Intrinsic value of GlaxoSmithKline ADR - GSK

Previous Close

$36.84

  Intrinsic Value

$42.07

stock screener

  Rating & Target

hold

+14%

Previous close

$36.84

 
Intrinsic value

$42.07

 
Up/down potential

+14%

 
Rating

hold

We calculate the intrinsic value of GSK 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, %
  16.58
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  33,905
  35,261
  36,707
  38,245
  39,878
  41,611
  43,445
  45,387
  47,439
  49,607
  51,895
  54,309
  56,854
  59,536
  62,361
  65,337
  68,469
  71,766
  75,234
  78,883
  82,721
  86,756
  90,999
  95,459
  100,148
  105,075
  110,254
  115,695
  121,413
  127,420
  133,731
Variable operating expenses, $m
 
  18,765
  19,505
  20,292
  21,127
  22,014
  22,952
  23,946
  24,996
  26,105
  27,275
  27,785
  29,087
  30,459
  31,905
  33,427
  35,030
  36,716
  38,491
  40,357
  42,321
  44,385
  46,556
  48,838
  51,237
  53,758
  56,407
  59,191
  62,116
  65,189
  68,418
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
  30,746
  18,765
  19,505
  20,292
  21,127
  22,014
  22,952
  23,946
  24,996
  26,105
  27,275
  27,785
  29,087
  30,459
  31,905
  33,427
  35,030
  36,716
  38,491
  40,357
  42,321
  44,385
  46,556
  48,838
  51,237
  53,758
  56,407
  59,191
  62,116
  65,189
  68,418
Operating income, $m
  3,158
  16,496
  17,202
  17,953
  18,751
  19,597
  20,493
  21,441
  22,444
  23,502
  24,620
  26,524
  27,767
  29,077
  30,457
  31,910
  33,440
  35,050
  36,744
  38,526
  40,400
  42,371
  44,443
  46,621
  48,911
  51,318
  53,847
  56,504
  59,297
  62,230
  65,313
EBITDA, $m
  5,315
  19,092
  19,875
  20,708
  21,592
  22,530
  23,524
  24,575
  25,686
  26,860
  28,099
  29,406
  30,784
  32,236
  33,766
  35,377
  37,073
  38,858
  40,736
  42,712
  44,790
  46,975
  49,272
  51,687
  54,226
  56,894
  59,698
  62,644
  65,740
  68,992
  72,409
Interest expense (income), $m
  890
  731
  569
  673
  783
  900
  1,023
  1,155
  1,293
  1,440
  1,595
  1,759
  1,931
  2,113
  2,305
  2,507
  2,720
  2,944
  3,180
  3,428
  3,689
  3,963
  4,252
  4,555
  4,874
  5,209
  5,562
  5,932
  6,321
  6,730
  7,160
Earnings before tax, $m
  2,357
  15,765
  16,633
  17,280
  17,968
  18,697
  19,470
  20,287
  21,150
  22,062
  23,025
  24,765
  25,835
  26,963
  28,151
  29,402
  30,720
  32,106
  33,564
  35,098
  36,711
  38,408
  40,191
  42,066
  44,037
  46,108
  48,285
  50,572
  52,975
  55,500
  58,153
Tax expense, $m
  1,066
  4,257
  4,491
  4,666
  4,851
  5,048
  5,257
  5,477
  5,711
  5,957
  6,217
  6,687
  6,976
  7,280
  7,601
  7,939
  8,294
  8,668
  9,062
  9,476
  9,912
  10,370
  10,852
  11,358
  11,890
  12,449
  13,037
  13,654
  14,303
  14,985
  15,701
Net income, $m
  1,109
  11,509
  12,142
  12,615
  13,117
  13,649
  14,213
  14,809
  15,440
  16,105
  16,808
  18,078
  18,860
  19,683
  20,551
  21,464
  22,425
  23,437
  24,502
  25,621
  26,799
  28,038
  29,340
  30,708
  32,147
  33,659
  35,248
  36,918
  38,672
  40,515
  42,452

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,061
  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
  71,825
  68,336
  71,137
  74,118
  77,284
  80,641
  84,197
  87,959
  91,936
  96,137
  100,572
  105,250
  110,182
  115,380
  120,855
  126,622
  132,692
  139,081
  145,803
  152,874
  160,311
  168,132
  176,355
  184,999
  194,085
  203,634
  213,670
  224,215
  235,296
  246,937
  259,168
Adjusted assets (=assets-cash), $m
  65,764
  68,336
  71,137
  74,118
  77,284
  80,641
  84,197
  87,959
  91,936
  96,137
  100,572
  105,250
  110,182
  115,380
  120,855
  126,622
  132,692
  139,081
  145,803
  152,874
  160,311
  168,132
  176,355
  184,999
  194,085
  203,634
  213,670
  224,215
  235,296
  246,937
  259,168
Revenue / Adjusted assets
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
  0.516
Average production assets, $m
  33,994
  35,367
  36,817
  38,360
  39,998
  41,735
  43,576
  45,523
  47,581
  49,756
  52,051
  54,472
  57,024
  59,715
  62,549
  65,533
  68,675
  71,981
  75,460
  79,120
  82,969
  87,016
  91,272
  95,746
  100,448
  105,391
  110,584
  116,042
  121,777
  127,802
  134,132
Working capital, $m
  -2,783
  -3,985
  -4,148
  -4,322
  -4,506
  -4,702
  -4,909
  -5,129
  -5,361
  -5,606
  -5,864
  -6,137
  -6,424
  -6,728
  -7,047
  -7,383
  -7,737
  -8,110
  -8,501
  -8,914
  -9,347
  -9,803
  -10,283
  -10,787
  -11,317
  -11,874
  -12,459
  -13,074
  -13,720
  -14,398
  -15,112
Total debt, $m
  22,843
  13,886
  16,408
  19,090
  21,939
  24,961
  28,161
  31,547
  35,127
  38,908
  42,899
  47,109
  51,548
  56,226
  61,154
  66,344
  71,807
  77,557
  83,607
  89,971
  96,664
  103,703
  111,103
  118,883
  127,060
  135,655
  144,687
  154,178
  164,150
  174,628
  185,635
Total liabilities, $m
  70,458
  61,502
  64,024
  66,706
  69,555
  72,577
  75,777
  79,163
  82,743
  86,524
  90,515
  94,725
  99,164
  103,842
  108,770
  113,960
  119,423
  125,173
  131,223
  137,587
  144,280
  151,319
  158,719
  166,499
  174,676
  183,271
  192,303
  201,794
  211,766
  222,244
  233,251
Total equity, $m
  1,366
  6,834
  7,114
  7,412
  7,728
  8,064
  8,420
  8,796
  9,194
  9,614
  10,057
  10,525
  11,018
  11,538
  12,086
  12,662
  13,269
  13,908
  14,580
  15,287
  16,031
  16,813
  17,635
  18,500
  19,408
  20,363
  21,367
  22,422
  23,530
  24,694
  25,917
Total liabilities and equity, $m
  71,824
  68,336
  71,138
  74,118
  77,283
  80,641
  84,197
  87,959
  91,937
  96,138
  100,572
  105,250
  110,182
  115,380
  120,856
  126,622
  132,692
  139,081
  145,803
  152,874
  160,311
  168,132
  176,354
  184,999
  194,084
  203,634
  213,670
  224,216
  235,296
  246,938
  259,168
Debt-to-equity ratio
  16.723
  2.030
  2.310
  2.580
  2.840
  3.100
  3.340
  3.590
  3.820
  4.050
  4.270
  4.480
  4.680
  4.870
  5.060
  5.240
  5.410
  5.580
  5.730
  5.890
  6.030
  6.170
  6.300
  6.430
  6.550
  6.660
  6.770
  6.880
  6.980
  7.070
  7.160
Adjusted equity ratio
  -0.045
  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
  1,109
  11,509
  12,142
  12,615
  13,117
  13,649
  14,213
  14,809
  15,440
  16,105
  16,808
  18,078
  18,860
  19,683
  20,551
  21,464
  22,425
  23,437
  24,502
  25,621
  26,799
  28,038
  29,340
  30,708
  32,147
  33,659
  35,248
  36,918
  38,672
  40,515
  42,452
Depreciation, amort., depletion, $m
  2,157
  2,596
  2,673
  2,755
  2,841
  2,933
  3,031
  3,134
  3,243
  3,358
  3,479
  2,882
  3,017
  3,160
  3,309
  3,467
  3,634
  3,809
  3,993
  4,186
  4,390
  4,604
  4,829
  5,066
  5,315
  5,576
  5,851
  6,140
  6,443
  6,762
  7,097
Funds from operations, $m
  10,354
  14,105
  14,815
  15,370
  15,958
  16,583
  17,244
  17,943
  18,682
  19,463
  20,287
  20,961
  21,877
  22,843
  23,860
  24,931
  26,059
  27,246
  28,494
  29,808
  31,189
  32,642
  34,169
  35,774
  37,462
  39,235
  41,099
  43,057
  45,115
  47,277
  49,548
Change in working capital, $m
  2,456
  -153
  -163
  -174
  -185
  -196
  -207
  -219
  -232
  -245
  -259
  -273
  -288
  -303
  -319
  -336
  -354
  -373
  -392
  -412
  -434
  -456
  -479
  -504
  -530
  -557
  -585
  -615
  -646
  -679
  -713
Cash from operations, $m
  7,898
  14,258
  14,978
  15,543
  16,143
  16,778
  17,451
  18,162
  18,914
  19,708
  20,546
  21,233
  22,165
  23,146
  24,179
  25,267
  26,413
  27,618
  28,886
  30,220
  31,623
  33,098
  34,648
  36,278
  37,991
  39,792
  41,684
  43,672
  45,761
  47,956
  50,262
Maintenance CAPEX, $m
  0
  -1,799
  -1,871
  -1,948
  -2,030
  -2,116
  -2,208
  -2,306
  -2,409
  -2,518
  -2,633
  -2,754
  -2,882
  -3,017
  -3,160
  -3,309
  -3,467
  -3,634
  -3,809
  -3,993
  -4,186
  -4,390
  -4,604
  -4,829
  -5,066
  -5,315
  -5,576
  -5,851
  -6,140
  -6,443
  -6,762
New CAPEX, $m
  -2,859
  -1,373
  -1,450
  -1,543
  -1,638
  -1,737
  -1,840
  -1,947
  -2,058
  -2,174
  -2,295
  -2,421
  -2,553
  -2,690
  -2,834
  -2,984
  -3,142
  -3,306
  -3,479
  -3,660
  -3,849
  -4,048
  -4,256
  -4,474
  -4,702
  -4,942
  -5,194
  -5,458
  -5,735
  -6,025
  -6,330
Cash from investing activities, $m
  -1,543
  -3,172
  -3,321
  -3,491
  -3,668
  -3,853
  -4,048
  -4,253
  -4,467
  -4,692
  -4,928
  -5,175
  -5,435
  -5,707
  -5,994
  -6,293
  -6,609
  -6,940
  -7,288
  -7,653
  -8,035
  -8,438
  -8,860
  -9,303
  -9,768
  -10,257
  -10,770
  -11,309
  -11,875
  -12,468
  -13,092
Free cash flow, $m
  6,355
  11,087
  11,657
  12,053
  12,475
  12,925
  13,402
  13,910
  14,447
  15,016
  15,618
  16,058
  16,730
  17,438
  18,186
  18,974
  19,804
  20,678
  21,599
  22,568
  23,587
  24,660
  25,789
  26,975
  28,223
  29,535
  30,914
  32,363
  33,887
  35,488
  37,170
Issuance/(repayment) of debt, $m
  158
  -3,937
  2,522
  2,683
  2,849
  3,021
  3,200
  3,386
  3,580
  3,781
  3,991
  4,210
  4,439
  4,678
  4,928
  5,190
  5,463
  5,750
  6,050
  6,364
  6,693
  7,039
  7,400
  7,780
  8,177
  8,594
  9,032
  9,491
  9,972
  10,477
  11,007
Issuance/(repurchase) of shares, $m
  18
  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  
  -1,875
  -3,937
  2,522
  2,683
  2,849
  3,021
  3,200
  3,386
  3,580
  3,781
  3,991
  4,210
  4,439
  4,678
  4,928
  5,190
  5,463
  5,750
  6,050
  6,364
  6,693
  7,039
  7,400
  7,780
  8,177
  8,594
  9,032
  9,491
  9,972
  10,477
  11,007
Total cash flow (excl. dividends), $m
  4,825
  7,150
  14,179
  14,735
  15,324
  15,946
  16,603
  17,296
  18,027
  18,797
  19,609
  20,268
  21,169
  22,117
  23,114
  24,163
  25,267
  26,428
  27,648
  28,932
  30,281
  31,699
  33,189
  34,755
  36,400
  38,129
  39,946
  41,854
  43,859
  45,965
  48,177
Retained Cash Flow (-), $m
  4,851
  -6,509
  -280
  -298
  -317
  -336
  -356
  -376
  -398
  -420
  -443
  -468
  -493
  -520
  -548
  -577
  -607
  -639
  -672
  -707
  -744
  -782
  -822
  -864
  -909
  -955
  -1,004
  -1,055
  -1,108
  -1,164
  -1,223
Prev. year cash balance distribution, $m
 
  1,041
  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
 
  1,682
  13,899
  14,437
  15,007
  15,610
  16,247
  16,920
  17,629
  18,377
  19,166
  19,801
  20,676
  21,597
  22,566
  23,587
  24,660
  25,789
  26,976
  28,225
  29,537
  30,917
  32,367
  33,891
  35,492
  37,175
  38,942
  40,800
  42,751
  44,801
  46,954
Discount rate, %
 
  8.60
  9.03
  9.48
  9.96
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.42
  27.74
  29.12
  30.58
  32.11
  33.71
  35.40
PV of cash for distribution, $m
 
  1,549
  11,692
  11,002
  10,267
  9,495
  8,698
  7,885
  7,069
  6,263
  5,478
  4,681
  3,984
  3,338
  2,752
  2,230
  1,774
  1,384
  1,058
  791
  578
  413
  287
  194
  128
  82
  51
  30
  18
  10
  5
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

GlaxoSmithKline plc is a global healthcare company. The Company operates through three segments: Pharmaceuticals, Vaccines and Consumer Healthcare. The Company focuses on its research across six areas: Respiratory diseases, human immunodeficiency virus (HIV)/infectious diseases, Vaccines, Immuno-inflammation, Oncology and Rare diseases. The Company makes a range of prescription medicines, vaccines and consumer healthcare products. The Pharmaceuticals business discovers, develops and commercializes medicines to treat a range of acute and chronic diseases. The Vaccines business provides vaccines for people of all ages from babies and adolescents to adults and older people. The Consumer Healthcare business develops and markets products in Wellness, Oral health, Nutrition and Skin health categories. Its product portfolio includes Adartrel, Bexsero, Daraprim and Quinvaxem. Its brands include Panadol, abreva, polident and physiogel.

FINANCIAL RATIOS  of  GlaxoSmithKline ADR (GSK)

Valuation Ratios
P/E Ratio 163.1
Price to Sales 5.3
Price to Book 132.4
Price to Tangible Book
Price to Cash Flow 22.9
Price to Free Cash Flow 35.9
Growth Rates
Sales Growth Rate 16.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 23.7%
Cap. Spend. - 3 Yr. Gr. Rate 6.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 1304.8%
Total Debt to Equity 1672.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 9.9%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 17.8%
Return On Equity 29.2%
Return On Equity - 3 Yr. Avg. 85.9%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 68.1%
Gross Margin - 3 Yr. Avg. 68%
EBITDA Margin 15.9%
EBITDA Margin - 3 Yr. Avg. 30.8%
Operating Margin 9.3%
Oper. Margin - 3 Yr. Avg. 23.9%
Pre-Tax Margin 7%
Pre-Tax Margin - 3 Yr. Avg. 21.3%
Net Profit Margin 3.3%
Net Profit Margin - 3 Yr. Avg. 16.8%
Effective Tax Rate 45.2%
Eff/ Tax Rate - 3 Yr. Avg. 23.4%
Payout Ratio 531.7%

GSK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GSK stock intrinsic value calculation we used $33905 million for the last fiscal year's total revenue generated by GlaxoSmithKline ADR. The default revenue input number comes from 2016 income statement of GlaxoSmithKline 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 GSK stock valuation model: a) initial revenue growth rate of 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 8.6%, whose default value for GSK is calculated based on our internal credit rating of GlaxoSmithKline 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 GlaxoSmithKline 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 GSK stock the variable cost ratio is equal to 53.3%.

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 GSK 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 4.1% for GlaxoSmithKline ADR.

Corporate tax rate of 27% is the nominal tax rate for GlaxoSmithKline 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 GSK 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 GSK are equal to 100.3%.

Life of production assets of 18.9 years is the average useful life of capital assets used in GlaxoSmithKline 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 GSK is equal to -11.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1366 million for GlaxoSmithKline 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 2452.78 million for GlaxoSmithKline 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 GlaxoSmithKline ADR at the current share price and the inputted number of shares is $90.4 billion.

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▶ GlaxoSmithKline Slips On 2018 Guidance As Generic Advair Looms   [04:38PM  Investor's Business Daily]
▶ Glaxo reports 4Q loss   [10:17AM  Associated Press]
▶ GSK sinks to Q4 loss on US tax code changes   [08:07AM  Associated Press]
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▶ Is GlaxoSmithKline plc a Buy in 2018?   [Jan-28-18 07:00AM  Motley Fool]
▶ Kahn Brother's Top 5 Position Increases of the 4th Quarter   [Jan-25-18 05:44PM  GuruFocus.com]
▶ Why Novavax Stock Is Spiking Today   [Jan-22-18 12:30PM  Motley Fool]
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Financial statements of GSK
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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