Intrinsic value of Union Pacific - UNP

Previous Close

$150.19

  Intrinsic Value

$81.15

stock screener

  Rating & Target

sell

-46%

Previous close

$150.19

 
Intrinsic value

$81.15

 
Up/down potential

-46%

 
Rating

sell

We calculate the intrinsic value of UNP 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 119.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  22,621
  24,057
  25,552
  27,109
  28,731
  30,422
  32,186
  34,026
  35,947
  37,954
  40,050
  42,241
  44,532
  46,928
  49,436
  52,060
  54,808
  57,685
  60,699
  63,857
  67,167
  70,635
  74,271
  78,084
  82,081
  86,274
  90,671
  95,284
  100,123
  105,200
Variable operating expenses, $m
  8,890
  9,454
  10,042
  10,654
  11,291
  11,956
  12,649
  13,372
  14,127
  14,916
  15,740
  16,601
  17,501
  18,443
  19,428
  20,460
  21,539
  22,670
  23,855
  25,096
  26,397
  27,760
  29,189
  30,687
  32,258
  33,906
  35,634
  37,447
  39,348
  41,343
Fixed operating expenses, $m
  5,050
  5,161
  5,274
  5,390
  5,509
  5,630
  5,754
  5,881
  6,010
  6,142
  6,277
  6,415
  6,557
  6,701
  6,848
  6,999
  7,153
  7,310
  7,471
  7,635
  7,803
  7,975
  8,151
  8,330
  8,513
  8,700
  8,892
  9,087
  9,287
  9,492
Total operating expenses, $m
  13,940
  14,615
  15,316
  16,044
  16,800
  17,586
  18,403
  19,253
  20,137
  21,058
  22,017
  23,016
  24,058
  25,144
  26,276
  27,459
  28,692
  29,980
  31,326
  32,731
  34,200
  35,735
  37,340
  39,017
  40,771
  42,606
  44,526
  46,534
  48,635
  50,835
Operating income, $m
  8,681
  9,442
  10,236
  11,065
  11,931
  12,836
  13,783
  14,773
  15,810
  16,896
  18,033
  19,225
  20,474
  21,785
  23,159
  24,602
  26,115
  27,705
  29,374
  31,126
  32,967
  34,901
  36,932
  39,067
  41,310
  43,668
  46,146
  48,750
  51,487
  54,365
EBITDA, $m
  14,112
  15,218
  16,371
  17,574
  18,829
  20,141
  21,511
  22,943
  24,441
  26,008
  27,649
  29,367
  31,166
  33,052
  35,029
  37,101
  39,275
  41,555
  43,947
  46,458
  49,094
  51,860
  54,765
  57,815
  61,018
  64,382
  67,916
  71,627
  75,527
  79,623
Interest expense (income), $m
  652
  915
  1,033
  1,153
  1,279
  1,409
  1,545
  1,687
  1,835
  1,989
  2,151
  2,319
  2,495
  2,678
  2,871
  3,072
  3,282
  3,502
  3,732
  3,974
  4,226
  4,491
  4,769
  5,060
  5,365
  5,684
  6,020
  6,371
  6,740
  7,127
  7,533
Earnings before tax, $m
  7,766
  8,409
  9,083
  9,786
  10,522
  11,291
  12,096
  12,938
  13,821
  14,745
  15,714
  16,730
  17,796
  18,914
  20,088
  21,320
  22,614
  23,972
  25,400
  26,900
  28,475
  30,132
  31,872
  33,702
  35,626
  37,648
  39,774
  42,010
  44,360
  46,832
Tax expense, $m
  2,097
  2,270
  2,452
  2,642
  2,841
  3,049
  3,266
  3,493
  3,732
  3,981
  4,243
  4,517
  4,805
  5,107
  5,424
  5,756
  6,106
  6,473
  6,858
  7,263
  7,688
  8,136
  8,606
  9,100
  9,619
  10,165
  10,739
  11,343
  11,977
  12,645
Net income, $m
  5,669
  6,139
  6,630
  7,144
  7,681
  8,242
  8,830
  9,445
  10,089
  10,764
  11,471
  12,213
  12,991
  13,807
  14,664
  15,563
  16,508
  17,500
  18,542
  19,637
  20,787
  21,996
  23,267
  24,603
  26,007
  27,483
  29,035
  30,667
  32,383
  34,187

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
  61,637
  65,550
  69,624
  73,867
  78,287
  82,895
  87,701
  92,715
  97,949
  103,416
  109,128
  115,098
  121,340
  127,870
  134,702
  141,853
  149,340
  157,181
  165,394
  173,998
  183,016
  192,467
  202,374
  212,762
  223,655
  235,079
  247,060
  259,629
  272,814
  286,648
Adjusted assets (=assets-cash), $m
  61,637
  65,550
  69,624
  73,867
  78,287
  82,895
  87,701
  92,715
  97,949
  103,416
  109,128
  115,098
  121,340
  127,870
  134,702
  141,853
  149,340
  157,181
  165,394
  173,998
  183,016
  192,467
  202,374
  212,762
  223,655
  235,079
  247,060
  259,629
  272,814
  286,648
Revenue / Adjusted assets
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
Average production assets, $m
  54,312
  57,761
  61,351
  65,089
  68,984
  73,044
  77,279
  81,697
  86,310
  91,127
  96,160
  101,420
  106,921
  112,675
  118,695
  124,996
  131,594
  138,502
  145,739
  153,322
  161,267
  169,595
  178,326
  187,479
  197,077
  207,143
  217,701
  228,776
  240,395
  252,584
Working capital, $m
  -2,556
  -2,718
  -2,887
  -3,063
  -3,247
  -3,438
  -3,637
  -3,845
  -4,062
  -4,289
  -4,526
  -4,773
  -5,032
  -5,303
  -5,586
  -5,883
  -6,193
  -6,518
  -6,859
  -7,216
  -7,590
  -7,982
  -8,393
  -8,823
  -9,275
  -9,749
  -10,246
  -10,767
  -11,314
  -11,888
Total debt, $m
  19,127
  21,358
  23,680
  26,098
  28,618
  31,244
  33,983
  36,841
  39,825
  42,941
  46,197
  49,600
  53,158
  56,880
  60,774
  64,850
  69,118
  73,587
  78,268
  83,173
  88,313
  93,700
  99,347
  105,268
  111,477
  117,989
  124,818
  131,982
  139,498
  147,383
Total liabilities, $m
  35,133
  37,364
  39,686
  42,104
  44,624
  47,250
  49,989
  52,847
  55,831
  58,947
  62,203
  65,606
  69,164
  72,886
  76,780
  80,856
  85,124
  89,593
  94,274
  99,179
  104,319
  109,706
  115,353
  121,274
  127,483
  133,995
  140,824
  147,988
  155,504
  163,389
Total equity, $m
  26,504
  28,187
  29,938
  31,763
  33,664
  35,645
  37,711
  39,867
  42,118
  44,469
  46,925
  49,492
  52,176
  54,984
  57,922
  60,997
  64,216
  67,588
  71,119
  74,819
  78,697
  82,761
  87,021
  91,488
  96,172
  101,084
  106,236
  111,640
  117,310
  123,258
Total liabilities and equity, $m
  61,637
  65,551
  69,624
  73,867
  78,288
  82,895
  87,700
  92,714
  97,949
  103,416
  109,128
  115,098
  121,340
  127,870
  134,702
  141,853
  149,340
  157,181
  165,393
  173,998
  183,016
  192,467
  202,374
  212,762
  223,655
  235,079
  247,060
  259,628
  272,814
  286,647
Debt-to-equity ratio
  0.720
  0.760
  0.790
  0.820
  0.850
  0.880
  0.900
  0.920
  0.950
  0.970
  0.980
  1.000
  1.020
  1.030
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.170
  1.170
  1.180
  1.190
  1.200
Adjusted equity ratio
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,669
  6,139
  6,630
  7,144
  7,681
  8,242
  8,830
  9,445
  10,089
  10,764
  11,471
  12,213
  12,991
  13,807
  14,664
  15,563
  16,508
  17,500
  18,542
  19,637
  20,787
  21,996
  23,267
  24,603
  26,007
  27,483
  29,035
  30,667
  32,383
  34,187
Depreciation, amort., depletion, $m
  5,431
  5,776
  6,135
  6,509
  6,898
  7,304
  7,728
  8,170
  8,631
  9,113
  9,616
  10,142
  10,692
  11,267
  11,870
  12,500
  13,159
  13,850
  14,574
  15,332
  16,127
  16,960
  17,833
  18,748
  19,708
  20,714
  21,770
  22,878
  24,039
  25,258
Funds from operations, $m
  11,100
  11,915
  12,765
  13,653
  14,579
  15,547
  16,558
  17,615
  18,720
  19,877
  21,087
  22,355
  23,683
  25,075
  26,534
  28,063
  29,667
  31,350
  33,116
  34,969
  36,914
  38,956
  41,099
  43,351
  45,715
  48,197
  50,805
  53,545
  56,422
  59,446
Change in working capital, $m
  -156
  -162
  -169
  -176
  -183
  -191
  -199
  -208
  -217
  -227
  -237
  -248
  -259
  -271
  -283
  -297
  -310
  -325
  -341
  -357
  -374
  -392
  -411
  -431
  -452
  -474
  -497
  -521
  -547
  -574
Cash from operations, $m
  11,256
  12,077
  12,934
  13,829
  14,763
  15,738
  16,757
  17,823
  18,937
  20,103
  21,324
  22,603
  23,942
  25,346
  26,817
  28,360
  29,978
  31,675
  33,456
  35,326
  37,288
  39,348
  41,510
  43,781
  46,166
  48,671
  51,302
  54,066
  56,969
  60,019
Maintenance CAPEX, $m
  -5,100
  -5,431
  -5,776
  -6,135
  -6,509
  -6,898
  -7,304
  -7,728
  -8,170
  -8,631
  -9,113
  -9,616
  -10,142
  -10,692
  -11,267
  -11,870
  -12,500
  -13,159
  -13,850
  -14,574
  -15,332
  -16,127
  -16,960
  -17,833
  -18,748
  -19,708
  -20,714
  -21,770
  -22,878
  -24,039
New CAPEX, $m
  -3,315
  -3,449
  -3,590
  -3,738
  -3,895
  -4,060
  -4,235
  -4,418
  -4,612
  -4,817
  -5,033
  -5,261
  -5,501
  -5,754
  -6,020
  -6,301
  -6,597
  -6,909
  -7,237
  -7,582
  -7,946
  -8,328
  -8,730
  -9,153
  -9,598
  -10,066
  -10,558
  -11,075
  -11,618
  -12,190
Cash from investing activities, $m
  -8,415
  -8,880
  -9,366
  -9,873
  -10,404
  -10,958
  -11,539
  -12,146
  -12,782
  -13,448
  -14,146
  -14,877
  -15,643
  -16,446
  -17,287
  -18,171
  -19,097
  -20,068
  -21,087
  -22,156
  -23,278
  -24,455
  -25,690
  -26,986
  -28,346
  -29,774
  -31,272
  -32,845
  -34,496
  -36,229
Free cash flow, $m
  2,842
  3,197
  3,568
  3,955
  4,359
  4,779
  5,218
  5,676
  6,155
  6,655
  7,179
  7,726
  8,299
  8,900
  9,529
  10,189
  10,881
  11,607
  12,369
  13,169
  14,010
  14,893
  15,820
  16,795
  17,820
  18,897
  20,030
  21,221
  22,473
  23,790
Issuance/(repayment) of debt, $m
  2,183
  2,231
  2,322
  2,418
  2,520
  2,626
  2,739
  2,858
  2,984
  3,116
  3,256
  3,403
  3,558
  3,722
  3,894
  4,076
  4,268
  4,469
  4,681
  4,905
  5,140
  5,387
  5,647
  5,921
  6,209
  6,511
  6,830
  7,164
  7,516
  7,885
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  
  2,183
  2,231
  2,322
  2,418
  2,520
  2,626
  2,739
  2,858
  2,984
  3,116
  3,256
  3,403
  3,558
  3,722
  3,894
  4,076
  4,268
  4,469
  4,681
  4,905
  5,140
  5,387
  5,647
  5,921
  6,209
  6,511
  6,830
  7,164
  7,516
  7,885
Total cash flow (excl. dividends), $m
  5,024
  5,428
  5,890
  6,374
  6,878
  7,406
  7,957
  8,534
  9,139
  9,771
  10,434
  11,129
  11,857
  12,622
  13,423
  14,265
  15,148
  16,076
  17,051
  18,074
  19,150
  20,280
  21,468
  22,716
  24,029
  25,409
  26,860
  28,385
  29,989
  31,675
Retained Cash Flow (-), $m
  -1,648
  -1,683
  -1,752
  -1,824
  -1,901
  -1,981
  -2,066
  -2,156
  -2,251
  -2,351
  -2,456
  -2,567
  -2,684
  -2,808
  -2,938
  -3,075
  -3,219
  -3,371
  -3,532
  -3,700
  -3,877
  -4,064
  -4,260
  -4,467
  -4,684
  -4,912
  -5,152
  -5,404
  -5,670
  -5,948
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
  3,377
  3,745
  4,139
  4,549
  4,977
  5,424
  5,891
  6,378
  6,888
  7,421
  7,978
  8,562
  9,173
  9,814
  10,486
  11,190
  11,929
  12,705
  13,519
  14,374
  15,272
  16,216
  17,208
  18,250
  19,345
  20,497
  21,707
  22,980
  24,319
  25,727
Discount rate, %
  5.00
  5.25
  5.51
  5.79
  6.08
  6.38
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.13
  16.93
  17.78
  18.67
  19.60
  20.58
PV of cash for distribution, $m
  3,216
  3,381
  3,523
  3,632
  3,706
  3,742
  3,741
  3,702
  3,627
  3,516
  3,372
  3,198
  3,000
  2,780
  2,545
  2,300
  2,050
  1,802
  1,561
  1,331
  1,116
  920
  745
  592
  461
  351
  262
  191
  135
  94
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

Union Pacific Corporation is a railroad operating company in the United States. The Company operates through its principal operating company, Union Pacific Railroad Company (UPRR). Its business mix includes Agricultural Products, Automotive, Chemicals, Coal, Industrial Products and Intermodal. Its freight traffic consists of bulk, manifest, and premium business. Bulk traffic primarily consists of coal, grain, soda ash, ethanol, rock and crude oil shipped in unit trains-trains transporting a single commodity from one origin to one destination. Manifest traffic includes individual carload or less than train-load business involving commodities, such as lumber, paper, food and chemicals. The transportation of finished vehicles, auto parts, intermodal containers and truck trailers are included as part of its premium business. As of December 31, 2016, its network included 32,070 route miles, linking Pacific Coast and Gulf Coast ports with the Midwest and Eastern United States gateways.

FINANCIAL RATIOS  of  Union Pacific (UNP)

Valuation Ratios
P/E Ratio 28.9
Price to Sales 6.1
Price to Book 6.1
Price to Tangible Book
Price to Cash Flow 16.3
Price to Free Cash Flow 30.5
Growth Rates
Sales Growth Rate -8.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24.6%
Cap. Spend. - 3 Yr. Gr. Rate 0.1%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 71.5%
Total Debt to Equity 75.3%
Interest Coverage 11
Management Effectiveness
Return On Assets 8.4%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 12.1%
Ret/ On T. Cap. - 3 Yr. Avg. 14.2%
Return On Equity 20.8%
Return On Equity - 3 Yr. Avg. 22.7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 81.2%
Gross Margin - 3 Yr. Avg. 78.5%
EBITDA Margin 47.4%
EBITDA Margin - 3 Yr. Avg. 46.5%
Operating Margin 36.5%
Oper. Margin - 3 Yr. Avg. 36.6%
Pre-Tax Margin 33.9%
Pre-Tax Margin - 3 Yr. Avg. 34.6%
Net Profit Margin 21.2%
Net Profit Margin - 3 Yr. Avg. 21.6%
Effective Tax Rate 37.4%
Eff/ Tax Rate - 3 Yr. Avg. 37.7%
Payout Ratio 44.4%

UNP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UNP stock intrinsic value calculation we used $21240 million for the last fiscal year's total revenue generated by Union Pacific. The default revenue input number comes from 2017 income statement of Union Pacific. 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 UNP stock valuation model: a) initial revenue growth rate of 6.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5%, whose default value for UNP is calculated based on our internal credit rating of Union Pacific, 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 Union Pacific.
    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 UNP 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 $4941 million in the base year in the intrinsic value calculation for UNP 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 Union Pacific.

Corporate tax rate of 27% is the nominal tax rate for Union Pacific. 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 UNP 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 UNP are equal to 240.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Union Pacific 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 UNP is equal to -11.3%. 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 - $24856 million for Union Pacific - 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 798 million for Union Pacific 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 Union Pacific at the current share price and the inputted number of shares is $119.9 billion.

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COMPANY NEWS

▶ Union Pacific profit rises 29.2 pct   [08:06AM  Reuters]
▶ Union Pacific Q2 Earnings Preview   [Jul-18-18 04:45PM  Benzinga]
▶ Union Pacific Spotlights Safe Chemical Transportation   [Jul-09-18 07:23PM  PR Newswire]
▶ Cramer's $100 billion club   [Jun-13-18 07:08PM  CNBC Videos]
▶ Jobs report shows we have 'perfect economy' for stocks   [Jun-01-18 07:45PM  CNBC Videos]
▶ Union Pacific Delivers on its Mission of Service   [May-29-18 02:00PM  PR Newswire]
▶ Union Pacific Chief Praises GE-Wabtec Railroad Deal   [May-23-18 05:49PM  The Wall Street Journal]
▶ Railroad CEO 'worried about NAFTA'   [May-22-18 07:38PM  CNBC Videos]
▶ 7 Industrial Stocks That Can Lead Longterm   [May-21-18 02:15PM  Investopedia]
▶ Union Pacific Gets Highball Signal   [May-16-18 02:47PM  TheStreet.com]
▶ Union Pacific Struggles to Lift Productivity   [May-09-18 07:07PM  Motley Fool]
▶ Railroads offer up to $25,000 for new hires   [05:46AM  CBS MoneyWatch]
▶ SMUD files $18 million suit against Union Pacific over waste cleanup   [Apr-30-18 06:07PM  American City Business Journals]
▶ [$$] Companies Feel the Impact of Rising Oil Prices   [12:06PM  The Wall Street Journal]
▶ [$$] Companies Feel the Impact of Rising Oil Prices   [Apr-26-18 11:55PM  The Wall Street Journal]
▶ Companies Feel the Impact of Rising Oil Prices   [07:47PM  The Wall Street Journal]
▶ This Denver job posting includes a $20K signing bonus   [04:38PM  American City Business Journals]
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