Intrinsic value of Gilead Sciences - GILD

Previous Close

$77.37

  Intrinsic Value

$138.49

stock screener

  Rating & Target

str. buy

+79%

Previous close

$77.37

 
Intrinsic value

$138.49

 
Up/down potential

+79%

 
Rating

str. buy

We calculate the intrinsic value of GILD 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  -6.89
  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
  30,390
  26,629
  27,242
  27,942
  28,728
  29,599
  30,554
  31,595
  32,721
  33,935
  35,237
  36,630
  38,117
  39,700
  41,382
  43,167
  45,059
  47,061
  49,179
  51,417
  53,779
  56,272
  58,901
  61,672
  64,591
  67,666
  70,904
  74,312
  77,898
  81,670
  85,638
Variable operating expenses, $m
 
  4,777
  4,838
  4,908
  4,986
  5,073
  5,168
  5,272
  5,384
  5,505
  5,634
  3,647
  3,795
  3,953
  4,120
  4,298
  4,487
  4,686
  4,897
  5,120
  5,355
  5,603
  5,865
  6,141
  6,431
  6,738
  7,060
  7,399
  7,756
  8,132
  8,527
Fixed operating expenses, $m
 
  7,587
  7,754
  7,925
  8,099
  8,277
  8,459
  8,646
  8,836
  9,030
  9,229
  9,432
  9,639
  9,851
  10,068
  10,290
  10,516
  10,747
  10,984
  11,225
  11,472
  11,725
  11,983
  12,246
  12,516
  12,791
  13,073
  13,360
  13,654
  13,954
  14,261
Total operating expenses, $m
  12,757
  12,364
  12,592
  12,833
  13,085
  13,350
  13,627
  13,918
  14,220
  14,535
  14,863
  13,079
  13,434
  13,804
  14,188
  14,588
  15,003
  15,433
  15,881
  16,345
  16,827
  17,328
  17,848
  18,387
  18,947
  19,529
  20,133
  20,759
  21,410
  22,086
  22,788
Operating income, $m
  17,633
  14,264
  14,649
  15,109
  15,642
  16,248
  16,927
  17,677
  18,502
  19,400
  20,374
  23,551
  24,682
  25,896
  27,194
  28,579
  30,056
  31,628
  33,298
  35,072
  36,952
  38,944
  41,053
  43,285
  45,644
  48,138
  50,771
  53,552
  56,487
  59,584
  62,850
EBITDA, $m
  18,791
  18,305
  18,734
  19,244
  19,834
  20,502
  21,249
  22,075
  22,980
  23,966
  25,033
  26,185
  27,423
  28,750
  30,169
  31,683
  33,296
  35,012
  36,834
  38,768
  40,819
  42,990
  45,288
  47,719
  50,288
  53,003
  55,869
  58,895
  62,088
  65,456
  69,007
Interest expense (income), $m
  885
  1,663
  1,713
  1,773
  1,841
  1,918
  2,002
  2,095
  2,197
  2,306
  2,425
  2,551
  2,687
  2,832
  2,986
  3,150
  3,324
  3,508
  3,703
  3,909
  4,127
  4,357
  4,600
  4,856
  5,126
  5,410
  5,710
  6,025
  6,357
  6,706
  7,073
Earnings before tax, $m
  17,097
  12,602
  12,936
  13,336
  13,801
  14,331
  14,924
  15,582
  16,305
  17,093
  17,949
  21,000
  21,995
  23,064
  24,207
  25,429
  26,733
  28,120
  29,595
  31,162
  32,825
  34,587
  36,453
  38,429
  40,518
  42,727
  45,062
  47,527
  50,130
  52,878
  55,776
Tax expense, $m
  3,609
  3,402
  3,493
  3,601
  3,726
  3,869
  4,030
  4,207
  4,402
  4,615
  4,846
  5,670
  5,939
  6,227
  6,536
  6,866
  7,218
  7,592
  7,991
  8,414
  8,863
  9,338
  9,842
  10,376
  10,940
  11,536
  12,167
  12,832
  13,535
  14,277
  15,060
Net income, $m
  13,501
  9,199
  9,443
  9,735
  10,075
  10,461
  10,895
  11,375
  11,902
  12,478
  13,103
  15,330
  16,056
  16,836
  17,671
  18,564
  19,515
  20,528
  21,605
  22,748
  23,962
  25,248
  26,611
  28,053
  29,578
  31,191
  32,895
  34,695
  36,595
  38,601
  40,717

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  11,895
  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
  56,977
  57,514
  58,837
  60,349
  62,047
  63,928
  65,992
  68,239
  70,672
  73,293
  76,106
  79,115
  82,326
  85,745
  89,378
  93,234
  97,320
  101,645
  106,218
  111,051
  116,153
  121,537
  127,215
  133,200
  139,506
  146,148
  153,140
  160,500
  168,245
  176,393
  184,964
Adjusted assets (=assets-cash), $m
  45,082
  57,514
  58,837
  60,349
  62,047
  63,928
  65,992
  68,239
  70,672
  73,293
  76,106
  79,115
  82,326
  85,745
  89,378
  93,234
  97,320
  101,645
  106,218
  111,051
  116,153
  121,537
  127,215
  133,200
  139,506
  146,148
  153,140
  160,500
  168,245
  176,393
  184,964
Revenue / Adjusted assets
  0.674
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
Average production assets, $m
  10,747
  19,146
  19,587
  20,090
  20,655
  21,281
  21,969
  22,717
  23,527
  24,399
  25,335
  26,337
  27,406
  28,544
  29,754
  31,037
  32,397
  33,837
  35,360
  36,968
  38,667
  40,459
  42,350
  44,342
  46,441
  48,652
  50,980
  53,430
  56,008
  58,721
  61,574
Working capital, $m
  10,370
  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 debt, $m
  26,346
  31,725
  32,830
  34,093
  35,510
  37,081
  38,804
  40,681
  42,712
  44,901
  47,249
  49,762
  52,443
  55,298
  58,332
  61,551
  64,963
  68,574
  72,393
  76,428
  80,689
  85,185
  89,926
  94,923
  100,189
  105,734
  111,573
  117,719
  124,186
  130,990
  138,146
Total liabilities, $m
  38,090
  48,024
  49,129
  50,392
  51,809
  53,380
  55,103
  56,980
  59,011
  61,200
  63,548
  66,061
  68,742
  71,597
  74,631
  77,850
  81,262
  84,873
  88,692
  92,727
  96,988
  101,484
  106,225
  111,222
  116,488
  122,033
  127,872
  134,018
  140,485
  147,289
  154,445
Total equity, $m
  18,887
  9,490
  9,708
  9,958
  10,238
  10,548
  10,889
  11,260
  11,661
  12,093
  12,557
  13,054
  13,584
  14,148
  14,747
  15,384
  16,058
  16,771
  17,526
  18,323
  19,165
  20,054
  20,991
  21,978
  23,018
  24,114
  25,268
  26,483
  27,760
  29,105
  30,519
Total liabilities and equity, $m
  56,977
  57,514
  58,837
  60,350
  62,047
  63,928
  65,992
  68,240
  70,672
  73,293
  76,105
  79,115
  82,326
  85,745
  89,378
  93,234
  97,320
  101,644
  106,218
  111,050
  116,153
  121,538
  127,216
  133,200
  139,506
  146,147
  153,140
  160,501
  168,245
  176,394
  184,964
Debt-to-equity ratio
  1.395
  3.340
  3.380
  3.420
  3.470
  3.520
  3.560
  3.610
  3.660
  3.710
  3.760
  3.810
  3.860
  3.910
  3.960
  4.000
  4.050
  4.090
  4.130
  4.170
  4.210
  4.250
  4.280
  4.320
  4.350
  4.380
  4.420
  4.450
  4.470
  4.500
  4.530
Adjusted equity ratio
  0.155
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165
  0.165

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13,501
  9,199
  9,443
  9,735
  10,075
  10,461
  10,895
  11,375
  11,902
  12,478
  13,103
  15,330
  16,056
  16,836
  17,671
  18,564
  19,515
  20,528
  21,605
  22,748
  23,962
  25,248
  26,611
  28,053
  29,578
  31,191
  32,895
  34,695
  36,595
  38,601
  40,717
Depreciation, amort., depletion, $m
  1,158
  4,041
  4,085
  4,135
  4,191
  4,254
  4,323
  4,398
  4,479
  4,566
  4,659
  2,634
  2,741
  2,854
  2,975
  3,104
  3,240
  3,384
  3,536
  3,697
  3,867
  4,046
  4,235
  4,434
  4,644
  4,865
  5,098
  5,343
  5,601
  5,872
  6,157
Funds from operations, $m
  18,031
  13,240
  13,528
  13,870
  14,266
  14,715
  15,217
  15,772
  16,381
  17,044
  17,762
  17,964
  18,797
  19,691
  20,647
  21,667
  22,755
  23,911
  25,141
  26,445
  27,829
  29,294
  30,846
  32,487
  34,222
  36,056
  37,993
  40,038
  42,196
  44,473
  46,874
Change in working capital, $m
  1,362
  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 operations, $m
  16,669
  13,240
  13,528
  13,870
  14,266
  14,715
  15,217
  15,772
  16,381
  17,044
  17,762
  17,964
  18,797
  19,691
  20,647
  21,667
  22,755
  23,911
  25,141
  26,445
  27,829
  29,294
  30,846
  32,487
  34,222
  36,056
  37,993
  40,038
  42,196
  44,473
  46,874
Maintenance CAPEX, $m
  0
  -1,878
  -1,915
  -1,959
  -2,009
  -2,066
  -2,128
  -2,197
  -2,272
  -2,353
  -2,440
  -2,534
  -2,634
  -2,741
  -2,854
  -2,975
  -3,104
  -3,240
  -3,384
  -3,536
  -3,697
  -3,867
  -4,046
  -4,235
  -4,434
  -4,644
  -4,865
  -5,098
  -5,343
  -5,601
  -5,872
New CAPEX, $m
  -748
  -365
  -440
  -503
  -565
  -626
  -687
  -748
  -810
  -873
  -936
  -1,002
  -1,069
  -1,138
  -1,210
  -1,283
  -1,360
  -1,440
  -1,523
  -1,609
  -1,699
  -1,792
  -1,890
  -1,992
  -2,099
  -2,211
  -2,328
  -2,450
  -2,578
  -2,712
  -2,853
Cash from investing activities, $m
  -11,985
  -2,243
  -2,355
  -2,462
  -2,574
  -2,692
  -2,815
  -2,945
  -3,082
  -3,226
  -3,376
  -3,536
  -3,703
  -3,879
  -4,064
  -4,258
  -4,464
  -4,680
  -4,907
  -5,145
  -5,396
  -5,659
  -5,936
  -6,227
  -6,533
  -6,855
  -7,193
  -7,548
  -7,921
  -8,313
  -8,725
Free cash flow, $m
  4,684
  10,996
  11,173
  11,408
  11,692
  12,024
  12,402
  12,827
  13,299
  13,819
  14,386
  14,428
  15,094
  15,812
  16,583
  17,408
  18,291
  19,232
  20,234
  21,301
  22,433
  23,635
  24,910
  26,260
  27,689
  29,201
  30,800
  32,490
  34,275
  36,160
  38,149
Issuance/(repayment) of debt, $m
  4,268
  930
  1,105
  1,263
  1,418
  1,571
  1,723
  1,877
  2,031
  2,188
  2,349
  2,513
  2,681
  2,855
  3,034
  3,219
  3,412
  3,611
  3,819
  4,035
  4,261
  4,496
  4,741
  4,997
  5,265
  5,546
  5,839
  6,146
  6,467
  6,804
  7,156
Issuance/(repurchase) of shares, $m
  -10,793
  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  
  -6,892
  930
  1,105
  1,263
  1,418
  1,571
  1,723
  1,877
  2,031
  2,188
  2,349
  2,513
  2,681
  2,855
  3,034
  3,219
  3,412
  3,611
  3,819
  4,035
  4,261
  4,496
  4,741
  4,997
  5,265
  5,546
  5,839
  6,146
  6,467
  6,804
  7,156
Total cash flow (excl. dividends), $m
  -2,167
  11,927
  12,277
  12,671
  13,110
  13,594
  14,126
  14,704
  15,331
  16,007
  16,735
  16,941
  17,776
  18,667
  19,617
  20,628
  21,702
  22,843
  24,053
  25,336
  26,694
  28,131
  29,651
  31,257
  32,954
  34,747
  36,639
  38,636
  40,742
  42,963
  45,305
Retained Cash Flow (-), $m
  -353
  -176
  -218
  -249
  -280
  -310
  -341
  -371
  -401
  -432
  -464
  -497
  -530
  -564
  -600
  -636
  -674
  -714
  -755
  -797
  -842
  -888
  -937
  -988
  -1,040
  -1,096
  -1,154
  -1,214
  -1,278
  -1,344
  -1,414
Prev. year cash balance distribution, $m
 
  11,128
  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
 
  627
  639
  654
  671
  689
  710
  733
  758
  785
  814
  846
  879
  915
  953
  993
  1,036
  1,081
  1,129
  1,180
  1,234
  1,291
  1,351
  1,414
  1,480
  1,550
  1,624
  1,702
  1,783
  1,870
  1,960
Cash available for distribution, $m
 
  22,879
  12,059
  12,421
  12,830
  13,284
  13,785
  14,333
  14,929
  15,575
  16,271
  16,444
  17,246
  18,103
  19,017
  19,992
  21,028
  22,130
  23,299
  24,538
  25,852
  27,243
  28,714
  30,270
  31,914
  33,651
  35,485
  37,421
  39,464
  41,619
  43,891
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
 
  21,936
  11,040
  10,810
  10,564
  10,297
  10,004
  9,683
  9,331
  8,947
  8,530
  7,809
  7,359
  6,883
  6,384
  5,869
  5,344
  4,815
  4,291
  3,778
  3,285
  2,818
  2,382
  1,984
  1,625
  1,309
  1,035
  803
  611
  454
  330
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

Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in areas of unmet medical need. The Company's portfolio of products and pipeline of investigational drugs includes treatments for Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), liver diseases, cancer, inflammatory and respiratory diseases and cardiovascular conditions. Its products for HIV/AIDS patients include Descovy, Odefsey, Genvoya, Stribild, Complera/Eviplera, Truvada, Emtriva, Tybost and Vitekta. Its products for patients with liver diseases include Vemlidy, Epclusa, Harvoni, Sovaldi, Viread and Hepsera. It offers Zydelig to patients with hematology/oncology diseases. Its products for patients with various cardiovascular diseases include Letairis, Ranexa and Lexiscan. Its products for various inflammation/respiratory diseases include Cayston and Tamiflu. It had operations in more than 30 countries, as of December 31, 2016.

FINANCIAL RATIOS  of  Gilead Sciences (GILD)

Valuation Ratios
P/E Ratio 7.5
Price to Sales 3.3
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow 6.4
Growth Rates
Sales Growth Rate -6.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0.1%
Cap. Spend. - 3 Yr. Gr. Rate 31.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 139.5%
Total Debt to Equity 139.5%
Interest Coverage 20
Management Effectiveness
Return On Assets 26.1%
Ret/ On Assets - 3 Yr. Avg. 37.4%
Return On Total Capital 31.5%
Ret/ On T. Cap. - 3 Yr. Avg. 45.7%
Return On Equity 72.2%
Return On Equity - 3 Yr. Avg. 89.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 86%
Gross Margin - 3 Yr. Avg. 86.2%
EBITDA Margin 63%
EBITDA Margin - 3 Yr. Avg. 66.5%
Operating Margin 58%
Oper. Margin - 3 Yr. Avg. 62.4%
Pre-Tax Margin 56.3%
Pre-Tax Margin - 3 Yr. Avg. 60.8%
Net Profit Margin 44.4%
Net Profit Margin - 3 Yr. Avg. 49.5%
Effective Tax Rate 21.1%
Eff/ Tax Rate - 3 Yr. Avg. 18.8%
Payout Ratio 18.2%

GILD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GILD stock intrinsic value calculation we used $26107 million for the last fiscal year's total revenue generated by Gilead Sciences. The default revenue input number comes from 2016 income statement of Gilead Sciences. 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 GILD 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 GILD is calculated based on our internal credit rating of Gilead Sciences, 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 Gilead Sciences.
    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 GILD stock the variable cost ratio is equal to 18.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $7424 million in the base year in the intrinsic value calculation for GILD 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 Gilead Sciences.

Corporate tax rate of 27% is the nominal tax rate for Gilead Sciences. 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 GILD stock is equal to 2.4%.

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 GILD are equal to 71.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Gilead Sciences 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 GILD is equal to 0%. 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 - $20442 million for Gilead Sciences - 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 1307 million for Gilead Sciences 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 Gilead Sciences at the current share price and the inputted number of shares is $101.1 billion.

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Financial statements of GILD
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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