Intrinsic value of Qualcomm - QCOM

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$57.52

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$57.52

 
Intrinsic value

$49.93

 
Up/down potential

-13%

 
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 84.1

 

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, %
  -6.83
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  23,554
  24,025
  24,578
  25,209
  25,918
  26,704
  27,566
  28,505
  29,521
  30,616
  31,791
  33,048
  34,390
  35,818
  37,335
  38,946
  40,653
  42,459
  44,370
  46,389
  48,520
  50,769
  53,141
  55,641
  58,275
  61,049
  63,970
  67,045
  70,280
  73,684
  77,264
Variable operating expenses, $m
 
  18,704
  19,121
  19,598
  20,133
  20,727
  21,377
  22,086
  22,853
  23,680
  24,567
  24,948
  25,960
  27,038
  28,184
  29,400
  30,688
  32,052
  33,494
  35,018
  36,627
  38,325
  40,115
  42,003
  43,991
  46,085
  48,290
  50,611
  53,054
  55,623
  58,326
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
  18,704
  19,121
  19,598
  20,133
  20,727
  21,377
  22,086
  22,853
  23,680
  24,567
  24,948
  25,960
  27,038
  28,184
  29,400
  30,688
  32,052
  33,494
  35,018
  36,627
  38,325
  40,115
  42,003
  43,991
  46,085
  48,290
  50,611
  53,054
  55,623
  58,326
Operating income, $m
  6,315
  5,321
  5,456
  5,611
  5,785
  5,978
  6,189
  6,419
  6,668
  6,936
  7,224
  8,100
  8,429
  8,779
  9,151
  9,546
  9,964
  10,407
  10,876
  11,370
  11,893
  12,444
  13,025
  13,638
  14,284
  14,964
  15,680
  16,433
  17,226
  18,061
  18,938
EBITDA, $m
  7,743
  6,648
  6,801
  6,976
  7,172
  7,389
  7,628
  7,888
  8,169
  8,472
  8,797
  9,145
  9,516
  9,911
  10,331
  10,777
  11,249
  11,749
  12,278
  12,836
  13,426
  14,049
  14,705
  15,397
  16,126
  16,893
  17,702
  18,552
  19,448
  20,389
  21,380
Interest expense (income), $m
  0
  350
  364
  379
  397
  417
  439
  463
  489
  517
  548
  581
  616
  654
  694
  736
  781
  829
  880
  933
  990
  1,049
  1,112
  1,179
  1,249
  1,322
  1,400
  1,482
  1,568
  1,658
  1,754
Earnings before tax, $m
  6,833
  4,971
  5,093
  5,232
  5,388
  5,561
  5,750
  5,956
  6,179
  6,419
  6,676
  7,519
  7,813
  8,126
  8,458
  8,810
  9,183
  9,578
  9,996
  10,437
  10,903
  11,395
  11,913
  12,460
  13,035
  13,642
  14,280
  14,952
  15,659
  16,402
  17,185
Tax expense, $m
  1,131
  1,342
  1,375
  1,413
  1,455
  1,501
  1,553
  1,608
  1,668
  1,733
  1,803
  2,030
  2,110
  2,194
  2,284
  2,379
  2,479
  2,586
  2,699
  2,818
  2,944
  3,077
  3,217
  3,364
  3,520
  3,683
  3,856
  4,037
  4,228
  4,429
  4,640
Net income, $m
  5,705
  3,629
  3,718
  3,819
  3,933
  4,060
  4,198
  4,348
  4,511
  4,686
  4,874
  5,489
  5,704
  5,932
  6,174
  6,431
  6,704
  6,992
  7,297
  7,619
  7,959
  8,318
  8,697
  9,095
  9,516
  9,958
  10,424
  10,915
  11,431
  11,974
  12,545

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
  34,371
  35,161
  36,065
  37,079
  38,203
  39,437
  40,780
  42,234
  43,800
  45,481
  47,279
  49,198
  51,241
  53,413
  55,717
  58,158
  60,743
  63,476
  66,364
  69,413
  72,631
  76,024
  79,601
  83,369
  87,338
  91,517
  95,915
  100,544
  105,413
  110,535
Adjusted assets (=assets-cash), $m
  33,711
  34,371
  35,161
  36,065
  37,079
  38,203
  39,437
  40,780
  42,234
  43,800
  45,481
  47,279
  49,198
  51,241
  53,413
  55,717
  58,158
  60,743
  63,476
  66,364
  69,413
  72,631
  76,024
  79,601
  83,369
  87,338
  91,517
  95,915
  100,544
  105,413
  110,535
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
  6,150
  6,292
  6,454
  6,635
  6,836
  7,057
  7,297
  7,557
  7,838
  8,139
  8,460
  8,804
  9,169
  9,558
  9,970
  10,407
  10,870
  11,359
  11,875
  12,421
  12,997
  13,604
  14,244
  14,918
  15,629
  16,376
  17,163
  17,992
  18,863
  19,780
Working capital, $m
  15,670
  -1,249
  -1,278
  -1,311
  -1,348
  -1,389
  -1,433
  -1,482
  -1,535
  -1,592
  -1,653
  -1,719
  -1,788
  -1,863
  -1,941
  -2,025
  -2,114
  -2,208
  -2,307
  -2,412
  -2,523
  -2,640
  -2,763
  -2,893
  -3,030
  -3,175
  -3,326
  -3,486
  -3,655
  -3,832
  -4,018
Total debt, $m
  11,757
  10,389
  10,831
  11,336
  11,903
  12,532
  13,221
  13,972
  14,785
  15,660
  16,600
  17,605
  18,678
  19,820
  21,034
  22,322
  23,686
  25,131
  26,659
  28,274
  29,978
  31,777
  33,673
  35,673
  37,779
  39,998
  42,334
  44,793
  47,380
  50,102
  52,965
Total liabilities, $m
  20,581
  19,213
  19,655
  20,160
  20,727
  21,356
  22,045
  22,796
  23,609
  24,484
  25,424
  26,429
  27,502
  28,644
  29,858
  31,146
  32,510
  33,955
  35,483
  37,098
  38,802
  40,601
  42,497
  44,497
  46,603
  48,822
  51,158
  53,617
  56,204
  58,926
  61,789
Total equity, $m
  31,778
  15,157
  15,506
  15,905
  16,352
  16,848
  17,392
  17,984
  18,625
  19,316
  20,057
  20,850
  21,696
  22,597
  23,555
  24,571
  25,648
  26,788
  27,993
  29,267
  30,611
  32,030
  33,527
  35,104
  36,766
  38,516
  40,359
  42,299
  44,340
  46,487
  48,746
Total liabilities and equity, $m
  52,359
  34,370
  35,161
  36,065
  37,079
  38,204
  39,437
  40,780
  42,234
  43,800
  45,481
  47,279
  49,198
  51,241
  53,413
  55,717
  58,158
  60,743
  63,476
  66,365
  69,413
  72,631
  76,024
  79,601
  83,369
  87,338
  91,517
  95,916
  100,544
  105,413
  110,535
Debt-to-equity ratio
  0.370
  0.690
  0.700
  0.710
  0.730
  0.740
  0.760
  0.780
  0.790
  0.810
  0.830
  0.840
  0.860
  0.880
  0.890
  0.910
  0.920
  0.940
  0.950
  0.970
  0.980
  0.990
  1.000
  1.020
  1.030
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
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
  3,629
  3,718
  3,819
  3,933
  4,060
  4,198
  4,348
  4,511
  4,686
  4,874
  5,489
  5,704
  5,932
  6,174
  6,431
  6,704
  6,992
  7,297
  7,619
  7,959
  8,318
  8,697
  9,095
  9,516
  9,958
  10,424
  10,915
  11,431
  11,974
  12,545
Depreciation, amort., depletion, $m
  1,428
  1,327
  1,345
  1,365
  1,387
  1,412
  1,439
  1,469
  1,501
  1,536
  1,573
  1,044
  1,087
  1,132
  1,180
  1,231
  1,285
  1,342
  1,402
  1,466
  1,533
  1,605
  1,680
  1,759
  1,842
  1,929
  2,022
  2,119
  2,221
  2,329
  2,442
Funds from operations, $m
  7,247
  4,956
  5,062
  5,184
  5,320
  5,471
  5,637
  5,817
  6,012
  6,221
  6,446
  6,534
  6,790
  7,064
  7,354
  7,662
  7,989
  8,334
  8,699
  9,085
  9,493
  9,923
  10,376
  10,854
  11,358
  11,888
  12,446
  13,034
  13,652
  14,302
  14,987
Change in working capital, $m
  -153
  -24
  -29
  -33
  -37
  -41
  -45
  -49
  -53
  -57
  -61
  -65
  -70
  -74
  -79
  -84
  -89
  -94
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -144
  -152
  -160
  -168
  -177
  -186
Cash from operations, $m
  7,400
  4,745
  5,091
  5,217
  5,357
  5,512
  5,682
  5,866
  6,065
  6,278
  6,507
  6,599
  6,860
  7,138
  7,433
  7,746
  8,077
  8,428
  8,799
  9,190
  9,604
  10,040
  10,499
  10,984
  11,494
  12,032
  12,598
  13,194
  13,820
  14,479
  15,173
Maintenance CAPEX, $m
  0
  -746
  -759
  -777
  -797
  -819
  -844
  -871
  -901
  -933
  -968
  -1,005
  -1,044
  -1,087
  -1,132
  -1,180
  -1,231
  -1,285
  -1,342
  -1,402
  -1,466
  -1,533
  -1,605
  -1,680
  -1,759
  -1,842
  -1,929
  -2,022
  -2,119
  -2,221
  -2,329
New CAPEX, $m
  -539
  -109
  -141
  -162
  -182
  -201
  -221
  -240
  -260
  -280
  -301
  -322
  -343
  -366
  -389
  -412
  -437
  -463
  -489
  -517
  -546
  -576
  -607
  -640
  -674
  -710
  -748
  -787
  -828
  -871
  -916
Cash from investing activities, $m
  -3,488
  -855
  -900
  -939
  -979
  -1,020
  -1,065
  -1,111
  -1,161
  -1,213
  -1,269
  -1,327
  -1,387
  -1,453
  -1,521
  -1,592
  -1,668
  -1,748
  -1,831
  -1,919
  -2,012
  -2,109
  -2,212
  -2,320
  -2,433
  -2,552
  -2,677
  -2,809
  -2,947
  -3,092
  -3,245
Free cash flow, $m
  3,912
  3,890
  4,190
  4,278
  4,379
  4,492
  4,617
  4,754
  4,903
  5,065
  5,239
  5,273
  5,472
  5,685
  5,912
  6,154
  6,409
  6,681
  6,968
  7,271
  7,592
  7,930
  8,288
  8,665
  9,062
  9,480
  9,921
  10,385
  10,873
  11,387
  11,928
Issuance/(repayment) of debt, $m
  749
  381
  442
  505
  567
  628
  689
  751
  813
  876
  940
  1,005
  1,073
  1,142
  1,214
  1,288
  1,365
  1,445
  1,528
  1,614
  1,705
  1,799
  1,897
  1,999
  2,107
  2,219
  2,336
  2,459
  2,587
  2,722
  2,863
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
  381
  442
  505
  567
  628
  689
  751
  813
  876
  940
  1,005
  1,073
  1,142
  1,214
  1,288
  1,365
  1,445
  1,528
  1,614
  1,705
  1,799
  1,897
  1,999
  2,107
  2,219
  2,336
  2,459
  2,587
  2,722
  2,863
Total cash flow (excl. dividends), $m
  1,376
  4,271
  4,632
  4,784
  4,946
  5,120
  5,306
  5,505
  5,716
  5,941
  6,179
  6,278
  6,545
  6,828
  7,126
  7,442
  7,774
  8,125
  8,496
  8,886
  9,296
  9,729
  10,184
  10,664
  11,168
  11,699
  12,257
  12,843
  13,460
  14,109
  14,791
Retained Cash Flow (-), $m
  -357
  -278
  -349
  -399
  -447
  -496
  -544
  -592
  -641
  -691
  -741
  -793
  -846
  -901
  -958
  -1,016
  -1,077
  -1,140
  -1,205
  -1,274
  -1,345
  -1,419
  -1,496
  -1,577
  -1,662
  -1,750
  -1,843
  -1,940
  -2,041
  -2,147
  -2,259
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
 
  20,892
  4,284
  4,385
  4,499
  4,625
  4,763
  4,913
  5,075
  5,250
  5,437
  5,485
  5,699
  5,927
  6,169
  6,425
  6,698
  6,986
  7,290
  7,612
  7,952
  8,310
  8,688
  9,087
  9,506
  9,948
  10,414
  10,904
  11,419
  11,962
  12,532
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
 
  20,030
  3,922
  3,816
  3,704
  3,585
  3,456
  3,319
  3,172
  3,016
  2,851
  2,605
  2,432
  2,253
  2,071
  1,886
  1,702
  1,520
  1,343
  1,172
  1,010
  860
  721
  596
  484
  387
  304
  234
  177
  131
  94
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 14.9
Price to Sales 3.6
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 11.5
Price to Free Cash Flow 12.4
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 2% 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 1462.96 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 $84.1 billion.


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Stock chart of QCOM Financial statements of QCOM Annual reports 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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