Intrinsic value of Annaly Capital Management - NLY

Previous Close

$11.91

  Intrinsic Value

$3.50

stock screener

  Rating & Target

str. sell

-71%

Previous close

$11.91

 
Intrinsic value

$3.50

 
Up/down potential

-71%

 
Rating

str. sell

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

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

We calculate the intrinsic value of NLY 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 13.7

 

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, %
  95.60
  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
  2,267
  2,312
  2,366
  2,426
  2,495
  2,570
  2,653
  2,744
  2,841
  2,947
  3,060
  3,181
  3,310
  3,447
  3,593
  3,748
  3,913
  4,087
  4,270
  4,465
  4,670
  4,886
  5,115
  5,355
  5,609
  5,876
  6,157
  6,453
  6,764
  7,092
  7,436
Variable operating expenses, $m
 
  294
  300
  308
  316
  325
  336
  347
  359
  372
  386
  394
  410
  427
  445
  464
  484
  506
  529
  553
  578
  605
  633
  663
  695
  728
  762
  799
  838
  878
  921
Fixed operating expenses, $m
 
  576
  590
  605
  620
  636
  652
  668
  685
  702
  719
  737
  756
  775
  794
  814
  834
  855
  877
  898
  921
  944
  968
  992
  1,017
  1,042
  1,068
  1,095
  1,122
  1,150
  1,179
Total operating expenses, $m
  836
  870
  890
  913
  936
  961
  988
  1,015
  1,044
  1,074
  1,105
  1,131
  1,166
  1,202
  1,239
  1,278
  1,318
  1,361
  1,406
  1,451
  1,499
  1,549
  1,601
  1,655
  1,712
  1,770
  1,830
  1,894
  1,960
  2,028
  2,100
Operating income, $m
  1,431
  1,443
  1,475
  1,513
  1,558
  1,609
  1,666
  1,729
  1,798
  1,873
  1,954
  2,050
  2,144
  2,246
  2,354
  2,470
  2,594
  2,725
  2,865
  3,013
  3,171
  3,337
  3,514
  3,700
  3,898
  4,106
  4,327
  4,559
  4,805
  5,064
  5,337
EBITDA, $m
  1,466
  1,457
  1,490
  1,528
  1,573
  1,624
  1,681
  1,745
  1,814
  1,889
  1,971
  2,060
  2,155
  2,257
  2,366
  2,482
  2,606
  2,738
  2,879
  3,028
  3,186
  3,353
  3,530
  3,718
  3,916
  4,125
  4,346
  4,580
  4,826
  5,086
  5,361
Interest expense (income), $m
  625
  2,504
  2,579
  2,640
  2,710
  2,789
  2,876
  2,971
  3,075
  3,187
  3,309
  3,439
  3,578
  3,726
  3,884
  4,052
  4,230
  4,419
  4,619
  4,830
  5,054
  5,290
  5,538
  5,801
  6,078
  6,369
  6,676
  6,999
  7,339
  7,697
  8,074
Earnings before tax, $m
  1,431
  -1,061
  -1,104
  -1,127
  -1,152
  -1,180
  -1,210
  -1,243
  -1,277
  -1,315
  -1,354
  -1,389
  -1,434
  -1,480
  -1,530
  -1,582
  -1,636
  -1,694
  -1,754
  -1,817
  -1,883
  -1,952
  -2,025
  -2,100
  -2,180
  -2,263
  -2,349
  -2,440
  -2,535
  -2,634
  -2,737
Tax expense, $m
  -2
  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
  1,434
  -1,061
  -1,104
  -1,127
  -1,152
  -1,180
  -1,210
  -1,243
  -1,277
  -1,315
  -1,354
  -1,389
  -1,434
  -1,480
  -1,530
  -1,582
  -1,636
  -1,694
  -1,754
  -1,817
  -1,883
  -1,952
  -2,025
  -2,100
  -2,180
  -2,263
  -2,349
  -2,440
  -2,535
  -2,634
  -2,737

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,540
  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
  87,905
  88,936
  90,982
  93,320
  95,945
  98,854
  102,045
  105,521
  109,283
  113,335
  117,685
  122,338
  127,303
  132,590
  138,208
  144,170
  150,488
  157,176
  164,248
  171,721
  179,611
  187,937
  196,717
  205,971
  215,722
  225,992
  236,805
  248,186
  260,163
  272,763
  286,015
Adjusted assets (=assets-cash), $m
  86,365
  88,936
  90,982
  93,320
  95,945
  98,854
  102,045
  105,521
  109,283
  113,335
  117,685
  122,338
  127,303
  132,590
  138,208
  144,170
  150,488
  157,176
  164,248
  171,721
  179,611
  187,937
  196,717
  205,971
  215,722
  225,992
  236,805
  248,186
  260,163
  272,763
  286,015
Revenue / Adjusted assets
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
  0.026
Average production assets, $m
  37
  37
  38
  39
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  60
  63
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  103
  108
  113
  119
Working capital, $m
  0
  1,156
  1,183
  1,213
  1,247
  1,285
  1,327
  1,372
  1,421
  1,473
  1,530
  1,590
  1,655
  1,724
  1,797
  1,874
  1,956
  2,043
  2,135
  2,232
  2,335
  2,443
  2,557
  2,678
  2,804
  2,938
  3,078
  3,226
  3,382
  3,546
  3,718
Total debt, $m
  73,081
  73,695
  75,442
  77,439
  79,681
  82,165
  84,891
  87,859
  91,071
  94,532
  98,247
  102,221
  106,461
  110,976
  115,774
  120,865
  126,261
  131,972
  138,012
  144,394
  151,132
  158,242
  165,740
  173,644
  181,971
  190,741
  199,976
  209,695
  219,923
  230,683
  242,001
Total liabilities, $m
  75,337
  75,951
  77,698
  79,695
  81,937
  84,421
  87,147
  90,115
  93,327
  96,788
  100,503
  104,477
  108,717
  113,232
  118,030
  123,121
  128,517
  134,228
  140,268
  146,650
  153,388
  160,498
  167,996
  175,900
  184,227
  192,997
  202,232
  211,951
  222,179
  232,939
  244,257
Total equity, $m
  12,568
  12,985
  13,283
  13,625
  14,008
  14,433
  14,899
  15,406
  15,955
  16,547
  17,182
  17,861
  18,586
  19,358
  20,178
  21,049
  21,971
  22,948
  23,980
  25,071
  26,223
  27,439
  28,721
  30,072
  31,495
  32,995
  34,574
  36,235
  37,984
  39,823
  41,758
Total liabilities and equity, $m
  87,905
  88,936
  90,981
  93,320
  95,945
  98,854
  102,046
  105,521
  109,282
  113,335
  117,685
  122,338
  127,303
  132,590
  138,208
  144,170
  150,488
  157,176
  164,248
  171,721
  179,611
  187,937
  196,717
  205,972
  215,722
  225,992
  236,806
  248,186
  260,163
  272,762
  286,015
Debt-to-equity ratio
  5.815
  5.680
  5.680
  5.680
  5.690
  5.690
  5.700
  5.700
  5.710
  5.710
  5.720
  5.720
  5.730
  5.730
  5.740
  5.740
  5.750
  5.750
  5.760
  5.760
  5.760
  5.770
  5.770
  5.770
  5.780
  5.780
  5.780
  5.790
  5.790
  5.790
  5.800
Adjusted equity ratio
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,434
  -1,061
  -1,104
  -1,127
  -1,152
  -1,180
  -1,210
  -1,243
  -1,277
  -1,315
  -1,354
  -1,389
  -1,434
  -1,480
  -1,530
  -1,582
  -1,636
  -1,694
  -1,754
  -1,817
  -1,883
  -1,952
  -2,025
  -2,100
  -2,180
  -2,263
  -2,349
  -2,440
  -2,535
  -2,634
  -2,737
Depreciation, amort., depletion, $m
  35
  15
  15
  15
  15
  15
  16
  16
  16
  17
  17
  10
  11
  11
  11
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Funds from operations, $m
  6,823
  -1,047
  -1,090
  -1,112
  -1,137
  -1,165
  -1,194
  -1,227
  -1,261
  -1,298
  -1,337
  -1,379
  -1,423
  -1,469
  -1,518
  -1,570
  -1,624
  -1,681
  -1,740
  -1,803
  -1,868
  -1,937
  -2,008
  -2,083
  -2,162
  -2,244
  -2,330
  -2,419
  -2,513
  -2,611
  -2,713
Change in working capital, $m
  -33
  23
  27
  30
  34
  38
  41
  45
  49
  53
  57
  60
  65
  69
  73
  78
  82
  87
  92
  97
  103
  108
  114
  120
  127
  134
  141
  148
  156
  164
  172
Cash from operations, $m
  6,856
  -1,069
  -1,116
  -1,142
  -1,171
  -1,202
  -1,236
  -1,272
  -1,310
  -1,351
  -1,394
  -1,439
  -1,487
  -1,538
  -1,591
  -1,647
  -1,706
  -1,768
  -1,832
  -1,900
  -1,971
  -2,045
  -2,122
  -2,204
  -2,289
  -2,377
  -2,470
  -2,567
  -2,669
  -2,775
  -2,886
Maintenance CAPEX, $m
  0
  -7
  -7
  -8
  -8
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
New CAPEX, $m
  -445
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
Cash from investing activities, $m
  -2,062
  -7
  -8
  -9
  -9
  -9
  -9
  -9
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -13
  -15
  -16
  -16
  -17
  -17
  -18
  -20
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
Free cash flow, $m
  4,794
  -1,077
  -1,124
  -1,151
  -1,180
  -1,212
  -1,245
  -1,282
  -1,320
  -1,362
  -1,405
  -1,451
  -1,500
  -1,551
  -1,605
  -1,661
  -1,721
  -1,783
  -1,848
  -1,917
  -1,988
  -2,063
  -2,142
  -2,224
  -2,310
  -2,400
  -2,494
  -2,592
  -2,694
  -2,802
  -2,914
Issuance/(repayment) of debt, $m
  -3,236
  2,154
  1,747
  1,997
  2,242
  2,484
  2,726
  2,968
  3,213
  3,461
  3,714
  3,974
  4,240
  4,515
  4,798
  5,091
  5,396
  5,711
  6,040
  6,382
  6,738
  7,110
  7,498
  7,903
  8,327
  8,770
  9,234
  9,720
  10,228
  10,760
  11,318
Issuance/(repurchase) of shares, $m
  -103
  1,478
  1,403
  1,468
  1,535
  1,605
  1,676
  1,750
  1,827
  1,906
  1,989
  2,068
  2,158
  2,252
  2,350
  2,452
  2,559
  2,670
  2,786
  2,908
  3,035
  3,168
  3,307
  3,452
  3,603
  3,762
  3,928
  4,102
  4,283
  4,473
  4,672
Cash from financing (excl. dividends), $m  
  -3,802
  3,632
  3,150
  3,465
  3,777
  4,089
  4,402
  4,718
  5,040
  5,367
  5,703
  6,042
  6,398
  6,767
  7,148
  7,543
  7,955
  8,381
  8,826
  9,290
  9,773
  10,278
  10,805
  11,355
  11,930
  12,532
  13,162
  13,822
  14,511
  15,233
  15,990
Total cash flow (excl. dividends), $m
  991
  2,555
  2,025
  2,314
  2,597
  2,877
  3,156
  3,436
  3,719
  4,006
  4,299
  4,591
  4,899
  5,216
  5,544
  5,882
  6,234
  6,599
  6,978
  7,373
  7,785
  8,214
  8,663
  9,131
  9,621
  10,133
  10,669
  11,230
  11,817
  12,432
  13,076
Retained Cash Flow (-), $m
  -672
  -1,478
  -1,403
  -1,468
  -1,535
  -1,605
  -1,676
  -1,750
  -1,827
  -1,906
  -1,989
  -2,068
  -2,158
  -2,252
  -2,350
  -2,452
  -2,559
  -2,670
  -2,786
  -2,908
  -3,035
  -3,168
  -3,307
  -3,452
  -3,603
  -3,762
  -3,928
  -4,102
  -4,283
  -4,473
  -4,672
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
 
  1,077
  622
  846
  1,062
  1,273
  1,480
  1,686
  1,892
  2,100
  2,309
  2,523
  2,741
  2,964
  3,193
  3,430
  3,675
  3,929
  4,192
  4,465
  4,750
  5,047
  5,356
  5,680
  6,018
  6,371
  6,741
  7,128
  7,533
  7,958
  8,404
Discount rate, %
 
  12.50
  13.13
  13.78
  14.47
  15.19
  15.95
  16.75
  17.59
  18.47
  19.39
  20.36
  21.38
  22.45
  23.57
  24.75
  25.99
  27.29
  28.65
  30.08
  31.59
  33.17
  34.82
  36.57
  38.39
  40.31
  42.33
  44.45
  46.67
  49.00
  51.45
PV of cash for distribution, $m
 
  958
  486
  574
  618
  627
  609
  570
  518
  457
  392
  328
  268
  213
  165
  124
  91
  65
  45
  30
  20
  12
  7
  4
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  90.3
  82.2
  74.6
  67.6
  61.2
  55.3
  50.0
  45.1
  40.6
  36.6
  33.0
  29.7
  26.7
  24.0
  21.6
  19.5
  17.5
  15.8
  14.2
  12.8
  11.5
  10.4
  9.3
  8.4
  7.6
  6.8
  6.2
  5.6
  5.0
  4.5

Annaly Capital Management, Inc. is a mortgage real estate investment trust (REIT). The Company owns a portfolio of real estate related investments. Its investment groups primarily consist of Agency, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments; Residential credit, which invests primarily in non-Agency mortgage-backed assets within securitized products and residential mortgage loan markets; Commercial real estate, which originates and invests in commercial mortgage loans, securities, and other commercial real estate investments, and Middle market, which provides customized debt financing to middle-market businesses. Its business operations consist of Annaly Commercial Real Estate Group, Inc., which is its subsidiary that specializes in originating or acquiring, financing and managing commercial loans and other commercial real estate debt; Annaly Middle Market Lending LLC, and RCap Securities, Inc.

FINANCIAL RATIOS  of  Annaly Capital Management (NLY)

Valuation Ratios
P/E Ratio 8.5
Price to Sales 5.4
Price to Book 1
Price to Tangible Book
Price to Cash Flow 1.8
Price to Free Cash Flow 1.9
Growth Rates
Sales Growth Rate 95.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11025%
Cap. Spend. - 3 Yr. Gr. Rate -14.7%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 62.6%
Total Debt to Equity 581.5%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. 0.5%
Return On Equity 11.7%
Return On Equity - 3 Yr. Avg. 3%
Asset Turnover 0
Profitability Ratios
Gross Margin 71%
Gross Margin - 3 Yr. Avg. 225.4%
EBITDA Margin 92.2%
EBITDA Margin - 3 Yr. Avg. 154.7%
Operating Margin 63.1%
Oper. Margin - 3 Yr. Avg. 277%
Pre-Tax Margin 63.1%
Pre-Tax Margin - 3 Yr. Avg. 277%
Net Profit Margin 63.3%
Net Profit Margin - 3 Yr. Avg. 278.6%
Effective Tax Rate -0.1%
Eff/ Tax Rate - 3 Yr. Avg. -0.4%
Payout Ratio 85.1%

NLY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NLY stock intrinsic value calculation we used $2267 million for the last fiscal year's total revenue generated by Annaly Capital Management. The default revenue input number comes from 2016 income statement of Annaly Capital Management. 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 NLY 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 12.5%, whose default value for NLY is calculated based on our internal credit rating of Annaly Capital Management, 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 Annaly Capital Management.
    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 NLY stock the variable cost ratio is equal to 12.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $562 million in the base year in the intrinsic value calculation for NLY 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 3.5% for Annaly Capital Management.

Corporate tax rate of 27% is the nominal tax rate for Annaly Capital Management. 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 NLY 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 NLY are equal to 1.6%.

Life of production assets of 3.1 years is the average useful life of capital assets used in Annaly Capital Management 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 NLY is equal to 50%. 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 - $12568 million for Annaly Capital Management - 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 1152.97 million for Annaly Capital Management 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 Annaly Capital Management at the current share price and the inputted number of shares is $13.7 billion.

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Financial statements of NLY
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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