Intrinsic value of PayPal Holdings - PYPL

Previous Close

$60.29

  Intrinsic Value

$47.58

stock screener

  Rating & Target

sell

-21%

  Value-price divergence*

+36%

Previous close

$60.29

 
Intrinsic value

$47.58

 
Up/down potential

-21%

 
Rating

sell

 
Value-price divergence*

+36%

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

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 71.7

 

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, %
  17.24
  16.90
  15.71
  14.64
  13.68
  12.81
  12.03
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.21
  6.98
  6.79
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
Revenue, $m
  10,842
  12,674
  14,665
  16,812
  19,111
  21,559
  24,152
  26,887
  29,762
  32,774
  35,924
  39,211
  42,636
  46,200
  49,908
  53,762
  57,767
  61,929
  66,255
  70,751
  75,426
  80,288
  85,348
  90,616
  96,102
  101,820
  107,781
  113,998
  120,487
  127,262
  134,338
Variable operating expenses, $m
 
  10,603
  12,205
  13,932
  15,782
  17,752
  19,838
  22,038
  24,351
  26,775
  29,309
  31,548
  34,303
  37,171
  40,154
  43,255
  46,477
  49,826
  53,306
  56,924
  60,685
  64,597
  68,668
  72,906
  77,320
  81,920
  86,716
  91,719
  96,939
  102,390
  108,083
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
  10,603
  12,205
  13,932
  15,782
  17,752
  19,838
  22,038
  24,351
  26,775
  29,309
  31,548
  34,303
  37,171
  40,154
  43,255
  46,477
  49,826
  53,306
  56,924
  60,685
  64,597
  68,668
  72,906
  77,320
  81,920
  86,716
  91,719
  96,939
  102,390
  108,083
Operating income, $m
  1,586
  2,071
  2,460
  2,880
  3,329
  3,808
  4,314
  4,849
  5,411
  5,999
  6,615
  7,663
  8,333
  9,029
  9,754
  10,507
  11,290
  12,103
  12,949
  13,827
  14,741
  15,691
  16,680
  17,710
  18,782
  19,899
  21,064
  22,280
  23,548
  24,872
  26,255
EBITDA, $m
  2,310
  2,676
  3,096
  3,550
  4,035
  4,552
  5,099
  5,677
  6,284
  6,920
  7,585
  8,279
  9,002
  9,755
  10,537
  11,351
  12,197
  13,076
  13,989
  14,938
  15,925
  16,952
  18,020
  19,132
  20,291
  21,498
  22,757
  24,069
  25,439
  26,870
  28,364
Interest expense (income), $m
  4
  0
  110
  228
  356
  493
  638
  792
  955
  1,126
  1,305
  1,492
  1,688
  1,891
  2,103
  2,324
  2,553
  2,791
  3,038
  3,295
  3,563
  3,841
  4,130
  4,431
  4,744
  5,070
  5,410
  5,764
  6,134
  6,520
  6,923
Earnings before tax, $m
  1,631
  2,071
  2,350
  2,652
  2,973
  3,315
  3,676
  4,057
  4,456
  4,874
  5,310
  6,171
  6,645
  7,138
  7,651
  8,184
  8,737
  9,313
  9,910
  10,532
  11,178
  11,851
  12,550
  13,279
  14,038
  14,829
  15,654
  16,515
  17,414
  18,352
  19,332
Tax expense, $m
  230
  559
  635
  716
  803
  895
  993
  1,095
  1,203
  1,316
  1,434
  1,666
  1,794
  1,927
  2,066
  2,210
  2,359
  2,514
  2,676
  2,844
  3,018
  3,200
  3,389
  3,585
  3,790
  4,004
  4,227
  4,459
  4,702
  4,955
  5,220
Net income, $m
  1,401
  1,512
  1,716
  1,936
  2,171
  2,420
  2,684
  2,961
  3,253
  3,558
  3,876
  4,505
  4,851
  5,211
  5,585
  5,974
  6,378
  6,798
  7,235
  7,688
  8,160
  8,651
  9,162
  9,694
  10,248
  10,825
  11,428
  12,056
  12,712
  13,397
  14,112

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
  32,920
  38,092
  43,668
  49,640
  55,998
  62,732
  69,836
  77,303
  85,128
  93,309
  101,846
  110,742
  120,001
  129,631
  139,641
  150,045
  160,856
  172,091
  183,769
  195,912
  208,542
  221,684
  235,366
  249,617
  264,467
  279,950
  296,100
  312,954
  330,550
  348,931
Adjusted assets (=assets-cash), $m
  28,128
  32,920
  38,092
  43,668
  49,640
  55,998
  62,732
  69,836
  77,303
  85,128
  93,309
  101,846
  110,742
  120,001
  129,631
  139,641
  150,045
  160,856
  172,091
  183,769
  195,912
  208,542
  221,684
  235,366
  249,617
  264,467
  279,950
  296,100
  312,954
  330,550
  348,931
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
  1,990
  2,302
  2,640
  3,000
  3,385
  3,792
  4,221
  4,673
  5,146
  5,640
  6,156
  6,694
  7,253
  7,836
  8,441
  9,069
  9,723
  10,402
  11,108
  11,842
  12,605
  13,400
  14,227
  15,088
  15,986
  16,922
  17,898
  18,916
  19,980
  21,091
Working capital, $m
  8,855
  4,537
  5,250
  6,019
  6,842
  7,718
  8,646
  9,626
  10,655
  11,733
  12,861
  14,037
  15,264
  16,540
  17,867
  19,247
  20,681
  22,171
  23,719
  25,329
  27,002
  28,743
  30,555
  32,441
  34,405
  36,451
  38,585
  40,811
  43,134
  45,560
  48,093
Total debt, $m
  0
  3,139
  6,521
  10,168
  14,074
  18,231
  22,636
  27,282
  32,165
  37,283
  42,633
  48,216
  54,034
  60,090
  66,388
  72,934
  79,738
  86,809
  94,156
  101,794
  109,735
  117,995
  126,590
  135,538
  144,858
  154,570
  164,696
  175,258
  186,281
  197,789
  209,810
Total liabilities, $m
  18,391
  21,530
  24,912
  28,559
  32,465
  36,622
  41,027
  45,673
  50,556
  55,674
  61,024
  66,607
  72,425
  78,481
  84,779
  91,325
  98,129
  105,200
  112,547
  120,185
  128,126
  136,386
  144,981
  153,929
  163,249
  172,961
  183,087
  193,649
  204,672
  216,180
  228,201
Total equity, $m
  14,712
  11,390
  13,180
  15,109
  17,175
  19,375
  21,705
  24,163
  26,747
  29,454
  32,285
  35,239
  38,317
  41,520
  44,852
  48,316
  51,915
  55,656
  59,543
  63,584
  67,785
  72,155
  76,703
  81,437
  86,367
  91,506
  96,863
  102,450
  108,282
  114,370
  120,730
Total liabilities and equity, $m
  33,103
  32,920
  38,092
  43,668
  49,640
  55,997
  62,732
  69,836
  77,303
  85,128
  93,309
  101,846
  110,742
  120,001
  129,631
  139,641
  150,044
  160,856
  172,090
  183,769
  195,911
  208,541
  221,684
  235,366
  249,616
  264,467
  279,950
  296,099
  312,954
  330,550
  348,931
Debt-to-equity ratio
  0.000
  0.280
  0.490
  0.670
  0.820
  0.940
  1.040
  1.130
  1.200
  1.270
  1.320
  1.370
  1.410
  1.450
  1.480
  1.510
  1.540
  1.560
  1.580
  1.600
  1.620
  1.640
  1.650
  1.660
  1.680
  1.690
  1.700
  1.710
  1.720
  1.730
  1.740
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
  1,512
  1,716
  1,936
  2,171
  2,420
  2,684
  2,961
  3,253
  3,558
  3,876
  4,505
  4,851
  5,211
  5,585
  5,974
  6,378
  6,798
  7,235
  7,688
  8,160
  8,651
  9,162
  9,694
  10,248
  10,825
  11,428
  12,056
  12,712
  13,397
  14,112
Depreciation, amort., depletion, $m
  724
  605
  636
  670
  706
  744
  785
  828
  873
  920
  970
  616
  669
  725
  784
  844
  907
  972
  1,040
  1,111
  1,184
  1,261
  1,340
  1,423
  1,509
  1,599
  1,692
  1,790
  1,892
  1,998
  2,109
Funds from operations, $m
  2,677
  2,117
  2,352
  2,606
  2,876
  3,164
  3,469
  3,789
  4,126
  4,478
  4,846
  5,121
  5,520
  5,936
  6,369
  6,818
  7,285
  7,770
  8,275
  8,799
  9,344
  9,912
  10,502
  11,116
  11,757
  12,424
  13,120
  13,846
  14,604
  15,395
  16,222
Change in working capital, $m
  -481
  656
  713
  769
  823
  876
  928
  979
  1,029
  1,079
  1,128
  1,177
  1,226
  1,276
  1,327
  1,380
  1,434
  1,490
  1,549
  1,610
  1,674
  1,741
  1,811
  1,886
  1,964
  2,047
  2,134
  2,226
  2,323
  2,425
  2,533
Cash from operations, $m
  3,158
  1,461
  1,639
  1,837
  2,053
  2,288
  2,540
  2,810
  3,097
  3,400
  3,719
  3,944
  4,294
  4,660
  5,041
  5,438
  5,851
  6,280
  6,726
  7,190
  7,671
  8,171
  8,690
  9,231
  9,793
  10,377
  10,986
  11,620
  12,281
  12,970
  13,688
Maintenance CAPEX, $m
  0
  -170
  -199
  -230
  -264
  -300
  -338
  -379
  -422
  -467
  -515
  -564
  -616
  -669
  -725
  -784
  -844
  -907
  -972
  -1,040
  -1,111
  -1,184
  -1,261
  -1,340
  -1,423
  -1,509
  -1,599
  -1,692
  -1,790
  -1,892
  -1,998
New CAPEX, $m
  -669
  -292
  -313
  -337
  -361
  -384
  -407
  -429
  -451
  -473
  -495
  -516
  -538
  -560
  -582
  -605
  -629
  -653
  -679
  -706
  -734
  -763
  -794
  -827
  -861
  -898
  -936
  -976
  -1,019
  -1,064
  -1,111
Cash from investing activities, $m
  -4,999
  -462
  -512
  -567
  -625
  -684
  -745
  -808
  -873
  -940
  -1,010
  -1,080
  -1,154
  -1,229
  -1,307
  -1,389
  -1,473
  -1,560
  -1,651
  -1,746
  -1,845
  -1,947
  -2,055
  -2,167
  -2,284
  -2,407
  -2,535
  -2,668
  -2,809
  -2,956
  -3,109
Free cash flow, $m
  -1,841
  999
  1,128
  1,270
  1,428
  1,604
  1,795
  2,002
  2,223
  2,459
  2,710
  2,864
  3,141
  3,431
  3,734
  4,050
  4,378
  4,720
  5,075
  5,443
  5,826
  6,223
  6,635
  7,064
  7,508
  7,971
  8,451
  8,952
  9,472
  10,014
  10,579
Issuance/(repayment) of debt, $m
  -21
  3,139
  3,382
  3,647
  3,905
  4,158
  4,405
  4,646
  4,883
  5,118
  5,350
  5,583
  5,818
  6,055
  6,298
  6,547
  6,804
  7,070
  7,348
  7,638
  7,941
  8,260
  8,595
  8,948
  9,320
  9,712
  10,126
  10,562
  11,022
  11,508
  12,021
Issuance/(repurchase) of shares, $m
  -886
  141
  74
  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  
  2,038
  3,280
  3,456
  3,647
  3,905
  4,158
  4,405
  4,646
  4,883
  5,118
  5,350
  5,583
  5,818
  6,055
  6,298
  6,547
  6,804
  7,070
  7,348
  7,638
  7,941
  8,260
  8,595
  8,948
  9,320
  9,712
  10,126
  10,562
  11,022
  11,508
  12,021
Total cash flow (excl. dividends), $m
  197
  4,279
  4,583
  4,917
  5,334
  5,762
  6,199
  6,648
  7,107
  7,577
  8,060
  8,447
  8,959
  9,486
  10,032
  10,597
  11,182
  11,790
  12,423
  13,081
  13,767
  14,483
  15,231
  16,012
  16,828
  17,683
  18,577
  19,514
  20,495
  21,523
  22,600
Retained Cash Flow (-), $m
  -953
  -1,653
  -1,789
  -1,929
  -2,066
  -2,200
  -2,330
  -2,458
  -2,583
  -2,707
  -2,831
  -2,954
  -3,078
  -3,204
  -3,332
  -3,464
  -3,600
  -3,741
  -3,887
  -4,041
  -4,201
  -4,370
  -4,547
  -4,734
  -4,931
  -5,138
  -5,357
  -5,588
  -5,831
  -6,088
  -6,360
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
 
  7,601
  2,794
  2,987
  3,268
  3,562
  3,869
  4,190
  4,523
  4,870
  5,229
  5,493
  5,881
  6,283
  6,700
  7,133
  7,583
  8,050
  8,535
  9,040
  9,566
  10,113
  10,683
  11,278
  11,898
  12,545
  13,220
  13,926
  14,663
  15,434
  16,240
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
 
  7,287
  2,558
  2,600
  2,691
  2,761
  2,808
  2,830
  2,827
  2,797
  2,742
  2,609
  2,510
  2,389
  2,249
  2,094
  1,927
  1,751
  1,572
  1,392
  1,216
  1,046
  886
  739
  606
  488
  386
  299
  227
  168
  122
Current shareholders' claim on cash, %
  100
  99.7
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6

PayPal Holdings, Inc. operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide. It enables businesses of various sizes to accept payments from merchant Websites, mobile devices, and applications, as well as at offline retail locations through a range of payment solutions, including PayPal, PayPal Credit, Braintree, Venmo, Xoom, and Paydiant products. The company's platform allows consumers to shop by sending payments, withdraw funds to their bank accounts, and hold balances in their PayPal accounts in various currencies. PayPal Holdings, Inc. was founded in 1998 and is headquartered in San Jose, California.

FINANCIAL RATIOS  of  PayPal Holdings (PYPL)

Valuation Ratios
P/E Ratio 51.9
Price to Sales 6.7
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 23
Price to Free Cash Flow 29.2
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 16.9% 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 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 10 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 1189.49 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 $71.7 billion.

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Stock chart of PYPL 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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