Intrinsic value of InterDigital - IDCC

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$81.05

  Intrinsic Value

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  Value-price divergence*

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$81.05

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

We calculate the intrinsic value of IDCC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.7

 

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, %
  51.02
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  666
  1,066
  1,646
  2,462
  3,572
  5,040
  6,929
  9,301
  12,213
  15,715
  19,849
  24,648
  30,134
  36,322
  43,216
  50,814
  59,109
  68,089
  77,738
  88,043
  98,986
  110,555
  122,736
  135,520
  148,902
  162,880
  177,455
  192,634
  208,426
  224,847
  241,914
Variable operating expenses, $m
 
  564
  871
  1,302
  1,890
  2,666
  3,665
  4,920
  6,460
  8,313
  10,500
  13,039
  15,941
  19,214
  22,861
  26,881
  31,269
  36,019
  41,124
  46,575
  52,364
  58,483
  64,927
  71,690
  78,769
  86,163
  93,874
  101,903
  110,257
  118,944
  127,973
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
  229
  564
  871
  1,302
  1,890
  2,666
  3,665
  4,920
  6,460
  8,313
  10,500
  13,039
  15,941
  19,214
  22,861
  26,881
  31,269
  36,019
  41,124
  46,575
  52,364
  58,483
  64,927
  71,690
  78,769
  86,163
  93,874
  101,903
  110,257
  118,944
  127,973
Operating income, $m
  437
  502
  775
  1,160
  1,683
  2,374
  3,264
  4,381
  5,752
  7,402
  9,349
  11,609
  14,193
  17,108
  20,355
  23,933
  27,840
  32,070
  36,615
  41,468
  46,623
  52,071
  57,808
  63,830
  70,133
  76,716
  83,581
  90,730
  98,169
  105,903
  113,942
EBITDA, $m
  490
  587
  906
  1,355
  1,967
  2,775
  3,814
  5,120
  6,723
  8,651
  10,926
  13,568
  16,588
  19,995
  23,790
  27,972
  32,539
  37,482
  42,794
  48,466
  54,490
  60,858
  67,564
  74,601
  81,968
  89,662
  97,686
  106,042
  114,735
  123,774
  133,170
Interest expense (income), $m
  8
  10
  14
  35
  65
  106
  160
  229
  316
  423
  551
  703
  879
  1,080
  1,307
  1,560
  1,838
  2,143
  2,472
  2,826
  3,204
  3,605
  4,029
  4,476
  4,945
  5,435
  5,948
  6,482
  7,039
  7,618
  8,220
Earnings before tax, $m
  422
  492
  761
  1,124
  1,617
  2,268
  3,104
  4,152
  5,436
  6,979
  8,798
  10,906
  13,314
  16,028
  19,048
  22,374
  26,002
  29,927
  34,143
  38,643
  43,419
  48,466
  53,779
  59,354
  65,188
  71,281
  77,633
  84,248
  91,130
  98,285
  105,721
Tax expense, $m
  117
  133
  206
  304
  437
  612
  838
  1,121
  1,468
  1,884
  2,375
  2,945
  3,595
  4,327
  5,143
  6,041
  7,021
  8,080
  9,219
  10,433
  11,723
  13,086
  14,520
  16,026
  17,601
  19,246
  20,961
  22,747
  24,605
  26,537
  28,545
Net income, $m
  309
  359
  556
  821
  1,181
  1,656
  2,266
  3,031
  3,968
  5,095
  6,422
  7,962
  9,720
  11,700
  13,905
  16,333
  18,981
  21,847
  24,924
  28,209
  31,696
  35,380
  39,259
  43,329
  47,587
  52,035
  56,672
  61,501
  66,525
  71,748
  77,177

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  953
  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
  1,728
  1,241
  1,917
  2,866
  4,159
  5,867
  8,066
  10,827
  14,217
  18,294
  23,107
  28,694
  35,081
  42,284
  50,309
  59,155
  68,811
  79,265
  90,499
  102,495
  115,234
  128,701
  142,882
  157,765
  173,343
  189,615
  206,583
  224,253
  242,638
  261,754
  281,623
Adjusted assets (=assets-cash), $m
  775
  1,241
  1,917
  2,866
  4,159
  5,867
  8,066
  10,827
  14,217
  18,294
  23,107
  28,694
  35,081
  42,284
  50,309
  59,155
  68,811
  79,265
  90,499
  102,495
  115,234
  128,701
  142,882
  157,765
  173,343
  189,615
  206,583
  224,253
  242,638
  261,754
  281,623
Revenue / Adjusted assets
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
  0.859
Average production assets, $m
  307
  491
  759
  1,135
  1,647
  2,324
  3,194
  4,288
  5,630
  7,244
  9,150
  11,363
  13,892
  16,744
  19,922
  23,425
  27,249
  31,389
  35,837
  40,588
  45,633
  50,966
  56,581
  62,475
  68,644
  75,088
  81,807
  88,804
  96,084
  103,654
  111,522
Working capital, $m
  796
  -251
  -389
  -581
  -843
  -1,189
  -1,635
  -2,195
  -2,882
  -3,709
  -4,684
  -5,817
  -7,112
  -8,572
  -10,199
  -11,992
  -13,950
  -16,069
  -18,346
  -20,778
  -23,361
  -26,091
  -28,966
  -31,983
  -35,141
  -38,440
  -41,879
  -45,462
  -49,189
  -53,064
  -57,092
Total debt, $m
  272
  400
  1,009
  1,864
  3,027
  4,565
  6,544
  9,029
  12,079
  15,749
  20,080
  25,108
  30,857
  37,339
  44,563
  52,523
  61,214
  70,623
  80,733
  91,529
  102,995
  115,115
  127,878
  141,272
  155,293
  169,938
  185,209
  201,112
  217,658
  234,863
  252,745
Total liabilities, $m
  988
  1,116
  1,725
  2,580
  3,743
  5,281
  7,260
  9,745
  12,795
  16,465
  20,796
  25,824
  31,573
  38,055
  45,279
  53,239
  61,930
  71,339
  81,449
  92,245
  103,711
  115,831
  128,594
  141,988
  156,009
  170,654
  185,925
  201,828
  218,374
  235,579
  253,461
Total equity, $m
  740
  124
  192
  287
  416
  587
  807
  1,083
  1,422
  1,829
  2,311
  2,869
  3,508
  4,228
  5,031
  5,915
  6,881
  7,927
  9,050
  10,249
  11,523
  12,870
  14,288
  15,776
  17,334
  18,962
  20,658
  22,425
  24,264
  26,175
  28,162
Total liabilities and equity, $m
  1,728
  1,240
  1,917
  2,867
  4,159
  5,868
  8,067
  10,828
  14,217
  18,294
  23,107
  28,693
  35,081
  42,283
  50,310
  59,154
  68,811
  79,266
  90,499
  102,494
  115,234
  128,701
  142,882
  157,764
  173,343
  189,616
  206,583
  224,253
  242,638
  261,754
  281,623
Debt-to-equity ratio
  0.368
  3.230
  5.260
  6.500
  7.280
  7.780
  8.110
  8.340
  8.500
  8.610
  8.690
  8.750
  8.800
  8.830
  8.860
  8.880
  8.900
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.970
Adjusted equity ratio
  -0.275
  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
  309
  359
  556
  821
  1,181
  1,656
  2,266
  3,031
  3,968
  5,095
  6,422
  7,962
  9,720
  11,700
  13,905
  16,333
  18,981
  21,847
  24,924
  28,209
  31,696
  35,380
  39,259
  43,329
  47,587
  52,035
  56,672
  61,501
  66,525
  71,748
  77,177
Depreciation, amort., depletion, $m
  53
  85
  131
  196
  284
  401
  551
  739
  971
  1,249
  1,578
  1,959
  2,395
  2,887
  3,435
  4,039
  4,698
  5,412
  6,179
  6,998
  7,868
  8,787
  9,755
  10,772
  11,835
  12,946
  14,105
  15,311
  16,566
  17,871
  19,228
Funds from operations, $m
  251
  444
  687
  1,016
  1,465
  2,056
  2,817
  3,770
  4,939
  6,344
  8,000
  9,921
  12,115
  14,587
  17,340
  20,372
  23,680
  27,259
  31,103
  35,207
  39,564
  44,168
  49,014
  54,100
  59,423
  64,981
  70,777
  76,812
  83,091
  89,619
  96,405
Change in working capital, $m
  -180
  -94
  -137
  -193
  -262
  -346
  -446
  -560
  -687
  -826
  -976
  -1,133
  -1,295
  -1,460
  -1,627
  -1,793
  -1,958
  -2,119
  -2,277
  -2,432
  -2,583
  -2,730
  -2,875
  -3,017
  -3,158
  -3,299
  -3,440
  -3,582
  -3,727
  -3,875
  -4,028
Cash from operations, $m
  431
  555
  824
  1,209
  1,727
  2,403
  3,262
  4,330
  5,626
  7,170
  8,976
  11,053
  13,409
  16,047
  18,967
  22,165
  25,637
  29,378
  33,381
  37,639
  42,146
  46,898
  51,889
  57,117
  62,581
  68,280
  74,217
  80,394
  86,818
  93,495
  100,432
Maintenance CAPEX, $m
  0
  -53
  -85
  -131
  -196
  -284
  -401
  -551
  -739
  -971
  -1,249
  -1,578
  -1,959
  -2,395
  -2,887
  -3,435
  -4,039
  -4,698
  -5,412
  -6,179
  -6,998
  -7,868
  -8,787
  -9,755
  -10,772
  -11,835
  -12,946
  -14,105
  -15,311
  -16,566
  -17,871
New CAPEX, $m
  -43
  -184
  -268
  -376
  -512
  -677
  -871
  -1,093
  -1,342
  -1,614
  -1,906
  -2,212
  -2,529
  -2,853
  -3,178
  -3,503
  -3,824
  -4,140
  -4,449
  -4,750
  -5,045
  -5,333
  -5,615
  -5,894
  -6,169
  -6,444
  -6,719
  -6,997
  -7,280
  -7,570
  -7,868
Cash from investing activities, $m
  -219
  -237
  -353
  -507
  -708
  -961
  -1,272
  -1,644
  -2,081
  -2,585
  -3,155
  -3,790
  -4,488
  -5,248
  -6,065
  -6,938
  -7,863
  -8,838
  -9,861
  -10,929
  -12,043
  -13,201
  -14,402
  -15,649
  -16,941
  -18,279
  -19,665
  -21,102
  -22,591
  -24,136
  -25,739
Free cash flow, $m
  212
  318
  471
  702
  1,019
  1,442
  1,991
  2,686
  3,545
  4,585
  5,821
  7,263
  8,921
  10,800
  12,902
  15,227
  17,774
  20,540
  23,520
  26,710
  30,103
  33,697
  37,486
  41,468
  45,640
  50,001
  54,551
  59,292
  64,227
  69,358
  74,693
Issuance/(repayment) of debt, $m
  -230
  128
  608
  855
  1,163
  1,538
  1,979
  2,485
  3,051
  3,669
  4,332
  5,028
  5,748
  6,483
  7,223
  7,961
  8,691
  9,408
  10,110
  10,796
  11,466
  12,120
  12,762
  13,395
  14,021
  14,645
  15,271
  15,903
  16,546
  17,204
  17,882
Issuance/(repurchase) of shares, $m
  -64
  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  
  -287
  128
  608
  855
  1,163
  1,538
  1,979
  2,485
  3,051
  3,669
  4,332
  5,028
  5,748
  6,483
  7,223
  7,961
  8,691
  9,408
  10,110
  10,796
  11,466
  12,120
  12,762
  13,395
  14,021
  14,645
  15,271
  15,903
  16,546
  17,204
  17,882
Total cash flow (excl. dividends), $m
  -75
  447
  1,080
  1,557
  2,182
  2,980
  3,970
  5,171
  6,595
  8,254
  10,152
  12,291
  14,670
  17,283
  20,125
  23,188
  26,465
  29,948
  33,631
  37,506
  41,569
  45,817
  50,249
  54,863
  59,661
  64,646
  69,822
  75,196
  80,773
  86,563
  92,575
Retained Cash Flow (-), $m
  -229
  -337
  -68
  -95
  -129
  -171
  -220
  -276
  -339
  -408
  -481
  -559
  -639
  -720
  -803
  -885
  -966
  -1,045
  -1,123
  -1,200
  -1,274
  -1,347
  -1,418
  -1,488
  -1,558
  -1,627
  -1,697
  -1,767
  -1,838
  -1,912
  -1,987
Prev. year cash balance distribution, $m
 
  953
  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
 
  1,063
  1,012
  1,462
  2,053
  2,809
  3,750
  4,894
  6,256
  7,846
  9,671
  11,733
  14,031
  16,562
  19,322
  22,304
  25,500
  28,903
  32,507
  36,306
  40,295
  44,471
  48,831
  53,375
  58,103
  63,019
  68,126
  73,429
  78,935
  84,651
  90,588
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
 
  1,019
  927
  1,272
  1,691
  2,177
  2,722
  3,307
  3,910
  4,507
  5,070
  5,572
  5,987
  6,297
  6,487
  6,548
  6,480
  6,289
  5,987
  5,590
  5,120
  4,600
  4,052
  3,498
  2,959
  2,452
  1,988
  1,576
  1,221
  924
  682
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

InterDigital, Inc. designs and develops technologies that enable and enhance wireless communications in the United States and internationally. It offers technology solutions for use in digital cellular and wireless products and networks, including 2G, 3G, 4G, and IEEE 802-related products and networks. The company develops cellular technologies, such as technologies related to CDMA, TDMA, OFDM/OFDMA, and MIMO for use in 2G, 3G, and 4G wireless networks and mobile terminal devices; and other wireless technologies related to Wi-Fi, WLAN, WMAN, and WRAN. Its patented technologies are used in various products, including mobile devices comprising cellular phones, tablets, notebook computers, and wireless personal digital assistants; wireless infrastructure equipment consisting of base stations; components, dongles, and modules for wireless devices; and Internet of Things devices and software platforms. The company also provides interoperability and scalability solutions across various vertical markets, networks, and devices through oneMPOWER platform; and common interface to multiple service providers through wot.io data service exchange for connected device platforms, as well as sensor and sensor fusion technology solutions. As of December 31, 2016, it had a portfolio of approximately 20,000 patents and patent applications related to the fundamental technologies that enable wireless communications. InterDigital, Inc. was founded in 1972 and is headquartered in Wilmington, Delaware.

FINANCIAL RATIOS  of  InterDigital (IDCC)

Valuation Ratios
P/E Ratio 9
Price to Sales 4.2
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate 51%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.9%
Cap. Spend. - 3 Yr. Gr. Rate -7.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 36.8%
Total Debt to Equity 36.8%
Interest Coverage 54
Management Effectiveness
Return On Assets 19.7%
Ret/ On Assets - 3 Yr. Avg. 12.8%
Return On Total Capital 30.7%
Ret/ On T. Cap. - 3 Yr. Avg. 19.8%
Return On Equity 49.4%
Return On Equity - 3 Yr. Avg. 31.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 72.5%
EBITDA Margin - 3 Yr. Avg. 58.3%
Operating Margin 65.6%
Oper. Margin - 3 Yr. Avg. 51.1%
Pre-Tax Margin 63.4%
Pre-Tax Margin - 3 Yr. Avg. 47.1%
Net Profit Margin 46.4%
Net Profit Margin - 3 Yr. Avg. 32.8%
Effective Tax Rate 27.7%
Eff/ Tax Rate - 3 Yr. Avg. 32.7%
Payout Ratio 10%

IDCC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IDCC stock intrinsic value calculation we used $666 million for the last fiscal year's total revenue generated by InterDigital. The default revenue input number comes from 2016 income statement of InterDigital. 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 IDCC stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for IDCC is calculated based on our internal credit rating of InterDigital, 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 InterDigital.
    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 IDCC stock the variable cost ratio is equal to 52.9%.

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 IDCC 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 InterDigital.

Corporate tax rate of 27% is the nominal tax rate for InterDigital. 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 IDCC 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 IDCC are equal to 46.1%.

Life of production assets of 5.8 years is the average useful life of capital assets used in InterDigital 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 IDCC is equal to -23.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $740 million for InterDigital - 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 33.314 million for InterDigital 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 InterDigital at the current share price and the inputted number of shares is $2.7 billion.


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COMPANY NEWS

▶ InterDigital Hosts 2017 Annual Meeting of Shareholders   [Jun-14-17 04:30PM  GlobeNewswire]
▶ ETFs with exposure to InterDigital, Inc. : June 9, 2017   [Jun-09-17 01:38PM  Capital Cube]
▶ 2 Attractive Income Stocks Whose Dividends Could Double   [Jun-01-17 07:57AM  Motley Fool]
▶ ETFs with exposure to InterDigital, Inc. : May 11, 2017   [May-11-17 04:53PM  Capital Cube]
▶ ETFs with exposure to InterDigital, Inc. : May 1, 2017   [May-01-17 03:59PM  Capital Cube]
▶ InterDigital posts 1Q profit   [Apr-27-17 08:40AM  Associated Press]
▶ InterDigital Joins the 5G Automotive Association   [Apr-10-17 08:30AM  GlobeNewswire]
▶ What Makes InterDigital (IDCC) a Strong Sell?   [Mar-14-17 08:37AM  Zacks]
▶ Why InterDigital, Inc. Fell 10% in February   [Mar-09-17 05:34PM  at Motley Fool]
▶ Why InterDigital, Inc. Stock Plunged Today   [Feb-23-17 07:04PM  at Motley Fool]
▶ Is It Too Late to Buy InterDigital Stock?   [Feb-21-17 07:21PM  at Motley Fool]
▶ 2 Cheap Stocks You Can Buy Right Now   [12:11PM  at Motley Fool]
▶ 3 Stocks With NVIDIA-Like Return Potential   [Feb-19-17 02:57AM  at Motley Fool]
▶ 7 Tech Stocks With Explosive Growth Potential   [Feb-07-17 09:00AM  at Kiplinger]
▶ European H2020 Project FLAME Kicks Off Call for Experiments   [Jan-24-17 04:15PM  GlobeNewswire]
▶ InterDigital Engineer Named IEEE Fellow   [Jan-04-17 11:53AM  GlobeNewswire]
▶ Why Eli Lilly, Xilinx, and InterDigital Jumped Today   [Dec-15-16 06:25PM  at Motley Fool]
▶ Should You Add InterDigital, Inc. (IDCC) to Your Portfolio?   [Dec-06-16 01:47PM  at Insider Monkey]
▶ InterDigital to Present at NASDAQ 35th Investor Program   [Nov-22-16 08:30AM  GlobeNewswire]
▶ Why InterDigital, Inc. Fell 11% in October   [Nov-12-16 06:14PM  at Motley Fool]
▶ InterDigital Adds Jay Markley to Board of Directors   [Nov-03-16 04:30PM  GlobeNewswire]
Stock chart of IDCC Financial statements of IDCC Annual reports of IDCC
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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