Intrinsic value of State Street - STT

Previous Close

$83.88

  Intrinsic Value

$30.36

stock screener

  Rating & Target

str. sell

-64%

Previous close

$83.88

 
Intrinsic value

$30.36

 
Up/down potential

-64%

 
Rating

str. sell

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

We calculate the intrinsic value of STT 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 31.5

 

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, %
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  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
Revenue, $m
  12,220
  13,315
  14,455
  15,642
  16,875
  18,157
  19,490
  20,875
  22,314
  23,810
  25,365
  26,984
  28,669
  30,423
  32,250
  34,155
  36,141
  38,213
  40,376
  42,635
  44,995
  47,461
  50,040
  52,737
  55,559
  58,512
  61,604
  64,842
  68,233
  71,786
Variable operating expenses, $m
  2,432
  2,650
  2,877
  3,113
  3,358
  3,613
  3,878
  4,154
  4,440
  4,738
  5,048
  5,370
  5,705
  6,054
  6,418
  6,797
  7,192
  7,604
  8,035
  8,484
  8,954
  9,445
  9,958
  10,495
  11,056
  11,644
  12,259
  12,904
  13,578
  14,286
Fixed operating expenses, $m
  6,310
  6,449
  6,591
  6,736
  6,884
  7,035
  7,190
  7,348
  7,510
  7,675
  7,844
  8,016
  8,193
  8,373
  8,557
  8,745
  8,938
  9,134
  9,335
  9,541
  9,751
  9,965
  10,184
  10,408
  10,637
  10,872
  11,111
  11,355
  11,605
  11,860
Total operating expenses, $m
  8,742
  9,099
  9,468
  9,849
  10,242
  10,648
  11,068
  11,502
  11,950
  12,413
  12,892
  13,386
  13,898
  14,427
  14,975
  15,542
  16,130
  16,738
  17,370
  18,025
  18,705
  19,410
  20,142
  20,903
  21,693
  22,516
  23,370
  24,259
  25,183
  26,146
Operating income, $m
  3,478
  4,217
  4,988
  5,793
  6,633
  7,509
  8,422
  9,372
  10,363
  11,397
  12,474
  13,598
  14,771
  15,996
  17,275
  18,612
  20,011
  21,474
  23,006
  24,610
  26,290
  28,051
  29,897
  31,834
  33,865
  35,997
  38,234
  40,583
  43,050
  45,641
EBITDA, $m
  29,795
  32,892
  36,119
  39,479
  42,976
  46,613
  50,395
  54,328
  58,418
  62,673
  67,101
  71,711
  76,511
  81,514
  86,728
  92,168
  97,844
  103,770
  109,960
  116,428
  123,190
  130,263
  137,663
  145,408
  153,516
  162,009
  170,905
  180,227
  189,997
  200,240
Interest expense (income), $m
  441
  6,813
  6,672
  7,559
  8,483
  9,444
  10,443
  11,481
  12,561
  13,682
  14,848
  16,060
  17,320
  18,631
  19,995
  21,416
  22,896
  24,439
  26,048
  27,726
  29,478
  31,308
  33,220
  35,217
  37,306
  39,491
  41,776
  44,169
  46,673
  49,296
  52,043
Earnings before tax, $m
  -3,334
  -2,455
  -2,571
  -2,689
  -2,810
  -2,934
  -3,060
  -3,188
  -3,319
  -3,451
  -3,586
  -3,722
  -3,860
  -4,000
  -4,141
  -4,284
  -4,428
  -4,574
  -4,721
  -4,869
  -5,018
  -5,168
  -5,320
  -5,472
  -5,626
  -5,780
  -5,935
  -6,090
  -6,246
  -6,402
Tax expense, $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
Net income, $m
  -3,334
  -2,455
  -2,571
  -2,689
  -2,810
  -2,934
  -3,060
  -3,188
  -3,319
  -3,451
  -3,586
  -3,722
  -3,860
  -4,000
  -4,141
  -4,284
  -4,428
  -4,574
  -4,721
  -4,869
  -5,018
  -5,168
  -5,320
  -5,472
  -5,626
  -5,780
  -5,935
  -6,090
  -6,246
  -6,402

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
  203,666
  221,915
  240,920
  260,693
  281,254
  302,624
  324,831
  347,909
  371,894
  396,828
  422,758
  449,733
  477,809
  507,043
  537,499
  569,243
  602,346
  636,884
  672,934
  710,580
  749,911
  791,017
  833,995
  878,947
  925,979
  975,203
  1,026,736
  1,080,699
  1,137,223
  1,196,441
Adjusted assets (=assets-cash), $m
  203,666
  221,915
  240,920
  260,693
  281,254
  302,624
  324,831
  347,909
  371,894
  396,828
  422,758
  449,733
  477,809
  507,043
  537,499
  569,243
  602,346
  636,884
  672,934
  710,580
  749,911
  791,017
  833,995
  878,947
  925,979
  975,203
  1,026,736
  1,080,699
  1,137,223
  1,196,441
Revenue / Adjusted assets
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
  0.060
Average production assets, $m
  263,169
  286,749
  311,307
  336,858
  363,425
  391,039
  419,734
  449,554
  480,547
  512,766
  546,271
  581,127
  617,405
  655,181
  694,534
  735,553
  778,328
  822,956
  869,538
  918,184
  969,005
  1,022,120
  1,077,655
  1,135,740
  1,196,513
  1,260,118
  1,326,707
  1,396,437
  1,469,474
  1,545,993
Working capital, $m
  -228,074
  -248,509
  -269,791
  -291,935
  -314,959
  -338,890
  -363,759
  -389,603
  -416,462
  -444,384
  -473,421
  -503,629
  -535,069
  -567,807
  -601,913
  -637,461
  -674,532
  -713,208
  -753,578
  -795,736
  -839,780
  -885,812
  -933,941
  -984,280
  -1,036,949
  -1,092,071
  -1,149,780
  -1,210,210
  -1,273,508
  -1,339,822
Total debt, $m
  123,557
  139,980
  157,085
  174,881
  193,385
  212,619
  232,605
  253,375
  274,962
  297,403
  320,739
  345,017
  370,285
  396,596
  424,006
  452,576
  482,369
  513,452
  545,898
  579,779
  615,177
  652,172
  690,852
  731,309
  773,638
  817,940
  864,319
  912,886
  963,758
  1,017,054
Total liabilities, $m
  183,300
  199,723
  216,828
  234,624
  253,128
  272,362
  292,348
  313,118
  334,705
  357,146
  380,482
  404,760
  430,028
  456,339
  483,749
  512,319
  542,112
  573,195
  605,641
  639,522
  674,920
  711,915
  750,595
  791,052
  833,381
  877,683
  924,062
  972,629
  1,023,501
  1,076,797
Total equity, $m
  20,367
  22,191
  24,092
  26,069
  28,125
  30,262
  32,483
  34,791
  37,189
  39,683
  42,276
  44,973
  47,781
  50,704
  53,750
  56,924
  60,235
  63,688
  67,293
  71,058
  74,991
  79,102
  83,399
  87,895
  92,598
  97,520
  102,674
  108,070
  113,722
  119,644
Total liabilities and equity, $m
  203,667
  221,914
  240,920
  260,693
  281,253
  302,624
  324,831
  347,909
  371,894
  396,829
  422,758
  449,733
  477,809
  507,043
  537,499
  569,243
  602,347
  636,883
  672,934
  710,580
  749,911
  791,017
  833,994
  878,947
  925,979
  975,203
  1,026,736
  1,080,699
  1,137,223
  1,196,441
Debt-to-equity ratio
  6.070
  6.310
  6.520
  6.710
  6.880
  7.030
  7.160
  7.280
  7.390
  7.490
  7.590
  7.670
  7.750
  7.820
  7.890
  7.950
  8.010
  8.060
  8.110
  8.160
  8.200
  8.240
  8.280
  8.320
  8.350
  8.390
  8.420
  8.450
  8.470
  8.500
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
  -3,334
  -2,455
  -2,571
  -2,689
  -2,810
  -2,934
  -3,060
  -3,188
  -3,319
  -3,451
  -3,586
  -3,722
  -3,860
  -4,000
  -4,141
  -4,284
  -4,428
  -4,574
  -4,721
  -4,869
  -5,018
  -5,168
  -5,320
  -5,472
  -5,626
  -5,780
  -5,935
  -6,090
  -6,246
  -6,402
Depreciation, amort., depletion, $m
  26,317
  28,675
  31,131
  33,686
  36,342
  39,104
  41,973
  44,955
  48,055
  51,277
  54,627
  58,113
  61,741
  65,518
  69,453
  73,555
  77,833
  82,296
  86,954
  91,818
  96,900
  102,212
  107,765
  113,574
  119,651
  126,012
  132,671
  139,644
  146,947
  154,599
Funds from operations, $m
  22,983
  26,219
  28,560
  30,997
  33,532
  36,170
  38,914
  41,767
  44,736
  47,825
  51,041
  54,391
  57,880
  61,518
  65,312
  69,271
  73,405
  77,722
  82,233
  86,950
  91,882
  97,044
  102,446
  108,102
  114,026
  120,232
  126,736
  133,554
  140,702
  148,197
Change in working capital, $m
  -19,597
  -20,435
  -21,282
  -22,143
  -23,024
  -23,931
  -24,869
  -25,843
  -26,859
  -27,922
  -29,037
  -30,208
  -31,440
  -32,738
  -34,106
  -35,548
  -37,070
  -38,676
  -40,371
  -42,158
  -44,044
  -46,032
  -48,129
  -50,339
  -52,669
  -55,123
  -57,708
  -60,431
  -63,297
  -66,315
Cash from operations, $m
  42,579
  46,655
  49,842
  53,140
  56,557
  60,101
  63,782
  67,610
  71,595
  75,748
  80,078
  84,599
  89,320
  94,256
  99,418
  104,820
  110,475
  116,398
  122,604
  129,108
  135,926
  143,076
  150,574
  158,441
  166,694
  175,355
  184,444
  193,985
  203,999
  214,512
Maintenance CAPEX, $m
  -24,056
  -26,317
  -28,675
  -31,131
  -33,686
  -36,342
  -39,104
  -41,973
  -44,955
  -48,055
  -51,277
  -54,627
  -58,113
  -61,741
  -65,518
  -69,453
  -73,555
  -77,833
  -82,296
  -86,954
  -91,818
  -96,900
  -102,212
  -107,765
  -113,574
  -119,651
  -126,012
  -132,671
  -139,644
  -146,947
New CAPEX, $m
  -22,608
  -23,580
  -24,557
  -25,551
  -26,567
  -27,614
  -28,696
  -29,820
  -30,993
  -32,219
  -33,505
  -34,856
  -36,278
  -37,775
  -39,354
  -41,019
  -42,775
  -44,628
  -46,583
  -48,645
  -50,821
  -53,115
  -55,535
  -58,085
  -60,773
  -63,605
  -66,588
  -69,730
  -73,037
  -76,519
Cash from investing activities, $m
  -46,664
  -49,897
  -53,232
  -56,682
  -60,253
  -63,956
  -67,800
  -71,793
  -75,948
  -80,274
  -84,782
  -89,483
  -94,391
  -99,516
  -104,872
  -110,472
  -116,330
  -122,461
  -128,879
  -135,599
  -142,639
  -150,015
  -157,747
  -165,850
  -174,347
  -183,256
  -192,600
  -202,401
  -212,681
  -223,466
Free cash flow, $m
  -4,085
  -3,242
  -3,390
  -3,541
  -3,696
  -3,855
  -4,017
  -4,183
  -4,353
  -4,526
  -4,703
  -4,885
  -5,070
  -5,260
  -5,454
  -5,652
  -5,855
  -6,062
  -6,275
  -6,491
  -6,713
  -6,940
  -7,172
  -7,410
  -7,653
  -7,901
  -8,156
  -8,416
  -8,682
  -8,955
Issuance/(repayment) of debt, $m
  -2,605
  16,424
  17,104
  17,796
  18,504
  19,233
  19,987
  20,770
  21,587
  22,441
  23,337
  24,278
  25,268
  26,311
  27,410
  28,570
  29,793
  31,084
  32,445
  33,882
  35,397
  36,995
  38,680
  40,457
  42,329
  44,302
  46,379
  48,567
  50,871
  53,296
Issuance/(repurchase) of shares, $m
  24,710
  4,280
  4,471
  4,667
  4,866
  5,071
  5,281
  5,496
  5,717
  5,945
  6,179
  6,420
  6,668
  6,923
  7,187
  7,458
  7,738
  8,027
  8,326
  8,633
  8,951
  9,279
  9,618
  9,968
  10,329
  10,702
  11,088
  11,486
  11,898
  12,324
Cash from financing (excl. dividends), $m  
  22,105
  20,704
  21,575
  22,463
  23,370
  24,304
  25,268
  26,266
  27,304
  28,386
  29,516
  30,698
  31,936
  33,234
  34,597
  36,028
  37,531
  39,111
  40,771
  42,515
  44,348
  46,274
  48,298
  50,425
  52,658
  55,004
  57,467
  60,053
  62,769
  65,620
Total cash flow (excl. dividends), $m
  18,020
  17,462
  18,186
  18,921
  19,674
  20,449
  21,250
  22,083
  22,951
  23,859
  24,812
  25,812
  26,865
  27,974
  29,143
  30,376
  31,676
  33,049
  34,496
  36,024
  37,635
  39,334
  41,126
  43,014
  45,005
  47,102
  49,311
  51,638
  54,087
  56,665
Retained Cash Flow (-), $m
  -24,710
  -4,280
  -4,471
  -4,667
  -4,866
  -5,071
  -5,281
  -5,496
  -5,717
  -5,945
  -6,179
  -6,420
  -6,668
  -6,923
  -7,187
  -7,458
  -7,738
  -8,027
  -8,326
  -8,633
  -8,951
  -9,279
  -9,618
  -9,968
  -10,329
  -10,702
  -11,088
  -11,486
  -11,898
  -12,324
Prev. year cash balance distribution, $m
  1,009
  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
  -5,681
  13,182
  13,714
  14,255
  14,808
  15,378
  15,970
  16,587
  17,234
  17,915
  18,633
  19,393
  20,198
  21,051
  21,956
  22,918
  23,938
  25,021
  26,171
  27,390
  28,684
  30,055
  31,508
  33,047
  34,676
  36,400
  38,224
  40,151
  42,189
  44,341
Discount rate, %
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
  24.20
  25.41
  26.68
  28.02
  29.42
  30.89
  32.43
  34.05
  35.76
  37.54
  39.42
  41.39
  43.46
  45.63
  47.92
  50.31
  52.83
  55.47
  58.24
  61.15
  64.21
PV of cash for distribution, $m
  -4,914
  9,732
  8,519
  7,338
  6,215
  5,173
  4,228
  3,391
  2,665
  2,051
  1,544
  1,135
  815
  569
  387
  256
  164
  102
  61
  36
  20
  11
  6
  3
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  41.3
  34.4
  28.8
  24.3
  20.6
  17.5
  15.0
  12.9
  11.1
  9.6
  8.3
  7.3
  6.3
  5.6
  4.9
  4.3
  3.8
  3.3
  3.0
  2.6
  2.3
  2.1
  1.9
  1.7
  1.5
  1.3
  1.2
  1.1
  1.0

State Street Corporation is a financial holding company. The Company operates through two lines of business: Investment Servicing and Investment Management. The Company, through its subsidiary, State Street Bank and Trust Company (State Street Bank), provides a range of financial products and services to institutional investors across the world. Investment servicing line of business performs functions, such as providing institutional investors with clearing, settlement and payment services. The Company operates investment management line of business through State Street Global Advisors (SSGA). SSGA provides a range of investment management, investment research and investment advisory services to corporations, public funds and other investors. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.

FINANCIAL RATIOS  of  State Street (STT)

Valuation Ratios
P/E Ratio 14.9
Price to Sales 0
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 19.1
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.8%
Cap. Spend. - 3 Yr. Gr. Rate 9.6%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 74.6%
Total Debt to Equity 82.1%
Interest Coverage 6
Management Effectiveness
Return On Assets 1.1%
Ret/ On Assets - 3 Yr. Avg. 1%
Return On Total Capital 5.5%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 10.1%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate -1%
Eff/ Tax Rate - 3 Yr. Avg. 9.9%
Payout Ratio 33.7%

STT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the STT stock intrinsic value calculation we used $11170 million for the last fiscal year's total revenue generated by State Street. The default revenue input number comes from 2017 income statement of State Street. 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 STT stock valuation model: a) initial revenue growth rate of 9.4% 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 15.6%, whose default value for STT is calculated based on our internal credit rating of State Street, 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 State Street.
    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 STT stock the variable cost ratio is equal to 19.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6174 million in the base year in the intrinsic value calculation for STT 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 State Street.

Corporate tax rate of 27% is the nominal tax rate for State Street. 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 STT 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 STT are equal to 2153.6%.

Life of production assets of 10 years is the average useful life of capital assets used in State Street 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 STT is equal to -1866.4%. 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 State Street - 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 375 million for State Street 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 State Street at the current share price and the inputted number of shares is $31.5 billion.

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COMPANY NEWS

▶ K&L Gates sues landlord over Boston tower sublease   [Aug-10-18 09:21AM  American City Business Journals]
▶ K&L Gates sues landlord over State Street tower sublease   [Aug-09-18 03:06PM  American City Business Journals]
▶ Theme ETFs Come of Age and Now the Big Firms Want In   [Aug-08-18 02:34PM  Bloomberg]
▶ State Street Appoints Andrew Allright to CEO of InfraHedge   [Aug-06-18 11:05AM  Business Wire]
▶ [$$] The rise of celebrity financial endorsements   [Aug-04-18 06:00AM  Financial Times]
▶ Go Small or Go Big?   [Aug-03-18 02:11PM  CNBC Videos]
▶ [$$] Index Quirk Helps Vanguard Fund Dodge Facebook Fall   [Aug-01-18 08:41PM  The Wall Street Journal]
▶ [$$] Index Quirk Helps Vanguard Fund Dodge Facebook Fall   [04:41PM  The Wall Street Journal]
▶ State Street Corporation Prices Common Stock Offering   [Jul-26-18 08:37PM  Business Wire]
▶ State Street hit as investors flee equities   [Jul-23-18 02:54PM  American City Business Journals]
▶ State Street Should Have Stayed Boring   [01:37PM  The Wall Street Journal]
▶ Earnings Data Deluge   [10:42AM  Zacks]
▶ State Street makes tech splash with $2.6B Charles River buy   [06:31AM  American City Business Journals]
▶ [$$] Investors Win From ETF Price War   [Jul-12-18 07:39PM  The Wall Street Journal]
▶ Fed gives OK to 32 of 35 biggest US banks to raise dividends   [Jun-28-18 05:27PM  Associated Press]
▶ State Street Introduces Cheapest Gold ETF Yet   [Jun-27-18 03:12PM  The Wall Street Journal]
▶ Ex-State Street exec found guilty of ripping off clients   [05:26AM  American City Business Journals]
▶ MOVES-State Street makes senior appointment   [Jun-20-18 12:07PM  Reuters]
▶ Early Call: State Street Launches Communications ETF   [Jun-19-18 02:26PM  Barrons.com]
▶ Boston's Amundi Pioneer makes bigger play for feel-good investors   [Jun-05-18 01:54PM  American City Business Journals]
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