Intrinsic value of Charles Schwab - SCHW

Previous Close

$52.88

  Intrinsic Value

$14.99

stock screener

  Rating & Target

str. sell

-72%

Previous close

$52.88

 
Intrinsic value

$14.99

 
Up/down potential

-72%

 
Rating

str. sell

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

We calculate the intrinsic value of SCHW 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 70.8

 

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, %
  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
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
Revenue, $m
  9,928
  11,336
  12,839
  14,436
  16,124
  17,901
  19,766
  21,719
  23,758
  25,885
  28,100
  30,405
  32,801
  35,291
  37,879
  40,569
  43,364
  46,270
  49,292
  52,435
  55,707
  59,114
  62,664
  66,364
  70,222
  74,247
  78,449
  82,836
  87,420
  92,211
Variable operating expenses, $m
  3,407
  3,429
  3,452
  3,477
  3,503
  3,531
  3,560
  3,590
  3,622
  3,655
  437
  472
  510
  548
  588
  630
  674
  719
  766
  815
  865
  918
  973
  1,031
  1,091
  1,153
  1,219
  1,287
  1,358
  1,432
Fixed operating expenses, $m
  1,464
  1,496
  1,529
  1,562
  1,597
  1,632
  1,668
  1,704
  1,742
  1,780
  1,819
  1,859
  1,900
  1,942
  1,985
  2,028
  2,073
  2,119
  2,165
  2,213
  2,262
  2,311
  2,362
  2,414
  2,467
  2,522
  2,577
  2,634
  2,692
  2,751
Total operating expenses, $m
  4,871
  4,925
  4,981
  5,039
  5,100
  5,163
  5,228
  5,294
  5,364
  5,435
  2,256
  2,331
  2,410
  2,490
  2,573
  2,658
  2,747
  2,838
  2,931
  3,028
  3,127
  3,229
  3,335
  3,445
  3,558
  3,675
  3,796
  3,921
  4,050
  4,183
Operating income, $m
  5,057
  6,411
  7,858
  9,396
  11,023
  12,738
  14,539
  16,424
  18,395
  20,450
  25,844
  28,073
  30,391
  32,801
  35,306
  37,910
  40,617
  43,432
  46,361
  49,408
  52,580
  55,885
  59,328
  62,919
  66,664
  70,572
  74,653
  78,916
  83,371
  88,028
EBITDA, $m
  39,269
  45,013
  51,148
  57,666
  64,556
  71,813
  79,431
  87,405
  95,736
  104,424
  113,472
  122,887
  132,677
  142,853
  153,428
  164,419
  175,843
  187,720
  200,071
  212,922
  226,298
  240,227
  254,739
  269,867
  285,643
  302,104
  319,287
  337,233
  355,983
  375,580
Interest expense (income), $m
  160
  10,157
  10,448
  11,789
  13,222
  14,744
  16,352
  18,046
  19,823
  21,684
  23,628
  25,654
  27,765
  29,961
  32,244
  34,618
  37,084
  39,647
  42,310
  45,080
  47,959
  50,955
  54,073
  57,320
  60,702
  64,228
  67,904
  71,740
  75,744
  79,925
  84,294
Earnings before tax, $m
  -5,100
  -4,037
  -3,931
  -3,826
  -3,720
  -3,614
  -3,507
  -3,399
  -3,289
  -3,178
  190
  308
  430
  557
  688
  826
  970
  1,122
  1,281
  1,449
  1,625
  1,812
  2,009
  2,216
  2,436
  2,668
  2,913
  3,172
  3,445
  3,734
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  51
  83
  116
  150
  186
  223
  262
  303
  346
  391
  439
  489
  542
  598
  658
  720
  786
  856
  930
  1,008
Net income, $m
  -5,100
  -4,037
  -3,931
  -3,826
  -3,720
  -3,614
  -3,507
  -3,399
  -3,289
  -3,178
  139
  225
  314
  406
  503
  603
  708
  819
  935
  1,058
  1,187
  1,323
  1,466
  1,618
  1,778
  1,947
  2,126
  2,315
  2,515
  2,726

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
  194,665
  222,269
  251,746
  283,053
  316,148
  350,997
  387,573
  425,860
  465,852
  507,554
  550,983
  596,168
  643,151
  691,983
  742,729
  795,464
  850,272
  907,249
  966,501
  1,028,143
  1,092,300
  1,159,106
  1,228,704
  1,301,247
  1,376,897
  1,455,824
  1,538,210
  1,624,244
  1,714,126
  1,808,068
Adjusted assets (=assets-cash), $m
  194,665
  222,269
  251,746
  283,053
  316,148
  350,997
  387,573
  425,860
  465,852
  507,554
  550,983
  596,168
  643,151
  691,983
  742,729
  795,464
  850,272
  907,249
  966,501
  1,028,143
  1,092,300
  1,159,106
  1,228,704
  1,301,247
  1,376,897
  1,455,824
  1,538,210
  1,624,244
  1,714,126
  1,808,068
Revenue / Adjusted assets
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
Average production assets, $m
  309,593
  353,493
  400,373
  450,163
  502,797
  558,220
  616,391
  677,282
  740,884
  807,205
  876,274
  948,136
  1,022,856
  1,100,519
  1,181,225
  1,265,093
  1,352,258
  1,442,874
  1,537,108
  1,635,143
  1,737,177
  1,843,424
  1,954,112
  2,069,483
  2,189,795
  2,315,319
  2,446,344
  2,583,171
  2,726,119
  2,875,522
Working capital, $m
  -257,372
  -293,867
  -332,840
  -374,231
  -417,987
  -464,062
  -512,420
  -563,040
  -615,914
  -671,049
  -728,467
  -788,208
  -850,325
  -914,887
  -981,980
  -1,051,702
  -1,124,165
  -1,199,496
  -1,277,834
  -1,359,333
  -1,444,156
  -1,532,482
  -1,624,499
  -1,720,410
  -1,820,428
  -1,924,780
  -2,033,704
  -2,147,451
  -2,266,287
  -2,390,490
Total debt, $m
  193,481
  218,324
  244,854
  273,030
  302,815
  334,179
  367,098
  401,556
  437,549
  475,080
  514,166
  554,833
  597,117
  641,067
  686,738
  734,199
  783,527
  834,806
  888,133
  943,611
  1,001,352
  1,061,478
  1,124,116
  1,189,405
  1,257,489
  1,328,524
  1,402,671
  1,480,101
  1,560,996
  1,645,543
Total liabilities, $m
  175,199
  200,042
  226,572
  254,748
  284,533
  315,897
  348,816
  383,274
  419,267
  456,798
  495,884
  536,551
  578,835
  622,785
  668,456
  715,917
  765,245
  816,524
  869,851
  925,329
  983,070
  1,043,196
  1,105,834
  1,171,123
  1,239,207
  1,310,242
  1,384,389
  1,461,819
  1,542,714
  1,627,261
Total equity, $m
  19,467
  22,227
  25,175
  28,305
  31,615
  35,100
  38,757
  42,586
  46,585
  50,755
  55,098
  59,617
  64,315
  69,198
  74,273
  79,546
  85,027
  90,725
  96,650
  102,814
  109,230
  115,911
  122,870
  130,125
  137,690
  145,582
  153,821
  162,424
  171,413
  180,807
Total liabilities and equity, $m
  194,666
  222,269
  251,747
  283,053
  316,148
  350,997
  387,573
  425,860
  465,852
  507,553
  550,982
  596,168
  643,150
  691,983
  742,729
  795,463
  850,272
  907,249
  966,501
  1,028,143
  1,092,300
  1,159,107
  1,228,704
  1,301,248
  1,376,897
  1,455,824
  1,538,210
  1,624,243
  1,714,127
  1,808,068
Debt-to-equity ratio
  9.940
  9.820
  9.730
  9.650
  9.580
  9.520
  9.470
  9.430
  9.390
  9.360
  9.330
  9.310
  9.280
  9.260
  9.250
  9.230
  9.220
  9.200
  9.190
  9.180
  9.170
  9.160
  9.150
  9.140
  9.130
  9.130
  9.120
  9.110
  9.110
  9.100
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5,100
  -4,037
  -3,931
  -3,826
  -3,720
  -3,614
  -3,507
  -3,399
  -3,289
  -3,178
  139
  225
  314
  406
  503
  603
  708
  819
  935
  1,058
  1,187
  1,323
  1,466
  1,618
  1,778
  1,947
  2,126
  2,315
  2,515
  2,726
Depreciation, amort., depletion, $m
  34,212
  38,602
  43,290
  48,269
  53,533
  59,075
  64,892
  70,981
  77,341
  83,974
  87,627
  94,814
  102,286
  110,052
  118,122
  126,509
  135,226
  144,287
  153,711
  163,514
  173,718
  184,342
  195,411
  206,948
  218,979
  231,532
  244,634
  258,317
  272,612
  287,552
Funds from operations, $m
  29,113
  34,565
  39,359
  44,443
  49,813
  55,461
  61,385
  67,582
  74,052
  80,796
  87,766
  95,038
  102,599
  110,458
  118,625
  127,112
  135,934
  145,106
  154,646
  164,572
  174,904
  185,665
  196,877
  208,566
  220,758
  233,479
  246,761
  260,632
  275,127
  290,278
Change in working capital, $m
  -33,959
  -36,495
  -38,973
  -41,391
  -43,756
  -46,075
  -48,358
  -50,620
  -52,874
  -55,135
  -57,418
  -59,741
  -62,117
  -64,563
  -67,093
  -69,721
  -72,463
  -75,331
  -78,339
  -81,499
  -84,823
  -88,326
  -92,017
  -95,911
  -100,018
  -104,352
  -108,924
  -113,748
  -118,836
  -124,202
Cash from operations, $m
  63,071
  71,061
  78,331
  85,835
  93,568
  101,536
  109,743
  118,202
  126,926
  135,931
  145,184
  154,779
  164,716
  175,021
  185,718
  196,834
  208,397
  220,437
  232,985
  246,070
  259,728
  273,991
  288,895
  304,477
  320,776
  337,831
  355,685
  374,380
  393,963
  414,481
Maintenance CAPEX, $m
  -26,874
  -30,959
  -35,349
  -40,037
  -45,016
  -50,280
  -55,822
  -61,639
  -67,728
  -74,088
  -80,721
  -87,627
  -94,814
  -102,286
  -110,052
  -118,122
  -126,509
  -135,226
  -144,287
  -153,711
  -163,514
  -173,718
  -184,342
  -195,411
  -206,948
  -218,979
  -231,532
  -244,634
  -258,317
  -272,612
New CAPEX, $m
  -40,849
  -43,900
  -46,880
  -49,790
  -52,634
  -55,423
  -58,170
  -60,891
  -63,602
  -66,322
  -69,069
  -71,862
  -74,721
  -77,662
  -80,706
  -83,868
  -87,166
  -90,616
  -94,234
  -98,035
  -102,034
  -106,247
  -110,688
  -115,371
  -120,312
  -125,525
  -131,025
  -136,827
  -142,948
  -149,403
Cash from investing activities, $m
  -67,723
  -74,859
  -82,229
  -89,827
  -97,650
  -105,703
  -113,992
  -122,530
  -131,330
  -140,410
  -149,790
  -159,489
  -169,535
  -179,948
  -190,758
  -201,990
  -213,675
  -225,842
  -238,521
  -251,746
  -265,548
  -279,965
  -295,030
  -310,782
  -327,260
  -344,504
  -362,557
  -381,461
  -401,265
  -422,015
Free cash flow, $m
  -4,652
  -3,799
  -3,898
  -3,992
  -4,082
  -4,167
  -4,249
  -4,328
  -4,404
  -4,479
  -4,605
  -4,710
  -4,818
  -4,927
  -5,040
  -5,157
  -5,278
  -5,404
  -5,536
  -5,675
  -5,821
  -5,974
  -6,135
  -6,305
  -6,484
  -6,673
  -6,872
  -7,081
  -7,302
  -7,534
Issuance/(repayment) of debt, $m
  5,391
  24,843
  26,530
  28,176
  29,786
  31,364
  32,919
  34,458
  35,992
  37,531
  39,086
  40,667
  42,284
  43,949
  45,672
  47,461
  49,327
  51,280
  53,327
  55,478
  57,741
  60,125
  62,638
  65,289
  68,085
  71,035
  74,147
  77,431
  80,894
  84,547
Issuance/(repurchase) of shares, $m
  24,718
  6,797
  6,879
  6,957
  7,030
  7,099
  7,165
  7,228
  7,289
  7,348
  4,204
  4,294
  4,384
  4,477
  4,572
  4,670
  4,772
  4,879
  4,990
  5,107
  5,229
  5,358
  5,494
  5,636
  5,787
  5,945
  6,112
  6,288
  6,473
  6,668
Cash from financing (excl. dividends), $m  
  30,109
  31,640
  33,409
  35,133
  36,816
  38,463
  40,084
  41,686
  43,281
  44,879
  43,290
  44,961
  46,668
  48,426
  50,244
  52,131
  54,099
  56,159
  58,317
  60,585
  62,970
  65,483
  68,132
  70,925
  73,872
  76,980
  80,259
  83,719
  87,367
  91,215
Total cash flow (excl. dividends), $m
  25,457
  27,842
  29,511
  31,140
  32,733
  34,296
  35,834
  37,358
  38,877
  40,400
  38,686
  40,250
  41,851
  43,499
  45,204
  46,975
  48,822
  50,754
  52,781
  54,910
  57,150
  59,509
  61,997
  64,620
  67,387
  70,307
  73,387
  76,637
  80,066
  83,681
Retained Cash Flow (-), $m
  -24,718
  -6,797
  -6,879
  -6,957
  -7,030
  -7,099
  -7,165
  -7,228
  -7,289
  -7,348
  -4,343
  -4,519
  -4,698
  -4,883
  -5,075
  -5,273
  -5,481
  -5,698
  -5,925
  -6,164
  -6,416
  -6,681
  -6,960
  -7,254
  -7,565
  -7,893
  -8,239
  -8,603
  -8,988
  -9,394
Prev. year cash balance distribution, $m
  152
  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
  155
  179
  204
  231
  260
  290
  322
  356
  391
  428
  466
  506
  547
  590
  635
  682
  730
  781
  833
  887
  944
  1,003
  1,064
  1,128
  1,195
  1,264
  1,336
  1,412
  1,491
  1,574
Cash available for distribution, $m
  891
  21,044
  22,632
  24,184
  25,704
  27,197
  28,670
  30,130
  31,588
  33,052
  34,343
  35,732
  37,153
  38,616
  40,129
  41,701
  43,341
  45,056
  46,855
  48,745
  50,734
  52,829
  55,037
  57,365
  59,822
  62,414
  65,149
  68,034
  71,077
  74,287
Discount rate, %
  14.30
  15.02
  15.77
  16.55
  17.38
  18.25
  19.16
  20.12
  21.13
  22.18
  23.29
  24.46
  25.68
  26.96
  28.31
  29.73
  31.22
  32.78
  34.41
  36.14
  37.94
  39.84
  41.83
  43.92
  46.12
  48.42
  50.85
  53.39
  56.06
  58.86
PV of cash for distribution, $m
  780
  15,908
  14,587
  13,104
  11,534
  9,947
  8,403
  6,951
  5,628
  4,457
  3,432
  2,587
  1,903
  1,365
  954
  648
  428
  274
  170
  102
  59
  33
  18
  9
  5
  2
  1
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  37.1
  28.3
  22.2
  17.8
  14.5
  12.0
  10.2
  8.7
  7.5
  6.9
  6.4
  6.0
  5.6
  5.2
  4.9
  4.7
  4.4
  4.2
  4.0
  3.8
  3.6
  3.4
  3.3
  3.1
  3.0
  2.9
  2.8
  2.7
  2.6

The Charles Schwab Corporation (CSC) is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, money management and financial advisory services. The Company provides financial services to individuals and institutional clients through two segments: Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services and other corporate brokerage services. The Advisor Services segment provides custodial, trading, and support services as well as retirement business services. The Company offers a range of products to address individuals' varying investment and financial needs. Its product offerings include brokerage, mutual funds, ETFs, advice solutions, banking and trust. Brokerage provides a range of brokerage accounts with cash management capabilities. Mutual funds offer third-party mutual funds through the Mutual Fund Marketplace.

FINANCIAL RATIOS  of  Charles Schwab (SCHW)

Valuation Ratios
P/E Ratio 37.3
Price to Sales 9.2
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 26.5
Price to Free Cash Flow 30.4
Growth Rates
Sales Growth Rate 17.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.1%
Cap. Spend. - 3 Yr. Gr. Rate 6.8%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 17.5%
Total Debt to Equity 1012.9%
Interest Coverage 20
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 0.9%
Return On Total Capital 1.1%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 12.7%
Return On Equity - 3 Yr. Avg. 12%
Asset Turnover 0
Profitability Ratios
Gross Margin 97.8%
Gross Margin - 3 Yr. Avg. 98%
EBITDA Margin 44.3%
EBITDA Margin - 3 Yr. Avg. 41.3%
Operating Margin 39.2%
Oper. Margin - 3 Yr. Avg. 36.2%
Pre-Tax Margin 39.2%
Pre-Tax Margin - 3 Yr. Avg. 36.2%
Net Profit Margin 24.7%
Net Profit Margin - 3 Yr. Avg. 22.8%
Effective Tax Rate 36.9%
Eff/ Tax Rate - 3 Yr. Avg. 37%
Payout Ratio 25.7%

SCHW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCHW stock intrinsic value calculation we used $8618 million for the last fiscal year's total revenue generated by Charles Schwab. The default revenue input number comes from 2017 income statement of Charles Schwab. 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 SCHW stock valuation model: a) initial revenue growth rate of 15.2% 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 14.3%, whose default value for SCHW is calculated based on our internal credit rating of Charles Schwab, 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 Charles Schwab.
    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 SCHW stock the variable cost ratio is equal to 39.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1432 million in the base year in the intrinsic value calculation for SCHW 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 Charles Schwab.

Corporate tax rate of 27% is the nominal tax rate for Charles Schwab. 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 SCHW stock is equal to 1.8%.

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 SCHW are equal to 3118.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Charles Schwab 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 SCHW is equal to -2592.4%. 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 - $0 million for Charles Schwab - 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 1339 million for Charles Schwab 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 Charles Schwab at the current share price and the inputted number of shares is $70.8 billion.

RELATED COMPANIES Price Int.Val. Rating
ETFC E*TRADE Financ 61.21 55.66  hold
FNGN Financial Engi 44.95 44.94  buy
RJF Raymond James 94.72 39.32  str.sell

COMPANY NEWS

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▶ Vanguard, Charles Schwab Land on Forbes' Best ETFs List   [Jun-21-18 11:50AM  Investopedia]
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▶ Getting In the Investing Game   [08:40AM  Kiplinger]
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