Intrinsic value of Priceline Group - PCLN

Previous Close

$1,747.22

  Intrinsic Value

$2,134

stock screener

  Rating & Target

buy

+22%

Previous close

$1,747.22

 
Intrinsic value

$2,134

 
Up/down potential

+22%

 
Rating

buy

We calculate the intrinsic value of PCLN 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 85.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  16.47
  18.30
  16.97
  15.77
  14.70
  13.73
  12.85
  12.07
  11.36
  10.73
  10.15
  9.64
  9.17
  8.76
  8.38
  8.04
  7.74
  7.46
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
  5.70
  5.63
Revenue, $m
  10,743
  12,709
  14,866
  17,210
  19,740
  22,449
  25,335
  28,392
  31,618
  35,009
  38,563
  42,280
  46,158
  50,200
  54,407
  58,783
  63,332
  68,059
  72,972
  78,077
  83,384
  88,901
  94,640
  100,611
  106,828
  113,303
  120,050
  127,084
  134,421
  142,077
  150,071
Variable operating expenses, $m
 
  8,179
  9,526
  10,991
  12,571
  14,263
  16,066
  17,976
  19,991
  22,109
  24,330
  26,412
  28,835
  31,359
  33,987
  36,721
  39,563
  42,516
  45,585
  48,774
  52,089
  55,535
  59,120
  62,851
  66,734
  70,779
  74,994
  79,388
  83,971
  88,754
  93,748
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
  7,900
  8,179
  9,526
  10,991
  12,571
  14,263
  16,066
  17,976
  19,991
  22,109
  24,330
  26,412
  28,835
  31,359
  33,987
  36,721
  39,563
  42,516
  45,585
  48,774
  52,089
  55,535
  59,120
  62,851
  66,734
  70,779
  74,994
  79,388
  83,971
  88,754
  93,748
Operating income, $m
  2,843
  4,530
  5,340
  6,220
  7,169
  8,186
  9,269
  10,416
  11,627
  12,900
  14,234
  15,868
  17,324
  18,841
  20,420
  22,062
  23,769
  25,543
  27,387
  29,303
  31,295
  33,366
  35,520
  37,761
  40,094
  42,524
  45,056
  47,696
  50,450
  53,323
  56,324
EBITDA, $m
  3,152
  4,936
  5,773
  6,684
  7,666
  8,718
  9,839
  11,026
  12,279
  13,596
  14,976
  16,419
  17,926
  19,495
  21,129
  22,829
  24,595
  26,431
  28,339
  30,321
  32,382
  34,525
  36,754
  39,073
  41,487
  44,001
  46,622
  49,353
  52,203
  55,176
  58,281
Interest expense (income), $m
  126
  217
  275
  338
  408
  482
  562
  647
  737
  832
  932
  1,037
  1,147
  1,261
  1,380
  1,504
  1,633
  1,767
  1,906
  2,051
  2,202
  2,358
  2,521
  2,690
  2,866
  3,049
  3,240
  3,439
  3,646
  3,863
  4,088
Earnings before tax, $m
  2,713
  4,313
  5,065
  5,881
  6,761
  7,704
  8,707
  9,769
  10,890
  12,067
  13,301
  14,831
  16,177
  17,580
  19,040
  20,558
  22,136
  23,776
  25,481
  27,252
  29,093
  31,007
  32,999
  35,071
  37,228
  39,475
  41,816
  44,257
  46,803
  49,461
  52,235
Tax expense, $m
  578
  1,165
  1,367
  1,588
  1,826
  2,080
  2,351
  2,638
  2,940
  3,258
  3,591
  4,004
  4,368
  4,747
  5,141
  5,551
  5,977
  6,420
  6,880
  7,358
  7,855
  8,372
  8,910
  9,469
  10,051
  10,658
  11,290
  11,949
  12,637
  13,354
  14,103
Net income, $m
  2,135
  3,149
  3,697
  4,293
  4,936
  5,624
  6,356
  7,131
  7,949
  8,809
  9,710
  10,827
  11,809
  12,833
  13,899
  15,007
  16,159
  17,357
  18,601
  19,894
  21,238
  22,635
  24,089
  25,602
  27,176
  28,816
  30,526
  32,308
  34,166
  36,106
  38,132

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,300
  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
  19,839
  18,392
  21,513
  24,907
  28,567
  32,488
  36,664
  41,088
  45,757
  50,664
  55,808
  61,186
  66,799
  72,648
  78,737
  85,069
  91,652
  98,494
  105,603
  112,991
  120,671
  128,656
  136,961
  145,603
  154,599
  163,969
  173,733
  183,913
  194,531
  205,611
  217,180
Adjusted assets (=assets-cash), $m
  15,539
  18,392
  21,513
  24,907
  28,567
  32,488
  36,664
  41,088
  45,757
  50,664
  55,808
  61,186
  66,799
  72,648
  78,737
  85,069
  91,652
  98,494
  105,603
  112,991
  120,671
  128,656
  136,961
  145,603
  154,599
  163,969
  173,733
  183,913
  194,531
  205,611
  217,180
Revenue / Adjusted assets
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
Average production assets, $m
  2,392
  2,834
  3,315
  3,838
  4,402
  5,006
  5,650
  6,331
  7,051
  7,807
  8,600
  9,428
  10,293
  11,195
  12,133
  13,109
  14,123
  15,177
  16,273
  17,411
  18,595
  19,825
  21,105
  22,436
  23,823
  25,267
  26,771
  28,340
  29,976
  31,683
  33,466
Working capital, $m
  2,543
  -928
  -1,085
  -1,256
  -1,441
  -1,639
  -1,849
  -2,073
  -2,308
  -2,556
  -2,815
  -3,086
  -3,370
  -3,665
  -3,972
  -4,291
  -4,623
  -4,968
  -5,327
  -5,700
  -6,087
  -6,490
  -6,909
  -7,345
  -7,798
  -8,271
  -8,764
  -9,277
  -9,813
  -10,372
  -10,955
Total debt, $m
  7,167
  7,852
  9,669
  11,644
  13,774
  16,056
  18,486
  21,061
  23,778
  26,634
  29,628
  32,758
  36,025
  39,429
  42,973
  46,658
  50,490
  54,471
  58,609
  62,909
  67,378
  72,026
  76,859
  81,889
  87,125
  92,578
  98,261
  104,185
  110,365
  116,814
  123,547
Total liabilities, $m
  10,019
  10,704
  12,521
  14,496
  16,626
  18,908
  21,338
  23,913
  26,630
  29,486
  32,480
  35,610
  38,877
  42,281
  45,825
  49,510
  53,342
  57,323
  61,461
  65,761
  70,230
  74,878
  79,711
  84,741
  89,977
  95,430
  101,113
  107,037
  113,217
  119,666
  126,399
Total equity, $m
  9,820
  7,688
  8,993
  10,411
  11,941
  13,580
  15,325
  17,175
  19,126
  21,178
  23,328
  25,576
  27,922
  30,367
  32,912
  35,559
  38,311
  41,170
  44,142
  47,230
  50,440
  53,778
  57,250
  60,862
  64,622
  68,539
  72,620
  76,876
  81,314
  85,946
  90,781
Total liabilities and equity, $m
  19,839
  18,392
  21,514
  24,907
  28,567
  32,488
  36,663
  41,088
  45,756
  50,664
  55,808
  61,186
  66,799
  72,648
  78,737
  85,069
  91,653
  98,493
  105,603
  112,991
  120,670
  128,656
  136,961
  145,603
  154,599
  163,969
  173,733
  183,913
  194,531
  205,612
  217,180
Debt-to-equity ratio
  0.730
  1.020
  1.080
  1.120
  1.150
  1.180
  1.210
  1.230
  1.240
  1.260
  1.270
  1.280
  1.290
  1.300
  1.310
  1.310
  1.320
  1.320
  1.330
  1.330
  1.340
  1.340
  1.340
  1.350
  1.350
  1.350
  1.350
  1.360
  1.360
  1.360
  1.360
Adjusted equity ratio
  0.355
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418
  0.418

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,135
  3,149
  3,697
  4,293
  4,936
  5,624
  6,356
  7,131
  7,949
  8,809
  9,710
  10,827
  11,809
  12,833
  13,899
  15,007
  16,159
  17,357
  18,601
  19,894
  21,238
  22,635
  24,089
  25,602
  27,176
  28,816
  30,526
  32,308
  34,166
  36,106
  38,132
Depreciation, amort., depletion, $m
  309
  405
  434
  464
  497
  532
  570
  610
  652
  696
  743
  551
  602
  655
  710
  767
  826
  888
  952
  1,018
  1,087
  1,159
  1,234
  1,312
  1,393
  1,478
  1,566
  1,657
  1,753
  1,853
  1,957
Funds from operations, $m
  4,141
  3,554
  4,131
  4,757
  5,433
  6,156
  6,926
  7,741
  8,601
  9,505
  10,453
  11,378
  12,411
  13,488
  14,608
  15,774
  16,985
  18,244
  19,553
  20,912
  22,325
  23,795
  25,323
  26,914
  28,569
  30,294
  32,091
  33,965
  35,919
  37,959
  40,089
Change in working capital, $m
  216
  -144
  -157
  -171
  -185
  -198
  -211
  -223
  -235
  -248
  -259
  -271
  -283
  -295
  -307
  -319
  -332
  -345
  -359
  -373
  -387
  -403
  -419
  -436
  -454
  -473
  -493
  -513
  -536
  -559
  -584
Cash from operations, $m
  3,925
  3,698
  4,288
  4,929
  5,618
  6,354
  7,137
  7,965
  8,837
  9,753
  10,712
  11,649
  12,694
  13,783
  14,916
  16,093
  17,317
  18,589
  19,911
  21,285
  22,713
  24,198
  25,742
  27,350
  29,023
  30,767
  32,584
  34,478
  36,455
  38,518
  40,672
Maintenance CAPEX, $m
  0
  -140
  -166
  -194
  -224
  -257
  -293
  -330
  -370
  -412
  -457
  -503
  -551
  -602
  -655
  -710
  -767
  -826
  -888
  -952
  -1,018
  -1,087
  -1,159
  -1,234
  -1,312
  -1,393
  -1,478
  -1,566
  -1,657
  -1,753
  -1,853
New CAPEX, $m
  -268
  -442
  -481
  -523
  -564
  -604
  -643
  -682
  -719
  -756
  -793
  -829
  -865
  -901
  -938
  -976
  -1,014
  -1,054
  -1,095
  -1,138
  -1,183
  -1,230
  -1,280
  -1,332
  -1,386
  -1,444
  -1,505
  -1,569
  -1,636
  -1,707
  -1,783
Cash from investing activities, $m
  -3,333
  -582
  -647
  -717
  -788
  -861
  -936
  -1,012
  -1,089
  -1,168
  -1,250
  -1,332
  -1,416
  -1,503
  -1,593
  -1,686
  -1,781
  -1,880
  -1,983
  -2,090
  -2,201
  -2,317
  -2,439
  -2,566
  -2,698
  -2,837
  -2,983
  -3,135
  -3,293
  -3,460
  -3,636
Free cash flow, $m
  592
  3,116
  3,642
  4,212
  4,829
  5,492
  6,200
  6,952
  7,747
  8,584
  9,463
  10,318
  11,278
  12,280
  13,323
  14,408
  15,536
  16,709
  17,928
  19,195
  20,511
  21,880
  23,303
  24,784
  26,325
  27,930
  29,602
  31,344
  33,162
  35,058
  37,037
Issuance/(repayment) of debt, $m
  995
  1,653
  1,817
  1,975
  2,130
  2,282
  2,430
  2,575
  2,717
  2,856
  2,994
  3,130
  3,267
  3,404
  3,543
  3,686
  3,831
  3,982
  4,138
  4,300
  4,470
  4,647
  4,834
  5,030
  5,236
  5,453
  5,683
  5,925
  6,180
  6,449
  6,733
Issuance/(repurchase) of shares, $m
  -998
  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  
  58
  1,653
  1,817
  1,975
  2,130
  2,282
  2,430
  2,575
  2,717
  2,856
  2,994
  3,130
  3,267
  3,404
  3,543
  3,686
  3,831
  3,982
  4,138
  4,300
  4,470
  4,647
  4,834
  5,030
  5,236
  5,453
  5,683
  5,925
  6,180
  6,449
  6,733
Total cash flow (excl. dividends), $m
  604
  4,769
  5,458
  6,187
  6,959
  7,774
  8,631
  9,528
  10,464
  11,441
  12,457
  13,448
  14,545
  15,684
  16,866
  18,093
  19,368
  20,691
  22,066
  23,495
  24,981
  26,527
  28,137
  29,813
  31,561
  33,383
  35,284
  37,269
  39,341
  41,507
  43,770
Retained Cash Flow (-), $m
  -1,025
  -1,200
  -1,305
  -1,418
  -1,530
  -1,639
  -1,745
  -1,849
  -1,951
  -2,051
  -2,150
  -2,248
  -2,346
  -2,445
  -2,545
  -2,647
  -2,752
  -2,860
  -2,972
  -3,088
  -3,210
  -3,338
  -3,472
  -3,612
  -3,761
  -3,917
  -4,081
  -4,255
  -4,438
  -4,632
  -4,836
Prev. year cash balance distribution, $m
 
  3,332
  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
 
  6,901
  4,153
  4,768
  5,429
  6,135
  6,885
  7,678
  8,513
  9,389
  10,306
  11,200
  12,199
  13,239
  14,321
  15,446
  16,616
  17,831
  19,094
  20,406
  21,771
  23,189
  24,665
  26,201
  27,800
  29,466
  31,203
  33,014
  34,903
  36,875
  38,934
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
 
  6,616
  3,802
  4,150
  4,471
  4,756
  4,997
  5,187
  5,321
  5,394
  5,403
  5,319
  5,206
  5,034
  4,808
  4,535
  4,222
  3,880
  3,516
  3,142
  2,766
  2,399
  2,047
  1,717
  1,416
  1,146
  910
  709
  540
  403
  293
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

The Priceline Group Inc. is a provider of travel and restaurant online reservation and related services. The Company, through its online travel companies (OTCs), connects consumers wishing to make travel reservations with providers of travel services across the world. It offers consumers an array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands. Its other brands include KAYAK, Rentalcars.com and OpenTable, Inc. (OpenTable). As of December 31, 2016, Booking.com offered accommodation reservation services for over 1,115,000 properties in over 220 countries and territories on its various Websites and in over 40 languages, which included over 568,000 vacation rental properties (updated property counts were available on the Booking.com Website).

FINANCIAL RATIOS  of  Priceline Group (PCLN)

Valuation Ratios
P/E Ratio 40.3
Price to Sales 8
Price to Book 8.8
Price to Tangible Book
Price to Cash Flow 21.9
Price to Free Cash Flow 23.5
Growth Rates
Sales Growth Rate 16.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 54%
Cap. Spend. - 3 Yr. Gr. Rate 26.1%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 63.1%
Total Debt to Equity 73%
Interest Coverage 23
Management Effectiveness
Return On Assets 12%
Ret/ On Assets - 3 Yr. Avg. 15.8%
Return On Total Capital 13.4%
Ret/ On T. Cap. - 3 Yr. Avg. 18.3%
Return On Equity 22.9%
Return On Equity - 3 Yr. Avg. 27.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 96%
Gross Margin - 3 Yr. Avg. 93%
EBITDA Margin 29.3%
EBITDA Margin - 3 Yr. Avg. 34.9%
Operating Margin 26.5%
Oper. Margin - 3 Yr. Avg. 32.7%
Pre-Tax Margin 25.3%
Pre-Tax Margin - 3 Yr. Avg. 31.5%
Net Profit Margin 19.9%
Net Profit Margin - 3 Yr. Avg. 25.4%
Effective Tax Rate 21.3%
Eff/ Tax Rate - 3 Yr. Avg. 19.6%
Payout Ratio 0%

PCLN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PCLN stock intrinsic value calculation we used $10743 million for the last fiscal year's total revenue generated by Priceline Group. The default revenue input number comes from 2016 income statement of Priceline Group. 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 PCLN stock valuation model: a) initial revenue growth rate of 18.3% 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 PCLN is calculated based on our internal credit rating of Priceline Group, 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 Priceline Group.
    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 PCLN stock the variable cost ratio is equal to 64.7%.

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 PCLN 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 Priceline Group.

Corporate tax rate of 27% is the nominal tax rate for Priceline Group. 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 PCLN 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 PCLN are equal to 22.3%.

Life of production assets of 17.1 years is the average useful life of capital assets used in Priceline Group 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 PCLN is equal to -7.3%. 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 - $9820 million for Priceline Group - 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 49.06 million for Priceline Group 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 Priceline Group at the current share price and the inputted number of shares is $85.7 billion.

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COMPANY NEWS

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▶ Revenue Weakness Impacts TripAdvisors Profitability   [Nov-15-17 02:30PM  Market Realist]
▶ Despegar.com Has a Lot to Prove on Thursday   [Nov-14-17 01:36PM  Motley Fool]
▶ Expedia: Buy the Dip?   [08:10AM  Motley Fool]
▶ Priceline Valuation: Whats Priced In?   [07:31AM  Market Realist]
▶ What Analysts Estimate for Priceline in 4Q17   [Nov-10-17 10:31AM  Market Realist]
▶ Pricelines 3Q17 Revenue Defies Tough Conditions   [Nov-09-17 05:40PM  Market Realist]
▶ Pricelines Key Metric Growth Is Slowing Down   [04:10PM  Market Realist]
▶ Why TripAdvisor Inc Stock Bounced Back Today   [Nov-08-17 04:08PM  Motley Fool]
▶ CBS leading the IQ100 index   [01:03PM  CNBC Videos]
▶ Why TripAdvisor Stock Got Torched Today   [12:40PM  Motley Fool]
▶ [$$] Priceline Shares Fall After It Lowers Profit Outlook   [Nov-06-17 06:14PM  The Wall Street Journal]
▶ Priceline Leaves Investors Wanting More   [05:33PM  Motley Fool]
▶ Priceline Quarterly Results Beat Views, Outlook Falls Short   [05:16PM  Investor's Business Daily]
▶ Priceline tops Street 3Q forecasts   [04:32PM  Associated Press]
▶ Pricelines Valuation: What Is Priced In?   [07:31AM  Market Realist]
▶ Listen to the conference calls   [06:29PM  CNBC Videos]
▶ Why Pricelines Margin Is on a Downtrend   [09:02AM  Market Realist]
▶ Assessing Pricelines Revenue Growth in 2017   [07:33AM  Market Realist]
▶ Chart in Focus: Pricelines Booking Guidance for 3Q17   [Nov-02-17 05:25PM  Market Realist]
Financial statements of PCLN
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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