Intrinsic value of U.S. Bancorp - USB

Previous Close

$53.17

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$53.17

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

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

We calculate the intrinsic value of USB 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 89.2

 

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, %
  3.40
  3.56
  3.70
  3.83
  3.95
  4.06
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.89
  4.90
  4.91
  4.92
  4.92
Revenue, $m
  21,158
  21,911
  22,723
  23,594
  24,526
  25,520
  26,579
  27,705
  28,899
  30,165
  31,505
  32,922
  34,419
  36,000
  37,669
  39,428
  41,282
  43,236
  45,294
  47,461
  49,742
  52,142
  54,667
  57,323
  60,116
  63,052
  66,140
  69,385
  72,796
  76,381
Variable operating expenses, $m
  12,483
  12,927
  13,406
  13,920
  14,470
  15,057
  15,682
  16,346
  17,050
  17,797
  18,588
  19,424
  20,307
  21,240
  22,224
  23,262
  24,357
  25,509
  26,724
  28,002
  29,348
  30,764
  32,253
  33,820
  35,468
  37,201
  39,022
  40,937
  42,950
  45,065
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
  12,483
  12,927
  13,406
  13,920
  14,470
  15,057
  15,682
  16,346
  17,050
  17,797
  18,588
  19,424
  20,307
  21,240
  22,224
  23,262
  24,357
  25,509
  26,724
  28,002
  29,348
  30,764
  32,253
  33,820
  35,468
  37,201
  39,022
  40,937
  42,950
  45,065
Operating income, $m
  8,675
  8,983
  9,316
  9,673
  10,055
  10,463
  10,897
  11,359
  11,849
  12,368
  12,917
  13,498
  14,112
  14,760
  15,444
  16,165
  16,926
  17,727
  18,571
  19,459
  20,394
  21,378
  22,413
  23,502
  24,647
  25,851
  27,117
  28,448
  29,847
  31,316
EBITDA, $m
  55,619
  57,599
  59,733
  62,023
  64,473
  67,087
  69,871
  72,830
  75,970
  79,298
  82,820
  86,545
  90,482
  94,638
  99,023
  103,648
  108,523
  113,660
  119,070
  124,766
  130,761
  137,071
  143,708
  150,690
  158,032
  165,752
  173,868
  182,400
  191,367
  200,791
Interest expense (income), $m
  1,591
  21,274
  19,877
  20,497
  21,166
  21,883
  22,651
  23,470
  24,343
  25,270
  26,254
  27,296
  28,400
  29,567
  30,801
  32,103
  33,477
  34,927
  36,454
  38,064
  39,759
  41,544
  43,422
  45,399
  47,479
  49,667
  51,968
  54,387
  56,930
  59,603
  62,413
Earnings before tax, $m
  -12,599
  -10,893
  -11,181
  -11,492
  -11,828
  -12,188
  -12,573
  -12,984
  -13,421
  -13,886
  -14,379
  -14,902
  -15,456
  -16,041
  -16,659
  -17,312
  -18,001
  -18,727
  -19,493
  -20,300
  -21,150
  -22,044
  -22,986
  -23,977
  -25,020
  -26,116
  -27,269
  -28,482
  -29,757
  -31,097
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
  -12,599
  -10,893
  -11,181
  -11,492
  -11,828
  -12,188
  -12,573
  -12,984
  -13,421
  -13,886
  -14,379
  -14,902
  -15,456
  -16,041
  -16,659
  -17,312
  -18,001
  -18,727
  -19,493
  -20,300
  -21,150
  -22,044
  -22,986
  -23,977
  -25,020
  -26,116
  -27,269
  -28,482
  -29,757
  -31,097

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
  358,605
  371,372
  385,127
  399,891
  415,688
  432,545
  450,494
  469,572
  489,816
  511,271
  533,982
  558,000
  583,378
  610,175
  638,450
  668,269
  699,701
  732,819
  767,700
  804,426
  843,083
  883,761
  926,556
  971,570
  1,018,909
  1,068,684
  1,121,013
  1,176,021
  1,233,837
  1,294,599
Adjusted assets (=assets-cash), $m
  358,605
  371,372
  385,127
  399,891
  415,688
  432,545
  450,494
  469,572
  489,816
  511,271
  533,982
  558,000
  583,378
  610,175
  638,450
  668,269
  699,701
  732,819
  767,700
  804,426
  843,083
  883,761
  926,556
  971,570
  1,018,909
  1,068,684
  1,121,013
  1,176,021
  1,233,837
  1,294,599
Revenue / Adjusted assets
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
  0.059
Average production assets, $m
  469,447
  486,160
  504,167
  523,495
  544,174
  566,241
  589,739
  614,712
  641,214
  669,300
  699,031
  730,473
  763,696
  798,775
  835,790
  874,826
  915,973
  959,328
  1,004,991
  1,053,068
  1,103,673
  1,156,924
  1,212,948
  1,271,875
  1,333,845
  1,399,006
  1,467,510
  1,539,520
  1,615,207
  1,694,750
Working capital, $m
  -413,295
  -428,008
  -443,861
  -460,877
  -479,083
  -498,511
  -519,198
  -541,184
  -564,516
  -589,242
  -615,417
  -643,098
  -672,347
  -703,230
  -735,817
  -770,184
  -806,410
  -844,579
  -884,779
  -927,106
  -971,658
  -1,018,540
  -1,067,862
  -1,119,741
  -1,174,299
  -1,231,665
  -1,291,975
  -1,355,371
  -1,422,005
  -1,492,034
Total debt, $m
  368,090
  379,579
  391,959
  405,247
  419,464
  434,636
  450,790
  467,959
  486,179
  505,489
  525,929
  547,545
  570,385
  594,502
  619,950
  646,787
  675,076
  704,882
  736,275
  769,329
  804,119
  840,730
  879,246
  919,758
  962,363
  1,007,161
  1,054,257
  1,103,764
  1,155,799
  1,210,484
Total liabilities, $m
  322,745
  334,234
  346,614
  359,902
  374,119
  389,291
  405,445
  422,614
  440,834
  460,144
  480,584
  502,200
  525,040
  549,157
  574,605
  601,442
  629,731
  659,537
  690,930
  723,984
  758,774
  795,385
  833,901
  874,413
  917,018
  961,816
  1,008,912
  1,058,419
  1,110,454
  1,165,139
Total equity, $m
  35,861
  37,137
  38,513
  39,989
  41,569
  43,255
  45,049
  46,957
  48,982
  51,127
  53,398
  55,800
  58,338
  61,017
  63,845
  66,827
  69,970
  73,282
  76,770
  80,443
  84,308
  88,376
  92,656
  97,157
  101,891
  106,868
  112,101
  117,602
  123,384
  129,460
Total liabilities and equity, $m
  358,606
  371,371
  385,127
  399,891
  415,688
  432,546
  450,494
  469,571
  489,816
  511,271
  533,982
  558,000
  583,378
  610,174
  638,450
  668,269
  699,701
  732,819
  767,700
  804,427
  843,082
  883,761
  926,557
  971,570
  1,018,909
  1,068,684
  1,121,013
  1,176,021
  1,233,838
  1,294,599
Debt-to-equity ratio
  10.260
  10.220
  10.180
  10.130
  10.090
  10.050
  10.010
  9.970
  9.930
  9.890
  9.850
  9.810
  9.780
  9.740
  9.710
  9.680
  9.650
  9.620
  9.590
  9.560
  9.540
  9.510
  9.490
  9.470
  9.450
  9.420
  9.400
  9.390
  9.370
  9.350
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
  -12,599
  -10,893
  -11,181
  -11,492
  -11,828
  -12,188
  -12,573
  -12,984
  -13,421
  -13,886
  -14,379
  -14,902
  -15,456
  -16,041
  -16,659
  -17,312
  -18,001
  -18,727
  -19,493
  -20,300
  -21,150
  -22,044
  -22,986
  -23,977
  -25,020
  -26,116
  -27,269
  -28,482
  -29,757
  -31,097
Depreciation, amort., depletion, $m
  46,945
  48,616
  50,417
  52,349
  54,417
  56,624
  58,974
  61,471
  64,121
  66,930
  69,903
  73,047
  76,370
  79,877
  83,579
  87,483
  91,597
  95,933
  100,499
  105,307
  110,367
  115,692
  121,295
  127,187
  133,385
  139,901
  146,751
  153,952
  161,521
  169,475
Funds from operations, $m
  34,345
  37,723
  39,236
  40,857
  42,590
  44,436
  46,401
  48,488
  50,700
  53,044
  55,524
  58,145
  60,914
  63,837
  66,920
  70,171
  73,597
  77,206
  81,006
  85,007
  89,218
  93,648
  98,309
  103,211
  108,365
  113,784
  119,482
  125,470
  131,764
  138,378
Change in working capital, $m
  -13,590
  -14,713
  -15,853
  -17,016
  -18,206
  -19,428
  -20,687
  -21,987
  -23,332
  -24,727
  -26,175
  -27,681
  -29,249
  -30,883
  -32,587
  -34,367
  -36,226
  -38,169
  -40,201
  -42,327
  -44,552
  -46,882
  -49,322
  -51,879
  -54,558
  -57,366
  -60,310
  -63,397
  -66,634
  -70,029
Cash from operations, $m
  47,935
  52,436
  55,089
  57,873
  60,795
  63,864
  67,088
  70,474
  74,032
  77,770
  81,699
  85,826
  90,163
  94,720
  99,507
  104,538
  109,822
  115,374
  121,207
  127,334
  133,770
  140,530
  147,631
  155,089
  162,923
  171,151
  179,792
  188,867
  198,398
  208,407
Maintenance CAPEX, $m
  -45,400
  -46,945
  -48,616
  -50,417
  -52,349
  -54,417
  -56,624
  -58,974
  -61,471
  -64,121
  -66,930
  -69,903
  -73,047
  -76,370
  -79,877
  -83,579
  -87,483
  -91,597
  -95,933
  -100,499
  -105,307
  -110,367
  -115,692
  -121,295
  -127,187
  -133,385
  -139,901
  -146,751
  -153,952
  -161,521
New CAPEX, $m
  -15,445
  -16,712
  -18,007
  -19,328
  -20,679
  -22,067
  -23,497
  -24,974
  -26,502
  -28,086
  -29,731
  -31,442
  -33,223
  -35,079
  -37,015
  -39,036
  -41,148
  -43,355
  -45,663
  -48,077
  -50,605
  -53,251
  -56,023
  -58,927
  -61,971
  -65,160
  -68,504
  -72,010
  -75,687
  -79,543
Cash from investing activities, $m
  -60,845
  -63,657
  -66,623
  -69,745
  -73,028
  -76,484
  -80,121
  -83,948
  -87,973
  -92,207
  -96,661
  -101,345
  -106,270
  -111,449
  -116,892
  -122,615
  -128,631
  -134,952
  -141,596
  -148,576
  -155,912
  -163,618
  -171,715
  -180,222
  -189,158
  -198,545
  -208,405
  -218,761
  -229,639
  -241,064
Free cash flow, $m
  -12,910
  -11,221
  -11,534
  -11,872
  -12,233
  -12,621
  -13,034
  -13,474
  -13,941
  -14,437
  -14,963
  -15,519
  -16,107
  -16,729
  -17,385
  -18,078
  -18,808
  -19,578
  -20,389
  -21,243
  -22,142
  -23,089
  -24,085
  -25,133
  -26,235
  -27,394
  -28,613
  -29,894
  -31,241
  -32,657
Issuance/(repayment) of debt, $m
  -25,874
  11,490
  12,380
  13,288
  14,217
  15,171
  16,154
  17,169
  18,220
  19,309
  20,440
  21,616
  22,841
  24,117
  25,448
  26,837
  28,289
  29,806
  31,393
  33,053
  34,791
  36,610
  38,516
  40,513
  42,605
  44,798
  47,096
  49,507
  52,035
  54,686
Issuance/(repurchase) of shares, $m
  49,864
  12,170
  12,557
  12,969
  13,408
  13,874
  14,368
  14,891
  15,446
  16,032
  16,650
  17,304
  17,993
  18,720
  19,487
  20,294
  21,144
  22,039
  22,981
  23,972
  25,015
  26,112
  27,266
  28,478
  29,753
  31,094
  32,502
  33,983
  35,538
  37,173
Cash from financing (excl. dividends), $m  
  23,990
  23,660
  24,937
  26,257
  27,625
  29,045
  30,522
  32,060
  33,666
  35,341
  37,090
  38,920
  40,834
  42,837
  44,935
  47,131
  49,433
  51,845
  54,374
  57,025
  59,806
  62,722
  65,782
  68,991
  72,358
  75,892
  79,598
  83,490
  87,573
  91,859
Total cash flow (excl. dividends), $m
  11,079
  12,439
  13,402
  14,385
  15,391
  16,424
  17,488
  18,587
  19,725
  20,904
  22,128
  23,401
  24,727
  26,108
  27,549
  29,054
  30,625
  32,268
  33,985
  35,783
  37,664
  39,634
  41,697
  43,858
  46,123
  48,497
  50,986
  53,595
  56,332
  59,202
Retained Cash Flow (-), $m
  -49,864
  -12,170
  -12,557
  -12,969
  -13,408
  -13,874
  -14,368
  -14,891
  -15,446
  -16,032
  -16,650
  -17,304
  -17,993
  -18,720
  -19,487
  -20,294
  -21,144
  -22,039
  -22,981
  -23,972
  -25,015
  -26,112
  -27,266
  -28,478
  -29,753
  -31,094
  -32,502
  -33,983
  -35,538
  -37,173
Prev. year cash balance distribution, $m
  1,404
  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
  -37,380
  269
  846
  1,416
  1,984
  2,551
  3,121
  3,696
  4,279
  4,872
  5,478
  6,097
  6,733
  7,388
  8,063
  8,760
  9,481
  10,229
  11,004
  11,810
  12,649
  13,522
  14,431
  15,380
  16,370
  17,403
  18,483
  19,613
  20,793
  22,029
Discount rate, %
  15.00
  15.75
  16.54
  17.36
  18.23
  19.14
  20.10
  21.11
  22.16
  23.27
  24.43
  25.66
  26.94
  28.28
  29.70
  31.18
  32.74
  34.38
  36.10
  37.90
  39.80
  41.79
  43.88
  46.07
  48.38
  50.80
  53.34
  56.00
  58.80
  61.74
PV of cash for distribution, $m
  -32,505
  200
  534
  746
  859
  892
  866
  799
  706
  601
  495
  394
  303
  226
  163
  114
  77
  50
  31
  19
  11
  6
  3
  2
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  50.0
  37.3
  27.9
  20.9
  15.6
  11.7
  8.8
  6.6
  5.0
  3.7
  2.8
  2.1
  1.6
  1.2
  0.9
  0.7
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0

U.S. Bancorp is a multi-state financial services holding company. The Company provides a full range of financial services, including lending and depository services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and automated teller machine (ATM) processing, mortgage banking, insurance, brokerage and leasing. The Company's banking subsidiary, U.S. Bank National Association, is engaged in the general banking business, principally in domestic markets. U.S. Bank National Association provides a range of products and services to individuals, businesses, institutional organizations, governmental entities and other financial institutions. As of December 31, 2016, the Company's loan portfolio was $273.2 billion. As of December 31, 2016, its investment securities amounted to $109.3 billion. As of December 31, 2016, the Company's deposits amounted to $334,590 billion.

FINANCIAL RATIOS  of  U.S. Bancorp (USB)

Valuation Ratios
P/E Ratio 15.3
Price to Sales 0
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 16.9
Price to Free Cash Flow 16.9
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 100%
Total Debt to Equity 100%
Interest Coverage 6
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 1.7%
Return On Total Capital 5.9%
Ret/ On T. Cap. - 3 Yr. Avg. 5.8%
Return On Equity 12.6%
Return On Equity - 3 Yr. Avg. 13.2%
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 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 26.3%
Payout Ratio 35.3%

USB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the USB stock intrinsic value calculation we used $20462 million for the last fiscal year's total revenue generated by U.S. Bancorp. The default revenue input number comes from 2017 income statement of U.S. Bancorp. 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 USB stock valuation model: a) initial revenue growth rate of 3.4% 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%, whose default value for USB is calculated based on our internal credit rating of U.S. Bancorp, 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 U.S. Bancorp.
    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 USB stock the variable cost ratio is equal to 59%.

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 USB 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 U.S. Bancorp.

Corporate tax rate of 27% is the nominal tax rate for U.S. Bancorp. 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 USB 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 USB are equal to 2218.8%.

Life of production assets of 10 years is the average useful life of capital assets used in U.S. Bancorp 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 USB is equal to -1953.4%. 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 U.S. Bancorp - 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 1677 million for U.S. Bancorp 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 U.S. Bancorp at the current share price and the inputted number of shares is $89.2 billion.

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