Intrinsic value of Sotheby's - BID

Previous Close

$45.09

  Intrinsic Value

$1,438

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

-175%

Previous close

$45.09

 
Intrinsic value

$1,438

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

-175%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BID 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 2016), $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 2.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -16.23
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  805
  1,288
  1,990
  2,976
  4,318
  6,092
  8,375
  11,242
  14,761
  18,994
  23,991
  29,792
  36,423
  43,903
  52,235
  61,419
  71,446
  82,299
  93,963
  106,418
  119,646
  133,628
  148,352
  163,804
  179,979
  196,874
  214,491
  232,838
  251,927
  271,774
  292,404
Variable operating expenses, $m
 
  632
  974
  1,454
  2,107
  2,971
  4,082
  5,477
  7,191
  9,251
  11,684
  14,502
  17,731
  21,371
  25,428
  29,898
  34,779
  40,062
  45,740
  51,803
  58,242
  65,049
  72,216
  79,738
  87,612
  95,836
  104,412
  113,343
  122,635
  132,297
  142,339
Fixed operating expenses, $m
 
  300
  308
  316
  323
  332
  340
  348
  357
  366
  375
  384
  394
  404
  414
  424
  435
  446
  457
  468
  480
  492
  504
  517
  530
  543
  557
  571
  585
  600
  615
Total operating expenses, $m
  683
  932
  1,282
  1,770
  2,430
  3,303
  4,422
  5,825
  7,548
  9,617
  12,059
  14,886
  18,125
  21,775
  25,842
  30,322
  35,214
  40,508
  46,197
  52,271
  58,722
  65,541
  72,720
  80,255
  88,142
  96,379
  104,969
  113,914
  123,220
  132,897
  142,954
Operating income, $m
  123
  356
  708
  1,207
  1,888
  2,790
  3,953
  5,416
  7,214
  9,377
  11,933
  14,905
  18,299
  22,127
  26,394
  31,097
  36,232
  41,791
  47,766
  54,147
  60,923
  68,087
  75,631
  83,549
  91,837
  100,495
  109,523
  118,924
  128,707
  138,878
  149,450
EBITDA, $m
  145
  393
  763
  1,286
  2,001
  2,948
  4,169
  5,703
  7,589
  9,859
  12,539
  15,652
  19,213
  23,229
  27,704
  32,638
  38,024
  43,856
  50,123
  56,816
  63,925
  71,439
  79,353
  87,658
  96,352
  105,433
  114,903
  124,765
  135,026
  145,695
  156,785
Interest expense (income), $m
  45
  45
  92
  160
  255
  385
  556
  776
  1,053
  1,393
  1,802
  2,284
  2,844
  3,485
  4,207
  5,011
  5,898
  6,866
  7,914
  9,040
  10,243
  11,520
  12,870
  14,292
  15,784
  17,346
  18,977
  20,678
  22,450
  24,293
  26,209
Earnings before tax, $m
  97
  310
  616
  1,047
  1,633
  2,405
  3,398
  4,640
  6,161
  7,984
  10,131
  12,621
  15,455
  18,643
  22,187
  26,085
  30,334
  34,925
  39,852
  45,106
  50,680
  56,567
  62,761
  69,257
  76,053
  83,149
  90,546
  98,246
  106,257
  114,585
  123,241
Tax expense, $m
  26
  84
  166
  283
  441
  649
  917
  1,253
  1,663
  2,156
  2,735
  3,408
  4,173
  5,034
  5,990
  7,043
  8,190
  9,430
  10,760
  12,179
  13,684
  15,273
  16,945
  18,699
  20,534
  22,450
  24,447
  26,527
  28,689
  30,938
  33,275
Net income, $m
  74
  227
  450
  764
  1,192
  1,756
  2,480
  3,387
  4,497
  5,828
  7,396
  9,213
  11,282
  13,609
  16,197
  19,042
  22,144
  25,495
  29,092
  32,928
  36,997
  41,294
  45,816
  50,558
  55,519
  60,699
  66,098
  71,720
  77,568
  83,647
  89,966

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  496
  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
  2,504
  3,670
  5,669
  8,479
  12,302
  17,356
  23,861
  32,028
  42,055
  54,115
  68,352
  84,877
  103,771
  125,078
  148,819
  174,984
  203,549
  234,471
  267,701
  303,186
  340,871
  380,707
  422,654
  466,679
  512,761
  560,895
  611,086
  663,356
  717,740
  774,286
  833,059
Adjusted assets (=assets-cash), $m
  2,008
  3,670
  5,669
  8,479
  12,302
  17,356
  23,861
  32,028
  42,055
  54,115
  68,352
  84,877
  103,771
  125,078
  148,819
  174,984
  203,549
  234,471
  267,701
  303,186
  340,871
  380,707
  422,654
  466,679
  512,761
  560,895
  611,086
  663,356
  717,740
  774,286
  833,059
Revenue / Adjusted assets
  0.401
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
  0.351
Average production assets, $m
  358
  572
  884
  1,321
  1,917
  2,705
  3,719
  4,991
  6,554
  8,433
  10,652
  13,228
  16,172
  19,493
  23,192
  27,270
  31,722
  36,541
  41,720
  47,250
  53,123
  59,331
  65,868
  72,729
  79,911
  87,412
  95,234
  103,380
  111,855
  120,668
  129,827
Working capital, $m
  526
  59
  92
  137
  199
  280
  385
  517
  679
  874
  1,104
  1,370
  1,675
  2,020
  2,403
  2,825
  3,286
  3,786
  4,322
  4,895
  5,504
  6,147
  6,824
  7,535
  8,279
  9,056
  9,867
  10,711
  11,589
  12,502
  13,451
Total debt, $m
  1,171
  2,361
  4,099
  6,540
  9,862
  14,255
  19,907
  27,005
  35,718
  46,198
  58,570
  72,930
  89,349
  107,865
  128,495
  151,233
  176,056
  202,927
  231,804
  262,640
  295,389
  330,007
  366,458
  404,716
  444,762
  486,590
  530,206
  575,628
  622,888
  672,027
  723,100
Total liabilities, $m
  1,999
  3,189
  4,927
  7,368
  10,690
  15,083
  20,735
  27,833
  36,546
  47,026
  59,398
  73,758
  90,177
  108,693
  129,323
  152,061
  176,884
  203,755
  232,632
  263,468
  296,217
  330,835
  367,286
  405,544
  445,590
  487,418
  531,034
  576,456
  623,716
  672,855
  723,928
Total equity, $m
  505
  481
  743
  1,111
  1,612
  2,274
  3,126
  4,196
  5,509
  7,089
  8,954
  11,119
  13,594
  16,385
  19,495
  22,923
  26,665
  30,716
  35,069
  39,717
  44,654
  49,873
  55,368
  61,135
  67,172
  73,477
  80,052
  86,900
  94,024
  101,431
  109,131
Total liabilities and equity, $m
  2,504
  3,670
  5,670
  8,479
  12,302
  17,357
  23,861
  32,029
  42,055
  54,115
  68,352
  84,877
  103,771
  125,078
  148,818
  174,984
  203,549
  234,471
  267,701
  303,185
  340,871
  380,708
  422,654
  466,679
  512,762
  560,895
  611,086
  663,356
  717,740
  774,286
  833,059
Debt-to-equity ratio
  2.319
  4.910
  5.520
  5.890
  6.120
  6.270
  6.370
  6.440
  6.480
  6.520
  6.540
  6.560
  6.570
  6.580
  6.590
  6.600
  6.600
  6.610
  6.610
  6.610
  6.620
  6.620
  6.620
  6.620
  6.620
  6.620
  6.620
  6.620
  6.620
  6.630
  6.630
Adjusted equity ratio
  0.004
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  74
  227
  450
  764
  1,192
  1,756
  2,480
  3,387
  4,497
  5,828
  7,396
  9,213
  11,282
  13,609
  16,197
  19,042
  22,144
  25,495
  29,092
  32,928
  36,997
  41,294
  45,816
  50,558
  55,519
  60,699
  66,098
  71,720
  77,568
  83,647
  89,966
Depreciation, amort., depletion, $m
  22
  37
  55
  80
  113
  158
  215
  287
  375
  481
  607
  747
  914
  1,101
  1,310
  1,541
  1,792
  2,064
  2,357
  2,669
  3,001
  3,352
  3,721
  4,109
  4,515
  4,939
  5,380
  5,841
  6,320
  6,817
  7,335
Funds from operations, $m
  214
  264
  505
  844
  1,305
  1,914
  2,695
  3,674
  4,872
  6,310
  8,002
  9,961
  12,196
  14,711
  17,507
  20,583
  23,936
  27,560
  31,449
  35,597
  39,998
  44,646
  49,537
  54,667
  60,034
  65,637
  71,479
  77,560
  83,887
  90,465
  97,301
Change in working capital, $m
  56
  22
  32
  45
  62
  82
  105
  132
  162
  195
  230
  267
  305
  344
  383
  422
  461
  499
  537
  573
  608
  643
  677
  711
  744
  777
  810
  844
  878
  913
  949
Cash from operations, $m
  158
  242
  473
  799
  1,243
  1,832
  2,590
  3,542
  4,711
  6,115
  7,773
  9,694
  11,890
  14,366
  17,124
  20,161
  23,475
  27,060
  30,912
  35,024
  39,390
  44,003
  48,860
  53,956
  59,290
  64,860
  70,668
  76,717
  83,009
  89,552
  96,352
Maintenance CAPEX, $m
  0
  -20
  -32
  -50
  -75
  -108
  -153
  -210
  -282
  -370
  -476
  -602
  -747
  -914
  -1,101
  -1,310
  -1,541
  -1,792
  -2,064
  -2,357
  -2,669
  -3,001
  -3,352
  -3,721
  -4,109
  -4,515
  -4,939
  -5,380
  -5,841
  -6,320
  -6,817
New CAPEX, $m
  -21
  -214
  -312
  -438
  -596
  -788
  -1,014
  -1,273
  -1,563
  -1,879
  -2,219
  -2,575
  -2,944
  -3,321
  -3,700
  -4,078
  -4,452
  -4,819
  -5,179
  -5,530
  -5,873
  -6,208
  -6,537
  -6,861
  -7,182
  -7,501
  -7,822
  -8,146
  -8,475
  -8,812
  -9,159
Cash from investing activities, $m
  -120
  -234
  -344
  -488
  -671
  -896
  -1,167
  -1,483
  -1,845
  -2,249
  -2,695
  -3,177
  -3,691
  -4,235
  -4,801
  -5,388
  -5,993
  -6,611
  -7,243
  -7,887
  -8,542
  -9,209
  -9,889
  -10,582
  -11,291
  -12,016
  -12,761
  -13,526
  -14,316
  -15,132
  -15,976
Free cash flow, $m
  38
  7
  129
  311
  573
  936
  1,424
  2,059
  2,866
  3,866
  5,077
  6,517
  8,199
  10,132
  12,322
  14,773
  17,482
  20,449
  23,669
  27,137
  30,847
  34,793
  38,970
  43,374
  47,999
  52,844
  57,908
  63,190
  68,693
  74,420
  80,375
Issuance/(repayment) of debt, $m
  12
  1,197
  1,738
  2,441
  3,323
  4,392
  5,653
  7,098
  8,713
  10,480
  12,372
  14,361
  16,418
  18,517
  20,630
  22,738
  24,823
  26,872
  28,877
  30,836
  32,748
  34,618
  36,452
  38,257
  40,046
  41,828
  43,616
  45,422
  47,259
  49,139
  51,074
Issuance/(repurchase) of shares, $m
  -360
  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  
  -354
  1,197
  1,738
  2,441
  3,323
  4,392
  5,653
  7,098
  8,713
  10,480
  12,372
  14,361
  16,418
  18,517
  20,630
  22,738
  24,823
  26,872
  28,877
  30,836
  32,748
  34,618
  36,452
  38,257
  40,046
  41,828
  43,616
  45,422
  47,259
  49,139
  51,074
Total cash flow (excl. dividends), $m
  -351
  1,204
  1,866
  2,752
  3,895
  5,328
  7,076
  9,157
  11,579
  14,345
  17,449
  20,877
  24,617
  28,649
  32,953
  37,511
  42,305
  47,321
  52,546
  57,973
  63,595
  69,411
  75,422
  81,631
  88,045
  94,672
  101,524
  108,613
  115,952
  123,559
  131,449
Retained Cash Flow (-), $m
  301
  -181
  -262
  -368
  -501
  -662
  -852
  -1,070
  -1,314
  -1,580
  -1,865
  -2,165
  -2,475
  -2,791
  -3,110
  -3,428
  -3,742
  -4,051
  -4,353
  -4,648
  -4,937
  -5,219
  -5,495
  -5,767
  -6,037
  -6,306
  -6,575
  -6,847
  -7,124
  -7,408
  -7,699
Prev. year cash balance distribution, $m
 
  205
  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
 
  1,228
  1,605
  2,384
  3,395
  4,666
  6,224
  8,087
  10,266
  12,766
  15,584
  18,712
  22,142
  25,857
  29,843
  34,083
  38,563
  43,270
  48,193
  53,324
  58,659
  64,193
  69,927
  75,864
  82,008
  88,367
  94,949
  101,765
  108,828
  116,151
  123,750
Discount rate, %
 
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.18
  10.69
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.20
  20.17
  21.17
  22.23
  23.34
  24.51
  25.74
  27.02
  28.37
  29.79
  31.28
PV of cash for distribution, $m
 
  1,141
  1,376
  1,873
  2,423
  3,000
  3,571
  4,101
  4,554
  4,899
  5,113
  5,183
  5,109
  4,901
  4,577
  4,163
  3,688
  3,184
  2,677
  2,192
  1,748
  1,356
  1,023
  750
  533
  368
  246
  160
  100
  60
  35
Current shareholders' claim on cash, %
  100
  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

Sotheby’s operates as an auctioneer of authenticated fine art, decorative art, jewelry, wine, and collectibles in the United States, the United Kingdom, China, France, Switzerland, and internationally. The company operates through two segments, Agency and Finance. The Agency segment accepts property on consignment; and matches buyers and sellers of authenticated fine art, decorative art, jewelry, wine, and collectibles through the auction or private sale process. It is also involved in the sale of artworks; and operation of an auction house for investment-quality automobiles. The Finance segment offers art-related financing services to various collectors and art dealers. This segment provides secured loans, including advances secured by consigned property to borrowers who are contractually committed to sell the property in the near term; and general purpose term loans secured by property not presently intended for sale. The company is also involved in the retail wine operations; licensing Sotheby’s International Realty and related trademarks; and licensing its Sotheby’s brand name for use in connection with the art auction business in Australia, and art education n services in the United States and the United Kingdom. Sotheby’s was founded in 1744 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Sotheby's (BID)

Valuation Ratios
P/E Ratio 32.3
Price to Sales 3
Price to Book 4.7
Price to Tangible Book
Price to Cash Flow 15.1
Price to Free Cash Flow 17.4
Growth Rates
Sales Growth Rate -16.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 90.9%
Cap. Spend. - 3 Yr. Gr. Rate -1.8%
Financial Strength
Quick Ratio 71
Current Ratio 0.1
LT Debt to Equity 230.5%
Total Debt to Equity 231.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 4.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity 11.3%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 78.6%
Gross Margin - 3 Yr. Avg. 79.5%
EBITDA Margin 20.4%
EBITDA Margin - 3 Yr. Avg. 24.3%
Operating Margin 15.2%
Oper. Margin - 3 Yr. Avg. 20.1%
Pre-Tax Margin 12%
Pre-Tax Margin - 3 Yr. Avg. 16.7%
Net Profit Margin 9.2%
Net Profit Margin - 3 Yr. Avg. 8.8%
Effective Tax Rate 26.8%
Eff/ Tax Rate - 3 Yr. Avg. 47.9%
Payout Ratio 2.7%

BID stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BID stock intrinsic value calculation we used $805 million for the last fiscal year's total revenue generated by Sotheby's. The default revenue input number comes from 2016 income statement of Sotheby's. 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 BID stock valuation model: a) initial revenue growth rate of 60% 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 7.6%, whose default value for BID is calculated based on our internal credit rating of Sotheby's, 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 Sotheby's.
    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 BID stock the variable cost ratio is equal to 49.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $293 million in the base year in the intrinsic value calculation for BID 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 3.9% for Sotheby's.

Corporate tax rate of 27% is the nominal tax rate for Sotheby's. 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 BID 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 BID are equal to 44.4%.

Life of production assets of 17.7 years is the average useful life of capital assets used in Sotheby's 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 BID is equal to 4.6%. 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 - $505 million for Sotheby's - 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 51.555 million for Sotheby's 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 Sotheby's at the current share price and the inputted number of shares is $2.3 billion.

RELATED COMPANIES Price Int.Val. Rating
CLCT Collectors Uni 23.19 28.34  hold
LQDT Liquidity Serv 5.90 0.95  str.sell

COMPANY NEWS

▶ Luxury home: Tour this home that was modeled after a historic ABQ hotel   [Aug-11-17 09:15AM  American City Business Journals]
▶ Sotheby's posts 2Q profit   [02:34AM  Associated Press]
▶ Falling Earnings Send Sotheby's Lower   [01:20PM  Motley Fool]
▶ Sotheby's Flirts With Record High   [Jul-25-17 12:37PM  Bloomberg]
▶ [$$] Old Masters have a bumpy ride   [Jul-14-17 08:22AM  Financial Times]
▶ Why Sothebys Stock Gained 37% in 2017 so Far   [Jul-13-17 03:37PM  Motley Fool]
▶ Luxury brokerage firm inks acquisition   [Jun-29-17 06:15PM  American City Business Journals]
▶ [$$] London Sales Help Art-Market Recovery   [12:09AM  The Wall Street Journal]
▶ [$$] Beyond the fair - what to see in Zurich and Basel   [Jun-09-17 09:34AM  Financial Times]
▶ Why Sothebys Shares Popped 11% in May   [08:59AM  Motley Fool]
▶ Daniel Loeb's Favorite Idea Spurs May Outperformance   [Jun-02-17 06:41PM  GuruFocus.com]
▶ [$$] Who's Afraid of Amazon? 9 Surprising Winners   [May-21-17 12:01AM  Barrons.com]
▶ [$$] Sothebys Loses Its Star Work But Auction Rallies   [12:22AM  The Wall Street Journal]
▶ [$$] Sotheby's Loses Its Star Work But Auction Rallies   [11:08PM  The Wall Street Journal]
▶ Amazon at 20: Is Any Retailer Safe?   [05:14PM  Barrons.com]
▶ [$$] Recovering Art Market Attracts Trophy Works   [07:47AM  The Wall Street Journal]
▶ Phillips CEO 'Confident' in Spring Auction's Success   [May-14-17 07:11PM  Bloomberg Video]
▶ Phillips Eyes Deep-Pocketed Chinese Buyers   [07:09PM  Bloomberg Video]
▶ [$$] Tefaf takes on Frieze in Manhattan   [May-12-17 09:58AM  Financial Times]
▶ Sotheby's sales beat estimates   [08:09AM  MarketWatch]
▶ [$$] Turner and Monet paintings on display ahead of auction   [May-07-17 03:15PM  Financial Times]
▶ Sothebys, Christie's Preview Spring Art Sale   [May-05-17 04:47PM  Associated Press Videos]
▶ [$$] Artists respond to Trump: "I'm a Muslim, I'm black"   [Apr-28-17 10:26AM  Financial Times]
▶ Auction of Soviet art triggers probe; art market on guard   [Apr-27-17 08:46AM  Associated Press]
▶ [$$] Virtual reality looms in Venice   [Apr-21-17 11:00AM  Financial Times]
▶ [$$] Sothebys New Executive Marc Porter Returns to Rival Christies   [Apr-20-17 12:41AM  The Wall Street Journal]
▶ [$$] Sotheby's New Executive Returns to Rival Christie's   [Apr-19-17 02:08PM  The Wall Street Journal]
▶ Pink diamond fetches record $71.2M in Hong Kong auction   [Apr-04-17 11:28PM  Associated Press]
Stock chart of BID Financial statements of BID
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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