Intrinsic value of NTT DoCoMo ADR - DCM

Previous Close

$23.34

  Intrinsic Value

$16.15

stock screener

  Rating & Target

sell

-31%

  Value-price divergence*

+5000%

Previous close

$23.34

 
Intrinsic value

$16.15

 
Up/down potential

-31%

 
Rating

sell

 
Value-price divergence*

+5000%

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

We calculate the intrinsic value of DCM 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 91.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  1.27
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  39,911
  40,709
  41,646
  42,716
  43,917
  45,249
  46,710
  48,301
  50,022
  51,878
  53,869
  55,998
  58,271
  60,691
  63,263
  65,992
  68,884
  71,945
  75,182
  78,603
  82,214
  86,025
  90,044
  94,280
  98,744
  103,445
  108,394
  113,604
  119,086
  124,853
  130,919
Variable operating expenses, $m
 
  33,663
  34,432
  35,312
  36,300
  37,394
  38,595
  39,902
  41,318
  42,842
  44,479
  46,029
  47,897
  49,886
  52,000
  54,243
  56,620
  59,136
  61,797
  64,609
  67,577
  70,710
  74,013
  77,495
  81,164
  85,028
  89,096
  93,378
  97,884
  102,624
  107,611
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
  31,686
  33,663
  34,432
  35,312
  36,300
  37,394
  38,595
  39,902
  41,318
  42,842
  44,479
  46,029
  47,897
  49,886
  52,000
  54,243
  56,620
  59,136
  61,797
  64,609
  67,577
  70,710
  74,013
  77,495
  81,164
  85,028
  89,096
  93,378
  97,884
  102,624
  107,611
Operating income, $m
  8,224
  7,047
  7,213
  7,404
  7,618
  7,855
  8,115
  8,398
  8,705
  9,035
  9,390
  9,970
  10,375
  10,805
  11,263
  11,749
  12,264
  12,809
  13,385
  13,994
  14,637
  15,316
  16,031
  16,786
  17,580
  18,417
  19,298
  20,226
  21,202
  22,229
  23,309
EBITDA, $m
  12,162
  10,004
  10,234
  10,497
  10,792
  11,119
  11,478
  11,869
  12,292
  12,748
  13,238
  13,761
  14,319
  14,914
  15,546
  16,217
  16,927
  17,680
  18,475
  19,316
  20,203
  21,140
  22,127
  23,168
  24,265
  25,420
  26,637
  27,917
  29,264
  30,681
  32,172
Interest expense (income), $m
  0
  49
  60
  73
  88
  105
  124
  145
  168
  192
  218
  247
  277
  309
  344
  380
  419
  460
  503
  549
  598
  649
  703
  760
  821
  884
  951
  1,021
  1,095
  1,173
  1,255
Earnings before tax, $m
  8,266
  6,998
  7,154
  7,331
  7,530
  7,750
  7,991
  8,253
  8,537
  8,843
  9,171
  9,723
  10,098
  10,496
  10,920
  11,369
  11,845
  12,349
  12,882
  13,445
  14,039
  14,667
  15,328
  16,025
  16,760
  17,533
  18,348
  19,205
  20,107
  21,056
  22,054
Tax expense, $m
  2,504
  1,889
  1,931
  1,979
  2,033
  2,092
  2,157
  2,228
  2,305
  2,388
  2,476
  2,625
  2,726
  2,834
  2,948
  3,070
  3,198
  3,334
  3,478
  3,630
  3,791
  3,960
  4,139
  4,327
  4,525
  4,734
  4,954
  5,185
  5,429
  5,685
  5,955
Net income, $m
  5,681
  5,108
  5,222
  5,351
  5,497
  5,657
  5,833
  6,025
  6,232
  6,455
  6,695
  7,098
  7,371
  7,662
  7,971
  8,299
  8,647
  9,015
  9,404
  9,815
  10,249
  10,707
  11,189
  11,698
  12,235
  12,799
  13,394
  14,020
  14,678
  15,371
  16,099

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  13,297
  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
  64,883
  52,596
  53,806
  55,188
  56,741
  58,461
  60,348
  62,404
  64,629
  67,025
  69,598
  72,349
  75,286
  78,412
  81,735
  85,261
  88,997
  92,952
  97,135
  101,554
  106,220
  111,144
  116,336
  121,809
  127,576
  133,649
  140,044
  146,775
  153,858
  161,309
  169,146
Adjusted assets (=assets-cash), $m
  51,586
  52,596
  53,806
  55,188
  56,741
  58,461
  60,348
  62,404
  64,629
  67,025
  69,598
  72,349
  75,286
  78,412
  81,735
  85,261
  88,997
  92,952
  97,135
  101,554
  106,220
  111,144
  116,336
  121,809
  127,576
  133,649
  140,044
  146,775
  153,858
  161,309
  169,146
Revenue / Adjusted assets
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
  0.774
Average production assets, $m
  27,010
  27,560
  28,194
  28,919
  29,732
  30,633
  31,622
  32,699
  33,865
  35,121
  36,469
  37,911
  39,450
  41,088
  42,829
  44,676
  46,634
  48,707
  50,898
  53,214
  55,659
  58,239
  60,960
  63,828
  66,850
  70,032
  73,383
  76,910
  80,621
  84,526
  88,632
Working capital, $m
  13,591
  855
  875
  897
  922
  950
  981
  1,014
  1,050
  1,089
  1,131
  1,176
  1,224
  1,275
  1,329
  1,386
  1,447
  1,511
  1,579
  1,651
  1,727
  1,807
  1,891
  1,980
  2,074
  2,172
  2,276
  2,386
  2,501
  2,622
  2,749
Total debt, $m
  1,932
  1,711
  2,091
  2,525
  3,013
  3,553
  4,145
  4,791
  5,489
  6,242
  7,050
  7,914
  8,836
  9,817
  10,861
  11,968
  13,141
  14,383
  15,696
  17,084
  18,549
  20,095
  21,726
  23,444
  25,255
  27,162
  29,170
  31,283
  33,507
  35,847
  38,308
Total liabilities, $m
  16,736
  16,515
  16,895
  17,329
  17,817
  18,357
  18,949
  19,595
  20,293
  21,046
  21,854
  22,718
  23,640
  24,621
  25,665
  26,772
  27,945
  29,187
  30,500
  31,888
  33,353
  34,899
  36,530
  38,248
  40,059
  41,966
  43,974
  46,087
  48,311
  50,651
  53,112
Total equity, $m
  48,147
  36,081
  36,911
  37,859
  38,924
  40,104
  41,399
  42,809
  44,335
  45,979
  47,744
  49,632
  51,646
  53,791
  56,070
  58,489
  61,052
  63,765
  66,634
  69,666
  72,867
  76,245
  79,807
  83,561
  87,517
  91,684
  96,070
  100,688
  105,546
  110,658
  116,034
Total liabilities and equity, $m
  64,883
  52,596
  53,806
  55,188
  56,741
  58,461
  60,348
  62,404
  64,628
  67,025
  69,598
  72,350
  75,286
  78,412
  81,735
  85,261
  88,997
  92,952
  97,134
  101,554
  106,220
  111,144
  116,337
  121,809
  127,576
  133,650
  140,044
  146,775
  153,857
  161,309
  169,146
Debt-to-equity ratio
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.220
  0.230
  0.240
  0.250
  0.250
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.330
Adjusted equity ratio
  0.676
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686
  0.686

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,681
  5,108
  5,222
  5,351
  5,497
  5,657
  5,833
  6,025
  6,232
  6,455
  6,695
  7,098
  7,371
  7,662
  7,971
  8,299
  8,647
  9,015
  9,404
  9,815
  10,249
  10,707
  11,189
  11,698
  12,235
  12,799
  13,394
  14,020
  14,678
  15,371
  16,099
Depreciation, amort., depletion, $m
  3,938
  2,957
  3,021
  3,093
  3,174
  3,264
  3,363
  3,471
  3,588
  3,713
  3,848
  3,791
  3,945
  4,109
  4,283
  4,468
  4,663
  4,871
  5,090
  5,321
  5,566
  5,824
  6,096
  6,383
  6,685
  7,003
  7,338
  7,691
  8,062
  8,453
  8,863
Funds from operations, $m
  11,388
  8,066
  8,243
  8,444
  8,671
  8,922
  9,197
  9,496
  9,820
  10,169
  10,543
  10,889
  11,316
  11,771
  12,254
  12,767
  13,310
  13,885
  14,494
  15,136
  15,815
  16,531
  17,285
  18,081
  18,920
  19,802
  20,732
  21,711
  22,740
  23,823
  24,963
Change in working capital, $m
  -37
  17
  20
  22
  25
  28
  31
  33
  36
  39
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  109
  115
  121
  127
Cash from operations, $m
  11,425
  8,049
  8,223
  8,422
  8,646
  8,894
  9,166
  9,462
  9,784
  10,130
  10,501
  10,844
  11,268
  11,720
  12,200
  12,710
  13,250
  13,821
  14,426
  15,064
  15,739
  16,451
  17,201
  17,992
  18,826
  19,704
  20,628
  21,601
  22,625
  23,702
  24,835
Maintenance CAPEX, $m
  0
  -2,701
  -2,756
  -2,819
  -2,892
  -2,973
  -3,063
  -3,162
  -3,270
  -3,387
  -3,512
  -3,647
  -3,791
  -3,945
  -4,109
  -4,283
  -4,468
  -4,663
  -4,871
  -5,090
  -5,321
  -5,566
  -5,824
  -6,096
  -6,383
  -6,685
  -7,003
  -7,338
  -7,691
  -8,062
  -8,453
New CAPEX, $m
  -5,602
  -551
  -634
  -725
  -813
  -901
  -989
  -1,077
  -1,166
  -1,256
  -1,348
  -1,442
  -1,539
  -1,638
  -1,741
  -1,848
  -1,958
  -2,072
  -2,192
  -2,316
  -2,445
  -2,580
  -2,721
  -2,868
  -3,022
  -3,183
  -3,351
  -3,527
  -3,711
  -3,904
  -4,107
Cash from investing activities, $m
  -8,210
  -3,252
  -3,390
  -3,544
  -3,705
  -3,874
  -4,052
  -4,239
  -4,436
  -4,643
  -4,860
  -5,089
  -5,330
  -5,583
  -5,850
  -6,131
  -6,426
  -6,735
  -7,063
  -7,406
  -7,766
  -8,146
  -8,545
  -8,964
  -9,405
  -9,868
  -10,354
  -10,865
  -11,402
  -11,966
  -12,560
Free cash flow, $m
  3,215
  4,797
  4,833
  4,878
  4,940
  5,019
  5,114
  5,223
  5,348
  5,487
  5,641
  5,755
  5,939
  6,137
  6,350
  6,579
  6,824
  7,085
  7,363
  7,659
  7,972
  8,305
  8,656
  9,028
  9,421
  9,836
  10,274
  10,736
  11,223
  11,736
  12,276
Issuance/(repayment) of debt, $m
  -11
  317
  380
  434
  487
  540
  593
  645
  699
  753
  808
  864
  922
  982
  1,043
  1,107
  1,173
  1,242
  1,313
  1,388
  1,465
  1,546
  1,630
  1,719
  1,811
  1,907
  2,008
  2,113
  2,224
  2,340
  2,461
Issuance/(repurchase) of shares, $m
  -1,302
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,328
  317
  380
  434
  487
  540
  593
  645
  699
  753
  808
  864
  922
  982
  1,043
  1,107
  1,173
  1,242
  1,313
  1,388
  1,465
  1,546
  1,630
  1,719
  1,811
  1,907
  2,008
  2,113
  2,224
  2,340
  2,461
Total cash flow (excl. dividends), $m
  1,878
  5,114
  5,213
  5,312
  5,428
  5,559
  5,706
  5,869
  6,046
  6,240
  6,449
  6,619
  6,861
  7,119
  7,394
  7,686
  7,997
  8,327
  8,677
  9,047
  9,438
  9,851
  10,287
  10,747
  11,232
  11,743
  12,282
  12,849
  13,447
  14,075
  14,737
Retained Cash Flow (-), $m
  -1,988
  -693
  -830
  -949
  -1,065
  -1,180
  -1,295
  -1,410
  -1,526
  -1,644
  -1,765
  -1,888
  -2,014
  -2,145
  -2,279
  -2,419
  -2,563
  -2,713
  -2,869
  -3,032
  -3,201
  -3,378
  -3,562
  -3,755
  -3,956
  -4,166
  -4,387
  -4,617
  -4,859
  -5,112
  -5,377
Prev. year cash balance distribution, $m
 
  12,759
  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
 
  17,181
  4,383
  4,364
  4,363
  4,379
  4,411
  4,459
  4,520
  4,596
  4,684
  4,732
  4,846
  4,974
  5,114
  5,268
  5,434
  5,614
  5,807
  6,015
  6,237
  6,473
  6,725
  6,992
  7,276
  7,577
  7,895
  8,232
  8,588
  8,964
  9,360
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  16,472
  4,012
  3,797
  3,592
  3,394
  3,202
  3,012
  2,825
  2,640
  2,456
  2,247
  2,068
  1,891
  1,717
  1,547
  1,381
  1,222
  1,069
  926
  792
  670
  558
  458
  371
  295
  230
  177
  133
  98
  70
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

NTT DOCOMO, INC. provides mobile telecommunications services in Japan. The company operates in three segments: Telecommunications Business, Smart Life Business, and Other Businesses. It purchase and sells smartphones/tablets, and data and other communications devices. The company also offers voice, data, and other value-added services; international calling and roaming services; Office Link, a service that allows mobile phones to be used as internal lines; Business Mopera Anshin Manager, which enables the unified control of corporate mobile phones; and satellite cell phone services. In addition, it provides optical-fiber broadband, Internet access, and mobile phone services; video and music distribution, electronic books, and other services through its dmarket portal; and finance/payment services. Further, the company is involved in the mail order sales of ingredients and cooking utensils; provision of home delivery services, medical database relating to healthcare-related companies, authentication and information services to medical personnel, and bicycle sharing services; sale of music software; online sales of women and men’s clothing; and operation of cooking school. Additionally, it offers mobile device protection, IoT/machine-to-machine, and billing/payment services; and information services for car navigation systems. The company sells its products through docomo shops and distributors, as well as online. As of March 31, 2016, it had 2,395 docomo shops. The company was founded in 1991 and is headquartered in Tokyo, Japan. NTT DOCOMO, INC. is a subsidiary of Nippon Telegraph and Telephone Corporation.

FINANCIAL RATIOS  of  NTT DoCoMo ADR (DCM)

Valuation Ratios
P/E Ratio 15.2
Price to Sales 2.2
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow 14.8
Growth Rates
Sales Growth Rate 1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.8%
Cap. Spend. - 3 Yr. Gr. Rate -2%
Financial Strength
Quick Ratio 25
Current Ratio 0.1
LT Debt to Equity 2.9%
Total Debt to Equity 4%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. 7.4%
Return On Total Capital 11.6%
Ret/ On T. Cap. - 3 Yr. Avg. 9.5%
Return On Equity 12%
Return On Equity - 3 Yr. Avg. 9.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 53.6%
Gross Margin - 3 Yr. Avg. 53.5%
EBITDA Margin 30.6%
EBITDA Margin - 3 Yr. Avg. 30.5%
Operating Margin 20.6%
Oper. Margin - 3 Yr. Avg. 17.5%
Pre-Tax Margin 20.7%
Pre-Tax Margin - 3 Yr. Avg. 17.5%
Net Profit Margin 14.2%
Net Profit Margin - 3 Yr. Avg. 11.9%
Effective Tax Rate 30.3%
Eff/ Tax Rate - 3 Yr. Avg. 31.5%
Payout Ratio 43%

DCM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DCM stock intrinsic value calculation we used $39911 million for the last fiscal year's total revenue generated by NTT DoCoMo ADR. The default revenue input number comes from 2017 income statement of NTT DoCoMo ADR. 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 DCM stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DCM is calculated based on our internal credit rating of NTT DoCoMo ADR, 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 NTT DoCoMo ADR.
    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 DCM stock the variable cost ratio is equal to 82.7%.

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 DCM 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 3.5% for NTT DoCoMo ADR.

Corporate tax rate of 27% is the nominal tax rate for NTT DoCoMo ADR. 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 DCM 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 DCM are equal to 67.7%.

Life of production assets of 10 years is the average useful life of capital assets used in NTT DoCoMo ADR 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 DCM is equal to 2.1%. 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 - $48147 million for NTT DoCoMo ADR - 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 3931.18 million for NTT DoCoMo ADR 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 NTT DoCoMo ADR at the current share price and the inputted number of shares is $91.8 billion.

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COMPANY NEWS

▶ NTT Docomo posts 1Q profit   [Jul-28-17 01:32AM  Associated Press]
▶ ETFs with exposure to NTT DoCoMo, Inc. : July 11, 2017   [Jul-11-17 02:25PM  Capital Cube]
▶ SoftBank partners with ZTE on 5G trials   [Jun-13-17 02:58AM  ZDNet]
▶ Why the next billboard is a flying drone   [11:33AM  TechRepublic]
▶ 5 Stocks to Buy as Japan Revises Q4 GDP Upward   [Mar-10-17 09:46AM  Zacks]
▶ DOCOMO Develops eSIM Platform for Consumer Devices   [Feb-23-17 03:00AM  ACN Newswire]
▶ 4 Cheap Stocks Among Recent Economic Moat Changes   [Jan-10-17 06:00AM  Morningstar]
▶ Is NTT Docomo Inc (ADR) (DCM) A Good Stock To Buy?   [Dec-16-16 12:34AM  Insider Monkey]
▶ Is NTT Docomo Inc (ADR) (DCM) A Good Stock To Buy?   [12:34AM  at Insider Monkey]
▶ Is It Time To Buy BP plc (ADR) (BP)?   [Dec-01-16 12:57PM  at Insider Monkey]
▶ Is Kraft Heinz Co (KHC) a Good Stock To Buy?   [Nov-29-16 02:37PM  at Insider Monkey]
▶ New Faces, a Show of Hands and the Evolution of Emoji   [12:26AM  at The Wall Street Journal]
▶ Apple Promotes A Cashless Society In Japan   [Oct-18-16 10:53AM  at Investopedia]
▶ 4 Fintech Firms Emerging in San Francisco (PYPL, BBVA)   [Aug-23-16 12:00PM  at Investopedia]
▶ NTT Docomo posts 1Q profit   [Jul-29-16 05:15AM  AP]
Stock chart of DCM Financial statements of DCM
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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