Intrinsic value of Ardagh Group Cl A - ARD

Previous Close

$20.09

  Intrinsic Value

$32.55

stock screener

  Rating & Target

str. buy

+62%

Previous close

$20.09

 
Intrinsic value

$32.55

 
Up/down potential

+62%

 
Rating

str. buy

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

We calculate the intrinsic value of ARD 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 4.7

 

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, %
  22.05
  57.80
  52.52
  47.77
  43.49
  39.64
  36.18
  33.06
  30.25
  27.73
  25.46
  23.41
  21.57
  19.91
  18.42
  17.08
  15.87
  14.78
  13.81
  12.92
  12.13
  11.42
  10.78
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.76
  7.49
Revenue, $m
  6,697
  10,568
  16,118
  23,817
  34,176
  47,724
  64,989
  86,475
  112,637
  143,870
  180,493
  222,747
  270,792
  324,713
  384,528
  450,201
  521,653
  598,774
  681,438
  769,514
  862,875
  961,409
  1,065,023
  1,173,651
  1,287,257
  1,405,834
  1,529,414
  1,658,060
  1,791,871
  1,930,979
  2,075,550
Variable operating expenses, $m
 
  9,680
  14,764
  21,817
  31,305
  43,715
  59,530
  79,211
  103,176
  131,785
  165,332
  204,036
  248,045
  297,437
  352,228
  412,385
  477,834
  548,477
  624,197
  704,875
  790,394
  880,651
  975,561
  1,075,065
  1,179,127
  1,287,744
  1,400,943
  1,518,783
  1,641,354
  1,768,776
  1,901,204
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
  6,295
  9,680
  14,764
  21,817
  31,305
  43,715
  59,530
  79,211
  103,176
  131,785
  165,332
  204,036
  248,045
  297,437
  352,228
  412,385
  477,834
  548,477
  624,197
  704,875
  790,394
  880,651
  975,561
  1,075,065
  1,179,127
  1,287,744
  1,400,943
  1,518,783
  1,641,354
  1,768,776
  1,901,204
Operating income, $m
  402
  888
  1,354
  2,001
  2,871
  4,009
  5,459
  7,264
  9,462
  12,085
  15,161
  18,711
  22,747
  27,276
  32,300
  37,817
  43,819
  50,297
  57,241
  64,639
  72,482
  80,758
  89,462
  98,587
  108,130
  118,090
  128,471
  139,277
  150,517
  162,202
  174,346
EBITDA, $m
  920
  1,595
  2,433
  3,595
  5,159
  7,204
  9,810
  13,054
  17,003
  21,717
  27,246
  33,624
  40,876
  49,016
  58,045
  67,958
  78,744
  90,386
  102,864
  116,159
  130,252
  145,126
  160,767
  177,164
  194,313
  212,212
  230,867
  250,286
  270,485
  291,484
  313,307
Interest expense (income), $m
  587
  679
  772
  1,320
  2,081
  3,104
  4,442
  6,148
  8,271
  10,856
  13,941
  17,560
  21,734
  26,481
  31,808
  37,718
  44,206
  51,265
  58,885
  67,052
  75,753
  84,977
  94,712
  104,949
  115,681
  126,905
  138,620
  150,829
  163,539
  176,759
  190,502
Earnings before tax, $m
  -1
  209
  582
  681
  790
  905
  1,017
  1,116
  1,191
  1,229
  1,220
  1,151
  1,012
  795
  492
  99
  -387
  -968
  -1,644
  -2,412
  -3,272
  -4,219
  -5,250
  -6,362
  -7,551
  -8,814
  -10,149
  -11,552
  -13,022
  -14,557
  -16,156
Tax expense, $m
  57
  56
  157
  184
  213
  244
  274
  301
  321
  332
  329
  311
  273
  215
  133
  27
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -58
  152
  425
  497
  577
  661
  742
  814
  869
  897
  891
  840
  739
  580
  359
  72
  -387
  -968
  -1,644
  -2,412
  -3,272
  -4,219
  -5,250
  -6,362
  -7,551
  -8,814
  -10,149
  -11,552
  -13,022
  -14,557
  -16,156

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  786
  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
  10,860
  15,892
  24,238
  35,816
  51,392
  71,765
  97,728
  130,038
  169,379
  216,346
  271,418
  334,958
  407,206
  488,290
  578,238
  676,995
  784,441
  900,412
  1,024,719
  1,157,164
  1,297,557
  1,445,728
  1,601,539
  1,764,889
  1,935,724
  2,114,037
  2,299,871
  2,493,324
  2,694,542
  2,903,727
  3,121,128
Adjusted assets (=assets-cash), $m
  10,074
  15,892
  24,238
  35,816
  51,392
  71,765
  97,728
  130,038
  169,379
  216,346
  271,418
  334,958
  407,206
  488,290
  578,238
  676,995
  784,441
  900,412
  1,024,719
  1,157,164
  1,297,557
  1,445,728
  1,601,539
  1,764,889
  1,935,724
  2,114,037
  2,299,871
  2,493,324
  2,694,542
  2,903,727
  3,121,128
Revenue / Adjusted assets
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
  0.665
Average production assets, $m
  3,680
  5,802
  8,849
  13,076
  18,763
  26,200
  35,679
  47,475
  61,838
  78,985
  99,091
  122,288
  148,665
  178,267
  211,106
  247,161
  286,388
  328,727
  374,110
  422,463
  473,719
  527,814
  584,698
  644,335
  706,704
  771,803
  839,648
  910,275
  983,737
  1,060,107
  1,139,477
Working capital, $m
  1,250
  740
  1,128
  1,667
  2,392
  3,341
  4,549
  6,053
  7,885
  10,071
  12,635
  15,592
  18,955
  22,730
  26,917
  31,514
  36,516
  41,914
  47,701
  53,866
  60,401
  67,299
  74,552
  82,156
  90,108
  98,408
  107,059
  116,064
  125,431
  135,168
  145,288
Total debt, $m
  9,312
  10,569
  18,081
  28,501
  42,520
  60,856
  84,223
  113,301
  148,708
  190,978
  240,544
  297,729
  362,752
  435,728
  516,681
  605,562
  702,264
  806,638
  918,514
  1,037,715
  1,164,068
  1,297,422
  1,437,652
  1,584,667
  1,738,419
  1,898,900
  2,066,151
  2,240,258
  2,421,355
  2,609,621
  2,805,282
Total liabilities, $m
  13,045
  14,302
  21,814
  32,234
  46,253
  64,589
  87,956
  117,034
  152,441
  194,711
  244,277
  301,462
  366,485
  439,461
  520,414
  609,295
  705,997
  810,371
  922,247
  1,041,448
  1,167,801
  1,301,155
  1,441,385
  1,588,400
  1,742,152
  1,902,633
  2,069,884
  2,243,991
  2,425,088
  2,613,354
  2,809,015
Total equity, $m
  -2,185
  1,589
  2,424
  3,582
  5,139
  7,177
  9,773
  13,004
  16,938
  21,635
  27,142
  33,496
  40,721
  48,829
  57,824
  67,699
  78,444
  90,041
  102,472
  115,716
  129,756
  144,573
  160,154
  176,489
  193,572
  211,404
  229,987
  249,332
  269,454
  290,373
  312,113
Total liabilities and equity, $m
  10,860
  15,891
  24,238
  35,816
  51,392
  71,766
  97,729
  130,038
  169,379
  216,346
  271,419
  334,958
  407,206
  488,290
  578,238
  676,994
  784,441
  900,412
  1,024,719
  1,157,164
  1,297,557
  1,445,728
  1,601,539
  1,764,889
  1,935,724
  2,114,037
  2,299,871
  2,493,323
  2,694,542
  2,903,727
  3,121,128
Debt-to-equity ratio
  -4.262
  6.650
  7.460
  7.960
  8.270
  8.480
  8.620
  8.710
  8.780
  8.830
  8.860
  8.890
  8.910
  8.920
  8.940
  8.940
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
Adjusted equity ratio
  -0.295
  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
  -58
  152
  425
  497
  577
  661
  742
  814
  869
  897
  891
  840
  739
  580
  359
  72
  -387
  -968
  -1,644
  -2,412
  -3,272
  -4,219
  -5,250
  -6,362
  -7,551
  -8,814
  -10,149
  -11,552
  -13,022
  -14,557
  -16,156
Depreciation, amort., depletion, $m
  518
  708
  1,079
  1,595
  2,288
  3,195
  4,351
  5,790
  7,541
  9,632
  12,084
  14,913
  18,130
  21,740
  25,745
  30,142
  34,925
  40,089
  45,623
  51,520
  57,771
  64,368
  71,305
  78,577
  86,183
  94,122
  102,396
  111,009
  119,968
  129,281
  138,961
Funds from operations, $m
  -54
  860
  1,504
  2,092
  2,865
  3,856
  5,093
  6,604
  8,410
  10,530
  12,975
  15,753
  18,869
  22,320
  26,104
  30,214
  34,538
  39,120
  43,979
  49,108
  54,499
  60,149
  66,055
  72,216
  78,632
  85,308
  92,247
  99,457
  106,946
  114,725
  122,804
Change in working capital, $m
  -549
  271
  389
  539
  725
  948
  1,209
  1,504
  1,831
  2,186
  2,564
  2,958
  3,363
  3,774
  4,187
  4,597
  5,002
  5,398
  5,786
  6,165
  6,535
  6,897
  7,253
  7,604
  7,952
  8,300
  8,651
  9,005
  9,367
  9,738
  10,120
Cash from operations, $m
  495
  589
  1,116
  1,553
  2,140
  2,907
  3,885
  5,100
  6,579
  8,343
  10,411
  12,796
  15,506
  18,546
  21,917
  25,617
  29,537
  33,722
  38,193
  42,942
  47,964
  53,252
  58,802
  64,612
  70,680
  77,007
  83,597
  90,452
  97,579
  104,987
  112,684
Maintenance CAPEX, $m
  0
  -449
  -708
  -1,079
  -1,595
  -2,288
  -3,195
  -4,351
  -5,790
  -7,541
  -9,632
  -12,084
  -14,913
  -18,130
  -21,740
  -25,745
  -30,142
  -34,925
  -40,089
  -45,623
  -51,520
  -57,771
  -64,368
  -71,305
  -78,577
  -86,183
  -94,122
  -102,396
  -111,009
  -119,968
  -129,281
New CAPEX, $m
  -340
  -2,122
  -3,047
  -4,227
  -5,687
  -7,438
  -9,479
  -11,796
  -14,363
  -17,147
  -20,106
  -23,197
  -26,377
  -29,603
  -32,839
  -36,055
  -39,227
  -42,339
  -45,383
  -48,354
  -51,255
  -54,095
  -56,884
  -59,637
  -62,369
  -65,099
  -67,845
  -70,627
  -73,462
  -76,370
  -79,370
Cash from investing activities, $m
  -3,169
  -2,571
  -3,755
  -5,306
  -7,282
  -9,726
  -12,674
  -16,147
  -20,153
  -24,688
  -29,738
  -35,281
  -41,290
  -47,733
  -54,579
  -61,800
  -69,369
  -77,264
  -85,472
  -93,977
  -102,775
  -111,866
  -121,252
  -130,942
  -140,946
  -151,282
  -161,967
  -173,023
  -184,471
  -196,338
  -208,651
Free cash flow, $m
  -2,674
  -1,982
  -2,639
  -3,753
  -5,142
  -6,819
  -8,789
  -11,047
  -13,574
  -16,345
  -19,327
  -22,486
  -25,784
  -29,187
  -32,662
  -36,182
  -39,832
  -43,543
  -47,278
  -51,035
  -54,812
  -58,614
  -62,450
  -66,330
  -70,267
  -74,275
  -78,371
  -82,571
  -86,892
  -91,351
  -95,967
Issuance/(repayment) of debt, $m
  2,855
  1,265
  7,512
  10,420
  14,019
  18,336
  23,367
  29,078
  35,407
  42,270
  49,565
  57,186
  65,023
  72,976
  80,953
  88,881
  96,702
  104,374
  111,876
  119,200
  126,354
  133,354
  140,230
  147,015
  153,751
  160,481
  167,251
  174,107
  181,097
  188,266
  195,660
Issuance/(repurchase) of shares, $m
  6
  4,400
  410
  661
  981
  1,377
  1,854
  2,416
  3,065
  3,799
  4,617
  5,514
  6,486
  7,528
  8,635
  9,803
  11,132
  12,565
  14,074
  15,657
  17,311
  19,036
  20,831
  22,697
  24,635
  26,646
  28,732
  30,897
  33,144
  35,475
  37,896
Cash from financing (excl. dividends), $m  
  3,139
  5,665
  7,922
  11,081
  15,000
  19,713
  25,221
  31,494
  38,472
  46,069
  54,182
  62,700
  71,509
  80,504
  89,588
  98,684
  107,834
  116,939
  125,950
  134,857
  143,665
  152,390
  161,061
  169,712
  178,386
  187,127
  195,983
  205,004
  214,241
  223,741
  233,556
Total cash flow (excl. dividends), $m
  516
  3,684
  5,282
  7,328
  9,858
  12,894
  16,432
  20,448
  24,899
  29,725
  34,855
  40,213
  45,725
  51,317
  56,927
  62,502
  68,001
  73,397
  78,672
  83,823
  88,853
  93,776
  98,611
  103,382
  108,119
  112,852
  117,612
  122,434
  127,349
  132,390
  137,590
Retained Cash Flow (-), $m
  93
  -4,552
  -835
  -1,158
  -1,558
  -2,037
  -2,596
  -3,231
  -3,934
  -4,697
  -5,507
  -6,354
  -7,225
  -8,108
  -8,995
  -9,876
  -11,132
  -12,565
  -14,074
  -15,657
  -17,311
  -19,036
  -20,831
  -22,697
  -24,635
  -26,646
  -28,732
  -30,897
  -33,144
  -35,475
  -37,896
Prev. year cash balance distribution, $m
 
  778
  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
 
  -91
  4,448
  6,170
  8,301
  10,857
  13,835
  17,217
  20,965
  25,028
  29,347
  33,859
  38,500
  43,209
  47,932
  52,626
  56,870
  60,831
  64,598
  68,166
  71,542
  74,740
  77,780
  80,686
  83,485
  86,206
  88,880
  91,536
  94,205
  96,915
  99,694
Discount rate, %
 
  14.30
  15.02
  15.77
  16.55
  17.38
  18.25
  19.16
  20.12
  21.13
  22.18
  23.29
  24.46
  25.68
  26.96
  28.31
  29.73
  31.22
  32.78
  34.41
  36.14
  37.94
  39.84
  41.83
  43.92
  46.12
  48.42
  50.85
  53.39
  56.06
  58.86
PV of cash for distribution, $m
 
  -79
  3,362
  3,977
  4,498
  4,872
  5,060
  5,046
  4,836
  4,459
  3,958
  3,383
  2,787
  2,213
  1,695
  1,251
  884
  600
  393
  247
  150
  87
  49
  26
  13
  7
  3
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  39.8
  31.2
  24.5
  19.3
  15.4
  12.3
  10.0
  8.1
  6.7
  5.6
  4.7
  3.9
  3.4
  2.9
  2.5
  2.1
  1.8
  1.6
  1.4
  1.2
  1.1
  0.9
  0.8
  0.7
  0.6
  0.6
  0.5
  0.4
  0.4

Ardagh Group SA, formerly Ardagh Finance Holdings SA, is a Luxembourg-based company engaged in the packing industry. The Company focuses on the design and manufacture of rigid packaging solutions mainly for food and beverage markets. Its activities are divided into two business segments: Metal packing, which supplies aluminum and steel beverage cans, two-piece aluminum, two-piece tinplate and three-piece tinplate food and specialty cans, as well as a range of can ends, among others, and Glass packing, which delivers glass containers, bottles and jars, among others. Its products are distributed in customized sizes and shapes, as well as are decorated with printed graphics. The Company operates in Europe, the Americas, Asia and Africa.

FINANCIAL RATIOS  of  Ardagh Group Cl A (ARD)

Valuation Ratios
P/E Ratio -81
Price to Sales 0.7
Price to Book -2.2
Price to Tangible Book
Price to Cash Flow 9.5
Price to Free Cash Flow 30.3
Growth Rates
Sales Growth Rate 22.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.3%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 98
Current Ratio 0
LT Debt to Equity -425.8%
Total Debt to Equity -426.2%
Interest Coverage 1
Management Effectiveness
Return On Assets 378.1%
Ret/ On Assets - 3 Yr. Avg. 126.3%
Return On Total Capital -1%
Ret/ On T. Cap. - 3 Yr. Avg. -9.3%
Return On Equity 2.7%
Return On Equity - 3 Yr. Avg. 22.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 18%
Gross Margin - 3 Yr. Avg. 17.2%
EBITDA Margin 16.5%
EBITDA Margin - 3 Yr. Avg. 10.8%
Operating Margin 6%
Oper. Margin - 3 Yr. Avg. 4.5%
Pre-Tax Margin -0%
Pre-Tax Margin - 3 Yr. Avg. -4.2%
Net Profit Margin -0.9%
Net Profit Margin - 3 Yr. Avg. -4.8%
Effective Tax Rate -5700%
Eff/ Tax Rate - 3 Yr. Avg. -1926.7%
Payout Ratio -491.4%

ARD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARD stock intrinsic value calculation we used $6697 million for the last fiscal year's total revenue generated by Ardagh Group Cl A. The default revenue input number comes from 2016 income statement of Ardagh Group Cl A. 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 ARD stock valuation model: a) initial revenue growth rate of 57.8% 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 14.3%, whose default value for ARD is calculated based on our internal credit rating of Ardagh Group Cl A, 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 Ardagh Group Cl A.
    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 ARD stock the variable cost ratio is equal to 91.6%.

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 ARD 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 7.3% for Ardagh Group Cl A.

Corporate tax rate of 27% is the nominal tax rate for Ardagh Group Cl A. 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 ARD 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 ARD are equal to 54.9%.

Life of production assets of 8.2 years is the average useful life of capital assets used in Ardagh Group Cl A 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 ARD is equal to 7%. 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 - $-2185 million for Ardagh Group Cl A - 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 234.874 million for Ardagh Group Cl A 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 Ardagh Group Cl A at the current share price and the inputted number of shares is $4.7 billion.

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Financial statements of ARD
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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