Intrinsic value of American Axle&Manufacturing Holdings - AXL

Previous Close

$17.35

  Intrinsic Value

$570.16

stock screener

  Rating & Target

str. buy

+999%

Previous close

$17.35

 
Intrinsic value

$570.16

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of AXL 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 2017), $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 1.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  58.70
  53.33
  48.50
  44.15
  40.23
  36.71
  33.54
  30.68
  28.12
  25.80
  23.72
  21.85
  20.17
  18.65
  17.28
  16.06
  14.95
  13.96
  13.06
  12.25
  11.53
  10.88
  10.29
  9.76
  9.28
  8.86
  8.47
  8.12
  7.81
  7.53
Revenue, $m
  9,944
  15,247
  22,642
  32,638
  45,769
  62,570
  83,555
  109,193
  139,894
  175,993
  217,746
  265,327
  318,834
  378,296
  443,684
  514,923
  591,908
  674,512
  762,604
  856,054
  954,746
  1,058,582
  1,167,491
  1,281,431
  1,400,393
  1,524,399
  1,653,509
  1,787,818
  1,927,453
  2,072,578
Variable operating expenses, $m
  8,821
  13,373
  19,719
  28,298
  39,567
  53,987
  71,997
  94,001
  120,350
  151,332
  186,879
  227,715
  273,638
  324,671
  380,789
  441,930
  508,002
  578,897
  654,501
  734,704
  819,406
  908,523
  1,001,994
  1,099,782
  1,201,880
  1,308,308
  1,419,116
  1,534,386
  1,654,228
  1,778,780
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
  8,821
  13,373
  19,719
  28,298
  39,567
  53,987
  71,997
  94,001
  120,350
  151,332
  186,879
  227,715
  273,638
  324,671
  380,789
  441,930
  508,002
  578,897
  654,501
  734,704
  819,406
  908,523
  1,001,994
  1,099,782
  1,201,880
  1,308,308
  1,419,116
  1,534,386
  1,654,228
  1,778,780
Operating income, $m
  1,123
  1,875
  2,923
  4,340
  6,201
  8,583
  11,558
  15,192
  19,544
  24,661
  30,867
  37,611
  45,196
  53,625
  62,894
  72,993
  83,906
  95,615
  108,103
  121,350
  135,340
  150,059
  165,498
  181,649
  198,512
  216,091
  234,393
  253,432
  273,226
  293,798
EBITDA, $m
  1,929
  2,957
  4,391
  6,330
  8,877
  12,136
  16,206
  21,179
  27,133
  34,135
  42,233
  51,461
  61,839
  73,372
  86,055
  99,872
  114,803
  130,825
  147,911
  166,036
  185,178
  205,317
  226,441
  248,540
  271,613
  295,665
  320,706
  346,756
  373,839
  401,987
Interest expense (income), $m
  87
  290
  562
  954
  1,501
  2,239
  3,210
  4,452
  6,003
  7,898
  10,168
  12,836
  15,922
  19,439
  23,395
  27,790
  32,623
  37,889
  43,580
  49,686
  56,197
  63,105
  70,400
  78,075
  86,126
  94,548
  103,341
  112,508
  122,051
  131,979
  142,301
Earnings before tax, $m
  833
  1,313
  1,969
  2,839
  3,962
  5,373
  7,106
  9,189
  11,646
  14,494
  18,031
  21,689
  25,757
  30,231
  35,104
  40,370
  46,017
  52,036
  58,417
  65,153
  72,235
  79,659
  87,422
  95,523
  103,964
  112,750
  121,885
  131,381
  141,247
  151,497
Tax expense, $m
  225
  354
  532
  767
  1,070
  1,451
  1,919
  2,481
  3,144
  3,913
  4,868
  5,856
  6,954
  8,162
  9,478
  10,900
  12,425
  14,050
  15,773
  17,591
  19,503
  21,508
  23,604
  25,791
  28,070
  30,442
  32,909
  35,473
  38,137
  40,904
Net income, $m
  608
  958
  1,437
  2,073
  2,892
  3,922
  5,187
  6,708
  8,501
  10,580
  13,162
  15,833
  18,803
  22,068
  25,626
  29,470
  33,592
  37,986
  42,645
  47,561
  52,732
  58,151
  63,818
  69,732
  75,894
  82,307
  88,976
  95,908
  103,110
  110,593

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
Total assets, $m
  12,508
  19,179
  28,480
  41,054
  57,571
  78,704
  105,100
  137,350
  175,968
  221,375
  273,894
  333,744
  401,049
  475,844
  558,093
  647,702
  744,538
  848,443
  959,250
  1,076,798
  1,200,938
  1,331,550
  1,468,543
  1,611,863
  1,761,500
  1,917,483
  2,079,886
  2,248,828
  2,424,470
  2,607,016
Adjusted assets (=assets-cash), $m
  12,508
  19,179
  28,480
  41,054
  57,571
  78,704
  105,100
  137,350
  175,968
  221,375
  273,894
  333,744
  401,049
  475,844
  558,093
  647,702
  744,538
  848,443
  959,250
  1,076,798
  1,200,938
  1,331,550
  1,468,543
  1,611,863
  1,761,500
  1,917,483
  2,079,886
  2,248,828
  2,424,470
  2,607,016
Revenue / Adjusted assets
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
  0.795
Average production assets, $m
  5,191
  7,959
  11,819
  17,037
  23,891
  32,662
  43,616
  56,999
  73,025
  91,868
  113,663
  138,501
  166,431
  197,470
  231,603
  268,790
  308,976
  352,095
  398,079
  446,860
  498,377
  552,580
  609,430
  668,907
  731,005
  795,736
  863,132
  933,241
  1,006,131
  1,081,886
Working capital, $m
  -646
  -991
  -1,472
  -2,121
  -2,975
  -4,067
  -5,431
  -7,098
  -9,093
  -11,440
  -14,153
  -17,246
  -20,724
  -24,589
  -28,839
  -33,470
  -38,474
  -43,843
  -49,569
  -55,644
  -62,058
  -68,808
  -75,887
  -83,293
  -91,026
  -99,086
  -107,478
  -116,208
  -125,284
  -134,718
Total debt, $m
  7,698
  13,068
  20,555
  30,677
  43,973
  60,985
  82,234
  108,195
  139,282
  175,835
  218,113
  266,293
  320,473
  380,683
  446,893
  519,028
  596,982
  680,625
  769,825
  864,451
  964,384
  1,069,526
  1,179,805
  1,295,179
  1,415,636
  1,541,202
  1,671,937
  1,807,935
  1,949,327
  2,096,277
Total liabilities, $m
  10,069
  15,439
  22,927
  33,048
  46,344
  63,357
  84,606
  110,567
  141,654
  178,207
  220,485
  268,664
  322,844
  383,054
  449,265
  521,400
  599,353
  682,997
  772,197
  866,822
  966,755
  1,071,898
  1,182,177
  1,297,550
  1,418,008
  1,543,574
  1,674,308
  1,810,306
  1,951,698
  2,098,648
Total equity, $m
  2,439
  3,740
  5,554
  8,005
  11,226
  15,347
  20,495
  26,783
  34,314
  43,168
  53,409
  65,080
  78,205
  92,790
  108,828
  126,302
  145,185
  165,446
  187,054
  209,976
  234,183
  259,652
  286,366
  314,313
  343,493
  373,909
  405,578
  438,521
  472,772
  508,368
Total liabilities and equity, $m
  12,508
  19,179
  28,481
  41,053
  57,570
  78,704
  105,101
  137,350
  175,968
  221,375
  273,894
  333,744
  401,049
  475,844
  558,093
  647,702
  744,538
  848,443
  959,251
  1,076,798
  1,200,938
  1,331,550
  1,468,543
  1,611,863
  1,761,501
  1,917,483
  2,079,886
  2,248,827
  2,424,470
  2,607,016
Debt-to-equity ratio
  3.160
  3.490
  3.700
  3.830
  3.920
  3.970
  4.010
  4.040
  4.060
  4.070
  4.080
  4.090
  4.100
  4.100
  4.110
  4.110
  4.110
  4.110
  4.120
  4.120
  4.120
  4.120
  4.120
  4.120
  4.120
  4.120
  4.120
  4.120
  4.120
  4.120
Adjusted equity ratio
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195
  0.195

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  608
  958
  1,437
  2,073
  2,892
  3,922
  5,187
  6,708
  8,501
  10,580
  13,162
  15,833
  18,803
  22,068
  25,626
  29,470
  33,592
  37,986
  42,645
  47,561
  52,732
  58,151
  63,818
  69,732
  75,894
  82,307
  88,976
  95,908
  103,110
  110,593
Depreciation, amort., depletion, $m
  806
  1,083
  1,469
  1,990
  2,676
  3,553
  4,648
  5,987
  7,589
  9,474
  11,366
  13,850
  16,643
  19,747
  23,160
  26,879
  30,898
  35,210
  39,808
  44,686
  49,838
  55,258
  60,943
  66,891
  73,100
  79,574
  86,313
  93,324
  100,613
  108,189
Funds from operations, $m
  1,414
  2,041
  2,906
  4,063
  5,568
  7,475
  9,835
  12,694
  16,091
  20,054
  24,529
  29,683
  35,446
  41,815
  48,787
  56,349
  64,490
  73,196
  82,453
  92,247
  102,569
  113,409
  124,761
  136,623
  148,995
  161,881
  175,289
  189,232
  203,723
  218,782
Change in working capital, $m
  -239
  -345
  -481
  -650
  -854
  -1,092
  -1,364
  -1,666
  -1,996
  -2,346
  -2,714
  -3,093
  -3,478
  -3,865
  -4,250
  -4,631
  -5,004
  -5,369
  -5,726
  -6,074
  -6,415
  -6,749
  -7,079
  -7,406
  -7,732
  -8,060
  -8,392
  -8,730
  -9,076
  -9,433
Cash from operations, $m
  1,653
  2,386
  3,387
  4,713
  6,421
  8,567
  11,199
  14,361
  18,086
  22,400
  27,243
  32,776
  38,924
  45,681
  53,037
  60,979
  69,494
  78,565
  88,178
  98,322
  108,984
  120,159
  131,840
  144,029
  156,727
  169,941
  183,682
  197,962
  212,799
  228,215
Maintenance CAPEX, $m
  -327
  -519
  -796
  -1,182
  -1,704
  -2,389
  -3,266
  -4,362
  -5,700
  -7,302
  -9,187
  -11,366
  -13,850
  -16,643
  -19,747
  -23,160
  -26,879
  -30,898
  -35,210
  -39,808
  -44,686
  -49,838
  -55,258
  -60,943
  -66,891
  -73,100
  -79,574
  -86,313
  -93,324
  -100,613
New CAPEX, $m
  -1,918
  -2,768
  -3,860
  -5,218
  -6,854
  -8,770
  -10,954
  -13,383
  -16,026
  -18,844
  -21,795
  -24,837
  -27,931
  -31,039
  -34,132
  -37,187
  -40,186
  -43,120
  -45,984
  -48,781
  -51,517
  -54,203
  -56,851
  -59,477
  -62,098
  -64,731
  -67,396
  -70,109
  -72,890
  -75,755
Cash from investing activities, $m
  -2,245
  -3,287
  -4,656
  -6,400
  -8,558
  -11,159
  -14,220
  -17,745
  -21,726
  -26,146
  -30,982
  -36,203
  -41,781
  -47,682
  -53,879
  -60,347
  -67,065
  -74,018
  -81,194
  -88,589
  -96,203
  -104,041
  -112,109
  -120,420
  -128,989
  -137,831
  -146,970
  -156,422
  -166,214
  -176,368
Free cash flow, $m
  -592
  -902
  -1,269
  -1,687
  -2,137
  -2,592
  -3,021
  -3,384
  -3,640
  -3,746
  -3,739
  -3,428
  -2,857
  -2,002
  -843
  632
  2,429
  4,548
  6,985
  9,733
  12,781
  16,118
  19,732
  23,609
  27,739
  32,109
  36,712
  41,540
  46,586
  51,847
Issuance/(repayment) of debt, $m
  3,722
  5,370
  7,488
  10,122
  13,296
  17,013
  21,249
  25,961
  31,087
  36,553
  42,278
  48,180
  54,180
  60,210
  66,210
  72,136
  77,953
  83,644
  89,200
  94,626
  99,933
  105,142
  110,279
  115,373
  120,458
  125,566
  130,735
  135,998
  141,392
  146,950
Issuance/(repurchase) of shares, $m
  295
  342
  376
  379
  329
  199
  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  
  4,017
  5,712
  7,864
  10,501
  13,625
  17,212
  21,249
  25,961
  31,087
  36,553
  42,278
  48,180
  54,180
  60,210
  66,210
  72,136
  77,953
  83,644
  89,200
  94,626
  99,933
  105,142
  110,279
  115,373
  120,458
  125,566
  130,735
  135,998
  141,392
  146,950
Total cash flow (excl. dividends), $m
  3,425
  4,811
  6,595
  8,814
  11,488
  14,619
  18,228
  22,577
  27,447
  32,807
  38,539
  44,752
  51,323
  58,208
  65,368
  72,768
  80,382
  88,191
  96,185
  104,358
  112,714
  121,261
  130,011
  138,982
  148,196
  157,676
  167,447
  177,538
  187,977
  198,797
Retained Cash Flow (-), $m
  -903
  -1,301
  -1,814
  -2,452
  -3,221
  -4,121
  -5,147
  -6,289
  -7,530
  -8,854
  -10,241
  -11,671
  -13,124
  -14,585
  -16,039
  -17,474
  -18,883
  -20,261
  -21,607
  -22,922
  -24,207
  -25,469
  -26,714
  -27,948
  -29,179
  -30,417
  -31,669
  -32,944
  -34,250
  -35,597
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
  44
  70
  107
  158
  228
  320
  438
  585
  764
  979
  1,232
  1,524
  1,857
  2,232
  2,648
  3,106
  3,604
  4,143
  4,722
  5,338
  5,992
  6,683
  7,410
  8,172
  8,970
  9,803
  10,671
  11,575
  12,515
  13,492
Cash available for distribution, $m
  2,522
  3,510
  4,781
  6,362
  8,267
  10,498
  13,081
  16,288
  19,917
  23,953
  28,297
  33,081
  38,199
  43,623
  49,329
  55,294
  61,499
  67,930
  74,577
  81,437
  88,507
  95,791
  103,297
  111,035
  119,017
  127,259
  135,778
  144,594
  153,727
  163,200
Discount rate, %
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
  2,320
  2,947
  3,632
  4,334
  5,001
  5,581
  6,045
  6,466
  6,708
  6,753
  6,586
  6,261
  5,787
  5,201
  4,548
  3,868
  3,200
  2,574
  2,013
  1,530
  1,129
  809
  561
  378
  246
  155
  94
  55
  31
  17
Current shareholders' claim on cash, %
  86.7
  78.0
  72.2
  68.5
  66.3
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4
  65.4

American Axle & Manufacturing Holdings, Inc. (AAM) manufactures, engineers, designs and validates driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles, crossover vehicles, passenger cars and commercial vehicles. Its driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. Its driveline, drivetrain and related products include axles, driveheads, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, transmission parts, electric drive systems and metal-formed products. The Company's subsidiary, e-AAM Driveline Systems AB (e-AAM), engineers and develops battery electric and hybrid driveline systems to be commercialized for crossover vehicles and passenger cars. As of April 6, 2017, it operated in 17 countries and had approximately 90 manufacturing, engineering and business office facilities around the world.

FINANCIAL RATIOS  of  American Axle&Manufacturing Holdings (AXL)

Valuation Ratios
P/E Ratio 5.5
Price to Sales 0.3
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 3.3
Price to Free Cash Flow 7.4
Growth Rates
Sales Growth Rate 1.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.5%
Cap. Spend. - 3 Yr. Gr. Rate -2%
Financial Strength
Quick Ratio 160
Current Ratio 0
LT Debt to Equity 276.9%
Total Debt to Equity 277.5%
Interest Coverage 4
Management Effectiveness
Return On Assets 9.4%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 13.4%
Ret/ On T. Cap. - 3 Yr. Avg. 12.2%
Return On Equity 59.7%
Return On Equity - 3 Yr. Avg. 119.7%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 18.4%
Gross Margin - 3 Yr. Avg. 16.3%
EBITDA Margin 14.9%
EBITDA Margin - 3 Yr. Avg. 14%
Operating Margin 9.7%
Oper. Margin - 3 Yr. Avg. 8.7%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 6.5%
Net Profit Margin 6.1%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 19.4%
Eff/ Tax Rate - 3 Yr. Avg. 17.4%
Payout Ratio 0%

AXL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AXL stock intrinsic value calculation we used $6266 million for the last fiscal year's total revenue generated by American Axle&Manufacturing Holdings. The default revenue input number comes from 2017 income statement of American Axle&Manufacturing Holdings. 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 AXL stock valuation model: a) initial revenue growth rate of 58.7% 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 8.7%, whose default value for AXL is calculated based on our internal credit rating of American Axle&Manufacturing Holdings, 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 Axle&Manufacturing Holdings.
    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 AXL stock the variable cost ratio is equal to 90.4%.

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 AXL 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 American Axle&Manufacturing Holdings.

Corporate tax rate of 27% is the nominal tax rate for American Axle&Manufacturing Holdings. 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 AXL stock is equal to 0.7%.

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 AXL are equal to 52.2%.

Life of production assets of 10 years is the average useful life of capital assets used in American Axle&Manufacturing Holdings 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 AXL is equal to -6.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1536 million for American Axle&Manufacturing Holdings - 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 111 million for American Axle&Manufacturing Holdings 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 Axle&Manufacturing Holdings at the current share price and the inputted number of shares is $1.9 billion.

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COMPANY NEWS

▶ American Axle: 2Q Earnings Snapshot   [09:15AM  Associated Press]
▶ Top Ranked Value Stocks to Buy for July 23rd   [Jul-23-18 10:25AM  Zacks]
▶ Automotive Equipment Industry Pins Hope on Best 4 Stocks   [Jul-19-18 10:12AM  InvestorPlace]
▶ Top Ranked Value Stocks to Buy for July 13th   [Jul-13-18 09:47AM  Zacks]
▶ Tesla (TSLA) Raises Prices in China as Trade Spat Escalates   [Jul-10-18 02:30PM  InvestorPlace]
▶ 5 Low Price-to-Book Stocks Worth Buying in July   [Jul-09-18 02:00PM  InvestorPlace]
▶ AAM Awarded Jaguar Land Rover Excellence Award   [Jun-20-18 09:00AM  PR Newswire]
▶ AAM Recognized by the Fortune 500 List   [Jun-19-18 09:00AM  PR Newswire]
▶ Why This Stock Can Rise 40%   [07:00AM  Investopedia]
▶ [$$] American Axle Is One of the Cheapest Stocks Around   [Jun-16-18 12:01AM  Barrons.com]
▶ American Axle's stock rises after sales target raised   [Jun-14-18 07:51AM  MarketWatch]
▶ American Axle Stands to Benefit From Auto 2.0   [Jun-13-18 03:37PM  Barrons.com]
▶ AAM to Supply AWD PTUs for Global Ford Crossovers   [Jun-11-18 10:02AM  PR Newswire]
▶ Cadillac XT4 to Feature AAM's AWD Power Transfer Unit   [Jun-07-18 09:00AM  PR Newswire]
▶ AAM to Host an Investor Day on June 14   [Jun-05-18 09:40AM  PR Newswire]
▶ [$$] Hidden Harbor Buys Auto Aftermarket Product Company Cloyes Gear   [May-04-18 01:39PM  The Wall Street Journal]
▶ American Axle: 1Q Earnings Snapshot   [08:07AM  Associated Press]
▶ Best NYSE Undervalued Companies   [Mar-06-18 09:02AM  Simply Wall St.]
▶ Why GM's Claim to Use 90% U.S. Steel Might Not Hold Water   [Mar-02-18 02:16PM  TheStreet.com]
▶ [$$] GKN in talks with Dana about auto business deal   [Mar-01-18 02:41AM  Financial Times]
▶ American Axle tops Street 4Q forecasts   [08:27AM  Associated Press]
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