Intrinsic value of United Continental Holdings - UAL

Previous Close

$81.44

  Intrinsic Value

$118.31

stock screener

  Rating & Target

buy

+45%

Previous close

$81.44

 
Intrinsic value

$118.31

 
Up/down potential

+45%

 
Rating

buy

We calculate the intrinsic value of UAL 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 24.1

 

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, %
  3.20
  3.38
  3.54
  3.69
  3.82
  3.94
  4.04
  4.14
  4.23
  4.30
  4.37
  4.44
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
Revenue, $m
  38,944
  40,260
  41,686
  43,223
  44,874
  46,641
  48,526
  50,535
  52,670
  54,936
  57,338
  59,881
  62,571
  65,413
  68,415
  71,582
  74,922
  78,443
  82,154
  86,062
  90,176
  94,508
  99,065
  103,861
  108,904
  114,209
  119,787
  125,651
  131,815
  138,294
Variable operating expenses, $m
  34,283
  35,415
  36,641
  37,962
  39,381
  40,900
  42,521
  44,248
  46,083
  48,031
  49,290
  51,476
  53,788
  56,232
  58,812
  61,534
  64,406
  67,433
  70,622
  73,982
  77,519
  81,242
  85,160
  89,282
  93,618
  98,178
  102,973
  108,014
  113,313
  118,882
Fixed operating expenses, $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 operating expenses, $m
  34,283
  35,415
  36,641
  37,962
  39,381
  40,900
  42,521
  44,248
  46,083
  48,031
  49,290
  51,476
  53,788
  56,232
  58,812
  61,534
  64,406
  67,433
  70,622
  73,982
  77,519
  81,242
  85,160
  89,282
  93,618
  98,178
  102,973
  108,014
  113,313
  118,882
Operating income, $m
  4,660
  4,845
  5,045
  5,261
  5,492
  5,740
  6,005
  6,287
  6,587
  6,905
  8,048
  8,405
  8,783
  9,182
  9,603
  10,048
  10,516
  11,011
  11,531
  12,080
  12,658
  13,265
  13,905
  14,578
  15,286
  16,031
  16,814
  17,637
  18,502
  19,411
EBITDA, $m
  8,858
  9,158
  9,482
  9,832
  10,207
  10,609
  11,038
  11,495
  11,981
  12,496
  13,042
  13,621
  14,233
  14,879
  15,562
  16,282
  17,042
  17,843
  18,687
  19,576
  20,512
  21,497
  22,534
  23,625
  24,772
  25,978
  27,247
  28,581
  29,983
  31,457
Interest expense (income), $m
  584
  777
  834
  897
  966
  1,039
  1,119
  1,203
  1,294
  1,390
  1,492
  1,601
  1,716
  1,838
  1,967
  2,103
  2,247
  2,399
  2,559
  2,728
  2,906
  3,093
  3,291
  3,498
  3,717
  3,947
  4,189
  4,443
  4,710
  4,992
  5,287
Earnings before tax, $m
  3,883
  4,011
  4,148
  4,295
  4,453
  4,622
  4,802
  4,993
  5,197
  5,412
  6,447
  6,689
  6,945
  7,215
  7,500
  7,800
  8,117
  8,451
  8,803
  9,174
  9,564
  9,975
  10,407
  10,861
  11,339
  11,842
  12,371
  12,926
  13,511
  14,124
Tax expense, $m
  1,048
  1,083
  1,120
  1,160
  1,202
  1,248
  1,296
  1,348
  1,403
  1,461
  1,741
  1,806
  1,875
  1,948
  2,025
  2,106
  2,192
  2,282
  2,377
  2,477
  2,582
  2,693
  2,810
  2,933
  3,062
  3,197
  3,340
  3,490
  3,648
  3,814
Net income, $m
  2,835
  2,928
  3,028
  3,135
  3,251
  3,374
  3,505
  3,645
  3,794
  3,951
  4,706
  4,883
  5,070
  5,267
  5,475
  5,694
  5,926
  6,169
  6,426
  6,697
  6,982
  7,282
  7,597
  7,929
  8,278
  8,645
  9,031
  9,436
  9,863
  10,311

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
  43,659
  45,134
  46,733
  48,456
  50,307
  52,288
  54,402
  56,654
  59,047
  61,588
  64,281
  67,132
  70,147
  73,333
  76,698
  80,249
  83,993
  87,941
  92,100
  96,482
  101,095
  105,950
  111,060
  116,436
  122,090
  128,037
  134,290
  140,864
  147,774
  155,038
Adjusted assets (=assets-cash), $m
  43,659
  45,134
  46,733
  48,456
  50,307
  52,288
  54,402
  56,654
  59,047
  61,588
  64,281
  67,132
  70,147
  73,333
  76,698
  80,249
  83,993
  87,941
  92,100
  96,482
  101,095
  105,950
  111,060
  116,436
  122,090
  128,037
  134,290
  140,864
  147,774
  155,038
Revenue / Adjusted assets
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
  0.892
Average production assets, $m
  33,920
  35,066
  36,308
  37,647
  39,085
  40,624
  42,267
  44,016
  45,876
  47,850
  49,942
  52,157
  54,499
  56,975
  59,589
  62,348
  65,257
  68,324
  71,556
  74,960
  78,544
  82,316
  86,286
  90,463
  94,856
  99,476
  104,334
  109,442
  114,811
  120,454
Working capital, $m
  -1,324
  -1,369
  -1,417
  -1,470
  -1,526
  -1,586
  -1,650
  -1,718
  -1,791
  -1,868
  -1,950
  -2,036
  -2,127
  -2,224
  -2,326
  -2,434
  -2,547
  -2,667
  -2,793
  -2,926
  -3,066
  -3,213
  -3,368
  -3,531
  -3,703
  -3,883
  -4,073
  -4,272
  -4,482
  -4,702
Total debt, $m
  15,450
  16,618
  17,885
  19,249
  20,715
  22,284
  23,958
  25,742
  27,637
  29,650
  31,782
  34,040
  36,428
  38,952
  41,617
  44,429
  47,395
  50,521
  53,816
  57,285
  60,939
  64,784
  68,831
  73,089
  77,567
  82,277
  87,230
  92,436
  97,909
  103,662
Total liabilities, $m
  34,578
  35,746
  37,013
  38,377
  39,843
  41,412
  43,086
  44,870
  46,765
  48,778
  50,910
  53,168
  55,556
  58,080
  60,745
  63,557
  66,523
  69,649
  72,944
  76,413
  80,067
  83,912
  87,959
  92,217
  96,695
  101,405
  106,358
  111,564
  117,037
  122,790
Total equity, $m
  9,081
  9,388
  9,720
  10,079
  10,464
  10,876
  11,316
  11,784
  12,282
  12,810
  13,370
  13,963
  14,591
  15,253
  15,953
  16,692
  17,471
  18,292
  19,157
  20,068
  21,028
  22,038
  23,100
  24,219
  25,395
  26,632
  27,932
  29,300
  30,737
  32,248
Total liabilities and equity, $m
  43,659
  45,134
  46,733
  48,456
  50,307
  52,288
  54,402
  56,654
  59,047
  61,588
  64,280
  67,131
  70,147
  73,333
  76,698
  80,249
  83,994
  87,941
  92,101
  96,481
  101,095
  105,950
  111,059
  116,436
  122,090
  128,037
  134,290
  140,864
  147,774
  155,038
Debt-to-equity ratio
  1.700
  1.770
  1.840
  1.910
  1.980
  2.050
  2.120
  2.180
  2.250
  2.310
  2.380
  2.440
  2.500
  2.550
  2.610
  2.660
  2.710
  2.760
  2.810
  2.850
  2.900
  2.940
  2.980
  3.020
  3.050
  3.090
  3.120
  3.150
  3.190
  3.210
Adjusted equity ratio
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,835
  2,928
  3,028
  3,135
  3,251
  3,374
  3,505
  3,645
  3,794
  3,951
  4,706
  4,883
  5,070
  5,267
  5,475
  5,694
  5,926
  6,169
  6,426
  6,697
  6,982
  7,282
  7,597
  7,929
  8,278
  8,645
  9,031
  9,436
  9,863
  10,311
Depreciation, amort., depletion, $m
  4,198
  4,313
  4,437
  4,571
  4,715
  4,869
  5,033
  5,208
  5,394
  5,591
  4,994
  5,216
  5,450
  5,698
  5,959
  6,235
  6,526
  6,832
  7,156
  7,496
  7,854
  8,232
  8,629
  9,046
  9,486
  9,948
  10,433
  10,944
  11,481
  12,045
Funds from operations, $m
  7,033
  7,241
  7,465
  7,706
  7,965
  8,243
  8,538
  8,853
  9,187
  9,542
  9,701
  10,099
  10,519
  10,964
  11,434
  11,929
  12,451
  13,002
  13,582
  14,193
  14,836
  15,513
  16,226
  16,975
  17,763
  18,592
  19,464
  20,380
  21,344
  22,356
Change in working capital, $m
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
  -77
  -82
  -86
  -91
  -97
  -102
  -108
  -114
  -120
  -126
  -133
  -140
  -147
  -155
  -163
  -171
  -180
  -190
  -199
  -210
  -220
Cash from operations, $m
  7,074
  7,285
  7,513
  7,759
  8,022
  8,303
  8,602
  8,921
  9,260
  9,619
  9,782
  10,185
  10,611
  11,061
  11,536
  12,037
  12,565
  13,122
  13,708
  14,326
  14,976
  15,660
  16,381
  17,138
  17,935
  18,773
  19,654
  20,580
  21,553
  22,576
Maintenance CAPEX, $m
  -3,287
  -3,392
  -3,507
  -3,631
  -3,765
  -3,909
  -4,062
  -4,227
  -4,402
  -4,588
  -4,785
  -4,994
  -5,216
  -5,450
  -5,698
  -5,959
  -6,235
  -6,526
  -6,832
  -7,156
  -7,496
  -7,854
  -8,232
  -8,629
  -9,046
  -9,486
  -9,948
  -10,433
  -10,944
  -11,481
New CAPEX, $m
  -1,048
  -1,146
  -1,242
  -1,339
  -1,438
  -1,539
  -1,643
  -1,749
  -1,860
  -1,974
  -2,092
  -2,215
  -2,343
  -2,476
  -2,614
  -2,759
  -2,909
  -3,067
  -3,232
  -3,404
  -3,584
  -3,772
  -3,970
  -4,177
  -4,393
  -4,620
  -4,858
  -5,108
  -5,369
  -5,643
Cash from investing activities, $m
  -4,335
  -4,538
  -4,749
  -4,970
  -5,203
  -5,448
  -5,705
  -5,976
  -6,262
  -6,562
  -6,877
  -7,209
  -7,559
  -7,926
  -8,312
  -8,718
  -9,144
  -9,593
  -10,064
  -10,560
  -11,080
  -11,626
  -12,202
  -12,806
  -13,439
  -14,106
  -14,806
  -15,541
  -16,313
  -17,124
Free cash flow, $m
  2,738
  2,747
  2,765
  2,789
  2,819
  2,855
  2,897
  2,945
  2,999
  3,058
  2,905
  2,976
  3,053
  3,135
  3,224
  3,319
  3,421
  3,529
  3,644
  3,766
  3,896
  4,034
  4,179
  4,333
  4,495
  4,667
  4,848
  5,039
  5,240
  5,452
Issuance/(repayment) of debt, $m
  1,058
  1,169
  1,266
  1,365
  1,466
  1,569
  1,674
  1,783
  1,896
  2,012
  2,133
  2,258
  2,388
  2,524
  2,665
  2,812
  2,966
  3,126
  3,294
  3,470
  3,653
  3,846
  4,047
  4,258
  4,478
  4,710
  4,952
  5,207
  5,473
  5,753
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  
  1,058
  1,169
  1,266
  1,365
  1,466
  1,569
  1,674
  1,783
  1,896
  2,012
  2,133
  2,258
  2,388
  2,524
  2,665
  2,812
  2,966
  3,126
  3,294
  3,470
  3,653
  3,846
  4,047
  4,258
  4,478
  4,710
  4,952
  5,207
  5,473
  5,753
Total cash flow (excl. dividends), $m
  3,796
  3,916
  4,031
  4,154
  4,285
  4,424
  4,572
  4,729
  4,894
  5,070
  5,038
  5,234
  5,441
  5,659
  5,889
  6,131
  6,387
  6,655
  6,938
  7,236
  7,550
  7,879
  8,226
  8,591
  8,974
  9,377
  9,800
  10,245
  10,713
  11,205
Retained Cash Flow (-), $m
  -275
  -307
  -333
  -358
  -385
  -412
  -440
  -468
  -498
  -528
  -560
  -593
  -627
  -663
  -700
  -739
  -779
  -821
  -865
  -911
  -959
  -1,010
  -1,063
  -1,118
  -1,176
  -1,237
  -1,301
  -1,367
  -1,437
  -1,511
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
  3,521
  3,609
  3,698
  3,795
  3,900
  4,012
  4,132
  4,260
  4,397
  4,542
  4,478
  4,641
  4,814
  4,996
  5,189
  5,393
  5,608
  5,834
  6,073
  6,325
  6,590
  6,869
  7,163
  7,472
  7,798
  8,140
  8,500
  8,878
  9,276
  9,694
Discount rate, %
  6.40
  6.72
  7.06
  7.41
  7.78
  8.17
  8.58
  9.01
  9.46
  9.93
  10.42
  10.95
  11.49
  12.07
  12.67
  13.31
  13.97
  14.67
  15.40
  16.17
  16.98
  17.83
  18.72
  19.66
  20.64
  21.67
  22.76
  23.89
  25.09
  26.34
PV of cash for distribution, $m
  3,309
  3,168
  3,014
  2,852
  2,681
  2,505
  2,323
  2,137
  1,950
  1,762
  1,504
  1,334
  1,170
  1,014
  867
  731
  607
  497
  399
  315
  245
  186
  138
  101
  72
  50
  34
  22
  14
  9
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

United Continental Holdings, Inc. (UAL) is a holding company and its principal subsidiary is United Air Lines, Inc. (United). The Company transports people and cargo through its mainline operations. It has global air rights in North America, Asia-Pacific, Europe, Middle East, Africa and Latin America. The Company, through United and its regional carriers, operates flights from its hubs at Newark Liberty International Airport (Newark Liberty), Chicago O'Hare International Airport (Chicago O'Hare), Denver International Airport (Denver), George Bush Intercontinental Airport (Houston Bush), Los Angeles International Airport (LAX), A.B. Won Pat International Airport (Guam), San Francisco International Airport (SFO) and Washington Dulles International Airport (Washington Dulles). It has contractual relationships with regional carriers to provide regional jet and turboprop service branded as United Express. These regional operations are an extension of the Company's mainline network.

FINANCIAL RATIOS  of  United Continental Holdings (UAL)

Valuation Ratios
P/E Ratio 11.3
Price to Sales 0.7
Price to Book 3
Price to Tangible Book
Price to Cash Flow 4.6
Price to Free Cash Flow 11
Growth Rates
Sales Growth Rate -3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.3%
Cap. Spend. - 3 Yr. Gr. Rate 8.3%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 124%
Total Debt to Equity 135.2%
Interest Coverage 8
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 10.8%
Return On Total Capital 11%
Ret/ On T. Cap. - 3 Yr. Avg. 20.2%
Return On Equity 25.7%
Return On Equity - 3 Yr. Avg. 65.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 28.4%
Gross Margin - 3 Yr. Avg. 25.6%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 14.8%
Operating Margin 11.9%
Oper. Margin - 3 Yr. Avg. 10.5%
Pre-Tax Margin 10.4%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin 6.2%
Net Profit Margin - 3 Yr. Avg. 9.5%
Effective Tax Rate 36%
Eff/ Tax Rate - 3 Yr. Avg. 12%
Payout Ratio 0%

UAL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UAL stock intrinsic value calculation we used $37736 million for the last fiscal year's total revenue generated by United Continental Holdings. The default revenue input number comes from 2017 income statement of United Continental Holdings. 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 UAL stock valuation model: a) initial revenue growth rate of 3.2% 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 6.4%, whose default value for UAL is calculated based on our internal credit rating of United Continental Holdings, 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 United Continental Holdings.
    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 UAL stock the variable cost ratio is equal to 88.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for UAL 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 United Continental Holdings.

Corporate tax rate of 27% is the nominal tax rate for United Continental Holdings. 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 UAL 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 UAL are equal to 87.1%.

Life of production assets of 10 years is the average useful life of capital assets used in United Continental Holdings 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 UAL is equal to -3.4%. 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 - $8806 million for United Continental Holdings - 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 296 million for United Continental Holdings 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 United Continental Holdings at the current share price and the inputted number of shares is $24.1 billion.

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