Intrinsic value of Sony ADR - SNE

Previous Close

$38.50

  Intrinsic Value

$67.95

stock screener

  Rating & Target

str. buy

+76%

  Value-price divergence*

+5000%

Previous close

$38.50

 
Intrinsic value

$67.95

 
Up/down potential

+76%

 
Rating

str. buy

 
Value-price divergence*

+5000%

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

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 48.8

 

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, %
  -6.20
  4.40
  4.46
  4.51
  4.56
  4.61
  4.65
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
Revenue, $m
  66,190
  69,102
  72,184
  75,443
  78,885
  82,519
  86,352
  90,394
  94,655
  99,143
  103,870
  108,846
  114,083
  119,594
  125,391
  131,489
  137,901
  144,643
  151,730
  159,180
  167,010
  175,238
  183,885
  192,971
  202,517
  212,546
  223,081
  234,149
  245,775
  257,986
  270,813
Variable operating expenses, $m
 
  66,595
  69,544
  72,663
  75,958
  79,436
  83,105
  86,974
  91,052
  95,347
  99,871
  104,179
  109,192
  114,467
  120,015
  125,852
  131,989
  138,441
  145,225
  152,355
  159,850
  167,725
  176,002
  184,698
  193,834
  203,433
  213,517
  224,110
  235,238
  246,926
  259,202
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
  66,595
  69,544
  72,663
  75,958
  79,436
  83,105
  86,974
  91,052
  95,347
  99,871
  104,179
  109,192
  114,467
  120,015
  125,852
  131,989
  138,441
  145,225
  152,355
  159,850
  167,725
  176,002
  184,698
  193,834
  203,433
  213,517
  224,110
  235,238
  246,926
  259,202
Operating income, $m
  2,513
  2,508
  2,640
  2,780
  2,927
  3,083
  3,247
  3,421
  3,603
  3,796
  3,998
  4,667
  4,891
  5,127
  5,376
  5,637
  5,912
  6,201
  6,505
  6,824
  7,160
  7,513
  7,884
  8,273
  8,682
  9,112
  9,564
  10,039
  10,537
  11,061
  11,610
EBITDA, $m
  5,360
  4,227
  4,416
  4,615
  4,826
  5,048
  5,282
  5,530
  5,790
  6,065
  6,354
  6,658
  6,979
  7,316
  7,671
  8,044
  8,436
  8,848
  9,282
  9,737
  10,216
  10,720
  11,249
  11,805
  12,388
  13,002
  13,646
  14,324
  15,035
  15,782
  16,566
Interest expense (income), $m
  0
  208
  224
  424
  635
  858
  1,094
  1,342
  1,604
  1,880
  2,171
  2,478
  2,800
  3,140
  3,497
  3,873
  4,268
  4,683
  5,120
  5,580
  6,063
  6,570
  7,103
  7,664
  8,253
  8,871
  9,521
  10,204
  10,922
  11,675
  12,467
Earnings before tax, $m
  2,190
  2,300
  2,416
  2,356
  2,292
  2,225
  2,153
  2,078
  1,999
  1,915
  1,827
  2,189
  2,091
  1,988
  1,879
  1,765
  1,644
  1,518
  1,385
  1,245
  1,098
  943
  780
  609
  430
  241
  43
  -166
  -385
  -615
  -856
Tax expense, $m
  1,080
  621
  652
  636
  619
  601
  581
  561
  540
  517
  493
  591
  565
  537
  507
  476
  444
  410
  374
  336
  296
  255
  211
  165
  116
  65
  12
  0
  0
  0
  0
Net income, $m
  638
  1,679
  1,763
  1,720
  1,673
  1,624
  1,572
  1,517
  1,459
  1,398
  1,334
  1,598
  1,526
  1,451
  1,372
  1,288
  1,200
  1,108
  1,011
  909
  801
  688
  570
  445
  314
  176
  31
  -166
  -385
  -615
  -856

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
  142,186
  148,527
  155,232
  162,315
  169,791
  177,679
  185,997
  194,763
  203,998
  213,724
  223,963
  234,739
  246,078
  258,007
  270,553
  283,747
  297,618
  312,201
  327,530
  343,641
  360,573
  378,365
  397,059
  416,701
  437,337
  459,015
  481,788
  505,710
  530,836
  557,228
Adjusted assets (=assets-cash), $m
  136,232
  142,186
  148,527
  155,232
  162,315
  169,791
  177,679
  185,997
  194,763
  203,998
  213,724
  223,963
  234,739
  246,078
  258,007
  270,553
  283,747
  297,618
  312,201
  327,530
  343,641
  360,573
  378,365
  397,059
  416,701
  437,337
  459,015
  481,788
  505,710
  530,836
  557,228
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
  12,646
  13,210
  13,806
  14,436
  15,101
  15,802
  16,542
  17,322
  18,143
  19,008
  19,919
  20,877
  21,886
  22,947
  24,062
  25,236
  26,470
  27,767
  29,130
  30,563
  32,069
  33,651
  35,314
  37,061
  38,896
  40,824
  42,849
  44,977
  47,212
  49,559
Working capital, $m
  -7,539
  -6,910
  -7,218
  -7,544
  -7,888
  -8,252
  -8,635
  -9,039
  -9,465
  -9,914
  -10,387
  -10,885
  -11,408
  -11,959
  -12,539
  -13,149
  -13,790
  -14,464
  -15,173
  -15,918
  -16,701
  -17,524
  -18,389
  -19,297
  -20,252
  -21,255
  -22,308
  -23,415
  -24,577
  -25,799
  -27,081
Total debt, $m
  10,443
  6,406
  12,114
  18,148
  24,522
  31,251
  38,350
  45,836
  53,726
  62,037
  70,790
  80,005
  89,704
  99,909
  110,645
  121,937
  133,811
  146,296
  159,420
  173,216
  187,716
  202,955
  218,967
  235,793
  253,470
  272,042
  291,553
  312,048
  333,578
  356,192
  379,944
Total liabilities, $m
  132,004
  127,967
  133,675
  139,709
  146,083
  152,812
  159,911
  167,397
  175,287
  183,598
  192,351
  201,566
  211,265
  221,470
  232,206
  243,498
  255,372
  267,857
  280,981
  294,777
  309,277
  324,516
  340,528
  357,354
  375,031
  393,603
  413,114
  433,609
  455,139
  477,753
  501,505
Total equity, $m
  21,740
  14,219
  14,853
  15,523
  16,231
  16,979
  17,768
  18,600
  19,476
  20,400
  21,372
  22,396
  23,474
  24,608
  25,801
  27,055
  28,375
  29,762
  31,220
  32,753
  34,364
  36,057
  37,836
  39,706
  41,670
  43,734
  45,902
  48,179
  50,571
  53,084
  55,723
Total liabilities and equity, $m
  153,744
  142,186
  148,528
  155,232
  162,314
  169,791
  177,679
  185,997
  194,763
  203,998
  213,723
  223,962
  234,739
  246,078
  258,007
  270,553
  283,747
  297,619
  312,201
  327,530
  343,641
  360,573
  378,364
  397,060
  416,701
  437,337
  459,016
  481,788
  505,710
  530,837
  557,228
Debt-to-equity ratio
  0.480
  0.450
  0.820
  1.170
  1.510
  1.840
  2.160
  2.460
  2.760
  3.040
  3.310
  3.570
  3.820
  4.060
  4.290
  4.510
  4.720
  4.920
  5.110
  5.290
  5.460
  5.630
  5.790
  5.940
  6.080
  6.220
  6.350
  6.480
  6.600
  6.710
  6.820
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
  1,679
  1,763
  1,720
  1,673
  1,624
  1,572
  1,517
  1,459
  1,398
  1,334
  1,598
  1,526
  1,451
  1,372
  1,288
  1,200
  1,108
  1,011
  909
  801
  688
  570
  445
  314
  176
  31
  -166
  -385
  -615
  -856
Depreciation, amort., depletion, $m
  2,847
  1,719
  1,776
  1,836
  1,898
  1,965
  2,035
  2,109
  2,187
  2,269
  2,356
  1,992
  2,088
  2,189
  2,295
  2,406
  2,524
  2,647
  2,777
  2,913
  3,056
  3,207
  3,365
  3,531
  3,706
  3,890
  4,082
  4,285
  4,498
  4,721
  4,956
Funds from operations, $m
  7,049
  3,399
  3,539
  3,555
  3,572
  3,589
  3,607
  3,626
  3,646
  3,667
  3,689
  3,590
  3,614
  3,640
  3,666
  3,694
  3,724
  3,755
  3,788
  3,822
  3,858
  3,895
  3,935
  3,976
  4,020
  4,065
  4,113
  4,119
  4,113
  4,106
  4,100
Change in working capital, $m
  4
  -291
  -308
  -326
  -344
  -363
  -383
  -404
  -426
  -449
  -473
  -498
  -524
  -551
  -580
  -610
  -641
  -674
  -709
  -745
  -783
  -823
  -865
  -909
  -955
  -1,003
  -1,054
  -1,107
  -1,163
  -1,221
  -1,283
Cash from operations, $m
  7,045
  3,690
  3,847
  3,881
  3,916
  3,952
  3,991
  4,030
  4,072
  4,116
  4,162
  4,087
  4,138
  4,191
  4,246
  4,304
  4,365
  4,429
  4,496
  4,567
  4,641
  4,718
  4,799
  4,885
  4,974
  5,068
  5,167
  5,226
  5,276
  5,328
  5,382
Maintenance CAPEX, $m
  0
  -1,210
  -1,265
  -1,321
  -1,381
  -1,444
  -1,510
  -1,580
  -1,654
  -1,732
  -1,814
  -1,901
  -1,992
  -2,088
  -2,189
  -2,295
  -2,406
  -2,524
  -2,647
  -2,777
  -2,913
  -3,056
  -3,207
  -3,365
  -3,531
  -3,706
  -3,890
  -4,082
  -4,285
  -4,498
  -4,721
New CAPEX, $m
  -2,903
  -549
  -564
  -596
  -630
  -665
  -702
  -740
  -780
  -821
  -865
  -911
  -958
  -1,008
  -1,061
  -1,116
  -1,173
  -1,234
  -1,297
  -1,363
  -1,433
  -1,506
  -1,582
  -1,663
  -1,747
  -1,835
  -1,928
  -2,025
  -2,128
  -2,235
  -2,347
Cash from investing activities, $m
  -10,916
  -1,759
  -1,829
  -1,917
  -2,011
  -2,109
  -2,212
  -2,320
  -2,434
  -2,553
  -2,679
  -2,812
  -2,950
  -3,096
  -3,250
  -3,411
  -3,579
  -3,758
  -3,944
  -4,140
  -4,346
  -4,562
  -4,789
  -5,028
  -5,278
  -5,541
  -5,818
  -6,107
  -6,413
  -6,733
  -7,068
Free cash flow, $m
  -3,871
  1,931
  2,019
  1,964
  1,905
  1,844
  1,779
  1,711
  1,638
  1,563
  1,483
  1,276
  1,187
  1,094
  997
  894
  786
  672
  552
  427
  295
  156
  10
  -143
  -304
  -473
  -651
  -882
  -1,137
  -1,405
  -1,686
Issuance/(repayment) of debt, $m
  2,709
  473
  5,707
  6,034
  6,374
  6,729
  7,099
  7,486
  7,889
  8,312
  8,753
  9,215
  9,699
  10,205
  10,736
  11,292
  11,874
  12,485
  13,125
  13,796
  14,500
  15,238
  16,013
  16,825
  17,678
  18,572
  19,511
  20,496
  21,529
  22,614
  23,753
Issuance/(repurchase) of shares, $m
  0
  3,802
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  119
  279
  447
  624
  810
  1,005
  1,210
  1,425
  1,651
  1,888
  2,137
  2,443
  2,777
  3,127
  3,495
Cash from financing (excl. dividends), $m  
  4,158
  4,275
  5,707
  6,034
  6,374
  6,729
  7,099
  7,486
  7,889
  8,312
  8,753
  9,215
  9,699
  10,205
  10,736
  11,292
  11,993
  12,764
  13,572
  14,420
  15,310
  16,243
  17,223
  18,250
  19,329
  20,460
  21,648
  22,939
  24,306
  25,741
  27,248
Total cash flow (excl. dividends), $m
  16
  6,206
  7,726
  7,998
  8,280
  8,573
  8,878
  9,196
  9,528
  9,874
  10,236
  10,491
  10,886
  11,300
  11,732
  12,185
  12,779
  13,436
  14,125
  14,847
  15,604
  16,399
  17,232
  18,107
  19,024
  19,987
  20,997
  22,057
  23,169
  24,337
  25,562
Retained Cash Flow (-), $m
  -295
  -5,481
  -634
  -670
  -708
  -748
  -789
  -832
  -877
  -924
  -973
  -1,024
  -1,078
  -1,134
  -1,193
  -1,255
  -1,319
  -1,387
  -1,458
  -1,533
  -1,611
  -1,693
  -1,779
  -1,869
  -1,964
  -2,064
  -2,168
  -2,443
  -2,777
  -3,127
  -3,495
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
 
  13,727
  7,092
  7,327
  7,571
  7,825
  8,089
  8,364
  8,651
  8,951
  9,263
  9,467
  9,809
  10,166
  10,539
  10,931
  11,459
  12,048
  12,666
  13,314
  13,993
  14,706
  15,453
  16,237
  17,060
  17,923
  18,829
  19,614
  20,392
  21,209
  22,066
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
 
  13,161
  6,493
  6,377
  6,234
  6,065
  5,871
  5,651
  5,407
  5,142
  4,856
  4,496
  4,186
  3,865
  3,538
  3,209
  2,912
  2,622
  2,333
  2,050
  1,778
  1,521
  1,282
  1,064
  869
  697
  549
  421
  315
  232
  166
Current shareholders' claim on cash, %
  100
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.8
  83.6
  83.2
  82.7
  82.0
  81.1
  80.0
  78.8
  77.5
  76.1
  74.6
  73.0
  71.3
  69.6
  67.7
  65.8

Sony Corporation designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. It offers LCD televisions; Blu-ray disc players and recorders, home audio, headphones, and memory-based portable audio devices; compact digital, interchangeable single-lens, and video cameras; and professional solutions, such as broadcast- and professional-use products. The company also markets and distributes PlayStation4, PlayStation3, and PlayStation Vita hardware and related software; and provides network services related to game, video, and music content. In addition, it offers CMOS image sensors, CCDs, system LSIs, and other semiconductors; and batteries, audio/video/data recording media, storage media, and optical pickups. Further, the company is involved in the production, acquisition, and distribution of animated motion pictures and direct-to-video content, and television programs; operation of television and digital networks, and a studio, as well as a visual effects and animation unit; production and distribution of recorded music, music videos, and animation titles; and music publishing business. Additionally, it provides various financial services, including life and non-life insurance, savings products, and loans; researches, designs, develops, produces, markets, distributes, sells, and services mobile phones, tablets, accessories, and applications; provides Internet broadband network services; and offers Blu-ray disc, DVD, and CD media replication services, as well as digital and physical supply chain solutions to business customers in the entertainment, education, and information industries. The company was formerly known as Tokyo Tsushin Kogyo Kabushiki Kaisha and changed its name to Sony Corporation in January 1958. Sony Corporation was founded in 1946 and is headquartered in Tokyo, Japan.

FINANCIAL RATIOS  of  Sony ADR (SNE)

Valuation Ratios
P/E Ratio 76.2
Price to Sales 0.7
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 11.7
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 0
Management Effectiveness
Return On Assets 0.4%
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 25.5%
Gross Margin - 3 Yr. Avg. 25.2%
EBITDA Margin 7.6%
EBITDA Margin - 3 Yr. Avg. 7.2%
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 4.4% 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 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 10 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 -10%. 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 1267.36 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 $48.8 billion.

RELATED COMPANIES Price Int.Val. Rating
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MSFT Microsoft 72.15 47.21  sell

COMPANY NEWS

▶ [$$] Now in the Mix for Sony Music Artists: Royalties From DJ Sets   [Aug-22-17 09:00AM  The Wall Street Journal]
▶ Bull of the Day: Sony (SNE)   [06:12AM  Zacks]
▶ 10 Facts You Might Not Know About 'Superbad'   [Aug-17-17 05:06PM  Benzinga]
▶ [$$] HBOs Hack: Hollywood Is Under Siege   [Aug-11-17 11:26PM  The Wall Street Journal]
▶ [$$] HBO's Hack: 'Hollywood Is Under Siege'   [06:20AM  The Wall Street Journal]
▶ Inside Sony's Search for the Next Walkman   [Aug-07-17 05:00PM  Bloomberg]
▶ Dark Tower opens at No. 1 on slow week at the box office   [Aug-06-17 11:17PM  MarketWatch]
▶ 3 Value Stocks for Every Investor   [Aug-04-17 01:21PM  Motley Fool]
▶ HBO Hackers Stole Episodes of Curb Your Enthusiasm   [Aug-02-17 05:47PM  Bloomberg]
▶ [$$] Sony Profit Surges, Boosted by Strong Sales   [12:09AM  The Wall Street Journal]
▶ Jefferies Sees No Reason for Sony to Raise Guidance   [Aug-01-17 10:17PM  Bloomberg Video]
▶ Sony posts 1Q profit   [09:36PM  Associated Press]
▶ Sony Tops Profit Estimates   [08:15PM  Bloomberg Video]
▶ [$$] Sony Profit Surges, Boosted by Strong Sales   [07:26AM  The Wall Street Journal]
▶ Sony's One-Hit (Profit) Wonder   [03:29AM  Bloomberg]
▶ [$$] Dunkirk Fends Off Rivals at Box Office   [12:42AM  The Wall Street Journal]
▶ Foxconn is investing $10 billion in the US   [Jul-27-17 03:01PM  CNBC Videos]
▶ The Summer's Most Profitable Film Is ...   [10:28AM  TheStreet.com]
▶ PlayStation Plus Free Games for August 2017   [Jul-26-17 05:37PM  InvestorPlace]
Stock chart of SNE 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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