Intrinsic value of Toyota Motor ADR - TM

Previous Close

$124.92

  Intrinsic Value

$173.50

stock screener

  Rating & Target

buy

+39%

Previous close

$124.92

 
Intrinsic value

$173.50

 
Up/down potential

+39%

 
Rating

buy

We calculate the intrinsic value of TM 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 204.9

 

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, %
  -2.84
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
Revenue, $m
  240,247
  257,064
  274,545
  292,720
  311,623
  331,294
  351,771
  373,098
  395,322
  418,492
  442,659
  467,879
  494,209
  521,711
  550,449
  580,490
  611,905
  644,768
  679,157
  715,154
  752,843
  792,316
  833,666
  876,991
  922,395
  969,987
  1,019,879
  1,072,190
  1,127,047
  1,184,579
  1,244,924
Variable operating expenses, $m
 
  231,358
  247,090
  263,448
  280,461
  298,164
  316,594
  335,788
  355,790
  376,643
  398,393
  421,091
  444,788
  469,540
  495,404
  522,441
  550,715
  580,291
  611,241
  643,638
  677,559
  713,085
  750,299
  789,292
  830,156
  872,988
  917,891
  964,971
  1,014,342
  1,066,121
  1,120,431
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
  222,885
  231,358
  247,090
  263,448
  280,461
  298,164
  316,594
  335,788
  355,790
  376,643
  398,393
  421,091
  444,788
  469,540
  495,404
  522,441
  550,715
  580,291
  611,241
  643,638
  677,559
  713,085
  750,299
  789,292
  830,156
  872,988
  917,891
  964,971
  1,014,342
  1,066,121
  1,120,431
Operating income, $m
  17,362
  25,706
  27,454
  29,272
  31,162
  33,129
  35,177
  37,310
  39,532
  41,849
  44,266
  46,788
  49,421
  52,171
  55,045
  58,049
  61,191
  64,477
  67,916
  71,515
  75,284
  79,232
  83,367
  87,699
  92,240
  96,999
  101,988
  107,219
  112,705
  118,458
  124,492
EBITDA, $m
  31,386
  40,674
  43,440
  46,316
  49,307
  52,419
  55,659
  59,034
  62,550
  66,216
  70,040
  74,031
  78,197
  82,548
  87,095
  91,849
  96,819
  102,019
  107,460
  113,156
  119,119
  125,365
  131,907
  138,763
  145,947
  153,477
  161,371
  169,648
  178,328
  187,431
  196,979
Interest expense (income), $m
  3,157
  3,020
  3,481
  3,958
  4,454
  4,970
  5,507
  6,065
  6,647
  7,254
  7,886
  8,545
  9,233
  9,952
  10,702
  11,486
  12,306
  13,163
  14,059
  14,998
  15,980
  17,008
  18,085
  19,213
  20,395
  21,634
  22,933
  24,294
  25,721
  27,218
  28,788
Earnings before tax, $m
  19,098
  22,686
  23,973
  25,314
  26,708
  28,159
  29,671
  31,245
  32,885
  34,596
  36,380
  38,243
  40,188
  42,220
  44,343
  46,563
  48,885
  51,314
  53,856
  56,518
  59,304
  62,223
  65,281
  68,486
  71,844
  75,364
  79,055
  82,925
  86,983
  91,240
  95,705
Tax expense, $m
  5,475
  6,125
  6,473
  6,835
  7,211
  7,603
  8,011
  8,436
  8,879
  9,341
  9,823
  10,326
  10,851
  11,399
  11,973
  12,572
  13,199
  13,855
  14,541
  15,260
  16,012
  16,800
  17,626
  18,491
  19,398
  20,348
  21,345
  22,390
  23,486
  24,635
  25,840
Net income, $m
  15,941
  16,561
  17,500
  18,479
  19,497
  20,556
  21,659
  22,809
  24,006
  25,255
  26,558
  27,917
  29,337
  30,820
  32,370
  33,991
  35,686
  37,459
  39,315
  41,258
  43,292
  45,423
  47,655
  49,995
  52,446
  55,016
  57,710
  60,535
  63,498
  66,605
  69,864

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  105,301
  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
  424,394
  341,387
  364,601
  388,738
  413,842
  439,965
  467,159
  495,482
  524,996
  555,766
  587,861
  621,353
  656,321
  692,844
  731,008
  770,903
  812,623
  856,266
  901,935
  949,739
  999,792
  1,052,213
  1,107,126
  1,164,663
  1,224,960
  1,288,163
  1,354,420
  1,423,892
  1,496,742
  1,573,146
  1,653,285
Adjusted assets (=assets-cash), $m
  319,093
  341,387
  364,601
  388,738
  413,842
  439,965
  467,159
  495,482
  524,996
  555,766
  587,861
  621,353
  656,321
  692,844
  731,008
  770,903
  812,623
  856,266
  901,935
  949,739
  999,792
  1,052,213
  1,107,126
  1,164,663
  1,224,960
  1,288,163
  1,354,420
  1,423,892
  1,496,742
  1,573,146
  1,653,285
Revenue / Adjusted assets
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
  0.753
Average production assets, $m
  86,783
  92,800
  99,111
  105,672
  112,496
  119,597
  126,989
  134,688
  142,711
  151,076
  159,800
  168,904
  178,410
  188,338
  198,712
  209,557
  220,898
  232,761
  245,176
  258,170
  271,776
  286,026
  300,953
  316,594
  332,985
  350,165
  368,176
  387,061
  406,864
  427,633
  449,417
Working capital, $m
  4,481
  -21,850
  -23,336
  -24,881
  -26,488
  -28,160
  -29,901
  -31,713
  -33,602
  -35,572
  -37,626
  -39,770
  -42,008
  -44,345
  -46,788
  -49,342
  -52,012
  -54,805
  -57,728
  -60,788
  -63,992
  -67,347
  -70,862
  -74,544
  -78,404
  -82,449
  -86,690
  -91,136
  -95,799
  -100,689
  -105,819
Total debt, $m
  166,760
  99,465
  113,092
  127,260
  141,997
  157,330
  173,293
  189,919
  207,244
  225,306
  244,145
  263,805
  284,331
  305,770
  328,173
  351,591
  376,081
  401,699
  428,507
  456,568
  485,949
  516,720
  548,954
  582,728
  618,123
  655,223
  694,116
  734,895
  777,659
  822,508
  869,549
Total liabilities, $m
  267,690
  200,394
  214,021
  228,189
  242,926
  258,259
  274,222
  290,848
  308,173
  326,235
  345,074
  364,734
  385,260
  406,699
  429,102
  452,520
  477,010
  502,628
  529,436
  557,497
  586,878
  617,649
  649,883
  683,657
  719,052
  756,152
  795,045
  835,824
  878,588
  923,437
  970,478
Total equity, $m
  156,705
  140,993
  150,580
  160,549
  170,917
  181,706
  192,937
  204,634
  216,823
  229,531
  242,786
  256,619
  271,060
  286,145
  301,906
  318,383
  335,613
  353,638
  372,499
  392,242
  412,914
  434,564
  457,243
  481,006
  505,909
  532,011
  559,376
  588,067
  618,155
  649,709
  682,807
Total liabilities and equity, $m
  424,395
  341,387
  364,601
  388,738
  413,843
  439,965
  467,159
  495,482
  524,996
  555,766
  587,860
  621,353
  656,320
  692,844
  731,008
  770,903
  812,623
  856,266
  901,935
  949,739
  999,792
  1,052,213
  1,107,126
  1,164,663
  1,224,961
  1,288,163
  1,354,421
  1,423,891
  1,496,743
  1,573,146
  1,653,285
Debt-to-equity ratio
  1.064
  0.710
  0.750
  0.790
  0.830
  0.870
  0.900
  0.930
  0.960
  0.980
  1.010
  1.030
  1.050
  1.070
  1.090
  1.100
  1.120
  1.140
  1.150
  1.160
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.270
Adjusted equity ratio
  0.296
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15,941
  16,561
  17,500
  18,479
  19,497
  20,556
  21,659
  22,809
  24,006
  25,255
  26,558
  27,917
  29,337
  30,820
  32,370
  33,991
  35,686
  37,459
  39,315
  41,258
  43,292
  45,423
  47,655
  49,995
  52,446
  55,016
  57,710
  60,535
  63,498
  66,605
  69,864
Depreciation, amort., depletion, $m
  14,024
  14,968
  15,986
  17,044
  18,145
  19,290
  20,482
  21,724
  23,018
  24,367
  25,774
  27,243
  28,776
  30,377
  32,050
  33,800
  35,629
  37,542
  39,544
  41,640
  43,835
  46,133
  48,541
  51,064
  53,707
  56,478
  59,383
  62,429
  65,623
  68,973
  72,487
Funds from operations, $m
  30,872
  31,529
  33,486
  35,523
  37,642
  39,846
  42,142
  44,532
  47,024
  49,622
  52,332
  55,160
  58,113
  61,197
  64,421
  67,790
  71,315
  75,001
  78,860
  82,898
  87,127
  91,556
  96,196
  101,058
  106,153
  111,494
  117,093
  122,964
  129,121
  135,578
  142,351
Change in working capital, $m
  1,149
  -1,429
  -1,486
  -1,545
  -1,607
  -1,672
  -1,741
  -1,813
  -1,889
  -1,969
  -2,054
  -2,144
  -2,238
  -2,338
  -2,443
  -2,553
  -2,670
  -2,793
  -2,923
  -3,060
  -3,204
  -3,355
  -3,515
  -3,683
  -3,859
  -4,045
  -4,241
  -4,447
  -4,663
  -4,890
  -5,129
Cash from operations, $m
  29,723
  32,958
  34,972
  37,068
  39,248
  41,518
  43,882
  46,345
  48,913
  51,591
  54,386
  57,304
  60,351
  63,535
  66,863
  70,344
  73,985
  77,795
  81,783
  85,958
  90,331
  94,912
  99,711
  104,741
  110,013
  115,539
  121,334
  127,411
  133,784
  140,468
  147,480
Maintenance CAPEX, $m
  0
  -13,997
  -14,968
  -15,986
  -17,044
  -18,145
  -19,290
  -20,482
  -21,724
  -23,018
  -24,367
  -25,774
  -27,243
  -28,776
  -30,377
  -32,050
  -33,800
  -35,629
  -37,542
  -39,544
  -41,640
  -43,835
  -46,133
  -48,541
  -51,064
  -53,707
  -56,478
  -59,383
  -62,429
  -65,623
  -68,973
New CAPEX, $m
  -30,830
  -6,017
  -6,310
  -6,561
  -6,824
  -7,101
  -7,392
  -7,699
  -8,023
  -8,364
  -8,724
  -9,104
  -9,505
  -9,928
  -10,374
  -10,845
  -11,341
  -11,864
  -12,414
  -12,995
  -13,606
  -14,250
  -14,927
  -15,640
  -16,391
  -17,180
  -18,011
  -18,885
  -19,803
  -20,769
  -21,784
Cash from investing activities, $m
  -25,855
  -20,014
  -21,278
  -22,547
  -23,868
  -25,246
  -26,682
  -28,181
  -29,747
  -31,382
  -33,091
  -34,878
  -36,748
  -38,704
  -40,751
  -42,895
  -45,141
  -47,493
  -49,956
  -52,539
  -55,246
  -58,085
  -61,060
  -64,181
  -67,455
  -70,887
  -74,489
  -78,268
  -82,232
  -86,392
  -90,757
Free cash flow, $m
  3,868
  12,944
  13,694
  14,521
  15,380
  16,273
  17,200
  18,164
  19,166
  20,209
  21,295
  22,425
  23,603
  24,831
  26,112
  27,449
  28,845
  30,302
  31,826
  33,419
  35,084
  36,827
  38,651
  40,559
  42,558
  44,652
  46,845
  49,143
  51,552
  54,076
  56,723
Issuance/(repayment) of debt, $m
  8,975
  13,179
  13,627
  14,168
  14,736
  15,334
  15,963
  16,626
  17,325
  18,062
  18,840
  19,660
  20,526
  21,439
  22,403
  23,418
  24,489
  25,618
  26,808
  28,061
  29,381
  30,771
  32,234
  33,774
  35,395
  37,100
  38,893
  40,780
  42,763
  44,849
  47,042
Issuance/(repurchase) of shares, $m
  -6,129
  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  
  2,290
  13,179
  13,627
  14,168
  14,736
  15,334
  15,963
  16,626
  17,325
  18,062
  18,840
  19,660
  20,526
  21,439
  22,403
  23,418
  24,489
  25,618
  26,808
  28,061
  29,381
  30,771
  32,234
  33,774
  35,395
  37,100
  38,893
  40,780
  42,763
  44,849
  47,042
Total cash flow (excl. dividends), $m
  6,040
  26,123
  27,320
  28,689
  30,117
  31,607
  33,163
  34,790
  36,491
  38,271
  40,134
  42,085
  44,129
  46,270
  48,515
  50,867
  53,334
  55,921
  58,634
  61,480
  64,465
  67,598
  70,885
  74,334
  77,953
  81,752
  85,738
  89,923
  94,315
  98,925
  103,765
Retained Cash Flow (-), $m
  -6,738
  -9,115
  -9,588
  -9,968
  -10,368
  -10,789
  -11,231
  -11,698
  -12,189
  -12,708
  -13,255
  -13,832
  -14,442
  -15,084
  -15,762
  -16,477
  -17,230
  -18,024
  -18,861
  -19,743
  -20,672
  -21,650
  -22,679
  -23,763
  -24,903
  -26,103
  -27,364
  -28,692
  -30,087
  -31,555
  -33,098
Prev. year cash balance distribution, $m
 
  24,827
  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
 
  41,835
  17,733
  18,721
  19,748
  20,818
  21,932
  23,092
  24,302
  25,563
  26,879
  28,253
  29,687
  31,186
  32,753
  34,391
  36,104
  37,896
  39,772
  41,737
  43,794
  45,948
  48,205
  50,571
  53,050
  55,649
  58,374
  61,231
  64,228
  67,370
  70,667
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  39,995
  16,137
  16,139
  16,047
  15,860
  15,575
  15,192
  14,714
  14,145
  13,491
  12,761
  11,964
  11,113
  10,221
  9,303
  8,374
  7,450
  6,546
  5,677
  4,856
  4,093
  3,396
  2,772
  2,224
  1,752
  1,354
  1,025
  759
  550
  389
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

Toyota Motor Corporation (Toyota) conducts business in the automotive industry. The Company also conducts business in finance and other industries. The Company's segments include Automotive, Financial Services and All Other. Toyota sells its vehicles in approximately 190 countries and regions. Toyota's markets for its automobiles are Japan, North America, Europe and Asia. The Company's Automotive segment includes the design, manufacture, assembly and sale of passenger vehicles, minivans and commercial vehicles, such as trucks and related parts and accessories. The Company's Financial Services segment consists of providing financing to dealers and their customers for the purchase or lease of Toyota vehicles. The All Other segment includes the design, manufacturing and sale of housing, telecommunications and other businesses. Its information technology related businesses include a Web portal for automobile information called GAZOO.com.

FINANCIAL RATIOS  of  Toyota Motor ADR (TM)

Valuation Ratios
P/E Ratio 23.3
Price to Sales 1.5
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 12.5
Price to Free Cash Flow -335.7
Growth Rates
Sales Growth Rate -2.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.8%
Cap. Spend. - 3 Yr. Gr. Rate 5.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 55.1%
Total Debt to Equity 106.4%
Interest Coverage 7
Management Effectiveness
Return On Assets 4.3%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 5%
Ret/ On T. Cap. - 3 Yr. Avg. 6%
Return On Equity 10.4%
Return On Equity - 3 Yr. Avg. 12.6%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 17.6%
Gross Margin - 3 Yr. Avg. 19.3%
EBITDA Margin 15.1%
EBITDA Margin - 3 Yr. Avg. 17.6%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 9.1%
Pre-Tax Margin 7.9%
Pre-Tax Margin - 3 Yr. Avg. 9.7%
Net Profit Margin 6.6%
Net Profit Margin - 3 Yr. Avg. 7.6%
Effective Tax Rate 28.7%
Eff/ Tax Rate - 3 Yr. Avg. 29.7%
Payout Ratio 34.9%

TM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TM stock intrinsic value calculation we used $240247 million for the last fiscal year's total revenue generated by Toyota Motor ADR. The default revenue input number comes from 2017 income statement of Toyota Motor 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 TM stock valuation model: a) initial revenue growth rate of 7% 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 4.6%, whose default value for TM is calculated based on our internal credit rating of Toyota Motor 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 Toyota Motor 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 TM stock the variable cost ratio is equal to 90%.

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 TM 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 Toyota Motor ADR.

Corporate tax rate of 27% is the nominal tax rate for Toyota Motor 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 TM 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 TM are equal to 36.1%.

Life of production assets of 6.2 years is the average useful life of capital assets used in Toyota Motor 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 TM is equal to -8.5%. 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 - $156705 million for Toyota Motor 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 1640.53 million for Toyota Motor 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 Toyota Motor ADR at the current share price and the inputted number of shares is $204.9 billion.

RELATED COMPANIES Price Int.Val. Rating
F Ford Motor 12.63 10.78  hold
HMC Honda Motor AD 33.73 8.72  str.sell

COMPANY NEWS

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▶ Who are Toyota's (TM) main suppliers?   [11:19AM  Investopedia]
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▶ US Automakers Report Flat November Sales   [02:38PM  GuruFocus.com]
▶ Carmakers accelerate, backfire as 2017 winds down   [Dec-02-17 10:25AM  American City Business Journals]
▶ Truck, Van Demand Drive November Auto Sales   [Dec-01-17 05:13PM  Benzinga]
▶ The 4 Best Investments of 2017   [02:35PM  InvestorPlace]
▶ Toyota's Betamax Moment   [Nov-28-17 09:25PM  Bloomberg]
▶ Toyota Names New CFO   [05:54PM  The Wall Street Journal]
▶ Toyota Drives Solo on Hydrogen Power   [08:26PM  Bloomberg Video]
▶ Toyota Drives Solo on Hydrogen Power   [08:26PM  Bloomberg]
▶ 3 Electric Car Plays With 25% Upside   [06:00AM  Investopedia]
▶ These Are the 5 Best-Selling Trucks of 2017   [Nov-24-17 06:05AM  Motley Fool]
▶ Could Toyotas Raised Growth Outlook Drive Optimism?   [Nov-23-17 09:01AM  Market Realist]
▶ Tesla stock headed for bumpy road in 2018   [Nov-22-17 01:16PM  Yahoo Finance Video]
▶ Yahoo Finance Live: Midday Movers - Nov 22nd, 2017   [09:40AM  Yahoo Finance Video]
▶ Five Scorching Hot Strong Buy Stocks   [Nov-21-17 04:57PM  Zacks]
Financial statements of TM
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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