Intrinsic value of McDermott International - MDR

Previous Close

$15.81

  Intrinsic Value

$1,332

stock screener

  Rating & Target

str. buy

+999%

Previous close

$15.81

 
Intrinsic value

$1,332

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of MDR 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 0001), $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 2.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  4,776
  7,378
  11,034
  16,010
  22,588
  31,053
  41,683
  54,732
  70,427
  88,955
  110,462
  135,050
  162,781
  193,677
  227,730
  264,905
  305,148
  348,395
  394,576
  443,620
  495,465
  550,056
  607,351
  667,324
  729,967
  795,288
  863,314
  934,090
  1,007,681
  1,084,170
Variable operating expenses, $m
  2,283
  3,527
  5,274
  7,653
  10,797
  14,844
  19,924
  26,162
  33,664
  42,521
  52,801
  64,554
  77,809
  92,578
  108,855
  126,625
  145,861
  166,533
  188,607
  212,051
  236,832
  262,927
  290,314
  318,981
  348,924
  380,148
  412,664
  446,495
  481,672
  518,233
Fixed operating expenses, $m
  1,289
  1,317
  1,346
  1,376
  1,406
  1,437
  1,468
  1,501
  1,534
  1,568
  1,602
  1,637
  1,673
  1,710
  1,748
  1,786
  1,825
  1,866
  1,907
  1,949
  1,992
  2,035
  2,080
  2,126
  2,173
  2,220
  2,269
  2,319
  2,370
  2,422
Total operating expenses, $m
  3,572
  4,844
  6,620
  9,029
  12,203
  16,281
  21,392
  27,663
  35,198
  44,089
  54,403
  66,191
  79,482
  94,288
  110,603
  128,411
  147,686
  168,399
  190,514
  214,000
  238,824
  264,962
  292,394
  321,107
  351,097
  382,368
  414,933
  448,814
  484,042
  520,655
Operating income, $m
  1,204
  2,534
  4,414
  6,982
  10,385
  14,773
  20,290
  27,069
  35,229
  44,867
  56,059
  68,859
  83,298
  99,390
  117,127
  136,494
  157,462
  179,997
  204,062
  229,621
  256,641
  285,094
  314,957
  346,217
  378,870
  412,920
  448,380
  485,276
  523,639
  563,514
EBITDA, $m
  1,366
  2,784
  4,787
  7,524
  11,150
  15,824
  21,701
  28,922
  37,613
  47,879
  59,799
  73,431
  88,809
  105,947
  124,837
  145,463
  167,793
  191,792
  217,420
  244,640
  273,415
  303,716
  335,519
  368,810
  403,584
  439,845
  477,608
  516,900
  557,755
  600,220
Interest expense (income), $m
  47
  53
  139
  264
  440
  679
  995
  1,401
  1,912
  2,539
  3,293
  4,183
  5,217
  6,398
  7,731
  9,215
  10,851
  12,637
  14,571
  16,649
  18,868
  21,224
  23,715
  26,338
  29,091
  31,973
  34,982
  38,121
  41,389
  44,790
  48,326
Earnings before tax, $m
  1,152
  2,396
  4,150
  6,542
  9,706
  13,778
  18,889
  25,157
  32,690
  41,574
  51,876
  63,642
  76,900
  91,659
  107,912
  125,643
  144,825
  165,426
  187,413
  210,753
  235,417
  261,379
  288,619
  317,126
  346,898
  377,937
  410,259
  443,886
  478,849
  515,189
Tax expense, $m
  311
  647
  1,120
  1,766
  2,621
  3,720
  5,100
  6,792
  8,826
  11,225
  14,006
  17,183
  20,763
  24,748
  29,136
  33,924
  39,103
  44,665
  50,602
  56,903
  63,563
  70,572
  77,927
  85,624
  93,662
  102,043
  110,770
  119,849
  129,289
  139,101
Net income, $m
  841
  1,749
  3,029
  4,776
  7,086
  10,058
  13,789
  18,365
  23,864
  30,349
  37,869
  46,459
  56,137
  66,911
  78,776
  91,719
  105,722
  120,761
  136,812
  153,850
  171,854
  190,806
  210,692
  231,502
  253,235
  275,894
  299,489
  324,037
  349,560
  376,088

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
  5,157
  7,968
  11,916
  17,290
  24,393
  33,535
  45,014
  59,106
  76,055
  96,064
  119,289
  145,843
  175,790
  209,155
  245,929
  286,075
  329,534
  376,237
  426,108
  479,072
  535,060
  594,013
  655,886
  720,653
  788,301
  858,842
  932,304
  1,008,736
  1,088,209
  1,170,810
Adjusted assets (=assets-cash), $m
  5,157
  7,968
  11,916
  17,290
  24,393
  33,535
  45,014
  59,106
  76,055
  96,064
  119,289
  145,843
  175,790
  209,155
  245,929
  286,075
  329,534
  376,237
  426,108
  479,072
  535,060
  594,013
  655,886
  720,653
  788,301
  858,842
  932,304
  1,008,736
  1,088,209
  1,170,810
Revenue / Adjusted assets
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
  0.926
Average production assets, $m
  2,684
  4,147
  6,201
  8,998
  12,695
  17,452
  23,426
  30,760
  39,580
  49,993
  62,080
  75,898
  91,483
  108,847
  127,984
  148,877
  171,493
  195,798
  221,752
  249,315
  278,451
  309,131
  341,331
  375,036
  410,242
  446,952
  485,182
  524,959
  566,317
  609,304
Working capital, $m
  549
  849
  1,269
  1,841
  2,598
  3,571
  4,794
  6,294
  8,099
  10,230
  12,703
  15,531
  18,720
  22,273
  26,189
  30,464
  35,092
  40,065
  45,376
  51,016
  56,978
  63,256
  69,845
  76,742
  83,946
  91,458
  99,281
  107,420
  115,883
  124,680
Total debt, $m
  1,416
  2,692
  4,485
  6,925
  10,150
  14,300
  19,511
  25,909
  33,604
  42,688
  53,232
  65,288
  78,883
  94,031
  110,727
  128,953
  148,683
  169,887
  192,528
  216,574
  241,992
  268,757
  296,847
  326,251
  356,964
  388,989
  422,341
  457,041
  493,122
  530,623
Total liabilities, $m
  2,341
  3,617
  5,410
  7,850
  11,075
  15,225
  20,436
  26,834
  34,529
  43,613
  54,157
  66,213
  79,808
  94,956
  111,652
  129,878
  149,608
  170,812
  193,453
  217,499
  242,917
  269,682
  297,772
  327,176
  357,889
  389,914
  423,266
  457,966
  494,047
  531,548
Total equity, $m
  2,816
  4,351
  6,506
  9,440
  13,319
  18,310
  24,578
  32,272
  41,526
  52,451
  65,132
  79,630
  95,981
  114,199
  134,277
  156,197
  179,926
  205,425
  232,655
  261,573
  292,143
  324,331
  358,114
  393,476
  430,413
  468,928
  509,038
  550,770
  594,162
  639,262
Total liabilities and equity, $m
  5,157
  7,968
  11,916
  17,290
  24,394
  33,535
  45,014
  59,106
  76,055
  96,064
  119,289
  145,843
  175,789
  209,155
  245,929
  286,075
  329,534
  376,237
  426,108
  479,072
  535,060
  594,013
  655,886
  720,652
  788,302
  858,842
  932,304
  1,008,736
  1,088,209
  1,170,810
Debt-to-equity ratio
  0.500
  0.620
  0.690
  0.730
  0.760
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.820
  0.820
  0.820
  0.820
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
  0.830
Adjusted equity ratio
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  841
  1,749
  3,029
  4,776
  7,086
  10,058
  13,789
  18,365
  23,864
  30,349
  37,869
  46,459
  56,137
  66,911
  78,776
  91,719
  105,722
  120,761
  136,812
  153,850
  171,854
  190,806
  210,692
  231,502
  253,235
  275,894
  299,489
  324,037
  349,560
  376,088
Depreciation, amort., depletion, $m
  162
  250
  374
  542
  765
  1,051
  1,411
  1,853
  2,384
  3,012
  3,740
  4,572
  5,511
  6,557
  7,710
  8,968
  10,331
  11,795
  13,359
  15,019
  16,774
  18,622
  20,562
  22,593
  24,713
  26,925
  29,228
  31,624
  34,115
  36,705
Funds from operations, $m
  1,002
  1,999
  3,403
  5,318
  7,850
  11,110
  15,200
  20,218
  26,248
  33,360
  41,609
  51,031
  61,648
  73,468
  86,486
  100,688
  116,053
  132,556
  150,170
  168,869
  188,629
  209,429
  231,254
  254,095
  277,949
  302,819
  328,717
  355,661
  383,676
  412,793
Change in working capital, $m
  206
  299
  420
  572
  756
  974
  1,222
  1,501
  1,805
  2,131
  2,473
  2,828
  3,189
  3,553
  3,916
  4,275
  4,628
  4,973
  5,311
  5,640
  5,962
  6,278
  6,589
  6,897
  7,204
  7,512
  7,823
  8,139
  8,463
  8,796
Cash from operations, $m
  796
  1,699
  2,983
  4,746
  7,094
  10,136
  13,977
  18,717
  24,443
  31,230
  39,136
  48,203
  58,459
  69,915
  82,570
  96,413
  111,425
  127,582
  144,859
  163,229
  182,667
  203,151
  224,665
  247,198
  270,745
  295,307
  320,894
  347,522
  375,213
  403,996
Maintenance CAPEX, $m
  -101
  -162
  -250
  -374
  -542
  -765
  -1,051
  -1,411
  -1,853
  -2,384
  -3,012
  -3,740
  -4,572
  -5,511
  -6,557
  -7,710
  -8,968
  -10,331
  -11,795
  -13,359
  -15,019
  -16,774
  -18,622
  -20,562
  -22,593
  -24,713
  -26,925
  -29,228
  -31,624
  -34,115
New CAPEX, $m
  -1,007
  -1,463
  -2,055
  -2,796
  -3,697
  -4,758
  -5,974
  -7,334
  -8,821
  -10,413
  -12,087
  -13,819
  -15,585
  -17,364
  -19,138
  -20,892
  -22,617
  -24,305
  -25,953
  -27,563
  -29,137
  -30,680
  -32,200
  -33,705
  -35,205
  -36,710
  -38,230
  -39,776
  -41,358
  -42,987
Cash from investing activities, $m
  -1,108
  -1,625
  -2,305
  -3,170
  -4,239
  -5,523
  -7,025
  -8,745
  -10,674
  -12,797
  -15,099
  -17,559
  -20,157
  -22,875
  -25,695
  -28,602
  -31,585
  -34,636
  -37,748
  -40,922
  -44,156
  -47,454
  -50,822
  -54,267
  -57,798
  -61,423
  -65,155
  -69,004
  -72,982
  -77,102
Free cash flow, $m
  -312
  75
  678
  1,576
  2,855
  4,614
  6,952
  9,972
  13,770
  18,433
  24,037
  30,645
  38,302
  47,040
  56,875
  67,811
  79,840
  92,947
  107,111
  122,307
  138,511
  155,697
  173,843
  192,931
  212,947
  233,884
  255,739
  278,518
  302,230
  326,894
Issuance/(repayment) of debt, $m
  879
  1,276
  1,792
  2,440
  3,225
  4,150
  5,211
  6,398
  7,695
  9,084
  10,544
  12,055
  13,596
  15,148
  16,695
  18,226
  19,731
  21,203
  22,641
  24,046
  25,418
  26,765
  28,091
  29,404
  30,713
  32,025
  33,352
  34,700
  36,080
  37,501
Issuance/(repurchase) of shares, $m
  214
  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  
  1,093
  1,276
  1,792
  2,440
  3,225
  4,150
  5,211
  6,398
  7,695
  9,084
  10,544
  12,055
  13,596
  15,148
  16,695
  18,226
  19,731
  21,203
  22,641
  24,046
  25,418
  26,765
  28,091
  29,404
  30,713
  32,025
  33,352
  34,700
  36,080
  37,501
Total cash flow (excl. dividends), $m
  782
  1,351
  2,471
  4,015
  6,080
  8,764
  12,164
  16,370
  21,465
  27,517
  34,582
  42,700
  51,898
  62,188
  73,571
  86,037
  99,570
  114,150
  129,752
  146,353
  163,929
  182,461
  201,933
  222,334
  243,659
  265,909
  289,091
  313,218
  338,311
  364,395
Retained Cash Flow (-), $m
  -1,055
  -1,535
  -2,156
  -2,934
  -3,879
  -4,991
  -6,267
  -7,694
  -9,254
  -10,925
  -12,681
  -14,498
  -16,351
  -18,217
  -20,079
  -21,919
  -23,729
  -25,500
  -27,230
  -28,918
  -30,569
  -32,188
  -33,783
  -35,362
  -36,936
  -38,515
  -40,110
  -41,732
  -43,392
  -45,100
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
  -273
  -184
  315
  1,081
  2,202
  3,773
  5,896
  8,676
  12,210
  16,592
  21,900
  28,202
  35,547
  43,971
  53,492
  64,117
  75,841
  88,650
  102,523
  117,435
  133,360
  150,273
  168,150
  186,972
  206,723
  227,394
  248,981
  271,486
  294,919
  319,295
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
  -262
  -168
  274
  890
  1,707
  2,738
  3,984
  5,423
  7,014
  8,698
  10,400
  12,035
  13,516
  14,762
  15,704
  16,294
  16,502
  16,326
  15,786
  14,922
  13,794
  12,469
  11,021
  9,523
  8,042
  6,634
  5,344
  4,200
  3,219
  2,404
Current shareholders' claim on cash, %
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0
  93.0

McDermott International, Inc. is a provider of integrated engineering, procurement, construction and installation (EPCI), front-end engineering and design (FEED) and module fabrication services for upstream field developments across the world. The Company delivers fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for offshore and subsea oil and gas projects. It operates through three segments: the Americas, Europe and Africa (AEA), the Middle East (MEA) and Asia (ASA). As of December 31, 2016, operated in approximately 20 countries across the Americas, Europe, Africa, the Middle East, Asia and Australia, its integrated resources include a diversified fleet of marine vessels, fabrication facilities and engineering offices. It support its activities with project management and procurement services, while utilizing its fully integrated capabilities in both shallow water and deepwater construction.

FINANCIAL RATIOS  of  McDermott International (MDR)

Valuation Ratios
P/E Ratio 112.2
Price to Sales 1.4
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 21.4
Price to Free Cash Flow -76.3
Growth Rates
Sales Growth Rate -14.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 121.4%
Cap. Spend. - 3 Yr. Gr. Rate -4.3%
Financial Strength
Quick Ratio 12
Current Ratio 0.6
LT Debt to Equity 45.3%
Total Debt to Equity 48.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 1.7%
Ret/ On Assets - 3 Yr. Avg. 0.1%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. -1.1%
Return On Equity 2.2%
Return On Equity - 3 Yr. Avg. -1.4%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 14.6%
Gross Margin - 3 Yr. Avg. 11.7%
EBITDA Margin 8.3%
EBITDA Margin - 3 Yr. Avg. 6.2%
Operating Margin 5.4%
Oper. Margin - 3 Yr. Avg. 3.3%
Pre-Tax Margin 3.1%
Pre-Tax Margin - 3 Yr. Avg. 1.2%
Net Profit Margin 1.3%
Net Profit Margin - 3 Yr. Avg. -0.9%
Effective Tax Rate 51.2%
Eff/ Tax Rate - 3 Yr. Avg. 24.8%
Payout Ratio 0%

MDR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MDR stock intrinsic value calculation we used $2984.768 million for the last fiscal year's total revenue generated by McDermott International. The default revenue input number comes from 0001 income statement of McDermott International. 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 MDR stock valuation model: a) initial revenue growth rate of 60% 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 MDR is calculated based on our internal credit rating of McDermott International, 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 McDermott International.
    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 MDR stock the variable cost ratio is equal to 47.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1261 million in the base year in the intrinsic value calculation for MDR 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 9.8% for McDermott International.

Corporate tax rate of 27% is the nominal tax rate for McDermott International. 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 MDR 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 MDR are equal to 56.2%.

Life of production assets of 16.6 years is the average useful life of capital assets used in McDermott International 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 MDR is equal to 11.5%. 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 - $1761 million for McDermott International - 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 180.537 million for McDermott International 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 McDermott International at the current share price and the inputted number of shares is $2.9 billion.

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COMPANY NEWS

▶ McDermott to begin work on $1B natural gas power plant near Houston   [03:21PM  American City Business Journals]
▶ Joint venture picks Houston area for polyethylene plant, awards contract to McDermott   [Sep-25-18 02:22PM  American City Business Journals]
▶ 5 Low-P/E Ratio Stocks in Prem Watsa's Portfolio   [Sep-19-18 06:53PM  GuruFocus.com]
▶ Howard Hughes Corp. closes on $53M purchase of former CB&I HQ   [Sep-11-18 02:35PM  American City Business Journals]
▶ McDermott to sell former CB&I HQ in The Woodlands to Howard Hughes   [Sep-05-18 05:04PM  American City Business Journals]
▶ Top 10 Stocks Under $20   [Aug-27-18 05:23PM  Zacks]
▶ 5 things to know in Texas energy this week   [Aug-20-18 09:59AM  American City Business Journals]
▶ McDermott: 2Q Earnings Snapshot   [Jul-31-18 04:52PM  Associated Press]
▶ McDermott hires TechnipFMC exec to fill COO role   [Jul-03-18 02:00PM  American City Business Journals]
▶ McDermott Announces Technology Awards in Indonesia   [Jul-02-18 07:00AM  PR Newswire]
▶ Houston energy CEO: 'We dont have the young talent'   [Jun-27-18 09:13AM  American City Business Journals]
▶ $1.7B Texas ethane cracker breaks ground, JV seeks incentives for another plant   [Jun-19-18 10:15AM  American City Business Journals]
▶ 3 Infrastructure Plays for the Trump Economy   [May-23-18 11:47AM  InvestorPlace]
▶ McDermott Completes Combination with CB&I   [06:39PM  GlobeNewswire]
▶ Behind the deal: McDermott to close $6B CB&I merger   [03:59PM  American City Business Journals]
▶ CEOs of McDermott, Oceaneering talk about subsea consolidation   [11:14AM  American City Business Journals]
▶ McDermott, CB&I stockholders OK $6B deal after hostile bid rejected   [May-02-18 03:23PM  American City Business Journals]

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