Intrinsic value of Intel - INTC

Previous Close

$35.81

  Intrinsic Value

$37.95

stock screener

  Rating & Target

hold

+6%

  Value-price divergence*

+6%

Previous close

$35.81

 
Intrinsic value

$37.95

 
Up/down potential

+6%

 
Rating

hold

 
Value-price divergence*

+6%

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

We calculate the intrinsic value of INTC 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 168.3

 

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, %
  7.28
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.17
  5.15
  5.13
  5.12
  5.11
Revenue, $m
  59,387
  63,722
  68,227
  72,910
  77,778
  82,840
  88,108
  93,590
  99,299
  105,247
  111,447
  117,913
  124,660
  131,703
  139,058
  146,742
  154,774
  163,173
  171,957
  181,149
  190,769
  200,841
  211,389
  222,437
  234,012
  246,142
  258,855
  272,183
  286,156
  300,808
  316,175
Variable operating expenses, $m
 
  47,243
  50,483
  53,851
  57,352
  60,994
  64,782
  68,725
  72,832
  77,110
  81,569
  84,810
  89,663
  94,728
  100,019
  105,546
  111,323
  117,364
  123,682
  130,293
  137,212
  144,457
  152,043
  159,990
  168,315
  177,040
  186,184
  195,770
  205,820
  216,359
  227,411
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
  46,605
  47,243
  50,483
  53,851
  57,352
  60,994
  64,782
  68,725
  72,832
  77,110
  81,569
  84,810
  89,663
  94,728
  100,019
  105,546
  111,323
  117,364
  123,682
  130,293
  137,212
  144,457
  152,043
  159,990
  168,315
  177,040
  186,184
  195,770
  205,820
  216,359
  227,411
Operating income, $m
  12,782
  16,480
  17,744
  19,059
  20,426
  21,847
  23,325
  24,865
  26,467
  28,137
  29,878
  33,103
  34,997
  36,974
  39,039
  41,197
  43,452
  45,809
  48,275
  50,856
  53,557
  56,384
  59,345
  62,447
  65,697
  69,102
  72,671
  76,413
  80,336
  84,449
  88,763
EBITDA, $m
  20,572
  22,261
  23,835
  25,470
  27,171
  28,940
  30,780
  32,695
  34,689
  36,767
  38,933
  41,192
  43,549
  46,009
  48,579
  51,263
  54,069
  57,003
  60,072
  63,283
  66,643
  70,162
  73,847
  77,706
  81,750
  85,987
  90,429
  95,085
  99,966
  105,085
  110,453
Interest expense (income), $m
  682
  723
  830
  943
  1,060
  1,182
  1,309
  1,440
  1,578
  1,720
  1,869
  2,024
  2,186
  2,355
  2,531
  2,715
  2,907
  3,108
  3,318
  3,538
  3,768
  4,009
  4,261
  4,525
  4,801
  5,090
  5,394
  5,712
  6,045
  6,395
  6,761
Earnings before tax, $m
  12,936
  15,757
  16,914
  18,116
  19,365
  20,665
  22,017
  23,424
  24,890
  26,417
  28,009
  31,079
  32,811
  34,619
  36,508
  38,482
  40,544
  42,701
  44,957
  47,318
  49,789
  52,376
  55,085
  57,923
  60,896
  64,012
  67,277
  70,701
  74,290
  78,054
  82,002
Tax expense, $m
  2,620
  4,254
  4,567
  4,891
  5,229
  5,579
  5,945
  6,325
  6,720
  7,133
  7,562
  8,391
  8,859
  9,347
  9,857
  10,390
  10,947
  11,529
  12,138
  12,776
  13,443
  14,141
  14,873
  15,639
  16,442
  17,283
  18,165
  19,089
  20,058
  21,075
  22,140
Net income, $m
  10,316
  11,502
  12,347
  13,224
  14,137
  15,085
  16,072
  17,100
  18,170
  19,284
  20,446
  22,687
  23,952
  25,272
  26,651
  28,092
  29,597
  31,172
  32,819
  34,542
  36,346
  38,234
  40,212
  42,283
  44,454
  46,728
  49,112
  51,612
  54,232
  56,980
  59,861

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17,099
  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
  113,327
  103,278
  110,579
  118,168
  126,058
  134,263
  142,800
  151,685
  160,938
  170,579
  180,627
  191,107
  202,042
  213,457
  225,377
  237,832
  250,850
  264,462
  278,699
  293,596
  309,188
  325,512
  342,607
  360,513
  379,274
  398,933
  419,539
  441,139
  463,786
  487,534
  512,439
Adjusted assets (=assets-cash), $m
  96,228
  103,278
  110,579
  118,168
  126,058
  134,263
  142,800
  151,685
  160,938
  170,579
  180,627
  191,107
  202,042
  213,457
  225,377
  237,832
  250,850
  264,462
  278,699
  293,596
  309,188
  325,512
  342,607
  360,513
  379,274
  398,933
  419,539
  441,139
  463,786
  487,534
  512,439
Revenue / Adjusted assets
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
Average production assets, $m
  40,728
  43,713
  46,804
  50,016
  53,356
  56,829
  60,442
  64,203
  68,119
  72,199
  76,453
  80,889
  85,517
  90,348
  95,394
  100,665
  106,175
  111,937
  117,963
  124,268
  130,868
  137,777
  145,013
  152,592
  160,532
  168,853
  177,575
  186,717
  196,303
  206,354
  216,896
Working capital, $m
  15,206
  2,931
  3,138
  3,354
  3,578
  3,811
  4,053
  4,305
  4,568
  4,841
  5,127
  5,424
  5,734
  6,058
  6,397
  6,750
  7,120
  7,506
  7,910
  8,333
  8,775
  9,239
  9,724
  10,232
  10,765
  11,323
  11,907
  12,520
  13,163
  13,837
  14,544
Total debt, $m
  25,283
  23,727
  26,947
  30,294
  33,774
  37,392
  41,157
  45,075
  49,156
  53,407
  57,839
  62,460
  67,283
  72,316
  77,573
  83,066
  88,807
  94,810
  101,088
  107,658
  114,534
  121,733
  129,272
  137,168
  145,442
  154,112
  163,199
  172,724
  182,712
  193,184
  204,167
Total liabilities, $m
  47,101
  45,545
  48,765
  52,112
  55,592
  59,210
  62,975
  66,893
  70,974
  75,225
  79,657
  84,278
  89,101
  94,134
  99,391
  104,884
  110,625
  116,628
  122,906
  129,476
  136,352
  143,551
  151,090
  158,986
  167,260
  175,930
  185,017
  194,542
  204,530
  215,002
  225,985
Total equity, $m
  66,226
  57,732
  61,814
  66,056
  70,466
  75,053
  79,825
  84,792
  89,964
  95,353
  100,971
  106,829
  112,942
  119,322
  125,986
  132,948
  140,225
  147,834
  155,793
  164,120
  172,836
  181,961
  191,517
  201,527
  212,014
  223,004
  234,522
  246,597
  259,256
  272,531
  286,453
Total liabilities and equity, $m
  113,327
  103,277
  110,579
  118,168
  126,058
  134,263
  142,800
  151,685
  160,938
  170,578
  180,628
  191,107
  202,043
  213,456
  225,377
  237,832
  250,850
  264,462
  278,699
  293,596
  309,188
  325,512
  342,607
  360,513
  379,274
  398,934
  419,539
  441,139
  463,786
  487,533
  512,438
Debt-to-equity ratio
  0.382
  0.410
  0.440
  0.460
  0.480
  0.500
  0.520
  0.530
  0.550
  0.560
  0.570
  0.580
  0.600
  0.610
  0.620
  0.620
  0.630
  0.640
  0.650
  0.660
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.700
  0.710
  0.710
Adjusted equity ratio
  0.511
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10,316
  11,502
  12,347
  13,224
  14,137
  15,085
  16,072
  17,100
  18,170
  19,284
  20,446
  22,687
  23,952
  25,272
  26,651
  28,092
  29,597
  31,172
  32,819
  34,542
  36,346
  38,234
  40,212
  42,283
  44,454
  46,728
  49,112
  51,612
  54,232
  56,980
  59,861
Depreciation, amort., depletion, $m
  7,790
  5,781
  6,090
  6,412
  6,745
  7,093
  7,454
  7,830
  8,222
  8,630
  9,055
  8,089
  8,552
  9,035
  9,539
  10,067
  10,618
  11,194
  11,796
  12,427
  13,087
  13,778
  14,501
  15,259
  16,053
  16,885
  17,757
  18,672
  19,630
  20,635
  21,690
Funds from operations, $m
  22,476
  17,284
  18,437
  19,636
  20,882
  22,178
  23,526
  24,930
  26,391
  27,914
  29,501
  30,776
  32,504
  34,307
  36,190
  38,158
  40,215
  42,365
  44,615
  46,969
  49,432
  52,012
  54,713
  57,543
  60,507
  63,614
  66,870
  70,283
  73,862
  77,615
  81,551
Change in working capital, $m
  668
  199
  207
  215
  224
  233
  242
  252
  263
  274
  285
  297
  310
  324
  338
  353
  369
  386
  404
  423
  443
  463
  485
  508
  532
  558
  585
  613
  643
  674
  707
Cash from operations, $m
  21,808
  17,084
  18,230
  19,421
  20,658
  21,945
  23,284
  24,678
  26,129
  27,640
  29,216
  30,479
  32,193
  33,983
  35,852
  37,805
  39,845
  41,979
  44,211
  46,546
  48,990
  51,549
  54,228
  57,034
  59,975
  63,056
  66,285
  69,670
  73,219
  76,941
  80,844
Maintenance CAPEX, $m
  0
  -4,073
  -4,371
  -4,680
  -5,002
  -5,336
  -5,683
  -6,044
  -6,420
  -6,812
  -7,220
  -7,645
  -8,089
  -8,552
  -9,035
  -9,539
  -10,067
  -10,618
  -11,194
  -11,796
  -12,427
  -13,087
  -13,778
  -14,501
  -15,259
  -16,053
  -16,885
  -17,757
  -18,672
  -19,630
  -20,635
New CAPEX, $m
  -9,625
  -2,985
  -3,091
  -3,212
  -3,339
  -3,473
  -3,613
  -3,761
  -3,916
  -4,080
  -4,253
  -4,436
  -4,628
  -4,831
  -5,046
  -5,272
  -5,510
  -5,761
  -6,026
  -6,305
  -6,600
  -6,909
  -7,236
  -7,579
  -7,941
  -8,321
  -8,721
  -9,143
  -9,586
  -10,051
  -10,541
Cash from investing activities, $m
  -25,817
  -7,058
  -7,462
  -7,892
  -8,341
  -8,809
  -9,296
  -9,805
  -10,336
  -10,892
  -11,473
  -12,081
  -12,717
  -13,383
  -14,081
  -14,811
  -15,577
  -16,379
  -17,220
  -18,101
  -19,027
  -19,996
  -21,014
  -22,080
  -23,200
  -24,374
  -25,606
  -26,900
  -28,258
  -29,681
  -31,176
Free cash flow, $m
  -4,009
  10,026
  10,768
  11,528
  12,317
  13,137
  13,988
  14,873
  15,792
  16,748
  17,743
  18,398
  19,476
  20,600
  21,772
  22,994
  24,269
  25,600
  26,991
  28,444
  29,964
  31,552
  33,215
  34,954
  36,775
  38,682
  40,678
  42,770
  44,962
  47,259
  49,667
Issuance/(repayment) of debt, $m
  1,219
  3,078
  3,220
  3,347
  3,479
  3,618
  3,765
  3,918
  4,081
  4,251
  4,432
  4,622
  4,822
  5,034
  5,257
  5,493
  5,741
  6,003
  6,279
  6,570
  6,876
  7,199
  7,539
  7,897
  8,273
  8,670
  9,087
  9,526
  9,987
  10,473
  10,983
Issuance/(repurchase) of shares, $m
  -1,479
  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  
  -814
  3,078
  3,220
  3,347
  3,479
  3,618
  3,765
  3,918
  4,081
  4,251
  4,432
  4,622
  4,822
  5,034
  5,257
  5,493
  5,741
  6,003
  6,279
  6,570
  6,876
  7,199
  7,539
  7,897
  8,273
  8,670
  9,087
  9,526
  9,987
  10,473
  10,983
Total cash flow (excl. dividends), $m
  -4,823
  13,104
  13,988
  14,875
  15,796
  16,755
  17,753
  18,791
  19,873
  21,000
  22,175
  23,019
  24,298
  25,634
  27,029
  28,486
  30,010
  31,603
  33,270
  35,014
  36,840
  38,751
  40,753
  42,851
  45,048
  47,351
  49,765
  52,296
  54,949
  57,732
  60,650
Retained Cash Flow (-), $m
  -5,141
  -3,971
  -4,082
  -4,242
  -4,410
  -4,587
  -4,772
  -4,967
  -5,172
  -5,389
  -5,617
  -5,858
  -6,113
  -6,381
  -6,664
  -6,962
  -7,277
  -7,609
  -7,959
  -8,327
  -8,716
  -9,125
  -9,556
  -10,010
  -10,487
  -10,990
  -11,518
  -12,075
  -12,660
  -13,275
  -13,922
Prev. year cash balance distribution, $m
 
  12,465
  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
 
  21,598
  9,907
  10,633
  11,386
  12,168
  12,981
  13,824
  14,700
  15,611
  16,557
  17,161
  18,186
  19,253
  20,365
  21,524
  22,733
  23,994
  25,311
  26,687
  28,124
  29,626
  31,197
  32,841
  34,561
  36,362
  38,247
  40,221
  42,290
  44,457
  46,728
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
 
  20,708
  9,069
  9,253
  9,375
  9,432
  9,421
  9,339
  9,188
  8,967
  8,680
  8,150
  7,761
  7,320
  6,837
  6,319
  5,777
  5,221
  4,661
  4,109
  3,574
  3,064
  2,589
  2,152
  1,760
  1,415
  1,116
  863
  654
  485
  352
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

Intel Corporation designs, manufactures, and sells computer, networking, and communications platforms worldwide. It operates through Client Computing Group, Data Center Group, Internet of Things Group, Non-Volatile Memory Solutions Group, Intel Security Group, Programmable Solutions Group, and All Other segments. The company’s platforms are used in notebooks, 2 in 1 systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, and mobile communication components; enterprise, cloud, and communication infrastructure; and retail, transportation, industrial, video, buildings, and other market segments. It offers microprocessors that processes system data and controls other devices in the system; chipsets, which send data between the microprocessor and input, display, and storage devices, such as keyboard, mouse, monitor, hard drive or solid-state drive, and optical disc drives; and system-on-chip and multichip packaging products that integrate its central processing units with other system components onto a single chip. The company also NAND flash memory products primarily used in solid-state drives; security software products that secure computers, mobile devices, and networks; programmable semiconductors and related products for communications, data center, industrial, military, and automotive market segments. It serves original equipment manufacturers, original design manufacturers, cloud and communications service providers, and industrial, communications, and automotive equipment manufacturers. The company was founded in 1968 and is based in Santa Clara, California.

FINANCIAL RATIOS  of  Intel (INTC)

Valuation Ratios
P/E Ratio 16.4
Price to Sales 2.9
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow 13.9
Growth Rates
Sales Growth Rate 7.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.3%
Cap. Spend. - 3 Yr. Gr. Rate -2.2%
Financial Strength
Quick Ratio 4
Current Ratio 0.4
LT Debt to Equity 31.2%
Total Debt to Equity 38.2%
Interest Coverage 20
Management Effectiveness
Return On Assets 10.1%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital 11.8%
Ret/ On T. Cap. - 3 Yr. Avg. 14.4%
Return On Equity 16.2%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 60.9%
Gross Margin - 3 Yr. Avg. 62.4%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 40.6%
Operating Margin 21.5%
Oper. Margin - 3 Yr. Avg. 24.8%
Pre-Tax Margin 21.8%
Pre-Tax Margin - 3 Yr. Avg. 25.2%
Net Profit Margin 17.4%
Net Profit Margin - 3 Yr. Avg. 19.6%
Effective Tax Rate 20.3%
Eff/ Tax Rate - 3 Yr. Avg. 21.9%
Payout Ratio 47.7%

INTC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INTC stock intrinsic value calculation we used $59387 million for the last fiscal year's total revenue generated by Intel. The default revenue input number comes from 2016 income statement of Intel. 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 INTC stock valuation model: a) initial revenue growth rate of 7.3% 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 INTC is calculated based on our internal credit rating of Intel, 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 Intel.
    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 INTC stock the variable cost ratio is equal to 74.3%.

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 INTC 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 Intel.

Corporate tax rate of 27% is the nominal tax rate for Intel. 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 INTC 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 INTC are equal to 68.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Intel 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 INTC is equal to 4.6%. 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 - $66226 million for Intel - 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 4698.86 million for Intel 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 Intel at the current share price and the inputted number of shares is $168.3 billion.

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Stock chart of INTC Financial statements of INTC
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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