Intrinsic value of Nomura Holdings ADR - NMR

Previous Close

$5.79

  Intrinsic Value

$9.86

stock screener

  Rating & Target

str. buy

+70%

Previous close

$5.79

 
Intrinsic value

$9.86

 
Up/down potential

+70%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as NMR.

We calculate the intrinsic value of NMR 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 2017), $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 22.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.44
  11.90
  11.21
  10.59
  10.03
  9.53
  9.07
  8.67
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
Revenue, $m
  14,934
  16,711
  18,584
  20,552
  22,614
  24,768
  27,016
  29,357
  31,794
  34,328
  36,962
  39,699
  42,544
  45,500
  48,573
  51,769
  55,093
  58,552
  62,153
  65,904
  69,814
  73,890
  78,143
  82,581
  87,215
  92,056
  97,114
  102,403
  107,934
  113,720
  119,776
Variable operating expenses, $m
 
  15,107
  16,800
  18,579
  20,443
  22,390
  24,422
  26,539
  28,742
  31,033
  33,414
  35,888
  38,460
  41,132
  43,910
  46,799
  49,804
  52,931
  56,186
  59,578
  63,112
  66,797
  70,641
  74,653
  78,842
  83,218
  87,791
  92,572
  97,572
  102,803
  108,278
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
  12,124
  15,107
  16,800
  18,579
  20,443
  22,390
  24,422
  26,539
  28,742
  31,033
  33,414
  35,888
  38,460
  41,132
  43,910
  46,799
  49,804
  52,931
  56,186
  59,578
  63,112
  66,797
  70,641
  74,653
  78,842
  83,218
  87,791
  92,572
  97,572
  102,803
  108,278
Operating income, $m
  2,810
  1,604
  1,784
  1,973
  2,171
  2,378
  2,594
  2,818
  3,052
  3,295
  3,548
  3,811
  4,084
  4,368
  4,663
  4,970
  5,289
  5,621
  5,967
  6,327
  6,702
  7,093
  7,502
  7,928
  8,373
  8,837
  9,323
  9,831
  10,362
  10,917
  11,498
EBITDA, $m
  3,427
  1,815
  2,018
  2,232
  2,456
  2,690
  2,934
  3,188
  3,453
  3,728
  4,014
  4,311
  4,620
  4,941
  5,275
  5,622
  5,983
  6,359
  6,750
  7,157
  7,582
  8,024
  8,486
  8,968
  9,472
  9,997
  10,547
  11,121
  11,722
  12,350
  13,008
Interest expense (income), $m
  2,678
  7,226
  8,098
  9,470
  10,912
  12,422
  14,000
  15,647
  17,362
  19,147
  21,003
  22,933
  24,938
  27,022
  29,188
  31,439
  33,780
  36,215
  38,749
  41,387
  44,135
  46,999
  49,985
  53,100
  56,351
  59,746
  63,292
  66,998
  70,872
  74,924
  79,163
Earnings before tax, $m
  2,810
  -5,622
  -6,314
  -7,497
  -8,741
  -10,044
  -11,407
  -12,828
  -14,310
  -15,851
  -17,455
  -19,122
  -20,854
  -22,654
  -24,525
  -26,469
  -28,491
  -30,594
  -32,782
  -35,060
  -37,433
  -39,905
  -42,483
  -45,172
  -47,979
  -50,909
  -53,969
  -57,167
  -60,510
  -64,007
  -67,664
Tax expense, $m
  698
  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
Net income, $m
  2,086
  -5,622
  -6,314
  -7,497
  -8,741
  -10,044
  -11,407
  -12,828
  -14,310
  -15,851
  -17,455
  -19,122
  -20,854
  -22,654
  -24,525
  -26,469
  -28,491
  -30,594
  -32,782
  -35,060
  -37,433
  -39,905
  -42,483
  -45,172
  -47,979
  -50,909
  -53,969
  -57,167
  -60,510
  -64,007
  -67,664

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  23,893
  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
  373,048
  388,631
  432,197
  477,962
  525,902
  576,005
  628,274
  682,727
  739,395
  798,326
  859,583
  923,243
  989,396
  1,058,147
  1,129,613
  1,203,924
  1,281,224
  1,361,667
  1,445,419
  1,532,660
  1,623,578
  1,718,377
  1,817,270
  1,920,481
  2,028,250
  2,140,826
  2,258,471
  2,381,464
  2,510,092
  2,644,661
  2,785,489
Adjusted assets (=assets-cash), $m
  349,155
  388,631
  432,197
  477,962
  525,902
  576,005
  628,274
  682,727
  739,395
  798,326
  859,583
  923,243
  989,396
  1,058,147
  1,129,613
  1,203,924
  1,281,224
  1,361,667
  1,445,419
  1,532,660
  1,623,578
  1,718,377
  1,817,270
  1,920,481
  2,028,250
  2,140,826
  2,258,471
  2,381,464
  2,510,092
  2,644,661
  2,785,489
Revenue / Adjusted assets
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
  0.043
Average production assets, $m
  938
  1,053
  1,171
  1,295
  1,425
  1,560
  1,702
  1,850
  2,003
  2,163
  2,329
  2,501
  2,680
  2,867
  3,060
  3,261
  3,471
  3,689
  3,916
  4,152
  4,398
  4,655
  4,923
  5,203
  5,495
  5,799
  6,118
  6,451
  6,800
  7,164
  7,546
Working capital, $m
  0
  8,356
  9,292
  10,276
  11,307
  12,384
  13,508
  14,679
  15,897
  17,164
  18,481
  19,850
  21,272
  22,750
  24,287
  25,884
  27,546
  29,276
  31,077
  32,952
  34,907
  36,945
  39,071
  41,290
  43,607
  46,028
  48,557
  51,201
  53,967
  56,860
  59,888
Total debt, $m
  230,360
  231,368
  270,577
  311,766
  354,912
  400,005
  447,047
  496,054
  547,055
  600,093
  655,225
  712,519
  772,056
  833,932
  898,251
  965,132
  1,034,702
  1,107,100
  1,182,477
  1,260,994
  1,342,821
  1,428,139
  1,517,143
  1,610,033
  1,707,025
  1,808,343
  1,914,224
  2,024,917
  2,140,683
  2,261,795
  2,388,540
Total liabilities, $m
  348,761
  349,768
  388,977
  430,166
  473,312
  518,405
  565,447
  614,454
  665,455
  718,493
  773,625
  830,919
  890,456
  952,332
  1,016,651
  1,083,532
  1,153,102
  1,225,500
  1,300,877
  1,379,394
  1,461,221
  1,546,539
  1,635,543
  1,728,433
  1,825,425
  1,926,743
  2,032,624
  2,143,317
  2,259,083
  2,380,195
  2,506,940
Total equity, $m
  24,288
  38,863
  43,220
  47,796
  52,590
  57,601
  62,827
  68,273
  73,939
  79,833
  85,958
  92,324
  98,940
  105,815
  112,961
  120,392
  128,122
  136,167
  144,542
  153,266
  162,358
  171,838
  181,727
  192,048
  202,825
  214,083
  225,847
  238,146
  251,009
  264,466
  278,549
Total liabilities and equity, $m
  373,049
  388,631
  432,197
  477,962
  525,902
  576,006
  628,274
  682,727
  739,394
  798,326
  859,583
  923,243
  989,396
  1,058,147
  1,129,612
  1,203,924
  1,281,224
  1,361,667
  1,445,419
  1,532,660
  1,623,579
  1,718,377
  1,817,270
  1,920,481
  2,028,250
  2,140,826
  2,258,471
  2,381,463
  2,510,092
  2,644,661
  2,785,489
Debt-to-equity ratio
  9.485
  5.950
  6.260
  6.520
  6.750
  6.940
  7.120
  7.270
  7.400
  7.520
  7.620
  7.720
  7.800
  7.880
  7.950
  8.020
  8.080
  8.130
  8.180
  8.230
  8.270
  8.310
  8.350
  8.380
  8.420
  8.450
  8.480
  8.500
  8.530
  8.550
  8.570
Adjusted equity ratio
  0.070
  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
  2,086
  -5,622
  -6,314
  -7,497
  -8,741
  -10,044
  -11,407
  -12,828
  -14,310
  -15,851
  -17,455
  -19,122
  -20,854
  -22,654
  -24,525
  -26,469
  -28,491
  -30,594
  -32,782
  -35,060
  -37,433
  -39,905
  -42,483
  -45,172
  -47,979
  -50,909
  -53,969
  -57,167
  -60,510
  -64,007
  -67,664
Depreciation, amort., depletion, $m
  617
  211
  234
  259
  285
  312
  340
  370
  401
  433
  466
  500
  536
  573
  612
  652
  694
  738
  783
  830
  880
  931
  985
  1,041
  1,099
  1,160
  1,224
  1,290
  1,360
  1,433
  1,509
Funds from operations, $m
  9,599
  -5,412
  -6,080
  -7,238
  -8,456
  -9,732
  -11,066
  -12,458
  -13,909
  -15,419
  -16,989
  -18,622
  -20,318
  -22,081
  -23,913
  -25,817
  -27,797
  -29,856
  -31,999
  -34,229
  -36,553
  -38,974
  -41,499
  -44,132
  -46,880
  -49,749
  -52,745
  -55,877
  -59,150
  -62,574
  -66,155
Change in working capital, $m
  -1,762
  889
  937
  984
  1,031
  1,077
  1,124
  1,171
  1,218
  1,267
  1,317
  1,369
  1,422
  1,478
  1,537
  1,598
  1,662
  1,730
  1,801
  1,876
  1,955
  2,038
  2,126
  2,219
  2,317
  2,420
  2,529
  2,644
  2,766
  2,893
  3,028
Cash from operations, $m
  11,361
  -6,300
  -7,016
  -8,222
  -9,487
  -10,809
  -12,190
  -13,629
  -15,127
  -16,686
  -18,306
  -19,990
  -21,740
  -23,559
  -25,449
  -27,414
  -29,458
  -31,585
  -33,799
  -36,105
  -38,508
  -41,012
  -43,625
  -46,351
  -49,197
  -52,169
  -55,275
  -58,521
  -61,916
  -65,467
  -69,183
Maintenance CAPEX, $m
  0
  -188
  -211
  -234
  -259
  -285
  -312
  -340
  -370
  -401
  -433
  -466
  -500
  -536
  -573
  -612
  -652
  -694
  -738
  -783
  -830
  -880
  -931
  -985
  -1,041
  -1,099
  -1,160
  -1,224
  -1,290
  -1,360
  -1,433
New CAPEX, $m
  -2,724
  -115
  -118
  -124
  -130
  -136
  -142
  -148
  -154
  -160
  -166
  -172
  -179
  -186
  -194
  -201
  -209
  -218
  -227
  -236
  -246
  -257
  -268
  -280
  -292
  -305
  -319
  -333
  -348
  -365
  -382
Cash from investing activities, $m
  -1,028
  -303
  -329
  -358
  -389
  -421
  -454
  -488
  -524
  -561
  -599
  -638
  -679
  -722
  -767
  -813
  -861
  -912
  -965
  -1,019
  -1,076
  -1,137
  -1,199
  -1,265
  -1,333
  -1,404
  -1,479
  -1,557
  -1,638
  -1,725
  -1,815
Free cash flow, $m
  10,333
  -6,603
  -7,345
  -8,580
  -9,875
  -11,230
  -12,644
  -14,117
  -15,651
  -17,246
  -18,905
  -20,628
  -22,420
  -24,281
  -26,216
  -28,228
  -30,320
  -32,497
  -34,764
  -37,125
  -39,584
  -42,149
  -44,824
  -47,615
  -50,529
  -53,573
  -56,753
  -60,078
  -63,555
  -67,192
  -70,997
Issuance/(repayment) of debt, $m
  -8,346
  24,901
  39,209
  41,189
  43,146
  45,093
  47,042
  49,007
  51,001
  53,038
  55,131
  57,294
  59,538
  61,876
  64,319
  66,880
  69,570
  72,398
  75,377
  78,516
  81,827
  85,319
  89,003
  92,891
  96,992
  101,318
  105,881
  110,693
  115,766
  121,112
  126,745
Issuance/(repurchase) of shares, $m
  -530
  20,197
  10,670
  12,074
  13,535
  15,054
  16,634
  18,274
  19,976
  21,745
  23,581
  25,488
  27,469
  29,529
  31,671
  33,900
  36,221
  38,638
  41,157
  43,784
  46,525
  49,385
  52,372
  55,493
  58,755
  62,166
  65,734
  69,466
  73,373
  77,464
  81,747
Cash from financing (excl. dividends), $m  
  -18,175
  45,098
  49,879
  53,263
  56,681
  60,147
  63,676
  67,281
  70,977
  74,783
  78,712
  82,782
  87,007
  91,405
  95,990
  100,780
  105,791
  111,036
  116,534
  122,300
  128,352
  134,704
  141,375
  148,384
  155,747
  163,484
  171,615
  180,159
  189,139
  198,576
  208,492
Total cash flow (excl. dividends), $m
  -7,805
  38,495
  42,534
  44,682
  46,805
  48,917
  51,032
  53,163
  55,327
  57,537
  59,807
  62,153
  64,587
  67,124
  69,775
  72,553
  75,470
  78,539
  81,770
  85,176
  88,767
  92,555
  96,552
  100,769
  105,218
  109,911
  114,862
  120,081
  125,584
  131,384
  137,495
Retained Cash Flow (-), $m
  -781
  -20,197
  -10,670
  -12,074
  -13,535
  -15,054
  -16,634
  -18,274
  -19,976
  -21,745
  -23,581
  -25,488
  -27,469
  -29,529
  -31,671
  -33,900
  -36,221
  -38,638
  -41,157
  -43,784
  -46,525
  -49,385
  -52,372
  -55,493
  -58,755
  -62,166
  -65,734
  -69,466
  -73,373
  -77,464
  -81,747
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
 
  18,298
  31,864
  32,608
  33,271
  33,863
  34,398
  34,890
  35,350
  35,792
  36,227
  36,665
  37,118
  37,595
  38,103
  38,653
  39,250
  39,901
  40,613
  41,392
  42,242
  43,170
  44,180
  45,276
  46,463
  47,745
  49,128
  50,615
  52,211
  53,920
  55,748
Discount rate, %
 
  12.60
  13.23
  13.89
  14.59
  15.32
  16.08
  16.89
  17.73
  18.62
  19.55
  20.52
  21.55
  22.63
  23.76
  24.95
  26.19
  27.50
  28.88
  30.32
  31.84
  33.43
  35.10
  36.86
  38.70
  40.64
  42.67
  44.80
  47.04
  49.39
  51.86
PV of cash for distribution, $m
 
  16,251
  24,853
  22,073
  19,299
  16,607
  14,059
  11,705
  9,579
  7,700
  6,076
  4,704
  3,569
  2,651
  1,927
  1,369
  949
  641
  422
  270
  168
  101
  59
  33
  18
  9
  5
  2
  1
  0
  0
Current shareholders' claim on cash, %
  100
  52.2
  40.1
  30.7
  23.4
  17.8
  13.5
  10.2
  7.7
  5.9
  4.4
  3.3
  2.5
  1.9
  1.4
  1.1
  0.8
  0.6
  0.5
  0.3
  0.3
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0

Nomura Holdings, Inc. (Nomura) is a financial services company. The Company, through its broker-dealer, banking and other financial services subsidiaries, provide investment, financing and related services to individual, institutional and government clients across the world. The Company's segments include Retail, Asset Management and Wholesale. Its clients include individuals, corporations, financial institutions, governments and governmental agencies. The Company's Retail segment provides investment consultation services to individual clients in Japan. The Company's Asset Management segment develops and manages investment trusts, and provides investment advisory services. The Company's Wholesale segment is engaged in the sales and trading of debt and equity securities, derivatives, and currencies on a global basis, and provides investment banking services, such as the underwriting of debt and equity securities, as well as mergers and acquisitions and financial advice.

FINANCIAL RATIOS  of  Nomura Holdings ADR (NMR)

Valuation Ratios
P/E Ratio 9.8
Price to Sales 1.4
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 1.8
Price to Free Cash Flow 2.4
Growth Rates
Sales Growth Rate -0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.6%
Cap. Spend. - 3 Yr. Gr. Rate 7.9%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 257.9%
Total Debt to Equity 948.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.1%
Ret/ On Assets - 3 Yr. Avg. 1.1%
Return On Total Capital 0.8%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. 7.4%
Asset Turnover 0
Profitability Ratios
Gross Margin 81.8%
Gross Margin - 3 Yr. Avg. 82%
EBITDA Margin 40.9%
EBITDA Margin - 3 Yr. Avg. 38.8%
Operating Margin 18.8%
Oper. Margin - 3 Yr. Avg. 15.5%
Pre-Tax Margin 18.8%
Pre-Tax Margin - 3 Yr. Avg. 15.5%
Net Profit Margin 14%
Net Profit Margin - 3 Yr. Avg. 11.1%
Effective Tax Rate 24.8%
Eff/ Tax Rate - 3 Yr. Avg. 24.5%
Payout Ratio 17.9%

NMR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NMR stock intrinsic value calculation we used $14934 million for the last fiscal year's total revenue generated by Nomura Holdings ADR. The default revenue input number comes from 2017 income statement of Nomura Holdings 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 NMR stock valuation model: a) initial revenue growth rate of 11.9% 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 12.6%, whose default value for NMR is calculated based on our internal credit rating of Nomura Holdings 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 Nomura Holdings 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 NMR stock the variable cost ratio is equal to 90.4%.

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 NMR 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 Nomura Holdings ADR.

Corporate tax rate of 27% is the nominal tax rate for Nomura Holdings 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 NMR 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 NMR are equal to 6.3%.

Life of production assets of 1.5 years is the average useful life of capital assets used in Nomura Holdings 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 NMR is equal to 50%. 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 - $24288 million for Nomura Holdings 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 3815.2 million for Nomura Holdings 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 Nomura Holdings ADR at the current share price and the inputted number of shares is $22.1 billion.

RELATED COMPANIES Price Int.Val. Rating
GS Goldman Sachs 244.73 547.95  str.buy

COMPANY NEWS

▶ Nomura's Shah Responds to Tesla Bears: Talk Is Cheap   [Oct-06-17 12:36PM  Bloomberg Video]
▶ Nomura's Dragicevich Sees More U.S. Dollar Weakness Ahead   [Sep-11-17 10:57PM  Bloomberg Video]
▶ Nomura's Kwon Sees S. Korea GDP Slowing in 2H   [Aug-31-17 08:45PM  Bloomberg Video]
▶ Nomura's Sakaki Sees Yen Rising to 100 Against Dollar   [Aug-08-17 09:23PM  Bloomberg Video]
▶ Nomura posts 1Q profit   [Jul-28-17 08:05PM  Associated Press]
▶ Nomura's Rochester Sees More Downside for U.S. Dollar   [Jul-18-17 03:11AM  Bloomberg Video]
▶ [$$] Nomura is back in expansion mode   [Jul-02-17 10:55AM  Financial Times]
▶ Nomura Chooses Frankfurt as EU Base After Brexit   [Jun-21-17 11:05PM  Bloomberg]
▶ A Profitable Play on Southeast Asia's Convenience Stores   [Jun-20-17 10:00AM  TheStreet.com]
▶ Nomura's Zhao Says China's Growth Momentum Peaked in 1Q   [Jun-07-17 10:59PM  Bloomberg Video]
▶ Nomura's Overseas Revival Has Legs   [Apr-27-17 06:31AM  Bloomberg]
▶ [$$] Czech koruna set to strengthen as CNB removes floor   [Mar-29-17 07:41AM  at Financial Times]
▶ Nomura posts 3Q profit   [Jan-31-17 05:01AM  Associated Press]
▶ Value Investment Opportunity or Irrational Exuberance?   [Jan-05-17 11:43AM  GuruFocus.com]
▶ Nomura lists 'grey swan' risks for 2017   [Dec-08-16 09:45AM  CNBC Videos]
▶ Nomura's Lost in Translation Moment   [Oct-28-16 12:57AM  at Bloomberg]
▶ Nomura to Maintain Profit Abroad After Cutting 900 Jobs   [Oct-26-16 08:57PM  at Bloomberg]
▶ Nomura Americas CEO Gets Guaranteed Pay, Riling Bankers   [Aug-16-16 02:40PM  at Bloomberg]
Financial statements of NMR
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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