Intrinsic value of Azul ADR - AZUL

Previous Close

$30.30

  Intrinsic Value

$5.97

stock screener

  Rating & Target

str. sell

-80%

Previous close

$30.30

 
Intrinsic value

$5.97

 
Up/down potential

-80%

 
Rating

str. sell

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

We calculate the intrinsic value of AZUL 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Azul ADR (AZUL) stock.

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, %
  6.57
  15.10
  14.09
  13.18
  12.36
  11.63
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.11
  5.99
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
Revenue, $m
  2,109
  2,427
  2,769
  3,135
  3,522
  3,932
  4,363
  4,815
  5,288
  5,783
  6,298
  6,835
  7,393
  7,974
  8,577
  9,204
  9,856
  10,533
  11,237
  11,969
  12,731
  13,524
  14,349
  15,209
  16,106
  17,041
  18,017
  19,035
  20,099
  21,210
  22,371
Variable operating expenses, $m
 
  2,489
  2,837
  3,208
  3,601
  4,017
  4,455
  4,914
  5,395
  5,897
  6,421
  6,942
  7,509
  8,099
  8,712
  9,349
  10,010
  10,698
  11,413
  12,157
  12,931
  13,736
  14,575
  15,448
  16,359
  17,309
  18,300
  19,334
  20,415
  21,543
  22,723
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
  2,000
  2,489
  2,837
  3,208
  3,601
  4,017
  4,455
  4,914
  5,395
  5,897
  6,421
  6,942
  7,509
  8,099
  8,712
  9,349
  10,010
  10,698
  11,413
  12,157
  12,931
  13,736
  14,575
  15,448
  16,359
  17,309
  18,300
  19,334
  20,415
  21,543
  22,723
Operating income, $m
  109
  -62
  -67
  -73
  -79
  -86
  -92
  -99
  -107
  -115
  -123
  -107
  -116
  -125
  -135
  -145
  -155
  -166
  -177
  -188
  -200
  -213
  -225
  -239
  -253
  -268
  -283
  -299
  -316
  -333
  -352
EBITDA, $m
  204
  40
  46
  52
  59
  66
  73
  80
  88
  96
  105
  114
  123
  133
  143
  153
  164
  176
  187
  200
  212
  225
  239
  254
  269
  284
  300
  317
  335
  354
  373
Interest expense (income), $m
  108
  75
  98
  123
  149
  177
  207
  238
  271
  305
  341
  378
  417
  457
  499
  543
  588
  635
  684
  735
  788
  843
  901
  960
  1,022
  1,087
  1,155
  1,226
  1,299
  1,376
  1,457
Earnings before tax, $m
  6
  -137
  -165
  -196
  -228
  -263
  -299
  -337
  -378
  -420
  -463
  -485
  -533
  -582
  -634
  -687
  -743
  -801
  -861
  -923
  -988
  -1,056
  -1,126
  -1,199
  -1,276
  -1,355
  -1,438
  -1,525
  -1,615
  -1,709
  -1,808
Tax expense, $m
  46
  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
  -40
  -137
  -165
  -196
  -228
  -263
  -299
  -337
  -378
  -420
  -463
  -485
  -533
  -582
  -634
  -687
  -743
  -801
  -861
  -923
  -988
  -1,056
  -1,126
  -1,199
  -1,276
  -1,355
  -1,438
  -1,525
  -1,615
  -1,709
  -1,808

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  278
  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
  2,656
  2,737
  3,122
  3,534
  3,971
  4,432
  4,918
  5,428
  5,962
  6,519
  7,100
  7,705
  8,335
  8,989
  9,670
  10,377
  11,111
  11,875
  12,668
  13,494
  14,353
  15,246
  16,177
  17,147
  18,158
  19,212
  20,312
  21,460
  22,659
  23,912
  25,221
Adjusted assets (=assets-cash), $m
  2,378
  2,737
  3,122
  3,534
  3,971
  4,432
  4,918
  5,428
  5,962
  6,519
  7,100
  7,705
  8,335
  8,989
  9,670
  10,377
  11,111
  11,875
  12,668
  13,494
  14,353
  15,246
  16,177
  17,147
  18,158
  19,212
  20,312
  21,460
  22,659
  23,912
  25,221
Revenue / Adjusted assets
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
  0.887
Average production assets, $m
  601
  692
  789
  893
  1,004
  1,120
  1,243
  1,372
  1,507
  1,648
  1,795
  1,948
  2,107
  2,272
  2,444
  2,623
  2,809
  3,002
  3,202
  3,411
  3,628
  3,854
  4,090
  4,335
  4,590
  4,857
  5,135
  5,425
  5,728
  6,045
  6,376
Working capital, $m
  -540
  -566
  -645
  -730
  -821
  -916
  -1,016
  -1,122
  -1,232
  -1,347
  -1,467
  -1,592
  -1,723
  -1,858
  -1,998
  -2,145
  -2,296
  -2,454
  -2,618
  -2,789
  -2,966
  -3,151
  -3,343
  -3,544
  -3,753
  -3,971
  -4,198
  -4,435
  -4,683
  -4,942
  -5,213
Total debt, $m
  1,290
  1,324
  1,658
  2,015
  2,394
  2,794
  3,215
  3,657
  4,120
  4,603
  5,107
  5,632
  6,177
  6,745
  7,335
  7,947
  8,584
  9,246
  9,934
  10,650
  11,395
  12,170
  12,977
  13,818
  14,694
  15,608
  16,562
  17,557
  18,597
  19,683
  20,818
Total liabilities, $m
  2,339
  2,373
  2,707
  3,064
  3,443
  3,843
  4,264
  4,706
  5,169
  5,652
  6,156
  6,681
  7,226
  7,794
  8,384
  8,996
  9,633
  10,295
  10,983
  11,699
  12,444
  13,219
  14,026
  14,867
  15,743
  16,657
  17,611
  18,606
  19,646
  20,732
  21,867
Total equity, $m
  317
  364
  415
  470
  528
  590
  654
  722
  793
  867
  944
  1,025
  1,109
  1,196
  1,286
  1,380
  1,478
  1,579
  1,685
  1,795
  1,909
  2,028
  2,152
  2,281
  2,415
  2,555
  2,701
  2,854
  3,014
  3,180
  3,354
Total liabilities and equity, $m
  2,656
  2,737
  3,122
  3,534
  3,971
  4,433
  4,918
  5,428
  5,962
  6,519
  7,100
  7,706
  8,335
  8,990
  9,670
  10,376
  11,111
  11,874
  12,668
  13,494
  14,353
  15,247
  16,178
  17,148
  18,158
  19,212
  20,312
  21,460
  22,660
  23,912
  25,221
Debt-to-equity ratio
  4.069
  3.640
  3.990
  4.290
  4.530
  4.740
  4.920
  5.070
  5.200
  5.310
  5.410
  5.500
  5.570
  5.640
  5.700
  5.760
  5.810
  5.850
  5.900
  5.930
  5.970
  6.000
  6.030
  6.060
  6.080
  6.110
  6.130
  6.150
  6.170
  6.190
  6.210
Adjusted equity ratio
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -40
  -137
  -165
  -196
  -228
  -263
  -299
  -337
  -378
  -420
  -463
  -485
  -533
  -582
  -634
  -687
  -743
  -801
  -861
  -923
  -988
  -1,056
  -1,126
  -1,199
  -1,276
  -1,355
  -1,438
  -1,525
  -1,615
  -1,709
  -1,808
Depreciation, amort., depletion, $m
  95
  102
  113
  125
  138
  151
  165
  180
  195
  211
  228
  221
  239
  258
  278
  298
  319
  341
  364
  388
  412
  438
  465
  493
  522
  552
  583
  616
  651
  687
  725
Funds from operations, $m
  -16
  -34
  -52
  -70
  -90
  -112
  -134
  -158
  -182
  -208
  -236
  -264
  -293
  -324
  -356
  -389
  -424
  -460
  -497
  -536
  -576
  -618
  -661
  -707
  -754
  -803
  -855
  -908
  -964
  -1,023
  -1,084
Change in working capital, $m
  -26
  -74
  -80
  -85
  -90
  -95
  -100
  -105
  -110
  -115
  -120
  -125
  -130
  -135
  -141
  -146
  -152
  -158
  -164
  -171
  -177
  -185
  -192
  -200
  -209
  -218
  -227
  -237
  -248
  -259
  -271
Cash from operations, $m
  10
  40
  28
  15
  0
  -16
  -34
  -52
  -72
  -93
  -116
  -139
  -163
  -189
  -216
  -243
  -272
  -302
  -333
  -365
  -398
  -433
  -469
  -506
  -545
  -585
  -627
  -671
  -716
  -764
  -813
Maintenance CAPEX, $m
  0
  -68
  -79
  -90
  -102
  -114
  -127
  -141
  -156
  -171
  -187
  -204
  -221
  -239
  -258
  -278
  -298
  -319
  -341
  -364
  -388
  -412
  -438
  -465
  -493
  -522
  -552
  -583
  -616
  -651
  -687
New CAPEX, $m
  -140
  -91
  -97
  -104
  -110
  -117
  -123
  -129
  -135
  -141
  -147
  -153
  -159
  -165
  -172
  -179
  -186
  -193
  -201
  -209
  -217
  -226
  -235
  -245
  -256
  -266
  -278
  -290
  -303
  -317
  -331
Cash from investing activities, $m
  -204
  -159
  -176
  -194
  -212
  -231
  -250
  -270
  -291
  -312
  -334
  -357
  -380
  -404
  -430
  -457
  -484
  -512
  -542
  -573
  -605
  -638
  -673
  -710
  -749
  -788
  -830
  -873
  -919
  -968
  -1,018
Free cash flow, $m
  -194
  -119
  -148
  -179
  -212
  -247
  -284
  -322
  -363
  -405
  -450
  -496
  -544
  -594
  -646
  -700
  -756
  -814
  -875
  -938
  -1,003
  -1,071
  -1,142
  -1,216
  -1,293
  -1,373
  -1,457
  -1,545
  -1,636
  -1,731
  -1,831
Issuance/(repayment) of debt, $m
  -183
  312
  334
  357
  379
  400
  421
  442
  463
  483
  504
  525
  546
  567
  590
  613
  637
  662
  688
  716
  745
  775
  807
  841
  876
  914
  954
  995
  1,040
  1,086
  1,135
Issuance/(repurchase) of shares, $m
  349
  184
  217
  250
  286
  324
  364
  405
  449
  494
  541
  566
  617
  669
  724
  781
  841
  902
  966
  1,033
  1,102
  1,175
  1,250
  1,328
  1,410
  1,495
  1,584
  1,677
  1,775
  1,876
  1,982
Cash from financing (excl. dividends), $m  
  167
  496
  551
  607
  665
  724
  785
  847
  912
  977
  1,045
  1,091
  1,163
  1,236
  1,314
  1,394
  1,478
  1,564
  1,654
  1,749
  1,847
  1,950
  2,057
  2,169
  2,286
  2,409
  2,538
  2,672
  2,815
  2,962
  3,117
Total cash flow (excl. dividends), $m
  -28
  376
  403
  428
  453
  477
  501
  525
  548
  571
  595
  595
  619
  643
  668
  695
  722
  750
  780
  811
  844
  878
  915
  953
  993
  1,036
  1,081
  1,128
  1,178
  1,231
  1,287
Retained Cash Flow (-), $m
  -441
  -184
  -217
  -250
  -286
  -324
  -364
  -405
  -449
  -494
  -541
  -566
  -617
  -669
  -724
  -781
  -841
  -902
  -966
  -1,033
  -1,102
  -1,175
  -1,250
  -1,328
  -1,410
  -1,495
  -1,584
  -1,677
  -1,775
  -1,876
  -1,982
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
 
  192
  186
  178
  167
  153
  138
  120
  100
  78
  54
  29
  2
  -26
  -56
  -87
  -119
  -152
  -186
  -222
  -259
  -296
  -335
  -375
  -417
  -460
  -504
  -549
  -596
  -645
  -696
Discount rate, %
 
  10.80
  11.34
  11.91
  12.50
  13.13
  13.78
  14.47
  15.20
  15.96
  16.75
  17.59
  18.47
  19.40
  20.37
  21.38
  22.45
  23.58
  24.75
  25.99
  27.29
  28.66
  30.09
  31.59
  33.17
  34.83
  36.57
  38.40
  40.32
  42.34
  44.45
PV of cash for distribution, $m
 
  174
  150
  127
  104
  83
  63
  46
  32
  21
  11
  5
  0
  -3
  -4
  -5
  -5
  -4
  -3
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  94.5
  89.2
  84.1
  79.3
  74.7
  70.4
  66.3
  62.4
  58.7
  55.3
  52.2
  49.2
  46.4
  43.8
  41.2
  38.9
  36.6
  34.5
  32.5
  30.6
  28.9
  27.2
  25.6
  24.1
  22.7
  21.4
  20.1
  19.0
  17.9
  16.8

Azul SA is a Brazil-based company engaged in the provision of passenger transportation services. The Company primarily acts as an airline operator under the Azul brand name. The Company provides scheduled flights between numerous cities in Brazil, including Sao Paulo, Brasilia, Rio de Janeiro, Belo Horizonte, Porto Alegre, Curitiba, Manaus, Cuiaba, Fortaleza and Salvador, among others. In addition, its air network comprises international routes to the Unites States, Europe and other Latin American countries. The Company also offers Azul Cargo Express, a scheduled cargo transport service with airport-to-airport and door-to-door delivery. It owns a number of subsidiaries, such as Azul Linhas Aereas Brasileiras SA and Tudo Azul SA.

FINANCIAL RATIOS  of  Azul ADR (AZUL)

Valuation Ratios
P/E Ratio -896.5
Price to Sales 17
Price to Book 113.1
Price to Tangible Book
Price to Cash Flow 3586.1
Price to Free Cash Flow -275.9
Growth Rates
Sales Growth Rate 6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -64.5%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 304.1%
Total Debt to Equity 406.9%
Interest Coverage 1
Management Effectiveness
Return On Assets -29.6%
Ret/ On Assets - 3 Yr. Avg. -12.5%
Return On Total Capital -2.6%
Ret/ On T. Cap. - 3 Yr. Avg. -10.2%
Return On Equity -41.5%
Return On Equity - 3 Yr. Avg. -2857.8%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 32.5%
Gross Margin - 3 Yr. Avg. 31.2%
EBITDA Margin 9.9%
EBITDA Margin - 3 Yr. Avg. 2.2%
Operating Margin 5.2%
Oper. Margin - 3 Yr. Avg. 3.1%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. -6.2%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. -6.7%
Effective Tax Rate 766.7%
Eff/ Tax Rate - 3 Yr. Avg. 264%
Payout Ratio 0%

AZUL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AZUL stock intrinsic value calculation we used $2109 million for the last fiscal year's total revenue generated by Azul ADR. The default revenue input number comes from 2016 income statement of Azul ADR. 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 AZUL stock valuation model: a) initial revenue growth rate of 15.1% 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 10.8%, whose default value for AZUL is calculated based on our internal credit rating of Azul ADR, 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 Azul ADR.
    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 AZUL stock the variable cost ratio is equal to 102.7%.

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 AZUL 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 7.4% for Azul ADR.

Corporate tax rate of 27% is the nominal tax rate for Azul ADR. 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 AZUL 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 AZUL are equal to 28.5%.

Life of production assets of 8.8 years is the average useful life of capital assets used in Azul ADR 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 AZUL is equal to -23.3%. 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 - $317 million for Azul ADR - 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 109.526 million for Azul ADR 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 Azul ADR at the current share price and the inputted number of shares is $3.3 billion.

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Financial statements of AZUL
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