Intrinsic value of Toyota Motor ADR - TM

Previous Close

$111.73

  Intrinsic Value

$171.57

stock screener

  Rating & Target

str. buy

+54%

  Value-price divergence*

+4228%

Previous close

$111.73

 
Intrinsic value

$171.57

 
Up/down potential

+54%

 
Rating

str. buy

 
Value-price divergence*

+4228%

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

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 180.3

 

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
  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
  5.08
Revenue, $m
  240,247
  256,584
  273,570
  291,237
  309,620
  328,758
  348,690
  369,460
  391,114
  413,700
  437,270
  461,878
  487,581
  514,439
  542,514
  571,874
  602,587
  634,726
  668,368
  703,592
  740,482
  779,127
  819,618
  862,052
  906,529
  953,158
  1,002,047
  1,053,315
  1,107,083
  1,163,480
  1,222,641
Variable operating expenses, $m
 
  230,925
  246,213
  262,113
  278,658
  295,882
  313,821
  332,514
  352,002
  372,330
  393,543
  415,690
  438,823
  462,995
  488,263
  514,686
  542,328
  571,254
  601,531
  633,233
  666,434
  701,214
  737,656
  775,846
  815,877
  857,842
  901,842
  947,983
  996,375
  1,047,132
  1,100,376
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
  230,925
  246,213
  262,113
  278,658
  295,882
  313,821
  332,514
  352,002
  372,330
  393,543
  415,690
  438,823
  462,995
  488,263
  514,686
  542,328
  571,254
  601,531
  633,233
  666,434
  701,214
  737,656
  775,846
  815,877
  857,842
  901,842
  947,983
  996,375
  1,047,132
  1,100,376
Operating income, $m
  17,362
  25,658
  27,357
  29,124
  30,962
  32,876
  34,869
  36,946
  39,111
  41,370
  43,727
  46,188
  48,758
  51,444
  54,251
  57,187
  60,259
  63,473
  66,837
  70,359
  74,048
  77,913
  81,962
  86,205
  90,653
  95,316
  100,205
  105,331
  110,708
  116,348
  122,264
EBITDA, $m
  31,386
  34,921
  37,233
  39,637
  42,139
  44,744
  47,457
  50,284
  53,231
  56,305
  59,512
  62,862
  66,360
  70,015
  73,836
  77,832
  82,012
  86,386
  90,965
  95,759
  100,780
  106,039
  111,550
  117,325
  123,379
  129,725
  136,379
  143,356
  150,674
  158,350
  166,401
Interest expense (income), $m
  0
  3,020
  3,468
  3,932
  4,414
  4,915
  5,437
  5,981
  6,548
  7,139
  7,755
  8,398
  9,069
  9,771
  10,504
  11,270
  12,071
  12,909
  13,785
  14,703
  15,664
  16,671
  17,725
  18,830
  19,988
  21,201
  22,474
  23,808
  25,206
  26,673
  28,212
Earnings before tax, $m
  19,098
  22,638
  23,889
  25,192
  26,548
  27,961
  29,432
  30,965
  32,563
  34,231
  35,972
  37,790
  39,689
  41,673
  43,748
  45,918
  48,188
  50,564
  53,051
  55,656
  58,384
  61,242
  64,236
  67,375
  70,665
  74,114
  77,731
  81,524
  85,502
  89,675
  94,052
Tax expense, $m
  5,475
  6,112
  6,450
  6,802
  7,168
  7,549
  7,947
  8,360
  8,792
  9,242
  9,712
  10,203
  10,716
  11,252
  11,812
  12,398
  13,011
  13,652
  14,324
  15,027
  15,764
  16,535
  17,344
  18,191
  19,080
  20,011
  20,987
  22,011
  23,086
  24,212
  25,394
Net income, $m
  15,941
  16,526
  17,439
  18,390
  19,380
  20,411
  21,485
  22,604
  23,771
  24,989
  26,260
  27,587
  28,973
  30,421
  31,936
  33,520
  35,177
  36,912
  38,727
  40,629
  42,620
  44,706
  46,893
  49,184
  51,586
  54,103
  56,744
  59,512
  62,416
  65,462
  68,658

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
  340,749
  363,306
  386,769
  411,182
  436,597
  463,068
  490,651
  519,407
  549,402
  580,704
  613,384
  647,518
  683,185
  720,470
  759,461
  800,248
  842,930
  887,607
  934,385
  983,376
  1,034,697
  1,088,470
  1,144,823
  1,203,890
  1,265,813
  1,330,740
  1,398,824
  1,470,230
  1,545,126
  1,623,693
Adjusted assets (=assets-cash), $m
  319,093
  340,749
  363,306
  386,769
  411,182
  436,597
  463,068
  490,651
  519,407
  549,402
  580,704
  613,384
  647,518
  683,185
  720,470
  759,461
  800,248
  842,930
  887,607
  934,385
  983,376
  1,034,697
  1,088,470
  1,144,823
  1,203,890
  1,265,813
  1,330,740
  1,398,824
  1,470,230
  1,545,126
  1,623,693
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
  92,627
  98,759
  105,136
  111,773
  118,682
  125,877
  133,375
  141,192
  149,346
  157,854
  166,738
  176,017
  185,712
  195,848
  206,446
  217,534
  229,136
  241,281
  253,997
  267,314
  281,265
  295,882
  311,201
  327,257
  344,090
  361,739
  380,247
  399,657
  420,016
  441,373
Working capital, $m
  4,481
  -21,810
  -23,253
  -24,755
  -26,318
  -27,944
  -29,639
  -31,404
  -33,245
  -35,165
  -37,168
  -39,260
  -41,444
  -43,727
  -46,114
  -48,609
  -51,220
  -53,952
  -56,811
  -59,805
  -62,941
  -66,226
  -69,668
  -73,274
  -77,055
  -81,018
  -85,174
  -89,532
  -94,102
  -98,896
  -103,924
Total debt, $m
  166,760
  99,091
  112,332
  126,104
  140,435
  155,354
  170,892
  187,083
  203,963
  221,570
  239,944
  259,127
  279,164
  300,101
  321,987
  344,874
  368,817
  393,871
  420,096
  447,555
  476,313
  506,438
  538,003
  571,082
  605,755
  642,103
  680,215
  720,181
  762,096
  806,060
  852,179
Total liabilities, $m
  267,690
  200,020
  213,261
  227,033
  241,364
  256,283
  271,821
  288,012
  304,892
  322,499
  340,873
  360,056
  380,093
  401,030
  422,916
  445,803
  469,746
  494,800
  521,025
  548,484
  577,242
  607,367
  638,932
  672,011
  706,684
  743,032
  781,144
  821,110
  863,025
  906,989
  953,108
Total equity, $m
  156,705
  140,729
  150,046
  159,735
  169,818
  180,315
  191,247
  202,639
  214,515
  226,903
  239,831
  253,327
  267,425
  282,156
  297,554
  313,657
  330,503
  348,130
  366,582
  385,901
  406,134
  427,330
  449,538
  472,812
  497,207
  522,781
  549,596
  577,714
  607,205
  638,137
  670,585
Total liabilities and equity, $m
  424,395
  340,749
  363,307
  386,768
  411,182
  436,598
  463,068
  490,651
  519,407
  549,402
  580,704
  613,383
  647,518
  683,186
  720,470
  759,460
  800,249
  842,930
  887,607
  934,385
  983,376
  1,034,697
  1,088,470
  1,144,823
  1,203,891
  1,265,813
  1,330,740
  1,398,824
  1,470,230
  1,545,126
  1,623,693
Debt-to-equity ratio
  1.064
  0.700
  0.750
  0.790
  0.830
  0.860
  0.890
  0.920
  0.950
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.130
  1.150
  1.160
  1.170
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.260
  1.270
Adjusted equity ratio
  0.161
  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
  16,526
  17,439
  18,390
  19,380
  20,411
  21,485
  22,604
  23,771
  24,989
  26,260
  27,587
  28,973
  30,421
  31,936
  33,520
  35,177
  36,912
  38,727
  40,629
  42,620
  44,706
  46,893
  49,184
  51,586
  54,103
  56,744
  59,512
  62,416
  65,462
  68,658
Depreciation, amort., depletion, $m
  14,024
  9,263
  9,876
  10,514
  11,177
  11,868
  12,588
  13,338
  14,119
  14,935
  15,785
  16,674
  17,602
  18,571
  19,585
  20,645
  21,753
  22,914
  24,128
  25,400
  26,731
  28,126
  29,588
  31,120
  32,726
  34,409
  36,174
  38,025
  39,966
  42,002
  44,137
Funds from operations, $m
  30,872
  25,789
  27,315
  28,904
  30,558
  32,279
  34,073
  35,942
  37,891
  39,923
  42,045
  44,260
  46,574
  48,993
  51,521
  54,165
  56,931
  59,825
  62,856
  66,028
  69,352
  72,833
  76,481
  80,304
  84,311
  88,512
  92,918
  97,537
  102,382
  107,464
  112,795
Change in working capital, $m
  1,149
  -1,389
  -1,444
  -1,502
  -1,563
  -1,627
  -1,694
  -1,765
  -1,841
  -1,920
  -2,003
  -2,092
  -2,185
  -2,283
  -2,386
  -2,496
  -2,611
  -2,732
  -2,860
  -2,994
  -3,136
  -3,285
  -3,442
  -3,607
  -3,781
  -3,963
  -4,156
  -4,358
  -4,570
  -4,794
  -5,029
Cash from operations, $m
  29,723
  27,177
  28,758
  30,406
  32,120
  33,906
  35,767
  37,707
  39,731
  41,843
  44,048
  46,352
  48,759
  51,276
  53,907
  56,660
  59,541
  62,557
  65,715
  69,022
  72,487
  76,118
  79,923
  83,911
  88,092
  92,476
  97,073
  101,895
  106,952
  112,258
  117,824
Maintenance CAPEX, $m
  0
  -8,678
  -9,263
  -9,876
  -10,514
  -11,177
  -11,868
  -12,588
  -13,338
  -14,119
  -14,935
  -15,785
  -16,674
  -17,602
  -18,571
  -19,585
  -20,645
  -21,753
  -22,914
  -24,128
  -25,400
  -26,731
  -28,126
  -29,588
  -31,120
  -32,726
  -34,409
  -36,174
  -38,025
  -39,966
  -42,002
New CAPEX, $m
  -30,830
  -5,844
  -6,132
  -6,378
  -6,636
  -6,909
  -7,196
  -7,498
  -7,817
  -8,154
  -8,509
  -8,883
  -9,279
  -9,696
  -10,135
  -10,599
  -11,087
  -11,602
  -12,145
  -12,716
  -13,317
  -13,951
  -14,617
  -15,319
  -16,056
  -16,833
  -17,649
  -18,508
  -19,410
  -20,359
  -21,357
Cash from investing activities, $m
  -25,855
  -14,522
  -15,395
  -16,254
  -17,150
  -18,086
  -19,064
  -20,086
  -21,155
  -22,273
  -23,444
  -24,668
  -25,953
  -27,298
  -28,706
  -30,184
  -31,732
  -33,355
  -35,059
  -36,844
  -38,717
  -40,682
  -42,743
  -44,907
  -47,176
  -49,559
  -52,058
  -54,682
  -57,435
  -60,325
  -63,359
Free cash flow, $m
  3,868
  12,655
  13,364
  14,152
  14,970
  15,820
  16,703
  17,622
  18,577
  19,570
  20,605
  21,683
  22,807
  23,978
  25,201
  26,477
  27,809
  29,202
  30,657
  32,178
  33,770
  35,436
  37,179
  39,004
  40,915
  42,917
  45,015
  47,213
  49,517
  51,933
  54,465
Issuance/(repayment) of debt, $m
  8,975
  12,806
  13,241
  13,772
  14,331
  14,919
  15,538
  16,191
  16,880
  17,607
  18,374
  19,183
  20,037
  20,937
  21,886
  22,887
  23,942
  25,054
  26,225
  27,459
  28,758
  30,125
  31,565
  33,079
  34,673
  36,349
  38,112
  39,966
  41,915
  43,964
  46,118
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
  12,806
  13,241
  13,772
  14,331
  14,919
  15,538
  16,191
  16,880
  17,607
  18,374
  19,183
  20,037
  20,937
  21,886
  22,887
  23,942
  25,054
  26,225
  27,459
  28,758
  30,125
  31,565
  33,079
  34,673
  36,349
  38,112
  39,966
  41,915
  43,964
  46,118
Total cash flow (excl. dividends), $m
  6,040
  25,461
  26,605
  27,924
  29,301
  30,739
  32,241
  33,813
  35,457
  37,177
  38,979
  40,866
  42,843
  44,915
  47,087
  49,364
  51,752
  54,256
  56,882
  59,637
  62,528
  65,561
  68,743
  72,083
  75,588
  79,266
  83,127
  87,179
  91,432
  95,897
  100,584
Retained Cash Flow (-), $m
  -6,738
  -8,850
  -9,316
  -9,690
  -10,083
  -10,496
  -10,932
  -11,392
  -11,877
  -12,388
  -12,927
  -13,497
  -14,097
  -14,731
  -15,399
  -16,103
  -16,845
  -17,627
  -18,452
  -19,319
  -20,233
  -21,195
  -22,208
  -23,274
  -24,395
  -25,574
  -26,815
  -28,119
  -29,490
  -30,932
  -32,448
Prev. year cash balance distribution, $m
 
  24,826
  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
 
  41,437
  17,289
  18,234
  19,218
  20,242
  21,309
  22,421
  23,580
  24,790
  26,052
  27,369
  28,746
  30,184
  31,688
  33,261
  34,906
  36,628
  38,431
  40,318
  42,295
  44,365
  46,535
  48,809
  51,193
  53,692
  56,312
  59,060
  61,942
  64,965
  68,136
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
 
  39,614
  15,732
  15,719
  15,616
  15,421
  15,132
  14,750
  14,277
  13,717
  13,076
  12,362
  11,585
  10,756
  9,889
  8,997
  8,096
  7,201
  6,325
  5,484
  4,690
  3,952
  3,279
  2,676
  2,146
  1,690
  1,306
  989
  732
  530
  375
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 designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories. The company operates through Automotive, Financial Services, and All Other segments. It offers hybrid cars under the Prius, Corolla Axio/Corolla Fielder, Harrier, Voxy/Noah, NX300h, RC300h, Esquire, Alphard, and Vellfire names; fuel cell passenger vehicles under the MIRAI name; and conventional engine vehicles, including subcompact and compact cars under the Corolla sedan, Yaris, Vitz, Aygo, Corolla Axio/Fielder, Porte, Spade, Auris, Etios, Vios, AGYA, and Scion iA brand names. The company also provides mini-vehicles, passenger vehicles, commercial vehicles, and auto parts under the Toyota brand; mid-size cars under the Camry, REIZ, and Mark X names; luxury cars under the Lexus, Avalon, and Crown names; Century limousines; sports cars under the under the Scion tC, Scion FR-S, and Lexus names; and sport-utility vehicles under the Sequoia, 4Runner, RAV4, Highlander, FJ Cruiser, Land Cruiser, and Lexus names. In addition, it offers pickup trucks under the Tacoma and Tundra names; minivans under the Alphard, Vellfire, Corolla Verso, Wish, Noah/Voxy, Esquire, Estima, Sienta, Isis, and Sienna names; large, medium, and small trucks; and large, medium, small, and micro-buses. Further, the company provides financial services, such as retail financing, retail leasing, wholesale financing, insurance, and credit cards; and manufactures and sells prefabricated housing. Additionally, it is involved in the information technology related businesses, including operation of a Web portal for automobile information known as GAZOO.com. The company operates in Japan, North America, Europe, Asia, Central and South America, Oceania, Africa, and the Middle East. Toyota Motor Corporation was founded in 1933 and is headquartered in Toyota City, Japan.

FINANCIAL RATIOS  of  Toyota Motor ADR (TM)

Valuation Ratios
P/E Ratio 20.8
Price to Sales 1.4
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 11.2
Price to Free Cash Flow -300.2
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 0
Management Effectiveness
Return On Assets 3.8%
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 13.8%
EBITDA Margin - 3 Yr. Avg. 17.7%
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 6.8% 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 10 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 1613.56 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 $180.3 billion.

RELATED COMPANIES Price Int.Val. Rating
F Ford Motor 10.56 14.53  buy
HMC Honda Motor AD 27.54 8.85  str.sell

COMPANY NEWS

▶ Hagertys 10 Future Classics to Buy Right Now   [Aug-20-17 07:21AM  The Cheat Sheet]
▶ Have your first look at BMW's next great sports car   [Aug-17-17 02:04PM  Business Insider]
▶ 10 of the Worst Cars of the 2000s   [Aug-16-17 08:08PM  The Cheat Sheet]
▶ 10 Fastest Pickup Trucks to Grace the Worlds Roads   [Aug-15-17 05:36PM  The Cheat Sheet]
▶ 10 of the Most Reliable Cars You Can Buy   [02:15AM  The Cheat Sheet]
▶ 10 Popular Cars We Wish Never Existed   [01:04AM  The Cheat Sheet]
▶ How Are Foreign Automakers Looking in August 2017?   [Aug-11-17 05:14PM  Market Realist]
▶ Both Carolinas now in the running for $1.6B electric car plant   [01:05PM  American City Business Journals]
▶ Intel teams up with Toyota to take on big data in self-driving cars   [10:30AM  American City Business Journals]
▶ [$$] Toyota Delays Start of Mexican Plant Production   [01:53PM  The Wall Street Journal]
▶ 5 Best Platinum Stocks to Buy Right Now   [02:19PM  Motley Fool]
▶ The 10 Most Affordable Vehicles to Insure   [12:07AM  The Cheat Sheet]
▶ [$$] Eleven States Jockey to Land Toyota-Mazda Production Facility   [Aug-08-17 05:48PM  The Wall Street Journal]
▶ Key Takeaways From Toyota's Q1   [Aug-07-17 04:16PM  Forbes]
▶ [$$] For Toyota, New U.S. Factory Offers More Than Plaudits From Trump   [Aug-04-17 11:47PM  The Wall Street Journal]
▶ [$$] Japanese Car Makers Pay Up to Grab U.S. Market Share   [11:46PM  The Wall Street Journal]
▶ Toyota Plans to Take 5% Stake in Mazda   [02:31PM  TheStreet.com]
▶ Toyota, Mazda to build U.S. plant   [01:46PM  Reuters Videos]
▶ [$$] Japanese Car Makers Pay Up to Grab U.S. Market Share   [07:57AM  The Wall Street Journal]
▶ Toyota's U.S. Jobs Drive   [07:48AM  TheStreet.com]
▶ Toyota and Mazda Said Planning U.S. Plant   [04:43AM  Bloomberg Video]
▶ Toyota, Mazda to build $1.6B U.S. auto plant, teaming on electric cars   [03:00AM  American City Business Journals]
Stock chart of TM 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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.