Intrinsic value of PayPal Holdings - PYPL

Previous Close

$74.09

  Intrinsic Value

$59.98

stock screener

  Rating & Target

hold

-19%

Previous close

$74.09

 
Intrinsic value

$59.98

 
Up/down potential

-19%

 
Rating

hold

We calculate the intrinsic value of PYPL 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 89.1

 

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, %
  17.24
  21.40
  19.76
  18.28
  16.96
  15.76
  14.68
  13.72
  12.84
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
Revenue, $m
  10,842
  13,162
  15,763
  18,645
  21,807
  25,243
  28,950
  32,921
  37,149
  41,629
  46,356
  51,324
  56,532
  61,977
  67,659
  73,580
  79,744
  86,155
  92,819
  99,744
  106,941
  114,421
  122,195
  130,278
  138,686
  147,434
  156,542
  166,028
  175,912
  186,218
  196,967
Variable operating expenses, $m
 
  10,996
  13,088
  15,407
  17,951
  20,716
  23,698
  26,893
  30,295
  33,899
  37,702
  41,293
  45,483
  49,864
  54,436
  59,200
  64,159
  69,317
  74,678
  80,251
  86,041
  92,059
  98,314
  104,817
  111,581
  118,620
  125,948
  133,580
  141,533
  149,824
  158,472
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
  9,256
  10,996
  13,088
  15,407
  17,951
  20,716
  23,698
  26,893
  30,295
  33,899
  37,702
  41,293
  45,483
  49,864
  54,436
  59,200
  64,159
  69,317
  74,678
  80,251
  86,041
  92,059
  98,314
  104,817
  111,581
  118,620
  125,948
  133,580
  141,533
  149,824
  158,472
Operating income, $m
  1,586
  2,166
  2,675
  3,238
  3,856
  4,528
  5,252
  6,028
  6,854
  7,730
  8,654
  10,031
  11,048
  12,113
  13,223
  14,380
  15,585
  16,838
  18,140
  19,494
  20,900
  22,362
  23,882
  25,461
  27,104
  28,814
  30,594
  32,448
  34,380
  36,394
  38,495
EBITDA, $m
  2,310
  2,831
  3,390
  4,010
  4,690
  5,429
  6,226
  7,080
  7,989
  8,953
  9,969
  11,038
  12,158
  13,329
  14,551
  15,824
  17,150
  18,529
  19,962
  21,451
  22,999
  24,608
  26,280
  28,018
  29,826
  31,708
  33,666
  35,706
  37,832
  40,049
  42,360
Interest expense (income), $m
  4
  0
  139
  293
  465
  653
  857
  1,078
  1,314
  1,565
  1,831
  2,112
  2,408
  2,717
  3,041
  3,379
  3,731
  4,097
  4,479
  4,875
  5,287
  5,714
  6,159
  6,621
  7,102
  7,602
  8,122
  8,663
  9,227
  9,815
  10,428
Earnings before tax, $m
  1,631
  2,166
  2,536
  2,945
  3,391
  3,875
  4,395
  4,951
  5,541
  6,165
  6,822
  7,918
  8,641
  9,395
  10,182
  11,001
  11,854
  12,740
  13,662
  14,619
  15,614
  16,648
  17,722
  18,840
  20,002
  21,212
  22,472
  23,785
  25,153
  26,579
  28,067
Tax expense, $m
  230
  585
  685
  795
  916
  1,046
  1,187
  1,337
  1,496
  1,665
  1,842
  2,138
  2,333
  2,537
  2,749
  2,970
  3,201
  3,440
  3,689
  3,947
  4,216
  4,495
  4,785
  5,087
  5,401
  5,727
  6,068
  6,422
  6,791
  7,176
  7,578
Net income, $m
  1,401
  1,582
  1,851
  2,150
  2,475
  2,829
  3,208
  3,614
  4,045
  4,500
  4,980
  5,780
  6,308
  6,858
  7,433
  8,031
  8,653
  9,300
  9,973
  10,672
  11,398
  12,153
  12,937
  13,753
  14,602
  15,485
  16,405
  17,363
  18,361
  19,403
  20,489

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,975
  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
  33,103
  34,188
  40,943
  48,429
  56,640
  65,567
  75,195
  85,508
  96,491
  108,127
  120,404
  133,309
  146,835
  160,978
  175,738
  191,118
  207,127
  223,778
  241,088
  259,077
  277,770
  297,197
  317,390
  338,385
  360,223
  382,946
  406,602
  431,241
  456,915
  483,683
  511,603
Adjusted assets (=assets-cash), $m
  28,128
  34,188
  40,943
  48,429
  56,640
  65,567
  75,195
  85,508
  96,491
  108,127
  120,404
  133,309
  146,835
  160,978
  175,738
  191,118
  207,127
  223,778
  241,088
  259,077
  277,770
  297,197
  317,390
  338,385
  360,223
  382,946
  406,602
  431,241
  456,915
  483,683
  511,603
Revenue / Adjusted assets
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
Average production assets, $m
  1,698
  2,066
  2,475
  2,927
  3,424
  3,963
  4,545
  5,169
  5,832
  6,536
  7,278
  8,058
  8,875
  9,730
  10,622
  11,552
  12,520
  13,526
  14,573
  15,660
  16,790
  17,964
  19,185
  20,454
  21,774
  23,147
  24,577
  26,066
  27,618
  29,236
  30,924
Working capital, $m
  8,855
  4,712
  5,643
  6,675
  7,807
  9,037
  10,364
  11,786
  13,299
  14,903
  16,595
  18,374
  20,238
  22,188
  24,222
  26,342
  28,548
  30,843
  33,229
  35,709
  38,285
  40,963
  43,746
  46,640
  49,650
  52,781
  56,042
  59,438
  62,977
  66,666
  70,514
Total debt, $m
  0
  3,968
  8,386
  13,282
  18,652
  24,490
  30,786
  37,531
  44,714
  52,324
  60,353
  68,793
  77,639
  86,889
  96,542
  106,600
  117,070
  127,960
  139,280
  151,045
  163,271
  175,976
  189,182
  202,913
  217,195
  232,056
  247,527
  263,641
  280,432
  297,938
  316,198
Total liabilities, $m
  18,391
  22,359
  26,777
  31,673
  37,043
  42,881
  49,177
  55,922
  63,105
  70,715
  78,744
  87,184
  96,030
  105,280
  114,933
  124,991
  135,461
  146,351
  157,671
  169,436
  181,662
  194,367
  207,573
  221,304
  235,586
  250,447
  265,918
  282,032
  298,823
  316,329
  334,589
Total equity, $m
  14,712
  11,829
  14,166
  16,756
  19,598
  22,686
  26,017
  29,586
  33,386
  37,412
  41,660
  46,125
  50,805
  55,699
  60,805
  66,127
  71,666
  77,427
  83,416
  89,640
  96,108
  102,830
  109,817
  117,081
  124,637
  132,499
  140,684
  149,209
  158,093
  167,354
  177,015
Total liabilities and equity, $m
  33,103
  34,188
  40,943
  48,429
  56,641
  65,567
  75,194
  85,508
  96,491
  108,127
  120,404
  133,309
  146,835
  160,979
  175,738
  191,118
  207,127
  223,778
  241,087
  259,076
  277,770
  297,197
  317,390
  338,385
  360,223
  382,946
  406,602
  431,241
  456,916
  483,683
  511,604
Debt-to-equity ratio
  0.000
  0.340
  0.590
  0.790
  0.950
  1.080
  1.180
  1.270
  1.340
  1.400
  1.450
  1.490
  1.530
  1.560
  1.590
  1.610
  1.630
  1.650
  1.670
  1.690
  1.700
  1.710
  1.720
  1.730
  1.740
  1.750
  1.760
  1.770
  1.770
  1.780
  1.790
Adjusted equity ratio
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,401
  1,582
  1,851
  2,150
  2,475
  2,829
  3,208
  3,614
  4,045
  4,500
  4,980
  5,780
  6,308
  6,858
  7,433
  8,031
  8,653
  9,300
  9,973
  10,672
  11,398
  12,153
  12,937
  13,753
  14,602
  15,485
  16,405
  17,363
  18,361
  19,403
  20,489
Depreciation, amort., depletion, $m
  724
  664
  715
  772
  834
  901
  974
  1,052
  1,135
  1,223
  1,316
  1,007
  1,109
  1,216
  1,328
  1,444
  1,565
  1,691
  1,822
  1,957
  2,099
  2,246
  2,398
  2,557
  2,722
  2,893
  3,072
  3,258
  3,452
  3,655
  3,865
Funds from operations, $m
  2,677
  2,246
  2,566
  2,921
  3,309
  3,730
  4,182
  4,666
  5,180
  5,723
  6,296
  6,788
  7,417
  8,075
  8,761
  9,475
  10,218
  10,991
  11,795
  12,629
  13,497
  14,398
  15,335
  16,310
  17,324
  18,378
  19,477
  20,621
  21,814
  23,057
  24,354
Change in working capital, $m
  -481
  831
  931
  1,032
  1,132
  1,230
  1,327
  1,422
  1,514
  1,604
  1,692
  1,779
  1,864
  1,949
  2,034
  2,120
  2,207
  2,295
  2,386
  2,479
  2,577
  2,678
  2,783
  2,894
  3,010
  3,132
  3,260
  3,396
  3,539
  3,689
  3,848
Cash from operations, $m
  3,158
  1,415
  1,635
  1,890
  2,178
  2,500
  2,855
  3,244
  3,666
  4,119
  4,604
  5,009
  5,553
  6,125
  6,726
  7,355
  8,012
  8,696
  9,409
  10,150
  10,920
  11,721
  12,552
  13,416
  14,314
  15,246
  16,216
  17,225
  18,275
  19,368
  20,506
Maintenance CAPEX, $m
  0
  -212
  -258
  -309
  -366
  -428
  -495
  -568
  -646
  -729
  -817
  -910
  -1,007
  -1,109
  -1,216
  -1,328
  -1,444
  -1,565
  -1,691
  -1,822
  -1,957
  -2,099
  -2,246
  -2,398
  -2,557
  -2,722
  -2,893
  -3,072
  -3,258
  -3,452
  -3,655
New CAPEX, $m
  -669
  -369
  -408
  -452
  -496
  -540
  -582
  -623
  -664
  -703
  -742
  -780
  -818
  -855
  -892
  -930
  -968
  -1,006
  -1,046
  -1,087
  -1,130
  -1,174
  -1,221
  -1,269
  -1,320
  -1,374
  -1,430
  -1,489
  -1,552
  -1,618
  -1,688
Cash from investing activities, $m
  -4,999
  -581
  -666
  -761
  -862
  -968
  -1,077
  -1,191
  -1,310
  -1,432
  -1,559
  -1,690
  -1,825
  -1,964
  -2,108
  -2,258
  -2,412
  -2,571
  -2,737
  -2,909
  -3,087
  -3,273
  -3,467
  -3,667
  -3,877
  -4,096
  -4,323
  -4,561
  -4,810
  -5,070
  -5,343
Free cash flow, $m
  -1,841
  834
  969
  1,128
  1,315
  1,532
  1,778
  2,053
  2,356
  2,687
  3,045
  3,319
  3,728
  4,161
  4,618
  5,098
  5,600
  6,125
  6,672
  7,241
  7,833
  8,448
  9,086
  9,749
  10,437
  11,151
  11,893
  12,664
  13,465
  14,298
  15,164
Issuance/(repayment) of debt, $m
  -21
  3,968
  4,418
  4,896
  5,370
  5,838
  6,297
  6,745
  7,183
  7,610
  8,029
  8,440
  8,846
  9,249
  9,653
  10,059
  10,470
  10,890
  11,320
  11,765
  12,225
  12,705
  13,206
  13,731
  14,282
  14,861
  15,471
  16,114
  16,791
  17,506
  18,260
Issuance/(repurchase) of shares, $m
  -886
  510
  486
  441
  366
  260
  123
  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  
  2,038
  4,478
  4,904
  5,337
  5,736
  6,098
  6,420
  6,745
  7,183
  7,610
  8,029
  8,440
  8,846
  9,249
  9,653
  10,059
  10,470
  10,890
  11,320
  11,765
  12,225
  12,705
  13,206
  13,731
  14,282
  14,861
  15,471
  16,114
  16,791
  17,506
  18,260
Total cash flow (excl. dividends), $m
  197
  5,312
  5,873
  6,464
  7,051
  7,630
  8,198
  8,798
  9,539
  10,297
  11,074
  11,759
  12,574
  13,411
  14,271
  15,156
  16,070
  17,015
  17,992
  19,006
  20,058
  21,153
  22,292
  23,480
  24,719
  26,012
  27,364
  28,777
  30,256
  31,803
  33,424
Retained Cash Flow (-), $m
  -953
  -2,092
  -2,337
  -2,590
  -2,841
  -3,089
  -3,331
  -3,568
  -3,800
  -4,026
  -4,248
  -4,465
  -4,680
  -4,893
  -5,107
  -5,322
  -5,539
  -5,761
  -5,989
  -6,224
  -6,468
  -6,722
  -6,987
  -7,264
  -7,556
  -7,862
  -8,185
  -8,525
  -8,883
  -9,262
  -9,660
Prev. year cash balance distribution, $m
 
  4,975
  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
 
  8,195
  3,536
  3,874
  4,210
  4,541
  4,866
  5,229
  5,739
  6,271
  6,826
  7,294
  7,894
  8,517
  9,164
  9,835
  10,531
  11,253
  12,003
  12,782
  13,590
  14,431
  15,306
  16,216
  17,163
  18,150
  19,179
  20,252
  21,372
  22,542
  23,763
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
 
  7,857
  3,237
  3,371
  3,467
  3,520
  3,532
  3,533
  3,587
  3,602
  3,579
  3,464
  3,369
  3,238
  3,076
  2,887
  2,676
  2,449
  2,210
  1,968
  1,727
  1,493
  1,270
  1,063
  874
  706
  560
  435
  331
  246
  179
Current shareholders' claim on cash, %
  100
  99.1
  98.5
  98.0
  97.6
  97.4
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3
  97.3

PayPal Holdings, Inc. is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants. The Company's combined payment solutions, including its PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant products, compose its Payments Platform. It operates a two-sided global technology platform that links its customers, both merchants and consumers, around the globe to facilitate the processing of payment transactions, allowing it to connect merchants and consumers. It allows its customers to use their account for both purchase and paying for goods, as well as to transfer and withdraw funds. It enables consumers to exchange funds with merchants using funding sources, which include bank account, PayPal account balance, PayPal Credit account, credit and debit card or other stored value products. It offers consumers person-to-person payment solutions through its PayPal Website and mobile application, Venmo and Xoom.

FINANCIAL RATIOS  of  PayPal Holdings (PYPL)

Valuation Ratios
P/E Ratio 63.8
Price to Sales 8.2
Price to Book 6.1
Price to Tangible Book
Price to Cash Flow 28.3
Price to Free Cash Flow 35.9
Growth Rates
Sales Growth Rate 17.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.3%
Cap. Spend. - 3 Yr. Gr. Rate 11.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 409
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.4%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 47.4%
Gross Margin - 3 Yr. Avg. 50.3%
EBITDA Margin 21.8%
EBITDA Margin - 3 Yr. Avg. 22.3%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 15%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 12.9%
Net Profit Margin - 3 Yr. Avg. 10.5%
Effective Tax Rate 14.1%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 0%

PYPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PYPL stock intrinsic value calculation we used $10842 million for the last fiscal year's total revenue generated by PayPal Holdings. The default revenue input number comes from 2016 income statement of PayPal Holdings. 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 PYPL stock valuation model: a) initial revenue growth rate of 21.4% 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 PYPL is calculated based on our internal credit rating of PayPal Holdings, 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 PayPal Holdings.
    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 PYPL stock the variable cost ratio is equal to 84.2%.

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 PYPL 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 PayPal Holdings.

Corporate tax rate of 27% is the nominal tax rate for PayPal Holdings. 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 PYPL 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 PYPL are equal to 15.7%.

Life of production assets of 8 years is the average useful life of capital assets used in PayPal Holdings 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 PYPL is equal to 35.8%. 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 - $14712 million for PayPal Holdings - 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 1202.34 million for PayPal Holdings 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 PayPal Holdings at the current share price and the inputted number of shares is $89.1 billion.

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COMPANY NEWS

▶ Square Inc Is┬áStill Not in an Attractive Buy Zone   [Dec-14-17 12:56PM  InvestorPlace]
▶ PayPal Is Headed to a $100 Billion Valuation   [Dec-13-17 08:03PM  TheStreet.com]
▶ 3 Stocks Moving Wednesday   [02:45PM  GuruFocus.com]
▶ 3 Growth Stocks Worth Buying   [Dec-11-17 08:05PM  Motley Fool]
▶ Insider Q&A: PayPal founder talks digital payments, bitcoin   [Dec-10-17 12:06PM  Associated Press]
▶ 5 Tech Stocks Weathering The Sector's Sell-Off: Investing Action Plan   [Dec-06-17 04:06PM  Investor's Business Daily]
▶ What Does PayPals Loan Sale Mean for Square?   [08:35AM  Market Realist]
▶ [$$] Duke Energy Says Some Customers May Be Affected by Data Breach   [Dec-05-17 05:02PM  The Wall Street Journal]
▶ Duke Energy customers' info potentially exposed by vendor's data breach   [03:45PM  American City Business Journals]
▶ How PayPal Grew Bigger than Its Parent eBay   [10:32AM  Market Realist]
▶ Why PayPal Is Teaming Up with Acorns   [09:03AM  Market Realist]
▶ How Are PayPals Expenses Trending?   [07:33AM  Market Realist]
▶ How Does PayPals Balance Sheet Look?   [11:56AM  Market Realist]
▶ Why PayPal Is Selling Its Loan Portfolio   [10:34AM  Market Realist]
▶ Take a Chance, Go Long PayPal Holdings Inc   [10:03AM  InvestorPlace]
▶ Why PayPal Suspended TIO Networks Services   [08:55AM  Market Realist]
▶ Is Square, Inc. a Buy?   [08:33AM  Motley Fool]
▶ 5 Top Picks As Oil Prices Make A Comeback   [Nov-29-17 07:30PM  Oilprice.com]
▶ A Closer Look at Facebooks Stock Today   [04:10PM  Market Realist]
▶ Why Peter Thiel Is Selling Facebook Shares   [02:35PM  Market Realist]
▶ Nearly every American is giving to charity this year   [09:20AM  American City Business Journals]
Financial statements of PYPL
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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