Intrinsic value of Koninklijke Philips ADR - PHG

Previous Close

$40.54

  Intrinsic Value

$19.95

stock screener

  Rating & Target

str. sell

-51%

  Value-price divergence*

-26%

Previous close

$40.54

 
Intrinsic value

$19.95

 
Up/down potential

-51%

 
Rating

str. sell

 
Value-price divergence*

-26%

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

We calculate the intrinsic value of PHG 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 38.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  1.12
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  25,875
  26,884
  27,962
  29,111
  30,333
  31,631
  33,007
  34,464
  36,006
  37,636
  39,358
  41,175
  43,091
  45,112
  47,241
  49,484
  51,847
  54,333
  56,950
  59,704
  62,600
  65,647
  68,850
  72,218
  75,758
  79,480
  83,391
  87,501
  91,820
  96,358
  101,126
Variable operating expenses, $m
 
  25,799
  26,796
  27,858
  28,988
  30,188
  31,461
  32,809
  34,234
  35,742
  37,333
  38,074
  39,847
  41,715
  43,684
  45,759
  47,943
  50,242
  52,662
  55,208
  57,887
  60,704
  63,666
  66,780
  70,054
  73,495
  77,112
  80,913
  84,907
  89,103
  93,512
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
  23,917
  25,799
  26,796
  27,858
  28,988
  30,188
  31,461
  32,809
  34,234
  35,742
  37,333
  38,074
  39,847
  41,715
  43,684
  45,759
  47,943
  50,242
  52,662
  55,208
  57,887
  60,704
  63,666
  66,780
  70,054
  73,495
  77,112
  80,913
  84,907
  89,103
  93,512
Operating income, $m
  1,958
  1,085
  1,166
  1,253
  1,345
  1,443
  1,546
  1,656
  1,772
  1,895
  2,024
  3,100
  3,244
  3,397
  3,557
  3,726
  3,904
  4,091
  4,288
  4,495
  4,713
  4,943
  5,184
  5,438
  5,704
  5,984
  6,279
  6,588
  6,913
  7,255
  7,614
EBITDA, $m
  3,295
  2,583
  2,687
  2,797
  2,914
  3,039
  3,171
  3,311
  3,459
  3,616
  3,781
  3,956
  4,140
  4,334
  4,539
  4,754
  4,981
  5,220
  5,472
  5,736
  6,014
  6,307
  6,615
  6,938
  7,279
  7,636
  8,012
  8,407
  8,822
  9,258
  9,716
Interest expense (income), $m
  328
  233
  275
  319
  366
  415
  468
  524
  583
  646
  712
  782
  856
  934
  1,016
  1,103
  1,194
  1,290
  1,391
  1,498
  1,610
  1,727
  1,851
  1,981
  2,118
  2,262
  2,414
  2,573
  2,740
  2,916
  3,100
Earnings before tax, $m
  1,466
  852
  891
  934
  979
  1,027
  1,078
  1,132
  1,189
  1,249
  1,312
  2,318
  2,388
  2,463
  2,541
  2,623
  2,710
  2,801
  2,897
  2,998
  3,104
  3,215
  3,333
  3,456
  3,586
  3,722
  3,865
  4,016
  4,174
  4,340
  4,514
Tax expense, $m
  345
  230
  241
  252
  264
  277
  291
  306
  321
  337
  354
  626
  645
  665
  686
  708
  732
  756
  782
  809
  838
  868
  900
  933
  968
  1,005
  1,044
  1,084
  1,127
  1,172
  1,219
Net income, $m
  1,528
  622
  651
  682
  715
  750
  787
  826
  868
  912
  958
  1,692
  1,744
  1,798
  1,855
  1,915
  1,978
  2,045
  2,115
  2,188
  2,266
  2,347
  2,433
  2,523
  2,618
  2,717
  2,822
  2,931
  3,047
  3,168
  3,295

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,570
  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
  34,093
  32,746
  34,059
  35,458
  36,947
  38,527
  40,204
  41,979
  43,857
  45,842
  47,939
  50,152
  52,486
  54,947
  57,541
  60,273
  63,151
  66,179
  69,367
  72,721
  76,249
  79,959
  83,861
  87,963
  92,276
  96,808
  101,572
  106,579
  111,840
  117,367
  123,175
Adjusted assets (=assets-cash), $m
  31,523
  32,746
  34,059
  35,458
  36,947
  38,527
  40,204
  41,979
  43,857
  45,842
  47,939
  50,152
  52,486
  54,947
  57,541
  60,273
  63,151
  66,179
  69,367
  72,721
  76,249
  79,959
  83,861
  87,963
  92,276
  96,808
  101,572
  106,579
  111,840
  117,367
  123,175
Revenue / Adjusted assets
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
  0.821
Average production assets, $m
  6,187
  6,425
  6,683
  6,958
  7,250
  7,560
  7,889
  8,237
  8,606
  8,995
  9,406
  9,841
  10,299
  10,782
  11,291
  11,827
  12,391
  12,986
  13,611
  14,269
  14,961
  15,690
  16,455
  17,260
  18,106
  18,996
  19,930
  20,913
  21,945
  23,030
  24,169
Working capital, $m
  3,802
  3,011
  3,132
  3,260
  3,397
  3,543
  3,697
  3,860
  4,033
  4,215
  4,408
  4,612
  4,826
  5,053
  5,291
  5,542
  5,807
  6,085
  6,378
  6,687
  7,011
  7,352
  7,711
  8,088
  8,485
  8,902
  9,340
  9,800
  10,284
  10,792
  11,326
Total debt, $m
  5,917
  5,000
  5,797
  6,646
  7,550
  8,509
  9,527
  10,604
  11,744
  12,949
  14,222
  15,565
  16,982
  18,476
  20,050
  21,709
  23,455
  25,294
  27,229
  29,265
  31,406
  33,658
  36,027
  38,517
  41,134
  43,886
  46,777
  49,816
  53,010
  56,365
  59,890
Total liabilities, $m
  20,794
  19,877
  20,674
  21,523
  22,427
  23,386
  24,404
  25,481
  26,621
  27,826
  29,099
  30,442
  31,859
  33,353
  34,927
  36,586
  38,332
  40,171
  42,106
  44,142
  46,283
  48,535
  50,904
  53,394
  56,011
  58,763
  61,654
  64,693
  67,887
  71,242
  74,767
Total equity, $m
  13,299
  12,869
  13,385
  13,935
  14,520
  15,141
  15,800
  16,498
  17,236
  18,016
  18,840
  19,710
  20,627
  21,594
  22,614
  23,687
  24,818
  26,009
  27,261
  28,579
  29,966
  31,424
  32,957
  34,570
  36,264
  38,046
  39,918
  41,885
  43,953
  46,125
  48,408
Total liabilities and equity, $m
  34,093
  32,746
  34,059
  35,458
  36,947
  38,527
  40,204
  41,979
  43,857
  45,842
  47,939
  50,152
  52,486
  54,947
  57,541
  60,273
  63,150
  66,180
  69,367
  72,721
  76,249
  79,959
  83,861
  87,964
  92,275
  96,809
  101,572
  106,578
  111,840
  117,367
  123,175
Debt-to-equity ratio
  0.445
  0.390
  0.430
  0.480
  0.520
  0.560
  0.600
  0.640
  0.680
  0.720
  0.750
  0.790
  0.820
  0.860
  0.890
  0.920
  0.950
  0.970
  1.000
  1.020
  1.050
  1.070
  1.090
  1.110
  1.130
  1.150
  1.170
  1.190
  1.210
  1.220
  1.240
Adjusted equity ratio
  0.340
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,528
  622
  651
  682
  715
  750
  787
  826
  868
  912
  958
  1,692
  1,744
  1,798
  1,855
  1,915
  1,978
  2,045
  2,115
  2,188
  2,266
  2,347
  2,433
  2,523
  2,618
  2,717
  2,822
  2,931
  3,047
  3,168
  3,295
Depreciation, amort., depletion, $m
  1,337
  1,498
  1,520
  1,544
  1,570
  1,596
  1,625
  1,655
  1,687
  1,721
  1,757
  856
  896
  938
  982
  1,028
  1,078
  1,129
  1,184
  1,241
  1,301
  1,364
  1,431
  1,501
  1,574
  1,652
  1,733
  1,819
  1,908
  2,003
  2,102
Funds from operations, $m
  1,208
  2,120
  2,171
  2,226
  2,284
  2,346
  2,412
  2,482
  2,555
  2,633
  2,715
  2,548
  2,639
  2,735
  2,837
  2,943
  3,056
  3,174
  3,298
  3,429
  3,567
  3,712
  3,864
  4,024
  4,192
  4,369
  4,555
  4,750
  4,955
  5,171
  5,397
Change in working capital, $m
  -1,084
  113
  121
  129
  137
  145
  154
  163
  173
  183
  193
  203
  215
  226
  238
  251
  265
  279
  293
  308
  324
  341
  359
  377
  397
  417
  438
  460
  484
  508
  534
Cash from operations, $m
  2,292
  2,007
  2,050
  2,097
  2,147
  2,201
  2,258
  2,318
  2,382
  2,450
  2,522
  2,344
  2,424
  2,509
  2,598
  2,692
  2,791
  2,895
  3,005
  3,121
  3,242
  3,370
  3,505
  3,647
  3,795
  3,952
  4,117
  4,289
  4,471
  4,662
  4,863
Maintenance CAPEX, $m
  0
  -538
  -559
  -581
  -605
  -630
  -657
  -686
  -716
  -748
  -782
  -818
  -856
  -896
  -938
  -982
  -1,028
  -1,078
  -1,129
  -1,184
  -1,241
  -1,301
  -1,364
  -1,431
  -1,501
  -1,574
  -1,652
  -1,733
  -1,819
  -1,908
  -2,003
New CAPEX, $m
  -917
  -239
  -258
  -275
  -292
  -310
  -329
  -348
  -369
  -390
  -411
  -434
  -458
  -483
  -509
  -536
  -565
  -594
  -625
  -658
  -692
  -728
  -766
  -805
  -846
  -889
  -935
  -982
  -1,032
  -1,085
  -1,140
Cash from investing activities, $m
  -1,232
  -777
  -817
  -856
  -897
  -940
  -986
  -1,034
  -1,085
  -1,138
  -1,193
  -1,252
  -1,314
  -1,379
  -1,447
  -1,518
  -1,593
  -1,672
  -1,754
  -1,842
  -1,933
  -2,029
  -2,130
  -2,236
  -2,347
  -2,463
  -2,587
  -2,715
  -2,851
  -2,993
  -3,143
Free cash flow, $m
  1,060
  1,230
  1,234
  1,241
  1,250
  1,260
  1,272
  1,284
  1,298
  1,312
  1,328
  1,092
  1,111
  1,130
  1,152
  1,174
  1,198
  1,224
  1,251
  1,279
  1,309
  1,341
  1,375
  1,411
  1,448
  1,488
  1,530
  1,574
  1,620
  1,669
  1,721
Issuance/(repayment) of debt, $m
  -398
  756
  797
  849
  904
  959
  1,017
  1,078
  1,140
  1,205
  1,273
  1,343
  1,417
  1,494
  1,574
  1,658
  1,746
  1,838
  1,935
  2,036
  2,141
  2,252
  2,368
  2,490
  2,618
  2,751
  2,892
  3,039
  3,193
  3,355
  3,525
Issuance/(repurchase) of shares, $m
  -555
  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  
  -95
  756
  797
  849
  904
  959
  1,017
  1,078
  1,140
  1,205
  1,273
  1,343
  1,417
  1,494
  1,574
  1,658
  1,746
  1,838
  1,935
  2,036
  2,141
  2,252
  2,368
  2,490
  2,618
  2,751
  2,892
  3,039
  3,193
  3,355
  3,525
Total cash flow (excl. dividends), $m
  947
  1,985
  2,031
  2,091
  2,154
  2,220
  2,289
  2,362
  2,438
  2,517
  2,601
  2,435
  2,528
  2,624
  2,726
  2,833
  2,945
  3,062
  3,185
  3,315
  3,451
  3,594
  3,743
  3,901
  4,066
  4,240
  4,422
  4,613
  4,814
  5,025
  5,246
Retained Cash Flow (-), $m
  -991
  -467
  -516
  -550
  -585
  -621
  -659
  -698
  -738
  -780
  -824
  -870
  -917
  -967
  -1,019
  -1,074
  -1,131
  -1,190
  -1,253
  -1,318
  -1,386
  -1,458
  -1,533
  -1,612
  -1,695
  -1,781
  -1,872
  -1,968
  -2,067
  -2,172
  -2,282
Prev. year cash balance distribution, $m
 
  897
  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
 
  2,415
  1,515
  1,541
  1,569
  1,599
  1,630
  1,664
  1,700
  1,737
  1,777
  1,566
  1,610
  1,657
  1,707
  1,759
  1,814
  1,872
  1,933
  1,997
  2,064
  2,135
  2,210
  2,289
  2,371
  2,458
  2,549
  2,645
  2,746
  2,852
  2,964
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
 
  2,316
  1,387
  1,341
  1,292
  1,239
  1,183
  1,124
  1,062
  998
  932
  744
  687
  630
  573
  516
  461
  407
  356
  307
  262
  221
  183
  150
  121
  96
  74
  57
  42
  31
  22
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

Koninklijke Philips N.V. is a health technology company. The Company's segments include Personal Health businesses, Diagnosis & Treatment businesses, Connected Care & Health Informatics businesses, and Lighting. The Company's Personal Health businesses segment is engaged in the health continuum, delivering integrated, connected solutions that support healthier lifestyles and those living with chronic disease. The Company's Diagnosis & Treatment businesses segment delivers precision medicine and treatment, and therapy. The Company's Connected Care & Health Informatics businesses segment provides consumers, care givers and clinicians with digital solutions that facilitate care by enabling precision medicine and population health management. The Company's Philips Lighting is engaged in the development, manufacture and application of lighting products, systems and services. The Company is the parent company of the Philips Group (Philips).

FINANCIAL RATIOS  of  Koninklijke Philips ADR (PHG)

Valuation Ratios
P/E Ratio 24.5
Price to Sales 1.4
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 16.3
Price to Free Cash Flow 27.2
Growth Rates
Sales Growth Rate 1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.2%
Cap. Spend. - 3 Yr. Gr. Rate 0.3%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 31.9%
Total Debt to Equity 44.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 11.9%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 43.3%
Gross Margin - 3 Yr. Avg. 40.8%
EBITDA Margin 12.1%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 7.6%
Oper. Margin - 3 Yr. Avg. 4.6%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. 25.3%
Payout Ratio 22.8%

PHG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PHG stock intrinsic value calculation we used $25875 million for the last fiscal year's total revenue generated by Koninklijke Philips ADR. The default revenue input number comes from 2016 income statement of Koninklijke Philips 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 PHG stock valuation model: a) initial revenue growth rate of 3.9% 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 4.3%, whose default value for PHG is calculated based on our internal credit rating of Koninklijke Philips 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 Koninklijke Philips 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 PHG stock the variable cost ratio is equal to 96.1%.

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 PHG 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 5.5% for Koninklijke Philips ADR.

Corporate tax rate of 27% is the nominal tax rate for Koninklijke Philips 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 PHG 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 PHG are equal to 23.9%.

Life of production assets of 11.5 years is the average useful life of capital assets used in Koninklijke Philips 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 PHG is equal to 11.2%. 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 - $13299 million for Koninklijke Philips 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 945.255 million for Koninklijke Philips 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 Koninklijke Philips ADR at the current share price and the inputted number of shares is $38.3 billion.

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COMPANY NEWS

▶ Master Your Shave With Philips   [Oct-03-17 08:30AM  CNW Group]
▶ Master Your Shave With Philips Norelco   [Sep-20-17 09:00AM  PR Newswire]
▶ Philips to build health technology center in Tennessee   [Aug-24-17 07:05PM  Associated Press]
▶ Fortune 500 company bringing jobs to Middle Tennessee   [04:59PM  American City Business Journals]
▶ ETFs with exposure to Royal Philips NV : August 8, 2017   [Aug-08-17 05:01PM  Capital Cube]
▶ Inside General Electrics 2Q17 Energy Connections Revenue   [Jul-28-17 07:36AM  Market Realist]
▶ Philips posts 2Q profit   [Jul-24-17 09:58PM  Associated Press]
▶ Philips: Diagnostics Are Positive   [01:48PM  TheStreet.com]
▶ Story Stocks from Briefing.com   [09:48AM  Briefing.com]
▶ Philips posts 2Q profit   [05:02AM  Associated Press]
▶ [$$] Deal Close Announcements: July 3-7   [Jul-07-17 06:53PM  The Wall Street Journal]
▶ Could Philips' Rivals Stage A Coup For Spectranetics?   [Jun-28-17 04:05PM  Investor's Business Daily]
▶ Stocks rebound after Tuesday's tech meltdown   [09:18AM  Yahoo Finance]
▶ Philips to buy Colorado medical device maker for $2.2 billion   [08:45AM  American City Business Journals]
▶ Stocks Higher As Facebook, 4 Others Reach New Buy Zones   [Jun-19-17 01:31PM  Investor's Business Daily]
▶ Europe's Central Bank Is the World's Most Important   [Jun-07-17 05:00AM  Bloomberg]
▶ Toll Bros. Earnings Top On 'Affordable' Luxury Homes, But Builder Stocks Fall   [May-23-17 04:05PM  Investor's Business Daily]
▶ RespirTech to be sold to health care technology giant Philips   [May-22-17 01:56PM  American City Business Journals]
▶ ETFs with exposure to Royal Philips NV : May 8, 2017   [May-08-17 05:05PM  Capital Cube]
Financial statements of PHG
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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