investment Life Holding - AEL

Previous Close

$34.34

  Intrinsic Value

$336.08

stock screener

  Rating & Target

str. buy

+879%

Previous close

$34.34

 
Intrinsic value

$336.08

 
Up/down potential

+879%

 
Rating

str. buy

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

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

We calculate the intrinsic value of AEL 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  46.15
  46.70
  42.53
  38.78
  35.40
  32.36
  29.62
  27.16
  24.94
  22.95
  21.16
  19.54
  18.09
  16.78
  15.60
  14.54
  13.59
  12.73
  11.95
  11.26
  10.63
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.69
  7.42
  7.18
  6.96
Revenue, $m
  0
  3,257
  4,642
  6,442
  8,722
  11,545
  14,964
  19,029
  23,776
  29,232
  35,417
  42,337
  49,994
  58,382
  67,489
  77,302
  87,804
  98,979
  110,811
  123,287
  136,396
  150,131
  164,487
  179,467
  195,073
  211,315
  228,207
  245,765
  264,013
  282,976
  302,682
Variable operating expenses, $m
 
  3,442
  4,906
  6,809
  9,219
  12,203
  15,817
  20,114
  25,131
  30,899
  37,435
  44,750
  52,844
  61,710
  71,336
  81,708
  92,808
  104,620
  117,127
  130,314
  144,171
  158,688
  173,863
  189,696
  206,192
  223,360
  241,214
  259,774
  279,062
  299,105
  319,935
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,505
  3,442
  4,906
  6,809
  9,219
  12,203
  15,817
  20,114
  25,131
  30,899
  37,435
  44,750
  52,844
  61,710
  71,336
  81,708
  92,808
  104,620
  117,127
  130,314
  144,171
  158,688
  173,863
  189,696
  206,192
  223,360
  241,214
  259,774
  279,062
  299,105
  319,935
Operating income, $m
  715
  -186
  -265
  -367
  -497
  -658
  -853
  -1,085
  -1,355
  -1,666
  -2,019
  -2,413
  -2,850
  -3,328
  -3,847
  -4,406
  -5,005
  -5,642
  -6,316
  -7,027
  -7,775
  -8,557
  -9,376
  -10,230
  -11,119
  -12,045
  -13,008
  -14,009
  -15,049
  -16,130
  -17,253
EBITDA, $m
  1,093
  -186
  -265
  -367
  -497
  -658
  -853
  -1,085
  -1,355
  -1,666
  -2,019
  -2,413
  -2,850
  -3,328
  -3,847
  -4,406
  -5,005
  -5,642
  -6,316
  -7,027
  -7,775
  -8,557
  -9,376
  -10,230
  -11,119
  -12,045
  -13,008
  -14,009
  -15,049
  -16,130
  -17,253
Interest expense (income), $m
  40
  43
  1,175
  2,982
  5,331
  8,307
  11,990
  16,453
  21,757
  27,952
  35,073
  43,143
  52,174
  62,167
  73,113
  84,998
  97,803
  111,508
  126,092
  141,533
  157,814
  174,921
  192,845
  211,581
  231,128
  251,494
  272,690
  294,734
  317,648
  341,462
  366,208
Earnings before tax, $m
  130
  -228
  -1,439
  -3,349
  -5,828
  -8,965
  -12,843
  -17,538
  -23,113
  -29,618
  -37,092
  -45,557
  -55,024
  -65,495
  -76,960
  -89,404
  -102,808
  -117,150
  -132,408
  -148,560
  -165,589
  -183,479
  -202,221
  -221,810
  -242,247
  -263,539
  -285,698
  -308,743
  -332,697
  -357,591
  -383,461
Tax expense, $m
  47
  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
  83
  -228
  -1,439
  -3,349
  -5,828
  -8,965
  -12,843
  -17,538
  -23,113
  -29,618
  -37,092
  -45,557
  -55,024
  -65,495
  -76,960
  -89,404
  -102,808
  -117,150
  -132,408
  -148,560
  -165,589
  -183,479
  -202,221
  -221,810
  -242,247
  -263,539
  -285,698
  -308,743
  -332,697
  -357,591
  -383,461

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
  56,053
  81,419
  116,046
  161,045
  218,054
  288,614
  374,112
  475,725
  594,394
  730,811
  885,417
  1,058,426
  1,249,852
  1,459,544
  1,687,226
  1,932,543
  2,195,091
  2,474,463
  2,770,269
  3,082,173
  3,409,902
  3,753,270
  4,112,187
  4,486,663
  4,876,816
  5,282,872
  5,705,166
  6,144,137
  6,600,329
  7,074,389
  7,567,058
Adjusted assets (=assets-cash), $m
  56,053
  81,419
  116,046
  161,045
  218,054
  288,614
  374,112
  475,725
  594,394
  730,811
  885,417
  1,058,426
  1,249,852
  1,459,544
  1,687,226
  1,932,543
  2,195,091
  2,474,463
  2,770,269
  3,082,173
  3,409,902
  3,753,270
  4,112,187
  4,486,663
  4,876,816
  5,282,872
  5,705,166
  6,144,137
  6,600,329
  7,074,389
  7,567,058
Revenue / Adjusted assets
  0.000
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
  0.040
Average production assets, $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
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
  736
  20,252
  51,416
  91,915
  143,223
  206,728
  283,676
  375,127
  481,930
  604,704
  743,850
  899,559
  1,071,842
  1,260,564
  1,465,479
  1,686,263
  1,922,557
  2,173,991
  2,440,217
  2,720,930
  3,015,886
  3,324,918
  3,647,943
  3,984,971
  4,336,109
  4,701,560
  5,081,624
  5,476,698
  5,887,271
  6,313,925
  6,757,327
Total liabilities, $m
  53,762
  73,277
  104,441
  144,940
  196,248
  259,753
  336,701
  428,152
  534,955
  657,729
  796,875
  952,584
  1,124,867
  1,313,589
  1,518,504
  1,739,288
  1,975,582
  2,227,016
  2,493,242
  2,773,955
  3,068,911
  3,377,943
  3,700,968
  4,037,996
  4,389,134
  4,754,585
  5,134,649
  5,529,723
  5,940,296
  6,366,950
  6,810,352
Total equity, $m
  2,292
  8,142
  11,605
  16,104
  21,805
  28,861
  37,411
  47,572
  59,439
  73,081
  88,542
  105,843
  124,985
  145,954
  168,723
  193,254
  219,509
  247,446
  277,027
  308,217
  340,990
  375,327
  411,219
  448,666
  487,682
  528,287
  570,517
  614,414
  660,033
  707,439
  756,706
Total liabilities and equity, $m
  56,054
  81,419
  116,046
  161,044
  218,053
  288,614
  374,112
  475,724
  594,394
  730,810
  885,417
  1,058,427
  1,249,852
  1,459,543
  1,687,227
  1,932,542
  2,195,091
  2,474,462
  2,770,269
  3,082,172
  3,409,901
  3,753,270
  4,112,187
  4,486,662
  4,876,816
  5,282,872
  5,705,166
  6,144,137
  6,600,329
  7,074,389
  7,567,058
Debt-to-equity ratio
  0.321
  2.490
  4.430
  5.710
  6.570
  7.160
  7.580
  7.890
  8.110
  8.270
  8.400
  8.500
  8.580
  8.640
  8.690
  8.730
  8.760
  8.790
  8.810
  8.830
  8.840
  8.860
  8.870
  8.880
  8.890
  8.900
  8.910
  8.910
  8.920
  8.930
  8.930
Adjusted equity ratio
  0.041
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  83
  -228
  -1,439
  -3,349
  -5,828
  -8,965
  -12,843
  -17,538
  -23,113
  -29,618
  -37,092
  -45,557
  -55,024
  -65,495
  -76,960
  -89,404
  -102,808
  -117,150
  -132,408
  -148,560
  -165,589
  -183,479
  -202,221
  -221,810
  -242,247
  -263,539
  -285,698
  -308,743
  -332,697
  -357,591
  -383,461
Depreciation, amort., depletion, $m
  378
  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
Funds from operations, $m
  1,189
  -228
  -1,439
  -3,349
  -5,828
  -8,965
  -12,843
  -17,538
  -23,113
  -29,618
  -37,092
  -45,557
  -55,024
  -65,495
  -76,960
  -89,404
  -102,808
  -117,150
  -132,408
  -148,560
  -165,589
  -183,479
  -202,221
  -221,810
  -242,247
  -263,539
  -285,698
  -308,743
  -332,697
  -357,591
  -383,461
Change in working capital, $m
  -225
  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
  1,414
  -228
  -1,439
  -3,349
  -5,828
  -8,965
  -12,843
  -17,538
  -23,113
  -29,618
  -37,092
  -45,557
  -55,024
  -65,495
  -76,960
  -89,404
  -102,808
  -117,150
  -132,408
  -148,560
  -165,589
  -183,479
  -202,221
  -221,810
  -242,247
  -263,539
  -285,698
  -308,743
  -332,697
  -357,591
  -383,461
Maintenance CAPEX, $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
New CAPEX, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from investing activities, $m
  -4,499
  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
Free cash flow, $m
  -3,085
  -228
  -1,439
  -3,349
  -5,828
  -8,965
  -12,843
  -17,538
  -23,113
  -29,618
  -37,092
  -45,557
  -55,024
  -65,495
  -76,960
  -89,404
  -102,808
  -117,150
  -132,408
  -148,560
  -165,589
  -183,479
  -202,221
  -221,810
  -242,247
  -263,539
  -285,698
  -308,743
  -332,697
  -357,591
  -383,461
Issuance/(repayment) of debt, $m
  100
  19,516
  31,165
  40,499
  51,308
  63,505
  76,948
  91,452
  106,803
  122,775
  139,146
  155,709
  172,283
  188,722
  204,914
  220,785
  236,294
  251,434
  266,226
  280,713
  294,956
  309,032
  323,025
  337,028
  351,138
  365,451
  380,064
  395,074
  410,573
  426,653
  443,402
Issuance/(repurchase) of shares, $m
  140
  6,078
  4,902
  7,849
  11,529
  16,021
  21,393
  27,699
  34,980
  43,260
  52,552
  62,857
  74,167
  86,464
  99,728
  113,936
  129,063
  145,087
  161,988
  179,750
  198,361
  217,816
  238,113
  259,258
  281,263
  304,145
  327,928
  352,640
  378,317
  404,997
  432,727
Cash from financing (excl. dividends), $m  
  3,499
  25,594
  36,067
  48,348
  62,837
  79,526
  98,341
  119,151
  141,783
  166,035
  191,698
  218,566
  246,450
  275,186
  304,642
  334,721
  365,357
  396,521
  428,214
  460,463
  493,317
  526,848
  561,138
  596,286
  632,401
  669,596
  707,992
  747,714
  788,890
  831,650
  876,129
Total cash flow (excl. dividends), $m
  415
  25,366
  34,627
  44,999
  57,009
  70,561
  85,497
  101,613
  118,669
  136,416
  154,606
  173,009
  191,426
  209,692
  227,683
  245,316
  262,549
  279,371
  295,807
  311,903
  327,729
  343,368
  358,917
  374,476
  390,153
  406,056
  422,294
  438,971
  456,193
  474,059
  492,669
Retained Cash Flow (-), $m
  -347
  -6,078
  -4,902
  -7,849
  -11,529
  -16,021
  -21,393
  -27,699
  -34,980
  -43,260
  -52,552
  -62,857
  -74,167
  -86,464
  -99,728
  -113,936
  -129,063
  -145,087
  -161,988
  -179,750
  -198,361
  -217,816
  -238,113
  -259,258
  -281,263
  -304,145
  -327,928
  -352,640
  -378,317
  -404,997
  -432,727
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
 
  19,287
  29,725
  37,150
  45,480
  54,540
  64,105
  73,914
  83,690
  93,157
  102,054
  110,152
  117,259
  123,228
  127,955
  131,381
  133,486
  134,284
  133,818
  132,153
  129,368
  125,553
  120,804
  115,218
  108,890
  101,911
  94,366
  86,331
  77,876
  69,062
  59,942
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
 
  18,492
  27,213
  32,330
  37,448
  42,275
  46,523
  49,935
  52,308
  53,514
  53,503
  52,310
  50,039
  46,853
  42,957
  38,571
  33,922
  29,218
  24,644
  20,348
  16,439
  12,986
  10,024
  7,552
  5,546
  3,964
  2,753
  1,853
  1,205
  754
  451
Current shareholders' claim on cash, %
  100
  33.9
  23.5
  15.7
  10.3
  6.7
  4.3
  2.8
  1.8
  1.2
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  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

American Equity Investment Life Holding Company is engaged in the development and sale of fixed index and fixed rate annuity products. The Company issues fixed annuity and life insurance products through its life insurance subsidiaries, American Equity Investment Life Insurance Company, American Equity Investment Life Insurance Company of New York and Eagle Life Insurance Company. Its target market includes the group of individuals aged 45 to 75 seeking to accumulate tax-deferred savings or create guaranteed lifetime income. The Company distributes through a range of distribution channels, including independent agents, broker/dealers, banks and registered investment advisors. Its product types include fixed index annuities, annual reset fixed rate annuities, multi-year fixed rate annuities and single premium immediate annuities. Its life insurance products include traditional ordinary and term, universal life and other interest-sensitive life insurance products.

FINANCIAL RATIOS  of  American Equity Investment Life Holding (AEL)

Valuation Ratios
P/E Ratio 36.4
Price to Sales 1.4
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 2.1
Price to Free Cash Flow 2.1
Growth Rates
Sales Growth Rate 46.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 32.1%
Total Debt to Equity 32.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 0.2%
Ret/ On Assets - 3 Yr. Avg. 0.4%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 3.9%
Return On Equity - 3 Yr. Avg. 7.3%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 24.7%
EBITDA Margin - 3 Yr. Avg. 29.2%
Operating Margin 32.2%
Oper. Margin - 3 Yr. Avg. 13.1%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 12.3%
Net Profit Margin 3.7%
Net Profit Margin - 3 Yr. Avg. 8%
Effective Tax Rate 36.2%
Eff/ Tax Rate - 3 Yr. Avg. 35.5%
Payout Ratio 25.3%

AEL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AEL stock intrinsic value calculation we used $2220 million for the last fiscal year's total revenue generated by American Equity Investment Life Holding. The default revenue input number comes from 2016 income statement of American Equity Investment Life Holding. 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 AEL stock valuation model: a) initial revenue growth rate of 46.7% 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 4.3%, whose default value for AEL is calculated based on our internal credit rating of American Equity Investment Life Holding, 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 American Equity Investment Life Holding.
    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 AEL stock the variable cost ratio is equal to 105.7%.

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 AEL 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 5.8% for American Equity Investment Life Holding.

Corporate tax rate of 27% is the nominal tax rate for American Equity Investment Life Holding. 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 AEL 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 AEL are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in American Equity Investment Life Holding 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 AEL 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 - $2292 million for American Equity Investment Life Holding - 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 90.791 million for American Equity Investment Life Holding 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 American Equity Investment Life Holding at the current share price and the inputted number of shares is $3.1 billion.

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COMPANY NEWS

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▶ American Equity beats Street 3Q forecasts   [Nov-06-17 06:00PM  Associated Press]
▶ American Equity beats Street 2Q forecasts   [Aug-02-17 10:54PM  Associated Press]
▶ American Equity Prices $500 Million of Senior Notes   [Jun-13-17 05:19PM  Business Wire]
▶ American Equity beats 1Q profit forecasts   [May-03-17 06:25PM  Associated Press]
Financial statements of AEL
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