Intrinsic value of ArcelorMittal ADR - MT

Previous Close

$31.31

  Intrinsic Value

$6.09

stock screener

  Rating & Target

str. sell

-81%

Previous close

$31.31

 
Intrinsic value

$6.09

 
Up/down potential

-81%

 
Rating

str. sell

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

We calculate the intrinsic value of MT 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 32.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -10.68
  17.00
  15.80
  14.72
  13.75
  12.87
  12.09
  11.38
  10.74
  10.17
  9.65
  9.18
  8.77
  8.39
  8.05
  7.75
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  56,791
  66,445
  76,944
  88,270
  100,405
  113,331
  127,028
  141,480
  156,674
  172,601
  189,256
  206,637
  224,750
  243,605
  263,216
  283,603
  304,790
  326,806
  349,687
  373,470
  398,197
  423,916
  450,678
  478,538
  507,555
  537,791
  569,313
  602,193
  636,505
  672,327
  709,744
Variable operating expenses, $m
 
  70,675
  81,759
  93,717
  106,529
  120,175
  134,635
  149,894
  165,935
  182,750
  200,333
  218,159
  237,282
  257,188
  277,893
  299,416
  321,784
  345,029
  369,185
  394,294
  420,400
  447,554
  475,808
  505,221
  535,855
  567,777
  601,057
  635,771
  671,995
  709,815
  749,318
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
  52,630
  70,675
  81,759
  93,717
  106,529
  120,175
  134,635
  149,894
  165,935
  182,750
  200,333
  218,159
  237,282
  257,188
  277,893
  299,416
  321,784
  345,029
  369,185
  394,294
  420,400
  447,554
  475,808
  505,221
  535,855
  567,777
  601,057
  635,771
  671,995
  709,815
  749,318
Operating income, $m
  4,161
  -4,230
  -4,815
  -5,447
  -6,123
  -6,844
  -7,608
  -8,414
  -9,261
  -10,149
  -11,078
  -11,522
  -12,532
  -13,583
  -14,677
  -15,813
  -16,995
  -18,222
  -19,498
  -20,824
  -22,203
  -23,637
  -25,129
  -26,683
  -28,301
  -29,987
  -31,744
  -33,578
  -35,491
  -37,488
  -39,575
EBITDA, $m
  6,882
  -919
  -1,064
  -1,220
  -1,388
  -1,567
  -1,756
  -1,956
  -2,166
  -2,386
  -2,617
  -2,857
  -3,107
  -3,368
  -3,639
  -3,921
  -4,214
  -4,518
  -4,835
  -5,164
  -5,505
  -5,861
  -6,231
  -6,616
  -7,017
  -7,435
  -7,871
  -8,326
  -8,800
  -9,295
  -9,813
Interest expense (income), $m
  1,354
  955
  1,550
  2,196
  2,893
  3,640
  4,435
  5,278
  6,167
  7,102
  8,082
  9,106
  10,176
  11,290
  12,450
  13,657
  14,911
  16,215
  17,569
  18,977
  20,440
  21,962
  23,544
  25,191
  26,905
  28,690
  30,551
  32,490
  34,513
  36,624
  38,828
Earnings before tax, $m
  2,720
  -5,185
  -6,365
  -7,643
  -9,016
  -10,484
  -12,043
  -13,691
  -15,428
  -17,251
  -19,159
  -20,628
  -22,708
  -24,873
  -27,127
  -29,470
  -31,906
  -34,437
  -37,068
  -39,802
  -42,644
  -45,599
  -48,674
  -51,874
  -55,206
  -58,677
  -62,295
  -66,068
  -70,004
  -74,113
  -78,403
Tax expense, $m
  986
  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
Net income, $m
  1,779
  -5,185
  -6,365
  -7,643
  -9,016
  -10,484
  -12,043
  -13,691
  -15,428
  -17,251
  -19,159
  -20,628
  -22,708
  -24,873
  -27,127
  -29,470
  -31,906
  -34,437
  -37,068
  -39,802
  -42,644
  -45,599
  -48,674
  -51,874
  -55,206
  -58,677
  -62,295
  -66,068
  -70,004
  -74,113
  -78,403

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,501
  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
  75,142
  84,969
  98,394
  112,877
  128,396
  144,924
  162,440
  180,921
  200,351
  220,718
  242,015
  264,242
  287,405
  311,515
  336,593
  362,663
  389,757
  417,911
  447,170
  477,583
  509,204
  542,093
  576,315
  611,941
  649,047
  687,712
  728,022
  770,068
  813,944
  859,753
  907,600
Adjusted assets (=assets-cash), $m
  72,641
  84,969
  98,394
  112,877
  128,396
  144,924
  162,440
  180,921
  200,351
  220,718
  242,015
  264,242
  287,405
  311,515
  336,593
  362,663
  389,757
  417,911
  447,170
  477,583
  509,204
  542,093
  576,315
  611,941
  649,047
  687,712
  728,022
  770,068
  813,944
  859,753
  907,600
Revenue / Adjusted assets
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
Average production assets, $m
  35,732
  41,794
  48,398
  55,522
  63,155
  71,285
  79,900
  88,991
  98,548
  108,566
  119,042
  129,975
  141,368
  153,228
  165,563
  178,386
  191,713
  205,561
  219,953
  234,912
  250,466
  266,643
  283,477
  301,001
  319,252
  338,270
  358,098
  378,779
  400,361
  422,894
  446,429
Working capital, $m
  4,132
  4,120
  4,771
  5,473
  6,225
  7,027
  7,876
  8,772
  9,714
  10,701
  11,734
  12,812
  13,935
  15,104
  16,319
  17,583
  18,897
  20,262
  21,681
  23,155
  24,688
  26,283
  27,942
  29,669
  31,468
  33,343
  35,297
  37,336
  39,463
  41,684
  44,004
Total debt, $m
  13,674
  19,138
  27,113
  35,716
  44,934
  54,752
  65,156
  76,134
  87,675
  99,773
  112,424
  125,627
  139,385
  153,707
  168,603
  184,089
  200,182
  216,906
  234,286
  252,351
  271,134
  290,670
  310,998
  332,160
  354,201
  377,168
  401,112
  426,087
  452,150
  479,360
  507,782
Total liabilities, $m
  45,007
  50,471
  58,446
  67,049
  76,267
  86,085
  96,489
  107,467
  119,008
  131,106
  143,757
  156,960
  170,718
  185,040
  199,936
  215,422
  231,515
  248,239
  265,619
  283,684
  302,467
  322,003
  342,331
  363,493
  385,534
  408,501
  432,445
  457,420
  483,483
  510,693
  539,115
Total equity, $m
  30,135
  34,497
  39,948
  45,828
  52,129
  58,839
  65,950
  73,454
  81,342
  89,611
  98,258
  107,282
  116,686
  126,475
  136,657
  147,241
  158,241
  169,672
  181,551
  193,899
  206,737
  220,090
  233,984
  248,448
  263,513
  279,211
  295,577
  312,647
  330,461
  349,060
  368,486
Total liabilities and equity, $m
  75,142
  84,968
  98,394
  112,877
  128,396
  144,924
  162,439
  180,921
  200,350
  220,717
  242,015
  264,242
  287,404
  311,515
  336,593
  362,663
  389,756
  417,911
  447,170
  477,583
  509,204
  542,093
  576,315
  611,941
  649,047
  687,712
  728,022
  770,067
  813,944
  859,753
  907,601
Debt-to-equity ratio
  0.454
  0.550
  0.680
  0.780
  0.860
  0.930
  0.990
  1.040
  1.080
  1.110
  1.140
  1.170
  1.190
  1.220
  1.230
  1.250
  1.270
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.340
  1.340
  1.350
  1.360
  1.360
  1.370
  1.370
  1.380
Adjusted equity ratio
  0.396
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,779
  -5,185
  -6,365
  -7,643
  -9,016
  -10,484
  -12,043
  -13,691
  -15,428
  -17,251
  -19,159
  -20,628
  -22,708
  -24,873
  -27,127
  -29,470
  -31,906
  -34,437
  -37,068
  -39,802
  -42,644
  -45,599
  -48,674
  -51,874
  -55,206
  -58,677
  -62,295
  -66,068
  -70,004
  -74,113
  -78,403
Depreciation, amort., depletion, $m
  2,721
  3,311
  3,751
  4,226
  4,735
  5,277
  5,851
  6,458
  7,095
  7,763
  8,461
  8,665
  9,425
  10,215
  11,038
  11,892
  12,781
  13,704
  14,664
  15,661
  16,698
  17,776
  18,898
  20,067
  21,283
  22,551
  23,873
  25,252
  26,691
  28,193
  29,762
Funds from operations, $m
  -486
  -1,874
  -2,614
  -3,417
  -4,281
  -5,207
  -6,191
  -7,234
  -8,333
  -9,488
  -10,698
  -11,963
  -13,283
  -14,658
  -16,089
  -17,578
  -19,125
  -20,733
  -22,404
  -24,141
  -25,946
  -27,823
  -29,775
  -31,807
  -33,922
  -36,126
  -38,422
  -40,816
  -43,313
  -45,920
  -48,641
Change in working capital, $m
  -3,181
  599
  651
  702
  752
  801
  849
  896
  942
  987
  1,033
  1,078
  1,123
  1,169
  1,216
  1,264
  1,314
  1,365
  1,419
  1,475
  1,533
  1,595
  1,659
  1,727
  1,799
  1,875
  1,954
  2,039
  2,127
  2,221
  2,320
Cash from operations, $m
  2,695
  -2,472
  -3,265
  -4,119
  -5,034
  -6,008
  -7,040
  -8,130
  -9,275
  -10,476
  -11,731
  -13,041
  -14,406
  -15,827
  -17,305
  -18,842
  -20,439
  -22,098
  -23,823
  -25,615
  -27,479
  -29,417
  -31,434
  -33,534
  -35,721
  -38,000
  -40,376
  -42,854
  -45,441
  -48,141
  -50,961
Maintenance CAPEX, $m
  0
  -2,382
  -2,786
  -3,227
  -3,701
  -4,210
  -4,752
  -5,327
  -5,933
  -6,570
  -7,238
  -7,936
  -8,665
  -9,425
  -10,215
  -11,038
  -11,892
  -12,781
  -13,704
  -14,664
  -15,661
  -16,698
  -17,776
  -18,898
  -20,067
  -21,283
  -22,551
  -23,873
  -25,252
  -26,691
  -28,193
New CAPEX, $m
  -2,444
  -6,063
  -6,603
  -7,124
  -7,633
  -8,130
  -8,615
  -9,091
  -9,557
  -10,018
  -10,476
  -10,933
  -11,393
  -11,860
  -12,335
  -12,823
  -13,327
  -13,849
  -14,392
  -14,959
  -15,554
  -16,177
  -16,833
  -17,524
  -18,251
  -19,018
  -19,828
  -20,681
  -21,582
  -22,532
  -23,535
Cash from investing activities, $m
  -1,143
  -8,445
  -9,389
  -10,351
  -11,334
  -12,340
  -13,367
  -14,418
  -15,490
  -16,588
  -17,714
  -18,869
  -20,058
  -21,285
  -22,550
  -23,861
  -25,219
  -26,630
  -28,096
  -29,623
  -31,215
  -32,875
  -34,609
  -36,422
  -38,318
  -40,301
  -42,379
  -44,554
  -46,834
  -49,223
  -51,728
Free cash flow, $m
  1,552
  -10,917
  -12,655
  -14,469
  -16,368
  -18,348
  -20,408
  -22,547
  -24,765
  -27,063
  -29,444
  -31,910
  -34,464
  -37,111
  -39,856
  -42,703
  -45,658
  -48,728
  -51,919
  -55,238
  -58,693
  -62,293
  -66,044
  -69,957
  -74,039
  -78,302
  -82,755
  -87,409
  -92,275
  -97,364
  -102,689
Issuance/(repayment) of debt, $m
  -6,007
  7,349
  7,974
  8,603
  9,218
  9,818
  10,404
  10,978
  11,541
  12,098
  12,651
  13,203
  13,759
  14,322
  14,896
  15,486
  16,094
  16,724
  17,380
  18,065
  18,783
  19,536
  20,328
  21,162
  22,041
  22,967
  23,944
  24,975
  26,063
  27,211
  28,421
Issuance/(repurchase) of shares, $m
  3,115
  10,163
  11,816
  13,523
  15,317
  17,194
  19,154
  21,195
  23,316
  25,520
  27,806
  29,652
  32,112
  34,662
  37,309
  40,055
  42,906
  45,868
  48,947
  52,149
  55,482
  58,952
  62,568
  66,338
  70,271
  74,375
  78,661
  83,138
  87,818
  92,711
  97,829
Cash from financing (excl. dividends), $m  
  -2,865
  17,512
  19,790
  22,126
  24,535
  27,012
  29,558
  32,173
  34,857
  37,618
  40,457
  42,855
  45,871
  48,984
  52,205
  55,541
  59,000
  62,592
  66,327
  70,214
  74,265
  78,488
  82,896
  87,500
  92,312
  97,342
  102,605
  108,113
  113,881
  119,922
  126,250
Total cash flow (excl. dividends), $m
  -1,440
  6,595
  7,136
  7,657
  8,167
  8,664
  9,150
  9,626
  10,093
  10,554
  11,012
  10,945
  11,406
  11,873
  12,349
  12,838
  13,342
  13,864
  14,408
  14,976
  15,571
  16,196
  16,852
  17,543
  18,272
  19,040
  19,850
  20,705
  21,606
  22,558
  23,561
Retained Cash Flow (-), $m
  -4,863
  -10,163
  -11,816
  -13,523
  -15,317
  -17,194
  -19,154
  -21,195
  -23,316
  -25,520
  -27,806
  -29,652
  -32,112
  -34,662
  -37,309
  -40,055
  -42,906
  -45,868
  -48,947
  -52,149
  -55,482
  -58,952
  -62,568
  -66,338
  -70,271
  -74,375
  -78,661
  -83,138
  -87,818
  -92,711
  -97,829
Prev. year cash balance distribution, $m
 
  616
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -2,952
  -4,680
  -5,866
  -7,150
  -8,530
  -10,004
  -11,569
  -13,224
  -14,965
  -16,794
  -18,707
  -20,706
  -22,790
  -24,959
  -27,217
  -29,564
  -32,004
  -34,539
  -37,173
  -39,911
  -42,756
  -45,716
  -48,795
  -51,999
  -55,335
  -58,811
  -62,434
  -66,212
  -70,153
  -74,267
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  -2,822
  -4,259
  -5,057
  -5,810
  -6,499
  -7,104
  -7,611
  -8,006
  -8,281
  -8,429
  -8,449
  -8,344
  -8,121
  -7,789
  -7,362
  -6,857
  -6,292
  -5,685
  -5,057
  -4,425
  -3,808
  -3,221
  -2,675
  -2,180
  -1,742
  -1,364
  -1,045
  -783
  -573
  -409
Current shareholders' claim on cash, %
  100
  75.5
  57.1
  43.3
  32.9
  25.1
  19.2
  14.8
  11.4
  8.8
  6.8
  5.3
  4.1
  3.2
  2.5
  2.0
  1.5
  1.2
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1

ArcelorMittal S.A. (ArcelorMittal) is a holding company. The Company, together with its subsidiaries, owns and operates steel manufacturing and mining facilities in Europe, North and South America, Asia and Africa. ArcelorMittal operates through five segments, which include NAFTA; Europe; Brazil; Africa and Commonwealth of Independent States (ACIS), and Mining. The NAFTA segment produces flat, long and tubular products. The Brazil segment includes the flat operations of Brazil, and the long and tubular operations of Brazil and neighboring countries. The Europe segment is the flat steel producer in Europe. The ACIS segment produces a combination of flat, long products and tubular products. The Mining segment comprises all mines owned by ArcelorMittal in the Americas, Asia, Europe and Africa. It produces a range of finished and semi-finished steel products (semis).

FINANCIAL RATIOS  of  ArcelorMittal ADR (MT)

Valuation Ratios
P/E Ratio 17.9
Price to Sales 0.6
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 11.8
Price to Free Cash Flow 127.2
Growth Rates
Sales Growth Rate -10.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.7%
Cap. Spend. - 3 Yr. Gr. Rate -6.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 39.1%
Total Debt to Equity 45.4%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. -0.5%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -4.2%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. -6.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 10.1%
Gross Margin - 3 Yr. Avg. 7.6%
EBITDA Margin 12%
EBITDA Margin - 3 Yr. Avg. 4.7%
Operating Margin 7.3%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 4.8%
Pre-Tax Margin - 3 Yr. Avg. -2.6%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. -3.6%
Effective Tax Rate 36.3%
Eff/ Tax Rate - 3 Yr. Avg. -21%
Payout Ratio 3.4%

MT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MT stock intrinsic value calculation we used $56791 million for the last fiscal year's total revenue generated by ArcelorMittal ADR. The default revenue input number comes from 2016 income statement of ArcelorMittal 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 MT stock valuation model: a) initial revenue growth rate of 17% 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 4.6%, whose default value for MT is calculated based on our internal credit rating of ArcelorMittal 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 ArcelorMittal 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 MT stock the variable cost ratio is equal to 106.5%.

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 MT 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 8.1% for ArcelorMittal ADR.

Corporate tax rate of 27% is the nominal tax rate for ArcelorMittal 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 MT 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 MT are equal to 62.9%.

Life of production assets of 15 years is the average useful life of capital assets used in ArcelorMittal 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 MT is equal to 6.2%. 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 - $30135 million for ArcelorMittal 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 1021.78 million for ArcelorMittal 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 ArcelorMittal ADR at the current share price and the inputted number of shares is $32.0 billion.

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COMPANY NEWS

▶ Will Coal Haunt US Steel Producers Next Year?   [09:01AM  Market Realist]
▶ Analyzing Nucor and ArcelorMittal amid Higher Cathode Costs   [Nov-23-17 09:02AM  Market Realist]
▶ How Did Wall Street Rate Steel Stocks Last Week?   [Nov-20-17 01:35PM  Market Realist]
▶ How Much Cash Did U.S. Steel Generate in 3Q17   [10:31AM  Market Realist]
▶ Why ArcelorMittals 3Q17 Shipments Profile Looks Encouraging   [Nov-15-17 04:34PM  Market Realist]
▶ Steel Companies in 3Q17: An Overview   [04:34PM  Market Realist]
▶ Your Key Steel Events: Week Ended November 10   [02:00PM  Market Realist]
▶ Analyzing ArcelorMittals Earnings in 3Q17   [Nov-10-17 03:15PM  Market Realist]
▶ What Drove ArcelorMittals 3Q17 Revenue Beat?   [01:45PM  Market Realist]
▶ ArcelorMittal posts 3Q profit   [05:41AM  Associated Press]
▶ How Markets See ArcelorMittal ahead of Its 3Q17 Earnings   [Nov-09-17 10:30AM  Market Realist]
▶ Top Ranked Value Stocks to Buy for November 7th   [Nov-07-17 08:47AM  Zacks]
▶ Analyzing U.S. Steel Europes 3Q17 Performance   [Nov-06-17 09:01AM  Market Realist]
▶ U.S. finds seven countries dumped steel wire rod   [Oct-25-17 07:13PM  Reuters]
▶ Why Last Week Was Big for US Steel   [Oct-16-17 02:33PM  Market Realist]
▶ Why HP, ArcelorMittal, and Sohu.com Jumped Today   [Oct-13-17 04:30PM  Motley Fool]
▶ How Chinas Communist Party Congress Could Affect US Steel   [Oct-11-17 09:09AM  Market Realist]
▶ Falling Iron Ore Prices Could Drive US Steel Prices Lower   [Oct-06-17 07:39AM  Market Realist]
▶ Which Steel Stocks Pay the Highest Dividends?   [Oct-05-17 09:07AM  Market Realist]
▶ [$$] ArcelorMittal to Invest $1 Billion as Mexico Launches Economic Zones   [Sep-28-17 11:43PM  The Wall Street Journal]
▶ 3 Strong Buy Stocks with Great P/E Ratios   [Sep-26-17 03:28PM  Zacks]
▶ Strong Coking Coal Prices Impact U.S. Steel Corporation   [Sep-25-17 07:38AM  Market Realist]
▶ Indian Steel Ministry: A Message for US Steelmakers   [Sep-22-17 10:39AM  Market Realist]
Financial statements of MT
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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