Intrinsic value of Union Pacific - UNP

Previous Close

$148.59

  Intrinsic Value

$85.09

stock screener

  Rating & Target

sell

-43%

Previous close

$148.59

 
Intrinsic value

$85.09

 
Up/down potential

-43%

 
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 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 109.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
Revenue, $m
  22,939
  24,706
  26,541
  28,449
  30,431
  32,492
  34,634
  36,863
  39,182
  41,597
  44,112
  46,732
  49,465
  52,315
  55,290
  58,396
  61,641
  65,031
  68,576
  72,282
  76,160
  80,218
  84,466
  88,914
  93,572
  98,452
  103,566
  108,925
  114,542
  120,431
Variable operating expenses, $m
  9,015
  9,709
  10,431
  11,180
  11,959
  12,769
  13,611
  14,487
  15,399
  16,347
  17,336
  18,366
  19,440
  20,560
  21,729
  22,950
  24,225
  25,557
  26,950
  28,407
  29,931
  31,526
  33,195
  34,943
  36,774
  38,692
  40,701
  42,807
  45,015
  47,329
Fixed operating expenses, $m
  5,055
  5,166
  5,280
  5,396
  5,515
  5,636
  5,760
  5,887
  6,016
  6,148
  6,284
  6,422
  6,563
  6,708
  6,855
  7,006
  7,160
  7,318
  7,479
  7,643
  7,811
  7,983
  8,159
  8,338
  8,522
  8,709
  8,901
  9,097
  9,297
  9,501
Total operating expenses, $m
  14,070
  14,875
  15,711
  16,576
  17,474
  18,405
  19,371
  20,374
  21,415
  22,495
  23,620
  24,788
  26,003
  27,268
  28,584
  29,956
  31,385
  32,875
  34,429
  36,050
  37,742
  39,509
  41,354
  43,281
  45,296
  47,401
  49,602
  51,904
  54,312
  56,830
Operating income, $m
  8,869
  9,830
  10,831
  11,873
  12,957
  14,087
  15,263
  16,489
  17,768
  19,101
  20,492
  21,945
  23,462
  25,048
  26,706
  28,441
  30,256
  32,156
  34,147
  36,232
  38,418
  40,709
  43,112
  45,632
  48,277
  51,051
  53,964
  57,021
  60,230
  63,600
EBITDA, $m
  11,145
  12,281
  13,464
  14,695
  15,976
  17,310
  18,699
  20,147
  21,655
  23,228
  24,869
  26,581
  28,370
  30,238
  32,192
  34,234
  36,372
  38,608
  40,951
  43,404
  45,974
  48,668
  51,492
  54,454
  57,560
  60,819
  64,239
  67,828
  71,595
  75,549
Interest expense (income), $m
  652
  915
  1,060
  1,208
  1,362
  1,522
  1,688
  1,861
  2,040
  2,227
  2,422
  2,624
  2,835
  3,055
  3,284
  3,523
  3,773
  4,033
  4,305
  4,590
  4,887
  5,198
  5,523
  5,864
  6,220
  6,593
  6,984
  7,393
  7,822
  8,271
  8,742
Earnings before tax, $m
  7,954
  8,771
  9,623
  10,511
  11,435
  12,399
  13,402
  14,449
  15,540
  16,679
  17,868
  19,109
  20,407
  21,764
  23,183
  24,668
  26,223
  27,851
  29,557
  31,345
  33,220
  35,186
  37,249
  39,413
  41,684
  44,068
  46,571
  49,199
  51,959
  54,858
Tax expense, $m
  2,148
  2,368
  2,598
  2,838
  3,088
  3,348
  3,619
  3,901
  4,196
  4,503
  4,824
  5,160
  5,510
  5,876
  6,259
  6,660
  7,080
  7,520
  7,980
  8,463
  8,969
  9,500
  10,057
  10,641
  11,255
  11,898
  12,574
  13,284
  14,029
  14,812
Net income, $m
  5,807
  6,403
  7,025
  7,673
  8,348
  9,051
  9,784
  10,548
  11,344
  12,176
  13,043
  13,950
  14,897
  15,887
  16,923
  18,007
  19,142
  20,331
  21,577
  22,882
  24,251
  25,686
  27,191
  28,771
  30,429
  32,170
  33,997
  35,915
  37,930
  40,046

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
  62,505
  67,317
  72,319
  77,517
  82,918
  88,533
  94,371
  100,444
  106,763
  113,342
  120,195
  127,336
  134,782
  142,549
  150,655
  159,118
  167,959
  177,197
  186,855
  196,954
  207,521
  218,578
  230,152
  242,272
  254,965
  268,263
  282,196
  296,798
  312,104
  328,150
Adjusted assets (=assets-cash), $m
  62,505
  67,317
  72,319
  77,517
  82,918
  88,533
  94,371
  100,444
  106,763
  113,342
  120,195
  127,336
  134,782
  142,549
  150,655
  159,118
  167,959
  177,197
  186,855
  196,954
  207,521
  218,578
  230,152
  242,272
  254,965
  268,263
  282,196
  296,798
  312,104
  328,150
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
  55,077
  59,318
  63,725
  68,305
  73,065
  78,012
  83,157
  88,508
  94,076
  99,874
  105,912
  112,205
  118,766
  125,610
  132,752
  140,210
  148,000
  156,140
  164,650
  173,550
  182,860
  192,604
  202,803
  213,482
  224,667
  236,384
  248,662
  261,529
  275,016
  289,155
Working capital, $m
  -528
  -568
  -610
  -654
  -700
  -747
  -797
  -848
  -901
  -957
  -1,015
  -1,075
  -1,138
  -1,203
  -1,272
  -1,343
  -1,418
  -1,496
  -1,577
  -1,662
  -1,752
  -1,845
  -1,943
  -2,045
  -2,152
  -2,264
  -2,382
  -2,505
  -2,634
  -2,770
Total debt, $m
  19,622
  22,365
  25,216
  28,179
  31,257
  34,458
  37,786
  41,247
  44,849
  48,599
  52,505
  56,576
  60,820
  65,247
  69,867
  74,691
  79,730
  84,996
  90,501
  96,258
  102,281
  108,583
  115,181
  122,089
  129,324
  136,904
  144,846
  153,169
  161,893
  171,040
Total liabilities, $m
  35,628
  38,371
  41,222
  44,185
  47,263
  50,464
  53,792
  57,253
  60,855
  64,605
  68,511
  72,582
  76,826
  81,253
  85,873
  90,697
  95,736
  101,002
  106,507
  112,264
  118,287
  124,589
  131,187
  138,095
  145,330
  152,910
  160,852
  169,175
  177,899
  187,046
Total equity, $m
  26,877
  28,947
  31,097
  33,332
  35,655
  38,069
  40,580
  43,191
  45,908
  48,737
  51,684
  54,755
  57,956
  61,296
  64,782
  68,421
  72,222
  76,195
  80,347
  84,690
  89,234
  93,988
  98,966
  104,177
  109,635
  115,353
  121,344
  127,623
  134,205
  141,105
Total liabilities and equity, $m
  62,505
  67,318
  72,319
  77,517
  82,918
  88,533
  94,372
  100,444
  106,763
  113,342
  120,195
  127,337
  134,782
  142,549
  150,655
  159,118
  167,958
  177,197
  186,854
  196,954
  207,521
  218,577
  230,153
  242,272
  254,965
  268,263
  282,196
  296,798
  312,104
  328,151
Debt-to-equity ratio
  0.730
  0.770
  0.810
  0.850
  0.880
  0.910
  0.930
  0.950
  0.980
  1.000
  1.020
  1.030
  1.050
  1.060
  1.080
  1.090
  1.100
  1.120
  1.130
  1.140
  1.150
  1.160
  1.160
  1.170
  1.180
  1.190
  1.190
  1.200
  1.210
  1.210
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
  5,807
  6,403
  7,025
  7,673
  8,348
  9,051
  9,784
  10,548
  11,344
  12,176
  13,043
  13,950
  14,897
  15,887
  16,923
  18,007
  19,142
  20,331
  21,577
  22,882
  24,251
  25,686
  27,191
  28,771
  30,429
  32,170
  33,997
  35,915
  37,930
  40,046
Depreciation, amort., depletion, $m
  2,276
  2,451
  2,633
  2,823
  3,019
  3,224
  3,436
  3,657
  3,887
  4,127
  4,377
  4,637
  4,908
  5,190
  5,486
  5,794
  6,116
  6,452
  6,804
  7,171
  7,556
  7,959
  8,380
  8,822
  9,284
  9,768
  10,275
  10,807
  11,364
  11,949
Funds from operations, $m
  8,083
  8,854
  9,658
  10,495
  11,367
  12,275
  13,220
  14,205
  15,232
  16,303
  17,420
  18,586
  19,805
  21,078
  22,409
  23,801
  25,258
  26,783
  28,380
  30,053
  31,807
  33,645
  35,572
  37,593
  39,713
  41,938
  44,272
  46,722
  49,295
  51,995
Change in working capital, $m
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -66
  -68
  -71
  -75
  -78
  -82
  -85
  -89
  -93
  -98
  -102
  -107
  -112
  -118
  -123
  -129
  -135
Cash from operations, $m
  8,122
  8,894
  9,700
  10,539
  11,413
  12,322
  13,269
  14,256
  15,285
  16,358
  17,478
  18,647
  19,868
  21,143
  22,477
  23,873
  25,333
  26,861
  28,462
  30,139
  31,896
  33,738
  35,669
  37,695
  39,820
  42,050
  44,390
  46,846
  49,424
  52,130
Maintenance CAPEX, $m
  -2,107
  -2,276
  -2,451
  -2,633
  -2,823
  -3,019
  -3,224
  -3,436
  -3,657
  -3,887
  -4,127
  -4,377
  -4,637
  -4,908
  -5,190
  -5,486
  -5,794
  -6,116
  -6,452
  -6,804
  -7,171
  -7,556
  -7,959
  -8,380
  -8,822
  -9,284
  -9,768
  -10,275
  -10,807
  -11,364
New CAPEX, $m
  -4,080
  -4,241
  -4,407
  -4,580
  -4,760
  -4,948
  -5,144
  -5,351
  -5,568
  -5,797
  -6,038
  -6,293
  -6,561
  -6,844
  -7,143
  -7,458
  -7,790
  -8,140
  -8,510
  -8,900
  -9,310
  -9,743
  -10,199
  -10,679
  -11,185
  -11,717
  -12,277
  -12,867
  -13,487
  -14,139
Cash from investing activities, $m
  -6,187
  -6,517
  -6,858
  -7,213
  -7,583
  -7,967
  -8,368
  -8,787
  -9,225
  -9,684
  -10,165
  -10,670
  -11,198
  -11,752
  -12,333
  -12,944
  -13,584
  -14,256
  -14,962
  -15,704
  -16,481
  -17,299
  -18,158
  -19,059
  -20,007
  -21,001
  -22,045
  -23,142
  -24,294
  -25,503
Free cash flow, $m
  1,934
  2,378
  2,842
  3,326
  3,830
  4,355
  4,901
  5,469
  6,059
  6,673
  7,312
  7,977
  8,670
  9,392
  10,144
  10,930
  11,749
  12,605
  13,500
  14,435
  15,414
  16,439
  17,511
  18,635
  19,814
  21,049
  22,344
  23,703
  25,130
  26,627
Issuance/(repayment) of debt, $m
  2,678
  2,743
  2,851
  2,963
  3,079
  3,200
  3,328
  3,461
  3,602
  3,750
  3,906
  4,071
  4,244
  4,427
  4,620
  4,824
  5,039
  5,266
  5,505
  5,757
  6,023
  6,303
  6,598
  6,908
  7,235
  7,580
  7,942
  8,323
  8,724
  9,146
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  
  2,678
  2,743
  2,851
  2,963
  3,079
  3,200
  3,328
  3,461
  3,602
  3,750
  3,906
  4,071
  4,244
  4,427
  4,620
  4,824
  5,039
  5,266
  5,505
  5,757
  6,023
  6,303
  6,598
  6,908
  7,235
  7,580
  7,942
  8,323
  8,724
  9,146
Total cash flow (excl. dividends), $m
  4,612
  5,121
  5,693
  6,289
  6,909
  7,556
  8,229
  8,930
  9,661
  10,424
  11,218
  12,048
  12,914
  13,819
  14,765
  15,754
  16,788
  17,871
  19,005
  20,192
  21,437
  22,741
  24,109
  25,544
  27,049
  28,628
  30,286
  32,027
  33,854
  35,773
Retained Cash Flow (-), $m
  -2,021
  -2,070
  -2,151
  -2,235
  -2,323
  -2,414
  -2,510
  -2,611
  -2,717
  -2,829
  -2,947
  -3,071
  -3,202
  -3,340
  -3,485
  -3,639
  -3,801
  -3,972
  -4,153
  -4,343
  -4,543
  -4,755
  -4,977
  -5,211
  -5,458
  -5,718
  -5,991
  -6,279
  -6,582
  -6,900
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  2,591
  3,051
  3,542
  4,054
  4,587
  5,141
  5,719
  6,319
  6,944
  7,595
  8,272
  8,977
  9,713
  10,479
  11,279
  12,114
  12,987
  13,898
  14,852
  15,849
  16,893
  17,987
  19,132
  20,332
  21,591
  22,910
  24,295
  25,748
  27,273
  28,873
Discount rate, %
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for distribution, $m
  2,465
  2,749
  3,006
  3,223
  3,395
  3,522
  3,600
  3,630
  3,611
  3,547
  3,438
  3,291
  3,109
  2,898
  2,664
  2,416
  2,159
  1,900
  1,646
  1,403
  1,176
  967
  781
  619
  480
  364
  270
  196
  138
  95
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 28.6
Price to Sales 6.1
Price to Book 6.1
Price to Tangible Book
Price to Cash Flow 16.1
Price to Free Cash Flow 30.2
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 0001 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 8% 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 5.1%, 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 $4946 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 24.2 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 -2.3%. 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 739.494 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 $109.9 billion.

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▶ Union Pacific Announces Unified Plan 2020   [05:00PM  PR Newswire]
▶ Union Pacific Is Losing Price Momentum   [Sep-14-18 12:55PM  TheStreet.com]
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