Intrinsic value of Sony ADR - SNE

Previous Close

$44.90

  Intrinsic Value

$180.68

stock screener

  Rating & Target

str. buy

+302%

Previous close

$44.90

 
Intrinsic value

$180.68

 
Up/down potential

+302%

 
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

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 56.9

 

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
  15.20
  14.18
  13.26
  12.44
  11.69
  11.02
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
Revenue, $m
  66,190
  76,251
  87,063
  98,610
  110,872
  123,836
  137,486
  151,813
  166,810
  182,475
  198,810
  215,821
  233,520
  251,924
  271,051
  290,929
  311,585
  333,053
  355,371
  378,581
  402,726
  427,856
  454,024
  481,286
  509,701
  539,334
  570,250
  602,520
  636,220
  671,427
  708,224
Variable operating expenses, $m
 
  73,437
  83,786
  94,837
  106,574
  118,982
  132,047
  145,760
  160,114
  175,107
  190,741
  206,568
  223,509
  241,123
  259,431
  278,456
  298,226
  318,774
  340,136
  362,350
  385,460
  409,513
  434,559
  460,652
  487,849
  516,211
  545,801
  576,689
  608,943
  642,641
  677,861
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
  73,437
  83,786
  94,837
  106,574
  118,982
  132,047
  145,760
  160,114
  175,107
  190,741
  206,568
  223,509
  241,123
  259,431
  278,456
  298,226
  318,774
  340,136
  362,350
  385,460
  409,513
  434,559
  460,652
  487,849
  516,211
  545,801
  576,689
  608,943
  642,641
  677,861
Operating income, $m
  2,513
  2,814
  3,278
  3,773
  4,298
  4,854
  5,440
  6,054
  6,697
  7,368
  8,069
  9,253
  10,012
  10,801
  11,621
  12,473
  13,358
  14,279
  15,236
  16,231
  17,266
  18,343
  19,465
  20,634
  21,852
  23,123
  24,448
  25,832
  27,276
  28,786
  30,363
EBITDA, $m
  5,360
  5,595
  6,388
  7,235
  8,135
  9,086
  10,088
  11,139
  12,239
  13,389
  14,587
  15,835
  17,134
  18,484
  19,888
  21,346
  22,862
  24,437
  26,075
  27,777
  29,549
  31,393
  33,313
  35,313
  37,398
  39,572
  41,841
  44,208
  46,681
  49,264
  51,964
Interest expense (income), $m
  121
  208
  688
  1,388
  2,137
  2,932
  3,772
  4,657
  5,585
  6,557
  7,572
  8,631
  9,734
  10,881
  12,074
  13,314
  14,602
  15,941
  17,332
  18,779
  20,283
  21,848
  23,477
  25,173
  26,940
  28,782
  30,702
  32,706
  34,798
  36,982
  39,264
Earnings before tax, $m
  2,190
  2,607
  2,590
  2,384
  2,162
  1,923
  1,668
  1,397
  1,112
  811
  496
  622
  278
  -80
  -453
  -841
  -1,243
  -1,662
  -2,096
  -2,548
  -3,017
  -3,505
  -4,012
  -4,539
  -5,088
  -5,659
  -6,254
  -6,874
  -7,521
  -8,196
  -8,900
Tax expense, $m
  1,080
  704
  699
  644
  584
  519
  450
  377
  300
  219
  134
  168
  75
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  638
  1,903
  1,891
  1,741
  1,578
  1,404
  1,217
  1,020
  811
  592
  362
  454
  203
  -80
  -453
  -841
  -1,243
  -1,662
  -2,096
  -2,548
  -3,017
  -3,505
  -4,012
  -4,539
  -5,088
  -5,659
  -6,254
  -6,874
  -7,521
  -8,196
  -8,900

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
  156,895
  179,142
  202,900
  228,133
  254,806
  282,894
  312,373
  343,231
  375,463
  409,074
  444,076
  480,494
  518,361
  557,719
  598,619
  641,121
  685,295
  731,217
  778,973
  828,654
  880,363
  934,207
  990,301
  1,048,768
  1,109,740
  1,173,353
  1,239,753
  1,309,094
  1,381,537
  1,457,251
Adjusted assets (=assets-cash), $m
  136,232
  156,895
  179,142
  202,900
  228,133
  254,806
  282,894
  312,373
  343,231
  375,463
  409,074
  444,076
  480,494
  518,361
  557,719
  598,619
  641,121
  685,295
  731,217
  778,973
  828,654
  880,363
  934,207
  990,301
  1,048,768
  1,109,740
  1,173,353
  1,239,753
  1,309,094
  1,381,537
  1,457,251
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
  13,954
  15,933
  18,046
  20,290
  22,662
  25,160
  27,782
  30,526
  33,393
  36,382
  39,495
  42,734
  46,102
  49,602
  53,240
  57,020
  60,949
  65,033
  69,280
  73,699
  78,298
  83,086
  88,075
  93,275
  98,698
  104,356
  110,261
  116,428
  122,871
  129,605
Working capital, $m
  -7,539
  -23,638
  -26,990
  -30,569
  -34,370
  -38,389
  -42,621
  -47,062
  -51,711
  -56,567
  -61,631
  -66,905
  -72,391
  -78,096
  -84,026
  -90,188
  -96,591
  -103,247
  -110,165
  -117,360
  -124,845
  -132,636
  -140,748
  -149,199
  -158,007
  -167,193
  -176,777
  -186,781
  -197,228
  -208,142
  -219,550
Total debt, $m
  10,443
  19,644
  39,667
  61,049
  83,758
  107,765
  133,043
  159,575
  187,347
  216,356
  246,605
  278,108
  310,884
  344,964
  380,386
  417,196
  455,448
  495,204
  536,534
  579,514
  624,228
  670,766
  719,225
  769,710
  822,331
  877,205
  934,457
  994,217
  1,056,624
  1,121,822
  1,189,965
Total liabilities, $m
  132,004
  141,205
  161,228
  182,610
  205,319
  229,326
  254,604
  281,136
  308,908
  337,917
  368,166
  399,669
  432,445
  466,525
  501,947
  538,757
  577,009
  616,765
  658,095
  701,075
  745,789
  792,327
  840,786
  891,271
  943,892
  998,766
  1,056,018
  1,115,778
  1,178,185
  1,243,383
  1,311,526
Total equity, $m
  21,740
  15,689
  17,914
  20,290
  22,813
  25,481
  28,289
  31,237
  34,323
  37,546
  40,907
  44,408
  48,049
  51,836
  55,772
  59,862
  64,112
  68,529
  73,122
  77,897
  82,865
  88,036
  93,421
  99,030
  104,877
  110,974
  117,335
  123,975
  130,909
  138,154
  145,725
Total liabilities and equity, $m
  153,744
  156,894
  179,142
  202,900
  228,132
  254,807
  282,893
  312,373
  343,231
  375,463
  409,073
  444,077
  480,494
  518,361
  557,719
  598,619
  641,121
  685,294
  731,217
  778,972
  828,654
  880,363
  934,207
  990,301
  1,048,769
  1,109,740
  1,173,353
  1,239,753
  1,309,094
  1,381,537
  1,457,251
Debt-to-equity ratio
  0.480
  1.250
  2.210
  3.010
  3.670
  4.230
  4.700
  5.110
  5.460
  5.760
  6.030
  6.260
  6.470
  6.650
  6.820
  6.970
  7.100
  7.230
  7.340
  7.440
  7.530
  7.620
  7.700
  7.770
  7.840
  7.900
  7.960
  8.020
  8.070
  8.120
  8.170
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
  1,903
  1,891
  1,741
  1,578
  1,404
  1,217
  1,020
  811
  592
  362
  454
  203
  -80
  -453
  -841
  -1,243
  -1,662
  -2,096
  -2,548
  -3,017
  -3,505
  -4,012
  -4,539
  -5,088
  -5,659
  -6,254
  -6,874
  -7,521
  -8,196
  -8,900
Depreciation, amort., depletion, $m
  2,847
  2,781
  3,110
  3,462
  3,837
  4,232
  4,648
  5,085
  5,543
  6,020
  6,519
  6,583
  7,122
  7,684
  8,267
  8,873
  9,503
  10,158
  10,839
  11,547
  12,283
  13,050
  13,848
  14,679
  15,546
  16,450
  17,393
  18,377
  19,405
  20,479
  21,601
Funds from operations, $m
  7,049
  4,683
  5,001
  5,203
  5,415
  5,635
  5,866
  6,105
  6,354
  6,613
  6,881
  7,036
  7,325
  7,603
  7,814
  8,033
  8,260
  8,496
  8,742
  8,999
  9,266
  9,545
  9,836
  10,140
  10,458
  10,791
  11,139
  11,503
  11,884
  12,283
  12,700
Change in working capital, $m
  4
  -3,119
  -3,352
  -3,579
  -3,801
  -4,019
  -4,232
  -4,441
  -4,649
  -4,856
  -5,064
  -5,273
  -5,487
  -5,705
  -5,930
  -6,162
  -6,403
  -6,655
  -6,919
  -7,195
  -7,485
  -7,790
  -8,112
  -8,451
  -8,809
  -9,186
  -9,584
  -10,004
  -10,447
  -10,914
  -11,407
Cash from operations, $m
  7,045
  7,802
  8,353
  8,782
  9,216
  9,654
  10,097
  10,547
  11,003
  11,469
  11,945
  12,310
  12,812
  13,308
  13,744
  14,195
  14,663
  15,152
  15,661
  16,194
  16,751
  17,335
  17,948
  18,592
  19,267
  19,977
  20,722
  21,506
  22,330
  23,197
  24,108
Maintenance CAPEX, $m
  0
  -2,016
  -2,326
  -2,655
  -3,008
  -3,382
  -3,777
  -4,193
  -4,630
  -5,088
  -5,565
  -6,064
  -6,583
  -7,122
  -7,684
  -8,267
  -8,873
  -9,503
  -10,158
  -10,839
  -11,547
  -12,283
  -13,050
  -13,848
  -14,679
  -15,546
  -16,450
  -17,393
  -18,377
  -19,405
  -20,479
New CAPEX, $m
  -2,903
  -1,857
  -1,979
  -2,113
  -2,244
  -2,372
  -2,498
  -2,622
  -2,744
  -2,867
  -2,989
  -3,113
  -3,239
  -3,368
  -3,500
  -3,638
  -3,780
  -3,929
  -4,084
  -4,247
  -4,419
  -4,599
  -4,789
  -4,989
  -5,200
  -5,423
  -5,658
  -5,906
  -6,167
  -6,443
  -6,734
Cash from investing activities, $m
  -10,916
  -3,873
  -4,305
  -4,768
  -5,252
  -5,754
  -6,275
  -6,815
  -7,374
  -7,955
  -8,554
  -9,177
  -9,822
  -10,490
  -11,184
  -11,905
  -12,653
  -13,432
  -14,242
  -15,086
  -15,966
  -16,882
  -17,839
  -18,837
  -19,879
  -20,969
  -22,108
  -23,299
  -24,544
  -25,848
  -27,213
Free cash flow, $m
  -3,871
  3,929
  4,049
  4,014
  3,964
  3,900
  3,822
  3,731
  3,628
  3,514
  3,390
  3,133
  2,990
  2,818
  2,560
  2,290
  2,010
  1,719
  1,419
  1,107
  786
  453
  110
  -245
  -612
  -992
  -1,385
  -1,792
  -2,213
  -2,651
  -3,105
Issuance/(repayment) of debt, $m
  2,709
  13,711
  20,023
  21,382
  22,709
  24,006
  25,279
  26,532
  27,772
  29,009
  30,249
  31,502
  32,776
  34,080
  35,422
  36,810
  38,252
  39,756
  41,330
  42,980
  44,714
  46,538
  48,459
  50,485
  52,621
  54,874
  57,252
  59,760
  62,407
  65,199
  68,143
Issuance/(repurchase) of shares, $m
  0
  5,049
  334
  635
  945
  1,264
  1,591
  1,928
  2,274
  2,631
  2,999
  3,046
  3,439
  3,867
  4,389
  4,931
  5,494
  6,079
  6,689
  7,324
  7,985
  8,676
  9,396
  10,148
  10,934
  11,756
  12,615
  13,514
  14,455
  15,440
  16,472
Cash from financing (excl. dividends), $m  
  4,158
  18,760
  20,357
  22,017
  23,654
  25,270
  26,870
  28,460
  30,046
  31,640
  33,248
  34,548
  36,215
  37,947
  39,811
  41,741
  43,746
  45,835
  48,019
  50,304
  52,699
  55,214
  57,855
  60,633
  63,555
  66,630
  69,867
  73,274
  76,862
  80,639
  84,615
Total cash flow (excl. dividends), $m
  16
  22,689
  24,406
  26,031
  27,619
  29,170
  30,692
  32,191
  33,675
  35,154
  36,638
  37,682
  39,206
  40,765
  42,370
  44,031
  45,756
  47,555
  49,437
  51,411
  53,485
  55,667
  57,965
  60,388
  62,943
  65,638
  68,482
  71,483
  74,649
  77,988
  81,510
Retained Cash Flow (-), $m
  -295
  -6,951
  -2,225
  -2,376
  -2,523
  -2,667
  -2,809
  -2,948
  -3,086
  -3,223
  -3,361
  -3,500
  -3,642
  -3,867
  -4,389
  -4,931
  -5,494
  -6,079
  -6,689
  -7,324
  -7,985
  -8,676
  -9,396
  -10,148
  -10,934
  -11,756
  -12,615
  -13,514
  -14,455
  -15,440
  -16,472
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
 
  28,739
  22,181
  23,656
  25,095
  26,503
  27,883
  29,243
  30,589
  31,931
  33,277
  34,182
  35,564
  36,898
  37,981
  39,100
  40,262
  41,476
  42,749
  44,087
  45,499
  46,991
  48,569
  50,240
  52,009
  53,882
  55,867
  57,969
  60,193
  62,548
  65,038
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
 
  27,554
  20,306
  20,587
  20,663
  20,543
  20,236
  19,756
  19,119
  18,343
  17,446
  16,232
  15,176
  14,029
  12,751
  11,479
  10,231
  9,024
  7,873
  6,788
  5,782
  4,860
  4,030
  3,293
  2,649
  2,096
  1,630
  1,244
  931
  683
  490
Current shareholders' claim on cash, %
  100
  81.9
  81.3
  80.2
  78.8
  77.1
  75.3
  73.4
  71.4
  69.4
  67.4
  65.5
  63.6
  61.7
  59.8
  57.8
  55.9
  53.9
  52.0
  50.1
  48.2
  46.3
  44.5
  42.7
  41.0
  39.3
  37.7
  36.1
  34.6
  33.1
  31.6

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 88.9
Price to Sales 0.9
Price to Book 2.6
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 13.7
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. 27.2%
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 15.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for 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 1267.91 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 $56.9 billion.

RELATED COMPANIES Price Int.Val. Rating
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MSFT Microsoft 85.23 60.77  sell

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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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