Intrinsic value of POSCO ADR - PKX

Previous Close

$55.26

  Intrinsic Value

$239.69

stock screener

  Rating & Target

str. buy

+334%

Previous close

$55.26

 
Intrinsic value

$239.69

 
Up/down potential

+334%

 
Rating

str. buy

We calculate the intrinsic value of PKX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.0

 

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, %
  28.70
  26.33
  24.20
  22.28
  20.55
  18.99
  17.60
  16.34
  15.20
  14.18
  13.26
  12.44
  11.69
  11.02
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
Revenue, $m
  72,671
  91,806
  114,020
  139,421
  168,071
  199,996
  235,185
  273,604
  315,197
  359,898
  407,634
  458,333
  511,928
  568,364
  627,598
  689,603
  754,368
  821,902
  892,235
  965,411
  1,041,499
  1,120,582
  1,202,765
  1,288,167
  1,376,928
  1,469,202
  1,565,159
  1,664,988
  1,768,888
  1,877,079
Variable operating expenses, $m
  61,465
  77,502
  96,120
  117,408
  141,421
  168,177
  197,669
  229,869
  264,729
  302,193
  341,642
  384,133
  429,052
  476,352
  525,997
  577,963
  632,243
  688,845
  747,791
  809,121
  872,891
  939,172
  1,008,050
  1,079,626
  1,154,018
  1,231,353
  1,311,776
  1,395,443
  1,482,524
  1,573,199
Fixed operating expenses, $m
  4,538
  4,638
  4,740
  4,844
  4,950
  5,059
  5,171
  5,284
  5,401
  5,519
  5,641
  5,765
  5,892
  6,021
  6,154
  6,289
  6,428
  6,569
  6,714
  6,861
  7,012
  7,166
  7,324
  7,485
  7,650
  7,818
  7,990
  8,166
  8,346
  8,529
Total operating expenses, $m
  66,003
  82,140
  100,860
  122,252
  146,371
  173,236
  202,840
  235,153
  270,130
  307,712
  347,283
  389,898
  434,944
  482,373
  532,151
  584,252
  638,671
  695,414
  754,505
  815,982
  879,903
  946,338
  1,015,374
  1,087,111
  1,161,668
  1,239,171
  1,319,766
  1,403,609
  1,490,870
  1,581,728
Operating income, $m
  6,669
  9,666
  13,161
  17,169
  21,700
  26,759
  32,345
  38,451
  45,068
  52,186
  60,351
  68,434
  76,984
  85,991
  95,448
  105,350
  115,697
  126,488
  137,730
  149,429
  161,596
  174,244
  187,391
  201,056
  215,261
  230,030
  245,393
  261,378
  278,019
  295,350
EBITDA, $m
  10,893
  14,857
  19,472
  24,761
  30,738
  37,408
  44,769
  52,813
  61,528
  70,901
  80,916
  91,558
  102,811
  114,665
  127,110
  140,141
  153,755
  167,954
  182,744
  198,134
  214,140
  230,778
  248,071
  266,044
  284,727
  304,152
  324,356
  345,378
  367,260
  390,050
Interest expense (income), $m
  597
  2,386
  3,446
  4,698
  6,151
  7,814
  9,688
  11,778
  14,080
  16,594
  19,316
  22,241
  25,365
  28,683
  32,190
  35,883
  39,759
  43,817
  48,055
  52,474
  57,077
  61,866
  66,845
  72,020
  77,398
  82,986
  88,795
  94,833
  101,112
  107,645
  114,444
Earnings before tax, $m
  4,283
  6,221
  8,463
  11,017
  13,887
  17,071
  20,567
  24,371
  28,474
  32,870
  38,110
  43,069
  48,301
  53,801
  59,565
  65,591
  71,880
  78,433
  85,256
  92,352
  99,730
  107,400
  115,371
  123,658
  132,274
  141,236
  150,560
  160,266
  170,374
  180,906
Tax expense, $m
  1,156
  1,680
  2,285
  2,975
  3,749
  4,609
  5,553
  6,580
  7,688
  8,875
  10,290
  11,629
  13,041
  14,526
  16,082
  17,710
  19,408
  21,177
  23,019
  24,935
  26,927
  28,998
  31,150
  33,388
  35,714
  38,134
  40,651
  43,272
  46,001
  48,845
Net income, $m
  3,127
  4,541
  6,178
  8,043
  10,137
  12,462
  15,014
  17,791
  20,786
  23,995
  27,820
  31,441
  35,260
  39,275
  43,482
  47,881
  52,472
  57,256
  62,237
  67,417
  72,803
  78,402
  84,221
  90,270
  96,560
  103,102
  109,909
  116,994
  124,373
  132,062

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
  94,379
  119,228
  148,078
  181,066
  218,274
  259,734
  305,435
  355,330
  409,347
  467,400
  529,395
  595,237
  664,842
  738,136
  815,063
  895,588
  979,698
  1,067,406
  1,158,746
  1,253,781
  1,352,596
  1,455,302
  1,562,032
  1,672,945
  1,788,218
  1,908,054
  2,032,675
  2,162,322
  2,297,258
  2,437,765
Adjusted assets (=assets-cash), $m
  94,379
  119,228
  148,078
  181,066
  218,274
  259,734
  305,435
  355,330
  409,347
  467,400
  529,395
  595,237
  664,842
  738,136
  815,063
  895,588
  979,698
  1,067,406
  1,158,746
  1,253,781
  1,352,596
  1,455,302
  1,562,032
  1,672,945
  1,788,218
  1,908,054
  2,032,675
  2,162,322
  2,297,258
  2,437,765
Revenue / Adjusted assets
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
Average production assets, $m
  40,696
  51,411
  63,851
  78,076
  94,120
  111,997
  131,704
  153,218
  176,511
  201,543
  228,275
  256,666
  286,680
  318,284
  351,455
  386,177
  422,446
  460,265
  499,651
  540,630
  583,239
  627,526
  673,548
  721,374
  771,080
  822,753
  876,489
  932,393
  990,578
  1,051,164
Working capital, $m
  17,005
  21,483
  26,681
  32,624
  39,329
  46,799
  55,033
  64,023
  73,756
  84,216
  95,386
  107,250
  119,791
  132,997
  146,858
  161,367
  176,522
  192,325
  208,783
  225,906
  243,711
  262,216
  281,447
  301,431
  322,201
  343,793
  366,247
  389,607
  413,920
  439,236
Total debt, $m
  30,224
  41,208
  53,959
  68,540
  84,986
  103,312
  123,511
  145,565
  169,440
  195,100
  222,501
  251,604
  282,369
  314,765
  348,767
  384,359
  421,536
  460,302
  500,675
  542,680
  586,356
  631,752
  678,927
  727,950
  778,901
  831,869
  886,951
  944,255
  1,003,897
  1,066,001
Total liabilities, $m
  41,715
  52,699
  65,450
  80,031
  96,477
  114,803
  135,002
  157,056
  180,932
  206,591
  233,993
  263,095
  293,860
  326,256
  360,258
  395,850
  433,027
  471,793
  512,166
  554,171
  597,847
  643,243
  690,418
  739,442
  790,393
  843,360
  898,442
  955,746
  1,015,388
  1,077,492
Total equity, $m
  52,663
  66,529
  82,628
  101,035
  121,797
  144,932
  170,433
  198,274
  228,416
  260,809
  295,402
  332,142
  370,982
  411,880
  454,805
  499,738
  546,672
  595,612
  646,580
  699,610
  754,749
  812,058
  871,614
  933,503
  997,826
  1,064,694
  1,134,232
  1,206,575
  1,281,870
  1,360,273
Total liabilities and equity, $m
  94,378
  119,228
  148,078
  181,066
  218,274
  259,735
  305,435
  355,330
  409,348
  467,400
  529,395
  595,237
  664,842
  738,136
  815,063
  895,588
  979,699
  1,067,405
  1,158,746
  1,253,781
  1,352,596
  1,455,301
  1,562,032
  1,672,945
  1,788,219
  1,908,054
  2,032,674
  2,162,321
  2,297,258
  2,437,765
Debt-to-equity ratio
  0.570
  0.620
  0.650
  0.680
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.750
  0.760
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.770
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
Adjusted equity ratio
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,127
  4,541
  6,178
  8,043
  10,137
  12,462
  15,014
  17,791
  20,786
  23,995
  27,820
  31,441
  35,260
  39,275
  43,482
  47,881
  52,472
  57,256
  62,237
  67,417
  72,803
  78,402
  84,221
  90,270
  96,560
  103,102
  109,909
  116,994
  124,373
  132,062
Depreciation, amort., depletion, $m
  4,225
  5,190
  6,311
  7,592
  9,038
  10,648
  12,424
  14,362
  16,460
  18,715
  20,565
  23,123
  25,827
  28,674
  31,663
  34,791
  38,058
  41,465
  45,014
  48,705
  52,544
  56,534
  60,680
  64,989
  69,467
  74,122
  78,963
  83,999
  89,241
  94,699
Funds from operations, $m
  7,351
  9,731
  12,489
  15,635
  19,175
  23,110
  27,438
  32,152
  37,246
  42,710
  48,385
  54,564
  61,087
  67,949
  75,145
  82,672
  90,530
  98,722
  107,250
  116,122
  125,347
  134,936
  144,901
  155,259
  166,027
  177,224
  188,872
  200,993
  213,614
  226,761
Change in working capital, $m
  3,792
  4,477
  5,198
  5,944
  6,704
  7,470
  8,234
  8,990
  9,733
  10,460
  11,170
  11,864
  12,541
  13,206
  13,861
  14,509
  15,155
  15,803
  16,458
  17,123
  17,805
  18,506
  19,231
  19,984
  20,770
  21,592
  22,454
  23,360
  24,313
  25,317
Cash from operations, $m
  3,559
  5,254
  7,291
  9,691
  12,471
  15,640
  19,204
  23,162
  27,513
  32,250
  37,215
  42,700
  48,546
  54,743
  61,284
  68,163
  75,375
  82,919
  90,792
  98,999
  107,543
  116,430
  125,670
  135,275
  145,257
  155,632
  166,418
  177,634
  189,301
  201,444
Maintenance CAPEX, $m
  -2,848
  -3,666
  -4,632
  -5,752
  -7,034
  -8,479
  -10,090
  -11,865
  -13,803
  -15,902
  -18,157
  -20,565
  -23,123
  -25,827
  -28,674
  -31,663
  -34,791
  -38,058
  -41,465
  -45,014
  -48,705
  -52,544
  -56,534
  -60,680
  -64,989
  -69,467
  -74,122
  -78,963
  -83,999
  -89,241
New CAPEX, $m
  -9,086
  -10,715
  -12,440
  -14,224
  -16,044
  -17,878
  -19,706
  -21,515
  -23,292
  -25,032
  -26,732
  -28,391
  -30,013
  -31,604
  -33,171
  -34,722
  -36,268
  -37,819
  -39,386
  -40,979
  -42,609
  -44,287
  -46,022
  -47,825
  -49,706
  -51,673
  -53,736
  -55,904
  -58,184
  -60,587
Cash from investing activities, $m
  -11,934
  -14,381
  -17,072
  -19,976
  -23,078
  -26,357
  -29,796
  -33,380
  -37,095
  -40,934
  -44,889
  -48,956
  -53,136
  -57,431
  -61,845
  -66,385
  -71,059
  -75,877
  -80,851
  -85,993
  -91,314
  -96,831
  -102,556
  -108,505
  -114,695
  -121,140
  -127,858
  -134,867
  -142,183
  -149,828
Free cash flow, $m
  -8,375
  -9,128
  -9,781
  -10,286
  -10,607
  -10,717
  -10,592
  -10,217
  -9,582
  -8,684
  -7,674
  -6,256
  -4,591
  -2,688
  -561
  1,778
  4,316
  7,041
  9,941
  13,006
  16,228
  19,599
  23,114
  26,769
  30,562
  34,492
  38,559
  42,767
  47,118
  51,616
Issuance/(repayment) of debt, $m
  9,299
  10,984
  12,752
  14,581
  16,446
  18,325
  20,200
  22,053
  23,876
  25,659
  27,402
  29,102
  30,765
  32,396
  34,002
  35,592
  37,177
  38,767
  40,373
  42,005
  43,676
  45,396
  47,175
  49,023
  50,951
  52,968
  55,082
  57,304
  59,642
  62,104
Issuance/(repurchase) of shares, $m
  8,575
  9,325
  9,920
  10,365
  10,625
  10,673
  10,487
  10,051
  9,356
  8,399
  6,773
  5,300
  3,579
  1,623
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  17,874
  20,309
  22,672
  24,946
  27,071
  28,998
  30,687
  32,104
  33,232
  34,058
  34,175
  34,402
  34,344
  34,019
  34,002
  35,592
  37,177
  38,767
  40,373
  42,005
  43,676
  45,396
  47,175
  49,023
  50,951
  52,968
  55,082
  57,304
  59,642
  62,104
Total cash flow (excl. dividends), $m
  9,499
  11,181
  12,891
  14,660
  16,464
  18,281
  20,094
  21,887
  23,649
  25,374
  26,501
  28,145
  29,754
  31,331
  33,441
  37,370
  41,493
  45,808
  50,314
  55,012
  59,904
  64,995
  70,289
  75,793
  81,513
  87,459
  93,642
  100,071
  106,759
  113,721
Retained Cash Flow (-), $m
  -11,702
  -13,866
  -16,098
  -18,407
  -20,762
  -23,135
  -25,501
  -27,841
  -30,142
  -32,394
  -34,593
  -36,740
  -38,839
  -40,898
  -42,925
  -44,933
  -46,934
  -48,941
  -50,968
  -53,029
  -55,139
  -57,310
  -59,556
  -61,889
  -64,323
  -66,868
  -69,538
  -72,343
  -75,294
  -78,403
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
  -2,203
  -2,685
  -3,207
  -3,748
  -4,298
  -4,854
  -5,407
  -5,954
  -6,493
  -7,019
  -8,092
  -8,595
  -9,086
  -9,567
  -9,485
  -7,563
  -5,441
  -3,133
  -654
  1,982
  4,766
  7,685
  10,734
  13,904
  17,190
  20,591
  24,103
  27,728
  31,465
  35,318
Discount rate, %
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
  -2,110
  -2,453
  -2,783
  -3,072
  -3,313
  -3,497
  -3,621
  -3,682
  -3,683
  -3,627
  -3,779
  -3,598
  -3,381
  -3,134
  -2,709
  -1,864
  -1,144
  -556
  -97
  241
  469
  604
  663
  664
  623
  556
  476
  392
  312
  239
Current shareholders' claim on cash, %
  77.0
  61.4
  50.6
  43.0
  37.3
  33.2
  30.1
  27.7
  26.0
  24.7
  23.8
  23.2
  22.9
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7
  22.7

POSCO is a Korea-based company principally engaged in the manufacture and distribution of steel products. The Company operates in four segments: steel, trading, construction, and others. The steel segment includes production of steel products and sale of such products. The trading segment consists of global trading activities of POSCO Daewoo Corporation, exporting and importing a range of steel products that are both obtained from and supplied to it, as well as between other suppliers and purchasers in Korea and overseas. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects, and commercial and residential buildings, both in Korea and overseas. The others segment includes power generation, liquefied natural gas (LNG) logistics, and network and system integration.

FINANCIAL RATIOS  of  POSCO ADR (PKX)

Valuation Ratios
P/E Ratio 3.8
Price to Sales 0.1
Price to Book 0.1
Price to Tangible Book
Price to Cash Flow 1
Price to Free Cash Flow 1.8
Growth Rates
Sales Growth Rate -8.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.6%
Cap. Spend. - 3 Yr. Gr. Rate -19.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 29.7%
Total Debt to Equity 53.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 3.3%
Return On Equity - 3 Yr. Avg. 1.7%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 12.6%
Gross Margin - 3 Yr. Avg. 11.7%
EBITDA Margin 10.1%
EBITDA Margin - 3 Yr. Avg. 8.6%
Operating Margin 4.2%
Oper. Margin - 3 Yr. Avg. 3.9%
Pre-Tax Margin 2.7%
Pre-Tax Margin - 3 Yr. Avg. 1.7%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. 1.3%
Effective Tax Rate 26.9%
Eff/ Tax Rate - 3 Yr. Avg. 79.8%
Payout Ratio 52%

PKX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PKX stock intrinsic value calculation we used $56465.7725865 million for the last fiscal year's total revenue generated by POSCO ADR. The default revenue input number comes from 0001 income statement of POSCO 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 PKX stock valuation model: a) initial revenue growth rate of 28.7% 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 4.4%, whose default value for PKX is calculated based on our internal credit rating of POSCO 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 POSCO 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 PKX stock the variable cost ratio is equal to 84.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4440 million in the base year in the intrinsic value calculation for PKX 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 11.4% for POSCO ADR.

Corporate tax rate of 27% is the nominal tax rate for POSCO 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 PKX 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 PKX are equal to 56%.

Life of production assets of 11.1 years is the average useful life of capital assets used in POSCO 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 PKX is equal to 23.4%. 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 - $40961.0573225 million for POSCO 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 36.899 million for POSCO 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 POSCO ADR at the current share price and the inputted number of shares is $2.0 billion.

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▶ Stocks Generating Improved Relative Strength: POSCO   [May-23-18 03:00AM  Investor's Business Daily]
▶ POSCO Files its Annual Report on Form 20-F   [Apr-27-18 09:27AM  PR Newswire]
▶ Should Value Investors Pick POSCO (PKX) Stock?   [Apr-13-18 09:40AM  Zacks]
▶ Deals of the day-Mergers and acquisitions   [Feb-27-18 04:01PM  Reuters]
▶ New Strong Buy Stocks for December 7th   [Dec-07-17 08:59AM  Zacks]
▶ Stocks Flashing Renewed Technical Strength: POSCO   [Dec-05-17 03:00AM  Investor's Business Daily]
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▶ POSCO Hits 80-Plus Relative Strength Rating Benchmark   [Oct-30-17 03:00AM  Investor's Business Daily]
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▶ Stocks With Rising Relative Price Strength: POSCO   [03:00AM  Investor's Business Daily]
▶ POSCO Shows Market Leadership With Jump To 83 RS Rating   [Sep-29-17 03:00AM  Investor's Business Daily]

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