Intrinsic value of Norfolk Southern - NSC

Previous Close

$155.23

  Intrinsic Value

$90.83

stock screener

  Rating & Target

sell

-41%

Previous close

$155.23

 
Intrinsic value

$90.83

 
Up/down potential

-41%

 
Rating

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 2017), $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 44.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
Revenue, $m
  11,258
  11,993
  12,758
  13,554
  14,383
  15,246
  16,146
  17,085
  18,064
  19,086
  20,154
  21,269
  22,435
  23,653
  24,928
  26,262
  27,657
  29,119
  30,649
  32,252
  33,931
  35,691
  37,535
  39,468
  41,495
  43,620
  45,849
  48,187
  50,639
  53,212
Variable operating expenses, $m
  2,567
  2,734
  2,909
  3,090
  3,279
  3,476
  3,681
  3,895
  4,119
  4,352
  4,595
  4,849
  5,115
  5,393
  5,684
  5,988
  6,306
  6,639
  6,988
  7,353
  7,736
  8,137
  8,558
  8,999
  9,461
  9,945
  10,454
  10,987
  11,546
  12,132
Fixed operating expenses, $m
  4,767
  4,871
  4,979
  5,088
  5,200
  5,315
  5,431
  5,551
  5,673
  5,798
  5,925
  6,056
  6,189
  6,325
  6,464
  6,607
  6,752
  6,900
  7,052
  7,207
  7,366
  7,528
  7,694
  7,863
  8,036
  8,213
  8,393
  8,578
  8,767
  8,960
Total operating expenses, $m
  7,334
  7,605
  7,888
  8,178
  8,479
  8,791
  9,112
  9,446
  9,792
  10,150
  10,520
  10,905
  11,304
  11,718
  12,148
  12,595
  13,058
  13,539
  14,040
  14,560
  15,102
  15,665
  16,252
  16,862
  17,497
  18,158
  18,847
  19,565
  20,313
  21,092
Operating income, $m
  3,925
  4,387
  4,870
  5,375
  5,903
  6,456
  7,034
  7,639
  8,272
  8,937
  9,633
  10,364
  11,130
  11,935
  12,780
  13,667
  14,600
  15,579
  16,609
  17,691
  18,829
  20,025
  21,283
  22,607
  23,998
  25,462
  27,002
  28,623
  30,327
  32,120
EBITDA, $m
  7,130
  7,802
  8,503
  9,234
  9,998
  10,796
  11,630
  12,503
  13,415
  14,371
  15,371
  16,419
  17,518
  18,669
  19,877
  21,144
  22,474
  23,869
  25,334
  26,873
  28,489
  30,186
  31,970
  33,843
  35,812
  37,881
  40,056
  42,341
  44,744
  47,270
Interest expense (income), $m
  0
  541
  614
  689
  766
  846
  930
  1,017
  1,108
  1,203
  1,302
  1,405
  1,513
  1,626
  1,744
  1,867
  1,996
  2,130
  2,271
  2,419
  2,574
  2,736
  2,905
  3,083
  3,270
  3,465
  3,670
  3,885
  4,110
  4,346
  4,594
Earnings before tax, $m
  3,384
  3,773
  4,182
  4,610
  5,057
  5,526
  6,016
  6,530
  7,069
  7,635
  8,228
  8,851
  9,505
  10,192
  10,913
  11,672
  12,469
  13,308
  14,190
  15,117
  16,093
  17,120
  18,200
  19,337
  20,533
  21,793
  23,118
  24,513
  25,981
  27,526
Tax expense, $m
  914
  1,019
  1,129
  1,245
  1,365
  1,492
  1,624
  1,763
  1,909
  2,061
  2,222
  2,390
  2,566
  2,752
  2,947
  3,151
  3,367
  3,593
  3,831
  4,082
  4,345
  4,622
  4,914
  5,221
  5,544
  5,884
  6,242
  6,618
  7,015
  7,432
Net income, $m
  2,470
  2,754
  3,053
  3,365
  3,692
  4,034
  4,392
  4,767
  5,161
  5,573
  6,006
  6,461
  6,938
  7,440
  7,967
  8,520
  9,103
  9,715
  10,358
  11,036
  11,748
  12,497
  13,286
  14,116
  14,989
  15,909
  16,876
  17,894
  18,966
  20,094

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
  38,162
  40,654
  43,247
  45,945
  48,755
  51,682
  54,733
  57,915
  61,234
  64,699
  68,318
  72,098
  76,049
  80,181
  84,501
  89,022
  93,754
  98,707
  103,894
  109,328
  115,020
  120,985
  127,237
  133,790
  140,661
  147,866
  155,422
  163,347
  171,659
  180,380
Adjusted assets (=assets-cash), $m
  38,162
  40,654
  43,247
  45,945
  48,755
  51,682
  54,733
  57,915
  61,234
  64,699
  68,318
  72,098
  76,049
  80,181
  84,501
  89,022
  93,754
  98,707
  103,894
  109,328
  115,020
  120,985
  127,237
  133,790
  140,661
  147,866
  155,422
  163,347
  171,659
  180,380
Revenue / Adjusted assets
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
Average production assets, $m
  32,051
  34,144
  36,322
  38,588
  40,948
  43,406
  45,969
  48,641
  51,429
  54,339
  57,378
  60,553
  63,871
  67,341
  70,970
  74,767
  78,740
  82,901
  87,257
  91,821
  96,601
  101,611
  106,862
  112,366
  118,137
  124,188
  130,533
  137,189
  144,171
  151,495
Working capital, $m
  -1,261
  -1,343
  -1,429
  -1,518
  -1,611
  -1,708
  -1,808
  -1,914
  -2,023
  -2,138
  -2,257
  -2,382
  -2,513
  -2,649
  -2,792
  -2,941
  -3,098
  -3,261
  -3,433
  -3,612
  -3,800
  -3,997
  -4,204
  -4,420
  -4,647
  -4,885
  -5,135
  -5,397
  -5,672
  -5,960
Total debt, $m
  11,168
  12,519
  13,924
  15,386
  16,909
  18,496
  20,149
  21,874
  23,673
  25,551
  27,512
  29,561
  31,703
  33,942
  36,284
  38,734
  41,299
  43,983
  46,795
  49,740
  52,825
  56,058
  59,446
  62,998
  66,722
  70,627
  74,723
  79,018
  83,523
  88,250
Total liabilities, $m
  20,684
  22,035
  23,440
  24,902
  26,425
  28,012
  29,665
  31,390
  33,189
  35,067
  37,028
  39,077
  41,219
  43,458
  45,800
  48,250
  50,815
  53,499
  56,311
  59,256
  62,341
  65,574
  68,962
  72,514
  76,238
  80,143
  84,239
  88,534
  93,039
  97,766
Total equity, $m
  17,478
  18,620
  19,807
  21,043
  22,330
  23,670
  25,068
  26,525
  28,045
  29,632
  31,290
  33,021
  34,831
  36,723
  38,702
  40,772
  42,939
  45,208
  47,584
  50,072
  52,679
  55,411
  58,274
  61,276
  64,423
  67,723
  71,183
  74,813
  78,620
  82,614
Total liabilities and equity, $m
  38,162
  40,655
  43,247
  45,945
  48,755
  51,682
  54,733
  57,915
  61,234
  64,699
  68,318
  72,098
  76,050
  80,181
  84,502
  89,022
  93,754
  98,707
  103,895
  109,328
  115,020
  120,985
  127,236
  133,790
  140,661
  147,866
  155,422
  163,347
  171,659
  180,380
Debt-to-equity ratio
  0.640
  0.670
  0.700
  0.730
  0.760
  0.780
  0.800
  0.820
  0.840
  0.860
  0.880
  0.900
  0.910
  0.920
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.060
  1.060
  1.070
Adjusted equity ratio
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458
  0.458

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,470
  2,754
  3,053
  3,365
  3,692
  4,034
  4,392
  4,767
  5,161
  5,573
  6,006
  6,461
  6,938
  7,440
  7,967
  8,520
  9,103
  9,715
  10,358
  11,036
  11,748
  12,497
  13,286
  14,116
  14,989
  15,909
  16,876
  17,894
  18,966
  20,094
Depreciation, amort., depletion, $m
  3,205
  3,414
  3,632
  3,859
  4,095
  4,341
  4,597
  4,864
  5,143
  5,434
  5,738
  6,055
  6,387
  6,734
  7,097
  7,477
  7,874
  8,290
  8,726
  9,182
  9,660
  10,161
  10,686
  11,237
  11,814
  12,419
  13,053
  13,719
  14,417
  15,149
Funds from operations, $m
  5,675
  6,169
  6,685
  7,224
  7,786
  8,374
  8,989
  9,631
  10,304
  11,007
  11,744
  12,516
  13,326
  14,174
  15,064
  15,997
  16,977
  18,005
  19,084
  20,218
  21,408
  22,659
  23,972
  25,353
  26,803
  28,327
  29,929
  31,613
  33,383
  35,244
Change in working capital, $m
  -79
  -82
  -86
  -89
  -93
  -97
  -101
  -105
  -110
  -114
  -120
  -125
  -131
  -136
  -143
  -149
  -156
  -164
  -171
  -180
  -188
  -197
  -207
  -217
  -227
  -238
  -250
  -262
  -275
  -288
Cash from operations, $m
  5,754
  6,251
  6,771
  7,313
  7,879
  8,471
  9,090
  9,736
  10,413
  11,122
  11,864
  12,641
  13,456
  14,310
  15,206
  16,146
  17,133
  18,168
  19,256
  20,397
  21,596
  22,856
  24,179
  25,569
  27,030
  28,565
  30,179
  31,875
  33,658
  35,532
Maintenance CAPEX, $m
  -3,004
  -3,205
  -3,414
  -3,632
  -3,859
  -4,095
  -4,341
  -4,597
  -4,864
  -5,143
  -5,434
  -5,738
  -6,055
  -6,387
  -6,734
  -7,097
  -7,477
  -7,874
  -8,290
  -8,726
  -9,182
  -9,660
  -10,161
  -10,686
  -11,237
  -11,814
  -12,419
  -13,053
  -13,719
  -14,417
New CAPEX, $m
  -2,011
  -2,093
  -2,177
  -2,266
  -2,360
  -2,458
  -2,562
  -2,672
  -2,788
  -2,910
  -3,039
  -3,175
  -3,318
  -3,470
  -3,629
  -3,797
  -3,974
  -4,160
  -4,357
  -4,563
  -4,781
  -5,010
  -5,251
  -5,504
  -5,771
  -6,051
  -6,346
  -6,656
  -6,982
  -7,324
Cash from investing activities, $m
  -5,015
  -5,298
  -5,591
  -5,898
  -6,219
  -6,553
  -6,903
  -7,269
  -7,652
  -8,053
  -8,473
  -8,913
  -9,373
  -9,857
  -10,363
  -10,894
  -11,451
  -12,034
  -12,647
  -13,289
  -13,963
  -14,670
  -15,412
  -16,190
  -17,008
  -17,865
  -18,765
  -19,709
  -20,701
  -21,741
Free cash flow, $m
  739
  953
  1,179
  1,415
  1,661
  1,918
  2,186
  2,467
  2,761
  3,069
  3,391
  3,728
  4,082
  4,454
  4,843
  5,253
  5,682
  6,134
  6,609
  7,108
  7,633
  8,186
  8,767
  9,379
  10,023
  10,701
  11,415
  12,166
  12,957
  13,791
Issuance/(repayment) of debt, $m
  1,332
  1,351
  1,405
  1,462
  1,523
  1,587
  1,654
  1,724
  1,799
  1,878
  1,961
  2,049
  2,141
  2,239
  2,342
  2,450
  2,564
  2,685
  2,811
  2,945
  3,085
  3,233
  3,388
  3,552
  3,724
  3,905
  4,095
  4,295
  4,505
  4,726
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  
  1,332
  1,351
  1,405
  1,462
  1,523
  1,587
  1,654
  1,724
  1,799
  1,878
  1,961
  2,049
  2,141
  2,239
  2,342
  2,450
  2,564
  2,685
  2,811
  2,945
  3,085
  3,233
  3,388
  3,552
  3,724
  3,905
  4,095
  4,295
  4,505
  4,726
Total cash flow (excl. dividends), $m
  2,071
  2,304
  2,584
  2,877
  3,184
  3,504
  3,840
  4,192
  4,560
  4,947
  5,352
  5,777
  6,224
  6,693
  7,185
  7,703
  8,247
  8,819
  9,420
  10,053
  10,719
  11,419
  12,156
  12,931
  13,747
  14,606
  15,510
  16,461
  17,463
  18,517
Retained Cash Flow (-), $m
  -1,119
  -1,141
  -1,187
  -1,236
  -1,287
  -1,341
  -1,397
  -1,457
  -1,520
  -1,587
  -1,657
  -1,731
  -1,810
  -1,892
  -1,979
  -2,071
  -2,167
  -2,269
  -2,376
  -2,488
  -2,607
  -2,732
  -2,863
  -3,002
  -3,147
  -3,300
  -3,461
  -3,630
  -3,807
  -3,994
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
  952
  1,162
  1,397
  1,641
  1,897
  2,164
  2,443
  2,735
  3,040
  3,360
  3,695
  4,046
  4,414
  4,801
  5,206
  5,632
  6,080
  6,550
  7,045
  7,565
  8,111
  8,687
  9,292
  9,929
  10,600
  11,306
  12,049
  12,832
  13,656
  14,523
Discount rate, %
  5.40
  5.67
  5.95
  6.25
  6.56
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.04
  15.80
  16.59
  17.42
  18.29
  19.20
  20.16
  21.17
  22.23
PV of cash for distribution, $m
  903
  1,041
  1,174
  1,288
  1,380
  1,451
  1,498
  1,522
  1,524
  1,503
  1,462
  1,402
  1,325
  1,235
  1,135
  1,027
  915
  802
  691
  586
  487
  398
  319
  250
  191
  144
  105
  75
  52
  35
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 Southern (NSC)

Valuation Ratios
P/E Ratio 27
Price to Sales 4.6
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 14.9
Price to Free Cash Flow 39.3
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 $10551 million for the last fiscal year's total revenue generated by Norfolk Southern. The default revenue input number comes from 2017 income statement of Norfolk Southern. 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 6.7% 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 5.4%, whose default value for NSC is calculated based on our internal credit rating of Norfolk Southern, 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 Southern.
    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 22.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4664 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 5.5% for Norfolk Southern.

Corporate tax rate of 27% is the nominal tax rate for Norfolk Southern. 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 284.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Norfolk Southern 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 -11.2%. 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 - $16359 million for Norfolk Southern - 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 286 million for Norfolk Southern 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 Southern at the current share price and the inputted number of shares is $44.4 billion.

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COMPANY NEWS

▶ Active Traders Fuel Transportation Stocks Higher   [Jul-17-18 10:25AM  Investopedia]
▶ 3 Charts That Suggest Transport Stocks Are Headed Higher   [Jun-05-18 05:55AM  Investopedia]
▶ Exploring for Summer Profits in Energy   [May-23-18 02:30PM  Investopedia]
▶ Norfolk Southern Building up Steam   [May-16-18 03:34PM  TheStreet.com]
▶ Norfolk Southern Longs Need to Be Patient   [May-14-18 12:58PM  TheStreet.com]
▶ Norfolk Southern Stock Is Leaving the Station   [Apr-26-18 10:34AM  TheStreet.com]
▶ Jim Cramer: Now That's How You Put on a Conference Call   [Apr-25-18 07:01PM  TheStreet.com]
▶ Norfolk Southern: 1Q Earnings Snapshot   [08:07AM  Associated Press]
▶ Norfolk Southern declares quarterly dividend   [Apr-24-18 12:29PM  PR Newswire]
▶ Railroads on the Defensive Ahead of CSX Earnings   [Apr-17-18 09:50AM  Investopedia]
▶ Railroad Industry Outlook - April 2018   [Apr-06-18 04:06PM  Zacks]
▶ Norfolk Southern multi-state safety train tour underway   [Apr-03-18 03:45PM  PR Newswire]
▶ Train carrying automobiles derails; 2 crew members treated   [Feb-15-18 09:58PM  Associated Press]
▶ As CSX workforce shrinks, accidents pile up and morale plummets   [Feb-14-18 03:10PM  American City Business Journals]
▶ Top 4 Railroad Stocks for 2018   [12:36PM  Investopedia]
▶ Why Analysts Are Divided on Canadian National Railway   [Jan-26-18 10:33AM  Market Realist]
▶ How Kansas City Southern Is Valued among Peers after 4Q17   [Jan-25-18 09:02AM  Market Realist]
▶ Tax cuts boost Norfolk Southern's fourth-quarter profit   [Jan-24-18 02:35PM  Associated Press]
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