Intrinsic value of Ferrari - RACE

Previous Close

$140.00

  Intrinsic Value

$320.45

stock screener

  Rating & Target

str. buy

+129%

Previous close

$140.00

 
Intrinsic value

$320.45

 
Up/down potential

+129%

 
Rating

str. buy

We calculate the intrinsic value of RACE 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
(a)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -100.00
  25.50
  23.45
  21.61
  19.94
  18.45
  17.11
  15.89
  14.81
  13.82
  12.94
  12.15
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
Revenue, $m
  0
  5,148
  6,355
  7,728
  9,270
  10,980
  12,858
  14,902
  17,108
  19,473
  21,993
  24,665
  27,485
  30,451
  33,560
  36,812
  40,206
  43,744
  47,426
  51,257
  55,239
  59,378
  63,679
  68,148
  72,794
  77,624
  82,647
  87,874
  93,315
  98,982
  104,887
Variable operating expenses, $m
 
  3,334
  4,082
  4,932
  5,886
  6,945
  8,108
  9,373
  10,739
  12,204
  13,764
  15,271
  17,017
  18,853
  20,778
  22,792
  24,893
  27,083
  29,363
  31,735
  34,201
  36,763
  39,426
  42,193
  45,069
  48,060
  51,170
  54,406
  57,775
  61,284
  64,940
Fixed operating expenses, $m
 
  500
  511
  522
  533
  545
  557
  569
  582
  595
  608
  621
  635
  649
  663
  678
  693
  708
  723
  739
  756
  772
  789
  807
  824
  843
  861
  880
  899
  919
  939
Total operating expenses, $m
  0
  3,834
  4,593
  5,454
  6,419
  7,490
  8,665
  9,942
  11,321
  12,799
  14,372
  15,892
  17,652
  19,502
  21,441
  23,470
  25,586
  27,791
  30,086
  32,474
  34,957
  37,535
  40,215
  43,000
  45,893
  48,903
  52,031
  55,286
  58,674
  62,203
  65,879
Operating income, $m
  0
  1,314
  1,763
  2,274
  2,850
  3,489
  4,193
  4,959
  5,787
  6,675
  7,621
  8,773
  9,833
  10,949
  12,118
  13,342
  14,620
  15,952
  17,339
  18,782
  20,283
  21,842
  23,463
  25,148
  26,900
  28,721
  30,616
  32,588
  34,641
  36,779
  39,008
EBITDA, $m
  0
  1,726
  2,237
  2,819
  3,474
  4,202
  5,002
  5,873
  6,815
  7,825
  8,901
  10,043
  11,248
  12,517
  13,847
  15,238
  16,691
  18,205
  19,782
  21,422
  23,128
  24,900
  26,743
  28,658
  30,649
  32,719
  34,872
  37,113
  39,447
  41,877
  44,410
Interest expense (income), $m
  0
  -43
  -14
  46
  114
  190
  274
  367
  468
  577
  694
  819
  951
  1,090
  1,237
  1,391
  1,552
  1,719
  1,894
  2,076
  2,266
  2,463
  2,667
  2,880
  3,101
  3,330
  3,569
  3,818
  4,076
  4,345
  4,625
Earnings before tax, $m
  0
  1,357
  1,777
  2,229
  2,736
  3,300
  3,918
  4,592
  5,318
  6,097
  6,927
  7,954
  8,882
  9,858
  10,881
  11,952
  13,069
  14,233
  15,445
  16,706
  18,017
  19,380
  20,796
  22,268
  23,799
  25,391
  27,047
  28,770
  30,565
  32,434
  34,383
Tax expense, $m
  0
  366
  480
  602
  739
  891
  1,058
  1,240
  1,436
  1,646
  1,870
  2,148
  2,398
  2,662
  2,938
  3,227
  3,529
  3,843
  4,170
  4,511
  4,865
  5,233
  5,615
  6,012
  6,426
  6,855
  7,303
  7,768
  8,252
  8,757
  9,283
Net income, $m
  0
  990
  1,297
  1,627
  1,997
  2,409
  2,860
  3,352
  3,882
  4,451
  5,057
  5,806
  6,484
  7,196
  7,943
  8,725
  9,540
  10,390
  11,275
  12,195
  13,152
  14,147
  15,181
  16,256
  17,373
  18,535
  19,744
  21,002
  22,312
  23,677
  25,099

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  0
  5,237
  6,465
  7,862
  9,430
  11,170
  13,080
  15,159
  17,404
  19,810
  22,374
  25,092
  27,960
  30,977
  34,140
  37,448
  40,901
  44,500
  48,246
  52,143
  56,194
  60,405
  64,780
  69,327
  74,052
  78,966
  84,076
  89,394
  94,929
  100,694
  106,701
Adjusted assets (=assets-cash), $m
  0
  5,237
  6,465
  7,862
  9,430
  11,170
  13,080
  15,159
  17,404
  19,810
  22,374
  25,092
  27,960
  30,977
  34,140
  37,448
  40,901
  44,500
  48,246
  52,143
  56,194
  60,405
  64,780
  69,327
  74,052
  78,966
  84,076
  89,394
  94,929
  100,694
  106,701
Revenue / Adjusted assets
  0.000
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
  0.983
Average production assets, $m
  0
  2,651
  3,273
  3,980
  4,774
  5,655
  6,622
  7,674
  8,811
  10,029
  11,327
  12,702
  14,155
  15,682
  17,283
  18,958
  20,706
  22,528
  24,424
  26,397
  28,448
  30,580
  32,794
  35,096
  37,489
  39,976
  42,563
  45,255
  48,057
  50,976
  54,017
Working capital, $m
  0
  -324
  -400
  -487
  -584
  -692
  -810
  -939
  -1,078
  -1,227
  -1,386
  -1,554
  -1,732
  -1,918
  -2,114
  -2,319
  -2,533
  -2,756
  -2,988
  -3,229
  -3,480
  -3,741
  -4,012
  -4,293
  -4,586
  -4,890
  -5,207
  -5,536
  -5,879
  -6,236
  -6,608
Total debt, $m
  0
  -258
  847
  2,104
  3,516
  5,081
  6,801
  8,672
  10,692
  12,857
  15,165
  17,611
  20,193
  22,908
  25,755
  28,732
  31,840
  35,079
  38,450
  41,958
  45,604
  49,393
  53,330
  57,423
  61,676
  66,098
  70,697
  75,483
  80,465
  85,653
  91,060
Total liabilities, $m
  0
  4,713
  5,819
  7,076
  8,487
  10,053
  11,772
  13,643
  15,663
  17,829
  20,136
  22,582
  25,164
  27,879
  30,726
  33,703
  36,811
  40,050
  43,422
  46,929
  50,575
  54,364
  58,302
  62,394
  66,647
  71,069
  75,669
  80,454
  85,436
  90,625
  96,031
Total equity, $m
  0
  524
  647
  786
  943
  1,117
  1,308
  1,516
  1,740
  1,981
  2,237
  2,509
  2,796
  3,098
  3,414
  3,745
  4,090
  4,450
  4,825
  5,214
  5,619
  6,040
  6,478
  6,933
  7,405
  7,897
  8,408
  8,939
  9,493
  10,069
  10,670
Total liabilities and equity, $m
  0
  5,237
  6,466
  7,862
  9,430
  11,170
  13,080
  15,159
  17,403
  19,810
  22,373
  25,091
  27,960
  30,977
  34,140
  37,448
  40,901
  44,500
  48,247
  52,143
  56,194
  60,404
  64,780
  69,327
  74,052
  78,966
  84,077
  89,393
  94,929
  100,694
  106,701
Debt-to-equity ratio
  0.000
  -0.490
  1.310
  2.680
  3.730
  4.550
  5.200
  5.720
  6.140
  6.490
  6.780
  7.020
  7.220
  7.400
  7.540
  7.670
  7.780
  7.880
  7.970
  8.050
  8.120
  8.180
  8.230
  8.280
  8.330
  8.370
  8.410
  8.440
  8.480
  8.510
  8.530
Adjusted equity ratio
  0.000
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  990
  1,297
  1,627
  1,997
  2,409
  2,860
  3,352
  3,882
  4,451
  5,057
  5,806
  6,484
  7,196
  7,943
  8,725
  9,540
  10,390
  11,275
  12,195
  13,152
  14,147
  15,181
  16,256
  17,373
  18,535
  19,744
  21,002
  22,312
  23,677
  25,099
Depreciation, amort., depletion, $m
  0
  412
  474
  545
  624
  713
  809
  915
  1,028
  1,150
  1,280
  1,270
  1,415
  1,568
  1,728
  1,896
  2,071
  2,253
  2,442
  2,640
  2,845
  3,058
  3,279
  3,510
  3,749
  3,998
  4,256
  4,526
  4,806
  5,098
  5,402
Funds from operations, $m
  0
  1,403
  1,771
  2,172
  2,622
  3,121
  3,670
  4,266
  4,911
  5,601
  6,337
  7,076
  7,899
  8,765
  9,672
  10,620
  11,611
  12,643
  13,717
  14,835
  15,997
  17,205
  18,461
  19,766
  21,122
  22,533
  24,000
  25,528
  27,118
  28,775
  30,501
Change in working capital, $m
  0
  -66
  -76
  -87
  -97
  -108
  -118
  -129
  -139
  -149
  -159
  -168
  -178
  -187
  -196
  -205
  -214
  -223
  -232
  -241
  -251
  -261
  -271
  -282
  -293
  -304
  -316
  -329
  -343
  -357
  -372
Cash from operations, $m
  0
  1,469
  1,847
  2,258
  2,719
  3,229
  3,788
  4,395
  5,050
  5,750
  6,495
  7,245
  8,077
  8,951
  9,868
  10,825
  11,825
  12,866
  13,949
  15,076
  16,248
  17,466
  18,732
  20,047
  21,415
  22,837
  24,317
  25,857
  27,461
  29,132
  30,873
Maintenance CAPEX, $m
  0
  -211
  -265
  -327
  -398
  -477
  -565
  -662
  -767
  -881
  -1,003
  -1,133
  -1,270
  -1,415
  -1,568
  -1,728
  -1,896
  -2,071
  -2,253
  -2,442
  -2,640
  -2,845
  -3,058
  -3,279
  -3,510
  -3,749
  -3,998
  -4,256
  -4,526
  -4,806
  -5,098
New CAPEX, $m
  0
  -537
  -622
  -707
  -794
  -881
  -967
  -1,053
  -1,136
  -1,218
  -1,298
  -1,376
  -1,452
  -1,527
  -1,601
  -1,675
  -1,748
  -1,822
  -1,897
  -1,973
  -2,051
  -2,131
  -2,215
  -2,302
  -2,392
  -2,487
  -2,587
  -2,692
  -2,802
  -2,918
  -3,041
Cash from investing activities, $m
  0
  -748
  -887
  -1,034
  -1,192
  -1,358
  -1,532
  -1,715
  -1,903
  -2,099
  -2,301
  -2,509
  -2,722
  -2,942
  -3,169
  -3,403
  -3,644
  -3,893
  -4,150
  -4,415
  -4,691
  -4,976
  -5,273
  -5,581
  -5,902
  -6,236
  -6,585
  -6,948
  -7,328
  -7,724
  -8,139
Free cash flow, $m
  0
  720
  960
  1,224
  1,527
  1,871
  2,255
  2,680
  3,146
  3,651
  4,195
  4,736
  5,354
  6,009
  6,698
  7,422
  8,181
  8,973
  9,800
  10,661
  11,558
  12,490
  13,459
  14,466
  15,513
  16,601
  17,732
  18,909
  20,133
  21,407
  22,734
Issuance/(repayment) of debt, $m
  0
  538
  1,105
  1,257
  1,411
  1,566
  1,720
  1,871
  2,020
  2,165
  2,307
  2,446
  2,582
  2,715
  2,847
  2,977
  3,108
  3,239
  3,372
  3,507
  3,646
  3,789
  3,938
  4,092
  4,253
  4,422
  4,599
  4,786
  4,982
  5,188
  5,406
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  0
  538
  1,105
  1,257
  1,411
  1,566
  1,720
  1,871
  2,020
  2,165
  2,307
  2,446
  2,582
  2,715
  2,847
  2,977
  3,108
  3,239
  3,372
  3,507
  3,646
  3,789
  3,938
  4,092
  4,253
  4,422
  4,599
  4,786
  4,982
  5,188
  5,406
Total cash flow (excl. dividends), $m
  0
  1,258
  2,066
  2,481
  2,938
  3,437
  3,975
  4,552
  5,166
  5,816
  6,502
  7,182
  7,936
  8,724
  9,545
  10,400
  11,288
  12,212
  13,172
  14,168
  15,204
  16,279
  17,396
  18,558
  19,766
  21,023
  22,332
  23,694
  25,115
  26,596
  28,141
Retained Cash Flow (-), $m
  0
  -524
  -123
  -140
  -157
  -174
  -191
  -208
  -224
  -241
  -256
  -272
  -287
  -302
  -316
  -331
  -345
  -360
  -375
  -390
  -405
  -421
  -438
  -455
  -473
  -491
  -511
  -532
  -554
  -576
  -601
Prev. year cash balance distribution, $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 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
 
  735
  1,943
  2,341
  2,782
  3,263
  3,784
  4,344
  4,941
  5,576
  6,246
  6,911
  7,649
  8,422
  9,229
  10,069
  10,943
  11,852
  12,797
  13,779
  14,798
  15,858
  16,959
  18,103
  19,293
  20,532
  21,820
  23,163
  24,561
  26,019
  27,540
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
 
  704
  1,779
  2,038
  2,290
  2,529
  2,746
  2,935
  3,088
  3,203
  3,274
  3,282
  3,264
  3,202
  3,098
  2,956
  2,781
  2,579
  2,357
  2,122
  1,880
  1,640
  1,407
  1,187
  983
  799
  637
  497
  380
  284
  207
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

Ferrari N.V., together with its subsidiaries, designs, engineers, produces, and sells luxury performance sports cars. The company offers seven models, including four sports cars comprising 488 GTB, 488 Spider, F12berlinetta, and special series F12 Tour de France; and three GT cars that include California T, FF, and GTC4Lusso. It also produces LaFerrari, a limited edition supercar; Fuoriserie, a very limited editions series; and one-off cars; non-registered racing cars; and parts, as well as offers repair, maintenance, and restoration services for cars. In addition, the company licenses its Ferrari brand to various producers and retailers of luxury and lifestyle goods; and Ferrari World, a theme park in Abu Dhabi. As of December 31, 2015, it had a network of 25 franchised stores and 12 owned Ferrari stores, as well as store.ferrari.com Website. The company sells its products through a network of 176 independent dealers operating 198 points of sale across 60 markets worldwide. Further, it provides direct or indirect finance, and leasing services for the purchase of cars to retail clients and dealers; participates in the Formula 1 racing activities through Scuderia Ferrari; and manages race tracks, as well as holds real estate properties. The company has collaboration agreement with Altair to design and engineer the next generation vehicle platform. Ferrari N.V. was founded in 1947 and is headquartered in Maranello, Italy.

FINANCIAL RATIOS  of  Ferrari (RACE)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

RACE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RACE stock intrinsic value calculation we used $4102 million for the last fiscal year's total revenue generated by Ferrari. The default revenue input number comes from income statement of Ferrari. 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 RACE stock valuation model: a) initial revenue growth rate of 25.5% 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 RACE is calculated based on our internal credit rating of Ferrari, 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 Ferrari.
    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 RACE stock the variable cost ratio is equal to 65.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $489 million in the base year in the intrinsic value calculation for RACE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Ferrari.

Corporate tax rate of 27% is the nominal tax rate for Ferrari. 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 RACE 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 RACE are equal to 51.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Ferrari 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 RACE is equal to -6.3%. 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 - $0 million for Ferrari - 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 189 million for Ferrari 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 Ferrari at the current share price and the inputted number of shares is $26.5 billion.

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Financial statements of RACE
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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