Intrinsic value of Novartis ADR - NVS

Previous Close

$85.20

  Intrinsic Value

$39.03

stock screener

  Rating & Target

str. sell

-54%

Previous close

$85.20

 
Intrinsic value

$39.03

 
Up/down potential

-54%

 
Rating

str. sell

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

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -1.93
  2.80
  3.02
  3.22
  3.40
  3.56
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
Revenue, $m
  49,386
  50,769
  52,302
  53,985
  55,819
  57,804
  59,943
  62,239
  64,696
  67,319
  70,111
  73,078
  76,228
  79,566
  83,099
  86,836
  90,784
  94,953
  99,352
  103,992
  108,883
  114,035
  119,463
  125,177
  131,192
  137,521
  144,180
  151,184
  158,550
  166,295
  174,437
Variable operating expenses, $m
 
  20,932
  21,470
  22,061
  22,705
  23,403
  24,154
  24,961
  25,824
  26,745
  27,726
  25,670
  26,777
  27,949
  29,190
  30,503
  31,890
  33,354
  34,900
  36,529
  38,247
  40,057
  41,964
  43,971
  46,084
  48,307
  50,646
  53,106
  55,694
  58,414
  61,275
Fixed operating expenses, $m
 
  21,701
  22,244
  22,800
  23,370
  23,954
  24,553
  25,167
  25,796
  26,441
  27,102
  27,779
  28,474
  29,186
  29,915
  30,663
  31,430
  32,216
  33,021
  33,847
  34,693
  35,560
  36,449
  37,360
  38,294
  39,252
  40,233
  41,239
  42,270
  43,327
  44,410
Total operating expenses, $m
  41,111
  42,633
  43,714
  44,861
  46,075
  47,357
  48,707
  50,128
  51,620
  53,186
  54,828
  53,449
  55,251
  57,135
  59,105
  61,166
  63,320
  65,570
  67,921
  70,376
  72,940
  75,617
  78,413
  81,331
  84,378
  87,559
  90,879
  94,345
  97,964
  101,741
  105,685
Operating income, $m
  8,275
  8,136
  8,588
  9,124
  9,743
  10,447
  11,236
  12,112
  13,077
  14,133
  15,283
  19,629
  20,977
  22,431
  23,993
  25,670
  27,464
  29,383
  31,432
  33,616
  35,943
  38,418
  41,050
  43,846
  46,814
  49,962
  53,301
  56,839
  60,586
  64,554
  68,753
EBITDA, $m
  14,318
  15,019
  15,585
  16,246
  17,002
  17,854
  18,802
  19,849
  20,997
  22,249
  23,607
  25,076
  26,660
  28,362
  30,188
  32,143
  34,232
  36,462
  38,838
  41,368
  44,059
  46,919
  49,955
  53,177
  56,594
  60,214
  64,049
  68,109
  72,406
  76,951
  81,757
Interest expense (income), $m
  723
  626
  675
  729
  788
  852
  922
  997
  1,078
  1,164
  1,256
  1,354
  1,458
  1,568
  1,685
  1,809
  1,941
  2,079
  2,225
  2,380
  2,543
  2,714
  2,895
  3,085
  3,286
  3,497
  3,719
  3,953
  4,198
  4,457
  4,729
Earnings before tax, $m
  7,817
  7,510
  7,913
  8,395
  8,955
  9,595
  10,314
  11,115
  11,999
  12,969
  14,027
  18,275
  19,519
  20,862
  22,308
  23,860
  25,524
  27,304
  29,206
  31,236
  33,400
  35,704
  38,155
  40,760
  43,528
  46,466
  49,582
  52,886
  56,388
  60,097
  64,025
Tax expense, $m
  1,119
  2,028
  2,137
  2,267
  2,418
  2,591
  2,785
  3,001
  3,240
  3,502
  3,787
  4,934
  5,270
  5,633
  6,023
  6,442
  6,891
  7,372
  7,886
  8,434
  9,018
  9,640
  10,302
  11,005
  11,753
  12,546
  13,387
  14,279
  15,225
  16,226
  17,287
Net income, $m
  6,712
  5,482
  5,776
  6,128
  6,537
  7,004
  7,529
  8,114
  8,759
  9,467
  10,240
  13,341
  14,249
  15,230
  16,285
  17,418
  18,632
  19,932
  21,321
  22,803
  24,382
  26,064
  27,853
  29,755
  31,775
  33,920
  36,195
  38,607
  41,163
  43,871
  46,738

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7,546
  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
  130,124
  125,977
  129,782
  133,958
  138,508
  143,434
  148,742
  154,440
  160,537
  167,044
  173,972
  181,336
  189,151
  197,433
  206,201
  215,473
  225,271
  235,616
  246,532
  258,045
  270,180
  282,966
  296,434
  310,613
  325,538
  341,244
  357,767
  375,147
  393,424
  412,642
  432,847
Adjusted assets (=assets-cash), $m
  122,578
  125,977
  129,782
  133,958
  138,508
  143,434
  148,742
  154,440
  160,537
  167,044
  173,972
  181,336
  189,151
  197,433
  206,201
  215,473
  225,271
  235,616
  246,532
  258,045
  270,180
  282,966
  296,434
  310,613
  325,538
  341,244
  357,767
  375,147
  393,424
  412,642
  432,847
Revenue / Adjusted assets
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
  0.403
Average production assets, $m
  48,590
  49,957
  51,465
  53,121
  54,925
  56,879
  58,984
  61,244
  63,661
  66,241
  68,989
  71,909
  75,008
  78,293
  81,769
  85,446
  89,332
  93,434
  97,763
  102,328
  107,140
  112,211
  117,551
  123,174
  129,093
  135,321
  141,873
  148,765
  156,013
  163,634
  171,646
Working capital, $m
  2,722
  1,015
  1,046
  1,080
  1,116
  1,156
  1,199
  1,245
  1,294
  1,346
  1,402
  1,462
  1,525
  1,591
  1,662
  1,737
  1,816
  1,899
  1,987
  2,080
  2,178
  2,281
  2,389
  2,504
  2,624
  2,750
  2,884
  3,024
  3,171
  3,326
  3,489
Total debt, $m
  23,686
  19,289
  20,826
  22,513
  24,351
  26,341
  28,486
  30,788
  33,251
  35,880
  38,679
  41,654
  44,811
  48,157
  51,699
  55,445
  59,403
  63,583
  67,993
  72,644
  77,547
  82,712
  88,153
  93,882
  99,911
  106,256
  112,932
  119,953
  127,337
  135,102
  143,264
Total liabilities, $m
  55,292
  50,895
  52,432
  54,119
  55,957
  57,947
  60,092
  62,394
  64,857
  67,486
  70,285
  73,260
  76,417
  79,763
  83,305
  87,051
  91,009
  95,189
  99,599
  104,250
  109,153
  114,318
  119,759
  125,488
  131,517
  137,862
  144,538
  151,559
  158,943
  166,708
  174,870
Total equity, $m
  74,832
  75,082
  77,350
  79,839
  82,551
  85,486
  88,650
  92,046
  95,680
  99,558
  103,687
  108,076
  112,734
  117,670
  122,896
  128,422
  134,261
  140,427
  146,933
  153,795
  161,027
  168,648
  176,674
  185,125
  194,021
  203,381
  213,229
  223,587
  234,481
  245,935
  257,977
Total liabilities and equity, $m
  130,124
  125,977
  129,782
  133,958
  138,508
  143,433
  148,742
  154,440
  160,537
  167,044
  173,972
  181,336
  189,151
  197,433
  206,201
  215,473
  225,270
  235,616
  246,532
  258,045
  270,180
  282,966
  296,433
  310,613
  325,538
  341,243
  357,767
  375,146
  393,424
  412,643
  432,847
Debt-to-equity ratio
  0.317
  0.260
  0.270
  0.280
  0.290
  0.310
  0.320
  0.330
  0.350
  0.360
  0.370
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.510
  0.520
  0.530
  0.540
  0.540
  0.550
  0.560
Adjusted equity ratio
  0.595
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596
  0.596

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,712
  5,482
  5,776
  6,128
  6,537
  7,004
  7,529
  8,114
  8,759
  9,467
  10,240
  13,341
  14,249
  15,230
  16,285
  17,418
  18,632
  19,932
  21,321
  22,803
  24,382
  26,064
  27,853
  29,755
  31,775
  33,920
  36,195
  38,607
  41,163
  43,871
  46,738
Depreciation, amort., depletion, $m
  6,043
  6,883
  6,997
  7,122
  7,259
  7,407
  7,566
  7,738
  7,921
  8,116
  8,324
  5,448
  5,682
  5,931
  6,195
  6,473
  6,768
  7,078
  7,406
  7,752
  8,117
  8,501
  8,905
  9,331
  9,780
  10,252
  10,748
  11,270
  11,819
  12,397
  13,004
Funds from operations, $m
  7,970
  12,365
  12,773
  13,251
  13,796
  14,411
  15,096
  15,851
  16,680
  17,584
  18,564
  18,788
  19,932
  21,161
  22,479
  23,891
  25,400
  27,010
  28,727
  30,555
  32,499
  34,565
  36,759
  39,087
  41,555
  44,171
  46,943
  49,877
  52,982
  56,267
  59,741
Change in working capital, $m
  -3,505
  28
  31
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  75
  79
  83
  88
  93
  98
  103
  109
  114
  120
  127
  133
  140
  147
  155
  163
Cash from operations, $m
  11,475
  12,337
  12,743
  13,217
  13,760
  14,371
  15,053
  15,805
  16,631
  17,531
  18,508
  18,729
  19,869
  21,094
  22,409
  23,816
  25,321
  26,927
  28,639
  30,462
  32,401
  34,462
  36,650
  38,972
  41,435
  44,045
  46,810
  49,737
  52,835
  56,113
  59,579
Maintenance CAPEX, $m
  0
  -3,681
  -3,785
  -3,899
  -4,024
  -4,161
  -4,309
  -4,468
  -4,640
  -4,823
  -5,018
  -5,226
  -5,448
  -5,682
  -5,931
  -6,195
  -6,473
  -6,768
  -7,078
  -7,406
  -7,752
  -8,117
  -8,501
  -8,905
  -9,331
  -9,780
  -10,252
  -10,748
  -11,270
  -11,819
  -12,397
New CAPEX, $m
  -2,879
  -1,367
  -1,509
  -1,656
  -1,804
  -1,953
  -2,105
  -2,260
  -2,418
  -2,580
  -2,747
  -2,920
  -3,099
  -3,284
  -3,477
  -3,677
  -3,885
  -4,102
  -4,329
  -4,565
  -4,812
  -5,070
  -5,340
  -5,623
  -5,919
  -6,228
  -6,552
  -6,892
  -7,248
  -7,621
  -8,012
Cash from investing activities, $m
  -3,441
  -5,048
  -5,294
  -5,555
  -5,828
  -6,114
  -6,414
  -6,728
  -7,058
  -7,403
  -7,765
  -8,146
  -8,547
  -8,966
  -9,408
  -9,872
  -10,358
  -10,870
  -11,407
  -11,971
  -12,564
  -13,187
  -13,841
  -14,528
  -15,250
  -16,008
  -16,804
  -17,640
  -18,518
  -19,440
  -20,409
Free cash flow, $m
  8,034
  7,289
  7,449
  7,662
  7,931
  8,257
  8,639
  9,077
  9,574
  10,128
  10,743
  10,582
  11,322
  12,127
  13,001
  13,945
  14,963
  16,057
  17,232
  18,490
  19,837
  21,275
  22,809
  24,444
  26,185
  28,037
  30,006
  32,097
  34,317
  36,672
  39,170
Issuance/(repayment) of debt, $m
  2,055
  1,392
  1,537
  1,687
  1,838
  1,990
  2,145
  2,302
  2,463
  2,629
  2,799
  2,975
  3,157
  3,346
  3,542
  3,746
  3,958
  4,179
  4,410
  4,651
  4,903
  5,166
  5,441
  5,729
  6,030
  6,345
  6,675
  7,021
  7,384
  7,764
  8,163
Issuance/(repurchase) of shares, $m
  -895
  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  
  1,161
  1,392
  1,537
  1,687
  1,838
  1,990
  2,145
  2,302
  2,463
  2,629
  2,799
  2,975
  3,157
  3,346
  3,542
  3,746
  3,958
  4,179
  4,410
  4,651
  4,903
  5,166
  5,441
  5,729
  6,030
  6,345
  6,675
  7,021
  7,384
  7,764
  8,163
Total cash flow (excl. dividends), $m
  8,808
  8,681
  8,986
  9,349
  9,769
  10,247
  10,783
  11,379
  12,037
  12,757
  13,542
  13,557
  14,479
  15,473
  16,543
  17,691
  18,921
  20,237
  21,642
  23,141
  24,739
  26,440
  28,250
  30,172
  32,215
  34,382
  36,681
  39,118
  41,701
  44,437
  47,333
Retained Cash Flow (-), $m
  2,214
  -2,007
  -2,267
  -2,489
  -2,711
  -2,936
  -3,164
  -3,396
  -3,634
  -3,878
  -4,129
  -4,389
  -4,658
  -4,936
  -5,225
  -5,526
  -5,839
  -6,166
  -6,506
  -6,861
  -7,233
  -7,621
  -8,026
  -8,451
  -8,895
  -9,361
  -9,848
  -10,358
  -10,893
  -11,454
  -12,042
Prev. year cash balance distribution, $m
 
  1,757
  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
 
  8,431
  6,719
  6,860
  7,058
  7,311
  7,620
  7,983
  8,403
  8,879
  9,412
  9,168
  9,822
  10,537
  11,317
  12,164
  13,081
  14,071
  15,136
  16,280
  17,507
  18,820
  20,223
  21,721
  23,319
  25,022
  26,833
  28,760
  30,808
  32,982
  35,291
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
 
  8,083
  6,151
  5,970
  5,811
  5,667
  5,530
  5,393
  5,252
  5,100
  4,935
  4,354
  4,191
  4,006
  3,799
  3,571
  3,324
  3,062
  2,787
  2,507
  2,225
  1,947
  1,678
  1,424
  1,188
  973
  783
  617
  477
  360
  266
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

Novartis AG is a holding company, which provides healthcare solutions. The Company is engaged in the research, development, manufacturing and marketing of a range of healthcare products led by pharmaceuticals. The Company's segments include Innovative Medicines, Sandoz, Alcon and Corporate activities. Innovative Medicines researches, develops, manufactures, distributes and sells patented prescription medicines to develop health outcomes for patients and healthcare providers. Sandoz develops, manufactures, distributes and sells prescription medicines, as well as pharmaceutical active substances that are not protected by valid and enforceable third-party patents. Alcon researches, develops, manufactures, distributes and sells eye care products. Alcon is a provider of eye care with product offerings in eye care devices and vision care. The Company's range of products includes pharmaceuticals and oncology medicines, generic and biosimilar medicines, and eye care devices.

FINANCIAL RATIOS  of  Novartis ADR (NVS)

Valuation Ratios
P/E Ratio 30.1
Price to Sales 4.1
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow 23.5
Growth Rates
Sales Growth Rate -1.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.9%
Cap. Spend. - 3 Yr. Gr. Rate -3.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 23.9%
Total Debt to Equity 31.7%
Interest Coverage 12
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. 9.5%
Return On Total Capital 6.8%
Ret/ On T. Cap. - 3 Yr. Avg. 12.2%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 15.7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 64.9%
Gross Margin - 3 Yr. Avg. 66.2%
EBITDA Margin 29.5%
EBITDA Margin - 3 Yr. Avg. 30.2%
Operating Margin 16.8%
Oper. Margin - 3 Yr. Avg. 18.3%
Pre-Tax Margin 15.8%
Pre-Tax Margin - 3 Yr. Avg. 18.3%
Net Profit Margin 13.6%
Net Profit Margin - 3 Yr. Avg. 22.6%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 13.5%
Payout Ratio 96.5%

NVS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NVS stock intrinsic value calculation we used $49386 million for the last fiscal year's total revenue generated by Novartis ADR. The default revenue input number comes from 2016 income statement of Novartis 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 NVS stock valuation model: a) initial revenue growth rate of 2.8% 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 NVS is calculated based on our internal credit rating of Novartis 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 Novartis 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 NVS stock the variable cost ratio is equal to 41.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $21172 million in the base year in the intrinsic value calculation for NVS 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 Novartis ADR.

Corporate tax rate of 27% is the nominal tax rate for Novartis 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 NVS 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 NVS are equal to 98.4%.

Life of production assets of 13.2 years is the average useful life of capital assets used in Novartis 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 NVS is equal to 2%. 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 - $74832 million for Novartis 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 2613.86 million for Novartis 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 Novartis ADR at the current share price and the inputted number of shares is $222.7 billion.

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COMPANY NEWS

▶ [$$] Greek Parliament Investigates Politicians in Novartis Bribery Probe   [Feb-23-18 12:10AM  The Wall Street Journal]
▶ [$$] Greek parliament backs Novartis probe   [03:07AM  Financial Times]
▶ [$$] Novartis CEO Steers Drug Maker Back to R&D   [Feb-20-18 11:33PM  The Wall Street Journal]
▶ [$$] Novartis CEO Steers Drug Maker Back to R&D   [Feb-18-18 09:00AM  The Wall Street Journal]
▶ How Celgene Hopes to Cash In on CAR-T   [Feb-17-18 10:31AM  Motley Fool]
▶ 3 Tough Questions for Amgen   [07:34AM  Motley Fool]
▶ 3 Reasons to Be Bullish on Pfizer Inc. Stock   [Feb-14-18 11:29AM  InvestorPlace]
▶ IIROC Trade Resumption - NVS   [08:46AM  PR Newswire]
▶ IIROC Trade Resumption - NVS   [08:46AM  CNW Group]
▶ IIROC Trading Halt - NVS   [11:24AM  PR Newswire]
▶ Regeneron Could Benefit From 'Lackluster' Data Presented By These Rivals   [Feb-12-18 04:26PM  Investor's Business Daily]
▶ [$$] Novartis Faces Investigation For Alleged Bribery In Greece   [Feb-09-18 06:52PM  The Wall Street Journal]
▶ Top Research Reports for Novartis, BP & Biogen   [Feb-08-18 03:23PM  Zacks]
▶ The Diseases We Arent CuringAnd Why   [Feb-06-18 12:01PM  Fortune]
▶ Greek govt alleges official ties to drug bribery scandal   [Feb-05-18 05:37PM  Associated Press]
▶ 3 Top Dividend Stocks With Yields Over 2%   [Jan-30-18 10:34AM  Motley Fool]
▶ Analysts Estimates for Pfizers 4Q17 Earnings   [09:38AM  Market Realist]
▶ Novartis Climbs Out of Its Growth Pit   [11:55AM  Bloomberg]
▶ How Is Kisqali Positioned for 2018?   [09:02AM  Market Realist]
▶ Novartis beats 4Q profit forecasts   [05:03AM  Associated Press]
▶ [$$] Novartis 4Q Profit Rises, Buoyed by Sales of New Drugs   [02:02AM  The Wall Street Journal]
▶ Key Updates on Novartiss Kymriah   [Jan-23-18 05:10PM  Market Realist]
▶ How Is Novartiss Kymriah Positioned for 2018?   [03:39PM  Market Realist]
▶ Behind Novartiss 4Q17 Estimates: Innovative Medicines   [Jan-22-18 11:30AM  Market Realist]
Financial statements of NVS
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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