Intrinsic value of Telecom Argentina ADR - TEO

Previous Close

$27.42

  Intrinsic Value

$53.72

stock screener

  Rating & Target

str. buy

+96%

  Value-price divergence*

+1171%

Previous close

$27.42

 
Intrinsic value

$53.72

 
Up/down potential

+96%

 
Rating

str. buy

 
Value-price divergence*

+1171%

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

We calculate the intrinsic value of TEO 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 2.7

 

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, %
  31.52
  18.20
  16.88
  15.69
  14.62
  13.66
  12.79
  12.02
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
Revenue, $m
  3,413
  4,034
  4,715
  5,455
  6,253
  7,107
  8,016
  8,979
  9,995
  11,063
  12,182
  13,352
  14,572
  15,844
  17,168
  18,545
  19,976
  21,463
  23,009
  24,615
  26,285
  28,021
  29,827
  31,706
  33,662
  35,700
  37,823
  40,037
  42,346
  44,756
  47,272
Variable operating expenses, $m
 
  3,413
  3,989
  4,615
  5,290
  6,012
  6,782
  7,596
  8,456
  9,359
  10,306
  11,295
  12,328
  13,404
  14,524
  15,689
  16,900
  18,158
  19,466
  20,824
  22,237
  23,706
  25,233
  26,823
  28,478
  30,202
  31,998
  33,871
  35,824
  37,863
  39,992
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
  2,911
  3,413
  3,989
  4,615
  5,290
  6,012
  6,782
  7,596
  8,456
  9,359
  10,306
  11,295
  12,328
  13,404
  14,524
  15,689
  16,900
  18,158
  19,466
  20,824
  22,237
  23,706
  25,233
  26,823
  28,478
  30,202
  31,998
  33,871
  35,824
  37,863
  39,992
Operating income, $m
  502
  621
  726
  840
  963
  1,094
  1,234
  1,383
  1,539
  1,704
  1,876
  2,056
  2,244
  2,440
  2,644
  2,856
  3,076
  3,305
  3,543
  3,791
  4,048
  4,315
  4,593
  4,883
  5,184
  5,498
  5,825
  6,166
  6,521
  6,892
  7,280
EBITDA, $m
  899
  835
  976
  1,129
  1,294
  1,470
  1,659
  1,858
  2,068
  2,289
  2,520
  2,762
  3,015
  3,278
  3,552
  3,837
  4,133
  4,441
  4,761
  5,093
  5,438
  5,798
  6,171
  6,560
  6,965
  7,386
  7,826
  8,284
  8,761
  9,260
  9,780
Interest expense (income), $m
  101
  106
  162
  224
  292
  364
  442
  525
  613
  705
  803
  904
  1,011
  1,122
  1,238
  1,359
  1,484
  1,615
  1,750
  1,891
  2,037
  2,190
  2,348
  2,512
  2,683
  2,862
  3,047
  3,241
  3,443
  3,653
  3,873
Earnings before tax, $m
  358
  515
  564
  616
  671
  730
  792
  858
  927
  998
  1,073
  1,152
  1,233
  1,318
  1,406
  1,497
  1,592
  1,691
  1,793
  1,900
  2,011
  2,126
  2,246
  2,370
  2,501
  2,636
  2,777
  2,925
  3,079
  3,239
  3,407
Tax expense, $m
  102
  139
  152
  166
  181
  197
  214
  232
  250
  270
  290
  311
  333
  356
  380
  404
  430
  456
  484
  513
  543
  574
  606
  640
  675
  712
  750
  790
  831
  875
  920
Net income, $m
  254
  376
  412
  450
  490
  533
  578
  626
  676
  729
  784
  841
  900
  962
  1,026
  1,093
  1,162
  1,234
  1,309
  1,387
  1,468
  1,552
  1,639
  1,730
  1,825
  1,924
  2,027
  2,135
  2,247
  2,365
  2,487

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  365
  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
  3,066
  3,192
  3,730
  4,316
  4,947
  5,623
  6,342
  7,104
  7,908
  8,752
  9,637
  10,563
  11,529
  12,535
  13,582
  14,671
  15,804
  16,980
  18,203
  19,474
  20,795
  22,169
  23,597
  25,084
  26,631
  28,243
  29,923
  31,674
  33,501
  35,408
  37,398
Adjusted assets (=assets-cash), $m
  2,701
  3,192
  3,730
  4,316
  4,947
  5,623
  6,342
  7,104
  7,908
  8,752
  9,637
  10,563
  11,529
  12,535
  13,582
  14,671
  15,804
  16,980
  18,203
  19,474
  20,795
  22,169
  23,597
  25,084
  26,631
  28,243
  29,923
  31,674
  33,501
  35,408
  37,398
Revenue / Adjusted assets
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
  1.264
Average production assets, $m
  1,805
  2,134
  2,494
  2,886
  3,308
  3,760
  4,241
  4,750
  5,287
  5,852
  6,444
  7,063
  7,709
  8,381
  9,082
  9,810
  10,567
  11,354
  12,172
  13,021
  13,905
  14,823
  15,778
  16,772
  17,807
  18,885
  20,008
  21,179
  22,401
  23,676
  25,007
Working capital, $m
  -61
  -270
  -316
  -365
  -419
  -476
  -537
  -602
  -670
  -741
  -816
  -895
  -976
  -1,062
  -1,150
  -1,242
  -1,338
  -1,438
  -1,542
  -1,649
  -1,761
  -1,877
  -1,998
  -2,124
  -2,255
  -2,392
  -2,534
  -2,682
  -2,837
  -2,999
  -3,167
Total debt, $m
  753
  849
  1,173
  1,526
  1,907
  2,314
  2,748
  3,208
  3,692
  4,202
  4,735
  5,293
  5,876
  6,483
  7,114
  7,771
  8,454
  9,163
  9,901
  10,667
  11,463
  12,292
  13,153
  14,049
  14,983
  15,955
  16,968
  18,024
  19,125
  20,275
  21,475
Total liabilities, $m
  1,829
  1,925
  2,249
  2,602
  2,983
  3,390
  3,824
  4,284
  4,768
  5,278
  5,811
  6,369
  6,952
  7,559
  8,190
  8,847
  9,530
  10,239
  10,977
  11,743
  12,539
  13,368
  14,229
  15,125
  16,059
  17,031
  18,044
  19,100
  20,201
  21,351
  22,551
Total equity, $m
  1,237
  1,267
  1,481
  1,713
  1,964
  2,232
  2,518
  2,820
  3,139
  3,475
  3,826
  4,193
  4,577
  4,976
  5,392
  5,825
  6,274
  6,741
  7,227
  7,731
  8,256
  8,801
  9,368
  9,958
  10,573
  11,213
  11,879
  12,575
  13,300
  14,057
  14,847
Total liabilities and equity, $m
  3,066
  3,192
  3,730
  4,315
  4,947
  5,622
  6,342
  7,104
  7,907
  8,753
  9,637
  10,562
  11,529
  12,535
  13,582
  14,672
  15,804
  16,980
  18,204
  19,474
  20,795
  22,169
  23,597
  25,083
  26,632
  28,244
  29,923
  31,675
  33,501
  35,408
  37,398
Debt-to-equity ratio
  0.609
  0.670
  0.790
  0.890
  0.970
  1.040
  1.090
  1.140
  1.180
  1.210
  1.240
  1.260
  1.280
  1.300
  1.320
  1.330
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.400
  1.410
  1.420
  1.420
  1.430
  1.430
  1.440
  1.440
  1.450
Adjusted equity ratio
  0.323
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397
  0.397

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  254
  376
  412
  450
  490
  533
  578
  626
  676
  729
  784
  841
  900
  962
  1,026
  1,093
  1,162
  1,234
  1,309
  1,387
  1,468
  1,552
  1,639
  1,730
  1,825
  1,924
  2,027
  2,135
  2,247
  2,365
  2,487
Depreciation, amort., depletion, $m
  397
  213
  249
  289
  331
  376
  424
  475
  529
  585
  644
  706
  771
  838
  908
  981
  1,057
  1,135
  1,217
  1,302
  1,390
  1,482
  1,578
  1,677
  1,781
  1,889
  2,001
  2,118
  2,240
  2,368
  2,501
Funds from operations, $m
  539
  590
  661
  738
  821
  909
  1,003
  1,101
  1,205
  1,314
  1,428
  1,547
  1,671
  1,800
  1,934
  2,074
  2,219
  2,370
  2,526
  2,689
  2,858
  3,034
  3,217
  3,408
  3,606
  3,813
  4,028
  4,253
  4,488
  4,732
  4,988
Change in working capital, $m
  -188
  -42
  -46
  -50
  -53
  -57
  -61
  -65
  -68
  -72
  -75
  -78
  -82
  -85
  -89
  -92
  -96
  -100
  -104
  -108
  -112
  -116
  -121
  -126
  -131
  -137
  -142
  -148
  -155
  -161
  -169
Cash from operations, $m
  727
  631
  707
  788
  874
  966
  1,063
  1,166
  1,273
  1,386
  1,503
  1,625
  1,753
  1,885
  2,023
  2,166
  2,315
  2,469
  2,630
  2,797
  2,970
  3,150
  3,338
  3,534
  3,737
  3,949
  4,171
  4,401
  4,642
  4,894
  5,157
Maintenance CAPEX, $m
  0
  -180
  -213
  -249
  -289
  -331
  -376
  -424
  -475
  -529
  -585
  -644
  -706
  -771
  -838
  -908
  -981
  -1,057
  -1,135
  -1,217
  -1,302
  -1,390
  -1,482
  -1,578
  -1,677
  -1,781
  -1,889
  -2,001
  -2,118
  -2,240
  -2,368
New CAPEX, $m
  -726
  -330
  -360
  -391
  -422
  -452
  -481
  -510
  -537
  -565
  -592
  -619
  -646
  -673
  -700
  -728
  -757
  -787
  -818
  -850
  -883
  -918
  -955
  -994
  -1,035
  -1,078
  -1,123
  -1,171
  -1,222
  -1,275
  -1,331
Cash from investing activities, $m
  -726
  -510
  -573
  -640
  -711
  -783
  -857
  -934
  -1,012
  -1,094
  -1,177
  -1,263
  -1,352
  -1,444
  -1,538
  -1,636
  -1,738
  -1,844
  -1,953
  -2,067
  -2,185
  -2,308
  -2,437
  -2,572
  -2,712
  -2,859
  -3,012
  -3,172
  -3,340
  -3,515
  -3,699
Free cash flow, $m
  1
  121
  133
  147
  164
  184
  206
  232
  261
  292
  326
  362
  401
  442
  485
  530
  577
  626
  677
  730
  785
  842
  901
  962
  1,025
  1,091
  1,159
  1,229
  1,303
  1,379
  1,458
Issuance/(repayment) of debt, $m
  410
  295
  325
  353
  381
  407
  434
  459
  485
  509
  534
  558
  582
  607
  632
  657
  683
  710
  737
  766
  797
  828
  861
  896
  933
  972
  1,013
  1,056
  1,102
  1,150
  1,200
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  309
  295
  325
  353
  381
  407
  434
  459
  485
  509
  534
  558
  582
  607
  632
  657
  683
  710
  737
  766
  797
  828
  861
  896
  933
  972
  1,013
  1,056
  1,102
  1,150
  1,200
Total cash flow (excl. dividends), $m
  325
  416
  458
  500
  544
  591
  640
  692
  745
  801
  860
  920
  983
  1,048
  1,116
  1,186
  1,259
  1,335
  1,414
  1,496
  1,581
  1,670
  1,762
  1,858
  1,958
  2,063
  2,172
  2,286
  2,404
  2,529
  2,658
Retained Cash Flow (-), $m
  -137
  -196
  -214
  -232
  -251
  -268
  -286
  -303
  -319
  -335
  -351
  -367
  -383
  -399
  -416
  -432
  -450
  -467
  -485
  -505
  -524
  -545
  -567
  -590
  -614
  -640
  -667
  -695
  -725
  -757
  -790
Prev. year cash balance distribution, $m
 
  166
  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
 
  386
  244
  268
  294
  323
  355
  389
  426
  466
  508
  553
  600
  649
  700
  754
  810
  868
  929
  991
  1,057
  1,124
  1,195
  1,268
  1,344
  1,423
  1,505
  1,590
  1,679
  1,772
  1,868
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
 
  370
  224
  233
  242
  250
  257
  263
  267
  268
  266
  263
  256
  247
  235
  221
  206
  189
  171
  153
  134
  116
  99
  83
  68
  55
  44
  34
  26
  19
  14
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

Telecom Argentina S.A. provides fixed-line telecommunications and other telephone-related services to residential customers, businesses, and governmental agencies in Argentina and internationally. The company operates in three segments: Fixed Telecommunications Services, Personal Mobile Telecommunications Services, and Núcleo Mobile Telecommunications Services. It offers fixed services, including basic telephone services, such as local, domestic, and international long-distance telephone services, as well as public telephone services; interconnection services, which primarily include the access, termination, and long-distance transport of calls; and data transmission and Internet services comprising traditional broadband, Internet dedicated lines, private networks, national and international video streaming, radio and television signals transportation, and videoconferencing services. The company also provides information and communication technology, datacenter, telecommunications consulting, and value-added solutions; and other telephone services, such as call waiting, call forwarding, conference calls, caller ID, voice mail, itemized billing, and maintenance services. In addition, it offers mobile services, including voice communications; global system for mobile communications; third-generation mobile system; and fourth-generation mobile system mobile communications. Further, the company sells mobile communication devices, such as handsets, tablets, modems mifi, and wingles. As of December 31, 2015, it had approximately 4 million fixed lines in service; 1.8 million Internet accesses; 19.7 million mobile subscribers in Argentina; and 2.5 million subscribers in Paraguay. The company was formerly known as Telecom Argentina STET-France Telecom S.A. and changed its name to Telecom Argentina S.A. in February 2004. The company was founded in 1990 and is based in Buenos Aires, Argentina. Telecom Argentina S.A. operates as a subsidiary of Nortel Inversora S.A.

FINANCIAL RATIOS  of  Telecom Argentina ADR (TEO)

Valuation Ratios
P/E Ratio 104.6
Price to Sales 7.8
Price to Book 21.5
Price to Tangible Book
Price to Cash Flow 36.6
Price to Free Cash Flow 26574.4
Growth Rates
Sales Growth Rate 31.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30.1%
Cap. Spend. - 3 Yr. Gr. Rate 22%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 44.8%
Total Debt to Equity 60.9%
Interest Coverage 5
Management Effectiveness
Return On Assets 11.8%
Ret/ On Assets - 3 Yr. Avg. 12.7%
Return On Total Capital 15%
Ret/ On T. Cap. - 3 Yr. Avg. 20.3%
Return On Equity 21.7%
Return On Equity - 3 Yr. Avg. 23.8%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 80.9%
Gross Margin - 3 Yr. Avg. 79.9%
EBITDA Margin 25.1%
EBITDA Margin - 3 Yr. Avg. 25.6%
Operating Margin 14.7%
Oper. Margin - 3 Yr. Avg. 15.5%
Pre-Tax Margin 10.5%
Pre-Tax Margin - 3 Yr. Avg. 13.4%
Net Profit Margin 7.4%
Net Profit Margin - 3 Yr. Avg. 8.9%
Effective Tax Rate 28.5%
Eff/ Tax Rate - 3 Yr. Avg. 32%
Payout Ratio 50.4%

TEO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TEO stock intrinsic value calculation we used $3413 million for the last fiscal year's total revenue generated by Telecom Argentina ADR. The default revenue input number comes from 2016 income statement of Telecom Argentina 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 TEO stock valuation model: a) initial revenue growth rate of 18.2% 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 TEO is calculated based on our internal credit rating of Telecom Argentina 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 Telecom Argentina 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 TEO stock the variable cost ratio is equal to 84.6%.

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 TEO 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 19.1% for Telecom Argentina ADR.

Corporate tax rate of 27% is the nominal tax rate for Telecom Argentina 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 TEO 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 TEO are equal to 52.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Telecom Argentina 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 TEO is equal to -6.7%. 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 - $1237 million for Telecom Argentina 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 98.714 million for Telecom Argentina 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 Telecom Argentina ADR at the current share price and the inputted number of shares is $2.7 billion.

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COMPANY NEWS

▶ [$$] Telecom Argentina, Cablevisión Announce Merger   [Jul-01-17 12:32PM  The Wall Street Journal]
▶ Growing Book Values for 7 Cheap Stocks   [Jun-20-17 04:02PM  GuruFocus.com]
▶ 6 Cheap Stocks With Growing Earnings   [Jun-16-17 02:20PM  GuruFocus.com]
▶ Top Ranked Growth Stocks to Buy for June 14th   [Jun-14-17 10:33AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for June 6th   [Jun-06-17 11:10AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for May 30th   [May-30-17 10:43AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for May 23rd   [May-23-17 10:21AM  Zacks]
▶ Telecom Argentina posts 1Q profit   [May-11-17 02:58PM  Associated Press]
▶ Top Ranked Growth Stocks to Buy for April 17th   [Apr-17-17 10:46AM  Zacks]
▶ Top Ranked Growth Stocks to Buy for April 10th   [Apr-10-17 10:04AM  Zacks]
▶ Morgan Stanley Ups Telecom Argentina To Buy   [Sep-06-16 02:54PM  at Barrons.com]
▶ Telecom Argentina Can Get Head Start on TV, Official Says   [Aug-24-16 06:15PM  at Bloomberg]
▶ Telecom Argentina posts 2Q profit   [Aug-10-16 06:37PM  AP]
▶ Greek Telecom OTE Jumps On Share Buyback   [Jun-29-16 11:40AM  at Barrons.com]
▶ TELECOM ARGENTINA SA Financials   [01:04PM  EDGAR Online Financials]
▶ [$$] Telecom Italia Completes Sale of Telecom Argentina Stake   [Mar-08-16 02:24PM  at The Wall Street Journal]
▶ Argentina: 30% Stock Upside As Holdout Debt Resolved?   [Feb-11-16 11:31AM  at Barrons.com]
▶ 7 Argentina Stocks, Bonds To Buy As Economic Pivot Begins   [Dec-09  12:12PM  at Barrons.com]
▶ How Smart Money Is Trading BWX Technologies Inc (BWXT)?   [Nov-24  08:55AM  at Insider Monkey]
▶ Argentina Upgraded: Election May Bring Holdout Bond Deal   [Sep-29  03:04PM  at Barrons.com]
▶ Argentina To Sell State Stake In Stocks?   [Aug-24  03:56PM  at Barrons.com]
▶ 5 High-Dividend Telecom Stocks To Buy   [Jul-16  08:47AM  at TheStreet]
▶ Argentina, Iran & the Nuclear Debate   [Apr-01  01:59PM  at Barrons.com]
▶ As Argentina Unions Strike, Should Investors Strike Too?   [Mar-31  11:48AM  at Barrons.com]
Stock chart of TEO Financial statements of TEO Annual reports of TEO
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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