Intrinsic value of Frontier Communications - FTR

Previous Close

$11.57

  Intrinsic Value

$47.60

stock screener

  Rating & Target

str. buy

+311%

  Value-price divergence*

-15%

Previous close

$11.57

 
Intrinsic value

$47.60

 
Up/down potential

+311%

 
Rating

str. buy

 
Value-price divergence*

-15%

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

We calculate the intrinsic value of FTR 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 0.9

 

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, %
  59.54
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  8,896
  9,074
  9,283
  9,521
  9,789
  10,086
  10,411
  10,766
  11,150
  11,563
  12,007
  12,482
  12,988
  13,528
  14,101
  14,709
  15,354
  16,036
  16,758
  17,520
  18,325
  19,175
  20,070
  21,015
  22,010
  23,057
  24,161
  25,322
  26,544
  27,829
  29,181
Variable operating expenses, $m
 
  7,839
  7,997
  8,177
  8,380
  8,605
  8,851
  9,120
  9,411
  9,724
  10,060
  9,452
  9,836
  10,244
  10,678
  11,139
  11,627
  12,144
  12,690
  13,267
  13,877
  14,520
  15,198
  15,913
  16,667
  17,460
  18,296
  19,175
  20,100
  21,074
  22,098
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
  7,994
  7,839
  7,997
  8,177
  8,380
  8,605
  8,851
  9,120
  9,411
  9,724
  10,060
  9,452
  9,836
  10,244
  10,678
  11,139
  11,627
  12,144
  12,690
  13,267
  13,877
  14,520
  15,198
  15,913
  16,667
  17,460
  18,296
  19,175
  20,100
  21,074
  22,098
Operating income, $m
  902
  1,235
  1,286
  1,344
  1,409
  1,481
  1,560
  1,646
  1,739
  1,840
  1,947
  3,030
  3,153
  3,284
  3,423
  3,571
  3,727
  3,893
  4,068
  4,253
  4,448
  4,655
  4,872
  5,101
  5,343
  5,597
  5,865
  6,147
  6,443
  6,755
  7,084
EBITDA, $m
  2,933
  3,487
  3,567
  3,659
  3,762
  3,876
  4,001
  4,138
  4,285
  4,444
  4,615
  4,797
  4,992
  5,199
  5,419
  5,653
  5,901
  6,163
  6,440
  6,733
  7,043
  7,369
  7,713
  8,076
  8,459
  8,861
  9,285
  9,732
  10,201
  10,695
  11,215
Interest expense (income), $m
  1,467
  1,519
  1,564
  1,612
  1,668
  1,730
  1,799
  1,875
  1,958
  2,048
  2,144
  2,247
  2,358
  2,476
  2,602
  2,736
  2,878
  3,028
  3,187
  3,355
  3,533
  3,721
  3,919
  4,128
  4,348
  4,580
  4,824
  5,082
  5,352
  5,637
  5,937
Earnings before tax, $m
  -623
  -284
  -278
  -268
  -259
  -249
  -240
  -229
  -219
  -208
  -197
  782
  795
  807
  821
  835
  849
  865
  881
  898
  915
  934
  953
  973
  995
  1,017
  1,041
  1,065
  1,091
  1,118
  1,147
Tax expense, $m
  -250
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  211
  215
  218
  222
  225
  229
  233
  238
  242
  247
  252
  257
  263
  269
  275
  281
  288
  295
  302
  310
Net income, $m
  -373
  -284
  -278
  -268
  -259
  -249
  -240
  -229
  -219
  -208
  -197
  571
  580
  589
  599
  609
  620
  631
  643
  655
  668
  682
  696
  711
  726
  742
  760
  778
  796
  816
  837

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  522
  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
  29,013
  29,083
  29,752
  30,517
  31,375
  32,326
  33,370
  34,506
  35,737
  37,062
  38,484
  40,006
  41,630
  43,358
  45,196
  47,145
  49,211
  51,398
  53,711
  56,155
  58,735
  61,457
  64,329
  67,355
  70,544
  73,902
  77,438
  81,160
  85,076
  89,196
  93,530
Adjusted assets (=assets-cash), $m
  28,491
  29,083
  29,752
  30,517
  31,375
  32,326
  33,370
  34,506
  35,737
  37,062
  38,484
  40,006
  41,630
  43,358
  45,196
  47,145
  49,211
  51,398
  53,711
  56,155
  58,735
  61,457
  64,329
  67,355
  70,544
  73,902
  77,438
  81,160
  85,076
  89,196
  93,530
Revenue / Adjusted assets
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
Average production assets, $m
  13,600
  13,874
  14,193
  14,558
  14,967
  15,421
  15,919
  16,461
  17,048
  17,680
  18,359
  19,085
  19,859
  20,684
  21,560
  22,491
  23,476
  24,519
  25,623
  26,788
  28,019
  29,318
  30,688
  32,132
  33,653
  35,255
  36,942
  38,717
  40,585
  42,551
  44,618
Working capital, $m
  -788
  -926
  -947
  -971
  -998
  -1,029
  -1,062
  -1,098
  -1,137
  -1,179
  -1,225
  -1,273
  -1,325
  -1,380
  -1,438
  -1,500
  -1,566
  -1,636
  -1,709
  -1,787
  -1,869
  -1,956
  -2,047
  -2,144
  -2,245
  -2,352
  -2,464
  -2,583
  -2,707
  -2,839
  -2,977
Total debt, $m
  18,070
  18,180
  18,746
  19,393
  20,119
  20,924
  21,807
  22,768
  23,809
  24,930
  26,134
  27,421
  28,795
  30,257
  31,811
  33,461
  35,209
  37,059
  39,016
  41,083
  43,266
  45,569
  47,998
  50,558
  53,256
  56,097
  59,088
  62,237
  65,550
  69,036
  72,702
Total liabilities, $m
  24,494
  24,604
  25,170
  25,817
  26,543
  27,348
  28,231
  29,192
  30,233
  31,354
  32,558
  33,845
  35,219
  36,681
  38,235
  39,885
  41,633
  43,483
  45,440
  47,507
  49,690
  51,993
  54,422
  56,982
  59,680
  62,521
  65,512
  68,661
  71,974
  75,460
  79,126
Total equity, $m
  4,519
  4,479
  4,582
  4,700
  4,832
  4,978
  5,139
  5,314
  5,503
  5,708
  5,927
  6,161
  6,411
  6,677
  6,960
  7,260
  7,579
  7,915
  8,271
  8,648
  9,045
  9,464
  9,907
  10,373
  10,864
  11,381
  11,925
  12,499
  13,102
  13,736
  14,404
Total liabilities and equity, $m
  29,013
  29,083
  29,752
  30,517
  31,375
  32,326
  33,370
  34,506
  35,736
  37,062
  38,485
  40,006
  41,630
  43,358
  45,195
  47,145
  49,212
  51,398
  53,711
  56,155
  58,735
  61,457
  64,329
  67,355
  70,544
  73,902
  77,437
  81,160
  85,076
  89,196
  93,530
Debt-to-equity ratio
  3.999
  4.060
  4.090
  4.130
  4.160
  4.200
  4.240
  4.280
  4.330
  4.370
  4.410
  4.450
  4.490
  4.530
  4.570
  4.610
  4.650
  4.680
  4.720
  4.750
  4.780
  4.810
  4.850
  4.870
  4.900
  4.930
  4.950
  4.980
  5.000
  5.030
  5.050
Adjusted equity ratio
  0.140
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -373
  -284
  -278
  -268
  -259
  -249
  -240
  -229
  -219
  -208
  -197
  571
  580
  589
  599
  609
  620
  631
  643
  655
  668
  682
  696
  711
  726
  742
  760
  778
  796
  816
  837
Depreciation, amort., depletion, $m
  2,031
  2,252
  2,282
  2,315
  2,353
  2,395
  2,441
  2,492
  2,546
  2,604
  2,667
  1,767
  1,839
  1,915
  1,996
  2,082
  2,174
  2,270
  2,372
  2,480
  2,594
  2,715
  2,841
  2,975
  3,116
  3,264
  3,421
  3,585
  3,758
  3,940
  4,131
Funds from operations, $m
  1,710
  1,968
  2,004
  2,047
  2,094
  2,146
  2,202
  2,262
  2,327
  2,396
  2,471
  2,338
  2,419
  2,505
  2,596
  2,692
  2,794
  2,902
  3,015
  3,136
  3,263
  3,396
  3,537
  3,686
  3,842
  4,007
  4,180
  4,362
  4,554
  4,756
  4,968
Change in working capital, $m
  44
  -18
  -21
  -24
  -27
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -52
  -55
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -107
  -113
  -118
  -125
  -131
  -138
Cash from operations, $m
  1,666
  1,986
  2,025
  2,071
  2,122
  2,176
  2,235
  2,298
  2,366
  2,439
  2,516
  2,387
  2,471
  2,560
  2,654
  2,754
  2,860
  2,971
  3,089
  3,213
  3,345
  3,483
  3,629
  3,782
  3,944
  4,114
  4,293
  4,481
  4,679
  4,887
  5,106
Maintenance CAPEX, $m
  0
  -1,259
  -1,285
  -1,314
  -1,348
  -1,386
  -1,428
  -1,474
  -1,524
  -1,579
  -1,637
  -1,700
  -1,767
  -1,839
  -1,915
  -1,996
  -2,082
  -2,174
  -2,270
  -2,372
  -2,480
  -2,594
  -2,715
  -2,841
  -2,975
  -3,116
  -3,264
  -3,421
  -3,585
  -3,758
  -3,940
New CAPEX, $m
  -1,401
  -274
  -319
  -365
  -410
  -454
  -498
  -542
  -587
  -632
  -679
  -726
  -775
  -825
  -876
  -930
  -986
  -1,043
  -1,103
  -1,166
  -1,231
  -1,299
  -1,370
  -1,444
  -1,521
  -1,602
  -1,687
  -1,775
  -1,868
  -1,966
  -2,067
Cash from investing activities, $m
  -11,259
  -1,533
  -1,604
  -1,679
  -1,758
  -1,840
  -1,926
  -2,016
  -2,111
  -2,211
  -2,316
  -2,426
  -2,542
  -2,664
  -2,791
  -2,926
  -3,068
  -3,217
  -3,373
  -3,538
  -3,711
  -3,893
  -4,085
  -4,285
  -4,496
  -4,718
  -4,951
  -5,196
  -5,453
  -5,724
  -6,007
Free cash flow, $m
  -9,593
  453
  422
  392
  364
  337
  309
  282
  255
  228
  200
  -39
  -71
  -104
  -138
  -172
  -208
  -246
  -285
  -325
  -367
  -410
  -456
  -503
  -553
  -604
  -659
  -715
  -774
  -836
  -901
Issuance/(repayment) of debt, $m
  1,487
  512
  566
  647
  726
  805
  883
  961
  1,041
  1,121
  1,203
  1,287
  1,374
  1,463
  1,554
  1,649
  1,748
  1,850
  1,957
  2,067
  2,183
  2,303
  2,429
  2,560
  2,698
  2,841
  2,991
  3,149
  3,313
  3,486
  3,666
Issuance/(repurchase) of shares, $m
  0
  364
  381
  386
  391
  396
  400
  404
  408
  412
  416
  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  
  1,442
  876
  947
  1,033
  1,117
  1,201
  1,283
  1,365
  1,449
  1,533
  1,619
  1,287
  1,374
  1,463
  1,554
  1,649
  1,748
  1,850
  1,957
  2,067
  2,183
  2,303
  2,429
  2,560
  2,698
  2,841
  2,991
  3,149
  3,313
  3,486
  3,666
Total cash flow (excl. dividends), $m
  -8,151
  1,329
  1,368
  1,425
  1,482
  1,537
  1,592
  1,648
  1,704
  1,761
  1,819
  1,248
  1,303
  1,359
  1,417
  1,477
  1,539
  1,604
  1,672
  1,743
  1,816
  1,893
  1,973
  2,057
  2,145
  2,237
  2,333
  2,434
  2,539
  2,649
  2,765
Retained Cash Flow (-), $m
  1,095
  -364
  -381
  -386
  -391
  -396
  -400
  -404
  -408
  -412
  -416
  -234
  -250
  -266
  -283
  -300
  -318
  -337
  -356
  -376
  -397
  -419
  -442
  -466
  -491
  -517
  -545
  -573
  -603
  -635
  -667
Prev. year cash balance distribution, $m
 
  120
  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
 
  1,085
  987
  1,039
  1,090
  1,141
  1,192
  1,244
  1,296
  1,349
  1,404
  1,014
  1,053
  1,092
  1,134
  1,177
  1,221
  1,268
  1,316
  1,366
  1,419
  1,474
  1,531
  1,591
  1,654
  1,720
  1,788
  1,860
  1,936
  2,015
  2,098
Discount rate, %
 
  11.90
  12.50
  13.12
  13.78
  14.46
  15.19
  15.95
  16.74
  17.58
  18.46
  19.38
  20.35
  21.37
  22.44
  23.56
  24.74
  25.98
  27.28
  28.64
  30.07
  31.57
  33.15
  34.81
  36.55
  38.38
  40.30
  42.31
  44.43
  46.65
  48.98
PV of cash for distribution, $m
 
  970
  780
  718
  651
  581
  510
  441
  376
  314
  258
  144
  114
  88
  67
  49
  36
  25
  17
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  89.4
  79.7
  71.2
  63.6
  56.9
  51.1
  45.9
  41.4
  37.4
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9
  33.9

Frontier Communications Corporation (Frontier) is a provider of communications services in the United States. The Company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment (CPE). The Company offers a range of broadband services. The principal residential service it provides is broadband Internet service. Its commercial services include Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS), Time Division Multiplexing (TDM) data transport services and optical transport services. It also offers wireless broadband services (using unlicensed spectrum) in various markets utilizing networks that it owns or operates. In addition, the Company offers its Frontier Secure suite of products, including computer security, cloud backup and sharing, identity protection and equipment insurance.

FINANCIAL RATIOS  of  Frontier Communications (FTR)

Valuation Ratios
P/E Ratio -2.4
Price to Sales 0.1
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 0.5
Price to Free Cash Flow 3.4
Growth Rates
Sales Growth Rate 59.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 62.3%
Cap. Spend. - 3 Yr. Gr. Rate 17.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 391%
Total Debt to Equity 399.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.8%
Ret/ On Assets - 3 Yr. Avg. 2.1%
Return On Total Capital -1.7%
Ret/ On T. Cap. - 3 Yr. Avg. -0.6%
Return On Equity -7.4%
Return On Equity - 3 Yr. Avg. -2.7%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 62.3%
Gross Margin - 3 Yr. Avg. 64.8%
EBITDA Margin 32.3%
EBITDA Margin - 3 Yr. Avg. 34.5%
Operating Margin 10.1%
Oper. Margin - 3 Yr. Avg. 13.6%
Pre-Tax Margin -7%
Pre-Tax Margin - 3 Yr. Avg. -3.4%
Net Profit Margin -4.2%
Net Profit Margin - 3 Yr. Avg. -1.6%
Effective Tax Rate 40.1%
Eff/ Tax Rate - 3 Yr. Avg. 34.7%
Payout Ratio -189.5%

FTR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FTR stock intrinsic value calculation we used $8896 million for the last fiscal year's total revenue generated by Frontier Communications. The default revenue input number comes from 2016 income statement of Frontier Communications. 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 FTR stock valuation model: a) initial revenue growth rate of 2% 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 11.9%, whose default value for FTR is calculated based on our internal credit rating of Frontier Communications, 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 Frontier Communications.
    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 FTR stock the variable cost ratio is equal to 86.6%.

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 FTR 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 8.6% for Frontier Communications.

Corporate tax rate of 27% is the nominal tax rate for Frontier Communications. 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 FTR 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 FTR are equal to 152.9%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Frontier Communications 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 FTR is equal to -10.2%. 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 - $4519 million for Frontier Communications - 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 79.03 million for Frontier Communications 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 Frontier Communications at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

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▶ Frontier Communications: Time to Move On?   [10:40AM  Motley Fool]
Financial statements of FTR
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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