Intrinsic value of Fresenius Medical Care ADR - FMS

Previous Close

$48.49

  Intrinsic Value

$89.36

stock screener

  Rating & Target

str. buy

+84%

  Value-price divergence*

+60%

Previous close

$48.49

 
Intrinsic value

$89.36

 
Up/down potential

+84%

 
Rating

str. buy

 
Value-price divergence*

+60%

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

We calculate the intrinsic value of FMS 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 29.6

 

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, %
  7.01
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.39
  5.35
  5.32
  5.29
Revenue, $m
  17,911
  19,899
  21,987
  24,172
  26,456
  28,837
  31,318
  33,899
  36,583
  39,373
  42,272
  45,285
  48,416
  51,671
  55,055
  58,576
  62,241
  66,057
  70,031
  74,174
  78,494
  83,001
  87,705
  92,617
  97,749
  103,112
  108,719
  114,583
  120,719
  127,140
  133,862
Variable operating expenses, $m
 
  14,482
  15,865
  17,314
  18,827
  20,405
  22,049
  23,759
  25,538
  27,387
  29,308
  30,009
  32,083
  34,240
  36,483
  38,817
  41,245
  43,773
  46,407
  49,153
  52,015
  55,002
  58,119
  61,374
  64,775
  68,328
  72,044
  75,930
  79,996
  84,251
  88,706
Fixed operating expenses, $m
 
  2,218
  2,274
  2,330
  2,389
  2,448
  2,510
  2,572
  2,637
  2,703
  2,770
  2,839
  2,910
  2,983
  3,058
  3,134
  3,212
  3,293
  3,375
  3,459
  3,546
  3,635
  3,725
  3,819
  3,914
  4,012
  4,112
  4,215
  4,320
  4,428
  4,539
Total operating expenses, $m
  15,273
  16,700
  18,139
  19,644
  21,216
  22,853
  24,559
  26,331
  28,175
  30,090
  32,078
  32,848
  34,993
  37,223
  39,541
  41,951
  44,457
  47,066
  49,782
  52,612
  55,561
  58,637
  61,844
  65,193
  68,689
  72,340
  76,156
  80,145
  84,316
  88,679
  93,245
Operating income, $m
  2,638
  3,199
  3,848
  4,528
  5,240
  5,984
  6,759
  7,567
  8,409
  9,284
  10,194
  12,437
  13,422
  14,447
  15,514
  16,626
  17,784
  18,990
  20,249
  21,562
  22,933
  24,365
  25,860
  27,424
  29,060
  30,771
  32,562
  34,438
  36,402
  38,460
  40,617
EBITDA, $m
  3,414
  4,546
  5,200
  5,886
  6,604
  7,354
  8,136
  8,951
  9,799
  10,681
  11,599
  12,554
  13,547
  14,581
  15,657
  16,777
  17,944
  19,161
  20,430
  21,754
  23,136
  24,579
  26,087
  27,664
  29,313
  31,038
  32,843
  34,734
  36,714
  38,789
  40,963
Interest expense (income), $m
  387
  341
  418
  498
  581
  668
  759
  853
  951
  1,054
  1,160
  1,270
  1,385
  1,505
  1,629
  1,757
  1,892
  2,031
  2,177
  2,328
  2,486
  2,650
  2,822
  3,001
  3,189
  3,384
  3,588
  3,802
  4,025
  4,259
  4,504
Earnings before tax, $m
  2,232
  2,858
  3,430
  4,031
  4,659
  5,316
  6,001
  6,714
  7,457
  8,230
  9,034
  11,166
  12,037
  12,943
  13,886
  14,868
  15,892
  16,959
  18,072
  19,234
  20,447
  21,714
  23,038
  24,423
  25,871
  27,387
  28,974
  30,636
  32,377
  34,201
  36,114
Tax expense, $m
  683
  772
  926
  1,088
  1,258
  1,435
  1,620
  1,813
  2,013
  2,222
  2,439
  3,015
  3,250
  3,495
  3,749
  4,014
  4,291
  4,579
  4,880
  5,193
  5,521
  5,863
  6,220
  6,594
  6,985
  7,395
  7,823
  8,272
  8,742
  9,234
  9,751
Net income, $m
  1,243
  2,086
  2,504
  2,942
  3,401
  3,881
  4,381
  4,901
  5,444
  6,008
  6,595
  8,151
  8,787
  9,448
  10,137
  10,854
  11,601
  12,380
  13,193
  14,041
  14,926
  15,851
  16,818
  17,829
  18,886
  19,993
  21,151
  22,364
  23,635
  24,967
  26,363

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  709
  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
  25,504
  27,561
  30,452
  33,480
  36,642
  39,941
  43,377
  46,952
  50,669
  54,533
  58,548
  62,721
  67,058
  71,566
  76,254
  81,131
  86,206
  91,491
  96,996
  102,734
  108,718
  114,960
  121,475
  128,278
  135,386
  142,814
  150,580
  158,702
  167,201
  176,094
  185,405
Adjusted assets (=assets-cash), $m
  24,795
  27,561
  30,452
  33,480
  36,642
  39,941
  43,377
  46,952
  50,669
  54,533
  58,548
  62,721
  67,058
  71,566
  76,254
  81,131
  86,206
  91,491
  96,996
  102,734
  108,718
  114,960
  121,475
  128,278
  135,386
  142,814
  150,580
  158,702
  167,201
  176,094
  185,405
Revenue / Adjusted assets
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
Average production assets, $m
  817
  915
  1,011
  1,112
  1,217
  1,327
  1,441
  1,559
  1,683
  1,811
  1,945
  2,083
  2,227
  2,377
  2,533
  2,695
  2,863
  3,039
  3,221
  3,412
  3,611
  3,818
  4,034
  4,260
  4,496
  4,743
  5,001
  5,271
  5,553
  5,848
  6,158
Working capital, $m
  1,585
  2,408
  2,660
  2,925
  3,201
  3,489
  3,789
  4,102
  4,427
  4,764
  5,115
  5,479
  5,858
  6,252
  6,662
  7,088
  7,531
  7,993
  8,474
  8,975
  9,498
  10,043
  10,612
  11,207
  11,828
  12,477
  13,155
  13,865
  14,607
  15,384
  16,197
Total debt, $m
  8,132
  9,088
  10,816
  12,627
  14,518
  16,491
  18,545
  20,683
  22,906
  25,217
  27,618
  30,113
  32,707
  35,402
  38,206
  41,122
  44,157
  47,318
  50,610
  54,041
  57,619
  61,352
  65,248
  69,316
  73,567
  78,009
  82,653
  87,510
  92,592
  97,910
  103,478
Total liabilities, $m
  15,526
  16,482
  18,210
  20,021
  21,912
  23,885
  25,939
  28,077
  30,300
  32,611
  35,012
  37,507
  40,101
  42,796
  45,600
  48,516
  51,551
  54,712
  58,004
  61,435
  65,013
  68,746
  72,642
  76,710
  80,961
  85,403
  90,047
  94,904
  99,986
  105,304
  110,872
Total equity, $m
  9,978
  11,080
  12,242
  13,459
  14,730
  16,056
  17,437
  18,875
  20,369
  21,922
  23,536
  25,214
  26,957
  28,770
  30,654
  32,615
  34,655
  36,779
  38,993
  41,299
  43,704
  46,214
  48,833
  51,568
  54,425
  57,411
  60,533
  63,798
  67,215
  70,790
  74,533
Total liabilities and equity, $m
  25,504
  27,562
  30,452
  33,480
  36,642
  39,941
  43,376
  46,952
  50,669
  54,533
  58,548
  62,721
  67,058
  71,566
  76,254
  81,131
  86,206
  91,491
  96,997
  102,734
  108,717
  114,960
  121,475
  128,278
  135,386
  142,814
  150,580
  158,702
  167,201
  176,094
  185,405
Debt-to-equity ratio
  0.815
  0.820
  0.880
  0.940
  0.990
  1.030
  1.060
  1.100
  1.120
  1.150
  1.170
  1.190
  1.210
  1.230
  1.250
  1.260
  1.270
  1.290
  1.300
  1.310
  1.320
  1.330
  1.340
  1.340
  1.350
  1.360
  1.370
  1.370
  1.380
  1.380
  1.390
Adjusted equity ratio
  0.397
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402
  0.402

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,243
  2,086
  2,504
  2,942
  3,401
  3,881
  4,381
  4,901
  5,444
  6,008
  6,595
  8,151
  8,787
  9,448
  10,137
  10,854
  11,601
  12,380
  13,193
  14,041
  14,926
  15,851
  16,818
  17,829
  18,886
  19,993
  21,151
  22,364
  23,635
  24,967
  26,363
Depreciation, amort., depletion, $m
  776
  1,347
  1,352
  1,358
  1,364
  1,370
  1,377
  1,383
  1,390
  1,397
  1,405
  117
  125
  134
  142
  151
  161
  171
  181
  192
  203
  214
  227
  239
  253
  266
  281
  296
  312
  329
  346
Funds from operations, $m
  1,991
  3,433
  3,856
  4,300
  4,765
  5,251
  5,757
  6,285
  6,834
  7,405
  8,000
  8,268
  8,912
  9,582
  10,279
  11,005
  11,762
  12,551
  13,374
  14,233
  15,129
  16,066
  17,045
  18,068
  19,139
  20,259
  21,432
  22,660
  23,947
  25,295
  26,709
Change in working capital, $m
  -149
  241
  253
  264
  276
  288
  300
  312
  325
  338
  351
  365
  379
  394
  410
  426
  443
  462
  481
  501
  523
  545
  569
  594
  621
  649
  678
  710
  742
  777
  813
Cash from operations, $m
  2,140
  3,192
  3,603
  4,036
  4,489
  4,963
  5,457
  5,972
  6,509
  7,068
  7,649
  7,904
  8,533
  9,188
  9,869
  10,579
  11,319
  12,089
  12,893
  13,731
  14,606
  15,520
  16,475
  17,474
  18,518
  19,610
  20,754
  21,951
  23,205
  24,518
  25,895
Maintenance CAPEX, $m
  0
  -46
  -51
  -57
  -62
  -68
  -75
  -81
  -88
  -95
  -102
  -109
  -117
  -125
  -134
  -142
  -151
  -161
  -171
  -181
  -192
  -203
  -214
  -227
  -239
  -253
  -266
  -281
  -296
  -312
  -329
New CAPEX, $m
  -1,608
  -99
  -96
  -101
  -105
  -110
  -114
  -119
  -123
  -128
  -133
  -139
  -144
  -150
  -156
  -162
  -169
  -176
  -183
  -191
  -199
  -207
  -216
  -226
  -236
  -247
  -258
  -270
  -282
  -295
  -309
Cash from investing activities, $m
  -1,379
  -145
  -147
  -158
  -167
  -178
  -189
  -200
  -211
  -223
  -235
  -248
  -261
  -275
  -290
  -304
  -320
  -337
  -354
  -372
  -391
  -410
  -430
  -453
  -475
  -500
  -524
  -551
  -578
  -607
  -638
Free cash flow, $m
  761
  3,048
  3,456
  3,879
  4,321
  4,785
  5,268
  5,773
  6,298
  6,845
  7,414
  7,656
  8,272
  8,913
  9,580
  10,275
  10,999
  11,753
  12,539
  13,360
  14,216
  15,110
  16,045
  17,021
  18,042
  19,111
  20,229
  21,400
  22,626
  23,911
  25,258
Issuance/(repayment) of debt, $m
  -234
  1,665
  1,729
  1,810
  1,891
  1,973
  2,055
  2,138
  2,223
  2,311
  2,401
  2,495
  2,593
  2,696
  2,803
  2,916
  3,035
  3,160
  3,292
  3,431
  3,578
  3,733
  3,896
  4,068
  4,250
  4,442
  4,644
  4,857
  5,082
  5,318
  5,568
Issuance/(repurchase) of shares, $m
  49
  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  
  -308
  1,665
  1,729
  1,810
  1,891
  1,973
  2,055
  2,138
  2,223
  2,311
  2,401
  2,495
  2,593
  2,696
  2,803
  2,916
  3,035
  3,160
  3,292
  3,431
  3,578
  3,733
  3,896
  4,068
  4,250
  4,442
  4,644
  4,857
  5,082
  5,318
  5,568
Total cash flow (excl. dividends), $m
  475
  4,712
  5,185
  5,689
  6,213
  6,757
  7,323
  7,911
  8,521
  9,155
  9,815
  10,151
  10,865
  11,609
  12,384
  13,191
  14,034
  14,913
  15,831
  16,791
  17,794
  18,843
  19,941
  21,090
  22,293
  23,553
  24,873
  26,257
  27,708
  29,230
  30,825
Retained Cash Flow (-), $m
  -91
  -1,102
  -1,162
  -1,217
  -1,271
  -1,326
  -1,381
  -1,437
  -1,494
  -1,553
  -1,614
  -1,677
  -1,743
  -1,812
  -1,885
  -1,960
  -2,040
  -2,124
  -2,213
  -2,307
  -2,405
  -2,509
  -2,619
  -2,735
  -2,857
  -2,986
  -3,122
  -3,265
  -3,416
  -3,575
  -3,743
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
 
  3,611
  4,023
  4,472
  4,941
  5,431
  5,942
  6,473
  7,027
  7,602
  8,201
  8,474
  9,122
  9,797
  10,499
  11,231
  11,993
  12,789
  13,618
  14,484
  15,389
  16,334
  17,322
  18,355
  19,435
  20,567
  21,751
  22,992
  24,292
  25,654
  27,083
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  3,390
  3,525
  3,633
  3,697
  3,713
  3,683
  3,608
  3,489
  3,331
  3,138
  2,801
  2,575
  2,332
  2,081
  1,827
  1,578
  1,340
  1,118
  915
  735
  578
  445
  335
  246
  177
  123
  84
  55
  36
  22
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

Fresenius Medical Care AG & Co. KGaA is a kidney dialysis company. The Company provides dialysis care and related services to persons suffering from end-stage renal disease (ESRD), as well as other healthcare services. The Company's segments include North America Segment, the Europe, Middle East and Africa (EMEA) Segment, the Asia-Pacific Segment and the Latin America Segment. The Company develops and manufactures a range of dialysis machines, systems and disposable products. As of December 31, 2016, the Company sold its products to customers in more than 120 countries and also used in its internal healthcare service operations. The Company's Care Coordination services include coordinated delivery of pharmacy services, vascular, cardiovascular and endovascular specialty services, non-dialysis laboratory testing services, physician services, hospitalist and intensivist services, health plan services, ambulatory surgery center services and urgent care services.

FINANCIAL RATIOS  of  Fresenius Medical Care ADR (FMS)

Valuation Ratios
P/E Ratio 11.9
Price to Sales 0.8
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 27.9
Growth Rates
Sales Growth Rate 7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 26.6%
Cap. Spend. - 3 Yr. Gr. Rate 5.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 68.5%
Total Debt to Equity 81.5%
Interest Coverage 7
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 6.8%
Ret/ On T. Cap. - 3 Yr. Avg. 6%
Return On Equity 12.5%
Return On Equity - 3 Yr. Avg. 11.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 32.3%
Gross Margin - 3 Yr. Avg. 31.9%
EBITDA Margin 19%
EBITDA Margin - 3 Yr. Avg. 17.7%
Operating Margin 14.7%
Oper. Margin - 3 Yr. Avg. 14.3%
Pre-Tax Margin 12.5%
Pre-Tax Margin - 3 Yr. Avg. 11.9%
Net Profit Margin 6.9%
Net Profit Margin - 3 Yr. Avg. 6.6%
Effective Tax Rate 30.6%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
Payout Ratio 22.3%

FMS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FMS stock intrinsic value calculation we used $17911 million for the last fiscal year's total revenue generated by Fresenius Medical Care ADR. The default revenue input number comes from 2016 income statement of Fresenius Medical Care 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 FMS stock valuation model: a) initial revenue growth rate of 11.1% 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 6.5%, whose default value for FMS is calculated based on our internal credit rating of Fresenius Medical Care 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 Fresenius Medical Care 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 FMS stock the variable cost ratio is equal to 73.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2164 million in the base year in the intrinsic value calculation for FMS 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 4.6% for Fresenius Medical Care ADR.

Corporate tax rate of 27% is the nominal tax rate for Fresenius Medical Care 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 FMS 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 FMS are equal to 4.6%.

Life of production assets of 17.8 years is the average useful life of capital assets used in Fresenius Medical Care 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 FMS is equal to 12.1%. 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 - $9978 million for Fresenius Medical Care 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 611.454 million for Fresenius Medical Care 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 Fresenius Medical Care ADR at the current share price and the inputted number of shares is $29.6 billion.

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COMPANY NEWS

▶ Like Mother Like Daughter   [Sep-13-17 04:11PM  Business Wire]
▶ [$$] Fresenius Unit Buys NxStage Medical in $2 Billion Dialysis Deal   [Aug-08-17 12:37AM  The Wall Street Journal]
▶ Buyout Bid Overshadows NxStage Medical's Losses   [Aug-07-17 05:31PM  Motley Fool]
▶ Fresenius to buy Lawrence-based NxStage Medical for $2B   [03:11PM  American City Business Journals]
▶ Fresenius Pays an Arm, and Maybe a Leg   [06:29AM  Bloomberg]
▶ [$$] U.S. Charges Four With Trading Insider Tips on Health-Care Policy   [May-24-17 07:44PM  The Wall Street Journal]
▶ Fresenius beats Street 1Q forecasts   [May-03-17 05:02AM  Associated Press]
▶ [$$] Revelstoke Capital Adds Operating Partner to Team   [May-02-17 12:03PM  The Wall Street Journal]
▶ Fresenius Buys Akorn -- What Now?   [09:29AM  Motley Fool]
▶ Akorn Launches To Six-Month High On Fresenius Takeover Rumor   [Apr-07-17 04:39PM  Investor's Business Daily]
▶ Fresenius Medical Care misses 4Q revenue forecasts   [Feb-22-17 05:07PM  Associated Press]
▶ Cleveland Clinic East Kidney Center Opening Soon   [Jan-04-17 12:30PM  Business Wire]
▶ How Kellogg Company (K) Stacks Up Against Its Peers   [Dec-10-16 09:07PM  at Insider Monkey]
▶ Hedge Funds Are Selling Sempra Energy (SRE)   [Dec-08-16 08:46AM  at Insider Monkey]
▶ Is Humana Inc (HUM) A Good Stock To Buy Right Now?   [Dec-01-16 09:22AM  at Insider Monkey]
Financial statements of FMS
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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