Intrinsic value of GlaxoSmithKline ADR - GSK

Previous Close

$41.87

  Intrinsic Value

$39.73

stock screener

  Rating & Target

hold

-5%

Previous close

$41.87

 
Intrinsic value

$39.73

 
Up/down potential

-5%

 
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
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
  5.64
Revenue, $m
  33,905
  48,339
  56,629
  65,652
  75,396
  85,844
  96,979
  108,786
  121,250
  134,358
  148,104
  162,480
  177,488
  193,129
  209,413
  226,351
  243,960
  262,261
  281,279
  301,042
  321,584
  342,941
  365,154
  388,266
  412,325
  437,382
  463,490
  490,707
  519,094
  548,717
  579,642
Variable operating expenses, $m
 
  30,161
  34,794
  39,836
  45,281
  51,120
  57,343
  63,941
  70,906
  78,231
  85,912
  90,798
  99,185
  107,926
  117,025
  126,491
  136,331
  146,558
  157,186
  168,230
  179,709
  191,644
  204,057
  216,973
  230,418
  244,420
  259,010
  274,220
  290,083
  306,637
  323,919
Fixed operating expenses, $m
 
  9,735
  9,949
  10,168
  10,391
  10,620
  10,854
  11,092
  11,336
  11,586
  11,841
  12,101
  12,367
  12,639
  12,917
  13,202
  13,492
  13,789
  14,092
  14,402
  14,719
  15,043
  15,374
  15,712
  16,058
  16,411
  16,772
  17,141
  17,518
  17,904
  18,298
Total operating expenses, $m
  30,746
  39,896
  44,743
  50,004
  55,672
  61,740
  68,197
  75,033
  82,242
  89,817
  97,753
  102,899
  111,552
  120,565
  129,942
  139,693
  149,823
  160,347
  171,278
  182,632
  194,428
  206,687
  219,431
  232,685
  246,476
  260,831
  275,782
  291,361
  307,601
  324,541
  342,217
Operating income, $m
  3,158
  8,443
  11,886
  15,648
  19,723
  24,104
  28,783
  33,753
  39,008
  44,542
  50,351
  59,581
  65,936
  72,564
  79,470
  86,659
  94,137
  101,914
  110,001
  118,410
  127,155
  136,254
  145,723
  155,581
  165,850
  176,551
  187,708
  199,346
  211,493
  224,176
  237,426
EBITDA, $m
  5,315
  16,928
  21,286
  26,045
  31,195
  36,730
  42,638
  48,911
  55,542
  62,523
  69,850
  77,519
  85,530
  93,886
  102,589
  111,648
  121,070
  130,867
  141,054
  151,645
  162,658
  174,115
  186,036
  198,446
  211,370
  224,837
  238,877
  253,520
  268,801
  284,754
  301,418
Interest expense (income), $m
  890
  1,247
  1,519
  2,272
  3,092
  3,977
  4,926
  5,937
  7,010
  8,142
  9,333
  10,582
  11,888
  13,251
  14,672
  16,151
  17,690
  19,289
  20,952
  22,679
  24,475
  26,341
  28,281
  30,299
  32,398
  34,584
  36,860
  39,232
  41,704
  44,283
  46,974
Earnings before tax, $m
  2,357
  7,196
  10,367
  13,376
  16,632
  20,127
  23,857
  27,816
  31,998
  36,399
  41,018
  48,999
  54,048
  59,313
  64,798
  70,508
  76,447
  82,624
  89,049
  95,730
  102,681
  109,913
  117,442
  125,282
  133,451
  141,967
  150,848
  160,115
  169,789
  179,893
  190,452
Tax expense, $m
  1,066
  1,943
  2,799
  3,612
  4,491
  5,434
  6,441
  7,510
  8,639
  9,828
  11,075
  13,230
  14,593
  16,015
  17,496
  19,037
  20,641
  22,309
  24,043
  25,847
  27,724
  29,677
  31,709
  33,826
  36,032
  38,331
  40,729
  43,231
  45,843
  48,571
  51,422
Net income, $m
  1,109
  5,253
  7,568
  9,765
  12,141
  14,693
  17,416
  20,306
  23,358
  26,572
  29,943
  35,770
  39,455
  43,299
  47,303
  51,471
  55,806
  60,316
  65,006
  69,883
  74,957
  80,237
  85,733
  91,456
  97,419
  103,636
  110,119
  116,884
  123,946
  131,322
  139,030

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
  90,352
  105,848
  122,715
  140,927
  160,456
  181,270
  203,339
  226,635
  251,137
  276,829
  303,701
  331,752
  360,989
  391,426
  423,086
  456,000
  490,207
  525,754
  562,695
  601,092
  641,012
  682,531
  725,731
  770,701
  817,536
  866,336
  917,209
  970,270
  1,025,639
  1,083,442
Adjusted assets (=assets-cash), $m
  65,764
  90,352
  105,848
  122,715
  140,927
  160,456
  181,270
  203,339
  226,635
  251,137
  276,829
  303,701
  331,752
  360,989
  391,426
  423,086
  456,000
  490,207
  525,754
  562,695
  601,092
  641,012
  682,531
  725,731
  770,701
  817,536
  866,336
  917,209
  970,270
  1,025,639
  1,083,442
Revenue / Adjusted assets
  0.516
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
Average production assets, $m
  33,994
  53,366
  62,518
  72,480
  83,237
  94,772
  107,065
  120,100
  133,860
  148,332
  163,506
  179,378
  195,946
  213,215
  231,192
  249,891
  269,332
  289,536
  310,531
  332,350
  355,029
  378,607
  403,130
  428,646
  455,207
  482,869
  511,693
  541,740
  573,080
  605,783
  639,924
Working capital, $m
  -2,783
  -24,701
  -28,937
  -33,548
  -38,527
  -43,866
  -49,556
  -55,590
  -61,959
  -68,657
  -75,681
  -83,027
  -90,696
  -98,689
  -107,010
  -115,665
  -124,664
  -134,015
  -143,733
  -153,832
  -164,329
  -175,243
  -186,594
  -198,404
  -210,698
  -223,502
  -236,843
  -250,751
  -265,257
  -280,394
  -296,197
Total debt, $m
  22,843
  28,128
  42,074
  57,254
  73,645
  91,221
  109,954
  129,815
  150,782
  172,834
  195,957
  220,142
  245,388
  271,701
  299,094
  327,588
  357,211
  387,997
  419,990
  453,236
  487,793
  523,721
  561,089
  599,969
  640,442
  682,593
  726,513
  772,299
  820,054
  869,885
  921,909
Total liabilities, $m
  70,458
  81,317
  95,263
  110,443
  126,835
  144,411
  163,143
  183,005
  203,972
  226,024
  249,146
  273,331
  298,577
  324,890
  352,283
  380,777
  410,400
  441,187
  473,179
  506,426
  540,982
  576,911
  614,278
  653,158
  693,631
  735,782
  779,702
  825,488
  873,243
  923,075
  975,098
Total equity, $m
  1,366
  9,035
  10,585
  12,271
  14,093
  16,046
  18,127
  20,334
  22,664
  25,114
  27,683
  30,370
  33,175
  36,099
  39,143
  42,309
  45,600
  49,021
  52,575
  56,270
  60,109
  64,101
  68,253
  72,573
  77,070
  81,754
  86,634
  91,721
  97,027
  102,564
  108,344
Total liabilities and equity, $m
  71,824
  90,352
  105,848
  122,714
  140,928
  160,457
  181,270
  203,339
  226,636
  251,138
  276,829
  303,701
  331,752
  360,989
  391,426
  423,086
  456,000
  490,208
  525,754
  562,696
  601,091
  641,012
  682,531
  725,731
  770,701
  817,536
  866,336
  917,209
  970,270
  1,025,639
  1,083,442
Debt-to-equity ratio
  16.723
  3.110
  3.970
  4.670
  5.230
  5.690
  6.070
  6.380
  6.650
  6.880
  7.080
  7.250
  7.400
  7.530
  7.640
  7.740
  7.830
  7.910
  7.990
  8.050
  8.120
  8.170
  8.220
  8.270
  8.310
  8.350
  8.390
  8.420
  8.450
  8.480
  8.510
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
  5,253
  7,568
  9,765
  12,141
  14,693
  17,416
  20,306
  23,358
  26,572
  29,943
  35,770
  39,455
  43,299
  47,303
  51,471
  55,806
  60,316
  65,006
  69,883
  74,957
  80,237
  85,733
  91,456
  97,419
  103,636
  110,119
  116,884
  123,946
  131,322
  139,030
Depreciation, amort., depletion, $m
  2,157
  8,485
  9,400
  10,396
  11,472
  12,625
  13,855
  15,158
  16,534
  17,981
  19,499
  17,938
  19,595
  21,321
  23,119
  24,989
  26,933
  28,954
  31,053
  33,235
  35,503
  37,861
  40,313
  42,865
  45,521
  48,287
  51,169
  54,174
  57,308
  60,578
  63,992
Funds from operations, $m
  10,354
  13,738
  16,968
  20,161
  23,613
  27,318
  31,270
  35,464
  39,892
  44,553
  49,442
  53,707
  59,050
  64,620
  70,422
  76,460
  82,740
  89,269
  96,059
  103,118
  110,460
  118,097
  126,046
  134,321
  142,940
  151,923
  161,288
  171,058
  181,254
  191,900
  203,022
Change in working capital, $m
  2,456
  -3,856
  -4,236
  -4,611
  -4,979
  -5,339
  -5,690
  -6,033
  -6,369
  -6,699
  -7,024
  -7,346
  -7,669
  -7,993
  -8,321
  -8,655
  -8,998
  -9,352
  -9,718
  -10,099
  -10,497
  -10,914
  -11,351
  -11,810
  -12,294
  -12,804
  -13,341
  -13,908
  -14,506
  -15,137
  -15,803
Cash from operations, $m
  7,898
  17,594
  21,204
  24,772
  28,592
  32,657
  36,961
  41,497
  46,261
  51,251
  56,465
  61,054
  66,718
  72,613
  78,743
  85,115
  91,738
  98,621
  105,777
  113,217
  120,957
  129,011
  137,396
  146,131
  155,234
  164,726
  174,629
  184,966
  195,760
  207,037
  218,825
Maintenance CAPEX, $m
  0
  -4,502
  -5,337
  -6,252
  -7,248
  -8,324
  -9,477
  -10,707
  -12,010
  -13,386
  -14,833
  -16,351
  -17,938
  -19,595
  -21,321
  -23,119
  -24,989
  -26,933
  -28,954
  -31,053
  -33,235
  -35,503
  -37,861
  -40,313
  -42,865
  -45,521
  -48,287
  -51,169
  -54,174
  -57,308
  -60,578
New CAPEX, $m
  -2,859
  -8,344
  -9,152
  -9,962
  -10,757
  -11,534
  -12,293
  -13,035
  -13,760
  -14,472
  -15,175
  -15,872
  -16,568
  -17,268
  -17,977
  -18,700
  -19,440
  -20,204
  -20,995
  -21,819
  -22,678
  -23,578
  -24,523
  -25,516
  -26,561
  -27,662
  -28,823
  -30,048
  -31,340
  -32,703
  -34,141
Cash from investing activities, $m
  -1,543
  -12,846
  -14,489
  -16,214
  -18,005
  -19,858
  -21,770
  -23,742
  -25,770
  -27,858
  -30,008
  -32,223
  -34,506
  -36,863
  -39,298
  -41,819
  -44,429
  -47,137
  -49,949
  -52,872
  -55,913
  -59,081
  -62,384
  -65,829
  -69,426
  -73,183
  -77,110
  -81,217
  -85,514
  -90,011
  -94,719
Free cash flow, $m
  6,355
  4,748
  6,715
  8,558
  10,587
  12,799
  15,190
  17,756
  20,492
  23,393
  26,458
  28,831
  32,212
  35,750
  39,444
  43,296
  47,308
  51,484
  55,828
  60,345
  65,043
  69,930
  75,013
  80,302
  85,809
  91,543
  97,519
  103,749
  110,246
  117,026
  124,105
Issuance/(repayment) of debt, $m
  158
  5,035
  13,946
  15,180
  16,391
  17,576
  18,732
  19,862
  20,967
  22,052
  23,123
  24,185
  25,246
  26,313
  27,393
  28,494
  29,623
  30,786
  31,992
  33,247
  34,557
  35,928
  37,367
  38,880
  40,473
  42,151
  43,920
  45,786
  47,755
  49,832
  52,023
Issuance/(repurchase) of shares, $m
  18
  3,874
  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
  8,909
  13,946
  15,180
  16,391
  17,576
  18,732
  19,862
  20,967
  22,052
  23,123
  24,185
  25,246
  26,313
  27,393
  28,494
  29,623
  30,786
  31,992
  33,247
  34,557
  35,928
  37,367
  38,880
  40,473
  42,151
  43,920
  45,786
  47,755
  49,832
  52,023
Total cash flow (excl. dividends), $m
  4,825
  13,657
  20,661
  23,738
  26,978
  30,375
  33,922
  37,617
  41,458
  45,445
  49,580
  53,016
  57,459
  62,063
  66,837
  71,790
  76,931
  82,270
  87,820
  93,592
  99,600
  105,858
  112,380
  119,182
  126,281
  133,694
  141,439
  149,535
  158,001
  166,858
  176,129
Retained Cash Flow (-), $m
  4,851
  -9,127
  -1,550
  -1,687
  -1,821
  -1,953
  -2,081
  -2,207
  -2,330
  -2,450
  -2,569
  -2,687
  -2,805
  -2,924
  -3,044
  -3,166
  -3,291
  -3,421
  -3,555
  -3,694
  -3,840
  -3,992
  -4,152
  -4,320
  -4,497
  -4,683
  -4,880
  -5,087
  -5,306
  -5,537
  -5,780
Prev. year cash balance distribution, $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 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
 
  4,530
  19,112
  22,052
  25,157
  28,422
  31,841
  35,411
  39,129
  42,995
  47,011
  50,329
  54,653
  59,139
  63,794
  68,624
  73,640
  78,850
  84,265
  89,898
  95,760
  101,866
  108,228
  114,862
  121,785
  129,011
  136,559
  144,447
  152,695
  161,321
  170,348
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  4,335
  17,426
  19,070
  20,533
  21,778
  22,776
  23,503
  23,943
  24,089
  23,941
  23,115
  22,449
  21,534
  20,398
  19,076
  17,607
  16,033
  14,398
  12,743
  11,110
  9,536
  8,051
  6,682
  5,447
  4,358
  3,418
  2,626
  1,974
  1,451
  1,041
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

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 185.4
Price to Sales 6.1
Price to Book 150.5
Price to Tangible Book
Price to Cash Flow 26
Price to Free Cash Flow 40.8
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 $40792 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 18.5% 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 4.5%, 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 63.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9525 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 5.4% 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 110.4%.

Life of production assets of 10 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 -51.1%. 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 - $-92 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 5368 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 $224.8 billion.

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COMPANY NEWS

▶ NeuroMetrix Reports Q2 2018 Financial Results   [Jul-19-18 07:00AM  GlobeNewswire]
▶ GlaxoSmithKline Is More Than Just a 5% Dividend Income Play   [Jul-17-18 12:33PM  InvestorPlace]
▶ Why GSK just inked a $330M deal with a Roivant subsidiary   [Jul-12-18 03:02PM  American City Business Journals]
▶ $331M deal: GSK sells rights to experimental psoriasis drug   [01:21PM  American City Business Journals]
▶ [$$] GSK director sued over US opioid epidemic   [Jul-03-18 12:33AM  Financial Times]
▶ 4 Drug and Biotech Stocks Awaiting FDA Decisions in July   [Jul-02-18 03:23PM  InvestorPlace]
▶ 3 Dividend Stocks That Pay You More Than Verizon Does   [Jun-27-18 09:46AM  Motley Fool]
▶ 3 Best Big Pharma Stocks of 2018 So Far   [06:31AM  Motley Fool]
▶ Mylan Stock Looks Cheap, but Dont Overlook These Risks   [Jun-21-18 12:12PM  InvestorPlace]
▶ Company News For Jun 15, 2018   [10:12AM  Zacks]
▶ Glaxo Pops But Analysts Say It's Unlikely To Swipe Gilead Share In HIV   [Jun-14-18 04:23PM  Investor's Business Daily]
▶ [$$] HIV treatment breakthrough boosts GSK   [02:43AM  Financial Times]
▶ After-hours buzz: TLRD, MYL & more   [Jun-13-18 06:06PM  CNBC]
▶ [$$] Head of GSKs vaccines division to leave by year-end   [Jun-11-18 10:14PM  Financial Times]
▶ The Cheapest Drug Stocks to Buy Right Now   [07:38AM  Motley Fool]
▶ Better Buy: GlaxoSmithKline plc vs. Johnson & Johnson   [Jun-08-18 08:18AM  Motley Fool]
▶ Pfizer Inc. Stock Desperately Needs a Viagra-Like Boost   [May-31-18 02:14PM  InvestorPlace]
▶ Is GlaxoSmithKline plc Stock a Buy?   [11:00AM  Motley Fool]
▶ As GSK broadens respiratory portfolio, Triangle at the center   [May-29-18 08:40AM  American City Business Journals]
▶ Liberty Property sells GSK's Navy Yard HQ for $130M   [May-08-18 10:34AM  American City Business Journals]
▶ 2 Beaten-Down Biotech Stocks That Look Like Bargains Now   [May-05-18 09:16AM  Motley Fool]
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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