Intrinsic value of SAP ADR - SAP

Previous Close

$111.84

  Intrinsic Value

$148.41

stock screener

  Rating & Target

buy

+33%

  Value-price divergence*

+61%

Previous close

$111.84

 
Intrinsic value

$148.41

 
Up/down potential

+33%

 
Rating

buy

 
Value-price divergence*

+61%

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

We calculate the intrinsic value of SAP 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 138.4

 

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, %
  6.11
  10.40
  9.86
  9.37
  8.94
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.53
  6.37
  6.24
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.31
  5.28
  5.25
Revenue, $m
  23,285
  25,707
  28,241
  30,889
  33,649
  36,524
  39,514
  42,624
  45,856
  49,215
  52,705
  56,333
  60,104
  64,026
  68,106
  72,353
  76,775
  81,382
  86,184
  91,192
  96,417
  101,870
  107,566
  113,516
  119,735
  126,238
  133,039
  140,155
  147,603
  155,400
  163,565
Variable operating expenses, $m
 
  7,559
  8,062
  8,587
  9,134
  9,704
  10,298
  10,914
  11,555
  12,222
  12,914
  11,173
  11,921
  12,699
  13,508
  14,350
  15,228
  16,141
  17,094
  18,087
  19,123
  20,205
  21,335
  22,515
  23,748
  25,038
  26,387
  27,798
  29,276
  30,822
  32,442
Fixed operating expenses, $m
 
  11,340
  11,623
  11,914
  12,211
  12,517
  12,830
  13,150
  13,479
  13,816
  14,162
  14,516
  14,879
  15,250
  15,632
  16,023
  16,423
  16,834
  17,255
  17,686
  18,128
  18,581
  19,046
  19,522
  20,010
  20,510
  21,023
  21,549
  22,087
  22,639
  23,205
Total operating expenses, $m
  17,865
  18,899
  19,685
  20,501
  21,345
  22,221
  23,128
  24,064
  25,034
  26,038
  27,076
  25,689
  26,800
  27,949
  29,140
  30,373
  31,651
  32,975
  34,349
  35,773
  37,251
  38,786
  40,381
  42,037
  43,758
  45,548
  47,410
  49,347
  51,363
  53,461
  55,647
Operating income, $m
  5,420
  6,808
  8,557
  10,388
  12,303
  14,303
  16,387
  18,559
  20,822
  23,177
  25,630
  30,644
  33,305
  36,077
  38,966
  41,980
  45,124
  48,407
  51,836
  55,419
  59,165
  63,084
  67,185
  71,479
  75,977
  80,690
  85,629
  90,808
  96,240
  101,939
  107,919
EBITDA, $m
  6,758
  9,489
  11,260
  13,114
  15,053
  17,077
  19,187
  21,386
  23,676
  26,060
  28,543
  31,128
  33,821
  36,627
  39,552
  42,602
  45,784
  49,106
  52,576
  56,202
  59,994
  63,959
  68,110
  72,455
  77,006
  81,774
  86,772
  92,012
  97,508
  103,274
  109,324
Interest expense (income), $m
  201
  238
  300
  366
  434
  505
  579
  656
  736
  820
  906
  996
  1,090
  1,187
  1,288
  1,393
  1,502
  1,616
  1,735
  1,859
  1,988
  2,123
  2,263
  2,410
  2,563
  2,723
  2,891
  3,066
  3,250
  3,442
  3,642
Earnings before tax, $m
  5,133
  6,570
  8,256
  10,023
  11,869
  13,797
  15,808
  17,903
  20,085
  22,358
  24,724
  29,648
  32,215
  34,890
  37,679
  40,587
  43,622
  46,791
  50,101
  53,560
  57,177
  60,962
  64,922
  69,070
  73,414
  77,966
  82,738
  87,742
  92,991
  98,497
  104,276
Tax expense, $m
  1,298
  1,774
  2,229
  2,706
  3,205
  3,725
  4,268
  4,834
  5,423
  6,037
  6,675
  8,005
  8,698
  9,420
  10,173
  10,958
  11,778
  12,633
  13,527
  14,461
  15,438
  16,460
  17,529
  18,649
  19,822
  21,051
  22,339
  23,690
  25,107
  26,594
  28,155
Net income, $m
  3,849
  4,796
  6,027
  7,316
  8,665
  10,072
  11,540
  13,069
  14,662
  16,321
  18,048
  21,643
  23,517
  25,470
  27,505
  29,629
  31,844
  34,157
  36,574
  39,099
  41,740
  44,502
  47,393
  50,421
  53,592
  56,915
  60,399
  64,052
  67,883
  71,903
  76,122

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,114
  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
  46,731
  47,082
  51,724
  56,573
  61,628
  66,893
  72,371
  78,066
  83,986
  90,137
  96,530
  103,174
  110,081
  117,264
  124,737
  132,515
  140,614
  149,051
  157,846
  167,018
  176,587
  186,576
  197,007
  207,905
  219,295
  231,205
  243,661
  256,694
  270,335
  284,616
  299,571
Adjusted assets (=assets-cash), $m
  42,617
  47,082
  51,724
  56,573
  61,628
  66,893
  72,371
  78,066
  83,986
  90,137
  96,530
  103,174
  110,081
  117,264
  124,737
  132,515
  140,614
  149,051
  157,846
  167,018
  176,587
  186,576
  197,007
  207,905
  219,295
  231,205
  243,661
  256,694
  270,335
  284,616
  299,571
Revenue / Adjusted assets
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
Average production assets, $m
  4,257
  4,704
  5,168
  5,653
  6,158
  6,684
  7,231
  7,800
  8,392
  9,006
  9,645
  10,309
  10,999
  11,717
  12,463
  13,241
  14,050
  14,893
  15,772
  16,688
  17,644
  18,642
  19,685
  20,773
  21,912
  23,101
  24,346
  25,648
  27,011
  28,438
  29,932
Working capital, $m
  1,995
  -411
  -452
  -494
  -538
  -584
  -632
  -682
  -734
  -787
  -843
  -901
  -962
  -1,024
  -1,090
  -1,158
  -1,228
  -1,302
  -1,379
  -1,459
  -1,543
  -1,630
  -1,721
  -1,816
  -1,916
  -2,020
  -2,129
  -2,242
  -2,362
  -2,486
  -2,617
Total debt, $m
  8,548
  8,582
  10,448
  12,397
  14,430
  16,546
  18,748
  21,038
  23,417
  25,890
  28,460
  31,131
  33,908
  36,795
  39,799
  42,926
  46,182
  49,574
  53,109
  56,796
  60,643
  64,658
  68,852
  73,233
  77,812
  82,599
  87,607
  92,846
  98,330
  104,071
  110,082
Total liabilities, $m
  18,893
  18,927
  20,793
  22,742
  24,775
  26,891
  29,093
  31,383
  33,762
  36,235
  38,805
  41,476
  44,253
  47,140
  50,144
  53,271
  56,527
  59,919
  63,454
  67,141
  70,988
  75,003
  79,197
  83,578
  88,157
  92,944
  97,952
  103,191
  108,675
  114,416
  120,427
Total equity, $m
  27,838
  28,155
  30,931
  33,830
  36,854
  40,002
  43,278
  46,684
  50,224
  53,902
  57,725
  61,698
  65,829
  70,124
  74,593
  79,244
  84,087
  89,133
  94,392
  99,877
  105,599
  111,572
  117,810
  124,327
  131,139
  138,260
  145,709
  153,503
  161,660
  170,200
  179,143
Total liabilities and equity, $m
  46,731
  47,082
  51,724
  56,572
  61,629
  66,893
  72,371
  78,067
  83,986
  90,137
  96,530
  103,174
  110,082
  117,264
  124,737
  132,515
  140,614
  149,052
  157,846
  167,018
  176,587
  186,575
  197,007
  207,905
  219,296
  231,204
  243,661
  256,694
  270,335
  284,616
  299,570
Debt-to-equity ratio
  0.307
  0.300
  0.340
  0.370
  0.390
  0.410
  0.430
  0.450
  0.470
  0.480
  0.490
  0.500
  0.520
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
Adjusted equity ratio
  0.557
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598
  0.598

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,849
  4,796
  6,027
  7,316
  8,665
  10,072
  11,540
  13,069
  14,662
  16,321
  18,048
  21,643
  23,517
  25,470
  27,505
  29,629
  31,844
  34,157
  36,574
  39,099
  41,740
  44,502
  47,393
  50,421
  53,592
  56,915
  60,399
  64,052
  67,883
  71,903
  76,122
Depreciation, amort., depletion, $m
  1,338
  2,681
  2,703
  2,726
  2,749
  2,774
  2,800
  2,827
  2,854
  2,883
  2,913
  484
  516
  550
  585
  622
  660
  699
  740
  783
  828
  875
  924
  975
  1,029
  1,085
  1,143
  1,204
  1,268
  1,335
  1,405
Funds from operations, $m
  3,163
  7,477
  8,730
  10,042
  11,414
  12,846
  14,340
  15,896
  17,517
  19,204
  20,961
  22,127
  24,033
  26,020
  28,090
  30,250
  32,504
  34,856
  37,314
  39,882
  42,568
  45,377
  48,318
  51,396
  54,621
  58,000
  61,542
  65,256
  69,151
  73,238
  77,527
Change in working capital, $m
  -1,721
  -39
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -58
  -60
  -63
  -65
  -68
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -100
  -104
  -109
  -114
  -119
  -125
  -131
Cash from operations, $m
  4,884
  7,516
  8,771
  10,085
  11,458
  12,892
  14,388
  15,946
  17,568
  19,258
  21,017
  22,185
  24,094
  26,083
  28,156
  30,318
  32,574
  34,930
  37,391
  39,962
  42,652
  45,465
  48,409
  51,491
  54,720
  58,104
  61,651
  65,370
  69,270
  73,363
  77,657
Maintenance CAPEX, $m
  0
  -200
  -221
  -243
  -265
  -289
  -314
  -339
  -366
  -394
  -423
  -453
  -484
  -516
  -550
  -585
  -622
  -660
  -699
  -740
  -783
  -828
  -875
  -924
  -975
  -1,029
  -1,085
  -1,143
  -1,204
  -1,268
  -1,335
New CAPEX, $m
  -1,056
  -448
  -464
  -484
  -505
  -526
  -547
  -569
  -591
  -615
  -639
  -664
  -690
  -718
  -747
  -777
  -809
  -843
  -879
  -916
  -956
  -998
  -1,042
  -1,089
  -1,138
  -1,190
  -1,245
  -1,302
  -1,363
  -1,427
  -1,494
Cash from investing activities, $m
  -1,899
  -648
  -685
  -727
  -770
  -815
  -861
  -908
  -957
  -1,009
  -1,062
  -1,117
  -1,174
  -1,234
  -1,297
  -1,362
  -1,431
  -1,503
  -1,578
  -1,656
  -1,739
  -1,826
  -1,917
  -2,013
  -2,113
  -2,219
  -2,330
  -2,445
  -2,567
  -2,695
  -2,829
Free cash flow, $m
  2,985
  6,869
  8,086
  9,357
  10,688
  12,077
  13,526
  15,037
  16,611
  18,249
  19,956
  21,069
  22,920
  24,848
  26,859
  28,956
  31,144
  33,427
  35,813
  38,306
  40,912
  43,638
  46,491
  49,478
  52,607
  55,885
  59,321
  62,924
  66,703
  70,668
  74,828
Issuance/(repayment) of debt, $m
  -1,478
  1,787
  1,866
  1,949
  2,032
  2,116
  2,202
  2,290
  2,380
  2,473
  2,570
  2,671
  2,777
  2,888
  3,004
  3,127
  3,256
  3,392
  3,536
  3,687
  3,847
  4,015
  4,193
  4,381
  4,579
  4,788
  5,008
  5,239
  5,484
  5,741
  6,012
Issuance/(repurchase) of shares, $m
  28
  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  
  -1,401
  1,787
  1,866
  1,949
  2,032
  2,116
  2,202
  2,290
  2,380
  2,473
  2,570
  2,671
  2,777
  2,888
  3,004
  3,127
  3,256
  3,392
  3,536
  3,687
  3,847
  4,015
  4,193
  4,381
  4,579
  4,788
  5,008
  5,239
  5,484
  5,741
  6,012
Total cash flow (excl. dividends), $m
  1,761
  8,655
  9,952
  11,307
  12,720
  14,194
  15,728
  17,327
  18,990
  20,722
  22,526
  23,739
  25,696
  27,736
  29,863
  32,082
  34,399
  36,819
  39,348
  41,993
  44,759
  47,654
  50,685
  53,859
  57,186
  60,673
  64,329
  68,164
  72,187
  76,409
  80,840
Retained Cash Flow (-), $m
  -3,281
  -2,678
  -2,776
  -2,899
  -3,023
  -3,148
  -3,276
  -3,406
  -3,540
  -3,679
  -3,823
  -3,973
  -4,130
  -4,295
  -4,469
  -4,651
  -4,843
  -5,046
  -5,259
  -5,485
  -5,722
  -5,973
  -6,238
  -6,517
  -6,811
  -7,122
  -7,449
  -7,794
  -8,157
  -8,540
  -8,943
Prev. year cash balance distribution, $m
 
  2,361
  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
 
  8,339
  7,176
  8,407
  9,697
  11,045
  12,453
  13,921
  15,450
  17,044
  18,703
  19,766
  21,566
  23,441
  25,394
  27,431
  29,556
  31,774
  34,089
  36,508
  39,036
  41,680
  44,447
  47,342
  50,374
  53,551
  56,880
  60,370
  64,030
  67,869
  71,897
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  7,995
  6,569
  7,316
  7,984
  8,561
  9,038
  9,405
  9,657
  9,791
  9,805
  9,387
  9,203
  8,913
  8,525
  8,053
  7,511
  6,913
  6,278
  5,621
  4,960
  4,311
  3,688
  3,103
  2,566
  2,083
  1,659
  1,296
  991
  741
  541
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

SAP SE (SAP) is a software and service provider. The Company offers enterprise application software. The Company operates through two segments: Applications, Technology & Services segment, and the SAP Business Network segment. The Applications, Technology & Services segment is engaged in the sale of software licenses, subscriptions to its cloud applications, and related services (primarily support services and various professional services, and support services, as well as implementation services of its software products and education services on the use of its products). The SAP Business Network segment includes its cloud-based collaborative business networks and services relating to the SAP Business Network (including cloud applications, professional services and education services). Within the SAP Business Network segment, the Company markets and sells the cloud offerings developed by SAP Ariba, SAP Fieldglass and Concur.

FINANCIAL RATIOS  of  SAP ADR (SAP)

Valuation Ratios
P/E Ratio 34.8
Price to Sales 5.8
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 27.4
Price to Free Cash Flow 35
Growth Rates
Sales Growth Rate 6.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 57.4%
Cap. Spend. - 3 Yr. Gr. Rate 12.1%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 24.4%
Total Debt to Equity 30.7%
Interest Coverage 27
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 9%
Return On Total Capital 10.9%
Ret/ On T. Cap. - 3 Yr. Avg. 11.1%
Return On Equity 14.7%
Return On Equity - 3 Yr. Avg. 15.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 72%
Gross Margin - 3 Yr. Avg. 71.4%
EBITDA Margin 28.7%
EBITDA Margin - 3 Yr. Avg. 28.7%
Operating Margin 23.3%
Oper. Margin - 3 Yr. Avg. 22.8%
Pre-Tax Margin 22%
Pre-Tax Margin - 3 Yr. Avg. 22%
Net Profit Margin 16.5%
Net Profit Margin - 3 Yr. Avg. 16.6%
Effective Tax Rate 25.3%
Eff/ Tax Rate - 3 Yr. Avg. 24.5%
Payout Ratio 37.8%

SAP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SAP stock intrinsic value calculation we used $23285 million for the last fiscal year's total revenue generated by SAP ADR. The default revenue input number comes from 2016 income statement of SAP ADR. 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 SAP stock valuation model: a) initial revenue growth rate of 10.4% 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 SAP is calculated based on our internal credit rating of SAP ADR, 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 SAP ADR.
    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 SAP stock the variable cost ratio is equal to 30.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11063 million in the base year in the intrinsic value calculation for SAP 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 SAP ADR.

Corporate tax rate of 27% is the nominal tax rate for SAP ADR. 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 SAP 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 SAP are equal to 18.3%.

Life of production assets of 21.3 years is the average useful life of capital assets used in SAP ADR 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 SAP is equal to -1.6%. 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 - $27838 million for SAP ADR - 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 1237.16 million for SAP ADR 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 SAP ADR at the current share price and the inputted number of shares is $138.4 billion.

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COMPANY NEWS

▶ [$$] These Companies Will Pay You to Learn Your Job   [09:00AM  The Wall Street Journal]
▶ Is SAP SE (SAP) Undervalued?   [Oct-14-17 01:37PM  Simply Wall St.]
▶ Featured Company News - SAP to Buy Gigya   [Sep-27-17 07:30AM  ACCESSWIRE]
▶ SAP Conceives New Data Hub for Era of Disaggregated Information   [Sep-25-17 05:36PM  The Wall Street Journal]
▶ These 10 Powerful Women Are Ones to Watch   [Sep-21-17 07:30AM  Fortune]
▶ Procurement Gets Purpose with SAP Ariba   [Sep-12-17 08:30AM  Business Wire]
▶ DuluxGroup Goes Digital with SAP Ariba   [Aug-21-17 07:00PM  Business Wire]
▶ ETFs with exposure to SAP SE : August 4, 2017   [Aug-04-17 07:51PM  Capital Cube]
▶ Step Up For Students Transforms Education with SAP Ariba   [Aug-01-17 08:30AM  Business Wire]
▶ SAP Ariba Live Heads Down Under   [Jul-25-17 06:00PM  Business Wire]
▶ SAP beats Street 2Q forecasts   [Jul-21-17 12:23AM  Associated Press]
▶ SAP Beats Q2 Targets, But Profit Margin Weighs On Stock   [Jul-20-17 04:00PM  Investor's Business Daily]
▶ SAP NS2® Achieves FedRAMP Authorization   [12:46PM  PR Newswire]
▶ [$$] SAP Second-Quarter Net Profit Falls   [12:14PM  The Wall Street Journal]
▶ [$$] SAP raises outlook as cloud sales take off   [06:48AM  Financial Times]
Financial statements of SAP
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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