Intrinsic value of E*TRADE Financial - ETFC

Previous Close

$61.19

  Intrinsic Value

$55.66

stock screener

  Rating & Target

hold

-9%

Previous close

$61.19

 
Intrinsic value

$55.66

 
Up/down potential

-9%

 
Rating

hold

Our model is not good at valuating stocks of financial companies, such as ETFC.

We calculate the intrinsic value of ETFC 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 16.7

 

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, %
  21.90
  20.21
  18.69
  17.32
  16.09
  14.98
  13.98
  13.08
  12.27
  11.55
  10.89
  10.30
  9.77
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
Revenue, $m
  2,884
  3,467
  4,115
  4,828
  5,604
  6,444
  7,345
  8,306
  9,325
  10,402
  11,535
  12,724
  13,967
  15,266
  16,619
  18,028
  19,494
  21,018
  22,603
  24,249
  25,959
  27,737
  29,586
  31,508
  33,508
  35,590
  37,758
  40,017
  42,372
  44,828
Variable operating expenses, $m
  717
  640
  554
  459
  356
  245
  126
  -2
  -137
  -280
  -1,529
  -1,686
  -1,851
  -2,023
  -2,203
  -2,389
  -2,584
  -2,786
  -2,996
  -3,214
  -3,441
  -3,676
  -3,921
  -4,176
  -4,441
  -4,717
  -5,004
  -5,304
  -5,616
  -5,941
Fixed operating expenses, $m
  479
  490
  501
  512
  523
  534
  546
  558
  570
  583
  596
  609
  622
  636
  650
  664
  679
  694
  709
  725
  741
  757
  774
  791
  808
  826
  844
  863
  882
  901
Total operating expenses, $m
  1,196
  1,130
  1,055
  971
  879
  779
  672
  556
  433
  303
  -933
  -1,077
  -1,229
  -1,387
  -1,553
  -1,725
  -1,905
  -2,092
  -2,287
  -2,489
  -2,700
  -2,919
  -3,147
  -3,385
  -3,633
  -3,891
  -4,160
  -4,441
  -4,734
  -5,040
Operating income, $m
  1,688
  2,338
  3,061
  3,857
  4,725
  5,664
  6,673
  7,749
  8,892
  10,099
  12,468
  13,801
  15,196
  16,653
  18,172
  19,753
  21,399
  23,110
  24,889
  26,738
  28,659
  30,657
  32,733
  34,894
  37,142
  39,482
  41,919
  44,459
  47,107
  49,869
EBITDA, $m
  10,863
  13,144
  15,682
  18,474
  21,517
  24,806
  28,338
  32,105
  36,102
  40,324
  44,767
  49,428
  54,304
  59,397
  64,705
  70,233
  75,983
  81,962
  88,176
  94,634
  101,345
  108,321
  115,574
  123,117
  130,965
  139,135
  147,643
  156,508
  165,749
  175,388
Interest expense (income), $m
  77
  2,549
  2,742
  3,248
  3,810
  4,429
  5,103
  5,832
  6,614
  7,447
  8,332
  9,267
  10,250
  11,282
  12,361
  13,488
  14,662
  15,885
  17,157
  18,480
  19,855
  21,284
  22,768
  24,311
  25,915
  27,584
  29,320
  31,127
  33,008
  34,969
  37,012
Earnings before tax, $m
  -861
  -405
  -187
  46
  296
  561
  841
  1,136
  1,444
  1,766
  3,201
  3,551
  3,914
  4,292
  4,684
  5,091
  5,514
  5,953
  6,409
  6,883
  7,376
  7,888
  8,422
  8,978
  9,558
  10,162
  10,792
  11,451
  12,138
  12,856
Tax expense, $m
  0
  0
  0
  13
  80
  152
  227
  307
  390
  477
  864
  959
  1,057
  1,159
  1,265
  1,375
  1,489
  1,607
  1,730
  1,858
  1,991
  2,130
  2,274
  2,424
  2,581
  2,744
  2,914
  3,092
  3,277
  3,471
Net income, $m
  -861
  -405
  -187
  34
  216
  410
  614
  829
  1,054
  1,290
  2,337
  2,592
  2,858
  3,133
  3,419
  3,717
  4,025
  4,346
  4,678
  5,024
  5,384
  5,759
  6,148
  6,554
  6,977
  7,418
  7,878
  8,359
  8,861
  9,385

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
  51,503
  61,911
  73,482
  86,209
  100,079
  115,070
  131,158
  148,318
  166,524
  185,753
  205,986
  227,210
  249,415
  272,600
  296,769
  321,934
  348,112
  375,329
  403,617
  433,012
  463,559
  495,309
  528,318
  562,647
  598,364
  635,542
  674,259
  714,598
  756,648
  800,503
Adjusted assets (=assets-cash), $m
  51,503
  61,911
  73,482
  86,209
  100,079
  115,070
  131,158
  148,318
  166,524
  185,753
  205,986
  227,210
  249,415
  272,600
  296,769
  321,934
  348,112
  375,329
  403,617
  433,012
  463,559
  495,309
  528,318
  562,647
  598,364
  635,542
  674,259
  714,598
  756,648
  800,503
Revenue / Adjusted assets
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
  0.056
Average production assets, $m
  80,756
  97,077
  115,220
  135,176
  156,923
  180,429
  205,656
  232,562
  261,109
  291,260
  322,986
  356,265
  391,083
  427,437
  465,334
  504,793
  545,840
  588,517
  632,871
  678,962
  726,861
  776,645
  828,402
  882,231
  938,235
  996,530
  1,057,238
  1,120,489
  1,186,424
  1,255,189
Working capital, $m
  -65,557
  -78,806
  -93,534
  -109,734
  -127,388
  -146,470
  -166,948
  -188,791
  -211,965
  -236,441
  -262,196
  -289,211
  -317,476
  -346,987
  -377,752
  -409,783
  -443,105
  -477,749
  -513,755
  -551,172
  -590,055
  -630,469
  -672,485
  -716,182
  -761,646
  -808,969
  -858,250
  -909,597
  -963,122
  -1,018,945
Total debt, $m
  50,782
  60,150
  70,564
  82,018
  94,501
  107,993
  122,472
  137,916
  154,301
  171,607
  189,818
  208,919
  228,904
  249,770
  271,522
  294,171
  317,731
  342,227
  367,685
  394,141
  421,633
  450,208
  479,916
  510,812
  542,958
  576,418
  611,263
  647,568
  685,413
  724,883
Total liabilities, $m
  46,352
  55,720
  66,134
  77,588
  90,071
  103,563
  118,042
  133,486
  149,871
  167,177
  185,388
  204,489
  224,474
  245,340
  267,092
  289,741
  313,301
  337,797
  363,255
  389,711
  417,203
  445,778
  475,486
  506,382
  538,528
  571,988
  606,833
  643,138
  680,983
  720,453
Total equity, $m
  5,150
  6,191
  7,348
  8,621
  10,008
  11,507
  13,116
  14,832
  16,652
  18,575
  20,599
  22,721
  24,942
  27,260
  29,677
  32,193
  34,811
  37,533
  40,362
  43,301
  46,356
  49,531
  52,832
  56,265
  59,836
  63,554
  67,426
  71,460
  75,665
  80,050
Total liabilities and equity, $m
  51,502
  61,911
  73,482
  86,209
  100,079
  115,070
  131,158
  148,318
  166,523
  185,752
  205,987
  227,210
  249,416
  272,600
  296,769
  321,934
  348,112
  375,330
  403,617
  433,012
  463,559
  495,309
  528,318
  562,647
  598,364
  635,542
  674,259
  714,598
  756,648
  800,503
Debt-to-equity ratio
  9.860
  9.720
  9.600
  9.510
  9.440
  9.380
  9.340
  9.300
  9.270
  9.240
  9.220
  9.190
  9.180
  9.160
  9.150
  9.140
  9.130
  9.120
  9.110
  9.100
  9.100
  9.090
  9.080
  9.080
  9.070
  9.070
  9.070
  9.060
  9.060
  9.060
Adjusted equity ratio
  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
  -861
  -405
  -187
  34
  216
  410
  614
  829
  1,054
  1,290
  2,337
  2,592
  2,858
  3,133
  3,419
  3,717
  4,025
  4,346
  4,678
  5,024
  5,384
  5,759
  6,148
  6,554
  6,977
  7,418
  7,878
  8,359
  8,861
  9,385
Depreciation, amort., depletion, $m
  9,175
  10,807
  12,621
  14,617
  16,791
  19,142
  21,665
  24,355
  27,210
  30,225
  32,299
  35,626
  39,108
  42,744
  46,533
  50,479
  54,584
  58,852
  63,287
  67,896
  72,686
  77,664
  82,840
  88,223
  93,824
  99,653
  105,724
  112,049
  118,642
  125,519
Funds from operations, $m
  8,314
  10,402
  12,434
  14,651
  17,008
  19,552
  22,279
  25,184
  28,264
  31,515
  34,636
  38,219
  41,966
  45,877
  49,953
  54,196
  58,609
  63,197
  67,966
  72,921
  78,070
  83,423
  88,988
  94,777
  100,801
  107,071
  113,602
  120,408
  127,503
  134,904
Change in working capital, $m
  -11,778
  -13,249
  -14,728
  -16,200
  -17,654
  -19,082
  -20,478
  -21,842
  -23,174
  -24,476
  -25,755
  -27,015
  -28,265
  -29,512
  -30,765
  -32,032
  -33,322
  -34,644
  -36,006
  -37,416
  -38,883
  -40,414
  -42,016
  -43,697
  -45,464
  -47,323
  -49,282
  -51,347
  -53,525
  -55,823
Cash from operations, $m
  20,092
  23,651
  27,162
  30,851
  34,662
  38,634
  42,757
  47,027
  51,438
  55,991
  60,390
  65,234
  70,231
  75,389
  80,717
  86,228
  91,931
  97,841
  103,972
  110,337
  116,954
  123,837
  131,005
  138,474
  146,264
  154,394
  162,884
  171,755
  181,028
  190,727
Maintenance CAPEX, $m
  -6,625
  -8,076
  -9,708
  -11,522
  -13,518
  -15,692
  -18,043
  -20,566
  -23,256
  -26,111
  -29,126
  -32,299
  -35,626
  -39,108
  -42,744
  -46,533
  -50,479
  -54,584
  -58,852
  -63,287
  -67,896
  -72,686
  -77,664
  -82,840
  -88,223
  -93,824
  -99,653
  -105,724
  -112,049
  -118,642
New CAPEX, $m
  -14,508
  -16,321
  -18,143
  -19,956
  -21,747
  -23,506
  -25,226
  -26,906
  -28,547
  -30,151
  -31,726
  -33,279
  -34,818
  -36,354
  -37,897
  -39,458
  -41,048
  -42,676
  -44,354
  -46,092
  -47,898
  -49,784
  -51,758
  -53,828
  -56,004
  -58,295
  -60,708
  -63,252
  -65,935
  -68,765
Cash from investing activities, $m
  -21,133
  -24,397
  -27,851
  -31,478
  -35,265
  -39,198
  -43,269
  -47,472
  -51,803
  -56,262
  -60,852
  -65,578
  -70,444
  -75,462
  -80,641
  -85,991
  -91,527
  -97,260
  -103,206
  -109,379
  -115,794
  -122,470
  -129,422
  -136,668
  -144,227
  -152,119
  -160,361
  -168,976
  -177,984
  -187,407
Free cash flow, $m
  -1,041
  -745
  -689
  -627
  -603
  -565
  -512
  -445
  -365
  -271
  -462
  -343
  -214
  -74
  76
  236
  404
  581
  766
  959
  1,159
  1,367
  1,582
  1,806
  2,037
  2,276
  2,523
  2,779
  3,044
  3,319
Issuance/(repayment) of debt, $m
  3,584
  9,368
  10,414
  11,454
  12,482
  13,492
  14,479
  15,444
  16,385
  17,306
  18,210
  19,101
  19,985
  20,867
  21,752
  22,648
  23,561
  24,495
  25,458
  26,456
  27,493
  28,575
  29,708
  30,896
  32,145
  33,460
  34,845
  36,305
  37,845
  39,470
Issuance/(repurchase) of shares, $m
  6,354
  1,446
  1,345
  1,239
  1,171
  1,089
  995
  887
  766
  633
  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  
  9,938
  10,814
  11,759
  12,693
  13,653
  14,581
  15,474
  16,331
  17,151
  17,939
  18,210
  19,101
  19,985
  20,867
  21,752
  22,648
  23,561
  24,495
  25,458
  26,456
  27,493
  28,575
  29,708
  30,896
  32,145
  33,460
  34,845
  36,305
  37,845
  39,470
Total cash flow (excl. dividends), $m
  8,897
  10,068
  11,069
  12,066
  13,050
  14,017
  14,962
  15,885
  16,787
  17,668
  17,748
  18,758
  19,771
  20,793
  21,829
  22,884
  23,965
  25,076
  26,224
  27,414
  28,652
  29,942
  31,290
  32,702
  34,182
  35,736
  37,368
  39,084
  40,890
  42,789
Retained Cash Flow (-), $m
  -6,354
  -1,446
  -1,345
  -1,273
  -1,387
  -1,499
  -1,609
  -1,716
  -1,821
  -1,923
  -2,023
  -2,122
  -2,221
  -2,319
  -2,417
  -2,516
  -2,618
  -2,722
  -2,829
  -2,940
  -3,055
  -3,175
  -3,301
  -3,433
  -3,572
  -3,718
  -3,872
  -4,034
  -4,205
  -4,386
Prev. year cash balance distribution, $m
  343
  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
  40
  49
  59
  70
  82
  95
  110
  125
  141
  159
  177
  196
  216
  237
  260
  283
  306
  331
  357
  384
  412
  441
  472
  503
  536
  570
  605
  642
  680
  720
Cash available for distribution, $m
  2,886
  8,623
  9,725
  10,793
  11,663
  12,517
  13,353
  14,169
  14,966
  15,746
  15,725
  16,635
  17,550
  18,474
  19,412
  20,368
  21,347
  22,355
  23,395
  24,475
  25,597
  26,767
  27,989
  29,269
  30,610
  32,018
  33,497
  35,050
  36,685
  38,403
Discount rate, %
  11.60
  12.18
  12.79
  13.43
  14.10
  14.80
  15.55
  16.32
  17.14
  18.00
  18.90
  19.84
  20.83
  21.87
  22.97
  24.12
  25.32
  26.59
  27.92
  29.31
  30.78
  32.32
  33.93
  35.63
  37.41
  39.28
  41.25
  43.31
  45.47
  47.75
PV of cash for distribution, $m
  2,586
  6,852
  6,778
  6,520
  6,031
  5,467
  4,857
  4,227
  3,604
  3,010
  2,343
  1,896
  1,499
  1,158
  873
  642
  460
  321
  218
  143
  91
  56
  34
  19
  11
  6
  3
  1
  1
  0
Current shareholders' claim on cash, %
  50.0
  39.0
  32.1
  27.4
  24.2
  21.8
  20.1
  18.8
  17.9
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2
  17.2

E*Trade Financial Corporation is a financial services company. The Company provides online brokerage and related products and services primarily to individual retail investors under the brand E*TRADE Financial. The Company also provides investor-focused banking products, primarily sweep deposits, to retail investors. It provides its services to customers through its digital platforms and network of industry-licensed customer service representatives and Financial Consultants, over the phone and by e-mail. The Company's brokerage business is organized into three product areas: Trading, Investing, and Corporate Services. The Company's Trading products deliver automated trade order placement and execution services. The Company's Investing products help investors build wealth and address their long-term investing needs. The Company's Corporate Services channel provides stock plan administration services for both public and private companies.

FINANCIAL RATIOS  of  E*TRADE Financial (ETFC)

Valuation Ratios
P/E Ratio 30.4
Price to Sales 8.3
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 10.3
Price to Free Cash Flow 10.8
Growth Rates
Sales Growth Rate 29.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.1%
Cap. Spend. - 3 Yr. Gr. Rate 9.8%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 22.4%
Total Debt to Equity 527.5%
Interest Coverage 12
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. 1.4%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 6.6%
Asset Turnover 0
Profitability Ratios
Gross Margin 90.6%
Gross Margin - 3 Yr. Avg. 83.9%
EBITDA Margin 57%
EBITDA Margin - 3 Yr. Avg. 50.5%
Operating Margin 41.4%
Oper. Margin - 3 Yr. Avg. 23.2%
Pre-Tax Margin 41.4%
Pre-Tax Margin - 3 Yr. Avg. 23.2%
Net Profit Margin 27.2%
Net Profit Margin - 3 Yr. Avg. 19.6%
Effective Tax Rate 34.1%
Eff/ Tax Rate - 3 Yr. Avg. -41.7%
Payout Ratio 0%

ETFC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ETFC stock intrinsic value calculation we used $2366 million for the last fiscal year's total revenue generated by E*TRADE Financial. The default revenue input number comes from 2017 income statement of E*TRADE Financial. 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 ETFC stock valuation model: a) initial revenue growth rate of 21.9% 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 11.6%, whose default value for ETFC is calculated based on our internal credit rating of E*TRADE Financial, 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 E*TRADE Financial.
    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 ETFC stock the variable cost ratio is equal to 33.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $469 million in the base year in the intrinsic value calculation for ETFC 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 5.4% for E*TRADE Financial.

Corporate tax rate of 27% is the nominal tax rate for E*TRADE Financial. 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 ETFC stock is equal to 1.7%.

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 ETFC are equal to 2800%.

Life of production assets of 10 years is the average useful life of capital assets used in E*TRADE Financial 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 ETFC is equal to -2273%. 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 - $0 million for E*TRADE Financial - 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 273 million for E*TRADE Financial 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 E*TRADE Financial at the current share price and the inputted number of shares is $16.7 billion.

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