Intrinsic value of Alaska Air Group - ALK

Previous Close

$69.47

  Intrinsic Value

$940.30

stock screener

  Rating & Target

str. buy

+999%

Previous close

$69.47

 
Intrinsic value

$940.30

 
Up/down potential

+999%

 
Rating

str. buy

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

We calculate the intrinsic value of ALK 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, %
  5.95
  35.40
  32.36
  29.62
  27.16
  24.95
  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
  6.77
  6.59
  6.43
Revenue, $m
  5,931
  8,031
  10,629
  13,778
  17,520
  21,891
  26,915
  32,609
  38,981
  46,031
  53,754
  62,140
  71,175
  80,845
  91,134
  102,029
  113,516
  125,587
  138,233
  151,452
  165,244
  179,614
  194,569
  210,122
  226,290
  243,092
  260,551
  278,697
  297,558
  317,170
  337,570
Variable operating expenses, $m
 
  6,099
  8,010
  10,326
  13,078
  16,292
  19,987
  24,174
  28,860
  34,045
  39,724
  45,697
  52,342
  59,453
  67,019
  75,031
  83,479
  92,355
  101,655
  111,377
  121,519
  132,086
  143,084
  154,522
  166,412
  178,768
  191,607
  204,951
  218,822
  233,244
  248,246
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
  4,582
  6,099
  8,010
  10,326
  13,078
  16,292
  19,987
  24,174
  28,860
  34,045
  39,724
  45,697
  52,342
  59,453
  67,019
  75,031
  83,479
  92,355
  101,655
  111,377
  121,519
  132,086
  143,084
  154,522
  166,412
  178,768
  191,607
  204,951
  218,822
  233,244
  248,246
Operating income, $m
  1,349
  1,932
  2,619
  3,452
  4,443
  5,599
  6,929
  8,435
  10,121
  11,987
  14,030
  16,443
  18,834
  21,392
  24,115
  26,998
  30,037
  33,231
  36,578
  40,075
  43,725
  47,527
  51,485
  55,600
  59,878
  64,324
  68,944
  73,745
  78,736
  83,926
  89,324
EBITDA, $m
  1,712
  2,540
  3,362
  4,359
  5,542
  6,925
  8,514
  10,316
  12,331
  14,562
  17,005
  19,658
  22,516
  25,575
  28,830
  32,276
  35,910
  39,728
  43,729
  47,911
  52,274
  56,819
  61,550
  66,471
  71,585
  76,900
  82,423
  88,164
  94,130
  100,334
  106,788
Interest expense (income), $m
  24
  93
  176
  279
  403
  551
  724
  923
  1,149
  1,401
  1,680
  1,986
  2,318
  2,676
  3,059
  3,466
  3,898
  4,353
  4,831
  5,331
  5,855
  6,401
  6,970
  7,562
  8,178
  8,818
  9,483
  10,175
  10,893
  11,640
  12,417
Earnings before tax, $m
  1,345
  1,839
  2,444
  3,174
  4,039
  5,048
  6,204
  7,512
  8,972
  10,586
  12,350
  14,457
  16,515
  18,716
  21,056
  23,531
  26,140
  28,879
  31,747
  34,744
  37,870
  41,126
  44,515
  48,038
  51,700
  55,506
  59,461
  63,571
  67,843
  72,286
  76,907
Tax expense, $m
  531
  497
  660
  857
  1,091
  1,363
  1,675
  2,028
  2,423
  2,858
  3,335
  3,903
  4,459
  5,053
  5,685
  6,353
  7,058
  7,797
  8,572
  9,381
  10,225
  11,104
  12,019
  12,970
  13,959
  14,987
  16,054
  17,164
  18,318
  19,517
  20,765
Net income, $m
  814
  1,342
  1,784
  2,317
  2,949
  3,685
  4,529
  5,484
  6,550
  7,728
  9,016
  10,553
  12,056
  13,663
  15,371
  17,178
  19,082
  21,081
  23,175
  25,363
  27,645
  30,022
  32,496
  35,068
  37,741
  40,519
  43,406
  46,407
  49,525
  52,769
  56,142

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,580
  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
  9,962
  11,343
  15,013
  19,461
  24,746
  30,919
  38,016
  46,058
  55,058
  65,016
  75,924
  87,768
  100,530
  114,187
  128,720
  144,108
  160,334
  177,382
  195,244
  213,915
  233,396
  253,692
  274,815
  296,783
  319,618
  343,350
  368,010
  393,639
  420,280
  447,980
  476,794
Adjusted assets (=assets-cash), $m
  8,382
  11,343
  15,013
  19,461
  24,746
  30,919
  38,016
  46,058
  55,058
  65,016
  75,924
  87,768
  100,530
  114,187
  128,720
  144,108
  160,334
  177,382
  195,244
  213,915
  233,396
  253,692
  274,815
  296,783
  319,618
  343,350
  368,010
  393,639
  420,280
  447,980
  476,794
Revenue / Adjusted assets
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
  0.708
Average production assets, $m
  5,306
  7,187
  9,513
  12,331
  15,681
  19,592
  24,089
  29,185
  34,888
  41,198
  48,110
  55,615
  63,702
  72,356
  81,565
  91,316
  101,597
  112,400
  123,719
  135,550
  147,894
  160,754
  174,139
  188,059
  202,529
  217,567
  233,193
  249,433
  266,315
  283,867
  302,125
Working capital, $m
  -485
  -2,361
  -3,125
  -4,051
  -5,151
  -6,436
  -7,913
  -9,587
  -11,460
  -13,533
  -15,804
  -18,269
  -20,925
  -23,768
  -26,793
  -29,996
  -33,374
  -36,922
  -40,641
  -44,527
  -48,582
  -52,806
  -57,203
  -61,776
  -66,529
  -71,469
  -76,602
  -81,937
  -87,482
  -93,248
  -99,246
Total debt, $m
  2,964
  5,018
  7,958
  11,521
  15,755
  20,699
  26,384
  32,826
  40,035
  48,011
  56,748
  66,235
  76,457
  87,397
  99,038
  111,364
  124,360
  138,016
  152,324
  167,279
  182,883
  199,140
  216,060
  233,656
  251,947
  270,956
  290,709
  311,238
  332,577
  354,765
  377,845
Total liabilities, $m
  7,031
  9,085
  12,025
  15,588
  19,822
  24,766
  30,451
  36,893
  44,102
  52,078
  60,815
  70,302
  80,524
  91,464
  103,105
  115,431
  128,427
  142,083
  156,391
  171,346
  186,950
  203,207
  220,127
  237,723
  256,014
  275,023
  294,776
  315,305
  336,644
  358,832
  381,912
Total equity, $m
  2,931
  2,257
  2,988
  3,873
  4,925
  6,153
  7,565
  9,166
  10,957
  12,938
  15,109
  17,466
  20,005
  22,723
  25,615
  28,678
  31,906
  35,299
  38,854
  42,569
  46,446
  50,485
  54,688
  59,060
  63,604
  68,327
  73,234
  78,334
  83,636
  89,148
  94,882
Total liabilities and equity, $m
  9,962
  11,342
  15,013
  19,461
  24,747
  30,919
  38,016
  46,059
  55,059
  65,016
  75,924
  87,768
  100,529
  114,187
  128,720
  144,109
  160,333
  177,382
  195,245
  213,915
  233,396
  253,692
  274,815
  296,783
  319,618
  343,350
  368,010
  393,639
  420,280
  447,980
  476,794
Debt-to-equity ratio
  1.011
  2.220
  2.660
  2.970
  3.200
  3.360
  3.490
  3.580
  3.650
  3.710
  3.760
  3.790
  3.820
  3.850
  3.870
  3.880
  3.900
  3.910
  3.920
  3.930
  3.940
  3.940
  3.950
  3.960
  3.960
  3.970
  3.970
  3.970
  3.980
  3.980
  3.980
Adjusted equity ratio
  0.161
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199
  0.199

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  814
  1,342
  1,784
  2,317
  2,949
  3,685
  4,529
  5,484
  6,550
  7,728
  9,016
  10,553
  12,056
  13,663
  15,371
  17,178
  19,082
  21,081
  23,175
  25,363
  27,645
  30,022
  32,496
  35,068
  37,741
  40,519
  43,406
  46,407
  49,525
  52,769
  56,142
Depreciation, amort., depletion, $m
  363
  609
  743
  906
  1,100
  1,326
  1,586
  1,880
  2,210
  2,575
  2,974
  3,215
  3,682
  4,182
  4,715
  5,278
  5,873
  6,497
  7,151
  7,835
  8,549
  9,292
  10,066
  10,870
  11,707
  12,576
  13,479
  14,418
  15,394
  16,409
  17,464
Funds from operations, $m
  1,475
  1,951
  2,527
  3,223
  4,049
  5,011
  6,115
  7,364
  8,760
  10,302
  11,990
  13,768
  15,738
  17,845
  20,086
  22,456
  24,955
  27,579
  30,327
  33,198
  36,194
  39,314
  42,562
  45,938
  49,448
  53,095
  56,886
  60,825
  64,919
  69,177
  73,606
Change in working capital, $m
  89
  -617
  -764
  -926
  -1,100
  -1,285
  -1,477
  -1,674
  -1,873
  -2,073
  -2,271
  -2,465
  -2,656
  -2,843
  -3,025
  -3,203
  -3,377
  -3,549
  -3,718
  -3,886
  -4,055
  -4,225
  -4,397
  -4,573
  -4,753
  -4,940
  -5,133
  -5,335
  -5,545
  -5,766
  -5,998
Cash from operations, $m
  1,386
  2,569
  3,291
  4,149
  5,149
  6,296
  7,592
  9,038
  10,633
  12,375
  14,260
  16,233
  18,395
  20,688
  23,111
  25,659
  28,332
  31,127
  34,045
  37,085
  40,249
  43,539
  46,958
  50,511
  54,201
  58,035
  62,019
  66,159
  70,465
  74,943
  79,604
Maintenance CAPEX, $m
  0
  -307
  -415
  -550
  -713
  -906
  -1,133
  -1,392
  -1,687
  -2,017
  -2,381
  -2,781
  -3,215
  -3,682
  -4,182
  -4,715
  -5,278
  -5,873
  -6,497
  -7,151
  -7,835
  -8,549
  -9,292
  -10,066
  -10,870
  -11,707
  -12,576
  -13,479
  -14,418
  -15,394
  -16,409
New CAPEX, $m
  -678
  -1,882
  -2,326
  -2,818
  -3,349
  -3,912
  -4,497
  -5,096
  -5,703
  -6,310
  -6,912
  -7,505
  -8,086
  -8,654
  -9,209
  -9,751
  -10,281
  -10,803
  -11,319
  -11,831
  -12,344
  -12,861
  -13,385
  -13,920
  -14,470
  -15,038
  -15,627
  -16,240
  -16,881
  -17,553
  -18,258
Cash from investing activities, $m
  -2,622
  -2,189
  -2,741
  -3,368
  -4,062
  -4,818
  -5,630
  -6,488
  -7,390
  -8,327
  -9,293
  -10,286
  -11,301
  -12,336
  -13,391
  -14,466
  -15,559
  -16,676
  -17,816
  -18,982
  -20,179
  -21,410
  -22,677
  -23,986
  -25,340
  -26,745
  -28,203
  -29,719
  -31,299
  -32,947
  -34,667
Free cash flow, $m
  -1,236
  380
  550
  781
  1,087
  1,478
  1,963
  2,549
  3,243
  4,049
  4,967
  5,947
  7,093
  8,352
  9,719
  11,194
  12,772
  14,452
  16,229
  18,102
  20,070
  22,130
  24,281
  26,525
  28,861
  31,291
  33,816
  36,440
  39,165
  41,996
  44,937
Issuance/(repayment) of debt, $m
  1,795
  2,373
  2,940
  3,562
  4,234
  4,945
  5,684
  6,442
  7,209
  7,976
  8,737
  9,487
  10,222
  10,940
  11,641
  12,326
  12,996
  13,656
  14,308
  14,955
  15,604
  16,257
  16,920
  17,596
  18,291
  19,009
  19,753
  20,529
  21,339
  22,188
  23,080
Issuance/(repurchase) of shares, $m
  -193
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,627
  2,373
  2,940
  3,562
  4,234
  4,945
  5,684
  6,442
  7,209
  7,976
  8,737
  9,487
  10,222
  10,940
  11,641
  12,326
  12,996
  13,656
  14,308
  14,955
  15,604
  16,257
  16,920
  17,596
  18,291
  19,009
  19,753
  20,529
  21,339
  22,188
  23,080
Total cash flow (excl. dividends), $m
  391
  2,753
  3,490
  4,343
  5,321
  6,422
  7,647
  8,992
  10,452
  12,025
  13,704
  15,434
  17,315
  19,291
  21,360
  23,520
  25,769
  28,107
  30,537
  33,058
  35,674
  38,387
  41,201
  44,121
  47,152
  50,299
  53,569
  56,969
  60,504
  64,184
  68,017
Retained Cash Flow (-), $m
  -520
  -587
  -730
  -885
  -1,052
  -1,228
  -1,412
  -1,600
  -1,791
  -1,982
  -2,171
  -2,357
  -2,540
  -2,718
  -2,892
  -3,062
  -3,229
  -3,393
  -3,555
  -3,716
  -3,877
  -4,039
  -4,204
  -4,372
  -4,544
  -4,723
  -4,907
  -5,100
  -5,301
  -5,512
  -5,734
Prev. year cash balance distribution, $m
 
  1,261
  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
 
  3,427
  2,759
  3,458
  4,269
  5,194
  6,235
  7,391
  8,661
  10,043
  11,534
  13,077
  14,776
  16,574
  18,468
  20,457
  22,540
  24,715
  26,982
  29,342
  31,797
  34,348
  36,997
  39,750
  42,608
  45,577
  48,662
  51,869
  55,203
  58,672
  62,283
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
 
  3,286
  2,526
  3,010
  3,515
  4,026
  4,525
  4,993
  5,414
  5,769
  6,047
  6,210
  6,305
  6,302
  6,200
  6,006
  5,728
  5,378
  4,969
  4,518
  4,040
  3,553
  3,070
  2,605
  2,170
  1,773
  1,420
  1,113
  854
  640
  469
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Alaska Air Group, Inc. is the holding company of Alaska Airlines (Alaska), Virgin America Inc., Horizon Air (Horizon) and other business units. The Company operates through three segments: Mainline, Regional and Horizon. Its Mainline segment includes Alaska's and Virgin America's scheduled air transportation for passengers and cargo throughout the United States, and in parts of Canada, Mexico, Costa Rica and Cuba. Its Regional segment includes Horizon's and other third-party carriers' scheduled air transportation for passengers across a shorter distance network within the United States under capacity purchased arrangements (CPAs). Its Horizon segment includes the capacity sold to Alaska under CPA. Alaska and Virgin America operate fleets of narrowbody passenger jets. As of December 31, 2016, it maintained two frequent flyer plans: the Alaska Airlines Mileage Plan and the Virgin America Elevate.

FINANCIAL RATIOS  of  Alaska Air Group (ALK)

Valuation Ratios
P/E Ratio 10.5
Price to Sales 1.4
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow 12.1
Growth Rates
Sales Growth Rate 5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.4%
Cap. Spend. - 3 Yr. Gr. Rate 3.6%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 90.2%
Total Debt to Equity 101.1%
Interest Coverage 57
Management Effectiveness
Return On Assets 10%
Ret/ On Assets - 3 Yr. Avg. 11.3%
Return On Total Capital 18.1%
Ret/ On T. Cap. - 3 Yr. Avg. 22.3%
Return On Equity 30.5%
Return On Equity - 3 Yr. Avg. 32.3%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 37%
Gross Margin - 3 Yr. Avg. 34.7%
EBITDA Margin 29.2%
EBITDA Margin - 3 Yr. Avg. 27.6%
Operating Margin 22.7%
Oper. Margin - 3 Yr. Avg. 21.3%
Pre-Tax Margin 22.7%
Pre-Tax Margin - 3 Yr. Avg. 21.4%
Net Profit Margin 13.7%
Net Profit Margin - 3 Yr. Avg. 13.4%
Effective Tax Rate 39.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.6%
Payout Ratio 16.7%

ALK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALK stock intrinsic value calculation we used $5931 million for the last fiscal year's total revenue generated by Alaska Air Group. The default revenue input number comes from 2016 income statement of Alaska Air 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 ALK stock valuation model: a) initial revenue growth rate of 35.4% 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 4.3%, whose default value for ALK is calculated based on our internal credit rating of Alaska Air 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 Alaska Air 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 ALK stock the variable cost ratio is equal to 76.8%.

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 ALK 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 Alaska Air Group.

Corporate tax rate of 27% is the nominal tax rate for Alaska Air 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 ALK 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 ALK are equal to 89.5%.

Life of production assets of 17.3 years is the average useful life of capital assets used in Alaska Air 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 ALK is equal to -29.4%. 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 - $2931 million for Alaska Air 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 124.881 million for Alaska Air 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 Alaska Air Group at the current share price and the inputted number of shares is $8.7 billion.

RELATED COMPANIES Price Int.Val. Rating
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UAL United Contine 77.97 200.08  str.buy
SKYW Skywest 54.80 17.60  str.sell
JBLU JetBlue Airway 22.53 45.73  str.buy
SAVE Spirit Airline 44.59 132.96  str.buy
ALGT Allegiant Trav 167.65 306.19  str.buy
LUV Southwest Airl 65.26 77.83  hold

COMPANY NEWS

▶ Alaska reveals new Luly Yang-designed uniforms (Photos)   [Jan-18-18 11:10PM  American City Business Journals]
▶ Alaska Airlines to give San Jose flyers access to second Seattle area airport   [Jan-17-18 10:20AM  American City Business Journals]
▶ The 10 Most Undervalued Stocks To Kick Off Earnings Season   [Jan-16-18 12:58PM  InvestorPlace]
▶ Alaska Airlines will reveal new Luly Yang-designed uniforms next week   [01:43PM  American City Business Journals]
▶ Delta Results Lifting Airline Stocks   [10:55AM  24/7 Wall St.]
▶ Is Now the Time to Buy Alaska Airlines?   [10:48AM  GuruFocus.com]
▶ Alaska Air names new CEO and chief operating officer at Horizon Air   [Jan-10-18 06:35PM  American City Business Journals]
▶ Alaska Airlines will reveal new Luly Yang-designed uniform next week   [11:50AM  American City Business Journals]
▶ Here's My Top Stock to Buy for 2018   [08:35AM  Motley Fool]
▶ Worlds Best Airlines, Airports for On-Time Service   [Jan-09-18 11:05AM  24/7 Wall St.]
▶ Alaska Air Group awards $1,000 bonuses to workers after Trump tax cut   [12:15AM  American City Business Journals]
▶ Airlines: Up, Up & Away in 2018   [Jan-04-18 03:05PM  Barrons.com]
▶ Cara Figgins set on producing the perfect cracker   [08:05AM  American City Business Journals]
▶ Tax Reform Could Help Boeing Win a Big Alaska Air Order   [Jan-02-18 10:04AM  Motley Fool]
▶ Woman in wheelchair falls down airport escalator   [Dec-29-17 05:20PM  ABC News Videos]
▶ Can Alaska Air Group Regain Its Poise in 2018?   [Dec-24-17 09:45AM  Motley Fool]
▶ With Partners, Cara Figgins and family have worked to perfect the cracker business   [Dec-20-17 09:25PM  American City Business Journals]
▶ 6 Stocks With Negative Performances   [02:56PM  GuruFocus.com]
▶ How Has Southwest Airlines Stock Fared?   [09:01AM  Market Realist]
▶ 2017 brought significant changes to Hawaii airline service   [Dec-15-17 07:45PM  American City Business Journals]
▶ Alaska Airlines launches new Hawaii service   [12:30PM  American City Business Journals]
▶ PSBJ's most-read stories of 2017 from Amazon to Zillow   [Dec-12-17 09:30PM  American City Business Journals]
▶ Is Alaska Air Group Incs (ALK) ROE Of 24.39% Sustainable?   [Dec-04-17 08:10AM  Simply Wall St.]
Financial statements of ALK
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