Intrinsic value of Nokia ADR - NOK

Previous Close

$6.38

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$6.38

 
Intrinsic value premium content
 
Up/down potential premium content
 
Rating premium content
 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

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

We calculate the intrinsic value of NOK 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 36.8

 

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, %
  89.05
  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
  24,939
  37,782
  58,374
  87,298
  126,665
  178,706
  245,680
  329,774
  433,014
  557,184
  703,768
  873,921
  1,068,452
  1,287,844
  1,532,280
  1,801,689
  2,095,797
  2,414,182
  2,756,331
  3,121,688
  3,509,705
  3,919,874
  4,351,767
  4,805,058
  5,279,539
  5,775,137
  6,291,922
  6,830,107
  7,390,055
  7,972,274
  8,577,416
Variable operating expenses, $m
 
  32,338
  49,651
  73,969
  107,067
  150,821
  207,130
  277,833
  364,633
  469,030
  592,273
  734,758
  898,312
  1,082,768
  1,288,280
  1,514,788
  1,762,063
  2,029,748
  2,317,413
  2,624,591
  2,950,820
  3,295,674
  3,658,792
  4,039,901
  4,438,826
  4,855,505
  5,289,997
  5,742,482
  6,213,264
  6,702,771
  7,211,549
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
  26,100
  32,338
  49,651
  73,969
  107,067
  150,821
  207,130
  277,833
  364,633
  469,030
  592,273
  734,758
  898,312
  1,082,768
  1,288,280
  1,514,788
  1,762,063
  2,029,748
  2,317,413
  2,624,591
  2,950,820
  3,295,674
  3,658,792
  4,039,901
  4,438,826
  4,855,505
  5,289,997
  5,742,482
  6,213,264
  6,702,771
  7,211,549
Operating income, $m
  -1,161
  5,444
  8,723
  13,329
  19,598
  27,885
  38,550
  51,941
  68,381
  88,153
  111,496
  139,163
  170,140
  205,076
  244,000
  286,901
  333,734
  384,434
  438,918
  497,097
  558,885
  624,200
  692,975
  765,157
  840,713
  919,632
  1,001,925
  1,087,625
  1,176,791
  1,269,504
  1,365,866
EBITDA, $m
  521
  6,515
  10,066
  15,054
  21,842
  30,816
  42,365
  56,866
  74,669
  96,081
  121,358
  150,699
  184,244
  222,076
  264,226
  310,683
  361,399
  416,301
  475,301
  538,304
  605,213
  675,942
  750,418
  828,583
  910,403
  995,864
  1,084,978
  1,177,783
  1,274,340
  1,374,738
  1,479,088
Interest expense (income), $m
  326
  351
  1,747
  3,774
  6,621
  10,497
  15,620
  22,212
  30,491
  40,654
  52,877
  67,306
  84,056
  103,206
  124,803
  148,865
  175,385
  204,337
  235,679
  269,360
  305,325
  343,521
  383,898
  426,413
  471,035
  517,743
  566,529
  617,401
  670,380
  725,501
  782,814
Earnings before tax, $m
  -1,445
  5,093
  6,976
  9,555
  12,976
  17,388
  22,930
  29,728
  37,890
  47,500
  58,619
  71,857
  86,084
  101,870
  119,198
  138,036
  158,349
  180,097
  203,239
  227,738
  253,560
  280,679
  309,077
  338,743
  369,678
  401,889
  435,395
  470,224
  506,411
  544,003
  583,052
Tax expense, $m
  -482
  1,375
  1,883
  2,580
  3,504
  4,695
  6,191
  8,027
  10,230
  12,825
  15,827
  19,401
  23,243
  27,505
  32,183
  37,270
  42,754
  48,626
  54,875
  61,489
  68,461
  75,783
  83,451
  91,461
  99,813
  108,510
  117,557
  126,960
  136,731
  146,881
  157,424
Net income, $m
  -808
  3,718
  5,092
  6,975
  9,473
  12,693
  16,739
  21,702
  27,660
  34,675
  42,792
  52,455
  62,841
  74,365
  87,014
  100,766
  115,595
  131,471
  148,365
  166,248
  185,099
  204,896
  225,626
  247,283
  269,865
  293,379
  317,839
  343,264
  369,680
  397,122
  425,628

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10,155
  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
  47,390
  56,476
  87,255
  130,490
  189,335
  267,124
  367,234
  492,936
  647,256
  832,861
  1,051,971
  1,306,309
  1,597,088
  1,925,028
  2,290,404
  2,693,108
  3,132,731
  3,608,643
  4,120,076
  4,666,201
  5,246,195
  5,859,303
  6,504,884
  7,182,448
  7,891,687
  8,632,492
  9,404,965
  10,209,428
  11,046,421
  11,916,703
  12,821,249
Adjusted assets (=assets-cash), $m
  37,235
  56,476
  87,255
  130,490
  189,335
  267,124
  367,234
  492,936
  647,256
  832,861
  1,051,971
  1,306,309
  1,597,088
  1,925,028
  2,290,404
  2,693,108
  3,132,731
  3,608,643
  4,120,076
  4,666,201
  5,246,195
  5,859,303
  6,504,884
  7,182,448
  7,891,687
  8,632,492
  9,404,965
  10,209,428
  11,046,421
  11,916,703
  12,821,249
Revenue / Adjusted assets
  0.670
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
  0.669
Average production assets, $m
  4,346
  4,987
  7,705
  11,523
  16,720
  23,589
  32,430
  43,530
  57,158
  73,548
  92,897
  115,358
  141,036
  169,995
  202,261
  237,823
  276,645
  318,672
  363,836
  412,063
  463,281
  517,423
  574,433
  634,268
  696,899
  762,318
  830,534
  901,574
  975,487
  1,052,340
  1,132,219
Working capital, $m
  8,517
  -1,511
  -2,335
  -3,492
  -5,067
  -7,148
  -9,827
  -13,191
  -17,321
  -22,287
  -28,151
  -34,957
  -42,738
  -51,514
  -61,291
  -72,068
  -83,832
  -96,567
  -110,253
  -124,868
  -140,388
  -156,795
  -174,071
  -192,202
  -211,182
  -231,005
  -251,677
  -273,204
  -295,602
  -318,891
  -343,097
Total debt, $m
  4,499
  18,199
  39,314
  68,973
  109,341
  162,704
  231,380
  317,611
  423,474
  550,799
  701,109
  875,585
  1,075,059
  1,300,026
  1,550,674
  1,826,929
  2,128,510
  2,454,986
  2,805,829
  3,180,471
  3,578,347
  3,998,939
  4,441,807
  4,906,616
  5,393,154
  5,901,346
  6,431,263
  6,983,124
  7,557,302
  8,154,315
  8,774,834
Total liabilities, $m
  26,182
  38,742
  59,857
  89,516
  129,884
  183,247
  251,923
  338,154
  444,017
  571,342
  721,652
  896,128
  1,095,602
  1,320,569
  1,571,217
  1,847,472
  2,149,053
  2,475,529
  2,826,372
  3,201,014
  3,598,890
  4,019,482
  4,462,350
  4,927,159
  5,413,697
  5,921,889
  6,451,806
  7,003,667
  7,577,845
  8,174,858
  8,795,377
Total equity, $m
  21,208
  17,733
  27,398
  40,974
  59,451
  83,877
  115,312
  154,782
  203,238
  261,518
  330,319
  410,181
  501,486
  604,459
  719,187
  845,636
  983,678
  1,133,114
  1,293,704
  1,465,187
  1,647,305
  1,839,821
  2,042,533
  2,255,289
  2,477,990
  2,710,602
  2,953,159
  3,205,760
  3,468,576
  3,741,845
  4,025,872
Total liabilities and equity, $m
  47,390
  56,475
  87,255
  130,490
  189,335
  267,124
  367,235
  492,936
  647,255
  832,860
  1,051,971
  1,306,309
  1,597,088
  1,925,028
  2,290,404
  2,693,108
  3,132,731
  3,608,643
  4,120,076
  4,666,201
  5,246,195
  5,859,303
  6,504,883
  7,182,448
  7,891,687
  8,632,491
  9,404,965
  10,209,427
  11,046,421
  11,916,703
  12,821,249
Debt-to-equity ratio
  0.212
  1.030
  1.430
  1.680
  1.840
  1.940
  2.010
  2.050
  2.080
  2.110
  2.120
  2.130
  2.140
  2.150
  2.160
  2.160
  2.160
  2.170
  2.170
  2.170
  2.170
  2.170
  2.170
  2.180
  2.180
  2.180
  2.180
  2.180
  2.180
  2.180
  2.180
Adjusted equity ratio
  0.307
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314
  0.314

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -808
  3,718
  5,092
  6,975
  9,473
  12,693
  16,739
  21,702
  27,660
  34,675
  42,792
  52,455
  62,841
  74,365
  87,014
  100,766
  115,595
  131,471
  148,365
  166,248
  185,099
  204,896
  225,626
  247,283
  269,865
  293,379
  317,839
  343,264
  369,680
  397,122
  425,628
Depreciation, amort., depletion, $m
  1,682
  1,071
  1,343
  1,725
  2,244
  2,931
  3,815
  4,925
  6,288
  7,927
  9,862
  11,536
  14,104
  17,000
  20,226
  23,782
  27,665
  31,867
  36,384
  41,206
  46,328
  51,742
  57,443
  63,427
  69,690
  76,232
  83,053
  90,157
  97,549
  105,234
  113,222
Funds from operations, $m
  -4,263
  4,789
  6,435
  8,700
  11,717
  15,625
  20,554
  26,627
  33,948
  42,602
  52,654
  63,991
  76,945
  91,365
  107,240
  124,549
  143,259
  163,338
  184,748
  207,455
  231,427
  256,638
  283,069
  310,709
  339,555
  369,611
  400,892
  433,421
  467,229
  502,356
  538,850
Change in working capital, $m
  -2,728
  -567
  -824
  -1,157
  -1,575
  -2,082
  -2,679
  -3,364
  -4,130
  -4,967
  -5,863
  -6,806
  -7,781
  -8,776
  -9,777
  -10,776
  -11,764
  -12,735
  -13,686
  -14,614
  -15,521
  -16,407
  -17,276
  -18,132
  -18,979
  -19,824
  -20,671
  -21,527
  -22,398
  -23,289
  -24,206
Cash from operations, $m
  -1,535
  7,465
  7,259
  9,857
  13,292
  17,706
  23,233
  29,991
  38,078
  47,569
  58,517
  70,797
  84,726
  100,141
  117,018
  135,325
  155,024
  176,073
  198,434
  222,069
  246,947
  273,045
  300,345
  328,841
  358,534
  389,435
  421,563
  454,948
  489,627
  525,645
  563,056
Maintenance CAPEX, $m
  0
  -313
  -499
  -771
  -1,152
  -1,672
  -2,359
  -3,243
  -4,353
  -5,716
  -7,355
  -9,290
  -11,536
  -14,104
  -17,000
  -20,226
  -23,782
  -27,665
  -31,867
  -36,384
  -41,206
  -46,328
  -51,742
  -57,443
  -63,427
  -69,690
  -76,232
  -83,053
  -90,157
  -97,549
  -105,234
New CAPEX, $m
  -503
  -1,860
  -2,718
  -3,818
  -5,196
  -6,869
  -8,841
  -11,100
  -13,628
  -16,390
  -19,349
  -22,460
  -25,678
  -28,960
  -32,266
  -35,562
  -38,822
  -42,027
  -45,164
  -48,227
  -51,218
  -54,142
  -57,010
  -59,834
  -62,631
  -65,419
  -68,216
  -71,040
  -73,913
  -76,853
  -79,879
Cash from investing activities, $m
  7,215
  -2,173
  -3,217
  -4,589
  -6,348
  -8,541
  -11,200
  -14,343
  -17,981
  -22,106
  -26,704
  -31,750
  -37,214
  -43,064
  -49,266
  -55,788
  -62,604
  -69,692
  -77,031
  -84,611
  -92,424
  -100,470
  -108,752
  -117,277
  -126,058
  -135,109
  -144,448
  -154,093
  -164,070
  -174,402
  -185,113
Free cash flow, $m
  5,680
  5,292
  4,042
  5,268
  6,943
  9,165
  12,034
  15,647
  20,097
  25,463
  31,813
  39,047
  47,512
  57,077
  67,753
  79,537
  92,419
  106,382
  121,403
  137,458
  154,523
  172,574
  191,593
  211,563
  232,476
  254,326
  277,116
  300,855
  325,556
  351,243
  377,943
Issuance/(repayment) of debt, $m
  -2,611
  14,542
  21,115
  29,659
  40,367
  53,363
  68,675
  86,231
  105,864
  127,325
  150,310
  174,476
  199,474
  224,967
  250,648
  276,255
  301,582
  326,476
  350,843
  374,641
  397,876
  420,592
  442,868
  464,809
  486,538
  508,192
  529,917
  551,861
  574,177
  597,014
  620,518
Issuance/(repurchase) of shares, $m
  -222
  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  
  -3,597
  14,542
  21,115
  29,659
  40,367
  53,363
  68,675
  86,231
  105,864
  127,325
  150,310
  174,476
  199,474
  224,967
  250,648
  276,255
  301,582
  326,476
  350,843
  374,641
  397,876
  420,592
  442,868
  464,809
  486,538
  508,192
  529,917
  551,861
  574,177
  597,014
  620,518
Total cash flow (excl. dividends), $m
  2,129
  19,834
  25,157
  34,927
  47,310
  62,528
  80,709
  101,879
  125,960
  152,788
  182,123
  213,523
  246,987
  282,044
  318,400
  355,792
  394,001
  432,858
  472,246
  512,100
  552,399
  593,166
  634,461
  676,372
  719,014
  762,518
  807,033
  852,716
  899,734
  948,257
  998,461
Retained Cash Flow (-), $m
  -10,123
  -6,654
  -9,665
  -13,576
  -18,477
  -24,426
  -31,435
  -39,470
  -48,456
  -58,280
  -68,801
  -79,862
  -91,305
  -102,973
  -114,728
  -126,449
  -138,042
  -149,436
  -160,590
  -171,483
  -182,118
  -192,516
  -202,712
  -212,755
  -222,701
  -232,613
  -242,557
  -252,601
  -262,816
  -273,269
  -284,027
Prev. year cash balance distribution, $m
 
  9,015
  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
 
  22,195
  15,492
  21,352
  28,833
  38,102
  49,275
  62,408
  77,504
  94,508
  113,322
  133,661
  155,682
  179,071
  203,672
  229,343
  255,959
  283,421
  311,656
  340,617
  370,281
  400,650
  431,749
  463,617
  496,313
  529,905
  564,476
  600,115
  636,918
  674,988
  714,434
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
 
  21,280
  14,183
  18,582
  23,741
  29,534
  35,761
  42,162
  48,442
  54,290
  59,411
  63,474
  66,435
  68,086
  68,376
  67,331
  65,045
  61,668
  57,395
  52,445
  47,051
  41,441
  35,824
  30,386
  25,278
  20,614
  16,469
  12,880
  9,854
  7,368
  5,379
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

Nokia Corporation, together with its subsidiaries, provides network infrastructure and related services worldwide. It operates in five business groups: Mobile Networks, Fixed Networks, IP/Optical Networks, Applications & Analytics, and Nokia Technologies. It offers mobile networking solutions, such as hardware, software, and services for telecommunications operators, enterprises, and related markets/verticals; macro radio access network solutions; subscriber data management and IP multimedia subsystem solutions; small cell access, and back haul and front haul solutions; and network planning and optimization, network implementation, systems integration, managed, and care services. The company also provides fixed networking solutions, including copper based solutions, such as very high rate digital subscriber line and vectoring technologies; digital home devices; copper and fiber broadband evolution, public switched telephone network transformation, site implementation and outside plant, and multi-vendor maintenance services; and develops copper technologies, gigabit passive optical networks, and fiber access technologies. In addition, it offers IP/optical networking solutions, such as IP routing and optical transport systems, software, and services; and packet-optimized and optical transport solutions. Further, the company provides software applications and platforms comprising customer and network operations software; network management and self-organizing networks, communication and collaboration, policy and charging, automated and predictive security, and CloudBand Cloud management and orchestration solutions; analytics solutions and algorithms; and IoT platforms. It has a collaboration agreement with BT to develop 5G technologies; and a strategic alliance with Access Technologies, Federated Wireless, Inc., Intel, Qualcomm Incorporated, and Ruckus Wireless. The company was founded in 1865 and is headquartered in Espoo, Finland.

FINANCIAL RATIOS  of  Nokia ADR (NOK)

Valuation Ratios
P/E Ratio -45.2
Price to Sales 1.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow -23.8
Price to Free Cash Flow -17.9
Growth Rates
Sales Growth Rate 89%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 52%
Cap. Spend. - 3 Yr. Gr. Rate 3.2%
Financial Strength
Quick Ratio 16
Current Ratio 0
LT Debt to Equity 18.2%
Total Debt to Equity 21.2%
Interest Coverage -3
Management Effectiveness
Return On Assets -1.7%
Ret/ On Assets - 3 Yr. Avg. 9.8%
Return On Total Capital -4.1%
Ret/ On T. Cap. - 3 Yr. Avg. 14.8%
Return On Equity -5%
Return On Equity - 3 Yr. Avg. 22.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 35.9%
Gross Margin - 3 Yr. Avg. 40.9%
EBITDA Margin 2.3%
EBITDA Margin - 3 Yr. Avg. 10.6%
Operating Margin -4.7%
Oper. Margin - 3 Yr. Avg. 7%
Pre-Tax Margin -5.8%
Pre-Tax Margin - 3 Yr. Avg. 5%
Net Profit Margin -3.2%
Net Profit Margin - 3 Yr. Avg. 15.3%
Effective Tax Rate 33.4%
Eff/ Tax Rate - 3 Yr. Avg. -38.8%
Payout Ratio -197.9%

NOK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NOK stock intrinsic value calculation we used $23614 million for the last fiscal year's total revenue generated by Nokia ADR. The default revenue input number comes from 2016 income statement of Nokia 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 NOK 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 NOK is calculated based on our internal credit rating of Nokia 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 Nokia 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 NOK stock the variable cost ratio is equal to 86.5%.

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 NOK 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 9.6% for Nokia ADR.

Corporate tax rate of 27% is the nominal tax rate for Nokia 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 NOK 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 NOK are equal to 13.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Nokia 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 NOK is equal to -4%. 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 - $20094 million for Nokia 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 5769.96 million for Nokia 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 Nokia ADR at the current share price and the inputted number of shares is $36.8 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
ERIC Ericsson ADR 7.25 prem.  prem.
MSFT Microsoft 70.26 prem.  prem.
TI Telecom Italia 7.34 prem.  prem.
DCM NTT DoCoMo ADR 24.85 prem.  prem.
VOD Vodafone Group 28.75 prem.  prem.
KT KT ADR 16.45 prem.  prem.

COMPANY NEWS

▶ Norges Bank Holds Rates Steady at 0.50%   [04:28AM  Bloomberg Video]
▶ The 5 Best-Selling Smartphones of All Time   [Jun-20-17 06:05AM  Motley Fool]
▶ Withings is now Nokia   [Jun-19-17 08:07PM  TechCrunch]
▶ [$$] Nokia's New Products Could Boost Revenue   [Jun-16-17 07:21AM  Barrons.com]
▶ With 5G in the distance, Nokia courts the Googles of the world   [Jun-15-17 10:40PM  American City Business Journals]
▶ New Nokia 9 Leak Reveals American Ambitions   [Jun-11-17 08:30AM  Forbes]
▶ Nokia cuts 170 jobs in Finland   [08:00AM  Reuters]
▶ John Rogers Buys Cardinal Health, Mattel, Nielsen   [Jun-05-17 03:43PM  GuruFocus.com]
▶ Africans never hung up on Nokia's old 'brick'   [May-31-17 03:08PM  Reuters]
▶ ETFs with exposure to Nokia Oyj : May 30, 2017   [May-30-17 12:36PM  Capital Cube]
▶ Nokia Corporation - Managers' transactions   [May-29-17 07:03AM  GlobeNewswire]
▶ Company News for May 24, 2017   [10:10AM  Zacks]
▶ Nokia and Agilent rise; Alexion, Kirkland's fall   [05:24PM  Associated Press]
▶ [$$] Nokia Uses Lawsuit To Make Apple Its Friend   [10:19AM  The Wall Street Journal]
▶ [$$] Nokia's Venture Arm Values Autonomy From Parent   [07:30AM  The Wall Street Journal]
▶ New Nokia, Apple deal ends bitter dispute   [07:06AM  Reuters Videos]
▶ Apple and Nokia Bury the Hatchet   [06:26AM  Investopedia]
▶ How to monetize virtual reality and 360 video   [May-19-17 02:55PM  Yahoo Finance Video]
▶ [$$] Apple's Nokia Suit More Pressing Than Qualcomm   [May-18-17 03:07PM  Barrons.com]
▶ New Nokia Leaks Reveal Secret Smartphones   [May-17-17 12:09PM  Forbes]
▶ ETFs with exposure to Nokia Oyj : May 8, 2017   [May-08-17 04:59PM  Capital Cube]
Stock chart of NOK Financial statements of NOK Annual reports of NOK
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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.