Intrinsic value of Qualcomm - QCOM

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$52.50

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$52.50

 
Intrinsic value

$53.32

 
Up/down potential

+2%

 
Rating

hold

 
Value-price divergence* premium content

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

We calculate the intrinsic value of QCOM 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 77.7

 

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, %
  -6.83
  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
  23,554
  24,473
  25,454
  26,500
  27,612
  28,794
  30,046
  31,373
  32,777
  34,260
  35,827
  37,481
  39,226
  41,065
  43,004
  45,046
  47,196
  49,460
  51,842
  54,348
  56,985
  59,758
  62,674
  65,740
  68,963
  72,350
  75,911
  79,652
  83,584
  87,715
  92,055
Variable operating expenses, $m
 
  19,042
  19,783
  20,572
  21,412
  22,304
  23,250
  24,251
  25,311
  26,431
  27,614
  28,294
  29,611
  31,000
  32,463
  34,005
  35,628
  37,337
  39,135
  41,027
  43,017
  45,111
  47,312
  49,626
  52,059
  54,616
  57,304
  60,129
  63,097
  66,215
  69,492
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
  17,239
  19,042
  19,783
  20,572
  21,412
  22,304
  23,250
  24,251
  25,311
  26,431
  27,614
  28,294
  29,611
  31,000
  32,463
  34,005
  35,628
  37,337
  39,135
  41,027
  43,017
  45,111
  47,312
  49,626
  52,059
  54,616
  57,304
  60,129
  63,097
  66,215
  69,492
Operating income, $m
  6,315
  5,431
  5,671
  5,927
  6,200
  6,490
  6,797
  7,122
  7,466
  7,830
  8,214
  9,187
  9,615
  10,066
  10,541
  11,041
  11,568
  12,123
  12,707
  13,321
  13,968
  14,647
  15,362
  16,114
  16,903
  17,734
  18,607
  19,524
  20,487
  21,500
  22,564
EBITDA, $m
  7,743
  6,772
  7,044
  7,333
  7,641
  7,968
  8,314
  8,681
  9,070
  9,480
  9,914
  10,372
  10,854
  11,363
  11,900
  12,465
  13,060
  13,686
  14,345
  15,039
  15,769
  16,536
  17,343
  18,191
  19,083
  20,020
  21,006
  22,041
  23,129
  24,272
  25,473
Interest expense (income), $m
  0
  350
  376
  404
  433
  464
  497
  532
  569
  609
  650
  694
  740
  789
  841
  895
  952
  1,012
  1,076
  1,142
  1,212
  1,286
  1,364
  1,445
  1,531
  1,621
  1,716
  1,816
  1,921
  2,031
  2,146
Earnings before tax, $m
  6,833
  5,080
  5,295
  5,524
  5,767
  6,026
  6,300
  6,590
  6,897
  7,221
  7,564
  8,493
  8,874
  9,276
  9,700
  10,146
  10,616
  11,111
  11,631
  12,179
  12,755
  13,361
  13,998
  14,668
  15,372
  16,112
  16,890
  17,708
  18,567
  19,469
  20,417
Tax expense, $m
  1,131
  1,372
  1,430
  1,491
  1,557
  1,627
  1,701
  1,779
  1,862
  1,950
  2,042
  2,293
  2,396
  2,505
  2,619
  2,740
  2,866
  3,000
  3,140
  3,288
  3,444
  3,608
  3,780
  3,960
  4,151
  4,350
  4,560
  4,781
  5,013
  5,257
  5,513
Net income, $m
  5,705
  3,709
  3,865
  4,032
  4,210
  4,399
  4,599
  4,811
  5,035
  5,271
  5,521
  6,200
  6,478
  6,772
  7,081
  7,407
  7,750
  8,111
  8,491
  8,891
  9,311
  9,754
  10,219
  10,708
  11,222
  11,762
  12,330
  12,927
  13,554
  14,213
  14,905

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18,648
  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
  52,359
  35,011
  36,415
  37,911
  39,503
  41,193
  42,985
  44,883
  46,891
  49,013
  51,255
  53,621
  56,117
  58,749
  61,522
  64,443
  67,519
  70,758
  74,166
  77,752
  81,524
  85,491
  89,662
  94,048
  98,659
  103,505
  108,599
  113,952
  119,576
  125,486
  131,696
Adjusted assets (=assets-cash), $m
  33,711
  35,011
  36,415
  37,911
  39,503
  41,193
  42,985
  44,883
  46,891
  49,013
  51,255
  53,621
  56,117
  58,749
  61,522
  64,443
  67,519
  70,758
  74,166
  77,752
  81,524
  85,491
  89,662
  94,048
  98,659
  103,505
  108,599
  113,952
  119,576
  125,486
  131,696
Revenue / Adjusted assets
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
  0.699
Average production assets, $m
  6,041
  6,265
  6,516
  6,784
  7,069
  7,371
  7,692
  8,031
  8,391
  8,771
  9,172
  9,595
  10,042
  10,513
  11,009
  11,532
  12,082
  12,662
  13,272
  13,913
  14,588
  15,298
  16,045
  16,829
  17,654
  18,522
  19,433
  20,391
  21,397
  22,455
  23,566
Working capital, $m
  15,670
  -1,273
  -1,324
  -1,378
  -1,436
  -1,497
  -1,562
  -1,631
  -1,704
  -1,782
  -1,863
  -1,949
  -2,040
  -2,135
  -2,236
  -2,342
  -2,454
  -2,572
  -2,696
  -2,826
  -2,963
  -3,107
  -3,259
  -3,418
  -3,586
  -3,762
  -3,947
  -4,142
  -4,346
  -4,561
  -4,787
Total debt, $m
  11,757
  10,747
  11,532
  12,368
  13,258
  14,203
  15,204
  16,265
  17,388
  18,574
  19,828
  21,150
  22,545
  24,016
  25,567
  27,200
  28,919
  30,730
  32,635
  34,639
  36,748
  38,965
  41,297
  43,749
  46,326
  49,036
  51,883
  54,875
  58,019
  61,323
  64,794
Total liabilities, $m
  20,581
  19,571
  20,356
  21,192
  22,082
  23,027
  24,028
  25,089
  26,212
  27,398
  28,652
  29,974
  31,369
  32,840
  34,391
  36,024
  37,743
  39,554
  41,459
  43,463
  45,572
  47,789
  50,121
  52,573
  55,150
  57,860
  60,707
  63,699
  66,843
  70,147
  73,618
Total equity, $m
  31,778
  15,440
  16,059
  16,719
  17,421
  18,166
  18,956
  19,793
  20,679
  21,615
  22,603
  23,647
  24,748
  25,908
  27,131
  28,419
  29,776
  31,204
  32,707
  34,288
  35,952
  37,701
  39,541
  41,475
  43,509
  45,646
  47,892
  50,253
  52,733
  55,340
  58,078
Total liabilities and equity, $m
  52,359
  35,011
  36,415
  37,911
  39,503
  41,193
  42,984
  44,882
  46,891
  49,013
  51,255
  53,621
  56,117
  58,748
  61,522
  64,443
  67,519
  70,758
  74,166
  77,751
  81,524
  85,490
  89,662
  94,048
  98,659
  103,506
  108,599
  113,952
  119,576
  125,487
  131,696
Debt-to-equity ratio
  0.370
  0.700
  0.720
  0.740
  0.760
  0.780
  0.800
  0.820
  0.840
  0.860
  0.880
  0.890
  0.910
  0.930
  0.940
  0.960
  0.970
  0.980
  1.000
  1.010
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.120
Adjusted equity ratio
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5,705
  3,709
  3,865
  4,032
  4,210
  4,399
  4,599
  4,811
  5,035
  5,271
  5,521
  6,200
  6,478
  6,772
  7,081
  7,407
  7,750
  8,111
  8,491
  8,891
  9,311
  9,754
  10,219
  10,708
  11,222
  11,762
  12,330
  12,927
  13,554
  14,213
  14,905
Depreciation, amort., depletion, $m
  1,428
  1,341
  1,372
  1,405
  1,441
  1,478
  1,518
  1,559
  1,604
  1,651
  1,700
  1,185
  1,240
  1,298
  1,359
  1,424
  1,492
  1,563
  1,638
  1,718
  1,801
  1,889
  1,981
  2,078
  2,180
  2,287
  2,399
  2,517
  2,642
  2,772
  2,909
Funds from operations, $m
  7,247
  5,050
  5,238
  5,438
  5,651
  5,877
  6,116
  6,370
  6,638
  6,922
  7,222
  7,385
  7,718
  8,070
  8,440
  8,830
  9,241
  9,674
  10,129
  10,608
  11,112
  11,642
  12,200
  12,785
  13,401
  14,049
  14,729
  15,444
  16,195
  16,985
  17,814
Change in working capital, $m
  -153
  -48
  -51
  -54
  -58
  -61
  -65
  -69
  -73
  -77
  -81
  -86
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -152
  -159
  -168
  -176
  -185
  -195
  -204
  -215
  -226
Cash from operations, $m
  7,400
  4,863
  5,289
  5,492
  5,709
  5,938
  6,181
  6,439
  6,711
  6,999
  7,303
  7,471
  7,809
  8,165
  8,541
  8,937
  9,353
  9,792
  10,253
  10,739
  11,249
  11,786
  12,351
  12,945
  13,569
  14,225
  14,914
  15,639
  16,400
  17,200
  18,040
Maintenance CAPEX, $m
  0
  -746
  -773
  -804
  -838
  -873
  -910
  -950
  -992
  -1,036
  -1,083
  -1,132
  -1,185
  -1,240
  -1,298
  -1,359
  -1,424
  -1,492
  -1,563
  -1,638
  -1,718
  -1,801
  -1,889
  -1,981
  -2,078
  -2,180
  -2,287
  -2,399
  -2,517
  -2,642
  -2,772
New CAPEX, $m
  -539
  -224
  -251
  -268
  -285
  -302
  -321
  -340
  -359
  -380
  -401
  -423
  -447
  -471
  -496
  -523
  -550
  -579
  -610
  -642
  -675
  -710
  -746
  -785
  -825
  -867
  -911
  -958
  -1,007
  -1,058
  -1,111
Cash from investing activities, $m
  -3,488
  -970
  -1,024
  -1,072
  -1,123
  -1,175
  -1,231
  -1,290
  -1,351
  -1,416
  -1,484
  -1,555
  -1,632
  -1,711
  -1,794
  -1,882
  -1,974
  -2,071
  -2,173
  -2,280
  -2,393
  -2,511
  -2,635
  -2,766
  -2,903
  -3,047
  -3,198
  -3,357
  -3,524
  -3,700
  -3,883
Free cash flow, $m
  3,912
  3,893
  4,264
  4,420
  4,586
  4,763
  4,951
  5,150
  5,361
  5,584
  5,819
  5,915
  6,178
  6,455
  6,747
  7,055
  7,379
  7,721
  8,080
  8,459
  8,857
  9,276
  9,716
  10,179
  10,666
  11,178
  11,716
  12,282
  12,876
  13,500
  14,156
Issuance/(repayment) of debt, $m
  749
  739
  785
  836
  890
  945
  1,002
  1,061
  1,122
  1,186
  1,253
  1,323
  1,395
  1,471
  1,550
  1,633
  1,720
  1,810
  1,905
  2,004
  2,109
  2,218
  2,332
  2,452
  2,577
  2,709
  2,847
  2,992
  3,144
  3,304
  3,471
Issuance/(repurchase) of shares, $m
  -3,255
  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  
  -2,532
  739
  785
  836
  890
  945
  1,002
  1,061
  1,122
  1,186
  1,253
  1,323
  1,395
  1,471
  1,550
  1,633
  1,720
  1,810
  1,905
  2,004
  2,109
  2,218
  2,332
  2,452
  2,577
  2,709
  2,847
  2,992
  3,144
  3,304
  3,471
Total cash flow (excl. dividends), $m
  1,376
  4,632
  5,049
  5,256
  5,476
  5,708
  5,952
  6,211
  6,483
  6,770
  7,072
  7,237
  7,573
  7,926
  8,297
  8,688
  9,099
  9,531
  9,985
  10,463
  10,965
  11,493
  12,048
  12,631
  13,244
  13,887
  14,563
  15,274
  16,020
  16,804
  17,627
Retained Cash Flow (-), $m
  -357
  -561
  -619
  -660
  -702
  -745
  -790
  -837
  -886
  -936
  -989
  -1,043
  -1,101
  -1,160
  -1,223
  -1,288
  -1,357
  -1,428
  -1,503
  -1,581
  -1,663
  -1,750
  -1,840
  -1,934
  -2,033
  -2,137
  -2,246
  -2,361
  -2,480
  -2,606
  -2,738
Prev. year cash balance distribution, $m
 
  16,899
  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
 
  20,970
  4,430
  4,597
  4,774
  4,962
  5,162
  5,374
  5,597
  5,834
  6,084
  6,194
  6,472
  6,765
  7,074
  7,400
  7,742
  8,103
  8,482
  8,882
  9,302
  9,744
  10,208
  10,697
  11,210
  11,750
  12,317
  12,913
  13,540
  14,198
  14,889
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
 
  20,106
  4,055
  4,000
  3,931
  3,846
  3,746
  3,630
  3,499
  3,351
  3,189
  2,941
  2,762
  2,572
  2,375
  2,172
  1,967
  1,763
  1,562
  1,368
  1,182
  1,008
  847
  701
  571
  457
  359
  277
  209
  155
  112
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

QUALCOMM Incorporated develops, designs, manufactures, and markets digital communications products and services in China, South Korea, Taiwan, the United States, and internationally. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on code division multiple access (CDMA), orthogonal frequency division multiple access (OFDMA), and other technologies for use in voice and data communications, networking, application processing, multimedia, and global positioning system products. The QTL segment grants licenses or provides rights to use portions of its intellectual property portfolio, which include various patent rights useful in the manufacture and sale of certain wireless products comprising products implementing CDMA2000, WCDMA, CDMA TDD, and/or LTE standards, as well as their derivatives. The QSI segment invests in early-stage companies in various industries, including digital media, e-commerce, healthcare, and wearable devices for supporting the design and introduction of new products and services for voice and data communications. The company also develops and offers products for implementation of small cells; mobile health products and services; software products, and content and push-to-talk enablement services to wireless operators; and development, and other services and related products to the United States government agencies and their contractors. In addition, it licenses chipset technology and products for data centers. QUALCOMM Incorporated was founded in 1985 and is headquartered in San Diego, California.

FINANCIAL RATIOS  of  Qualcomm (QCOM)

Valuation Ratios
P/E Ratio 13.6
Price to Sales 3.3
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 10.5
Price to Free Cash Flow 11.3
Growth Rates
Sales Growth Rate -6.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -45.8%
Cap. Spend. - 3 Yr. Gr. Rate -12.5%
Financial Strength
Quick Ratio 11
Current Ratio 0.1
LT Debt to Equity 31.5%
Total Debt to Equity 37%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.1%
Ret/ On Assets - 3 Yr. Avg. 12.9%
Return On Total Capital 13.3%
Ret/ On T. Cap. - 3 Yr. Avg. 15.8%
Return On Equity 18.1%
Return On Equity - 3 Yr. Avg. 18.1%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 60.5%
Gross Margin - 3 Yr. Avg. 60.4%
EBITDA Margin 35.1%
EBITDA Margin - 3 Yr. Avg. 34.3%
Operating Margin 26.8%
Oper. Margin - 3 Yr. Avg. 25.6%
Pre-Tax Margin 29%
Pre-Tax Margin - 3 Yr. Avg. 29.3%
Net Profit Margin 24.2%
Net Profit Margin - 3 Yr. Avg. 25%
Effective Tax Rate 16.6%
Eff/ Tax Rate - 3 Yr. Avg. 16.5%
Payout Ratio 52.4%

QCOM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the QCOM stock intrinsic value calculation we used $23554 million for the last fiscal year's total revenue generated by Qualcomm. The default revenue input number comes from 2016 income statement of Qualcomm. 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 QCOM 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 QCOM is calculated based on our internal credit rating of Qualcomm, 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 Qualcomm.
    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 QCOM stock the variable cost ratio is equal to 77.9%.

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 QCOM 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 Qualcomm.

Corporate tax rate of 27% is the nominal tax rate for Qualcomm. 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 QCOM 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 QCOM are equal to 25.6%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Qualcomm 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 QCOM is equal to -5.2%. 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 - $31778 million for Qualcomm - 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 1480.64 million for Qualcomm 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 Qualcomm at the current share price and the inputted number of shares is $77.7 billion.


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COMPANY NEWS

▶ 4 Charts That Tell Different Tales   [Apr-23-17 10:00AM  TheStreet.com]
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▶ Qualcomm's Business Model At Risk   [05:47PM  Forbes]
▶ Qualcomm Price Targets Slashed On Apple Uncertainty   [04:18PM  Investor's Business Daily]
▶ What you need to know on Wall Street today   [01:44PM  Business Insider]
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▶ Story Stocks from Briefing.com   [09:44AM  Briefing.com]
▶ [$$] Qualcomms Leap of Faith   [12:39AM  The Wall Street Journal]
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▶ Qualcomm Beats Street Views For Second Quarter, Guides Lower   [05:11PM  Investor's Business Daily]
▶ Qualcomm earnings: 4 ways to trade it   [05:00PM  CNBC Videos]
▶ Qualcomm Q2 tops estimates   [04:44PM  ZDNet]
▶ Qualcomm tops 2Q profit forecasts   [04:42PM  Associated Press]
▶ [$$] Qualcomm Earnings: What to Watch   [08:00AM  The Wall Street Journal]
▶ 4 Top Earnings to Look For on Wednesday   [01:10PM  24/7 Wall St.]
▶ BlackBerry's Bet on Security Software   [Apr-17-17 08:48PM  Bloomberg]
▶ Earnings rush What you need to know in markets this week   [Apr-16-17 07:22AM  Yahoo Finance]
▶ 7 Key Earnings Expected This Coming Week   [Apr-15-17 09:45AM  24/7 Wall St.]
Stock chart of QCOM Financial statements of QCOM
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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