Intrinsic value of Sprint - S

Previous Close

$8.07

  Intrinsic Value

$1.34

stock screener

  Rating & Target

str. sell

-83%

  Value-price divergence*

-160%

Previous close

$8.07

 
Intrinsic value

$1.34

 
Up/down potential

-83%

 
Rating

str. sell

 
Value-price divergence*

-160%

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

We calculate the intrinsic value of S 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 2017), $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 31.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.63
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.06
  5.06
  5.05
  5.05
  5.04
  5.04
Revenue, $m
  33,347
  35,281
  37,299
  39,406
  41,606
  43,905
  46,307
  48,820
  51,447
  54,197
  57,075
  60,088
  63,243
  66,548
  70,011
  73,639
  77,442
  81,429
  85,610
  89,993
  94,590
  99,411
  104,469
  109,775
  115,341
  121,182
  127,310
  133,742
  140,491
  147,574
  155,009
Variable operating expenses, $m
 
  34,890
  36,848
  38,892
  41,027
  43,257
  45,589
  48,026
  50,576
  53,244
  56,036
  58,301
  61,363
  64,569
  67,929
  71,450
  75,140
  79,009
  83,064
  87,317
  91,778
  96,456
  101,363
  106,511
  111,912
  117,579
  123,526
  129,766
  136,314
  143,187
  150,400
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
  31,583
  34,890
  36,848
  38,892
  41,027
  43,257
  45,589
  48,026
  50,576
  53,244
  56,036
  58,301
  61,363
  64,569
  67,929
  71,450
  75,140
  79,009
  83,064
  87,317
  91,778
  96,456
  101,363
  106,511
  111,912
  117,579
  123,526
  129,766
  136,314
  143,187
  150,400
Operating income, $m
  1,764
  391
  451
  514
  579
  647
  719
  793
  872
  953
  1,039
  1,786
  1,880
  1,978
  2,081
  2,189
  2,302
  2,421
  2,545
  2,675
  2,812
  2,955
  3,106
  3,263
  3,429
  3,603
  3,785
  3,976
  4,177
  4,387
  4,608
EBITDA, $m
  9,914
  6,800
  7,189
  7,595
  8,019
  8,462
  8,925
  9,409
  9,915
  10,445
  11,000
  11,581
  12,189
  12,826
  13,493
  14,192
  14,925
  15,694
  16,499
  17,344
  18,230
  19,159
  20,134
  21,157
  22,230
  23,355
  24,536
  25,776
  27,077
  28,442
  29,875
Interest expense (income), $m
  0
  1,256
  1,381
  1,511
  1,647
  1,789
  1,936
  2,091
  2,253
  2,422
  2,599
  2,784
  2,978
  3,181
  3,394
  3,616
  3,850
  4,095
  4,351
  4,620
  4,902
  5,198
  5,509
  5,834
  6,175
  6,534
  6,910
  7,304
  7,718
  8,152
  8,608
Earnings before tax, $m
  -771
  -865
  -931
  -998
  -1,068
  -1,141
  -1,218
  -1,298
  -1,381
  -1,469
  -1,560
  -998
  -1,098
  -1,203
  -1,312
  -1,427
  -1,548
  -1,674
  -1,806
  -1,945
  -2,090
  -2,243
  -2,403
  -2,571
  -2,747
  -2,931
  -3,125
  -3,328
  -3,541
  -3,765
  -4,000
Tax expense, $m
  435
  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
Net income, $m
  -1,206
  -865
  -931
  -998
  -1,068
  -1,141
  -1,218
  -1,298
  -1,381
  -1,469
  -1,560
  -998
  -1,098
  -1,203
  -1,312
  -1,427
  -1,548
  -1,674
  -1,806
  -1,945
  -2,090
  -2,243
  -2,403
  -2,571
  -2,747
  -2,931
  -3,125
  -3,328
  -3,541
  -3,765
  -4,000

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8,314
  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
  85,123
  81,293
  85,943
  90,797
  95,866
  101,163
  106,699
  112,487
  118,542
  124,878
  131,508
  138,451
  145,721
  153,336
  161,315
  169,676
  178,439
  187,625
  197,257
  207,357
  217,949
  229,058
  240,711
  252,937
  265,763
  279,221
  293,342
  308,161
  323,712
  340,033
  357,163
Adjusted assets (=assets-cash), $m
  76,809
  81,293
  85,943
  90,797
  95,866
  101,163
  106,699
  112,487
  118,542
  124,878
  131,508
  138,451
  145,721
  153,336
  161,315
  169,676
  178,439
  187,625
  197,257
  207,357
  217,949
  229,058
  240,711
  252,937
  265,763
  279,221
  293,342
  308,161
  323,712
  340,033
  357,163
Revenue / Adjusted assets
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
Average production assets, $m
  54,372
  57,508
  60,798
  64,232
  67,818
  71,565
  75,481
  79,576
  83,859
  88,341
  93,032
  97,943
  103,086
  108,473
  114,117
  120,032
  126,231
  132,730
  139,544
  146,688
  154,181
  162,040
  170,284
  178,932
  188,006
  197,526
  207,516
  217,999
  229,000
  240,546
  252,664
Working capital, $m
  1,659
  -1,729
  -1,828
  -1,931
  -2,039
  -2,151
  -2,269
  -2,392
  -2,521
  -2,656
  -2,797
  -2,944
  -3,099
  -3,261
  -3,431
  -3,608
  -3,795
  -3,990
  -4,195
  -4,410
  -4,635
  -4,871
  -5,119
  -5,379
  -5,652
  -5,938
  -6,238
  -6,553
  -6,884
  -7,231
  -7,595
Total debt, $m
  40,914
  39,471
  43,181
  47,055
  51,100
  55,327
  59,745
  64,364
  69,196
  74,251
  79,543
  85,083
  90,884
  96,961
  103,328
  110,000
  116,993
  124,324
  132,010
  140,070
  148,522
  157,387
  166,687
  176,442
  186,678
  197,417
  208,686
  220,511
  232,921
  245,945
  259,615
Total liabilities, $m
  66,315
  64,872
  68,582
  72,456
  76,501
  80,728
  85,146
  89,765
  94,597
  99,652
  104,944
  110,484
  116,285
  122,362
  128,729
  135,401
  142,394
  149,725
  157,411
  165,471
  173,923
  182,788
  192,088
  201,843
  212,079
  222,818
  234,087
  245,912
  258,322
  271,346
  285,016
Total equity, $m
  18,808
  16,421
  17,360
  18,341
  19,365
  20,435
  21,553
  22,722
  23,946
  25,225
  26,565
  27,967
  29,436
  30,974
  32,586
  34,274
  36,045
  37,900
  39,846
  41,886
  44,026
  46,270
  48,624
  51,093
  53,684
  56,403
  59,255
  62,248
  65,390
  68,687
  72,147
Total liabilities and equity, $m
  85,123
  81,293
  85,942
  90,797
  95,866
  101,163
  106,699
  112,487
  118,543
  124,877
  131,509
  138,451
  145,721
  153,336
  161,315
  169,675
  178,439
  187,625
  197,257
  207,357
  217,949
  229,058
  240,712
  252,936
  265,763
  279,221
  293,342
  308,160
  323,712
  340,033
  357,163
Debt-to-equity ratio
  2.175
  2.400
  2.490
  2.570
  2.640
  2.710
  2.770
  2.830
  2.890
  2.940
  2.990
  3.040
  3.090
  3.130
  3.170
  3.210
  3.250
  3.280
  3.310
  3.340
  3.370
  3.400
  3.430
  3.450
  3.480
  3.500
  3.520
  3.540
  3.560
  3.580
  3.600
Adjusted equity ratio
  0.137
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,206
  -865
  -931
  -998
  -1,068
  -1,141
  -1,218
  -1,298
  -1,381
  -1,469
  -1,560
  -998
  -1,098
  -1,203
  -1,312
  -1,427
  -1,548
  -1,674
  -1,806
  -1,945
  -2,090
  -2,243
  -2,403
  -2,571
  -2,747
  -2,931
  -3,125
  -3,328
  -3,541
  -3,765
  -4,000
Depreciation, amort., depletion, $m
  8,150
  6,409
  6,738
  7,081
  7,440
  7,814
  8,206
  8,615
  9,044
  9,492
  9,961
  9,794
  10,309
  10,847
  11,412
  12,003
  12,623
  13,273
  13,954
  14,669
  15,418
  16,204
  17,028
  17,893
  18,801
  19,753
  20,752
  21,800
  22,900
  24,055
  25,266
Funds from operations, $m
  207
  5,544
  5,807
  6,083
  6,372
  6,673
  6,988
  7,318
  7,663
  8,023
  8,401
  8,797
  9,211
  9,645
  10,099
  10,576
  11,075
  11,599
  12,148
  12,724
  13,328
  13,961
  14,626
  15,323
  16,054
  16,822
  17,627
  18,472
  19,359
  20,290
  21,267
Change in working capital, $m
  -3,961
  -95
  -99
  -103
  -108
  -113
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -186
  -195
  -205
  -215
  -225
  -236
  -248
  -260
  -273
  -286
  -300
  -315
  -331
  -347
  -364
Cash from operations, $m
  4,168
  5,639
  5,906
  6,187
  6,480
  6,786
  7,106
  7,441
  7,791
  8,158
  8,542
  8,944
  9,365
  9,807
  10,269
  10,754
  11,262
  11,794
  12,353
  12,939
  13,553
  14,197
  14,873
  15,583
  16,327
  17,108
  17,927
  18,787
  19,690
  20,637
  21,631
Maintenance CAPEX, $m
  0
  -5,437
  -5,751
  -6,080
  -6,423
  -6,782
  -7,156
  -7,548
  -7,958
  -8,386
  -8,834
  -9,303
  -9,794
  -10,309
  -10,847
  -11,412
  -12,003
  -12,623
  -13,273
  -13,954
  -14,669
  -15,418
  -16,204
  -17,028
  -17,893
  -18,801
  -19,753
  -20,752
  -21,800
  -22,900
  -24,055
New CAPEX, $m
  -3,958
  -3,136
  -3,289
  -3,434
  -3,586
  -3,747
  -3,916
  -4,095
  -4,283
  -4,482
  -4,691
  -4,911
  -5,143
  -5,387
  -5,644
  -5,915
  -6,199
  -6,499
  -6,814
  -7,145
  -7,493
  -7,859
  -8,244
  -8,648
  -9,073
  -9,520
  -9,990
  -10,483
  -11,001
  -11,546
  -12,118
Cash from investing activities, $m
  -9,225
  -8,573
  -9,040
  -9,514
  -10,009
  -10,529
  -11,072
  -11,643
  -12,241
  -12,868
  -13,525
  -14,214
  -14,937
  -15,696
  -16,491
  -17,327
  -18,202
  -19,122
  -20,087
  -21,099
  -22,162
  -23,277
  -24,448
  -25,676
  -26,966
  -28,321
  -29,743
  -31,235
  -32,801
  -34,446
  -36,173
Free cash flow, $m
  -5,057
  -2,935
  -3,134
  -3,327
  -3,530
  -3,743
  -3,967
  -4,202
  -4,449
  -4,709
  -4,983
  -5,270
  -5,572
  -5,889
  -6,222
  -6,573
  -6,941
  -7,327
  -7,734
  -8,160
  -8,609
  -9,080
  -9,574
  -10,094
  -10,640
  -11,213
  -11,815
  -12,448
  -13,112
  -13,809
  -14,542
Issuance/(repayment) of debt, $m
  5,549
  3,593
  3,711
  3,874
  4,045
  4,227
  4,418
  4,619
  4,832
  5,056
  5,291
  5,540
  5,802
  6,077
  6,367
  6,672
  6,993
  7,331
  7,686
  8,060
  8,452
  8,865
  9,299
  9,756
  10,235
  10,739
  11,269
  11,825
  12,410
  13,024
  13,670
Issuance/(repurchase) of shares, $m
  0
  1,756
  1,870
  1,978
  2,092
  2,211
  2,336
  2,467
  2,604
  2,748
  2,899
  2,400
  2,566
  2,741
  2,924
  3,116
  3,318
  3,530
  3,752
  3,985
  4,230
  4,487
  4,757
  5,040
  5,337
  5,650
  5,977
  6,321
  6,683
  7,062
  7,460
Cash from financing (excl. dividends), $m  
  5,286
  5,349
  5,581
  5,852
  6,137
  6,438
  6,754
  7,086
  7,436
  7,804
  8,190
  7,940
  8,368
  8,818
  9,291
  9,788
  10,311
  10,861
  11,438
  12,045
  12,682
  13,352
  14,056
  14,796
  15,572
  16,389
  17,246
  18,146
  19,093
  20,086
  21,130
Total cash flow (excl. dividends), $m
  229
  2,414
  2,446
  2,525
  2,608
  2,695
  2,787
  2,884
  2,986
  3,094
  3,208
  2,670
  2,796
  2,929
  3,068
  3,216
  3,370
  3,533
  3,704
  3,884
  4,074
  4,273
  4,482
  4,702
  4,933
  5,176
  5,431
  5,699
  5,981
  6,277
  6,588
Retained Cash Flow (-), $m
  975
  -1,756
  -1,870
  -1,978
  -2,092
  -2,211
  -2,336
  -2,467
  -2,604
  -2,748
  -2,899
  -2,400
  -2,566
  -2,741
  -2,924
  -3,116
  -3,318
  -3,530
  -3,752
  -3,985
  -4,230
  -4,487
  -4,757
  -5,040
  -5,337
  -5,650
  -5,977
  -6,321
  -6,683
  -7,062
  -7,460
Prev. year cash balance distribution, $m
 
  3,278
  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
 
  3,936
  576
  546
  516
  484
  451
  417
  382
  346
  309
  270
  230
  188
  144
  99
  52
  3
  -48
  -101
  -156
  -214
  -275
  -338
  -405
  -474
  -546
  -622
  -702
  -785
  -872
Discount rate, %
 
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
 
  3,644
  491
  424
  362
  304
  252
  205
  163
  127
  96
  70
  49
  33
  20
  11
  4
  0
  -2
  -4
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  93.7
  87.8
  82.3
  77.1
  72.2
  67.6
  63.4
  59.3
  55.6
  52.0
  49.4
  46.8
  44.4
  42.1
  39.8
  37.7
  35.6
  33.6
  31.7
  30.0
  28.3
  26.6
  25.1
  23.6
  22.3
  20.9
  19.7
  18.5
  17.4
  16.4

Sprint Corporation, through its subsidiaries, provides various wireless and wireline communications products and services to consumers, businesses, government subscribers, and resellers in the United States, Puerto Rico, and the U.S. Virgin Islands. The company operates in two segments, Wireless and Wireline. The Wireless segment offers wireless data communication services, including mobile productivity applications, such as Internet access, messaging, and email services; wireless photo and video offerings; location-based capabilities comprising asset and fleet management, dispatch services, and navigation tools; and mobile entertainment applications. It also provides wireless voice communications services that include local and long-distance wireless voice services, as well as voicemail, call waiting, three-way calling, caller identification, directory assistance, and call forwarding services. In addition, this segment offers voice and data services internationally through roaming arrangements; and customized wireless services to large companies and government agencies, as well as sells wireless devices, broadband devices, connected devices, and accessories to agents and other third-party distributors. The Wireline segment provides wireline voice and data communications, including domestic and international data communications using various protocols, such as multiprotocol label switching technologies, Internet protocol (IP), managed network services, Voice over IP, session initiated protocol, and traditional voice services to other communications companies, and targeted business and consumer subscribers, as well as for cable multiple system operators. Sprint Corporation offers its services under the Sprint, Boost Mobile, Virgin Mobile, and Assurance Wireless brands. The company was founded in 1899 and is headquartered in Overland Park, Kansas. Sprint Corporation is a subsidiary of SoftBank Group Corp.

FINANCIAL RATIOS  of  Sprint (S)

Valuation Ratios
P/E Ratio -26.7
Price to Sales 1
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 153.1
Growth Rates
Sales Growth Rate 3.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -44%
Cap. Spend. - 3 Yr. Gr. Rate 19.3%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 190.8%
Total Debt to Equity 217.5%
Interest Coverage 0
Management Effectiveness
Return On Assets -1.5%
Ret/ On Assets - 3 Yr. Avg. -2.6%
Return On Total Capital -2.1%
Ret/ On T. Cap. - 3 Yr. Avg. -3.9%
Return On Equity -6.3%
Return On Equity - 3 Yr. Avg. -10%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 55.2%
Gross Margin - 3 Yr. Avg. 51%
EBITDA Margin 22.1%
EBITDA Margin - 3 Yr. Avg. 14.2%
Operating Margin 5.3%
Oper. Margin - 3 Yr. Avg. 0.3%
Pre-Tax Margin -2.3%
Pre-Tax Margin - 3 Yr. Avg. -6.5%
Net Profit Margin -3.6%
Net Profit Margin - 3 Yr. Avg. -6.5%
Effective Tax Rate -56.4%
Eff/ Tax Rate - 3 Yr. Avg. -16.5%
Payout Ratio 0%

S stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the S stock intrinsic value calculation we used $33347 million for the last fiscal year's total revenue generated by Sprint. The default revenue input number comes from 2017 income statement of Sprint. 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 S stock valuation model: a) initial revenue growth rate of 5.8% 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 8%, whose default value for S is calculated based on our internal credit rating of Sprint, 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 Sprint.
    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 S stock the variable cost ratio is equal to 99%.

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 S 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 Sprint.

Corporate tax rate of 27% is the nominal tax rate for Sprint. 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 S 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 S are equal to 163%.

Life of production assets of 10 years is the average useful life of capital assets used in Sprint 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 S is equal to -4.9%. 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 - $18808 million for Sprint - 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 3942.31 million for Sprint 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 Sprint at the current share price and the inputted number of shares is $31.8 billion.

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COMPANY NEWS

▶ ETFs with exposure to Sprint Corp. : August 18, 2017   [Aug-18-17 06:01PM  Capital Cube]
▶ Sprint hopes to turn solar eclipse into fun (and a recruiting tool)   [Aug-17-17 05:48PM  American City Business Journals]
▶ The 2 Best Wireless Stocks To Buy in 2017   [06:03AM  Motley Fool]
▶ Testsrts   [Aug-16-17 02:56AM  Reuters]
▶ T-Mobile Launches Its Own Low-Cost Smartphone   [Aug-10-17 02:54PM  Investopedia]
▶ Pinsight Media adopts new business model, moves into new HQ   [09:40AM  American City Business Journals]
▶ [$$] SoftBank Chief Says He Wants Stake in Uber or Lyft   [12:37AM  The Wall Street Journal]
▶ Why a Sprint Deal With T-Mobile Is Likely   [12:34AM  Bloomberg Video]
▶ This analyst has a 'buy' call on SoftBank   [Aug-07-17 10:00PM  CNBC Videos]
▶ [$$] SoftBank Chief Says He Wants Stake in Uber or Lyft   [05:43PM  The Wall Street Journal]
▶ Masayoshi Son's Hunt for a Wireless Deal   [01:44PM  Bloomberg Video]
▶ Sprint Resumes Preliminary Talks on T-Mobile Merger   [Aug-06-17 10:52PM  Bloomberg]
▶ Verizon Stock Is Ready to Break Out of Its Slump   [Aug-04-17 09:00AM  Investopedia]
▶ Report: Unlimited data takes a bite out of Sprint's competition   [02:50PM  American City Business Journals]
▶ Sprint merger buzz: Charter or T-Mobile? Breaking down the options   [09:41AM  American City Business Journals]
▶ [$$] Sprint Says a Merger Decision Is Near   [12:09AM  The Wall Street Journal]
▶ Sprint tops 1Q profit forecasts   [Aug-01-17 11:07PM  Associated Press]
▶ The Likely Candidates for a Merger With Sprint   [06:48PM  Bloomberg Video]
▶ [$$] Sprint Says a Merger Decision Is Near   [01:05PM  The Wall Street Journal]
▶ Claure: Expect an M&A announcement in 'near future'   [11:15AM  American City Business Journals]
▶ Why Sprint Is Getting a Boost After Earnings   [09:15AM  24/7 Wall St.]
Stock chart of S Financial statements of S
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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