Intrinsic value of Norfolk Souther Corporation - NSC

Previous Close

$173.00

  Intrinsic Value

$68.14

stock screener

  Rating & Target

str. sell

-61%

Previous close

$173.00

 
Intrinsic value

$68.14

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of NSC 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 46.3

 

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, %
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
Revenue, $m
  12,432
  13,445
  14,499
  15,593
  16,731
  17,914
  19,142
  20,420
  21,749
  23,131
  24,570
  26,068
  27,629
  29,256
  30,954
  32,724
  34,573
  36,503
  38,520
  40,628
  42,833
  45,138
  47,551
  50,076
  52,719
  55,488
  58,388
  61,426
  64,610
  67,947
Variable operating expenses, $m
  6,440
  6,965
  7,510
  8,077
  8,667
  9,279
  9,916
  10,578
  11,266
  11,982
  12,727
  13,503
  14,312
  15,155
  16,034
  16,951
  17,909
  18,909
  19,953
  21,045
  22,187
  23,382
  24,631
  25,939
  27,309
  28,743
  30,245
  31,819
  33,468
  35,196
Fixed operating expenses, $m
  1,631
  1,667
  1,704
  1,741
  1,779
  1,819
  1,859
  1,900
  1,941
  1,984
  2,028
  2,072
  2,118
  2,164
  2,212
  2,261
  2,310
  2,361
  2,413
  2,466
  2,521
  2,576
  2,633
  2,691
  2,750
  2,810
  2,872
  2,935
  3,000
  3,066
Total operating expenses, $m
  8,071
  8,632
  9,214
  9,818
  10,446
  11,098
  11,775
  12,478
  13,207
  13,966
  14,755
  15,575
  16,430
  17,319
  18,246
  19,212
  20,219
  21,270
  22,366
  23,511
  24,708
  25,958
  27,264
  28,630
  30,059
  31,553
  33,117
  34,754
  36,468
  38,262
Operating income, $m
  4,361
  4,814
  5,285
  5,775
  6,285
  6,816
  7,368
  7,943
  8,542
  9,165
  9,815
  10,493
  11,199
  11,937
  12,708
  13,512
  14,354
  15,233
  16,153
  17,116
  18,125
  19,181
  20,287
  21,446
  22,661
  23,935
  25,271
  26,672
  28,142
  29,684
EBITDA, $m
  5,560
  6,110
  6,682
  7,278
  7,898
  8,543
  9,213
  9,911
  10,638
  11,395
  12,184
  13,006
  13,863
  14,758
  15,692
  16,667
  17,687
  18,752
  19,867
  21,033
  22,254
  23,532
  24,871
  26,273
  27,743
  29,284
  30,899
  32,594
  34,370
  36,235
Interest expense (income), $m
  0
  602
  698
  798
  902
  1,009
  1,121
  1,238
  1,359
  1,484
  1,615
  1,751
  1,893
  2,040
  2,194
  2,354
  2,521
  2,696
  2,877
  3,067
  3,266
  3,474
  3,690
  3,917
  4,155
  4,403
  4,664
  4,936
  5,222
  5,521
  5,834
Earnings before tax, $m
  3,759
  4,115
  4,487
  4,873
  5,276
  5,694
  6,130
  6,584
  7,057
  7,550
  8,064
  8,600
  9,159
  9,743
  10,353
  10,991
  11,658
  12,356
  13,086
  13,850
  14,651
  15,490
  16,369
  17,291
  18,257
  19,271
  20,335
  21,450
  22,621
  23,850
Tax expense, $m
  1,015
  1,111
  1,211
  1,316
  1,424
  1,537
  1,655
  1,778
  1,905
  2,038
  2,177
  2,322
  2,473
  2,631
  2,795
  2,968
  3,148
  3,336
  3,533
  3,740
  3,956
  4,182
  4,420
  4,669
  4,930
  5,203
  5,490
  5,792
  6,108
  6,440
Net income, $m
  2,744
  3,004
  3,275
  3,558
  3,851
  4,157
  4,475
  4,807
  5,152
  5,511
  5,887
  6,278
  6,686
  7,113
  7,558
  8,024
  8,510
  9,020
  9,553
  10,111
  10,695
  11,308
  11,950
  12,622
  13,328
  14,068
  14,844
  15,659
  16,514
  17,411

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
  39,342
  42,548
  45,882
  49,346
  52,947
  56,688
  60,577
  64,620
  68,825
  73,199
  77,752
  82,494
  87,434
  92,584
  97,954
  103,558
  109,407
  115,516
  121,899
  128,570
  135,546
  142,842
  150,477
  158,467
  166,833
  175,594
  184,771
  194,385
  204,461
  215,021
Adjusted assets (=assets-cash), $m
  39,342
  42,548
  45,882
  49,346
  52,947
  56,688
  60,577
  64,620
  68,825
  73,199
  77,752
  82,494
  87,434
  92,584
  97,954
  103,558
  109,407
  115,516
  121,899
  128,570
  135,546
  142,842
  150,477
  158,467
  166,833
  175,594
  184,771
  194,385
  204,461
  215,021
Revenue / Adjusted assets
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
  0.316
Average production assets, $m
  33,318
  36,033
  38,856
  41,790
  44,840
  48,008
  51,302
  54,725
  58,286
  61,991
  65,847
  69,863
  74,046
  78,407
  82,956
  87,701
  92,655
  97,829
  103,234
  108,884
  114,791
  120,970
  127,436
  134,203
  141,288
  148,707
  156,479
  164,621
  173,154
  182,097
Working capital, $m
  -547
  -592
  -638
  -686
  -736
  -788
  -842
  -898
  -957
  -1,018
  -1,081
  -1,147
  -1,216
  -1,287
  -1,362
  -1,440
  -1,521
  -1,606
  -1,695
  -1,788
  -1,885
  -1,986
  -2,092
  -2,203
  -2,320
  -2,441
  -2,569
  -2,703
  -2,843
  -2,990
Total debt, $m
  12,929
  14,776
  16,696
  18,691
  20,765
  22,920
  25,160
  27,489
  29,911
  32,431
  35,053
  37,785
  40,630
  43,596
  46,690
  49,917
  53,287
  56,805
  60,482
  64,325
  68,342
  72,545
  76,943
  81,545
  86,364
  91,410
  96,696
  102,234
  108,037
  114,120
Total liabilities, $m
  22,661
  24,508
  26,428
  28,423
  30,497
  32,652
  34,892
  37,221
  39,643
  42,163
  44,785
  47,517
  50,362
  53,328
  56,422
  59,649
  63,019
  66,537
  70,214
  74,057
  78,074
  82,277
  86,675
  91,277
  96,096
  101,142
  106,428
  111,966
  117,769
  123,852
Total equity, $m
  16,681
  18,040
  19,454
  20,923
  22,449
  24,036
  25,685
  27,399
  29,182
  31,036
  32,967
  34,977
  37,072
  39,256
  41,533
  43,909
  46,389
  48,979
  51,685
  54,514
  57,471
  60,565
  63,802
  67,190
  70,737
  74,452
  78,343
  82,419
  86,691
  91,169
Total liabilities and equity, $m
  39,342
  42,548
  45,882
  49,346
  52,946
  56,688
  60,577
  64,620
  68,825
  73,199
  77,752
  82,494
  87,434
  92,584
  97,955
  103,558
  109,408
  115,516
  121,899
  128,571
  135,545
  142,842
  150,477
  158,467
  166,833
  175,594
  184,771
  194,385
  204,460
  215,021
Debt-to-equity ratio
  0.780
  0.820
  0.860
  0.890
  0.920
  0.950
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.110
  1.120
  1.140
  1.150
  1.160
  1.170
  1.180
  1.190
  1.200
  1.210
  1.210
  1.220
  1.230
  1.230
  1.240
  1.250
  1.250
Adjusted equity ratio
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,744
  3,004
  3,275
  3,558
  3,851
  4,157
  4,475
  4,807
  5,152
  5,511
  5,887
  6,278
  6,686
  7,113
  7,558
  8,024
  8,510
  9,020
  9,553
  10,111
  10,695
  11,308
  11,950
  12,622
  13,328
  14,068
  14,844
  15,659
  16,514
  17,411
Depreciation, amort., depletion, $m
  1,198
  1,296
  1,398
  1,503
  1,613
  1,727
  1,845
  1,969
  2,097
  2,230
  2,369
  2,513
  2,664
  2,820
  2,984
  3,155
  3,333
  3,519
  3,713
  3,917
  4,129
  4,351
  4,584
  4,827
  5,082
  5,349
  5,629
  5,922
  6,229
  6,550
Funds from operations, $m
  3,943
  4,300
  4,673
  5,061
  5,464
  5,884
  6,321
  6,775
  7,248
  7,741
  8,255
  8,791
  9,350
  9,933
  10,542
  11,178
  11,843
  12,539
  13,266
  14,028
  14,825
  15,659
  16,534
  17,450
  18,410
  19,417
  20,473
  21,580
  22,742
  23,961
Change in working capital, $m
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -85
  -89
  -93
  -97
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -140
  -147
Cash from operations, $m
  3,986
  4,345
  4,719
  5,109
  5,514
  5,936
  6,375
  6,831
  7,307
  7,802
  8,318
  8,857
  9,418
  10,005
  10,617
  11,256
  11,925
  12,624
  13,355
  14,120
  14,922
  15,761
  16,640
  17,561
  18,527
  19,539
  20,601
  21,714
  22,882
  24,108
Maintenance CAPEX, $m
  -1,105
  -1,198
  -1,296
  -1,398
  -1,503
  -1,613
  -1,727
  -1,845
  -1,969
  -2,097
  -2,230
  -2,369
  -2,513
  -2,664
  -2,820
  -2,984
  -3,155
  -3,333
  -3,519
  -3,713
  -3,917
  -4,129
  -4,351
  -4,584
  -4,827
  -5,082
  -5,349
  -5,629
  -5,922
  -6,229
New CAPEX, $m
  -2,607
  -2,715
  -2,823
  -2,934
  -3,049
  -3,169
  -3,293
  -3,424
  -3,561
  -3,705
  -3,856
  -4,016
  -4,184
  -4,361
  -4,548
  -4,746
  -4,954
  -5,174
  -5,405
  -5,650
  -5,908
  -6,179
  -6,465
  -6,767
  -7,085
  -7,419
  -7,772
  -8,142
  -8,533
  -8,943
Cash from investing activities, $m
  -3,712
  -3,913
  -4,119
  -4,332
  -4,552
  -4,782
  -5,020
  -5,269
  -5,530
  -5,802
  -6,086
  -6,385
  -6,697
  -7,025
  -7,368
  -7,730
  -8,109
  -8,507
  -8,924
  -9,363
  -9,825
  -10,308
  -10,816
  -11,351
  -11,912
  -12,501
  -13,121
  -13,771
  -14,455
  -15,172
Free cash flow, $m
  274
  431
  600
  777
  962
  1,154
  1,354
  1,562
  1,777
  2,001
  2,232
  2,473
  2,722
  2,980
  3,248
  3,527
  3,816
  4,117
  4,431
  4,757
  5,097
  5,452
  5,823
  6,210
  6,614
  7,037
  7,480
  7,943
  8,428
  8,936
Issuance/(repayment) of debt, $m
  1,784
  1,847
  1,920
  1,996
  2,074
  2,155
  2,240
  2,329
  2,422
  2,520
  2,623
  2,731
  2,846
  2,966
  3,093
  3,228
  3,369
  3,519
  3,676
  3,843
  4,018
  4,203
  4,397
  4,603
  4,819
  5,046
  5,286
  5,538
  5,803
  6,083
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  1,784
  1,847
  1,920
  1,996
  2,074
  2,155
  2,240
  2,329
  2,422
  2,520
  2,623
  2,731
  2,846
  2,966
  3,093
  3,228
  3,369
  3,519
  3,676
  3,843
  4,018
  4,203
  4,397
  4,603
  4,819
  5,046
  5,286
  5,538
  5,803
  6,083
Total cash flow (excl. dividends), $m
  2,058
  2,278
  2,520
  2,773
  3,036
  3,309
  3,594
  3,891
  4,199
  4,521
  4,855
  5,204
  5,567
  5,946
  6,341
  6,754
  7,185
  7,636
  8,107
  8,600
  9,115
  9,655
  10,220
  10,812
  11,433
  12,083
  12,766
  13,481
  14,231
  15,019
Retained Cash Flow (-), $m
  -1,319
  -1,359
  -1,413
  -1,469
  -1,527
  -1,586
  -1,649
  -1,714
  -1,783
  -1,855
  -1,931
  -2,010
  -2,095
  -2,183
  -2,277
  -2,376
  -2,480
  -2,590
  -2,706
  -2,829
  -2,958
  -3,094
  -3,237
  -3,388
  -3,547
  -3,715
  -3,891
  -4,077
  -4,272
  -4,477
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
  739
  918
  1,107
  1,304
  1,509
  1,723
  1,945
  2,177
  2,417
  2,666
  2,925
  3,193
  3,472
  3,763
  4,064
  4,378
  4,705
  5,046
  5,401
  5,771
  6,158
  6,561
  6,983
  7,424
  7,886
  8,369
  8,875
  9,404
  9,959
  10,541
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  697
  813
  913
  997
  1,061
  1,107
  1,132
  1,138
  1,125
  1,095
  1,049
  989
  918
  839
  755
  668
  581
  496
  416
  343
  277
  219
  169
  128
  95
  68
  48
  33
  22
  14
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Norfolk Southern Corporation is a holding company engaged in the rail transportation business. As of December 31, 2016, the Company operated approximately 19,500 miles of road primarily in the East and Midwest. The Company is engaged in the rail transportation of raw materials, intermediate products and finished goods primarily in the Southeast, East and Midwest. The Company, through interchange with rail carriers, to and from the rest of the United States. The Company also transports overseas freight through various Atlantic and Gulf Coast ports. It provides logistics services and offers the intermodal network in the eastern half of the United States. The Company's system reaches various manufacturing plants, electric generating facilities, mines, distribution centers and other businesses located in its service area. The Company's intermodal market group consists of shipments moving in trailers, domestic and international containers, and RoadRailer equipment.

FINANCIAL RATIOS  of  Norfolk Souther Corporation (NSC)

Valuation Ratios
P/E Ratio 30.1
Price to Sales 5.1
Price to Book 4
Price to Tangible Book
Price to Cash Flow 16.6
Price to Free Cash Flow 43.8
Growth Rates
Sales Growth Rate -5.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -20.9%
Cap. Spend. - 3 Yr. Gr. Rate -0.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 77.1%
Total Debt to Equity 82.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 5.2%
Return On Total Capital 7.4%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 13.6%
Return On Equity - 3 Yr. Avg. 14.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 44.6%
Gross Margin - 3 Yr. Avg. 42.2%
EBITDA Margin 36.5%
EBITDA Margin - 3 Yr. Avg. 35%
Operating Margin 31%
Oper. Margin - 3 Yr. Avg. 29.7%
Pre-Tax Margin 26.1%
Pre-Tax Margin - 3 Yr. Avg. 25.4%
Net Profit Margin 16.9%
Net Profit Margin - 3 Yr. Avg. 16.3%
Effective Tax Rate 35.4%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 41.7%

NSC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NSC stock intrinsic value calculation we used $11458 million for the last fiscal year's total revenue generated by Norfolk Souther Corporation. The default revenue input number comes from 0001 income statement of Norfolk Souther Corporation. 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 NSC stock valuation model: a) initial revenue growth rate of 8.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6%, whose default value for NSC is calculated based on our internal credit rating of Norfolk Souther Corporation, 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 Norfolk Souther Corporation.
    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 NSC stock the variable cost ratio is equal to 51.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1596 million in the base year in the intrinsic value calculation for NSC 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 5.4% for Norfolk Souther Corporation.

Corporate tax rate of 27% is the nominal tax rate for Norfolk Souther Corporation. 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 NSC 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 NSC are equal to 268%.

Life of production assets of 27.8 years is the average useful life of capital assets used in Norfolk Souther Corporation 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 NSC is equal to -4.4%. 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 - $15362 million for Norfolk Souther Corporation - 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 267.435 million for Norfolk Souther Corporation 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 Norfolk Souther Corporation at the current share price and the inputted number of shares is $46.3 billion.

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