Intrinsic value of Emerson Electric - EMR

Previous Close

$67.26

  Intrinsic Value

$82.73

stock screener

  Rating & Target

buy

+23%

Previous close

$67.26

 
Intrinsic value

$82.73

 
Up/down potential

+23%

 
Rating

buy

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

We calculate the intrinsic value of EMR 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 43.0

 

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, %
  -10.63
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
Revenue, $m
  14,522
  15,960
  17,461
  19,028
  20,659
  22,356
  24,120
  25,955
  27,861
  29,841
  31,900
  34,040
  36,265
  38,580
  40,990
  43,499
  46,113
  48,837
  51,678
  54,642
  57,736
  60,966
  64,342
  67,869
  71,557
  75,415
  79,451
  83,675
  88,097
  92,728
  97,578
Variable operating expenses, $m
 
  11,117
  12,126
  13,179
  14,275
  15,416
  16,602
  17,834
  19,115
  20,447
  21,830
  22,878
  24,373
  25,929
  27,549
  29,235
  30,991
  32,822
  34,732
  36,724
  38,803
  40,974
  43,243
  45,614
  48,092
  50,685
  53,397
  56,236
  59,208
  62,321
  65,581
Fixed operating expenses, $m
 
  2,072
  2,123
  2,176
  2,231
  2,287
  2,344
  2,402
  2,462
  2,524
  2,587
  2,652
  2,718
  2,786
  2,856
  2,927
  3,000
  3,075
  3,152
  3,231
  3,312
  3,394
  3,479
  3,566
  3,655
  3,747
  3,840
  3,937
  4,035
  4,136
  4,239
Total operating expenses, $m
  12,121
  13,189
  14,249
  15,355
  16,506
  17,703
  18,946
  20,236
  21,577
  22,971
  24,417
  25,530
  27,091
  28,715
  30,405
  32,162
  33,991
  35,897
  37,884
  39,955
  42,115
  44,368
  46,722
  49,180
  51,747
  54,432
  57,237
  60,173
  63,243
  66,457
  69,820
Operating income, $m
  2,401
  2,771
  3,212
  3,672
  4,153
  4,653
  5,175
  5,718
  6,283
  6,871
  7,483
  8,511
  9,174
  9,865
  10,586
  11,337
  12,121
  12,939
  13,794
  14,687
  15,621
  16,598
  17,619
  18,689
  19,809
  20,983
  22,213
  23,502
  24,854
  26,271
  27,758
EBITDA, $m
  2,969
  3,448
  3,915
  4,404
  4,913
  5,445
  5,998
  6,573
  7,172
  7,796
  8,445
  9,120
  9,823
  10,556
  11,320
  12,116
  12,947
  13,814
  14,719
  15,666
  16,655
  17,689
  18,772
  19,905
  21,091
  22,333
  23,636
  25,000
  26,431
  27,932
  29,506
Interest expense (income), $m
  209
  142
  182
  224
  267
  313
  360
  409
  460
  514
  569
  626
  686
  748
  813
  880
  950
  1,023
  1,099
  1,178
  1,261
  1,347
  1,437
  1,531
  1,630
  1,732
  1,840
  1,953
  2,070
  2,194
  2,323
Earnings before tax, $m
  2,316
  2,629
  3,030
  3,449
  3,885
  4,341
  4,815
  5,308
  5,822
  6,357
  6,914
  7,884
  8,488
  9,117
  9,773
  10,457
  11,171
  11,917
  12,695
  13,509
  14,360
  15,251
  16,182
  17,158
  18,180
  19,251
  20,373
  21,549
  22,783
  24,078
  25,436
Tax expense, $m
  697
  710
  818
  931
  1,049
  1,172
  1,300
  1,433
  1,572
  1,716
  1,867
  2,129
  2,292
  2,462
  2,639
  2,823
  3,016
  3,217
  3,428
  3,647
  3,877
  4,118
  4,369
  4,633
  4,909
  5,198
  5,501
  5,818
  6,151
  6,501
  6,868
Net income, $m
  1,635
  1,919
  2,212
  2,518
  2,836
  3,169
  3,515
  3,875
  4,250
  4,641
  5,047
  5,756
  6,196
  6,656
  7,134
  7,634
  8,155
  8,699
  9,268
  9,862
  10,483
  11,133
  11,813
  12,525
  13,271
  14,053
  14,872
  15,731
  16,632
  17,577
  18,568

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,182
  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
  21,732
  20,383
  22,301
  24,301
  26,384
  28,551
  30,805
  33,148
  35,582
  38,111
  40,740
  43,474
  46,316
  49,272
  52,350
  55,554
  58,892
  62,372
  66,000
  69,785
  73,736
  77,862
  82,173
  86,678
  91,389
  96,315
  101,470
  106,865
  112,512
  118,426
  124,621
Adjusted assets (=assets-cash), $m
  18,550
  20,383
  22,301
  24,301
  26,384
  28,551
  30,805
  33,148
  35,582
  38,111
  40,740
  43,474
  46,316
  49,272
  52,350
  55,554
  58,892
  62,372
  66,000
  69,785
  73,736
  77,862
  82,173
  86,678
  91,389
  96,315
  101,470
  106,865
  112,512
  118,426
  124,621
Revenue / Adjusted assets
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
  0.783
Average production assets, $m
  4,472
  4,916
  5,378
  5,861
  6,363
  6,886
  7,429
  7,994
  8,581
  9,191
  9,825
  10,484
  11,170
  11,883
  12,625
  13,398
  14,203
  15,042
  15,917
  16,830
  17,783
  18,778
  19,817
  20,904
  22,040
  23,228
  24,471
  25,772
  27,134
  28,560
  30,054
Working capital, $m
  1,952
  1,484
  1,624
  1,770
  1,921
  2,079
  2,243
  2,414
  2,591
  2,775
  2,967
  3,166
  3,373
  3,588
  3,812
  4,045
  4,288
  4,542
  4,806
  5,082
  5,369
  5,670
  5,984
  6,312
  6,655
  7,014
  7,389
  7,782
  8,193
  8,624
  9,075
Total debt, $m
  6,635
  5,190
  6,387
  7,635
  8,935
  10,287
  11,693
  13,155
  14,674
  16,253
  17,893
  19,598
  21,372
  23,217
  25,137
  27,137
  29,220
  31,391
  33,655
  36,017
  38,483
  41,057
  43,747
  46,558
  49,497
  52,572
  55,788
  59,154
  62,679
  66,369
  70,235
Total liabilities, $m
  14,164
  12,719
  13,916
  15,164
  16,464
  17,816
  19,222
  20,684
  22,203
  23,782
  25,422
  27,127
  28,901
  30,746
  32,666
  34,666
  36,749
  38,920
  41,184
  43,546
  46,012
  48,586
  51,276
  54,087
  57,026
  60,101
  63,317
  66,683
  70,208
  73,898
  77,764
Total equity, $m
  7,568
  7,664
  8,385
  9,137
  9,920
  10,735
  11,583
  12,463
  13,379
  14,330
  15,318
  16,346
  17,415
  18,526
  19,684
  20,888
  22,143
  23,452
  24,816
  26,239
  27,725
  29,276
  30,897
  32,591
  34,362
  36,215
  38,153
  40,181
  42,305
  44,528
  46,858
Total liabilities and equity, $m
  21,732
  20,383
  22,301
  24,301
  26,384
  28,551
  30,805
  33,147
  35,582
  38,112
  40,740
  43,473
  46,316
  49,272
  52,350
  55,554
  58,892
  62,372
  66,000
  69,785
  73,737
  77,862
  82,173
  86,678
  91,388
  96,316
  101,470
  106,864
  112,513
  118,426
  124,622
Debt-to-equity ratio
  0.877
  0.680
  0.760
  0.840
  0.900
  0.960
  1.010
  1.060
  1.100
  1.130
  1.170
  1.200
  1.230
  1.250
  1.280
  1.300
  1.320
  1.340
  1.360
  1.370
  1.390
  1.400
  1.420
  1.430
  1.440
  1.450
  1.460
  1.470
  1.480
  1.490
  1.500
Adjusted equity ratio
  0.236
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,635
  1,919
  2,212
  2,518
  2,836
  3,169
  3,515
  3,875
  4,250
  4,641
  5,047
  5,756
  6,196
  6,656
  7,134
  7,634
  8,155
  8,699
  9,268
  9,862
  10,483
  11,133
  11,813
  12,525
  13,271
  14,053
  14,872
  15,731
  16,632
  17,577
  18,568
Depreciation, amort., depletion, $m
  568
  677
  704
  732
  761
  791
  823
  856
  890
  925
  962
  610
  649
  691
  734
  779
  826
  875
  925
  978
  1,034
  1,092
  1,152
  1,215
  1,281
  1,350
  1,423
  1,498
  1,578
  1,660
  1,747
Funds from operations, $m
  3,259
  2,596
  2,916
  3,249
  3,597
  3,960
  4,338
  4,731
  5,140
  5,566
  6,009
  6,365
  6,846
  7,346
  7,868
  8,413
  8,981
  9,574
  10,193
  10,840
  11,517
  12,225
  12,965
  13,741
  14,553
  15,403
  16,295
  17,229
  18,209
  19,237
  20,315
Change in working capital, $m
  378
  134
  140
  146
  152
  158
  164
  171
  177
  184
  191
  199
  207
  215
  224
  233
  243
  253
  264
  276
  288
  300
  314
  328
  343
  359
  375
  393
  411
  431
  451
Cash from operations, $m
  2,881
  2,462
  2,776
  3,103
  3,446
  3,802
  4,174
  4,560
  4,963
  5,382
  5,818
  6,166
  6,639
  7,131
  7,644
  8,179
  8,738
  9,320
  9,929
  10,565
  11,229
  11,924
  12,651
  13,413
  14,210
  15,045
  15,920
  16,837
  17,798
  18,806
  19,864
Maintenance CAPEX, $m
  0
  -260
  -286
  -313
  -341
  -370
  -400
  -432
  -465
  -499
  -534
  -571
  -610
  -649
  -691
  -734
  -779
  -826
  -875
  -925
  -978
  -1,034
  -1,092
  -1,152
  -1,215
  -1,281
  -1,350
  -1,423
  -1,498
  -1,578
  -1,660
New CAPEX, $m
  -447
  -444
  -463
  -482
  -502
  -523
  -544
  -565
  -587
  -610
  -634
  -659
  -685
  -713
  -742
  -773
  -805
  -839
  -875
  -913
  -953
  -995
  -1,040
  -1,086
  -1,136
  -1,188
  -1,243
  -1,301
  -1,362
  -1,426
  -1,494
Cash from investing activities, $m
  -626
  -704
  -749
  -795
  -843
  -893
  -944
  -997
  -1,052
  -1,109
  -1,168
  -1,230
  -1,295
  -1,362
  -1,433
  -1,507
  -1,584
  -1,665
  -1,750
  -1,838
  -1,931
  -2,029
  -2,132
  -2,238
  -2,351
  -2,469
  -2,593
  -2,724
  -2,860
  -3,004
  -3,154
Free cash flow, $m
  2,255
  1,759
  2,028
  2,308
  2,602
  2,909
  3,230
  3,563
  3,911
  4,273
  4,649
  4,936
  5,344
  5,769
  6,211
  6,673
  7,154
  7,655
  8,179
  8,726
  9,298
  9,895
  10,520
  11,174
  11,858
  12,575
  13,326
  14,113
  14,938
  15,803
  16,710
Issuance/(repayment) of debt, $m
  -198
  1,139
  1,197
  1,248
  1,300
  1,352
  1,406
  1,462
  1,519
  1,578
  1,641
  1,705
  1,774
  1,845
  1,920
  1,999
  2,083
  2,171
  2,264
  2,362
  2,466
  2,575
  2,690
  2,811
  2,939
  3,074
  3,216
  3,366
  3,524
  3,690
  3,865
Issuance/(repurchase) of shares, $m
  -601
  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  
  -818
  1,139
  1,197
  1,248
  1,300
  1,352
  1,406
  1,462
  1,519
  1,578
  1,641
  1,705
  1,774
  1,845
  1,920
  1,999
  2,083
  2,171
  2,264
  2,362
  2,466
  2,575
  2,690
  2,811
  2,939
  3,074
  3,216
  3,366
  3,524
  3,690
  3,865
Total cash flow (excl. dividends), $m
  1,355
  2,898
  3,224
  3,557
  3,902
  4,262
  4,636
  5,025
  5,430
  5,851
  6,290
  6,641
  7,117
  7,614
  8,132
  8,672
  9,237
  9,827
  10,443
  11,088
  11,763
  12,470
  13,210
  13,985
  14,798
  15,649
  16,542
  17,479
  18,462
  19,493
  20,575
Retained Cash Flow (-), $m
  513
  -694
  -721
  -752
  -783
  -815
  -847
  -881
  -915
  -951
  -989
  -1,028
  -1,069
  -1,112
  -1,157
  -1,205
  -1,255
  -1,308
  -1,364
  -1,423
  -1,486
  -1,551
  -1,621
  -1,694
  -1,771
  -1,852
  -1,938
  -2,028
  -2,124
  -2,224
  -2,329
Prev. year cash balance distribution, $m
 
  598
  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
 
  2,802
  2,503
  2,804
  3,119
  3,447
  3,789
  4,144
  4,515
  4,900
  5,301
  5,613
  6,049
  6,502
  6,974
  7,467
  7,981
  8,518
  9,079
  9,665
  10,278
  10,919
  11,589
  12,291
  13,027
  13,797
  14,604
  15,451
  16,338
  17,269
  18,246
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
 
  2,686
  2,292
  2,441
  2,568
  2,672
  2,750
  2,800
  2,822
  2,815
  2,779
  2,666
  2,581
  2,472
  2,341
  2,192
  2,028
  1,853
  1,672
  1,488
  1,306
  1,129
  962
  806
  663
  537
  426
  332
  253
  189
  137
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

Emerson Electric Co. is a diversified global manufacturing company, which provides solutions to customers by bringing technology and engineering together in the industrial, commercial and consumer markets around the world. The Company operates through four segments based on the nature of the products and services rendered: Process Management, Industrial Automation, Climate Technologies and Commercial & Residential Solutions. The Company's principal production operations are electronics assembly, metal stamping, forming, casting, machining, welding, plating, heat treating, painting and assembly. In addition, the Company uses specialized production operations, including automatic and semiautomatic testing, automated material handling and storage, ferrous and nonferrous machining, and special furnaces for heat treating and foundry applications. The Company provides measurement, control and diagnostic technologies for automated industrial processes.

FINANCIAL RATIOS  of  Emerson Electric (EMR)

Valuation Ratios
P/E Ratio 26.4
Price to Sales 3
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow 17.8
Growth Rates
Sales Growth Rate -10.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24%
Cap. Spend. - 3 Yr. Gr. Rate -8%
Financial Strength
Quick Ratio 1
Current Ratio 0.4
LT Debt to Equity 53.5%
Total Debt to Equity 87.7%
Interest Coverage 12
Management Effectiveness
Return On Assets 8.1%
Ret/ On Assets - 3 Yr. Avg. 9.9%
Return On Total Capital 11.2%
Ret/ On T. Cap. - 3 Yr. Avg. 14%
Return On Equity 20.9%
Return On Equity - 3 Yr. Avg. 23.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 42.6%
Gross Margin - 3 Yr. Avg. 43.1%
EBITDA Margin 21.3%
EBITDA Margin - 3 Yr. Avg. 23.9%
Operating Margin 16.5%
Oper. Margin - 3 Yr. Avg. 17.9%
Pre-Tax Margin 15.9%
Pre-Tax Margin - 3 Yr. Avg. 19.1%
Net Profit Margin 11.3%
Net Profit Margin - 3 Yr. Avg. 13.3%
Effective Tax Rate 30.1%
Eff/ Tax Rate - 3 Yr. Avg. 31.1%
Payout Ratio 75%

EMR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EMR stock intrinsic value calculation we used $14522 million for the last fiscal year's total revenue generated by Emerson Electric. The default revenue input number comes from 2016 income statement of Emerson Electric. 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 EMR stock valuation model: a) initial revenue growth rate of 9.9% 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 EMR is calculated based on our internal credit rating of Emerson Electric, 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 Emerson Electric.
    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 EMR stock the variable cost ratio is equal to 69.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2021 million in the base year in the intrinsic value calculation for EMR 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 Emerson Electric.

Corporate tax rate of 27% is the nominal tax rate for Emerson Electric. 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 EMR 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 EMR are equal to 30.8%.

Life of production assets of 17.2 years is the average useful life of capital assets used in Emerson Electric 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 EMR is equal to 9.3%. 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 - $7568 million for Emerson Electric - 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 640.012 million for Emerson Electric 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 Emerson Electric at the current share price and the inputted number of shares is $43.0 billion.

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COMPANY NEWS

▶ Emerson Electric Gets Technical Rating Upgrade   [03:00AM  Investor's Business Daily]
▶ Emerson completes acquisition of Houston company   [Dec-04-17 04:05PM  American City Business Journals]
▶ Emerson Completes Paradigm Acquisition   [10:00AM  Business Wire]
▶ [$$] The iPhone Gains Share in China   [Dec-02-17 12:01AM  Barrons.com]
▶ Understanding the Moat Investing Philosophy   [Nov-29-17 02:37PM  Market Realist]
▶ Emerson/Rockwell: No Deal Is Good News   [Nov-28-17 02:22PM  Barrons.com]
▶ US and European Stocks in Green Tuesday   [12:27PM  GuruFocus.com]
▶ Emerson withdraws Rockwell offer after third rejection   [11:55AM  American City Business Journals]
▶ Emerson pulls bid for Rockwell   [10:30AM  Reuters Videos]
▶ Emerson's Hail Mary Failed. Now What?   [10:21AM  Bloomberg]
▶ Deere and Axalta climb while Hewlett Packard Enterprise dips   [Nov-22-17 04:53PM  Associated Press]
▶ Rockwell rebuffs Emerson's latest bid   [01:51PM  Reuters Videos]
▶ Emerson Should Know When to Fold   [10:20AM  Bloomberg]
▶ [$$] Rockwell Automation Rejects New Offer From Emerson   [07:31AM  The Wall Street Journal]
▶ Emerson Raises Pressure on Rockwell With $29 Billion Bid   [Nov-16-17 07:25PM  Bloomberg Video]
▶ Closing Bell: LIVE MARKETS BLOG   [04:04PM  TheStreet.com]
▶ [$$] Emerson sweetens bid for Rockwell to $29bn   [02:02PM  Financial Times]
▶ Emerson Offers $225 Per Share for Rockwell   [09:23AM  Bloomberg Video]
▶ The Biggest Loser: General Electric's Very Bad Day   [Nov-13-17 05:28PM  Barrons.com]
▶ How Safe is Emerson Electrics Dividend?   [10:36AM  Motley Fool]
▶ Emerson Electric Sees Growth Ahead   [10:51AM  Motley Fool]
Financial statements of EMR
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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