Intrinsic value of Sony ADR - SNE

Previous Close

$49.41

  Intrinsic Value

$272.18

stock screener

  Rating & Target

str. buy

+451%

Previous close

$49.41

 
Intrinsic value

$272.18

 
Up/down potential

+451%

 
Rating

str. buy

We calculate the intrinsic value of SNE 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
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, %
  -6.20
  22.10
  20.39
  18.85
  17.47
  16.22
  15.10
  14.09
  13.18
  12.36
  11.62
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.68
  6.52
  6.36
  6.23
  6.10
  5.99
  5.89
  5.81
Revenue, $m
  66,190
  80,818
  97,297
  115,638
  135,835
  157,867
  181,701
  207,298
  234,618
  263,619
  294,264
  326,523
  360,370
  395,793
  432,786
  471,356
  511,519
  553,303
  596,748
  641,901
  688,824
  737,586
  788,265
  840,953
  895,746
  952,751
  1,012,084
  1,073,871
  1,138,242
  1,205,341
  1,275,316
Variable operating expenses, $m
 
  77,808
  93,580
  111,135
  130,467
  151,554
  174,366
  198,866
  225,014
  252,772
  282,103
  312,524
  344,920
  378,825
  414,232
  451,148
  489,589
  529,582
  571,163
  614,381
  659,292
  705,963
  754,470
  804,899
  857,343
  911,904
  968,694
  1,027,831
  1,089,443
  1,153,665
  1,220,640
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
  63,677
  77,808
  93,580
  111,135
  130,467
  151,554
  174,366
  198,866
  225,014
  252,772
  282,103
  312,524
  344,920
  378,825
  414,232
  451,148
  489,589
  529,582
  571,163
  614,381
  659,292
  705,963
  754,470
  804,899
  857,343
  911,904
  968,694
  1,027,831
  1,089,443
  1,153,665
  1,220,640
Operating income, $m
  2,513
  3,010
  3,716
  4,503
  5,369
  6,313
  7,335
  8,433
  9,604
  10,847
  12,161
  13,999
  15,450
  16,969
  18,555
  20,208
  21,930
  23,722
  25,584
  27,520
  29,532
  31,622
  33,795
  36,054
  38,403
  40,847
  43,391
  46,040
  48,799
  51,676
  54,676
EBITDA, $m
  5,360
  5,930
  7,139
  8,485
  9,967
  11,583
  13,332
  15,210
  17,215
  19,342
  21,591
  23,958
  26,441
  29,040
  31,755
  34,585
  37,532
  40,597
  43,785
  47,098
  50,541
  54,119
  57,837
  61,703
  65,723
  69,906
  74,259
  78,793
  83,516
  88,439
  93,573
Interest expense (income), $m
  121
  208
  984
  2,052
  3,240
  4,550
  5,977
  7,522
  9,181
  10,952
  12,832
  14,818
  16,909
  19,103
  21,399
  23,796
  26,296
  28,899
  31,608
  34,423
  37,350
  40,391
  43,552
  46,837
  50,252
  53,803
  57,498
  61,343
  65,348
  69,520
  73,869
Earnings before tax, $m
  2,190
  2,802
  2,733
  2,451
  2,128
  1,764
  1,358
  910
  422
  -105
  -671
  -819
  -1,459
  -2,134
  -2,844
  -3,588
  -4,366
  -5,178
  -6,023
  -6,903
  -7,818
  -8,769
  -9,757
  -10,783
  -11,849
  -12,956
  -14,107
  -15,304
  -16,549
  -17,844
  -19,193
Tax expense, $m
  1,080
  757
  738
  662
  575
  476
  367
  246
  114
  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
  638
  2,046
  1,995
  1,789
  1,554
  1,288
  991
  664
  308
  -105
  -671
  -819
  -1,459
  -2,134
  -2,844
  -3,588
  -4,366
  -5,178
  -6,023
  -6,903
  -7,818
  -8,769
  -9,757
  -10,783
  -11,849
  -12,956
  -14,107
  -15,304
  -16,549
  -17,844
  -19,193

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17,512
  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
  153,744
  166,292
  200,199
  237,939
  279,497
  324,829
  373,870
  426,539
  482,753
  542,426
  605,482
  671,857
  741,503
  814,389
  890,507
  969,868
  1,052,508
  1,138,484
  1,227,876
  1,320,784
  1,417,333
  1,517,666
  1,621,945
  1,730,356
  1,843,098
  1,960,393
  2,082,478
  2,209,610
  2,342,062
  2,480,125
  2,624,107
Adjusted assets (=assets-cash), $m
  136,232
  166,292
  200,199
  237,939
  279,497
  324,829
  373,870
  426,539
  482,753
  542,426
  605,482
  671,857
  741,503
  814,389
  890,507
  969,868
  1,052,508
  1,138,484
  1,227,876
  1,320,784
  1,417,333
  1,517,666
  1,621,945
  1,730,356
  1,843,098
  1,960,393
  2,082,478
  2,209,610
  2,342,062
  2,480,125
  2,624,107
Revenue / Adjusted assets
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
  0.486
Average production assets, $m
  12,097
  14,790
  17,805
  21,162
  24,858
  28,890
  33,251
  37,936
  42,935
  48,242
  53,850
  59,754
  65,948
  72,430
  79,200
  86,258
  93,608
  101,255
  109,205
  117,468
  126,055
  134,978
  144,253
  153,894
  163,921
  174,353
  185,211
  196,518
  208,298
  220,577
  233,383
Working capital, $m
  -7,539
  -25,054
  -30,162
  -35,848
  -42,109
  -48,939
  -56,327
  -64,262
  -72,731
  -81,722
  -91,222
  -101,222
  -111,715
  -122,696
  -134,164
  -146,120
  -158,571
  -171,524
  -184,992
  -198,989
  -213,535
  -228,652
  -244,362
  -260,695
  -277,681
  -295,353
  -313,746
  -332,900
  -352,855
  -373,656
  -395,348
Total debt, $m
  10,443
  28,102
  58,618
  92,584
  129,986
  170,785
  214,922
  262,324
  312,916
  366,622
  423,373
  483,111
  545,792
  611,389
  679,895
  751,321
  825,697
  903,075
  983,527
  1,067,145
  1,154,039
  1,244,338
  1,338,190
  1,435,759
  1,537,227
  1,642,793
  1,752,670
  1,867,088
  1,986,295
  2,110,552
  2,240,136
Total liabilities, $m
  132,004
  149,663
  180,179
  214,145
  251,547
  292,346
  336,483
  383,885
  434,477
  488,183
  544,934
  604,672
  667,353
  732,950
  801,456
  872,882
  947,258
  1,024,636
  1,105,088
  1,188,706
  1,275,600
  1,365,899
  1,459,751
  1,557,320
  1,658,788
  1,764,354
  1,874,231
  1,988,649
  2,107,856
  2,232,113
  2,361,697
Total equity, $m
  21,740
  16,629
  20,020
  23,794
  27,950
  32,483
  37,387
  42,654
  48,275
  54,243
  60,548
  67,186
  74,150
  81,439
  89,051
  96,987
  105,251
  113,848
  122,788
  132,078
  141,733
  151,767
  162,195
  173,036
  184,310
  196,039
  208,248
  220,961
  234,206
  248,013
  262,411
Total liabilities and equity, $m
  153,744
  166,292
  200,199
  237,939
  279,497
  324,829
  373,870
  426,539
  482,752
  542,426
  605,482
  671,858
  741,503
  814,389
  890,507
  969,869
  1,052,509
  1,138,484
  1,227,876
  1,320,784
  1,417,333
  1,517,666
  1,621,946
  1,730,356
  1,843,098
  1,960,393
  2,082,479
  2,209,610
  2,342,062
  2,480,126
  2,624,108
Debt-to-equity ratio
  0.480
  1.690
  2.930
  3.890
  4.650
  5.260
  5.750
  6.150
  6.480
  6.760
  6.990
  7.190
  7.360
  7.510
  7.630
  7.750
  7.850
  7.930
  8.010
  8.080
  8.140
  8.200
  8.250
  8.300
  8.340
  8.380
  8.420
  8.450
  8.480
  8.510
  8.540
Adjusted equity ratio
  0.061
  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
  638
  2,046
  1,995
  1,789
  1,554
  1,288
  991
  664
  308
  -105
  -671
  -819
  -1,459
  -2,134
  -2,844
  -3,588
  -4,366
  -5,178
  -6,023
  -6,903
  -7,818
  -8,769
  -9,757
  -10,783
  -11,849
  -12,956
  -14,107
  -15,304
  -16,549
  -17,844
  -19,193
Depreciation, amort., depletion, $m
  2,847
  2,920
  3,422
  3,982
  4,598
  5,270
  5,997
  6,777
  7,611
  8,495
  9,430
  9,959
  10,991
  12,072
  13,200
  14,376
  15,601
  16,876
  18,201
  19,578
  21,009
  22,496
  24,042
  25,649
  27,320
  29,059
  30,869
  32,753
  34,716
  36,763
  38,897
Funds from operations, $m
  7,049
  4,966
  5,417
  5,771
  6,152
  6,557
  6,988
  7,442
  7,919
  8,390
  8,759
  9,140
  9,532
  9,938
  10,356
  10,788
  11,235
  11,698
  12,177
  12,675
  13,191
  13,727
  14,285
  14,866
  15,472
  16,103
  16,762
  17,449
  18,168
  18,919
  19,704
Change in working capital, $m
  4
  -4,535
  -5,108
  -5,686
  -6,261
  -6,830
  -7,388
  -7,935
  -8,469
  -8,990
  -9,500
  -10,000
  -10,493
  -10,981
  -11,468
  -11,957
  -12,451
  -12,953
  -13,468
  -13,998
  -14,546
  -15,116
  -15,711
  -16,333
  -16,986
  -17,672
  -18,393
  -19,154
  -19,955
  -20,801
  -21,692
Cash from operations, $m
  7,045
  9,500
  10,526
  11,457
  12,413
  13,387
  14,376
  15,377
  16,388
  17,381
  18,259
  19,140
  20,025
  20,919
  21,824
  22,745
  23,686
  24,651
  25,645
  26,672
  27,737
  28,843
  29,996
  31,199
  32,457
  33,775
  35,155
  36,603
  38,123
  39,719
  41,396
Maintenance CAPEX, $m
  0
  -2,016
  -2,465
  -2,968
  -3,527
  -4,143
  -4,815
  -5,542
  -6,323
  -7,156
  -8,040
  -8,975
  -9,959
  -10,991
  -12,072
  -13,200
  -14,376
  -15,601
  -16,876
  -18,201
  -19,578
  -21,009
  -22,496
  -24,042
  -25,649
  -27,320
  -29,059
  -30,869
  -32,753
  -34,716
  -36,763
New CAPEX, $m
  -2,903
  -2,693
  -3,016
  -3,356
  -3,696
  -4,032
  -4,362
  -4,684
  -4,999
  -5,307
  -5,608
  -5,903
  -6,194
  -6,482
  -6,770
  -7,058
  -7,350
  -7,647
  -7,950
  -8,263
  -8,587
  -8,923
  -9,274
  -9,642
  -10,027
  -10,432
  -10,858
  -11,307
  -11,780
  -12,279
  -12,805
Cash from investing activities, $m
  -10,916
  -4,709
  -5,481
  -6,324
  -7,223
  -8,175
  -9,177
  -10,226
  -11,322
  -12,463
  -13,648
  -14,878
  -16,153
  -17,473
  -18,842
  -20,258
  -21,726
  -23,248
  -24,826
  -26,464
  -28,165
  -29,932
  -31,770
  -33,684
  -35,676
  -37,752
  -39,917
  -42,176
  -44,533
  -46,995
  -49,568
Free cash flow, $m
  -3,871
  4,791
  5,045
  5,133
  5,190
  5,212
  5,200
  5,151
  5,066
  4,918
  4,611
  4,262
  3,872
  3,445
  2,982
  2,487
  1,960
  1,403
  819
  208
  -428
  -1,089
  -1,775
  -2,485
  -3,219
  -3,978
  -4,762
  -5,572
  -6,410
  -7,276
  -8,172
Issuance/(repayment) of debt, $m
  2,709
  22,169
  30,516
  33,966
  37,402
  40,799
  44,137
  47,403
  50,592
  53,706
  56,751
  59,738
  62,681
  65,598
  68,506
  71,425
  74,376
  77,378
  80,452
  83,618
  86,894
  90,299
  93,852
  97,569
  101,468
  105,565
  109,877
  114,419
  119,207
  124,257
  129,584
Issuance/(repurchase) of shares, $m
  0
  5,846
  1,396
  1,985
  2,602
  3,246
  3,913
  4,602
  5,313
  6,072
  6,976
  7,457
  8,423
  9,423
  10,456
  11,524
  12,630
  13,775
  14,963
  16,194
  17,473
  18,802
  20,185
  21,624
  23,123
  24,685
  26,316
  28,017
  29,794
  31,650
  33,591
Cash from financing (excl. dividends), $m  
  4,158
  28,015
  31,912
  35,951
  40,004
  44,045
  48,050
  52,005
  55,905
  59,778
  63,727
  67,195
  71,104
  75,021
  78,962
  82,949
  87,006
  91,153
  95,415
  99,812
  104,367
  109,101
  114,037
  119,193
  124,591
  130,250
  136,193
  142,436
  149,001
  155,907
  163,175
Total cash flow (excl. dividends), $m
  16
  32,805
  36,957
  41,083
  45,194
  49,257
  53,249
  57,156
  60,971
  64,696
  68,338
  71,456
  74,977
  78,465
  81,944
  85,436
  88,966
  92,557
  96,234
  100,020
  103,939
  108,012
  112,262
  116,708
  121,372
  126,273
  131,431
  136,863
  142,591
  148,631
  155,003
Retained Cash Flow (-), $m
  -295
  -7,891
  -3,391
  -3,774
  -4,156
  -4,533
  -4,904
  -5,267
  -5,621
  -6,072
  -6,976
  -7,457
  -8,423
  -9,423
  -10,456
  -11,524
  -12,630
  -13,775
  -14,963
  -16,194
  -17,473
  -18,802
  -20,185
  -21,624
  -23,123
  -24,685
  -26,316
  -28,017
  -29,794
  -31,650
  -33,591
Prev. year cash balance distribution, $m
 
  13,002
  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
 
  37,916
  33,567
  37,309
  41,038
  44,724
  48,345
  51,889
  55,350
  58,623
  61,361
  63,999
  66,553
  69,043
  71,488
  73,912
  76,336
  78,782
  81,271
  83,826
  86,466
  89,210
  92,077
  95,085
  98,249
  101,588
  105,115
  108,846
  112,797
  116,980
  121,412
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
 
  36,353
  30,729
  32,469
  33,791
  34,667
  35,086
  35,055
  34,595
  33,676
  32,169
  30,392
  28,401
  26,251
  24,000
  21,699
  19,398
  17,142
  14,967
  12,907
  10,987
  9,227
  7,640
  6,232
  5,004
  3,952
  3,067
  2,336
  1,745
  1,277
  914
Current shareholders' claim on cash, %
  100
  81.1
  78.8
  76.2
  73.4
  70.6
  67.8
  65.0
  62.3
  59.7
  57.1
  54.8
  52.5
  50.3
  48.1
  46.1
  44.1
  42.2
  40.3
  38.5
  36.9
  35.2
  33.7
  32.2
  30.8
  29.4
  28.1
  26.8
  25.6
  24.5
  23.4

Sony Corporation (Sony) is engaged in the development, design, manufacture and sale of various kinds of electronic equipment, instruments and devices for consumer, professional and industrial markets, as well as game consoles and software. The Company's segments include Mobile Communications, Game & Network Services, Imaging Products & Solutions, Home Entertainment & Sound, Devices, Pictures, Music, Financial Services and All Other. It is engaged in the production, acquisition and distribution of motion pictures and television programming and the operation of television and digital networks. It is also engaged in the development, production, manufacture and distribution of recorded music and the management and licensing of the words and music of songs. It is also engaged in various financial services businesses, including life and non-life insurance operations, through its Japanese insurance subsidiaries and banking operations through a Japanese Internet-based banking subsidiary.

FINANCIAL RATIOS  of  Sony ADR (SNE)

Valuation Ratios
P/E Ratio 97.8
Price to Sales 0.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow 15.1
Growth Rates
Sales Growth Rate -6.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.2%
Cap. Spend. - 3 Yr. Gr. Rate 3.3%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 27.3%
Total Debt to Equity 48%
Interest Coverage 19
Management Effectiveness
Return On Assets 0.5%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity 3%
Return On Equity - 3 Yr. Avg. 1.2%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 31.4%
Gross Margin - 3 Yr. Avg. 31%
EBITDA Margin 7.8%
EBITDA Margin - 3 Yr. Avg. 7.3%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 3.3%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin 1%
Net Profit Margin - 3 Yr. Avg. 0.4%
Effective Tax Rate 49.3%
Eff/ Tax Rate - 3 Yr. Avg. 101.3%
Payout Ratio 34.5%

SNE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SNE stock intrinsic value calculation we used $66190 million for the last fiscal year's total revenue generated by Sony ADR. The default revenue input number comes from 2017 income statement of Sony 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 SNE stock valuation model: a) initial revenue growth rate of 22.1% 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 SNE is calculated based on our internal credit rating of Sony 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 Sony 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 SNE stock the variable cost ratio is equal to 96.4%.

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 SNE 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 Sony ADR.

Corporate tax rate of 27% is the nominal tax rate for Sony 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 SNE 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 SNE are equal to 18.3%.

Life of production assets of 6 years is the average useful life of capital assets used in Sony 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 SNE is equal to -31%. 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 - $21740 million for Sony 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 1266.96 million for Sony 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 Sony ADR at the current share price and the inputted number of shares is $62.6 billion.

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COMPANY NEWS

▶ 'Fifty Shades Freed' Is A Timely Fantasy   [Feb-12-18 10:00AM  Forbes]
▶ Top Mutual Fund Holders of Activision Blizzard (ATVI)   [Feb-08-18 04:17PM  Investopedia]
▶ Sony back in the top spot with Jumanji amid sale rumors   [Feb-05-18 12:20PM  American City Business Journals]
▶ Sony CEO Kazuo Hirai Is Stepping Down   [09:35AM  Investopedia]
▶ [$$] Sony Chief Hands Over Reins After Resurgence   [Feb-02-18 10:53PM  The Wall Street Journal]
▶ [$$] After Sonys Resurgence, CEO Steps Down   [07:52PM  The Wall Street Journal]
▶ Business Highlights   [05:32PM  Associated Press]
▶ What Sonys executive shakeup might mean for Sony Pictures   [01:10PM  American City Business Journals]
▶ Sony CEO to step down to become chairman   [11:47AM  CNBC Videos]
▶ [$$] Sony Chief Hands Over Reins After Resurgence   [07:34AM  The Wall Street Journal]
▶ [$$] Sony Has New Boss, Same Good Story   [06:54AM  The Wall Street Journal]
▶ Sony posts 3Q profit   [05:15AM  Associated Press]
▶ [$$] Sony CEO Cedes Post To Finance Official   [12:11AM  The Wall Street Journal]
▶ Nintendo's Mario is going mobile   [02:03PM  Yahoo Finance Video]
▶ A.M. Best Affirms Credit Ratings of PMG Assurance Ltd.   [Jan-31-18 12:11PM  Business Wire]
Financial statements of SNE
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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